SEN. RICHARD G. LUGAR (R-IN): This meeting of the Senate Foreign Relations Committee is called to order. The committee meets today to examine the situation in Iran and options for United States policy. We will have a second hearing on the same topic tomorrow.

As the American people and policymakers debate our course in Iran, I am hopeful that our committee can contribute by being a bipartisan forum for clarifying the diplomatic situation and evaluating policy options. Our intent is to inform our own policymaking role, as well as to stimulate constructive public debate.

President Bush has announced that the United States remains committed to exhausting all diplomatic options with respect to Iran. The United States and its allies at the United Nations have been pressing for multilateral diplomatic and economic sanctions under Chapter 7.

There is widespread agreement that Iran sought to deceive the international community about its nuclear intentions. Tehran's decision to move ahead with uranium enrichment was condemned by the international community, but efforts to attain a Security Council consensus on a firm response to Iran's actions have not been successful.

American policy in the near term will be defined by efforts to convince the international community of our commitment to diplomacy and to build a broad, multilateral and international coalition against Iran's nuclear ambitions.

I believe this is the strategy that Iran fears most. Last-minute negotiations, letters to President Bush, feigned interest in compromises are just a few of transparent efforts Tehran has undertaken to split the international community.

We must overcome Iran's efforts with patient, diplomatic spadework. We've stated that no option is off the table. All the direct talks with Iran come with difficulties and risks; we cannot rule out their utility, particularly as they relate to our primary effort to build an international coalition.

Secretary Baker's talks with Iraqi leaders in 1991 were distasteful but proved to be a gesture that displayed America's hope for a peaceful settlement and built international equity for all steps in our response. The United States has the diplomatic prowess to obtain a strong, multilateral response and win international debates.

We must be prepared to commit the time, the energy and the resources necessary in this diplomatic battle. Our retaining all communication tools is also important because they may be necessary to avoid a tragic miscalculation by the Iranians.

Analysts in our intelligence agencies and State Department do not regard the Tehran regime as irrational, but the framework for their decision making is very different from our own. We must understand that they are interpreting our actions in ways that we do not always discern. And if one overlays these perceptual differences with demagogic rhetoric, historic suspicion, and high political stakes, the possibility for miscalculation increases exponentially.

Our policies, our communication must be clear, precise, confident, without becoming inflexible. And in some situations, this delicate diplomatic balance can best be achieved through direct communications.

Some have expressed frustration with the administration's coalition-building approach and have advocated a quick, punitive and unilateral sanction focused on international companies doing business in Iran.

Secretary Rice has stated that such a policy, and I quote, "would complicate our ability to work successfully with our allies to counter the threat posed by Iran. It would narrow, in important ways, the president's flexibility in the implementation of Iran's sanctions, create tensions with countries whose help we need in dealing with Iran, and shift focus away from Iran's actions and spotlight differences between us and our allies. This could play into Iran's hands at it attempts to divide the U.S. from international community, as well as to sow division between the E.U.-3, China, and Russia," end of quote from Secretary Rice.

Unilateral sanctions targeting European and Asian corporations do not appear to be an effective way to secure long-term commitments from their host governments on a multilateral approach to the threat posed by Iran. And as such, they are likely to be counterproductive, as the Bush administration has asserted.

As part of our diplomatic efforts, the administration should consider how the NATO alliance might be utilized to strengthen our position. NATO is the principle defense and security organization of the trans-Atlantic community, and NATO has become the preeminent strategic forum for broader security cooperation with Japan, with Australia, and members of the Partnership for Peace in the Caucasus in Central Asia.

It also is facilitating closer ties with North American countries through the Mediterranean Dialogue. NATO is the only entity that has successfully developed and implemented its strategy of deterrence and containment against a nuclear-armed enemy. The alliance provides us with an effective and experienced infrastructure capable of supplementing our activities with the U.N. and implementing an international coalition strategy toward Iran.

I would underscore a final point, as the Congress and the administration move forward with decisions pertaining to Iran. Even as we work quickly, we must calibrate our response with the long term in mind. The issues related to Iran's pursuit of nuclear weapons, its role in the Persian Gulf region, its impact on world energy markets will not be addressed with a single act or policy, be it military, economic or diplomatic.

The American people must know that whatever policy options are chosen will likely require years, if not decades and intense vigilance and diplomatic follow-through.

To assist us in our deliberations today, we welcome two distinguished panels of experts. The first panel will discuss the status of Iran's nuclear program. We're joined by Dr. Robert Einhorn, a senior adviser at the Center for Strategic and International Studies, and Dr. David Albright, president of the Institute for Science and International Security.

Our second panel will discuss Iran's motivations and strategies. Joining us then will be Dr. Ken Pollack, the director of the Saban Center for Middle East Policy at the Brookings Institution; Mr. Karim Sadjadpour, an Iran expert with International Crisis Group; Dr. Patrick Clawson, deputy director of the Washington Institute for Near East Policy; and Dr. Geoffrey Kemp, director of Regional Strategic Programs at the Nixon Center.

We appreciate our witnesses being with us today and, in a moment, I will call upon our first panel. But first, it's my privilege to call upon the distinguished ranking member, Senator Biden, for his opening statement.

 

OPENING STATEMENT OF

JOE BIDEN
A Senator from Delaware, and
Ranking Member, Senate Foreign Relations Committee

 

SEN. JOSEPH R. BIDEN JR. (D-DE): Thank you very much, Mr. Chairman. It will not surprise the panel to hear that my statement tracks yours in many ways. As we say in this business, I associate myself with your remarks.

Mr. Chairman, I commend you for calling this hearing, and I welcome genuinely an impressive group of witnesses we have today. Unfortunately, in my view, Mr. Chairman, this administration has chosen not to send a senior official to be part of these hearings, and I think that's a mistake. I think they should have. I know you tried.

The administration wants to avoid the repeat of the Iraqi fiasco leading up to the war in Iraq. I think it has to begin to do what it failed to do at that time, and that is level with the American people, straight up level with them as what's at stake and what the strategy is. Platitudes like "All options are on the table," and, "We're pursuing diplomacy," on my view, are not good enough.

Dodging congressional hearings is not a good start to what promises to be one of the most challenging problems facing our country over the next several years, if not decade, as you've indicated.

Let me state what I think the problem is: a nuclear-armed Iran that would put a bomb in the hands of a radical theocracy, swimming in the sea of high-priced oil, whose president has denied the Holocaust and threatened to wipe Israel off the map and to attack us.

Now, in my view, I don't believe Iran would use a weapon against us or Israel or give its technology to terrorists. But I believe it would feel emboldened to make more mischief in the region. And if Iran gets the bomb, that could well fuel an arms race with Sunni Arab countries like Egypt and Saudi Arabia, making an already volatile region even more dangerous than it is.

But I believe we have time. Most published reports conclude Iran is likely -- I'm quoting from published reports; I'm not quoting from any direct information I have. Published reports conclude Iran is unlikely to develop a weapon for another five to 10 years. The critical question is: How do we use that time to persuade Iran to forego nuclear weapons?

For now, the administration seems to have settled on a diplomatic course, and I think that's the right course. But it seems to be pursuing it with one hand tied behind its back, without providing the answers to critical questions that we need to shape a smart policy.

For example, our allies in Europe are working on a package of incentives that are meant to be a final offer to Iran. What is our role in developing those incentives? How seriously can Iran take an offer from Europe, say, in matters relating to security guarantees if the United States is no part of that deal?

Why are we, in a posture of an effect, negotiating with the negotiators who are going negotiate with Iran? I find that strange, as I suspect you do, just as I find the same situation strange as relates to North Korea.

We're negotiating with the negotiators, who are going to negotiate with Iran, and yet we are the lynchpin of any negotiation. Wouldn't it save some trouble and confusion to be in the room, along with our allies, as well as possibly Russia and China?

The press reports that if the Iranians spurn the European offer, the U.S. and its allies will move for sanctions in Iran, either through the United Nations Security Council, or failing that, through a coalition of like-minded nations.

What cost will these sanctions entail for Iran, for us, for the key countries we need on our side? How vulnerable is Iran to a ban on imports of gasoline or exports of crude? What would be the impact on oil markets at the local gas pump if Iranian crude were removed from the market?

Why isn't the administration doing more to prepare the public for the sacrifices sanctions would entail if we go that route, as, by the way, I might note, the Iranian leadership is preparing their public? More broadly, what are the chances that Europe, Russia and China will agree to sanctions if they believe the United States has not explored every diplomatic avenue, including direct negotiations with Tehran?

Is the administration committed to regime change in Iran? Would it be prepared to abandon it as part of a package of security guarantees in a negotiated settlement on the nuclear issue that was verifiable?

I asked that question to Secretary of State Rice. I believe it was during a confirmation hearing or the next visit she had. They're so seldom, I should remember them. And she said we'd have to talk about many other things.

I find it interesting that the recognition of the Gadhafi regime, and placing an embassy in Tripoli, and suggesting that the same kind of rationale in dealing with -- it wasn't too long ago, Mr. Leader, that this administration, as was not totally inappropriate, talked about two madmen, the madman in Baghdad and the madman in Libya. And we're putting an embassy in the madman's country because we actually negotiated. We actually got something that we wanted that was consequential. And I'm not criticizing that judgment, but we negotiated.

Is the administration's funding of democracy activities inside Iran the best way to promote internal reform, or is it literally a kiss of death for Iranian democrats? How do we tap into the deep desire for change, particularly among the majority of the Iranian population, which was born after the Islamic revolution?

Why, after more than five years in office, has the administration not lifted sanctions on American NGOs so they can support democratic activities in Iran? I wish we had someone here today from the administration to answer these questions. It's time for a full public hearing on the choices that are before us.

Let me state my recommendation, my recommended policy up front, and it's not fundamentally different than yours, Mr. Chairman.

Last week, the Iranian president sent a letter to President Bush. The letter won't be nominated for the Nobel Prize for Literature -- or for Peace, for that matter -- but the content and style of the letter is not the point, nor is the identity of the sender. I have not been alone in suggesting that we should respond not to the letter received, but with out own ideas on how to move forward.

I would go a step further. We shouldn't respond to the president. President Bush should respond to the man who has the final say in Iran, that is Ayatollah Khamenei. I would make the letter public.

I would include a call for direct talks anywhere, anytime, with everything on the table. We should be willing to talk about all the issues that divide us: a nuclear program; terrorism; Iraq; Afghanistan; the Israeli-Palestinian peace; sanctions; and security.

We should, in my view, lay out for Iran's leaders and especially for its people what the future would look like if Iran renounces its nuclear ambitions and its support for terrorism, and what the future will look like if it does not.

Would Iran respond favorably? I have no idea. I don't know. But in recent months, Iran has indicated a readiness to engage. Indeed, an Iranian outline for a grand bargain was communicated to the Bush administration three years ago.

While the government in Tehran has changed since then, Iran's fundamental position likely has not. If anything, the regime is now more comfortable with reformers purged from the modulus and the presidency.

Four years ago, when I was chairman of this committee, I called publicly for a dialogue between members of Congress and the Iranian Muslims. Senator Hagel joined me in that effort.

That call from two senators sparked an intense debate in Iran which lasted for several weeks in every major publication in the country. The reformers press embraced it; the hardliners condemned it; the supreme leader finally weighed in and rejected any direct discussion or meeting.

If two senators can spark that kind of a debate within a country, imagine what the president could do. I believe that an offer of direct dialogue would place enormous pressure on the Iranian leadership, from their own people, from the international community.

Iranian leaders would face a stark choice: Reject the overture and risk complete isolation and an angry public, or accept an historic path that would require Iran to alter its nuclear ambitions or be exposed for not having any intention of doing that.

Talking to Iran would not reward bad behavior legitimize the regime. Talking is something we have done virtually at every other country on Earth, including the former Soviet Union during the Cold War, which possessed, in fact, an existential threat to us, and the unsavory regimes like ones in North Korea and in Libya.

And demonstrating that we made a serious attempt at diplomacy is also the best way to keep others on board, the point of your statement -- one of the points in your statement -- for tougher actions if Iran fails to respond. It seems to me we have been outsmarted by not very smart people in their ham-handed use of diplomacy, by us refusing to engage in imaginative diplomacy.

There's more than one purpose to a meeting, one of which is to keep the rest of the world on our side. I think it would be a wise course of action for any administration, but for the Bush administration, with its blemished record on Iraq, it is not simply a wise choice, I think it's a requirement.

The threshold of trust is much, much, much, much higher for this administration at this point with regard to Iran. And if the administration wants to convince our allies and others to place serious pressure on Iran over the long haul, it seems to me it makes sense for us to walk the extra diplomatic mile. I hope we can proceed with the wisdom that the moment requires. How the Iran crisis is handled will help determine the international security for a generation, if not longer.

I look forward to the testimony and the insights of our witnesses, and I thank you, Mr. Chairman, for once again staying focused on what is one of the greatest concerns we have right now, in terms of our long-term interest. And I thank the chair for the time.

SEN. LUGAR: Thank you very much, Senator Biden.

And we now turn to our witnesses, and I'll ask you to testify in the order that I introduced you. That would be, first of all, Mr. Einhorn, then Dr. Albright. Your full statements will be made a part of the record. And you may summarize and proceed as you wish.

And we're looking forward to your testimony, and then to our ability to our ability to ask questions of you.

We have been advised that our colloquy may be punctuated by a roll call vote or two, as the case may be. And at that point, the chair will recess the committee for a short period of time so the senators may vote and return, and all of us here the same questions and answers and testimony.

Now, we're delighted to have you, and would you please proceed, Mr. Einhorn?

 

STATEMENT OF

MR. ROBERT EINHORN
Senior Advisor,
Center for Strategic and International Studies

 

MR. EINHORN: Mr. Chairman, Senator Biden, I thank you very much for the opportunity to appear here this morning. In the brief time I have, I would like to make five points.

First, I believe that Iran's claim that it's already mastered centrifuge enrichment technology is premature. It's true that the Iranians have assembled 164 machine centrifuge cascade and produced enrichments of up to 5 percent. And that's significant.

But they cut many corners in their R&D efforts. For example, instead of running the cascades with gaseous uranium for six months or more, which would have been standard practice for gaining the necessary confidence, they ran it for less than two months -- I'm sorry, less than two weeks.

Iran's recent R&D efforts have been driven by political rather than technical considerations. Their highest priority has been to be able to announce a publicly impressive level of enrichment so that they can claim that they've already achieved their goal and that it's too late to stop them.

They want the international community to conclude that it has little choice but to accommodate to the reality of an Iranian enrichment capability. But they're not there yet, at least not with any degree of confidence; they'll now have to go back and do the thorough developmental and testing work they would normally have done earlier.

It will probably take several months to a year before Iran will have mastered the technology and be able to replicate it and scale it up with confidence.

Second point: While Iran has indeed reached some key milestones recently, its basic time line for achieving a nuclear weapons capability has not significantly changed.

I think David Albright has done the best analysis of this, and I agree with his conclusion that, whether Iran enriches uranium in a small, clandestine enrichment plan or breaks out of the NPT and uses the first module of its industrial-scale facility at Natanz, the earliest it could have enough highly enriched uranium for a bomb would be about three years from now, or 2009.

I would emphasize, as David does, that this is a worst-case assessment. Unless Iran is both very lucky and very good, it will probably take significantly longer.

