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tv   Undersecretary of State Wendy Sherman Testimony on Iran Nuclear Agreement  CSPAN  September 3, 2015 8:00pm-9:24pm EDT

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now, they have backed off a little bit. there is some confusion around that. and by the way, i want to say there is confusion. i think iran views at the way we had it in this document. but if someone spent a billion dollars on these sanctions -- let's say bp on an oil facility -- and sanctions snap act. by the way, you realize that in nine months, iran has the nuclear snap back. the agreement clearly states they can walk away. they have a nuclear snap back. we have a sanctions snap act. i guess the question is, if somebody enters into a contract over the next year when the sanctions are relieved -- everybody expects them to be relieved in nine months regardless of what the report says -- can that contract continue on -- in other words, it was put in place during the free time, can it continue on if
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sanctions are put in place afterward? that is a gray area. it is a detail, and i realize it is not the biggest issue, but it does create concerns about people rushing in now to establish contracts, which we see happening now. >> senator, i don't think that is an unimportant issue. i wouldn't describe it as a detail at all. i think it is essential. companies could enter into contracts and then somehow be protected against snap backs, then we would have a very weak snap back indeed. we were in tent not to let that happen. iran may want to put grayness into the issue, but they understand the issue as well. when sanctions are lifted, the business allowed by that lifting can occur.
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if sanctions are snapped back, any protections on an existing contract or a new contract are sanctionable. our friends in the u.k., france, and germany understand that. if there is any doubt, i want to remove it today. senator: if we could have a letter from the other parties that agree to that, that would be helpful. if you could get the other parties, including china and russia, to agree that is the case -- because we are getting very mixed -- i think it would just help us, to some degree, at least with people who are on the bubble about the issue. ambassador sherman: i spoke with the u.k. ambassador to the united states this morning. i know he has talked to many of you. he shared with me and e-mail -- an e-mail that i believe he sent to your office about this. he said that in fact he is committed, and you are committed
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to snap back and to the ability to apply sanctions for other forms of an acceptable activity. he also said to me on the phone this morning that he absolutely understands, all europeans understand -- and helga schmidt, the deputy of the europeans high representatives office just held a meeting to affirm the very fact that you questioned, that indeed companies have no grandfather clause whatsoever. senator: thank you, senator corcoran. senator graham. i appreciate: senator corcoran's concerns
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about this issue. the military option, obviously, is always on the table. it's a political agreement that any party can obviously pull out of, just to make that clear. again, i appreciate senator corker's comments. i'm not sure about the analogy of 50 versus 100. i want to get to that in a moment. i don't know if analogizing that to the size of our economy really gets us anywhere. but that aside, let's talk about sanctions release and this is the jurisdiction of this committee and the primary area of jurisdiction. i know you opposed, secretary sherman, a pay for performance model in the iran agreement, and i would like you to discuss, generally, the steps iran will have to go through before receiving any new sanctions relief under the agreement on implementation take, if you would walk through that with us. ambassador sherman: sure. iran has to uninstall two thirds of its centrifuges.
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it has to get its stock pile down 98% from 12,000 tons to 300. it must take the core of the iraq reactor out and fill it with concrete so that is unusual -- unusable. it must set up with the iaea all of the verification processes. the iaea must have access on a 24/seven basis. there will be real-time data transmission. there will be electronic monitoring so that the iaea will know if something is tampered with in real time. the iaea will have eyes on production for 20 years. for 25 years, the iaea will have eyes on uranium from the time it comes out of the ground until it
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is milled, from its mining until it's milling, conversion set into gas so that they will not be able to divert one ounce of uranium, one portion of uranium. we will always know where goes. i wrong, in essence -- iran, in essence, would have to create an entire new supply chain covertly to get a nuclear weapon. in addition to all of these new measures which have to be put in place, iran has to take all of the steps the iaea requires on pmd. that is supposed to happen around october 15, adoption day as opposed to implementation day, so even sooner. all of these things have to take place and all of these are detailed in annex five of the agreement, before there is any sanctions relief whatsoever. all sanctions relief is a lifting, not a termination. termination comes 20 years later or when the iaea reaches broader
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conclusions, meaning they have no undeclared fifth ladies and -- undeclared facilities, and they can certify that their program is completely peaceful. senator: if you could certify what sanctions remain in place that will help us manage, combat, eliminate as much as possible, various activities in terrorism in the region. within that answer, if you could talk about the $50 billion figure, why it is 50 and not 100, in terms of obligations. second, if you could speak to the $500 billion -- i think you used the term "hole" in the iranian economy, what that pressure is on their government to supply domestic needs as some of this money is available.
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>> absolutely. the sanctions regime that remains in place to combat terrorist activities, their support of has a lock, the ongoing violence in yemen, their support to shia militants in iraq, their support in syria, that sanctions regime fully remains in place and it is very extensive. it is an ongoing authority that we have, that the europeans maintain, and that many of our allies maintained to go after these actors. senator: if i could interrupt, you are confident our allies stay with us on those sanctions, unlike suggestions we hear from others that particularly china and russia will not be there with the broader sanctions that take place overall.
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>> one does need to distinguish. when it comes to iran's regional activities, there is a coalition of countries that are highly concerned and working alongside us. increasingly, we are seeing cooperation from the gulf countries who for obvious reasons are increasingly troubled by iran's activities. we saw a number of hezbollah leaders just a few months back -- the concern is very high. but our concern about hezbollah, i don't want to mislead the committee, is not shared worldwide. i don't think we will see china and russia stepping up in the way we have seen our allies in europe, in israel and the gulf, with respect to a lot of these regional interventions.
