you never see the gop or the tea party inviting people to capitol hill that are sitting here getting killed by these police officers. they sit here and they talk about how they wanted to reach to the other side. i do not see that. when you have a tragedy in and you have people come to capitol hill to testify about their tragedy, why haven't you said here and had these people come to capitol hill and testify about their kids getting killed by these police officers? the reason why i am sitting here and saying don't critique the other side is because the president sent them a bill for to be thousand body cameras and they never responded to it yet. .- 50,000 body cameras what type of reaching on the other side of a doing? cricket.really a

if you want to be a grasshopper, jump to the other side and reach to the other side. don't just sit here and try to get out and get into the white house and the senate. it is not going to work. painve so many years of that they have to think. host: ok. and manual in south petersburg, florida. usa today reports that the average car on the road is about 11.5 years old. record, according to people who gave statistics of this information. also writing that americans are still buying cars of the annualized rate of more than 17 million vehicles, marking a high not seen before the great recession. consumers. more cars than they scrapped in 2014. the number of vehicles registered in the u.s. hit an all-time high of 257.9 million in the u.s.. marilyn is our last call.

marilyn from new york. go ahead. caller: i would please ask somebody to tell me one thing that obama has done to make this beautiful land of ours a success. thing gotten into every bad in our country. because of the comes up that we look like we may have something made better, he comes along with something else to take everybody's bullet away from what should be done. host: sorry to have to leave either. i have to take you to capitol hill. it is a hearing on the senate foreign a late relations foreign relations committee. today's hearing give us an opportunity to look -- >> mostly at one of the key aspects .

today we have two well respected experts on sanctions. we thank you both for being here. it's worth noting that real questions about sanctions relief remain. on the same day the u.n. passed the resolution endorsing the deal and setting out the wrote a mechanism, iran letter to the u.n. saying that they would treat use of the snapback as grounds to walk out of the agreement. again, i think you-all know this passed in about 90 seconds at the u.n. last monday, and at that moment iran sent a letter refuting the ability to use snapback. that same letter outlines that extension of current sanctions would be in violation of the agreement. i know we had an exchange the other day where it was asked if we had some sanctions that are rolling off in 2016 if we just extended those so there would be something to snap back to. i snow senator menendez has made a strong point about this. that itself would be a

violation. and then iran would reconsider any imposition of new sanctions with the nature and scope identical or similar to those that were in place prior to the implementation day irrespective of whether new sanctions are introduced on nuclear aid or other grounds. we have a number of very powerful sanctions that are being alleviated. most of us have felt that if for some other reason iran was out of order, we could reapply those sanctions against terrorism, human rights, other activities. debate here's a major over that could happen. as a matter of fact iran has said it couldn't. i also say that our partners in told me ery strongly the same thing. recently they had been backing off of that a little bit. i don't know exactly where that stands. those statements, the agreement itself, and the lack of clarity from our administration have left senators with unresolved vest.

-- questions. those include questions about the efficacy of u.s. secondary sanction it is congress disapproves the deal, very important factor for us to be considering. there are also remaining questions about whether or not the u.s. can reimpose sanctions lifted in the agreement should we need to use them for terrorism purposes. although i'm very honestly surprised to say but there are remaining questions about whether or not extending the iran sanctions act would constitute a violation of the agreement, as i mentioned earlier. i see no reason why simply extending existing authority, which could be can waived, would be in violation of the agreement, but secretary lieu and the identify -- secretary lew and the iranians think otherwise. i hope you answer these questions and expand on what you might see as the current climate for doing business in iran. both of you spent time with the companies affected by these sanctions and if you could i would appreciate hearing any valuable take aways. it's important to note that the sanctions this congress put in

place are responsible for bringing iran to the negotiating table. in exchange for suspension of virtually all of our economic leverage -- economic leverage, iran over time will develop an national scale, legitimate nuclear program. while this agreement is not intended to address terrorism, many of us worry that the agreement will prevent the u.s. from using economic tools to counter iranian regional aggression. our witnesses have extensive experience in both economic coercion and combating terrorism. i would appreciate your perspective on how this agreement could affect our ability to use sanctions in response to terrorism. secretary kerry said last week we are free to adopt additional sanctions as long as they are not a phony excuse for just taking the whole pot of past ones and putting them back. i worry that iran will not agree with our definition of phony and that through this agreement the administration could inadvertently be hampering its

own ability to combat iranian terrorism. in september, we'll have the opportunity to vote to approve our disapprove of the agreement. at its core that choice is whether or not this agreement merits congress voting to lift those sanctions. thank you very much for appearing before our committee. i turn to our distinguished ranking member for his comments and look forward to a very good hearing. senator cardin: mr. chairman, thank you for arranging this hearing. the deal with the sanction aspects of the joint jcpoa. i thank both our witnesses, two experts in this area, for sharing their thoughts and engaging our committee in a discussion so we can better understand the impact of the jcpoa as it relates to sanctions. yesterday we had, i thought, a very helpful hearing that dealt with the overall effects of the agreement. i think we spent a good deal of time looking at the alternatives. if we do not -- if congress

effectively rejects the jcpoa, what would be the consequences? and in that discussion, we did talk about sanctions. i'm sure we'll get back to the same impact today. but i think today we want to concentrate on the sanction aspects of the agreement. ultimately the members of this committee, the members of the united states senate, congress, are going to make a decision whether the benefits are -- of the agreement outweigh the risks or whether the risks of the agreement outweigh the benefits to prevent iran from ever becoming a nuclear weapon state. that's our test and the sanctions have a major impact on our evaluation of those issues. let me first deal with an issue that is -- i raised since day one that the chairman raised again in his opening comments. i hope that we'll get your views on this. and that is it has been stated very clearly by this administration that we are not

taking off sanctions as it relates to terrorism and human rights and their missile program. it's also been stated, and i asked the direct question at the hearing last thursday, if we credible information that iran has violated our policies on terrorism, can we reimpose sanctions on the specific organizations that received the jcpoa, or the economic sectors that were affected such as the crude oil sales by iran. could we reimpose those types of sanctions? and secretary lew said fairly directly the answer is yes. depending on the circumstances if we condemn and it's related to terrorism. mr. chairman, i asked similar questions to the representatives of your office that were here this week because we know that it's going to require ultimately

five of the eight votes in the commission that oversights this. and their response was similar o what secretary lew said in all fairness, i'm just relaying what they said to me. but i am tempered by the language of the jcpoa. after all, that's what we agreed . to i said frequently, i'm more interested in what's in the jcpoa than what the iranians say is in there or for that matter our own administration's words. because we are bound by the language in the jcpoa if we go forward with it. the e.u. -- it says section 29, the e.u. and its member states, the united states, insistent with the respective laws, will refrain from any policy specifically intended to directly and adversely affect normalization of trade and economic relations with iran. that then it says in paragraph earnings u. -3, e. plus 3, will not respect entities for engaging in

entities covered floiferting of sanctions in jcpoa. there are qualifications. so what i would have hoped we'll get into a discussion today would we be out of compliance with the jcpoa if we reimpose sanctions for nonnuclear activities of entities or conomic activities that were relieved from sanctions under the jcpoa? and secondly, what type of pressure would there be on the united states if we wanted to go forward? would there be international pressure for us not to be as aggressive as perhaps the congress or the administration wants to be? and we were told yesterday by both of our witnesses that we should be very aggressive in holding iran to high standards if this agreement goes forward, what type of pressure would there be on us effectively being able to impose the type of

sanctions to prevent iran from the -- their nonnuclear nefarious activities. that's one set of questions i hope we can get into today. the second is, how effective would snapback sanctions be? after they are lifted and during that period of time before they are repealed, if the -- any of the negotiating partners felt that there was a material breach and takes it to the point of snapping back all or part of the sanctions that were relieved upped the u.n., e.u., and/or the united states, how effective and can we reimpose sanctions that will require iran to rethink it's behavior? i would be interested in your views in that regard. and then the last point i would

to, andhave you respond that is, if we do not approve the agreement, if we reject it, the united states sanctions remain in place, how effective will those sanctions be if we do not have the support of the international community to cooperate with us in a sanction regime? i think these are important questions for the members of the congress to understand. and i just look forward to our discussion today. senator corker: i do want to say again i think when i met -- i know when i met with our western partners they were very explicit in agreeing with iran. they did get back with us since that time and there may have been some reach out from the administration, but they moderated their views much in line with what you may be saying. i want to also say the chairman and i, ranking member and i, asked mr. omano testify before

us today this week -- next week. just so we could get an understanding of the iaea issues that we have been concerned about and whether we do that in a classified setting or someplace else. we have been turned down. i do want to make people aware of that. obviously there are a lot of concerns about the agreement that we haven't seen. what we do know about it, i think we all know, at best, very questionable. i'm sorry to say we are not going to have the benefit of their testimony to help clear up some of the concerns that we have. with that we have two outstanding witnesses today that will be very helpful. our first witness is honorable zarate, chairman of the financial integrity network and chairman of the center on sanctions and illicit finance at the foundation for defevens democracies. mr. a ratty previously served as deputy assistant to the president and deputy national security advisor for combating terrorism. in addition, mr. zarate was the

first ever assistant secretary of the treasury for terrorist financing and financial crimes. you haven't been very successful in that regard, just kidding. thank you. our second wednesday is mr. richard nephew, program director for the economic state craft sanctions and energy market at the certainty for global energy policy. previously mr. nephew served as principal deputy coordinator for sanctions policy at the department of state and the lead sanctions expert for the u.s. team negotiating with iran. he has also served as the director for iran on the national security staff. thank you both for being here. we are excited about you being here. if you would sort of abbreviate your comments. you are going to have lots of questions. your written testimony without any opposition will be made part of the record. thank you both. you can start which ever order ou wish. chairman zarate: thank you very much for that kind introduction. ranking member cardin shall

distinguished members of this distinguished committee, thank you for this privilege and opportunity to speak to you about the sanctions implications of the jcpoa. i'm honored, privileged, thank you very much. i'm also grateful to be here next to mr. richard nephew. i'm going to pass those difficult questions to him. i do want to thank him in all honesty for his service to the u.s. government, to the state department, and on the issues related to sanctions. i think this did -- take this responsibility before you today seriously given the graphity and implications of the agreement. i appreciate the questions you have posed which are nuanced and important and happy to answer any others. i come to the issue with views borne dealing with iran from both the treasury department and national security council. i know that all involved have been working incredibly hard toward a peaceful solution to the iranian nuclear program, through painstaking strategies of coercion, sanction, and diplomacy.

