I'm new to this whole chairmanship thing. I learned under the tutelage of Mr. Royce, the gentleman from California. And one thing I learned is that, if I'm chairing a hearing, I can do something unusual; in this case, it'll be asking Mr. Royce to start with his opening statement and then I'll deliver mine.

In the meantime, we may have votes called, I doubt very -- witnesses might as well relax. It's highly unlikely that we'll get to you before the votes are called on the floor.

 

OPENING STATEMENT OF

ED ROYCE
A Congressman from California, and
Ranking Member of the Subcommittee on Terrorism, Nonproliferation and Trade,
House Committee on Foreign Affairs

 

REP. ED ROYCE (R-CAL): And thank you, Mr. Chairman.

I would like to state my desire to work closely with you as, indeed, I think we have in the past. And I think this hearing today should help us better work through some of the grave challenges that you and I talk about; the challenges that Iran poses to the security of the United States.

So, again, Congressman, I thank you for calling it.

Mr. Chairman, the Iranian regime is a state sponsor of terrorism, and I can attest to that, because I was in Haifa last July as Iranian- backed Hezbollah was sending rockets into the town of Haifa where I was. And, frankly, those rockets came from Iran and Syria.

Iran is aiding militants in Iraq. It's determined to develop nuclear weapons, or at least its president, its head of state, is. President Bush has rightly declared that unacceptable. Which is all the more so, by the way, with a messianic Ahmadinejad in Iran's presidency is the one who wants to develop these nuclear weapons.

Unfortunately, I think you and I agree, Americans agree, that the world has been very slow to respond. The international community has not made a lot of progress. But lately the U.N. Security Council imposed limited sanctions on Iran.

And Undersecretary of State Burns recently testified that China's and Russia's backing of U.N. sanctions against Iran at first was more important than the actual sanctions themselves. Because if we can build international pressure -- and we'll see what the Security Council does this week -- but if we can build that pressure, it may derail Tehran's nuclear weapons program.

The regime's weak spot is its economy, which is distressed. Government spending and inflation are spiraling up. Unemployment is spiraling up. Corruption is rampant.

And, meanwhile, Iran's oil windfall has been very mismanaged. The oil infrastructure's in shambles, desperately needing foreign investment.

Despite its plentiful oil reserves, Iran right now has got a refining shortfall.

It imports 42 percent of its gasoline. Public discontent is growing.

The good news is that Iranians view President Ahmadinejad as bearing responsibility for these economic woes. Legislators have formally complained there about his economic policies. His popularity has fallen through the floor. The president's party did very poorly in recent municipal elections there in Iran. And we seem to have found, frankly, an effective pressure point, and that being Iran's financial sector.

Because the international business community has noticed the risks. As a consequence, the foreign banks have left Iran. Many companies are withdrawing from Iran, and they're doing it because of the risks of doing business there.

Iran's foreign exchange transactions are being pinched. Iran's oil minister's complain that oil production is being hurt by Iran's international isolation.

Now here's where we can be doing more. There is one element of engagement of subsidy by Europe, which keeps some of their businesses in the game, and that is the export credits for commerce in Europe, which keep companies that otherwise wouldn't do business in such a risky place -- that is, in fact, being subsidized by the taxpayers in Europe.

Now Japan is scaling back. Germany must scale back. The European Union trade with Iran, we understand, is considerable. But remember, it's underwritten by the taxpayers in Europe.

Sanctions and financial pressure are the best course of action for now with respect to Iran.

The U.S. must also reach out to the people of Iran, telling them that we have no issue with them, but that we must oppose a regime that backs terrorism and is developing nuclear weapons. So our message has to be, "Ahmadinejad's policies are isolating you, hurting your economy, hurting your livelihood, and it could get worse."

This realization is already setting in. We need to step up our public diplomacy, including radio broadcasts, and they've got to communicate that message. And they've got to communicate a message also of freedom.

Regrettably, our public diplomacy efforts have been poor. That's a subject for another day. But it's not been anything like what we had in Eastern Europe.

The Nuclear Non-Proliferation Treaty is a bulwark against Iran developing nuclear weapons. And of course Iran is twisting the NPT, claiming the right to enrich uranium, which would place it far too close to possessing nuclear weapons.

Their president has declared 2007 to be the year to celebrate Iran's right to develop nuclear power. The regime has even put the atomic symbol on its currency, trying to stoke national pride.

Unfortunately, for him, that currency is increasingly inflating in value.

Nevertheless, we'd be in a weaker position, by the way, without the NPT. And Chairman Lantos and Chairman Sherman have introduced legislation promoting an IAEA-based nuclear fuel bank designed to dissuade countries from enriching uranium and reprocessing plutonium exercising this alleged NPT right. No doubt they have Iran in mind.

There are questions about the workability of an international fuel bank, but this legislation forces this important issue, and I'd like to give credit to Chairman Sherman for our chairman's leadership on that.

On a procedural point, my hope is that the TNT Subcommittee would give it full attention, including hearings, before the legislation is moved.

And I thank you again, Chairman Brad Sherman.

 

OPENING STATEMENT OF

BRAD SHERMAN
A Congressman from California, and
Chairman of the Subcommittee on Terrorism, Nonproliferation and Trade,
House Committee on Foreign Affairs

 

REP. BRAD SHERMAN (D-CAL): Thank you for that excellent opening statement.

We'll continue here until they tell us we have about seven minutes to go vote. And even if I'm in the middle of this carefully constructed opus, I'll suspend, we'll go vote, and we'll come back.

But, again, I think the witnesses can relax.

I want to thank the Middle East Subcommittee for joining us, at least in spirit, with these hearings. I suspect that Chairman Ackerman and Ranking Member Pence will be with us at some point after the votes.

I do want to commend the ranking member, Mr. Royce, for his opening statement. The general comment and concern I have is how much time do we have and how quickly are we moving. And I fear that the approach that we're taking now may end up being a day late and dollar short.

In mid-2002, an Iranian opposition group held a press conference revealing the existence of a covert effort to produce enriched uranium, including the now-infamous Natanz pilot enrichment plant and the planned industrial-scale facility for some 50,000 centrifuges to be build underground at that site.

Subsequent to these revelations, we learned many more details about the concerted Iranian nuclear program that had gone unreported for nearly two decades.

Iran had no operational nuclear plants at that time. Nuclear fuel is cheap, readily available from a variety of international suppliers. The Russians, who were actually building the only Iranian nuclear plant under construction, would surely supply the fuel for that and any future plant.

The effort to enrich uranium, in the words of one expert, made about as much economic sense -- if electric power were the objective, it made as much economic sense as building a slaughterhouse because you want a sandwich.

Even if you buy the argument that Iran, with its natural gas and oil resources, needs nuclear power, that's a very hard argument to buy, given the fact that they're flaring natural gas. But even if you buy that argument, there's no explanation for the enrichment of uranium except a desire to develop nuclear weapons.

The number one state sponsor of terrorism is trying to gain the most powerful weapons yet invented.

In September of 2005, we were able to achieve a referral of Iran to the U.N. Security Council. That is to say, it took more than three years to get the Iranians into the dock, and we celebrated that as if it was a great victory.

Just over a year later, in December 2006, nearly four and a half years after the Iranians were caught red-handed with a covert program to develop nuclear weapons, the world finally took the basic step of cutting off nuclear-relevant commerce with Iran. And that's what we've achieved.

We're told that this is enormous progress. All we've done is to make it just a little bit harder for Iran to continue to do what we know they've been doing.

Given another four years, we may finally get a ban on international travel by regime officials. Maybe, another four years after -- which I would call the no Disneyland for Ahmadinejad sanction -- and then, maybe four years after that, we'd be able to ban him from visiting Magic Mountain as well.

Needless to say, the nuclear program of Iran is going much more quickly than the sanctions effort.

At this point, I'm going to suspend. We'll come back. I'll finish this opening statement. And then we'll hear any other opening statements from other members and then we'll go to witnesses.

SHERMAN: Thank you.

(RECESS)

 

OPENING STATEMENT OF

GARY L. ACKERMAN
A Congressman from New York, and
Chairman of the Subcommittee on the Middle East and South Asia,
House Committee on Foreign Affairs

 

REP. GARY L. ACKERMAN (D-NY): In the interest of time, I'll begin my opening statement and turn the gavel back over to Chairman Sherman upon his arrival.

As the IAEA recently reported, Iran's nuclear weapons program is booming, while the world's opportunity to prevent this horrifying prospect shrinks every day.

Every day we debate options and argue about tactics, the Iranians are enriching uranium and working out the secrets to opening a massive cascade of centrifuges. Once that happens, the world will be a very different and much more dangerous place.

How did we come to such a predicament? To be blunt, five years ago, we picked the wrong oil-producing, terrorist-sponsoring, weapons- proliferating, ultra-violent, authoritarian Persian Gulf state starting with the letter "I" on which to focus our attention.

And ever since then, Iraq has been an enormous distraction from our most pressing national security interests.

Only recently has American policy begun to reflect the urgency of the Iranian nuclear threat. To be successful, or at least to have a chance of being successful, our Iran policy must be comprehensive. We need bigger carrots, and we need bigger sticks.

We need a credible diplomatic and political alternative to offer the Iranians through negotiations, and we need to simultaneously utilize every means we have of applying pressure. Everything must remain on the table.

Maintaining Iranian uncertainty about the prospect of U.S. military action is the best way to ensure that force will actually not be necessary. Likewise, we have to continue to increase the economic and political costs of Iranian proliferation efforts.

Fortunately, the international debate about sanctions is effectively over. The Iranians have been so outrageous, so obnoxious, so defiant that the U.N. Security Council is now debating what kind of additional sanctions to impose, not whether to sanction at all.

To be clear, sanctions are necessary but alone, they are not sufficient. Sanctions work only when they are part of a multifaceted policy, and when they are maximized in both their scope and their application.

At this point, I ask unanimous consent to put the rest of my statement in the record. Seeing no objection, it is so ordered.

Now you got the gavel.

SHERMAN: Thank you. I will need to return the gavel to you in just a minute or two to go vote -- oh.

ACKERMAN: I'm off.

SHERMAN: You're off.

We're probably going to suspend these hearings. I hate to ask your indulgence for another 15 minutes until we conclude votes in the Judiciary Committee. For reasons that the Appropriations Committee will have to explain to the House, it took them an extra 30 minutes to get to the floor for the floor votes, and now we've got Judiciary Committee votes. So we stand adjourned for -- I don't see any staff or any of my other colleagues who are likely to come right back, so we'll stand adjourned for 15 minutes. Thank you.

(RECESS)

(UNKNOWN): Thank you very much for your forbearance with the House schedule.

And with that, we are ready to proceed, and I would like to introduce our witnesses and experts.

