REP. TOM LANTOS (D-CA): The committee will come to order.

For decades to come, the world's pre-eminent historians will analyze the Iraq War and its manifold impact. But one impact is already clear: when dealing with a looming threat to international peace and security, Congress will insist that all -- and I mean all -- diplomatic and economic remedies be pursued before military action is undertaken.

We are far from having exhausted all diplomatic and economic options for stopping Tehran's headlong pursuit of nuclear weapons. Talk of military intervention is unwise and unsupported by Congress and the American people.

I am very pleased that the administration has recently reversed course and will join Iran and Syria for discussions on stability in Iraq. Perhaps this diplomatic contact with Iran might pave the way for a broader dialogue with Tehran designed to bridge the gulf between our two nations.

But diplomacy with Iran does not stand a chance unless it is backed by strong international sanctions against the regime in Tehran. Iran's theocracy must understand that it cannot pursue a nuclear weapons program without sacrificing the political and economic future of the Iranian people.

That is why this week I am introducing the Iran Counter- Proliferation Act of 2007. The objective of my legislation is two- fold: to prevent Iran from securing nuclear arms and the means to produce them and to ensure that we achieve this goal in a peaceful manner. My legislation will increase exponentially the economic pressure on Iran and empower our diplomatic efforts by strengthening the Iran Sanctions Act.

It will put an end to the administration's ability to waive sanctions against foreign companies that invest in Iran's energy industry. Until now, abusing its waiver authority and other flexibility in the law, the executive branch has never sanctioned any foreign oil company which invested in Iran. Those halcyon days for the oil industry are over.

If Dutch Shell moves forward with its proposed $10 billion deal with Iran, it will be sanctioned. If Malaysia moves forward with a similar deal, it too will be sanctioned. The same treatment will be accorded to China and India should they finalize deals with Iran.

The corporate barons running giant oil companies -- who have cravenly turned a blind eye to Iran's development of nuclear weapons -- have come to assume that the Iran Sanctions Act will never be implemented. This charade will now come to a long overdue end. My legislation goes beyond the waiver issue. If a nation aids Iran's nuclear program, it will not be able to have a nuclear cooperation agreement with the United States.

Import sanctions will be re-imposed on all Iranian exports to the United States. The Clinton administration lifted sanctions on Iranian carpets and other exports in an effort to encourage Tehran to undertake a dialogue. It is self-evident that this diplomatic breakthrough has not occurred, and the favor offered Iran will now be revoked.

My legislation also calls on the president to declare the Iranian Revolutionary Guard Corps a terrorist group. The Revolutionary Guard and its Quds Force train terrorists throughout the Middle East, including in Iraq and in Lebanon. The Revolutionary Guard, which is a major base of support for Ahmadinejad, owns huge economic enterprises in Iran. Foreign banks will think twice about dealing with these enterprises once the Guard is declared a terrorist organization.

All of these actions will deprive Iran of the funds that currently support and sustain its nuclear program. I will also join with my distinguished colleague Barney Frank, the chairman of the Financial Services Committee, in introducing legislation to limit pension fund investment in foreign companies that pour money into Iran's energy industry. A variety of means will be used for this purpose from name and shame for private funds to mandating divestment for public funds.

I want to acknowledge with pleasure the Ranking Member's leadership on the Iran divestment issue and other Iran sanctions legislation and I fully anticipate that key elements of her proposals will be incorporated in our bipartisan bill. The reason for this all- encompassing approach -- and for its urgency -- is that we have so little time.

Iran is forging ahead with its nuclear program, in blatant defiance of the unanimous will of the U.N. Security Council and the International Atomic Energy Agency. Before it is too late, we must try to persuade others to join us in increasing the diplomatic and economic pressure on Iran and where necessary, we must give them incentives to do so. I now turn to my friend and colleague, the esteemed ranking member of this committee, Ileana Ros-Lehtinen, for any comment she might choose to make.

 

OPENING STATEMENT OF

ILEANA ROS-LEHTINEN
A Congresswoman from Florida, and
Ranking Member of the House Committee on Foreign Affairs

 

REP. ILEANA ROS-LEHTINEN (R-FL): Thank you so much, Mr. Chairman.

Thank you, Undersecretary Burns, for testifying before our committee today. There are a growing number of voices arguing for the United States to engage Iran and even to enter into negotiations with its regime.

I believe that this would be a disastrous mistake. Direct or indirect U.S. engagement with the Islamic regime without preconditions would only be interpreted as evidence that, regardless of what the U.S. proclaims about our resolute opposition to Iran's destructive policies, we will in fact overlook that regime's continuing support of terrorists, including those like Hamas and Hezbollah. We will ignore its moves to dominate the Persian Gulf and its defiance of U.N. resolutions.

Worse, it undermines our all-important efforts to stop Iran from acquiring nuclear weapons. Our willingness to discuss diplomatic ties and the removal of North Korea from the list of state sponsors of terrorism in exchange for initial temporary assurances from North Korea further undermines our efforts in dealing with Iran. We must stay focused on denying the Iranian regime the political and the diplomatic legitimacy, the technology and the resources to continue its destructive policies.

We are at a critical juncture and the opportunity for successful application of our sanctions has never been greater. Iran's economy is heavily dependent on its energy sector, which requires foreign investment. According to James Phillips of the Heritage Foundation, he said the United States should lead international efforts to exploit Iran's Achilles heel: its faltering economy.

High oil prices have boosted Iran's regime but it allowed it to postpone long-needed economic reforms. Iran's rapidly growing population is plagued by high unemployment, high inflation, endemic state corruption and low economic growth. Iran's oil sector, which provides for about 85 percent of export revenues, are projected to shrink without huge injections of foreign investment, technology and expertise.

Also, Jim Woolsey, the former director of the CIA made the following assessment during his testimony in front of our committee in January. He said Iran's economy is driven by oil exports and we have indeed begun to have some effect on its oil production by our efforts -- although they could well be intensified -- to dry up its oil and gas developments.

In order to succeed in placing the necessary economic pressure on Iran, it is critical that we follow up with our two-track strategy and have it be implemented. The first is that we ourselves, what we can do -- which is enforcing our existing laws and building upon them.

Secondly, convincing other nations that they must take effective action and simply not hide behind the U.N. Security Council to avoid their own obligations. These nations must show that they are committed to non-proliferation or face consequences in their relations with the United States. At the crux of securing such commitment from other nations is full implementation of all sanctions under U.S. law, namely the Iran Sanctions Act.

This and other Iran-related laws were strengthened by the Iran Freedom Support Act which I introduced last Congress, with my distinguished colleague, chairman of the full committee, Tom Lantos and which was enacted into law by the president in September of last year.

In the last few months there have been multiple reports of proposed investment deals in Iran. As the chairman pointed out, in Iran's energy sector that would be in violation of some of these laws. Some of the firms includes China's national offshore oil corporation, Australian's LNG, Royal Dutch Shell in cooperation with the stain company, Repsol, and Malaysia's SKS.

These entities are testing the resolve of the United States and we are failing to meet those challenges. In may of these proposed investment deals in Iran's energy sector, foreign governments and export credit agencies would help to subsidize these investments. Yet, rather than make it clear to these entities and their government that we will implement the Iran Sanctions Act to the fullest extent, the Department of State refuses to enforce these sanctions.

Mr. Chairman, I have a longer statement that I would like to be placed in the record.

LANTOS: Without objection.

ROS-LEHTINEN: And I yield back the balance of my time. Thank you.

LANTOS: Thank you very much. I'm pleased to recognize the distinguished chairman of the Middle East and South Asia committee, Mr. Ackerman.

ACKERMAN: Thank you very much, Mr. Chairman. I fully concur with the statements of both you and the ranking member.

The situation we face today is grave. Over the past few years, Iran's nuclear program has made significant progress and if unchecked, it will soon give the mullahs mastery of the nuclear fuel cycle. Once that happens, an Iranian nuclear weapons capability will only be a matter of choosing by Tehran.

At the same time, Iran is continuing to destabilize the Middle East through Shia sectarianism combined with the strategic use of violent Islamic proxies. These efforts have brought chaos and disaster to the Palestinians, to Lebanon, and to Iraq. And America? We are badly mired in Iraq and our coalition of the willing is rapidly dissolving.

So many Americans have lost confidence in the Bush administration that there is now growing pressure to legislatively fence off any military options concerning Iran. To those who are horrified by the implications of this development, I would say that serial incompetence and mendacity comes with a political price, not just a presidential medal of freedom.

The world's response to Iran has been too slow and too soft, and our misadventure in Iraq has certainly complicated our efforts to deal with this threat. It does appear, however, almost by process of elimination, that the administration has begun to implement a new policy toward Iran. Instead of just blustering about options being on the table, we now have carrier battle groups in the Persian Gulf.

Instead of merely lecturing other nations, we now have a regular and serious dialogue with the gulf-plus-two group, and are patiently working the Iran question through the Security Council. Likewise, we have suddenly taken away the Iranian Revolutionary Guard's carte blanche to instigate murder and mayhem in Iraq.

But there is much more the administration could be doing. The president has at his disposal an imposing, indeed, a massive set of authorities made available to him through numerous laws and executive orders.

U.S. laws have been used occasionally to punish Iran, but any honest assessment of the past six years would conclude that the large corpus of anti-terror and anti-proliferation laws and authorities have never been used aggressively, or comprehensively, or effectively, either as bargaining chips or as weapons and for this failure, there is no excuse.

If the Iranian threat is as serious as the president has said, if it is unacceptable -- and that word has grave implications -- then we ought to be seeing a much more aggressive use by the administration of the large and largely ignored set of tools that bipartisan majorities in Congress have provided to the executive.

Under Chairman Lantos' leadership, Congress is going to keep up the pressure on the administration to act. We believe a comprehensive Iran policy requires bigger carrots and bigger sticks. As the chairman has made clear, and as chairman of the subcommittee I would state, the bigger sticks are on the way. The question for the administration is the same as always, what are they going to do with them?

I look forward to hearing the answer from our very distinguished witness as to the answer to those questions.

I yield back the balance of my time.

LANTOS: Thank you very much.

I am pleased to recognize for three minutes distinguished ranking member of the subcommittee, Mr. Pence.

PENCE: Thank you, Mr. Chairman. Thank you for calling this hearing and I wish to extend a personal welcome to Secretary Burns.

Thank you for your service to this country and for your participation today. Our witness today says to no-ones surprise that Iran has quote "long been the world's leading sponsor of terrorism" -- state sponsor of terrorism. I noted the curious paradox, the lesson of the Iran-Contra affair 20 years ago was that we don't negotiate with terrorists, specifically Iran.

Today it seems that many of the critics of President Bush and the Bush administration want to know why we haven't negotiated with terrorists already, in this case specifically Iran.

Similarly, many in Congress and some on this committee agree that our ally, Israel, should not negotiate with Hamas until they meet basic standards of international conduct and I agree strongly with that principle. Yet we, the United States, I would assess should negotiate with one of Hamas' leading state sponsors. In pursuit of what, exactly, I would ask rhetorically.

Rarely has so much hope been placed in so little performance with respect to the hope placed in these negotiations. I have concerns about the wisdom of inviting Iran and Syria to talks with the United States and the Iraqi government. Their president continues to posture himself as a global menace. Just today, while some have hailed negotiations with the Iranian president Mahmoud Ahmadinejad called on Hamas quote "To continue resistance until deliverance from Zionist Israel".

He went on to say "The time of fulfillment of the Godly promise is near. The Zionist regime" -- meaning Israel -- "is going through its worst phase and is on the verge of" -- his word now -- "elimination" close quote. It appears that the process involving the U.N. Security Council resolutions on Iran and potential sanctions are giving us additional leverage and yet, we are moving their direction it seems from my vantage point, in inviting them to a regional conference.

What possible commonality of interests do we think we share with them. Iran has been implacably hostile for decades and member as the president coined it of the axis of evil, one of only a handful of countries with which we have no diplomatic relations.