the financial and economic restriction campaign built over the course of a decade helped bring iran to the table. in the words of president row sanctions ohani, the threatened to drive iran into the stone age. they have also been designed to onstrain and isolate rogue iranian behavior, the assad regime, proliferation, and other dangerous acktifment as well as to protect the integrity of the u.s. and international financial systems. i will based on your invitation focus my testimony on the sanctions relief framework in the jcpoa. mr. chairman, i will tell you the framework in the jcpoa is flawed. the relief is too front-loaded. it does not account for the increased risks stemming from iranian commercial and financial activity. and the jcpoa as you have alluded to broadly constrains the u.s. government's ability to use effective financial power against iranian nonnuclear national security risks.

there are structural problems in the jcpoa that undermine the ability of the u.s. to use these powers to affect iranian debee behavior. the snapback framework itself proves problematic and is a blunt instrument. it will only be applied if the most egregious violations can be proven openly and convincingly to all parties. if new contracts signed or grandfathered as is suggested in some of the text of the u.n. resolution and discussions around the jcpoa, the snapback loses its real world effect to insure compliance. it has the potential to create a gold rush incentive for commercial actors to get into quickly. n market the iranians maintain a heckler's veto on any reimpose significance of nuclear and can walk away from

the agreement. with the appellate processes, any u.s. sanction or related action to which iran objects would be subject to review by the other parties, including iran, china, russia. creating a whole new paradigm for how and can walk away from the agreement. the u.s. reviews issues its sanctions. the jcpoa unwinds sanctions bluntly. encompassing issues of proliferation and weaponization without addressing the underlying conduct. this creates real risks and it does damage to the ability to use the very same tools against iranian individuals and entities in the future. this proves highly problematic with the delisting of iranian banks, for example, the central bank of iran. and transport companies which have been used not just to facilitate the nuclear program but also for proliferation and sanctions evasion. though nonnuclear sanctions were supposedly off the table, the spirit and letter of the agreement may actually neuter u.s. ability to leverage one of its most powerful tools.

the normalization of economic relations with iran, which is embedded in paragraph 29 of the preface to jcpoa, and also further ensconced in the new u.n. security council resolution does grave damage to that ability and those powers. mr. chairman, from the start of negotiations, as you know, what the iranians wanted most was the ability to do business again. unfettered and plugged back into the global financial and commercial system. with a commitment to the reintegration of the iranian back of the nuclear deal, the administration effectively put all sanctions on the table. to understand this, one needs to appreciate why these financial and commercial measures were so effective in the first instance. these were not the sanctions of old. the financial constriction campaign which began against iran in 2005 has proven effective over the past decade t because iran was her

medically sealed with naval blockades or trade embargoes, but because it was unplugged from the elements of the global financial and commercial order. the regime has needed access to banking, shipping, insurance, new technologies, and activity to the oil and global economic markets to maintain and sustain the regime. that is what they lost over the past decade. that appears to be what they have gained and guaranteed in this deal. now, mr. chairman, in addition the united states will need to amplify its use of financial measures aggressively against key elements of the iranian economy to deal with increased risks based not just on this deal but also iranian foreign policy. it's not clear to me that this is well understood by all parties or part of our strategy. the risks from iran are real and will increase. iran will get a massive infusion of capital from initial

sanctions relief with some of the estimates up to $150 billion. no doubt some of this will go to support terrorists and militant groups from the golan to yemen can. with the allowance for an iranian nuclear program, the deal will likely increase not decrease the risk of proliferation. the regime will use its control of the economy not only to further enrich itself, but to suppress internal opposition rule. y and ensconce its the concerns over human rights abuse also grow. and the reality and risks of iranian sanction evasion, money laundering, and other financial crimes will increase not decrease over time. the united states will need to use the same types of financial strategies and campaigns to isolate rogue iranian activity affect ll necessarily the trade, commerce, and economy of iran. mr. chairman, i think there are three critical principles for congress to demand related to sanctions and the jcpoa. congress, i think, should ensure there is clarity in the jcpoa

and in the execution of any sanctions unwinding plan or framework. unitedld ensure that the states maintains as much financial and economic power and leverage as possible. congress should as well mitigate the risks attended to enriched and embolden regime in tehran. these principles then could help inform the basis of a new strategy to address the real and dangerous risks stemming from iran. the u.s. should adopt the financial constriction campaign focusing on the irgc, and core elements of the regime that engage in terrorist financing, weapons and of nuclear technology, and support to militias. this could include the use of secondary sanctions. there should be a recommitment to the elements of a nonproliferation regime and a dedicated strategy focusing on the proliferation risks attendant to any deal with iran. this would include tighter export control enforcement, financial s, and

restrictions tied to suspect iranian actors and activities, including iranian banks. the elements of the patriot act section 311 action against iran and the central bank of iran should be reiterated and reinforced with a designation of primary money laundering concern against the class of transactions involving any iranian bank. this, mr. chairman, could be amplified with a program, perhaps led by the european union, to create a monitoring system through swift, the bank messaging system, akin to what we built in the terrorist financing tracking program. to track and analyze suspect iranian banking transactions. mr. cardin, the global human rights accountability act could be used expansively to target the finances and holdings of the iranian regime and those involved in gross human rights violations on its behalf. senator, i know this is of deep concern and issue for you. mr. chairman, these are just some of the measures that could be taken to confront the risks from iran. but of course undertaking these

types of steps in whatever form will likely be seen by diplomats from whatever country as interfering with the jcpoa or any deal for that matter. instead, they should be seen as necessary steps to enable any nuclear deal temper market enthusiasm for doing business with a dangerous regime, and preserve importantly a key element of america's power and leverage against iran and rogues. mr. chairman, when the iranians came back to the table after president rohani's election, one western diplomat based in tehran told me in confidence, you have economic using sanctions and financial pressure. but he then asked, can you win the peace? i think and hope we can still it will ace, but

require using and leveraging the very same powers and authorities that helped bring the regime to the table. we must ensure that the jcpoa has not inadvertently empowered the regime in tehran while taking one it will of america's potent powers off the table. thank you, mr. chairman. senator cardin-- senator corker: thank you. mr. nephew: it is a privilege and honor to speak to you about a subject to which i have dedicated my professional life. the iranian nuclear program and sanctions, and with juan who pioneered a lot of the work we'll be discussing today. would like to begin by extending my personal gratitude to the members of the u.s. negotiating team. regardless of how one evaluates this deal, we are all most fortunate this country produces diplomats, civil servants, and experts like those who worked on this deal. in my opinion, the deal that they negotiated is a very good one. especially compared to the most realistic alternative. and any negative consequences can be managed. it satisfies the two most

important u.s. national security objectives for iran's nuclear program. first, lengthening the time iran would need to produce enough nuclear material for one nuclear weapon. and second, ensuring that any such attempt could be quickly detected. in doing so, it creates a 10 to 15 year band of time in which fears of an iranian nuclear weapon will be reduced. some may argue that the sun set key provisions renders the deal unacceptable. i disagree these concerns are worth killing the deal. the argument against sunset presupposes either that there is no point in time in which iran could be trusted with a nuclear program, requiring regime change. or that negotiateations -- negotiations could possibly have delivered a longer sunset. having been in that room i believe the length is as long as was achievable. after key restrictions lapse, the united states is also free to declare that iran's nuclear program remains a concern, getting international support to do something about it will require effective diplomacy.