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senator: secretary sherman, the singular goal that we have discussed of the five plus one negotiations is to make sure that iran does not obtain a nuclear weapon. many of the opponents to this agreement have talked about the dollars that have been -- that will be available because of the lifting of sanctions and what discord and terror iran could sow in the region. speak to what the administration is doing to combat that. ambassador sherman: indeed, we share the concerns this committee has and our country has about iran's activities in the region. not only will he have all of the sanctions rules -- tools that were laid out, but iran has -- but obama has provided more security to israel than any
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other president. every president has held on the efforts of the previous president, but this president has offered the most assistance. this president has commissioned technology that allows us to take action in iran in a way no resident has before. and to ensure we have the options that we need to commission and deploy those options. in addition, as you know, the president had all of the goal cooperation council to the meeting at camp david to talk about how to develop security for the region and the regional strategy. that has been fold up with a meeting that secretary kerry just had in doha. it will bring more security to the region.
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i think that would help to better improve those capabilities, whether in training, intelligence sharing, having the right armaments to deal with these efforts, and really working coalition. i think we are all in common cause. this is quite critical and we will be following up on a daily basis. secretary of defense carter was in israel. we are ready when ever the prime minister of israel is ready to discuss further enhancements. >> i neglected to answer. on the 50 billion -- we have a high degree of confidence that it is $50 billion.
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i know we have a classified session with you and the senate later this afternoon. >> thank you. >> i would be pleased to. the reason the $100 billion figure has been out there is that there are $100 billion in foreign reserves that have been inaccessible to it. some of that has been due to the sanctions, some of it because it is obligated, and some of it has been spent. one can list it on the books, but it is not there. obviously, those latter baskets, the funds that have been spent and are now in place as collateral, can't be recovered, even when sanctions are lifted. what remains is about $50 billion to come back to iran. with that, one needs to keep the perspective of the 500 billion dollars or more that iran needs
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to meet fundamental needs in terms of unpaid military pensions and salaries, needed infrastructure, their oil sector, which is crippled. the final point i want to add -- >> how much of that $500 billion hole would be required to get the oil sector up and producing so they could bring the wealth into the country that they aspire to? >> their oil minister has stated they require $160 billion to $200 billion just for the oil sector repairs alone. that is not to take their sector into the future. that is to take it back to the baseline and undo the damage. across the economy, we see a seven year lag due to the sanctions. upon sanctions relief in the middle of next year, the major economic sanctions abroad are
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relieved, it will be seven years before iran comes back to where they ought to be today. >> even if they invested the money, it would take them that long? >> that wasn't a comment on the oil repairs. the oil repairs might happen in a shorter amount of time, 2-3 years. i need to get back to you on that. if you look at their gdp curve, and where it ought to have been, it had this radical break due to the international sanctions, and it only gets back in seven years to where it ought to have been today. the hole that they are in cannot be overstated. $50 billion coming back to them does not begin to meet the needs. what's more, that $50 billion is not spending money. that is all of their freed up foreign reserves. no country is going to exhaust its foreign reserves down to zero, risking huge and stability
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-- instability to do so. we estimate that they will use it for their domestic economy and will need to leave some in reserve in the way any country would with its foreign reserves. >> last question. secretary sherman, many of us have raised concerns about the prospects of the u.n. embargoes in iran and conventional arms being lifted in five years, and ballistic missiles in eight years. i know all of us would have preferred to retain these embargoes longer. russia and china felt differently. outline briefly what specific specific legal authorities remain in place to combat iran's conventional arms and missile efforts. ambassador sherman: sure. we will be able to rely on other un security council resolutions that levy embargoes. so, all of those remain in
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place. we will continue to work with over 100 countries around the world that have signed the proliferation security initiative to limit imports or exports. the missile technology control regime also remains in place and will play a critical role in that regard. we have bilateral cooperative tools. we have ongoing sanctions in place as adam has pointed out, executive orders which authorize u.s. sanctions on a foreign persons that contribute to the proliferation of missiles. we will make use of those executive orders. the iran, north korea, syria proliferation act connected to iranian ballistic and cruise missile activities and the sanctions of the 2006 provision of the foreign assistance act of the fine assistant act, iran
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amended in the iran proliferation arms act, all and impose sanctions on entities. the un security council resolution that was just recently passed has not let the program off the hook. the current prohibitions on the supply of ballistic missile related items in place and are still required to prevent transfers of missile related items. they are still required to prevent provision to iran technology, technical assistance, and other services. they are still required to prevent transfers of ballistic missile of items that happen to pass through their territory. i can go on. there are about 10 things that it still continues to require states around the world to do.
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frankly, yes. would we have liked them to go on forever? of course. we have kept them on far longer than iran, china, or russia wanted them to stay on. we have kept them on under article 41, chapter seven, which means they are enforceable. we have other un security council resolutions and other tools unilaterally to make sure that where arms and missiles are concerned, we can keep moving forward in every way we need to. >> thank you, mr. chairman. :enter to me -- senator toomey thank you, mr. chairman. i thank the witnesses for appearing today. i want to go back to the issue raised by senator corker. ambassador sherman, the iran nuclear review act of 2015 is abundantly clear that congress is supposed to receive all the documentation, all of the
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agreement, annexes, related materials. it says right in the beginning referring to the transmission of agreements, the president shall transmit to the impersonal -- appropriate congressional committees and leadership the agreement as defined in subsection h-one, including all related materials. subsection h-one specifies that this agreement includes -- and i quote the last part of this -- any additional materials related thereto, including annexes, appendixes, compasses, site agreements, implemented materials, guidance, or other understandings, and any related agreements. i think that is clear that that is meant to be all encompassing. yet we discovered that there is a secret side agreement, which presumably compliments that contemplates the previous dimension of activities, which strikes many of us as a very important information to have and evaluating whether or not future activities are in violation of this agreement or not.