As Secretary Burns says, quote "Confrontational ideology and blatant anti-Americanism". As President Bush made clear at his press conference last month, Iran is responsible for its weaponry through the Quds force that has been used to target U.S. troops in Iraq. Unclassified reports link these armaments to perhaps 170 of the more than 3,000 American soldiers who've died in Iraq.

Given these facts, how we have any room whatsoever for discussion is a matter of grave concern to me and I am therefore greatly interested in the testimony of our distinguished witness today. I yield back.

LANTOS: Thank you very much.

I'm pleased to call on my friend from California, the chairman of the terrorism non-proliferation and trade subcommittee, Mr. Sherman.

SHERMAN: Thank you, Mr. Chairman.

Time is running out. A few years from now Iran will have nuclear weapons and it is more likely that they will try to smuggle them into an American city than it is that they will give them up in return for one million tons of heavy fuel oil. Our policy has failed to seriously impair Iran's nuclear program and the times to centrifuges turned yesterday, they turned today and they will turn tomorrow.

We are now schizophrenically lurching forward to apply some additional economic pressure while ignoring opportunities to apply pressure in other ways. Most importantly at the United Nations we have secured sanctions resolutions that are somewhere between pitiful and inadequate. They have of course failed to change Iran's policy. The reason for our failure at the U.N. is our failure to bargain in good faith with Russia and China on issues important to them in order to secure their very strong votes at the U.N. Security Council.

Our Treasury Department has stopped dollar transactions by two Iranian banks, leaving them open with the other four major Iranian banks. As the chairman points out, the Iran-Libya Sanctions Act worked with regard to Libya and we failed to enforce it with regard to Iran.

We opened our doors to imports for Iran and I want to commend the chairman's bill for closing that door finally, but when they were first opened, I said that there was blood in the caviar. It is now seven years later. It is time to close that door as long as Iran continues its politics.

At the World Bank, concessionary loans are made to Iran. We vote "no" quietly and then acquiesce. We should not take the military option off the table but certainly we should not use it as a first resort. We have failed to negotiate with Iran, failed to negotiate with Russia and China about Iran and about issues of concern to Russia and China. We have failed to stop the centrifuges. More of the same will leave the next president with a truly grave national security crisis. At best, Iran having nuclear weapons is like a Cuban missile crisis every week.

I yield back.

LANTOS: Thank you.

I'm pleased to call on my friend from California, the distinguished ranking member, terrorism non-proliferation and trade subcommittee, Mr. Royce.

ROYCE: Thank you, Mr. Chairman.

And welcome, Ambassador Burns.

We have a regime here that's actively seeking nuclear weapons, that is aiding Hezbollah in destabilizing Iraq. I saw the consequences of some of its work when I was in Haifa and rockets were coming down on the town. I was in Rambam trauma center, talking to some of the wounded. This sowing of terror is something that President Ahmadinejad does very, very well. We're going to have to be very, very creative in approaching Tehran.

We're going to have to use several tracks, I think, to keep this regime in check. We should be promoting political change inside the country. We have no problem with the Iranian people. Obviously it's the regime that's odious and we need to make that clear. We should continue using the financial lever. We have got to make it clear to the European and other financial institutions there that the risk of doing business with that regime is considerable.

We've got to do something in the U.N. to make it clear I think to the Europeans that export credit agencies, particularly the Germans and Italians, should re-evaluate what they're doing there. I think it'll be increasingly difficult for Iran to be part of the international financial system frankly. Because of this pressure but also because of the poor state of the Iranian economy, which is almost imploding according to economists inside the country.

Inflation is way up, headed towards hyperinflation. Government spending is spiraling out of control. The oil windfall has been mismanaged which is common throughout the world in terms of oil windfalls, but. Unemployment is sky high in the country. Iran's oil ministry admitted that international financial pressure has stunted its oil industry.

It appears that public opinion is turning against President Ahmadinejad, who is responsible frankly for this economic misery because he's running this thing, micromanaging the economy and not allowing the market to work internally.

The Iranian people are beginning to challenge reckless nuclear policies. The president there has set his country in conflict against his region and in conflict against the world and that is beginning to have an impact on the man on the street and the women in Iran. Fortunately Iranians are coming to question his pursuit of nuclear weapons, which only serves frankly to impoverish that country.

We should be doing all the can to help Iranians better understand this through our public broadcasting and diplomacy including exchanges but also by unrelenting financial pressure until Iran changes that course of terrorism in developing nuclear weapons. Financial pressure, frankly in my view, has worked against North Korea. I think that that financial pressure is what got them to the table.

It's working against Iran right now. It should be intensified and, Ambassador Burns, that's part of your charge. So thank you very much for being with us today.

LANTOS: Thank you very much.

The chair will now give an opportunity for every member to give a one minute statement if he or she so desires.

Mr. Payne?

PAYNE: Thank you very much, Mr. Chairman.

It's good to see you, Ambassador Burns. I think this is a very important issue that we're dealing with. I think there tends to be some difference of opinion from members of the committee about whether there should be negotiations and discussions with Iran or not. I think that's probably one of the key differences.

I think we all agree that Iran is a terrible threat. I think that we need to deal with it. I do recall that back in 1941, President Roosevelt called Japan after the infamous attack on the United States and its partners the axis, and they were the three countries that we had to defend ourselves against.

Now we hear the same term, the axis of evil, used with Iran, North Korea and Iraq. I think that we're finding ourselves in another, similar situation. However we are negotiating with North Korea and we have people say we shouldn't negotiate with Iran. I think that one of our big problems is that we have inconsistency in our programs. I hear of us having problems with PRC that we will put...

LANTOS: The gentleman's time has expired.

PAYNE: Okay -- Iran on financial things but you've got countries like China that will then lend them money where we continue to give China all of our business. There's inconsistencies that we've really got to straighten out.

LANTOS: Mr. Smith of New Jersey.

SMITH: Thank you, Mr. Chairman.

We are here to focus on the enormous threat posed by Iran. A threat not just to the United States, Iraq, Israel and the region, but a compelling threat to the world. President Ahmadinejad's tirades about Israel and his denial of the holocaust reveals his bigotry, his unseemly hate, thankfully he is not the only voice but in present day he is the dominant one.

We are fortunate to have such a skilled and accomplished and determined diplomat in Ambassador Nick Burns, and we welcome you again.

On another front, Mr. Chairman, let me bring to the attention of the committee that Vietnam -- obviously not the subject of today's hearing but nevertheless this happened just a few hours ago -- having recently gained another step in U.S. economic cooperation has instituted a new wave of crackdowns and arrests.

One of the lawyers that I met while I was in Vietnam recently, a man by the name of Dai, who is a modern day human rights activist equivalent to people that we saw in Eastern Europe, was arrested; as was Father Li and so many others in Vietnam. We need to take this up with the committee and it is reason for grave concern that Vietnam is now turning back to its old ways of repression and arrests.

LANTOS: Thank you, Mr. Smith.

Mr. Wexler?

WEXLER: Thank you, Mr. Chairman.

Ambassador Burns, I have the utmost enormous respect for you and thank you for being here. Just help me understand, please, the administration's policy? In 2003 allegedly the Iranians make an offer where they say they'll stop their enrichment, they will consider a two-state solution and they will consider stopping funding of Hezbollah. We refused to address them. We don't negotiate. That wasn't good enough.

Now they offer nothing and we negotiate. Help me understand that, please.

LANTOS: Mr. Rohrabacher?

ROHRABACHER: Thank you very much. First and foremost I'd like to identify myself with the opening remarks of the chairman, Chairman Lantos, and Ranking Member Ros-Lehtinen. I think that they both reflect the commitment of the people in this committee.

I'd just like to raise this as a point as we move forward today. That is, certainly Iran poses a threat and I am with everybody so far on everything that's been said about getting tough. We need to do that. I certainly don't believe we should go into negotiations until after they have promised to at least cease developing their nuclear program while we talk.

But let me note that it is disturbing to me that the threat posed by Iran seems to be being used as an excuse not to hold Sunni regimes like the Saudis and others accountable for their support in the mayhem that's going on in Iraq. I mean, most of these bombs that are going off are Sunni bombs killing Shiites. They are not coming from Iran and we should hold the Saudis accountable for this.

It seems to me that the administration seems to be tilting away to try to focus attention on Iran right now when we should be holding our Saudi and other Sunni regimes accountable for what their wrongdoing is.

Thank you very much.

LANTOS: Thank you very much.

Ambassador Watson?

WATSON: Thank you, Mr. Chairman.

And I want to welcome Ambassador Burns, and we look forward to your testimony.

I'm very pleased to join with the chair, Chairman Lantos, as he expressed various strategies for dealing with Iran and the sanctions. I would hope that military options are on the bottom of the list and maybe not on the list at all. I have an issue that has been mentioned by all the other people preceded me.

That is we understand from Ambassador Holbrooke, who was here last week, that the United States would consider and the State Department agreed to participate in a series of gatherings for our Iraqi neighbors, which would include Iran and Syria. But all of a sudden, they have backed away from that plan and backed away from conducting bilateral meetings with the Iranians at this gathering or these series of gatherings.

So I hope as you respond that you will address that issue. Thank you so much for coming. I look forward to your testimony.

Thank you, Mr. Chairman.

LANTOS: Gentleman from Ohio, Mr. Chabot.

CHABOT: Thank you, Mr. Chairman.

When one thinks of President Ahmadinejad, he is probably the epitome of what Islamic fundamentalism and the danger of it is around the world. Somebody that denies that the holocaust occurred and that wants to have Israel wiped off the face of the earth and I would urge my colleagues today, if they get an opportunity, to go over and view a documentary called "Obsession" which is running around the clock over there in the family room on the third floor of the Capital Building.

I saw most of it earlier today. Members of the public, I'm guessing that that documentary is probably available through one source or another. It's very eye opening. I would also like to mention that I had the opportunity over the break to be in Bangladesh and the Philippines and in the Philippines, they clearly have a resurgence of a problem with Islamic fundamentalism.

In Bangladesh, this committee passed House Resolution 64 relative to Shoaib Chodhury who's a journalist who is on trial for trying to bring out the problems with Islamic fundamentalism. He's been beaten, he's been tortured, he was jailed for 17 months and his trial is coming up. I would think we should continue to focus attention on that.

I would like to thank our committee for doing that and Mr. Kirk especially. Thank you.

LANTOS: Thank you.

Ms. Woolsey of California?

Mr. Tancredo?

TANCREDO: Thank you, Mr. Chairman.

Congresswoman Watson indicated she hopes that there is no military response that would even be on the table that would ever be mentioned. She hopes it's not part of the agenda.

I will tell you I think personally that I pray to God that we never have to reach that stage, but the most dangerous situation I can imagine is to tell the world and tell Iran in particular that that is not on the table and to in fact not leave it as part of the set of possibilities open to us.

I hope that -- Ed Luttwak, you are familiar with I'm sure, wrote a fascinating piece in the Wall Street Journal on February 27th, in which he talked about the various divisions inside Iran that we should concentrate on. Beyond just the economic problems, there are of course ethnic divisions. The Kurds, especially the Azeris, 20 million Azeris, probably the largest single element inside the country that you could call disaffected and there are several others.

Also the religious persecution that is ongoing. I hope that you will, in your testimony, talk about that, sir, and to what extent you think we can exploit those divisions.

LANTOS: Thank you.

Mr. Hinojosa?

HINOJOSA: Thank you, Mr. Chairman. I wish to pass and yield back.

LANTOS: Mr. Boozman?

BOOZMAN: Thank you, Mr. Chairman.

It's good to have you here, Ambassador Burns. I had the opportunity as you know to serve on the NATO parliament when you were ambassador and I take this opportunity to say I learned a great deal through your leadership.

Not too long ago I was asked to go over and do the Voice of America broadcast to Iran and I've been very critical of our outreach efforts in the past and some of the things that we're trying to do.