but it is an option for future president. a principal complaint and main subject for today is on the nature of sanctions relief in the deal. some argue it provides iran with far too much relief and the practical effect of increasing trade with iran will render snapback ineffective. first, it is a blunt reality that iran was not going to accept major restrictions in invasive monitoring. the administration did the right thing in leveraging sanctions relief for maximum early nuclear steps. iran is now under every incentive to take the steps required of it as soon as possible. which the iiaea will strare phi before iran gets an extra dollar. the sanctions leaf provided by the united states does not equate with unilateral sanctions -- it retains a number of sanction authorities that will continue to exact consequences for iranian violations of human rights and engage in terrorism

financing. though i personally believe that fears about the extent of new iranian spending in this regard are overblown. and according to the "l.a. times" he so does the c.i.a. the united states will still be able to pressure banks and companies into not doing and ess with the irgc, iran's military forces as well as those who facilitate their business. even if the e.u. and u.n. remove some of these from their lists, these bad actors and iran generally will find business stymied will they correct their own behavior in the eyes of the united states. this is both due to the direct risk of u.s. sanctions and the improvement in international banking practices since 9/11. a bipartisan effort begun under george bush and juan and continued under barack obama. the united states will also etain its facility to impose sanctions on those trading with iran in conventional arms as

well as ballistic missiles even after u.n. restrictions lapse. the united states can also trigger snapback fecksisting sanctions, even just one jcpoa participant can trigger a review and a vote on a resolution to continue with relief. the u.s. veto power in the u.n. security council gives us the ultimate free hand to reimpose these sanctions. snapback can be less draconian to deal with. as secretary lew testified. this could come with political costs. many skeptics point to these costs as likely meaning that no such snapback would be triggered. but international reaction to u.s. actions will always depend on the context. if the rationale for doing so is credible, chances for success will always be higher. iran had much to lose if snapback were to be triggered. iran's leader would carefully evaluate the cost and benefits of any course of action that threatens the integrity of the nuclear deal. these cost also grow as iran's economy grows. some may see this as resilience, i see it as iran having more to

lose. a critic once referred to this deal as a marshal plan for iran. while the analogy is far from perfect, it is interesting. the marshal plan was intended in art to prevent the spread of radicalism in europe after the second world war in recognition of the fact that harsh sanctions had on german politics in the 1930's, and the liberalizing benefits of trade and growth. the soviets refused to participate, fearing the effect economic openness would have on their population. as the president outlined one potential benefit of the deal is the possible transformation of iranian society. over time, government policy. this may not happen. but at a minimum, iran's leaders will have to wrestle with the benefits of economic openness and risk of losing control as a result of this deal. as well as the threat of returning sanctions that may break its terms. this will be a challenge for them and possibly an exy tension one. to conclude, though it is not a perfect deal, i believe the nuclear deal reached by the united states the p5+1 partners

and identify rain meets our needs, preserves our option, and possibly lays a path to a better future. i urge the congress to make the right choice and support t thank you. senator corker: thank you both. we can see from these two witnesses why this is a difficult decision for people to make. we thank you so much. so that i can reserve my time for various interjects along the way and not nominate in any way, i'll turn to our ranking member for questions and move on down the line. thank you. senator cardin: let me also join the chairman in thank you you -- thank you you -- thanking you both for your testimony here today. let me give you a hypothetical. it's a year from now. and iran complies with all of the preliminaries required and they have received the relief a few months earlier than that. from both the united states, the waivers being exercised by the as nistration on sanctions,

well as the u.n. and europe. we get clear evidence that iran crude oil sales to directly finance terrorist activities in leb bonn -- lebanon and yemen. they have done it through the central bank of iran. we have clear evidence of that. the united states congress passes the statute that says that we'll impose sanctions against iran for their support of terrorism against the central and crude oil sales. a, are we in compliance with the jcpoa? and secondly, what pressure would there be on the administration to implement such a statute if congress were to pass it? ny thoughts? chairman zarate: it's an asfute hypothetical because it points out the difficulty of

disentangling the regime. with respect to a country and regime that controls key elements of the economy. and when they are still engaged in some of the underlying activity that is subject to at a minimum u.s. sanctions. so it certainly is within the congress' right and i would argue certainly should be a focus of this administration to go after the financial conduits that the iranian regime or any other state sponsor uses to support destablizing activity or support terrorist groups around the world. so it would be wholly justified . to richard's point i think in the context of any action taken in the could he number bra of the jcpoa context, it would depend on what information and evidence we have. the problem i have with the jcpoa framework as i laid out in both my submitted testimony and/orally this morning, is that we have now established ourselves and placed ourselves into a framework where we ourselves will have to submit or

potentially have to answer to other parties why we are justifying the use of u.s. national power with respect to these other types of challenges and risks. so under the agreement the iranians, for example, could object, could threaten to walk away. and perhaps even the view of some legitimately say you are simply trying to reimpose sanctions that were just lifted under another name. of course, the administration is saying and we would argue, all of us, that these are different sanctions and they should be imposed and they can be imposed, but there would be a question in jcpoa and of the probably a process trigger if it were significant enough action that would call into question whether or not we could take the action. ultimately it may prevail. but it would put us into a completely new venue and into a new process to have to explain ourselves, demonstrate evidence to parties like the chinese and russians, and ultimately justify

our action in the contours of the jcpoa. i just don't think that's an cceptable outcome. mr. nephew: i would add two important caveats or conditions to it. first is we always had to justify and explain our secondary saxes. you have to bear in mind the sanctions you are referring to govern the trade activity of foreigners with foreigners. to get them to do things we have to explain why and explain in what context it's appropriate. i think that going after the hypothetical that you brought up would be complicated because the chinese, for instance, or other importers of iranian oil, we have known for a long time that iran supports these groups, that's a given. it was a given when we were -- what change made you have to do this? i think this points to the second problem. the hypothetical you brought up will happen because oil is a primary revenue stream for iran and it's a primary way which

they support groups we believe are terrorists and engage as terrorists. i think the bigger question to my mind is, is that the most effective way of curtailing iranian terrorism? in my view, no. we have had very crushing oil sanctions on iran for the last three years and they still supported assad, and hezbollah. that's because the scope and scale of that support doesn't have to be oil revenue worthy. it can be much smaller and something the iranians believe in strongly. i would argue that rather than go for an oil embargo-type sanction we have to think of a better policy response to deal with the terrorist issue that we have identified. senator cardin: do we have the flexibility to do that? do we have -- you may very well be right. we may choose other ways. the reason i use that two examples because they were lifted by the sanctions. bsolutely.

here i guess is the question. yesterday we heard from both witness that is u.s. should be pretty aggressive in making sure iran complies with the letter of everything it said in this agreement and be prepared to start taking action. iran's past activities show they us. they try to push the envelope as far as they can. so will interpret some of the jcpoa differently than we do and do things we think are wrong. how aggressive should we be? can we get our partners to agree less than major violations? will we be able to do that? mr. nephew: it depends on the context. if we go with a good case and able to justify why we are doing t. then we can be very effective as we were from 2011 to 2013 with respect to the oil embargo. on the other hand, if we are seen as acting capriciously and if the response is to say we are from the nuclear deal, that will be a challenge. ultimately we need to be aggressive, but we also need to be mindful that the nuclear deal, again, in here i guess is my view, is something that's worth preserving. i don't think that precludes our

use as sanction tools in an aggressive way. just like we have already done, we are going to have to be careful about the unintended consequences of those acts. senator cardin: if we have to snap back, if there is a substantial violation that we have to take the international community and maybe exercise our veto, how quickly can they bite strong enough to effect iranian behavior? mr. nephew: i would say that if we are able to get snap back and in the context that is conducive to people imposing swift sanctions, we can start biting the iranian economy quickly. the oil embargo we were talking about started having dramatic economic effects on iran within two or three months of being imposed starting in january of 2012. so again i think with the right context, with cooperation, we can start to really have an impact on the iranian economy. senator cardin: you were inconsistent on oil. you said one time that would not

be effective from financial terrorism if we impose the sanction. now you're saying that could bite quickly. mr. nephew: i think-dirnl' not saying it wouldn't bite the economy. my point on terrorism, biting the economy does not necessarily preclude iranian support for terrorism. so you can have damaging impact on the iranian economy, but will that translate into stopping iranian terrorism? if my view the history suggests not. chairman zarate: if i could address strategy and the use of these tools. our tool kit is not expansive. we have limited tools to address whether it's terrorism, human rights abuses, etc. the use of financial power and the power to exclude from the global system is one of our principal if not most effective tools. and so i take richard's point which is an important one. we have to have a comprehensive strategy. we have to use all tools of national power. no doubt. but the reality is at the end of the day these tools are the ones that prove to be most effective. and as i said in my testimony, i

actually think the risks to the international financial system go up with this deal or any other deal with respect to iranian activity. so we are going to have to, if we are honest about what's happening in the international financial commercial order, we are going to have to crack down companies, irgc funding flows, contracts run by the ministry of intelligence. that's the nature of the ine rainian economy and the way they do business and the way they what we ed precisely have cut off. you have asked some astute sets of questions. at the heart of this is have we given up too much of our power to deal with all these other risks that iran presents that will actually go up over time? senator cardin: thank you. senator corker: before i move to senator flake, just because you have different view, wonder if we could get consensus. it would be fair to say, on the other hand, in nine months when the sanctions most people believe all the sanctions will

be gone, and then iran has, in essence, the nuclear snapback, that people will be somewhat rhett sent -- reticent to put sanctions in place if iran cheats by inches because of the things that you're saying. iran does have the ability to say at that moment, well, we are out of the program. would you agree, i think both of you are shaking your head up and down, that does create ady lema? -- dilemma? i'll take that as a yes. senator flake. thank you. senator flake: thank you. the chairman and ranking minority member for putting these hearings together. hearing your testimony today, each on one side of this in terms of favor the agreement or not, i think demonstrates that the only thing that's certain is this is no easy call. stand and say that it is, i think they haven't examined the agreement or the

brotter foreign policy context in which this is going to be implemented. so i appreciate the testimony and the way you have gone about it. and i appreciate the question from the ranking minority member and i think all of us will have some variance of the same kind of questions because we have asked administration witnesses. we have been assured we haven't diminished our tool kit. that we can distinguish between nuclear and nonnuclear sanctions. but when you read the plain text of the agreement, that seems to conflict with the assurances that we have received. and let me just turn to the financial sanctions. i couldn't agree more that that's -- i have always felt that that's what really finally bit. because it's more difficult with these financial, these secondary sanctions for the russians, chinese, or others to help iran evade. which is easier to do with just crude oil sanctions or other

petroleum sanctions. but if we find that iran is linked directly to terrorism and we want to punish and go in, hen i look at the agreement it seems difficult to do that. on the financial sanctions, if e decide to do so, how effective will that be if ourure peaian allies are not with us -- if our european allies are not with us? i hear conflicting testimony and bout sion from others a whether or not we can lead on that and that the -- our european partners will eventually have to follow, or if they can go their merry way and we are left with unilateral sanctions which rarely work. what's your thought on financial

sanctions? can we lead our partners back, do they have to be with us? whether people choose to do business with a $17 trillion economy or $1 trillion economy, what do you make of that, mr. zarate? chairman zarate: again another very astute question. i think the financial sanctions have been led by the u.s. because the u.s. is the dominant economic and financial center of the world. the u.s. dollar is the reserve currency. and we have the moral and strategy situation to be able to effect what others do. both governments and the private sector. i want to emphasize the last point. i do think we shouldn't undervalue or undercut the power of our u.s. financial sanctions. in many ways, u.s. unilateral sanction that is affect the financial community in the first instance here, iranian banks, are global by definition. there is no unilateral u.s. financial sanction. what the u.s. says in terms of how to interact with u.s.

