[Senate Hearing 111-336]
[From the U.S. Government Publishing Office]
S. Hrg. 111-336
MINIMIZING POTENTIAL THREATS FROM IRAN: ASSESSING ECONOMIC SANCTIONS
AND OTHER U.S. POLICY OPTIONS
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
ON
EXAMINING HOW THE UNITED STATES CAN USE SANCTIONS AND OTHER FORMS OF
ECONOMIC PRESSURE TO PREVENT IRAN FROM ACQUIRING A NUCLEAR WEAPONS
CAPABILITY
__________
JULY 30, 2009
__________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
CHRISTOPHER J. DODD, Connecticut, Chairman
TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York JIM BUNNING, Kentucky
EVAN BAYH, Indiana MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey MEL MARTINEZ, Florida
DANIEL K. AKAKA, Hawaii BOB CORKER, Tennessee
SHERROD BROWN, Ohio JIM DeMINT, South Carolina
JON TESTER, Montana DAVID VITTER, Louisiana
HERB KOHL, Wisconsin MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia KAY BAILEY HUTCHISON, Texas
JEFF MERKLEY, Oregon
MICHAEL F. BENNET, Colorado
Edward Silverman, Staff Director
William D. Duhnke, Republican Staff Director and Counsel
Colin McGinnis, Professional Staff Member
Neal Orringer, Professional Staff Member
Misha Mintz-Roth, Legislative Assistant
Mark Oesterle, Republican Chief Counsel
John O'Hara, Republican Senior Investigative Counsel
Ellen Chube, Professional Staff Member
Dawn Ratliff, Chief Clerk
Devin Hartley, Hearing Clerk
Shelvin Simmons, IT Director
Jim Crowell, Editor
(ii)
C O N T E N T S
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THURSDAY, JULY 30, 2009
Page
Opening statement of Senator Bayh................................ 1
Opening statements, comments, or prepared statement of:
Senator Shelby............................................... 3
Prepared statement....................................... 45
Senator Tester............................................... 4
Senator Corker............................................... 4
Senator Menendez............................................. 4
Senator Martinez............................................. 5
Senator Merkley.............................................. 6
Senator Johanns.............................................. 6
Prepared statement....................................... 45
Senator Bennet............................................... 7
WITNESSES
Joseph I. Lieberman, a United States Senator from the State of
Connecticut.................................................... 8
Prepared statement........................................... 46
Nicholas Burns, Professor of the Practice of Diplomacy and
International Politics, Harvard University..................... 12
Prepared statement........................................... 47
Responses to written questions of:
Chairman Dodd............................................ 63
Senator Johanns.......................................... 64
Dr. Matthew Levitt, Senior Fellow and Director of the Stein
Program on Counterterrorism and Intelligence, Washington
Institute for Near East Policy................................. 15
Prepared statement........................................... 50
Responses to written questions of:
Chairman Dodd............................................ 65
Senator Johanns.......................................... 69
Suzanne Maloney, Senior Fellow, The Saban Center for Middle East
Policy, Brookings Institution.................................. 17
Prepared statement........................................... 54
Responses to written questions of:
Chairman Dodd............................................ 69
Senator Johanns.......................................... 70
Danielle Pletka, Vice President, Foreign and Defense Policy
Studies, American Enterprise Institute for Public Policy
Research....................................................... 20
Prepared statement........................................... 59
Responses to written questions of:
Senator Johanns.......................................... 71
(iii)
MINIMIZING POTENTIAL THREATS FROM IRAN: ASSESSING ECONOMIC SANCTIONS
AND OTHER U.S. POLICY OPTIONS
----------
THURSDAY, JULY 30, 2009
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:04 a.m. in room SD-538, Dirksen
Senate Office Building, Senator Evan Bayh, presiding.
OPENING STATEMENT OF SENATOR EVAN BAYH
Senator Bayh. The Committee will please come to order. I am
pleased to call to order this hearing of the Senate Banking
Committee which will focus on how the United States can use
sanctions and other forms of economic pressure----
Senator Corker. Your microphone.
Senator Bayh. Ah, great. Thank you. I am grateful that you
are interested in what I am saying, Bob.
Senator Lieberman. It is very good to see the spirit of
bipartisanship at the outset.
Senator Bayh. Absolutely. No one goes without an adequate
hearing in the Banking Committee, Joe. Thank you, Senator.
I am pleased to call to order this hearing of the Senate
Banking Committee which will focus on how the United States can
use sanctions and other forms of economic pressure to prevent
Iran from acquiring a nuclear weapons capability.
I want to begin by thanking our Chairman, Senator Dodd, for
his assistance in arranging this hearing and for his support
and leadership on this important issue and his staff and the
staff of the Banking Committee as well. We all know that
Senator Dodd has many other demands on his time, and his
willingness to schedule this hearing, despite those demands,
demonstrates his commitment to confronting this serious threat.
As we gather here today, there is perhaps no challenge more
pressing or vexing than Iran's pursuit of nuclear weapons. The
extent of the three is well documented. The Iranian regime has
refused to cease its illicit nuclear activities in defiance of
multiple U.N. Security Council resolutions. It is the world's
foremost state sponsor of terrorism, and it has provided arms
and training to dangerous terrorists groups in Iraq,
Afghanistan, Lebanon, and the Palestinian Territories. And as
we have all observed so vividly in the past few weeks, it is
engaged in brutal repression of its own citizens.
If this regime were to acquire nuclear weapons, it could
spark a dangerous arms race in the Middle East, do irreparable
damage to the global nonproliferation regime, and pose a
serious threat to the security of the United States and our
allies. In confronting a threat of this magnitude, a sense of
urgency is in order.
I know that many Senators share my concerns about Iran, as
is evidenced by the legislation this Committee has considered
over the past several years. Last year, Chairman Dodd put
forward a sanctions bill that included some very noteworthy
measures. More recently, I introduced legislation with Senator
Kyl and Senator Lieberman called ``The Iran Refined Petroleum
Sanctions Act.'' This bipartisan bill would give President
Obama expanded authority to target what has been described as
Iran's Achilles heel: its dependence on imported refined
petroleum products.
Our bill has since won the support of 71 Senators from
across the ideological spectrum. This hearing, however, will
not focus exclusively on any particular legislation; rather, we
will focus more broadly on the relative advantages and
disadvantages of different forms of economic pressure.
We are fortunate to have with us today several noted
experts who have agreed to share their views on how the United
States can best use economic pressure as a tool to advance our
interests with respect to Iran. As we consider this question,
we should keep in mind that when it comes to Iran's nuclear
program, there are, unfortunately, no easy answers.
Accordingly, all of the different approaches we will
explore today are bound to have some drawbacks, and we are
likely to be faced with a choice among difficult options. I
firmly believe, however, that using economic pressure is far
superior to the extreme alternatives of standing idly by as
Iran goes nuclear or relying solely on a potential military
strike, which could have grave consequences and should be
contemplated only as a last resort.
As we consider our various options, we do so in cooperation
with President Obama's historic outreach to Iran. This outreach
has demonstrated to the Iranian people and the international
community that the United States is prepared to engage in
direct dialog to resolve our differences between our two
countries. The President's offer of engagement has also put the
regime on the defensive and made it more difficult for Iran's
leaders to blame the West for all of their problems.
While I have supported the President's outreach, I believe
that we have been wise to set a deadline for Iran to accept his
offer. I am also pleased that the Senate last week unanimously
adopted a resolution that I put forward, once again with my
friends Senator Lieberman, Senator Kyl, and Senator McCain,
that reinforced the deadline by making it clear to the Iranians
that they have until the G-20 summit at the end of September to
agree to negotiations or else to face sanctions.
While I sincerely hope that Iran's leaders seize this
historic opportunity for dialog, I believe that prudence
demands that Congress begin to lay the groundwork for a
different approach should Iran continue to reject meaningful
negotiations. Such preparations will demonstrate to Iran's
leaders that there will be grave consequences if they do not
agree to forego their drive for nuclear weapons.
To put it even more bluntly, if Iranian officials are
unwilling to sit down at the table and negotiate, then Congress
is prepared to authorize what Secretary of State Clinton has
referred to as ``crippling'' economic sanctions.
With each day that passes, Iran is installing more
centrifuges and producing more fissile material. According to
published reports, they have now accumulated enough low
enriched uranium for a nuclear weapon should the regime decide
to develop one, and by next February, they will have enough for
two weapons.
Conversely, our window of opportunity to stop Iran from
acquiring nuclear weapons is rapidly closing. The clock is
ticking, and at some point it will run out. As we have seen
with India, Pakistan, and North Korea, the clock can often run
out sooner than we think, with grave consequences for the
region and the world.
I hope that today's hearing will help underscore the depth
of the Senate's concern over Iran's nuclear program and will
demonstrate to Iran and to the international community that
Congress is prepared to act.
As I have previously mentioned, we are fortunate to have
with us today a distinguished group of panelists, beginning
with our friend and colleague Senator Lieberman. But before we
hear from them, I would first like to give my distinguished
colleagues an opportunity to share their thoughts, and we will
begin with my friend and colleague, our Ranking Member, Senator
Shelby.
STATEMENT OF SENATOR RICHARD C. SHELBY
Senator Shelby. Thank you, Mr. Chairman.
Once again, the Committee meets to hear testimony on Iran's
support for terrorism and its determination to develop nuclear
capability. This time, however, we meet at a time that is
marked by weeks of unprecedented social, economic, and
political upheaval in Iran. While many things remain unclear
about Iran and its future, two remain very clear: Iran's
nuclear ambitions and its sponsorship of terrorism.
Iran continues to make strides in both its nuclear and
missile programs, and it is still recognized as the so-called
central bank for terrorist financing. Over the years, various
administrations have attempted, with little or no success, to
moderate the regime's nuclear aspirations and to curb its
support for terror. Certainly time and experience have shown
that economic sanctions can be a mixed bag as a foreign policy
instrument. Sanctions and other financial measures, directly or
indirectly, have restrained some of Iran's activities. But we
have yet to implement a sanctions regime that produces the
desired result. It has become clear that we need a fresh
approach and that stricter controls may be necessary.
I appreciate our witnesses' willingness to appear before
the Committee today. I cannot help but note, however, that the
current administration is not represented at today's hearing.
The members of this panel will undoubtedly provide valuable
insight on the previous administration's efforts. Current
officials, however, would certainly be in a better position to
provide details or even discuss generally how the President
intends to engage Iran diplomatically and whether he would
support further sanctions on the regime. I hope we will get the
opportunity to have that discussion sometime in the near
future.
Thank you, Mr. Chairman.
Senator Bayh. Thank you, Senator Shelby.
I will recognize members in the order in which we arrived,
alternating sides of the aisle. Senator Tester.
STATEMENT OF SENATOR JON TESTER
Senator Tester. Thank you, Senator Bayh, and I want to
thank you and Chairman Dodd and Ranking Member Shelby for
having this hearing, and I welcome Joe Lieberman. Thank you for
being here, Senator.
This is an interesting issue on a couple different fronts
because I think that any sanctions that we apply, we cannot be
the only ones on the block doing it, I guess is what I want to
say. We need to make sure that it is a community effort amongst
the world, and how we get other folks to step up to the table
because, quite frankly, Iran's potential nuclear capabilities,
if they come to pass, will have a destabilizing impact on the
world. And so how we get other folks to step up and help us
keep that region stable, basically--that is what we are looking
for--is important.
And then as we look and see what has transpired over the
past while with the recent elections and the unrest that is
occurring in that country due, I think, to poverty and
unemployment and a government that is simply not responsive to
the people, how do we not distinguish that flame that is
burning? Because, quite frankly, I think that the people have
figured it out, and we do not want to stop them from
controlling their own destiny.
So I look forward to the hearing, look forward to the
panelists, look forward to hearing what they have to say about
the region. I by no means am an expert, but I certainly look
forward to the information.
Thank you.
Senator Bayh. Thank you very much, Senator.
Senator Corker.
STATEMENT OF SENATOR BOB CORKER
Senator Corker. Thank you, Mr. Chairman.
Mr. Chairman, I, as you know, do not ordinarily make
opening comments. I do want to welcome, though, Senator
Lieberman. There is a hearing in Foreign Relations on Sudan. I
just came from there. So I am going to be in and out. I want
you to know that is no disrespect to one of the most honored
witnesses we have had in recent times.
So thank you for having this hearing. It is very important,
and I look forward to learning from it.
Senator Bayh. Thank you, Senator.
Senator Menendez.
STATEMENT OF SENATOR ROBERT MENENDEZ
Senator Menendez. Thank you, Mr. Chairman.
I want to just briefly say that I appreciate this hearing.
It is timely and important. It is my personal view that Iran is
not simply an existential threat to our ally in the Middle
East--Israel--but it is a threat. And when I look at the fact
that Iran has made dramatic progress in its nuclear program
over the last 18 months, with the June IAEA report indicating
that it had increased the number of installed centrifuges by
1,200 in the preceding 3 months, and that its stockpile of low
enriched uranium is now at 1,339 kilograms, an increase of 33
percent since the February report, enough low enriched uranium
to produce a minimum amount needed to arm a bomb if the
material were further enriched to weapons grade; and in
addition to its growing enrichment process, Iran continues to
test fire ballistic missiles at a rapid pace, missiles that now
are capable of delivering a payload to Israel or our allies in
Europe, I am seriously, seriously concerned.
So I look forward--I believe and respect what the
administration is doing in terms of seeking to have a
diplomatic track, but I think the Congress strengthens the hand
of the President in having an alternative track, a parallel
track at the same time, and that is why I support your
legislation, am a cosponsor of it, and looking to hearing the
witnesses today to determine how do we best ensure that what we
universally do not want to see happens does not take place.
Thank you, Mr. Chairman.
Senator Bayh. Thank you very much, Senator Menendez.
Senator Martinez.
STATEMENT OF SENATOR MEL MARTINEZ
Senator Martinez. Mr. Chairman, thank you very much. A very
important hearing, of course. We all agree.
Senator Lieberman, a pleasure to have you, and to the other
distinguished panelists as well, thank you for being with us
today.
No doubt that Iran is on a path to achieving nuclear power,
a weapon. There is no doubt that that would be an incredibly
destabilizing event to the region, but it is also equally a
threat to the very existence of the people of Israel. We cannot
allow for this to occur. I appreciate the diplomatic track, but
I believe that all options must be available and on the table.
And I think the longer we wait, the more danger arises. I think
the time to act becomes closer and closer at hand.
I do not think there is any question that Russia does not
care about this outcome that we so much care about, and so I
think, so long as they are part of the P5-plus-1 process, that
nothing significant is going to come out of that.
Obviously, it is great to look at the diplomacy being a
part of this, but I have no hope that Iran voluntarily will
stop the path they are on. Even with the unrest that they have
had, there is really no indication that a changed government
would have a different idea on the pursuit of nuclear weapons
and perhaps even on the issue of the destruction of Israel that
President Ahmadinejad seems so intent upon.
So I am concerned and I think the fuse on our timeframe
grows shorter by the minute, and I would love to hear the
administration make a clear statement that all options continue
to be on the table and also that time is of the essence, and
that simply hoping for a negotiation to begin that is, in my
view, elusive at best, particularly with a government that
today you do not even know who you are to negotiate with
because I am not sure the power structures are intact in Iran
at the moment. I think that the time for more aggressive action
draws really, really close.
So thank you for being here. I look forward to hearing from
all of you.
Senator Bayh. Thank you, Senator Martinez.
Senator Merkley.
STATEMENT OF SENATOR JEFF MERKLEY
Senator Merkley. Thank you very much, Mr. Chair, and I
associate myself with the comments of my colleagues. I am
hoping that in the testimony today we can really get into the
details of understanding the potential features of a sanctions
strategy and why is it the 1996 Iran Sanctions Act did not work
so well. How do we bring in and strengthen and move from
unilateral to multilateral sanctions that might be more
effective? What are the levers with Russia and Europe and Asia?
And so that we have basically recognized over time that
sanctions are--there is no magic bullet here, but what can we
do that would make this tool the most effective one possible to
try to prevent this unacceptable threat of a nuclear weapon in
Iranian hands?
Senator Bayh. Thank you, Senator Merkley.
Senator Johanns.
STATEMENT OF SENATOR MIKE JOHANNS
Senator Johanns. Thank you very much, Mr. Chairman.
Let me start out today and say it is good to be here, and,
Senator Lieberman, I have so much respect for your thinking in
this area, and I wanted you to know that. I really appreciate
your strong leadership.
I look back over the events of the last few months with the
election in Iran, and I must admit that I am deeply worried by
not only the rhetoric that has come out of that country on
behalf of and by Ahmadinejad over the past years. But I am
deeply worried by this situation where I think because of the
election, because of the just aggressive violence, oppression
of any voice pushing back on the results of that election, that
unfair election, that Ahmadinejad has been emboldened by what
has happened.
For a long time, I would express the view that I really
felt that the religious leadership in Iran had complete control
over Ahmadinejad and where he was at and what he said. And I
have to tell you, after the election, I certainly appreciate
the power of the religious leadership there, but I also think
that they have seen the train leaving the station, if you will,
and they got on the train. And I worry about whether his power
has now been solidified and strengthened in a way where as long
as he pays deference to the leadership there, the religious
leadership, he can do about what he chooses to do.
If that is the case--and I would like to hear your thoughts
on that--then I think the dynamic is changing. And the threats
that sometimes seem crazy, the references to Israel that
sometimes seem too bizarre to be real, maybe all of a sudden
they are not bizarre anymore, and they are more real than
bizarre.
Those things, I think, are things we have to be paying
attention to. If, in fact, that is a new nuance that has
occurred in this very difficult part of the world, then we
really have to refocus on what our strategy is going to be, how
we are going to deal with this, what sanctions can have an
impact, because it seems to me so far we are not having an
impact in terms of sanctions.
So my hope is that in today's hearing we can focus on has
there been a new nuance added to this situation. Is Ahmadinejad
in a more powerful position than maybe he has ever been? And
what would the consequence of that be as we start to think
about how we work with this situation?
The final thing I will say--and I did not expect to speak
this long, but I feel so strongly about this relationship we
have with Israel and its importance to us. This is a part of
the world where it is hard to find friends, and this is a deep,
deep friend. This is a part of the world where it is hard to
find democracy, and this is a country that was established on
the basis of democracy and freedom. And I just think in every
way we can we have to stand by this friend and support them,
and the stronger we can speak as a Nation in that regard, I
think the better off we are in terms of our long-term strategy
for this part of the world.
With that, I will just wrap up and say again, Senator, I am
so anxious to hear your thoughts, and I appreciate your
leadership in this area.
Senator Lieberman. Thank you.
Senator Bayh. Thank you, Senator.
Senator Bennet.
STATEMENT OF SENATOR MICHAEL F. BENNET
Senator Bennet. Thank you, Mr. Chairman. I will be very
brief. I want to first thank you for your leadership in the
Congress on this incredibly important issue, for calling all of
our attention to it, and for Senator Lieberman's leadership as
well, thanks for being here today.
This is an enormously important topic for us. The threat is
real, both to the United States and to Israel, and the profound
instability that could result in the region if Iran were able
to acquire nuclear weapons should be of concern to every
American and every citizen on this planet.
I just appreciate your willingness to hold the hearing and
am deeply grateful, Senator Lieberman, that you are willing to
come talk to the Committee.
Thank you.
Senator Bayh. Thank you, Senator. I appreciate your kind
words. As I mentioned in my opening statement, Senator Dodd was
also instrumental in bringing us here today, so I want to let
you know that your gratitude should be shared with him as well
and his staff. So thank you for that, Senator.
I would like to thank our distinguished witness for his
patience in listening to all of us, and now the time has come
for us to benefit from his insights. If there was ever a
witness who truly needed no introduction to this panel, it is
our first witness, Senator Lieberman, our distinguished
colleague from the State of Connecticut. Senator Lieberman.
STATEMENT OF JOSEPH I. LIEBERMAN, A UNITED STATES SENATOR FROM
THE STATE OF CONNECTICUT
Senator Lieberman. Thanks very much, Senator Bayh, Senator
Shelby, and members of the Committee. Thank you for giving me
the honor of speaking before you this morning. Thank you for
your kind words during the comments you spoke. I am really
honored to be here.
I join you in giving credit to my friend and colleague from
Connecticut, Senator Dodd, for the leadership role he and this
Committee have played, and to Senator Shelby as a strong,
principled partner to Senator Dodd on these matters. Last year,
this Committee reported out critically important sanctions
legislation and endorsed it overwhelmingly.
I thank you, Senator Bayh, for your strong and persistent
leadership on this matter, and I will tell you what an honor it
was for me to work with you on the amendment that passed in the
Department of Defense authorization bill last week, and on S.
908, the Iran Refined Petroleum Sanctions Act, all very
important, as you said, quite remarkable.
You all have spoken so eloquently and well that I am going
to ask that my statement be included in the record because it
is repetitive, and I will see if I can just put in context, I
think, what we are all feeling and what this moment of
challenge is about.
The Senate is picking up its pace of action here. The
amendment that was adopted last week unanimously by the Senate
for the first time puts an explicit time schedule on sanctions
against Iran, and it adopts the schedule that President Obama
and President Sarkozy have stated, which is that if there is
not a reaction by Iran by the G-20 meeting that will be held in
Pittsburgh in the third week of September, action will have to
be taken.
And in our resolution last week, we said that that action
should begin with sanctions against the Central Bank of Iran.
Senator Shelby, you used the term that Iran has become ``a
central bank for terrorism worldwide.'' The Central Bank of
Iran is the central bank of support for terrorism and
sustaining the economy of Iran and, may I say, end-running some
of the other sanctions that a very creative, aggressive
Treasury Department under the Bush Administration, continuing
now under President Obama, have imposed on Iran.
So
Do this, Mr. President
is what we said last week
at the G-20 or right after it, if there has been no response
from Iran or if within 60 days of that summit they do not stop
their production of enrichment on fissionable material.
S. 908, as you said, has 71 Senate sponsors, broadly
bipartisan. I would say, if you look at the list, it includes
some of the most liberal and some of the most conservative
members of the Senate. And there is power in this because it
sends a very clear message to Iran and the rest of the world
that no matter what may divide us on other issues, we are very
united in our concern and our anger about the Iranian program
of nuclear weapons development and our commitment to urge and
push and pressure and legislate our Government to be very
strong in doing everything we can to stop that development.
Now, why does it worry us? Iran is a great country with
great people. The whole history of Persia is of an
extraordinarily bright, well-educated, highly developed
culture. In 1979, the government was taken over--a complicated
situation, I understand, but the reality--taken over by a
fanatical Islamist regime. And it has grown more fanatical over
the years, both with regard to its neighbors and the rest of
the world, and with regard to its people. And too often in our
discussion of Iran here, we, quite understandably, talk about
the threat it represents to Israel, the threat it represents to
the United States, the threat it represents to stability in the
Middle East. But it has represented a daily threat, and not
just a threat, but the reality of suppression and the denial of
freedom and the brutal treatment of dissenters, to its people
ever since this revolution took place.
This is a fanatical regime that is also an expansionist
regime, and it has chosen to work through proxies, terrorist
proxies--Hezbollah, Hamas, the Shia extremists in Iraq--who
have on their hands the blood of hundreds of American soldiers
who would not have been killed there were it not for the
support that the Iranian Revolutionary Guard Corps was giving
to those extremists in Iraq.
Now we have a situation where, as a result of the public
uproar over the blatantly unfair elections, two things have
happened. One, the world now sees what we cannot see every day
because it is a closed society: the terrible repression that
the Iranian people live under. And I always remember--I think
it was Sakharov who said during the dark days of Soviet
communist oppression that how can the world rely on the word of
a nation that lies consistently to its own people and
suppresses their freedom?
But here is what I worry about, and, Senator Johanns, I
think you have asked a very interesting question. I worry--and
history gives us, I think, a basis for this worry--that
nations, particularly dictatorial nations, when they are in
domestic difficulty--and this regime is in trouble right now in
Tehran--very often look to generate an international crisis,
and through that crisis try to unite the people behind them
again. So I think we are in perilous times.
As you have all said, every day that goes by, more of those
centrifuges are spinning, more fissionable material is being
created. They have enough for one bomb now. They are soon going
to have more than that.
What happens when they achieve that capability? Well, of
course, for Israel, listening to the words of Ahmadinejad and
all the others, including some who today are described as
moderates who say ``Death to Israel''--it represents an
existential threat.
But we also have to remember the cheers of ``Death to
America,'' too. And, you know, we do not have to go back too
far--only, unfortunately, to Osama bin Laden--to know that at
our peril do we not listen to threats against us that seem so
fantastic that they are unbelievable. But it is a real threat.
Also, if you have been to the Middle East, as many of you
have been, what has been striking to me is that the anxiety
level about Iran and the Iranian nuclear weapons program is as
high and intense at the leadership of the Arab countries as it
is in Israel. The threats are not made to the Arab countries,
but they feel the danger. And what they feel is if Iran gets a
nuclear weapon, the balance of power switches in the Middle
East.
For us, this is very significant because over decades we
have been committed to that stability, worked hard, spent a lot
of money, lost a lot of lives to preserve that stability. That
will be greatly disrupted if the Iranians get a nuclear weapon.
