REP. ACKERMAN: Within the next two years there is a real possibility that Iran will have the means to make an atomic bomb. Let me say that again. Within the next two years, there is a real possibility that Iran will have the means to make an atomic bomb.

The reason for this awful truth is that they wanted it more than we wanted to stop them. They have risked war. We decided to fight the wrong country. They have risked sanctions. We have failed to get the international community to embargo so much as a box of cereal.

They have committed the resources needed to create an extensive, hidden and hardened nuclear infrastructure. We can't even get the Senate to debate measures to toughen our own sanctions laws. They are serious. We are not. They will probably have the ability to make an atomic bomb within the next two years, and then we will have to deal with it.

The dynamic at work is no mystery. It's a simple matter of cost- benefit analysis. For the Iranians, the benefits of having the ability to make nuclear weapons are immense. They can deter the United States; they can threaten their neighbors in the region, and even states in Europe; they can contend for hegemony in the Middle East behind a nuclear shield; they can continue their sponsorship of terrorism from a position of unassailable strength; they can intimidate their neighbors in OPEC; and toy with the world's economy. These benefits are huge.

On the cost side, they have to endure mild and mostly painless sanctions. Worse than that, they must absorb endless self-righteous lectures from European diplomats; and they have to be patient for just a little while longer. That's it. The benefits are gigantic, and they pay a price that's puny.

So, why on earth would we expect them to give up on their nuclear ambitions? Looking out from Tehran, they must think that we are childlike or stupid. Here is a simple question: If the world's businesses were forced to choose between access to the United States economy, and doing business with Iran, how many would choose Iran? My guess is somewhere between zero and none.

Another simple question: Why have we not forced that choice on the world's businesses? Maybe our witnesses from the administration can answer that one. The president has been aware of the threat of Iranian nuclear proliferation from day one of his administration. He has known and done next to nothing.

Future generations of Americans will neither understand nor forgive this appalling foreign policy failure. To guess wrong is always the risk of making choices. To know the right choices and do nothing is just incompetent.

Using the Iran Sanctions Act, the administration has put sanctions on no one, nowhere, no time. That means the cost of developing the bomb will soon yield unthinkable choices.

In the case of Iraq -- a neighboring oil-producing nation that had a history state-sponsored terror, and nothing to do with the attacks of 9/11 -- the administration was willing to use sanctions; to work with the international community to strengthen and sustain those sanctions; and, ultimately, to use force to achieve our objectives.

To this day, the administration maintains its Iraq policy has been worth the lives of over 4,000 American heroes; the dismemberment of 30,000 soldiers' bodies; and the (emiseration ?) of tens of thousands of mourning spouses, mothers, fathers, children; and at a cost of more than half a trillion dollars.

There has been only one beneficiary of this on-going and tragic disaster. Who else? Iran. But as for Iran's nuclear aspirations, in truth, we've scarcely even begun to fight.

I don't want to completely dismiss the work done by the Department of State and Treasury to convince the world's banks to stop doing business in Iran. This work was well-done and much appreciated here in Congress. Nevertheless, this effort has to be considered in the context of the overall efforts to stop Iran's nuclear program, and that effort is failing.

When Switzerland's foreign minister feels free to stop by Tehran to throw flowers at the feet of Iran's lunatic president, and to jostle for position in the photos commemorating a $15 billion oil deal between a Swiss company and Iran, I think we have to admit our policy of constraining and sanctioning Iran doesn't to be -- appear to be on the fast-track to success.

For that matter, the Bush administration has not only utterly failed to use U.S. sanction laws against foreign companies investing in Iran's oil sector, the administration has actively worked to prevent Congress from making those laws more stringent and more compulsory.

Presumably, their logic is that the slow-motion, multilateral diplomatic track -- that in four-and-a-half years has produced absolutely no change in Iranian behavior, is just about to make a huge breakthrough. I, for one, can't wait to be surprised by a massive, but completely unprecedented success in this policy.

But the fact is, the multilateral sanctioning effort is moving at a glacial pace. Iran's enrichment program is in the home stretch and sprinting. We're moving in inches, and they're advancing in yards. The mullahs are not only ahead in this race, they're expanding their lead.

So, once again, we come back to the reality that within the next two years there is a real possibility that Iran will have the means to make an atomic bomb. So, the only question that matters is, what are we going to do between now and then to stop Iran?

With so little time, our thinking about this problem needs to change. Options that years ago would have seemed reckless -- discussing embargoes and blacklists, and highlighting the emphasizing of our military capabilities, have now become essential leverage if we are going to be successful in peacefully getting Iran to back down.

Likewise, continuing doggedly and patiently on the diplomatic path alone -- which years ago may have seemed wise, today looks like a road map to disaster. With Iran's proliferation on the horizon, what is feckless, is now, in fact, reckless. Toothless diplomacy, in this case, makes military intervention by ourselves or by others more, rather than less, likely.

I am not calling for another war. I want to prevent one. But we may have to go right up to the very brink if we're going to be considered serious and credible when we call an Iranian nuclear weapon "unacceptable." President Bush has used this word "unacceptable." Based on policy to date, I'm not really sure had knows what it means.