First, I welcome back David Albright, president of the Institute for Science and International Security here in Washington, DC. He is a renowned expert on nuclear proliferation issues, and is especially adept at looking into secret nuclear program of countries like Iran and North Korea.

Next, I welcome back Matt Levitt, senior fellow and director of the Washington Institute's Stein Program on Terrorism, Intelligence and Policy. From 2005 to early 2007, Dr. Levitt served as deputy assistant secretary for intelligence and analysis at the United States Department of Treasury.

Daniel Byman is associate professor and director of the security studies program and the Center for Peace and Security Studies at Georgetown University's Edmund Walsh School of Foreign Service. He's also a senior fellow at the Saban Center for Middle East Policy at the Brookings Institution.

We also welcome back Ilan Berman. Elan is vice president for policy at the American Foreign Policy Council in Washington, DC.

And Mr. Levitt, if you would care to begin?

LEVITT: Thank you very much. It's a pleasure and an honor to be back, especially as a private citizen. I'd like to ask if my remarks could be -- full remarks could be put into the record, and I will just read a shortened version of them.

(UNKNOWN): Without objection. So ordered.

 

STATEMENT OF

MATTHEW LEVITT
Director, Stein Program on Terrorism, Intelligence and Policy,
Washington Institute for Near East Policy

 

LEVITT: Thank you.

The pressing question is how the United States and international community can raise the cost for Iran's continued defiance of the international community over suspension of it's uranium enrichment program; what levers are likely to feed on domestic discontent and induce the regime into Tehran to abandon such objectionable and threatening activities?

Most commentators agree that any viable answer has to include a combination of military, diplomatic and financial tools, as well as a mix of carrots and sticks. Where they differ is on the question of how to apply these tools, and in what combinations.

Keeping the military option on the table is important, but is by no means an attractive option. First, there's no simple military option that could wipe out Iran's nuclear program. And second, Iran today is one of the few places in the greater Middle East, where the regime is anti-American, but the people are not. Invading Iran would certainly draw on Iranian nationalism and unite the population against us.

As for diplomacy, sitting at the table with Iranian officials in the context of improving security in Iraq was a good thing. There is, however, ample reason to doubt the sincerity of Iran's diplomatic message, not only on Iraq, but on the nuclear issue and terrorism as well. While maintaining both military and diplomatic options, with the former as a measure of last resort and the latter as the preferred tool of choice, the United States should continue to apply targeted financial measures against Iran.

These include not only graduated sanctions, but also efforts to leverage existing market forces. Together these targeted financial measures offer the most flexible, regime-hostile, people-friendly, and realistic tool at our disposal.

Graduated sanctions, including multi-lateral U.N. sanctions and unilateral measures to protect the U.S. financial system, are critical and effective tools. Employing these in a graduated manner demonstrates that the purpose of such measures is not simply to punish Iran, but to encourage change in the regime's behavior. Indeed, targeted financial measures are aimed at illicit conduct, not at a specific country.

U.N. Security Council Resolution 1737 appropriately initiated sanctions against a list of individuals and entities involved in Iranian proliferation activity, and called for additional sanctions if Iran continued to defy the international community.

It is critical that the international community both enforce the existing sanction regime and quickly agree on and implement a second tier of sanctions.

Both should include a focus on key Iranian leadership figures and Islamic Revolutionary Guard Corps, the IRGC.

Other international measures that should be included in the next round of sanctions include an embargo on the sale of arms to Iran and purchases from Iran; asset freezes and travel restrictions on senior Iranian officials tied to the regime's procurement activities and support for terrorist groups; and cutting off government sanctioned import/export credits to Iran.

Additional measures could focus on the shipping and shipping insurance industries, without which Iran can neither export its crude oil, which is the backbone of its economy, nor import refined oil, which is heavily subsidized by the government.

One thing that should not be tolerated is the introduction of a false distinction between financial measures and trade, which some European partners proposed in an effort to maintain business contracts with Iran while imposing other financial sanctions.

Domestically, Treasury should continue to take action to safeguard the U.S. financial system from abuse by targeting Iranian financial institutions knowingly facilitating financial transactions in support of terrorism or proliferation activities.

Treasury's domestic actions have also been graduated. In September 2006, the department cut off Bank Saderat from the U.S. financial system by denying it the ability to carry out so-called U- turn dollar transactions through third-party banks.

Four months later, in January 2007, the department went a step further, fully designating Bank Sattah (ph), its wholly owned U.K. subsidiary, and its chairman.

The effectiveness of sanctions is increased manyfold when they are multilateral. That said, the impact of unilateral U.S. sanctions is also felt internationally due to existing market forces. Foreign financial institutions and private industry, for example, increasingly incorporate Treasury's designation lists into their due-diligence databases not because they are required to do so, but out of their own fiduciary interests.

While in the business of making a profit, they have a responsibility to their shareholders to balance profit margin and risk, as well as gaggles of cautious lawyers looking over their shoulders to safeguard these firms from reputational risk.

There exists today one global economy, one international financial system, and the United States is at its center. Financial institutions are eager to maintain branches in New York City, which provides the Treasury Department significant leverage over their activities worldwide.

U.S. officials have, therefore, met with much success discussing global risk with governments and the private sector alike. Whether referring to government-sponsored import/export insurance, lines of credit provided by public or private banks, maintaining correspondent banking relationships with Iranian banks or even facilitating their transactions in dollars or other denominations, the common question all parties doing business with Iran must ask themselves is: Do you really want to be doing business with a high-risk actor like Iran?

To be sure, there is near unanimous agreement that Iran's pursuit of a nuclear weapon and its support for terrorism pose significant risks to the global economy and global security.

But there are more specific economic reasons for avoiding business with Iran as a country with a heightened risk for investment. For example, Iran engages in a variety of deceptive financial practices to deliberately conceal the nature of its illicit businesses. Bank Sattah (ph), for example, requested that other financial institutions remove its name from transactions when processing these transactions in the international financial system.

According to the State Department's recently released international cartex (ph) control strategy report, quote, "There are currently no meaningful anti-money laundering controls on the Iranian banking system," end quote.

Moreover, according to the report, Iran claims to have established a financial intelligence unit, but it's provided no documentation or details on its existence.

In light of these deceptive practices and the lack of anti-money laundering controls, how can financial institutions or multilateral corporations have any level of comfort that their funds do not end up in Iran's 9-digit budget line-item for support to terrorist groups or in its clandestine efforts to procure materials for its WMD programs through front and shell companies.

When the public sector shares information with the private sector and informs banks and businesses of these risks, market forces lead many to forgo business with Iranian institutions.

In light of all of the above, it should not surprise that the OECD raised the risk rating for Iran in early 2006. And, in the event banks and corporations do not determine that the reputational and litigation risks outweigh the potential profit benefits, the fact that these institutions want to conduct business in the United States often leads them to conclude that putting their U.S. business at risk is not worth the investment in Iran.

Undersecretary of the Treasury Stuart Levey, under whom I had the honor and pleasure to serve, put it best in a recent speech he gave in Dubai.

And he said, and I quote: "It is clear that many businesses are taking it upon themselves to scale back on business with Iran."

"At first glance, this may appear to present a tempting business opportunity for other corporations to step in. However, there is reason that these other companies are pulling back. They have decided that the risks of business with Iran outweigh any potential gain," end quote.

And later in the speech, he was more direct: quote, "Those who are tempted to deal with targeted, high-risk actors are put on notice. If they continue this relationship, they may be next."

Targeted financial measures represent, in short, the strongest non-military tool at our disposal to convince Tehran that it can no longer afford to engage in dangerous, destabilizing activities like proliferation and support for terrorism. A combination or graduated sanctions and leveraged or marshaled market forces can compel Iran to reconsider the utility of pursuing such endeavors.

Already, there are signs of domestic discontent within Iran, and targeted financial measures can produce further political pressure on the regime. According to the Economist Intelligence Unit, the nuclear crisis and subsequent sanctions, quote, "is imposing a heavy opportunity cost on Iran's economic development, slowing down investments in the oil, gas and petrochemical sectors, as well as in critical infrastructure projects including electricity."

This assessment stands in stark contrast to the findings of a 2003 World Bank report on Iran, which noted the, quote, "daunting unemployment challenge," end quote, facing Iran, and concluded, quote, "Unless the country moves quickly to a faster path of growth with employment, discontent and disenchantment could threaten its economic, social and political system."

We are already seeing the benefits of this strategy. Banks like UBS, HSBC, Standard Chartered, Commerzbank and others have decided to cut off or curtain dealings with Iran. Some foreign banks are refusing to issue new letters of credit to Iranian businesses, and Iran is now facing a stand-up with Russia over Bushehr, over Tehran's apparent desire to pay for Bushehr in euros, not dollars.

Targeted financial measures are not symbolic sanctions. They have teeth, and Tehran is weary of their bite. And I'm grateful for the invitation to testify before you, and I welcome any questions you may have.

(UNKNOWN): Thank you, Dr. Levitt.

Mr. Albright?

 

STATEMENT OF

DAVID ALBRIGHT
President, Institute for Science and Interational Security

 

ALBRIGHT: We can all agree that we do not want to see Iran with nuclear weapons or even with a nuclear weapons capability. I would like to focus my oral testimony on certain aspects of Iran's uranium enrichment program, to have a more technical discussion.

My written testimony is more detailed and the ISIS Web site has a considerable amount of information on Iran's nuclear program. And I'd like to basically just focus on a set of questions that committee staff gave me.

First, one of the most frequently asked questions about Iran's nuclear program is whether Iran is competent in operating centrifuges. There's been many reports in the media that they can't operate centrifuges; there's been reports that they can operate them well.

Unfortunately, the question is difficult to answer. Iran is under no obligation to inform the International Atomic Energy Agency about such matters, and has chosen not to do so.

It is also important to realize that Iran is unlikely to ever operate its gas centrifuge plan like a European gas centrifuge consortium, Urenco. And so, when people ask the question, "Has Iran gained mastery of gas centrifuges?," you have to ask, "What do you mean by mastery?"

The most important aspect of this question is whether Iran has achieved adequate competence in the operation individually and in groups of what are called P-1 gas centrifuge cascades. And the focus is particularly on a 164-machine cascade, which is the workhorse of the Iranian program.

Iran appears to be able to make all the centrifuge components for the P-1. I think a couple years ago, that was still at issue, but currently Iran is assessed as being able to make all components.

It's also gaining valuable experience in operating cascades. But it still, for some reason, has not operated these cascades continuously. And, frankly, it's rather perplexing why.

If it is ever going to enrich uranium on a significant scale, it's going to have to run its cascades more than what we would estimate is perhaps five hours a day on average. I mean, cascades aren't operated that way, but it just gives you a flavor of how these cascades are not operating anywhere near 24 hours a day, which is what you want.