For comparison, Director of National Intelligence John Negroponte told the Senate Intelligence Committee in February that Iran will likely have the capability to produce a nuclear weapon within the next decade. And according to a news report, a national intelligence estimate last year judged that Iran could have a nuclear weapon in five to 10 years. I think that was the report you were referring to, Senator Biden.

SEN. BIDEN: It was.

MR. EINHORN: Of course, large margins of uncertainty surround such estimates. The biggest wildcard is whether and to what extent Iran has a clandestine nuclear program parallel to its own overt program. If it has successfully hidden both a uranium conversion plant and an enrichment facility, then clearly all bets are off. Although I believe Iran is pursuing some activities covertly, I doubt that they include both conversion and enrichment.

Third point: The presence of the International Atomic Energy Agency on the ground in Iran is crucial in helping us keep track of Iran's progress toward a fissile material production capability. But without stronger verification authority, the IAEA will not be able to determine whether Iran is pursuing a covert nuclear weapons program.

The IAEA can measure accurately how much Iranian feedstock is produced at Isfahan and how much low-enriched uranium is produced at Natanz. It can also tell us that no bomb-grade, highly enriched uranium is being produced at Natanz.

But while the IAEA is good at monitoring declared nuclear facilities, its ability to detect undeclared facilities and activities is limited, especially after Iran's decision no longer to act as if bound by the IAEA's additional protocol.

The IAEA admitted as much in its April 28th report, which said that, given Iran's failure to cooperate and be transparent, it is, quote, "unable to make progress in its efforts to provide assurances about the absence of undeclared nuclear material and activities in Iran," end of quote.

The U.N. Security Council should act soon to give the IAEA stronger verification authorities, including monitoring and inspection rights that go well beyond those contained in the additional protocol.

Fourth point: Unless there is a major change in Iran's current perception of the benefits and risks of pursuing its own enrichment program, Iranian leaders will stay on course. The U.S. and the other major powers should act boldly and quickly to alter Iran's calculus.

With military strikes unlikely and Russia and China resolutely opposing sanctions, Tehran now sees little cost in proceeding with enrichment. And with the U.S. seemingly intent on regime change, whatever happens on the nuclear issue, it sees little benefit in negotiating away its enrichment program with the Europeans.

If the international community is to have any chance at persuading Iran to give up its enrichment capability -- and that's an increasingly big "if" -- it must confront Iran with stronger sticks and more attractive carrots.

Russia and China must join the U.S. and Europeans in posing a credible threat of increasingly severe penalties. At the same time, the major powers must offer significant incentives, going beyond what the Europeans proposed last July.

A critical incentive for Iran would be the prospect of a less threatening, more normal relationship with the United States, and specifically, a recognition in Washington that regime change in Tehran should be the prerogative of the Iranian people and not the policy of the United States.

Fifth and final point: Within a multilateral framework that also includes Germany and the other P5 countries, the U.S. should be prepared to have bilateral, face-to-face contacts with Iran. The agenda for U.S.-Iranian contacts should not be confined to the nuclear issue.

It should cover the full range of issues that divide the two countries, including U.S. concerns about Iran's support for Middle East terrorist groups, its alleged harboring of Al Qaida operatives, its role in Iraq, its policies toward Israel, and its treatment of its own people. And, of course, the Iranians undoubtedly will have their own list of issues.

The purpose of the talks would be to explore whether U.S. concerns can be met and whether the interests of the two countries can be reconciled. Only by addressing the broad range of issues can prospects for normalization be assessed, and only the prospect of normalized, bilateral relations can provide the context in which Iran is likely to consider suspending its enrichment program and giving up its aspiration for nuclear weapons.

Thank you, Mr. Chairman.

SEN. LUGAR: Thank you very much, Dr. Einhorn. We will at this point recess the committee. We're in the midst of a roll call vote. Senator Biden and I will vote and return, and look forward to Dr. Albright's testimony. For the moment, we are recessed.

(RECESS)

SEN. LUGAR: The committee is called to order again, and we're privileged now to hear from Dr. David Albright.

 

STATEMENT OF

DR. DAVID ALBRIGHT
President and Founder,
Institute for Science and International Security

 

DR. ALBRIGHT: Now that Iran has resumed enrichment activities in Natanz, one of the key questions facing us is: How soon could Iran have nuclear weapons?

A critical factor in developing reliable, credible information needed to answer that question has been intensive or intrusive IAEA inspections and monitoring of Iran's enrichment-related activities. Such inspections are now sharply reduced in scope and intensity. Iran has halted its adherence to the additional protocol, and it has ended the monitored suspension of its enrichment activities.

IAEA inspections, as Bob has pointed out, can now provide only a partial picture of Iran's progress in operating gas centrifuge cascades, which are just a collection of centrifuges connected by pipes. And Iran's mastering of these centrifuge cascades remains its last significant technical hurdle before it can actually build gas centrifuge plants.

With the clock now ticking, our ability to learn critical information about Iran's gas centrifuge activities has greatly diminishing, making revisions of estimates -- and I'd emphasize revisions of estimates -- of time to the bomb more uncertain. Such a condition carries special risks, as diplomacy picks up over the next several months.

The risk of Iran can be understated, leading to a false sense of security. On the other hand, the risk of hyping up or exaggerating Iran's progress toward the bomb can propel us toward unnecessary confrontation and military action against Iran. As a result, Congress needs to conduct thorough oversight in review of intelligence community assessments and become familiar with these assessment themselves.

And therefore I applaud this committee's actions in this subject and with this -- to try to get a handle and expertise over what Iran is up to. And it reminds me of this committee's actions in September of 2002, when they tried to get a handle on the aluminum tubes issue and to bring in dissenters from the intelligence community and to try to get to the bottom of that story, although I think we've learned a lot from that time and I think that that kind of expertise in this committee is extremely valuable in the coming debate.

I think Bob has outlined the current situation with regard to Iran's nuclear program, and I'll just skip over that quickly.

As you know, Iran has enriched uranium in its 164 machine cascade. It just operated the cascade for a relatively short period of time, and it's going to need to operate it much longer.

It's now building a second and third cascade. The pilot plant can hold up to six of these cascades, and they can work individually or together. And the working of these machines in parallel -- or these cascades in parallel is going to be a critical goal for Iran to achieve.

I think the gas centrifuges, based on Iranian statements, don't seem to be working as well as they could, and I would wholly endorse what Bob said, that Iran has a lot to learn and the demonstration phase for these cascades is likely to last for many more months.

With regard to the fuel-enrichment plant, the underground site at Natanz, from talking to officials in Vienna, not much has been happening. I mean, Iran earlier this year moved fairly quickly to bring some equipment in there, but that it does not appear that Iran is aggressively moving to out-ship the fuel-enrichment plant.

And some of the things it has to do, from what I understand from officials in Vienna, is lay electrical cable and finish installing auxiliary equipment that would go along with the centrifuges. And as you all know, Iran has announced that it plans to start installing the centrifuges in the underground halls during the fourth quarter of this year.

To understand the time line to the bomb, I developed several worst-case scenarios, two of which I've put in my prepared remarks. And Bob summarized them better than I could. The first is the clandestine plant that Iran would build. And then the other is the breakout using the fuel-enrichment plant in the first module of 3,000 centrifuges.

And, in my estimate, I felt that they could not do that any sooner -- or let's say do all that and then produce enough material for a bomb before 2009. An the information I've seen since I originally did these assessments has not shifted by time line.

And, as Bob said, these are worst-case assessments and should in no way be viewed as projections of when Iran could have the bomb, but more in answer to the question of how much time do we have, or what's the least amount of time that we have?

And with three years, I think there is plenty of time for diplomatic action, but I would emphasize that it's not too much time. And I would say that complacency should not set in.

It's also very important that we get more information through the inspection process. And I know everyone is waiting for the inspectors to report, and many people in many countries are contacting them to learn about what their recent inspection missions have detected, because I think, again in this case, as it was true in Iraq, the best information will come from the inspectors and that our own intelligence means will continue to provide only limited information about what's actually going on.

One of the aspects of the Iranian program that has emerged during the inspection process is how dependent Iran was on outside assistance. And I would say that it continues to be dependent on outside assistance. It's not for big-ticket items, necessarily, major dual-use equipment, but it still is out there shopping for enrichment- related items.

And it's very important that countries maintain their guard. And I think the Western suppliers do a very good job at trying to stop Iran from getting items from European companies, U.S. companies. And that work needs to continue.

But I think Iran is now targeting more countries. I mean, we hear reports that Iran is targeting or planning to target India as a source of certain types of equipment that it just cannot make itself and it needs to build its centrifuge plants.

I would emphasize that one of the uncertainties is: Does Iran have everything it needs to build this 3,000-centrifuge module? I mean, there is still debate about that. The IAEA does not know, from what I understand. They don't know what Iran has in hand and what it still needs. Certainly, if Iran wants to go beyond this module, it's going to need more items from overseas. And so I think it's very important that the United States work with a broader set of nations to try to stop Iran's illicit procurement.

And the final point I'd like to make is that it's very important for the United States to stick to its goal. I personally believe, and have for many years, that the goal in Iran has to be no enrichment or enrichment-related activities and no reprocessing.

I think that Iran's nuclear power program can proceed, and I would actively support Iran acquiring power reactors. But I do think a little bit of enrichment is a bad thing and that what we should maintain as our goal is no enrichment activities.

And I think we need that for broader security goals and we also need it for verification. Gas centrifuge plants are very hard to detect. I've worked on many studies, some with the IAEA, trying to detect clandestine enrichment plants, particularly gas centrifuge plants. We've had years of experience studying secret gas centrifuge plants in many countries, and they remain one of the most challenging aspects of verification.

And I think that it's much easier to assure or provide assurance of no enrichment activity if there's no enrichment plant in operation in the country, there's no R&D. And I think it's appealing now to try to reduce our goal or compromise on our goal, but I think we have to maintain a very strict position.

And in that sense, I do applaud the Bush administration for being willing to maintain that central goal.

Thank you, Mr. Chairman.

SEN. LUGAR: Thank you very much, Dr. Albright.

Let me mention that, just sort of in terms of management of the hearing, we will have a round of questions. I might suggest eight minutes, although the chair will be liberal, in case there is some run-over in terms of questions and answers there, because we have good representation of senators present and we have another distinguished panel of four witnesses still to come.

And so we'll have one round of questions, and I'm sure we'll not exhaust all of the things we would like to ask you. And we hope that you might be available for further questions and deliberation by mail, if not in person.

Let me start the questioning by asking both of you: Yesterday, E.U. officials stated that Iran should be offered, quote, "the best and most sophisticated," end of quote, nuclear technology in exchange for coming back into compliance with its non-proliferation obligations and commitments.

Now, let me ask you for a discussion by both of you. What do you understand this technology to be? And what are the conditions under which it could be given to Iran? How can that technology be reliably safeguarded in a country such as Iran? And something to frame the issue more, what technology should not be given to Iran, as far as its non-compliance with current obligations?

And, finally, if enrichment of fresh fuel and reprocessing of spent fuel for Iran were carried out in Russia, as a part of this plan, would that prevent Iran from building a nuclear weapon? Will both of you sort of discuss this sort of current development and the E.U. proposal?

Mr. Einhorn?

MR. EINHORN: Thank you, Mr. Chairman.

I think what the Europeans have in mind are a couple of things. One is to provide a light-water research reactor to Iran so that it can do, you know, legitimate research, it could produce medical, agricultural, industrial isotopes, these kinds of peaceful uses.

Right now, Iran is constructing a 40-megawatt heavy-water moderated research reactor at a town called Arak. Now, that reactor is exactly the same kind of reactor that several countries have used in the past for nuclear weapons programs. It's a very efficient producer of weapons-grade plutonium. I think that's why Iran is constructing that reactor; it wants to be able to reprocess the spent fuel and have plutonium for bombs.

So the Iranians are trying to wean them away from that kind of reactor and give them a more proliferation-resistant light-water research reactor, which has to be fueled with enriched fuel, rather than natural uranium fuel. So that's better, and I think that it's a very good idea, to provide Iran that and to show the Iranian public that the West is not seeking to deny them the benefits of nuclear energy.

Also, the Europeans may be talking about providing fuel assurances. The Iranians say they've got to make their own enriched fuel because they've been so disappointed in the past about being the victim of embargoes from the U.S. and others. They've been a member of the Eurodif Enrichment Consortium but have been cut out of that.

So what they're saying is they have to have their own enrichment capability. The Europeans are saying, "We'll give you guarantees that, if you are cut off, your fuel supply is cut off for reasons having nothing to do with your performance on non-proliferation, we'll assure you that you can get alternative sources of supply." It's a way of encouraging them to give up this indigenous capability, and I think that makes good sense.

On your third question about the Russian joint venture, I think that's a good idea. The Bush administration endorses having the joint venture, but on Russian territory, without Iran having access to the enrichment technology that will be used in Russia. I think that's fine. But, of course, it's no guarantee that the Iranians are not going to try clandestinely to have their own enrichment facility, even if they formally sign up to foregoing that capability indigenously.

And that's why it's very, very important to have the IAEA given strengthened verification authorities by the U.N. Security Council.

SEN. LUGAR: Dr. Albright, you have a comment?

DR. ALBRIGHT: He said it very well. Why don't I just leave it at that?

SEN. LUGAR: All right, fine. Let me try out for size then -- and we've talked about Russia, but let me ask: How are the Russians and/or the Chinese likely to get interested in the European proposals or into our desires in this situation?

We have talked about diplomatic track, and clearly it includes those two countries, members of the Security Council. Almost anything having to do with resolutions, large or small, involves them. We've already touched maybe the plans the Europeans have that involve the Russians, with regard to the spent fuel.

Why would they become interested in this, given their protestations that they already have energy deals with Iran, have very sizable strategic interest in dealing with Iran?

DR. ALBRIGHT: Well, I think I could -- let me just respond to one of the sets of statements by China and Russia, which is they mistrust what the United States is up to, that they often see this as Iraq Number Two, and so they pull back. Particularly, Russian officials have expressed that.

And so I think it would help, as Senator Biden pointed out, if the U.S. would change its policies and be willing to negotiate with the Iranians. I would tend to support efforts that are somewhat like the six-party talks, built from the European-Iranian discussions, and then try to -- then, if the U.S. is involved, try to draw in Russia and China.

I also think it would be helpful if the administration would, certainly not remove the military option from the table, but stop banging that drum, because I think it's hurting this effort. I mean, I don't think they intended to do that. They think they're...

(APPLAUSE)

I think they think that they're sending a signal to Iran and Iran will somehow listen. In our monitoring of the Iranians in the press, it's having the opposite effect. And so I think that it would be useful if the administration would, as Britain has done, just back away from that for now.

MR. EINHORN: Can I just add to that, Mr. Chairman? I've been, in the last three weeks, both in Moscow and in Beijing and spoken to senior officials involved in the Iran issue. Iraq looms very large in their thinking.

They don't want to -- I use the words of one of my interlocutors -- they don't want to get on the first rung of the escalatory ladder. They think that adopting a Chapter 7 resolution will get the world on that first rung, and then we will -- if I can shift metaphors -- slide down the slippery slope to a military confrontation, and that's their principal reason not wanting to get tougher in the Security Council.