There will be a powerful motivation in some of the larger Arab
countries to develop their own nuclear capability. It will be,
I think, the end of the international nonproliferation regime.
And it will strengthen the terrorist proxies of Iran, because
behind terrorist action then will be nuclear blackmail.
I think this is about the most unsettling thing--in a world
that seems very unsettled--that could happen. The greatest
threat to peace is for Iran to get a nuclear weapons
capability.
So, for all those reasons and because time is not on our
side, we have very few options to peacefully draw this to a
close in a positive way.
It is why I support President Obama's initiative to engage
with Iran. We have got to test that, but we have got to test
it, as you have said, on a time-limited basis. They can't drag
this out as the Iranians did with the Europeans.
I think what is becoming increasingly clear because of this
initiative and the deadly silence of the Iranians in response
to it--not only publicly, but from everything I can determine,
privately--that the world has to recognize that the problem
between Iran and the United States is not in Washington. It is
in Tehran.
And I think it will become increasingly clear that only
through what Secretary Clinton described earlier this year as
crippling sanctions do we have a chance to convince the
Iranians to stop this nuclear weapons program and to save
ourselves from exactly the choice that Senator Bayh described,
the most difficult choice between doing nothing in regard to a
nuclear Iran and taking military action, because that is the
choice we will be faced with. To me, in that moment, I think
there is only one choice, but we don't have to make it now and
it is why these sanctions proposals are so important.
I think we are at this point. I think, as someone else said
to me, the only thing that the fanatical regime in Tehran cares
more about today than the development of nuclear weapons is the
survival of their regime. And I think with the instability in
Tehran today politically, crippling economic sanctions may
reasonably lead the regime to wonder whether it can survive and
to lead it to do what it ought to do to become part of the
family of nations.
So I think that S. 908 is the next significant step. They
depend on refined petroleum products. This bill will basically
say to companies worldwide who are selling gasoline to Iran,
who are shipping it to Iran, or who are ensuring or financing
those shipments, you have got a choice to make. You can
continue what you are doing with Iran or you can do business in
the United States of America. You cannot do both.
I think time is of the essence. I appreciate greatly that
you are holding the hearing this morning. I hope that the
Committee will consider marking up this bill and reporting it
out in September. Remember, it is not mandatory. It gives the
President the authority to impose these sanctions, and I think
only if the Iranians see that these sanctions are coming do we
have any hope of avoiding the stark choice that you, Mr.
Chairman, have laid out.
When you depart from your prepared text, you speak longer
than you otherwise would. But your opening statements really
inspired me to do that. I thank the Members of the Committee
and I have great confidence in your judgment on this matter and
so many others that come before you, as well.
Senator Bayh. Thank you, Senator Lieberman.
First, without objection, I will order the entry of your
full statement into the record. So ordered.
Thank you for your very insightful and sobering comments
today. You have been a longtime leader in this area, and I know
I speak for the entire Committee when I say how grateful we are
for your leadership and your testimony today.
Senator Lieberman. Thank you very much, Senator Bayh. Good
morning.
Senator Bayh. Good morning.
I would like to ask the next panel of witnesses to please
join us.
While they are taking their seats, I would like to ask my
colleagues, we are fortunate to have four very distinguished
individuals with us today. That means the list of their
accomplishments is rather lengthy. I ask my friend and
colleague Senator Shelby, if it is all right with him and the
rest of the Committee, I would like to have ordered the entire
list of their credentials into the record, but in the interest
of saving time, I will just cite their current place of
employment.
Senator Shelby. That is fine.
Senator Bayh. With no objection, we will proceed that way
and I will order their entire resumes entered into the record.
Senator Bayh. I would like to thank our witnesses for
joining us today. I am well aware that they have busy schedules
and so I speak for the entire Committee when I say how grateful
we are for your time and for the benefits of your thinking on
this important area.
As I mentioned, I am simply going to list your current
place of employment and enter into the record your entire list
of credentials. Because you are all so accomplished, it would
take us quite some time to go through the entire list of
academic accomplishments, employment history, and that sort of
thing.
We are first joined by Ambassador Nicholas Burns, who is
with us today. He is a Professor of the Practice of Diplomacy
and International Politics at the John F. Kennedy School for
Government at Harvard University.
Next, we have Dr. Matthew Levitt, Director of the Stein
Center on Counterterrorism and Intelligence at the Washington
Institute for Near East Policy. Thank you, Dr. Levitt.
Next, we have Dr. Suzanne Maloney. I guess I am skipping
over one in the order of the table here, but that is the way it
has been given to me. I will come back to you, trust me,
Danielle. She is Senior Fellow at the Saban Center for Middle
East Policy at the Brookings Institution.
And we also have Ms. Danielle Pletka, Vice President of
Foreign and Defense Policy Studies at the American Enterprise
Institute for Public Policy Research.
I would like to thank you all for joining us today, and
Ambassador, we will begin with you and then go in order down
the table. Ambassador Burns?
STATEMENT OF NICHOLAS BURNS, PROFESSOR OF THE PRACTICE OF
DIPLOMACY AND INTERNATIONAL POLITICS, HARVARD UNIVERSITY
Mr. Burns. Senator Bayh, thank you very much. Senator
Shelby and Members of the Committee, it is a pleasure to be
here. I have testified before this Committee as a government
official during the Bush Administration in the past. This is my
first time testifying as a private citizen, so obviously the
views I am about to express to you are entirely my own. But it
is a pleasure to be here.
I will not read my statement. I will take mercy on the
Committee. I submit it for the record, obviously. But I would
just like to say that----
Senator Bayh. We will have to call you more often to
testify, Ambassador Burns.
[Laughter.]
Mr. Burns. I will just make a couple of points that are at
the heart of my statement.
First, let me just say that I agree very much with the
sentiment that I think every Member of the Committee made in
the opening remarks as did Senator Lieberman. I can think of no
foreign policy challenge to our country that is more serious
and perhaps more pressing than the challenge of a nuclear-armed
Iran.
There are three challenges to our national security posed
by Iran. First is a nuclear weapons future that would
destabilize the balance of power. It would confront Israel with
a terrible strategic situation and confront our Arab friends
with the same situation.
Second, as Senator Shelby has pointed out many times, Iran
is the major funder of most of the Middle East terrorist groups
that are a problem for us, a problem for the Israelis, a
problem for the Iraqis, and in other parts of South Asia.
And third, Iran is highly significant and highly
influential in Afghanistan and in Iraq, so we have a real
challenge here. We Americans should seek to maintain our
position as the dominant power in the Middle East because our
influence is positive in that region and Iran's is not. But
that is a strategic challenge that is posed for the United
States by the rise of power of the Ahmadinejad government over
the past 4 years.
I would defer to other panelists, especially Suzanne
Maloney, who is a great expert on the internal politics of
Iran. But, as many of you have said, I think the events of the
last several months--from the lead-up to the elections, to the
June 12 elections, to the extraordinary aftermath and the
opposition that we saw in the streets of Iran of all classes,
all ages, all ethnic groups--pose a real challenge now to the
Iranian government. I believe the Iranian government has been
weakened by this whole episode and we should seek to diminish
its strength further.
I think we do have the upper hand as a country, we and the
coalition of countries with which we are working, and we should
seek to diminish Iran's strength in the wake of this political
crisis.
Now, I know that many people think we should at this time
not deal with the Iranian government at all because, of course,
people say, well, if you deal with a government, you might
legitimize it and it might be an affront to the demonstrators.
I have some sympathy with that because I think most Americans
looking at these events immediately sympathized with the people
in the streets who wanted liberty and wanted a better
government and wanted a better future. That is obvious.
I think the problem with isolating them now and not talking
to the government at all is that it probably weakens our
ability to be effective in opposing them and in providing for a
more difficult and energetic sanctions regime to pressure them.
So my view is that--and I am a former official of the Bush
Administration--is that I think that President Bush's strategy
of two paths, because that is how he and Secretary of State
Condoleezza Rice articulated it, is the correct one, and I
think that President Obama is essentially following that same
basic strategy, and so I support what President Obama is trying
to do.
Here are the two paths. We, the international community,
would say to the Iranians, we are willing to negotiate in a
very short window, as many Members of the Committee have said.
Given the fact that they have stonewalled negotiations, the
Iranians, they have prevented them for 3 years now. We are
willing to negotiate and sit down with you. The object of those
negotiations, I believe, should be--I think it is the Obama
Administration's idea, as well--to seek an end to the nuclear
weapons project of Iran. If it is not possible to negotiate
successfully that objective in a very short period of time,
then I think we will have much greater credibility to say to
the Russians and the Chinese, the Europeans and others, you now
need to join us in draconian sanctions against the Iranian
regime.
I think that if we refuse to negotiate at all, we diminish
our ability to be successful in arguing for subsequent
sanctions.
I would just make one further point on this. I think it is
likely, if the parties even get to the negotiating table, that
the negotiations will likely not succeed, because I think the
Iranian government under Ahmadinejad is so determined to create
a nuclear weapons future for its country, it is not likely to
agree to the object of these negotiations that I just cited, an
end to that program.
Therefore, that sets up this important question of
sanctions, which is at the heart of the bill that you have put
forward, Senator, and that so many Senators have cosponsored.
What type of sanctions and what type of flexibility should the
President and the executive branch have? I would just say that
you are right to consider sanctions of every kind, strong
financial sanctions, economic sanctions, and energy sanctions,
because those have not been tried in the past, the energy
sanctions, and that is Iran's Achilles heel.
I would just say two things. I think it is important that
the President maintain his flexibility to conduct foreign
policy because this is a shifting situation. It is a situation
that is highly complex and I wouldn't favor any legislation, or
I wouldn't suggest any legislation that would tie his hands,
that would mandate deadlines for him. But if he is given
sufficient waiver authority, then I think these types of
sanctions are likely to have the greatest potential impact on
the Iranian government and they may be the only thing that will
convince Iran to think twice about going forward with a nuclear
weapons project in the face of concerted international
opposition.
The second point I would make on sanctions, Senator, would
be I think it would behoove the United States, both the
administration and the Congress, to try to convince other
countries of the world to make these sanctions multilateral and
not unilateral. Because despite the best intentions of the
Congress or our government or any one of us on this panel, if
Americans are the only ones sanctioning, those sanctions will
not succeed. We need to convince the Russians and the Chinese,
the Europeans, the South Koreans, the Japanese, the Arab
countries that are trading partners of Iran to join us in these
sanctions. So if there are going to be financial sanctions,
then they have to be universally applied, and the same is true
of energy sanctions.
The last point I would say is this, and I will finish on
this point, and forgive the length of these extemporaneous
remarks. I think that we would be well served if we didn't
allow our national debate to come down to, well, either it is
negotiations with Iran or it is war. I think that we can have a
more complex strategy of negotiations combined with sanctions,
of negotiations combined, as I think Senator Shelby said, with
the threat of the use of force. We must keep all options on the
table, in my judgment. I think we have to say that all options
are on the table. The Iranians will understand that. They may
be more impressed with that than anything else.
And I think it is very important that diplomacy and the
threat of force be combined here so that we bring the national
power of the United States to greatest effect to try to
convince the Iranians, as well as to try to impress our
negotiating partners on our side of the table that we are not
going to live with a nuclear armed Iran.
And I would just end by saying that I don't think it is
inevitable that we are going to have a war with Iran. I still
maintain some hope that a combination of skillful diplomacy
with the threat of force, with the threat of very tough
sanctions, might succeed in convincing the Iranians to back
down. Should that not happen, then, of course, the President
and the Congress will be faced with a truly excruciating
decision, the use of force or the construction of a containment
regime in order to limit Iranian power against Israel, against
the Arab world, and against the United States. That is down the
road. I don't think you face that now, but that ultimately is
what the stakes are, I think, in this very difficult problem.
Thank you.
Senator Bayh. Thank you, Ambassador, very much. I look
forward to having an opportunity to explore your thoughts in
further depth during the round of questioning.
Dr. Levitt?
STATEMENT OF DR. MATTHEW LEVITT, SENIOR FELLOW AND DIRECTOR OF
THE STEIN PROGRAM ON COUNTERTERRORISM AND INTELLIGENCE,
WASHINGTON INSTITUTE FOR NEAR EAST POLICY
Mr. Levitt. Thank you, Senator Bayh, Senator Shelby,
Members of the Committee. It is an honor to be here. It is an
honor to be on a panel with such distinguished experts.
Allow me to maybe start off where Ambassador Burns finished
in explaining a little bit about the sanctions strategy, as
someone who was at Treasury when we first started implementing
it, because a lot of people ask me, well, if this hasn't ended
Iran's pursuit of nuclear weapons, if it hasn't changed their
calculus, if it hasn't prevented them from doing what they
wanted to do, then really how effective are these tools anyway?
The answer is that targeted financial sanctions were never
intended to solve your problem. This is not a silver bullet. It
is not a panacea. On their own, financial tools can only do so
much and they were always planned that way. But coupled with
other tools, as Ambassador Burns said, especially robust
diplomacy and a credible military presence in the region,
financial measures, I believe, can effectively create leverage
for diplomacy in particular. That diplomacy should focus on
Iran, but also on Russia, on China, and on our European and
Asian allies and the Gulf States, among others.
There are three critical things that sanctions can
accomplish. The first is to disrupt Iran's illicit activities,
make it more difficult for them to do what they want to do,
constrict their operating environment, and even if it doesn't
completely stop the program, they are still effective.
The second is to deter third parties from knowingly or
unintentionally facilitating Iran's illicit activities.
And the third and the most difficult is impacting Iran's
decisionmaking process so that the continued pursuit of these
illicit activities themselves are reconsidered.
Some question the wisdom of employing sanctions when the
administration is seeking to pursue engagement. Others question
the wisdom of employing sanctions that might give the regime,
in the wake of the June 12 elections and protests that
followed, a straw man and a scapegoat to blame for all their
ills, though now Great Britain has taken the number one slot
and we are down to number two.
My own conclusion is just the opposite. This is exactly the
time to use financial tools to build leverage for diplomacy.
With a hard-line regime so significantly delegitimized at home
to the point that both moderates and hard-liners alike have
overtly questioned the decisions of the Supreme Leader, the
regime's ability to easily deflect criticism over the state of
Iran's economy, as a result of sanctions imposed over the
nuclear program, I think, is significantly undermined. The
regime faces far greater legitimacy crisis over its handling of
the sham elections, the IRGC-related Basij militia crackdown on
Iranian citizens protesting the election, the demonization of
those protestors by senior leaders, and the incarceration of
protesters.
Given that Iran's nuclear program continues to progress,
one thing is clear, as you have all said and we have heard here
already: we do not have the luxury of time. Therefore, the only
question is not whether or not to use sanctions, but what
sanctions, targeting which entities, under which tools and
authorities, and in what order. And so here are a few ideas.
First, I think we should seek international consensus and
multilateral sanctions, including, as Ambassador Burns said,
multilateralizing our efforts focused on the energy sector. I
think that the deadline of the G-20 here is critical, and among
the targets that we should be focusing on first, at the U.N.,
are those that the U.N. has already made a shot over the bow.
For example, UNSCR 1803 explicitly called on member states
to exercise vigilance over the activities of financial
institutions in their territories with all banks domiciled in
Iran and their branches and subsidiaries abroad. There are
several banks that we in the United States have sanctioned that
have not been sanctioned by the United Nations yet. We should
take those actions. We should target Bank Mellat. We should
target Bank Melli. We should certainly consider targeting Bank
Merkazi, the Central Bank of Iran, as you have heard.
I also think we need to focus on the IRGC elements that are
involved in the missile and nuclear weapons programs, and also
in terms of the more recent Basij crackdown on peaceful
protestors. Khatam al-Anbia, the IRGC-affiliated engineering
conglomerate, is very involved in the oil sector. We have
already designated it unilaterally. It would make a very good
target for multilateral designation. In fact, it has already
been listed by the European Union. And IRISL, the Iranian
shipping line, which has also been called out by the U.N.
Security Council as a company that has engaged in proliferation
shipments and which we have already designated, a designation
that would have, I think, significant impact.
Multilateral action, however, is very difficult. Russia is
not on board yet. China is not on board yet. And so if we are
to do something around the time of the G-20, we may have to
take some other unilateral actions, bilateral actions with
other countries, with other regional bodies, as well, and we
should not shy away from doing that.
Nor should we shy away from actively supporting the efforts
of multilateral technocratic bodies like the FATF. The FATF's
multiple warnings on Iran have had a very significant impact on
Iran's ability to do business. FATF's letters calling for
enhanced due diligence, highlighting the shortcomings of their
anti-money laundering system, and most recently, instructing
countries to begin developing countermeasures, as they
described them, to deal with Iran's illicit financial
activities have been very effective.
I do think, however, that it might be time to engage in
less targeted financial measures. The targeted financial
measures campaign focusing on Iran's illicit conduct has been
very successful in getting people on board. But I agree, as we
have all said today, that the true Achilles heel of the regime
is the energy sector. And even though the regime has great
expertise in the formation of front companies and sanctions
busting, if we were to have a robust program in place,
especially if we weren't the only ones doing it, they would not
be able to make up for that 40 percent of reimported refined
petroleum. It would have a tremendous impact, I believe.
There are other things that need to be done, especially
focusing on Iran's continued ability to transfer arms and
technology, and I will just cite one thing in that regard. For
example, I think we should encourage implementation of the
World Customs Organization's Draft Framework on Standards to
Secure and Facilitate Global Trade. This is something DHS has
thought a lot about and I think it is something that would make
a big difference. We all saw earlier this year when the
Monchegorsk, the Cypress-bound Iranian chartered ship which was
carrying weapons, we believe for Syria, perhaps further on,
that clearly, we have holes in our current program.
So to conclude, it seems clear to me that today, Iran is
politically and economically exposed. Even as it continues to
pursue a nuclear program and other illicit activities, these
sanctions are no panacea. The fact is, if properly leveraged,
in tandem with other elements of national power--this tool will
not solve anything by itself--the pinch of targeted financial
measures could ultimately have a much bigger punch.
Thank you very much.
Senator Bayh. Thank you, Dr. Levitt.
Ms. Pletka? Or we can skip over to Dr. Maloney. Dr.
Maloney, by the way, did I have the benefit of hearing you at
an Aspen Institute conference once on the Middle East?
Ms. Maloney. You did.
Senator Bayh. Yes. You were very impressive then, and I am
sure you will be, as well, today.
STATEMENT OF SUZANNE MALONEY, SENIOR FELLOW, THE SABAN CENTER
FOR MIDDLE EAST POLICY, BROOKINGS INSTITUTION
Ms. Maloney. Well, thank you. Thank you very much, Senator
Bayh, Senator Shelby, Members of the Committee. I am very
grateful for this opportunity to be here and very honored to be
part of this panel.
The Islamic Republic today is contending with an almost
unprecedented array of internal challenges. The persistence of
street skirmishes and passive resistance to the regime, the
increasingly uneasy straddling of a broad array of conservative
politicians, the mutiny against the Supreme Leader's unfettered
authority by a quartet of veteran revolutionary leaders, as
well as senior clerics, all this clearly marks the opening
salvo of a new phase of existential competition for power
within Iran.
At this stage, it is impossible to predict precisely where,
when, and how Iran's current power struggle will end. In the
near term, the Islamic Republic will likely survive this
crisis, thanks to the same tactics that have preserved it for
the past 30 years, behind-the-scenes deals and mass repression.
But we don't know where Iran is going from here and I think
that is an important point to make at the outset of our
discussion of U.S. policy tools.
I was asked to say a few words about the Iranian economy.
Let me tell you that Iran is an economy that has recorded
respectable growth rates in recent years. It is a wealthy
country, but it has serious economic problems: Double-digit
inflation, power shortages, a tumbling stock market, stubbornly
high unemployment rates, particularly among its large young
population, increasing dependence on volatile resource
revenues, and perhaps most ominously for the Iranian
leadership, a rising tide of popular indignation about economic
frustrations.
Ahmadinejad was elected on the basis of economic
grievances, but he governed in an ideological fashion and, for
his part, bears a lot of responsibility for the continuing
economic problems of the country. What has really galled
Iranians is the opportunity that has been squandered over the
past 4 years. Iran's oil revenues during Ahmadinejad's first
term exceeded 8 years of revenues under either of its previous
presidents. Forty percent of all of Iran's oil revenues in the
past 30 years have come in under Ahmadinejad's watch, and
really, very few people know where that money has been spent.
The unrest of the past 6 weeks is likely to exacerbate
Iran's economic problems and put solutions to its long-term
structural distortions that much further out of reach. And
should the political situations degenerate, opposition economic
actions may well further paralyze the Iranian economy.
And let me speak for a moment about U.S. policy options.
The events since the June 12 elections have changed Iran in
profound fashion and it would be counterproductive to suggest
that this were not the case. The United States must adjust our
assumptions about Iran and our approach to dealing with our
concerns about Iranian policy.
But the turmoil within Iran haven't altered our core
interest vis-a-vis Iran, nor has the turmoil effectively
strengthened the case for alternatives to the stated policy of
the Obama Administration to engage with the Iranian regime.
Engagement will require talking to some particularly unpleasant
people, but the administration's interest in diplomacy was
never predicated on the palatability of the Iranian regime but
on the urgency of our concerns.
Like Ambassador Burns, I am sympathetic to the concern that
bilateral negotiations would somehow legitimize the regime. But
diplomacy does not confer a seal of American approval on its
interlocutors. To the contrary, the Iranian regime, in fact,
derives whatever remaining legitimacy it has from its
revolutionary ideology that is steeped in anti-Americanism. If
we can successfully draw them to the bargaining table on our
urgent concerns, negotiations would only undercut their
attempts to stoke revolutionary passions at home and rejection
of sentiments across the region. And negotiations, even if they
don't succeed, would help exacerbate divisions within the
regime.
Negotiations are unlikely to succeed in the short term.
There is a precedent I would cite, and that is the successful
negotiations over the hostage crisis in the late 1979 to 1981
period. They were difficult. We were not dealing with
moderates. Our Iranian interlocutors were people whose
authority, credibility, and interest in resolving the crisis
was very much in doubt.
What made those negotiations eventually successful and
produced what has been a durable agreement in the Algiers
Accords were a variety of tools, including secret talks and the
involvement of a third-party mediator, but also the presence of
a fact that clarified the minds of our Iranian interlocutors,
the Iraqi invasion of Iran.
In a similar respect, any U.S. effort to negotiate with
Iran right now would benefit from the identification of
incentives and counterincentives that will focus the minds of
the Iranian leadership. In this respect, there is a direct and
mutually reinforcing relationship between engagement and the
identification of sanctions if Iran chooses to proceed with
non-cooperation. The threat of sanctions may be the only
effective means of persuading Iran's increasingly hard-line
leadership that their interests lie in constraining their own
nuclear ambition.
In addition, the offer of dialog with Iran represents the
most important factor for creating a framework for long-term
economic pressures. We know from the experience of the Bush
Administration that Russia, China, and in particular also the
Gulf States have proven averse to the steps that would really
constrain their economic relations or their strategic
relationships with Tehran. The minimum price for achieving
their support for and participation in significantly
intensified economic pressure will entail a serious American
endeavor at direct diplomacy with the Islamic Republic.
As a result, we should be coordinating our next step as
closely as possible with all of these states. In particular, we
should be stepping up our dialog with Beijing, whose interests
with respect to Iran diverged substantially with those of the
Russians and whose investments in Iran reflect a long-run
effort to secure prospective opportunities rather than a short-
term calculus, and I think we can leverage that long-term
interest.
I understand now the buzzword in Washington is ``crippling
sanctions,'' but the simple reality is that we alone in the
United States don't have the capacity to cripple the Iranian
economy with our sanctions, which means that multilateral steps
represent the only real alternative to a negotiated solution.
While Iran is certainly capable of change, we have to recognize
that economic pressures alone in the past have not generated
substantial modifications to Iranian policy. Where they have
worked, it has been where they have particularly played into
the perceptions and utility of swaying critical constituencies
within Iran.
Let me just finish by suggesting that the choice posed in
one of the previous panel member's discussions between doing
nothing and military action, I think is really a fallacy. We
are the United States. We are a superpower. We deterred the
Soviet Union and a Chinese regime that was responsible for the
murder of 30 million of its own citizens. We can deter and
contain Iran. Economic pressures will be part of that.
Thank you.
Senator Bayh. Thank you, Dr. Maloney.
Ms. Pletka.
STATEMENT OF DANIELLE PLETKA, VICE PRESIDENT, FOREIGN AND
DEFENSE POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE FOR
PUBLIC POLICY RESEARCH
Ms. Pletka. Thank you very much, Senator Bayh, Senator
Shelby, for all of your leadership on this issue and for
inviting me to testify here today. It is a pleasure to be on
such a distinguished panel.
For the first 7 months of this year, the Congress has been
extraordinarily--unusually, I would say--deferential to the
President and careful to do nothing that might undercut the
prospects for success in direct diplomacy with Iran.
While the U.S. Congress and the United Nations have stood
down, however, change has been in the air in Iran. I think my
colleagues have talked a lot about the circumstances on the
ground.
What we have seen on the nuclear front is that Iran has
continued its enrichment activities and claims to have now
7,000 centrifuges spinning at Natanz, an operational uranium
conversion plant at Isfahan, and continuing operations at the
heavy water facility at Arak.