Mr. Woolsey was here not too long ago and echoed that. In traveling the region, sometimes our efforts haven't been as good. But I really do want to complement you on that particular program. The feedback that I got from people that had seen the program, from friends that were in Iran and said I saw Congressman Boozman during Prime Time or whatever, was very, very positive.

I think the program itself, you know, all of us have done a lot of you know, call in radio and call in television. I think the format and the way that the program went was as good as any program I've ever participated in, anywhere. And the calls and the information back and forth was excellent. So I do want to complement you on that particular program. Thank you.

LANTOS: Thank you.

The gentleman from Georgia, Mr. Scott?

SCOTT: Thank you, Mr. Chairman.

Ambassador, welcome. Iran of course is the big elephant in the room, no question about that. I guess my major concern is, now that we are talking with Iran, I think that we need to put a little emphasis on these other nations. Particularly I am concerned about Russia. How is it -- and I'd be interested in hearing your response -- that Russia recently completed an agreement to sell $750 million worth of anti-aircraft weapons to Iran?

The Dutch Royal Petroleum Company has just signed on to explore and millions of dollars of help to developing oil fields and helping with the refining capacity of Iran. These are very troublesome indicators, particularly it seems to me the biggest economic sanction we could have with Iran in that they produce about one quarter of the earth's known oil reserves underneath them, yet they don't have that refining capacity and have to import that gas in.

If we have individuals who are supposed to be our allies, working with them, and then China of course getting into an agreement to...

LANTOS: The gentleman's time has expired.

SCOTT: Thank you, Mr. Chairman, but I'd be looking for your comments on that as well.

LANTOS: Gentleman from Texas, Mr. Poe.

POE: Thank you, Mr. Chairman.

Iran is saber rattling again on several fronts in the world community. It's training insurgents at sites outside Iraq to be used against American soldiers in Iraq. Iran hadn't found a terrorist group in the world that it does not like to embrace and one solution being proposed to Iran is sanctions.

Sanctions sound good, but historically somebody cheats, either countries or companies, and it's all in the name of filthy lucre -- money, greed. As a former judge in Texas I know there had better be consequences for violating the rules or violating sanctions. No sanctions should be proclaimed without heavy or embarrassing or monetary consequences that make companies and countries toe the line or pay the piper.

I look forward to hearing why previous rules and sanctions have not been enforced by our government. I look forward to your testimony, Mr. Burns.

LANTOS: Thank you very much.

Mr. Carnahan of Missouri.

CARNAHAN: Thank you, Mr. Chairman, Ranking Member Ros-Lehtinen.

Mr. Secretary, welcome.

Finding solutions to the crisis in Iran is going to require robust diplomatic relations that can be used to design and implement a sustainable, strong, regional solution. I'm worried that the "go it alone" foreign policy of this administration has tarnished our image around the world and in turn diminished our bargaining power at a time when we need it most.

As we've seen over the past several years in Iraq as well as during the conflict in Lebanon this past summer, Iran is actively looking to expand its influence throughout the Middle East. I believe we must look at every possible diplomatic solution available in order to contain the spread of extremist elements within Iran.

I'm also very interested in hearing your thoughts about the U.S. attending the upcoming Iraqi conference with Iran and especially with regard to reaching out to moderate elements within Iran and how we can take advantage of that to our national interests. Thank you for being with us.

LANTOS: Mr. Crowley.

CROWLEY: Mr. Chairman, firstly let me welcome myself back to the committee. It's great to be back.

(LAUGHTER)

LANTOS: We join you in that welcome, Mr. Crowley.

I call for a vote.

(LAUGHTER)

CROWLEY: I'm seeing a lot of hands in opposition.

Ambassador, great to see you again my friend. Thank you for coming before the committee. I too look forward to hearing your testimony. In light of the outreach that apparently is being made in terms of creating a dialogue with Iran, I hope that there is not a sacrifice that is made for helping on one hand and going light when it comes to the issue of uranium enrichment in Iran.

I know you have your work cut out ahead of you, but I look forward to working with you again very closely here on the committee, and I welcome you here today.

Thank you, Mr. Chairman.

LANTOS: Thank you, everybody.

Secretary Burns has held a wide range of most important and sensitive posts in the Department of State. He is one of our most distinguished diplomats of this and indeed of any generation. For the past two years, he has been distinguished Undersecretary of State for political affairs which is the highest ranking position for any individual in the professional foreign service.

Prior to his current assignment, he served our nation as ambassador at NATO and in Greece. This is the first time that he is testifying before our committee during the 110th session. I am delighted to welcome him.

You may proceed any way you choose, Mr. Secretary.

 

STATEMENT OF

R. NICOLAS BURNS
Undersecretary of State for Political Affairs
U.S. Department of State

 

BURNS: Mr. Chairman, thank you very much for your welcome.

Ms. Ros-Lehtinen, thank you very much.

Distinguished members of the committee, I have learned a lot just in listening to the comments that the various members made, so thank you for them and I'll try very hard to respond directly to each of the concerns that have been raised. There is a lot of overlap, I think, in these concerns.

I will spare you reading my entire testimony. I submitted it last evening, you have it before you, Mr. Chairman.

LANTOS: Without objection, it'll be part of the record.

BURNS: Thank you. I thought I would take the opportunity to just give you a summary of the major outlines of our policy towards Iran, how we're trying to use multiple points of pressure to drive Iran to a position where it wants to negotiate and not seek confrontation with the rest of the world, particularly over its nuclear weapons ambitions.

I'll try to do that as briefly as I can, so that you'll have a chance to ask the questions that you wanted to ask.

I would say, Mr. Chairman, that we face -- our country faces -- a series of four interconnect crises in the Middle East.

We have the imperative of achieving a democratic and stable and peaceful Iraq.

We have the imperative of strengthening the democratically elected government of Lebanon against those like Iran, Syria and Hezbollah who would seek to overturn that government.

We have the necessity of establishing the foundation of a final peace between the Israeli and Palestinian people and we're working on that, as Secretary Rice has told you.

Finally, we need to block and counter Iran's nuclear ambitions and its regional ambitions and many of you have spoken to those ambitions as they've expressed themselves. This region of the Middle East is now without any question in my judgment the area of greatest importance to our country. It is where our critical national interests are engaged.

But beyond our responsibility to help stabilize Iraq, nothing is more vital to the future of our country and of our role and interest in the Middle East than addressing the challenges posed by the government of Iran, whose public face of course is this vitriolic presence of President Mahmoud Ahmadinejad.

This has been a problem of long standing for our country. It goes back to President Carter's administration and it involves every administration since. How to deal with Tehran's confrontational ideology, its blatant anti-Americanism, and never have our concerns regarding Iran's intentions been more serious, nor the intricacies of Iranian politics more significant and the policy imperatives more urgent than they are today.

We believe the Iranian government has embarked on a dangerous course. It has repeatedly defied its obligations to the United Nations and to the International Atomic Energy Agency. Its rhetoric has been appalling and has reached standards that we have not seen since the fascist powers of the 1930s and '40s.

President Ahmadinejad has declared that Iran's nuclear program has no brakes and the Iranian regime has brazenly disregarded what Mohammed ElBaradei, what first Secretary General Kofi Annan and now Secretary General Ban Ki-moon say are the responsibilities and obligations of a peaceful and constructive country.

They have refused specifically to suspend their enrichment and reprocessing activities at their plant at Natanz, which is the condition for sitting down to talk to them. Now, we are joined by the great majority of countries around the world in opposing this nuclear weapons ambition. I have been the liaison to the Chinese and Russian and European governments for two years now and I have never encountered a single individual in any of those countries who believe that Iran's intentions are peaceful in going ahead with its nuclear research.

All of us assume that its intentions are to develop a nuclear weapons capability. Iran in this fashion has ignored what has been I think the most significant offer made by any American administration in the past 27 years, and that is to sit down and negotiate on the nuclear issue. When Secretary Rice announced last June along with the foreign ministers from Russia, China, Britain, France, and Germany that together the six of us were willing to sit down with the Iranian government, and she said she would sit down personally with them.

We said that they had to do one thing: suspend their enrichment program, because we didn't want to be in a position where we would negotiate -- and Congressman Rohrabacher made this point -- and at the same time to allow them to continue down the path to achieve a nuclear weapons capability, to develop missile material or to produce a nuclear warhead.

This is a condition not imposed by the United States. It's a condition imposed by the United Nations Security council land it was written into the Chapter VII Sanctions Resolution that we passed just before Christmas.

In the last week, I have had three conversations with the representatives of all those governments. China, Russia, and the three European governments. We have committed to each other that we will now pass a second Chapter VII Article 41 Security Council Resolution and in fact, the formal deliberations for that resolution began last evening in the United Nations Security Council. They continue today and our ambassador, Alex Wolff, our acting ambassador, is in charge of those negotiations for the United States.

I would tell you that I am very pleased by the constructive attitude of Russia and of China and of the European countries. We have not yet agreed on the specific nature of the sanctions for this second resolution, but we have agreed that we must answer this blatant disregard for its obligations that Iran has shown.

We hope that this resolution can be passed as quickly as possible. What I think his very interesting is last week, the government of India and the government of Brazil both announced implementing measures to put their own sanctions on Iran, because they are members of the United Nations General Assembly and they have to, because these sanctions are mandatory under Chapter VII.

So Iran is in a position where it is one now of only 11 countries in the entire United Nations out of 192, that are under sanctions. It's been that spotlight -- and here I would just have to disagree very respectfully with some of the comments made -- it's those sanctions that have worried the Iranian government. When they were passed in December I did not anticipate that they would have the impact that they have had, but they have had an impact.

This is not a monolithic political culture in Iran. Either the highly divided and fairly tumultuous political environment where just yesterday the former president, Ali Akbar Rafsanjani excoriated President Ahmadinejad for his handling of Iran's economic policies. Just three weeks ago, the newspaper devoted to the supreme leader, Ali Khamenei, criticized President Ahmadinejad for his handling of the nuclear issue, because now when you have India and Brazil and Egypt also sanctioning Iran as you do the United States and our Perm Five colleagues, Iran is cornered and isolated diplomatically.

I would argue to you that this diplomatic process of trying to use the United Nations and trying to use a multilateral framework for negotiations is the right path for the United States. Many of you talked about some of the other problems that Iran is projecting to the United States and the rest of the world.

Iran is endeavoring to sow violence and instability in the Middle East. In fact, it's the central banker for Middle East terrorism. It's the funder for Hamas and Hezbollah. It was responsible for providing the long-range rockets that rained down on the people of Northern Israel and Haifa and other cities last summer.

Iran is a country that does not stand for peace between the Palestinians and Israelis and when the Hamas leader visited Tehran this morning, it is true, and one member said this, that President Ahmadinejad apparently said, if we are to believe the press reports, that Hamas should continue its violent attacks on the government of Israel.

It's the only country in the Middle East that has consistently not supported the Middle East peace negotiations, consistently supported instead the Middle East terrorist groups.

So we are responding here to a broad set of challenges on the nuclear front, the terrorism front and on Iran's very obvious campaign to become the dominant country in the Middle East as we see it flex its muscles on the international stage.

These are great challenges for our country, Mr. Chairman, but we believe and I certainly believe personally that a concerted, diplomatic approach is the best strategy for our country in dealing with these interconnected problems.

You'll remember just a few months ago, just after the congressional elections in our own country, Iran appeared to be riding high. It had this self-proclaimed success in unleashing Hezbollah on the people of Israel this past summer, which we opposed. It appeared to be unimpeded in its nuclear weapons ambitions. It appeared not to be paying any price or absorbing any cost of this behavior.

But in the closing months of 2006, and certainly in the last two months, the United States has taken a series of significant steps to contain Iran's regional ambitions and to press it in a very tough way on the nuclear issue. We have coordinated a series of diplomatic steps with our friends around the world in order to try to knock Iran off its stride. We believe this strategy is beginning to succeed.