Shakespeare's three witches warn Macbeth that "fair is foul, and foul is fair." Our options for dealing Iran may be seen in much the same way. What has seemed to be wise, may be foolish; and what has seemed to be foolish, may be wise. Let us hope that we can parse the witches' warning better than Macbeth, and in the meantime Iran's nuclear cauldron continues to boil and to bubble.

Now I'd like to ask for my colleague and partner, ranking member Pence, for his opening remarks.

REP. MIKE PENCE (R-IN): Thank you, Mr. Chairman. And thank you for calling this hearing and bringing together a panel of such distinction. And I welcome our witnesses.

Mr. Chairman, your -- Chairman, your hearing titles are often memorable, although not always completely to my liking. I, frankly, was wondering, when I saw the theme between "feckless" and "reckless," whether we were referring to what remains of the Carter Administration, as opposed to the present administration.

I frankly don't think the theme accurately reflects this administration's efforts, reflected in part by the hard work of the two witnesses here today.

In all seriousness, no one in Congress that I'm aware of wants a nuclear Iran. And our problems with Iran are as enduring as they are troubling. For more than 28 years now, five straight American presidents have been vexed by this outlaw regime. In fact, tomorrow marks the 25th anniversary of Hezbollah's bombing of our embassy in Beirut, a milestone Ambassador Feltman knows well, having just concluded a tour there. Hezbollah, we now know and our witnesses reiterate, is financed by the Iranian Revolutionary Guard Quds Force. The first Beirut bombing would mark only the beginning of Iran's murderous attempts to harm the U.S. and our interests in the region.

Mr. Chairman, this is a dangerous and destabilizing country, as you have eloquently and powerfully stated. Just in this last week, Iran has announced that it's now operating 6,000 centrifuges in its nuclear facilities, and President Ahmadinejad has bizarrely and offensively questioned the reality of the September 11th attacks three times in the last week. Iran's nuclear intentions cannot be read in anything but the most ominous light. Now the subject of four U.N. Security Council resolutions as recently as 3 March, 2008, this is a state more than willing to harm itself economically in order to advance a nuclear program that cannot be viewed as peaceful.

To that end, I laud the efforts of our witnesses. I laud them for their efforts to squeeze the worldwide assets of the Iranian regime and I am pleased with their relative success in that area. I believe they've not left no stone unturned. The approach of sanctions and international pressure is nothing new. The Congressional Research Service scholar Kenneth Katzman speaks of, quote, "the wide range of U.S. sanctions in place since November of 1979 seizure of U.S. hostages in Iran."

When it comes to Israel, Iran's intentions could not be clearer. Its president has uttered what he views as a prophecy, heralding the destruction of Israel so many times that it's no longer even viewed as newsworthy. Just two days ago, Mohammad Reza Ashtiani, Iran's deputy commander in chief of the army, called for, quote, "eliminating," close quote, the Jewish state in the event of hostilities, according to Reuters News Service. If a wise threat assessment considers intentions and capabilities, Iran's intentions toward Israel are hiding in plain sight. We must as a Congress and as a nation do everything in our power to deny Iran the capability of carrying out its malevolent intent. For my part, Mr. Chairman, as you're aware, I'm working on a bipartisan basis with members of this committee to explore ways that the American people might be heard on the world stage regarding the depth of our commitment to the security of Israel and the depth of our opposition to a nuclear Iran.

Threatening Israel and pursuing WMD are far from the extent of Iranian mischief. Iranian trouble is sown far and wide. Funding Hamas is another favorite pastime of the Iranians. On that note, let me add former President Carter's meeting -- perhaps tomorrow in Damascus -- with the Iranian-supported Hamas terrorist is troubling, unhelpful and outrageous. It is not in keeping with the dignity or the high office he has held. I am very pleased that so many of my Democratic colleagues on this committee have joined me and others in denouncing this unwise gamut by what appears to be an American self- appointed diplomat possibly in violation of the Logan Act.

In this vein, I believe it's foolish in a related matter to pursue unconditional discussions with Iran on any basis. I'm reminded that last week in testimony before the full committee, Ambassador Ryan Crocker made it clear in questions that I posed that the limited discussions with Iran that have taken place in Baghdad on the subject of Iraq have been utterly fruitless. We all know Iran's role in fomenting destabilizing and destructive Shi'ite groups in Iraq. Mr. Glaser's testimony makes it clear that the Iranian Revolutionary Guard is actually funding the Taliban in Afghanistan as well. It seems like everywhere we turn, Iranian mischief and malevolence is not far behind. Terms like "rogue regime," Axis of Evil" -- although sometimes demeaned, were invented for the state of Iran.

With that, again, I want to commend the chairman of this subcommittee for once again proving that this subcommittee is committed to talking about the next subject that the American people and this Congress will face, and I appreciate the chairman's leadership and the presence of our witnesses.

REP. ACKERMAN: Thank you.

It's now time to hear from our co-host of this hearing, which we do jointly with the Subcommittee on Terrorism, Nonproliferation and Trade, and call on my full partner in chairing this hearing, Chairman Brad Sherman.

REP. BRAD SHERMAN (D-CA): Thank you.

