Implementing Tougher Sanctions on Iran: A Progress Report
Under Secretary for Political Affairs
Chairman Berman, Congresswoman Ros-Lehtinen, Members of the Committee: Thank you for the opportunity to appear before you again, with my friend and colleague Under Secretary Levey.
We meet today at a moment of great consequence in the long and complicated history of international concerns about Iran and its nuclear ambitions. In recent months, working closely together, the Administration, Congress and our international partners have put in place the strongest and most comprehensive set of sanctions that the Islamic Republic of Iran has ever faced. It is a set of measures that we are determined to implement fully and aggressively. It is a set of measures that is already producing tangible results. And it is a set of measures that reinforces our collective resolve to hold Iran to its international obligations.
A great deal is at stake, for all of us. A nuclear-armed Iran would severely threaten the security and stability of a part of the world crucial to our interests and to the health of the global economy. It would seriously undermine the credibility of the United Nations and other international institutions, and seriously weaken the nuclear nonproliferation regime at precisely the moment when we are seeking to strengthen it. These risks are only reinforced by the wider actions of the Iranian leadership, particularly its longstanding support for violent terrorist groups like Hizballah and Hamas; its opposition to Middle East peace; its repugnant rhetoric about Israel, the Holocaust, 9/11, and so much else; and its brutal repression of its own citizens.
In the face of those challenges, American policy is straightforward. We must prevent Iran from developing nuclear weapons. We must counter its destabilizing actions in the region and beyond. And we must continue to do all we can to advance our broader interests in democracy, human rights, peace and economic development across the Middle East. President Obama has made clear repeatedly that we will stand up for those rights that should be universal to all human beings, and stand with those brave Iranians who seek only to express themselves freely and peacefully. The simple truth is that a government that does not respect the rights of its own people will find it increasingly difficult to win the respect that it professes to seek in the international community.
We have emphasized from the start that what is at issue between Iran and the rest of the world is not its right to a peaceful nuclear program, but rather its decades-long failure to live up to the responsibilities that come with that right. If Iran is sincere, it should not be hard to show the rest of the international community that its nuclear program is aimed at exclusively peaceful purposes. Facts are stubborn things, however, and it is a telling fact that Iran, alone among signatories of the NPT, continues to fail year after year to convince the IAEA and the United Nations of its peaceful nuclear intentions.
Nearly two years ago, President Obama began an unprecedented effort at engagement with Iran. We did so without illusions about whom we were dealing with, or the scope of our differences over the past thirty years. We sought to create early opportunities for Iran to pursue a different path and to build confidence in its intentions. This was both a serious demonstration of our good faith, and also an investment in partnership with a growing coalition of countries profoundly concerned about Iran’s nuclear ambitions.
When, regrettably, those early efforts made little headway, we and our partners were left with no choice but to respond to Iran’s intransigence by employing another tool of diplomacy, political and economic pressure. The cornerstone of this campaign was UN Security Council resolution 1929, passed early last June. By far the toughest of the four Chapter Seven resolutions enacted in recent years, 1929 broke important new ground in curbing arms transfers to Iran; targeting the central role of the IRGC in Iran’s proliferation efforts; banning for the first time all Iranian activities related to ballistic missiles that could deliver a nuclear weapon; sharply limiting Iran’s ability to use the international financial system to fund and facilitate nuclear and missile proliferation; and for the first time highlighting formally potential links between Iran’s energy sector and its nuclear ambitions. Russia’s partnership was particularly crucial to passage of such an effective resolution, which led directly to its enormously important cancellation of the S-300 surface-to-air missile sale to Iran.
The significance of 1929 is only partly about its content. It is also about the message of international solidarity that it sent, and the platform that its carefully-crafted language has provided for subsequent steps. Barely a week after passage of 1929, the European Union announced by far its most sweeping collection of measures against Iran, including a full prohibition of new investment in Iran’s energy sector, bans on the transfer of key technology, and the strictest steps to date against Iranian banks and correspondent banking relationships. Canada, Australia, Norway, Japan and South Korea have followed the EU’s example. New provisions in 1929 regarding cargo inspections are already being applied, resulting, for example, in the recent seizure by Nigeria of an illicit Iranian arms shipment.