As Dr. Maloney detailed, on the economic front there is
very little good news, despite some years of extraordinarily
high oil prices, very, very high unemployment, inflation at
over 22 percent, the central bank announced this week.
And on the military and paramilitary fronts, Iran has
continued to refine its delivery systems. In May they tested a
solid-fuel ballistic missile with a range of 2,000 to 2,500
kilometers, and they continue to deliver weaponry to Hezbollah
in Lebanon.
Finally, on the political front, we are well aware of the
aftermath of the elections, the fraud, the outpouring by the
Iranian people, and the brutal repression and murder of
protesters and opposition members.
I think even the closest of Iran watchers are unsure of
what is next in Iran. But I think that many have failed to take
into account the radical transformation of the country and the
fact that the Iranian Revolutionary Guard Corps has quietly and
very systematically taken over the reins of power inside the
country.
They have really come to dominate all sectors of Iranian
life, including the economy, the military, and as we saw in the
last month, domestic politics.
On the economic side, most interestingly, what that means
for countries and for companies that are doing business in
Iran, it means that if you are doing business there, you are
probably doing business with the IRGC.
It is always possible that the regime does have a surprise
in store. The Iranian Foreign Ministry has promised us a
package aimed at assuaging--this was a great phrase--the
``economic, cultural and moral crises'' of the world. I know we
are all looking forward to seeing that. And some have persuaded
themselves that only hardliners in Iran can successfully
deliver a credible deal to the Europeans and the Americans. But
I think that that optimism flies in the face of every statement
that we have seen from every member of the government,
including so-called reformers.
Meanwhile, however, Iran has chosen not to accept the
outreached hand of the Obama Administration and others and
rebuffed an invitation from Secretary Clinton to attend the G-8
meeting. Indeed, the regime explicitly attempted to embarrass
the President by leaking a letter, a private and personal
letter, that President Obama had sent to the Supreme Leader,
leaking it to an American newspaper--something I do not think
that they have done in the past.
I believe that the time has come to reassess the value of
our current policy. I think that those who suggest that we are,
in fact, proceeding on two tracks are wrong. I think we have
been proceeding on one track. That need not be a repudiation of
engagement, but it should be an acceptance of the reality that
the free pass engagement on offer by the administration has
bought little more than time for Iran to install more
centrifuges.
In part because of our silence, the decline in trade
between Iran and certain countries of the European Union--now
Iran's second largest trading partner after China--has begun to
reverse itself.
More troubling, the increases in trade with Europe have
been dwarfed by the explosion in Iran-China trade. More than
100 Chinese state companies operate in Iran, with bilateral
trade reaching over $27 billion in 2008--by the way, a 35-
percent increase over 2007.
Despite the growing movement for divestment from state
sponsors of terrorism, there have been scores of major
transactions in Iran in the last couple of years, most in the
oil and gas and construction sector, with values in the
hundreds of millions of dollars, including companies ranging
from France's Renault and Peugeot to Germany's Krupp, Siemens,
Toyota, Royal Dutch Shell, Gazprom, Hyundai, Spain's Repsol,
and many others.
Perhaps more important than the moral and financial suasion
of divestment, however, is the tool that has yet to be used by
the international community to persuade Tehran of the wisdom of
coming to the table, and those are restrictions that you
yourselves have been talking about here today--restrictions on
the export to Iran of refined petroleum products and equipment
to enhance Iran's own refinery capacity. I think that S. 908
really does afford the President the opportunity to address
that.
Iran is heavily dependent--we know that, we have talked
about it--on imported refined petroleum. They are trying to
address that problem at home, though. Using this pressure point
quickly and decisively will do more to convince the Tehran
government of the world's seriousness than any number of
videograms and letters and goodwill visits.
Iranian refining capacity, imports, and shipping are
concentrated in fairly few hands. News reports indicate that
supplies come largely from two Swiss firms--Vitol and
Trafigura. And then there are the insurers without which these
shipments would halt, reportedly including Lloyd's of London,
Munich Re of Germany, Steamship Mutual Underwriting
Association, and others of the U.K.
Companies helping Iran gain refining independence--which
could be subject to sanction under S. 908--include British
Universal Oil Products, which is a subsidiary of the U.S.-based
Honeywell; Axens and Technip of France; Sinopec; Hyundai of
South Korea, and others.
Mr. Chairman, even proponents recognize that sanctions are
a blunt tool. They are, as we have all said, not a silver
bullet, and they may not--in fact, they will certainly not
deliver an end to the Iranian nuclear program. But they will
help force a decision inside the Tehran regime about the value
of the nuclear program and the wisdom of remaining isolated
from the world in order to further that program.
In truth, I think that the choice is really not between
engagement and sanctions. Rather, it is only by applying the
toughest possible sanctions that we stand any chance of
persuading Iran's leaders to consider serious negotiations with
the international community. And it is time to give the
President the additional tools he needs to do just that.
Thank you very much.
Senator Bayh. Thank you, Ms. Pletka. I appreciate your very
good testimony here, and I particularly appreciate your joining
us, even though you apparently may be under the weather a
little bit. So thank you.
Ms. Pletka. No. It is so cold in here.
Senator Bayh. You feel cold in here? In spite of all the
hot air emanating from this institution?
[Laughter.]
Senator Bayh. Well, we will now begin the round of
questioning, and I thought this was an excellent panel, and we
will have 5 minutes per member and then a second round if there
are sufficient questions thereafter.
Let me begin, and I think--this is just for the record. I
think, Dr. Maloney, you touched upon this, although at least
indirectly everybody else did as well. Following the invasions
of Afghanistan but particularly the invasion of Iraq, there was
a brief window there where, through back channels, the Iranians
were reaching out to us looking for ways to cooperate, even
suggesting perhaps some accommodations could be made here. They
were just tentative feelers, that sort of thing.
My takeaway from that was that they were very impressed by
action and material consequences. They were worried. The regime
on their east had been changed. The regime on their west had
been changed. They were beginning to think--as some of you
suggested, they care most about regime preservation. They were
beginning to think about their own situation, and so they began
to moderate their behavior a little bit.
What insight does that offer us into how we can actually
change their behavior with regard to their quest for nuclear
weapons? Doesn't it suggest that, you know, at least the
potential threat of or the thoughtful application of sanctions
with material consequences is our best hope to change their
behavior? Is there any useful insight to be gained from their
outreach following Afghanistan and Iraq, at least for a brief
window that then closed after they began to realize that Iraq
was really a place we were going to get bogged down and might
help them in the long run?
Ms. Maloney. I think what that episode shows us most
clearly is that Iran, the leadership as a whole, is capable of
making a rational cost/benefit assessment of its own interests,
and at that time they saw the potential costs and the potential
threat to their own survival as severe enough to generate
perhaps some kind of unprecedented outreach to the United
States.
It is not clear, I would say, that Mr. Ahmadinejad is
capable of that same sort of assessment, but, clearly, the
overtures that were made in 2003 could not have come without
the approval of the Supreme Leader. He was influenced, no
doubt, by people around him who were perhaps more moderate than
those who are surrounding him today. But that is, of course,
what also makes the emergence and the potential empowerment of
what we are calling an opposition but really is not an
opposition in the sense of an opposition trying to oust the
regime.
The reemergence of former President Rafsanjani in
particular, former President Khatami, Mr. Mir Hussein Moussavi,
and Mehdi Karrubi, these are all people who appreciate that the
nuclear program is not worth the potential cost to Iran, and I
think we have got to be watching their position very closely in
hopes that some sort of--that that kind of pressure can be
reapplied, that that kind of calculation can once again be part
of the Iranian leadership's decisionmaking.
Senator Bayh. Ambassador, I would appreciate your thoughts
on that. It seems there is consensus among the testimony
today--and I suspect on the Committee--that dialog and
negotiations is appropriate, but they are most likely to be
effective, indeed, will only be effective if there is some
meaningful consequences for a failure to negotiate in good
faith or a failure to negotiate at all. So I am interested in
your assessment. Dr. Maloney mentioned that the hostage crisis
was only resolved when they began to worry about their own
situation. They reached out to us, at least temporarily and
tentatively following the invasion of Iraq because they were
worried.
What does that suggest about the importance of meaningful
sanctions and to have any hope of changing Iranians' behavior
with regard to their nuclear program?
Mr. Burns. Well, I agree with Dr. Maloney that the Iranian
Government is more likely to respect strength than anything
else, and I think, Senator, you are right to conclude that is
one of the lessons, perhaps of how they acted in 2001 after our
invasion of Afghanistan and in 2003 after our invasion of Iraq.
For the record, I will say the Iranians had a golden
opportunity to negotiate with the Bush Administration in May-
June of 2006 when the administration offered negotiations. The
Iranians then turned those down over the next 2 years. So the
onus is really on Iran to show that they are interested.
Senator Bayh. Perhaps their assessment of their own
situation had changed by 2006.
Mr. Burns. Well, that gets to my second point. I think that
strength of the United States is not enough. We have to have
international strength, and we have to have a diplomacy that
brings Russia and China in particular--Russia sells arms to
Iran; China is their leading trade partner--with us. And that
is why I think that President Obama has done--I have been
impressed by his diplomacy toward Iran. I think setting up this
construct of being willing to engage, willing to talk, seeming
to go the extra mile, with the likelihood that those
negotiations either will not take or will fail, that allows the
United States to have a stronger hand in arguing for the type
of sanctions that the Committee is considering and the Senate
will consider. And it gives us more options, I think, for the
future than fewer.
Senator Bayh. My time is about up on the first round, but I
guess my point is--and I gather it is the consensus of the
panel--that none of us wants to impose sanctions on Iran if we
do not have to. But our assessment is that at least the
credible presence of material consequences through sanctions
gives the engagement the maximum chance of working and is our
only hope of changing behavior if the negotiations do not work.
Is that sort of the bottom line you would agree with, too?
Mr. Burns. It is, and I would say there is an additional
benefit to tough-minded sanctions. It puts off a decision to
use force, and that would be a fateful decision for the United
States. We should keep that option on the table, but I still
think there is room and time for a combined strategy of
negotiations and sanctions to try to see if it is possible to
lever, influence the Iranians to change their program.
Senator Bayh. They demonstrate strength, and the stronger
we are, the more likelihood that we will resolve this in an
acceptable way.
Senator Shelby.
Senator Shelby. Thank you, Mr. Chairman.
Mr. Burns, how do you believe we should measure progress
under the administration's engagement strategy? And, second,
what do you believe that Iran wants to achieve from discussions
with us? And is there anything that we should be prepared to
give to Iran?
Mr. Burns. Senator Shelby, I think that President Obama has
done a very good job of regaining the initiative and putting
Iran on the defensive. And I think taking the high road, the
Cairo speech, the videotaped message to the Iranian people, he
said that he would continue the Bush Administration's policy of
being with the P5 in negotiations. All of that has been very, I
think, effective.
The Iranians are going to be extraordinarily difficult, I
believe, at the negotiating table, and they will want to divide
the parties sitting at the table alongside of us. And they have
effectively done that the last couple of years.
So I think the challenge for the United States now is to
unite those parties against the Iranians, and that is why I
think that giving the President not only waiver authority but
some flexibility in sanctions is really important for him and
for the effectiveness of our policy.
Senator Shelby. Mr. Burns, you alluded to this a minute
ago. A key reason, I believe, that the U.N. sanctions on Iran
are so weak is that Russia and China do not share our goal of
preventing Iran from developing nuclear weapons. Can our
sanctions regime, as it is now, or under the various proposals
we have heard here, that you are aware of work to encourage
Iran to abandon their quest for nuclear weapons without
bringing China and Russia to the table? I think they are very
important to be at the table with us.
Mr. Burns. I agree with you, Senator. I was the negotiator
for the United States on the first three U.N. sanctions
resolutions, and they were well intentioned and they were a
good start, but they were insufficient, and we knew that. We
knew that we needed to get to stronger sanctions. The time is
coming for those stronger sanctions.
What would make the Russians and Chinese now decide to work
with us? I think, number one, they need to know this is a vital
concern of the United States. It is the top of our agenda, not
at the middle or the bottom of our agenda.
Number two, they need to know that the United States is
willing to keep all options on the table and willing to take
any action necessary to deny Iran a future nuclear weapons
capability.
If both of those are in place, then I think that they might
be more inclined then to work with us. You know, look at the
Russians only. They live closer to Iran than any of the other
countries negotiating. It cannot be in their interests to see
Iran have a nuclear weapons capability. So the negotiations
with Moscow and Beijing I think are the most important right
now.
As I said in my testimony, if President Obama has said he
is willing to negotiate, then I think the Russians and Chinese
should be willing to promise the United States up front, if
negotiations fail, we, Russia and China, will agree to
sanctions. They did not do that in 2006 and 2007 and 2008. They
need to do it now.
Senator Shelby. Mr. Levitt, in her testimony, Ms. Pletka--I
am using all of your testimony--made reference to the notion
that if one is doing business in Iran today, they are probably
doing business with the Islamic Revolutionary Guard. In October
of 2007, the Office of Foreign Assets Control listed the
leading Iranian financial institutions as well as the IRGC,
among others, as ``specially designated global terrorist
organizations.''
Are you aware of anyone who has mapped out a complete
picture of who is trading with Iran? And, Ms. Pletka, I will
address this question to you. Do you believe having a full
understanding of all of Iran's trading partners would help us
develop a better, more complete sanctions regime? I will start
with Mr. Levitt.
Mr. Levitt. Well, as usual, Danielle was right. If you are
doing business with Iran, you are doing business with the
regime's illicit--OK. As usual, you were right again.
Ms. Pletka. I am glad to hear that.
Mr. Levitt. If you are doing business with Iran, there is
no way to know that you are not doing business with illicit
elements of the regime, in particular the IRGC. I do not know
anybody who has successfully, certainly in the open source,
done a full mapping, even a partial mapping, of who is trading
with Iran. I do think it would be useful, but it would be
limited. And I think Dr. Maloney has talked about this before,
and she is right as well, of course. Iran is extremely adept at
sanctions busting. They are better than anyone else at
operating front companies, et cetera.
One of the biggest problems we have had, one of the things
that we have been able to leverage most effectively with our
allies to get banks designated, for example, is their use of
deceptive financial practices. So simply getting a list of who
is trading with Iran is like to be only the very tip of the
iceberg and not necessarily address the most illicit activity.
Senator Shelby. Ms. Pletka, do you have any comment?
Ms. Pletka. I think that Dr. Levitt is right. It is an
enormous challenge. But, of course, the truth is that even what
we can find out from open press sources--and AEI has a project
on our Iran tracker website that actually keeps track of all of
the open press reporting on such transactions.
I have got here a six-point list of all of these companies
that are doing business or reporting, and we have done a pretty
solid job about trying to verify most of them. You have got
hundreds and millions and billions of dollars worth of projects
that are not merely selling pencils and desks, but are also in
the Iranian oil sector and the construction sector. And I think
that naming and shaming is worthwhile.
The truth is that the Chinese Government and the Russian
Government do not really care. But I think that the German
Government cares a little bit more. The Italian Government
cares a little bit more. And the taxpayers in those countries
that are often subsidizing these transactions through state-
guaranteed insurance also care. So I think it is very
worthwhile.
Senator Shelby. Thank you.
Thank you, Mr. Chairman
Senator Bayh. Thank you, Senator Shelby.
Senator Corker.
Senator Corker. Thank you, Mr. Chairman.
I missed your oral testimony. I heard it was outstanding.
We were in another hearing, but thank you for being here today.
Are there sanctions today that we have in place that you
would herald as having modest success? Is there anything you
would point to under our present sanctioning process that is
having modest success? Any of you.
Mr. Levitt. Sure. But I will caveat that it is an almost
impossible question to answer--I will answer it anyway--because
there are so many things that we have now targeting Iran.
People say, well, you know, what percentage impact has this one
had or that one, and it is really impossible to know
specifically how much of an impact has anyone had.
But I would argue that there are a whole bunch of sanctions
targeting Khatam al-Anbia, IRGC-related entities, most recently
IRISL, the shipping lines, and certainly the banks, that have
had an impact on, A, disrupting Iran's ability to easily
conduct its illicit business; and, B, there is plenty of
evidence, even long before the June 12th election, these
actions were have a domestic political impact and people were
resigning and people were getting fired and people were
pointing fingers at Ahmadinejad for his poor economic policies.
I think there is no real argument that these have had no
success, that they have not had some significant success. But I
think there is also unanimity that they have not been fully
successful in the sense of undermining the regime's nuclear
program or making it possible for them to achieve that program.
But, honestly, that was not the strategy's goal. We never
thought that it would be able to accomplish that.
Ms. Pletka. I think what is important to understand is not
just what Dr. Levitt underscored, but the fact that so much of
the sanctions activity, particularly, I think, the really
ground-breaking work that the Treasury Department did in the
Bush Administration and is continuing today, has raised the
cost of business to Iran significantly so that Iran finds it
very difficult, for example, right now to get letters of
credit, to bring in exports. They are finding it difficult to
get trading partners.
Yes, it is true there are still hundreds of millions' worth
of business out there, but that is hundreds of millions' worth
of business that may have cost a lot less in earlier days and
probably was better quality. Iran is much more isolated. But
these are our only tools, and that is the problem. None of
these individuals sanctions is going to cause the regime to
turn around and say, ``You know what? Forget it. Nuclear
weapons really were not a good choice for us.''
But the more targeted they are, the more that they
discredit the regime in the eyes of the public, and I think
that they have done that, to great effect. The more that they
do that, particularly building on the opportunities after the
election, the more likely we are to get the Iranians to the
table to make agreements toward concessions.
Senator Corker. I am going to move on to another question.
I appreciate the two responses.
The Chairman has discussed earlier and I think introduced
legislation dealing with the refined product issue. I just came
from a hearing on Sudan, and, you know, our foreign policy is
replete with unintended consequences. I mean, that is the way
life is. It is not a criticism, but it is.
So we have this movement inside of Iran right now where,
you know, obviously, many of the people who live there are very
pro-Western. They actually respect our country. They respect
democracy. We have a regime that certainly is the antithesis of
that. And so we have talked about this whole issue of basically
keeping refined product outside of the country, keeping it from
coming back in.
We have had some people say that, in essence, the
unintended consequence of that could be that the people inside
the country that are pro-Western may, in fact, very quickly
become not that. We have also had people say that, you know,
they could quickly, 6 months, 8 months afterwards, figure out
other ways of getting refined product in the country. Maybe
that is not true, but I would like to hear from each of you--I
know my time is up--what your thoughts are about whether we
absolutely should create this sanction where refined product
cannot make its way into Iran, and then what the consequences
of that might be with a population that, generally speaking,
seems to have quite a movement underway, if you will, as it
relates to countering the regime right now.
Mr. Burns. Senator, thank you. I think that one of the
reasons why we ought to be focused on a diplomacy, engagement,
and sanctions path rather than a war path is that if we
resorted to military force, that would unite the country more
than anything else. We ought to try to play on the divisions
within Iran that were so apparent after the June 12th
elections.
On the sanctions, I keep coming back to a basic problem,
and that is that if the U.S. Congress or the executive branch
asserts unilateral sanctions, they may make us feel good--and I
support stronger sanctions--but they will not be effective
unless they are multilateral. And that is why I very much
believe that the President needs the flexibility to work with
the allies to make those sanctions, if he can do it,
multilateral. Striking out on our own, I think, will not have
the intended effect that we want, and we would not want a
situation to develop where we create divisions between, say,
Europe and the United States at a time when we ought to be
united and focused on Iran itself.
So I see this as a highly complex maneuver here, and that
is why the waiver authority, I think, in the legislation is so
important for the President to have. I hope President Obama
will have the political strength with the Russians and Chinese,
in particular, to convince them that they have got to get on
board these sanctions. And that is the test of our diplomacy in
September and October of this year.
Mr. Levitt. I would give one caveat maybe to Ambassador
Burns' point. I completely agree that multilateral sanctions
are far more effective, and for the petroleum concept to be
effective, it will have to be multilateral. But I do not think
that unilateral sanctions are ineffective, and, in fact, you
know, when I was at Treasury we used to see all the time that
international financial institutions, for example, used to
incorporate our unilateral sanctions in their due diligence
data bases, though they had no legal requirement to do so. And
we have many, many examples on Iran, on Hamas, on other cases,
where unilateral designations have had an impact, although I do
not think we disagree. In essence, the multilateral route is
the only one that is going to have sufficient power to get us
where we want to be.
I would also point, however, to some precedent. Consider,
for example, the dramatic failure of the regime's gas ration
card program in the summer of 2007. The cards were loaded with
6 months' worth of ration. Iranians reportedly used the entire
ration within weeks. It was a huge fiasco. As cold winters
come, Iran worries about the possibility of heating fuel
shortages.
Neither of these, when I look back at them, at least in the
open source, demonstrates a huge Iranian, really any
significant Iranian reaction against the United States. They
have been reactions against the economic policies of
Ahmadinejad's regime.
Ms. Pletka. I know that time is up. I think that it is
always ironic when people suggest that the sanctions that we
are going to impose in an effort to get Iran to the table to
talk about their nuclear weapons program could hurt the Iranian
people, and yet we are willing to stand idly by while the
Iranian people are crushed beneath the jack-booted heel of the
IRGC on a daily basis.
There is some risk that if we end up needing to impose
draconian sanctions, whether unilaterally or multilaterally,
that the Iranian people will, yes, blame their government--
because they almost always blame their government for
everything because it is so inept--but also may blame us.
But at the end of the day, we are really not in this to
talk about the tools that are available to us. We are in this
because we want to stop the Iranian Government from acquiring a
nuclear weapon. And that seems to be a fairly urgent
requirement. We actually have not talked that much about what
it would mean for Iran to have a nuclear weapon and how Iran
would come to the negotiating table or whether they would with
nuclear weapons and how the regime would feel empowered vis-a-
vis its own people, not to speak of its neighbors, if they had
a nuclear weapon, and the threat that they pose, of course, to
us in our homeland.
So when we talk about these things, we do need to recognize
that weighed very heavily on one side is this rather terrifying
prospect that Senator Lieberman outlined at the outset that all
of you have talked about, and on the other side these tools
that are available to us, which tend to take on the aspect of a
discussion at a tea party when we talk about whether this would
work and whether that would work and how we could all sit down
around the nice table at Foggy Bottom or at Turtle Bay.
We need to be serious, and we need to recognize that there
is some real urgency to achieving these goals.
Senator Corker. Thank you.
Ms. Maloney. In terms of Iranian public opinion, I can
speak to my time there, although I have not been now in a few
years. And I would say Iranians generally are not fans of
American sanctions on their economy. However, at this stage I
think it is also quite clear that they look at the disastrous
policies of Ahmadinejad and at this stage certainly look more
toward the government for the economic problems than they do
toward U.S. sanctions. And I think that would be the case.
It is not to say the regime would not be able to leverage
the blame issue, and it is already beginning to do so. I see a
lot of talk about the difficulties of getting spare parts for
airlines and some of their recent aircraft disasters. And I
think that is taking a page from the Saddam playbook in terms
of trying to mobilize international and public opinion around
the unfairness issue or the public safety issue with respect to
sanctions.
But let me just say that I think it is also important to
recognize that a ban on refined products is not going to be a
silver bullet. It may not be the Achilles heel of the Iranian
economy, if only because Iranians are well aware of this
vulnerability. They have been investing very heavily in new
refineries and expect to be self-sufficient by 2012. One of the
countries that we are speaking with about major new investments
is China, and I think that is going to be something we are
going to have to consider, the extraterritorial dimensions of
these potential sanctions, if we are looking to build our case
for multilateral sanctions, particularly including the Chinese.
Senator Corker. Thank you for the excellent testimony, and
thank you, Mr. Chairman.
Senator Bayh. Thank you, Senator, for your excellent
questions.
Senator Martinez?
Senator Martinez. Thank you, sir.
One thing that seems to me to be important that we have not
talked a lot about is the question of regime change. This used
to be a word that got thrown around this town a lot a few years
ago. It isn't talked about too much these days. But what a
better world it would be if there was a completely different
regime in Iran. The people of Iran have been in the streets
trying to advocate for change.
My question to perhaps all of you would be, what is the
likelihood of a regime to be changed in Iran by the Iranian
people, and is there a likelihood that a different leadership--
and we have mentioned Rafsanjani and some of the other leaders
who now appear to be very much on the side of regime change, as
well--whether they would present any significant change in
terms of the problem we are dealing with, which is nuclear
arms, or whether we would see more of the same as it relates to
that issue. While it might be more to the liking of the Iranian
people, it wouldn't really be any different in terms of its
international attitudes toward Iran--I am sorry, toward Israel
or whether or not the pursuit of a nuclear weapon would
continue.
Mr. Burns. Senator, I think that, obviously, looking at the
actions of the Iranian government in the wake of the June 12
elections, all of us would wish to see that regime disappear
and would wish to see a democratic regime take its place.
Unfortunately, that is not likely to happen in the short term
over the next couple of years. And so I don't think regime
change by itself can be a policy for the U.S. Government and I
do think it is important that we understand that even
Rafsanjani or Mohammed Khatami, two prior presidents to
Ahmadinejad, well, they built the nuclear program. They
sustained the support for Hezbollah and for Hamas and for
Palestinian Islamic jihad, so these are not Jeffersonian
Democrats who might be the people who take over if Ahmadinejad
should fall from power.