I thank the gentleman from New York for joining with us in holding these hearings. These hearings will expose an administration that is hiding behind a supposed Hobson's choice -- that we either bomb Iran or we do nothing but scream at them, and that we occasionally supplement that screaming with truly feckless and token sanctions. The administration has chosen to ignore the truly important economic and diplomatic tools at our disposal. The question is why.

This administration is famous throughout the world for what seems to be vigilance or even overvigilance toward protecting America from terrorist attack. What is misunderstood is that this administration has been captured by extremists -- extremists in defense of corporate liberty. Extremists who would not ever allow any corporation to have its right to make a profit impaired in the slightest, merely in the interest of defending the United States and our national security. I know that seems to be a strong statement, but with me here is Don McDonald of our committee staff. And during the break, he would like to collect from any of the smart people in this room any example of where the Bush administration has voluntarily acted to inconvenience a multinational corporation in order to achieve a national security objective.

We are also hamstrung by the bureaucratic imperatives and arrogance of our foreign policy establishment. We can't bargain because we can't prioritize, we can't link -- we can't give anything to get anything. We have never gone to the Chinese and said that our actions toward their currency manipulation will be affected by what they do with regard to Iran, and we have never gone to Russia and said that even as to issues like Abkhazia and Transnistria-Moldova -- issues so unimportant to American security that no one in this room knows what I'm talking about, with the exception of our witnesses and a few of my colleagues. Even as to issues like that, we are unwilling to tell Russia that our policies will be affected by their policies toward Iran. And so we send these two fine public servants and others to do their best, and they've done the best that can be done if you send them out there with no bargaining power. Send them to Moscow. Send them to Beijing. Ask them to beg, but don't allow them to bargain.

Now another part of this is the NIE, who -- the summary of which was designed to be misread. The big headline out of that summary is that Iran has abandoned its weaponization program. Only in a footnote do you learn the weaponization program is just the engineering as to how to create the bomb. They can do that in one or two years. The report itself makes it clear.

Iran is in an all-out effort to do the hard part of making a nuclear weapon -- creating the fissile material with 3,000 and more centrifuges.

Some are even fooled by the Iranian claim that they just want to generate electricity. Iran in 2006 flared approximately 13 billion cubic meters of natural gas. That's the equivalent of what you would need to power 9,618 megawatts of natural gas electric generation capacity, more than 10 times Bushehr, far more, or at least somewhat more, than all the electricity Iran claims it plans to generate from 10 nuclear electric plants.

If natural gas is free, then power can be generated cheaply and in a manner that is safe for the local environment. So we have an Iran on target to develop nuclear weapons. What does this mean for us? It means that other states in the region will develop nuclear weapons and the nonproliferation regime is dead. It means terrorism with impunity. It means that we go eyeball to eyeball with a hostile nuclear force, a hostile nuclear nation.

That's a Cuban missile crisis every time there's an incident in the Persian Gulf -- not a Cuban missile crisis with Khrushchev, but with someone considerably less sane. And if this regime feels it is about to be overthrown, they can send a nuclear weapon to Tel Aviv in an effort to regain popularity, or send one to us, smuggle it inside a bale of marijuana, feeling that if they're going to go out, they might as well go out with a bang.

When it comes to getting U.N. sanctions, sanctions that could be immediately effective in preventing refined oil products from going into Iran -- which, as many of you know, has to import nearly half of its refined energy since it lacks refinery capacity.

In order to get those U.N. sanctions, we need Russia. We need China. Yet, as I mentioned before, we are unwilling to bargain. Instead we have cut a kind of interesting bargain. They'll vote for truly inconsequential sanctions and we'll do a great job of convincing the press that we've actually accomplished something.

For example, we now have U.N. sanctions that says the head of the Qods Force not only cannot visit Disney World, but cannot visit even Euro Disney. I doubt that's enough to change Iranian nuclear behavior. What we need, as I've alluded to, is linkage between what we do on issues of importance to Russia and China and what they do vis-a-vis Iran.

We also don't have to wait for U.N. sanctions. There are a number of things we can do without the Security Council. For example, we could actually have an administration that follows the law. And I refer to the Iran Sanctions Act, which has been consistently ignored by this administration and the last administration.

We could stop allowing the Pentagon to procure weapons from companies that sell munitions items to Iran, but instead that's what the Pentagon is doing today. Our current efforts are not enough. They have been significant -- just significant enough to fool the press.

For example, Treasury has prevented four Iranian banks from doing business with the New York Federal Reserve branch while allowing other Iranian banks to do so. And if the Iranians aren't able to use an Iranian bank, which they still can do under our extremely limited sanctions, they're free to do the same transactions through a European bank.

Upon designating the Iran Revolutionary Guard Corps as a terrorist organization, there was a few hours in which it seemed like we might impose secondary sanctions; that is to say, you can't sell trucks in the United States if you sell trucks to the Iran Revolutionary Guard Corps. Within hours, Treasury announced, "Sorry, we don't really mean that -- no secondary sanctions. You can do business as usual in the United States while doing business as usual with the Iran Revolutionary Guard Corps."

