REP. ROS-LEHTINEN: (Sounds gavel.) The committee will come to order. I truly sincerely apologize for being so late. I had to handle a bill on the floor dealing with suicide bombings, and had it not been for the seriousness of the subject, I would have definitely allowed someone else to handle the bill for me, and I apologize. I thank the witnesses for your patience. I know that our time will be limited with you, but we will make some opening remarks and ask the other members to also participate, and then we'll hear from you and open it up for questions. I'm sorry. Thank you.

I want to thank the members of the subcommittee for your patience, and for attending this first in a series of hearings that we will be holding on the implementation of the Iran-Libya Sanctions Act, otherwise known as ILSA.

Today's session will focus on Iran. As many of you know, ILSA was first passed by Congress in August of 1996, and was reauthorized on October 3rd, 2001. The bill places a ceiling of $20 million in investments in the oil sectors of both Iran and Libya before U.S. sanctions become possible. The catalyst for the legislation was the mounting concern that investment in these countries' oil fields would provide them with the funds necessary to expedite their development of weapons of mass destruction and expand their ability to fund, to train and to supply terrorist organizations around the world.

Six years after the passage of ILSA, Iran, according to the State Department's terrorism report, remained the most active state sponsor of terrorism. The report continues, describing how, quote, "Iran provided Lebanese Hezbollah and Palestinian rejectionist groups, notably Hamas, the Palestine Islamic Jihad and the Popular Front for the Liberation of Palestine General Command, with funding, safe haven, training and weapons. Teheran also encouraged Hezbollah and the Palestinian rejectionist groups to coordinate their planning and to escalate their terrorist activities against Israel."

The report continues: "Iran also provided support to extremist groups in Central Asia, Afghanistan and Iraq with ties to al Qaeda, though less than that provided to the groups opposed to Israel," end quote.

This description is certainly proof of why Iran is deserving of being included in President Bush's axis of evil. Iran's terrorism must be paid for, and that could not be done without the sale of oil and natural gas that is abundant in that country. As such we are reminded of the statement of former Undersecretary of State Peter Tarnoff, who declared in an October 11th, 1985, hearing in the Senate Banking Committee regarding oil investment and Iran that, quote, "A straight line links Iran's oil income and its ability to sponsor terrorism and build weapons of mass destruction, and any private company that helps interest expand its oil sector must accept that it is indirectly contributing to this menace," end quote.

It is precisely because of this connection that we have called this hearing today. In the aftermath of the deplorable attacks on September 11th, 2001, when we are focused on "starving terrorists of funding, to quote President Bush, we must not lose sight of the crucial need to vigorously pursue this same policy with respect to state sponsors. However, it appears that the use of ILSA as a vague and unfulfilled threat is seen by some as more important than the actual application of it. As a result, the deterrent effect has been lost. It is not taken seriously by those investing in Iran, as illustrated by the statement made last year by a Washington oil consultant who referred to ILSA as "a paper tiger." How can investing companies accept ILSA as being of any real threat if it has never been used?

While we are grateful for the help and support of some of our European allies in Operation Iraqi Freedom, they and the other nations whose companies are investing in Iran must comprehend the threat that that nations poses. The harm that is being done first by the investment, and second by the refusal to sanction them, is incalculable. It is difficult to understand how on the one hand our European allies can so fervently wish to be part of the Middle East roadmap, yet provide the resources through ongoing investments in Iran to Hamas and other forces seeking to obstruct and destroy that very same peace process. Europe cannot seek inclusion in the diplomatic process while funding its obstruction.

The implementation of ILSA must be viewed in the full context of the war on terrorism, a battle we can and must win. Vital to this fight is a worldwide effort to deny terrorist groups the funds they need to pay for their terrorism. As such we should remember that President Bush declared on September 24th, 2001, "Money is the lifeblood of terrorist operations today. We are asking the world to stop payments." With the Iran-Libya Sanctions Act, I would have argued, we would have accomplished just that: stopping the flow of money to the terrorists. Finding ways to restrict the increasing wave of foreign investment into Iran and Libya must be an integral part of the same effort to suppress terrorist financing. It is just as important to stop the flow of money into Iran and Libya as it is to terrorist organizations, their leaders and corporate and charitable fronts. Terrorist fundings schemes are difficult enough to stop. If we aim for their largest donors, the state sponsors, we are making a bigger dent in the financial infrastructure of the global terrorist network.