financial institutions and u.s. markets is a global standard. and in fact is applied as such by the private sector. one of the interesting things here, this goes to a time dimension of this issue. one of the interesting things here is i think there is still opportunity to shape the environment and the risk calculus of the private sector. in many instances the major global banks, non-american banks ound the world are derisking enormously. they are making decisions not to do business in iran, cuba. regardless of where sanctions policy is going. almost in opposite direction. and so what congress says, what the u.s. does, what the u.s. treasury may put out in advisories or designations, has an enormous power and capability to shape the market. i don't want almost in to -- anything i say here to undercut that reality. in the context of this deal, that diminishes over time ecause the international

sanctions architecture in the u.n., in the e.u. directives really does enable countries at may not be quite as enthusiastic about this risk calculus to participate. i would say if we wanted to effect the global financial system, if we wanted to isolate banks, based on legitimate concerns that are demonstrable, we can put out in registry, we can put out and show to our allies, that has enormous power and capability to isolate the iranians. banks, by the at be accepted iranians? probably not. that's why i'm so concerned about the constraint on our power based on the agreement. senator flake: mr. nephew? mr. nephew: i would agree with what juan had to say of the the ly thing i would add is, again, this concept of the context matters. if we are going after an iranian bank of -- because of very clear evidence, support payment for european to go to

countries to say you need to impose sanctions on this bank is strong. if it's capricious, i don't think that's going to have the same kind of impact. that by the doesn't mean we won financial companies and financial institutions cooperate. this is important point i want to note. it may be we are able to influence banks and company behavior even if their governments are not supportive. this is what we did from 2005 until 2010 in europe. but the danger of that is that you start to have european governments or japanese governments or anybody else have laws that say you are not allowed to comply with u.s. sanctions as what happened in act with the iran sanctions originally. i think there is still u.s. unilateral power we can use in the financial sector, but with that power comes the responsibility to wield it effectively and carefully lest we challenge ourselves, the w.t.o. and so on. senator flake: the concern that we have is that we -- the leverage point actually goes to

iran. if we find that they are engaged in nefarious activities, we want to impose sanctions on, and given the multilateral nature of this agreement, and the fact that we would have to submit to the body that we believe that iran has violated good behavior and we want to impose sanctions. given the interlocking nature of these it sanctions, how it affects banks, private companies, and governments, it might be even more difficult to get them to agree to allow us to impose those sanction it is that's what we have to do. if we go it alone, that's a whole different can of worms. my time is done. i appreciate the answers and i'm sure this will be touched on later. thank you. senator corker: before going to senator menendez, there was another question senator flake asked in a previous setting i

want to use part of my time to follow up on. we sent out a nine-page summary of about 13 documents to help everybody understand quickly what the deal was. in that we talked about contracts that were entered into, in other words, if you lift sanctions, contracts that way we entered into, the read it, those contracts are grand fathered. you can continue to do business under those contracts even if sanctions are put in place after. we had some pushback and obviously we don't want to be accused of sending something out that has fault, so we asked the white house for redlines we never got back. and we started send out something to qualify, i think we did, but candidly as we sat down and talked with the experts that we typically rely upon for these things, they are telling us that , in fact, we were right in the first place.

that contracts that are entered into when sanctions are lifted are grand fathered. could you give us some clarification as to whether that is or is not the case, mr. zarate? chairman zarate: it's a great question. i read paragraph 14 of the new u.n. security council resolution to create some sort of a grandfather provision. now, this is not typical paragraph in these kinds of sanctions regimes. now, of course, this is related to snapback provision which is not usual in these types of regimes anyway. i read that to open the door for some sort of grand fathering provision. so you could read in a maximum way to say, look, there is no application of the snapback to contracts that are signed between the lifting of the sanctions and the snapback. that creates the potential gold rush effect that i talked about. if you read this to say, look, it has to be -- contracts that don't have anything to do with prior sanctions, then you say, look, if there is a contract with the irgc or some other

element that is now relisted that has to be nullified. perhaps. but i would say in the interpretation of any of these sanctions whether they are related to iran or north korea, there has always been slippage of interpretation, especially when talking to the chinese or russians, about what some of these provisions mean. i would imagine at a minimum there would be a fight, diplomatically, over what this provision means and what contracts with chinese banks, chinese companies, russian banks, russian companies would ultimately mean. i would say, mr. chairman, it is interesting that the russians are a part of this commission in part because they are under and chafing under sanctions regime led by the u.s. and european union. so they are going to have every interest to undermine any capability of thwarting commercial relations that affect their economy as well. senator corker: can i get you to reach at least a degree of agreement, would you say at a

minimum that it's highly unusual that a clause like that would be in an agreement like this when typically it's very clear that there's no ambiguity. it's an unusual clause to have in an agreement like this. go ahead, mr. nephew. this is an think unusual agreement in a lot of respects. i wouldn't call that particular provision the most unusual. would disagree with the idea that this immunizes long-term contracts. i think the intent here is basically to assure people if they invest in iran and snapback is triggered, that we would will the impose sanctions for the plant that was built or for the -- the business that was conducted. the intent is to say that business will not be sanctioned, but that doesn't stop us from saying you now have to stop performing the business under the contract. what's at issue does it nullify or protect contracts, it's more the performance of the contract rom snapback forward can akur.

senator corker: if b.p. built a llion dollar facility to so they l in iran, invested that billion dollars, so they are performing under that contract, they are producing x barrels a day, and they did that after the sanctions were lifted, could they continue under that contract or not? mr. nephew: my understanding is no. at the moment the snapback is triggered the b.p. staff and whatever financing is still going on or technical assistance going on has to be stopped. the united states government will now not sanction them for having built the plant in the first place. senator corker: you agree with that? chairman zarate: i'm not sure. it's a question how it gets interpreted. this can be affected by the nature of the snapback if there

is a tailored snapback, this could be impacted by the gnaw ture of the contract itself. it -- nature of the contract itself. special vehicles created to contend with this provision to make sure there could be continuity of the actions. i think you could have parties at the u.n., permanent five, arguing that as long as the continued activities aren't furthering the activities that are sanctioned, if you can assure they are clean, for example, or productive, that she shouldn't fall under this provision. i'm not convinced yet there is arity as to how this would apply. senator corker: thank you very much. senator menendez. senator menendez: thank you, mr. chairman. mr. chairman, before i get to the issue that our witnesses are here for, i want to comment on you and the ranking member's request to the iaea. i am deeply, deeply disappointed of their unwillingness to come in any session, public or classified, to have a discussion.

this whole agreement rests upon if you support it the concept of inspection and verification by whom? by the iaea. we are putting an enormous part of the national security of the united states and of our allies in the region in the iaea. a u.n. organization for which we pay membership dues. r us not to be able, maybe their fear is the questions which they can allege and take the position that's it -- we are not going to talk about that. but the entire inspection regime, the entire verification regime depends upon the iaea. and not to be able to question how they are going to go about it, about their abilities to do so, about the budgetary realities they need to accomplish what we want them to accomplish, i don't know

how one can come to a conclusion on this agreement without understanding from the agency that is involved. the most critical element of this agreement is them. forget about the sanctions. because sanctions only come into play if they are not performing. we have to know whether they are performing in the first instance, in the implementation. and subsequently if they are performing afterwards. i would hope that we would find a mechanism. whether that is a letter, you and the ranking member, i applaud for having done that, every member of this committee, whether that is a resolution of the united states senate that could be quickly passed, calling upon the iaea to engage in consultations with the senate, you cannot advise and consent in a sense to something for which you are going in the blind on pure faith. without knowing the wherewithal how that agency is essential to

this agreement, if one believes in it, is ultimately going to do its job. and for which we are going to depend upon our interests for. it's amazing to me. i would urge the chair and ranking member, and i would be happy, i'm sure many other members would agree, to engage with you in any way possible to bring that about. if it doesn't, that's a critical material issue for me. i just want to speak to that. let me thank both of you for not only your testimony but your service to our country. t's been both exceptional. i look at this whole question of sanctions vis-a-vis incrementalism, and it's very poignant question. why? how did iran get to where we are today? through incrementalism, through

deceit, deception, delay, through notwithstanding u.n. security council resolutions in the world saying you cannot, shall not. but they did. ch step of the way we were collectively reticent to do what was necessary to stop them until it got to a certain point that both the world and to be very honest the congress drove some elements t critical despite the opposition of administrations. i think about the context of potential violations and looking at the agreement and thinking about what is substantial or not substantial, i see a history. if you go by the archives in washington, it out here

says what is past is prologue. and you have a 20-year history here of getting to the point of being a threshold nuclear state by everything that iran did. so you give it a little bit, give it a little bit because you want to preserve the agreement, and you don't, as some of our witnesses yesterday, including you say, this is not an e agreement to play with, we're not going to give you a little bit and a little bit more, we're oing to come down heavy now. i'm surprised at our unwillingness at time for these sanctions, i look how hard it is, despite congressional legislation on venezuela. i look at how hard it is in russia and the ukraine to pursue additional sanctions to try to get them to deter their actions. i look at how difficult it is as it relates to syria where we still haven't gotten all the chemical weapons. so, you know, the concern for me

is if you want the deal so bad and you hope it will work so well that you're willing to overlook elements that may seem small at the time but begin to grow collect ily and then collectively have a point in time when you say, oh, my god, which is where we're at right now. so i think that those are ritical questions. now mr. zarate, i want to understand something. i'm pretty convinced of it but i want to make sure i haven't self-convinced myself because i want to be convinced. on page 26 of the agreement, it says the united states administration, acting consistent with the respective roles of the president and the ongress, will refrain from reintroducing or reimposing the sanctions specified in athecks 2, basically the congressional mandated sanction, that it has seized -- ceased applying under the joint plan of action without