There is so much we can do. What we need to do is use Radio Farda to broadcast a message that Iran faces diplomatic and economic isolation if it doesn't abandon its nuclear program. The problem is, I can't lie that well in Farsi. She faces almost no sanctions -- no U.N. sanctions, no effort by the United States to use the laws on the books to prevent business as usual with companies in Europe and Asia.

We have before us two fine servants of the public who are told to go do their best as long as no European company is offended and as long as we make no linkage to any issue of importance to Russia and China.

I want to commend you for doing your best, but at the same time, point out that by doing your best under these circumstances, you've been part of an overall effort to fool the American public.

And I yield back.

REP. ACKERMAN: Thank you very much.

We're going to try to get all opening statements of our members in before we go to the floor for the last votes. So considering the limited time, the chair has consistently not used the clock, but I would ask members if they could, in brevity, just out of deference to those who want to get it in before we recess.

The ranking member of the subcommittee.

REP. ED ROYCE (R-CA): Well, I want to thank the chairman for holding this hearing.

I don't think any of us dispute that Iran is one of our greatest security challenges. It's been that way since the Carter administration. It's been that way since the campaign to depose the shah, and it is not going to change any time soon.

A state sponsor of terrorism, Iran is aggressively meddling in Iraq. It's meddling throughout the Middle East and even in our hemisphere. And when I say even in our hemisphere, I say it because in my home state of California, we had Mahmoud Karani (sp) come over the border of California in the trunk of a car and make his way all the way up, I think it was, to Detroit before he was found to be here as a Hezbollah operative, and along with some 50 other Hezbollah operatives who he was in contact here with in the United States. He was arrested. He's now in federal penitentiary.

I mention him also because his brother was in charge of security for Hezbollah. He was trained in Iran. His brother was in charge for security when I was in Haifa when it was being shelled in August two years ago, and I saw the damage that his brother was able to do with those missiles slamming into residential sections of that city, missiles coming from Syria and coming from Iran with 90,000 ball bearings in each one. And when I visited the trauma hospital there, I saw a little bit of the effect of 30 days' worth of attacks by Hezbollah.

By the way, the prime minister of Israel told me that a lot of the information they took as they overran positions while I was there included information that showed the Iranian involvement in the attacks, that showed Iranian officers had been present during the firing of some of these missiles.

One of the other things he shared with me was the incomprehensible nature of the way in which politics in the United States has gotten to the point where the one asset that Israel had and the United States had, as he shared with me, in this war was the ability electronically to monitor the phone conversations which would come out of Beirut or come out of the Middle East or come out of Pakistan so that people would know in advance about these attacks and the way in which we have allowed that information to be broadcast -- unfortunately, I might add, through partisanship -- be broadcast to the rest of the world, and, by the way, I would just add, the way in which right now it is much more difficult to monitor Hezbollah's operations.

So for those that are worried about what Iran and Hezbollah is doing today, a little bit of assistance for Israel and for the United States on the security front would be very, very helpful.

Now, yes, Iran appears to be near developing a nuclear arsenal. And we can debate that time line. It's either a couple of years or it's five years. What's certain is that regional security and our security will be seriously harmed if Iran develops that weapon.

Our diplomatic efforts to prevent this were set back by last November's National Intelligence Estimate. And I've got to tell you, that NIE was botched. The Director of National Intelligence has acknowledged its mishandling. The administration is correctly recasting the estimate's finding that Iran halted its nuclear weapons program in 2003.

Given Iran's insistence on enriching uranium and its ballistic missile program, it is clear to me that Iran has a nuclear weapons program. But while the NIE has handicapped our efforts to build international pressure against Iran before its release, before the release of that report, many countries were already making only half- efforts in that regard.

For some, the NIE became an excuse for not taking actions that they wouldn't have taken anyway. For those enthralled by multiculturalism, Russia and China have consistently blocked tough actions against Iran at the United Nations. This week in Shanghai, the major powers failed to agree on a common negotiating position. China resisted sanctions once again. Iran's considerable oil resources, it seems, give it a big shield, though many countries don't even appear much bothered by the spread of nuclear weapons.

So let's not pin this crisis wholly on U.S. policy shortcomings. It is a policy shortcoming of the civilized world that is failing to come together right now to bring the pressure that's needed. And the U.S. has taken some innovative actions. The Treasury Department has persuaded foreign banks not to provide financing for exports to Iran or process its dollar transactions. Some of you are familiar with those results.

More can be done to raise the cost of business in an already troubled economy in Iran. We've got a point now where you've got hyperinflation. You've got mass unemployment in Iran. That is because of their centralized economy. It is also because of the actions being taken by banks around the world.

We should add Bank Markazi, the central bank of terrorism. That should be targeted, and I'm sure it will be. Several countries are reducing credits for exports to Iran. Many of us have been involved in trying to get Europe to understand the necessity of not financing through these credits the Iranian economy.

Radio broadcasting is a powerful tool that worked in Eastern Europe as a tool to foment dissent and pressure the regime. You can listen on those programs. You can hear people say, "I've been standing in line here for gas for three hours, and this regime has the money to send to Hezbollah but not the money for refining here in my own country?" You can hear those broadcasts, broadcast across the country.

