Administration Perspectives on Imple- Menting New Economic Sanctions One Year Later
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S. HRG. 112–332 ADDRESSING POTENTIAL THREATS FROM IRAN: ADMINISTRATION PERSPECTIVES ON IMPLE- MENTING NEW ECONOMIC SANCTIONS ONE YEAR LATER HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED TWELFTH CONGRESS FIRST SESSION ON EXAMINING THE GLOBAL IMPACT OF THE IRAN REGIME SANCTIONS AND EVALUATE THE EFFECTIVENESS OF THE COMPREHENSIVE IRAN SANCTIONS, ACCOUNTABILITY, AND DIVESTMENT ACT OCTOBER 13, 2011 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: http://www.fdsys.gov/ U.S. GOVERNMENT PRINTING OFFICE 73–564 PDF WASHINGTON : 2012 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS TIM JOHNSON, South Dakota, Chairman JACK REED, Rhode Island RICHARD C. SHELBY, Alabama CHARLES E. SCHUMER, New York MIKE CRAPO, Idaho ROBERT MENENDEZ, New Jersey BOB CORKER, Tennessee DANIEL K. AKAKA, Hawaii JIM DEMINT, South Carolina SHERROD BROWN, Ohio DAVID VITTER, Louisiana JON TESTER, Montana MIKE JOHANNS, Nebraska HERB KOHL, Wisconsin PATRICK J. TOOMEY, Pennsylvania MARK R. WARNER, Virginia MARK KIRK, Illinois JEFF MERKLEY, Oregon JERRY MORAN, Kansas MICHAEL F. BENNET, Colorado ROGER F. WICKER, Mississippi KAY HAGAN, North Carolina DWIGHT FETTIG, Staff Director WILLIAM D. DUHNKE, Republican Staff Director CHARLES YI, Chief Counsel PATRICK GRANT, Counsel COLIN MCGINNIS, Professional Staff Member JOHN O’HARA, Republican Senior Investigative Counsel ANDREW OLMEM, Republican Chief Counsel DAWN RATLIFF, Chief Clerk RIKER VERMILYE, Hearing Clerk SHELVIN SIMMONS, IT Director JIM CROWELL, Editor (II) CONTENTS THURSDAY, OCTOBER 13, 2011 Page Opening statement of Chairman Johnson ............................................................. 1 Opening statements, comments, or prepared statements of: Senator Shelby .................................................................................................. 2 Senator Menendez ............................................................................................ 4 Senator Kirk ..................................................................................................... 5 Prepared statement ................................................................................... 33 Senator Brown .................................................................................................. 6 Senator Moran .................................................................................................. 7 Senator Tester .................................................................................................. 9 Senator Bennet Prepared statement ................................................................................... 33 WITNESSES Wendy Sherman, Under Secretary for Political Affairs, Department of State ... 9 Prepared statement .......................................................................................... 34 Response to written questions of: Chairman Johnson .................................................................................... 47 Senator Schumer ....................................................................................... 48 Senator Menendez ..................................................................................... 50 Senator Toomey ......................................................................................... 53 Senator Moran ........................................................................................... 54 David S. Cohen, Under Secretary for Terrorism and Financial Intelligence, Department of the Treasury ................................................................................ 12 Prepared statement .......................................................................................... 38 Response to written questions of: Chairman Johnson .................................................................................... 57 Senator Schumer ....................................................................................... 58 Senator Menendez ..................................................................................... 61 Senator Vitter ............................................................................................ 63 Senator Toomey ......................................................................................... 66 Senator Moran ........................................................................................... 67 David W. Mills, Assistant Secretary for Export Enforcement, Department of Commerce ......................................................................................................... 13 Prepared statement .......................................................................................... 43 Response to written questions of: Chairman Johnson .................................................................................... 70 ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD 2011 IMF Article IV Consultation Report Comparisons: U.S. and Iran, sub- mitted by Senator Kirk ........................................................................................ 73 Cumulative LEU Production at Natanz Chart, submitted by Senator Kirk ...... 74 International Monetary Fund Iran Economy Chart, submitted by Senator Kirk ....................................................................................................................... 74 (III) ADDRESSING POTENTIAL THREATS FROM IRAN: ADMINISTRATION PERSPECTIVES ON IMPLEMENTING NEW ECONOMIC SANC- TIONS ONE YEAR LATER THURSDAY, OCTOBER 13, 2011 U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. The Committee met at 10:03 a.m. in room 538, Dirksen Senate Office Building, Hon. Tim Johnson, Chairman of the Committee, presiding. OPENING STATEMENT OF CHAIRMAN TIM JOHNSON Chairman JOHNSON. Good morning. I call this hearing to order, and I welcome my colleagues and our witnesses. In the wake of the alarming announcement this week of an Ira- nian Government-linked plot to assassinate the Ambassador of Saudi Arabia to the United States and U.S. announcements of criminal prosecutions coupled with the Treasury sanctions against key plotters, we are reminded once again of Iran’s continuing sup- port for terrorism, which has now reached our own shores. Today, we will hear from key Administration officials imple- menting U.S. policy to minimize potential threats from Iran, in- cluding through vigorous enforcement of the Comprehensive Iran Sanctions, Accountability, and Divestment Act, or CISADA, devel- oped by this Committee and enacted last year. That bill broadened and strengthened current U.S. sanctions law with respect to Iran, provided for voluntary divestment from firms active in Iran’s en- ergy sector, and strengthened limitations and penalties on illegal diversion of sensitive technologies to Iran. When he took office, President Obama took an aggressive dual- track approach to Iran, offering high-level engagement coupled with sustained pressure through economic sanctions. Since then, Iran has continued to defy the demands of the international com- munity to halt its illegitimate nuclear activities or even to answer questions about them. And, it has continued to support terrorist ac- tivity throughout the world. In response, the President has re- focused U.S. policy to intensify pressure on Iran’s Government through new U.S. sanctions, and multilateral sanctions adopted by the U.N. Security Council. Iran’s leaders confront the same choice today that they have faced for some time. They can agree to end Iran’s illegitimate nu- clear program and stop supporting terrorists around the world, or (1) 2 they can continue on their present course, ignoring the legitimate demands of the international community on their nuclear program, repressing their people, and supporting terrorists, deepening Iran’s isolation and further threatening their economy. Today, we are fortunate to have before the Committee Under Secretary of State for Political Affairs Wendy Sherman, Under Sec- retary of Treasury for Terrorism and Financial Intelligence David Cohen, and Assistant Secretary of Commerce for Export Enforce- ment David Mills. Under Secretary Sherman will elaborate on on- going diplomatic efforts, assess our chances for success, and survey policy options. Under Secretary Cohen will discuss the targeted fi- nancial measures employed against Iran and explore with us other pressure points in the global financial system that could be em- ployed against Iran. Assistant Secretary Mills will update us on progress in efforts to combat black market networks throughout Asia and the Middle East which help to illegally supply Iran with sensitive technologies. With enactment of new Iran sanctions last year, Congress equipped the Administration with new tools to confront the threats posed by Iran. It is clear that U.S. sanctions, as well as those im- posed by the United Nations, European Union, and others have further isolated Iran and had some impact on its economy, though that has been mitigated by continuing high oil prices. But it is also clear that the sanctions imposed so far have not deterred Iran from pursuing its nuclear ambitions. I am eager to hear a description of the full range of U.S. efforts to pressure Iran. I hope our witnesses will also discuss any chal- lenges in implementing