Beyond its ongoing support and active participation in terrorist activities, the Iranian regime is racing to obtain weapons of mass destruction. The regime's weapons program, especially its nuclear programs, are taking on added concern, because Iran is speeding up its efforts to build long-range ballistic missiles to deliver these weapons. The discovery of the secret Natanz and Iraq nuclear sites, combined with the Jam missile project and the successful test of the Shahab 4 missiles only further explain why investment by European oil companies must be stopped.

I understand that the administration is discussing the idea of seeking multilateral sanctions through the United Nations Security Council for the recently disclosed Iranian violations of the Nuclear Non-Proliferation Treaty. If this is the case, it is a positive development, but not on that should preclude the use of ILSA as the most effective U.S. tool short of war to prevent a pariah state such as Iran from achieving nuclear status.

We'd prefer the support of the global community in curbing these weapons of mass destruction; however, when our safety and security and that of our allies in the region is being threatened, we must take immediate action to address the problems and not sit idly b y waiting for consensus to be achieved. Diplomacy does not mean surrender. Defense Secretary Donald Rumsfeld pointed out the threat posed by countries such as Iran securing nuclear weapons. While speaking in Germany in a NATO meeting on June 11th, he said, "If our free nations do not come to grips with this problem, it is possible that not so many years from now when we gather for the 20th anniversary of this center, we could be living in a world with as many as twice the number of nuclear powers, and a number of those new nuclear powers being terror states.

With respect to Iran, undersecretary of State for arms control and international security, John Bolton, testified to the full committee on June 4th that the conclusion is inescapable, that Iran is pursuing its nuclear energy program -- not for peaceful or economic purposes, but as a front for developing the capabilities to produce nuclear materials for nuclear weapons.

Moreover, the IAEA's condemnation of Iran's failure to declare its nuclear imports and activities gives added credence to its offensive threatening intentions. Iran's efforts at building nuclear weapons cannot be achieved without great cost. An influx of hard currency in the form of foreign investments, credit and loans can certainly help, however. In this context, ILSA reveals itself as a critical tool in the arsenal of U.S. foreign policy instruments. If there is no foreign investment flowing into these terrorist states, their coffers are depleted; their economies and official budgets are reduced. This not only results in fewer funds being diverted to weapons of mass destruction programs, but it serves to remove the infusion of financial resources which props up the regime and enables it to carry out repression, persecution and intimidation against those inside the country who want freedom and democracy.

The EU stubbornly continues to believe that only constructive engagement will work with Iran. EU External Affairs Commissioner Chris Patten has stated that he believes that only through investment in Iran can political reform be achieved. Years of investment by the EU has proven this assertion to be false, as this is a regime which stones people to death, flogs or hangs them in the public square in an effort to stifle defense. The choice is clear: You are either with the oppressor or with those struggling to free themselves from a brutal theocracy. You cannot have it both ways. Unfortunately, failure to implement ILSA has fueled the assumption that one can. Lack of ILSA implementation has its origin in the State Department's waiver of the 1998 Total deal that violated ILSA. At that time, former Secretary of State Albright found that the French company did indeed violate ILSA, but she refused to impose sanctions, instead invoking the national interest waiver included in the law. Secretary Albright, however, went too far in granting this waiver. While statutorily permitted to grant the company a waiver, there was no provision in ILSA for extending the waiver to the entire continent; nor was there ever intended to be. Then Secretary Albright stated that if there was a continued cooperation from the European Union on these matters with respect to Iran, similar waivers would be granted.

It is Congress's view that this type of waiver is not allowable under the law. Simply put, because of this action ILSA has been undermined. On April 17th, 2003, Iran's oil minister bragged that his country has signed oil investment contracts worth $20 billion in the last five years -- interestingly, five years from the time the waivers were issued. Moreover, he bragged that this investment has boosted Iran's GDP to a great extent.

European oil investment and credit provisions had unquestionably helped the Iranian economy. Iran is issuing bonds on the international market, receiving credit guarantees from Britain for oil and other investment deals, World Bank loans, Japanese loan guarantees for its companies' investments in Iran. In September 2000, only two years after the waivers, Moody's, the U.S. credit rating agency, raised Iran's foreign currency rating from "stable" to "positive." In 2001, IMF analysts agreed, and said Iran's credit rating had greatly improved. Now with Iran's economic outlook rising even more, the investment by companies in Europe is only speeding the day when we will see a nuclear Iran. As frightening a thought as this may be, we must face the facts. Iran's economic rise and its ability to advance its nuclear and chemical weapons programs are directly tied to our lack of enforcement. If the waivers had not been granted, the investment flow would not have gone forward as it has.