Multilateral discussions -- they're okay. But sticks are a must. The P5 plus 1 put many carrots on the table two years ago. They even included allowing Iran to resume uranium enrichment if properly safeguarded, and again, Iran rejected this offer, gaining time. Two years later, facing Iran's nuclear push, time is not on our side. We need to levy as much pressure as possible, building our leverage as soon as possible, and we need to do it in a bipartisan way.

Thank you.

REP. ACKERMAN: We have barely five minutes before being on the floor. Mr. Poe, do you think you can do this in a minute, or would you like to take --

REP. TED POE (R-TX): I'll be as brief as I can, Mr. Chairman. Thank you.

REP. ACKERMAN: You are recognized, sir.

REP. POE: Thank you, Mr. Chairman.

I had the opportunity to be in Iraq over Easter weekend to see our military and see General Petraeus. And while there on Easter morning at 6:00 a.m., five rockets came into the area in which a couple of us were staying. Later we learned that those rockets were all made in Iran.

And we also learned that possibly the people firing those rockets were just people that were paid money by the Iranian government to shoot those rockets into the Green Zone, because it appears that Iran will pay anybody in Iraq a couple of hundred dollars of U.S. money to put IEDs in the road or to shoot rockets. And after talking to General Petraeus, I think what we're doing there is good, except the main problem, of course, is the Iranians that are next door.

Iran has a history, a long history of being a rogue nation, and continues to do so. And if we're looking for blame, we can go all the way back to the Carter administration, where this mess started, and continues to this day. And for some reason, President Carter won't leave well enough alone, and he's meeting with our enemy, Hamas, tomorrow.

Hamas, Hezbollah, funded by the Iranian government, they're looking for any way they can to cause chaos in the world theater. And that includes us. Now the London Times reports that long-range ballistic missiles are in the Iranian area, capable of reaching not only Europe but our allies in the Middle East, including Israel. And so each day that passes, we are concerned about their growing military threat. And now they're moving into the area of nuclear weapons.

I serve as one of the two members of the United States House of Representatives as a representative in the United Nations. And we all know the United Nations continues to pass sanction after sanction after sanction against the Iranians, and, of course, we know those are hollow words. It doesn't seem to do much, in my opinion, to stop the nuclear threat.

So my concern is, one, Mr. Ambassador, in the Iranian country itself, how do the people of Iran feel about this situation? And is there a movement in Iran to replace their own government? What is the status of that? What direction is it moving in? And, of course --

REP. SHERMAN: Mr. Poe, we really do have to go vote.

REP. POE: And -- I'll have the other questions later. Thank you, Mr. Chairman. (Laughter.)

REP. SHERMAN: Thank you.

(Recess.)

REP. ACKERMAN: The subcommittee will come back to order.

I'm pleased to welcome our two distinguished witnesses. I may be critical of the administration's policies, but I have nothing but respect for the two exceptional public servants that we have here with us today.

Ambassador Jeffrey D. Feltman is principle deputy assistant secretary of State in the Bureau of Near Eastern Affairs. A career member of the U.S. Foreign Service since January '86 until January 25th of this year, he served as U.S. ambassador to Lebanon having been sworn in in July of 2004. Before his posting to Lebanon, Ambassador Feltman headed the Coalition Provisional Authority's office in the Ibril Province of Iraq and simultaneously served as deputy regional coordinator for CPA's northern area.

From August '01 until December '03, Ambassador Feltman served at the U.S. Consulate General in Jerusalem, first as deputy principle officer and then from July '01 until September '02 as acting principle officer. In addition to staff positions in Washington, Ambassador Feltman has also served in Tel Aviv, Tunisia, Hungary and Haiti.

Ambassador Feltman, it's nice to see you again. I think the last time we met was a few years back in Beirut.

Mr. Daniel Glaser is the Treasury Department's deputy assistant secretary for terrorist financing and financial crimes. He is the primary treasury official responsible for the development and coordination of international anti-money laundering and counterterrorist financing policy.

He serves as the head of the U.S. allegations of the Financial Action Task Force, TATF, and is co-chair of TATF working group on territorial financing.

Mr. Glaser previously served as the first deputy of the executive office for terrorist financing of financial crimes which is established in March '03 and prior to that as a director of money laundering and financial crime section within the Treasury's office of enforcement.

Mr. Glaser has also served as senior council of financial crimes in the office of the Treasury's general council and prior to that as an attorney in the U.S. Secret Service Office of the Chief Counsel.

Welcome to both of you. Without objection, your entire statements will be placed in the record, and I would ask if possible if you could summarize those statements in about five minutes each.

Ambassador Feltman, we'll turn to you and then we'll turn to Mr. Glaser.

MR. FELTMAN: Thank you, Chairman --

REP. ACKERMAN: Glaser -- Glaser.

MR. FELTMAN: Thank you. Thank you, Chairman Ackerman, Chairman Sherman, other representatives, distinguished members of this committee. Thank you for this opportunity to discuss U.S. policy options regarding Iran.

I'd like to put Iran in context by noting some of the other challenges it poses for U.S. interests -- namely, its destabilizing regional policies, its role as the world's leading state sponsor of terrorism and the regime's oppression of its own people -- its oppression of Iranian society.