I've also spoken to German, British and French officials, and all of them, as well as the Russians and Chinese, say it would be very, very important for the U.S. administration to be prepared to engage directly with Iran.

Now the Russians and Chinese are doubtful that the U.S. is prepared to take yes for an answer on the nuclear issue. I think they would be much more willing to pose the prospect of penalties to Iran, if the Bush administration were prepared to say, you know, "We're prepared to negotiate. And if Iran is prepared to change its behavior on the nuclear issue, but in other ways, we are prepared to move eventually toward normalization." I think the Russians and Chinese would see that as a very different kind of situation and I would, I think, increase the likelihood that they would buy into a package of both sticks and carrots.

SEN. LUGAR: I thank you.

Senator Biden?

SEN. BIDEN: I've not had the same talks you had, Bob, but I've talks with European counterparts. And I'm going to say something maybe -- I agree with both your judgments that, if we stopped rattling the saber -- I mean, it's kind of interesting that, six years ago, the other metaphor was used by the president of Teddy Roosevelt, walking softly and carrying a big stick. I think he used that actual metaphor; I'm not positive of that, but that's my recollection.

And now we sort of rattle the cage, and actions have consequences. The very thing that a number of us sitting on this dais warned that would flow from Iraq, in terms of impacting our ability to get the rest of the world to listen to us and join us on other things, I think we're seeing it now, because I can't imagine why Russia or China would not think of their interest to stop Iran from having a nuclear weapon, particularly Russia.

But one of the things that -- and I'm not asking you to respond -- one of the things that I hear back -- and I had not intended on saying this -- is that, as long as Mr. Rumsfeld and Mr. Cheney are perceived to be the drivers of policy in almost -- I'm not sure whatever the administration says, absent what they do will make a lot of difference.

So, although I'm not -- as I suggested, we should be talking. We should flat out say that regime change can be taken off the table if behavior changes. I must tell you, I'm not sure, absent actually engaging in such discussions, it's going to matter a whole lot, because I find the rest of the world extremely skittish.

I note that, the end of March, the Brits floated a proposal not unlike what you suggested, and that Russia and the United States, the E.U.-3 get involved in direct talks, and the White House wasn't very happy about that. And maybe it's coincidental, but I noticed the Brits backed off that proposal. So I think we got a long way to go, but it doesn't mean we shouldn't be pushing it.

I'd like to speak to this issue -- ask you to speak to the issue of this notion of a full range of issues. When I say to people -- and it's not unique to me. I know the chairman has been saying it for some time. I may be mistaken -- Senator Dodd has said it -- I know Senator Hagel has -- that we should be directly engaging the Iranians and that it not just be limited to the issue relating to nuclear questions. As a matter of fact, I've suggested that, with regard to Iraq, we engage them, just on Iraq engage them.

I get the following response from skeptics, and there's reason to be skeptical, and that is that Iraq has no interest whatsoever -- there's no common ground that we could arrive at with regard to Iraq, no common ground we could arrive at with regard to the nuclear issue, no common ground we could arrive at on any of the range of issues that would come up in a discussion.

And my response is -- and I'd like you to respond to it -- my response is that it seems to me it's clearly in the -- unless you assume the leadership of Iran to be totally irrational, not miscalculating, but irrational, it's not in their interest, for example, to have an all-out civil war in Iraq. It threatens their security, their stability, that is the clerics. It's not in their interest to see the world united in attempting to isolate them and sanction them in various ways.

And so they would be inclined to, if there were enough carrots and sticks to make it credible, talk about a lot of these things. Respond to that for me, the criticism that, no, there is no common interest here. Why would the Iranians be willing to talk to us about anything constructively?

MR. EINHORN: I think it was clear a few years ago, after the Afghanistan campaign, when there were meetings in Bonn about the future of Afghanistan, that it was possible for American and Iranian diplomats to speak together about the future of Afghanistan in a very constructive way. I know the Americans who participated in those discussions, and they found the Iranians very forthcoming, very practical, because we did have common interests in stabilizing the situation in Afghanistan.

I think, clearly, our interests are not identical in Iraq, but you've cited a number of areas where they do converge. I can't imagine that Iran wants to see chaos in...

(CROSSTALK)

SEN. BIDEN: ... in Iran wants to see 17 million Shia, who are Arabs, honing the art of war, when 65 of their 71 million people don't like them and the border is relatively porous. I don't understand, but that's me.

MR. EINHORN: But we have to explore. We don't know how much commonality of interest there might be on Afghanistan, on Iraq, or any other subject. That's why we have to sit down and explore.

The administration has authorized Ambassador Khalilzad to sit down and talk about Iraq and nothing else. My hope is that, if those...

SEN. BIDEN: But even that, by the way, took about a year and a half for him to get that kind of authority. And even there, I'm not sure what the breadth of that...

MR. EINHORN: Well, it would be good if broader authorization were provided. But if not, if it turns out that these Iraq-specific talks look productive, then eventually there will be authorization to broaden then, but I think that's the best hope.

I think we do have to address the full range of issues that divide us. As much as I think the nuclear issue deserves high priority, it's hard to imagine domestically, for us to cut a deal on the nuclear issue, when Ahmadinejad is still making these outrageous comments about Israel, if we believe that Al Qaida operatives are being harbored in Iran, if we believe Iran is still providing arms to Middle East terrorist groups.

So I think we have to explore the possibility of reaching a broad modus vivendi with Iran. It may not be possible, but it will take a long time to address all of these issues. And I would hope that, as we engage in this broad dialogue, we can at least put the nuclear issue on hold by gaining Iran's agreement to fully suspend its enrichment program.

SEN. BIDEN: Doctor, my time is almost up, but let me ask you, you raised the point that had been raised by others that there appears to be a continued requirement on the part of the Iranians, in order to move forward in a robust way with their gas centrifuge system. They're searching the world.

What could or should we be doing, what other things can be done to make it harder for Iran to be able to access what material or technology that they may need to move forward more rapidly?

DR. ALBRIGHT: Yes, let me just mention, too, one is a simple one. I mean, making Iran the center of international attention. I mean, it alerts companies, governments; they understand that companies should find out what the end user is planning to do and see through all these trading companies that go out and seek items for Iran.

If I can highlight the U.S.-India deal, I think one of the problems I had with that deal is, is that India, from what we understand, is going to be a target for Iranian procurement. We don't know exactly what form; we sort of know the items they're looking for.

We see India having inadequate export controls. I mean, their heart's in the right place, but it's inadequate. And I don't think this administration is putting enough pressure on India to come up with adequate controls, which we all know what they are. Indians may not. I don't know if they really understand, and they need to interact and cooperate on this issue with us and others.

But I think that India remains a ripe place for Iran to go and try to seek items, either directly from Indian companies, or through contacting, let's say, European companies who are setting up shop there now, and to try to then move the material to Iran under false pretense.

SEN. BIDEN: Thank you very much.

Mr. Chairman, for the record -- because I don't have time now -- I think it would be useful for the public at large and our colleagues if you would each respond to a question for the record that makes a distinction between -- which confuses people as I speak to them -- uranium enrichment and plutonium.

Why, when one is more available, is the seeking of the other more consequential? In other words, why the dual track that they're on? And if you'd, for the record...

DR. ALBRIGHT: Is this for Iran or just in general?

SEN. BIDEN: Yes, I'm sorry, Iran specifically.

DR. ALBRIGHT: Well, I think that Iran is seeking both pathways to the bomb. It has agreed to not pursue reprocessing. I mean, that's been accomplished. But as Bob pointed out, it's building this heavy- water reactor, which will probably make weapons-grade plutonium normally, and it could create a reprocessing plant fairly quickly. And so I think that path needs to remain as part of these deals that Iran would stop the heavy-water reactor.

Another part of these deals put forth by Europeans and the Russians is that spent fuel produced in power reactors would leave Iran, that Iran wouldn't have an endless supply of plutonium and spent fuel. The uranium enrichment route traditionally is much harder for developing countries, no doubt about it. And without the assistance of A.Q. Khan, I don't think we'd be talking very much about Iranian gas centrifuges.

And so that's been the big disappointment of the international community, that these technologies have gotten out and spread. But once you have a gas centrifuge program, from a proliferation or from a proliferance point of view, it's much more valuable than the plutonium pathways, which are in large facilities, easy to spot.

And if you can go the gas centrifuge route, you master that, then you can build these things in what are just light industrial buildings. They don't emit much radiation. You can isolate them from the rest of your nuclear establishment so people aren't moving back and forth and successfully hide them from even some of the best IAEA inspections.

SEN. BIDEN: Thank you very much.

SEN. LUGAR: Senator Dodd?

SEN. DODD: Thank you, Mr. Chairman. And thank you again for hosting and holding this hearing.

And I gather Senator Biden raised the point earlier, but it deserves being underscored again: I'm terribly disappointed that we didn't get administration officials to come and share their thoughts with us on this issue. If I had to prioritize issues involving this nation's national security, obviously Iraq would probably come in number one, because of the proximity and the immediacy of all of that. But a very close second, in my view, would be this issue.

And the fact the administration is unwilling to participate in a discussion about where we ought to be going from here is troubling, to put it mildly. I'm very grateful to both of these witnesses, but my hope is that in other hearings we have that they will be forthcoming and share with us their thoughts, because this is critically important.

I spent a week or so in the Middle East two weeks ago. And unless I brought up the issue of Iraq, it didn't come up. Iran came up everywhere. Everyone wanted to talk about Iran and what we were going to do, what likely would happen.

So I appreciate the witnesses' testimony. It was very helpful, by the way, and I thank you for it.

I'd like to underscore the point again. I think, again, I heard Senator Biden raise it. It may have been raised by the chairman, as well, and that is the notion somehow that the administration and others are marketing that diplomacy is a gift to Iran, rather than recognizing it as a vital national security tool.

And we're allowing this word "diplomacy" and "negotiation" to slip into the category of as a favor to our adversaries our opponents in the world, rather than utilizing it as a tool by which we minimize the very threats we're facing. And you pointed out some serious ones here.

And no less a figure than Henry Kissinger on yesterday's -- I think it was yesterday's piece he wrote for, I think, the Washington Post, as well as Richard Haas and others have argued that we ought to begin more seriously looking at the diplomacy route here, as a way to try and explore that route, without giving up, obviously, as we all say, the option of utilizing force, but with a clear understanding -- and I think, Dr. Albright, you've made it very clear, as well -- we need to be downplaying that at this time, it seems to me, and more aggressively pursuing the diplomatic approach.

And, Mr. Chairman, I had some opening comments here, and I'd just ask consent they be included as part of the record.

SEN. LUGAR: They'll be included in the record in full.

SEN. DODD: And I want to underscore that point. I think it's -- I look back over the years. And had that view of treating diplomacy as a gift been predominant, I shudder to think what the 1950s, '60s, '70s, '80s might have looked like as we worked through a containment philosophy with the former Soviet Union and others.

We had sound diplomats who utilized diplomacy to minimize those threats. And to treat it today as somehow a favor to someone I think is a major step backwards, and I hope we reverse that trend.

Let me explore the issue of the military option with you, though, because I think it needs to be thought out. I want you if you can, both of you, or however you want to do it here, draw the comparisons between the Israeli attack in the 1980s on the reactor in Iraq and what would be involved today, if we were to successfully or an ally or someone else were to try and successfully take out the Iranian nuclear capability.

What is involved? Compare the two actions for us, based on the information you have today, and the likelihood of succeeding with such an option. What period of time would it take? What sort of forces would be necessary?

DR. ALBRIGHT: Well, one is the 1981 attack by Israel was to take out a reactor that they believed would produce plutonium for nuclear weapons and was also, by the way, fueled by highly enriched uranium. And I would say that attack, you know, was successful at taking out the reactor but, unfortunately had the effect of greatly accelerating the Iraqi nuclear weapons program and left them with the highly enriched uranium, which was going to be used by them in their crash program in 1990 and '91 to build their first nuclear weapon.

And so I think the one lesson of the '81 strike is, is that you're unlikely to take out all of the program and you may reinforce the country's view that their only solution to their security problem is to build nuclear weapons.

I think Iran has certainly learned from that example. And from the very beginning, it's been building things underground. It's been dispersing sites. I think even during the suspension, it's been focused on trying to build up stockpiles of certain items, like uranium hexafluoride, so that if, let's say, the uranium conversion facility at Isfahan was bombed, it would have enough for a bomb program.

You know, the civilian program would be stopped dead by a bombing. But, because of these actions of Iran, their bomb program would have enough of this vital uranium hexafluoride.

So I think what military planners are confronted with is a dispersed program, an adversary that is thinking actively of how to maintain its capabilities after a military campaign, and I think that what we would be faced with is essentially a massive bombing campaign that would really be aimed at other things in Iran. They probably couldn't have much confidence that their nuclear weapons program was set back.

Again, as I said before, their civil nuclear program would be devastated and probably would never recover. But their nuclear weapons program may not be affected very much at all, and particularly if the bombing isn't even contemplated for a while.

I mean, in a certain sense, the best time to have bombed Iran was probably last January or February. The IAEA knew where everything was. That information certainly somehow becomes known. And now, as this crisis builds, we can expect that we will know less and less about their key assets that would be oriented toward a nuclear weapons program.

SEN. DODD: What time would be necessarily involved? And does it involve more than a day, a single strike, multiple strikes over a period of time?

DR. ALBRIGHT: Oh, I think it would be many strikes.

(CROSSTALK)

SEN. DODD: A sustained military operation?

DR. ALBRIGHT: Yes, I think it would be -- because some of these Natanz -- at the time of a military strike that's being discussed, Natanz may very well have centrifuges underground and so you'd want to knock out that site. I mean, you know, from our understanding, the roof is about eight meters underground, and so it's vulnerable to conventional strikes, but I don't think you can take it out with one bomb.

I think you're going to be doing multiple strikes against those kind of facilities. There's tunnels everywhere in Iran. I mean, it's a legacy of the Iran-Iraq War.

PROTESTER: I want to testify we will not -- that the American people will not stand...

(CROSSTALK)

SEN. LUGAR: The committee will be in order. The committee will be in order.

(APPLAUSE)

The committee will be in order.

DR. ALBRIGHT: But I think the bottom line is: You're looking at a major military campaign against Iran that would go over, I think, a significant period of time. And it would just start a war. I mean, it's not going to be 1981 again, where Israel bombs Iraq and then there's a diplomatic crisis.

SEN. DODD: (inaudible) I'd like you to also comment. How far along is this heavy-water reactor in construction? So the extent that you might be able to convince the Iranians with the European proposal to back up on that proposal to build a way smaller facility, how far down, just as add-on to the question?

MR. EINHORN: Yes. On that, Senator Dodd, they're at the very early stage of constructing this 40-megawatt heavy-water reactor, so that years and years to go before. And I think they've been more successful in their enrichment program. That's why I think they're probably prepared to bargain away their plutonium program.

SEN. DODD: OK.

MR. EINHORN: But just on the other question, I think the main difference between Osirak in 1981 and Iran today is the ease and speed of regenerating the capability. There are probably lots of facilities in Iran we cannot locate; they're just hidden.

But my guess is we know where the critical facilities are, and I think it's: Natanz, their enrichment plant, their two plants, their pilot plant and their industrial-scale facility that's not yet really under construction; their conversion facility in Isfahan; and this reactor in Arak.