While we are gratified by the recent statements from the EU countries on Iran's nuclear objectives, mere rhetoric while negotiating further investment deals with Iran are not sufficient grounds, do not justify the lack of ILSA implementation. We are talking about an extremely dangerous regime, a regime whose leaders have repeatedly vowed to bring America to its needs, and who are committed to the destruction of our country and our allies in the region. We intend to review ILSA implementation very carefully. Now that we have seen the painful truth that the oceans that separate us no longer provide us the protection they once did, we would almost be mindful of the actions we take in building up tyrants who may one day grow to hurt us.

I look forward with great interest in hearing the testimony of our witnesses today, and I thank you again for your patience. I'd like to yield to Mr. McCotter for his opening remarks.

REP. THADDEUS MCCOTTER (R-MI): (Off mike.)

REP. ROS-LEHTINEN: Thank you. Thank you so much. And I know that the State witnesses must leave at 3:30, so if you would like to give your remarks, and we'll open it up for questions. Thank you again for your patience.

REP. MCCOTTER: Thank you, Madam Chairwoman.

AUDIENCE MEMBER: Madam Chairman, I'm an Iranian.

(Off mike outburst from audience member.)

REP. ROS-LEHTINEN: Thank you. I would like to introduce the panel. Ms. Anna Borg became the deputy assistant secretary of State for energy.

(Outburst from audience member.)

Thank you. Ms. Anna Borg became the deputy assistant secretary of State for energy, sanctions and commodities in August 2000. She was also named the State Department coordinator for conflict diamonds. From 1999 to 2000, she served as director of the Office of United Kingdom and Ireland Affairs. Mr. Philo Dibble is a career member of the Senior Foreign Service. He has been a deputy assistant secretary of State in the Bureau of Near Eastern Affairs since May 2003. He was deputy chief of missions in Damascus, Syria from 2001 until 2003. Other overseas assignments have included tours in Saudi Arabia, Lebanon, Tunisia, Italy and Pakistan. And then we will hear from Mr. Charles Ries, principal deputy assistant secretary of State for European and Eurasian affairs. While he will unfortunately be unable to attend this hearing due to illness, Mr. Charles English, acting deputy assistant secretary for European and Eurasian affairs will testify in his stead. Thank you so much, and we will begin with you, Ms. Borg, unless -- batter up. Thank you. That was an interesting little side note. Democracy is great. (Laughter.)

STATEMENT OF

ANNA BORG
Deputy Assistant Secretary of State for Energy,
Sanctions and Commodities, and
Coordinator for Conflict Diamonds,
State Department

 

MS. BORG: Madam Chairwoman, thank you very much, and members of the Middle East subcommittee, I appreciate very much the opportunity to testify today about implementation of the Iran and Libya Sanctions Act in the context of dealing with key threats to our national security.

In enacting ILSA, Congress expressed deep concern about the pursuit of weapons of mass destruction by Iran and Libya -- also about their support for international terrorism, and in the case of Libya its failure to meet its obligations under the U.N. Security Council resolutions relating to the bombing of Pan Am 103. Accordingly, we have sought to ensure that the process of ILSA implementation makes the greatest possible contribution to the goal of countering the WMD and terrorism threats posed by Iran and Libya. The effort to combat these threats is of course a very broad one within the U.S. government. ILSA is only one of a number of ways in which we are pursuing these important objectives.

In discussing the implementation of ILSA, it is useful to go back to the decision by the secretary of State in the 1998 South Pars (ph) case which involved an agreement by a French-Russian-Malaysian companies to develop part of a gas field in Iran. The secretary decided in this case decided in this case to exercise the authority granted by the statute, and delegated to the secretary of State by the president, to waive the imposition of ILSA sanctions on the ground that doing so was important to the national interests. The secretary's statement noted that after careful examination of all the facts available that the investment by the company did constitute sanctionable activity under the statute, but that the imposition of sanctions would not stop the deal. The secretary found further that we had achieved enhanced cooperation with the European Union and Russia in accomplishing ILSA's primary objective of inhibiting Iran's ability to develop WMD and support terrorism, and that the waiver would enhance our ability to work with all the countries involved on a host of bilateral and international concerns. This framework was endorsed again in 2001 at the first U.S.-EU summit of the present administration. We have continually raised our ILSA and policy concerns at senior levels of government and with company management.

Whenever private petroleum sector agreements with Iran or Libya appeared to be likely.

ILSA has thus served as an important platform for discussions that allow us to reiterate and to underscore the seriousness of our WMD and terrorism concerns about Iran -- (audio break) -- has testified to the depth of our concerns.

U.S. policy towards Iran and close consultations with like-minded governments, including those in the G-8, have further enhanced the level of cooperation from other countries encountering the threats, particularly those posed by Iran.