Now, why is that?

And, frankly, there's a range of opinion. And these opinions are shared at the International Atomic Energy Agency. One is certainly that they're just having technical problems, although I don't think that's the most likely answer.

Another is that it's deliberately slowing down its program in order not to alarm the international community, that it's calculating that it will move slower in order to in the long run gain more progress, albeit at a slower rate.

Another is that it's already competent in enriching uranium continuously in cascades, but it's simply choosing to hide that from the inspectors and the rest of the world.

An unanswered question is: Just how much assistance did Iran get from the A.Q. Khan network? Was it also provided with expertise in operating centrifuges?

And then, the final one is just that Iran is implementing its own plan for cascade installation that includes its own method to become proficient, according to its own timetable, and has simply chosen not to share that with the IAEA or the outside world.

So I must say we're left with a rather wide range of possibilities, but at some point, Iran's going to have to play its hand. It's putting in place up to 3,000 centrifuges in the underground facility, and it's going to have to either start to operate centrifuges or start to actually look like it cannot do so.

But I would say that our bottom-line assessment at ISIS is that Iran is becoming more competent at running centrifuge cascades, but it has not yet demonstrated what one would call mastery or full competence.

However, we're also asked how long will it be before they are competent? And it's a very difficult question to answer, but I would certainly say that by the middle of this year that Iran, even if it were having technical problems, could be competent at running its basic cascade.

Another question is: Is Iran likely to finish its first module, as they call it, in May of 2007? You're all aware that Ahmadinejad has made a commitment to finish this 3,000 centrifuge module by the end of May.

Most are skeptical that Iran can finish installing 3,000 centrifuges in that time frame, let alone getting them all to enrich uranium. It needs to install about one cascade a week in order to meet that schedule.

Now, between the middle of January and the middle of February, it essentially met that schedule, so I would not dismiss Iran being able to meet a pretty rapid installation schedule, but still remain, frankly, skeptical that they could get all those machines up and running.

And I would estimate that they're going to need several more months to a year to get this module fully operational.

And I think you've all heard that all the estimates that are out in the public that once such a large number of centrifuges are operational, that they could use those centrifuges to make enough highly enriched uranium for a bomb in six to 12 months. It just depends on how well it would operate.

This estimate assumes, of course, that Iran decides to take this path of producing highly enriched uranium. If it did, it would certainly be seen as violating all its commitments, and tantamount to seeking nuclear weapons.

So, again, probably the more likely option is Iran would produce low-enriched uranium in that cascade for some period and try to stockpile its low-enriched uranium and achieve what we would call a breakout scenario that, in a fairly rapid period of time, it could enrich further low-enriched uranium to weapon grade and achieve a nuclear weapons status rather rapidly.

So I think our assessments at ISIS are still that the worst case is that, in 2009, Iran could have several thousand centrifuges operating and have enough highly enriched uranium for a nuclear weapon.

There's still quite a bit of uncertainty of that in that estimate. And we can see many ways that it could be delayed, and our estimate would become more in line with the standard estimates you hear -- at least publicly reported -- from the U.S. intelligence community of no sooner than 2010 to 2015.

But if Iran does make faster progress in getting this module to operate, then I think we're going to have to all relook at our estimates.

The final question is whether the IAEA is capable of monitoring Iran's nuclear program. And I would say: Yes, if Iran implemented the additional protocol, including the additional transparency measures that have been requested by the IAEA.

However, Iran is doing neither, which explains the IAEA's recent statement in its safeguards report on Iran that it will no longer be able to provide assurances about the absence of undeclared Iranian nuclear facilities or activities.

Which means another concern is that if the IAEA can't provide assurances about undeclared activities, we don't actually know if Iran is building a secret centrifuge plant.

And it's unlikely -- I believe it's unlikely they're doing that now, given the amount of resources it's taking them to put together this module in the underground site at Natanz.

But in the future, it becomes more worrisome, particularly if they develop this module and they're looking at a breakout scenario where they would want to take the low-enriched uranium and turn it into highly-enriched uranium. And they could do that at a secret site which we would know nothing about. All's we would know is that low-enriched uranium has gone missing.

I would like to say that, despite these limitations, the IAEA remains the best source of information on Iran's nuclear program. Its inspectors, even with limited access to people and places, are on the ground on a regular basis and are well-qualified to assess the Iranian program.

The IAEA has people who have worked at Urenco. In fact, they have one person who was involved in developing some of the very same centrifuges that Iran is now building. He was working in the Netherlands in the 1970s, at the time when A.Q. Khan stole these designs from the Netherlands and, ultimately, they ended up in the hands of Iran.

Also, intelligence assessments based on other non-IAEA information are more limited and should be viewed with some skepticism in light of past failures in Iraq and elsewhere.

And so, I'd like to end my testimony by just saying that I think we all need to be very vigilant, and I would commend this committee for holding this hearing about -- we need to be more vigilant about the possible assessments that could either exaggerate or simply be wrong about the Iranian program.

And then I think we need a full, fair, and unclassified debate about Iran's nuclear capabilities and ways to deal with that threat.

Thank you very much.

(UNKNOWN): Thank you very much, Mr. Albright. I want you to know that I believe that this committee does intend to take it very seriously, and will continue to follow up. We thank you for your thoughtful testimony.

Our next witness is -- and I might remind all those testifying that we do have your written statements for the record, and so if you can summarize to try to stay within the 5-minute rule, we will truly be appreciative.

And with that, I'd like to introduce our next witness, Dr. Daniel Byman, associate professor for the director of Security Studies Program and the Center for Peace and Security Studies at Georgetown University's Edmund A. Walsh School of Foreign Service.

(UNKNOWN): He's also a senior fellow at the Saban Center for Middle East Policy and the Brookings Institution.

And we look forward to hearing your testimony, Dr. Byman.

BYMAN: Thank you.

And I'd like to thank members of the committee for having me today. And the hint was duly taken.

(LAUGHTER)

(UNKNOWN): Very good.

 

STATEMENT OF

DAN BYMAN
Director, Security Studies Program, Georgetown University
Senior Fellow, Saban Center for Middle East Policy, Brookings Institution

 

BYMAN: I will briefly talk about the dangers of an Iranian nuclear weapon and then what I feel are a list of quite troubled and flawed U.S. options for dealing with it.

There are three main problems, in my judgment, with an Iranian nuclear weapon, all of which should make the prevention of Iran having a weapon a priority.

The first is that Iran might step up its backing of terrorist groups around the world. Although Iran is often called the world's leading sponsor of terrorism, it has been in the past much worse than it is today. And it's worth pointing out that it could go back to that level or perhaps increase it.

A second concern is that Iran might be even more aggressive in Iraq.

And a third is that it might spur proliferation elsewhere.

For all this, Iran might be more aggressive because it no longer worries that U.S. conventional strength will punish it because it has a nuclear weapon to protect it.

There are two things to point out, through, that Iran would not be likely to do.

The first is that Iran is not likely to launch an unprovoked assault on the United States or one of its allies, including Israel, in the region with a nuclear weapon.

The second is that Iran is not likely to give a nuclear weapon to terrorist groups. And in Q&A I'm happy to expand on that, if you'd like.

But a final caveat is in order for all of this, which is we know remarkably little about Iran's intentions with a nuclear weapon. And this is not meant as a dig at the U.S. intelligence community. It is meant to say that I do not believe the Iranian leadership knows what it will do with a nuclear weapon. There are various purposes that are possible, but acquiring a nuclear weapon has achieved a certain status symbol effect in Iran that I think goes beyond Iran's strategic ambitions.

Now, U.S. policy options for handling the nuclear program with Iran are poor. There have been advocates of talks with Tehran, and I agree the United States should talk with Iran about Iraq, terrorism and other issues, but we should have very low expectations. Iran consistently has not gotten its act together in terms of a position with the United States, and right now it believes it has the high hand and that the United States will make further concessions.

Regime change has not worked for the United States over the years. The U.S. has had very weak programs, and these efforts have met with no progress. The regime is well entrenched. The opposition movements seem penetrated.

And, even more important, Iranians are exceptionally sensitive to outside meddling. And the one thing guaranteed to unify them behind a regime they don't like is the idea that the United States is trying to manipulate the country.

It is possible that U.S. a military strike on a uranium- enrichment plant at Natanz or uranium-conversion facility at Isfahan or other targets could set back the nuclear program. But in my judgment, a successful strike not only is far from guaranteed, but would likely backfire.

I believe that the military option should remain on the table for the long term, but a strike right now would be a mistake.

It is not clear that the United States has the necessary intelligence to do such a strike. And, even if we did, Iran for years has been reinforcing its facilities in preparation of just such a strike.

A strike would lead Iran to redouble its efforts to get a nuclear program and, also, it would tarnish the U.S. image in the Middle East, which is actually about as low as it's been in modern history; and where the United States is already viewed as trigger happy.

But the biggest concern is that Iran would strike back. Iran has an international terrorism presence and has cased U.S. embassies around the world. And, in particular, Iranians talk openly of what they call 140,000 hostages next door in Iraq.

Although Iran is certainly up to no good in Iraq today, the situation could be far worse in terms of what Iran is involved in, and it could turn parts of Iraq that right now are relatively peaceful into parts comparable to the worst of Anbar province.

And we need to recognize Iran's power to strike back at Iraq.

Dr. Levitt has spoken ably about different economic instruments to press Tehran, and I won't repeat what he said. I will simply emphasize what Mr. Royce said early on, which is: Iran's economy is its vulnerability. And that's where we should be directing our efforts. We should be tightening the economic noose with regard to Tehran.

Although much of Iran's leadership supports the nuclear program and a nuclear weapon, many of them think economic growth should be a higher priority.

And that difference is a source of potential U.S. leverage.

And our strategy should be designed to strengthen those voices that are pragmatic enough to recognize that a nuclear program will mean Iran's economic ruin.

And from our point of view, that means both calibrating the strategy, yet ensuring the punishments we're trying to inflict are tough enough where these voices are credible.

This pressure has to be sustained. Over the years, Iran has made an art form of evading punishment, making token concessions, and otherwise trying to outlast the international community.

We need to be sure that pressure we're applying today, we can also apply again in five years.

I will add that Congress needs to allow the administration flexibility to put possible concessions on the table if Iran makes real, verifiable progress.

At times, states have made progress on nuclear issues or terrorism, and it's been difficult for the administration to recognize that because of congressional pressure. This should not be done today, because Iran is certainly going in the wrong direction, but the administration must have the flexibility to reward good behavior, as well as support for punishing Iran's current bad behavior.

I'm going to conclude by saying that the United States must also recognize that influence over Tehran, while considerable, is not absolute. And as a result, there is a real possibility of failure.