It hasn't fully succeeded. It needs to play out over a certain period of time and we ought to have the patience to see diplomacy play out because we do have time to allow that to happen.

Let's just review where we are. We're pushing on Iran in the United Nations Security Council as I have said and we will continue to do that. Many of you talked about the financial measures that have been successful, and Congressman Tancredo and others talked about this. They need to be successful against Iran.

The Department of Treasury has used its Patriot Act 311 authority now to sanction two Iranian Banks, Bank Saderat and Bank Sepah, and Secretary Paulson and Deputy Secretary Kimmitt have used the moral authority of the United States to try to send out a message to the international banking community that it shouldn't be business as usual with the Iranian private sector; that there are risks associated with that; and three major European banks in the past year have cut off all lending to Iran as a consequence.

I think the Iranians are worried about this policy of the United States government to press forward on the financial end, not just on the nuclear and terrorist side.

It's also true that in Iraq, Iran continues to provide lethal support to select groups of Shiite militants who target and kill American and British troops, as well as innocent Iraqis. We have made clear to the government in Tehran that this is absolutely unacceptable. President Bush announced in January that our troops on the ground in Iraq will now act to disrupt those Iranian paramilitary networks in Iraq itself, because they are providing these deadly weapons to these Iraqi groups.

Our actions are consistent with a mandate that we have from the United Nations to be present in Iraq and from the commitment that we have to the Iraqi Government that we will take all necessary measures to contribute to the maintenance of Iraq's peace and Iraq's security. We believe that we have an absolute obligation to the young men and women of our armed forces to protect them against a government that would spirit weapons into the country -- these explosive devices, these very sophisticated explosive devices that are used as armor piercing to attack our soldiers.

We are also working with France, and with Saudi Arabia, and with Jordan and Egypt to try to support Prime Minister Siniora in Lebanon. It is unacceptable that a government like Iran would seek to overthrow using as a proxy Hezbollah, a democratically elected government in the Middle East.

So, Mr. Chairman, we're trying to proceed with multiple points of pressure against the Iranian government and the object is to drive up the cost of its behavior, to isolate it and to hopefully contribute to a debate within the Iranian system that they are far better off seeking a peaceful, diplomatic approach to the United States, to Europe, to the Arab countries, than they are with their current confrontational approach.

We are acting very vigorously to isolate the Iranian government in this regard. I would also say that we have agreed that need to seek opportunities when they arise to use our influence in the Middle East to create an environment that would be more conducive to peace and stability. That is why the president and Secretary Rice have asked Ambassador Khalilzad to participate in this meeting this Friday, hosted by the Maliki government, with the United States, with countries from Europe, with Iran and Syria, to try to bring peace to Iraq.

To try to send a message that every one of those countries, particularly Iran and Syria, have a self interest and an obligation to use their influence for peace, for an end to the fighting among the ethnic groups there and to secure stability at long last in Iraq itself. That is a point of contact that makes sense for our country and of course, Secretary Rice has said that she will personally be present at the negotiations if they materialize on the nuclear issue in the future.

Mr. Chairman, I'd just conclude by saying that it's my judgment that diplomacy is the best course of action in blocking and containing the Iranian regime. I do not believe a military confrontation with Iran is either inevitable or desirable. If we continue a skillful, patient, energetic, diplomatic course and we have the patience to see it play out over the mid to long term, I am confident we can avoid conflict and we can see this larger American strategy in the Middle East vis-a-vis Iran, succeed.

Our strong hope is that Iran will now turn away from its confrontationist policies and will seek to negotiate with us and the other countries to give up its nuclear weapons ambitions and to use its influence in the Middle East for peace and stability in Iraq, in Lebanon, in the Palestinian territories and in Israel itself.

I wanted to say those few words, Mr. Chairman. You have my full testimony, I will not cover more of it.

I look forward to responding to the questions and comments of you and your members.

LANTOS: Thank you very much, Mr. Secretary. I listened very carefully to your summary and as I understand it, you favor a concerted diplomatic approach. I take it by "concerted diplomatic approach" you mean we and our allies -- I wonder whether you also mean various branches of our own government and particularly various branches of the administration?

I am profoundly disturbed by the actions of our trade negotiator and I would like to tell you why. On January 31 I wrote a letter to our trade negotiator and I would like to highlight the key paragraph from it. This is to Ambassador Schwab.

"I am writing to you to highlight an issue that has come to my attention regarding Iran and Malaysia and to request formal action on your part. According to recent press reports, Iran has signed a $16 billion liquefied natural gas deal with Malaysia's SKS to help develop gas fields in Southern Iran and to establish LNG production plants."

"This is a disturbing development that I believe requires swift action by the administration. As part of legislation which I co- sponsored, Congress recently extended and strengthened the Iran Sanctions Act, requiring sanctions against companies involved in Iranian energy development, as is potentially the case here."

"In addition to enforcing this legislation, it behooves us all charged with implementing U.S. foreign policy to take actions to further press Iran to cease its development of nuclear weapons".

So far, I don't think there is anything controversial from the administration's point of view of what I'm writing to the trade negotiator. I go on to say "I understand that your office is currently engaged in discussions with the government of Malaysia to negotiate a free trade agreement. Since a fundamental purpose of any free trade agreement is to strengthen cooperation, consistent with broader U.S. strategic goals, I believe we have a right to expect a government of Malaysia to join us in condemning this deal and to make certain that it is nullified before we proceed with further negotiations."

"Malaysia stands to benefit greatly from a free trade agreement with the United States. It is important that our trade partners are not engaged actively or passively in undermining our most basic security policies."

Our trade negotiator cavalierly and arrogantly advised her Malaysian counterparts that this is just a voice from Congress and proceeds without any explanation or let up, continuing these negotiations. Now, the trade negotiator may disagree with me, but I wonder what is her right to disagree with the fundamental policy enunciated by this government at the highest level that we wish to deal with Iran through economic pressure?

This is economic pressure and the trade negotiator is undermining this economic pressure. I'd be grateful if you could comment.

BURNS: Mr. Chairman, thank you for your question. I would have to say with all respect that I have great admiration for Ambassador Schwab and her leadership of USTR, and while I am not familiar with the details of this particular case and have just now heard about the letter you have sent to her, I am sure that everything that USTR is doing is consistent with our policy of applying financial pressure on the Iranian government.

LANTOS: How can that be true, Mr. Secretary, if trade negotiations leading to a free trade agreement benefit Malaysia, while Malaysia is signing a major agreement helping to develop Iranian energy to the tune of some $16 billion of investment?

BURNS: Mr. Chairman, I would be happy to go back and look at exactly where we think the Malaysia deal is, but our impression is that on the Malaysia deal, the proposed major Chinese investment, the proposed Royal Dutch Shell investment that some of the members talked about: these are all preliminary in nature.

What we have done is in each of these cases, go to the companies but also the governments of the companies and say that we are opposed to these long-term oil and gas deals with Iran. We don't believe that countries should exercise a business as usual practice with Iran. We're vigorously opposed to them and we'll continue to use our diplomatic influence to convince them not to go forward.

I think you're right, Mr. Chairman, in your larger point as I understand it, that now is not the time to reward the Iranian government for this abhorrent international behavior.

In fact, if we are to pass a second security council resolution as soon as possible, and I think we will, the message is expand the sanctions against Iran. Make the pressure more meaningful; make it hurt, so that the Iranians know that they are not going to get away with creating a nuclear weapons program and have the world just stand by and watch, because that's not our attitude.

LANTOS: Well I appreciate your comments, Secretary, and I'm sure that Secretary Rice would agree with everything you have said. But the trade negotiator is undermining your basic policy. The basic policy of this administration, which is to place economic pressure on Iran, and our trade negotiator is actively undermining this goal.

I am not asking you to comment on your colleague in the administration. She is coming in to see me in a few days. But I think it's very important -- you made the observation a minute ago that in Tehran there is a divided government. Well it seems there is a divided government in Washington as well. The Department Of State and the trade negotiator are operating at cross purposes.

I also would like to ask a question before I deal with this issue of concerted diplomatic approach which you favor and I favor -- we all, at this table, favor. When Congress passes legislation with overwhelming bipartisan majorities and the administration waives all the sanctions that we have passed, no oil company is handicapped by administration actions. Despite their violation of congressionally passed laws.

We have no option but to take away the waiver authority of this administration. That is precisely what the legislation I am introducing this week will do. We are spinning our wheels. We are passing legislation after legislation, designed to promote the goals of the administration of putting economic pressure on Iran. The administration claims not to want to use military means. We agree with that.

If military means are not to be used then economic means are to be used and the administration systematically undermines our desire to use economic sanctions. There is a profound inconsistency between what the administration says and what the administration does.

I would be very grateful, Mr. Secretary, if you could tell us how you envision concerted diplomatic approaches while the diplomatic approaches we provide are rejected by the administration refusing to employ the mechanisms we have provided.

BURNS: Mr. Chairman, with your permission, I'd just like to say one more word if I could about your first question and say that I'm convinced that we do have a united executive branch approach to Iran that of course includes the great work being done by Ambassador Schwab.

Here's the difficulty that we have faced and I think the Clinton administration faced as well pertaining to Iran. The irony here is at a time when the United States has had sanctions in place for the better part of three decades, all of our allies are trading with Iran. That's true of every member of the European Union. It's true of Japan, and our best allies in the world. What we've tried to do is to convince them that they need to act in their national parliaments to stop that business as usual approach.

So for instance, in the negotiations that are underway now in the United Nations, the United States and many other countries are going to press for a reduction in export credits. This is a government approach in Japan and the European Union to encourage trade with Iran. In 2005 there were $22 billion worth of export credits from the OECD countries to stimulate trade with Iran. We're beginning to see Japan, Germany, Italy reduce those export credits. That's a positive trend.

On your second question -- and I know that Congresswoman Ros- Lehtinen is also concerned with this because I've talked with her about it in the past -- I would just say this. We support the extension of the Iran Sanctions Act. We opposed energy investments by any country or company with the government of Iran for obvious reasons and will continue to do that. We have a very active policy underway to talk to the CEOs of these companies as well as the prime ministers of the countries.

We do believe, as Secretary Rice has said to this committee and others, that the Iran Sanctions Act is a deterrent. It was very interesting when Royal Dutch Shell pronounced the preliminary agreement and then came out 48 hours later with a public statement saying they had to reflect on that preliminary agreement because they had received so much of a kick back, frankly, from our government as well as members of Congress and people around the world.

So we would hope that we'd be able to encourage Japan and the European countries and the Russian Federation and China to reduce their economic activities with Iran. We also believe that -- and here's the point where we probably have a disagreement with some members of this committee -- that if the focus of the United States effort is to sanction our allies and not sanction Iran, that may not be the best way to maintain this very broad, international coalition that we have built up since March of 2005 when we first decided that we would support these nuclear negotiations with Iran itself.

I think to defend our administration, one of the accomplishments of the last two years is that we have Russia and China and Europe united on a Common approach to squeeze the Iranians. If we start focusing our attention on them, and not on the Iranians, it might undercut that coalition. That's what I said in testimony last year. It's what Secretary Rice has told you, and I'd respectfully put that point forward again today.

LANTOS: Thank you, Mr. Secretary.

Mr. Smith?

SMITH: Thank you very much, Mr. Chairman.

Ambassador Burns, again thank you for your extraordinary leadership and for your testimony today. Let me just ask a couple of questions. One of them, you urged patience vis-a-vis diplomacy and I think members of both sides of the aisle certainly would echo the importance of patience, particularly with a country like Iran.

Maybe you might want to speak to the issue of -- and you pointed out some of this in your testimony -- the indigenous descent? There are large numbers of people who -- and it's even manifesting itself at the ballot box. Rafsanjani did extremely well, not that he's the end- all and be-all of a moderate, but he's certainly somebody with whom I think we could deal much better with obviously than Ahmadinejad.