The importance of this focus was highlighted by President Bush, who, in his signing statement for the ILSA reauthorization legislation in 2001, called for, and I quote, "strengthening our efforts with other countries whose cooperation is essential to pursuing the most effective approaches to solving the problems of proliferation and terrorism addressed by ILSA," end quote.

We have not succeeded in stopping all petroleum sector investment in these countries of concern, although some observers and analysts do credit ILSA for slowing oil and gas development in Iran. ILSA thus is one vehicle for emphasizing our concerns about the objectionable policies and actions of Iran and Libya. It is certainly not the only such instrument, but we are using the law continually as a basis for making representations to governments and companies that underline our views with these two very problematic countries.

Under the terms of the reauthorization legislation, we will be reporting to Congress between August of this year and next February on certain aspects of ILSA's impact and effectiveness. We look forward to presenting that report and look forward to taking your questions today.

REP. ROS-LEHTINEN: Thank you very much. I'd like to go next -- thank you.

 

STATEMENT OF

PHILO DIBBLE
Career Member, Senior Foreign Service,
Deputy Assistant Secretary of State,
Bureau of Near Eastern Affaurs, and
Former Deputy Chief of Missions in Damascus, Syria

 

MR. DIBBLE: Thank you, Madam Chairwoman. I, too, am thankful for the opportunity to appear before the subcommittee today.

U.S. policy toward state sponsors of terrorism, including Iran and Libya, has always been oriented toward maximum U.S. unilateral efforts to end those countries' destructive policies, combined with maximum effort to garner international cooperation.

While there is still much to be done, we see indications that both countries are feeling increasing pressure. Both Iran and Libya represent great challenges, but we are making some progress in gaining international cooperation to pressure them to end their destructive policies.

First, with respect to Iran, President Bush has clearly stated that the United States supports the aspirations of the people of Iran for freedom and democracy, and he has called on the Iranian government to fulfill those aspirations.

U.S. policy towards Iran has not changed. As in the past, it works to advance long-standing goals. It focuses now on the issues of Iran granting safe haven to al Qaeda operatives and interfering in the establishment of a representative government in Iraq, along with the continuing effort to end Iran's support for terrorism and for violent opposition to the peace process and its pursuit of weapons of mass destruction, including nuclear weapons.

In addition, it calls on Iran to stop abusing the human rights of the Iranian people. Unlike some countries, we do not accept the notion of differentiating between hardliners and reformers in the government of Iran. We believe that the government as a whole must be held responsible for its actions.

President Bush has stated in no uncertain terms that the international community will not tolerate a nuclear-armed Iran. Such a development would greatly destabilize an already volatile region and do grave harm to the nuclear non-proliferation treaty and the international non-proliferation regime.

We saw the international community come together last week at the IAEA board of governors to support a strong conclusion by the chairwoman calling on Iran to address the concerns outlined in Director General ElBaradei's interim report.

This report is based on the results to date of the work of inspectors on the ground in Iran, and it outlines in thorough detail Iran's failures to meet its safeguards obligations, its lack of cooperation with IAEA inspectors, and the areas of unresolved concern that the IAEA will continue to investigate.

We expect to hear a further report from Dr. ElBaradei as soon as new information comes to light, including the results of environmental samples. If such sampling results and other information support it, we would expect an eventual IAEA board resolution finding Iran in non- compliance with its safeguard obligations.

As a result of our efforts to date, we have seen the EU and Russia adopt a firmer stance towards the growing threat of Iran's covert nuclear weapons program. We continue to press them and all countries to do all they can to counter Iran's nuclear, chemical, biological and missile programs. The strong G-8 statement on Iran's nuclear program was a very positive development.

Iran is currently the most active state supporter of terrorism. It is the primary political and financial backer of Hezbollah and the chief supplier of its military equipment and training. It maintains forces as advisers to Hezbollah in Lebanon. Iran also provides financial and logistical support to many Palestinian terrorist groups and, as evidenced by the intercepted Karinne A shipment of January 2002, has been involved in attempts to smuggle weapons to the Palestinian Authority.

As we relaunch peace negotiations, we are watching closely to see if Iran will direct these groups to try to derail the quartet's road map and are calling on the plan's co-authors to make clear to Iran the unacceptability of its acting as a spoiler.

In addition to our long-standing concerns about Iranian involvement in terror, the presence of senior al Qaeda members in Iran is worrisome. We are certain that some members of the al Qaeda advisory council are connected to the May 12th attack in Riyadh. Some council members knew attacks in Saudi Arabia were imminent, and they had been coordinating terrorist plots with top members of the Saudi al Qaeda network, which carried out the attacks, since last fall.