And we must begin to think about the implications of not only Iran with a nuclear program, but Iran with a nuclear weapon, and how the United States will handle that in its regional diplomacy and in its international diplomacy.

Thank you very much.

(UNKNOWN): Thank you very much, Dr. Byman. I appreciate your trying to stay within the five minutes.

Our last witness, but certainly one who is familiar with this committee -- we welcome back Mr. Ilan Berman. Ilan is the vice president for policy of the American Foreign Policy Council in Washington, DC, and is known as an expert in regional security throughout the Middle East, Central Asia, and the Russian Federation.

Mr. Berman, would you please present your testimony?

 

STATEMENT OF

ILAN BERMAN
Vice President for Policy,
American Foreign Policy Council

 

I. BERMAN: Thank you, sir. And let me start by thanking the chairmen, Chairman Sherman and Chairman Ackerman, for the invitation to come here, as well as the ranking members, Congressman Pence and Congressman Royce.

Let me very quickly -- because you do have my written testimony in front of you -- let me very quickly run through some of the main points. I would say that a very good place to start in any discussion about Iran's nuclear program and the next steps, is the current lay of the political land when it comes to discussions about strategy.

And today, if you were to ask any policy maker, expert, or analyst what can be done, you will very likely get one of three answers. The first is that some people believe that the optimum way to deal with Iran's nuclear ambitions is to reach some sort of negotiated accommodation, essentially dialogue with the Iranian regime.

The second is that there are others who've concluded that Iran's atomic effort is a cassus belli and warrants the immediate use of force. And the third group, a distinct group, thinks that the ascendance of a nuclear Iran or a nuclear-ready Iran is a benign, even a beneficial, turn of events, and that no action at all is needed on the part of the United States.

I would contend that none of these amounts to a serious strategy. Because diplomatic engagement, even though it can reap short-term benefits, risks alienating the young pro-Western population that we see on the Iranian street. It's a vibrant constituency of some 45 million to 50 million people, who will ultimately determine the political disposition of that country. And because of their age, that ultimately is likely to become very, very soon.

Military action is likewise deeply problematic, as Dr. Byman mentioned, both because of the intelligence shortfalls that we have, and because of the likely blowback that -- political blowback, both abroad and within Iran -- that such military action would entail.

And as well, it's not feasible, in my opinion, to think that the U.S. can simply do nothing, because our inaction will prompt a number of negative regional dynamics, ranging from a new arms race in the Middle East to the rise of a radical, anti-American, Shia-dominated political order.

It's something we should be concerned about.

In my opinion, instead, the United States needs to look at five discrete areas.

The first is intelligence. We need to expand intelligence on Iran's nuclear program, as well as the regime's larger strategic capabilities.

We do have a substantial amount of knowledge now, as Dr. Albright mentioned. However, there are things that we don't know about the Iranian nuclear program, and these things are likely to be decisive.

For example, we do not know the extent and the success of Iranian procurement activities on the nuclear black market in the former Soviet Union over the last decade.

Likewise, we don't know the extent of Iran's current contacts with the nuclear cartel of Abdul Qadeer Khan, the Pakistani nuclear scientist, a cartel which, as testimony before this committee last year heard, is still alive and functioning.

The conclusion here is that these sort of inputs into the Iranian nuclear program have the ability to dramatically accelerate its pace and maturity.

And what the U.S. needs to do desperately is to -- if I could use the term -- get smart on Iran, to designate it as a priority intelligence-gathering target, which I'm sure is going on already in certain sectors.

But also to accurately identify the most effective means by which to blunt Iran's nuclear ambitions. And also, more than anything else, to accurately gauge how much time is left to achieve them.

The second point is creative diplomacy. And we've seen that over the last several weeks there has been progress on the international level, at the United Nations Security Council.

But I would think it's fair to say that the type of progress on sanctions and other measures that it taking place is being outpaced by Iran's nuclear progress. And that means that the U.S. needs more creative bilateral and international diplomacy.

It needs to exploit new developments, such as the fissures that are beginning to emerge between Russia and Iran over construction of the Bushehr plant, it needs to exploit them to strengthen its hand vis-a-vis Russia and to leverage that relationship better.

The third point is counterproliferation. And today the United States faces essentially three proliferation problems relating to Iran. We are concerned about outside assistance to Iran's nuclear effort that has the ability to accelerate it. We're concerned about the assistance that Iran already has received from Russia, from China and North Korea and other places of being proliferated onward to places like Syria or to groups like Hezbollah. And we're concerned that this model of Iran's nuclear progress will become internationalized.

And here it's worth noting that two years ago there was one nuclear aspirant in the Persian Gulf. Today there are nine. So it's something that I think is rather eye opening.

And what we need to do is we need to work better on technologies that slow Iran's acquisition of WMD capabilities and make it more difficult for Iran to proliferate those technologies onward.

I won't mention economic sanctions, which is the fourth point, because my colleague Dr. Levitt has done so, so ably.

I would end by talking about one element that I think overrides all of the others.

What the United States needs more than anything else is better strategic communications, both with the Iranian regime and the Iranian people.

To the former, the United States needs to communicate in no uncertain terms that its continued rogue behavior will carry adverse consequences, and consequences that are up to and including the use of force if necessary.

To the latter, the United States needs to demonstrate its commitment to their urge for freedom, the urge for freedom that's visible on the Iranian street, and to do so not just in word, but in deed as well.

And to do so, I think it's essential to understand that we need to launch an effort to reform and retool the existing outreach vehicles that we have toward the Iranian people -- the Voice of American Persian Service and Radio Farda.

Today, neither, I would say, is responsive to the core constituency they're designed to reach, the Iranian street.

What we need to do is, we need to overhaul these organs to be more responsive and to provide a clearer message to the constituencies they're designed to reach.

Moreover, all of this needs to happen soon, because the closer Iran gets to a nuclear bomb, the more difficult it will be to communicate.

And I'll end by saying that all of these steps, in my opinion, are synergistic, and they need to happen in tandem. But they also need to happen, more than anything else, as you, Chairman Sherman, said, they need to happen soon, because time is running out.

Thank you.

(UNKNOWN): Thank you.

At this point, let's turn to Mr. Costa for questions.

COSTA: Thank you very much, Mr. Chairman.

Mr. Albright, you spent a great deal of time in your testimony about the technological advances of their nuclear capability. You didn't speak of their delivery capability.

If, in fact, they do develop one or more nuclear weapons, what's their ability to deliver the system with any reliability?

ALBRIGHT: The main system that we think they would depend on is the ballistic missile, and the Shahab-3 in particular.

There's questions about whether they can build a warhead sufficiently small to fit on that missile. There's also questions. I mean, it's an outstanding question: Did the A.Q. Khan network provide Iran with more advanced nuclear warhead designs?

COSTA: On that point, how good do you think our intelligence is?

ALBRIGHT: Well, I don't want to judge it. I mean, I think there are a lot of gaps in it.

COSTA: There's a lot of, based upon our most recent history in the last four years, there's obviously cause for concern.

ALBRIGHT: Yes, there's gaps. Certainly there's gaps in it. And I think it's very hard to overcome those gaps with human intelligence. I mean, it's hard to do that.

COSTA: Based on those gaps, how much time do you think we have? Three years plus?

ALBRIGHT: Our worst-case assessment is still that in 2009, they could have enough highly enriched uranium for a nuclear weapon.

And you can see lots of ways that that estimate could get pushed back.

COSTA: I'd like to switch to Mr. Levitt, Dr. Levitt or Dr. Byman. You talked about focusing on the economy -- both of you did. And I agree. I think that's, frankly, a better means.

But given the challenges we face with our allies, how much more progress do you think we could make and where would it make the most amount of difference with the Iranians?

LEVITT: I'll answer that in two ways. One is, I think there are lots of ways we can make progress with our allies. What's beginning to come out in the press today, whether it turns out to be accurate or not, about the second tier of 1737 sanctions -- if anybody thought that that was going to be comprehensive, that would have been naive. But there are, I understand, 18 new entities that are being listed in the annex for designation purposes, 10 of which are associated with the IRGC.

That's good news.

There's a lot that needs to be done on two levels. One is, as I mentioned, resisting the Europeans' pressure to make a distinction between financial measures and trade. It's a completely false distinction.

We should be stopping import/export credits, lines of credit, et cetera.

COSTA: And the second one?

LEVITT: The second one is working more, as Mr. Berman said, on Russia and, I would add, China -- especially with the Security Council -- so that we can get something multilateral through, because Iran will feel that.

If I may, the second sign, however, is: Our unilateral sanctions, as I said, have an international impact just by marshalling market forces.

COSTA: All right.

LEVITT: And so there's a lot of potential.

COSTA: Dr. Byman, do you have anything to add? Because my time is running out and I want to ask Mr. Berman another question.

All right.

Mr. Berman, with your background with Russia and you all shared common thoughts on this, what is the key? I mean, we have this relationship with Russia, but it just seems to, I think, many of us, that Russia's trying to have it both ways. And, therefore, how do we really prevent Russia from continuing to have it both ways and make them a meaningful partner in this effort?

I. BERMAN: I think that's an excellent question. And I would say just by virtue of background, that the traditional Russian-Iranian relationship, as we understand it, it really underpinned by three things. It's underpinned by a fairly robust military trade, arms trade, and of late -- of the last eight years -- nuclear trade as well.

It's underpinned by Russian concerns about Iran's capability to cause trouble in what Russia calls the southern rim, in the Caucasus, in the mostly majority -- the majority Muslim states of Central Asia.

And it's underpinned by good old-fashioned anti-Americanism. And the last one, we can't do anything about. There's certainly many people, certainly in the force ministries and in places like Rosothum Export (ph), which is the main atomic sales body for the Kremlin...

COSTA: They're making a lot of money off the Iranians.

I. BERMAN: They sure are. They sure are.

And here, the anti-Americanism is hard to combat. But I would say that on the two other fronts, there are hopeful signs. There are signs over the last four years that Iran has begun to breach the sort of understanding that it's reached with Russia previously, and begun interfering more and more in the politics of Central Asia and the Caucasus and this is certainly something that's of concern in Moscow.

And the other element that I think is exploitable, frankly, is the fact that Russia is discovering that Iran is not as durable a defense industrial partner as it thought. Iran -- the current scandal over Bushehr has to do with the fact that Iran has been in default of payment -- of the monthly payment that it owes on the Bushehr reactor, and it's been in default for some months.

Those payments total $25 million to $30 million a month, so that's a pretty hefty sum. So what Russia is discovering is that the steady stream of funds that it expected from Iran might not be so steady after all.

COSTA: Thank you very much. My time's expired. But I do appreciate your efforts and your focus.