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now senator corker asks why you have not given us the documents. you said it was because we don't have the documents. knowing this statute, the intent of the statute, and that the letter of this law, why did you not insist that this essential to enforcement document be disclosed? >> senator, thank you very much for your question. as you point out, we don't have the document. the united states senate has every single document that the united states government has. secondly, the reason we did not insist is because we want to protect u.s. confidentiality. this is a safeguard protocol on the iaea protection of confidential understandings and arrangements between the united states and the iaea. i know you will say this is a
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different situation. i grant you that this is an international understanding to try to stop iran from having a nuclear weapon, and that is a different circumstance. in the development of where the iaea was going, they did come to us for technical expertise as they came to every other member, and in a classified briefing this afternoon, i will share everything i know about this. i am also grateful that the director general on his own cognizance is meeting with the senate foreign relations committee in an informal setting. it is extreme he on usual, because every other country wonders why he is. >> you did not see the final document? >> i was shown documents, but whether there were other discussions -- you know, what this is about is about the technical modalities that the iaea uses, and i will share with you this afternoon in a classified setting every single
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thing i know about that, and i think it will give you great confidence that the iaea is doing what it needs to. >> i look forward to that. it is still disappointing to me. we are being asked to vote on an agreement in which the enforcement depends on a very important document that we are not allowed to see. it is not clear to me that you have read the final document, or anyone else in our government. you do not have it your possession. >> i have seen the document, as i said. as we were going to the technical discussions with the iaea, but what is important here, senator, ultimately what we are talking about is the credibility of the iaea, whether in fact we believe they are credible, independent, verifiable organization, which it is.
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they have done a superb job on the joint plan of action. all of those reports have come up here. they have done a very fine job. i have trust and confidence in their ability to do a fine job on the joint conference plan. >> i'm glad you do. i think that is a document we ought to have before us. let me ask a separate question. paragraph 36 grants to either party the opportunity to walk away from this agreement. anybody can raise an objection about what the other side is doing. after an adjudication process, if this objection is not resolved to the satisfaction of the claiming -- complaining participant, then the complaining participant can then so we walk away, either side. so iran for any reason that iran deems sufficient can walk away from the agreement, after they have their $50 billion or $100 billion, or whatever the figure is. here is my concern. i am concerned that this dynamic creates a very -- this fact creates a very dangerous
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dynamic, one in which the administration will have a hard time enforcing anything other than a massive violation. former secretary of state shultz and kissinger wrote a widely read piece that suggested that most likely if a violation occurs, it would not be a clear-cut event, but the gradual accumulation of ambiguous evasions. so let's say we start to discover the gradual
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accumulation of ambiguous violations, which strikes me as possible. if we were to take any measures at all, any enforcement mechanism of any kind, iran could invoke paragraph 36 and say this is unacceptable. since this administration has told me that the alternative to this is war, and so we have to have this agreement, and we have to make all these concessions after concessions after concessions to get this agreement, why should we believe that in the face of the accumulation of these small but accumulating evasions that the administration is going to risk iran walking away from the table, because i suspect that that would be there threat. >> senator, i appreciate that you believe that iran will have gotten enormous sanctions relief and will be sitting in the driver seat, but you forget the other half of the equation. iran will have reduced their centrifuges by two thirds,
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eliminated 98% of their stockpile, made the iraq reactor in operable, allowed inspectors in their country to have 24/7 access to the facilities. >> 24 day access. >> no, for declared facilities, the iaea has 24/7 access every day of the week. >> and the military sites? >> if the iaea believes there is justification for them going to a site, the additional protocol allows them to give 24 hours notice to get into that site. if the country says we think you should go to this site or we think you should have this document, under the additional protocol, they are allowed to suggest alternatives. however, that debate about what the iaea can do can go on for quite some time. what this agreement did, different than any other arms control agreement ever negotiated, we put a clock on that debate.
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we said that if the iaea under the additional protocol wants to go to a site, it has to have access to that site. so we said that you can debate with iran for two weeks, at the end of those two weeks, the joint commission made up of all of us looks at that. if we believe that on day one of the saving days we have to consider the situation that they ought to give access and we believe we will always have europe and the european union representatives with us, iran has three days to provide access.
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it could be as short as 18 days. as the secretary has testified again and again, nuclear material cannot be cleansed away. it will be found if it is there. so quite frankly, senator, what we have negotiated in this agreement is absolutely unprecedented access when ever the iaea believes that it has a suspicious site that needs access to. >> senator, would it be permissible to address the snap back aspect? >> at the discretion of the chairman. >> your next. you want to read? >> i will take my time and as -- ask quickly to respond to the question. >> thank you. i just wanted to speak to one of the premises behind your questions on the snap back. i absolutely agree that the more likely scenario we see is small breach, testing, sticking a toe across a line. what we need to do is show them that those breaches have consequences, otherwise we are just asking for larger breaches. we have to be very serious about
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that. we have been very clear with our partners that we are going to be serious about that. but there is a premise that i have heard circulating that after the initial sanctions relief, iran can immunize itself to further pressure. therefore it will care about snap back. that is just simply not the case. iran's foreign reserves cannot be put in a vault in the form of gold or bills. if they are not liquid, they are not usable. what iran needs with its foreign reserves is to have them in major financial centers, imports, boost currency, a whole host of things that countries do with their foreign reserves.
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that means they will have to keep them in foreign jurisdictions where they are subject to snap back. if anything, the more iran begins to benefit from the deal, the more vulnerable they are to this pressure. so we need to be very serious, and i agree with your question in that respect, but the consequences to iran will remain very serious, very severe, throughout this agreement. >> senator reed. >> thank you very much. within my allotted time, you have testified that you don't expect iran to stop funding has -- hezbollah and other proxies, so what do you expect? >> i do expect them to continue funding hezbollah and other violent proxies. it's one of the goals of my career. i have been working 13 years on the terrorist financing portfolio. we have a lot of tools at our disposal here. one of the most powerful is the one that congress has given us, which is when we sanction
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iranian terror supporters, our designation is amplified internationally. what i mean by that is when we name a hezbollah finance -- financier, a money launder, any bank worldwide, that facilitates transactions for that designated entity, it faces very severe sanctions from the united states, sanctions that no no bank wants to face. what we have seen as a practical matter thanks to those congressional sanctions is that our sanctions against their proxies carries international weight, and those designated entities become pariahs worldwide. but we have to do more. i think it is incumbent upon us to do more. additional intelligence targeting, to identify the money launderers, facilitators, and funders, and muster a coalition of countries to cut it off to -- and shut it down. >> thank you. let me go to a very critical point here. the sanctions regime is in place today.