The idea of waiting out the local intolerant leader -- you know, we certainly did it with the Soviet Union. We did it with the Warsaw Pact. We've done it before where there were nuclear missiles -- in this case potential nuclear weapons aimed against us. It seems to me the diplomatic route is always the best route and war is absolutely a last resort.

Secondly, the ranting and ravings of President Ahmadinejad with regards to threatening Israel and its demise, certainly it seems to me rises to the level of a violation of the genocide convention.

My question there is since the IAEA and other elements of the United Nations Security Council being the most important focused on Iran, what have we done to try to get the genocide panel of experts, the implementing treaty body of people, to look at the statements that have been made by the president and to take action. You know, the genocide convention talks about threat or the actual implementation in destroying a people in whole or in part.

He's talking about the complete annihilation of the entirety of a people and it seems to me it is prima facie evidence of a violation of the genocide convention and ought to be engaged there. I would say in like manner the Human Rights Council needs to be engaged. I know we decided not to run -- I think that's a mistake -- but having said that we certainly have friends who should be bringing the issue of Iran front and center at the Human Rights Council if that body is to have any legitimacy and credibility at all.

Finally with regards to the weapons that are being made in Iran and used against our soldiers and civilians in Baghdad and throughout Iraq. On one of my most recent visits in September, I was struck by the statements that I heard that virtually all of the IEDs that are doing terrible damage and death to our soldiers are being made in Iran. It seems to me that when Maliki meets with President Ahmadinejad when there's any kind of contact with the Iranians, at the front of that discussion obviously nuclear weapons pose a potential threat.

IEDs are a current threat that is literally killing and maiming many of our soldiers. That should be at the centerpiece of our negotiations as well and any comments you might have along those lines?

BURNS: Congressman Smith, thank you very much. Let me just try to respond to your questions very briefly. You're right to focus on the internal situation. It's a very fractious country. The Baluch minority, the Kurdish minority, the Azeri minority, as you know, have not always been happy to be living under this regime, nor should they be.

We have seen a great deal of restiveness among those groups over the last few months, and particularly in Tehran itself, where sometimes we have an image of a forbidding country like this of being monolithic. As I said in my remarks, it's anything but. There's a great political debate underway as far as we can tell in Iran. We've seen it at the highest levels of the government. President Ahmadinejad has made a series of mistakes. He has literally painted Iran into a diplomatic corner with the outrageous comments -- and you referred to them -- about the state of Israel and about the holocaust.

He's embarrassed the country. There's no question that many Iranians feel that and are expressing that in our own system. I was remiss in not saying in my summary remarks that we are grateful to the congress for the funds that you gave us last year to try to promote civil society and democracy inside Iran. We've tried to use those and Congressman Boozman talked about it, to build up VOA's capacity to broadcast into Iran as it now can, longer than eight hours a day.

Radio Farda, which is on most of the day in Persian into Iran. We also have initiated exchange programs. If our governments can't meet and have formal diplomatic relations -- and we haven't had that with Iran since 1979, which is a long time -- our peoples need to meet each other. So we ask the United States national wrestling team to travel to Iran in January. It did. It received a rapturous welcome from a crowd. Of course, it's the national sport of Iran.

We've invited now the Iranian national team to come to the United States. We'll bring more than 100 Iranians, disaster relief experts, health professionals, to our country using funds provided by the Congress. This is the right policy for us. If we can't and don't want to engage Ahmadinejad directly, because of his reprehensible views and policies, we can certainly engage the Iranian people.

So we are asking in our F.Y. '08 budget, the Congress for $108 million for the totality of these democratic outreach programs and we hope that the Congress would see its way towards fully funding them. Second, I would say that, Congressman, on the Human Rights Council, it is true that the administration has decided not to seek a seat on the Human Rights Council this year. I know it was Secretary Rice's very strong view that that Council discredited itself last summer.

It spent the entire year slamming Israel. Four separate hearings by the Human Rights Council for the U.N. against Israel. But not against Burma and not against Zimbabwe and not against North Korea and not against Iran. You're right to call attention to the deplorable human rights practices inside Iran of the government.

Today we released -- because Congress of course under congressional mandate -- our annual human rights report. We sent it to every member and there's a very stark set of accusations that we make against the Iranian government and I'd be happy to talk about that if you'd like.

Finally, Congressman, you refer to the Quds force. We are certain that over the last two years, the Quds force has been active inside Iraq and providing these EFPs, Explosively Formed Projectiles, to Shia militant groups. These are armor piercing. We do believe they're responsible for the death of over 170 of the 3,100 Americans who have died in Iraq. That is a very serious charge to make. We have made it because we're certain of the facts.

We have sent messages as early as 18 months ago through the Swiss government -- our intermediary power in Tehran -- to the Iranian government, asking them to cease and desist. The British government has done the same. It's our obligation to help protect our soldiers and to take this issue on as squarely as President Bush has done so.

Finally, Congressman, you're right to focus on Ahmadinejad. Frankly we haven't -- I don't believe that the government, or the Europeans and others, looked at the genocide convention -- but his comments are the most appalling comments that I can remember a world leader making about another state in many years.

I think they have received the just criticism of the international community and that will continue.

(CROSSTALK)

LANTOS: The gentleman's time has expired.

Mr. Ackerman?

ACKERMAN: Thank you, Mr. Chairman.

There have been numerous press reports based on claims from officials who were in the administration that the United States received an offer in mid 2003 from the highest levels of the Iranian government to consider comprehensive policy changes on all major issues of concern to the U.S., including the nuclear issue, support for terrorism, non-recognition of Israel.

According to the reports, the Bush White House rejected the offer because key players in the administration prefer to pursue a policy of regime change with Iran rather than accommodation even on favorable terms.

First, are you familiar with this offer which obviously predated your tenure in your current job? Do you believe that it was an authentic offer? Do you believe that that was an opportunity for diplomacy? Did the U.S. make an effort to confirm the seriousness of the offer? Was this a major opportunity missed or merely, as some of your colleagues have suggested, much ado about nothing?

Are those not the opportunities that you're now seeking? Finally, why is the administration always 180 degrees out of phase with the world?

BURNS: Congressman Ackerman, I was in 2003 at NATO and I was not working on the Iran issue, obviously, so I have no personal knowledge whatsoever of what I've now read about in the newspapers over the last month as this reputed offer by the government of Iran.

I can tell you that you have seen the comments of the people who are in positions of authority at the NSC, including Secretary Rice...

ACKERMAN: Let me just ask, I don't mean to interrupt, but just as a clarification -- wouldn't you out of curiosity ask people that were there at the time while you were over at NATO if this really was true?

BURNS: I can tell you we were fully occupied at NATO in 2003. Obviously this is an issue of great interest.

ACKERMAN: Yes, I know, but like yesterday or last Thursday or something like that? You know?

BURNS: It's an issue of great interest and the people who were at the NSC and the State Department at the time in positions of responsibility have spoken to this and I think the totality of the people who have spoken, including Secretary Rice, the totality of views is that our government was not at all sure that this was a legitimate offer of the government of Iran.

ACKERMAN: But the offer was made and we weren't sure if it was legitimate, that's what you said?

BURNS: I think that's what a number of people have said and this is absolutely part of the MO of the Iranian government, to send up lots of flares...

ACKERMAN: But as they say now, your entreaties here were basically that we should be engaged in discussions and negotiations and indeed that's what we're doing. But how do we know that these are legitimate? Why did we allow those three, four, five, six, seven -- four years to pass while a nuclear program proceeded and all sorts of atrocities and bad words and bad blood and more mistrust and everything else has gone by?

Why? I mean, when you ask somebody to negotiate, how do you know they're serious? I mean, we should have pursued this four years ago? No? Yes? Maybe?

BURNS: If you're asking for my personal view? I think it really is much ado about nothing. I'll tell you why. What the Iranian government does very consistently, especially when they're about to be sanctioned as they are in the coming weeks at the Security Council as they send out lots of emissaries, they make lots of public statements and half of them are rubbish.

ACKERMAN: So if they appear to cave in to your request right now, maybe that's a bad term of art -- if they willingly agreed and saw the light about what you're asking them to do right now at a time when they're about to be sanctioned, why would you believe them now?

BURNS: Because we would be able to verify that they've met the condition for the negotiations. This is the P-5 offer that they suspend their enrichment programs to negotiate their nuclear future. That would be...

ACKERMAN: But with the major offer before we could have attempted to verify. We could have...

BURNS: That would be verified by Mohamed ElBaradei.

ACKERMAN: Yes, but we could have said in mid '03, being that they reached out to us and said they were going to do all these things, why couldn't we say yes, okay, we just wanted to verify you're willing to do it or whatever it is you're willing to do now, why couldn't you have done it then?

BURNS: I think the present opportunities before us are interesting enough to contemplate and I think, rather than go back and argue about what may or may not had happened in 2003, we have the opportunity now to sit around the table with them Friday in Baghdad to talk about stability in Iraq. We have the possibility that they'll meet the conditions of the P-5 to negotiate the nuclear issue.

We're fully occupied with that and most of us just weren't around in our current positions in 2003, frankly, to spend too much time looking at that when we've got these major opportunities with Iran, perhaps, in the future.

ACKERMAN: We're glad you're there now, but I think we blew it -- or possibly blew it -- in '03 and we can't go back and figure that out now. But I think it's a complete turnaround. I think it may be a good idea, but I think we blew it for four years.

Thank you, Mr. Chairman.

LANTOS: Thank you.

Mr. Rohrabacher?

ROHRABACHER: Thank you very much, Mr. Chairman.

And Ambassador Burns, again thank you for your diligence and hard work. I give you a hard time sometimes but I give everybody a hard time sometimes. But I want you to know that we're very grateful for the effort put out by you and the members of the State Department to try to, as you say, bring peace to this troubled region in a way that's consistent with our national security interests.

I'd like to ask you a specific question and then more of a general question about the MEK -- it's an Iraqi -- they call themselves an Iraqi Mujahedeen I guess. Some people believe that they are a force that should be supported in their efforts against the Iranian government and they are Iranian. Some people believe that there used to be a Marxist Leninist group and have actually killed American soldiers in the past and should be looked at as a terrorist organization.

What's our position on that?

BURNS: Congressman, thank you.

Our position is that we have not dealt with the MEK and we have treated it as a terrorist organization. You're right, that there has been a debate in our country about how we should approach the MEK. Some people believe that the MEK could be an effective instrument against the government of Iran but our view is that they'd been involved in violent activities against the United States and our military in the past and should be treated accordingly.

ROHRABACHER: And you don't see that as a change in their basic make up that would justify our changing that policy?

BURNS: I'm not aware of any such change.

ROHRABACHER: All right, thank you. About my original point and again let me note that I am in no way trying to soften the outrage that we have about the Iranian government providing explosive devices to those elements in Iraq that are killing American soldiers.

We need to address that and I'm very supportive of the administration's efforts, but it seems to me that we have such an extraordinary focus on that as compared to not holding accountable the Saudis and some of the other Sunni regimes that have been so involved with providing or at least financing for the terrorist explosions that have killed so many thousands of Iraqi citizens.

Can you explain that to me, why we don't seem to have held the Saudis publicly accountable while we just focus on the Iranians? Not that I don't want to hold the Iranian's feet to the fire, don't get me wrong. I agree with your outrage on that. But shouldn't we put a little focus on the Saudis and the Sunni regimes as well?

BURNS: Congressman Rohrabacher, we are primarily concerned with those forces that we can see that are providing technology to kill our soldiers and we know that the Iranian government has provided that technology, as President Bush said back on January 10th.

In terms of the Sunni violence, our impression is that much of it is produced by Sunni insurgent forces, Sunni internal forces, terrorist forces and also by al-Qaida in Iraq. Its activities are well known. We would never accuse our friends and our partners in Saudi Arabia or in other countries with aiding and abetting those groups to attack American soldiers.

ROHRABACHER: Mr. Chairman, might I suggest -- and this is with all due respect to our witness -- I think that this committee should investigate the Sunni connection to the mass killings that go on in Iraq, because obviously the administration does not believe that there is a connection between some of these regimes and the violence that is going on.