SHERMAN: Thank the gentleman from California.

And now turn to the other gentleman from California for five minutes.

ROYCE: Yes, and as you mentioned, Dr. Byman, Dr. Berman, those payments are certainly questionable; the possibility of Iran being a good business partner are really called into question by the conduct of the regime. But how to explain the actions of the government- sanctioned import/export credits to Iran?

In my opening statement, I talked about Italy, Germany, France and the fact that their governments' taxpayers were underwriting this. And this is one of the few things that is keeping any life's blood in that economy.

So let's discuss for a minute: Does this take an action by the E.U., does it take a U.N. Security Council resolution? How do we get the point across that, when businesses in Europe are pulling out, the government in Europe shouldn't be subsidizing this?

And let's ask, also let me ask you -- Dr. Levitt, you probably have the best information on this: Which are the prime offenders worldwide in terms of export/import credits that should be addressed?

We'll start with that aspect.

LEVITT: I'd have to get back to you -- and will be happy to do that -- on who the worst offenders are...

ROYCE: Both per capita and in overall terms. I think this would be important, because this should be a prime focus.

LEVITT: I don't have those in front of me, but I can get them and get them to you. I'd be happy to do that.

ROYCE: Appreciate that.

LEVITT: Your point is exactly what I was trying to get at with the point that we should not be allowing a difference to be made between trade and financial measures. This is exactly what many European countries are trying to do so they can continue to facilitate certain types of business while putting some types of financial pressures in place.

The $25 million, $30 million a month to Bushehr or to Russia over Bushehr may well be tied to this because, according to at least press reports, what's happening is that Iran wants to pay in denominations other than dollars; the contract calls for dollars. Iran's having a hard time with dollars because of our sanctions.

And so there's a lot of trickle-down effects to this just through the market.

We need to do a lot more, diplomatically. And I think, bilaterally, we will be more successful than leading into multilateral arenas to convince the Europeans that not only is this type of investment in Iran a pure security decision, it is a poor economic decision.

Again, Iran has no anti-money laundering regime. Period. I mean, how do you know the money you're investing for X is not going to Y? You absolutely cannot.

And, as a fiduciary obligation, they understand that language. They understand, when you walk into their offices, public and private sector alike, and use the term "reputational risk."

ROYCE: We talk about public diplomacy, but frankly, how do you get the Europeans to address it? Again, do you go through the E.U.? What's the process? A U.N. resolution? How do we get that leverage?

LEVITT: My personal feeling is that we will not make any headway in multi-lateral bodies until we've made headway bilaterally, so that those individual member states will be more cooperative in the multi- lateral setting. And so I think it's very important to continue the bilateral discussion and pressure frankly.

ROYCE: OK, now we go over to Dr. Byman. Your comment, "We've got to strengthen the voices in Iran that worry that the nuclear program will lead to international isolation, which in turn would derail their economy." Who are these voices? How strong are these voices? How do you amplify those voices? How do you strengthen them?

BYMAN: Those voices -- an example would be the former president Rafsanjani, who is -- let's be clear, this is not a good man. This is not someone that the United States should be happy has influence in the world. But there are voices in Iran that recognize that the confrontational of the current president has been a disaster for a while.

ROYCE: Well, he's the richest man in the country, so the destruction of wealth in the country impacts him.

(LAUGHTER)

BYMAN: Right. And there are several others -- there are many among the Iranian technocratic elite who are smart people, who recognize that you need foreign investment and foreign trade to have a modern economy, and they care about that. There are others who have emerged and who became stronger fairly recently, who actually have a very kind of 1970s leftist view of economics, which is you want self- reliance and you don't want trade.

But it's hard, with oil prices high, to strengthen the voices of those calling for investment. But that said, oil prices are not going to solve -- high oil prices are not solving Iran's problems. And we've seen in the last six months that the more radical camp has been loosing out in local elections. There's been a lot of criticism. So it does seem that the voices of, I won't say moderation, but pragmatism, are becoming stronger.

ROYCE: And I want to ask, Mr. Berman, you say Iran is currently interacting with the clandestine nuclear cartel of Pakistani scientist A.Q. Khan. But Khan's under house arrest in Pakistan. We're trying to see him. Are you suggesting that that network is still active?

I. BERMAN: Well, Congressman, I go by the testimony -- the same testimony that you're...

ROYCE: I figured you were going to say that.

I. BERMAN: And so I can only defer to those experts. However, I have heard from more than one source that the type of asymmetrical proliferation that has existed for some time in the Gulf has not become a thing of the past as a result of the house arrest of A.Q. Khan, and there are suspicions, as you heard yourself, in the fall, there are suspicions that even that network itself, the A.Q. Khan network itself, is still operational in some fashion.

ROYCE: Gentlemen, thank you very much for your testimony.

SHERMAN: The gentleman from South Carolina?

(UNKNOWN): Thank you, Mr. Chairman.

And thank you for being here today.

And I want to commend Congressman Royce -- he asked the question I had for you, Dr. Levitt, and, indeed, the import-export credits, I look forward to getting the information from you as to the countries that are facilitating these credits.

Additionally, you and Dr. Byman have pointed out that this is a modern economy; it is a trading economy. In terms of which countries do they mostly trade with and what do they trade?

LEVITT: Again, I can get back to you with more specifics, but the biggest offender, of course, is the oil sector and the gas sector. Petrochemicals next -- but oil and gas is, you know, almost everything we're talking about, for all the obvious reasons.

Germany now is looking at a gas deal, I don't think necessarily because they're trying to be bad actors, but because, again, Russia, they have learned the hard way that they cannot rely on gas supplies from Russia. I think that's a good example where diplomacy can be effective, because there are other ways to facilitate their getting reliable gas without having to go to Iran.

(UNKNOWN): And it's my understanding India, China are major trading partners. And, indeed, I would hope that they would understand our point that Mr. Berman brought up. And in regard to Russia, it's really frustrating to me that the potential of nuclear development in Iran, to me, is a greater, more immediate threat to Russia possibly than any other country, with the proximity of Chechnya, the ease of land travel. It'll take a little while to get to us.

But why can't they comprehend this threat? And I would also extend it to China. Why can't, with the potential of Uighir unrest, understand that nuclear proliferation direction impacts Russia and China?

I. BERMAN: Well, the answers are separate for Russia and for China, but let me try to take a stab at both.

On the Russian side, I think there is a great deal of concern about Iran's potential to foment instability. And so that has, if you were to use the phrase, has the Russians over a barrel, so to speak, in terms of how they relate to the Iranians. They know full well that forceful action of the Security Council is likely to create exactly the type of destabilizing regional behavior that they're trying to avoid.

So that's obviously a disincentive for cooperation.

But I think you're right. And I think what you're beginning to see on the Russian street is that policy experts and policymakers there are beginning to understand that the threat of a nuclear-ready Iran will rebound to their detriment in a much more direct fashion than they predicted otherwise.

So I'm hopeful that the ability of us to push that dialogue bilaterally with the Russians is increasing rather than decreasing.

I'm less hopeful with the Chinese for the simple reason that all politics is local. And if you look at what Iran is doing to the Chinese economy, it would be fair to say that Iran is the driving piston of the Chinese economy. The Chinese economy is expanding dramatically, in the neighborhood of 10 percent a year, and Iran is its second or third largest energy supplier.

I. BERMAN: So simply taking Iran off the table and not having a serious discussion with Beijing about ways to compensate, ways to discuss with them about energy partnership moving forward, seems somewhat of a nonstarter, the same way that if someone were to address us and ask us unilaterally to cease or reliance on Saudi Arabia -- although a very good idea, economically unworkable if we were to go cold turkey.

(UNKNOWN): And back again on Russia. It's so frustrating to me that, as we're developing our missile interceptor sites in Eastern Europe, these are obviously, whether it be in the Czech Republic or Poland, directed at Iran, not the Russian Federation.

But it's so sad to me that somehow they have perceived this as anti-Russian when, again, I would think that most of us are very hopeful about the emerging democracy of Russia and that they would understand that this is not a slap at them.

I. BERMAN: Well, and I actually think that they do. I think the public rhetoric that they're expressing -- this concern about interception, about invalidation of the Russian strategic arsenal -- is more of an expression of discontent with the diminution of Russian political and economic prestige in Eastern Europe than anything else.

If you listen and talk to missile proliferation and missile defense experts in Moscow, you will hear pretty much the same thing that I've heard over the last couple of years, which is that the Russians have looked at our program, our ground-based and theater missile defense program. And they're OK with it -- even with the European-basing.

What they're very concerned about is a space layer. And that's, obviously, not on the table at this point.

So I have to conclude that the type of rhetoric that's coming out of the Kremlin is designed to use this European leg of the missile defense program more as a political crutch to accomplish goals than anything else. I don't think it actually reflects the real concern about invalidation of their arsenal.

(UNKNOWN): Thanks very much, Mr. Chairman.

SHERMAN: I get the feeling that those of us trying to put economic pressure on Iran are like throwing spitballs at a tank. We're angry at the tank. We realize the threat that it poses. All we've got is spitballs. So all we can do is throw spitballs at the tank and hope it'll have some effect.

And maybe we can dream that, if we can convince others to help us, we can throw rocks at the tank.

But even if we were able to throw rocks, I don't think that stops the tank.

I'd like Mr. Albright, but others perhaps to comment. Let's say we actually got an end to all subsidies to Iran, full enforcement of what used to be called the Iran-Libya Sanctions Act, no actual investment in Iran's oil fields, cash and carry for Iran. Given their interest in having nuclear weapons, would this level of throwing rocks at the tank be enough to get the tank to decide to go in reverse?

ALBRIGHT: It could be. I mean, the point of the sanctions isn't to stop directly the nuclear weapons program.

SHERMAN: It's to put pressure on the government. The thing is, if you have a government supported by a high oil price and an ideology that has captured at least some of the population, and fanatically so, and you're able to cut 10 percent of their trade, reduce their GDP by 5 percent, would that be enough to persuade that government to renounce such an important goal as nuclear weapons, especially when they're going to get there in just a few years and then they can negotiate from that point and open themselves back up to trade?

ALBRIGHT: Well, I can't predict the future.

(CROSSTALK)

ALBRIGHT: I mean, I can give an example of South Africa, where it could get pretty hairy. I mean, South Africa had sanctions put on it in '77...

(CROSSTALK)

SHERMAN: And South Africa did more than give up its nuclear weapon program...

ALBRIGHT: I'm sorry?

SHERMAN: South Africa really gave up its...

ALBRIGHT: But only after years of sanctions. And I think that you have to be realistic about Iran. There's no magic bullet.

But I would still say that pursuing that route has a much better chance of working than other routes.

SHERMAN: Yes. I mean, the other routes available to us are bombing when we don't know where to bomb, and acquiescing.

