SPEAKERS CONTENTS INSERTS
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72–349 DTP
2001
THE ILSA (IRAN-LIBYA SANCTIONS)
EXTENSION ACT OF 2001
HEARING
BEFORE THE
SUBCOMMITTEE ON THE MIDDLE EAST
AND SOUTH ASIA
OF THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
MAY 9, 2001
Serial No. 107–13
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COMMITTEE ON INTERNATIONAL RELATIONS
HENRY J. HYDE, Illinois, Chairman
BENJAMIN A. GILMAN, New York
JAMES A. LEACH, Iowa
DOUG BEREUTER, Nebraska
CHRISTOPHER H. SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
EDWARD R. ROYCE, California
PETER T. KING, New York
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STEVE CHABOT, Ohio
AMO HOUGHTON, New York
JOHN M. McHUGH, New York
RICHARD BURR, North Carolina
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
RON PAUL, Texas
NICK SMITH, Michigan
JOSEPH R. PITTS, Pennsylvania
DARRELL E. ISSA, California
ERIC CANTOR, Virginia
JEFF FLAKE, Arizona
BRIAN D. KERNS, Indiana
JO ANN DAVIS, Virginia
TOM LANTOS, California
HOWARD L. BERMAN, California
GARY L. ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
DONALD M. PAYNE, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
EARL F. HILLIARD, Alabama
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BRAD SHERMAN, California
ROBERT WEXLER, Florida
JIM DAVIS, Florida
ELIOT L. ENGEL, New York
WILLIAM D. DELAHUNT, Massachusetts
GREGORY W. MEEKS, New York
BARBARA LEE, California
JOSEPH CROWLEY, New York
JOSEPH M. HOEFFEL, Pennsylvania
EARL BLUMENAUER, Oregon
SHELLEY BERKLEY, Nevada
GRACE NAPOLITANO, California
ADAM B. SCHIFF, California
THOMAS E. MOONEY, SR., Staff Director/General Counsel
ROBERT R. KING, Democratic Staff Director
Subcommittee on the Middle East and South Asia
BENJAMIN A. GILMAN, New York, Chairman
DAN BURTON, Indiana
STEVE CHABOT, Ohio
JOHN M. McHUGH, New York
JOSEPH R. PITTS, Pennsylvania
DARRELL E. ISSA, California
ERIC CANTOR, Virginia
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JO ANN DAVIS, Virginia
DANA ROHRABACHER, California
PETER T. KING, New York
JOHN COOKSEY, Louisiana
GARY L. ACKERMAN, New York
HOWARD L. BERMAN, California
BRAD SHERMAN, California
ROBERT WEXLER, Florida
ELIOT L. ENGEL, New York
JOSEPH CROWLEY, New York
JOSEPH M. HOEFFEL, Pennsylvania
SHELLEY BERKLEY, Nevada
ADAM B. SCHIFF, California
HILLEL WEINBERG, Subcommittee Staff Director & Counsel
DAVID S. ADAMS, Democratic Professional Staff Member
DEBORAH BODLANDER, Professional Staff Member
PAUL BERKOWITZ, Professional Staff Member
MATTHEW ZWEIG, Staff Associate
C O N T E N T S
WITNESSES
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The Honorable Alfonse D'Amato, former U.S. Senator
Howard A. Kohr, Executive Director, American Israel Public Affairs Committee
Patrick Clawson, Ph.D., Director for Research, The Washington Institute for Near East Policy
The Honorable William A. Reinsch, President, National Foreign Trade Council, Inc.
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
The Honorable Benjamin A. Gilman, a Representative in Congress from the State of New York, and Chairman, Subcommittee on the Middle East and South Asia: Prepared statement
The Honorable Alfonse D'Amato: Prepared statement
Howard A. Kohr: Prepared statement
Patrick Clawson: Prepared statement
The Honorable William A. Reinsch: Prepared statement
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APPENDIX
The Honorable Joseph Crowley, a Representative in Congress from the State of New York: Prepared statement
The Honorable Jo Ann Davis, a Representative in Congress from the State of Virginia: Prepared statement
The Honorable Darrell E. Issa, a Representative in Congress from the State of California: Prepared statement
Archie W. Dunham, Chairman, President and CEO, Conoco Inc.: Prepared statement
Shahriar Afshar, President, Iranian Trade Association: Prepared statement
THE ILSA (IRAN-LIBYA SANCTIONS) EXTENSION ACT OF 2001
WEDNESDAY, MAY 9, 2001
House of Representatives,
Subcommittee on the Middle East and South Asia,
Committee on International Relations,
Washington, DC.
The Committee met, pursuant to call, at 10:23 a.m. in Room 2172, Rayburn House Office Building, Hon. Benjamin A. Gilman, [Chairman of the Subcommittee] presiding.
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Mr. GILMAN. The Subcommittee will come to order.
The Subcommittee on the Middle East and South Asia meets today in open session to receive testimony on a draft bill to extend the life of the Iran-Libya Sanctions Act (ILSA) for another 5 years. We are about to receive testimony from the author of the original ILSA legislation, Senator Alfonse D'Amato, and I was pleased to join with him in sponsoring this in the House.
We will be hearing witnesses on both sides of the issue and we will be introducing them properly in a moment, but first permit me to make just a few opening remarks.
ILSA was intended to change unacceptable Iranian behavior by reducing or making more expensive Iran's access to its energy resources. It was the intent of the supporters of the bill and its authors 5 years ago that either Iran would change its behavior so that it would gain access to investments from around the world or that—absent a change in behavior—it would be hampered in its efforts to promote terror and obtain weapons of mass destruction.
It is regrettable that Iranian behavior has not changed for the better. In fact, it seems to be getting worse—in its training of terrorists, its production of chemical and biological weapons, its production of long-range missiles and pursual of the development of nuclear capabilities. But that is no reason to give up the struggle to deprive Iran of the means to use to violence to achieve its aims.
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We do not repeal the laws against murder because those laws fail to deter every killer, nor do we close down our police departments because they do not resolve every case. There is ample evidence that ILSA has delayed exploitation of Iran's energy resources and made their development even more difficult and more expensive. That is exactly what we intended to do when we introduced this measure.
We need to ask those who would tell us not to use sanctions as a tool against Iran what the record of the alternative, that is, diplomacy and commercial engagement, has been with respect to dealing with Iran?
Has Iran changed at all in the face of European diplomatic and commercial engagement?
Have Saudi Arabia, Syria, Iraq, Equatorial Guinea and other oil exporters become places where the right to free speech and religion flourish under the influence of our oil companies?
It could be said, on the contrary, that the more money some of these regimes have, the more repressive they have become. Let me note that there are and will continue to be constraints—which I believe are illegal—on oil production imposed by the OPEC cartel. As long as that cartel continues to operate, it is pure folly to say that increasing investment in energy production in Iran will do anything significant to lower prices or increase availability. Oil production may move marginally in the direction of Iran, but prices and availability are manipulated by OPEC's emirs and there is little any Administration has been able to do about it.
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In Iran, we are faced with a regime whose national security aims appear to include the destruction of the state of Israel and a desire to threaten the United States. There is no appreciable gap between the views of the so-called moderates in Iran and the so-called hard liners on these issues. Each call for the destruction of Israel.
Iran's supreme leader, Ayatollah Khomeni, calls Israel a ''cancerous tumor.'' Iran's parliament, in the hands of the moderates, hosts conferences where terrorists are feAE3ted and ''moderate'' President Khatami recently told Yasser Arafat that, and I quote, ''All of Palestine must be liberated.''
It does not matter how many liberal French philosophers Khatami may have read. He has not understood their true message.
We cannot send a signal of lack of resolve to the rulers of Iran. We have no quarrel with the Iranian people who do not—I repeat, do not—have the right to elect a leader who would move them away from the destructive policies of the Islamic republic. Their ability to change their government is circumscribed by the clerics who defend the existing order. And, of course, their regime is a repressive one that often stifles dissent and kills or imprisons members of religious minorities.
So it is left to us to do what the Iranian people cannot do for themselves, which is to contain the existing regime as best we can, and that is all that our policy does.
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Let me remind my colleagues that ILSA levels the playing field between American companies and foreign companies. ILSA does not affect American companies. They are barred by executive order from dealing in Iran.
All we are doing in the underlying measure and in its reauthorization is telling foreign companies that are willing to deal with Iran that they may have to pay a price when it comes to their dealings with our nation. Clearly, this can create problems for our diplomacy with Europeans and others. But, if as President Bush certified in March, Iran continues to, and I quote the President, ''Threaten the vital interests of the national security, foreign policy and the economy of the United States,'' then they must continue to do everything to contain that threat and today that means we must renew the Iran-Libya Sanctions Act.
[The bill follows:]
72349f.eps
72349g.eps
Mr. GILMAN. I am pleased to recognize the Ranking Minority Member, who is with us today, the gentleman from New York, Mr. Ackerman.
[The prepared statement of Mr. Gilman follows:]
PREPARED STATEMENT OF THE HONORABLE BENJAMIN A. GILMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK, AND CHAIRMAN, SUBCOMMITTEE ON THE MIDDLE EAST AND SOUTH ASIA
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The Subcommittee will come to order.
The Subcommittee on the Middle East and South Asia meets today in open session to receive testimony on a draft bill to extend the life of the Iran-Libya Sanctions Act—ILSA—for another five years.
We will receive today testimony from the original author of the legislation, Senator Alfonse D'Amato, and from witnesses on both sides of this issue. I will introduce them properly in a moment but first permit me to make a few opening remarks.
ILSA is intended to change unacceptable Iranian behavior by reducing, or making more expensive, Iran's access to its energy resources. It was the intent of the supporters of this bill, five years ago, that either Iran would change its behavior so that it would gain access to investments from around the world or that, absent a change in behavior, it would be hampered in its efforts to promote terror and obtain weapons of mass destruction.
It is regrettable that Iranian behavior has not changed for the better. In fact, it seems to be getting worse—- in its training of terrorists, in its production of chemical and biological weapons and the production of long range missiles.
But that is no reason to give up our struggle to deprive Iran of the means to use violence to achieve its aims.
We do not repeal the laws against murder because those laws fail to deter every killer. We do not close down our police departments because they do not resolve every case.
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There is ample evidence that ILSA has delayed exploitation of Iran's energy resources and made their development more difficult and more expensive. And that is exactly what it is intended to do.
We need to ask those who would tell us not to use sanctions as a tool against Iran what the record of the alternative—that is, diplomacy and commercial engagement—has been with respect to dealing with Iran. Has Iran changed at all in the face of European diplomatic and commercial engagement? Have Saudi Arabia, Syria, Iraq, Equatorial Guinea, and other oil exporters become places where the right to free speech and religion flourish under the influence of our oil companies? It could be said, on the contrary, that the more money some of these regimes, have the more repressive they become.
