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Joint Hearing of the Middle East and South Asia Subcommittee and the Terrorism, Nonproliferation and Trade Subcommittees of the House Foreign Affairs Committee - Preventing Nuclear Iran


Location: Washington, DC


REP. BRAD SHERMAN (D-CA): Thank you.

I thank the gentleman from New York for joining with us in holding these hearings. These hearings will expose an administration that is hiding behind a supposed Hobson's choice -- that we either bomb Iran or we do nothing but scream at them, and that we occasionally supplement that screaming with truly feckless and token sanctions. The administration has chosen to ignore the truly important economic and diplomatic tools at our disposal. The question is why.

This administration is famous throughout the world for what seems to be vigilance or even overvigilance toward protecting America from terrorist attack. What is misunderstood is that this administration has been captured by extremists -- extremists in defense of corporate liberty. Extremists who would not ever allow any corporation to have its right to make a profit impaired in the slightest, merely in the interest of defending the United States and our national security. I know that seems to be a strong statement, but with me here is Don McDonald of our committee staff. And during the break, he would like to collect from any of the smart people in this room any example of where the Bush administration has voluntarily acted to inconvenience a multinational corporation in order to achieve a national security objective.

We are also hamstrung by the bureaucratic imperatives and arrogance of our foreign policy establishment. We can't bargain because we can't prioritize, we can't link -- we can't give anything to get anything. We have never gone to the Chinese and said that our actions toward their currency manipulation will be affected by what they do with regard to Iran, and we have never gone to Russia and said that even as to issues like Abkhazia and Transnistria-Moldova -- issues so unimportant to American security that no one in this room knows what I'm talking about, with the exception of our witnesses and a few of my colleagues. Even as to issues like that, we are unwilling to tell Russia that our policies will be affected by their policies toward Iran. And so we send these two fine public servants and others to do their best, and they've done the best that can be done if you send them out there with no bargaining power. Send them to Moscow. Send them to Beijing. Ask them to beg, but don't allow them to bargain.

Now another part of this is the NIE, who -- the summary of which was designed to be misread. The big headline out of that summary is that Iran has abandoned its weaponization program. Only in a footnote do you learn the weaponization program is just the engineering as to how to create the bomb. They can do that in one or two years. The report itself makes it clear.

Iran is in an all-out effort to do the hard part of making a nuclear weapon -- creating the fissile material with 3,000 and more centrifuges.

Some are even fooled by the Iranian claim that they just want to generate electricity. Iran in 2006 flared approximately 13 billion cubic meters of natural gas. That's the equivalent of what you would need to power 9,618 megawatts of natural gas electric generation capacity, more than 10 times Bushehr, far more, or at least somewhat more, than all the electricity Iran claims it plans to generate from 10 nuclear electric plants.

If natural gas is free, then power can be generated cheaply and in a manner that is safe for the local environment. So we have an Iran on target to develop nuclear weapons. What does this mean for us? It means that other states in the region will develop nuclear weapons and the nonproliferation regime is dead. It means terrorism with impunity. It means that we go eyeball to eyeball with a hostile nuclear force, a hostile nuclear nation.

That's a Cuban missile crisis every time there's an incident in the Persian Gulf -- not a Cuban missile crisis with Khrushchev, but with someone considerably less sane. And if this regime feels it is about to be overthrown, they can send a nuclear weapon to Tel Aviv in an effort to regain popularity, or send one to us, smuggle it inside a bale of marijuana, feeling that if they're going to go out, they might as well go out with a bang.

When it comes to getting U.N. sanctions, sanctions that could be immediately effective in preventing refined oil products from going into Iran -- which, as many of you know, has to import nearly half of its refined energy since it lacks refinery capacity.

In order to get those U.N. sanctions, we need Russia. We need China. Yet, as I mentioned before, we are unwilling to bargain. Instead we have cut a kind of interesting bargain. They'll vote for truly inconsequential sanctions and we'll do a great job of convincing the press that we've actually accomplished something.

For example, we now have U.N. sanctions that says the head of the Qods Force not only cannot visit Disney World, but cannot visit even Euro Disney. I doubt that's enough to change Iranian nuclear behavior. What we need, as I've alluded to, is linkage between what we do on issues of importance to Russia and China and what they do vis-a-vis Iran.

We also don't have to wait for U.N. sanctions. There are a number of things we can do without the Security Council. For example, we could actually have an administration that follows the law. And I refer to the Iran Sanctions Act, which has been consistently ignored by this administration and the last administration.