-- with respect to dispute resolution. i tried to get from secretary lew a clear, definitive view, you either have the right to reimpose isis saxes that expire next year or you don't. you can maybe argue about the timing but you either have the right or you don't. now i did not get a clear answer from him. if anything, i suggested that, well, it sounds like you want the sanctions to expire. did not oppose that view, didn't say, yes, that's what i want, but he didn't say no i was absolutely wrong. when i pursued, why shouldn't we re-authorize the sanctions so that if deterrents -- deterrence is in part by the virtue of consequences which is that there's an actionable activity, an actionable consequence to an activity you take in violation of the agreement, you have to think twice about it, which is a lot of what your discussion was,

shouldn't we have those sanctions in place with all the same provisions, the president's waiver options? and secondly, do you read this agreement to suggest that we cannot do that or we'll be in violation of the agreement? r. sa daughter re: it aer -- mr. zarate: it appears it would put us in violation of the jpoa r at minimum it would go against to reimpose -- senator menendez: not only reimposition. it says reintroducing. mr. zarate: which raises the question whether the waiver provision is good enough as a safeguard. i think this goes to the larger point we were discussing earlier about whether or not this framework itself, the way it's structured, actually takes away the ability of the u.s.

government to dictate how it's going to frame the use of these powers, whether it's in deterrent mode or whether it's in application. the other part of this, senator that we've already discussed is the problem that if you begin to impact those same elements of the economy of iran that are implicated by issa -- isil, in some other ways that that too could potentially be viewed as a violation of that provision. so i think the construct as laid out puts too much power in the hands of iran and those who might object to what it is we're trying to impact, either in deterrent mode or in effect. senator menendez: let me ask another question. one is an observation. it seems to me that the burden is shifting here. under the joint comprehensive plan of action, it's almost like we've got to prove our case and that, you know, versus that, look, you're in violation. and of course we should say why

a country is in violation, right? not just arbitrarily or capriciously do it. but the brrp seems to shift. we all talk about violations in the short-term. what about in the long-term when iran has become a more significant nuclear, potentially uses of , the dual that will be far harder to make the case on than it will under its present circumstances. is that a fair statement? >> i would say you're absolutely right in terms of the framework of the jcpoa. in my written testimony submitted to the committee, what i suggest is, that's one of the fundamental problems of the jcpoa. put aside the sanctions issue. it's the fact that iran is suddenly become an equal partner this framework and the u.s.

along with other parties are now on equal footing in terms of how they present evidence and information. the burden of persuasion and proof which had all along around the u.n. security council resolutions been on iran as the suspect actor, has now shifted. i think that's part of the problem with the process, whether it's with respect to the nuclear or the sanctions. i think we've moved into a different frame of wenches, diplomatically, which does get harder over time, you're right. senator menendez: my final point, as my time expires, one of the things i grapple with, and it came to me again when mr. nephew was responding to one of your questions, is, you know, e hope here that the iranian venture into a deal that changes he course of their country's conduct. but you know, the whole focus,

at least as i see it up to now, their actions, is the ayatollah trying to think about how do i preserve the regime and the revolution? and it would be a unique thought to think they are entering into an agreement that would mean the end of the regime and revolution. certainly, if they're doing that, it may be, you know, certainly, i don't think it's their intent. and hopefully this all passes and it will be the consequence. i don't think they're entering into it with the intent of thinking that this will end the revolution or the regime. thank you, mr. chairman. senator corker: senator perdue. senator perdue: thank you, i'd like to read a couple of quick questions. thank you for your careers. some part of this committee has addressed this issue in a nonpartisan, i'm not going to say bipartisan, but a nonpartisan issue.

this is the security of our country, indeed, i think the security of the world. this is from the jcpoa this historic jcpoa will ensure that iran's nuclear program will be exclusively peaceful. iran reaffirms that under no circumstances will iran ever seek, develop, or acquire any uclear weapons this jcpoa will allow it to move -- iran to move orward with an exclusively peaceful, indidgenuss nuclear program. i have just one question. the whole process. we started in the beginning and allowed them to have enrichment in the very beginning. there are 18 country, we talked about this yesterday, there are 18 countries, out of 180-plus countries in the nonproliferation treaty, there are 32 cubt -- countries that have peaceful nuclear programs. here are only 18 that have

similar programs but can ebb rich. so there are only 14 countries that have the combination. only nine countries have the bomb. five countries have civil programs but can't enrich, countries like germany and j pan. if you look at this thing his tore exly, we did a similar deal with north korea and it didn't work out so well. i think we might have been naive in looking at it in historical terms. the problem with this deal that i can see so far, and i'm still trying to look at it in a measured way this deal in my mind doesn't prevent iran from become agnew clear weapons state even b -- even though the intent of the agreement is to do this. i think, mr. nephew, you said, we talked about sunset and this deal gives them an opportunity to have a nuclear weapon system of when i look at this thing, it comes down, do we have a false choice? accept this deal or war? and i don't accept that. my question this morning leads to that. but initially, when we did this

enrichment and allowed them to it hat way, in my mind, violates the very issue we have here. a peaceful, indigenous nuclear program doesn't require enrichment. though we've now taken that up as a presumption and i challenge that, but that's historical. it's given. in this agreement they're allowed to enrich. so i have a question. if we have to go it alone. let's just say, i'm trying to understand is there an alternative to the position we're in right now? i'd like both of you to address new york my opinion, i'm a business guy. i'm outside of this process. you don't sanction country you sanction companies. when you look at the financial industry and their energy industry and you sanction, from our $18 trillion economy you start sanctioning -- saxing businesses, you can have a lot -- we don't need any other sanctions, in my opinion, really have a dramatic impact on this regime. and we know from past history, recent hithsry, just in the last five years, under this administration, when they doubled down on sanctions, it brought them to the table.

in my opinion, we gave in too early my question to both of you this morning, do we have an alternative we haven't talked about in detail? another alternative to war or this bill as it is? mr. nephew. mr. nephew: i think that's an important question. i don't know that you'll like my answer. view is that -- senator perdue: why would you say that? mr. nephew: while we don't want iran to have a nuclear policeman -- enrichment program, there's nothing that precludes them having it. the way in which we were able to mount this pressure on iran is because, as senator menendez was describe, they engaged in years of cheating. senator perdue: but they said, we need to have enrichment because we can't secure a consistent flow of material yet 18 countries do that. i push back a little bit on

hat. mr. nephew: but they weren't ubjected to these rules. senator perdue: but they didn't violate laws like this either. mr. nephew: but they face a history in which we attempted to strang they will nuclear program in the cradle as often as we could from back in the 1990's and going back beyond that. from the iranian perspective they couldn't sign a deal that didn't allow an indigenous nuclear program, and while that wouldn't have been my preference, i started my job as the guy going after iranian enrichment efforts, the practical reality is we faced a country that wouldn't give this up. senator her due: you're going to run out of time. adrets, do we have an

alternative? mr. nephew: my feeling is if we don't agree to this bill, they'll start build manager centrifuges. senator perdue: what sanctions have impact? mr. nephew: i don't think u.s. sanctions would stop iran's enrichment program. senator perdue: all right. >> i've argued for a long time that the use of power and influence has to be part of a broader strategy of influence and leverage against the regime. mr. zarate: and i -- senator perdue: do you believe they have to have enrichment capability in order to have a peaceful nuclear program in iran. mr. sa raw': absolutely not.