Let me note that there are and will continue to be constraints—which I believe are illegal—on oil production imposed by the OPEC cartel. As long as that cartel continues to operate, it is pure folly to say that increasing investment in energy production in Iran will do anything significant to lower prices or increase availability. Oil production may move, marginally, in the direction of Iran. Prices and availability are manipulated by OPEC's Emirs, and there is little any Administration has been able to do about it.
In Iran we are faced with a regime whose national security aims appear to include the destruction of the State of Israel and a desire to threaten the United States. There is no appreciable gap between the views of the so-called ''moderates'' and the so-called ''hard liners'' on these issues. Each call for the destruction of Israel. Iran's Supreme Leader, Ayatollah Khamenei, calls Israel a ''cancerous tumor.'' Iran's Parliament, in the hands of the ''moderates'', hosts conferences where terrorists are feted. And ''moderate'' President Khatami recently told Yasir Arafat that ''all of Palestine must be liberated.'' It doesn't matter how many liberal French philosophers Khatami has read. He hasn't understood their true message. We cannot send a signal of lack of resolve to the rulers of Iran.
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We have no quarrel with the Iranian people, who do not—I repeat, do not—have the right to elect a leader who would move them away from the destructive policies of the Islamic Republic. Their ability to change their government is circumscribed by clerics who defend the existing order. And, of course, their regime is a repressive one that often stifled dissent and kills or imprisons members of religious minorities. So it is left to us to do what the Iranian people cannot do for themselves, which is to contain the existing regime as best we can. And that is all that our policy does.
Let me remind the public that ILSA levels the playing field between American companies and foreign ones. ILSA does not affect American companies—they are barred by executive order from dealing in Iran. All we are doing is telling foreign companies that are willing to deal with Iran that they may have to pay a price when it comes to their dealings with the United States. Clearly this can create problems for our diplomacy with the Europeans and others.
But if, as President Bush certified in March, Iran continues to ''threaten the vital interests of the national security, foreign policy and economy of the United States'', then we must continue to do everything to contain that threat. And today, that means we must renew the Iran-Libya Sanctions Act.
Mr. ACKERMAN. Thank you very much, Mr. Chairman. Thank you for scheduling this meeting. I want to associate myself with your very articulate and strong statement.
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Mr. Chairman, when the Iran-Libya Sanctions Act was signed into law 5 years ago, it was the judgment of this Committee that the bill would be, in the exact words of the Committee, ''a key element in United States policy of cutting off sources of funding to those rogue regimes in Iran and Libya who continue to support acts of terrorism and develop weapons of mass destruction.'' That is exactly from the report language.
Five years later, little has changed and I believe ILSA remains a key element of U.S. policy. The State Department's most recent terrorism report states that, and I quote, ''Iran remains the most active state sponsor of terrorism.''
Iranian support for terrorism continues to focus on groups who are opposed to peace between Israel and its neighbors and opposes the very existence of Israel itself.
Iran continues to provide Hezbollah, Hamas, the Palestinian-Islamic Jihad, Ahmed Jabril's PFLP-GC with weapons, training, safe haven and varying amounts of funding.
Iran also remains a significant threat to the region through its aggressive pursuit of both weapons of mass destruction and advanced conventional weapons technology.
According to the most recent CIA report on the acquisition of these technologies, ''Iran remains one of the most active countries seeking to acquire WMD and ACW technology from abroad.''
Iranian cooperation with Russia, China and North Korea will accelerate Iran's missile program and its ability to develop nuclear weapons. There are those in the United States who believe that it is time for a new relationship with Iran. They argue that President Khatami is a reformer whose efforts we should encourage.
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Well, Mr. Chairman, President Khatami is no reformer when it comes to Iranian foreign policy. He continues to oppose the peace process. President Khatami has said ''The Arab countries now know that it is not impossible to defeat Israel as they once believed, and the states that did think so were isolated by their own people.''
Clearly, President Khatami is not interested in supporting a peace agreement between Israel and the Palestinians.
With regard to Libya, President Bush was correct to note a few weeks ago that Libya needs to take further steps before sanctions can be lifted. Libya must express remorse, admit their guilt and renounce terrorism, and compensate the families of Pan Am 103 for their tragic losses. If that happens, I think it might be appropriate to reconsider U.S. policy toward Libya, bearing in mind Libya's continued pursuit of chemical weapons as well as ballistic missile technology.
Mr. Chairman, given the circumstances in both Iran and Libya, I think the Congress should act swiftly to renew the Iran-Libya Sanctions Act. The same conditions that demanded actions 5 years ago demand action today.
I look forward to hearing from our very distinguished witnesses today, Mr. Chairman, especially from our very good friend and former colleague, the distinguished Senator from New York, Senator D'Amato, and we look forward to his remarks, especially since he played the lead role in formulating the original act.
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Thank you, Mr. Chairman.
Mr. GILMAN. Thank you, Mr. Ackerman.
Mr. Cooksey?
Mr. COOKSEY. Thank you, Mr. Chairman. In my opening statement, I want to throw out some challenges for the witnesses for today. I hope today you will answer the question, which is: Are the sanctions working? And, if not, what can be done to improve the effectiveness of the sanctions?
I can say more bad things about the leadership of Iran and Libya than they can. The difference is that I am usually very blunt about it and they are more diplomatic, and I do not want to be diplomatic. Qaddafi is a bad guy. The leadership of Iran is terrible. Their leadership is bad for the people in Libya and Iran. But on the other hand, when I look at countries like France—and I hate the use the word prostitute—but when I see the way they acted in removing our people from the Human Rights Commission and replacing them with the government representatives from Sudan, Cuba, Libya, whoever else is on there, and yet if you would confirm or deny this in your testimony, every time the French oil companies are threatened with sanctions a waiver is made. Specifically, I am talking about Total SA of France, France's Elf Aquitaine, and also a project run by Canada's Bow Valley, Royal Dutch Shell—of course, that is the Netherlands.
So my question again, and I hope you will answer this, and I hope my colleagues on this panel will be objective, are the sanctions working? If not, what can be done to improve them and what can be done to make the rogue nations in Europe, that are supposedly our allies, behave in a manner that is a little bit more honorable than what they were last week when they removed us as a member of the Human Rights Commission?
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So I have laid out my challenges for you, I would like to hear the answer.
Thank you, Mr. Chairman.
Mr. GILMAN. Thank you, Dr. Cooksey.
Mr. Lantos?
Mr. LANTOS. Thank you very much, Mr. Chairman. Let me identify myself with your comments and those of my other colleagues.
Mr. Chairman, a little over a year ago, Secretary of State Madeleine Albright offered new hope for improvement in relations between the United States and Iran. Let me recall for you and for all of us Secretary Albright's memorable words: ''Spring is the season of hope and renewal, of planting the seeds for new crops, and my hope is that both in Iran and the United States we can plant the seeds now for a new and better relationship in years to come.''
Secretary Albright did indeed plant new seeds last spring by announcing an easing of sanctions against Iran, including the lifting of the ban on caviar and carpet imports. It was a bold and courageous move and one I supported. The Administration's rationale was sound, offering sanctions relief to hard working Iranians engaged in those industries, not to the Iranian regime. And its intention was good, Mr. Chairman, seeking to break a stalemate in U.S. Iranian relations.
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Iranian caviar began arriving in this country in May of 2000 and the Iranian carpets now being sold here have the potential to earn hundreds of millions of dollars for the Iranian people every year, but there was more to Madeleine Albright's approach toward Iran than caviar and carpets.
In September of 2000, Secretary Albright and President Clinton personally attended speeches at the United Nations of Iranian President Khatami and the U.S. quietly reached to Iran through many different channels. Given the litany of concerns we have regarding Iran's destabilizing behavior in the international community, these were extraordinary signals by the United States that we were prepared for a new chapter in our relations with Iran.
We are now a year later and we must ask the question have the seeds that we planted a year ago taken root? Did the easing of sanctions and other goodwill gestures succeed in making relations between Washington and Tehran better?
Unfortunately, the answer to both of those questions is decidedly no.
Since Secretary Albright's announcement last year, the Iranian regime has not reciprocated with a similar level of good faith gestures of its own, nor has it given any indication of wanting to reverse its ways. It continues to support terrorism aimed at Americans and our allies. It continues to seek weapons of mass destruction and the technologies to deliver them. It continues to wage a propaganda war against the west. It continues to violate the human rights of its citizens, especially women, the B'hai and its Jewish community.
Let me offer just a few specific examples, Mr. Chairman, of the menacing actions Iran has taken since Secretary Albright made her speech a year ago.
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A few weeks ago, President Khatami visited Moscow and the two sides agreed that Russia will resume new arms sales to Iran. Iran's Ambassador to Moscow says that Iran plans to purchase $7 billion worth of Russian weapons in the near future. This deal provides clear insights into Russia's new intentions and the new intentions of Iran.
A CIA report released earlier this year concludes that Iran continues to actively seek to acquire weapons of mass destruction, not only from Russia, but from China and North Korea. Recent non-proliferation reports indicate that Iran continues to seek the technology that could be used to create a self-sufficient chemical weapons infrastructure and it may have stockpiled chemical weapons, including blister, blood and choking agents.
Just 4 months after Secretary Albright made her speech, Iran tested an 800-mile range Shahab-3 missile and it is currently developing a 1200-mile missile.
Iran fingerprints are all over the Khobar Towers housing complex bombing in which 19 of our airmen perished. Iran still refuses to cooperate with U.S. investigators.
In the Middle East, Iran publicly supports Hezbollah and its ambush and capture of soldiers on the Israeli border and supreme leader Ali Khameni in November said that the crisis in the Middle East could only end if Israel were, I quote, ''eradicated.''
About 100 Iranian revolutionary guards remain in Lebanon to coordinate arms deliveries to Hezbollah. Iran has also tried to exploit the current crisis to rally Arab nations against Israel, threatening the very survival of the region's only democracy.
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On the human rights front, Mr. Chairman, the persecution of the Iranian B'hai community has continued unabated. Eight Iranian intellectuals were sentenced to prison terms in January 2001 for attending a scientific conference in Germany. And just these past few weeks authorities banned four more newspapers critical of the regime.
In short, Mr. Chairman, the United States reached out an open hand only to be met with a clenched fist from Iran. We have no choice but to hold firm to our principles and our policies and I support the Bush Administration in its recent announcement to continue sanctions against Tehran. President George Bush has no other choice.
And I strongly support my colleague and the Chairman of our Committee, Henry Hyde, who announced earlier this year that he plans to move expeditiously to the floor of the House a renewal of the Iran-Libya Sanctions Act. I pledge my full support to assist Henry Hyde in achieving that objective and I commend you for holding this hearing.
Mr. GILMAN. Thank you, Mr. Lantos.