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if we reject this deal, some have argued that it will not make a difference, the sanctions will stay in place. you have been working on this for 10 years. how would our partners react if we said we walk away from the deal? >> from my perspective, and i would certainly defer to ambassador sherman on the diplomatic perspective, but we have tremendous clout and influence as the world's most powerful economy. i do not underestimate that. i have been a privilege of exercising that clout for the last 10 years and i have seen how effective it can be. as i mentioned in my opening statement, it is not all powerful. we do not get to dictate to other countries, especially major economies, what there foreign policy will be. we need to harness shared concerns. when it comes to iran, we have a
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shared concern, for you and resolutions have called out their program as being a threat, so when we went to china, india, japan, saying we need you to work with us. you agree with us that iran's nuclear program is a threat. they said yes, we do agree. we said, here is the way to address it. we have a diplomatic path forward. join us and let's test it. let's try to use our sanctions leverage to obtain the concessions we need from iran. they worked with us and it succeeded. it succeeded to a remarkable extent. in the event that we walk away, it is a very different and much bleaker scenario. the international consensus is behind this deal, 90 countries have endorsed this deal. we would be alone in walking away from it. going and asking them to take
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costly economic sacrifices in the hope of a future better, tougher deal, i think we would have very weak prospects for that. >> thank you. mr. chairman, i think i will stop. >> thank you, mr. chairman. good morning to the witnesses. thank you for being here. like so many of us, i am concerned about this deal, not supportive of it whatsoever. the more i read of the deal, the less i like it, and that does not include the iaea site agreements. ambassador, you have said a couple of conflicting things this morning from my perspective. sitting here, i can see your notebooks. i can't read what is in it. in the final deal from the iaea, have you seen it and read it? >> let me be very clear. i have seen the documents that the iaea and iran have discussed
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to create the final arrangements for the modalities that underpin the roadmap document, the public document that congress has a copy of. i was not allowed to keep any of the documents about the arrangements on the modalities that underpin the public roadmap that you have a copy of. however, i told the iaea that given our constitution that if congress asked me to brief on the details that i understood, i would do so in a classified session, and i will do so this afternoon in the all senate classified session. i will give you all the details of which i am aware. >> have you read the final agreement? >> it is not an agreement. it is a set of arrangements. >> have you read it? >> i have.
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>> question for you. you stated earlier that the iranian regime continues to fund terrorism and bad behavior. at the same time, we are concerned that the more money the iranian regime has, the more they will fund terrorist activity. in spite of the fact that they have a crumbling economy, infrastructure needs, needs to repair, ability to sell more oil, yet they are still funding terrorism. it seems like to me that you would agree with susan rice when she says that we should expect that some portion of the money from sanctions relief will go to the iranian military and could potentially be used to fund more bad behavior and terrorist behavior in the region in spite of the state of their economy. >> thank you, senator.
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i do agree with the premise of your question. i do agree with the statement that you quote from secretary rice. we saw them fund these groups during the iran-iraq war. i expect we will continue to see that. the question is, what do we do about it? it is my office's responsibility along with our colleagues in the intelligence community to ramp up our efforts and go after those funding streams. the alternative that is put out there does not make sense to me strategically, which is we don't enter into a nuclear agreement, give them back their money, then what? so we will continue to combat their support for terrorism, but we will have the prospect of iran 2-3 months away from breakout. when you talk about a state sponsor of terrorism, that is a terrifying prospect.
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>> strategically speaking according to the agreement, five years from the start of the agreement, more access to weapons, eight years, ballistic missiles, and they will be able to move ford with advanced research on nuclear technology, and then we know for certain at the end of the 10th year that we are looking out a breakout phase. the reality of the agreement is that we will be able to mark on a calendar when the iranians will have an opportunity for nuclear weapons? >> no, as ambassador sherman has said, at no future date does iran have the ability to pursue a nuclear weapon.
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in fact, the agreement locks in the contrary. it has varying durations with respect to enrichment limits, and those are strictest in the first 10-15 years and then reduced, but at no point do they have the right to pursue or obtain a nuclear weapon. senator: we will have to respectfully disagree. i have one final question. paragraph 25 seems to suggest that there would be an effort to preempt state laws and other states to pass laws that prohibit companies from investing in iran. how is this not a violation of states rights, and how do you read that paragraph? mr. szubin: there is nothing to my knowledge about preemption in the joint plan of action. all it says is that we will make sure that state authorities who have enacted legislation with respect to iran are informed of the developments, which i think
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are pretty key to be aware of, when it comes to the iraq nuclear deal, and that will encourage them to take this into account as they consider it. senator: how would you encourage them? mr. szubin: in some cases those laws were predicated on the nuclear case. any authority looking at divestment laws based on their nuclear program, you would have to take into account the historic developments that we are talking about today. senator: thank you. chairman: senator schumer. senator schumer: under secretary sherman, i've appreciated your thoughtfulness, intelligence, your candor, your availability in our past meetings. i thank you for your laudable years of service. sec. szubin, thank you for your service as well.
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i hope to have you for the daunting challenges we face not only with iran, but around the world. i read and reread the agreement. i've had many meetings with both people on sides of the issue. more meetings to come this week. i'm carefully analyzing the proposed deal, because it implications are profound and far-reaching. i've had many questions answered. i'm not get reached a conclusion. this is one of the most important votes i've had to take -- any of us will have to take in our legislative career. i owe it to my constituents to make an informed decision. i will let party pressure politics in form what i think is right. i want to judge the deal on its merits and demerits alone.