I think a far more realistic policy, frankly, is the one
that President Bush had in his second term and certainly that
President Obama has now. We have to deal with this government
in Iran. We don't like it, but we have to deal with it. We
dealt with Stalin's Soviet Union. We dealt with Mao's China,
and successfully through containment.
And so I think we ought to practically focus on the issue
of how do we coerce that government internationally to back
down from its nuclear program, and if it doesn't, how do we
sanction it effectively, hopefully in a way that prevents us
from getting into a third war in the Middle East. I think that
is the strategic challenge and President Obama deserves some
time to see this strategy of engagement plus sanctions, which I
understand is his policy, play out. I think he has done very
well in his first 7 months to set this up. But the crucial time
will come in September and October. I think he set his own
deadline, as I understand it--the G-20 summit in Pittsburgh.
Senator Martinez. Unless someone has a different view, we
can move to something else. Is there----
Ms. Maloney. I don't think anyone would make the assumption
that a Rafsanjani or Khatami or Moussavi presidency would have
abandoned the nuclear program. Their track records are very
clear.
Senator Martinez. Right.
Ms. Maloney. However, they did speak in the campaign about
a different kind of attitude toward negotiations, and I think
if we were to see some sort of change in the leadership, as
unexpected as that is at this stage, it would create more room
for a serious negotiation and potentially more room for
concessions. It was under the Khatami presidency, of course,
that the Iranians did agree to suspend uranium enrichment for
several years.
Senator Martinez. Now, moving on to the current track and
with the critical diplomacy in the months ahead, there seems to
be a fairly strong consensus that in order for sanctions to
really function, we are going to have to get the Chinese, the
Russians, and to some extent, as well, the Europeans on board.
What is it going to take to get Russian cooperation? Even the
Chinese might be easier. But what is the likelihood of Russian
cooperation when they are an arms seller as well as an
important trade partner?
Mr. Burns. Senator, I guess I wouldn't want to twin the
Russians and Chinese here in terms of analysis. I think the
Chinese, unfortunately, have shown themselves to be devoted to
mercantilism, to trade above all else. When the Europeans
pulled back in part from the Iranian market in 2005 and 2006,
the Chinese rushed in and filled all those contracts. The
Russians seem to have a more strategic view based on their
history with the Iranians.
So I think that we have to let the Russians know this is a
vital concern to the United States and that we have options and
that we are willing to exercise those options to deny Iran a
nuclear weapons capability unless Russia can join us in an
engagement and sanctions regime. That is the test for the
Russians. But the Russians have been cynical, as well.
Senator Martinez. Ms. Pletka?
Ms. Pletka. I agree with Ambassador Burns that I don't
think we can see the Russians and the Chinese the same way. And
although the Chinese are very mercantilist, I think that they
have interests in North Korea and elsewhere that we can use to
discuss our interest here, and frankly, there is some prospect
of them being made perhaps a little bit more cooperative than I
think that the Russians have been. I defer to those who have
sat with the Russians on these negotiations, but certainly the
evidence is that they have been very, very difficult.
And I think that the truth is that they need to be
persuaded that we, in fact, have some credible other option,
and the assumptions in each one of these capitals, whether it
is the European capitals or it is in Beijing or in Moscow is
that the United States is not going to use force under any
circumstance. And if you are persuaded of that, then you are
probably not going to be persuaded of the wisdom of moving
toward any sanctions with any alacrity.
That was the advantage that the Bush Administration, for
all that it has been vilified, had. There was some prospect
that they were going to do that, although I think it was
exaggerated. I think people believe, again perhaps falsely,
that the Obama Administration holds out no prospect for the use
of force.
Senator Martinez. On that vein, if I may just extend for a
second, you touched on something that I think is very
important, which is what would it mean for Iran to have a
nuclear weapon. Dr. Maloney also mentioned the prospects of
containment and our success in the cold war on containment. I
think the Iranian leadership is a little different and their
motivation may be a little different than what we were dealing
with in the cold war. How do we deal with a nuclear Iran and
what are the prospects for containment as well as what
alternative there would be beyond that, which I guess would be
military action?
Ms. Pletka. Thank you for giving me the hardest question of
the day.
[Laughter.]
Ms. Pletka. I do think that the analogy between the Soviet
Union and the containment of the Soviet Union during the cold
war and that of Iran is a false analogy. I think the Iranian
leadership is a far more apocalyptic one. I think that the
threats that they have articulated, frankly, are much stronger
and much more consistent than the ones that were certainly in
latter years articulated by the Soviet--pardon me, maybe I am
sick----
[Laughter.]
Ms. Pletka.----by the Soviet leadership, and we have to ask
ourselves, I think, whether this is a risk worth taking.
Some have said that the Iranians--in fact, I think
Secretary Clinton said this during the campaign--that the
Iranians must know that if they used a nuclear weapon that they
could be annihilated. And all I would say to that is, first of
all, that is not terribly credible. And second of all, I think
it was President Ahmadinejad who said that it would be worth
losing half of Iran in order to destroy the state of Israel,
and we should take people like that seriously. Senator
Lieberman said that at the outset. We need to listen to
people----
Senator Martinez. Take them at their word.
Ms. Pletka.----talk about the use of weapons. Exactly.
Senator Martinez. Yes, sir?
Mr. Levitt. I would just add that containing, deterring a
nuclear Iran from using a nuclear weapon is only one part of
the equation. As several of us have already said, there is the
whole second part of it, of how it would empower and muscle up
Iran in terms of its regional intentions. And here, when I
travel in the region, it is not the Israelis who are the most
vocal on this issue. It is the Emirates and others in the Gulf
practically taking me by the lapel, saying, ``Matt, you don't
understand,'' after I have given them my spiel on Iran, ``No,
you don't understand exactly how''--hegemonic is the word they
use--their intent would become, or they would act on that
existing intent, as they put it.
And the reason I think there would be a cascade of
instability, other regions starting up nuclear programs, and
just by virtue of having that power, it is kind of a, ``So I
support Hezbollah. What are you going to do about it? I am a
nuclear power.'' That is a whole second side of it, that
attitude that we would have to contend with, that is not
necessarily containable.
Senator Martinez. And it is not limited to the Middle East
because that includes the Western Hemisphere, as well.
Yes, I am sorry. I am way over my time, but----
Ms. Maloney. I realize we are over our time----
Senator Martinez. That is all right.
Ms. Maloney.----but let me just make a couple of points.
Senator Martinez. Thank you.
Ms. Maloney. I recognize that the Gulf states spend a lot
of time talking about the Iranian threat, but they don't spend
a lot of time doing anything about it.
Senator Bayh. When you are contemplating an apocalypse,
Senator, it is worth taking some time.
Senator Martinez. I appreciate that.
[Laughter.]
Ms. Maloney. They don't spend a lot of time doing anything
about it, and they may be grabbing that by the lapels, but they
have been very averse to doing anything that would curtail
their business relationships with Iran and their political
relationships, both of which are quite substantial. So I will
take that rhetoric much more seriously when I see them behaving
in a way that suggests that they believe that that threat is as
real as they say.
In terms of the threat of force and the inability to
contain the Iranians or deter them, I think that that puts a
very problematic sort of choice for American foreign policy.
The inability to talk about deterring Iran in this Capitol is
stunning to me. We have to recognize that we cannot necessarily
control the outcome in Iran and we have to be able to develop
policies that are intended to deal with whatever we may face in
the future. And so we have to have a serious discussion about
how we would handle a nuclear Iran, because that eventuality
could be upon us much more quickly than we suspect.
And for those who suggest that Iran is somehow much greater
and much more severe of a threat than either Maoist China or
Soviet Russia, I would say that your memories are probably very
short.
Senator Bayh. Ambassador, I think we would like to hear
from you on this question, but then out of courtesy to Senator
Johanns, we will need to turn to him.
Mr. Burns. I will be very brief, Senator. I did want to
join this discussion. I think it would be unwise to limit the
President's options should negotiations and sanctions fail, and
I would bet that they probably would. To be left with only one
option, military force, when that option is fraught with
difficulties for us--a third war in the Middle East and South
Asia in a decade--I think would be very unwise of us as a
country, and therefore, we need to look at containment.
The Soviet Union and Communist China were far superior to
Iran, present-day Iran, in their military strength and their
threat to the United States. We have the means and we have the
partners in Israel and the Arab states to contain the Iranians.
It ought to be an option alongside the use of force that we
ought to be looking at very carefully, and the President ought
to decide what is best for our country if that time should
come. It may come in the future.
Senator Bayh. Thank you, Ambassador.
Senator Martinez. Thank you. I appreciate the indulgence.
Senator Bayh. Senator Johanns, I apologize. In my intent
focus on our witnesses' testimony, I did not notice that
Senator Menendez reentered and he is ahead of you on the queue,
so I apologize for that.
Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman. That is the
first time someone has not been able to notice me, so I like
that, actually. It means I have withered away a little bit in
the process.
Senator Bayh. Hardly.
[Laughter.]
Senator Menendez. Let me thank you all for your testimony.
I know that the G-8 has set the September meeting of the G-20
as supposedly a deadline for Iran to accept negotiations or
face stronger sanctions. My question is, and I saw Secretary
Clinton's speech discussing in the Council of Foreign Relations
engagement, but at the same time saying that the opportunity
doesn't remain open indefinitely. So how can the G-8 prevent
Iran from stalling and what is, in your view, what would occur
if Iran has refused to accept the invitation to engage? What
should be done then?
Mr. Levitt. I think what should be done is an immediate
movement to try and pick off the low-hanging fruit for
multilateral designations at the United Nations, and by low-
hanging fruit, I mean those entities that we know designating
them would have an impact and that have already been called out
at the U.N.--banks and the IRISL, the shipping line, in
particular. That should be done both because it would have an
impact and it should be something we could do quickly because
the U.N. has already called them out.
But we need to do much more than that, and as we all have
said, if we really want sanctions to be able to have a
significant bite, they are going to have to be multilateral. We
can't go this on our own. Unilateral sanctions on the margins
can be effective, as well, and that might be a useful means of
filling in the blank some of the time as we are trying to
negotiate multilateral sanctions.
To me, the critical thing is that we do something and we do
something quickly if Iran doesn't respond to our offer by the
deadline that the administration has set. I have often said
that I think what made the first U.N. Security Council
resolution on Iran most effective was not--of the several we
have had--is not just that it had the sharpest teeth, though
its teeth were not all that sharp, either, but that it was
unanimous. And the fact that subsequent resolutions were not is
something that the Iranians paid a lot of attention to.
So we should be working now--I hope we are working now
very, very hard diplomatically with our allies to secure
agreement so that if the G-20 comes and goes, we don't then
have a whole bunch of other deadlines by which a few more weeks
and a few more weeks and the UNGA and something after that,
because what everyone is clear on is that we don't have time
and that the Iranian strategy will be to buy time.
Senator Menendez. Yes?
Ms. Pletka. I just want to make a point of clarification. I
think that, as several members have alluded to, that the G-20
deadline, and I know the Congress passed a Sense of the Senate
on it, it is not a deadline as it has been described. You were
about to say the same thing. It has been described as a time to
reassess.
And so for those who are conceiving of this as a moment, a
launching point for decisive action, whether that action is
multilateral sanctions or United Nations resolutions or
whatever it might be, I think that that is not correct. The
President himself in his discussions with Benjamin Netanyahu
gave the Iranians, in fact, until the end of the year. But even
there, I don't think that we can think of that as a hard
deadline. So----
Senator Menendez. Well, that raises the question. So let us
accept--I accept that it is a time to reassess. We can keep
reassessing this ad infinitum. The question is----
Ms. Pletka. We have been.
Senator Menendez. We have been, which is what worries me.
The question is whether it is a determination that you can't,
as Dr. Maloney said, you are not going to affect the outcome,
and if you come to that conclusion, then you have to look to
your next step, or the question is can you affect the outcome
in some way, and if so, then what is that. It just seems to me
that when we create the impression that we are reassessing
without action, then I think if I was the Iranians and my goal
was theirs, that I would love all these reassessments. So what
is our action?
When I hear you, Dr. Levitt, talk about multilateral
actions, I agree. So how do you get the Chinese and the
Russians to join you? What is your leverage there? Ballistic
missile issues? Anti-defense missiles? How do you get them,
engage them on this critical issue?
Mr. Burns. Senator, I just would make two points in
response to your question. First of all, the Iranians have had
an awfully long time to consider this offer. It was first made
by the P-5--most of those countries are in the G-8--in June of
2006. This is not a new offer. I think they are unlikely to
accept the offer.
But let me speak up for reassessment. I think this is such
a highly complex environment following the elections, where we
are going to want to try to capitalize in divisions in Iran,
that President Obama is right not to say right now, here is
what I am going to do. He ought to wait and see if the Iranians
accept this offer. If they don't, then he has a much--he is
greatly strengthened to turn to the other members of the G-8
and G-20 and say, we tried to negotiate. We had a good faith
offer on the table. Now you need to join us, Russia and China,
in sanctions, because this has gone on long enough.
I think the President is actually in a very strong position
internationally, stronger than, let us say, President Bush was
a couple of years ago, and I worked for President Bush and, of
course, wanted that policy to succeed.
So this is set up not so badly for us, and reassessment
doesn't mean inaction. It means actually that we might be able
to get to a period of action with greater international and
multilateral strength. That will be the test sometime this
autumn.
And I wouldn't want, just as a former diplomat, I certainly
wouldn't want to impose on President Obama an outsider's view
of what his deadline is. I think he will be in the best
position, given his talks with Hu Jintao and President Medvedev
and others, of when the time has come to move toward that
tougher sanctions regime.
Senator Menendez. Yes, sure.
Ms. Maloney. I would just say the Iranians never actually
turn down an offer. They always propose their own offer, which
tends to be something that is completely unreasonable by most
external standards. And I think what we have to be prepared for
is not an Iran that is simply unwilling to speak on any basis,
but an Iran that comes back to us with something way out there
but which then is kind of grabbed by the Chinese and Russians
and others, and potentially they will do this in advance of
September, as a rationale for refusing any further action. And
I think that is where our efforts have to be focused on how do
we make the case that an Iran that is not capable of putting
forward a serious offer is an Iran that needs to be the subject
of serious multilateral sanctions.
Senator Menendez. And, Mr. Chairman, if I may, just one
last question. How do you get the Russians, for example, to
cease its arms sales, specifically sophisticated anti-aircraft
systems, to Iran? How do you incentivize them here to move in
the direction that we want to see and that is in our mutual
interest? Any thoughts on that?
Ms. Maloney. Well, I mean, I will say that I think what the
administration has tried to do is, as they say, reset the
relationship and develop a level of trust and understanding in
our mutual interest and goals that the Russians will be willing
to put some of their own economic interests on the back burner
in order to continue and potentially advance this bilateral
relationship.
The difficulty with that kind of a strategy is it is a
long-term strategy. It is not a short-term strategy. And I
don't think we are in a position yet where the Russians are
likely to do that.
I also don't think the threat of force terribly worries the
Russians. They probably can see an upside to that, which is
that oil prices would go up and they would be the primary
beneficiary and supplier of choice under a set of circumstances
where the Gulf were in flames.
I think where we do have some leverage is with the Chinese,
because they have a long-term view. They are trying to sew up
some opportunities in Iran, but they are also looking to all
their relationships with the other Gulf oil producers because
of the significance of energy for their economy, and I think
that is where we may be able to create some new leverage. By
moving the Chinese, we may therefore help move the Russians.
Senator Menendez. Thank you, Mr. Chairman.
Senator Bayh. Thank you, Senator. Very interesting
questions and excellent responses.
Thank you for your patience. I just have a few more
questions and then we will wrap the hearing up.
Dr. Levitt, you testified, and I think accurately, and
several of the other panelists referenced the financial
sanctions that have been put into place which have raised the
cost of doing business on Iran, but not modified their
behavior. But there is something to be said for gaining some
leverage. They are increasing the cost of them doing business.
I would be interested in your assessment or other panelists
assessments, if we could get some sanctions on the import of
refined petroleum products. Now, they are moving, as Dr.
Maloney suggested. They are aware of their vulnerability. They
are moving to increase their refining capacity. But we do have
a window here where they are not there yet. If we could get
some sanctions on the importation of refined petroleum products
into Iran that were reasonably successful--not perfect, but
reasonably successful--how much would that increase the cost of
doing business for Iran?
Mr. Levitt. Significantly, but I can't measure it for you.
In other words, 40 percent is a lot of oil, domestically
consumed oil. The big shift here would be moving from a
targeted financial measure, which is trying to target illicit
actors engaged in illicit activity and not the people of Iran,
moving toward one that begins to target the people of Iran in a
way to put pressure on the regime since the fact is that regime
stability is the only thing, as you have heard, that they care
more about than the nuclear program.
I think that the idea of giving the administration this
tool is a wise one, but we also need to think creatively. There
are lots of ways to skin this cat. For example, we have talked
a lot about the formal sanctions. Many would argue that at
least as effective have been the informal sanctions, the
leveraging of market forces, going out and meeting not only
with governments, but also with the private banks, the Treasury
dog-and-pony show which State was actively engaged in, as well.
This was----
Senator Bayh. Your testimony is that the combination of
either formal or informal would increase the cost of doing
business potentially a lot----
Mr. Levitt. Correct, and especially--I am sorry.
Senator Bayh. I was going to be interested, then, and the
next question would be, enough that it might actually get them
to think seriously about moderating their behavior or not?
Mr. Levitt. On their own?
Senator Bayh. It has gone up the scale, but is it enough?
Mr. Levitt. I don't think it is going to be enough. I don't
think it is going to be there yet, especially if it is--unless
it is a truly multilateral international effort focused on
petroleum.
Senator Bayh. I think there was an agreement between you
and Mr. Burns. I think you both agreed that, ideally,
multilateral approach would be much more efficacious, but with
your caveat that there was some utility in a unilateral
approach if you just had no recourse other than that. But you
would agree that if we could get cooperation, as difficult as
it might be, that a multilateral approach would be the ideal
path.
Mr. Levitt. Yes, and there is a third option, and that is
taking the informal sanction approach and moving beyond the
financial sector, and moving beyond State and Treasury to other
agencies, Commerce in particular, and moving beyond to the
insurance industries, the petrochemical industries, and having
this conversation. They, too, have shareholders. They, too, are
concerned about reputational risk and due diligence and
fiduciary obligations to shareholders. There are other levers
that we can press here that can also be things we shouldn't be
doing. None of this is an either/or.
Senator Bayh. Thank you, Doctor.
Ambassador, you might have some thoughts on that. Again, my
question is, this continues to--getting back to my original
question, they respect strength and material consequences to
them focus the mind, give us the best chance of moderating
their behavior, leading to successful negotiations. The
importation would ratchet up the pressure, but is it enough for
them to begin to focus, wait a minute, this is something we
just can't ignore anymore. Perhaps we need to start thinking
about some sort of negotiated settlement here.
Mr. Burns. Thank you, Senator. I think that the Congress
would be right to give the President greater authority to
impose sanctions in the future. I know that your bill intends
to do that----
Senator Bayh. It does, with the waiver provision that you
have noted.
Mr. Burns. Exactly. Forgive me for sounding like a broken
record here, but I do think that it is not enough to inflict
economic pain on the Iranian government at a time when they
are, if you look at the IAEA reports, proceeding vigorously on
their nuclear research. And so I think we have to have a
decisive impact, and that would be an agreement that would
encompass the Russians, the Chinese, the Europeans, and
Americans on truly decisive sanctions.
I do think the only way to get there is through an
engagement strategy showing the willingness to negotiate, which
then enhances the power of the United States to say to the
others when those negotiations haven't worked out, you have to
try it our way.
Senator Bayh. What is your response to Dr. Maloney's
testimony that, well, the Iranians will probably at some point
after delay agree to negotiate and then put out incredibly
unreasonable counterproposals that will be seized upon by some
of the countries you have cited whose cooperation we need as a
reason to do nothing. What do you think about that?
Mr. Burns. That is exactly--she is exactly right, as
usual----
Senator Bayh. So how do we deal with that?
Mr. Burns. That is what happened over the last several
years. How we deal with that, I think, is having prior
agreements with all the governments that Iran will not have the
capability of dividing and conquering, that we are going to
stand together. If a certain amount of measurable progress is
not made in a very short time in negotiations, all of those
parties would turn to sanctions. I don't think that is too much
for the United States to ask of these other negotiating
partners, like the Russians and Chinese.
Senator Bayh. Do you think that is a reasonable prospect,
even given the Chinese commercial interest and the Russians'
commercial interest?
Mr. Burns. I think it is a difficult prospect. I am not
sure this strategy will succeed, but it is worth trying because
the only other alternatives, I think, would be worse, such as
the resort to military force at this time. That would be worse
for the United States, in my judgment.
Senator Bayh. So your testimony is clearly that a
unilateral approach gives us the best prospect of success, so
we need to focus on what it takes to get the other countries,
including India, I think, who is doing a fair amount of
business there, to participate in this. And it would, according
to Dr. Levitt, substantially increase the cost of doing
business, perhaps so much if we can take a unilateral approach,
Ambassador, that it would get them to contemplate modifying
their behavior?
Mr. Burns. Well, my belief is that we cannot have a solely
unilateral approach, that some of these steps might be helpful
in constructing a larger strategy, but in essence, we have to
lead a coalition. We have to start a coalition here, lead it,
and keep it unified. That is going to be very difficult to do,
but it is worth trying and there is time to do it.
Senator Bayh. Ms. Pletka or Dr. Maloney, do you have any
response to what your two co-panelists have said?
Ms. Maloney. Getting back to your original point about the
impact of a ban on refined products, I think, depending on the
environment in Iran, it could play into some change in the
regime's calculus. I play out what this would look like on the
ground, and potentially with smuggling, with disrespect of the
provisions of the act, Iran might be down, say, to 20 percent
of its refined products actually coming into the country, so
they have got a deficit potentially of 20 percent.
What happens on the streets? You have got people waiting in
long lines. You have got a lot of frustration. Now, the regime
has been successful in cutting demand for refined products. It
has imposed both a rationing program and also tried to gear up
CMG vehicles around the country for public transportation. So
it could cope for some period of time, but----
Senator Bayh. Could I interject for just a moment? You
previously had testified that with the controversy surrounding
the election, the protests in the street, perhaps they are a
little bit more worried about the stability of the regime,
although they are going to retain control in the longer term.
Might it not be true that if you added this additional economic
element to what is already now a changed political situation
that perhaps that increases their anxiety level a bit about
their own situation?
Ms. Maloney. I think it absolutely----
Senator Bayh. Because I was very impressed by your original
statements to my first question about what could we learn from
their behavior post-Afghanistan and Iran and you said they do a
cost-benefit analysis. Might this not increase the cost to get
them to change that calculus a bit?
Ms. Maloney. Absolutely. I think that it plays into a very
different environment in Iran, and one in which the population
would be far more willing to blame their own regime rather than
outside forces for this action. But I also would note the
caveat that the Iranians are not terribly good at capitulation.
This is a regime that tends to believe the best defense is a
good offense, and so I think we also have to be prepared that
Iran, under pressure from within, under pressure from greater
sanctions from without, would, at least in the immediate term,
probably prove more difficult to deal with.
It doesn't mean that it wouldn't change their calculations.
But to the extent that we have got a timing issue here, and the
ticking clocks metaphor gets used a lot, we have to try to
think about exactly how we get them to the table if they feel
entirely cornered. So I think----
Senator Bayh. Well----
Ms. Maloney. I think there is a cost-benefit to it from our
side, and I think, like Ambassador Burns, the waiver is key
because to the extent that the Chinese see their economic
interests threatened, they won't play ball.
Senator Bayh. Having them at the table feeling cornered
seems to me to be a better set of circumstances than the ones
we are looking at today, because then at least if we can come
up with a face-saving way out of it for them if they agree to
modify their behavior, I mean, then you have made some
progress. Right now, it seems that they just feel they can kind
of continue their current course without much--at least without
consequences they are perfectly willing to bear, but thank you.
Ms. Pletka, anything?
Ms. Pletka. The only thing I would say is to underscore and
agree with what you just said. The wisdom of having an
engagement policy is giving them a way out when they are backed
up into a corner. It is allowing them the graceful exit. The
problem is, if you have an open door on one side and absolutely
nothing pushing them toward it on the other side, or nothing
credible pushing them toward it on the other side, then the
engagement policy becomes nothing other than an open hand.
We can stand waiting for an awfully long time, and this is
what we have heard over the course of many, many years. Don't
do that because around the corner is the persuasive moment when
everybody will join with us. No, no, no, don't do that because
it will really take away from our credibility and our bona
fides.
But what the Iranians have seen over the same course of
time is that we have changed our red line every single time and
we have always been willing to do it. First, we didn't want
them to get uranium conversion. Then we didn't want them to do
enrichment. Then we wanted them only to suspend enrichment. Now
we want them to suspend enrichment, but maybe we could even
have an enrichment facility in Iran. Goodness me, what a great
idea.