I am going to urge my colleagues to limit their remarks and we are going to call on just two more colleagues, one on each side, so that we can get to the witness who has been kind enough to wait during the opening remarks.
Mr. Issa?
Mr. ISSA. Thank you, Mr. Chairman.
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In light of your request, I will submit my opening statement for the record and make just very brief remarks outside of the opening statement.
Mr. GILMAN. Thank you, Mr. Issa.
Mr. ISSA. Thank you, Mr. Chairman.
I would hope that today we get as much interface of ideas about what those items are that we should do instead of lifting the sanctions and what signs to look for or what signals to send Iran to let them know that we do want peace, we do want a dialogue, we do want to work together to solve the problems in the Middle East if they have a will to do so.
I say this as an Arab-American, as somebody who has family and friends throughout the region of the Middle East, that it is with great regret that these sanctions must stay in place. It is with great regret that we have not been able to convince Iran who funds Hezbollah (in all candor, for the good things they do, too, the humanitarian, the hospitals, the schools that they pay) to cease the funding of those things which only prolong the agony of the people in the Middle East.
And to the extent that I have the ability to do so and that this Committee has the ability to do so, we ask you to give us guidance here today.
Thank you, Mr. Chairman.
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Mr. GILMAN. Thank you, Mr. Issa.
Mr. Sherman, our last intervenor.
Mr. SHERMAN. Mr. Chairman, I think the so-called difference between the moderates and the extremists in the Iranian government may relate to important cultural and domestic issues, but they are united in their support for terrorism, total opposition to peace in the Middle East and expedited development of nuclear weapons, perhaps, the scariest aspect of Iranian policy.
The Iran-Libya Sanctions Act is so critical because Iran will become a net energy importer in the next 10 years unless it can get its hands on western capital and western technology to improve its aging oil fields and to develop additional ones. And I think the Iran-Libya Sanctions Act represents an outstanding step toward depriving them of that technology and capital.
We also ought to look at two other areas, one that you have mentioned, Mr. Chairman, and that is to make sure that the World Bank does not go through with its idea of perhaps lending $750 million to the Iranian government and I might slightly disagree with my colleague from California and say that unless there is a change, and for the last year, there has not been any change for the better in Iranian policy, we have to look at rolling back the importation of caviar, carpets, et cetera, and other non-energy imports to the United States, especially when the worst elements of the Iranian government control those exports.
I thank you for holding these hearings.
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Mr. GILMAN. Thank you, Mr. Sherman.
And now I am pleased to turn to our witnesses and I would ask our witnesses to try to limit their remarks as best they can and your full statements will be entered into the record without objection. Also without objection, the record will remain open for 10 days to receive any additional materials.
It is appropriate that we begin our witness comments with the author of this legislation, the gentleman from New York, Senator D'Amato. The Senator is appearing courtesy of facilities provided by our Department of State in New York City and we thank the department for their courtesy and cooperation.
Senator Alfonse D'Amato served three terms as our Senator from the State of New York. Senator D'Amato won a reputation as a tireless fighter for the people of the State of New York, but, beyond that, his main concern was always our national security.
The Senate Committee on Banking, which he chaired, was responsible for export control policies under the Senate rules and that brought him front and center on the issue of how to pressure Iran when we became aware of its depredations. Senator D'Amato also served with distinction on the Committees on Appropriations and Finance in the Senate.
Senator D'Amato, it is a genuine pleasure to welcome you to our Committee's hearing. You are the father of the Iran-Libya Sanctions Act. It was in an effort to make ILSA more acceptable that we included a sunset provision some 5 years ago, so here we are, looking at that deadline head on.
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Senator, how should we evaluate ILSA? And I hope you will comment on whether it should be renewed for another 5 years.
Senator Alfonse D'Amato.
STATEMENT OF THE HONORABLE ALFONSE D'AMATO, FORMER U.S. SENATOR
Senator D'AMATO. Mr. Chairman, let me first commend you and the Committee for holding these hearings in a very timely way. Let me thank you for the great support that you and Members of the Committee 5 years ago gave, in a very meaningful way, so that we could pass expeditiously and continue the pressure to get that legislation signed. And, as you recall, it was not easy. It took a number of tragedies to finally move the Administration, notwithstanding that we had passed this legislation overwhelmingly, to have it signed into law.
I would like to take the opportunity of commending Congressman Cooksey for his straightforward presentation, because it seems to me that some of our allies like to have our support. But whenever the going gets tough, they are never there. They are just not there.
Let me also say it is a great honor to see my friend and former colleague Congressman Ackerman up and around, and he is looking as wonderful as ever with that wonderful boutonniere that he continues to champion.
Let me also say, so that we do not get into the business of repeating, because so much of what I have in my statement your Members have commented on, that, Congressman Sherman, you absolutely went in your remarks in a most cogent way to the heart of the issue.
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The heart of the issue is that there are those who are lobbying against ILSA today and unfortunately I think our State Department, and I have the greatest respect for Secretary Powell, a great American, a great leader, a great patriot, but I have to tell you, the State Department never wanted ILSA. They fought it when it first came up, they are opposed to it now. It makes their job tougher. Our allies get annoyed because they have companies who want to invest in Iran.
The question of whether or not, and Dr. Cooksey raised it and Congressman Sherman went right to the heart, does ILSA work, absolutely. Billions and billions of dollars that would have been invested in making the money machine for Iran, which is their oil and gas production, have not been invested as a result of ILSA. And, indeed, they will talk to you, those who say, oh, it is ineffective. They will say to you do you know that X company and Y company is investing, and our own companies cannot, and we are being disadvantaged, and it has had no impact. That is a distortion of reality because the fact of the matter is there have only been seven deals as opposed to 50 different offerings with respect investment opportunities.
The investment opportunities over the past 5 years have only brought in about $9 billion, much less than what would have been the case had we not had ILSA. Indeed, take the little tiny oil state of Qatar. It does not have nearly the great oil and gas fields that Iran has. During that same period of time, they attracted $18 billion in foreign investment.
Let me say to you if one wants to examine the records clearly, there is absolutely no doubt that the legislation that you, Mr. Chairman, Congressman Ackerman and others, supported and brought into law is working. It is effective. That is why we have so many of the industrial oil people, some sadly, our own nationals, who are saying, roll this back, because they want to be able to invest there and they have deals that otherwise have not and would not take place.
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Congressman Sherman absolutely went to center stage when he talked about the Iranian oil fields. They are old. They are failing. As a matter of fact, it is estimated that 90 percent of its oil comes from its oldest onshore fields, and their output is declining because they have not been rehabilitated with very expensive and advanced technology.
Iranian energy officials have had a dire warning that, since the mid 1990's, the output of some of these fields is in sharp decline. The CIA predicted in 1996, ''Unless Iran starts making massive investments in oil field maintenance, it will become a net importer of oil by the year 2005.''
As recently as January of this year, an Iranian expert warned that at the present rate Iran's oil exports would disappear due to domestic consumption.
My God, is this the time not to renew and to allow this to sunset?
Have we seen a real change in terms of Iran, in terms of its support of terrorism, in terms of its supplying over $100 million to groups like Hezbollah and others?
What about the 19 U.S. servicemen who were blown up in their barracks and the 500 others who were injured in Saudi Arabia?
Let me tell you, it is our outgoing great patriot Louis Freeh, head of the FBI, who just recently, in an article in The New Yorker magazine, said that the attack was a well coordinated effort by the Iranian government which recruited the terrorists, provided the passports, training and explosives to perpetuate the crime.
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Again, and I do not know Congressman Sherman, but I want to tell you you were right on when you said this myth, and you did not say it is a myth, but that is what we have created, about the leadership in Iran being more moderate. That is as it relates to their own internal political and domestic situation. But understand as it relates to the central core of what Iran is about, and supporting Hezbollah and other groups that have brought terror and death to American citizens and soldiers, they are one and the same. Make no mistake about it.
Mr. Chairman, I would like to submit the totality of my statement for the record, but suffice it to say this is not the time to abandon ILSA. This is the time to talk about the impact, the very beneficial impact, it has had in denying tens of billions of dollars that otherwise would have been invested, and help them increase not only their production, but give them additional latitude to fund terrorist activities against this country and our allies.
I thank the Committee for giving me this opportunity to participate. I commend you for what you are doing and I say stay the course.
[The prepared statement of Senator D'Amato follows:]
PREPARED STATEMENT OF THE HONORABLE ALFONSE D'AMATO, FORMER U.S. SENATOR
INTRODUCTION
Mr. Chairman, I am proud that five years ago, I introduced and the Congress passed the Iran-Libya Sanctions Act (ILSA). I believed then that Iran represented a threat to the United States and our interests. And I believe this is still true today. That's why I'm willing, and proud, to testify today to urge my former colleagues to renew the Iran-Libya Sanctions Act, because today Iran remains a grave threat to the United States and our interests. Iran has done nothing to deserve this free gift from the U.S.
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Iran was hit by American sanctions in 1995–96 the old fashioned way; they earned them, with support for terrorism, opposition to Israel and Middle East peace, and proliferation of weapons of mass destruction. According to people better informed than me, such as the U.S. government, Israel, Europe's intelligence agencies, and governments the world over, Iran is still doing the things that earned them the sanctions in the first place. And, in point of fact, these same sources agree that Iran is growing more dangerous and assertive, and is stepping up its support for terror activities and its pursuit of weapons of mass destruction, including ballistic missiles and nuclear bombs.
IRAN'S CONDUCT
WMD
Iran's proliferation of weapons of mass destruction (WMD) is not only a grave threat to the United States and Israel, but to all American allies throughout the wider Middle East. Some experts now believe that Iran could develop a nuclear device within the next five years. Iran in 1998 tested a missile, the Shihab-3, with the range to hit Israel, Turkey, Saudi Arabia and American bases throughout the region. The missile can potentially carry chemical or biological weapons, which Iran already possesses, and a nuclear warhead, which Iran is working to acquire. It is certain that within a few years, Iran will begin regular production of missiles with the range to cover much of the region and that sometime in next few years Iran will acquire nuclear capability.
Terrorism
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Indeed, in the past few days we learned new information that only strengthens my support for this legislation and its renewal. Outgoing FBI Director Louis Freeh, a great public servant from New York, reported that Iran is responsible for the deaths of 19 Americans in the 1996 Khobar barracks bombing in Saudi Arabia, which also injured 500. In an interview with The New Yorker magazine, Freeh said that the attack was a well-coordinated effort by the Iranian government, which recruited the terrorists and provided the passports, training and explosives to perpetrate the crime.