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in that spirit, i want to ask you a question today. one of the questions i had is this, to both of you. where will iran 10 years from now? i am interested in where iran will be. some will say, look at the people of iran, they tend to be secular. they will push iran in a direction that is more moderate, more welcoming to the world, etc. some say, we've had that population for a long time and this dictatorship, a very totalitarian, evil dictatorship of mullahs has barely shuddered even with one transition of power. so let me ask you how you see these two elements competing. i want your judgment, because this is only a judgment question, but i think in very important one as to where iran will be 10 years from now. i would ask you each to answer that question.
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undersec. sherman: thank you senator schumer. i think all numbers for the enormous diligence of looking at this deal and trying to ask and answer incredibly ethical questions. the u.s. senate has been united behind democratic and republican presidents for war, and i appreciate that we can perhaps come united together behind peace. where iran will be in the future, i don't know, senator. i really don't. i don't think anyone does. our intelligence community probably has given you an assessment of what they believe, but quite frankly, it is a very common gated situation.
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the people who turn out on the streets tended to be the young people who are desperate, not only for a better life and a job, but they want to end their isolation. we live in a technologically connected world. no matter what the iranian regime does, indeed, they get on the internet. they read twitter. they use all of the devices all of our kids use. and they know what is going on in the world and they want to be part of it. i think the u.s. senate for their support of programs which have helped break through the internet so that they can get on. at the same time we have a regime led by clerics who have been around for a very long time, had a very conservative
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views, more than conservative -- radical. or part of the revolution of 1979, and have not let go of that history of the depth of mistrust between us which is profound. i don't think there will be some magic transformation as a result of this deal.for me, this deal is about one thing and one thing only, making sure that this regime, which does do a lot of terrible things in the region and to its own people, will not have a nuclear weapon that could further terrorize the world and terabytes of the region. i am hopeful because i am a hopeful person that a transformation will take place in 10 years, but it may not. so we have to use every tool we have on all of the activities of concern that we have and work with israel, work with the region to stop those activities to make sure that those young people have a future atoll. -- future at all. >> do you have anything to add, mr. szubin? sec. szubin: i don't. >> she is a very hard act to follow. i would like to talk about the grant monitoring of contracts. i want to give you a hypothetical.
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a country, a major oil company, government owned, signed a 10 year contract with iran immediately after sanctions are lifted because iran has complied with the long list of agreements. and then snapback, we find a major violation. we go forward on snapback. it is now year 4 of that contract. i understand that grandfathering will not affect 1, 2, and 3. what they made in the first three years, they keep. is the contract terminated in year 4 for the next six years, or does the contract continue? this is a important question as senator corker said, not the most important question, but we need an answer. there was a "new york times" article where people had different views. when a new york spokesman refused to give an answer. that is why i am glad you are
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here to clarify. what happens in year 4, 5, 6, 7, is that contract terminated? sec. szubin: i want to make sure i am exactly answering the question. sanctions don't terminate a contract. they don't have the authority to anull a contract between parties. what u.s. sanctions do in that circumstance you are describing is they say any future transactions, whether it is future investment by wheel committees, future derivation of profits, future expansion is sanctionable. that is what the sanctions and do right now. >> you will have to explain what that means to me in layman's terms. i am totale. it's my 4th year, and i'm due to send iran $1 billion for oil which i want. can i still send that oil? that's allowed? mr. szubin: no. sen. schumer: what does it mean it's sanctionable?
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is it in your view that the sections are severe enough that total will terminate the contract and risk being sued by iran? what does sanctionable mean in that situation. sec. szubin: it's exactly what the circumstances are right now and what the circumstances have been. there were a lot of pre-existing contracts that were 10 year, 20 year contracts when we put them into place. what companies saw is that they faced the threat of these powerful u.s. sanctions -- >> so another words, totale will not be able to do business in the u.s. if they continued in year 4, for instance. answer me that question. would they be able to do business in the u.s. in year 4 if they continued the contract? sec. szubin: totale could face a
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menu of choices. a menu of penalties under the iranian sanctions act, which could include being cut off from the u.s. market. >> what does could include mean? i just want to nail this. sec. szubin: the iran sanctions act has a menu-- >> and who has the ability to determine what on the menu is chosen? is that the u.s. government unilaterally? undersec. sherman: if i may, i was in the private sector for a decade. at the time when these sanctions came into place and totale had to make a decision at that point about whether to leave, the risks were too high for them. same for siemens, who was a client of mine at the time. they had to leave. they had to unwind those investments. the risks were too high. >> what were those risks? sec. szubin: they didn't have access-- undersec. sherman: they did not have corresponding banking relationships.
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their shipping is at risk. >> mr. szubin, you said could, you didn't say will. who determines that? sec. szubin: in respect to your hypothetical, it is done at the state department. the penalties are imposed on the banks unilaterally by the u.s. government. >> that's good. >> the only reason i was putting in the caveat the top about the contract is that if a contract is signed between a european company and a broad, the contract isn't invalidated by our sanctions. >> so that company would have to make a decision, doesn't risk the -- does it risk the suit by the iranians by violating the contract, given the heaviness of our sanctions? i appreciate the answer and i think you answered it. next question. i think undersecretary -- ambassador sherman, what is your title? you are good by me whatever your
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name is. a british ambassador said it agreed with the that after that interpretation. do we have that in writing somewhere that britain, france, germany, and the eu agree with that interpretation? undersec. sherman: we do not have a letter to that. i will talk with them about it that possibility. i want to tell this committee, though, i've had extensive discussions during the 27 days i was in vienna with everyone of our partners. quite extensive. they'll have these concerns and we were extremely explicit. the explicitness is the following, which adam said and i will repeat.