LANTOS: I thank my friend for his suggestion.

ROHRABACHER: Okay. I would just add in closing, there is ample evidence and I'm not here to have a diatribe about this, but there's a website of Saudis that have lost their lives in Iraq while fighting us. There's a website of martyrs. Lists of martyrs. Hundreds of names.

To suggest that these very wealthy Sunni interests are not financing this insurgency, I think is not going to help us bring it to an end, but I want to congratulate you for all the hard work you're doing. Israeli Palestinian issues, the Lebanon issues that you've raised and of course, we wish you all success.

LANTOS: Thank you very much.

Mr. Payne?

PAYNE: Thank you very much.

Ambassador Burns, I too agree with Representative Smith, that I think we missed an opportunity by not participating in the Human Rights Council at the U.N. Certainly a far from perfect group, to say the least. There was a move, as you know, to modify and change it and there were some changes where not only regional groupings and voted for members, but it had to get a certain percentage of people from outside the region which was a major change, because of that influence outside the regions.

The regions were kind of tightly knit and a number of other suggestions to attempt to change the terrible image that the Council had, and I think that when you talk about the four bad hearings they had on Israel and there's one or two others that was held by the total council, by us being a member of the council it would seem to me that we would have an opportunity to try to change what went on.

You can't change it from outside and I just can't understand a rationale for us totally rejecting not only at the initial change which was made a year or so ago, but for the new round of countries where they are even going to expand it by another 15 or 20 -- 15 or so countries or more to expand the council. We once again are refusing to participate, so could you explain to me how we do better by not trying to influence the decision?

It's not like it's a Democrat and Republican third party. You're either in or you're not, you don't even have a Ross Perot. You know what I mean? So how do we deal with that, sir?

BURNS: Thank you for the question and I understand why you're asking it, because it's an important question. We had high hopes for the Human Rights Council. We were among the leaders in creating it back in 2005 and 2006. You remember that time when we recreated many of the U.N. institutions?

Because the Human Rights Commission, its predecessor, had been so frankly poor in what it did, so discredited, but all that Council did in 2006 -- the new Council -- was to bash Israel. And we repeatedly tried to use our influence on that Council to try to get them to focus on the real human rights violators in the world...

PAYNE: That's my point. If we had been in there, if we had been a part of, you know, the discussion leading up to what is going to be debated -- I just still believe that we could have had some kind of influence on perhaps changing the tone, changing the tenor, changing the focus. At least modifying, perhaps finding their -- everyone on the Council is not in support of what the Council did.

But if there is no strong advocate for those weaker countries that are looking for some leadership, they roll over because the others are so dominant and there is no buffer, no counter balance to that influence. So that is the only -- and my time is going -- as you see the chairman hits the gavel quickly, so let's have another second or two if you want to say on that?

I do have another quick question about the apparent change in the administration's shift towards regional talks, which I support, the fact that Iran and Syria could be in these talks. I don't know why we made it so clear that we will not talk to Iran while they may be sitting next to us at some coffee break.

That's where a lot of breakthroughs are made. Could you explain whether there is a shift. Should this be considered a shift or not and if so what seemed to change since the president's speech on January 10th, where he said he didn't want to talk to Iran about Iraq, although I think we should talk to anybody that we can to try to see if we can come to some solution.

BURNS: Thank you, Congressman. I just wanted to say, if I could, on the human rights question, we understand that the United States has an obligation to be a leading voice on human rights. We understand that tradition goes back to Eleanor Roosevelt at the United Nations and a U.N. declaration of human rights.

Secretary Rice has directed that we be as active as we can be on the issue of human rights at the U.N. We may not sit on the Council but we will be influential in the affairs of the Council and we'll raise human rights issues. Just recently, we put Burma on the Security Council agenda. We had to get nine votes to do it. It took several months. Then we brought a resolution on Burma Human Rights to a vote.

It was vetoed by China and South Africa, but we're going to continue to press the issue with Burma and North Korea and Zimbabwe and Iran and Cuba, the major human rights violators of the world. I can assure you of that, we'll be very, very active. On your second question, we have come to the conclusion that on the issue of Iraq, it does make sense for us to respond to the Maliki government's request that all of the neighbors of Iraq sit down at a conference at the ambassadorial level this coming Friday.

Hopefully at the ministerial level in a month or so time, and to invite in some of the countries that are active, like the United States in Iraq, to see if we can help to promote the political stability of the country, support the government and the ethnic conflicts -- or at least reduce it in the beginning stages -- and to fashion if you will, pull together a much stronger international support for what the Maliki government is trying to do.

Iran and Syria we believe have been agents of instability and so hopefully this kind of environment will lead them to reflect on what they're doing and feel the pressure of various states including our country, to play a more responsible role. That's the motivation. You asked why we'd make a decision, that's the motivation.

In a separate arena, as I said in my testimony, we would like to reach negotiations on the nuclear weapons issue, but there we are acting in a multilateral group that includes the other permanent members of the Security Council and Germany. That group has been together for the better part of the last year and a half. It's been a very effective instrument to get our view across to the Iranian government.

LANTOS: Thank you very much.

Mr. Royce?

ROYCE: Thank you, Mr. Chairman.

I wanted to go to a question that Ambassador Burns mentioned, in response to something Chairman Lantos asked you, and that was about European export credits. As you say, they're now decreasing but I'd like to explore that a little bit, because I can understand European businesses seeking commercial ties to Iran. What disturbs me is that these businesses are being subsidized by European governments to carry out this kind of trade.

Without these subsidies the market would realize the risk of doing business with the regime, but European government-backed export guarantees are in fact fueling the expansion. If we look from 2003 to 2005, we've got a 29 percent increase. You know, it wouldn't be so objectionable if we were actually increasing Iranian contacts with the outside world, but this isn't trade in the marketplace, it turns out.

The vast majority of Iranian industry is now state controlled. So you have a European policy of subsidizing two thirds of their exports -- in Germany's case -- into the country in order to do business with state run businesses. As I understand the Security Council negotiations, there is this consideration of a ban on export credits to Iran.

I can imagine that's a tough sell but it's worth pressing on for this reason: the great oddity is that private sector European institutions are realizing the risk. They're in the papers every day to point out getting of Iran. Well the foreign governments are the problem. I imagine it's going to be a tough sell, but I wanted to ask you about that.

Second, let me just say in bringing financial pressure on Iran, I suspect we're employing many of the successful lessons learned that were brought against North Korea, for example the case of Banco Delta Asia in Macao. It is that ripple effect, enormously successful against North Korea, that we are attempting to recreate here I suspect.

But I do have a concern here with North Korea, and that is my concern is we have forgotten how we got this far and that we might relent on the pressure on Banco Delta Asia. We committed to resolving the issues around the bank, but when you testified before this committee on North Korea last November, you said that the way to resolve this is for North Korea to stop counterfeiting American currency.

We haven't received those assurances. That greatly disturbs me. And yet, Secretary Hill says we're going to resolve this. So I'd like to go to that question about having them stop counterfeiting our currency.

Thank you, Secretary.

Go ahead, Ambassador Burns.

BURNS: Thank you, Congressman Royce. I think you're right to focus on the financial issues. We're trying to weave together multiple pressure points on Iran. The carrier battle groups in the gulf, the push back against them in Iraq that we've done over the last month. The Security Council sanctions.

Most people now think that the most effective instrument we have are the financial instruments. If the combination of Treasury using its Patriot Act authority to sanction banks -- now Bank Saderat and Bank Sepah can no longer trade in U.S. dollars. That's a significant sanction against them. You're right to focus on export credits.

We have said -- and I've said to my European colleagues -- our country has sacrificed for 27 years in imposing full scale sanctions on Iran. It's time that other countries sacrificed with us so that we have a more effective international point of pressure.

ROYCE: Let me interrupt you for a second. It's not a sacrifice. We're just asking them not to subsidize it. That's the point.

BURNS: It's a sacrifice for companies to give up business opportunities. We've done it because we have a higher objective.

ROYCE: In our case we prohibit the businesses. In their case, they are guaranteeing the businesses regardless of the economic decisions which make no sense, that cause implosion potentially in the government and hyperinflation the tax payers of Europe are going to subsidize and that's the difference. It's very stark.

BURNS: Well I think we agree with each other. I certainly agree with the point you're making. Congressman, what I would tell you is the trend line is in the positive direction, meaning the Japanese government informed us last week that they are beginning to reduce their export credits to Iran.

The European Union governments, both collectively and individually, Germany, Italy, France, are beginning to do that as well. That's an encouraging trend, which we want to push on and I think you will see reference to export credits. At least I hope you will in the next Security Council resolution in New York. Iran needs and wants integration. It's not a country like North Korea, that is willing to live in isolation.

It wants investment. It needs to import 60 percent of its gasoline. It needs that kind of continual flow of investment funds and we're trying to choke that off. That's an effective policy for the United States.

On North Korea, I would only say that I think we've seen some movement since the time that I testified before Congress in November on North Korea. You've seen the six party agreement, the magnificent negotiating job of Secretary Rice and Ambassador Chris Hill. And you've seen us form this working group with the North Koreans, led by Danny Glaser of the Treasury Department to work on the Banco Delta issue.

And of course we're going to insist that North Korea stop counterfeiting the American currency. We think that issue can be resolved in that channel that's been created.

(CROSSTALK)

LANTOS: Thank you very much.

Mr. Sherman?

SHERMAN: Mr. Secretary, you talked to us about how important and vital it is to knock two Iranian banks from dealing in U.S. currency. Why not stop all Iranian banks from dealing in U.S. currency?

BURNS: Congressman, I would say this. The Treasury Department is willing to use the authority given to it by Congress in the Patriot Act...

(CROSSTALK)

SHERMAN: Are you saying that the Treasury Department doesn't have the authority? Because that would be one thing we could probably give them.

BURNS: No, I'm saying that we're willing to use the authority that the Congress has given to the Treasury Department -- and you've seen Treasury use it. I can't sit here and speak for the Treasury Department, I'm not an officer of that Department, but I will say this. As a government, we are determined to press forward on this type of sanctions and I would be very surprised if you did not see us move forward with similar actions in the future.

SHERMAN: Well, that's six years later than we should have and two banks when we should have done all, but you will get there eventually. Now, you know, I've leveraged you and the president and Secretary Rice to link Iran policy to other issues of concern to Russia and China in order to secure serious Chapter VII sanctions.

Like all ideas presented to the State Department, the natural reaction is to reject it -- at least initially. The rejection has taken two forms. One is to exaggerate what we have achieved at the U.N. so far. We have Chapter VII sanctions, but all they do is say "Don't help Iran build nuclear weapons and don't help the Iranian nuclear program", which is devoted exclusively of course to building nuclear weapons.

Obviously that is just a small pea compared to Iran actually giving up its nuclear program. Even those sanctions have a big exception, big enough to fit a nuclear reactor through, namely Bushehr.

The other way that the idea of linkage is rejected is to exaggerate the amount of time that we have to achieve our objective. In your opening statement, you told us please be patient. We have been for six years. "We have time" was another phrase. Toward the end of your opening statement, you said "Let's look to the medium and long term".

This is not a bombing run which would have some immediate effect. This is economic sanctions. So we're talking about slowly getting to the point where the economic sanctions are so severe that they impact the Iranian economy. That impact becomes so intolerable to the people of Iran and the politics of Iran they mind a change in policy where the extremists give up something so critical to them as nuclear weapons.

That's a long process. We're just at the beginning of that process. Do we have weeks? Months? Years? How patient should we be? How long before we get sanctions that have a strong impact on the Iranian economy if we're going to have this whole process take place before they attain sufficient fusile material?

BURNS: Thank you, Congressman. I have great respect for your knowledge of this issue. We've talked many times, so if I disagree with anything you said it's with great respect. But I would say this.