While in the past we have seen instances where Iran turned over suspected al Qaeda operatives to other countries, in these cases senior al Qaeda extremists appear to be finding safe haven in Iran, likely with the support of some elements within the Iranian regime.

Iran claims to have a number of al Qaeda in detention, but to date has not turned them over to other countries. We have seen evidence that other countries have also strongly voiced to Iran the importance of taking unequivocal steps to shut down al Qaeda. As National Security Adviser Dr. Rice said recently, we cannot tolerate al Qaeda activists going in and out of Iran.

The overall human rights situation inside Iran has continued to deteriorate. Pro-reform publications are regularly shut down, and journalists, editors and publishers are routinely jailed. Fifteen political activists were recently given lengthy jail sentences. A dissident academic was sentenced to death last fall for questioning Islamic rule, sparking days of demonstrations and domestic and international outrage that eventually forced the regime to grant a retrial.

While the regime has supposedly suspended, though not outlawed, the practice of stoning, we have a recent report of a beheading. We are pleased to have received congressional authority to use Middle East Partnership Initiative funds, as well as funds administered by the Bureau of Democracy, Rights and Labor, to initiate pro-democracy and human rights programs for Iran. We are now studying how to initiate programs in the most effective way.

President Bush and other senior U.S. officials have applauded the courage of the demonstrators who came out for over a week of protests this month calling for democracy and an end to clerical domination. The Iranian government nonetheless has put down these protests. The population seems to have lost faith in the Khatami government's ability to carry out meaningful reform in both the political and economic spheres.

The Iranian people deserve a better future. Their greatest concern is the economy, with high levels of inflation and corruption and a woeful lack of professional jobs, causing constant deterioration of their standard of living.

More recently, we have seen other disturbing indicators of negative Iranian behavior, such as Iran's meddling with the political process inside Iraq. Iran is using money and armed proxies to try to promote those Shi'a groups that it sees as sympathetic to its interests. Coalition Provisional Authority Administrator Bremer has publicly warned Iran that there would be consequences for such behavior.

And briefly, with respect to Libya, another state sponsor of terrorism, has yet to fulfill its obligations under the relevant U.N. Security Council resolutions related to the bombing of Pan Am 103 over Lockerbie, Scotland in 1988. These obligations include accepting responsibility for the actions of its officials and paying appropriate compensation. It is past time that Libya fulfill these obligations.

Thank you, Madam Chairwoman.

REP. ROS-LEHTINEN: Thank you.

 

STATEMENT OF

CHARLES ENGLISH
Acting Deputy Assistant Secretary,
European and Eurasian Affairs

 

MR. ENGLISH: Thank you, Madam Chairwoman. And I, too, appreciate the opportunity to appear before you and your subcommittee this afternoon. And I would like to discuss with you today European Union policies toward Iran and to talk about some recent developments in the cooperation between the U.S. and the EU on control of the spread of weapons of mass destruction.

Iran's pursuit of weapons of mass destruction and its support of terrorism were major concerns to the Congress when it passed the Iran and Libya Sanctions Act. I will try to outline how the U.S. and EU cooperate to address our shared concerns over Iranian policies and how we cooperate in the broader question of non-proliferation.

The U.S. and the EU share strong concerns over Iran's pursuit of WMD, over their support of terrorism and their promotion of violent opposition to the peace process and their abysmal record on human rights. We do, however, come from different starting points on how to curb objectionable Iranian behavior.

The EU follows a policy of engagement with Iran, with the political focus, to a large degree, centered on a structured so-called comprehensive dialogue. The dialogue focuses on major EU political concerns regarding Iran. The EU believes that engagement gives it influence with the Iranian regime and that it also encourages reformers in the Iranian government. We, as Mr. Dibble has testified, are very skeptical and do not believe that engagement will achieve either objective.

We have not certainly seen evidence that this engagement has to date produced any real change in Iranian behavior. This is a point that we continuously make clear to the European Union. But while U.S. and EU policy toward Iran come from different starting points, the gaps between the U.S. and the EU approach have narrowed, and the EU has increased its cooperation with us on practical levels since the passage of ILSA. U.S.-EU joint declarations on non-proliferation and counterterrorism reflected shared goals in these areas and a determination to work together to pursue these objectives.

More recently, the EU has shown greater willingness to condition improvement in its economic relations with Iran on concrete, verifiable and sustained improvements in Iranian behavior. An example is the EU's response to an Iranian request to improve economic relations through a trade and cooperation agreement. In June of last year, the European Union Council responded positively but decided to keep the proposed agreement at a basic level; that is to say, it would contain no preferential tariffs, nor would it contain any concessional assistance.