But first, I would like to offer a word of personal thanks to Chairman Ackerman for his leadership on Lebanon. There are many Lebanese who are heartened by the strong words, by the measures that Chairman Ackerman took in supporting Lebanese freedom from Iranian and Syrian control. And it was a source of strength through me during my three-and-a-half years that I was in Lebanon, so thank you very much, Chairman, for your leadership on Lebanon.

I also want to thank Mr. Pence for mentioning the important anniversary tomorrow. I think it's appropriate that we are discussing Iran now, this week, when we're commemorating tomorrow the 25th anniversary of the bombing of the U.S. Embassy in Beirut. Iran's targeting of U.S. personnel, of course, began early with the 1979 takeover of the U.S. Embassy in Tehran. But it took on a new order of magnitude in Beirut in 1983. And so throughout my tenure as ambassador to Lebanon, you know, I faced the problem of Iranian support for terrorism everyday in the form of Hezbollah.

In terms of Iran's destabilizing behavior, Iran undermines the elected government of Iraq and endangers our soldiers and diplomats by providing lethal support to Iraqi militants. Speaking about Iran's maligning influence in Iraq, on April 10th the president said that the Iranian regime has a choice to make -- it can choose to live in peace with its neighbor, enjoying strong economic, religious and cultural ties, or it can continue to arm, fund and train illegal militant groups which are terrorizing the Iraqi people and turning them against Iran.

While we would like to see a peaceful relationship between Iran and Iraq, make no mistake, the United States will act to protect its interests, our troops and our Iraqi partners.

We've talked about Iran's destabilizing influence in Lebanon, but Iran also underlines the Israeli-Palestine peace process. Through its support for terrorist groups in Afghanistan, Iran destabilizes the Karzai government through assistance to the Taliban.

Let's now turn to nuclear issue, which is the topic of the testimony today. Iran continues its disregard for the demands of both the International Atomic Energy Agency and the United Nations Security Council for the suspension of its enrichment and related reprocessing activities.

The December 2007 National Intelligence Estimate, which many of you mentioned in the opening remarks, makes clear that Iran's leadership remains committed to two key elements of building a nuclear weapon -- acquisition of high-grade nuclear material and development of a capable delivery system.

And as Chairman Sherman and others noted, Tehran can restart the third element, weaponization, any time, and conceivably could already have taken that step.

We remain committed to finding a multilateral diplomatic solution to address the threat posed by Iran's nuclear proliferation-sensitive activities and its overall destabilizing influence in the region.

We are pursuing a duel-track strategy toward Iran in concert with the five permanent members of the Security Council plus Germany -- what we call the P5 plus 1. The first track is the incremental escalation of pressure that you've asked for, Mr. Chairman, in your remarks -- incremental pressure to encourage the Iranian regime to revise their strategic nuclear calculus, to abandon once and for all Iran's long-term nuclear weapons ambition.

The second track of our policy is that P5 plus 1 package of incentives that would cover the gamut of political, economic, technical and social benefits, including the guarantee of nuclear fuel for a genuinely verifiable civilian nuclear energy program.

In addition, Secretary Rice has stated numerous times, in an offer first made in May 2006, that should Iran meet its Security Council obligation to suspend Iranian enrichment and other proliferation-sensitive activities, at that time, she would personally sit down with her Iranian counterpart any place, any time, to discuss all issues.

Let's look at the pressure points. Over the past year, we've had a number of successes in dealing -- in working with our partners to increase the pressure. In March 2007, the Security Council unanimously passed, under Chapter 7, U.N. Security Council Resolution 1747, which followed up on an earlier one of the previous December -- 1737.

The pressure increased again with the passage last month on May 3rd (sic/March 3rd) of U.N. Security Council Resolution 1803. We believe that the strong support for 1803 -- the fact that we were able to maintain the international consensus regarding Iran's nuclear ambitions shocked Tehran and further demonstrated the international community's profound concerns over Iran's nuclear program.

Iran's cooperation the IAEA to date has been incomplete and -- (inaudible). And the U.N. Security Council has requested a follow-up report from the IAEA on or about June 3rd to answer two simple questions -- has Iran fully and verifiably suspended its proliferation sensitive nuclear activities?

And, is Tehran in compliance with its international obligations as outlined by the IAEA Board of Governors and U.N. Security Council Resolutions 1737, 1747 and 1803?

I assure you, Mr. Chairman, the U.S. will continue to pressure Iran through a range of financial matters -- both unilaterally, and in coordination with the international community, to halt Iran's nuclear proliferation efforts, as well as to stop its support of terrorism.

I'm sure Danny will go into more detail on the important role Treasury is playing -- and many of you made reference to that in your own remarks, but let me say that this strategy is working. Around the world, firms and banks are pulling back from investments in, or deals with, Iran. More and more firms, countries, companies, individuals are recognizing the risks of doing business with Iran.

In closing, I note that Secretary Rice noted at Davos that the United States has no desire to have a permanent enemy in Iran, even after 29 years of difficult history. We have no conflict with the Iranian people. An important part of our Iran strategy is to build bridges to the people themselves through exchanges and other outreach programs, such as the broadcasting that's so important.