The latest State Department Report on Patterns of Global Terrorism, issued just last month, affirmed ''Iran remained the most active state sponsor of terrorism in 2000.'' The Report goes on to say that ''Iran provided increasing support to numerous terrorist groups, including the Lebanese Hezbollah, HAMAS, and the Palestine Islamic Jihad,'' the very groups responsible for terrorist attacks against innocent Israelis. The Report notes that official Iranian agencies ''continue to be involved in the planning and the execution of terrorist acts,'' that Iran's support for Hezbollah, HAMAS, and Islamic Jihad include ''funding, safe haven, training, and weapons,'' and that this support ''continued at its already high levels following the Israeli withdrawal from Lebanon in May and during the Intifada in the fall.'' Moreover, in the words of the Report, ''Iran continued to encourage Hezbollah and the Palestinian groups to coordinate their planning and to escalate their activities against Israel.''
A U.S. official told the LA Times this week that ''Iran's behavior has taken a nasty turn for the worse . . . since last fall. The increase has been pretty steady and pretty intense.'' Iran now reportedly spends $100 million annually on these groups. Iranian jetliners loaded with weaponry continue to land weekly in Damascus, where their cargoes are unloaded and trucked to Hezbollah forces in southern Lebanon. Iran has recently begun supplying Hezbollah with long-range 240mm katyusha missiles capable of reaching as far into Israel as Haifa.
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Iran's support for terrorism goes beyond Israel. Iran continues to fund, train, and provide logistical assistance to a variety of radical groups in the Persian Gulf, Africa, Turkey, and Central Asia, according to our State Department. And we know that Iran has used terrorism to force the U.S. out of the Persian Gulf.
Anti-Israel
One aspect of Iranian policy that is particularly egregious is their attitude to Israel. And there are no Iranian moderates on Israel; it is a consensus issue. Last December, Iran's Supreme Leader, Ayatollah Khamene'I, said, ''Iran's stance has always been clear ''this cancerous tumor of a state should be removed from the region.'' In February of this year, Khamene'i stated that, ''It is the mission of the Islamic Republic of Iran to erase Israel from the map of the region.'' And Iran's ''moderate'' President, Muhammad Khatami, last year called Israel an ''illegal state'' and told Yasir Arafat that ''All of Palestine must be liberated.'' On April 25—two weeks ago—Khatami called Israel ''a parasite in the heart of the Muslim world.''
ILSA's Effectiveness
It strikes me as the height of irony that the same State Department, that lobbied hard (and convincingly) for the Clinton administration to waive ILSA and render it ineffective, is now lobbying the Bush administration to allow ILSA to sunset because it is ineffective and makes the U.S. look foolish to pass a law that is ineffective. How do you say chutzpah in ''diplomatese?''
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Actually ILSA has been effective. The Congress acted to lower Iran's disposable income from selling oil in order to combat Iran's stepped up efforts to acquire weapons of mass destruction and support for terrorism, particularly terror against Israel and its peace efforts. And since ILSA was introduced in 1995, Iran has secured only seven contracts out of the more than 50 foreign investment opportunities Iran has offered to international energy companies since 1994, a success rate of 14 percent.
These seven projects netted Iran $9 to $10 billion, an average of $2 billion per year and well below what Iran's own planners expected. Tiny Qatar, with much fewer resources, did twice as well, receiving $18 billion in foreign energy investment over the same time period. International energy experts agree that Iran's crude oil productive capacity ought to be higher by now, a decade after the end of the debilitating Iran-Iraq war.
Foreign companies, with their access to capitol and technical expertise, are essential to Iran's plans to fix the many serious problems in its energy sector and increase income. This was the reason for ILSA. It did not target the Iranian people; nor does it affect food and medicine exports. It targets Iran's oil income, the source of 85 percent of its budget.
Iran's oil fields are aging; 90% of its oil comes from its oldest onshore fields and their output is declining output because they have not been rehabilitated by expensive and advanced technologies. Iranian energy officials have been warning since the mid-nineties that output at some aging fields is in sharp decline, after years of being pushed too hard. The CIA predicted in 1996 ''unless Iran starts making massive investments in oil field maintenance, it will become a net importer of oil by the year 2005.'' As recently as January 2001, an Iranian expert warned that at the present rate, Iran's oil exports would disappear soon due to domestic consumption.
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Iran now consumes over 40 percent of the energy that it produces, up from about 10 percent in the last year of the Shah's reign. These same experts cite requirements for $20 billion in foreign investment over the next 25 years just to maintain Iran's current oil export levels, well above the $2 billion average of the past five years.
Many companies cited the threat of U.S. sanctions when considering Iranian projects even before ILSA passed the House of Representatives in 1996. Investments by Shell, BHP, Elf Aquitaine, BP, Japan's JGC, Westdeutsche Landesbank, and Bow Valley Petroleum were delayed significantly or cancelled.
ILSA has also set back Iran's effort to attract foreign investment to develop its natural gas reserves, the world's second largest. Iran today remains a gas-poor country—its current production ranks only 17th. This is insufficient to meet its current domestic demand (and gas consumption is expected to rise 50 percent over the next five years). More importantly, its collateral impact is delaying Iran's oil recovery, since gas is used to refurbish aging oil fields. The gas shortage also means that Iran cannot supply gas to its neighbors through pipelines, nor substitute gas for some of the oil it consumes domestically. To offset this, Iran was forced in late 1997 to begin importing gas from Turkmenistan.
And the Iranians noticed its impact. A senior member of the Iranian parliament's oil commission in January 1997 conceded, ''Despite widespread arrangements by the [oil] ministry, foreign contractors are not much interested in engaging in petroleum projects in Iran.'' Iran even complained to the UN about ILSA in 1998: They said it created difficulties in the petroleum and oil sector, such as ''reduction in international investment, delays in . . . oil projects, cancellation of some tender contracts, technological shortcomings and increased negotiating expenses.'' President Khatami acknowledged later in 1998 that U.S. sanctions have ''inflicted damages upon us.''
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I know that American oil companies are lobbying you to allow ILSA to sunset. They rightly note that while some foreign companies have concluded investment contracts with Iran, they are not allowed to follow them due to the Executive Order, affecting American jobs and these companies' bottom lines. Well I can report to you that in the months before ILSA passed the Congress, no oil workers unions or individual workers contacted me to ask me to not support ILSA. I only heard from management. I also note that American oil companies are doing quite well today, judging by the performance of their stocks, without investing in Iran. These companies benefit from the protection of the US flag throughout the world. On rare occasions, for serious national security reasons, the price of having that flag behind them is not doing business with a country that is acting against American interests.
Mr. GILMAN. Senator D'Amato, we cannot thank you enough for taking the time to be here and to give us your current assessment of the ILSA act. I hope you have some time to stay with us for a while. We may want to call on you for comment on any of the issues raised.
Do you have sufficient time to be with us?
Senator D'AMATO. I have a few minutes, Mr. Chairman.
Mr. GILMAN. How long do you have?
Senator D'AMATO. A half hour.
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Mr. GILMAN. Well, then, let us do this. I am going to deviate and since it is only a half hour, we will allow our Members to question this witness and let me start off.
Senator, if ILSA were to lapse, how do you think Iran would react?
Will their hope that U.S. policy eventually will be driven entirely by commercial concerns be vindicated?
How do you think Europe will react if ILSA is not renewed?
Senator D'AMATO. Well, I think that there are two different propositions. Number one, Europe would love it. I mean, let us face it, the French will do anything——
Mr. GILMAN. We are having an audio problem.
You are back on. No?
I guess the French disconnection is one of our problems.
I do not know if the audio is still available. Bear with us a few moments and while we are waiting, let us allow our next witness to start until we get the audio reconstructed.
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Mr. Howard Kohr is our next witness and we would like to welcome Mr. Kohr, Executive Director of the American Israel Public Affairs Committee (AIPAC).
AIPAC is a membership organization with a tremendous grassroots presence in nearly every congressional district in the United States. It is recognized as the prime voice for those Americans who value a strong relationship between Israel and the United States.
Howard Kohr has been with AIPAC——
I think we are back on.
Senator D'AMATO. Yes.
Mr. GILMAN. All right. We will interrupt, Howard, and we will get back to you.
Senator D'AMATO. Howard, how are you?
Mr. Chairman, as I was saying, some of our allies, let us be very candid, are more interested in economic impact. They are not nearly as concerned with taking on the terrorist tactics because in many cases they have been spared these kinds of terrorist attacks. It is not their citizens, it is not their troops on the line, and it is not their ally, the state of Israel. And to be quite candid with you, they might be relieved and, indeed, that is the sad part.
In addition, your first question was how would Iran take this. They would not decrease their fervor in supporting the Jihad. They would not decrease their efforts aimed at America, the great Satan that they portray us as. They would see this as a sign that they were winning the struggle and, indeed, that we did not have the wherewithal to continue sanctions which are really crippling their oil production.
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Make no mistake about it, it is effective and, indeed, they will not be able to export oil. They will need it for their own domestic use. They are having great troubles with developing and maintaining even gas right now commercially within their country, and so we send the wrong signal for all the wrong reasons. The way to get their respect and earn it is to demonstrate that we keep our commitments, and that we are not going to be bowed and that we are not going to have economic interests by others take center stage.
Mr. GILMAN. Thank you, Senator.
Mr. Ackerman?
Mr. ACKERMAN. Thank you, Mr. Chairman.
Senator, during the early 1990's, Iran was spending over a billion dollars a year on their arms acquisitions. Between 1996 and 1999, it dropped dramatically to about $300 million a year.
What, in your view, would contribute to the dramatic decline in their procurement and what implications are there in light of this for ILSA? Do we attribute the decline just to ILSA?
Senator D'AMATO. Yes, I think so. I am not going to stay that singularly, but I will say—let me give you a little statistic. Iran now consumes, Mr. Congressman, over 40 percent of the energy that it produces. Over 40 percent. That is because their production levels are declining. That is up from 10 percent last year, and the experts who watch this say that they need $20 billion in foreign investments over the next 25 years in order to just maintain their current levels.
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How is that translated? So that is well above the $2 billion average that they have had these last 5 years.
That is translated in the fact that they do not have the hard currency to make those kinds of weapon acquisitions in the manner in which they did heretofore, and that is notwithstanding that they are getting more foreign oil now than ever before. So it just is an indication that ILSA has deprived them of billions of dollars that would be going into their war machine.
Mr. GILMAN. Thank you.
Dr. Cooksey?
Mr. COOKSEY. Thank you, Mr. Chairman.
I have a series of questions. Senator D'Amato, I am sorry I cannot pitch it up to you, you look great on the screen, but I cannot get you these questions. And it is good to see you again, too. But I am giving these questions to the three witnesses and the gist of the questions are, first, does any individual country support these sanctions or have similar measures? What about U.N. support?
Are there any or have there ever been any other instances of foreign governments sanctioning American firms in a similar way?
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How many foreign firms have actually been sanctioned?
What are foreign firms being allowed to do that Americans cannot do?
And how much are the U.S. sanctions costing Americans? What about American assets, particularly in Libya?