But we know where they area. I think we could destroy those facilities. The problem is that it might not take a long time to regenerate facilities capable of fissile material production.

It would take a long time to regenerate facilities able to generate nuclear power, you know, a large-scale enrichment plant. But a small, clandestine enrichment facility, with 1,500 or 3,000 centrifuge machines, I think that could be done relatively quickly, whereas in the Israeli raid against Osirak in '81, you had to rebuild the whole reactor.

That's a major project. It's out there in the open; you can see it. In the case of Iran, you're not going to see what they're able to do, in terms of, you know, building clandestine and relatively small facilities.

SEN. DODD: Thank you.

Thank you, Mr. Chairman.

SEN. LUGAR: Thank you very much, Senator Dodd.

Senator Martinez?

SEN. MARTINEZ: Mr. Chairman, thank you very much for holding this important and timely hearing on this very important issue. I wanted to just ask the panel, and whichever one of you cares to answer it would be perfectly OK.

You know, on the issue of Iran's internal situation and their own perception of this nuclear program, as to -- at times, I've had the idea that perhaps this has been a very popular thing within the country and that, in fact, politically it has helped the Iranian government to solidify support within the country.

And what is your insight into that? And how do you think whatever steps we take would not help to enhance further strengthening of the hand of the current government?

MR. EINHORN: Senator Martinez, I suggest -- I'll give you an answer, but the second panel is really going to be...

SEN. MARTINEZ: OK.

MR. EINHORN: ... much more informative on this question. My take on it is that, so far, there's been unanimity in the Iranian public about this enrichment program, about the nuclear program. But there's been unanimity because no one's had to pay a price.

The Iranians have felt they could have their cake and eat it, too. They can have an enrichment capability, advanced nuclear power, and good relations with the West. But if they're forced to make a choice and they can't have their cake and eat it, too, I think there might be divisions within Iranian society.

We've already seen some fissures opening up. A number of senior Iranians have begun raising questions about the wisdom of going down this enrichment track in defiance of the international community, because they think there may be costs that could really hurt Iran.

I think it's important that we demonstrate to them that there will be costs if they continue down this track, and I think that will open up and expand fissures within Iran and, perhaps over time, lead to a change of policy.

SEN. MARTINEZ: But that really would require a fairly united front from the international community?

MR. EINHORN: Absolutely.

SEN. MARTINEZ: And my perception is that we're not quite there at this point.

MR. EINHORN: Absolutely. And as long as they get the impression that the Russians and the Chinese will block any severe penalties, then they're going to continue on their presence course.

SEN. MARTINEZ: A lot of focus has been placed recently on the idea that the United States should play a more preeminent role in negotiating with Iran. It seems to me that we should be, perhaps, focusing on our negotiations with the Soviet -- I'm sorry, with Russia and with the Chinese governments in hopes of instilling their commitment for strong international action. How do you suggest we might approach that?

MR. EINHORN: Well, I think the administration has put a lot of time and effort into persuading Russia and China to join with the U.S. and the Europeans and threatening sanctions in the Security Council, so far to no avail. We'll see now -- in Friday, in London there's going to be a meeting of the P5 plus Germany to try to come up with a package of both incentives and disincentives, and perhaps that will be more successful.

The Russians and Chinese have urged the Europeans to put more carrots on the table. In exchange, they may be prepared to support some sticks; we'll see.

SEN. MARTINEZ: One other area that I know my colleague from Florida, Senator Nelson, and I, and I know Senator Dodd -- and I don't mean to exclude others -- but the area of Latin America and our neighbors close to the south of Florida. Increasingly, there seems to be a strategic alliance developing between the Venezuelan government and the Cuban government with Iran, and it particularly seems like they're working in lockstep internationally or -- as, you know, Iran makes aggressive statements, they seem to have fairly supportive echoes from both Caracas and Havana.

Have you focused on this, a potential alliance in this area of support for the Iranian so close to our own backyard?

MR. EINHORN: It something that bears close watching. The Iranians and Ahmadinejad, President Ahmadinejad personally, have talked about sharing their nuclear technology. You know, this is very worrisome. I don't know if he was just trying to twist our tail on that or what. But I think we need to watch that very carefully and make sure Iran is not exporting any of its technology.

I think Hugo Chavez has talked about nuclear technology and perhaps cooperating with Iran. That bears close watching. Again, don't know if it's just thinking out loud or a bluff, but I think we have to be very careful about that.

SEN. MARTINEZ: Lastly, there was one other -- Mr. Chairman, I guess I'm OK on time -- there was one other area of recently I've heard the thought advanced that perhaps one of the great ways in which we can check Iranians' ambitions is by having pluralistic democracies at two of their borders, in Afghanistan and Iraq, particularly countries that are Shia majorities. Do you share that view, that perhaps this is a positive development for the region and that it could influence Iranians, particularly within Iran, in terms of their own attitudes towards their government?

MR. EINHORN: I think the demonstration effect of functioning democracies in Afghanistan and Iraq would be very powerful, as far as Iran is concerned. I think we have a long way to go, though, before we have truly functioning democracies. But I think it's a goal that we ought to be pursuing.

DR. ALBRIGHT: Yes, I would just add that I don't think that would stop Iran from seeking uranium enrichment.

SEN. MARTINEZ: You mean, the fact that they had a democratic neighbor. But, however, do you think it would influence people within the country, in terms of how they view their own government?

DR. ALBRIGHT: It could possibly affect their security calculation, but I don't see -- you know, for Iran, the Iraq issue was settled in 2003. I think that the motivations for them to pursue enrichment, which are both national pride, you know, a desire to have enriched uranium for power reactors, and I believe also nuclear weapons, will remain in tact.

And so I think the -- and, in fact, it could be, too, that if Iran transforms and becomes more democratic, in many conditions I can envision, they would still seek uranium enrichment. They may be easier to negotiate with, because they may drop some of these other attributes, like the support of terrorism.

SEN. MARTINEZ: You're clear that their ambitions are not purely civilian?

DR. ALBRIGHT: Oh, I don't believe they're civilian. And we don't -- we're all struggling with, you know, what's the smoking gun? And we can't find one. At least, I don't believe we can.

But everything I've seen, I believe they are seeking nuclear weapons. I don't believe they've necessarily made a decision and allocated the budget to build a nuclear arsenal, but I think they've made a decision to put in place an ability to produce nuclear weapons in the future and will only make a concrete decision when they're further along.

SEN. MARTINEZ: Thank you, Mr. Chairman.

SEN. LUGAR: Thank you very much, Senator Martinez.

Senator Nelson?

SEN. NELSON: So, as we consider the India nuclear deal, you're suggesting to us that we have as a condition of it tightened export controls and guarantees on cooperation with Iran?

DR. ALBRIGHT: Well, what I would suggest is, is that the condition be that India has taken steps, measurable steps, to improve its export control system. And they're well-known, I mean, number of staff devoted to this, number of companies in India formed. But I wouldn't put a condition that relates to Iran specifically, because it may be other countries that will target India, too, but I do think that a critical condition is for India to improve its export control system, particularly its implementation of that system.

MR. EINHORN: The Indians like to say that their exports controls are impeccable. Well, I agree with David: I think they're peccable and they need further work. Whether you condition our nuclear cooperation with strengthening their export control system, I'm not sure what the committee would want to do.

But I think we need to work with the Indians and ensure that they do strengthen their system, especially if David is right and the Iranians are going to go shopping in India's market for enrichment- related technology and equipment.

DR. ALBRIGHT: I would add another condition. I mean, India goes out and buys items from Western countries for its own gas centrifuge program and its other un-safeguarded nuclear programs. I think we should also ask India to stop that.

We see networks that they create where -- they're not like Pakistan. I mean, they're not as hidden; they're not as involved in active deception on a national level of the supplies. But we see them going out, and buying things, and using very circuitous routes. They use trading companies to get items, dual-use items.

And I think another condition should be that India would stop such what we call illicit procurement, because it's not violating Indian laws, but if they go to Germany and do this, it can violate German laws.

SEN. NELSON: Let's talk about Hezbollah. What dollar value would you put on Iranian support for Hezbollah?

MR. EINHORN: I'd encourage you to wait for the second panel. I think the fellows just behind me have information and it's off the top of their heads. And if they don't, they have a few minutes to figure out a good answer.

(LAUGHTER)

SEN. NELSON: OK, I'll wait until the second panel.

SEN. LUGAR: Thank you very much, Senator Nelson.

Senator Obama?

SEN. OBAMA: Thank you, Mr. Chairman. Thanks for the panel. This is very informative, and I appreciate you taking the time.

I wanted to just follow up on Senator Dodd's question, with respect to the military option, because I think that there has been a lot of saber rattling out there, and it strikes me that, any time we start talking about military options, we should weigh cost and benefits, something that sometimes we haven't done, and we pay a price.

And so I just wanted to be clear. My understanding, based on the testimony, was that it was possible, through a sustained and fairly costly series of air strikes, for example, which would not only involve major military operations, but also presumably significant civilian casualties, to slow down a program but not eliminate a program. Is that an accurate assessment on both your parts?

DR. ALBRIGHT: Yes.

SEN. OBAMA: If that's the case, and if we agree that it's very important for us to pursue diplomatic approaches in a vigorous way, can you tell me where -- what's the space that we would potentially provide Iran to land in negotiations?

I mean, the problem right now is you've got national pride that has been built up. I mean, there's been a lot of stoking of the fires within Iran. It strikes me in some ways that they've backed themselves into a corner by placing so much capital into the nuclear program.

So if, in fact, we were to try to provide some sort of carrots as well as sticks, what would that look like? What would be a position that the Iranians took that would accommodate their political needs and meet our national security objectives, if there is any?

I mean, it may they're irreconcilable, in which case diplomacy will flounder. But presumably we'd want to start thinking about what an end game might be.

DR. ALBRIGHT: Let me just say one thing. I think you want to have it end up somewhat how Taiwan and South Korea have ended, where they gave up reprocessing and uranium enrichment. They were caught. The U.S. played major roles in catching them and turning them around, but they both have robust civil nuclear energy programs.

And, in fact, I mean, even if you look in our country, there is certainly more money spent on even medical isotopes, radio isotopes and industrial isotopes in their applications than on electrical generation by nuclear power. And there's money to be made in enrichment, but they tend to be -- it's not that great of money.

And so I think, in terms of the benefits and sort of where the action is, it's on nuclear power and isotopes. And I think one of the brilliant moves of the Iranian regime has been to kind of turn this all on its head and make it look like some incredibly uneconomic, wasteful activity like gas centrifuge enrichment in Iran for civil purposes is the major goal of civil nuclear energy, when it's not at all.

And I think, if Iran was invested in civil nuclear energy and isotope use, the enrichment program would just evaporate for economic reasons. And so I think where we want Iran to land is with the most of the rest of the world that's invested in civil nuclear energy.

SEN. OBAMA: Can I just follow up on that? And I'd like your response, Mr. Einhorn.

Is it your understanding that our administration's posture provides room for that scenario? Or in public statements, have we seemed to go further and expect Iran to completely dismantle all its activities?

DR. ALBRIGHT: Yes, it's gotten better. They've shifted over the three years of this sort of active problem with Iran or crisis with Iran. Many of them started out saying that, you know, Bushehr was not acceptable. Some even said Bushehr was more of a threat than the enrichment program.

And so I think they've shifted away from that, but I don't think they've come out and publicly stated that it's fine for Iran to have, you know, Bushehr Two, Three, Four and Five. And, in fact, this meeting on Friday could be interesting to see how the United States reacts to this potential European offer to provide a light-water reactor if it marks another shift in the U.S. position toward accepting a robust nuclear energy program in Iran.

MR. EINHORN: On that question, I think, Senator Obama, that the administration has come a long way. They're prepared to concede that Iran can pursue a nuclear power program. It may not make sense for them, given, you know, the amount of oil and natural gas they have, but if they want to do it, fine, as long as they don't pursue sensitive fuel-cycle capabilities that will give them the ability to produce nuclear weapon fuel.

But in terms of what incentives should they be given, I think much of the explanation for their program is a desire for prestige in the region, in the Islamic world, and so forth. And I think any incentives would have to address those kinds of needs.

The Europeans have tried to do that. They've talked about advanced technology cooperation so that Iran would be seen as, you know, on the cutting edge of advanced technology. I think that is important.

Also, Iran wants to get into the World Trade Organization. I think accelerating that process would be very beneficial to Iran.

There are security objectives, obviously, that contribute to Iran's desire for a nuclear deterrent. A key one now is the concern about the contentions of the United States. And I think, by having direct discussions with them and seeing if we can reach some kind of modus vivendi, we can alleviate over time concerns about a threat from the United States.

It means, as I mentioned in my statement, recognizing that regime change is the prerogative of the Iranian people and not a policy of the United States. But also Iran has legitimate security interests in its own region. It probably wants to dominate its region. It sees itself as the natural leader.

Well, I think we can't prevent Iran from playing a leading role in its region, but I think, by working through our friends and allies in the region and having discussions about confidence-building measures and security arrangements in the region, we can both satisfy the security needs of our friends allies, but also demonstrate to Iran that we are not, you know, opposed to their living in the region and playing an important part in that region.

SEN. OBAMA: Mr. Chairman, I'm running out of time, but I'm wondering if I can just ask one more question, and that is on the stick side of the equation.

There is -- and you voiced some concerns about what China and Russia would or would not be willing to go along with. Just in terms of changing the cost-benefit analysis for the Iranians, what measured steps or sanctions could be taken that you think would have a significant effect on them, but would not be perceived as provocations of the sort that would lead to regime change or imply that we're not willing to negotiate in good faith?

MR. EINHORN: Well, at the low end of the spectrum, the kinds of measures that have been considered are bans on travel, you know, for members of the elite leadership: you denied visas coming to their countries; you don't send your own senior officials to Tehran; freezing the assets of Iranians overseas; making it difficult for Iranian financial institutions to deal with Western institutions, these kinds of things.

They're symbolic kinds of measures. And some of the people on the second panel have suggested various devices, deny them the ability to compete in the World Cup of soccer, for example, because, you know, Iranians love soccer. You know, there are lots of things that could be done at the political level.

But, you know, you escalate it when you get into the area of trade and investment. Those are potentially very, very significant, but, you know, that sword cuts both ways. And that's why it's of such great concern.

SEN. OBAMA: Thank you, Mr. Chairman.

SEN. LUGAR: Thank you very much, Senator Obama.

We thank both of the witnesses for your outstanding testimony and your response to our questions, and we look forward to visiting with you again.

DR. ALBRIGHT: Thank you.

SEN. LUGAR: The chair would like to call now our distinguished second panel, that includes: Dr. Kenneth Pollack, director of research and senior fellow at the Saban Center for Middle East Policy, Brookings Institution; Mr. Karim Sadjadpour, Iran analyst, International Crisis Group; Dr. Patrick Clawson, deputy director for research at the Washington Institute for Near East Policy; and Dr. Geoffrey Kemp, director of regional strategic programs of the Nixon Center.

We welcome you, gentlemen. And I'll ask you to testify in the order that you were introduced, and that will mean Dr. Pollack first.

Let me just say at the outset your full statements will be made a part of the record. And we'll ask that you please summarize those statements. And we'll each of the members of the panel and then have a round of questioning by senators.