And, indeed, should Iran comply with its U.N. Security Council obligations to suspend enrichment and cooperate with the IAEA, the secretary has said, I quote, "We could begin negotiations, and we could work, over time, to build a new, more normal relationship -- one defined not by fear and mistrust, but growing cooperation, expanding trade and exchange, and the peaceful management of our differences."

Iran should take this opportunity to rejoin the international community, build better lives for its people, and support peace and stability in the region. Thank you.

REP. ACKERMAN: Department Assistant Secretary Glaser.

MR. GLASER: Thank you, Chairman. Chairman Ackerman, Chairman Sherman, and distinguished members of the subcommittees, thank you for the opportunity to speak to you today about the Treasury Department's actions to counter Iran's proliferation activities and support of terrorism.

Working with our colleagues at the State Department, foreign governments, and the international financial community, we are implementing a strategy to apply financial pressure on the Iranian regime. In my remarks today I will discuss this strategy, including the financial aspects of the threats we face from Iran, Treasury's efforts to counter these threats, and the impact our actions are having.

Iran has demonstrated a clear disregard for the international community by continuing its pursuit of a nuclear capability in defiance of numerous U.N. Security Council resolutions. In fact, Iran has announced to the world the expansion of its nuclear efforts. Iran further poses a threat to the international community through its support of terrorism. Iran has long been a state sponsor of terrorism, and provides extensive support to Hezbollah, Hamas, Shiite extremist groups in Iraq, and the Taliban.

The challenge of this dual threat is exacerbated by Iran's integration into the international financial system, its deceptive financial practices, and its lack of an effective framework to combat money laundering and other illicit finance. In fact, terrorist financing is not even a crime in Iraq -- in Iran.

Iran uses various techniques to engage in seemingly legitimate commercial transactions that are actually related to its nuclear and missile programs. This deceptive behavior, coupled with Iran's access to the global economy, gives the Iranian regime the financial capability to support its activities.

All of this adds up to enormous risks for the international financial system. With this in mind, Treasury is implementing a three-prong strategy to counter the multiple threats Iran poses to the international community:

First, we are using sanctions to target Iranian individuals, companies, and branches of the Iranian government that are engaged in proliferation and terrorism activities. In doing so, we are barring them from accessing the U.S. financial system and exposing their behavior to the world. Our actions have targeted, among others, four major Iranian banks and Iran's ministry of defense.

Second, we are working with our allies to make sure that Iran can find no safehaven within the international financial system. Recent actions by the United Nations and the Financial Action Task Force reflect a broad international consensus, not only that Iran's conduct is unacceptable, but that financial measures are a vital component in countering it. The challenge now is for countries to fully implement commitments that are reflected in these agreements. The international community has made progress in this regard, but there is considerable work to be done.

Third, we are engaged in a strategic dialogue with the international private sector to reinforce the risks of doing business with Iran. We have met with more than 40 leading financial institutions world-wide. As part of our outreach to the international financial community, we have issued public advisories informing -- providing information about Iran's deceptive financial practices and warning them about the specific risks of doing business with Iranian financial institutions. The most recent of these formal advisories warns the financial community of the deceptive conduct of the central bank of Iran itself.

We are seeing indications that our actions are having an impact. With mounting evidence of Iran's illicit behavior, the international financial community is deciding that doing business with Iran is too risky. The world's leading financial institutions have largely stopped dealing with Iran, and especially Iranian banks, in any currency. Iranian financial institutions and businesses have been left with reduced access to private international financial institutions, and a lessened ability to attract international investment and capital. Those Iranian financial institutions and businesses that do continue to operate in the international financial system are doing so under intense scrutiny and vigilance.

I would close by saying that we recognize that financial tools alone are not enough to solve this problem. But financial measures are an integral component of U.S. and international efforts to counter Iran's threatening behavior. Through our authorities and our engagement with our counterparts around the world, we are implementing a financial strategy that is having an impact. This impact will only be enhanced as the international community continues to crack down on Iran's illicit financial behavior through national action, and through organizations such as the United Nations and the FATF.

The international financial system is becoming an increasingly challenging and unfriendly environment for Iran's illicit conduct. But it is important that we, and our international partners, keep up the pressure. This remains a top priority for the Treasury Department, and we will continue to work closely with our colleagues at the State Department, at foreign governments, and in the international financial community to maximize the effectiveness of our efforts.

Thank you, Mr. Chairman. And I'm happy to taken questions.

REP. ACKERMAN: Thank you, Mr. Glaser.

Ambassador Feltman you, in your -- in your testimony, for which we thank you, you note that we have been working with our friends in the international community to put pressure on Iran. I recalled once -- I'll do it again, when I was young and misbehaving, and my mother would warn me that my behavior was unacceptable, she would then lay down the law and tell me that I'd better stop doing whatever it was I doing by the time she counted to five.

And the discussion went something like: one, two, three; having no obvious effect on me, she went, three-and-a-half, three-and-five- sixteenths, three-and-six-sixteenths. I was able to learn fractions pretty quick that way (laughs) -- into sixty-fourths, as a matter of fact, figuring out that there was no limit to my mother's patience. And if the question ever came up -- "stop it," or "stop that," or what else, it would be: "wait until your father gets home."