i'm not a nuclear physicist but it raises an interesting point. you talk about that having been a concession up front. the other problem with the structure is we may be conceding most favored nation status in terms of a sanction regime. this is part of my problem with the structure. given the structure, we're now allowing iran a process and a vehicle to challenge the use of u.s. financial power and oh, by the way, we put it in context where the chinese and russians are no fans or in favor of u.s. power, financial power in particular, have a voice in the vote. enge the very structure of that is, not just with respect to iran but more broadly the use of our power with other issues we care about. so it goes to how we have given iran most favored nation status in terms of how we made this deal. senator perdue: i'm out of time

but i want to say i'm troubled by this side deal. i know side deals are done between iaea inspectors and individual countries are normal practice. but this is not normal practice. we're signing a deal for the future of america and it assumes those deals are part of this deal. the way i read this document. in this document, those special deals are not mentioned, and i am really troubled that we are not going to be able to get the best advice from those people. i don't know how we can make a decision without that. i'd encourage more pressure to be put on the iaea to come before us to explain that. there may be very good explanations but when i hear the types of inspection processes that are going to be done which are not mentioned in this document at all, i'm troubled by that. senator corker: i think almost everything that's occurred in this committee since chairman menendez was champlee and i became chairman and senator cardin became ranking member, it's been done in a strong, boish way system of we're going

to -- in a strong, bipartisan way. so we're going to craft a letter that everyone can sign if they wish, that hopefully won't affect anybody's sensibilities urging them to reconsider that and to come before us next week. so that's under way right now. certainly, i would like everybody to have the opportunity to sign that if they wish. >> mr. chairman, as long as we're making requests, i would also ask that we request a confidential, classified brief big our intelligence agencies. senator corker: ok, we'll do that. i appreciate it. senator koontz. -- senator coons. senator coons: thank you, chairman corker, for the way you're conducting these hearings, i think they're vitally important. i associate myself with the comments about the iaea and their centrality to understanding this, and their roles and capabilities, are very

central to our understanding of this agreement. let me, if i might, gentlemen, just touch on four different questions, i hope in the next sex minutes we'll get some response to. you had a vigorous disagreement about the grandfathering clause and what it means. will it lead to a gold rush? as long as they are not explicitly in furtherance of the sanctioned activity, contracts entered into will be allowed to continue to perform or no what it means is you won't be subject to sanction for having entered into an agreement. i'm a lawyer. who decides and how does the outcome of the dispute resolution -- i've gotten both answers from folks in senior level of this government, current and former, but the reality is this is an agreement. it's a multilateral agreement. there are inevitably going to be distribute putes over this provision. it raises the larger question about the extent to which we can rely on our allies in dispute resolution and the potential consequences of our ability to

actually, meaningfully enforce first, second. -- first. second, mr. nephew 100% saying that a certain proposal involving sanctions was not the best policy response to restrain likely ongoing support for the hue tees and assad. what's the best response? i think there's very legitimate concern by all our regional allies that sanction relief whether it's $50 billion or $100 billion will lead to a significant flow of funds into the iranian central bank and out regionally to support folks who we view as terrorists and who are significant bad players in the region. what would be the ideal policy response? whether sanctions, interdictions or otherwise, if you were in a position to advise the administration, what would you do? third, and think this is an important question, we go it alone if we reject this bill and we rely on u.s. economic power to reimpose sanctions and steek renegotiate tougher terms, what

are the consequences for our role in the global financial system? the chinese have made persistent efforts to suggest to others that our central role, the fact that the dollar is the reserve currency of the world system, the fact that the vast majority of financial transactions run through the united states, should be lessened or weakened. what are the longer term consequences? will our allies really support us? can we use the enormous leverage we have effectively and sustain it other time? and last, any insights on the impact those flows will have on iran? some suggest the relief from sanctions will overwhelmingly have to invest in restoring their own oil and gas sector. the oil sector has suffered a nearly 50% drop in the per-barrel price of oil over the last year. how will that influence their ability to finance and sustain what i think is their enduring commitment to promoting terrorism in the region and being a destabilizing force and determine odd opponent of our objectives in the region and the

world? o gentlemen, please, have fun. mr. nephew: on the issue of grandfathering, the decision on whether or not to impose sanctions with respect to the issue of grandfathering is the u.s. the united states gets to make the decision as to whether or not sanctions can be imposed under our own laws. now that doesn't mean, though, that we're not going to have response from our partners. if we were to go and sanction b.p., total and other institutions, i think we can expect a reaction from that. as we've done in previous instances, i imagine there will be at least consultation and engagement with our partners to ensure we deal with any concerns they have with the action as well as to protect our broader interests. that does not mean we can't, as we did in 2010, curtail the activities of partner companies in iran, including with regard to oil and gas sector, which we did. we had comprehensive iran

sanctions. on going it alone. my view is that if we decide to reject this deal and just use our sanctions, we will have an effect. and we will have an effect on iran. i don't think it will be as strong, nearly as strong as we would have if we had cooperation, particularly out of europe. long-term, i'm very concerned about overuse of u.s. sanctions, removing it as a tool. you spoke to the idea of the chinese and others looking for alternative financial systems. that's my fear. my fear is that if we go it alone here as well as in other circumstance well, may actually invalidate the too many of financial sanctions in the future because people just create systems that don't have to involve us. on the issue of flows in iran and what they'll do with them, my view is they'll use a lot of them on domestic economic issues. they have a lot of infrastrubblingture problems, i think rah haw nee was selected on the bay -- rahani was elected on the basis of solving those

problems and i think they don't want instability and conflict on the inside. they are concerned about ashe spring -- arab spring and the things that happened throughout the middle east. i think they'll spend most of their money at home. very quick on the policy response for the region, i think it needs to be a multifaceted approach involving targeted sanctions on individual bad actors, but it also needs to be support such as weapons sales, logistical support, cooperation with partners in dealing with individual terrorist groups and the broader regional security architecture. it can't just be choke off all iranian money and the problem is solved. mr. zarate: i think we run the risk of the joint commission and the sanction subcommittee becomes the arbiter of how to interpret these sectors which by definition is how it's set up. so i think we certainly can impose sanctions but a lot of that becomes subject to discourse and debate in that

context. >> would you try to find ways to o too do that? mr. zarate: to ensure there's a meeting of the minds you can't figure out all permutations but some of the these fundamental questions should be entered into. it gets hard every over time to have the agreement or impose sanctions. i think we're in the most effective and powerful position to determine how this goes and how it's sape shaped. in some ways it's how customary international laws are created that explain how this is going to be applied. i think that's right. otherwise, i think you create an incentive for iran to do what saddam hussein did in the oil for food scan dl. i hoped chase down his assets on

behalf of the treasury department when i was there. what he did was pick winners and losers. important for geopolitical and dip willmatic shielding. -- and diplomatic shielding. so you have the possibility of iranians, chinese, russians, other allies on the ground who are going to have vested commercial interests in ensuring this is interpreted the right way. i think that's a real danger here. in terms of strategy, to repeat richard's point, it has to be multifasselted, has to involve interdick, has to involve strategic, targeted financial measures, has to involve aggressive support on the ground to our allies which i think we failed to do from a counterterrorism view today. if we go it alone, it's easier to go do now than later. over time the sanctions regime melts away but i think reality is, and i have written about this, there are potential long-term cons quebses. the russians and the chinese are clearly trying to challenge and

create alternate platforms, payment platform, currency arrangements, trade arrange lts to circumvent the dollar and the u.s. market. on the margins, talk to most experts, most treasury firns they'll say this is marginally relevant and other factors that drive whether the u.s. is the principal economy and the dollar is the principal currency around the world. rule of law, the functionality of our congress, thins like that. finally on iran, we should take the iranians at their word. they're going to support their allies. they have in the past. there's no question that the sanctions restrixes we put in place for oil purposes, which richard puzz art -- was part of and this administration did a great job on, has impacted their ability to support hezbollah, the palestinian groups and their procksjis -- proxies. they will, no doubt, and this is an expectation of folks like the secretary general of hezbollah,

to be receive manager funding from iran in the future as a esult of the sanctions relief. >> thank you. senator corker: just for reporting back to new hampshire, the intel brief willing take place at act monday. o senator gardner. senator gardner: thank you, mr. chairman. thank you to our witnesses today. appreciate your time and service and testimony. mr. chairman, i wanted to clarify on the iaea, they were offered a setting such as this or classified setting, is that correct? senator corker: yes. in any form. i think nk -- again, it, on what we know about

all of us would like to dig into more this -- i know that these agreements generally speaking are between the country and the iaea but generally speaking we're in sort of new territory here altogether and so again we'll write a letter for all of taos participate in trying to get them to change their mind. > just to clarify. in talking with the chairman and our staffs on how we would receive during the viewing period, our staff, senator corker and myself felt information about the iaea would be critically important and we should hear it directly from the iaea senator cardin: so from the beginning it's been our hope to get direct communications with the iaea. we know there's confidentiality between the iaea and the participating state, we know that. we also understand that information is shared at times in a confidential way with other

member states. the united states, because of its separation of branches, it becomes a little more complicated system of we made that request from the beginning. we don't know how much of that is under the control of our own government and how much is iaea and that's been one of the difficulties. there are two documents we specifically requested that are confidential documents between iran and the iaea that we think are important for us to be able to see and review. so it's not just a direct contact with the iaea for our i iew which would be done -- would believe that would be in a confidential setting because of the information we would have to get system of we'll continue to press for that but it's an independent agency, not under control of the federal -- of the u.s. government. >> thank you for that, thank you to the ranking member for being part of this and making sure these hearings are successfully completed. i think it's important we have that opportunity to hear and i

can't imagine anyone, regardless of where you are in the government would be opposed to us hearing the full details of the agreement. i think that's important. senator gardner: in the meantime, mr. chairman, perhaps if the iaea is not available, maybe we hear from the deputy at the iaea, he's testified in the house, i believe, and i think our witnesses yesterday mentioned some of the comments he made about the agreement. senator corker: we had, as you can imagine, all of us do this we have experts in and out of our office, and we've had him in. but the problem is, he hasn't seen the agreement. so that's problematic. senator gardner: thank you, mr. chairman. to turn to mr. zarate, i have a question for you. under the terms of the nuclear agreement, we talked a lot at the hearing with secretary lew about the businessing that were dedesignated, delisted. one of the companies set to be delisted is controlled by the supreme leader khomeini. designated in 2013 as the --

known as the eiko a group of companies, includes gray investment company, a couple of banks, and their investment arm which is the investment arm on the tehran stock exchange. this eiko was lifted an exec i order which was not a nuclear related sanction but it was a sanction addressing deceptive financial practices and the risk they posed to the integrity of the international financial system. in 2013, the u.s. treasury designated along with 37 subsidiaries, stating that they continue to generate and control massive off the books investments shielded from the view of the iranian people and international regulators. we've also talk about the amount of money that will be freed up to iran. it's been characterize being between $100 billion to $150 billion. secretary lew spent time at the hearing last week talking about

how it may be around $55 billion or so, not $100 billion. what's the purpose of delisting these entities and from reuters studies and other well, know that eiko has $95 billion worth of assets and they're coming off of this list. there may be some sanctions the u.s. will maintain to be in place against them directly but $52 billion in real estate portfolio, $3.4 billion in publicly traded companies and more. so $95 billion. should that $95 billion that will be freed up, it looks like, be included in the $100 billion to $150 billion, or $56 billion figure that will be an impact to iran's economy up front? mr. zarate texas -- mr. zarate: you raise a great uestion.