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we said there is no validity towards snapback provisions if there is any form of grandfathering. then it renders snapback meaningless. and we will not agree to a deal, the u.s. will not agree to a deal where there is not a real snapback provision. that is what we insisted upon and that is what we got. >> there are other aspects to it that i understand. do russia and china, is there any indication they agree with this interpretation of "grandfathered"? undersec. sherman: yes we had explicit discussions with them. there is line which in the documents that talks about prior contracts. if you read about language carefully, you will see there is no grandfathering whatsoever. >> okay. i suppose if it is a major contract to them, they could add that snapback not be put into effect, or pull out of the deal. that is speculation. undersec. sherman: snapback cannot be stopped by any one country.
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>> let's say there is a contract that is important to russia. they could pull out. >> they could. >> thank you mr. chairman. >> i would like to address my first questions to you, mr. szubin with regard to sanctions. at this point the jcpoa has been approved and submitted to the security council of the united nations, correct? what effect does that approval have on the sanctions regimes, both u.s. and u.n.? sec. szubin: it has no impact on the sanctions of the u.s. whatsoever. with respect to the u.n. sanctions regime, as i understand it, the endorsement
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by the un security council sets out a timetable in line with what ambassador sherman was describing, where iranian performance, when verified, will lead to a listing of u.n. sanctions. >> that would lead to all of the u.n. sanctions on iran? sec. szubin: when iran has taken those initial steps. the sanctions on their arms trade and acquisitions of ballistic missile knology remain in place for many years to come under the u.n.. >> in your opening statement, you made a point that it would be very hard for the u.s. to back out of the agreement that it has reached and then reimpose a sanctions regime, correct? sec. szubin: what i was referring to is that if congress were to strike down the deal, would we of the u.s. be able to unilaterally coerce
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international pressure to secure a much better agreement? i wasn't talking about snapback. the key distinction between the two is that iran is in breach of the second. iran is defying the international community. in the second. i think we have good leverage in that case. >> that's the question we wanted to ask. if it's not possible for us to go back and re-implement and affection -- an effective sanctions regime now, what about snapback? i understand that is based on an iranian violation of the agreement. but what about that makes you think, now that the sanctions have been essentially put into the process of being removed, what makes you think that the snapback will work? sec. szubin: that's a question i spent the better part of two years working on. i appreciate it very much. one of the things you hear about us talking about lifting vice terminating sanctions is for
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that exact reason, to make sure these authorities remain in place. that the structures of the un's sections resolution is still on the books. that the eu and u.s. sanctions are still on the books so that they are hovering in suspense. we make very clear, not just symbolically, but legally that we are quickly in a position to restore that pressure. >> so you believe that the fact that we have five other nations agreeing that the violation of the agreement would require a snapback of sanctions means that they would immediately join us if we said there was a violation of the agreement?
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sec. szubin: obviously if we are talking about a scenario of the violation in the future, the key question would be, what is the violation? how material is it? but in the event that the u.s. views it as a significant breach, we retain the authority to do so unilaterally, including at the un, even if members of the security council are not with us. >> you believe in that case, we could effectively cause the other nations to reimplement sanctions? sec. szubin: in the event of a serious breach, i do. what you're talking about then is the scenario we faced in 2012, where iran seems to be on the path towards a nuclear weapons capability. we won international agreement to impose tough sanctions to cut off contracts, to pull out of investments, all of those costly steps were taken because the world frankly does not want iran to have that capability. that is not a u.s.-only priority. >> what i'm getting is that you're talking about a serious violation that would cause other nations of the world to believe that iran was building a nuclear weapon? sec. szubin: yes, senator. >> it would have to get to that level of proof of a violation before we could see an effective rehabilitation of the sanctions? sec. szubin: no, we want to respond in a proportional way. it is not in our strategic
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interest to respond to a small breach with scrapping the agreement and trying to put all of the sanctions back into place. i don't think that would have this affect that we had over the last few years. i don't think it would be in our interest to see this agreement scrapped. if we see a small breach, it's in our interest to see iran come back into full compliance in a way that we can verify. >> thank you mr. chairman. i see my time is up. senator mendez: let me thank you both for your service. regardless of my questions, i thank you both for your service. madam secretary, this agreement, or war? is that the choice? it's a simple yes or no? >> i do not believe it is a simple yes or no. >> if you can't give me a simple
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yes or no that if it is this agreement or war. if you had not struck agreement with iran, we would be at war with iran? undersec. sherman: i believe the chances that we would be at war would go up exponentially. >> you are saying compared to other witnesses who observed in the administration in the past, who support the agreement and have been asked the same question, they have unequivocally, easily said no, it's not this or war. undersec. sherman:, i just said to you it is not binary, senator. >> two years now, three years from now? undersec. sherman: i don't think any of us can predict the future in that way. >> the secretary of state has come before various members of the senate and said it's either this or war. that is a binary statement. undersec. sherman: and the reason, senator, is because sanctions have never gotten rid of their nuclear program. it's only brought them to the table. >> it hasn't gotten rid of war, either.
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undersec. sherman: if we abandon this deal, they will continue this program further. >> i think there is real doubt, including if you got an intelligence briefing. i think there is real doubt that iran believes a credible military forces on the table. >> i don't agree with that at all. >> on page 26 of the agreement, it says the u.s. will make its best efforts in good faith to sustain the agreement and to prevent interference with the realization of the full benefit by iran on the sanctions lifting specified in annex 2, which is basically the u.s. section. the u.s. administration, acting consistent with the respective roles of the president and the congress, will refrain from reintroducing or re-imposing the sanctions specified in annex 2 under the joint comprehensive plan of action. i tried to get this from the treasury secretary, and he didn't give me an answer.