So I think the Iranians look at that, and just as we make
assessments about them, and we have all talked about them, they
look at us. And what they see is a United States that isn't
terribly decisive. They see an international community that
isn't going to come together. And they see the likelihood that
they are going to continue. When people talk about the
possibility of containment, the way they see that, the way they
reacted to Secretary Clinton's statement last week in Thailand
was that the United States will accept a nuclear Iran. They
will all talk about deterring us and containing us, but at the
end of the day, they will accept a nuclear Iran.
And I think at the end of the day, the truth is, but a lot
of people aren't willing to say it, that they are willing to
accept a nuclear Iran. A lot of people in this town.
Senator Bayh. Well, the hope here is that we are taking a
calibrated approach and the hope is that we can empower the
President, working in a multilateral context, to change the
cost-benefit analysis in Tehran by--in a different political
environment now, somewhat more unstable, to add some economic
and financial difficulties on top of that that might get them
to feel cornered, Dr. Maloney, but not without a way out. And
that is what we are--if they agree to moderate their behavior,
then there is a way out, and in the fullness of time, God
willing, the regime will change. But at least in the near term,
in their own minds, they will have relieved the pressure and
perhaps they will be internally in a better situation from
their own point of view.
I don't know, you look like you seem a bit skeptical, you
are thinking a bit skeptically. It is incredibly difficult, but
that is the challenge here.
I had one final question and this might be a question--
well, there are so many ways we can go, but you have been most
patient. Two final questions, actually.
I was in Moscow--it has been some time. The world has
changed a lot in the last year and a half. But I met with the
energy minister there whose portfolio is to deal with some of
these questions with Iran and he used a word that caught my
attention. He said that the Iranians were terrified--that is
the word he used, terrified--at the prospect of perhaps some
restriction, not on their import of refined petroleum products.
That is the next step. We began with the financial issues Mr.
Levitt worked on. We are now contemplating refined petroleum
importation. He said they were terrified at the potential for
any restrictions on their export of petroleum because they rely
so heavily upon that.
Now, that would have all sorts of consequences for the
global oil market, and at this moment in the global economy, it
is unlikely we would go there. I think maybe Dr. Maloney, one
of you pointed out the Russians actually think about that in
terms of their own self-interest.
But I would be interested in any of your thoughts, and how
we can work with the Saudis and some others in a multilateral
way to deal with some of the consequences of something like
that. Is that--if the Iranians are terrified about that, isn't
it at least worth us thinking about?
Not doing today, but at least ultimately as an end-game
strategy and perhaps doing some things to mitigate the economic
consequences to us and the rest of the world of such a
scenario.
Mr. Burns. I believe it makes sense for the United States
to consider sanctions on energy because that is the source of
Iran's national power and its economic power. The question is:
Will the Arab governments agree with that? Will the Russians
and Chinese agree with that? It has not been tested. We have
not put that on the table before. Giving the President that
kind of authority, therefore, expands his options and I think
enhances, strengthens his diplomatic portfolio. It is a good
thing to give him that authority.
I want to just say, however, I do not think we should
consider the Iranians as 10 feet tall here. The Iranian threat
to the United States, to Israel, to the Arab countries is not
in any way comparable to what we faced in the middle part of
the 20th century through the early 1990s with the two great
communist powers. That threat was far greater.
Therefore, we ought to have a little bit of self-confidence
that with a skillful diplomatic approach that combines these
various elements that we have been talking about, Senator, and
that are in your bill--engagement and sanctions and keeping the
threat of force on the table--that is the proper way for the
United States to proceed. And I very much disagree with the
criticism that somehow President Obama has been soft or weak or
indecisive or he is not keeping to deadlines. Frankly, I see
President Obama continuing a lot of the strength that was in
President Bush's policy, and I think what he has been able to
do is to put Iran on the defensive internationally. And,
frankly, Iran is weakened now as a result of the political
crisis over the past summer.
So I do not assume that somehow this is a strategy that is
bound to fail. It may not succeed, but it is worth trying for
the United States, and we ought to have the self-confidence
that our President has put in place a lot of different
initiatives now that might come together, hopefully will come
together, for a successful policy.
Senator Bayh. Well, the hope is to move progressively, with
timelines and real consequences for failing to meet them, to
ratchet up the consequences, to change the cost/benefit
analysis in Tehran, and then, God willing, avoid very difficult
decisions, you know, at the end of the day if all that does not
work. That is why I asked about the exportation, because if
they are truly terrified about it, at least having some
prospect of that out there might get them to focus on their
cost/benefit analysis. But I am well aware that there are
some--that would be very difficult on us economically,
potentially, if we do not move to mitigate some of that.
Perhaps I will end up with--both you and Dr. Maloney have
suggested--you, Dr. Maloney, spoke about deterrence. You have
talked about the Iranians not being, you know, 10 feet tall and
that sort of thing. When you sit in these chairs and the chairs
that some of you have served in previously, at the end of this
road lies an assessment of their intentions and their
psychology.
You are correct, the military capabilities of the former
Soviet Union and some of our previous adversaries make what
Iran can do pale by comparison. But as best we can tell, they
were never suicidal. The Iranians may very well not be
suicidal. At the end of the day, Dr. Maloney--and here is my
question to all of you at the end of this. At the end of the
day they may be irrational, cost/benefit analysis--who was
that? Jeremy Bentham? They may view the world in those sorts of
terms. But they do have some leaders that make apocalyptic
statements. They do have some religious fanatics amongst their
midst. And if the consequences of error are the launching of a
nuclear weapon, how great a risk do we run that our assessment
of their psychology is wrong? Even if there is a relatively
small possibility that they might engage in such behavior, the
consequences of that are so great--granted, the consequences of
acting to try and prevent them from doing that, if all these
steps we have outlined here today are unsuccessful, is
certainly no walk in the park and should sober all those who
advocate such a step.
But that is ultimately the decision that we may very well
be confronted with and why this hearing and these steps to try
and change the analysis are so important, because the answer to
that question may in large part be unknowable with consequences
either way that could be potentially very adverse.
Ms. Maloney. Well, I mean, deterrence is effectively about
risk and about the psychology of your adversary, and I think
you are right to raise the extent to which we have not always
forecast Iranian behavior accurately and the extent to which
certainly the leadership at this stage is prepared to use
violence to advance its aims and essentially secure its power.
At the same time, I think you could have made equally,
perhaps even more compelling arguments about the psychology of
communist Russia, about the psychology of Maoist China and
their willingness to use violence, their ability to be deterred
by the threat of violence, and their interests in protecting or
preserving their own citizens, and it worked. And I think that
the same laws of deterrence applied to Iran will work. They
have worked. We have deterred Iran from engaging in some of the
worst behavior that certainly some within the regime would have
engaged in without any sorts of curbs on their activities. And
I think we can certainly deter and contain a nuclear Iran.
Let me just say, in answer to your previous question--and I
realize that I am indulging here, but I think that the export
question is certainly far more of an existential threat to the
Iranian regime, but it is one that they recognize that also has
some costs to the international community, particularly in the
wake of this global economic crisis. At this stage, there is
sufficient spare capacity for the world to live without Iranian
exports, but it will have an impact on the price.
I think the easier way to get at this, because you will
never get--if you cannot get multilateral agreement to the sort
of very modest measures that Dr. Levitt suggested, you will
never get multilateral agreement on a ban on Iranian oil
exports short of them testing a nuclear weapon. I think the
easier step would be just begin talking about targeting
investment in their energy sector, writ large, because the
Iranians know better than anyone that they have a production
decline, that they have technological and now, given the
financial crisis, some financial, some issues of capital that
they need international involvement in their sector in order to
avert potentially becoming an importer of oil rather than an
exporter.
Senator Bayh. So you would agree with the sentiments of the
Russian energy minister I spoke with? He used the words
``existential threat,'' that they would be very concerned about
even beginning to discuss something along those lines.
Ms. Maloney. I think even those discussions, the suggestion
that the Chinese and others would be willing to go along with
anything that involves energy investments would be very
powerful.
Ms. Pletka. Senator?
Senator Bayh. Yes.
Ms. Pletka. May I just address an issue that has not
arisen? We have gotten drawn into the question of parallels and
similes with the Soviet Union and Maoist China, and I think
that Ambassador Burns is absolutely right. There is no
comparison in terms of the might, the power, or the threat that
they represent to the United States. Neither the Soviet Union
nor Maoist China were especially interested in annihilating the
state of Israel. Each of the members, I noticed up here,
regardless of party, happened to mention our alliance with the
state of Israel, and I think that we are interested in the
security of the state of Israel as well as the security of our
own homeland and other allies. And, in fact, Iran does have an
ability to do significant damage----
Senator Bayh. Well, and if I could interject, the Israelis
obviously have an interest in their own security, and we are
not the only actors on this stage.
Ms. Pletka. That is exactly right.
Senator Bayh. And if some others feel sufficiently
threatened, they could engage in behavior that would then
implicate us and a whole chain of events could take place.
Ms. Pletka. Exactly, that would be enormously destabilizing
in the region. We have not talked about that, but obviously the
implications are very serious for us and for our allies. And,
of course, you know, for us to stand by as the Jewish people
twice in the space of 60 or 70 years face the prospect of
genuine annihilation is something that is a fairly daunting
prospect and not something I think that this Congress or most
of us are willing to indulge in.
Senator Bayh. Well, I think we would all agree that we have
a strong interest in avoiding that.
Anything else? You have been very patient, and I want to
thank you. This has been a very good hearing, and your
testimony has been very thoughtful. And I want to thank you for
that. Anything else, Ambassador, anything you would like to
add, anything that we did not touch upon?
Mr. Burns. I just want to thank you for the opportunity to
testify, and I want to agree with you that the prospect of a
nuclear-armed Iran is unthinkable for our interests and for
Israel's interests. But I am convinced that the best way to
protect Israel's interests--and everyone wants to do that--as
well as ours is not to leap to the solution of military force
at this point. It is to engage in the more complex diplomatic
move that I think President Obama is currently engaging in.
Senator Bayh. Well, as Senator Lieberman indicated in his
testimony and I tried to indicate in my opening remarks, the
purpose for this hearing and for some of our initiatives is to
try and make negotiations--maximize the chances that we do not
reach that point, to try and buttress the negotiations with
real consequences from a position--to change the cost/benefit
analysis so that, God willing, we do not have to have a second
panel here at some future date discussing what to do next.
Thank you all very much. The hearing is adjourned.
[Whereupon, at 12:19 p.m., the hearing was adjourned.]
[Prepared statements and responses to written questions
follow:]
PREPARED STATEMENT OF SENATOR RICHARD C. SHELBY
Thank you Mr. Chairman.
Once again, the Committee meets to hear testimony on Iran's support
for terrorism and its determination to develop a nuclear capability.
This time, however, we meet at a time that is marked by weeks of
unprecedented social, economic, and political upheaval in Iran.
While many things remain unclear about Iran and its future, two
remain very clear--Iran's nuclear ambitions and its sponsorship of
terrorism.
Iran continues to make strides in both its nuclear and missile
programs, and it is still recognized as the ``Central Bank'' for
terrorist financing.
Over the years, various Administrations have attempted, with little
or no success, to moderate the regime's nuclear aspirations and to curb
its support for terror.
Certainly, time and experience have shown that economic sanctions
can be a mixed bag as a foreign policy instrument. Sanctions and other
financial measures, directly or indirectly, have restrained some of
Iran's activities. But, we have yet to implement a sanctions regime
that produces the desired result.
It has become clear that we need a fresh approach and that stricter
controls may be necessary.
I appreciate our witnesses willingness to appear before the
Committee. I can't help but note, however, that the current
Administration is not represented at today's hearing.
The members of this panel will undoubtedly provide valuable insight
on the previous administration's efforts.
Current officials, however, would certainly be in a better position
to provide details, or even discuss generally how the President intends
to engage Iran diplomatically
I hope we will get the opportunity to have that discussion sometime
in the near future.
Thank you, Mr. Chairman.
______
PREPARED STATEMENT OF SENATOR MIKE JOHANNS
Thank you, Mr. Chairman. And I'd also like to thank the witnesses
testifying before us today, about an issue that has been in the news
quite a bit these past few weeks. I recognize this hearing is not
primarily about Iran's Presidential elections in June. But those
elections have affected both the regime's willingness to negotiate and
raised the cost of reaching out too far to this Iranian government. The
Obama Administration came into office promising to extend its hand to
nations that it felt had been unnecessarily threatened and bullied
under the previous administration. In March, the President made a
direct address to the Iranian nation, in which he sought to offer the
Iranian government legitimacy as an equal partner in constructive
negotiations over its nuclear program.
His intention was commendable. I too am extremely hopeful that the
current diplomatic process can produce a solution. I am thus proud to
be an original cosponsor of S. 908, the Iran Refined Petroleum
Sanctions Act. I understand that the President needs a great deal of
flexibility to manage these highly delicate negotiations. I absolutely
do not want to have the United States face yet another crisis in the
Middle East. But at the end of the day, we in the United States do not
dictate the pace of events. Nor, I believe, do our allies and partners
in the ``P five plus one'' group negotiating with Iran.
For years, successive Administrations have requested just what you
have recommended in your testimony, Dr. Burns; that we allow the
executive branch the greatest possible flexibility in instituting
sanctions. I think Congress has indeed been flexible. Since the Iran-
Libya Sanctions Act was passed in 1996, no foreign firm has been
penalized for investing in Iran's energy sector. That omission became
even more glaring after the 2002 revelation of Iran's hidden nuclear
facilities, and the subsequent beginning of negotiations over Iran's
nuclear program. Initially, the Europeans took the lead in these
efforts. The United States has been repeatedly assured that our
European partners are equally concerned with Iran as we are, and
equally committed to finding a diplomatic solution.
But then why does German and French and Italian trade with Iran
continue? Why is it rising? Why does the German government, itself part
of the ``P five plus one'' negotiating group, continue to offer its
companies export credits for their sales to Iran? I cannot understand
how long our partners need before they get serious. The latest deadline
I have heard--a soft deadline--is this fall, before Iran needs to reply
to our latest offer. If it has not reciprocated by then, the United
States and its partners will reportedly impose--in the words of the
French President, among others--``crippling sanctions.'' But these
sanctions almost certainly will require a strong U.N. Security Council
resolution to be truly effective. And I don't see how we get from here
to U.N. Security Council unanimity by waiting for 6 months, or a year,
or whatever.
I am unclear on why Russia and China would support a massively
ramped-up U.N. sanctions regime when they never have in the past. Is
there reason to think that they were waiting for direct, unconditional
U.S. engagement with Iran before they were convinced of our sincerity?
I find that unlikely. I do not think the Administration's engagement
effort will change anything fundamental in Russia or China's strategic
view of this situation. China, in particular, is aggressively deepening
its business relationship with Iran. Is that partnership likely to be
outweighed by the strategic value of another hand reached out to Iran's
fist? I doubt it. If Iran responds to the U.S. offer by this fall--and
I imagine its leadership, as masters of the delaying tactic, may well
do so, to prolong the process--negotiations will stretch on. And a
strong U.N. resolution will still be opposed by Russia and China.
I find this a highly realistic scenario. And what worries me is
that while our Administration and our partners continue to call for
more time, and more negotiations, and flexibility, our best window for
sanctions is slipping away from us. I believe a comprehensive
application of economic sanctions on Iran is necessary and could be
effective, given the state of its economy and the regime's actions in
the recent Presidential election. But these measures are critical now,
not in a year or so.
I do not mean to sound too gloomy. But I--and I think others in
this room--have a terrible feeling that this situation is close to
slipping beyond our ability to influence it. Thank you, Mr. Chairman.
______
PREPARED STATEMENT OF SENATOR JOSEPH I. LIEBERMAN
Thank you, Senator Bayh and Senator Shelby. I greatly appreciate
the opportunity to appear before you and your distinguished Committee
this morning as you take up what Defense Secretary Gates recently
characterized as the greatest threat to global security today: the
pursuit of a nuclear weapons capability by the Islamic Republic of
Iran.
I am deeply grateful to the Chairman of the Banking Committee, my
good friend and colleague Chris Dodd, for calling today's hearing.
Under Chairman Dodd's leadership, the Banking Committee has played a
critically important role in the response to Iran's nuclear ambitions--
most notably, in the sanctions bill your Committee overwhelmingly
endorsed 1 year ago.
I also would like to applaud you, Senator Bayh, for chairing this
hearing, and for your distinguished and strong leadership on this
issue. It has been my privilege to work closely with Senator Bayh this
year as we, together with Senator Jon Kyl, put forward S. 908, the Iran
Refined Petroleum Sanctions Act.
As of this morning, no less than 71 members of the Senate have
joined together as cosponsors of S. 908. This includes both some of our
most liberal and some of our most conservative colleagues--Senators who
do not see eye-to-eye on many issues. And that is precisely the point.
In uniting behind S. 908, our bipartisan coalition sends an
unambiguous message of unity, strength, and resolve to Iran and the
rest of the world, that, whatever other differences may divide us, they
are not as important as what unites us--our shared determination as
Americans to do whatever is necessary to prevent Iran from getting
nuclear weapons.
Today's hearing could not take place at a more critical moment.
Last week, the Senate unanimously adopted an amendment to the NDAA that
Senator Bayh and I put forward, together with Senator Kyl and Senator
McCain, and thereby for the first time endorsed an explicit timetable
for imposing sanctions against Iran.
Specifically, our amendment urges President Obama to adopt tough
new sanctions against the Central Bank of Iran in the event that the
Iranians fail to respond to his historic outreach by the time of the G-
20 summit in Pittsburgh on September 24, 2009, or if they fail to
suspend all enrichment and reprocessing activities within 60 days of
that summit.
I have been a supporter of the President's effort to engage the
Iranians in direct diplomacy over the past 6 months. Thanks to this
outreach, it should now be clear to the world that the obstacle to the
peaceful resolution of Iran's nuclear program is not in Washington, but
in Tehran.
Unfortunately, however, it has also become increasingly clear that
Iran's current leaders are unlikely to engage in a serious negotiation
with the international community over their nuclear program until they
are under existential pressure to do so. In this way, crippling
sanctions are not only consistent with diplomacy; they are critical to
any hope of its success. It is precisely by putting in place the
toughest possible sanctions, as quickly as possible, that we stand the
best chance of persuading Iran's leaders to make the compromises and
concessions that the peaceful resolution of this crisis will require.
In fact, this is exactly the formula that President Obama himself
endorsed a year ago when he argued that the key to preventing Iran's
nuclear breakout is, and I quote, ``aggressive diplomacy combined with
tough sanctions.''
Given the September deadline endorsed by the Senate last week, I
respectfully hope that your Committee will act expeditiously to provide
the President with every authority he needs to impose crippling
sanctions this fall--starting with S. 908.
The logic of S. 908 is simple. During last year's Presidential
campaign, President Obama repeatedly pointed to Iran's reliance on
imports of refined petroleum products as a point of leverage in our
nuclear diplomacy. As Senator Bayh and I subsequently discovered,
however, the President's authority to target the handful of companies
involved in this trade is at best ambiguous. The Congress can end this
ambiguity by passing S. 908. Doing so will not tie the President's
hands; rather, it will hand him a new and powerful weapon in our
diplomacy toward Iran.
The coming months will be critical in determining whether we stop
Iran from acquiring nuclear weapons. As I know all of the members of
this Committee are aware, time is not on our side. Whatever else we may
debate or discuss about Iran, there is one reality we cannot afford to
lose sight of: every minute of every day, right now as we speak,
thousands of centrifuges in Iran are continuing to spin. Hundreds more
are being installed every month. More and more fissile material is
being stockpiled. Already, Iran has enough low enriched uranium to form
the core of one nuclear weapon. Soon, it will have much more.
Simply put, every day that we wait, the Iranian regime is advancing
closer to its goal--and the odds that we can persuade them to turn back
from the brink, through peaceful means, diminish.
I thank the Committee for its time and consideration, and again
express my gratitude for your strong leadership on this critical issue.
______
PREPARED STATEMENT STATEMENT OF NICHOLAS BURNS
Professor of the Practice of Diplomacy and International Politics,
Harvard University
July 30, 2009
Chairman Dodd, Senator Shelby and Members of the Committee, thank
you for the invitation to testify today on United States policy toward
Iran.
I have had the pleasure of testifying to this Committee in the past
as a government official. This is my first appearance as a private
citizen. The views that follow are entirely my own.
One of the most important diplomatic challenges facing the United
States is what we should do about an aggressive, reactionary and
truculent government in Iran.
After 4 years in power, it is clear that the Ahmadinejad government
is seeking a dominant role in the Middle East. It is pursuing with
great energy a future nuclear weapons capability that would threaten
Israel and our Arab partners. It continues to support the most
destructive and vile terrorist groups in the region. It plays an
influential role in both Iraq and Afghanistan, often in direct
opposition to the United States.
Given Iran's confrontational policies on issues that are vital for
American interests, we are, in many ways, on a collision course with
its government.
In the short-term, we must assume that relations between our two
governments will remain poor. We have had no sustained and meaningful
diplomatic contacts in thirty years since the Iranian revolution.
Given the lethal nature of Iran's challenge to the United States,
our government must respond to it with toughness and strength but also
with ingenuity. One of our highest priorities should be to maintain
America's leadership role in the Middle East and to deflect
Ahmadinejad's own quest for regional supremacy.
But, we must also recognize that the near total absence of
communication between our two governments is no longer to our
advantage. We know very little about a government that exerts such a
negative influence in the Middle East. President Obama has gone further
than any of his predecessors in offering negotiations with the Iranian
regime. I believe his instincts have been right in positioning the
United States to regain the upper hand with Iran in the international
arena. President Obama's outreach to Moslems worldwide in his Cairo
speech, his video message to the Iranian people and his pledge that the
United States would participate in the Perm-Five Group nuclear talks
with Iran have put us on the diplomatic offensive.
The result has been telling. The Iranian government has had no
effective or coherent response to these overtures. It is now Iran,
rather than the United States, that is considered internationally to be
the party preventing the resolution of the nuclear issue.
This is not an insignificant accomplishment. Unfortunately, many in
the Moslem world saw the United States, incorrectly, as the aggressor
in the conflict with Iran in past years. President Obama has managed to
shift global opinion. The United States is now in a stronger position
to argue convincingly for a more tough-minded international approach to
the Iran nuclear issue.
Given these developments, I believe that the best course for the
United States is to continue to offer two paths to the Iranian
authorities.
The first is the possibility of international negotiations over the
nuclear issue. The United States and the other countries have declared
their readiness to talk. The aim of these talks should be to convince
Iran to cease its illegal nuclear research efforts. Should Iran not
respond seriously and convincingly to this international offer by the
autumn, the United States should turn to the second path by moving
quickly and decisively with its key international partners to place
very tough economic and financial sanctions on the Iranian government.
U.S. policy, in short, should be to increase pressure on the
Iranian government at a time when it finds itself an international
pariah with vastly reduced credibility around the world.
In many ways, Iran is now far weaker than it was before its June 12
elections and the subsequent revolt on the streets of Tehran and other
major cities.
It is highly probable that the government's cynical and corrupt
handling of the elections is a fundamental turning point in the history
of the country. The demonstrations that followed the government's
transparent intervention in the ballot counting represented the most
critical assault on the credibility of the Supreme Leader and the
government in the thirty-year history of the Islamic Republic. The
reform movement that surged onto the streets was the strongest such
protest movement in this entire period, representative of all age and
ethnic groups and classes. And, while the government's brutal and anti-
democratic actions on the streets appear to have been effective in
quelling the demonstrations in the short-term, the reformers are
unlikely to go away. It is more likely that the deep divisions created
by the stolen election will be a major force in Iranian politics and
society for some time to come.
Despite the relative quiet on the streets of Iran today, tensions
and fundamental disagreements about the future of the government are
simmering just below the surface. The situation in Iran will remain for
some time to come highly volatile and unpredictable. Some experts on
Iran believe the regime has retaken control of the streets for good and
will continue to rule essentially unchallenged. But, many others
believe that there is an equally good chance that the country will
remain roiled by instability and division for months to come.
What is the proper way for the United States to respond to this
potentially explosive situation?
First, I continue to believe that President Obama was correct to
not inject the United States into the middle of the Iranian domestic
crisis right after the elections. Had he done otherwise, it would have
given the most reactionary Iranian leaders, such as Ahmadinejad, the
excuse to charge that the United States was intervening unjustly in the
domestic affairs of a proud country. By tempering U.S. statements and
actions in the days following the election, I believe President Obama
succeeded in keeping the international spotlight on Ahmadinejad rather
than the U.S. Government.
Second, the United States and other governments around the world
now face a highly difficult and complex situation in Iran. Inaction or
choosing to ignore or isolate the Iranian government would allow
Ahmadinejad to continue unfettered the nuclear research that the
International Atomic Energy Agency believes continues unabated.
Allowing the Iranian government to continue to build a nuclear
capability with no effective international opposition is definitely not
in the U.S. interest. Refusing to negotiate would weaken the potential
for effective international action to pressure the regime.
The right policy for the United States, in my judgment, is thus to
stand by the invitation for international discussions between the
Permanent Five countries (the United States, France, the United
Kingdom, Russia, China and also Germany) and Iran on the nuclear issue
and to combine it with the threat of strong and immediate sanctions
should Tehran refuse to negotiate seriously.