Dr. Pollack?

 

STATEMENT OF

DR. KENNETH POLLACK
Director of Research and Senior Fellow for Middle East Policy
The Brookings Institution

 

DR. POLLACK: Thank you very much, Mr. Chairman.

Thank you, distinguished senators. As always, it is a great pleasure to be back here testifying for this committee on this very important topic.

You've asked us to consider Iran's motives in seeking a nuclear enrichment capability wholly with the intent of at some point acquiring nuclear weapons capability. Like most of my colleagues, I see three principle sets of motives among Iranians, and I will say that I think that different Iranians probably share different mixtures of these different motives.

The first, the most obvious, I think, is a security motive. As we are fond of saying, Iran lives in a tough neighborhood. It is surrounded by countries that at times have been Iran's adversaries, oftentimes are antagonistic toward the Islamic regime.

The fact that, in many cases, the Iranians provoked the antagonism of these other countries, I think, is often lost on the Iranians. But, nevertheless, the objective fact remains the case that Iran does have significant security problems.

Farther beyond its borders, there is Israel. And, of course, beyond that is the United States. And I would say that, of all of Iran's security considerations, I think that the United States is the overwhelming security threat that Iranians feel, that, while they may talk about Israel and its threats to Iran, that in truth what they fear is an American military strike and an American effort at regime change designed to topple their regime.

I would say that the experience of North Korea versus Iraq is probably one that is not lost on the Iranian leadership. The North Koreans are believed to possess nuclear weapons, and so they were not invaded by the United States of America. The Iraqis did not posses nuclear weapons, but were believed to be trying to do so, and were invaded by the United States of America.

And so, just looking at the other members of President Bush's axis of evil, I think the Iranians could draw some obvious conclusions: that, if you want to keep the United States from invading your country and trying to overturn your government, you need to have a nuclear weapon.

I think a second set of motivations for many Iranians is prestige. We should never forget that Iranians consider themselves the lineal descendants of a 2,500-year-old civilization which produced the world's first superpower and many great powers after it. Iranians, almost to a man or a woman, believe themselves to be part of a nation that ought to be one of the world's great powers, and I think that a lot of Iranians do believe that acquisition of a nuclear weapons capability would help boost them to that status that they seek.

And here I think the example of India is probably one that is not lost on Iran, that India's acquisition of nuclear weapons and ultimately the international community's acceptance of India's nuclear weapons program were critical in India achieving its long-term aspiration to become one of the great powers of the world, to be consulted on all of the important matters of the world, something that Iranians themselves seek.

And I think that that prestige motive is also one that lies behind many Iranians in their thinking about their nuclear weapons program.

The final motive is one that I would term ideology. Although I would hear caution, but I think that most of the Iranians who would subscribe to this position would not consider their motivation to be ideologically driven but strategically driven, that when they were to present it, they would present it in strategic terms. But I think, from our perspective, we can consider it ideological.

There are still Iranians who believe in the export of their revolution, who do still believe in the mission that Ayatollah Khomeini preached to them during his time as the leader of Iran, who believe that there is a fundamental battle between good and evil going on in the world in which they perceive to be the champion of good and the United States to be the champion of evil. And therefore, again, they must acquire a nuclear weapon or some other deterrent to keep the United States at bay and help them to wage this struggle.

We've seen Iranian leaders over the last 27 years engage in a variety of different aggressive behavior around the region, oftentimes, I would say, largely because of this ideological aspiration: their efforts to subvert friendly governments in Saudi Arabia, in Kuwait, in Bahrain; to subvert governments in Iraq.

Their efforts in Lebanon, elsewhere are often driven by these goals. These goals bring them into conflict with the United States. And, again, I think that, for some Iranians, acquisition of nuclear weapons is important to them because they believe that only by acquiring nuclear weapons will they be able to successfully wage this cataclysmic struggle, this apocalyptic struggle that they see between the United States and the West, or the United States and Iran, or in more mundane level, simply be able to expand their own power, create governments that are friendly to themselves and the region without fear of American retaliation.

That, I think, broadly encompasses most Iranian motives for acquiring nuclear weapons. But that said, I think that the discussion of Iran's motives is at best no more than half of the issue before us. And I think that the other issue, which the previous panel alluded to at least briefly, is the question of priorities.

As all of you know better than any of us on this panel, politics is not so much what you want but what you're willing to get or willing to take. Politics is mostly about making tradeoffs.

And I think that the critical question that we need to be asking ourselves is not what do the Iranians want, but what are their priorities? What is their highest aspiration? What is secondary, what they would be willing to give up to hang onto their nuclear program?

A friend of mine, a Swedish diplomat, once said to me, in response to exactly this point, that, you know, if you asked Swedes on the street whether they wanted a nuclear weapon, most of them would probably say yes, too, until you actually pointed out to them that the acquisition of those weapons would probably entail costs and possibly even international sanctions.

Once you start introducing costs into people's calculus, that calculus can change very rapidly. And here I think what's important is that there do seem to be very important divisions, both among the Iranian leaders and between the Iranian leadership and the Iranian people.

It is always dangerous to start divvying up the Iranian leadership and ascribing some leaders to this group and other leaders to that group, but, of course, there is no alternative to doing so, not certainly in the amount of time that we're allocated today. And so I will go down that slippery slope and divide the Iranian leadership into three different groups.

There are pragmatists, typically associated with former President Hashemi Rafsanjani, among others, for whom Iran's economy is clearly the highest priority. What's more, these figures seem to recognize that the only salvation for Iran's economy, which is in very deep trouble, is a better relationship with the West, and the technology, and the investment, and the lashing up with the global economy that would come from that.

For them, therefore, Iran's nuclear weapons, I think, are desirable. I suggest that most Iranian leaders in this group probably would like to have nuclear weapons if there were no costs involved. But they have consistently suggested that Iran's economic health was a higher priority than the nuclear program and that Iran might be willing to make accommodations and even sacrifices where its nuclear program was involved, if it were important for Iran's economic health.

At the other end of the spectrum are the radical hardliners, today typically associated with President Ahmadinejad, although he is not by any means the most important member or the only member of that camp. The radical hardliners seem to believe that nuclear weapons are Iran's highest priority, and that's not because -- in some cases, they don't believe that Iran's economy isn't important; in many cases, they do -- but because they have very different ideas about how to solve Iran's economic problems.

In part, it's because they don't know very much about economics or how to solve Iran's economic problems, but also because they do, in many cases, ascribe to this ideological motivation. They do believe in the revolution, and they do seem to believe that having nuclear weapons is important for them to ultimately achieve the goals that Ayatollah Khomeini laid out for the Islamic revolution.

Caught in between are Iran's mainstream conservatives. And here, the most important figure by far is the Supreme Leader Ali Khamenei. I think that the best way I would describe Khamenei's position, as best any of us can tell given the tea leaves that we are forced to read, because our sources of information about Iran or Iranian leadership are so limited, is that they see Iran's economy and its nuclear program as perhaps being co-equal in importance, or at least that's the best we can tell, given their behavior so far.

Khamenei has tried very hard since about 1990 to simultaneously maintain progress on Iran's acquisition of nuclear weapons and maintain good enough ties with the West so that Iran can have enough trade and enough investment to keep its economy from stumbling along.

The mainstream conservatives, like the pragmatists, seem to recognize that the greatest problem for the regime is popular dissatisfaction with the regime and that the greatest source of that popular dissatisfaction is Iran's poor economic health.

What we've seen from the regime to support this point, first of all, are very different perspectives on the nuclear program, to the extent of Mr. Ahmadinejad's foreign ministry rejecting out of hand offers for negotiations, for example, from the Russians, only to have, several days or weeks later, Mr. Khamenei's people come in and then accept those very same offers from the Russians and from others, suggesting a very serious difference within the Iranian regime.

Beyond that, there is the fact that the Iranian regime has tried scrupulously to maintain that their nuclear program is all about Iran's economic health, even to the extent of throwing out the CNN bureau when an interpreter mistranslated remarks by President Ahmadinejad where he mentioned nuclear power. It was mistranslated as nuclear weapons. And this demonstrates the extreme sensitivity of the regime.

Again, as the previous panel suggested, the regime is trying to convince the Iranian people that the reason that they need this nuclear program is to help Iran's economy, that it is the solution of Iran's economic problems, not its security problems.

And, again, that speaks to I think what is the fourth factor in all of this, which is the Iranian people, which, again, I will say we have the least, the worst information on what the Iranian people believe. However, there do seem to be quite a bit of anecdotal evidence that indicates that, for the Iranian people, it's the economy, stupid.

The economy is by far the most important priority that they have, and I think that there is every expectation, especially given the regime's own rhetoric, that if the Iranian people were ever forced to choose between their economic health and their nuclear program, they would grudgingly but readily choose their economic health.

Now, what all of this suggests to me is that convincing Iran to give up its nuclear weapons program or its nuclear program will be difficult, but not impossible. Iran clearly does have powerful incentives for acquiring this capability. And I don't think that it is going to be easy for someone to convince them otherwise.

By the same token, there is nothing about their priority structure that suggests that it is going to be impossible to do so. And again, for me, history is an important set of lessons.

In the 1960s, especially in the late 1960s, Mr. Chairman, you will remember that it was considered a foregone conclusion that Egypt would acquire nuclear weapons. They, too, had compelling strategic reasons, reasons of prestige and reasons of ideology, for acquiring those weapons. In fact, I think you could argue that Egypt's reasons were even more compelling than Iran's reasons today.

But Egypt voluntarily chose to give up its nuclear weapons program. And it did so because Egypt's leadership recognized that nuclear weapons were not its highest priority and that its pursuit of nuclear weapons were undermining its highest priorities.

More recently, Belarus, Ukraine and Kazakhstan have been convinced to give up their nuclear weapons, even though any number of academic strategists believed that they were insane to do so because of their own strategic rationales for keeping the weapons. But what the Ukrainians, Belarusians and Kazaks realized was that, again, their relationship with the West and the health of their economies was far more important to them than their possession of their nuclear weapons.

And as a final example, there is Libya, one of the worst rogues of the Middle East over the last 30 years, which also, under the weight of international sanctions, was ultimately convinced that its pursuit of terrorism and nuclear weapons stood in the way of its ultimate prosperity and stability. All of that suggests to me that, again, it will be difficult, but not impossible to convince the Iranians to give up their nuclear weapons program.

Ultimately, in addition, what it points to, to me, is that the goal, the strategy that the West should be employing, international communities should be employing to try to convince the Iranians to cease its nuclear weapons program is to force them to make a choice between their highest priority, the economy, and their nuclear weapons program. And I think that it has been our failure to do so all along that has left us in the conundrum we face today.

Ultimately, I believe that we need to change Iran's incentive structure, since at the moment they have strategic, ideological and prestige incentives for pursuing it, and few economic and other disincentives to cease pursuing it.

And here, as a sidebar, I'll point out that this is one reason that I'm also very leery of a military operation against Iran to try to eliminate its nuclear capability, because ultimately, no matter how successful that effort may or may not be in the short run, in the long run it will do nothing to change Iran's incentive structure and, in fact, will most likely simply reinforce it.

Now, my time is running short and I'm not going to get into this in greater detail, because others have already made the point and is available elsewhere, but I do believe that the key incentive for Iran is ultimately economic incentives, both positive and negative.

As I've said, the one priority that we can clearly identify among the Iranian people and among important segments of its leadership is the health of Iran's economy. And so, therefore, I think that the key for the international community is to make clear to the Iranians that, if they continue down this path, if they continue to resist the will of the international community, their economy will suffer and will suffer very markedly and very quickly.

On the other hand, I also think it is critical that the international community, including the United States, also offer a positive set of incentives to the Iranians that the best way out of their current economic impasse is to give up the nuclear program and, ideally, their support of terrorism, and that in so doing they would be rewarded and it would help them to solve their economic problems.

As I suggested, it is going to be difficult to convince them to give up this program. And I think that only a combination of positive and economic inducements is going to -- positive and negative economic inducements is going to do so.

And, what's more, I would also suggest that these positive and negative economic inducements are going to have to be very significant. As I said, given the range of Iranian motivations for possessing these weapons, I don't think that we should assume that symbolic sanctions or minor concessions, along the lines of what President Bush offered on March 10, 2005, when he offered admission to the WTO and spare parts for Boeing aircraft, is going to be sufficient to bring the Iranians around.

We're going to have to put some very significant offers on the table, including the lifting, ultimately, of U.S. economic sanctions against Iran and very serious economic sanctions against Iran if they're not willing to comply. And here I think the best way to focus our efforts would be in the area of investment rather than trade.

My own experience with our Iran sanctions during the 1990s has convinced me that trade sanctions, which can very immediately affect the people of the targeted country, are not in our best interests. They are not sustainable.

(APPLAUSE)

SEN. LUGAR: The committee will come to order.

DR. POLLACK: They are not the appropriate moral course of action for the United States of America. Investment is an area where Iran is vulnerable and ultimately an area where the West can apply significant pressure over the long term, in a way that is unlikely to hurt the Iranian people in the short term.

I would also say that I think that we need to brace ourselves, because even if we are willing to put a very significant set of positive inducements on the table -- and here I would make the point that, while I do believe that economic inducements need to be at the heart of that package, it cannot be the only thing.

Security guarantees, a new security architecture for the Persian Gulf, where the Iranians can discuss their legitimate security concerns and perhaps even find a way toward an arms control solution to the various problems of the Persian Gulf should be another element.

I would also be very willing to allow the Iranians nuclear energy, access to nuclear technology, as the first panel described, and a range of other incentives. But, again, for me, I think it is the economic incentives that need to be at the heart of it, because that is the one priority that we've identified of the Iranians that seems to stand above even their pursuit of nuclear weapons.

But I think that we need to recognize that the Iranians also have a reason to resist even a very compelling package, a package of big carrots and big sticks. And this is because, ultimately, it is going to be -- while we are the one required to put up the big carrots at this point in time, it is our European allies, and hopefully the Russians, and Chinese, and Indians, who will have to put up the big sticks.

And, quite frankly, I don't think that the Europeans are up to it. All throughout the 1990s, they saw the Europeans threaten economic sanctions and then back off, often for no reason whatsoever, regardless of what Iran's behavior was. And so I think that Iran's current policy of brinksmanship is very much designed to force the Europeans to do something that the Iranians believe that the Europeans just don't have the stomach for.

And for that reason, as well, I think that, even if we do apply a package of carrots and sticks, we're going to have to expect that we're going to have to impose significant sanctions on Iran probably for some period of time before the Iranian regime believes that the Europeans really mean business.

I will conclude with one final though. I've had a chance to quickly skim Dr. Clawson's testimony, and I know that he is going to advocate different kind of a package, one where the incentives are primarily security-related.

And I will simply close by saying, Mr. Chairman, I think that we now have in front of us the definition of a hard problem, which is when the security expert on the panel urges an economic solution to the program and the economist on the panel urges a security solution to the problem.

Thank you very much.

(APPLAUSE)

SEN. LUGAR: Well, thank you very much, Dr. Pollack, for your very comprehensive testimony.

I appreciate our guests today are enthusiastic about our panel members, but please, if you can, resist too many of these impulses. It would be helpful, in terms of the order of the hearing to proceed.