With considerable U.S. urging, the European Union decided to link this trade and cooperation agreement with tangible improvements in Iranian policies in such areas as weapons of mass destruction to alleviate their support for terrorism and to stop Iranian opposition to the peace process and to improve their abysmal record on human rights.

The EU is currently negotiating two political agreements with Iran focusing on those areas. In those agreements, the EU has stressed that they must proceed in parallel with the trade and cooperation agreement and would have to be signed simultaneously with this TCA. Not surprisingly, there has been considerable resistance in the government of Iran to this approach, and we understand that negotiations have moved very slowly.

Our European allies are also proving to be staunch partners in the face of recent revelations that Iran's declared nuclear program masks a hidden program to develop fissile material production in support of weapons programs.

We understand that during the visit to Teheran on June 1st and 2nd, an EU delegation made clear to high levels of the Iranian government that the European Union was very concerned about their nuclear program. And at the June 1st Evian summit, G-8 leaders, which include the leaders of the four largest European Union member nations and include the European Union itself as an observer, declared their concern about Iran's nuclear program.

I'd like to just quote briefly the G-8 statement on Iran. Quote: "We will not ignore the proliferation implications of Iran's advanced nuclear program. We stress the importance of Iran's full compliance with its obligations under the NPT. We urge Iran to sign and implement an IAEA additional protocol without delay or conditions. We offer our strongest support to a comprehensive IAEA examination of this country's nuclear program."

I would like to note, Madam Chairwoman, that the European Union followed up with its own statement on this at its June 16th council and at its June 20th summit meeting at Thessaloniki, as well as today, in a U.S.-EU summit, the United States and the European Union agreed on a non-proliferation statement which contained very harsh language about Iran.

I'd like to submit the balance of my statement for the record.

REP. ROS-LEHTINEN: Thank you very much.

MR. ENGLISH: And if I may just --

REP. ROS-LEHTINEN: Sure.

MR. ENGLISH: -- with a sum --with a few sentences of summary.

REP. ROS-LEHTINEN: Sure.

MR. ENGLISH: Well, two sentences, I promise, no more.

REP. ROS-LEHTINEN: Go ahead.

MR. ENGLISH: In sum, we can still find ways to further strengthen and deepen our cooperation. The U.S. and the EU, particularly over the past year, have taken significant steps to achieve our common objectives in Iran and, more broadly, have had an impact on non- proliferation in the world as a whole.

REP. ROS-LEHTINEN: Indeed, a great finish. Thank you very much.

MR. ENGLISH: Yes, ma'am.

REP. ROS-LEHTINEN: Thank you. And I wanted to point out that we have a series of International Relations resolutions on the floor today, and that's why you don't see many of our members here, because they're there.

Ms. Borg, if I could begin the questions with you and then I'll have Mr. Smith question the panelists as well. In your statement, you say that the imposition of sanctions for the Total deal would not have prevented it from going through. Is this now the threshold for the imposition of sanctions under ILSA? That is, do we have sanctionability if it is deemed that the deal can't be stopped?

MS. BORG: Thank you, Ms. Chairwoman. In the statement, I tried to bring out the factors that were involved in that decision, of which only one factor, in fact, was the conclusion that sanctions would not prevent the deal from going forward.

But also involved in the decision were -- and I refer again to President Bush's statement, because it underscores that in going forward with the national interest waiver, there was a decision again that the importance of strengthening other countries whose cooperation is essential to pursuing the most effective approaches to solving the problems of proliferation and terrorism, that in the whole mix there was a decision, as you know, that what had occurred, or what we knew of the reports, made it look as if this fit under the umbrella of ILSA. At the same time, it was determined at that point that it was very unlikely that any sanction would prevent that deal from going forward, and that there were the additional factors of needing to work these issues forward in cooperation with other partners. And so there was a great deal of activity at that time as we have continued since then -- great deal of activity both with senior diplomats, senior company officials and others to describe our concerns. And at the same time at the London summit in 1998, also agreement to work on those areas with the EU. So it was in that whole context of heightened cooperation that this decision was taken.

REP. ROS-LEHTINEN: Thank you. Mr. Dibble, in your testimony you state that unlike some countries we do not accept the notion of differentiating between hardliners and the so-called reformers in the Iranian regime. Are you referring to the European countries? And do you believe that the differences in the approach between the U.S. and the EU is rooted in this fine line differentiation by the EU in spite of the recent harsh words, as it does with Hamas, for example? And how can we reconcile this difference to ensure greater cooperation from our EU partners toward a EU policy that demands concrete verifiable results from the Iranian regime? Mr. Dibble?