I would point out, and I just discovered this, that the author of the CRS report, Kenneth Katzman, is sitting right behind me. In his report on page 4 of the report, he says ''The Clinton Administration wanted the ILSA through, but they sought to balance implementation.'' They put the sanctions on and then turned around and gave waivers for France, the Dutch and everyone else. So it looks to me as if it is somewhat of a charade, if you put the sanctions on, the only ones that end up being sanctioned are our American oil companies and we did not enforce the sanctions against France, and specifically Total S.A. of France, Gazprom of Russia, Petronas of Malaysia, who are all trying to develop Iran's South Pars gas field.
So my questions are do the sanctions work if you are giving a waiver to all of our ''allies''?
Senator D'AMATO. Well, if you give waivers, blanket waivers, to all our allies and to everyone who comes to you, obviously you do not have nearly the impact that the sanctions can and were intended to have.
As it relates to the waivers with Total and Gazprom, absolutely disgraceful and they should never have been given.
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But I would note, Mr. Congressman, that not withstanding that there have been very real attempts to circumvent ILSA, there are, I think, only seven projects with a total of about $9 billion that have been invested or committed, and some of those projects have not even been started because they are concerned. The Japanese, for example, were very anxious to go in. They have been one of our great allies, as it relates to not charging in and putting money in where they had a very strong economic incentive to do so because we did express our concern.
Total, the French, you said it best—when planes are over—when it becomes important and when we have a mission and we strike out, you remember that Libyan situation.
Mr. COOKSEY. Absolutely.
Senator D'AMATO. We had to fly around them. And so theirs is a be damned attitude.
When you mentioned as it relates to their disgraceful support against the U.S. as it relates to the Human Rights Commission, that it is just the epitome. That epitomizes their kind of conduct and attitude toward us.
No, the Administration can be more forceful in seeing to it that the sanctions have greater strength and that we really mean it.
The fact of the matter is they have been less effective than they would have been, but still effective overall. And our oil companies, you know, you will hear the drumbeat, you have heard it, you are just impeding us and you are letting our competitors go in.
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Well, that is not the whole story, it is just a part of the story.
Mr. COOKSEY. Well, my closing comment is that if we can prove, and apparently the Director of the FBI has good proof, that the Iranian leadership is responsible for the bombing that cost the lives of our 19 airmen, when we can prove that these countries have carried out this terrorism, I believe that we should take the position of direct retribution on that leadership.
Now, that is not our law or our policy, but I think that would be probably more effective than these sanctions. I think the sanctions are another powder puff way of going about things, particularly when you had someone like Clinton that gives waivers to everyone.
Thank you, Mr. Chairman.
Thank you, Senator.
Senator D'AMATO. Thank you.
Mr. GILMAN. Thank you, Dr. Cooksey.
Mr. Sherman?
Mr. SHERMAN. I think we have talked about the waivers a bit. Do you have any insight as to how we could inspire the current Administration to not grant waivers, assuming we are successful in reauthorizing this bill?
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Senator D'AMATO. You know, Congressman, I wish I could give you any insight. I was basically rather ineffective as it related to the question of Total. I was in the Senate then and had real go-arounds. And the same thing with the Russian oil conglomerate.
I am very much concerned that we are just going to continue that pattern and that it may even become easier than it was in the past to get these waivers and to really then just basically say, well, we have this law but we are not implementing it, so go ahead in.
Once you give to the foreign governments and to the investment community—see, right now, there is still a doubt out there. That is why the billions that otherwise would have flowed in, even in some of these deals, by the way, that have been consummated where there were waivers, the investment bankers have been somewhat reluctant to commit. They are not really sure. There is instability, et cetera. But if you almost make this a matter of course that we are going to give waivers, et cetera. I tell you then it becomes self-defeating, and that is something that the Congress, by going to the Administration and by raising the level of public interest—I think if the American people knew, for example, that which I was not aware of until Director Freeh just indicated, that indeed the Iranians financed, orchestrated, brought about that attack that killed 19 U.S. servicemen. Do we forget so quickly? Those are our sons. Those are our families whose lives were shattered. And we just fail to do anything?
I am not suggesting that we send over bombers and bomb the hell out of everybody, but I am suggesting that we do everything we can to make life miserable for them and, economically, we still have the power to do something. So let us use at least that power to protect our citizenry.
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Mr. SHERMAN. I think you are wise to point out the need to publicize what happened at Khobar and to honor the 19 airmen who gave their lives.
I would like to yield at this point to my colleague from California, Mr. Berman.
Mr. BERMAN. I thank the gentleman for yielding.
I just want to make one point on the waiver. I share the Senator's chagrin and opposed the waiver at the time, but I think it is important to remember that was the only waiver granted and, if I recall correctly, Total had extricated itself from all its U.S. ties, so that none of the sanctions provided in ILSA would have actually been applicable to Total. Petronas had no such ties and I even think Gazprom at the end severed its ties. So that in the end, even had there not been a waiver, there were no relationships.
And I certainly agree that there are a lot of other deals that are thought of that that might have been commercially viable for companies that, because they did not want to sever their ties with the U.S., were not entered into.
Senator D'AMATO. Congressman, you are absolutely right and I am glad that you bring that back because now I have a better recollection because we had some bitterness over that.
The French finally made a decision that they had better pull out and they sold a bunch of their stations that they had. I forgot the group of retail stations, but it was a significant group and they severed that. So in essence, we are, in effect, saying that if you want to do business, and you want to invest in those who are our enemies, let us state it, the Iranian government as it exists, not the people, but the government and its policies, are counter to those of the United States and they have helped bring death and destruction to our people.
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We are saying you want do business with them, you cannot do it here, there is going to be a penalty. That is basically what we are saying. You make the choice.
And I believe that it is a very cogent way to deal with the situation. This is not a situation where we can just go in and invade and take over, nor are we looking to do that or use our great military strength to subdue the aggressor. No one is suggesting that. But to be less than vigilant as it relates to sending out a clear message, we are not going to countenance business as usual with you, Iran.
Mr. GILMAN. The gentleman's time has expired.
Mr. Chabot?
Mr. Issa?
Mr. ISSA. Thank you, Mr. Chairman.
Senator D'Amato, Darrell Issa. Long time no see.
Senator D'AMATO. How are you, Congressman?
Mr. ISSA. I am doing great. Good to see you well.
Senator D'AMATO. Good.
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Mr. ISSA. Over the years, watching you as a private citizen, the one thing that I remember is what a champion you were for the business community and for American companies working abroad. I wonder if you could comment for just a moment, as to whether the cup of coffee is 99 percent full or 1 percent empty. What is the relative size of the chunk of business that we are forsaking by not selling to Iran versus the amount of business that we do on a global basis? Perhaps your perspective after years of being a very pro business legislator would help people understand just how little we are really giving up.
Senator D'AMATO. Well, Mr. Congressman, you have just said it in your concluding remarks or observations. It is nickels and dimes as it relates to the total energy investment that our multi-national companies are making worldwide in just about every area of the world that you can think about, with the exception of Iran and Libya. As a matter of fact, there is not an area that you can think of that we are not pursuing additional exploration, additional development, and the construction of pipelines. It is minuscule.
May there be an opportunity that might be lost that otherwise we would like to undertake? Of course. But it certainly is not hurting the bottom line of our oil companies. It is not disadvantaging them from really carrying out their business. If you said, well, you know, we really cannot do business, you are impeding us to that extent, that is not the case. Exxon-Mobil reported profits of $5 billion this last quarter—$5 billion for the quarter. By the way, last year, same quarter, it was $1 billion. So, come on.
Would they like to maybe make a deal that otherwise they cannot and that one of their competitors—and who is Exxon-Mobil's great competitor that they have to fear might get a deal?
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And, you know, taking a deal and making a deal, Iran is a rather risky kind of business proposition as well. So it is not all roses for even those who choose and even those who negotiate, whether it is Total or anyone else.
So I think it is a very, very infinitesimal portion of business that they may be putting aside and, indeed, if the barriers were down, I would not be a bit surprised if many of those who say they are losing opportunities would choose not to enter that area because of the risk factors involved.
Mr. ISSA. Thank you, Senator.
I yield back the balance of my time.
Mr. GILMAN. Mr. Schiff?
Thank you.
Mr. SCHIFF. Thank you, Mr. Chairman.
Senator, I am a new Member from Los Angeles. I appreciate all your work in this area.
You started to address one of the two questions I had, and I wonder if you could share a little more of your thoughts on it, is how can we determine to what degree ILSA is effective rather than simply companies determining that investment in Iran is a bad risk and a risk they are not willing to take?
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And then, a second question, is if ILSA is only marginally effective—and I think, frankly, even if it is only marginally effective it is worth doing—are there ways that we can change ILSA to make it more effective?
Senator D'AMATO. Well, I think there is a way to make it more effective and that is to say to our allies that we are very serious about this, that we are not going to grant waivers, and that indeed you have to make choices and the choice here may be that that is an investment opportunity that you will have to put the side. But there are many more oil fields throughout the world, and, indeed, in that region, that have great potential, and to hold it out, and to suggest that maybe this is the most critical area, and somehow our energy needs would be enhanced and our people would be better, or that we are going to change this government's attitude just is not the case.
Let me say this to you. Let me tell you how effective this is. Let us talk just about gas, and I have this in my prepared remarks, I am talking about natural gas.
Iran today remains a gas poor country. Its current production ranks only 17th. Now, here we hear about this great energy producer that they are, so understand they are having—and as a result of their not having the billions of dollars that go into developing and maintaining these fields, this is sufficient to meet its current domestic demands and gas consumption is expected to rise 50 percent over the next 5 years. More importantly, its collateral impact is delaying Iran's oil recovery. Since gas is used to refurbish aging oil fields, the gas shortage also means that Iran cannot supply gas to its neighbors through its pipelines, nor substitute gas for some of its oil consumers. To offset this, Iran was forced in 1997 to begin importing gas from Turkmenistan.
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Now, if you follow the impact, what people would minimize is, oh, this is not working, it is. ILSA has had a devastating impact as it relates to the Iranians maintaining their oil fields, investing in modernization, and keeping them up. While their domestic consumption continues to increase, the aging fields produce less and less. They are now actually importing gas.
The fact of the matter, the U.S. sanctions have been—let me say this to you, here is what President Khatami says. In 1998, he said that the U.S. sanctions ''have inflicted damages upon us.''
Now, they do not want to admit this, but every once in a while they will come out with their statement. It has had an absolutely profound impact, and that has kept probably 20 plus billion dollars that would have and could have been invested from being invested.
It has also discouraged even those who have made decisions to go in and invest. It has slowed their activity down dramatically.
Mr. SCHIFF. And, Senator, other than shedding light and discouraging the Administration from granting any waivers in this area, are there any legislative steps that need to be undertaken to strengthen ILSA?