Now, Mr. Sadjadpour, would you please testify?

 

STATEMENT OF

MR. KARIM SADJADPOUR
Iran Analyst,
International Crisis Group

 

MR. SADJADPOUR: Thank you very much, Mr. Chairman. It's a great privilege to be here for you on behalf of International Crisis Group. It's a great privilege to be a member of such a distinguished panel, as well.

I thought I will focus primarily on domestic political happenings in Iran, given that my colleagues not have been granted a visa to go to Iran by the Iranian government.

I think that we are in a collision course here between the United States and Iran, with decidedly potentially devastating consequences for the future of non-proliferation, for the future of Middle East peace and security, and for Iran's evolution towards democracy.

The negotiations were once called a game of chess. I believe they've now evolved into a game of chicken. We essentially have a situation where we have two cars moving at each other with increasingly velocity, and neither side, meaning neither the United States nor Iran, believes that it behooves them to either slow down or to get out of the way.

From Washington's perspective, there is great suspicion about Iran's intentions to acquire this nuclear capability. There is the sense in Washington that we should not reward bad Iranian behavior and we should not talk to it. By talking to Iran would be conferring legitimacy on the regime.

From Tehran's perspective, there is also great suspicion about U.S. intentions. Tehran believes that this nuclear issue is simply a pretext for a regime change approach, and their mentality is that, if we succumb to pressure on this nuclear issue, it's not going to get us out of trouble; it's simply going to invite further pressure and, again, nothing short of a regime change is going to appease the United States.

I thought I will focus on four observations and their implications for U.S. policy. And the first observation -- this is my capacity as an analyst with International Crisis Group, based on Tehran and in interviewing Iranian, and Europeans, and U.S. officials frequently -- I believe there is very little hope of reaching any binding resolution absent some type of direct U.S. involvement.

In three years of interviewing the Europeans negotiating team and senior Europeans officials, I've always come away with the notion that there's very little confidence that a binding resolution can be reached, absent some type of direct U.S. role, because it is not political security and economic dividends that Iran is seeking from the Europeans, but from the United States.

Iran analysts commonly invoke a paradigm to talk about the situation, two ticking clocks. There is the regime change clock and the nuclear clock. I believe the dilemma that, when you try to speed up the regime change clock, you simultaneously expedite Iran's ambitions for a nuclear deterrent.

I think, when it comes to U.S. policy, we should be very clear to the Iranians that a belligerent foreign policy is not going to reap rewards. But at the same time, we should make it clear that a more conciliatory and compromising Iranian stance would trigger reciprocal steps from the United States.

The second observation I wanted to address is that we should disabuse ourselves of this notion that dialogue is tantamount to appeasement or indifference to human rights abuses, that talking to Iran would be selling out the will of the Iranian people. Empirical studies, anecdotal evidence suggests overwhelmingly that the Iranian people, despite their great discontent with their leadership, overwhelming want to have relations with the United States.

Empirical studies suggest upwards of 80 percent of Iranians would support having dialogue and relations with the United States. The vast majority of Iranian democratic activists have come across agreeing that they believe that U.S.-Iran diplomatic accommodation would actually be helpful to their cause, not hurtful of their cause. I'm talking about Nobel laureate Shirin Ebadi, brave activists like Akbar Ganji.

One thing that has been dismaying for me personally is that the issues of human rights and democracy have been absent from these E.U.- Iran nuclear accords which have taken place the last few years. And I do believe that the United States is the only country which, if they were to join the negotiations, would be able to ensure that these issues, human rights and democracy, have a role at the table.

Now, I wanted to nuance some of the comments of the previous panel about Iranian popular sentiment, vis-a-vis the nuclear issue. Having been based in Iran intermittently since 2003, this is an issue in which I would engage the vast majority of Iranians I would come across traveling around the country. And I found that this popular sentiment, which has been written about in the Western media, and, of course, the Iranian media has been very much exaggerated.

It is true that, for some Iranians, this is an issue of national pride. Iran is an old country, old civilization. And they look around and say, "Well, India, Pakistan, Israel can have this project. Why the double standard?"

But I would argue that, at the same time, that this is a society which experienced a devastating eight-year war with Iraq, which not really one family was left unscathed by this war. And no one romanticizes about the prospect of conflict, about the prospect of militarization. So when they see this nuclear project, there's a lot of concern about the direction in which the country is headed.

And, quite frankly, this is very technical project, the act of enriching uranium indigenously as opposed to importing enriched uranium from abroad. So despite the claims of the Iranian government, I can tell you that the Iranian people don't wake up thinking in the morning, "What's missing from our lives in enriched uranium."

I would argue that, you know, if you were to pose two options to the Iranian people as a referendum, a, pursue this nuclear program unequivocally, come what may sanctions, further isolation, potentially military confrontation, or, b, make certain nuclear compromises and reintegrate into the international community, this young Iranian population, two-thirds of whom are under 30, would overwhelmingly choose the latter option.

Now, lastly, I believe that we need to disabuse ourselves of the notion that a sudden upheaval in Iran or some type of abrupt political change would necessarily be for the better. I would argue that the vast majority of Iranians are in favor of a democratic system, a more tolerant system, a more open society, but unfortunately these peaceful and democracy-loving Iranians are not the ones who are currently organized and they're not the ones current with arms.

To quote the great U.S. diplomat and Iran symbol John Limbert, who was actually a hostage in Iran for 444 days, to paraphrase him, in fact: Revolutions are not won by those who can write incisive op-ed pieces. At that time, it was won by those who were willing to throw acid in other people's faces. These days, it's won by those willing to conduct suicide operations, et cetera. So I think we should be very careful about romanticizing about the prospect of sudden, abrupt change in Iran.

Lastly, I wanted to present two visions for Iran, two possibilities which I believe are equally plausible. The first is of a country isolated from the world, isolated from the international community, but with enough oil wealth to continue to fund its paramilitary groups, two million Basige (ph), 150,000 Revolutionary Guards, to repress popular will and popular demand for change. And, unfortunately, I can see this sustainable. I can see an Islamic Cuba with a bomb in 15, 20 years from now.

The second vision is of a country reintegrated into the international community, having relations with the United States, having a U.S. embassy in Tehran, having increased foreign investment, strengthened middle class, tourists going back and forth, the Iranian diaspora going back and forth. I believe this is a much more fertile ground for democratic change and would certainly expedite Iran's path towards democracy, rather than the contrary.

Thank you.

SEN. LUGAR: Well, thank you very much, Dr. Sadjadpour.

Dr. Clawson?

 

STATEMENT OF

DR. PATRICK CLAWSON
Deputy Director for Research,
The Washington Institute for Near East Policy

DR. CLAWSON: Thank you. I'd like to pick up with some of the themes that Dr. Pollack referred to about Iran's economic situation and how that could influence its thinking about its nuclear question.

Iran has very serious economic problems of its own making. The country has a growing unemployment, which the World Bank warned could, quote, "threaten its economic, social, and political system," end quote. And Iran's per capita income today is 30 percent below that of the pre-revolutionary period. At a time when the rest of the world incomes have doubled, Iran's income has fallen.

And these serious economic problems create a lot of vulnerability to foreign pressure. Much of the discussion about foreign pressure is about multilateral sanctions posed by the U.N. Security Council. And, in fact, I would suggest that going that route is a good way of giving Ahmadinejad a rallying point around which to say to his people that the rest of world is ganging up on us and to feed this populist nationalism that he has been such a master of manipulating.

So I'm not convinced by any means that U.N. sanctions is the best route. And, indeed, something below the horizon which could impact Iranian business may be a better way to go.

And in that regard, de facto sanctions, which the governments in Europe and also this government have been talking about, may be a good way to persuade businesses to pull out of Iran and to have the impact on the business and economic elite that Dr. Pollack referred to without having to give a red flag that Ahmadinejad can wave around.

And, indeed, the U.S. government has been quite creative at pushing other governments about how are they going to be implementing the two relevant U.N. Security Council resolutions, 1353, which calls on governments to take action against the financing of terrorism and support for terrorism, and 1540, which calls on governments to take action to prevent the proliferation of weapons of mass destruction and financing of this.

And we've also been quite effective at reminding banks around the world and industrial companies around the world they really do have to go through the U.S. banking system if they want to carry out their economic activities.

And do they really want to be doing this with these bad guys? It's going to cause them a lot of problems in their public relations and a lot of problems with the U.S. government.

And we've already seen quite a bit of success about this. That is to say, three large European banks, two large Swiss banks and the largest British bank have stopped doing new business in Iran.

And, recently, a state-owned Iranian bank said that -- and I quote from this report from the Karafarin Bank -- "The fear of imposition of sanctions by the U.N. against Iran, in connection with a nuclear enrichment issue, has reduced the reliability of Iranian banks as international trading partners. This may prove to be, for the banks and the country as a whole, one of the most important obstacles to hurdle in the months to come," end quote.

So I would argue that going this route of pursuing de facto sanctions, it's in well with also European traditions of providing informal guidance to companies about what to do, and that it is something that we can do with a coalition of likeminded countries, rather than relying on the Security Council, where there could be grandstanding, and of course, there's always the veto issue.

Plus, as the Russians and Chinese remind us, that every time we talk about sanctions at the United Nations, we are also talking about the authority to use military force at the same time, whereas, if we do this, discourage business in Iran through these de facto sanctions, we don't run into these kinds of problems.

Now, some will counter that, "Look, putting economic pressure on Iran right now is pretty tough given the state of world oil prices." And it's certainly true that the Iranians are feeling very self- confident at the moment.

But, in fact, times in Iran are not so good, despite the high oil income. Last year, the stock market fell by 26 percent. And again, quoting from the Karafarin Bank's report, it said that, quote, "The Tehran Stock Market has shown to be hypersensitive to political issues, such as the course of the nuclear enrichment negotiations, as well as domestic economic policy uncertainties," end quote.

So I would suggest there is much that we can do, even while oil prices remain high. And furthermore, the last couple times around when oil prices were high, that only lasted for three or four years, and then they came crashing back down again.

And so I wouldn't get to be so confident at the Iranians. In 1981, prices went up; they came way back down again in 1985, because of increased production and of conservation.

Now, some will say that economic pressure is not going to dissuade hardline Iranian leaders, and I would agree with Dr. Pollack that someone like Ahmadinejad doesn't seem to factor economics that much into his calculations.

But Ahmadinejad was elected not because of his stance on the nuclear program, but because of his economic populism and all these promises he's been making. He runs around the country offering to build a hospital there and a school there. And when he can't deliver on those promises, he's going to have a problem.

Now, his two predecessors, both Mr. Rafsanjani and Mr. Khatami, came into office with grand plans for how to remake Iran. And they each got about two years into their terms before their plans turned to dust and they ran into a lot of resistance in a system which is really pretty hard to move. And they found themselves undercut by the supreme leader, who forced them to throttle way back from their plans.

And if I had to guess, I'm going to give Ahmadinejad about the same period, about two years, where he goes ahead with his plans to rekindle revolutionary fervor before he is going to find that his plans turn to dust and he gets yanked back by the supreme leader once again.

Lastly, as Dr. Pollack mentioned, I'm skeptical about using economic inducements, as well as pressure on Iran. And one important reason is that it's a lot easier to pull on a rope than it is to push on it.

And if we offer Iran economic inducements, it's not going to have much impact on the Iranian economy so long as they're following the inappropriate, and ineffective, and, frankly, stupid policies where they are, even before Ahmadinejad came in, and he's only made them worse.

So all of our economic inducements aren't really going to do very much to the Iranian economic state, and the Iranians will realize that pretty soon and then say, "So what do we get for all this?" And the answer is, "Not very much." On top of which, economic inducements can look like bribes, which just encourage more mischief.

So I am a fan of security inducements. And several previous speakers have noted that some of the security inducements that we could offer would be mutually advantageous.

Things like confidence and stability-building measures would be in the interest of both sides. If we had an agreement about how to prevent incidents at sea or if we had an exchange of military observers and exercises, both sides would benefit.

There's a lot of talk about one security inducement which concerns me and that is about a security guarantee for the regime. Well, we don't guarantee the survival of any regime, anywhere in the world. Whether or not a regime survives is up to its own people.

But what we can do is provide additional security insurance, which is a fancy way of saying, "If you don't attack us, we won't attack you." And that, really, is what we ought to be talking about, which is, "If you get off your nukes, then we agree, you don't attack us, we won't attack you."

That, rather than guaranteeing a regime, is a security approach that we have taken in other situations and could take in this case, without compromising our stand in favor of democratic change inside of Iran.

Thank you.

SEN. LUGAR: Thank you very much to Dr. Clawson.

Dr. Kemp?

 

STATEMENT OF

DR. GEOFFREY KEMP,
Director of Regional Studies,
The Nixon Center

 

DR. KEMP: I'm the last speaker, Mr. Chairman, so how do I make this interesting?

(LAUGHTER)

I was asked to talk about three issues: Russia and China; the attitudes of Iran's neighbors; the opportunities for containing Iran by the neighbors; and a fourth issue that I think is very important, the necessity for U.S.-European cooperation to continue.

On Russia and China, Mr. Chairman, I am convinced that Russia is a key player, that Russia could have played a much tougher role in containing Iran's nuclear program, and that, if it had done this, the Chinese would have gone along. They do not want to be the lone dissenter.

But, frankly, in my judgment, we've not handled the Russian portfolio with great skill on this particular issue. Russia sees Iran as a cooperative partner in an unstable part of the world, straddling the Caucasus in Central Asia. In contrast, the Russians see American policy towards the near-abroad as provocative.

And while the laudatory objectives of the Bush administration to nurture more freedom in Eurasia and develop multiple pipeline routes are sensible, this does not help the Russians in their decisions on Iran.

And I think that those of who've talked to Russians -- and many of us have -- what you hear, quite frankly, is that, "If you want us to take the step of leaning very hard on our partner, Iran, then you have to offer us some quid pro quo." And quid pro quos that you normally hear discussed have to do with efforts to get Ukraine into NATO.

Now, we can discuss whether or not this is just Mickey Mouse, but in my judgment, the Russians and the Chinese are both playing power politics on the issue with Iran, and I don't think they see any reason to help us on the particular nuclear issue unless there is something in it for them. And, frankly, aside from the broad goals of non- proliferation, I don't think we are offering them very much.

Now, to change the subject, what about the neighborhood that Iran finds itself in? What do the neighbors think about this current regime and its behavior, particularly on the nuclear front? Well, of course, the neighbors of Iran all have specific problems with the leadership, but I think they all share a concern about the nuclear program.

The dilemma is, of course, that Iraq's Shiite leaders owe a great deal to Iran and have nurtured very close ties with the mullahs, while also making it clear they do not want to see the establishment of a Shia theocracy in Iraq.

Turkey and Iran share common concerns about the evolving problems in the Kurdish region in northern Iraq. And there we've seen reports of Iranian troop movements in the north and Turkish troop movements in the north, suggesting that this tranquil area may not by tranquil forever.

The key Sunni states of the region are very, very fearful about Iran's hegemonic tendencies. And, as you know, there's this talk throughout the Arab world about a "Shia crescent" emerging, running from Iran through Iraq, into Syria and Lebanon. And we can dispute that, but there's no doubt that is a concern.