ieko present ats challenge. they may have had elements of support dimensions to the nuclear program. some of them may have been captured by nuclear executive orders. others had other problems attendant to them making them subject to sanctions and other financial, what i call preventive measures, given the risks to the international financial system. and i think this is a fundamental challenge for how we've constructed the unwinding because in some way, we've given up on much of the underlying conduct that we've worried about in terms of what these entities, owned and controlled by the regime and various elements, are able to do in the international financial system. and i think unfortunately, what i see as the sort of blunt unwinding traunches here is really part and parcel of what stated as the intent of the jcpoa which is the normalization of trade and economy with iran. now i want this deal to work.

i don't want to be sort of perceived as throwing stones at this. because this is incredibly hard and the unwinding of the sanctions which is the most sanctioned regem out there is incredibly difficult. but i think what we've done work the example you described and others, is we've thrown them into a lot of unwinding without having the iranians contend with the underlying conduct that is still a risk to the international financial system and our national security. again, this is why i worry that, you know, viewed in maximalist term, we've given iran a get out of jail free card on some of these issues. i've been critical of even my wn administration, our own actions, when i was at the treasury, at the white house. what we did in 2005, 2006, to let up too early on our financial leverage against north korea, not forcing the north koreans to deal with the underlying conduct and stopping further financial and commercial

isolation on the back of a nuclear deal. that was a mistake. and i said so and i've written about it. i think it was a mistake at the time. i still think. so so i don't think we should repeat those mistakes and ignore the underlying conduct that still presents a real risk to our national security. senator gardner: and one of the groups under control in this with is a german group machinery iran needs for centrifuges. with this lift og of sanctions they'd be able to put money into that. mr. zarate: that's right. and given how we've defined unwinding and nuclear related sanctions, i put that in quotes, we've included elements of proliferation and dual use and even missile trade that is still of concern and still is subject to other sanctions. so we've in some ways enconsed and -- ensconced an embedded a

broad definition of nuclear sanctions which infect the rest of the implementation of the deal. senator gardner: thank you, and i have to go vote on energy committee system of thank you, plch. senator corker: thank you. senator udall. senator udall:: i thank both witnesses for the testimony today. let's assume the deal is approved, what do you think the u.s. needs to do to ensure the snapeback option remains a legitimate threat for iran for breaking the agreement and how can we work with the p-5 plus one to ensure we have international buy-in of of the use of these kinds of sanctions if needed? mr. zarate: i believe so long as we are insisting on tough erification -- mr. nephew: i think as long as

we insisting on tough verification and respond to them directly, even with more modest snapback for minor violations. the bottom line is the iranians need to understand that we will respond at all times and it starts by continuously monitoring the program, prompting and challenging them when we see things that are inconsistent with the terms of the deal or that causes question, and vigorously using the dispute process we have put in terms of the deal. we have to do that with high level attention and we have to do that with rigs you nforcement and monitoring. mr. zarate: i think congress has a role to play here, congress can put in place measures that makes it clear not just to the negotiating parties but also the private sector that there are going to be sanctions and sanctions provisions that are potentially brought to bear if there's evidence and suggestions of ill list iranian activity. so creating a sanctions framework where congress itself shapes the environment and

shapes expectations around how the international community may view doing business with the irtc or the intelligence services, that actually i think could be incredibly helpful this grandfathering provision, getting clarity on that, i think is really important and will shape the marketplace and then to richard's point, enforcing the elements of the deal quickly and often and demonstrably i hink will be critical. senator udall:: i think one thing your testimony here this morning highlights is there definitely is a role for congress to play. you have the approval or disapproval of the agreement but if you move forward on the agreement, a role for congress to play in order to strengthen it, to bring transparency, to plug holes that occur that we don't think are going to be there. would you agree with that? e-- raw

mr. zarate: absolutely. whether you agree with the deal or not, congress has a role to play to deal with the risks that are very real, deal or no deal. mr. nephew: i agree. senator udall:: there are concerns about what happens at year 10, year 15, year 20 under the deal. what are your thoughs on these sunset provisions and do you think the existence of of a sunset is reason enough to reject the deal. mr. nephew: i do not. i don't think there's any arms control arrangement that's possible that does not include sunset. even the original n.p.t. included a sunset. we had to get it extended permanently in the mid 1990's only after demonstrating it had been working for so long. the idea that a country would voluntarily renounce its nuclear program in perpetuity i don't think was ever credible.

mr. zarate: one element of the sunset provision that is problematic and doesn't match with the 15-year timetable and the assumption of the peaceful nature of the regime is the cessation of chapter 7 obligations and scrutiny by the u.n. at year 10. again, i'm a bit more skeptical and i think we should be presumptive of ill intent on the part of the iranians, or at least an intent to push the envelope in terms of what they're able to do in terms of a covert nuclear weapons program system of i think that in and of itself is problematic. to richard's point, sunset provisions are part of the international legal landscape but thing this case, we are dealing with a unique circumstance, we are dealing with high risk and we are dealing with a suspect party that was subject to a numb of security council resolutions that assumed that they were suspect party. senator udall:: thank you both. thank you, mr. chairman.

senator corker: as clarification, how would we appropriately understand the grandfather issue? in other words if we wanted clarification, as we talk with people, we have, you know, various opinions and obviously this is -- we're in the selling mode at this moment, how would we best clarify that issue? what would be the responsible way for us to know what the true meaning of the grandfather clause or not grandfather clause means? n advance of voting? mr. zarate: i've thought about that a little bit but not a lot. so i'll think out lud loud a little bit. one is congress could have people push back and shape the definition. a letter from the senate or this committee proclaiming what it deems this to be actually has some impact and would force open

reaction. secondly, getting -- asking for, in writing, the interpretation from the various parties to the agreement. in particular our allies. how do they interpret this deal and how are they going to enforce it? third i would suggest that the treasury department is going to have to have a role in clarifying how the sanctions unwinding is going to play out. so as part of that regulatory process, they're probably going to have to put out interpretive notes or other regulatory guidance and so it's probably in that context that the administration is going to have to be incredibly clear i hope for the marketplace to then determine system of those are three ways that i can think of off of top of my head that might help. senator corker: thank you. senator isakson:. senator isakson:: i'm not a nuclear scientist and certainly not an expert in this subject

but i was a real estate broker for 33 years. i've run for office 17 times. when you run for office you get to a opponent where if you're in the final two, there's a frontrunner and a challenger. i've been both at one time or another but eventually the press wants to challenge both of you to a debate toward the end of the campaign. and so you appoint your best guy to go negotiate your pox on the debate, they appoint their best guy, they negotiate whether you're sitting or stand, talking english or french, whether you can have a prop or anything else. it appears to me that the iranians negotiated a lot of wiggle room in this agreement for them to do a lot of nefarious things if they wanted to. i think you made -- there's a paragraph in your testimony where it says, iran's problematic construct of in iran as a co-equal which el straits -- illustrates what i'm talking about. if somebody challenges the

iranians to a -- to an inspection other a suspected violation of the agreement, they first of all can question, reject, stall any challenge they want to. they can interrogate people making the request. they can object to the reimposition of saxes. and they can appeal anything they want to to the joint commission which they sit on. am i reading that correctly? mr. zarate: yes, sir, that's my reading as well. senator isakson: so not only is there a period of time to get to the i.a. -- iaea which can't include an american, but there's an additional way to do rope-a-dope for an expended period of time to keep that from aking place. mr. zarate: yes, sir. and there's been analysis of how many days that means, and it's

more than 4 days given the potential for stalling an challenges. what's been negotiated in the let ore they have jcpoa is the right of iran to waubling away. they get the ultimate, what's been called the nuclear snapback by my colleague mark dubowitz, i all it the heckler a's veto. -- heckler's veto. hatever it is, i dent like it. senator isakson:: from the day that jpao is signed, there's a place for them to get to a position where they can, it may be as long as 15 years, or 8 1/2 under the most liberal interpretation but either way you take that, combined with the wiggle room they've negotiated with the joint commission where you can make the appeal or other things, give them a glide path to being able to have a nuclear weapon. that's why when the chairman

asking the question yesterday about is there an alternative about agreeing to the deal or war, there should be. because we need to reclaim some of the equality we ought to have in this agreement once it's signed. there will be bumps and bruises. the iranians negotiated a lot of excellent rat holes for them to run into if something pops up, but we're pretty much exposed. i want to call everyone's attention to one other thing in mr. zarate's testimony, where it says the e.u. and its member states on the united states of america consistent with their respective laws will refrain from 308cyings intended to directly and adversely affect the normalization of trade with iran inconsistent with their commitments not to undermine the successful implementation of the jcpoa. it looks like from the beginning there's a speed bump for all of us to be able to have any snap back, reimposition of sanctions

or any other economic tool we want to use if we suspect they violated the agreement is that correct? mr. zarate: that's right, senator. the reason i highlight that paragraph, it's essential. it reinforces and illuminates what the goal of the deal is for iran. which makes sense. they want reintegration into the global order. what i'm arguing is that the reason these sanctions have been so darn effective post-9/11, a regime that's been subject to sanctions for three decades has come to the table. why? because they were unplugged from the global financial and commercial system. we messed with, we interfered, we interrupted their very trade and economy. my point is, if we want to preserve that power moving fard for terrorism, human rights, support to assad, proliferation, we may have just negotiated away the effective use of those kinds of measures. and that was the point of that portion of my testimony.

senator isakson:: that's my point. what got them to the table was not that they liked or respected us, but we were squeezing them. when they got to the table to negotiate from day one, the construct of it brought them up to be a co-equal with the united states when in fact it was our power and leverage that brought them there in the first place. that's what concerns me so much about the way in which the negotiations ended up. we've raised and elevated their stature and position an given them various windows along the way to violate what they promised in the preamble which is not to develop a nuclear weapon. thank you both very much. senator corker: senator shaheen. am i out of order? you can politely decide.