We could stop allowing the Pentagon to procure weapons from companies that sell munitions items to Iran, but instead that's what the Pentagon is doing today. Our current efforts are not enough. They have been significant -- just significant enough to fool the press.

For example, Treasury has prevented four Iranian banks from doing business with the New York Federal Reserve branch while allowing other Iranian banks to do so. And if the Iranians aren't able to use an Iranian bank, which they still can do under our extremely limited sanctions, they're free to do the same transactions through a European bank.

Upon designating the Iran Revolutionary Guard Corps as a terrorist organization, there was a few hours in which it seemed like we might impose secondary sanctions; that is to say, you can't sell trucks in the United States if you sell trucks to the Iran Revolutionary Guard Corps. Within hours, Treasury announced, "Sorry, we don't really mean that -- no secondary sanctions. You can do business as usual in the United States while doing business as usual with the Iran Revolutionary Guard Corps."

There is so much we can do. What we need to do is use Radio Farda to broadcast a message that Iran faces diplomatic and economic isolation if it doesn't abandon its nuclear program. The problem is, I can't lie that well in Farsi. She faces almost no sanctions -- no U.N. sanctions, no effort by the United States to use the laws on the books to prevent business as usual with companies in Europe and Asia.

We have before us two fine servants of the public who are told to go do their best as long as no European company is offended and as long as we make no linkage to any issue of importance to Russia and China.

I want to commend you for doing your best, but at the same time, point out that by doing your best under these circumstances, you've been part of an overall effort to fool the American public.

And I yield back.


REP. ACKERMAN: Chairman Sherman

REP. SHERMAN: Thank you.

Let me first ask unanimous consent to put in the record these two charts that I have off to the side.

REP. ACKERMAN: Without objection.

REP. SHERMAN: The first illustrates what I said earlier, and that is that Iran has enormous natural gas reserves, does not have the capacity to export them, produces natural gas as a by-product of producing oil and flares 10 times as much natural gas as it would take to generate all the electricity they're claiming that they wanted to generate out of the Bushehr reactor. The second chart shows that both the last administration and this administration is violating federal law by failing to at least name and shame the companies investing over $20 million in the Iranian oil sector. That is to say, they're violating U.S. law to protect Tehran's business partners.

Mr. Glaser, the Financial Crimes Enforcement Network issued an advisory opinion to U.S. banks specifically warning that the Central Bank of Iran was using an array of deceptive practices to hide the bank's involvement in nuclear proliferation and terrorist activities. The governor of that bank made it easier when he said on February 5th that he was proud that his bank assisted private Iranian and state- owned banks to, quote, "do their commitments regardless of the pressures on them." In effect, he's announced that his Central Bank is helping those other banks evade the various sanctions that you've applied.

Why would we have FinCEN issue a warning about the Central Bank of Iran and their involvement in terrorism proliferation and not designate that bank pursuant to Executive Order 13224 or 13382, dealing with terrorism and proliferation?

I'll ask you to give a brief answer. I think I also have an answer.

MR. GLASER: Okay, I'll try to keep my answer brief. I'll tell you, Chairman Sherman, that we do share your concerns about the Central Bank of Iran. As you noted, they engage in deceptive financial practices. They try to strip names off of wire transactions. They assist designated banks conducting transactions. And as we've also noted before, they work with Bank Saderat to funnel money to Hezbollah. So --

REP. SHERMAN: Now you're repeating my question. I want the answer to the question. Why haven't you designated it?

MR. GLASER: Well, the simple answer is that we're in the middle of a campaign to apply financial pressure to Iran. The United States, through that FinCEN advisory that you're talking about, which came out very recently, is the first time the United States or anyone in the world has made a formal statement about the Central Bank of Iran. And I think it's very important that we did that.

It is also important that we -- taking action against the central bank is an extraordinary step. It is certainly something that is within our tool box. But I think it's also important that we work with our partners around the world to ensure that when we do take steps --

REP. SHERMAN: I think you've given us your answer.

Ambassador, you've said that our current campaign is working. It's obviously not working to change Iran's policy. The centrifuges are turning. It is working to get the press and the public off the backs of the administration and to fool them, and to even fool them to the point where we get answers like those given by your colleague.

Clearly at some point the Central Bank of Iran will be designated. We will dribble out these little tiny actions each time it's necessary politically to prevent any significant action. And so I'm sure that we'll eventually do the right thing with regard to the central bank, but as long as we put about six months or a year in between each tiny action we take, we can avoid taking any significant action until Iran tests a nuclear bomb.