The smaller Gulf states with significant populations, plus Saudi Arabia, worry about the impacts of Iranian hegemony on their own Shia populations. The UAE has long-standing territorial disputes with Iran. Qatar has become perhaps the most reliable military ally in the region, apart from Kuwait, and therefore has certainly taken sides on this issue. I think Oman is probably the least worried country in the Gulf about what the Iranians are doing, but they, too, have their problems.

Now, how do we assess, therefore, the development of an Iranian nuclear program on Gulf security? Here, I think there is a major difference between Saudi Arabia, the large country, and the smaller countries that are basically going to have to depend on us for their security no matter what the Iranians do.

I think, in the case of Saudi Arabia, they have the money and the wherewithal -- not the technical wherewithal, but the political wherewithal -- to essentially buy themselves some form of deterrence if the Iranians get a bomb. You will remember in the 1980s that when we, the United States, refused to upgrade the Saudi F-15 fleet with conformal fuel tanks, because that would extend their range deep into Israel, they unknowingly to us turned to China for medium-range surface-to-surface missiles, which they still have in their inventory.

How good they are, we don't know, but they have them there, and there's not doubt in my judgment that, if the circumstances arose where Iran had a nuclear program, they could do likewise. And there are countries who I think would be prepared to be very supportive of them; Pakistan immediately comes to mind.

If the Iranians crossed the threshold and actually produced some form of nuclear device, aside from the Saudis, what would be the major concern?

I think the major concern, frankly, at this point in time in the Arab Gulf at least -- the concern would be that there would a preemptive U.S. and/or Israeli strike, which I think they believe would be highly destabilizing, not only because of their own internal problems, which I alluded to, but because of the impact that could have on the oil market, and, of course, they're all there together in this highly vulnerable Gulf infrastructure.

The problem also, of course, is that there is huge suspicion about how much we are really confident in talking about the Iranian weapons program. Here, of course, the failure of the intelligence on Iraq has had an enormous impact on our credibility.

I go on in my testimony to talk about opportunities for containing Iran, even if it goes as far as a nuclear weapon, and, indeed, there are many things we can do in bolstering the security of the region, not only with our own forces, but with providing more capabilities to the local countries to defend themselves, so that, at the end of the day, when the Iranians look around at their strategic environment, if they, in fact, go and get the bomb, they may find themselves even less secure because their neighbors have responded and responded with upgrading their own military capabilities.

Let me just end, Mr. Chairman -- since it's getting late -- with my overview of where we stand today diplomatically. I think the Iranian government, as my colleagues have also been inferring, feel supremely confident at this point in time that neither the U.N. nor the IAEA is going to really do anything to hurt them.

And, therefore, I think what we have to fall back on is the issue as to whether or not this coalition of the willing that Dr. Clawson alluded to, namely the United States and the Europeans, will, in the last resort, be prepared to use more strong economic and diplomatic measures against Iran, irrespective of what the U.N., Russia, China decide to do.

And here, I think, the real pressure is on the Europeans. Don't forget, we've had Iran under sanctions now full-speed, really, since the mid-1990s. The Europeans keep avoiding the discussion of imposing sanctions similar to ours in part because they haven't yet, I think, agreed amongst themselves about whether this is a wise idea or whether they can even get consensus.

But there's no doubt in my judgment that if, in fact, the European Union were to do to Iran what we are currently doing in the economic arena, it would have a very, very serious impact on the Iranian economy for all the reasons that my colleagues have pointed out.

It would not, however, I think, change the Iranian's behavior on the specific issues that we are most concerned about at this point in time: the nuclear threat, terrorism, and attitudes toward the peace process in Israel.

So while I think that European and American and probably to be joined by Japanese economic sanctions against Iran would have a long- term impact on the regime, and that might, in turn, bring about much more discontent with the current leadership, we should not kid ourselves that this is going to change anything in the short run.

The Iranians are showing at this point in time sort of almost gleeful defiance, not only at ourselves, but at the international community. Mr. Ahmadinejad's statements about Israel have actually stimulated a lot of support in certain Islamic countries. And once he saw this happening, he's learned and repeating it time and time again.

But I think, as my colleagues have pointed out, the Iranians would be very unwise to assume that things will go their way indefinitely. And in this regard, I think, ultimately, I agree with most of my colleagues that Iran's vital national interests would be helped by ending the standoff with the United States. I believe that we should have a dialogue.

I think we have far more to gain than to lose if we have a coherent and pragmatic policy towards the Islamic republic. And I think, in the long run, that will benefit everybody. Thank you.

(APPLAUSE)

SEN. LUGAR: Thank you very much, Dr. Kemp.

We'll have a round of questions and once again have an eight- minute period for senators.

Now, let me commence by asking you, Mr. Sadjadpour, frequently persons talk about working with elements inside Iran, presumably persons, groups, that might be helpful in creating a dialogue somewhat different from the official dialogue that many witnesses have suggested today at the highest levels, conceivably with youth. Even, I understand, an Iranian congressional delegation went to London recently, met with legislators over there.

But let me just ask you, as a student who is in Iran and who might talk, and who could make any difference, are there avenues here, or are these sort of wishful thoughts by many Americans who somehow are still looking for persons who want peace and who want a different situation, maybe who resist the mullahs and have many other views?

Are we able to identify those people? And would even contact with them be dangerous for them, maybe not useful to be identified as friends with whom we might talk?

MR. SADJADPOUR: Well, that's a great question, Mr. Chairman. I think, in the current conflicts of U.S.-Iran relations, not only with the military options not being taken off the table, but also with $75 million recently earmarked for supporting change in Iran, what was perceived in Tehran as a passive or covert regime change approach, I think it's very difficult to have official interaction with these types of elements within Iran.

The example I will give you right now is a very dear friend of mine called Ramin Jahanbegloo, a prominent secular intellectual who was imprisoned three weeks ago and has been in solitary confinement since. He was a fellow at the National Endowment for Democracy about four years ago, and he has a great track record of being an apolitical, secular intellectual, espouser of non-violence, et cetera.

And I see in the current context one of the wishes from his family -- one of the first wishes from his family was that the U.S. government doesn't release any statements on his behalf, that it would be counterproductive to his cause when he's currently being tried on bogus charges of espionage.

So I think, in the current context, it's very difficult to support these actors within Iran simply because the costs for them are tremendous and then the United States has very little leverage, if at all, to help their cause.

But I would argue that any types of interactions, in terms of easing of visa restrictions for Iranian students, as you said, congressional delegations both from the United States and Iran interacting with each other, scholars going back and forth, every time I've seen these interactions take place, I always come away with both -- I see that the Iranian officials and the members of the political elite who come and spend time in the United States come away with a far more nuanced and understanding position of the United States, and vice versa. U.S. scholars, and academics, and analysts who go to Iran come away with a much better understanding of Iran's perspective.

So I do believe that interaction is definitely a plus, something that we should push for, but in the current context it's very difficult to support any types of political actors within Iran because, by helping them, I think we're doing far more to hurt them.

SEN. LUGAR: Let me ask you, Dr. Kemp...

(PROTESTER INTERRUPTS)

SEN. LUGAR: Please. I'm sorry. The committee will come to order. We'll be in recess until the police have removed the demonstration.

(RECESS)

SEN. LUGAR: Alright, the committee will come back into session.

And, Dr. Kemp, let me ask you, what can the United States say to China or to Russia that might bring greater cooperation with them? Are there things that we can say to them, offer them? How do we enhance our dialogue with partners that we've always said might well be around the table? I think one witness suggested six-hour talks with Iran that may be comparable to the North Korean effort.

DR. KEMP: I think it's not easy. I think what we have to do is to get our priorities straight. I mean, if, indeed, we all agree that the Iranian crisis is right up there with Iraq as a priority for the administration and for the country, then we have to make tradeoffs.

And it seems to me that, in the case of Russia, we are doing things in diplomacy that are not only, I think, unhelpful, but seem to me, at least, to be somewhat provocative. And therefore, perhaps the first thing we should do is to lower our own rhetoric at this point in time about some of the issues on which this particular Russian government feels extremely sensitive.

Now, you know, that, of course, means upsetting those who want to hear us speak out more loudly for the extension of democracy and freedom in Russia and in the near-abroad and in Central Asia, but, you know, we have to make some hard choices. And my judgment is that it's not just that we're not offering the Russians -- or for that matter, the Chinese -- any real incentive to help us on Iran. We seem to be, in the case of Russia, going almost in the opposite direction.

SEN. LUGAR: Let me just ask you, Mr. Clawson, quickly, you suggest in your written testimony that Iran has had little success using oil projects to influence China, Japan and India. Why is this? One has the impression reading the press every day that, given the sizable contracts that are signed and the oil that's still to be delivered, that Iran has considerable leverage over these countries.

DR. CLAWSON: Well, a good example is what's happened this last week. Iran signed a contract with India, when President Ahmadinejad went to India, for shipping natural gas to India. And Iran insisted on a price which was 40 percent higher than what India is paying for natural gas in ports in Qatar.

And this week, the Iranians said, "Well, you know, we've rethought this matter, and we decided that's not good enough. We want an extra 57 percent more in price. So in other words, we want to get a price which is more than twice what you're paying Qatar."

And the Indians are saying, "Well, wait a minute, here. This deal's no good. We would have to be paying much more than we could get the gas from other sources." So the fact is, is that the Iranians have been insisting that they're going to get every last penny out of these deals, and they're not particularly attractive. So the Indians, in fact, have said, "If you don't back off, we're going to, in fact, tear up this deal because it's just not attractive."

So, in other words, while Iran has been prepared to sign big deals, it hasn't been prepared to put even small bucks on the table to make those deals attractive, and most of the deals are in very serious trouble.

SEN. LUGAR: It's fascinating testimony, because the general impression is that the price is right, that, essentially, that there's a cohesion of effort here. But as you're pointing out, the price isn't right, and apparently there are still alternatives to the Indians, thank goodness, at least in terms of their economic security.

And I appreciate -- and Senator Biden and I just chatted for a moment when you talked about the stock market in Iran going down 26 percent. It sort of raised all sorts of curious issues about the market, what's listed there, and what, in fact, happens in their economy. But the fact that that market might be sensitive through its foreign policy and actually reflect that and be reported is interesting all by itself.

Well, let me cease for the moment and recognize my colleague, Senator Biden.

SEN. BIDEN: Well, you asked some of the questions that I wanted to raise, particularly with Dr. Kemp, about what could we essentially offer or forego with regard to Russia or China. I get the impression, Dr. Kemp, the thing that surprises me the most is that the seven administrations that have been here when I've been here, this is the only one that doesn't seem to connect dots very well. I mean, everything's bilateral.

There doesn't seem to be any ability to be able to figure out what may be in our mutual interest if we offer A or B to country X or Y, that they may change their policy in regard to a priority we have. I don't get a sense that -- I really don't. In six years, I've not gotten a sense there's any of that kind of thinking.

(UNKNOWN): (OFF-MIKE)

SEN. BIDEN: Catchy tune.

But at any rate, so -- but you've answered that question. Here's what I take away from your collective testimony, is that -- and any one of you jump in, here -- that the economy is critically important to the regime to be able to have a prospect of not preventing a rebellion, but providing some stability, that you vary in your sense from Dr. Pollack to you, Dr. Clawson and others in between, as to whether or not the oil revenues that are available now are enough to sort of satiate that or hold over any kind of, if not eruption, you know, genuine discontent within the country.

And this notion that, if given choices, as one of you said, if given choices of sanctions or reintegrate, they choose to reintegrate, but that requires you to have some credible sanctions.

And right now, it seems to me, the real choice is they get a nuclear program, there are no sanctions, and they're not denied from -- they don't have total integration, but I think they think -- me speaking -- I think they think they can see their way through integration, once they break through this nuclear piece and actually accomplish it or get the rest of the world to back off.

And so I guess what I'm getting at here is that I am -- the central question for me, listening to all of you -- and I may have missed it -- but the central question is: Number one, who is really in charge? Who gets to call the final shots? Is it the radical hardliners? Is it the mainstream, you know, Khamenei? Is that where it is? Or is it -- what influence do the Iranian people have at all on this process?

And the second big question I have is, absent credible sanctions -- and, Dr. Clawson, you piqued my interest in a way I hadn't thought about it, is that a coalition of the willing dealing with sanctions that affect the banking industry and/or an ability to encourage their domestic companies to cease and desist from operations in Iran is fairly powerful.

And so I have two questions: One, Dr. Pollack, do you think Dr. Clawson's notion about if, in fact, the E.U. would engage in the same kind of sanctions that the United States is engaged in, that would have any material impact on material attitudes in Iran?

And, to ask all of you, in a sense, what difference does it make if the hardliners are really calling the shots at the end of the day, because they do not have any genuine fear of this grand bargain like was made in China? "You let us continue our despotic oligarchy and maintain the control over foreign policy and your lives; we'll let you have economic growth." And this grand bargain is going on where growth is occurring in China, at least the game is, to sort of satiate the desire for what we call freedom. Is there any such dynamic going on in Iran?

And so first question, and maybe my only question, and three minutes I have left here is, you know, who's in charge? And do the sanctions that Dr. Clawson, assuming we could get them, would they matter, Dr. Pollack?

DR. POLLACK: Thank you, Senator. And my response will also have to be brief, as the chairman's were. I'm going to have to leave to make an event at the University of Delaware, which I know you would not want me to miss.

(LAUGHTER)

SEN. BIDEN: Get going. We can go right to Clawson.

DR. POLLACK: I will answer quickly. First, we regard to who rules who's going to make this decision, the honest answer that I think we all have to say is we don't really know. The Iranian regime is, as Winston Churchill once said about Russia, a riddle wrapped in a mystery inside an enigma. And even Iranians themselves, high-ranking Iranians in the government, often have difficulty predicting what's going to happen.

I think what we would all agree on is also though that the most important figure in the regime is clearly the Supreme Leader Ali Khamenei, who has had the most decisive impact on Iranian policy over the last 15 years. That said, he is typically, as best we can tell, exerted that influence by balancing his two camps off and coming up with very clever compromises that gave each of them half a loaf.

The policy, which we are all more or less subscribing to in one way or shape or form, would ultimately about driving Mr. Khamenei to make a decision he doesn't want to make, which is to say to him, "You can't give each side half a loaf. One side gets the whole loaf. Which side is it?"

And I think what we're all betting is that, based on his prior behavior and the fact that the regime, as Karim pointed out, is quite sensitive to public opinion, we're betting that he ultimately, if faced with that dilemma, if faced with that choice, would say, "I don't like, but the pragmatists, the economy get the whole loaf."

As regard to Dr. Clawson's idea, as always, I think it is a very clever one. I certainly agree -- it is very, actually, consistent with something that I wrote a number of years ago about the importance of, perhaps, pursuing these sanctions in a multilateral forum outside the Security Council, because of the problems we are likely to have in the Security Council. The one caveat I would attach is that I think that it is absolutely critical that there be formal sanctions.

As Dr. Clawson pointed out, all of these kind of informal sanctioning that is going on, this capital flight, the fear of doing business in Iran, is all predicated on the expectation of sanctions. And if at some point in time it were clear that those sanctions were never going to occur, I think all of this informal pressure would go away.

So I think it is important, but I think it is entirely possible to do it in a multilateral framework.