I'd like the other panel members to comment, but particularly is there an Achilles' heel where, if the rest of the world does something that it's possible to try to get the rest of the world to do, you're going to impact the lives of people on the Tehran street?

And the only thing I've heard voiced in this area is if we could prevent Iran from being able to import refined petroleum products, an ironic vulnerability for a major oil exporter to have.

LEVITT: Well, for that reason, and I think some of my -- maybe some of my former colleagues in government would disagree with me, that I included in my testimony the comment on the shipping and insurance industry for shipping.

I think it is absolutely the case that smart sanctions and targeted financial measures can cause enough pain for the regime and can follow up on the existing discontent on the street, where people really are angry that money is being spent on a WMD program, money is being spent for Hezbollah, for example, whereas all of the economic promises that Ahmadinejad and others have made are not being kept.

That's something that is a real force on the street.

And, again, I go back to that World Bank report -- unless the country moves quickly to a faster path of growth with employment, discontent and disenchantment could threaten its economic, social and political system. That was in 2000 -- that statement was made in 2003. We did nothing from 2003 until recently to try this. Now we are, and we're already seeing dividends.

SHERMAN: So you're talking, for example, of interfering with insurance for tankers going to Iran. Do you think that that would force them to sell their oil for a dollar a barrel cheaper, or how much? Certainly, there will be those happy to buy Iranian oil a few cents cheaper if others won't.

LEVITT: There'll always be someone who wants to step into the gap. Undersecretary Levey's comments in Dubai to that effect was important. He said, "There may be some of you who will want to take advantage, seeing a business opportunity there. Let me be clear: You could be next."

I think that's why it's so important to have important sanctions that go along with this, so that people who facilitate Iran's economic activity understand that they could be targeted. And I do think that they have a greater...

SHERMAN: He's talking about sanctions where the world wouldn't buy Iranian oil?

LEVITT: We're not going to get to that point. What we are going to get to the point is where individual companies are going to think long and hard: Do you want to do business with the United States? Do you want to do business with Iran?

Iran has no anti-money laundering controls. What do you tell your investors?

But long before we target the oil that they import, which I would caution against simply because in the best of all circumstances we will be able to focus on regime-hostile people friendly to sanctions, long before then -- that is something that could have a great impact, but long before then, I think we could have a significant impact on the level of foreign investment in Iran.

LEVITT: Without foreign investment, Iran cannot produce the oil that it charges so much money for.

SHERMAN: But if I'm working in Tehran and I can't get gasoline for my car, maybe I riot and bring down the government some time this decade.

If I'm working in Tehran and I read in the newspaper that Total is not going to start work in 2011 on a project that might increase the oil revenues of my government by 2015, I'm not sure my blood pressure rises at all.

LEVITT: Which is why...

SHERMAN: Are we focusing these sanctions on affecting the lives of people in the street? Or is the focus -- you know, if I was just the average guy working in Tehran and I read that article about, say, Total not making an investment, my blood pressure may remain unchanged.

If I was part of the Iranian intelligentsia focused on the needs of my country, if I carried it around in the back of my head the expected Iranian GDP of 2014 and realized the impact that this Total decision might have on that, then I might be disturbed.

Whose blood pressure are you trying to raise, the average Mohammed in the street, or the tiny percentage of the Iranian population that dreams of 5 percent GDP growth...

LEVITT: You're trying to affect both. You're trying to affect first those who are in the decision-making positions, which happens to be the elite; and then you want to affect the people on the street who will have some impact on what those decision-makers decide as well.

One of the things that's going on right now is people are saying, in some situations, we're not going to provide credits, you know, in the future.

Well, your comment is exactly why that's insufficient. Something that's going to happen five, 10, 15 years out is not going to have an impact.

But we need people to start taking these actions now. And you want to try and have actions where people will feel the impact. And, for example, if those lines of credit are cut and business dealings are cut now and people lose their jobs, people can't buy oil at the extremely subsidized prices. We can put enough hurt on Iranians on the street that it'll make them realize there's some discomfort -- without actually being hostile to them.

Again, we don't want to change the calculus where, right now, Iranians themselves, the average Iranian, is pro-American.

SHERMAN: I think we're doing a great job of creating a policy for America to follow in 1999. The problem is it's 2007.

That is to say, I see an array of steps we could take now, which might very well derail a program that was 10 years to completing.

But let me ask Mr. Levitt one more question and then move on to Mr. Albright for a question. And then I'll recognize my colleague.

The Treasury has stopped dollar transactions by two major Iranian banks. Why not all of them?

LEVITT: Well, I have to be careful. I'm no longer a Treasury official, and I don't speak for...

SHERMAN: All the better reason to ask you the question. I might get a real answer.

LEVITT: I understand, sir.

I would simply put it this way -- first of all, as I said, we want these actions to be graduated. We want to be able to show the Iranians and the Europeans that we're not simply out to punish, we're out to try and change behavior -- A. B, this is largely a function of available intelligence.

I was the deputy chief of the Treasury's intelligence shop, and so I -- what people are doing is working very closely with the rest of the intelligence community to put together packages to fully identify: What are the nature of the specific activities all these various entities are engaged in?

And I think it's fair to say, neither Bank Saderat nor Bank Sattah (ph) -- these are not the only banks that people are looking at.

SHERMAN: Well, all of the major Iranian banks, certainly all those engaging in dollar transactions, are critically important to moving the Iranian economy forward.

If you're going to ban all banks in an effort to have an economic effect on Iran, you ban them all. If you only want to ban those banks that process transactions involved in buying dual-use material usable to the Iranian nuclear program, then you might limit yourself to those where you had actual intelligence.

I'll ask Mr. Albright just one question, and then my time will be more than over.

Do you believe that Iran currently has the capacity to produce all of the components necessary for the P1 centrifuges and assemble them domestically? Or are they still reliant on a foreign supply? If they are reliant on a foreign supply, from whom are they getting what, or at least likely to be getting what?

Moreover, U.N. Security Council Resolution 1737; is it broad enough to capture everything that Iran would need to keep its centrifuge program going? Is the so-called Bushehr loophole in that resolution wide enough?

ALBRIGHT: Iran has a supply of components for P1, probably several thousand in hand.

It's hard to know the exact number.

They do, from our information, they do go out and seek things -- I mean, valves. That's even been written about in the resolution.

We've seen that many times, where trading companies are trying to acquire different types of valves from European suppliers, sometimes in lots of -- I saw one that was in a lot of 150,000.

And the P1 has three fast-acting valves attached to it. Each -- I won't go into the technical details, but the cascades need a lot of valves. And my understanding is they can't make those themselves, along with other things. And so, they are dependent on foreign supply.

The catch is is that they've been at this a long time, and they have a certain amount stockpiled. And I think it's enough to put together several thousand centrifuges, which give them a nuclear weapons capability, but it's by no means enough to build these 50,000 centrifuges they want to build in Natanz.

In terms of the loophole -- I don't see the Bushehr loophole as a loophole. I'm disappointed. I mean, I was kind of, frankly, surprised, given everything that's gone on that that was written in there, but I understand it was a price to get the Russians on board.

Now, suppliers are working better now -- I mean both in terms of companies and then supplier countries -- to try to limit Iran's acquisition of items.

In fact, that's part of our involvement with some companies is to discourage what we would call illicit nuclear trade, and companies being hoodwinked, because it is a very sophisticated set of operations that countries like Iran mount to get these items.

One of the advantages of the Security Council resolution is it sends a message to other states that they should be doing more, states where Iran may set up a trading company and that don't have good export controls or knowledge of how illicit trade works.

And so, I think in general the Security Council resolution is a net benefit to try and just keep Iran from getting dual-use items.

But it's a cat-and-mouse game, and you've got to keep at it. And it's not foolproof. And so, Iran's going to continue to successfully get things, even though quite a few things are being stopped from getting to Iran.

SHERMAN: Well, and the cautionary tale here is they may have enough for 3,000 centrifuges they want -- I think your use was 50,000.

ALBRIGHT: They want 50,000, which is enough, frankly is enough for a civil nuclear program. I see that as a civil nuclear program. It's ironic, maybe I should use the word it's tragic -- you get the capability for a nuclear weapons program far before you get the capability for a civil nuclear energy program.

SHERMAN: It could be enough for a civil energy program or enough for a whole lot of bombs.

With that, I'll yield to the gentleman from South Carolina.

(UNKNOWN): Thank you, Mr. Chairman.

And, Mr. Byman, I was intrigued. In your testimony, you state that Iran has been more helpful than harmful in advancing the cause of civility and democracy in Iraq.

In contravention of that, they obviously have been providing upgraded IEDs.

Although what you say really should, maybe in their interests, be a stable Iraq. And so how do you explain and how do you explain the providing of upgraded IEDs?

BYMAN: Iran has multiple interests in Iraq, some of which are in harmony with the United States, some of which are not.

The system of government the United States has put in in Iraq is as close to Tehran's dream as Tehran could realistically expect. So, not surprisingly, they urged their various proxies to cooperate with the United States in a variety of ways politically.

At the same time, Iran recognizes that street power, local power, violent power, is what's going to matter in Iraq -- what matters in Iraq today and what's going to matter in Iraq in the future.

And, in their views, the United States is a tourist there. We are there. Maybe we'll stay for 18 months, maybe we'll stay for five years, but we'll be gone.

And when the United States is gone, Iran needs power on the ground. And power on the ground entails having lots of proxies, not just Shia, but also Kurdish and -- I don't have evidence for this -- but I'd be surprised if Iran hasn't at least tried to reach out tactically to some of the Sunni jihadists who hate Iran.

And it wants influence and it wants options. And the model, I think, Iran has in mind is what it did in Lebanon, where it was there and it worked at a grassroots level of creating parties, creating organizations, social work and so on -- and very, very effectively, unfortunately for the United States.

So in Iraq, because the system we put in is one that actually accords with Iran's interests, there is a degree of harmony. But, at the same time, Iran's long-term vision is that it needs power on the ground. And, in so doing, it is undermining central authority and undermining the power of the government and the efforts of the United States.

And I am not surprised at all that some of the groups Iran is working with are violently anti-American, and Iran is OK with that.

And I will add that Iran has a mixed view of the United States. It certainly recognizes that the United States is fighting to protect a government that is relatively pro-Iranian. But, at the same time, Iran fears the United States, respects the United States and dislikes the United States.

So it's happy to see the U.S. nose bloodied. And it's happy to see problems for the United States as well.

And, yes, there are contradictions in there. But Iraq is probably the overwhelming policy issue for Iran today. And it's not surprising to me that, for a big issue, you have some policy contradiction.

(UNKNOWN): Wouldn't another contradiction be their support of Hezbollah, a clearly identified terrorist organization?