MR. DIBBLE: I think -- thank you, Madam Chairwoman. I think that what we look at with respect to Iran are the actions of the regime. And while it is an interesting analytical exercise to try to figure out who is behind what action and how much each one -- how much support each one has, how much support each one has. What we need to see are the actions themselves, and what we need to do is hold the government as a whole accountable for them.

I think we are seeing our European allies come to the same realization. I think that is one of the meanings --

REP. ROS-LEHTINEN: With actions?

MR. DIBBLE: Yes. I think that's one of the meanings --

REP. ROS-LEHTINEN: Not just with the rhetoric?

MR. DIBBLE: -- of the IAEA board of governors' statement. I think that is the meaning of the EU statement that the Europeans saw that we had in fact Iranian action as documented by the IAEA report which they had to deal with. And what we saw was a growing process of getting closer to our position on this question.

REP. ROS-LEHTINEN: Thank you. I was just explaining to Mr. Chabot what had gone before, especially about the screaming protestor. You missed that one. That was good. (Laughter.)

MR. DIBBLE: I'm sorry, I've completed the answer.

REP. ROS-LEHTINEN: Go ahead. Would you rephrase that?

MR. DIBBLE: Say it again? Sure. I think the important thing is Iranian actions and not the degree of support they may or may not have within Iran. I think the Europeans are coming to share that view, and the evidence for that are recent statements by the EU in the G-8 and in other fora in reaction to the reports on the Iranian nuclear industry. There was a fact. There was an action. The EU had to deal with it, and it really didn't matter whether this was the hardliners or the reformists who were behind it.

REP. ROS-LEHTINEN: Thank you. Mr. English, on your written statement following up from that, the most recent report to Congress on Iran-related multilateral sanctions regime efforts -- that report states that the U.S., quote, "Works with other countries and regional organizations, such as the European Union, that have relations with Iran to promote compliance with arms control agreements and link improvements in their relations to," as we have said, "concrete, verifiable cessation of Iran's destructive policies." And, based on that, what is the message that our diplomats are delivering to foreign governments whose companies are making deals with Iran in spite of the governments' harsh statements? Would you say that our efforts have been successful? How is State defining what is concrete verifiable stoppage of Iran's policies? And what is the threshold that State is using with our EU partners to determine when their actions are sufficient to substantiate a continuing waiver of ILSA? And related to that, are European diplomats willing to listen to our objections to deals with Iran, or do they dismiss our complaints out of hand? You've mentioned the new rhetoric that is coming out of the EU. We hope it is followed up. But are there consequences to the EU's lack of cooperation on some of these key areas?

MR. ENGLISH: Madam Chairwoman, in terms of the overall cooperation that the EU is beginning - -is evermore showing in terms of understanding our position on Iran, I think that the best example, as I mentioned in my testimony, is -- are the conditions that they are willing to consider in terms of their moving forward in their program of engagement. We have been in touch with the European Union 15, and increasingly now with the European Union soon to be 25, very often. They meet monthly in something called the General Affairs and Foreign Affairs Council. And we ask them almost monthly to listen to our complaints about Iran, to listen to our proposals on this idea that they carry forward these linkages in their trade and cooperation agreement. We have not determined for them what those concrete verifiable benchmarks must be. We have urged them to do so. We want to hold a dialogue with them as they are developing them. But the fact of the matter is their negotiations are going so slowly at the moment that we haven't yet really engaged them to that point. So the bottom line is through our diplomatic pressure we have both gotten the European Union collectively to join us in such places as the IAEA board of governors to condemn Iran's policies and to insist on change, and to insist in that setting on possible consequences. And also we have mitigated their warming of relations, or any possibility of their warming of relations with Iran by continually bringing to their attention Iran's support for terrorism, Iran's abysmal human rights record. And I think the proof that we have been successful in that is that no agreement -- these agreements have not gone forward.

REP. ROS-LEHTINEN: Thank you very much. Mr. Smith. I'll have other questions, and I'll submit them in writing. Thank you.

REP. SMITH: Madam Chairman, thank you. I have a question on the demonstrations. At the time of his election there was guarded optimism that the government of President Mohammad Khatemi was going to result in a move towards greater democracy and reform. However, it would seem at least that the protest that we observed in the last couple weeks would indicate that there's still a lot of frustration with both maybe Khatemi and the ruling mullahs. The protests, almost unprecedented in number, apparently that were involved the duration I guess, and though the demonstrations have pretty much been silenced now, if Khatemi and the mullahs can convince people that the demonstrations were instigated by the United States, then it seems to me like they're absolutely going to be unsuccessful in terms of bringing about any change. Will they be able to convince people and prove that the United States was instigating the demonstrations?