Senator D'AMATO. I think ILSA basically is a very powerful weapon. It is a weapon for peace, and it is a weapon that basically can and should be implemented fully. Only when and if we see clear signs, and not just talk about moderation, but see real steps, should wavers be granted. The answer is I do not know how we could improve upon its effectiveness. It will take an Administration that lets Iran know and Libya know that we are serious about living in peace, but that we are going to protect our interests and we will see to it that we do everything we can to discourage others from normal investment in, of course, their oil fields, unless they change their attitudes. And not just that, in a meaningful way, lest we see it demonstrated, lest they stop sending $100 million a year and that is what our intelligence reports estimate, they spend in funding just terrorist organizations.
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We need to see an action program by the Iranians before we begin then to grant waivers and go in a different direction.
So, no, I think the legislation must give the Administration sufficient flexibility because we might see a change. I am hopeful. I am hopeful if we are strong and resolute now that maybe a year from now, when ILSA is still hopefully still the law of the land, and the President is exercising his leadership in the way he has by placing them on the terrorist list, that we are not going to approve business as usual unless you change. Maybe they will change their course.
I think we give Secretary Powell greater strength when he has met, whether it is the Iranian leadership or whether it is to say, look, I can recommend and may recommend suspension or waivers, but you are going to have to demonstrate a conduct that gives me the ability to do that.
So I would keep the waivers intact. I think it is necessary for the Administration—and I have great confidence in General Powell in that he will not use these waivers as a way to decimate the intent of ILSA.
Mr. SCHIFF. Senator, thank you.
Mr. Chairman, I yield back the balance of my time.
Mr. GILMAN. Thank you.
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Mr. Chabot?
Mr. CHABOT. Thank you, Mr. Chairman, and thank you, Senator, for being with us this morning.
I have a three-part question. First of all, as you are well aware and we all are, for anybody who has gone to the gas pump lately, the price of gasoline, heating oil, and everything else has been going through the roof. Obviously we need to drill more domestically and conserve to some extent, but we need to deal with this problem and deal with it in the very near future. So one of the questions would be could you comment on the impact of this on the overall energy situation/crisis/problem that we have in this country.
Secondly, the goal of ILSA and the purpose, could you comment on how much of it is just to modify the Iranian behavior, which has obviously not been particularly successful thus far. One of the reasons that the renewal of ILSA is being urged is because they really have not changed, versus the idea that we are also doing it to keep them from getting additional resources to promote terrorism around the world. That is the second question.
And then the third, President Khatami has just announced, I believe last week, that he intends to run for another term, and he has obviously been in a somewhat of a battle or rivalry with the more hard line ayatollahs or leaders for some time now. Could you comment on whether there is any reason for us to hope that there may be some reason to be optimistic in the near future, or perhaps in the far future?
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If you could comment on those, I would be very appreciative, Senator. Again, thank you for your leadership.
Senator D'AMATO. Thank you, Congressman.
Let me address the area of production. There have been those who have said, we have an energy crisis. If we can get more oil into the system, obviously that should have a beneficial impact as it relates to the prices at the pump.
That is the way free markets basically work, but this not a free market. It is totally controlled. You have that cartel, the OPEC cartel. So consequently giving them the ability to produce more so that they can and will raise more revenues, will not drop the prices at the pump. They are still going to exercise that control.
The other problem is that it will ease their situation at home in terms of having the ability to put more out in the market so OPEC will just give them a greater share.
By the way, let me say this to you. I am tremendously disappointed in those who we have rescued and their short lived gratitude in terms of what the United States did, what former President Bush put on the line, and what our young men and women did in saving their skins. Because let me tell you, Saudi Arabia, you would be gone. You might be annoyed, and you have great economic power now, but you ought to get down on your knees and say we want to thank Allah that there was the great Nation of the United States, a great partner who came and saved us. What a terrible repayment they have given to us. Terrible. When they have yielded in so many cases and particularly when they keep these prices artificially inflated.
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Now, I am not suggesting we should be able to buy oil at $10 a barrel or $12, and I am not suggesting they should not make a good profit. But I am saying to you that what is taking place now is disgraceful. Absolutely disgraceful.
So I do not see that having any impact in their additional production.
Modify a conduct? Yes, hopefully, I think what we are saying. We do not think that ILSA in and of itself is going to get a rogue regime, or a fundamentalist group that is so filled with hate and that they, I believe, have distorted the basic beauty of their religion. And it is a beautiful religion, but people, you have humans now who are using this in a manner which certainly Allah has never intended, to direct hatred and means of mass destruction at whether its Israel and/or its allies in the United States. That was never intended. So what we are doing is it is a hope that you will modify it, but we are going to punish you because you deserve to be punished for what you have done. So it is modify and punish, it is a combination of both, and so far—and that comes to your last point—we have not been successful in getting them to modify.
The question about whether or not you have a more moderate leader as opposed to one who is more hard line within does not amount to much. The differences are minuscule, and they are more internal politics than they are in terms of how they would reflect in the conduct of foreign policy with other countries, and the United States and Israel in particular. So I think it is good propaganda. I think they have milked the hell out of this moderate guy, but absolutely nothing has changed as it relates to what their conduct is.
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Rhetoric is easy, but what is your conduct? What is the bottom line? What have they been doing? Have they really changed their actions? And they have not.
Mr. GILMAN. Thank you.
Mr. Berman?
Mr. BERMAN. Thank you, Mr. Chairman. I do not have a question for the Senator, but I just wanted to make a response to a comment by Mr. Chabot and Dr. Cooksey.
If ILSA has not been effective in deterring investment in the Iranian energy sector, then ending it will add nothing to our energy supply. I think there is a case to be made that it has been effective, but if the essential argument against renewing it is it has not been effective, then I do not think we can argue that its termination will now significantly increase our energy supply.
Secondly, Dr. Cooksey, if we ended ILSA tomorrow, American corporations and individuals would still be bound not to do business with Iran and not to develop economic relationships and trade with Iran based on unilateral presidentially imposed embargo that there seems to be a consensus of both the executive and legislative branches should be continued to so that ILSA, the irony is the ending of ILSA will simply eliminate whatever deterrent effect exists on foreign companies that want to do business with the United States and still pursue investment opportunities in Iran while still holding back the American companies from doing it. So I just wanted to make those points.
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I would like to yield the remainder of my time to Mr. Sherman, who did the same for me earlier.
Mr. SHERMAN. As we explore this bill, and I hope the other speakers will address this, the simplest thing is to simply extend this, but we may want to take a look to see whether we should eliminate the waiver provision or at least upgrade it to a national security waiver.
We also ought to take a look at how heavy the sanctions are to those companies. We have already, I think, had sanctions that were strong enough. Total just decided that they wanted to do business with Iran and would stop doing business with the United States. But the current law only requires the President to impose two out of six identified penalties, perhaps we want six out of six.
I am a member of the Financial Services Committee. The day before yesterday I spent a lot of time with Nasdaq and the New York Stock Exchange and increasingly it is going to be critical for foreign oil companies to have access directly to the American capital market, to in effect be listed on Nasdaq or listed on the New York Stock Exchange and perhaps we could add that as a seventh punishment.
So while I think ILSA has been effective as proven by the fact that Iran, as the Senator points out, is importing natural gas, we could make it perhaps more effective and perhaps as we go through the process we will see if the Committee and the Congress is of a mind to make it more effective.
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I think Dr. Cooksey is correct, that perhaps economic sanctions, no matter how effective, are not enough. Certainly if Director Freeh shows us that our 19 airmen were murdered, it may not be enough to deprive Iran of money. But I will tell you this, if we do not at very minimum extend ILSA, if we do not tell our corporations that their business as usual will have to be cut back, then we cannot turn to American servicemen and women and say go risk your lives on some mission or go undertake any harsher action against Iran. Before we ask our men and women in uniform to engage in any other activity, whether it be covert or overt, temporary or permanent, for retribution or to interfere with the nuclear weapons program, before we risk an American lives, we have to be willing to tell our corporations that they have got to do their part.
Mr. GILMAN. Thank you, Mr. Sherman.
If there are no other questions, I want to thank Senator D'Amato for his time, his effort to be with us this morning and his cogent remarks. They will be of great help to us as we consider the reauthorization of ILSA.
If you would like to stand by, we will keep you on.
Senator D'AMATO. Mr. Chairman, thank you, and thank you for your graciousness. I consider it a great privilege and an honor that you asked me to participate and extended the invitation. I want to commend all of my colleagues for the cogency of their observations, the questions they raised, and urge you to continue the battle. Good luck to all of you and thank you again, Mr. Chairman.
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Mr. GILMAN. Thank you, Senator D'Amato, and good luck to you and good health.
Senator D'AMATO. Thank you.
Mr. GILMAN. We will now proceed with our next witness. We are sorry we had to interrupt him earlier.
Howard Kohr, as I noted, is the executive director of AIPAC, the American Israel Public Affairs Committee. He has been with AIPAC for some 14 years and has been the executive director of that organization since 1996. He is a highly respected voice on Capitol Hill.
Mr. Kohr, you may proceed.
STATEMENT OF HOWARD A. KOHR, EXECUTIVE DIRECTOR, AMERICAN ISRAEL PUBLIC AFFAIRS COMMITTEE
Mr. KOHR. Thank you, Mr. Chairman. I want to thank the Subcommittee, first of all, for holding this hearing on the renewal of the Iran-Libya Sanctions Act, ILSA, and for inviting AIPAC to testify before you this morning. I ask that my full statement be included in the record.
AIPAC strongly supports the efforts led by Chairman Gilman, Representative Berman, and the overwhelming majority of this Subcommittee, to extend ILSA for another 5-year period of time. All the conditions 5 years ago when Congress unanimously enacted ILSA remain. Congress enacted this legislation because Iran at that time was the leading state sponsor of international terrorism, because it opposed the Arab-Israeli peace process. In fact, it opposed Israel's very right to exist, because it was pursuing acquisition of weapons of mass destruction and the missiles to deliver them.
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Libya for its part was under U.N. Security Council mandated sanctions for its role in the downing of Pan Am Flight 103.
Today, 5 years later, a Libyan intelligence officer has been found guilty of murder for his involvement in Pan Am 103 and Iran's objectionable policies and behavior have, if anything, gotten worse. In short, all of the factors which led Congress to act initially remain true today.
We have heard statements from the Members of the Committee and from Senator D'Amato about the comments that the leaders of Iran, both the religious leader and the political leaders in Iran, have said about Israel. Ayatollah Khameni said just a couple of months ago that the mission of the Islamic Republic of Iran is to erase Israel from the map of the region.
As for discussion about the moderate president of Iran, Khatami, just 2 weeks ago—this is the moderate leader of Iran—said that ''Israel is a parasite in the heart of the Muslim world.''
Their actions have supported these words. As has been noted, the State Department report on global terrorism issued just last month and quoted by Congressman Ackerman affirmed that Iran was the most active state sponsor of terrorism in the year 2000, and they continue to be involved in the planning and execution of terrorist acts.