None of this is accidental. We have worked intensively with our partners, in conversation after conversation and trip after trip around the world, to produce an unprecedented package of measures, and to ensure robust enforcement.
Central to our strategy have been the efforts made by the Congress, by all of you, to sharpen American sanctions. When the President signed into law the Comprehensive Iran Sanctions Accountability and Divestment Act (CISADA) in early July, the Administration and the Congress sent an unmistakable signal of American resolve and purpose, expanding significantly the scope of our domestic sanctions and maximizing the impact of new multilateral measures.
We are enforcing the law rigorously and energetically. Already, more foreign investment in Iran has been curbed than at any time since Congress enacted the original Iran Sanctions Act nearly fifteen years ago. In late September, Secretary Clinton imposed sanctions for the first time in the history of the ISA, on a Swiss-based, Iranian-owned firm involved in hundreds of millions of dollars worth of deals in Iran. Deputy Secretary Steinberg announced that we have opened formal investigations into other firms. Just as importantly, we have used the powerful instrument provided by CISADA’s “special rule” to persuade major European and Asian firms, including Shell, Statoil, ENI, Total and INPEX, to terminate existing sanctionable activities in Iran and provide clear assurances that they would not undertake any such activities in the future. According to reliable estimates, Iran may be losing as much as $50-60 billion overall in potential energy investments, along with the critical technology and know-how that comes with them.
Faced with new international concerns, and the choice between doing business with Iran and doing business with America, more and more foreign companies are pulling out of the Iranian market. Major energy traders like Lukoil, Reliance, Vitol, Glencore, IPG, Tupras and Trafigura have stopped sales of refined petroleum products to Iran. Until last July, according to open sources, Iran imported roughly 130,000 barrels per day of refined petroleum products; in October, that figure had dropped by 85%, to 19,000 barrels per day. Large shipping companies like Hong Kong-based NYK are withdrawing completely from the Iranian market. Major firms like Lloyd’s have stopped insuring Iranian shipping. Daimler, Toyota and Kia have stopped exporting cars to Iran. Major banks like HSBC and Deutsche Bank have pulled out. Stuart will address the impact of these developments in more detail, and his own personal efforts with firms and governments around the world remain hugely important. But the short answer is that the net result of all of the measures we’ve applied in recent months is substantial, far more substantial than any previous set of steps.
I would also like to emphasize that we take very seriously CISADA’s provisions regarding human rights concerns in Iran. Earlier this fall, we designated eight senior Iranian officials for human rights abuses, and we are working with Treasury on other potential designations. One of the best ways in which we and others can support the cause of universal human rights in Iran, and the brave people who defend them, is to hold accountable people who deny them.
I cannot honestly predict for you with any certainty how all these collective and individual measures will affect the choices that Iran’s leadership makes. We will continue to sharpen those choices. We will show what’s possible if Iran meets its international obligations and adheres to the same responsibilities that apply to other nations. We will intensify the costs of continued non-compliance and show Iran that pursuit of a nuclear weapons program will make it less secure, not more secure. And in the meantime we will continue to reassure our friends and partners in the Gulf of our long-term commitment to their security, a commitment clearly reflected in the visits to the region that both Secretary Clinton and Secretary Gates will be making in the next two weeks.
Let me conclude by emphasizing two simple but important realities. First, Iran is not ten feet tall. Its economy is badly mismanaged. Iran’s leaders have tried very hard to deflect or divert the international pressures building all around them – itself an acknowledgement of their potential effect.
Second, and just as significant, sanctions and pressure are not an end in themselves. They are a complement, not a substitute, for the diplomatic solution to which we and our partners are still firmly committed. There is still time for diplomacy if Iran is prepared to engage in serious discussions. There is still room for a renewed effort to break down mistrust, and begin a careful, phased process of building confidence between Iran and the international community. There is still an opportunity for an outcome which ensures both Iran’s rights and the fulfillment of its responsibilities.
The P5+1, led by EU High Representative Ashton, will approach next week’s meeting with Iran with seriousness of purpose and a genuine readiness to engage constructively on international concerns about Iran’s nuclear program. The door is open to serious negotiation, if Iran is prepared to walk through it.