>> mr. zarate, i've enjoyed reading "treasury's war," i haven't finished it but i recommend all read the book he's has n about how treasury been important to our negotiations. r. kaine: i agree with the comment senator menendez made about the iaea and the needing to dig more into their situation, whether it be, you know, agreements they may have with iran as they do with other members or to get comfort level with thaw howe they inspect. i don't want to leave this room with an unstated -- what i think would be an inaccurate impression that we don't trust the iaea or they don't know what they're doing. if i can, just, to remind everybody of a painful history new york march of 2003, the iaea issued an opinion that they said to date, the iaea has found no

evidence or plausible indication of the revival of a nuclear weapons program in iraq. that was in march of 2003. the administration at that time immediately jumped out, trashed the iaea, said they were wrong. and said that the united states needed to initiate a war that has proven highly costly in american lives, in treasure, and in instability in the region because the administration said, no, we have better intel. they do have a program of weapons of mass destruction. nuclear weapons. we need to war thrabet mushroom cloud and we need to -- to worry about the mushroom cloud and we need to end this war. the iaea was right and the united states was wrong and there was a significant generation altering consequence of that. so i completely get the notion that we want to dig in to what

the iaea is going to do on this i don't want to leave with the impression that the iaea hasn't demonstrated their chops. the iaea hasn't been perfect either. there were weaknesses in the north korean negotiation, especially with respect to north korean covert programs but the iaea and went back to add the additional protocol that iran is obligated to ratify to fix challenges. let's not leave the impression that the iaea doesn't know what they're doing because in one of the most critical decisions we have made as a nation in our foreign policy history, we trash their conclusions, they were right, we were wrong and a war that should never have been started, that's an edtorial opinion, was the result. >> would the senator yield? senator kaine: i don't want you to think, -- yes. >> i don't want you to think because i don't know if you're

referring to me, but i want to know what they're going to do. senator kaine: the agreement says they'll put between 130 and 150 inspectors into iran to carry out inspections. they have the financial ability to do that, i think that's critical. but i was worried that there was an unstated point and i wanted to clarify that. i think you both hinted at this but i want to ask your opinion on this statement. i was intrigued. i was going back as part of understanding this deal trying to understand the status quo before negotiations started or before the public phase of the jpoa began. i want back and looked at the speech that prime minister netanyahu gave to the u.n. in september of 2012678 he had a quote that i thought was interesting. seven years of international sanctions have hurt iran's economy but let's be honest, they have not stopped iran's nuclear program. i think the evidence suggests that the sanctions have been incredibly effective.

in hurting iran's economy. and getting them to the table to negotiate. certainly the congressional sanctions, but also the international sadgeses an the compliance of all allies in that. however, i think the prime minister was honest and i think if you look at the data, it would suggest that the sanctions did not stop iran's nuclear development, in some way because of a resistance mentality or defiance mentality, the sanctions may have accelerated centrifuge development to 19,000. enriched ewe yain -- ewe rainian development. the enrichment level to 0% they have process on the iraq plutonium reactor. but i'm curious, do you share that opinion? did sanctions slow down iran's nuclear program? mr. nephew: i would say it did have an impact on their supply and procurement efforts. but i think your point is

rightle -- is right. if you look at the end of the 2011, they had 9,000 installed centrifuges. by 2013 they had 2,000. -- 22,000. my view is sanctions were always a means to an end. the end was a diplomatic outcome that probably wasn't the end of the nuclear program put was putting it under significant restraints and very aggressive monitoring. mr. zarate: thank you again for your kind remarks. i think you're right. i don't think sanctions were a silver bullet here, was ever going to be a silver bullet. i've argued we needed multiple points of leverage. i think it's important to keep in mind that sanctions have multiple purposes. to richard's point, they can throw sand in the geefers what a country is trying to do or a transnational organization. it can help deter actors willing to act with sanction parties. and it can ultimately hopefully

change behavior and policy. i think the reality is, you know, iranians were brought to the table because of the sanctions but they were also facing the reality of internal economic mismanagement, demographics that were not conducive to regime stability, and i would argue the ghost of the green movement even though they were able to crush it in its infancy, the very threat to the regime of internal instability, in combination with that external pressure, i think is really what drove president rahani and his team back to the table. 10 you're right, sanctions alone wasn't going to do it. but sanctions were necessary element to getting them to the table. senator kaine: the reason i ask, this is a risk analysis, a very complicated one, where every option has upsides and downsides and some unpredictable upsides and downsides. one of the, i think,

alternatives we have to contemplate is if we walk away from a deal and we think that reimposing sanctions, now assuming we can get the international partners to completely go along and i think that's a big assumption, but reimposing sanctions, getting everybody to go along, is going to lead to a better deal. it could lead to a better deal. it could also lead to the same kind of acceleration. i think in that same speech, the prime minister said, you know, they're just months away from crossing the nuclear threshold. now the critique is in 15 years they could be months away from crossing the nuclear threshold. i think even some of the critics' critique of the deal acknowledge that the deal is moving. sanctions could get us a better deal. they could. sanctions could also lead to acceleration of an iranian knew leer program that could put us in a worse position. we might assign different percentages to that but we're dealing with, again, sop upside

risks and some downside risks and some are known and some are unknown. this is a very complicated analysis. senator corker: thank you. thank you for that line of question. to further clarify the iaea situation, we can reach out and talk to former people, nonstop, to get a comparison between the inspection regime that is going to take place and -- in iran versus the ones that have taken place in other polices. and other -- i know the secretary of state mentioned this is by far the best we've ever had. i think most people dispute that the one you're talking about in iraq was actually the -- a much better inspection regime. much better. i know the other day in his well, he he tried to, twisted around, i don't know if that was what he tried to do, to indicate we had a lot of eyes on the ground when we invaded. that's not what i was talking about. it's back in the 2003 time frame. and the ability to go anywhere,

any place, was much better with iraq. than exists with this. i think that's all the more reason that we need to get them in to understand at least, let me say this. the elements we know thus far, certainly is much better and the anywhere, any time inspection that's been alluded to, could be 24 days, could be 74 days, is very different than what we had in iraq. mr. zarate: that's right but we purchased those better inspections with a war. we got the significant inspections of iraq as a result senator kaine: but we bought those better inspections with a war. i don't want to go to war to get better inspections. senator corker: i don't know about that.

senator rubio. senator rubio: on one hand we can continue with the strategy, international sanctions, had an impact on iran's economy, they continued to make progress in their enrichment capabilities and so to the but it was the combination of international sanctions and the threat of credible military force which no one wants to talk about, but that was on the table. the president said if it came down to it, the u.s. would do that if it were necessary, versus what we have now which is a deal that argues, well, what this bill do if they comply with it, it will slow them down and in 10 years if they want to break out out -- break out it buys us 10 years time. assuming everybody complies with everything. here's my problem with that analysis. my problem is in eight to 10 years, which sounds like a long time, but it's nothing. 10 years goes quickly. that's if we're optimist ex. in 10 years, iran will be in a much stronger position. in fact, i think in 10 yearsing they'll be immune from international pressure compared

to where they are today. here's why. first of all, they're going to use the sanctions relief and the billions of $s that it frees up and i know everybody wants to believe they're going to invest in hospitals an roads and social services in order to win their next election. i promise they're going to win their next election. i don't think they're worried about that as much as they are about their need, for example, they're going to get to modernize their enrichment capability into a 21st century industrial system. it falls right in line with the mandate that the supreme leader, i believe, gave his negotiators which is don't agree to anything that's irreversible but go as far as you need to go to get the sanctions removed but don't agree to anything irreversible. they'll have less centrifuges but they'll be better and modernized and they'll retain that infrastructure, and that's the hardest part of any nuclear program, the infrastructure. but here's what else they'll continue to do. they'll continue to build their conventional capabilities. iran in 10 years will have conventional capabilities, maybe

less, but could potentially drive us out of the persian gulf and the strathes of hormuth because the price of being there will be too high. they can develop capabilities to kill ships, add to fast swift boats, things that can threaten an aircraft carrier, they'll build long-range rockets. why are you building a lock-range rocket? are you going to put a man on the moon? no. they say north korea has a long range rocket. we don't know whether it's going -- where it's going to hit. it'll hit somewhere. hat alone has made north korea bigger. i would argue even now before sanctions relief they've given iran tremendous leverage over u.s. policy. iran has laid out clear red