Washington, D.C. - One of this country's most pressing and potentially dangerous foreign policy challenges involves Iran's development of nuclear weapons and their means of delivery. A nuclear capable Iran would fundamentally alter the situation in the Middle East.

Furthermore, Iran's support for some of the most dangerous terrorist organizations in the world, and its exploitation of those organizations to undermine efforts at peace and stability in the Middle East make it imperative that we continue to examine the role of economic sanctions in limiting the scope of its conduct. Confronting the scourge of terrorism remains the central tenet of U.S. national security policy. Terrorist organizations from the Middle East to Southeast Asia, to say nothing of terrorist tactics employed by insurgents in our own hemisphere, continue to present serious challenges.

It is in this context that the Committee today will hear from the Administration its view on reauthorization of the Iran Libya Sanctions Act, or ILSA. That statute, passed in 1996 and renewed in 2001, targets foreign entities that seek to invest in the development of Iran's oil and natural gas industries - industries vital to Iran's economic well-being and, by extension, presumably vital to its ability to develop a nuclear weapons complex.

Since the revolution of 1979, the Iranian regime has remained an implacable foe of United States interests in the Middle East. The blossoming of democracy we thought and hoped we saw with the 1997 election of President Mohammed Khatemi proved short-lived, as the ruling theocracy subverted genuine democratic reform at every turn. In fact, those early gains now appear to have been lost following last year's election of Mahmoud Ahmadinejad. Ahmadinejad's open hostility towards the United States and towards the existence of the State of Israel, combined with his government's commitment to carrying out activities consistent with the development of nuclear weapons, have placed a premium on the effectiveness of sanctions programs targeting Iran, especially those sanctions intended to minimize the financial assets available to develop weapons of mass destruction and the ballistic missile technology to effect their delivery.

There seems little question that ILSA has been effective in impeding Iran's ability to modernize its energy sector. Even though the test case for its application, the French company Total SA's $2 billion agreement with Iran for development of the South Pars gas field, resulted in a presidential waiver rather than the imposition of sanctions, the $11 billion in new contracts signed since then remain in limbo by virtue of foreign concerns regarding ILSA's potential application, concerns more recently supplemented by fear of additional sanctions or military action. That Iran has nonetheless moved forward with activities consistent with the development of nuclear weapons is not a testament to ILSA's lack of effectiveness, but rather to the vast increase in revenue resulting from the increase in oil prices over the past two years.

In addition to the questions of whether and how to reauthorize ILSA, the Committee is interested in hearing from today's witnesses on the importance of other economic sanctions regimes that target Iran. In this regard, the Committee looks forward to hearing from the Treasury Department on implementation of Executive Order 13382, the President's WMD proliferation initiative that imposes financial sanctions on foreign entities determined to be assisting in the development of nuclear, chemical or biological arms and their means of delivery. Development of an indigenous nuclear weapons capability is beyond the means of all but a few countries. Iran has received assistance in developing its nuclear complex. This raises the question about how the issuance of Executive Order 13382 effected this situation?

The Committee is pleased to have with us today the Honorable Nicholas Burns, Under Secretary of State for Political Affairs, and the Honorable Patrick O'Brien, Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes. The Department of State is the lead agency for implementation of ILSA. The Department of Treasury, particularly its Office of Foreign Assets Control, is vested with authority for administration and enforcement of U.S. economic sanctions. Their appearance here today will help the Committee to better understand the role ILSA and other economic sanctions regimes have and continue to play in containing or impeding Iran's ability to conduct activities threatening to U.S. interests.