But, the offer for such discussions should not be open-ended. The
offer to negotiate has been on the table for months. It would thus be
reasonable to give Iran a deadline of this autumn to reply. If no
serious response is forthcoming by then, the United States and the
other countries would have every right to turn to draconian economic
and financial sanctions.
Some will argue that any willingness by the Obama Administration to
talk to Iran would legitimize the Iranian government and would be an
affront to the courageous Iranians who took to the streets in
opposition. They say we should either do nothing or move directly to
sanctions.
I think the issues at the core of this dilemma are much more
complex. The entire democratic world was outraged by the brutal actions
of the Iranian government in the wake of the failed elections. The
Iranian regime was seen for what it really is--a ruthless group of
leaders who have used the power of the military and security services
to terrorize their own population. The Iranian government deserves the
most severe criticism for its mistreatment of the Iranian people.
While it may serve our collective sense of outrage and frustration
to stonewall the Tehran government, that kind of policy is not likely
to serve our core American interest--finding a way to prevent Iran from
becoming a nuclear weapons power.
By supporting the international offer for negotiations, the Obama
Administration is building credibility with countries important for any
future negotiation or sanctions effort--Russia, China, the Gulf states,
Japan, South Korea, Germany and other European countries.
If the United States refused to negotiate, we would likely have
little subsequent international credibility to argue for tough
sanctions. But, if we offer to negotiate and the talks fail, we will be
in a much better position to assemble a stronger international effort
to apply tough sanctions on Iran.
My best judgment is that, even if negotiations are held this
autumn, they will fail due to the predictably unreasonable and
inflexible attitudes of Ahmadinejad and his colleagues. It is highly
likely, for example, that the Iranian government will not agree at the
negotiating table to cease its enrichment of uranium as the United
Nations Security Council has demanded in successive sanctions
resolutions passed during the last 3 years.
The most important decision facing the United States and other
countries is thus to decide what kind of sanctions would have the most
significant impact on the Iranian authorities. In other words, our
primary goal must be to find the most effective strategy toward Iran
that will resolve the crisis on our terms and peacefully.
There are proposals for sanctions resolutions being debated in the
Congress and wider public. I agree that the time has come for the
United States and others to threaten much tougher sanctions on the
Iranian regime.
My main recommendation for this Committee and the Congress,
however, is to permit the President maximum flexibility and
maneuverability as he deals with an extraordinarily difficult and
complex situation in Iran and in discussions with the international
group of countries considering sanctions. It would be unwise to tie the
President's hands in legislation when it is impossible to know how the
situation will develop in the coming months.
The most effective sanctions against Iran, in my view, would be
those that are multilateral and not unilateral and those that the
President could decide to either implement or waive, depending on
events during the coming months. The most powerful signal to
Ahmadinejad would be for Moscow and Beijing to stand alongside the
United States in imposing collective sanctions rather than have the
United States adopt its own way forward, absent consultation and
agreement with our international partners.
It makes sense that the search for an effective sanctions regime
should include initiatives (such as energy imports by Iran) that will
strike at the heart of the Iranian government's strength. Senator Bayh
and others have produced creative ideas for more forceful sanctions
against Iran. It stands to reason that a much more aggressive sanctions
regime would likely have a more powerful impact on the thinking of the
government in Iran in the months ahead.
Still, my strong advice is to give the President the independence
and flexibility he will surely need to negotiate successfully the
twists and turns of this volatile issue.
As many Congressional leaders have stated, we must negotiate with
Iran from a position of strength. The President would be wise to set a
limited timetable for any discussions with Iran. He should be ready to
walk away if progress is not visible in a reasonable period of time. He
should also agree on the automaticity of sanctions with Russia and
China, in particular, before any talks begin. In other words, Moscow
and Beijing should assure the United States that they will sanction if
the talks fail. China and Russia have acted unhelpfully by continuing
to trade and sell arms to Tehran as it thumbed its nose at the
international community. If President Obama is to offer talks to
Tehran, it is only reasonable for China and Russia to pledge to join us
in draconian sanctions on Iran should the talks break down.
In this charged and unpredictable environment, with the stakes so
high for American interests, it will be very important for the United
States to keep all options on the table--meaning the United States
should reserve the right to employ every option, including the use of
force, to prevent Iran from becoming a nuclear weapons power. This
marriage of diplomacy with the threat of force is essential to send a
convincing signal to Iran that it must choose to negotiate soon.
While there is no guarantee that negotiations will work, the Obama
Administration's diplomatic approach has several real advantages for
the United States.
First, it may be the only way we will ever know if there is a
reasonable chance for a peaceful outcome to the crisis with Iran.
Second, a negotiation may be effective in slowing down Iran's nuclear
research as a pause or freeze in uranium enrichment would be a logical
demand of the United States and its partners if the talks continued for
any length of time. Third, negotiations would serve to isolate and
pressure the Iranian regime in the international arena. Finally, we
will be no worse off if we try diplomacy and fail. In fact, we will be
stronger. We will be far more likely to convince China and Russia to
join us in sanctions.
I have one final thought to offer to the Committee today. We will
not be well served if we allow the debate in our own country to be
reduced to ``negotiation or war'' with Iran.
Should negotiations fail, stronger sanctions, not war, are the next
logical step. And should sanctions fail, President Obama would face a
difficult choice between using force or seeking to build a containment
regime against Iran. While the stakes are high, there is nothing
inevitable about war between the United States and Iran.
This is an extraordinary time in the history of the Iran nuclear
issue. The Iranian government has been weakened by the national and
international furor over its dishonest handling of the elections and
the protests that followed. We should seek to weaken it further by the
threat of unprecedented sanctions. Those sanctions are most likely to
be agreed by the leading nations of the world if we try diplomacy and
negotiations first.
What we learned from watching the people of Iran demand more
liberty and a better government when they took to the streets is that
Iran is not a monolithic country. Instead, it is a remarkably diverse
nation in ethnic, religious, regional and ideological terms.
Now that it is apparent to the whole world that Iran is a society
in crisis and a country fundamentally divided, we should look at our
own long-term options in a new light.
We should reflect on the complex set of choices available to us as
we seek to prevent a nuclear Iran in the short term and build, at some
point in the future, a better and more peaceful relationship with the
Iranian people.
Now is therefore not the time, in my judgment, for the United
States to consider a military approach to this dilemma. Our interests
will be far better served if the United States uses its diplomatic
skill and dexterity to lead an international coalition to make an
ultimatum to a weakened and despotic regime--agree to negotiations
quickly or face a renewed international sanctions effort that will
weaken the regime further.
We have the upper hand with Iran for the time being. We should seek
to keep it. And, we should still believe that diplomacy might yet
produce an ultimately peaceful resolution of this dispute without
recourse to war.
______
PREPARED STATEMENT OF DR. MATTHEW LEVITT
Senior Fellow and Director of the Stein Program on Counterterrorism
and Intelligence, Washington Institute for Near East Policy
July 30, 2009
Chairman Dodd, Ranking Member Shelby, Committee members, thank you
for the opportunity to appear before you today to discuss the utility
and applicability of targeted financial measures as part of a strategic
policy, leveraging all elements of national power to deal with the
threats presented by Iran's nuclear program.
As a former Deputy Assistant Secretary of the Treasury who
participated in the department's outreach to the private sector as
early as 2006, I am often asked why I support the use of targeted
financial measures--both formal sanctions and informal outreach to the
private sector--if the use of these tools has not stopped Iran from
pursuing a nuclear weapon. If these efforts have neither altered the
decisionmaking of Iranian leaders nor disrupted Iran's ability to
continue developing its nuclear program, then are they really
effective?
The answer is that targeted financial sanctions were never intended
to solve the problem of Iran's pursuit of nuclear weapons. Sanctions
are no silver bullet. On their own, these financial tools can only do
so much. But coupled with other tools--especially robust diplomacy but
also a credible military presence in the region--financial measures can
effectively create leverage for diplomacy. That diplomacy should focus
not only on Iran, but on Russia, China, our European and Asian allies,
the Gulf States, and others.
What can sanctions accomplish? They are intended to advance any of
the following three goals: (1) disrupt Iran's illicit activities; (2)
deter third parties from knowingly or unintentionally facilitating
Iran's illicit activities; and (3) impacting Iran's decisionmaking
process so that continued pursuit of illicit activities is
reconsidered.
Note, for example, that despite the many problems with the
declassified key judgments of the November 2007 National Intelligence
Estimate (NIE) on Iran's nuclear intentions and capabilities, the
report accurately noted that the tools most likely to alter Iran's
nuclear calculus--if any--are targeted political and economic pressure,
not military action. According to the NIE, Iran's decision to halt its
nuclear weapons program in 2003 was ``in response to increasing
international scrutiny and pressure resulting from exposure of Iran's
previously undeclared nuclear work.'' The key judgments conclude that
the intelligence community's ``assessment that the [nuclear weapons]
program probably was halted primarily in response to international
pressure suggests Iran may be more vulnerable to influence on the issue
that we judged previously.''
Iran may or may not have actually halted its weapons program. Even
if it did, this may actually mean far less than the NIE suggested if
what was suspended was a piece of the program that could be quickly
resumed at any time, but the potential of such tools to impact the
decisionmaking process of key Iranian leaders is worth noting.
That said, recent events suggest that Iran's current hard line
leadership sees the pursuit of a nuclear program and ongoing tension
with the West as positive things that support their primary objective:
regime survival. But even if the goal of altering the Iranian regime's
nuclear calculus is not so likely under current circumstances, the
other two goals of financial sanctions--(1) constricting the operating
environment and making it more difficult for Iran to engage in illicit
activities by disrupting their finance, banking, insurance, shipping
and business dealings; and (2) deterring others from partnering with
Iran--remain important objectives that can be furthered by employing
financial tools.
While some question the wisdom of employing sanctions when the
administration is actively seeking to pursue engagement with Iran, and
others question the wisdom of employing sanctions that might give the
regime a straw man and scapegoat to blame for all of Iran's ills, my
own conclusion is just the opposite; this is exactly the time to use
financial tools to build leverage for diplomacy.
With the hard-line regime so significantly delegitimized--to the
point that both moderates and hardliners have overtly questioned
decisions of Supreme Leader Ayatollah Ali Khamenei--the regime's
ability to easily deflect criticism over the state of the Iranian
economy or sanctions imposed over Iran's nuclear program has been
significantly undermined. Indeed, the regime faces a far greater
legitimacy crisis over its handling of the sham election, the Basij
crackdown targeting Iranian citizens, the demonization of protestors by
senior leaders, and the incarceration of protestors.
Given that Iran's nuclear program continues to progress, the one
thing that is clear is that we do not have the luxury of time. The
question is not whether or not to use sanctions, but what sanctions,
targeting which entities, using which tools and authorities, and in
what order?
To be sure, diplomatic engagement, directly with Iran or with
others focused on Iran, whether broad or limited, is severely
undermined when Iran is able to pursue its nuclear ambitions, support
terrorist groups, and erode security in Iraq and Afghanistan without
consequence. As Washington Post columnist David Ignatius put it,
``[T]hese new, targeted financial measures are to traditional sanctions
what Super Glue is to Elmer's Glue-All.'' Periodically reassessing and
adjusting the package of targeted financial measures is the tool most
likely to create enough diplomatic leverage to avoid a military
confrontation. Short of creating such leverage, negotiation and
diplomacy alone will not convince Iran to abandon its nuclear program.
What sanctions should be employed?
First, we should actively seek international consensus on
multilateral sanctions through the United Nations that would be ready
to be implemented in the early fall should Iran fail to respond to the
administration's offer of engagement by the deadline of the G-8 summit
and the U.N. General Assembly that follows shortly thereafter. As
important as the entities to be listed will be the unanimity of the
decision to impose sanctions, so it is critical that the administration
engage in robust diplomatic engagement with China and Russia now.
New multilateral designations should focus on entities engaged in
illicit conduct in support of Iran's proliferation program, in
particular those already designated unilaterally by the United States.
For example:
Bank Mellat. Bank Mellat was designated by the United
States in October 2007 for providing banking services in
support of U.N.-designated Iranian nuclear entities, namely the
Atomic Energy Organization of Iran (AEOI) and Novin Energy
Company. A multilateral designation would go far in
constricting the activities of the banks foreign regional
offices in South Korea, Armenia, and Turkey.
Bank Melli. As FINCEN noted in a March 2008 advisory to the
financial sector, ``UNSCR 1803 calls on member states to
exercise vigilance over the activities of financial
institutions in their territories with all banks domiciled in
Iran, and their branches and subsidiaries abroad. While Bank
Melli and Bank Saderat were specifically noted, the United
States urges all financial institutions to take into account
the risk arising from the deficiencies in Iran's AML/CFT
regime.'' Iran's largest bank, Bank Melli was also designated
by the Treasury in October 2007 for providing banking services
to entities involved in Iran's nuclear and ballistic missile
programs, including entities listed by the U.N. for their
involvement in those programs. Following up on the warning
included in UNSCR 1803 with outright designations of these
banks would send a strong message.
Khatam al-Anbya. The U.N. should also follow up on the U.S.
and E.U. designations of the Khatam al-Anbya construction
company (also called Ghorb), which is one of the most
significant of the multiple entities owned or operated by the
IRGC that have been designated by the United States. With the
increased militarization of the Iranian regime, and the blatant
abuses of the IRGC-affiliated Basij militia, now is the time to
target IRGC affiliated entities.
IRISL. The U.S. designation of Iran's national maritime
carrier, the Islamic Republic of Iran Shipping Lines (IRISL),
in September 2008, was another key unilateral action that
should be made multilateral. IRISL was designated for
facilitating the transport of cargo for U.N. designated
proliferators and for falsifying documents and using deceptive
schemes to shroud its involvement in illicit commerce. And as
the State Department noted at the time of the designation,
IRISL had already been ``called out by the U.N. Security
Council as a company that has engaged in proliferation
shipments.''
Multilateral action, however, is not only difficult to achieve but
can often lead to lowest common denominator decisionmaking. While
international consensus is built for robust action at the United
Nations, the United States should pursue both unilateral and bilateral
financial measures (together with other States or regional bodies like
the E.U.) focused on IRGC-affiliated and other individuals and
institutions facilitating Iran's illicit conduct.
The United States should also actively support the efforts of
multilateral technocratic bodies such as the Financial Action Task
Force (FATF), which has issued a series of increasingly blunt warnings
about doing business with Iran. The FATF is a 34 member technocratic
body based in Paris which seeks to set global standards on combating
money laundering and terrorism financing. The FATF has put out multiple
warnings on Iran--the first in October 2007 and the most recent in
February 2009. In these warnings, FATF instructed its members to urge
their financial institutions to use ``enhanced due diligence'' when
dealing with Iran. In the second warning, the FATF president also urged
Iran to address the ``shortcomings'' in its anti-money laundering and
terrorist financing regimes immediately. The most recent warning
instructed countries to begin developing ``countermeasures'' to deal
with Iran's illicit financial activities--an indication of how
concerned the international body was with Iran's behavior in this
arena. After one such warning, Iran sent a delegation to lobby FATF (of
which it is not a member) but FATF dismissed the Iranian delegation's
claims that legislative changes fixed the regime's shortcomings,
calling the changes ``skimpy'' and noting their ``big deficiencies.''
Informal sanctions, what I describe as leveraging market forces,
should be continued and expanded. As my colleague Michael Jacobson has
also argued, the direct outreach that Treasury has pursued with the
international financial sector should be broadened to include other
U.S. agencies and departments, notably the Commerce Department,
engaging with a wider array of private sector actors in the insurance,
shipping, and other industries. We should continue to think creatively
about how to leverage our existing influence to achieve our goals. For
example, coupled with additional action targeting IRISL, an effort to
convince countries concerned about Iran's illicit and deceptive conduct
to deny landing rights to Iran Air would further constrict Iran's
ability to move funds and material for illicit purposes and isolate the
regime internationally. Even in today's economy, and to a certain
extent because of it, the private sector is very sensitive to
reputational risk and is acutely aware of its due diligence and
fiduciary obligations to its shareholders.
Less Targeted Financial Measures
Targeted financial measures have proven impressively effective at
disrupting Iran's illicit conduct, but given the short timeframe and
the rapid progress Iran is making on its nuclear program it may be time
to consider more drastic and less targeted measures. Secretary Clinton
has spoken about the possibility of inflicting ``crippling sanctions''
on Iran, and one particularly promising avenue to pursue would be to
exploit Iran's continued reliance on foreign refined petroleum to meet
its domestic consumption needs at home. Due to insufficient refining
capacity at home, Iran must still re-import the 40 percent of its
domestically consumed petroleum from refineries abroad. The prospect of
targeting Iran's continued ability to re-import this refined petroleum
back into the country could be a powerful tool targeting a regime soft
spot. Consider as precedent the dramatic failure of the Iranian
regime's gas ration card program in June 2007. The cards were loaded
with a 6-months ration, but many Iranians reportedly used their entire
ration within weeks. Indeed, Iran worries each winter about a possible
heating fuel shortage and the consequence of not being able to provide
the public with sufficient fuel subsidies.
Technology Arms Transfers
We should also focus our attention on developing a more systematic
approach for dealing with Tehran's efforts to transfer technology and
arms to radical allies in the Middle East and elsewhere, even as
Washington seeks to engage Iran. Earlier this year, Cyprus impounded
the Iranian-chartered freighter Monchegorsk, a vessel laden with war
materiel bound for Syria (and perhaps beyond). The episode highlighted
the shortcomings of current U.N. and European Union sanctions on Iran,
and underscores the need to fill the gaps in the available policy tools
to deal with Iranian arms transfers to its allies and surrogates. To
close these gaps, the United States should work with its allies and the
international community on a number of fronts:
encourage the U.N. sanctions committee to issue a Security
Council communique to the U.N. General Assembly, emphasizing
the obligation of all member states, including Iran and Syria,
to fully abide by the U.N. ban on arms transfers;
work with the EU to expand its current policy banning the
sale or transfer to Iran of ``all arms and related material, as
well as the provision of related assistance, investment and
services'' to include a ban on the purchase or transfer from
Iran of the same;
work with U.N. and EU member states to adopt legislation
pertaining to Iranian arms and technology transfers, to enable
them to fulfill their U.N. and EU obligations. Encourage
regional organizations in South America and South and East Asia
to adopt similar resolutions;
work with the EU and Turkey (the de facto eastern gateway
to Europe) to develop an enhanced customs and border security
regime to prevent Iranian arms and technology transfers through
Turkey;
engage the private sector to draw attention to the risk of
doing business with IRISL, its subsidiaries, and other banned
entities. Given Iran's history of deceptive financial and trade
activity, extra scrutiny should be given to any ship that has
recently paid a call to an Iranian port;
encourage countries to require ports and/or authorities to
collect detailed, accurate, and complete data regarding all
cargo being shipped to or through their countries (especially
from risk-prone jurisdictions like Iran), to conduct rigorous
risk assessments, and to proceed with actual inspections as
necessary;
encourage implementation of the World Customs
Organization's (WCO) draft Framework of Standards to Secure and
Facilitate Global Trade. The WCO represents 174 Customs
administrations across the globe (including Iran) that
collectively process approximately 98 percent of world trade.
Under the proposed framework, a risk management approach would
be implemented for all cargo to identify high-risk shipments at
the earliest possible time. Participating members would benefit
from enhanced security and efficiency, and could benefit from
lower insurance premiums.
There are signs of success, and with continuing signs of domestic
discontent in Iran, targeted financial measures can increase the
political pressure on the regime. Indeed, long before the June 12
elections, the U.S.-led campaign had played a role in causing domestic
political problems for Iranian hard-liners as well. In September 2007,
former president Ahkbar Hasehemi Rafsanjani, a moderate opposed to the
regime's confrontational approach, was elected as the speaker of the
Experts Assembly--the body which chooses and has the power to remove
Iran's Supreme Leader. Several days earlier, the Supreme Leader
dismissed Yahya Rahim Safavi, the IRGC's commander since 1997, who was
blacklisted by the U.N. in March 2007. Safavi's replacement, Muhammad
Ali Jafari, confirmed that Safavi was removed primarily ``due to the
U.S. threats.'' Finally, Motjtaba Hashemi Samarah, one of Ahmadinejad's
close allies, was removed from his position as the deputy interior
minister. Iran's former chief nuclear negotiator, Hasan Rowhani,
disparaged the country's growing international isolation and stated
that economic sanctions were definitely impacting Iran. Despite high
oil prices, he noted, ``[W]e don't see a healthy and dynamic economy.''
While there are a number of factors contributing to Iran's economic
difficulties, including declining oil prices and President
Ahmadinejad's mismanagement of economy policy, the response of
international financial institutions to the Treasury Department's
outreach has been a key reason as well. Many of the major global
financial institutions--particularly those based in Europe--have either
terminated or reduced their business with Iran. More surprisingly, it
appears that banks in the United Arab Emirates and China are also
beginning to exercise greater caution in their business dealings with
Iran as well.
Conclusion
Even as it continues to pursue a nuclear program and other illicit
activities, Iran today is financially and politically exposed. While
sanctions are no panacea, if properly leveraged in tandem with other
elements of national power, the pinch of targeted financial measures
could potentially have a very significant impact.
______
PREPARED STATEMENT OF SUZANNE MALONEY
Senior Fellow, The Saban Center for Middle East Policy,
Brookings Institution
July 30, 2009
Mr. Chairman and members of the Committee, I'm very grateful for
the opportunity to discuss recent developments in Iran and the policy
tools available to the United States for tempering Tehran's nuclear and
regional ambitions.
With turmoil on the streets and in the corridors of power, Iran's
perennially unpredictable politics have moved into uncharted territory
in the wake of the shameless manipulation of last month's Presidential
elections. Unrest within Iran is hardly unprecedented; Iran has
experienced ethnic rebellions, labor actions, student protests,
economic riots, and a range of other political agitation with a
surprising regularity over the past 30 years.
However, the current turbulence stands apart from any past
instability within Iran in the scope of popular engagement and the
severity of divisions among the political elite. As a result, the
Islamic Republic today is now forced to contend with an almost
unprecedented array of internal challenges, including the emergence of
an embryonic opposition movement and profound fissures within the inner
circles of power. The persistence of street skirmishes and passive
resistance on the streets, the increasingly uneasy straddling of the
broader array of conservative politicians, the mutiny against the
supreme leader's unfettered authority by a quartet of veteran
revolutionary leaders as well as senior clerics--all this clearly marks
the opening salvos of a new phase of existential competition for power
in Iran.
At this stage, it is beyond the capabilities of any external
observer to predict precisely where, when and how Iran's current power
struggle will end. In the immediate term, the Islamic Republic will
likely survive this crisis with its governing system and leadership
largely intact, thanks to the same tactics that have preserved it for
the past 30 years: behind-the-scenes deals and mass repression.
However, the regime's internal challenges have already intensified
beyond what most analysts anticipated a mere 6 weeks ago, and at some
point the discord may begin to transcend Tehran's capacity to navigate.
Iran's Economy
Among the most important factors shaping both Iran's future
trajectory and the tools available to the international community for
influencing that course are those related to the Iranian economy. As
even the most cursory review of the press coverage of Iran would
suggest, its economy has experienced perennial problems of
mismanagement that have been exacerbated by the ideological and
interventionist approach of President Ahmadinejad. In the past 4 years,
every meaningful economic indicator has suggested serious trouble for
Iran--alarms that were sounded well before the global economic crisis.
Iranians must contend with double-digit inflation, power shortages, a
tumbling stock market, stubbornly high unemployment rates particularly
among young people, increasing dependence on volatile resource
revenues, and perhaps most ominously for Iran's leaders a rising tide
of popular indignation spawned by individual hardship and the broader
national predicament.
Ironically, Ahmadinejad owes his unlikely ascent from
administrative obscurity to the pinnacle of power in Iran in part to
his successful exploitation of Iranians' frustration with their living
standards and economic opportunities. While Ahmadinejad's original 2005
election surely benefited from no small amount of electoral
manipulation, his election was accepted as a credible outcome by many
if not most Iranians because he waged an unexpectedly effective
campaign. His messages emphasized the economic hardships and inequities
that afflict the average Iranian, and he spoke bitterly about the
indignities of Iran's grinding poverty and pointedly contrasted his
lifestyle with that of his chief rival, the profiteering former
president Akbar Hashemi Rafsanjani. Ultimately, Ahmadinejad's initial
election reflected the frustrations of an electorate more concerned
with jobs and the cost of living than with slick campaigns or
implausible pledges of political change.
Despite this apparent mandate, however, Ahmadinejad governed on the
basis of ideology rather than performance. As a result, the president
himself bears much direct responsibility for the current state of
Iran's economic affairs; his heavy-handed interference with monetary
policy and freewheeling spending contributed the spiraling inflation
rates, and his provocative foreign policy and reprehensible rhetoric
has done more to dissuade prospective investors than any U.S. or U.N.
actions. His personal disdain for the technocracy and quixotic economic
notions has undermined much of the progress that has been made in
recent years to liberalize the Iranian economy and address its
underlying distortions. The president has boasted of his instinctive
grasp of economic policy, reveled in the reverberations of the global
economic meltdown, and scoffed that his government could withstand even
a drop in oil prices to a mere $5 per barrel. And he spent--taking full
advantage of an epic oil boom that reaped more than $250 billion in his
first three and a half years as president. Ahmadinejad traversed the
country with his full cabinet in tow, and taking evident enjoyment from
a paternalistic process of doling out funds large and small for
picayune provincial projects and even individual appeals.