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do we -- the iran sanctions act, that i was one of the authors of expires next year, do we have the right to reauthorize those sanctions now or at any given time? yes or no? undersec. sherman: i believe that it doesn't expire until the end of next year and it's premature to have that discussion. >> so here we go again. we either have the right or we do not have the right. having a question of pre-maturely discussing something doesn't answer the question. do you understand that we have the right or don't have the right? undersec. sherman: we said in this document that it recognizes
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the constitution of the u.s. the u.s. congress has the right to do whatever it wants to do in its authority. so it not case you do have the right. what we are saying, we urge that it is premature to make that decision. >> given a snapback, you have to snapback to something. the iran sanctions act, which this administration on various occasions has credited as one of the significant elements of getting iran to the negotiating table, if they don't exist after next year, there is nothing to snapback to in that context. undersec. sherman: we believe there is a way forward in that regard. >> let me just read to you what your partner in this deal said in a letter to the security council, dated july 20, 2015. the iranians said it was clearly spelled out in the joint comprehensive plan of action that both the eu and the u.s. will refrain from reintroducing or reimposing the sanctions and restrictive measures listed under the joint comprehensive plan of action. it is understood that
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reintroduction or reimposition, including through extension of the sanctions and restrictive measures will constitute significant nonperformance, which would relieve iran from its commitments in part or in whole. your partner in this regard believes that if we were, if congress were to go ahead and reauthorize -- which i think most members believe is still going to exist. i think most numbers believes that the iran sanctions act is going to exist as something that will be reverted back to if the iranians violate. that is a form of deterrence. either sanctions work or they don't. either they are a deterrent, or they are not. and if they are not, then the agreement is really based on the hope over the course of 10
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years, or 13, as the president said in his npr interview, that there will be performance by the iranians, that they won't violate, and then with no sanctions in place, the only choice you have is a very limited window in which you will have to act possibly militarily. mr. szubin, let me ask you this. is it true that when we have imposed sanctions, we have given companies and individuals sufficient notice for them to divest themselves of the sanctionable activity? sec. szubin: no, what i would say senator is that when we impose major sections that affect sectoral behavior or major investments, there is a wind down period. in some cases, 6 months or longer. >> if it is six months, and you have a one-year break out time. david albright, in testimony before the senate foreign relations committee, said that
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they believe their calculation of the potential breakout time under one scenario, 6-7 months. the time for potential reenactment of sanctions. it is either one or the other. i don't see how we have the wherewithal under this agreement. your partner says there is no way that they will respect that. we will be back to point zero. you are reluctant to acknowledge that there should be a reauthorization of the iran sanctions act because then they may very well walk away. if they are going to walk away
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simply by the existence of sanctions that don't go into effect unless there is a violation in the future, you have to worry that what they are doing is buying for time. the last point i want to make. sometimes what is past is prologue. i want to read some excerpts from a hearing when i was pursuing the iran sanctions act when did the then-chairman, now the secretary of state was arguing against the sanctions. i guess to not respect things have not changed. rather than motivating these countries to join us and increasing pressure on iran, they are more likely to present our actions and resist following our lead. a consequent that would serve
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the iranians more than it harms them. he could have the opposite effect and increase the iranian regime's revenue. secretary sherman, you were recorded as also buying into that point of view. if you look at the transcript of the hearing, basically what it talks about is everything that we have heard here. that we will break the coalition. that we will be isolated. that we will be alone, and therefore, we will not have the consequences against iran. when you cry wolf too many times, it really is problematic. based upon the history which says no, those sanctions should not be imposed because if they do we will lose the coalition, now listening to this agreement. unwilling to say that the iran sanctions act should be
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reauthorized, which i think every member believes will exist as a deterrent. that is hard to understand. the final point i would make, mr. chairman, this iranian regime cares about two things. preserving the regime of the revolution. they are not going to enter into any agreement that does not preserve the regime. they would think this is a good agreement for them to accomplish that goal. that is worrisome. i understand the hope that the agreement implies in that they will perform. but when they don't perform, i don't think we are going to be in a better position at that time. that's my concern. >> invested her sherman, i'm wondering if you can help me what you think congress is actually voting on. whether or not congress would kill the deal, does that matter in any way to the iranians, or are they guaranteed all the benefits of what is then initiated today? undersec. sherman: of course they are not. the u.s. congress has the
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authority and the right under our constitution to in fact review and vote a resolution of disapproval. the president of the u.s. then has the right and the authority to exercise his veto, if you wants, and i would expect that he would. then the u.s. congress has the right to override that veto. that's how our system works. i would hope the u.s. congress cannot override that veto, because i believe that this plan is the most profound, the most far-reaching arms agreement ever negotiated and that will keep his country, israel, and our allies safer. >> if the congress did override that veto, why would it matter to the iranians? what would they lose? undersec. sherman: they would lose an opportunity to have sanctions relief. they would have the opportunity to lose their isolation from the
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rest of the world. they would lose their opportunity to come into the community of nations. they may not care about that. and what i would expect is that the u.s. congress overwrites a presidential veto, which i would not expect that to happen, because i believe this congress has united behind democratic and republican residents for war, and i believe they would unite behind them for peace. that is what this deal is about, not having to go to war, but ensuring that iran does not get a nuclear weapon. >> i agree this should not be a partisan issue. is the administration are going that we already lost the international community? so that if we do not go forward with the deal, the iranians will get this relief anyway? if no, isn't that an answer to senator menendez's question? what secretary kerry was saying 3-4 weeks before, it isn't a choice between this deal and war, but there are other scenarios where sentience could have an effect?
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undersec. sherman: yes, i understand that. it is what kind of effect, and whether that will stop their nuclear program. is it true that our unilateral sentience could be put back in place and continue on? is it possible that the rest of the world, maybe not europe, europe may follow through because they are allies, but other parts of the world that have taken huge economic costs by stopping their importation of iranian oil or taken huge costs by ending trade with iran would not pay attention to our sanctions? yes, that is indeed the case. our sentience regime would not be as effective as it would be. the international community has come together behind the steel. -- this deal. the u.s. will be in a weaker position, not only on this, senator, but on many other things we are trying to do internationally.
