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The Implications of Sanctions Relief Under the Iran Agreement Hearing Committee on Banking, Housing, and Urban Affairs United St

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The Implications of Sanctions Relief Under the Iran Agreement Hearing Committee on Banking, Housing, and Urban Affairs United St S. HRG. 114–128 THE IMPLICATIONS OF SANCTIONS RELIEF UNDER THE IRAN AGREEMENT HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED FOURTEENTH CONGRESS FIRST SESSION ON ASSESSING THE NATURE, IMPLICATIONS, AND POTENTIAL CON- SEQUENCES OF IRAN SANCTIONS RELIEF THAT ARE PROPOSED TO BE PROVIDED TO IRAN IN RETURN FOR THE NUCLEAR-RELATED COMMITMENTS SET FORTH IN THE JOINT COMPREHENSIVE PLAN OF ACTION AUGUST 5, 2015 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: http://www.fdsys.gov/ U.S. GOVERNMENT PUBLISHING OFFICE 97–883 PDF WASHINGTON : 2016 For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate 0ct 09 2002 11:24 Dec 22, 2016 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\DOCS\97883.TXT SHERYL BANKI-41578DSA with DISTILLER COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS RICHARD C. SHELBY, Alabama, Chairman MIKE CRAPO, Idaho SHERROD BROWN, Ohio BOB CORKER, Tennessee JACK REED, Rhode Island DAVID VITTER, Louisiana CHARLES E. SCHUMER, New York PATRICK J. TOOMEY, Pennsylvania ROBERT MENENDEZ, New Jersey MARK KIRK, Illinois JON TESTER, Montana DEAN HELLER, Nevada MARK R. WARNER, Virginia TIM SCOTT, South Carolina JEFF MERKLEY, Oregon BEN SASSE, Nebraska ELIZABETH WARREN, Massachusetts TOM COTTON, Arkansas HEIDI HEITKAMP, North Dakota MIKE ROUNDS, South Dakota JOE DONNELLY, Indiana JERRY MORAN, Kansas WILLIAM D. DUHNKE III, Staff Director and Counsel MARK POWDEN, Democratic Staff Director DANA WADE, Deputy Staff Director JOHN V. O’HARA, Senior Counsel for Illicit Finance and National Security Policy JAY DUNN, Professional Staff Member SHELBY BEGANY, Professional Staff Member LAURA SWANSON, Democratic Deputy Staff Director COLIN MCGINNIS, Democratic Policy Director DAWN RATLIFF, Chief Clerk TROY CORNELL, Hearing Clerk SHELVIN SIMMONS, IT Director JIM CROWELL, Editor (II) VerDate 0ct 09 2002 11:24 Dec 22, 2016 Jkt 000000 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 S:\DOCS\97883.TXT SHERYL BANKI-41578DSA with DISTILLER CONTENTS WEDNESDAY, AUGUST 5, 2015 Page Opening statement of Chairman Shelby ................................................................ 1 Opening statements, comments, or prepared statements of: Senator Brown .................................................................................................. 2 WITNESSES Wendy Sherman, Under Secretary, Department of State .................................... 4 Prepared statement .......................................................................................... 72 Responses to written questions of: Senator Crapo ............................................................................................ 163 Senator Warner ......................................................................................... 164 Senator Heitkamp ..................................................................................... 166 Adam J. Szubin, Acting Under Secretary of Treasury for Terrorism and Financial Crimes, Department of the Treasury ................................................ 6 Prepared statement .......................................................................................... 75 Juan C. Zarate, Chairman & Senior Counselor, Center on Sanctions and Illicit Finance, Foundation for Defense of Democracies and Senior Adviser, Transnational Threats Project, Center for Strategic and International Stud- ies .......................................................................................................................... 52 Prepared statement .......................................................................................... 79 Mark Dubowitz, Executive Director, Center on Sanctions and Illicit Finance, Foundation for Defense of Democracies ............................................................. 54 Prepared statement .......................................................................................... 101 Matthew Levitt, Ph.D., Fromer-Wexler Fellow and Director, Stein Program on Counterterrorism and Intelligence, The Washington Institute for Near East Policy ............................................................................................................ 56 Prepared statement .......................................................................................... 150 Nicholas Burns, Goodman Professor of Diplomacy and International Rela- tions, Harvard Kennedy School .......................................................................... 