Iran continues to encourage Hezbollah and Palestinian groups to coordinate their planning and to escalate their activities against Israel. All this, by the way, quoted from the State Department report. They are spending now approximately $100 million annually to support groups such as Hezbollah, Hamas and Islamic Jihad, with funds, safe haven, training and weapons.
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Iranian jet liners loaded with weaponry continue to land weekly in Damascus, Syria, where their cargos are unloaded and trucked to Hezbollah forces in southern Lebanon. Just this week, a boat left Lebanon filled with mortars, Katyusha rockets and anti-aircraft missiles destined for Gaza. It was intercepted by the Israeli navy. I think when the investigation of the source of these weapons is done, it will lead us back to Tehran.
Iran's support for international terrorism goes beyond merely Israel, as has been stated here by Senator D'Amato and others. As the latest New Yorker article points out, FBI Director Louis Freeh believes that Iranian intelligence officials were directly involved in the 1996 Khobar Towers bombing. And most significantly of all, Iran continues to seek weapons of mass destruction.
Russia is helping Iran today build a nuclear power reactor in Bushehr, which provides Iran the cover for its clandestine nuclear weapons program. Iran, which is currently one of the richest countries in both petroleum and in natural gas, has absolutely no need to develop ''peaceful'' nuclear power.
China has also assisted Iran's nuclear weapon program and both these countries in addition to North Korea have aided Iran's missile program. As has been stated earlier, Iran has tested a Shahab-3 missile with a range of 900 miles, capable of hitting any point in Israel, as well as any of our armed forces in that part of the world. And they are openly developing long-range ballistic missiles that could threaten Europe and the United States directly.
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The Iran-Libya Sanctions Act was designed to deter foreign investment in Iran's energy sector, and if we ask the question that has been asked today, has it been effective, I too would like to read some words directly from the Iranian government in a report that they submitted to the United Nations in 1998, where Iran stated that sanctions have ''led to the disruption of the country's economic system, caused a decline in its gross national product, weakened the country's ability to deal with its international lenders, and impeded credit transactions.''
It went on to report that ILSA has created difficulties in the petroleum and oil sector, such as ''reduction in international investment, delays in . . . oil projects, cancellation of some vendor contracts, technological shortcomings, and increased negotiating expenses.''
These, by the way, are the words of the Iranian government, to answer the question whether this has been effective or not.
As has been pointed out earlier, the regime in Iran since the fall of the shah has not made any investments in its own petroleum and natural gas infrastructure and that has led to the difficulties that have been enumerated.
Keeping foreign investment out has prevented the reinvigoration of this crucial sector, which provides the wherewithal for the support for terrorism as well as its support for acquisition of weapons of mass destruction.
Over 50 foreign investment opportunities have been put forward by the Iranian government since 1995. As has been mentioned, only seven of them have been funded. And we have read about any number of potential imminent contracts that are about to be signed, but they have never come to fruition.
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Yes, part of that is no doubt due to the difficulties that Iran has in attracting foreign investment, but there is no doubt that it is also because ILSA acts as a further complication for foreign corporations trying to decide where to invest in energy development.
And, yes, the French company Total has invested in Iran, but it made a conscious decision to divest itself of all of its holdings in the United States, and I would suggest there are not many other companies willing to do that in order to do business merely with Iran.
The point of ILSA is twofold: to raise the cost of Iran's dangerous policies and to delay the time for it to acquire weapons of mass destruction. And on that score, I would argue ILSA has been very successful. Raising the costs and delaying the time line may allow for political change in Iran. That day will someday come, and we in the meantime must do everything we can to delay Iran's ability to acquire weapons of mass destruction long enough so that political change may occur.
If Congress renews ILSA for another 5 years, it will send a strong message, a new message, particularly to those who eagerly await the demise of ILSA. It will reinvigorate the deterrent effect of ILSA and do so just at the start of a new Administration when everyone is watching to see how the United States will react.
If, on the other hand, we allow ILSA to expire, it will be interpreted by the Iranian regime and others as a weakening of America's opposition to Iran's programs that threaten our vital interests.
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Mr. Chairman, Iran has done nothing to warrant such a reward.
The expiration of ILSA would provide Iran a potential windfall by allowing unfettered foreign investment in its petroleum industry, thereby securing its petroleum capabilities and its ability to fund its weapons program and support for terrorism indefinitely.
And, this is a critical point, it would secure the hard liners in power. It would be seen by the moderates and those inside Iran who are seeing true change in Iran as a weakening of America's posture against the very regime they are seeking to change.
Thus, Mr. Chairman, I urge the Congress to renew the Iran-Libya Sanctions Act. Iranian behavior demands it. ILSA has met the test and proven its effectiveness over time. Its expiration now would be a major and totally undeserved victory for the Islamic Republic of Iran.
Thank you.
[The prepared statement of Mr. Kohr follows:]
PREPARED STATEMENT OF HOWARD A. KOHR, EXECUTIVE DIRECTOR, AMERICAN ISRAEL PUBLIC AFFAIRS COMMITTEE
Thank you, Mr. Chairman. I want to thank the subcommittee for holding this hearing on the renewal of the Iran-Libya Sanctions Act—ILSA—and for inviting me to testify before you this afternoon. The American Israel Public Affairs Committee strongly supports the efforts led by Chairman Gilman and Rep. Berman to extend ILSA for another five year period.
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Five years ago, when Congress unanimously enacted ILSA, it did so because Iran was the leading state sponsor of international terrorism, because it opposed the Arab-Israeli peace process, and, indeed, Israel's very right to exist, and because it was pursuing the acquisition of weapons of mass destruction and the missiles to deliver them. Libya, for its part, was under UN Security Council-mandated sanctions for its suspected role in the downing of Pan Am 103. Today, a Libyan intelligence officer has been found guilty of murder for his involvement in Pan Am 103 in the words of the court ''in furtherance of the purposes of . . . Libyan Intelligence Services,'' yet Libya continues to refuse to acknowledge its role and to pay compensation to the families of the victims. And Iran's objectionable policies and behavior have, if anything, gotten worse. In short, all of the factors which led Congress to act initially remain true today, and both Iran and Libya deserve to remain to remain subject to the sanctions outlined in ILSA.
I want to divide my testimony today into three parts: outline what Iran is doing today, to discuss the effectiveness of ILSA, and to look at the consequences of allowing ILSA to expire.
IRAN'S THREATENING POLICIES
Support for International Terrorism and Rejection of Israel's Right to Exist
Let me start with Iran's state support for international terrorism. The latest State Department Report on Patterns of Global Terrorism, issued just last month, again affirmed that, ''Iran remained the most active state sponsor of terrorism in 2000.'' The Report goes on to say that, ''Iran provided increasing support (emphasis added) to numerous terrorist groups, including the Lebanese Hizballah, HAMAS, and the Palestine Islamic Jihad,'' the very groups responsible for the countless terrorist attacks against innocent Israelis. The Report notes that official Iranian agencies ''continue to be involved in the planning and the execution of terrorist acts,'' that Iran's support for Hizballah, HAMAS, and Islamic Jihad include ''funding, safehaven, training, and weapons,'' and that this support ''continued at its already high levels following the Israeli withdrawal from Lebanon in May and during the intifadah in the fall.'' Moreover, in the words of the Report, ''Iran continued to encourage Hizballah and the Palestinian groups to coordinate their planning and to escalate (emphasis added) their activities against Israel.''
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Iran is now reportedly spending $100 million annually on these groups. Iranian jetliners loaded with weaponry continue to land weekly in Damascus, where their cargoes are unloaded and trucked to Hizballah forces in southern Lebanon. Iran has recently begun supplying Hizballah with long-range 240mm mortars capable of reaching Haifa and beyond.
Late last year, Iran announced the formation of the International Anti-Zionist Movement, an eight-member alliance designed to undermine the peace process. The head of the organization is Mohsen Rezaie, the former head of the Iranian Revolutionary Guard and a close associate of Iran's Supeme Leader, Ayatollah Khamene'i. A statement sent by the new organization to the heads of all Islamic states said, in part, ''We ask you, before the vast storm of Islamic countries, to mobilize to destroy Israel and create problems for those governments who defend it . . .'' Rezai said that, ''Iran will continue its campaign against Zionism until Israel is completely eradicated.''
In January, Iranian officials met in Beirut with representatives of Hizballah, HAMAS, Islamic Jihad, and the Popular Front for the Liberation of Palestine—General Command to discuss ways to cooperate in attacks aimed at Israel and US targets. Two weeks ago, Iran hosted a follow-up session in Tehran with the leaders of these groups.
There are those who note a power struggle going on inside Iran between hard-line clerics, led by Iran's Supreme Leader, Ayatollah Khamene'i, and supposedly moderate clerics, led by President Khatami. Whatever the reality of that struggle, it is clear that their differences do not extend to Iran's support of international terrorism nor to their opposition to Israel's very existence. Last December, Ayatollah Khamene'i said that, ''Iran's stance has always been clear on this ugly phenomenon (Israel). We have repeatedly said that this cancerous tumor of a state should be removed from the region.'' In February of this year, Khamene'i stated that, ''It is the mission of the Islamic Republic of Iran to erase Israel from the map of the region.''
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And Iran's so-called ''moderate'' President Khatami last year called Israel an ''illegal state.'' Last August he told a visiting Yasir Arafat that the peace process was doomed to fail and that, ''All of Palestine (emphasis added) must be liberated.'' On April 25—two weeks ago—Khatami said Israel ''is a parasite in the heart of the Muslim world.''
Iran's support for international terrorists goes beyond Israel, however. The State Department Report noted that Iran continued funding, training, and logistical assistance to a variety of radical groups in the Persian Gulf, Africa, Turkey, and Central Asia. An article in this week's The New Yorker confirms that Iran has been directly involved in terrorist activities against American targets. According to this article, the FBI has a long list of people—including Iranian intelligence officials—who it believes should be indicted for the 1996 Khobar Towers bombing in Saudi Arabia that killed 19 U.S. servicemen and injured 500 others.
Iran's Pursuit of Weapons of Mass Destruction
The United States Government has repeatedly reported on Iran's efforts to acquire weapons of mass destruction and the missiles to deliver them. The CIA's annual proliferation report to Congress has noted Iran's clandestine nuclear weapons program for a number of years. Russia is rebuilding Iran's nuclear power reactor at Bushehr that was damaged during the Iran-Iraq war. Iran, one of the world's richest countries in both petroleum and natural gas has, of course, absolutely no need to develop ''peaceful'' nuclear power; and yet it has agreed to pay the Russians billions of dollars for just such a capability.