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>> just to be clear, it is your position that if the congress would kill this deal, the u.s. sanctions regime could still have some significant effect? undersec. sherman: it would have some effect, i would suspect so. but not to the effect that it does today. everyone has to remember that iran will then move forward with its program. the sanctions come as devastating as they have been, and i would say to senator menendez, that indeed this administration has enforced both unilateral and multilateral sanctions than every previous administration. each of which has tried to do a very good and credible job. the we have intensified that. that is what president obama set out to do, intensified that sanctions pressure, so that iran would come to the table.
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>> thank you. i do appreciate your advocacy for the agreement. i think this was a yes or no question that you just gave. you don't believe that it is war or this deal. you just outlined a third scenario. you wouldn't answer yes or no for him. undersec. sherman: even though our sections would have some bite, iran would move forward with its nuclear program. because why wouldn't they? they wouldn't get all the relief they wanted. they would keep marching forward with their program. it would force us into a choice. where we allow them to have a nuclear weapon? president obama is resolute he will not allow that to happen. that leads us down a road heading to war. >> secretary szubin, i'd like to ask you a question. i know that we have mutual
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affection for one of your predecessors. he said that the irgc receives no sentience -- receives no sanctions under this deal. most of those and -- most of those entities receive sentience relief under this deal. sec. szubin: on this point, i respectfully beg to differ. the business and for -- empire of the irgc will remain under sanctions. thanks to congress, that will have international effect. the largest construction engineering firm in iran we have designated for being controlled by the irgc. it is not coming off. not at five years, 8 years, 15 years under this deal. they will be cut off from the u.s. financial system. those all remain in place. there are companies who have done what i would call arms transactions with the irgc which we have designated conducting business with the irgc. they are due to receive relief under various phases.
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but the business empire as you described it remains intact. undersec. sherman: and the irgc does not support this deal. that should tell you something. >> my understanding is that the irgc controls smuggling benefits very handsomely. that is one of the reasons they are opposed to that. is that a correct impression? sec. szubin: the irgc is engaged in a lot of nefarious activity within iran's activity. -- within iran's economy. we have heard and credible allegations of profiteering and
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black markets, including goods going to the help of the iranian people. >> i submitted a series of questions to this administration. iran has committed indefinitely to not engage in specific activities that could intervene to the design and develop a nuclear weapon. in this context, does "indefinitely" meaning that the
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time period has not been established, or does it mean indefinitely? undersec. sherman: it means iran is prohibited from acquiring or obtaining a nuclear weapon, ever. >> so it means perpetually. undersec. sherman: yes. >> does iran have the right to enrich weapons grade uranium after the enrichment cap? undersec. sherman: no, because if they indeed move to enriching, what we would consider weapons grade, it would raise a red flag to the iaea. there are very few circumstances where iran needs to enrich above
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5% for peaceful purposes. one could argue for submarine fuel perhaps. but if they went to weapons grade, it would raise red flags immediately and we would see it as a major noncompliance. >> so enrichment over 5% starts to essentially raise this red flag with the exception of submarine fuel? undersec. sherman: there may be one or other two things. there may be other instances, but they are very few. >> what would submarine fuel be near? undersec. sherman: it could be 20%. >> that is a big distention between 5% and 20%. are you basically saying that if the amount of fuel enriched didn't specifically meet the quantity profile of the nuclear submarines, that that would be a red flag? so most purposes it is 5%. undersec. sherman: yes, 5% or
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less. the one other distinction i should make is for the tehran research reactor, which helps to make medical isotopes for cancer treatment in iran. it uses 20%, but this agreement says that we will provide fabricated fuel for that tehran research reactor overtime. we put controls on that so that it cannot be used for other purposes. >> how much enriched uranium above 5% could iran store without creating a red flag? undersec. sherman: two point acting under secretary sbuzin, hopefully reminds me. for 15 years, iran is not allowed to enrich beyond 3.67%. the concern you raised only begins to raise those red flags after those 15 years. they are allowed for those 15 years to only have a stockpile
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of hundred kilograms. that 300 kilograms is not enough to provide enough physical material or a nuclear weapon. >> after those 15 years, they can have more than 300 kilograms? there is no limit? undersec. sherman: there is no limit, but again, we would look at it ever increasing stockpile. we have centrifuged reduction for 20 years. they have to make a declaration to the iaea of their additional per call and -- additional protocol. there will be many metrics for measuring what they are doing with their program for a very long time. >> my last question is, when you look at snapback, it is kind of a sledgehammer approach. given the scale of the violations, is there a scalable response? sec. szubin: yes, senator.
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we reserve the right to snapback in full or in part. that is a quote from the agreement. we can do that with you when sections or unilateral sections. the eu has reserved a similar right. whether it is on a category transactions all the way to full snapback's. >> thank you. >> senator cotton. >> i too noted with some astonishment there was an eight minute exchange between the meeting of the grandfather clause. i think we got some kind of answer out of it. administration officials have said repeatedly that iran will exploit every ambiguity in the text of this agreement to their advantage. i can only imagine what they will say about that clause should it come to pass. moving on, secretary sherman. there's a lot of commentary about access. access to iran's nuclear sites, their military sites. secretary kerry and moniz talked about access.
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can you assure us that this access will be physical access, iaea inspectors will be physically walking into these sites and taking samples for installing equipment? undersec. sherman: i think every situation is different. the iaea has the capability, the expert knowledge to make sure that whatever they do can be technically authenticated. i can't go through every hypothetical situation. i know the director general working ask these questions i your colleagues in this informal meeting. i would rely on his answers more than my answers. what i am assured of is that whatever they do in every circumstance where they believe the need to have access, it will be technically authenticated and will meet the standards that they must have and they require for ensuring verification.
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sen. cotton: it sounds like the answer is no we cannot verify that iaea inspectors will be physically present on every site. undersec. sherman: you don't

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