MR. DIBBLE: Well, of course it's nonsense that we were, and it's very hard to prove a negative. But I am sure that all elements of the Iranian government understand that they have a problem, that they are, in the president's words, "unable to meet the aspirations," whether political, social, cultural or economic of a rising generation of Iranians. They are going to have to deal with this, and it has nothing to do with the United States how they deal with it.

REP. SMITH: What are our communications and what is available in terms of radio, television communications?

MR. DIBBLE: We operate Radio Farda and we operate websites. The Internet has been a very, very powerful weapon both in Iran and communicating between Iran and the outside world, and we intend to use that as much as possible.

REP. SMITH: Let me ask a question about the Iranian and Libyan sanctions. Ten billion dollars in foreign investment have been channeled into Iran in the last five years, so apparently those sanctions aren't working the way at least I thought they were going to work. Can you react to that, anybody?

MS. BORG: Yes, thank you.

REP. ROS-LEHTINEN: If you could make your answer brief, because I would like to recognize Mr. Chabot for his last question. Thank you.

MS. BORG: I think there are a lot of different ways in which we have looked at effectiveness of sanctions, and one of them again has been the area of strengthening cooperation. The other has been I think people have looked at -- as a number of oil company people have said when they think about investments, they have a lot of different factors in front of them, and one of them described ILSA has having a dampening effect. Lastly, I would say that one can look at all different numbers of investment over recent years in Iran, and the estimates range all across the map. Most recently we looked at the IMF, the Chapter 4 consultation piece, which estimated $360 million in the number of recent years, and $2 billion, and then proposed for their year, or possibly for this year, $1.9 billion, leading to a total of maybe $6 billion. But I think we agree it's very hard to get a sense of the numbers, and we certainly would never let up, even if the numbers were low. Our concerns are there. We raise them all the time.

REP. ROS-LEHTINEN: Thank you so much.

REP. SMITH: Madam Chairwoman, thank you. I understand we are under a time constraint, so I yield.

REP. ROS-LEHTINEN: Right. You can submit them for the record. Thank you. And I'm sorry I took up so much time.

Mr. Chabot.

REP. CHABOT: Thank you, Madam Chair. Do you want me to ask and --

REP. ROS-LEHTINEN: You could just ask one question, and then we'll submit the rest.

REP. CHABOT: Thank you. This is relevant to the -- or relative to the Total waiver. The Clinton administration issued a waiver of ILSA for Total's investment phases two and three of South Pars (ph) gas project. Since then there have been several other foreign energy investments -- over $20 million. How many foreign energy investments over $20 million have the Iranians secured? How many are actually on line today, and what's the total value of the investments? And how much in additional energy production and revenue will Iran acquire as a result of these foreign investments?

And I've got some more questions, but we can submit them in writing and get answers later.

MS. BORG: Thank you. And we look forward of course to answering all the written questions and getting back to the committee. We know it's been a day pressed for time.

So let me just comment on the ones that you noted. In our semiannual report to Congress, under Section 10 of ILSA, we have a section always on recent reported petroleum investments agreements in Iran, where we note ones that we are watching, ones that have been in the press, and also note the instances we have brought these up with governments and oil company senior management. And, as you can see from recent reports, we have seen reports of investment agreements in the range of 15-16. Some of these, you know, pop up on the horizon, as the Tracer one did, but -- and then they disappear. So it's been a constant effort to see how many there are and what has happened to them.

On the issue of how many do we think are actually on stream at this point, I think our best estimate is probably about four of them on stream. In terms of the total investments that these might amount to as we tried to answer before, it's tough to gauge these, because it's hard to gauge the actual investment or whether you add in capital costs, or when it comes on at a certain point. And I think that answers most of the questions you outlined.

REP. CHABOT: Thank you very much.

REP. ROS-LEHTINEN: Thank you. And that was a question -- just one more, Mr. Berman, my traveling buddy from Jordan -- we just got back the other day. Do you have a statement or a question? They must leave.

REP. BERMAN: Leave. No, I think it would be wrong to come in now and mess up the timing, so I will hold off on any questions.

REP. ROS-LEHTINEN: I was pressed for timing. They were very nice about it.

REP. BERMAN: -- issues on the floor.

REP. ROS-LEHTINEN: We've all got issues. Thank you so much. We appreciate it. And thank you for your patience again. Muchas gracias. Thank you. And we will submit our questions in writing to you.