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The Clinton Administration sanctioned a number of Russian entities for their clandestine nuclear weapons cooperation with Iran, yet the assistance continues. Just this past winter, the Clinton Administration vigorously sought to dissuade Russia from providing Iran isotope separation technology with which it could ultimately produce its own weapons-grade nuclear material. It is as yet unclear whether that transaction has been permanently shut down. China has also assisted Iran's nuclear weapons program, and both these countries, in addition to North Korea, have aided Iran's missile program.
A Defense Department study entitled, ''Proliferation: Threat and Response,'' issued this past January stated that Iran is seeking the full range of weapons of mass destruction: nuclear, chemical, and biological weapons, and is expanding its missile program. Iran has already flight tested the Shahab-3, a medium range ballistic missile with a range of 900 miles—that is, a missile that can reach any point in Israel as well as hitting American forces in the region.
The study reported that Iran is eventually planning to develop intercontinental ballistic missiles that could threaten Europe and the United States directly. It added that ''Iran is striving to indigenously produce ballistic missiles and become a supplier state.'' The report came to the not startling conclusion that were Iran to possess nuclear and missile capabilities, it would likely lead to increased intimidation of its Gulf neighbors and an increased willingness to confront the United States. Both American and Israeli intelligence are reported to believe that Iran could have such a capability within the next decade. The timing could be considerably shortened if Iran were to obtain the necessary fissile material from abroad.
One can only imagine what the United States and our friends in the region would confront were the clerical regime in Iran to obtain such capabilities. Imagine a nuclear-armed Iran sitting astride the Persian Gulf shipping lanes through which so much of the world's petroleum resources flow. Imagine what Israel would confront. Imagine how much more severe would be the dangers of Iranian-supported terrorist groups emboldened by the Islamic Republics new weapons capabilities and the likelihood of Iran sharing these weapons with these very same groups. Clearly, Mr. Chairman, we believe the United States must do all it can—for our own sake and for that of our allies—to prevent such nightmare scenarios from becoming realities.
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THE ROLE OF ILSA
Over the course of the last five years, both the executive branch and the legislative branch of the US government have made concerted efforts to do precisely that—prevent Iran from gaining such dangerous capabilities. To demonstrate that direct American action was required to stop weapons proliferation, Congress in 1996 overwhelmingly passed the Iran-Libya Sanctions Act (ILSA), and last year enacted the Iran Nonproliferation Act, again overwhelmingly. The Clinton Administration made Russian transfers of dangerous technologies to Iran a very important item on the agenda of our bilateral relations with Moscow and engaged our allies to tighten their own nonproliferation controls. We are pleased that the Bush Administration has pledged to maintain this priority and take the necessary measures to address this serious national security problem.
ILSA was designed to deter foreign investment in Iran's energy sector. It was based on a few simple facts: 1) Virtually all Iran's hard currency earnings are derived from its energy exports. It is this revenue that provides Iran the wherewithal to pay for its programs to acquire weapons of mass destruction and its support of terrorism. 2) Since the fall of the Shah through 1995, the clerical regime of Iran made no investments in its own petroleum and natural gas infrastructure; as a result, its production capabilities have declined by more than a third since 1979. At the same time, its population has doubled, meaning that Iran's export earnings per capita have dropped to about only one quarter of their level under the Shah.
Iran's oil fields are aging. Ninety percent of its oil comes from its oldest onshore fields and their output is declining because they have not been rehabilitated by expensive water separation and gas reinjection. Senior Iranian officials have been warning since the mid-nineties that output at some reservoirs is in sharp decline after years of being pushed too hard.
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If foreign investment could be prevented from reinvigorating this crucial sector to Iran, then its production capabilities would continue to decline, and with it, Iran's ability to continue its weapons programs and its support for terrorism. Indeed, the CIA estimated in 1996 that ''unless Iran starts making massive investments in oil field maintenance, it will become a net importer of oil by the year 2005 (emphasis added).''
Not surprisingly, Iran has, since 1995, sought a great deal of foreign investment. It has promoted over 50 foreign energy investment opportunities. As of the end of the year 2000, only seven contracts had been secured, a success rate of 14 percent. These seven projects have netted Iran less than $10 billion, less than $2 billion a year and well below what Iran's own planners expected. Compare that to tiny Qatar, with much fewer petroleum resources. During the same time frame, Qatar received twice as much foreign investment—$18 billion—in its energy sector.
Iran's own government has admitted that ILSA has been effective in deterring investment. In an August, 1998 report to the UN, Iran stated that ILSA had ''led to the disruption of the country's economic system, . . . caused a decline in its gross national product, . . . [and] weakened the country's ability to deal with its international lenders, . . . which impeded credit transactions.'' Iran went on to report that ILSA created difficulties in the petroleum and oil sector, such as ''reduction in international investment, delays in . . . oil projects, cancellation of some tender contracts, technological shortcomings, and increased negotiating expenses.'' President Khatami acknowledged later in 1998 that US sanctions had ''inflicted damage upon us.''
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In short, Mr. Chairman, ILSA is an example of sanctions legislation that has worked. There are those who will assert that foreign investment in Iran is just about to really take off. Over the past five years, I have read about any number of imminent contracts about to be signed. Most, however, never came to fruition. That is, no doubt, in part true because of Iran's own problems in attracting foreign investment. But it is also undoubtedly true because ILSA acts as a further complication for foreign corporations trying to decide where to invest in energy development.
Indeed, ILSA is a carefully balanced piece of legislation that is narrowly and effectively targeted only at foreign energy investments in Iran. The legislation provides our government with the necessary tools to stop or at least deter this investment. The menu of sanctions from which the President must choose ranges from the minor—such as prohibiting the Export-Import Bank from extending credit to sanctioned entities—to the major—such as invoking an import ban on these foreign entities. When Royal Dutch Shell, for example, with its hundreds of gasoline service stations in the United States, has to decide whether or not to invest in Iran, certainly ILSA requires consideration.
ILSA is a good example of how sanctions legislation should be done. While addressing an issue of vital national security interest to the United States, it does not tie the President's hands but indeed provides great flexibility. If the President has determined that a sanctionable action has occurred, he may, if he determines that it is in the US national interest, waive the application of sanctions. ILSA also is narrowly targeted at foreign companies and does not in any way restrict agricultural or medicinal trade between American companies and Iran.
The point of ILSA is twofold: to raise the cost of Iran's dangerous policies and to delay the time for it to acquire weapons of mass destruction. And on that score I would argue ILSA has been very successful. Unless Iran is able to somehow obtain fissile material, it will have to master the entire nuclear fuel cycle in order to indigenously produce weapons-grade material. That is a long and costly endeavor. Raising the costs and delaying the timeline may allow for real political change in Iran. As we have seen from Iran's continuing efforts to seek weapons of mass destruction and support terrorism, ILSA alone is not enough but it is a necessary policy tool of our government to delay Iranian success in these efforts as long as possible.
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I have no doubt that the vast majority of Iranians would end clerical rule if they had the opportunity to do so. One reason so-called clerical ''moderates'' do so well in Iranian elections is that they are the most moderate allowed to run. They are, nevertheless, part of the clerical regime, and Iran has been experiencing considerable civil unrest over the past year in opposition to the regime. Unfortunately, we have seen no evidence whatsoever of any ''moderation'' in Iranian foreign or national security policy and the changes at home have been minor and are reversible. Witness the 9 Iranian Jews that have been falsely charged and imprisoned; the closing of Iranian dissident newspapers; and the arrest of dissident leaders.
In short, our hope must be that we are able to delay Iran's acquisition of weapons of mass destruction long enough so that political change may occur. That is one of the underlying objectives of ILSA and it is based on historic experience elsewhere. In the early 1980's, Argentina, Brazil, and Chile all had nuclear weapons programs. All were ruled by the military. The United States imposed restrictions in nuclear commerce with the three. Today, all three are democracies, and none of them have nuclear weapons programs. Delay allowed eventually for political change and an end to a nuclear proliferation threat.
Moreover, if Congress does renew ILSA for another five years, as I hope it will, it will send a new message to those now eagerly anticipating its demise. It will reinvigorate the deterrent effect of ILSA, and do so just at the start of a new administration.
IF ILSA IS NOT RENEWED
Put simply, were ILSA allowed to lapse, it would be broadly interpreted by the Iranian regime, and others, as a weakening of America's opposition to Iran's policies and programs that threaten our vital interests. Iran has done nothing to warrant such a reward. Indeed, even those who have argued these past years that Iranian moderation was forthcoming have to admit that the Islamic Republic's international behavior has deteriorated not improved. Its weapons development program has accelerated; its financial and arms support for terrorists has increased both quantitatively and qualitatively; and its objections to an Israel-Arab peace process are as vociferous as ever. Based on this record, we would not only fail to derive any benefit from allowing ILSA to lapse, we would put our country and our allies at even greater risk.
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Over the past three years, the United States has made it abundantly clear to Iran that we wished to improve relations. We took several unilateral steps that were all rebuffed. We eased import restrictions on some Iranian products; we provided greater ease of travel between Iran and the United States and even encouraged Americans to visit; we sought to open a dialogue with the Iranian regime—all to no avail. Hard-line clerics shut down every initiative while continuing to pursue policies and programs inimical to our interests.
But couldn't the lapsing of ILSA be seen as a gesture of support to Iranian moderates? Quite the contrary. The expiration of ILSA would provide Iran a potential windfall by allowing unfettered foreign investment in its petroleum industry, thereby securing its petroleum capabilities—and its ability to fund its weapons programs and support of terrorism—indefinitely. It would secure the hard-liners in power. And it would be seen by moderates hoping for political change in Iran as a weakening of America's posture against the very regime they seek to change.
Thus, Mr. Chairman, I strongly urge the Congress to renew the Iran Libya Sanctions Act. Iranian behavior demands it; ILSA has met the test and proven its effectiveness over time; and its expiration now would be a major, and totally undeserved, victory for the Islamic Republic, leading to potentially disastrous consequences to vital American national interests. We must, in short, remain vigilant and steadfast.
Mr. GILMAN. Thank you, Mr. Kohr.
The next witness that we will hear from is Dr. Patrick Clawson. Dr. Clawson is Director for Research at the Washington Institute for Near East Policy. The institute has served as a place where individuals on all sides of the issues in the Middle East have been able to gather and have informative exchanges. Many high officials of various Administrations are among its alumni, including former special Middle East coordinator Dennis Ross and former NSC official and American Ambassador to Israel Martin Indyk.
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I would also welcome a recent arrival from the institute, Mr. Alan Wicovski, who recently joined the Democratic staff here.
Dr. Clawson is a recognized authority on Gulf issues and in the political economy of the Middle East and has appeared before the Committee many times.
Welcome, Dr. Clawson.
STATEMENT OF PATRICK CLAWSON, PH.D., DIRECTOR FOR RESEARCH, THE WASHINGTON INSTITUTE FOR NEAR EAST POLICY
Mr. CLAWSO