The senselessness of his policies has provoked an intensifying
firestorm of criticism from across the political spectrum. At first the
critiques were light-hearted. When he once boasted about the bargain
price of tomatoes in his low-rent Tehran neighborhood, the president
sparked a flurry of popular jokes at his expense and grumbling among
the political elite. However, as the ripple effects of the global
economic slowdown began to impact Iran and the price of oil crashed to
less than one-third of its stratospheric 2008 high, the mood soured
both among the regime's veteran personalities and its population at
large. In three successive letters, panoply of the country's most
respected economists detailed the dangers of the president's policies.
Notably, the critiques were not limited to the president's factional
adversaries; much of the disquiet voiced in recent years over the state
of the economy emerged from sources ideologically inclined to support
Ahmadinejad and his patron the supreme leader, including traditional
conservatives with longstanding links to the powerful bazaar and the
centers of clerical learning.
Thanks to his assiduous deployment of economic grievances during
his original campaign and his copious and public spending throughout
his first term, Ahmadinejad made himself particularly vulnerable to the
regime's stumbling in this arena. What particularly galled so many
Iranian political figures was the opportunity sacrificed by the
malfeasance of the past few years. Iran's oil revenues under
Ahmadinejad's first term exceeded 8 years' of income during both the
Khatami and Rafsanjani presidencies; indeed of the more than $700
billion that Iran has earned through oil exports in the past thirty
years, nearly 40 percent came in during the past 4 years. Adding fuel
to the fire was the lack of transparency over its allocation; having
decimated the economic planning bureaucracy and attempted to classify
the details of the nation's oil reserve fund, Ahmadinejad left vast
ambiguity as to the destination of tens of billions of dollars of his
government's spending. The presumption is much of it has financed
record consumption, with a disturbingly high import quotient, rather
than creating jobs, attracting investors, or taking advantage of Iran's
large, well-educated baby boom as it comes of age.
During the Presidential campaign, this particular issue and the
state of the economy more broadly were hot-button issues for
Ahmadinejad's opponents. Musavi, who had pressed for statist policies
through his tenure as prime minister during the 1980s, embraced a
relentlessly technocratic message centered on the incumbent's failure
to manage the economy effectively. Musavi and his rivals pitched the
economy as the primary issue in their attempt to connect with voters,
equating economic grievances with threats to the country's security. As
is his wont, Ahmadinejad was not cowed, and brandished shocking
allegations of corruption and patronage as well as misleading
statistics in the riveting televised campaign debates with each of his
rivals.
The unrest of the past 6 weeks will only aggravate Iran's economic
dilemmas and put durable solutions to the perpetual problems of
uncontrollable subsidies, unaccountable spending that much further out
of reach. The crisis will likely persuade more Iranians who have the
means and/or ability to leave the country to do so, exacerbating the
persistent problem of the brain drain and related capital flight. Even
in advance of any multilateral action on sanctions, the political risks
and generally unpalatable nature of the new power structure will
dissuade some investors and reduce the competitiveness of Iran's
external links. Should the political situation degenerate further,
economic actions by the opposition such as strikes and mass boycotts
could further paralyze the Iranian economy as a means of applying
pressure to current decisionmakers.
However, one caveat regarding assumptions on the state of the
Iranian economy: Particularly over the past 4 years, the media as well
as policymakers have routinely speculated on the prospect for economic
grievances to spark turmoil that might threaten the Islamic Republic.
The longstanding distortions that plagued the Iranian economy have been
greatly exacerbated by Ahmadinejad's spendthrift, interventionist
policies, and in recent years Iranians have had to contend with double-
digit inflation and unemployment rates. Analysts often pointed to
small-scale labor actions as well as the short-lived protests against
the gasoline rationing program, launched in 2007, and other poorly
designed efforts to revamp the government's vast subsidies as the
harbingers of mass unrest. They were repeatedly wrong on this count;
Iranians grumbled and routinely vented their outrage over the economic
conditions, but largely resigned themselves to making do.
Instead, what drove the Iranian people into the streets in record
numbers and established the nascent stirrings of a popular opposition
to the creeping totalitarianism of the Islamic Republic was a purely
political issue--the brazen abrogation of their limited democratic
rights. This should not imply that Iranians view their economic
interests as somehow secondary to their political aspirations, but
rather that three decades of Islamic rule have generated the conviction
that Iran's representative institutions and its citizens' limited
democratic rights represent the most effective tools for advancing
their overall quality of life. With the brazen manipulation of the
election, Iranians saw not simply the abrogation of their voice but the
continuing hijacking of their nation's potential wealth and their
individual opportunities for a better quality of life.
This reflects a remarkable transformation in the way that Iranians
view their leadership; although Ahmadinejad, like Ayatollah Khomeini
before him, prefers to emphasize the regime's ideological mandate, the
population as well as much of the political elite have come to identify
the responsibilities of their leaders as primarily oriented toward the
provision of opportunities and a conducive environment for the nation's
growth and development. Neither Ahmadinejad nor Khamenei can meet this
test; their functioning frame of reference remains the fierce passions
of religion and nationalism.
U.S. Policy
The events since the June 12th elections have changed Iran in
profound and irreversible fashion, and it would be fruitless and even
counterproductive to proceed as though this were not the case. The
United States must adjust both its assumptions about Iran and its
approach to dealing with our concerns about Iranian policies to address
the hardening of its leadership, the narrowing of the regime's base of
support, the broadening of popular alienation from the state, and the
inevitability that further change will come to Iran, most likely in
erratic and capricious fashion.
But the turmoil within Iran has not altered America's core
interests vis-a-vis Iran, nor has it manifestly strengthened the case
for alternatives to the Obama Administration's stated policy of
diplomacy. The worst of these prospective alternatives, military
action, remains fraught with negative consequences for all of our
interests across the region, including the revitalization of the peace
process and the establishment of secure, independent states in Iraq and
Afghanistan. Even as an option of last resort, military action would
leave us and our allies in the Middle East markedly less secure and
would likely strengthen rather than derail Iran's nuclear ambitions.
There may be some who see the past 6 weeks as a vindication for the
prospects of regime change in Iran. This is precisely the wrong lesson
to take from the recent unrest. Every element of the past 6 weeks of
drama in Iran has been wholly internally generated, and even the whiff
of any external orchestration or support would have doomed its
prospects. Even today, with a burgeoning opposition movement, America's
instruments and influence for effecting regime change are almost
nonexistent.
As a result, I remain support the Obama Administration's continuing
interest in utilizing direct diplomacy with Tehran to address the
nuclear program and the broader array of concerns about Iranian
policies. As profound as recent events have been in splintering the
Iranian leadership and creating the seeds of an opposition movement,
engagement remains the only path forward for Washington. Engagement
will require an effort to negotiate with a particularly unpleasant and
paranoid array of Iranian leaders. Still, the Administration's interest
in diplomacy was never predicated on the palatability of the Iranian
leadership--indeed, until very recently the conventional American
wisdom tended to presume a second Ahmadinejad term--but on the urgency
of the world's concerns and the even less promising prospects for the
array of alternative U.S. policy options.
The upheaval in Iran does not inherently alter that calculus, but
it does seem likely to exacerbate the potential pitfalls of
implementing engagement. One of the lines floated by the
administration--that the consolidation of power under Iranian hard-
liners will create incentives for a quick resolution of the nuclear
standoff--is certainly conceivable, but given Tehran's uncompromising
rhetoric and resort to violence, it sound suspiciously like wishful
thinking. More probable is the opposing scenario--that the United
States is going to have to deal with an increasingly hard-line,
suspicious Iranian regime, one that is preoccupied by a low-level
popular insurgency and a schism among its longstanding power brokers.
Among American policymakers and citizens, sincere trepidations have
emerged about the impact that any direct bilateral negotiations might
have on the seemingly precarious stability of the Islamic regime and on
the prospects and mood of the opposition. However, conducting the
business of diplomacy does not confer an official American seal of
approval on our interlocutors, as evidenced by our ongoing capability
to maintain a formal dialog with a wide range of authoritarian leaders
across the world.
To the contrary, the Iranian regime in fact derives its scant
remaining legitimacy from its revolutionary ideology that remains
steeped in anti-Americanism. If we can successfully draw Iran's current
leadership into serious discussion about the urgent concerns for our
own security interests, negotiations with Washington would only
undercut Tehran's attempts to stoke revolutionary passions at home and
rejectionist sentiment across the region. Negotiations could also play
a powerful role in exacerbating the divisions within the regime and
clarifying the prospective path forward available to Iranian leaders
who are capable of compromise.
How can Washington draw an even more thuggish theocracy to the
bargaining table? What incentives might possibly persuade a leadership
that distrusts its own population to make meaningful concessions to its
historical adversary? How can the international community structure an
agreement so that the commitments of a regime that would invalidate its
own institutions are in fact credible and durable? Finally, what
mechanisms can be put in place to hedge against shifts in the Iranian
power structure, an outcome that seems almost inevitable given the
current volatility of the situation?
These hurdles are not insurmountable; the context for the
successful 1980-81 diplomacy that led to the release of the American
hostage was at least as challenging as that of today. Most of the
tentative American relationships with the revolutionary regime had
evaporated with the demise of Iran's Provisional Government, and
instead U.S. negotiators faced an implacably anti-American array of
Iranian interlocutors, whose authority, credibility, and interest in
resolving the crisis remained an open question throughout the dialog.
Moreover, Tehran's ultimate goals seemed unclear, possibly even unknown
to its leadership, who often employed the negotiating process as a
means of prolonging the crisis rather than resolving it.
A successful agreement to end the hostage crisis entailed months of
intense work and many false starts, but a variety of tools--including
secret negotiations and the involvement of a third-party mediator and
guarantor for the eventual agreement--helped facilitate an outcome that
both sides abided by. There are no guarantees that the hard-won success
of the negotiations that ended the hostage crisis can be replicated
today; if anything, the stakes are higher and the Iranian political
dynamics are less promising at least in the very short term.
Perhaps the critical factor in the success of the 1981 conclusion
to hostage negotiations was the Iraqi invasion and Iran's desperate
need for economic and diplomatic options to sustain the defense of the
country. In a similar respect, any U.S. effort to negotiate with Tehran
would benefit from the identification of incentives and
counterincentives that can similarly focus the minds of leaders and
expedite the path for negotiators.
In this respect, there is a direct and mutually reinforcing
relationship between the act of engagement and the identification of
potential sanctions to be applied by the international community if
Iran chooses to persist with noncooperation. The threat of sanctions
may be the only effective means of persuading Iran's increasingly hard-
line leadership that their interests lie in restraining their nuclear
ambitions and cooperating with their old adversary in Washington.
In addition, the offer and the act of dialog with Tehran represent
the most important factors for creating a framework for long-term
economic pressure if negotiations fail. The historical experience of
prior U.S. administrations makes clear that international willingness
to apply rigorous sanctions is inherently limited. The critical
actors--Russia and China, as well as the Gulf states--have generally
proven averse to steps that would severely constrain their economic
interests and/or strategic relationships with Tehran. The minimum price
for achieving their support for and participation in significantly
intensified economic pressure will entail a serious American endeavor
at direct diplomacy with the Islamic Republic.
Recognizing the currently hostile context for diplomacy, we should
be coordinating our next steps as closely as possible with those states
that can still bring greater political and economic pressure to bear on
Tehran. In particular, we need to step up our dialog with Beijing,
whose interests with respect to Iran diverge substantially from those
of the Russians and whose investments in Iran reflect a long-run effort
to secure prospective opportunities rather than a short-term calculus
of maximizing profit.
Still, we should be careful to presume too much with respect to the
efficacy of sanctions. The conventional wisdom in Washington appears to
be shifting toward the need to identify ``crippling'' sanctions that
can force Tehran to capitulate on enrichment. Unfortunately, this
policy pronouncement overlooks the reality that Iran's multifaceted
economy and, in particular, its petroleum exports offer a significant
degree of insulation from sanctions. History has demonstrated that
there simply are no silver bullets with respect to Iran.
While Tehran is certainly capable of change, economic pressures
alone have only rarely generated substantive modifications to Iranian
policy, particularly on issues that the leadership perceives as central
to the security of the state and the perpetuation of the regime. In
general, external pressure tends to encourage the coalescence of the
regime and even consolidation of its public support, and past episodes
of economic constraint have generated enhanced cooperation among Iran's
bickering factions and greater preparedness to absorb the costs of
perpetuating problematic policies.
Specifically, the debate within the Iranian leadership at the
height of the war with Iraq during the mid-1980s offers an illuminating
case in point. Tehran was confronted with mounting frustration with the
increasing human, political, and financial toll of the war as well as a
collapse in the oil markets which cut prices by half. Iran's prime
minister at the time, Mir Husayn Musavi, had the thorny task of
persuading its feuding parliament to pass an austerity budget, which
entailed persuading traditionalists with ties to Iran's bazaar merchant
community to accept new taxes and left-wing radicals to endorse cuts in
state spending, particularly on social welfare. Musavi succeeded by
presenting both factions with a choice--either accept the harsh budget
measures or end the war. The regime's ideological commitment to the
`sacred defense' and the conviction, even among growing misgivings
about war strategy, that this was an existential struggle meant that
this was no choice at all; Iranian leaders undertook the painful
political and economic steps that Musavi proposed.
Much has changed in Iran over the past two decades. The diminution
of revolutionary fervor and the arguably less compelling public
interest in the nuclear program would surely complicate any effort to
persuade Iranians that economic deprivation is an acceptable price to
pay for defending what the leadership has portrayed as its national
right to technology. However, the global context differs as well; Iran
today is not nearly as isolated as it was in the 1980s, the
considerable economic opportunities offered by Europe and conceivably
by the United States are no longer irreplaceable.
As a result, sanctions, while nominally successful in raising the
costs to Tehran of its provocative policies, could fail in their
ultimate goal of gaining Tehran's adherence to international
nonproliferation norms and agreements. Equally importantly, the time
horizon for sanctions to revise the calculus of the Iranian elite may
be more protracted than the world is prepared to wait.
In retrospect, the rare cases where economic pressures have
produced changes to Iranian security policies relate less to the actual
financial cost to the Iranian leadership, which have ultimately proven
manageable even during periods of low oil prices, than to the
perceptions, timing, and utility in swaying critical constituencies
within the Iranian political elite. Efforts to deter the import of
refined gasoline are unlikely to have such an impact; they will be
mitigated by Iran's porous borders, long history of smuggling petroleum
products, and ongoing efforts to upgrade its refining capabilities. And
to the extent that sanctions aimed at refined products penalize third-
country governments and entities, trying to exploit Iran's gasoline
vulnerability may cost more in terms of international influence than it
is worth.
Finally and perhaps most importantly, any forward-looking U.S.
policy needs sufficient dexterity to adjust to the inevitable changes
that will buffet Iran over the forthcoming months. Iran is in a period
of great flux, and there simply can be no certainty about the final
outcome of the current dynamics. As events inside Iran shift toward
either compromise or confrontation, Washington must be ready to respond
accordingly.
______
PREPARED STATEMENT OF DANIELLE PLETKA
Vice President, Foreign and Defense Policy Studies,
American Enterprise Institute for Public Policy Research
July 30, 2009
Mr. Chairman, Members of the Committee, thank you for the
opportunity to testify before you this morning on recent developments
in Iran and future policy options for the United States. I am
especially pleased to have the opportunity to comment on S. 908, the
Iran Refined Petroleum Sanctions Act, and to commend Senators Bayh, Kyl
and Lieberman (not to speak of the 66 other members) who have signed on
in support of this important initiative.
During the course of last year's Presidential campaigns, the
American public was treated to a singularly pointless debate about how
to handle Iran's quest for nuclear weapons--a debate that centered on
whether and under what conditions the United States should be ``sitting
down'' with the regime in Tehran, as if somehow ``sitting down''
constituted a policy. In any case, the election was won by a candidate
who embraced a markedly different approach to Iran than that of the
outgoing Administration. And in our democratic system, the elected
President can be expected to pursue the policies on which he
campaigned.
For the first 7 months of this year, the Congress has been
extraordinarily deferential to President Obama, and has been careful to
do nothing that might undercut the prospects for success in the direct
diplomacy with Iran that he has promised, such as mandating the
imposition of new sanctions. And despite Iran's continued defiance of
the United Nations Security Council's demand that it suspend its
enrichment and other proliferation related activities, the U.N. has
been equally reticent.
While the U.S. Congress and the diplomats in Turtle Bay have stood
down, however, change has been in the air in Iran. And in keeping with
the trends since the revolution in 1979, most of that change has been
detrimental not only to American and allied interests, but also to the
interests of the Iranian people.
On the nuclear front, Iran has continued its enrichment activities
and now claims to have 7,000 centrifuges spinning at Natanz, an
operational uranium conversion plant at Isfahan, and continuing
operations at the heavy water facility at Arak. The IAEA reports that
Iran remains uncooperative.
On the economic front, the Iranian Central Bank disclosed this week
that inflation is at 22.5 percent. Unemployment, reported at 11.1
percent, is likely close to three times that amount. Gasoline shortages
are common, as are electrical outages. Meanwhile, domestic production
of basic goods continues to decline, and the Iranian press reports that
meat prices go up on an hourly basis and that rice imports--a vital
staple--have skyrocketed by 219 percent since March.
The silver lining in economic news for Iran is that trade--and with
Europe in particular--which had suffered in earlier years, appears to
be rebounding somewhat. But allow me to return to this topic a little
bit later.
On the military and paramilitary fronts, Iran continues to refine
its delivery systems, and in May tested a ballistic missile, the so-
called Sajjil, a solid fuel rocket with a range of 2,000-2,500
kilometers. Iran continues to arms enemies of the United States inside
Iraq, and has continued apace with its financial and military support
for terrorist groups like Hezbollah and Hamas.
And finally, on the political front inside Iran, we are all well
aware of the aftermath of the Iranian elections, the electoral fraud,
the subsequent outpouring from the Iranian people and the brutal
repression and murder of demonstrators by agents of the regime. Events
still continue to play out inside Iran. Opponents and suspected
opponents of the regime are still being arrested on a daily basis,
though the Supreme Leader this week ordered the closure of a
particularly infamous illegal detention facility in response to a
public outcry.
Even the closest of Iran watchers are unsure of what's next inside
Iran. Some have suggested that once out of the bottle, the genie of
public unrest cannot be stuffed back in again. While that may be true
in some cases, history suggests that after historic revolutionary
events like the Hungarian uprising, the Prague Spring, and the
Tiananmen uprising, it is actually possible to strangle the genie. In
addition, many have failed to take into account the dramatic
transformation of the Iranian political scene--a transformation that
diminishes the odds of any successful reformist movement and carries
critical consequences for our own nuclear diplomacy.
For some years now, the Iranian Revolutionary Guard Corps has
quietly and systematically taken over the reins of power inside Iran.
There have been creeping signs of this transformation for several
years--the takeover of the Tehran airport by the IRGC in 2004, followed
by their takeover of the country's mobile phone operations. But
increasingly, with the full backing of the Ahmadinejad government--and
apparently of the Supreme Leader--the IRGC has come to dominate all
sectors of Iranian life, including the economy, the military and
domestic politics. On the economic side, what that ultimately means for
countries and companies is that if you are doing business in Iran, you
are probably doing business with the IRGC.
More importantly, however, the IRGC today is not just the exporter
of the Revolution and the protector of the regime. The IRGC has become
the regime. The clerics so hated by the Iranian public--for their
repression, their corruption, and their incompetence--are all but gone
from the Iranian political scene. Ahmadinejad purged the last cleric
from his cabinet this weekend, Intelligence Minister Hojjat al-Eslam
Gholam-Hossein Ezheh-I.
What does this mean for the Iranian nuclear weapons program, for
the Obama administration's hopes of engagement, and for the Iranian
people themselves? It's hard to find any good news. Engagement with the
new breed of Iranian leader will likely resemble engagement with the
previous breed of Iranian leader, but without the trappings or finesse.
IRGC veterans have little appreciation for the diplomatic minuets so
enjoyed by previous presidents Rafsanjani and Khatami. Indeed, these
veterans of the Iran-Iraq war, many younger and brought up entirely
under the Islamic Republic, publicly scorn the value of trade, free
markets, or relations with Europe and the United States.
It is always possible that the regime has a surprise in store for
us--and the Iranian Foreign Ministry reports they soon will offer a
package aimed at assuaging the ``economic, cultural and moral crises''
of the world. Some optimists here in the United States and in Berlin,
Paris and London have persuaded themselves that it is only the
hardliners in Iran that can successfully deliver a credible deal to the
Europeans and the Americans--something on the Nixon-China, Sharon-Gaza
scenario. This optimism ignores every statement made by the
government's own ministers, spokesmen and supporters, but time will
tell.
Meanwhile, however, the regime continues to progress toward a
nuclear weapons capability. The unclenched fist offered by the Obama
administration has been rebuffed, and no serious response has been
proffered to repeated invitations. Iran chose not to join the G8
meeting despite an offer from Secretary of State Clinton. Indeed, the
regime explicitly attempted to embarrass Obama by leaking the
President's personal and private letter to Supreme Leader Khamenei to
an American newspaper.
The time has come to reassess the value of the current U.S.
policies. But let's be clear--this should not be a repudiation of
engagement (though I myself doubt its merits), but an acceptance of the
reality that the free pass engagement on offer by the Obama
administration has bought little more than time for Iran to install
more centrifuges. Speaking softly in the absence of a big stick--our
approach for the past 6 months--will not bring the current Iranian
leadership into serious negotiations, nor will it stop them from their
pursuit of nuclear weapons.
In part because of our silence, the decline in trade between Iran
and certain countries of the European Union--now Iran's second largest
trading partner after China--has begun to reverse itself. Germany and
Italy are among the worst offenders, though Germany deserves particular
censure because of its place at the table in the all-important EU-3+3
talks with Iran. The Wall Street Journal reported last October that the
``German-Iranian Chamber of Industry and Trade counts about 2,000
members, including such big names as Siemens and BASF [about which more
later]. In the first 7 months of [2008], Germany's Federal Office of
Economics and Export Control approved 1,926 business deals with Iran--
an increase of 63 percent over last year. During that same period,
German exports to Iran rose 14.1 percent. For the record, French
exports went up 21 percent during the first 6 months of [2008], but
they are still worth less than half of Germany's =2.2 billion of
exports. Britain's exports to Tehran, only a fraction of Germany's
trade with Iran, fell 20 percent.''
More troublingly, the increases in trade with Europe have been
dwarfed by the explosion in Iran-China trade. There are deep and wide
economic ties between the two, and AEI's Iran Tracker project
(IranTracker.org) reports that more than 100 Chinese state companies
operate in Iran, with bilateral trade reaching over $27 billion in
2008, a 35 percent increase over 2007. Our report goes on to detail,
among other transactions:
A 2008 China National Petroleum Corporation (CNPC)--
National Iranian Oil Company (NIOC) $1.76 billion deal to
develop Iran's North Azadegan oil field.
In March 2009, a $3.2 billion gas deal, in which China's
LNG and a Chinese-led consortium will build a line to transport
liquid Iranian gas from the South Pars Gas Field.
In June 2009, a $5 billion Iran-Chinese National Petroleum
Corporation gas deal to develop Iran's South Pars Gas field.
Despite the growing movement for divestment from state sponsors of
terrorism, including Iran, global business transactions with Iran
continue to flourish. Our Iran Interactive data base, which should be
back online at IranTracker.org shortly, details 75 major transactions
in the last 2 years, most in the oil and gas or construction and
engineering sector, with value in the hundreds of millions, including
companies ranging from France's Renault and Peugeot to Germany's Krupp
and Siemens, Toyota, Royal Dutch Shell, Gazprom, Hyundai, Spain's
Repsol and many more.
Among the more appalling stories, however, is German-Finnish
telecom giant Nokia-Siemens delivery of surveillance equipment to
Irantelecom--surveillance equipment surely used to suppress and arrest
opponents of the regime. Nokia and Siemens both do business with the
U.S. Government, and Siemens was the leading contender to receive a
contract with possible value in the hundreds of millions to replace
rail cars in Los Angeles, a contract that is rightly now at risk.
Perhaps more important than the moral and financial suasion of
divestment, however, is the tool that has yet to be used by the
international community to persuade Tehran of the wisdom of coming to
the table: restrictions on the export to Iran of refined petroleum
products and equipment to enhance Iran's own refinery capacity. S. 908
affords the President that opportunity; it doesn't force it on him,
which may be an option another Congress will feel compelled to
consider. But as a supermajority of the Senate and many in the House of
Representatives (who support Congressman Berman's companion bill) have
made clear, only the ``sword of Damocles'' (to use Chairman Berman's
phrase) of punitive sanctions will impel the Iranian regime to take
seriously the many, many deadlines and redlines announced by the
international community.