SEN. BIDEN: Is that the context you see it, Dr. Clawson, that the threat of sanctions is the mover behind the actions taken by the various banks and others, of not investing, or withholding, or withdrawing? Are they connected? I mean, tell me what you think about that.

DR. CLAWSON: We've got a powerful helper in this process, and his name is Ahmadinejad. With his stupid economic policies, and his discouraging foreign investment, and his imposing price controls here, there and everywhere, and announcing that the way he's going to help automobile companies is freeze the prices that cars are sold at, in a country with 20 percent-per-year inflation, I mean, his stupid economic policies are making the place a bad place to do business, and he's helping us a lot, therefore, on this front.

SEN. BIDEN: Well, I guess let me ask you another way. The threat of sanctions out of the Security Council over whatever formal sanctions, how much of a factor is that in the broader point you made about sanctions that are less formal but coherent?

DR. CLAWSON: For the key actors involved in the Iranian economy at the moment, not very.

SEN. BIDEN: OK.

DR. CLAWSON: So, for instance, you've got Renoix (ph) and Totale (ph), two companies which have historically been owned by the French government, and the French government can provide some pretty impressive informal guidance to the social networks that link together the business elite and with the government elite in France. And Totale (ph) and Renoix (ph) can get the point and scale back their activities.

So this sort of informal guidance fits in with how France does business usually, and let's build on it. And if I may say so, it was a French government official who told me about their interest in these de facto sanctions.

So I'm optimistic that -- right now, Ahmadinejad is living on a cloud, because he's done the easy part. He's promised everybody things, and now he's got to deliver. And I don't think he's going to be able to. And when, in fact, people discover that he's not delivering, there's going to be a real drop in his popularity. And right now, the supreme leader who's letting Ahmadinejad run free is going to yank his chain back, and this guy is not going to get what he wants.

I mean, that's what's happened to the last two presidents. And we shouldn't go around assuming that this president is somehow Superman. We thought that about Khatami, with his talk about dialogue of civilizations. We thought that 16 years ago about Rafsanjani, with his talk of economic reform. And they both came crashing down to Earth pretty fast.

So it's a question of: How can we postpone this nuclear issue long enough until Ahmadinejad crashes and burns?

SEN. BIDEN: Thank you very much.

SEN. LUGAR: Thank you.

Senator Dodd?

SEN. DODD: Thank you, Mr. Chairman.

And thank all of you. It really has been terrific testimony and most informative. I appreciate it immensely.

And, again, thank you, Mr. Chairman, for doing this. It's tremendously helpful.

A couple of kind of quick questions. I may have -- I presume you heard the previous two panelists, and I raise the issue to lay out a scenario of exercising nuclear or, rather, the military option.

And there was, I think, general consensus was that this would be a very complicated process, to put it mildly, that there would be a significant -- make it difficult to really have any kind of permanent solution here on the nuclear weapons capability of Iran, even if you were successful with the military option. And the collateral fallout of it would be pretty significant.

I wonder if any of you disagree with anything that was said there. I don't want to dwell on it. Would you add anything to what, on that question I raised, or would you disagree with anything that was said by the two previous witnesses?

DR. CLAWSON: I would say that we should certainly operate on the assumption that's what's going to happen, because it's a cautious assumption and we should plan for very bad cases. But I would just point out that the last time the United States and the Iranians really mixed it up was back at the end of the Iran-Iraq War in 1988.

And at that time, after some initial belligerence by the Iranians, the fact is that, when they decided that the United States was entering this conflict on the side of Iraq, that they had choice but to back down.

And Ayatollah Khomeini, in fact, had to give up what had been for him one of the most precious aspects of the revolution, the war with Iraq. And he described it as by worse than drinking a cup of poison, but he did that.

SEN. DODD: Yes.

DR. CLAWSON: It would be a bad idea for us to plan that that's going to happen, but there is that possibility that it could happen. But we certainly, certainly should not at all assume that that's the case.

DR. KEMP: I don't disagree with that, but I do think we have to be very specific about the circumstances under which we would contemplate any military action. I mean, there are things the Iranian government could do to provoke, not just ourselves, but the rest of the world, that would make it much more legitimate to consider the use of force.

But absent getting a much broader agreement and a consensus on the use of force than we have today, I think the most immediate consequence, of course, would be in the energy sector at a very critical time, and that is something that I think in any administration would have to pay enormous attention to, and it's not just the fact that the oil prices would spike significantly, but that there could be really serious damage to the infrastructure, not just of Iran's oil facilities, but those of the neighbors, including Saudi Arabia.

SEN. DODD: Mr. Sadjadpour?

MR. SADJADPOUR: Yes, I know Senator McCain has spoken on this before, saying that the only thing worse than military strikes on Iran would be Iran acquiring a nuclear weapon. I would slightly disagree with that, and I will put it into three different contexts.

The first is a domestic context. I would still make the argument that the Iranian people are the most pro-American people in the Middle East, but I can tell you that the United States has lost considerable political capital on the Iranian streets in the aftermath of the Iraq war. Daily broadcasts of the chaos, tumult and insecurity in Iraq, I think, have taken a toll on the Iranians and there's increasing skepticism about what the U.S. has planned for the region.

So I think the fallout, in terms of soiling this oasis of goodwill which currently exists vis-a-vis the United States, will take place. I think that people like the confrontationists, like Ahmadinejad, would actually perhaps welcome some type of a military encounter. It would give them further pretext to clamp down on popular will.

From the regional perspective, I would argue that it's going to be very difficult to confront Iran or simultaneously trying to tranquilize and democratize Iraq. I would argue that the most plausible Iranian reaction will be in Iraq, but it won't be, I would argue, what Iran was doing in Lebanon in the 1980s, which is conducting suicide operations and killing U.S. troops.

I would argue perhaps a more plausible Iranian response would be to mobilize and incite their Shiite friends in Iraq, to say mobilize a two million man march against the U.S. occupation. When you have Iraq's newly elected leadership telling the United States to leave, it's going to be very difficult to stay. And I would argue that that's going to be a much greater blow to U.S. interests in the region, rather than the killing of more U.S. troops.

Lastly, from a proliferation perspective, I believe the fallout will be tremendous and it will actually be counterproductive. I once played out this military option with a Navy captain, a retired Navy captain, who said to me: Well, let's assume that we bomb Iran's facilities. Admittedly, we don't have very good intelligence on where these facilities are. Some of them are buried underground.

Iran's likely reaction is going to be, "Well, you've now proven to us that we need a nuclear deterrent, so, in fact, we are pursuing the nuclear option," and tells the IAEA inspectors to get out. International public opinion, I think, will sympathize with Iran's stance.

And at that point, if they are pursuing a nuclear weapons program clandestinely, and there's no inspectors present, and the intelligence is very small, you're going to have to send in ground troops to go and prevent this production of nuclear weapons. And where are ground troops going to come from when we have 140,000 troops in Iraq and we're quite spent?

So I think the fallout from a military encounter will be tremendous and would actually be, in my opinion, the greater of the two evils of Iran acquiring a weapon or a bomb.

SEN. DODD: Very good. Thanks.

Let me jump -- I'm curious as to how you would -- what you think the U.S. response, the official response, ought to be to the letter, which I've read several times. And my reaction is, first of all, forget about the content. It was a letter, and that you react to the letter. The fact that it was sent has more value to me, in many ways, than what was in the letter.

And, in fact, if you read the letter and sort of disregard each of the major paragraphs about Christianity and the like, there are certain sentences in there that certainly sympathizing, expressing a sense of condolence and solidarity with the United States regarding the 9/11 attacks, and how any nation has a right to respond when its security it jeopardized.

So I wonder what you think we ought to be doing about that, if anything at all?

DR. KEMP: I'm certain we all have views on that.

DR. CLAWSON: That letter was not for President Bush; that letter was for the Iranian people and to make an argument for Ahmadinejad to the Iranian people. And I think we should respond in kind with a letter to the Iranian people, which I would address to Ayatollah Khamenei, who's the supreme leader...

SEN. DODD: Supreme leader, yes.

DR. CLAWSON: ... who really holds power. But my aim would be to influence Iranian opinion and world opinion. And to heck with the Iranian government. I mean, that letter was not designed to persuade President Bush to do anything. It was designed to be part of the battle of ideas. And we should take advantage of this, to wage the battle of ideas.

I, frankly, think our diplomacy is going pretty well with regard to Iran, but I think that our public diplomacy, our waging the battle of ideas, is not going particularly well, and we're not spending a lot of time and effort on it. And so I thought it was unfortunate that we looked at this and said, "Well, this is silly if it's diplomacy," which diplomats around the world will recognize that's the case.

That's not the purpose of this. This was a propaganda ploy, vis- a-vis his own people, and we should respond in kind.

SEN. DODD: Mr. Kemp?

DR. KEMP: I think we should have responded to it. I think we should respond to it. I would be open to suggestions as to who the addressees are. We can make it to both the president and the supreme leader and to the Iranian people. But I think there are things that we could see in a letter that would put us on the high ground. I mean, there's many issues that he raised about liberty and justice that I think we could certainly ask about the situation in Iran.

I think the letter was quite deferential, actually, to religion, particularly to Christianity. And there's so reason why we should ignore or snub the letter; we just have to craft a wise and careful response.

MR. SADJADPOUR: Well, I think President Ahmadinejad was trying to take a page out of the playbook of his idol, Ayatollah Khomeini, who wrote a letter to Gorbachev in, I believe, 1989 was it. And he wrote to Gorbachev that he should embrace Islam or risk the downfall of the Soviet Union.

And many Iranian radicals to this day believe that Khomeini was very prescient in his analysis, and I think Ahmadinejad was trying to take -- in fact, yes, he caused the downfall of the Soviet Union, so he was trying to take a page out of his idol's playbook.

But I would also agree with Professor Kemp and Dr. Clawson that we should respond to this letter. We could have a debate about who the letter would be addressed to, the Iranian people, to the supreme leader, et cetera, but there were particular lines from the letter which I found quite astounding and really lacking of any type of self- awareness, when Ahmadinejad criticizes human rights abuses in the United States, or the unfair detentions in Guantanamo Bay, lack of representation, lack of legal process.

As I said, when I have a very close friend of mine who is detained right now in an Iranian prison in solitary confinement for three weeks without any legal representation, without any contact with his family, I think the United States would be wise to call Ahmadinejad on this type of rhetoric.

SEN. DODD: Let me jump to another letter, though, that is a bit more substantive, and that is, of course, this piece that appeared in the May 9th edition of "Time." And it's "Iran's Nuclear Program: The Way Out," written by Hassan Rohani, who is one of the chief negotiators for Iran and its nuclear program, but also very close as an adviser to the supreme leader.

And this was a far more substantive piece. I don't know if you've seen it. Have you seen this piece? Well, it lays out some suggestions as to how Iran might be willing to respond to this nuclear question. Could you address this?

And, by the way, just in the context of it -- and I think you answered this with Senator Biden's question, but I didn't really see this as a debate between economic approach or security approach, but rather probably having some mix of the two would make the best sense, in a way, here, taking your suggestions.

But I wonder if you might comment on these suggestions. They're far more, obviously, substantive than the letter that was sent to President Bush.

DR. CLAWSON: To quote a senior State Department official, there's a reason he only sent that letter after he got fired. And if Iran's really interested in exploring these things, there are quiet channels through which these things can be passed.

And so a former official publishing in the pages of "Time" is, again, more aimed at showing American public and the European publics that Iran is reasonable than it is of actually trying to resolve things, because I don't think there's a bat's chance in Hell that the current Iranian government would agree to those proposals at the present.

DR. KEMP: I think what the letter demonstrates is that, you know -- and Rohani is not the only one who write that sort of letter. There are some extremely sophisticated ex-Iranian officials, some of them may still be in the government, who are quite capable of negotiating a reasonable deal, it seems to me, under the right circumstances, but they have been shoved aside by the rhetoric of the current president, and that we should therefore try to find a way to nurture relations with these former officials one way or another, because at some point, if the pendulum swings the way some of my colleagues think it will back to the supreme leader, then it is people like Mr. Rohani who ultimately, I think, we are capable of talking to.

SEN. DODD: Yes. I find your answers to (inaudible) cavalier. I mean, I don't disagree it's a publication, but it seems to me this is something that ought to be pursued. I mean, I don't disagree that the way of channeling these ideas in a more sophisticated way, but possibly the reaction has been so negative that this is one opportunity.

DR. CLAWSON: I would pursue it, by indeed trying to write in various places a similar offer which looks very attractive to the Iranian people and looks very moderate in the like. And I would also pass a back-channel, sort of the kind of message that Professor Kemp was suggesting, saying, "Look, if you were back in charge again, then we could work out a deal here on this one."

But let's be honest that this is unlikely to be a breakthrough at the moment.

SEN. DODD: I know. But this is a game of -- I understand what's going on.

DR. CLAWSON: Battle of ideas.

SEN. DODD: But this is vastly different than what happened with North Korea, for instance.

DR. CLAWSON: The negotiating style is vastly different, which is to say the Iranians have a divided government, which makes our system of checks and balances look modest by comparison. And they have a style of doing politics which makes our partisanship look modest by comparison, as well.

And at some point, as Professor Kemp was saying, the pendulum could swing back and we could be dealing with a different group again.

SEN. DODD: I don't want to leave any misimpressions. I certainly have said over and over again I don't think you ought to take a force option off the table off at, and I don't necessarily believe this is still going to work, but it seems to me it ought to be pursued. So it ought to pursued. Do you hear me right now?

Any comment on this?

MR. SADJADPOUR: Yes. You know, Dr. Clawson's comments about Rohani being an ex-official, I think he would agree that, in Iran, personalities are more important than positions. So Hassan Rohani is definitely a very relevant official. He's very close to both former President Rafsanjani and the current Supreme Leader Ayatollah Khamenei.

And I think this letter from Rohani is indicative of these deep splinters taking place among Iran's leadership. When Ahmadinejad won the presidency in 2005, it was widely assumed that the conservatives had now consolidated power. As we see now, they've never been more divided.

And the timing of this letter was very interesting. As soon as there was word out that Ahmadinejad had written an 18-page letter to President Bush, Rohani quickly released this letter. And, in my opinion, he was presenting both an alternative message and an alternative messenger to the Americans that, "Don't think you just have to deal with this crazy president of ours." And I'm sure he would agree with that statement, but there's other more pragmatic minds.

But I would argue that, in the very broad sense, we should make it clear to Iran that a belligerent foreign policy is absolutely not going to reap rewards. And if you want to take this bellicose, uncompromising, belligerent approach, you're just going to reach a brick wall.

But at the same time, I think we should make it clear that there is an alternative path, that a more conciliatory approach, a more compromising approach will trigger reciprocal steps from the United States. I think, to quote President Bush, Sr., good will begets good will.

SEN. DODD: It's terrific, Mr. Chairman. I can't thank you enough. We could go on, I'm sure, another couple of hours. We hardly touched on the subject. It's very complicated. It's very important. I think it's right there at the top of -- should be at the very top of our foreign policy agenda.

And I deeply appreciate your thoughts and observations. It's very, very helpful.

Thank you, Mr. Chairman.

SEN. LUGAR: Well, I join my colleague, Senator Dodd, in thanking you for your wisdom, likewise for your stamina. And we appreciate the hearing.

And the hearing is adjourned.