BYMAN: From Iran's point of view, Hezbollah has been a remarkable success; that not only does Iran have a strong ideological sense of brotherhood with Hezbollah, which really should not be underestimated, but also Hezbollah has proven a proxy for Iran in Lebanon and in particular against Israel.

And in part because of Hezbollah attacks in the 1990s or support for Palestinian groups, it was harder to have an Israeli-Palestinian peace which, from Tehran's point of view, was a policy success.

So unfortunately, Tehran has learned a lesson, which is: Support for terrorism works.

(UNKNOWN): Which is an extraordinary threat to the United States and its allies.

BYMAN: Absolutely.

(UNKNOWN): And, Mr. Albright, you were discussing the nuclear capabilities. Are you knowledgeable, or any of you who may want to respond, in regard to delivery systems; in regard to missiles, their range, their accuracy?

ALBRIGHT: I'm not an expert in missiles, but I think it's well known that Iran's delivery system of choice would probably be a Shahab-3 missile. I mean, its range depends on its payload. Certainly, Israel is within sights.

(UNKNOWN): And Southeastern Europe.

ALBRIGHT: And I'm sure that eventually they'll be able to deliver some kind of warhead into Europe. From what I understand, they're certainly working in that direction.

The catch for them is: Can they put a nuclear warhead on that kind of missile? And I think that's still an open question. I mean, very little is known about their nuclear weaponization program, as we would call it.

And I mentioned this earlier. It also -- it adds urgency to knowing what Khan provided, because it could be that Khan provided more advanced nuclear warhead designs than have been admitted to.

And so that question remains open and needs an answer.

(UNKNOWN): Thank you very much.

SHERMAN: Recognize the gentleman from Colorado.

TANCREDO: Thank you, Mr. Chairman. And I apologize, my questions certainly may be redundant because I was not here for much of the hearing, so I apologize in advance for this.

But name a single country in the world really that would benefit as a result of Iran obtaining a nuclear weapon. I mean, maybe, I don't know, North Korea. But what country in the world would possibly be happy about that, would be OK with the idea of Iran becoming a nuclear power?

BYMAN: Sir, I think there are two different questions. I can't think of a country that would be happy about it, but I can think of a number of countries that, frankly, don't care that much. And those are the problems.

TANCREDO: OK. All right. Let's talk about the ones that certainly would have an interest in this, especially those in the -- in what we would call the Sunni crescent, as opposed -- this is their desire to maintain that crescent and not have a Shia full moon there. All right.

So you've got countries in the area that certainly it's not in their best interest. And the question in my mind is whether they will accommodate, you know, with the absence of the United States from the area itself, will they simply accommodate Iran and just try to live with it, no matter what Iran does, or will they actively participate in some scheme or other that would work to overthrow the regime or at least do what they can to stop from acquiring nuclear weaponry?

The countries right in the region that actually will have the most to fear?

BYMAN: I think that, as you said, they have the most to fear, and they are tremendously concerned. Their sense of influence over Tehran is extremely limited.

The Saudis, by Saudi standards, have been relatively proactive. It's a rather low bar, but, nevertheless, they have been trying to forge a consensus against Tehran.

But, in their eyes, there isn't much that they can do. And they look to the United States, I would say, in a conflicted way: They want U.S. leadership, but, frankly, they're concerned that the United States will stir the pot too much and create tension from which they'll suffer.

And a number of our allies in the region, to me have a very bad track record of looking ahead, that they will wring their hands, but have not been able to work consistently.

And I would like to see more Saudi support, more Gulf state support with our European allies for our bilateral diplomacy. And to my knowledge, at least, that's been rather limited.

TANCREDO: Sir?

I. BERMAN: Congressman, thank you.

I would only amplify for just a few seconds. I would say that Iran's -- the impact of Iran's quest for a nuclear capability is having a two-fold effect on the region, on the Sunni crescent that you mentioned.

One is actually very positive. One is that there's a number of countries that are beginning to discuss more and more cooperation amongst themselves and greater strategic reliance on the United States.

But I think that trend, although it is positive, is outweighed by the negative trend, which is that there are a number of countries that are beginning to seek accommodation with the Islamic republic.

Over the last five years or so, we've had an unprecedented deployment of political capital, economic capital, military personnel into the region in support of the war on terror and the war in Iraq.

But during that same period, we've seen countries like Kuwait, countries like Oman, countries, even like Saudi Arabia, sign bilateral security deals with the Islamic republic.

And so, the trend here, I think, is very clear. There are countries who, while they're nervous about a nuclear Iran or a nearly nuclear Iran, have no confidence that we're in it for the long haul.

I. BERMAN: And so what they're doing is they're trying to create a modus vivendi with Iran, with sort of the new regional hegemony, to hedge against the day that we are gone; that the American interest is gone; that the American personnel are gone.

And what that does, in a very practical sense, over the next several years is it makes the Persian Gulf, which is already a very inhospitable region, less and less friendly to U.S. interests while we're still there.

TANCREDO: OK, but isn't the enmity that exists within Islam itself in these various schisms -- the Shias, Sunni, and there are others, of course, that exist -- isn't the enmity so great that -- how does one accommodate that?

Aren't they always going to be concerned about the fact that the ultimate desire of the other party, in this case Iran, would be to eliminate, to destroy, Sunnis? And therefore, there is no way -- you're going to have to figure out a way to change the regime.

I. BERMAN: Well, no. I think that's correct. And I would say that the trend that's emerging in the Sunni parts of the Gulf is very troubling to me, because you're seeing, again, two things. You're seeing this sense of increased accommodation of the Islamic Republic on the part of at least some countries in the Persian Gulf.

What you're also beginning to see is that because a rising tide lifts all boats, we're seeing a wave of empowerment sweep over Shia communities in places Bahrain, in places like Saudi Arabia.

And what I suspect is going to happen -- and, you know, permit me just a little bit of predictive analysis -- but because the region is dominated by overwhelmingly authoritarian or quasi-totalitarian states, these regimes tend to react to challenges to their rule in predictable ways.

So what we're going to see is an increasingly unfree region moving forward, as these countries feel the need to crack down on their religious minorities within their own borders to prevent Iran from exploiting those assets.

TANCREDO: Thank you very much.

Thank you, Mr. Chairman.

SHERMAN: If our witnesses will endure, we will go through one more round of questioning. We'll conclude this hearing roughly at four o'clock.

Mr. Berman, we're trying to get Russia to be on our side on this. We're getting U.N. sanctions that -- it's wonderful that they're under Chapter 7, but they don't say much. The Russians seem to be convinced that what they do in the Security Council vis-a-vis Iran, what they do vis-a-vis Iran elsewhere, has no connection with what American policy will be toward missile defense bases in the Czech Republic and Poland, toward NATO expansion, toward Abkhazia, Moldova, the routing of pipelines to carry Caspian oil.

First of all, do the Russians think that what they do vis-a-vis Iran will have no impact on American policy in these other areas?

SHERMAN: And, second, are they right?

I. BERMAN: Well, I know that this is an area that is of particular interest to both of us. So let me be brief because -- at the risk of repeating myself.

But I think that's exactly the question.

I would say that that is mostly their calculus. I think what we've demonstrated to them, unfortunately, over the last three years, is that we are very heavy on the rhetoric, far less heavy on the implementation.

And we spend a lot of time talking about anti-democratic drift in Russia and not much time actually doing things about it.

And I would argue for a much more pragmatic approach to the equation, which is that, you know, the Russians have a few red lines, if you would call them that, when it comes to U.S. policy. They're concerned about missile defense, certainly.

But they're much more concerned, for example, about a U.S. hand in what they call color revolutions in the post-Soviet space. This is something that we've been accused of fomenting in places like Kyrgyzstan and other places when, in fact, only in Ukraine I would say has there really been an overt American hand.

And an argument that says to the Russians that, "Yes, I understand that you're concerned about this; we're not in the business of doing this. However, our stance toward these revolutions is dependent entirely upon how constructive you are in other fields" I think would go a long way.

You need to have a discussion with them about some sort of security arrangement in the post-Soviet space that protects their interests, but you also need to demonstrate to them that the status quo is not impenetrable.

SHERMAN: Yes. There's a natural avoidance among diplomats in any kind of direct quid pro quo. But anything that's just kind of vague takes years to accomplish, as you do something vague, then I do something vague, then you do something vague, and eventually you move forward.

Again, I wish these hearings were being held in 1999.

Likewise, the Chinese seem to believe that their access to U.S. markets will be unimpaired in any way, regardless of what they do vis- a-vis Iran. Is this what they believe? And are they right? I'll ask either Mr. Berman or anyone else with a strong opinion...

I. BERMAN: Let me just tackle this for one second. I think that is what they believe. And I do think, largely, they are correct.

If you noticed, over the last two and a half months, at least two Chinese companies -- CNOOC, the China National Off-Shore Oil corporation, and PetroChina, which is a subsidiary of CMPC -- have signed deals in excess $100 billion with Iran over the next 25 years.

SHERMAN: Of course, our policy in enforcing: We have a president of the United States -- and the last one, too -- who took oaths of office to uphold the laws of the United States, yet their position is that the Iran Sanctions Act doesn't apply unless they get an official notice from the government of Iran that the investment is being made.

SHERMAN: And so I would call upon Tehran to help the U.S. government carry out its laws or for presidents to adhere to their oath of office, as both this one and the last one did not.

I would give to you that you're not going to stop that tank by throwing spitballs. And if we as a country can't think through how we're going to deal with Russia and China on other issues and tie them, we're not going to change Russia and China -- Chinese policy.

And I'll ask unanimous consent to put my opening statement into the record, which I didn't get a chance to deliver because of votes in Judiciary, and yield to the gentleman from Colorado.

TANCREDO: Thank you, Mr. Chairman. And I do have just one last thing.

There are organizations, of course, they're part of the Iranian diaspora that we hear from, from time to time. And I read a great deal about, in terms of what services they have provided to the United States. I'm speaking specifically of the MEK.

I know exactly -- I know that their background is, shall we say, spotty, and that there's a lot of concern about whether it's a cult of personality and the nature of the organization, all that sort of thing.

But my greatest, I guess, quest here is to try to determine whether or not they can be of help to us. I don't care what they looked like 35 years ago.

I want to know whether or not they can be helpful to us today and whether or not all the stuff that I read in terms of the generals who are in charge of Camp Ashraf, for instance, who have written letters saying, you know, these people are great, the FBI and the State Department that has interviewed every single person in the camp and said nothing to worry about here, there are certainly not terrorists, yet they're on the terrorist watch list. They got there apparently because there was some desire to placate the regime, and this was during the last administration.