Iran, as many can detail more persuasively than I, is heavily
dependent on imported refined petroleum. Domestic capacity is limited,
and while the Ahmadinejad government has identified that weakness and
is working to remedy it, it remains a significant regime weakness
nonetheless. Using this pressure point quickly and decisively will do
more to convince the Tehran government of the world's seriousness than
any number of videograms, letters, Hallmark cards or goodwill visits.
This is the language they speak, and we must begin to grasp that fact.
Iranian refining capacity, imports and shipping are concentrated in
fairly few hands. News reports indicate that supplies come largely from
two Swiss firms, Vitol and Trafigura with others from India's Reliance
(which has announced it is suspending such shipments--a claim thus far
unconfirmed), Shell, BP, France's Total and Swiss trader Glencore.
Then there are the insurers without which these shipments would
halt, reportedly including Lloyd's of London, Munich Re of Germany,
Steamship Mutual Underwriting Association and the North of England P &
I Association of the United Kingdom. Indeed, insurers should already be
on the highest alert in light of the January interception of the
Islamic Republic of Iran Shipping Lines (IRISL) chartered Monchegorsk,
stopped at Cyprus carrying weaponry destined for Syria--and most likely
to Hezbollah. (IRISL and its affiliates are already under U.S.
sanction, and will likely also be sanctioned by the U.N. Security
Council this year.)
Companies helping Iran gain refining independence (which could be
subject to sanction under S. 908) include the British Universal Oil
Products (a subsidiary of U.S.-based Honeywell), Axens and Technip of
France, Sinopec of China, Hyundai of South Korea and Aker Kvaerner
Powergas of Norway.
Mr. Chairman, even proponents of sanctions recognize they are a
blunt tool. Too often, sanctions impact those least likely to be able
to change policies. They are not a silver bullet, and they may not
deliver an end to the Iranian nuclear program. But we are on a tight
timeline. Iran will soon have a weapon that will doubtless preclude any
desire on their part to negotiate.
Some, including some at this table and their allies inside the
Administration, will argue that sanctions will have the opposite effect
. . . that Iran will not respond well to any pressure, and will be
driven away from negotiations. Others will argue that only by slow-
rolling our sanctions effort will we be able to persuade the world of
our bona fides and bring them along in the most effective form of
persuasion--multilateral sanctions.
These arguments have little basis in history, and even less
likelihood of getting us to a successful outcome with Iran. Who here
believes that the reason that China and Russia have been reluctant to
support tougher sanctions is because they doubt America's good faith?
This week, Secretary Gates suggested that ``if the engagement
process is not successful, the United States is prepared to press for
significant additional sanctions that would be non-incremental.'' The
Secretary is absolutely right that the drip drip of incremental
sanctions will not answer the mail. But he posits a false choice for
the administration and our allies. In truth, the choice is not between
engagement and sanctions. Rather, it is only by applying the toughest
possible sanctions that we stand any chance of persuading Iran's
leaders to consider serious negotiations with the international
community.
It's time to give the President the tools he needs to do what is
necessary to force a choice inside the halls of power in Tehran. Right
now there is no choice to be made; the status quo with the rest of the
world is working out nicely for the regime.
I would like to say that we can rely on the Iranian people to
deliver a better government, and one that serves their needs as much as
the needs of the international community. But I don't think such a
change is on the cards in the timeframe we need. That should be the
topic of another hearing, and other legislative efforts. The courageous
people of Iran deserve our support. In the meantime, however, the
United States needs to do more to defend its own national security and
that of our allies. I believe this Committee can provide much needed
help, and that S. 908 is an important and useful way to move forward.
Thank you.
RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN DODD FROM NICHOLAS
BURNS
Q.1. You describe ``military containment'' as an option the
Obama Administration should consider once diplomacy and
additional sanctions have run their course. Would you please
elaborate on what you envision containment to mean? How is such
a posture different from current conditions?
A.1. If negotiations and sanctions do not succeed in convincing
Iran to cease its nuclear research efforts, the United States
will most likely be left with the choice of either accepting,
in effect, Iran's nuclear capability or trying to stop it
through the use of military force. The United States cannot be
passive and do nothing given the grave threat a nuclear-armed
Iran would pose for the United States, Israel and our Arab
partners. But, I also believe that the early use of force by
the United States or others against Iran in the next year would
also be unwise. I believe the United States should consider
instead a series of security and economic measures to contain
Iranian power in the Middle East, including a stronger U.S.
military presence in the Gulf and security guarantees for
Israel and some Arab partners in case Iran should threaten them
with force. In addition, the United States and others could
threaten much tougher sanctions, including on Iran's energy
sector. Such an effort to contain the Iranian government would,
by definition, include stronger efforts than are currently in
place. The United States and its allies contained the Soviet
and Chinese threats during the cold war. We should look at a
similar containment regime against Iran as an alternative to
war.
Q.2. You have noted that Iran's foes lie not only in the East
but also along its borders. Indeed, many Arab countries remain
concerned about Iran's intentions and destabilizing ambitions.
How can the United States and its European allies enlist Arab
countries more effectively in their fight to isolate Iran
economically and diplomatically? How can the United States
embolden Arab states in the region to apply more local pressure
and deflect criticism that this is merely ``Western
Aggression''?
A.2. Most of the Arab governments are deeply suspicious of the
Ahmadinejad government in Iran. The United States can do more
to help augment their defenses against future Iranian
aggression and to enhance U.S. military cooperation in the Gulf
region. Such a step would be a fundamental building block in
any future containment regime. Many of the Arab governments,
however, have been insufficiently active in the sanctions
against Iran. They should make a much greater effort to join in
the international pressure on Iran to give up its nuclear
ambitions.
Q.3. What role should China and Russia play in fashioning our
multilateral Iran policies?
A.3. Russia and China are partners with the United States in
the international effort to convince Iran to join negotiations
over its nuclear weapons future. Frankly, neither of them have
been consistently strong supporters of that strategy. Despite
the fact that they voted for the three United Nations sanctions
resolutions from 2006-2008, they have both acted to decrease,
rather than increase, international pressure on Iran. Russia
continues to sell arms to Iran. China has become the leading
trade partner of Iran. If the United States makes a good faith
effort to negotiate with Iran and those talks fail, then China
and Russia should commit to stronger sanctions.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR JOHANNS FROM NICHOLAS
BURNS
Q.1. Why will the Administration's current policy of direct
engagement with Iran change Russia and China's judgment that
their national interest lies in opposing strong U.N. Security
Council economic sanctions resolutions?
A.1. I do not know whether China and Russia will contribute
effectively to the international effort to pressure Iran. Their
immediate past record in this respect is weak. The
Administration's plan to negotiate with Iran makes sense, in my
judgment, because it will strengthen U.S. credibility
internationally to argue for tougher sanctions should
negotiations fail. Should Russia and China balk at stronger
sanctions, it would give the United States greater standing to
consider even tougher measures, such as containment or the use
of force.
Q.2. Do China and Russia fundamentally want to resolve the
Iranian nuclear issue in such a way that Iran does not control
a close nuclear fuel cycle?
A.2. China and Russia both state that they do not wish Iran to
possess a nuclear weapons capability. But, neither of them have
worked to pressure Iran sufficiently to give up its nuclear
ambitions.
Q.3. What should a realistic ``red line'' be for the United
States? And, do you think our red line is the same as that of
the Europeans or the Israelis? If not, what should theirs be?
A.3. I believe both President Bush and President Obama have
been correct to assert that the United States will not tolerate
Iran as a nuclear weapons power. Both have tried to marshal
U.S. and international pressure against Iran.
Q.4. You have spent a great deal of time at very high levels in
the U.S. Government working on this very issue. If you were in
a similar position in the Israeli government, what policy
recommendations would you be giving to the Israeli leadership?
A.4. I believe Israel faces a clear threat from a nuclear-armed
Iran. That is why, in my opinion, the United States should
continue to extend substantial military support to Israel. But,
I also believe it would be a mistake for Israel to use military
force against Iran. Such a step would likely prove ineffective
and unleash counter attacks on Israel with the possibility of a
wider war in the region. I think it is more effective now for
Israel to support President Obama's strategy of engagement
backed up by sanctions.
------
RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN DODD FROM MATTHEW
LEVITT
Q.1. The Government Accountability Office previously found that
enterprising Iranians may circumvent our current trade embargo
by acquiring U.S. technology re-exported through various other
countries. And renowned scientists such as Institute for
Science and International Studies President David Albright have
indicated that in fact black-market proliferation networks are
thriving, using such methods.
Please discuss your understanding of this situation.
Are there any particular countries that the United States
should engage to improve cooperation in countering such
``diversion?''
A.1. Earlier this year, Cyprus impounded the Iranian-chartered
freighter Monchegorsk, a vessel laden with war materiel bound
for Syria (and perhaps beyond). This episode highlights the
shortcomings of current U.N. and European Union sanctions on
Iran, and underscores the need for a more systematic approach
for dealing with Tehran's efforts to transfer technology and
arms to radical allies in the Middle East and elsewhere, even
as Washington seeks to engage Iran.
The Monchegorsk and its Cargo
In January, the U.S. Navy stopped Monchegorsk while it was
transiting the Red Sea en route to Syria, on the basis of
intelligence that the freighter was carrying Iranian arms
exports in violation of U.N. Security Council Resolution 1747.
According to U.N. documents, the Monchegorsk, a Russian-owned,
Cypriot-flagged vessel, was chartered by Islamic Republic of
Iran Shipping Lines (IRISL). In September 2008, the Treasury
Department designated IRISL for its proliferation activities,
stating that ``Not only does IRISL facilitate the transport of
cargo for U.N. designated proliferators, it also falsifies
documents and uses deceptive schemes to shroud its involvement
in illicit commerce.''
A U.S. Navy boarding party confirmed the arms embargo
suspicions and ordered the ship to Cyprus. There, according to
the Wall Street Journal, the Cypriot authorities found
components for mortars and thousands of cases of powder,
propellant, and shell casings for 125mm and 130mm guns. The
cargo was then unloaded and impounded by Cypriot authorities.
U.S. and Cypriot authorities acted upon the legal
guidelines set forth by a series of EU and U.N. resolutions
pertaining to Iran. In February and April 2007, the EU imposed
a number of sanctions on Iran in order to implement U.N.
Security Council decisions, including a ban on Iranian
transfers of military materiel, arms, and missile technology.
Similarly, Resolution 1747, adopted in March 2007, prohibited
the transfer of ``any arms or related materiel'' by Iran, and
urged U.N. member states not to facilitate such efforts. In
addition, Resolution 1803, passed in March 2008, calls upon all
states, ``in accordance with their national legal authorities
and legislation and consistent with international law,'' to
inspect IRISL cargoes to and from Iran transiting their
airports and seaports, ``provided there are reasonable grounds
to believe that the aircraft or vessel is transporting
[prohibited] goods.''
Not a New Problem
Problems relating to interdicting destabilizing technology
and arms transfers on the high seas, or those proscribed by
U.N. resolutions, are not new. In October 1991, the North
Korean freighter Mupo, carrying Scud missiles and related
equipment to Syria, returned to North Korea after Egypt denied
it transit through the Suez Canal amid concerns that Israel
might try to interdict the shipment. The cargo was subsequently
delivered to Iran in March 1992 by North Korean freighters Dae
Hung Ho and Dae Hung Dan, which were shadowed by U.S. Navy
vessels during the transit. (The navy was unable to stop the
transfers because they were not illegal under international
law.) The shipments are believed to have subsequently been
flown to Syria.
In August 1993, the Chinese freighter Yinhe, which was
believed to be carrying chemical warfare agent precursors bound
for Iran, was forced to dock in Saudi Arabia, but was found not
to be carrying any banned items. And in December 2002, a North
Korean freighter carrying Scud missiles believed to be for Iraq
was stopped and inspected by Spanish warships, but was set free
when it turned out that the Scuds were intended for Yemen.
These episodes demonstrate the need to ensure that efforts
to interdict destabilizing or proscribed shipments are backed
up by reliable intelligence and appropriate legal authorities,
and highlight the risks of acting without one or the other.
Iran Arming U.S. Foes
A number of similar incidents in recent years have involved
Iranian efforts to transport military materiel and arms by sea,
land, and air to allies and surrogates. During the second
Palestinian intifada, Iran helped facilitate arms shipments to
Gaza through Hizballah and the Popular Front for the Liberation
of Palestine to Gaza (by means of floating waterproof
containers) by using two civilian vessels, the Santorini,
seized by Israel in May 2001, and the Calypso 2. In December
2001, Iran attempted to deliver fifty tons of weapons to the
Palestinian Authority aboard the Karine A, whose shipment was
seized by the Israeli Navy in the Red Sea.
During the 2006 Hizballah-Israel war, Israeli intelligence
claimed that Iran was resupplying the Shiite movement via
Turkey. Such claims gained credibility in May 2007, when a
train derailed by PKK terrorists in southeastern Turkey was
found to be carrying undeclared Iranian rockets and small arms
destined for Syria--probably for transshipment to Hizballah.
More recently, Iran has emerged as a major arms supplier
for Hamas in Gaza, as well as for anti-American governments in
South America. In January and February 2009, the Israeli Air
Force bombed two vehicle convoys reportedly carrying Iranian
arms destined for Hamas fighters in Gaza. (There are also
reports that the Israeli Navy sunk an Iranian ship carrying
arms for Hamas off the coast of Sudan at this time.) Also in
January 2009, Turkish customs officials in the port of Mersin
discovered a shipment with equipment capable of producing
explosives. The shipment, which originated in Iran, had entered
Turkey by truck and was destined for Venezuela.
These recent episodes underscore Iran's growing emergence
as a supplier of military materiel, equipment, and arms for
radical Islamist and anti-American allies and surrogates in the
Middle East and beyond. For that reason, it is increasingly
important to establish a comprehensive regime to constrain
Iran's ability to transfer military materiel and arms to its
allies and surrogates by sea, land, and air, especially if Iran
were to market its nuclear technology abroad.
Enhancing Leverage over Tehran
These past incidents indicate that intelligence must be
timely and reliable to avoid embarrassing incidents that
undermine U.S. credibility. They also highlight the gaps in the
available policy tools to deal with Iranian arms transfers to
its allies and surrogates. To close these gaps, the United
States should work with its allies and the international
community to:
Lencourage the U.N. sanctions committee to issue a
Security Council communique to the U.N. General
Assembly, emphasizing the obligation of all member
states, including Iran and Syria, to fully abide by the
U.N. ban on arms transfers;
Lwork with the EU to expand its current policy
banning the sale or transfer to Iran of ``all arms and
related material, as well as the provision of related
assistance, investment and services'' to include a ban
on the purchase or transfer from Iran of the same;
Lwork with U.N. and EU member states to adopt
legislation pertaining to Iranian arms and technology
transfers, to enable them to fulfill their U.N. and EU
obligations. Encourage regional organizations in South
America and South and East Asia to adopt similar
resolutions;
Lwork with the EU and Turkey (the de facto eastern
gateway to Europe) to develop an enhanced customs and
border security regime to prevent Iranian arms and
technology transfers through Turkey;
Lengage the private sector to draw attention to the
risk of doing business with IRISL, its subsidiaries,
and other banned entities. As the U.S. Treasury noted
when it designated IRISL: ``Countries and firms,
including customers, business partners, and maritime
insurers doing business with IRISL, may be unwittingly
helping the shipping line facilitate Iran's
proliferation activities.'' Indeed, given Iran's
history of deceptive financial and trade activity,
extra scrutiny should be given to any ship that has
recently paid a call to an Iranian port;
Lencourage countries to require ports and/or
authorities to collect detailed, accurate, and complete
data regarding all cargo being shipped to or through
their countries (especially from risk-prone
jurisdictions like Iran), to conduct rigorous risk
assessments, and to proceed with actual inspections as
necessary;
Lencourage implementation of the World Customs
Organization's (WCO) draft Framework of Standards to
Secure and Facilitate Global Trade. The WCO represents
174 Customs administrations across the globe (including
Iran) that collectively process approximately 98
percent of world trade. Under the proposed framework, a
risk management approach would be implemented for all
cargo to identify high-risk shipments at the earliest
possible time. Participating members would benefit from
enhanced security and efficiency, and could benefit
from lower insurance premiums.
Export Control: Areas for Improvement
As my colleague Michael Jacobson has noted, Iran has been
able to circumvent the various U.S. sanctions regimes by using
third-party countries as reexport hubs. Since the UAE has
started to crack down on this type of trade, new countries have
emerged as safe havens, with Malaysia at the top of the list.
Malaysia and Iran have taken steps recently to build closer
ties on many fronts including trade, and in December 2008,
Malaysian prime minister Abdullah Ahmad Badawi traveled to
Tehran, culminating in agreements to further cooperation in
technology and automotive manufacturing. While in Iran, Badawi
called on the Malaysia-Iran Joint Trade Committee to bolster
both the volume and breadth of trade between the two countries.
Hong Kong is also becoming more of a problem in this area,
with Iranian front companies and procurement agents setting up
shop there. Hong Kong is an attractive reexport location for
Iran in part because of the 1992 U.S.-Hong Kong Policy Act,
which dictates that Hong Kong be treated differently than the
rest of China when it comes to export control issues. As a
result, most items that can be shipped to the United Kingdom
can also be sent to Hong Kong, despite the fact that many of
these goods could not be shipped to mainland China. The Chinese
government has also been stepping in to protect Iranians
targeted by U.S. enforcement efforts. Hong Kong, for example,
arrested Iranian procurement agent Yousef Boushvark in 2007 at
America's request for attempting to acquire F-14 fighter plane
parts, but Chinese authorities denied a subsequent U.S.
extradition request, and Boushvark was then released from
custody.
Although the main challenge for U.S. export control efforts
is on the international front, problems closer to home exist as
well:
LDespite the presence of a national export control
coordinator, no agency is officially in charge of U.S.
Government export control efforts, with responsibility
spread between State, Justice, Treasury, Commerce, and
DHS;
LThe main statute governing this issue--the Export
Administration Act (EAA)--has expired, forcing the
United States to temporarily operate under the
International Emergency Economic Powers Act, which does
not allow for the full set of tools that the EAA
provided;
LSentences in export control cases are often light,
in part because judges do not always view them as
serious national security issues. Adding to this
prevalent perception is the fact that export control
offenses are not in Title 18 of the U.S. Code, where
the vast majority of crimes are found.
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RESPONSE TO WRITTEN QUESTION OF SENATOR JOHANNS FROM MATTHEW
LEVITT
Q.1. What should a realistic ``red-line'' for the United States
be? And do you think our red-line is the same as those of the
Europeans or the Israelis? If not, what should theirs be?
A.1. As a blue ribbon Washington Institute task force argued in
its report, ``Preventing A Cascade of Instability,'' now is the
time for the United States to promote a policy of ``resist and
deter'' rather than ``acquiesce and deter'' within the
international community. Assertive action now to build U.S.
leverage is more likely to prevent Iran's emergence as a
military nuclear power. But time is short if diplomatic
engagement is to have a chance of success and military
confrontation avoided. Iran continues to produce enriched
uranium, of which it already has a sufficient amount--if
processed further--for a bomb.
The Middle East is looking for strong U.S. leadership and
reenergized relationships. Vigorous steps to bolster regional
defense cooperation could enhance stability and serve to check
regional perceptions that U.S. influence is weakening. As part
of the solution to the impasse, Washington could propose
measures that would also serve to shore up the global
nonproliferation system.
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RESPONSE TO WRITTEN QUESTION OF CHAIRMAN DODD FROM SUZANNE
MALONEY
Q.1. Dr. Maloney, what is the current state of Iran's civil
society, and what role is the Opposition currently playing in
the wake of the crackdown? Do you consider opposition to the
current Iranian regime to be broad-based? What potential does
the Iranian middle class have to empower such opposition, and
in what ways do you think it might do this going forward? What
are the key indicators of the status of Opposition forces or
that you think policymakers ought to be looking for in the
coming months?
A.1. Despite the repression of the current regime, Iran has
always boasted a relatively vibrant civil society.
Associational life was and largely remains in some way
interconnected with the state, but until recently much of this
sector of society operated with a considerable degree of
autonomy from the government. Over the past 30 years, Iranians
have developed a wide range of institutions and mechanisms for
insulating civil society from the intrusions of the regime.
Although student organizations, cultural groups, and other
institutions of Iran's civil society have undoubtedly borne the
brunt of the post-election crackdown, I would venture that the
resilience of the Iranian people and Iranian society generally
will prevail even during this difficult period.
As to the scope of the opposition to the regime, it is
difficult to say with any degree of certainty. For many years,
anecdotal evidence has suggested widespread dissatisfaction
with the government's performance on quality of life issues
and, at a more profound level, with the system of government
that endows absolute authority in an unaccountable, unelected
leader. And it is clear that Iranians from a very wide range of
socioeconomic, geographic, and ethnic identifications
participated in the demonstrations to protest the manipulation
of the June Presidential elections. So there is a deep well of
popular frustration with the government which, for the first
time since the revolution, was mobilized in public on a mass
scale in opposition to the regime's policies. What remains
unknown and perhaps unknowable to those of us outside Iran is
how many of the participants in the June demonstrations are
ready and willing to actively confront the system as a whole.
Certainly the recent recurrence of opposition protests suggests
that deep resentment remains among many Iranians that will
continue to undermine the government's attempts to impose its
will on society.
As one of my colleagues at the Brookings Institution,
Djavad Salehi-Isfahani, has written, Iran today has a large and
growing middle class. Ironically this is one of the factors
that has helped stabilize Iran over many years; the expansion
of infrastructure and education since the revolution combined
with the influx of epic oil revenues over much of the past
decade helped to create a broad sense of investment in the
future among many Iranians. However, this same middle class is
interested in greater economic opportunities, more interaction
with the world, and a stronger voice in the nation's future
course. The rigging of the June election likely deepened their
alienation from Ahmadinejad and from the Islamic Republic
overall.
In terms of how Iran and the opposition will evolve, key
indicators include the following: the size, scope and frequency
of anti-government demonstrations; the politics within the
ranks of the senior clerical establishment; the level of rancor
within the conservative establishment, many of whom are almost
as alienated from President Ahmadinejad as reformists; the
posture of influential second-generation political actors, many
of whom have remained loyal to the system even as they endeavor
to court the frustrated masses; the level of capital flight,
inflation, job creation and the government's willingness and
ability to undertake significant economic reforms as currently
considered; any shifts in the apparent cohesion of the security
forces; and the relationship between the executive branch and
other state institutions, including the Supreme National
Security Council.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR JOHANNS FROM SUZANNE
MALONEY
Q.1. Why will the Administration's current policy of direct
engagement with Iran change Russia and China's judgment that
their national interest lies in opposing strong U.N. Security
Council economic sanctions resolutions?
Q.2. Do China and Russia fundamentally want to resolve the
Iranian nuclear issue in such a way that Iran does not control
a closed nuclear fuel cycle?
Q.3. What should a realistic ``red-line'' for the United States
be? And do you think our red-line is the same as those of the
Europeans or the Israelis? If not, what should theirs be?
A.1.-A.3. The decision by the Obama Administration to engage
directly with Iran will not, on its own, decisively alter the
reluctance of China and Russia to embrace robust sanctions
against Iran. The Chinese and Russian leaderships have made
clear that they do not want to see Iran cross the nuclear
threshold, but their distaste for tough economic pressure
reflects both their continuing interest in preserving a
mutually beneficial economic relationship with Tehran and the
less urgent sense of threat they appear to perceive from Iran's
continuing defiance of United Nations Security Council
resolutions. Nor has the Obama Administration embraced
diplomacy for the sole or primary purpose of persuading
international fence-sitters; based on the president's clear and
consistent rhetoric, the Administration made the calculation
that diplomacy represented the best possible policy, among an
array of unappealing alternatives, for influencing Iran's
nuclear calculus.
However, American engagement in the diplomatic process is a
necessary condition for beginning to alter the Chinese and
Russian reluctance on sanctions, and for building a credible
case that other means of persuading Tehran have not worked.
I cannot speak for any other government, but our own
priority should be developing a robust set of safeguards that
can provide the international community with maximum confidence
that Iran's program will not be utilized for military purposes.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR JOHANNS FROM DANIELLE
PLETKA
Q.1. Do China and Russia fundamentally want to resolve the
Iranian nuclear issue in such a way that Iran does not control
a closed nuclear fuel cycle?
Q.2. What should a realistic ``red-line'' for the United States
be? And do you think our red-line is the same as those of the
Europeans or the Israelis? If not, what should theirs be?
A.1.-A.2. While it would be nice to ``know'' with certainty
what Russia and China's true intentions are vis a vis Iran, we
can only interpret each's statements and actions to make
informed inferences. And while both Moscow and Beijing have
criticized Iran's lack of cooperation with the IAEA and made
occasional statements suggesting sanctions could be inevitable,
neither Russia nor China has indicated support for new
sanctions despite the fact that Tehran has missed repeated
deadlines to accept an offer to enrich uranium outside Iran.
So many red lines have passed already, for both Israel and
the United States, that etching new lines in the sand seems
futile. Iran has progressed to the point that it is mere months
away from a nuclear weapons capability. Technical glitches are
just that, glitches. The Europeans and Israelis are now in the
position of having a more robust Iran policy than the United
States. The point is not for all of us to embrace exactly the
same policies, but for us all to ensure that Iran is unable to
divide us and play one off against the other.