Now, I said in my opening remarks that I hypothesized that the Bush administration has been seized by extremists in the defense of corporate liberty. Ambassador, what's the biggest example you can give me of when the Bush administration voluntarily inconvenienced -- really put a crimp in the style of any multinational corporation in an effort to deal with the Iran problem? Can you name any that go beyond just begging the corporation to change its policies?

MR. FELTMAN: Mr. Chairman, I'll get back to you after I talk to my colleague in the economic bureau about that. I don't have a ready answer for you.

REP. SHERMAN: I assure you, I've asked everyone at the State Department -- and oh, by the way, in my opening statement, everyone in this room -- to identify any circumstance where the Bush administration had voluntarily inconvenienced a multinational corporation to protect our security. And so far we're at 0.0 as an answer.

Now, there are five bills that have been introduced in Congress -- H.R. 957 from Ileana Ros-Lehtinen, to apply the Iran Sanctions Act sanctions to financiers, et cetera; H.R. 1357, requiring federal divestment; H.R. 1400, Chairman Lantos's bill -- may he rest in peace -- known as the Iran Counterproliferation Act; H.R. 2347, Congressman Frank's bill, the Iran Sanctions Enabling Act; and finally, H.R. 2880, Mark Kirk's bill, adding refined petroleum to the triggers for the Iran Sanctions Act.

Ambassador, does the -- can you name any of those bills which the administration either supports or is neutral about?

MR. FELTMAN: Mr. Chairman, I know you have --

REP. SHERMAN: That's a yes or no question.

MR. FELTMAN: You had an exchange with the secretary of State on these sorts of issues a few weeks ago. The secretary of State made it clear she's not afraid of using sanctions. She doesn't hesitate --

REP. SHERMAN: Sir, I asked you a yes or no question. I have very limited time here. Does the State Department take a support or neutral position on any of the five pieces of legislation I identified?

MR. FELTMAN: I'm not familiar with all five, sir.

REP. SHERMAN: As to any that you are familiar with.

MR. FELTMAN: Our policy is trying to use flexibility and firmness together to try to change Iran's calculus on its nuclear (thinking ?). I'm sorry I do not have the details on the legislative --

REP. SHERMAN: Well, I will ask you to respond for the record as to the five pieces of legislation. Just for your information -- I thought you'd be involved in these bills since they affect Iran -- the State Department is working to undermine and prevent the passage of each of these pieces of legislation, as far as I can tell, sometimes officially, sometimes unofficially.

To have all this talk about Iran and then to have the administration oppose every action and never take any action that inconveniences a multinational corporation is reflective of a duplicitous policy. I should point out that this is not the first administration.

Let's return to the Iran Sanctions Act. The charts are there showing over 40 investments that should have triggered that act. Some go back to the prior administration. We have a law that requires, at a minimum, the administration to identify, name and shame the companies involved. To not take that action is to violate American law, to protect Tehran and its business partners.

Without telling me how wonderful you think your sanctions are, can you tell me why the State Department has not even identified any of these transactions?

MR. FELTMAN: What I will say, Mr. Chairman, is there's lots of information that's under review right now, much of which you've provided to the State Department. But the offices involved are reviewing a lot of information in --

REP. SHERMAN: Some of these transactions go back to the Clinton administration. It is not my job to be the intelligence officer. These were provided chiefly by the Congressional Research Service. This is not because I have spies in the boardrooms of European oil companies. This is information that you have known about before I did; you have known about for a decade. And the State Department, under both administrations, has decided to commit the illegal act of refusing to take even the minimum steps required by law.

I think my time has expired. My patience has expired.

REP. ACKERMAN: If the gentleman would yield me 30 seconds of his remaining --

REP. SHERMAN: I yield you all my remaining time, Mr. Chairman. You can (define ?) how much it is.


REP. SHERMAN: I thank the gentleman from New York.

I want to thank our witnesses. The State Department selected you for your courage and your high tolerance for pain. They sent you here to defend a feckless policy that you did not choose but have had to defend.

I look forward to you getting us the answers to the questions for the record as promptly as you can. I'm particularly anxious to get that list of occasions in which multinational corporations have been seriously inconvenienced and have lost significant profit opportunities as a result of the action taken voluntarily by the Bush administration.

With that, our hearing is concluded.

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