We have done very well with Russia and China. We are not completely like minded. We certainly employ different tactics at the Security Council. But we have kept together a coalition that includes Russia and China and that's been a powerful message to the Iranians. I wouldn't underestimate that.

Second, when the Security Council resolution passed on December 23, I will tell you that I felt perhaps it wasn't strong enough after two and a half months of negotiations. We have been pleasantly surprised to see the impact its had inside Iran. I think the Iranians are less concerned with the specific aspects of those sanctions than they are with the isolation that it's brought them and the international condemnation that it's brought them.

I think they were surprised that Russia and China joined us. Third...

SHERMAN: Mr. Secretary, how far -- let me ask the question another way. How far are we away from U.N. sanctions so that no nation may export refined petroleum products to Iran? Because I know you deal with foreign ministries et cetera, but if you're talking about a process by which the people of a country demand a change in policy, some of us up here are familiar with that and I don't think you're going to get there as long as refined petroleum products can be exported to Iran.

Are we anywhere close to achieving Russian and Chinese support for something that significant?

BURNS: No, and as Secretary Rice and I both said to Congress in various appearances here, we are not now seeing sanctions on oil and gas. We are trying to use multiple instruments. Military, as we've done in the Gulf and in Iraq; economic and financial, diplomatic as well as the sanctions that the United Nations and outside the United Nations.

We think those multiple points of pressure make sense right now. I think we are making progress. I'd just like to address your last point. It's a very important point. How much time do we have? Secretary Negroponte, when he was director of national intelligence, testified before Congress and gave a projection of the intelligence community.

I am not in a position and have no inclination to argue with that projection. But my view is this. Rather than rush off, I'm not suggesting that you favor this, but rather than rush off to a conflict to Iran, we ought to exhaust the diplomatic opportunities. We ought to build international coalition -- as we have done -- to pressure them. We ought to look for ways to try to get them to the negotiating table and use diplomacy.

But diplomacy in my personal experience as a career foreign service officer, in most instances, requires time, requires patience, it also requires energy and commitment and I can assure you we have that. Because our objective is to deny them a nuclear weapons capability. It's not to go along with them. It's not to risk that they might get it. It's to deny them.

We think that diplomacy can do that. It doesn't mean that we will succeed, but it means that we should give that a chance before we leave our national leadership in this administration or the next with one option. So that forms the basis for our strategy and you know, we were I think rather surprised in the administration to see the drum beat of criticism that we were marching off to war in January and February.

You've seen the president and Secretary Yates and Secretary Rice say consistently, we are trying to give diplomacy a chance. And diplomacy is intricate and it involves all these multiple points of pressure and I for one think it's the right policy for our country at this time.

LANTOS: Thank you very much.

Ms Ros-Lehtinen?

ROS-LEHTINEN: Thank you so much, Mr. Chairman.

And I thank everyone for their great questions, and you, Mr. Ambassador for your wonderful answers.

Why have we not implanted the sanctions that are available to us? We tell the international community "You don't have to wait for the U.N. Security Council to act, you can impose sanctions". Yet we don't do that ourselves, even though we passed this law in various ways and in different years.

You said that proposed international deals are not yet at the level where we can use the sanctions. At which point will we have sanctions available to us? For example, if the Royal Dutch Shell and Repsol go forward with their plans to develop Iran's South Pars oil fields. Would this violate the Iran Sanctions Act? Would we then implement what our laws say?

I think that we would agree that preventing investment in Iran's energy sector does have dramatic impact on Iran's ability to finance its nuclear program, so why don't we become the leader in making sure that we implement all of the tools that are available to us? Before we tell other countries what they should do? Let's implement the sanctions.

BURNS: Thank you, Congresswoman Ros-Lehtinen, and I know that you have been a sponsor of this legislation and I gather will be supporting Chairman Lantos. We look forward to reading that legislation. I for one don't think it would be appropriate for me to criticize that legislation before we've read it. We'll give you the courtesy of reading it and asking questions and hopefully we'll be able to support major aspects of this.

But here's how I would frame the issue from our perspective. We support the Iran Sanctions Act. We supported the reauthorization as you know last summer and last autumn with the Congress. It is important that companies not invest in the long term or the medium term in Iran's oil and gas sectors. We have gone to the CEOs and the corporate officers of many of these companies including Royal Dutch Shell to say this is not a good idea, we are opposed to it, we would you to reconsider it.

It's our view that in the Malaysia case, the China case, the Repsol case and Royal Dutch Shell, they've entered into what re preliminary agreements but have not signed long-term contracts. We have made the point to some of them that it is our view that if they sign those long-term contracts they would be in violation of the Iran Sanctions Act. So we hope that the ISA would be a deterrent to those companies and we know that it's been a deterrent to several companies in the past.

This does bear watching. It is on our radar screens and it is important. The final thing I'd say is a point that I made to Chairman Lantos, and that is this. We support ISA, the Iran Sanctions Act, but we also hope that the major pressure from our government would be on Iran, not on our allies, and I say that for the following reason. We've had success since March of 2005 in building this international coalition.

Before that, we were not involved in the international efforts to try to stem Iran's nuclear progress. We had sat out from the negotiations that the EU three had led and then President Bush decided in March 2005 we'd joint the effort. We grew that circle to include Russia and China and then India and Brazil and Egypt and the IAEA Board of Governors. So rather than focus the full attention of our national weight from the Congress and the administration on our allies, we'd rather focus it on Iran.

ROS-LEHTINEN: On Iran: Just one last question, Mr. Chairman. Thank you for the time.

And thank you, Mr. Ambassador.

For the longest time, the Bush administration has been very clear about not negotiating or engaging Iran until it stopped its uranium enrichment. Now of course, in just a few days, we will have what you could call indirect or direct talks because of the problems in Iraq and it will involve Iran and Syria.

What is the Bush administration's position on what could have factored in this change or at least this perception of change when in the past year, if there's been any movement on the part of Iran, it's to make even worse statements about Israel, horrific statements about the United States, increasing its centrifuges, continuing with its water reactor project. In words and deeds its proven to be an unworthy participant in direct or indirect negotiations.

I know that's the big question, but why reward such behavior?

BURNS: I don't think we are. We've been consistent for two years in asserting the following point: we will not negotiate on the nuclear issue with Iran unless it suspends its enrichment and reprocessing programs at its plant in Natanz. That I have said before, but it's very important. It's not just a unilateral American demand, it's a demand of Russia, China, the three European countries and now the entire security council. So we will stick to that and we hope that the Iranians will accept the offer to negotiate.

In any negotiation, even with a regime as difficult as Iran's, it's important to provide exit doors. You don't want to corner the other country. We provided an exit door. If they suspend, for the life of the negotiations, their enrichment programs, we've said that we'll suspend the security council sanctions and that we'd negotiate them. Secretary Rice has said that she would be at those negotiations personally. It would be the first face to face meeting of our national leaderships since the administration of President Jimmy Carter, a long, long time ago.

We have been consistent on that. On the Iraq issue, the reason that we're sitting down around a table with them on Friday in Baghdad is because the government of Iraq asked us to make this decision. They felt it was important to get their neighbors there with countries like us that have decisive influence inside Iraq to help stabilize Iraq. We thought that was the best decision for our country.

LANTOS: Thank you very much.

Ms. Woolsey?

WOOLSEY: Thank you, Mr. Chairman.

I'd like to just follow up on Congresswoman Ros-Lehtinen's suggestion that the United States first follow through on their expectations of others, just by a comment. The comment is I also think the United States should implement our own U.N. and international nuclear agreements. I think that would make a difference.

My questions are kind of in two parts. First of all, Mr. Ambassador, and by the way thank you very much for being a witness and staying here so long with us. We're learning a lot. I know I am.

How popular, how strong is President Ahmadinejad? I mean, is he really the leader? Or is he just out there rattling sabers? You said as part two of the question that the United States -- I believe you said wrestling team, not soccer team -- was greeted with rapture -- or rapturously greeted. So we are liked. The United States is really liked by the Iranian people. From what I understand, the civilians.

So what will happen to that popularity we have if we get goaded into taking on a position of conflict instead of negotiation?

BURNS: Thank you very much. On your first question, you're correct that President Ahmadinejad is not in the supreme position in the Iranian governing structure. That's the supreme leader, Ali Khamanei, who is in the top position. President. Ahmadinejad obviously won the election in August 2005 because he had a constituency of sorts that he spoke to. He has styled himself as a champion of the underclass and of the poor, but we believe that he's increasingly in trouble inside his own country.

There have been student demonstrations against him. There's widespread unhappiness among those who prize democracy and human rights, that his government has been grossly intolerant of those human rights. Most interestingly, as I mentioned before, a newspaper which is thought to be that of the supreme leader has been very critical of him for his handling of a nuclear issue.

His statements on Israel and the holocaust are reprehensible and have brought worldwide condemnation. Our view is that he was once riding high but his star has dimmed a little bit. I must say, there's a degree of humility I think that we have to actually exercise in commenting upon events inside Iran. We don't have an embassy there. There are very few Americans who live there. There are very few American journalists who report from there full time and so we try our best using all the resources at our disposal to understand the events inside Iran.

But as we're not there and it's a distant country, these are impressions that we have and we try our best to understand that dynamics that are shaping the country. The irony that you mentioned is really quite striking and that is in a Middle East where there is a lot of anti-Americanism, unfortunately for our country, public opinion polls would show most Iranians have a good attitude toward the United States, a positive attitude toward our country and even toward our government, which is ironic.

We try to of course exploit that by Voice of America, by Radio Farda, by bringing Iranians to the United States, by bringing Americans to Iran. Along with the diplomatic isolation of the last three decades, there's been an isolation between the peoples. We can correct that. We can bring more Iranian students to the United States and we should do that, because that might provide for part of a long- term change in attitudes toward our country that we'd like to see and change within Iran that all of us would like to see.

WOOLSEY: What happens to that popularity if we either step in and start dropping bombs on their nuclear facilities, and/or think that it is our responsibility to lead regime change?

BURNS: On the first question, our policy is not to see a military confrontation with Iran. It's to seek a diplomatic solution to the problems that we have with Iran. The second question, that's not our policy. Our policy has not been one of regime change. Our policy is one of seeing change in the behavior of the Iranian Government, and that has I think been our policy for quite some time.

WOOLSEY: Thank you.

LANTOS: Thank you very much.

Mr. Tancredo?

TANCREDO: Thank you, Mr. Chairman.

Although not the original questions I had in mind, your comments both to Mr. Rohrabacher and then just now to Ms Woolsey, especially in terms of our lack of information about Iran and what's happening inside Iran and the fact that you are not aware of anything that had happened with regard to the MEK that would change our designation of it from a terrorist organization. Those two things prompt my question.

First of all, it is I guess in a way an elucidation more than a question, but I just want you to know that this organization at least was first brought to my attention by the ranking member and since then I have studied it to some extent. One of the interesting things that you'll find is that they were placed on the terrorist watch list by President Clinton.

They were placed there not because of any action they took against the United States, but because it was part of a deal that was cut with the government of Iran. The Mullahs, in order to develop some sort of rapprochement, there was an agreement on our part to put the MEK on the terrorist watch list. It was not because of any actions taken, I underline that, by them. We were trying to placate the government of Iran at the time and that's what they wanted.

They hate this organization. I have no idea and I couldn't care less whether or not they have an popularity inside the nation itself. I do know that when you realize that there is that kind of enmity there between the leaders of Iran and this organization, it piques my curiosity as to why. Even other members of the administration by the way have been here, and testified that information -- valuable information -- has been provided to the United States of America by this organization, by the MEK, specifically in regard to the nuclear capabilities in Iran.

Now unless there is some elaborate ruse of which I am not aware, that should be an indication that the designation of a terrorist organization should be re-thought.

Finally there are the comments of a number of people who have been involved with them, directly involved with them, at Camp Ashraf, which is where the MEK are now being kept -- on by the way a protected basis as protected citizens, not incarcerated, but protected by the American military. Here's the comment of General Raymond Odierno, the commander of the fourth infantry and now the assistant chairman of the Joint Chiefs of Staff.

