Mr. Chairman, thank you for scheduling this timely and important hearing on the Iran and Libya Sanctions Act (ILSA). As you are aware, this law will expire in early August 2006, so it is important for the Committee on Banking to gather insight on enforcement of the current law, find out how the law is meeting our foreign policy goals, and determine if modifications to the law are necessary.

As you know, I have taken a keen interest in making sure that the tools authorized by ILSA are effectively employed to deter investment in Iran's energy sector. In addition, because of the nascent democratic movement taking hold within Iran, I have sought to provide greater financial and political assistance to the people of Iran to enable a peaceful democratic government inside Iran. Both goals are reflected in S. 333, the Iran Freedom and Support Act, a bill that has garnered 61 cosponsors.

In my opinion, the Senate missed a golden opportunity to not only improve upon current law but also to support the pro-democracy movement inside Iran when it failed to adopt Senate Amendment 4234 during consideration of the Fiscal Year 2007 National Defense Authorization Act last week. However, the issue of an atomic Iran is pressing enough and important enough for this body to reconsider its vote last week. I am confident that the Senate will realize that now is the time to authorize not only improvements in ILSA, but also help shape a viable U.S. foreign policy approach towards Iran.

Mr. Chairman, as you know, the Congress enacted ILSA because it concluded an Iran that with fewer oil revenues would allocate its limited resources towards intrinsic domestic needs rather than funding terror groups. Not wanting to tie the President's hands, Congress permitted the use of a waiver if use of the waiver is important to the national interests of the U.S. While most observers would contend that the law has been helpful in dissuading large scale investment in Iran, additional improvements are necessary so that the law can be strengthened. Put bluntly, some would say that the law lacks teeth. If that assessment is true, I believe that this committee can be helpful in adding teeth to ILSA.

Let me remind this committee that in 2001, when the Iran and Libya Sanctions Act of 1996 was nearing its expiration date, the Bush Administration requested a two-year re-authorization of the law. Congress chose to disagree with the Administration and re-authorized the law for another five years. I ask members of this committee to remember that request for "flexibility" when recalling last week's objections raised by the Department of State to my amendment.

I find it even more telling that foreign investments in Iran's energy sector, investments made during the Clinton Administration, have not yet been acted upon. That is, the current administration has not made a determination on whether investments by foreign entities in Iran have triggered sanctions defined by the law. To date, the only action taken was the issuing of a waiver back in 1998 on the investment made by a consortium lead by TotalFinaElf, Gazprom, and Petronas to develop phases two and three of Iran's South Pars gas field.

Unfortunately, major investments in Iran's energy sector have continued despite the enactment of the ILSA legislation. Recent examples include GVA Consultants of Sweden's Caspian Sea transit contract worth an estimated $225 million (March 2001); ENI of Italy's Darkhovin field contract worth an estimated $1 billion (June 2001); LG of South Korea's Phases 9 and 10 of the South Pars field worth an estimated $1.6 billion (September 2002); and Inpex of Japan's Azadegan field contract worth approximately $2 billion (February 2004). As best I can tell, these deals are still under review by the Administration.

While ILSA has probably discouraged whole scale investment in Iran's energy sector, these recent investments are a result of calculated assessments by foreign companies and entities that they will not be sanctioned by the U.S. government. One of the aspects of the amendment I offered to the Fiscal Year 2007 National Defense Authorization Act was a provision requiring the President to take action on transactions that were under review. I believe that this provision makes sense as the Executive Branch has been silent on ILSA for far too long.