I just want to know, can these people be used for our purposes? They know the language, they know the culture. They have apparently given us good information, at least that's what we're told, with regard to the nuclear facilities in Iran, identifying them, and a number of other things.

I'm trying to separate out fact from fiction in this whole thing and determine whether or not there's any opportunity.

BYMAN: Sir, I'll give you my opinion, and others on the panel may have quite a different one.

The MEK has at times produced extremely valuable intelligence that the United States has used. There's no question about that, especially the revelations about the extent of the Iranian nuclear program that helped trigger much more scrutiny.

That said, I believe there is an extremely heavy cost to U.S. cooperation with the MEK. We have to remember, this is a regime that set up shop in Saddam's Iraq. This is the sort of group we're talking about. A colleague of mine in the intelligence community once referred to them as they would be the muggers in Beirut.

And the point I'd like to make is that this alienates many ordinary Iranians who see this group as having betrayed them fundamentally by allying with Saddam against Iran during the Iran-Iraq war.

BYMAN: This group has carried out numerous terrorist attacks that are fairly well documented, also supported attacks, years ago, against the United States.

And we are trying to go around the world, to say to people, "Even though Al Qaida or another group isn't directly killing your citizens, you should not support or allow them to do activities because it's wrong, fundamentally."

And my view is that even though the MEK is not currently targeting the United States and has some tactical values, for us to have that legitimacy, we need to make sure that we are not cooperating with a group we've designated as a terrorist group.

TANCREDO: Well, let me ask you this: There seems to be an enormous amount of concern on the part of the regime about that possibility. I mean, apparently the mullahs hate the MEK with a passion that's unbridled, certainly the stuff they say.

You know, I keep thinking to myself, if that's the case, if they really are that worried about these people, it may not be the worst thing in the world to at least use whatever leverage we can by saying, "Well, this is a possibility. Unless Tehran" -- if we wanted to use it as a way to make them move away, for instance, from nuclear procurement, is there anything we can do -- maybe we can't talk about it in this kind of a setting, and that's one thing that's possible. I mean, there's certainly, you know, covert operations that may have to be undertaken, and that we can't discuss.

But I'm just thinking, if they despise them as much as they do, if they fear them as much as they do, if the mullahs fear the MEK as much as they appear to, there's something there we should be able to take advantage of. I'm just hoping.

All right.

Well, thank you.

No, I don't -- anybody else is welcome to.

LEVITT: I'll just say that I echo Dr. Byman's position completely. They have provided some very useful information and I think that by meeting with them and getting that information, we've sent the message that I think you're talking about to Iran already.

I would be very, very, very wary and concerned about reaching out to a group like that. It undermines our position when we tell the world they need to ban Hamas, ban Hezbollah, even though they're not, Hamas in particular, targeting us today.

The State Department needs to verify every few years that groups that are on the foreign terrorist organization list remain active. And if they can't do that, then this body will have reason to remove them.

LEVITT: But until that point, we may not like Iran, but if the MEK has bombed, and it has, Iranian civilians, then I'd consider them the terrorist group that we shouldn't be hugging.

ALBRIGHT: Let me add one thing. I think their information has become much less credible over the last couple of years. And I think it's due to the fact that they do have a very heavy agenda.

TANCREDO: A very heavy...

ALBRIGHT: Heavy agenda -- and so, for example, they have claimed that Pakistan sold highly enriched uranium to Iran -- I mean, no basis for that claim.

They've claimed that there's all kinds of laser enrichment plants. There's been no evidence to support that. They certainly, in the early years, identified nuclear facilities -- I mean, they misidentified Natanz. So their intelligence isn't by any means perfect. They called it a fuel fabrication plant.

Their importance was that they identified two secret nuclear sites, and that started a chain of events. And I would never want to underplay the importance of that.

But I know we've had -- we've, in fact, used their information from the start. And we have found that, particularly in the last couple years, that it's largely been unusable and often just flat-out wrong, when you check it out -- and driven by an agenda that is -- they want the regime in Iran changed.

And it's made us feel that we can no longer trust what they put out.

TANCREDO: Yes, well, that's true that that is their agenda. And they tell you they want a secular -- I mean a non-sectarian, democratic Iraq.

I don't know. Anyway, thank you very much, gentlemen, for your observations.

SHERMAN: I've got a few questions about Iranian politics, the first of which will build on the gentleman from Colorado's comment, that we know full well that those who rule Iran, and perhaps many who don't, really, really hate the MEK.

The question is: Do they fear them?

Benedict Arnold, had he been landed on our -- you know, brought back by the British, right before the War of 1812, would not have had much of a positive effect on British objectives.

SHERMAN: We really hated him, but he didn't have a following here in the United States that American patriots had anything to worry about.

Does the MEK have a following? Is there any reason that the mullahs would fear them? Or would they just hate them?

BYMAN: There's a hatred that goes back because the MEK has done...

SHERMAN: I don't know about the hatred. Tell me about the hatred.

BYMAN: But the hatred is also, I want to say, at a regime level very specific, because a lot of regime figures were killed by this group in some of their successful attacks. But that hatred doesn't correspond with a fear anymore. When the MEK set up shop in Iraq, they lost what limited base they had in Iran itself. So this is more resentment, anger, but not fear.

SHERMAN: OK. Now let's move on. We can debate whether it's a good idea to use the military option. The question is: Is there any reason to take it off the table by legislation? When the Iranian body politic tries to decide whether to cut a deal or whether to continue with its nuclear program, do they have a genuine concern of an American military attack? And do they view the possibility of a U.S. bombing attack as positive or a negative?

I. BERMAN: I would say that, for my money, it's impossible to conduct robust coercive diplomacy while taking an element such as military action off the table. In other words, there has to be a credible threat that something will happen if the negotiations break down in order to force people to participate in the negotiations.

SHERMAN: On the other hand, if you threaten the rabbit with throwing him into the briar patch, you don't have much of a threat at all.

Mr. Albright, is an American bombing attack something that the Ahmadinejads of the world wish to avoid, might even negotiate in order to avoid, or is it something that they'd actually be looking for, keeping in mind it's unlikely to be followed up with a ground attack?

ALBRIGHT: Yeah. I don't think they are that worried about it. I mean, I think it's been played. It's been overplayed. I would say, take it off the table. It can always be brought back. But I think it's just been overplayed.

SHERMAN: Well, we in Congress, once we take something off, it takes an act of Congress to put it back on.

ALBRIGHT: Well, but it would be taken on or off by the president, not by legislation.

SHERMAN: Welcome to the Capitol, where others have different views.

ALBRIGHT: Yeah. Well, but anyway, let me just finish the point, because it's come up since 2002. I remember when we released satellite imagery of the Natanz site, back in December of 2002. We were the first ones to do it. We were actually the first ones to correctly identify publicly that Natanz was a gas centrifuge plant. We did it in conjunction with CNN.

CNN went to a senior administration official's office and said: What are your comments? This is a serious problem.

ALBRIGHT: Iran will not let the IAEA come in and look at this site. What are you going to do?

They said: Well, when we get to Baghdad, we're turning right.

And so we saw -- and then, if you just follow through that, what it seems...

SHERMAN: Well, it's real clear that Tehran feared America far more before we got to Baghdad than six months after.

ALBRIGHT: Than after.

SHERMAN: Six months after we got to Baghdad.

ALBRIGHT: But it's continued to be put out there. And what I've witnessed in following this issue and following it in Iran is that it's been a nationalist call in Iran. It's actually backfired on us.

And so I think that the military option is too often put on the table and put in the Iranians' face, and it's backfired. And I think the administration should simply withdraw from mentioning it for some period of time.

SHERMAN: Well, I point out that I may not know that much about Iranian politics, but it may be the only thing that gets us any support in Europe.

If you're asking Europe to forego economically advantageous relationships, perhaps the only argument you have is: You better do this or Cheney's going to take over and bomb Iran and you don't want us to do that, do you?

ALBRIGHT: Yes, but against the opinion of the American public and the military leaders. So I think it's not credibly.

SHERMAN: I think there's at least one Web site where you can bet on whether or not this administration...

(CROSSTALK)

SHERMAN: And I wouldn't -- if you're given a chance to bet, don't bet against unless you get odds. No one has ever made money betting against the aggressiveness of our current president.

At this point, I'll ask whether there are any round-up comments by any of the witnesses; and then we'll adjourn.

I. BERMAN: I would only make the comment to round out your previous question about whether or not there are segments of the Iranian leadership that actually are looking for military conflict.

And I actually think that that's a very good question because, up until the summer of 2005, the political lay of the land in Tehran was essentially known. The president was an empty office. The supreme leader was in charge -- unquestionably in charge -- and all decisions flowed from that structure.

I think what we've seen now is, today, the supreme leaders still is in charge. Ali Khamenei is still in charge. But what I've seen, what I've witnessed sort of in following this is that, over the last year or so, Iran's president, Ahmadinejad, has emerged as a foreign policy actor in his own right; so much so that there are elements within the regime, such as the pragmatics led by Ali Akbar Hashemi Rafsanjani that have chosen to expand their power as a check to his.

So what I think that they are concerned about...

SHERMAN: Politicians don't need an excuse to seek to expand their power. But go ahead.

I. BERMAN: Well, what I think they're concerned about, and certainly we should be concerned about, is that streak, that apocalyptic millenarian streak that we see when Ahmadinejad gives his public speeches, not only for consumption in the West, but for domestic consumption.

When he talks about hastening the coming of the 12th imam, the hidden imam, the Mahdi 9and about the overriding religious need for a nuclear capability, that is not a formula for stability.

I. BERMAN: And, in fact, it would suggest, strongly, that that segment of the population, the war generation that grew up under -- during the Iran-Iraq war -- is interested in a more confrontational attitude, possibly including sort of provoking or precipitating an attack, comforted by the knowledge that our intelligence, in terms of being able to denuclearize is completely...

SHERMAN: I'll ask the other panelists just to respond to this one last question: The thinking here is that you make Ahmadinejad more powerful if you bomb the nuclear facilities in Iran.

Do you think that would be the case, or do you think that they would say, look, you pushed too far and unnecessarily in a way that was harmful to us?

BYMAN: In my judgment, under current conditions, it would make him more popular and in the short term, at least, make him...

(CROSSTALK)

LEVITT: I agree. And as I said in my statement, I think the military option would unite the Iranian people against us. I think the only -- I think that having the military option is still credible, however, in terms of -- not that I'm saying, as I said in my statement, I think that it's the absolute, absolute last resort.

But you want to make it an option, whether it's to strike an IRGC facility or something else. And I think that we've seen benefits at having carriers in the region.

SHERMAN: Gentlemen, you have shown incredible patience; you have dealt with votes on the floor, votes in committee, other distractions.

Thank you very much for donating your afternoon to the United States government.