He commended the MEK at Camp Ashraf for the cooperation and stated that the MEK should be reviewed to determine whether they are still a terrorist organization. Colonel David Phillips, another former commander at the camp, said that the was exceptionally impressed with the dedication of the MEK. Camp Ashraf was the safest place in his area of responsibility.

There was a New York Times article not too long ago, in which it talks about the fact that there was an extensive investigation of every single person at the camp. FBI went in and looked and they came to the conclusion that there was nothing there -- there war no one there that would post a threat to the United States or that could be thought of as a terrorist.

Now, I say all this because we are contemplating, I read someplace not too long ago, that we are actually thinking about taking, as part of the six party negotiations with Korea -- taking them off the terrorist watch list, as a thing we might hold out there as a possibility.

It's incredible to me, in a way -- and again it wasn't my original set of questions -- but because of the responses here and because of the need for us to actually have this kind of access inside of Iran, have the ability to know what is going on with people who do know the language, do understand the culture and could be used by us.

I just wonder, Mr. Ambassador, whether it is not in our best interests now to actually rethink this whole thing, especially as I say if we want to push our desires to not have regime change. Okay. Our desire is to simply force Iran into becoming a better nation in terms of its relationship with the rest of the world. If that's what we want, why would we not use this one -- at least, it's a small thing I admit, but I think an important piece of leverage that we may have with them and the possibility of taking them off that list.

BURNS: Thank you very much. I would just say this on the MEK. There's been a long discussion in Washington and between Congress and the executive branch about this issue and within the executive branch. Much of that discussion we could enter into in a classified session. I would be happy to do that at any time and respond to any of your questions in classified form and I'd be happy to take those questions today.

For the most part, what I can say in this session is that it's true that some members of the group have defected and have shown their capacity for redemption of sorts if you will. But most of the group remains intact. We believe the group still has the capacity for violence and terrorism and for that reason, the policy that I talked about before has stood.

LANTOS: Thank you very much.

Mr. Wexler.

WEXLER: Thank you, Mr. Chairman.

Ambassador Burns, I want to reiterate my respect and admiration for you and for all of the efforts that you have led with respect to the Iranian nuclear program and our efforts to thwart it as well as your efforts in NATO. I'm fully cognizant of the heinousness of the Iranian regime, their duplicity, their dangerousness. But I want to try to hone in to determine quite frankly the credibility of our own administration as we develop our Iranian strategy.

I want to follow Mr. Ackerman's question if I could. Secretary Rice, when she was here not long ago, said she never saw this purported offer that the Iranians purportedly sent to us in 2003 as Mr. Ackerman described, putting on the table the nuclear program, support by Iran for a two-state solution and their support for Hezbollah and other Islamist Palestinian rejectionist groups.

It is inconceivable, Ambassador Burns, you are too smart a man, too prepared a diplomat, too capable a person not to know as you chart our strategy with Iran whether or not in 2003 Iran made an offer to this nation.

Either they did or they did not. If they did, we either determined it to be credible or not credible. All of this information is 100 percent relevant -- in fact, essential -- to know as we go forward. It is not, respectfully, an acceptable position for this administration to tell Congress "We don't know, I didn't see it, and who really cares because we have so much on our plate now".

So please, if you could, and when it's combined with your comment, correctly so when you say our policy is not regime change. I believe you, you're an honest man.

Yet, Colonel Wilkerson and Mr. Leverett, within the administration, said we rejected that purported Iranian offer because the vice president of the United States concluded that our policy at that time toward Iran was regime change and it wasn't going to be negotiation.

We are entitled to know whether or not the United States of America received and offer and what the vice president and president of the United States decided to do with it and it is, in fact, respectfully, 100 percent relevant to how we go forward. Because it speaks volumes as to what is possible or not possible as we begin this new process with Iran.

BURNS: Thank you, Congressman Wexler. I would just say this. It's my understanding in talking to people four years later, because I was not in Washington when all this unfolded, that the vast majority of people involved in it believe that that offer was not genuine and not credible.

There are people who have spoken up who are no longer with the administration, who have spoken up and some who are critics of the administration, who have spoken up and said the opposite, but the people that I know well, I certainly trust those people. I trust their judgment that this was not a credible offer.

It does fit a pattern, and here I owe you my best answer in terms of what I believe about the Iranian regime. I think it is a deeply fractured regime. There are obviously people in that system who genuinely want to have a better relationship with Europe, Russia, China, the United States, who want to negotiate. But there are other people who don't and we know that Ahmadinejad leads one of those factions.

The pattern of behavior of the Iranian government -- and we've seen it just in the last few days -- is before a major international event to focus on Iran, like a Security Council resolution, they send out multiple envoys to capitals and they make multiple statements that all conflict with each other. Lots of smoke and lots of evasiveness about what they mean. So Velayati has been traveling around world capitals.

Larijani, Ahmadinejad went to Caracas to talk to his friend Hugo Chavez. He's now got the leader of Hamas in Tehran today. If you did a Google on all the statements made by the Iranian representatives over the last 10 days, you'd find wildly conflicting statements about whether or not they're going to negotiate, meet the conditions of ElBaradei or the P-5.

So what we've got to do is sit back, look at all the statements and try to bring our best analysis to bear. I know that the people who were involved in 2003 have told me that they believe that they believe that offer was not credible. The people I work with. Including the Secretary of State.

Our emphasis now has to be on moving forward to try to work on present opportunities in 2007 to get them to the negotiating table, that's our objective.

LANTOS: Mr. Pence?

PENCE: Thank you, Mr. Chairman.

Ambassador, I would echo the sentiments of my colleagues who've expressed gratitude for your candor and your testimony today. It's been enormously informative. When I led a delegation a year ago to meet with Prime Minister Nouri al-Maliki, he described to a small group, a bipartisan delegation, in his offices in the green zone what his first 1,000 days would be. One of the things that he described was that he would reach out to Iraq's neighbors and I wrote down the words.

I'm not supposed to, but I did. He said I will reach out and offer good relations with our neighbors quote "On the absolute precondition of non-interference in the internal affairs of Iraq" close quote.

My question to you as we begin this process that we'll begin in a couple of days, first I think at the ambassadorial level and then perhaps higher, is this in fact -- because by my clock it's been almost 12 months since that meeting -- is this to your knowledge the first approach that Iraq has made and the government of Nouri al- Maliki has made to Iran? Or have there been other attempts to act on what the prime minister described to me in that meeting?

I would be very interested in your candid assessment of that.

Question number two, is clearly dialog with the United States has been a priority for the Iranian regime for some time. I understand how it benefits them. What I'm concerned about, as I said in my opening statement, is how it benefits us. I'm particularly intrigued and I'm prepared to listen to your suggestion that quote "We will sit with Iran, Syria and other countries and support strategies to end bloodshed in Iraq and divisive internal struggles".

If you could respond first to what contact, if any, there's been by Iraq to Iran and secondly, what evidence does the United States have at this point that Iran has any interest in ending bloodshed in Iraq and why we should place any hope on these discussions that could begin. Maybe those two questions are interrelated.

I'll yield the balance to the Ambassador.

BURNS: Thank you very much. I would defer to Ambassador Zal Khalilzad on how many times the Iraqi government has attempted to reach out to the Iranian government in this fashion, but I believe it's probably the first significant attempt that we've seen. And it has now elicited this positive response from a number of countries including our own.

What we hope is that this can be a form that will produce stability, as I said. You've asked a very important question. How is Iran likely to react? Based on its present policies, Iran is not acting responsibly. It's not a country that has done what most of us have done, and that's argue for the three major ethnic groups to get together for the state to be held together.

It's tended to favor its relations with the Shia population and the connections between the Shia leaders and Iran are quite extensive because many of them took refuge as you know in Iran during the period of Saddam Hussein's rule, so that they wouldn't be victimized by Saddam. So there are close economic relations between Iran and Iraq. Trade has multiplied several times over since 2003.

There are extensive political relations and we believe that Iran has not acted in Iraq's best interest. It has not played the kind of role that we're playing, for instance, which is one of a fair arbiter and of a friend to Kurd, Sunni and Shia. We would ask Iran to do that but what we'd specifically ask Iran is to stop fomenting violence against our soldiers. Stop giving the technology -- this EFP technology, sophisticated explosive devices, to Shia militant groups that have killed American soldiers and British soldiers.

We've made that very clear to the Iranian government.

PENCE: Is there any evidence that they are interested in ending bloodshed at this point?

BURNS: I have seen no evidence that they have stopped providing the type of technology that I talked about to the Shia militant groups. There was a fairly dramatic rise in the attacks against our soldiers at the end of 2006 and the beginning of this year. That's one of the reasons that President Bush was prompted to make the statement that he did. I'm not aware of any evidence that would lead us to believe that the Iranians have stopped that activity.

It's still an abiding concern, a very strong concern of ours.

PENCE: Thank you.

LANTOS: Thank you very much.

Before turning to Mr. Carnahan, let me just say to my two colleagues who will not get a chance to ask questions, I will ask unanimous consent that the record remain open for questions for the record, and at the next meeting we will begin with you, Mr. Scott.

Mr. Carnahan, I recognize you.

CARNAHAN: Thank you, Mr. Chairman, and I'll be brief as we try to get over for votes. But you mentioned trying to reach out to other elements in Iranian society and in leadership and there's opportunities there. In particular, I wanted to ask you about opportunities to reach out to younger generations of Iranians with technology on the world wide web, satellite television -- things that they are viewing from other parts of the world and particularly from the U.S. and what kind of opportunities we have there to take advantage of that, what we're doing.

Secondly, I want to get your comment about the poppy crop production in Afghanistan. You know, there are some common ground areas there, in terms of that really flooding into Iran, into Europe and on into the streets of the U.S. We've had some very high profile cases in the Midwest, where I'm from, of deaths from those high potency drugs, and if there are some common ground areas there that we can work on?

BURNS: Thank you very much. We have used some of the money given to us by Congress to restructure completely our web sites. We have a virtual embassy for Iran. It's our web site. We have specific web sites for specific Iranian cities and they are targeted at young people, who are obviously Internet savvy, as opposed to people in our generation who may not be.

Secondly, we've built up Radio Farda, our Persian language radio service, and VOA TV, to be on the air much more frequently. Secretary Rice and I have been over to VOA to view our call in radio shows to Iran. I would invite any of you who would like to do that to do so.

Congress Boozman did. People do call in and are very honest about their views toward our country and often very critical of their own government.

Third, I would say and I would hope that the Congress would continue to support these programs, to reach out to the Iranian people, to bring them here on scholarships. We brought medical professionals to Congressman Delahunt's homes state, my home state of Massachusetts, to Harvard Medical School, just last month. We hope to do more of that to ease the sense of tension between our societies.

If you will, it's a modern day version of ping-pong diplomacy. It's just wrestling, which tends to be the common denominator in our athletic establishments.

You suggested something very interesting and that is that Iran is the opponent of the Taliban in Afghanistan and Iran is being affected very negatively by the flow of poppy to Iran itself and the drug usage, we think, among Iranian youths, unfortunately is alarmingly high.

So if you're looking for common ground and we always must, in relations with particularly difficult regimes, we seem to have a common interest in stability in Afghanistan, a common opponent in the Taliban and we hope that Iran will use its influence to try to diminish the power of the Taliban and also use its influence to convince the governors in Afghanistan to work against poppy production.

Unfortunately, the United Nations said yesterday we may be facing the largest ever poppy crop in Afghanistan in 2007. We're working very hard against that and we've seen that poppy production is declining in the north but in Nurestan province and Kandahar province in the South, it's quite high, so it's alarming and it does threaten the future of the Afghan people.

LANTOS: Mr. Secretary, we are deeply in your debt for a brilliant and knowledgeable and comprehensive testimony and we hope to have you back soon. I know I speak for all of my colleagues in expressing our thanks.

This hearing is adjourned.