58 Prepared statement .......................................................................................... 158 (III) VerDate 0ct 09 2002 11:24 Dec 22, 2016 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\DOCS\97883.TXT SHERYL BANKI-41578DSA with DISTILLER VerDate 0ct 09 2002 11:24 Dec 22, 2016 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\DOCS\97883.TXT SHERYL BANKI-41578DSA with DISTILLER THE IMPLICATIONS OF SANCTIONS RELIEF UNDER THE IRAN AGREEMENT WEDNESDAY, AUGUST 5, 2015 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 Sen- ate Office Building, Hon. Richard Shelby, Chairman of the Com- mittee, presiding. OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY Chairman SHELBY. The Committee will come to order. We have a very important hearing today, and we have a lot of attendants. I will start the hearing off by recognizing my colleague and friend Senator Corker because he is tied up on similar stuff himself. Senator Corker, go ahead. Senator CORKER. Well, I just want to ask the first questions. Chairman SHELBY. Oh, you want to go ahead and ask it now? Senator CORKER. I will wait. Chairman SHELBY. You want to wait? Senator CORKER. Yeah. Chairman SHELBY. OK. If that satisfies you, that satisfies me. Much has changed since the Committee held its hearing on Iran and marked up an economic sanctions bill drafted by Senators Kirk and Menendez. Since then, there has been a nuclear agreement with Iran, after numerous delays. Many serious concerns have been raised regarding this deal, in- cluding, first and foremost, whether it would actually prevent Iran from continuing on its dangerous path to a nuclear weapon. And although a new deal has been reached, fundamental problems remain with Iran, the country upon whose assurances the deal rests. Iran remains the world’s leading state sponsor of terror. It re- mains a serious risk to the national security interests of the United States. It remains a constant threat to the survival of Israel. And despite these grave concerns, it will remain a country with the ca- pability to enrich uranium. Under these circumstances, I believe it is critical that Congress conduct a thorough review of the agreement as required by the Iran Nuclear Agreement Review Act. As part of this review, the Banking Committee will focus specifically on analyzing the sanc- tions relief provided in the nuclear agreement and the implications of taking such actions. (1) VerDate 0ct 09 2002 11:24 Dec 22, 2016 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\DOCS\97883.TXT SHERYL BANKI-41578DSA with DISTILLER 2 There is general agreement that the pressure of sanctions brought Iran to the negotiating table. Congress must consider care- fully now the repercussions of lifting those sanctions on our na- tional security and our economic interests. In recent weeks, many of my colleagues—on both sides of the aisle—have expressed skepticism over several aspects of the agree- ment. For example, the relief provided to Iran under this deal would allow it to rejoin the international economic system. Over time, this would give Iran the financial means to increase its sup- port of terrorism and regional destabilization. In addition, the mechanism for reimposing the harshest sanc- tions, should Iran not comply with parts of the deal, may prove in- effective except in the most extreme cases of violation. Many view it as Iran’s ‘‘license to cheat,’’ as long as such cheating falls just short of a significant violation of the agreement. Financial sanctions have become a critical tool of U.S. foreign policy, and they are an important part of this Committee’s jurisdic- tion. In fact, over initial Administration objections, this Committee was instrumental in imposing the sanctions that brought Iran to negotiations in the first place. I believe it is essential for U.S. sanc- tions law and policy to continue to evolve to meet any new security challenges presented by Iran. Today the Committee will hear from two panels. On our first panel, we will hear from the Administration’s lead negotiator of the agreement and its lead sanctions expert. Following this, the Com- mittee will receive testimony from a panel of experts who have studied the agreement extensively, including officials from the pre- vious Administration. Senator Brown. STATEMENT OF SENATOR SHERROD BROWN Senator BROWN. Thank you, Mr. Chairman. Ms. Sherman and Mr. Szubin, thank you for being here and for your very important public service. We will hear in the second panel from four witnesses who worked in the Bush administration and terrorist finance and Mid- dle East policy. In fact, this whole process began in the Bush ad- ministration with a Republican President who was, in the wake of the Iraq war, willing to engage Iran diplomatically. As Secretary Kerry observed in Senator
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