We seem to be almost, with regards to Iraq (sic), single- parenting Iraq (sic) -- Iran, single-parenting this situation. What is the "or else?" We'll tell the U.N.? I don't understand the pressure. Working with our friends in the international community means what?

And I do acknowledge the work that Treasury and State has done with the banking sector, to good measure, which has -- which has certainly been refreshingly useful and helpful.

But outside of that, such as the incident and sidestepping the whole thing, such as at Switzerland that I cited specifically, could you name one country -- just one country that we've sanctioned or one company -- any one company in the entire planet earth or any other planet you might want to think of -- Pluto no longer counts -- one company that's been sanctioned for dealing in contradiction of our laws?

MR. FELTMAN: Mr. Chairman, in my remarks I mentioned the multilateral aspects -- the working with our friends. The dual strategy approach of working multilaterally both to offer incentives and to increase the pressure in order to try to persuade Iran to change its calculus.

And one reason why the administration has moved in this direction is after consultations with many members of Congress, after seeing study after study that says in order to get at the Iran problem effectively, you need to work multilaterally -- the GAO report talked about the importance of multilateral sanctions and things like that.

So one reason why there's been such emphasis on the multilateral approach is because there seems to be broad recognition that working together will have a greater impact. And that's one reason why the P- 5 plus one process, in our view, has been so important.

If we go back to a year-and-a-half or two years ago, I think the allegations that it's business as usual for Iran were probably more accurate than they are today. Since December 2006, we have had three Chapter Seven Security Council resolutions. These have included sanctions on entities and individuals that are very close -- that are part of the heart of the Iranian regime.

The World Bank has not made any new lending to Iran since 2005. The World Bank has just announced that they don't intend to do anymore lending to Iran. The banks that have been mentioned are the major banks of Iran.

This is an excruciatingly time consuming process. It's not always easy to work multilaterally. You mentioned in your opening remarks about the Iranians having to put up with the, you know, lectures from self-righteous European diplomats. Well, I think all of us have had lots of lectures from self-righteous European diplomats on these sorts of issues. But the point is, the P-5 process is still working.

We have Russia, China, the other Security Council permanent members and Germany inside this process that is looking at multilateral sanctions, autonomous sanctions with the EU, within the United States. All of these things --

REP. ACKERMAN: How does looking at sanctions change Iranian behavior?

MR. FELTMAN: Our hope is that Iran's calculus will change. I'd like to think --

(Cross talk.)

REP. ACKERMAN: And I would --

MR. FELTMAN: -- pressure increases.

REP. ACKERMAN: I would respectively suggest that we should give up on hope -- not give up on it in the abstract, but give up on it as a policy. Having a policy of hope is horse dung! You know, praise the Lord, but pass the ammunition.

Hope and prayer and having a faith-based administration and a faith-based foreign policy and a hopeful attitude that after seven- and-a-half years of this president, after eight years of the previous president, after four years of prior president, after four years of the president before that going back to the Eisenhower administration that introduced nuclear to the Shah of Iran, hope is not a plan and prayer is not a blueprint!

I don't dislike either hope or prayer, but I want to know what we do while we're praying, because praying doesn't always give you the answer that you want, because there's a billion other people who have prayers as well. But in addition to their prayers, they have a plan. And their plan is to have a nuclear bomb. And with that nuclear bomb, have an influence and effect that we don't necessarily ascribe to.

MR. FELTMAN: It is not business as usual with Iran.

REP. ACKERMAN: The chair will announce that everybody is welcome at our hearings. Everybody's entitled to an opinion. We would ask that people do not make hand signs or hold up signs. If you have something to say to anybody, send us a letter.

If that persists, I will ask the Capitol Police to remove you from the room. It is the policy of the committee to tolerate no demonstrations within -- and it is the policy of the Capitol Police to, in every case, place under arrest the person that is making the demonstration -- whether we disagree or agree with them.

Please continue, Ambassador.

MR. FELTMAN: Mr. Chairman, we believe that Iran is finding it increasingly difficult, expensive to do business internationally. Iran is increasingly isolated. Iran is having to spend more and more time to figure out how to do trading, financial transfers. The sanctions are having an effect. The calculus hasn't changed yet, perhaps, but the pressure is rising.

The international community remains united on --

REP. ACKERMAN: When you say the pressure is having an effect, does that mean that they've given up on their nuclear ambitions? Have they had the -- have any of the things we've asked taken place?

MR. FELTMAN: We want them to give up their nuclear ambitions. We all have that goal. We all have that goal.

Look at -- in the Security Council Resolution 1803, for example, that was passed in March --

REP. ACKERMAN: What did you want me to look at?

MR. FELTMAN: I'm sorry?

REP. ACKERMAN: What year did you just say we should look at?

MR. FELTMAN: Resolution 1803, for example, calls on the international community to exercise increasing vigilance on all banks -- not just the four that we mentioned -- all banks that are domiciled in Iran. It prohibits the export to Iran of any dual-use nuclear technology under the control -- and puts this under the control of the nuclear suppliers group.

There are increasing restrictions on Iran, increasing costs to Iran. This is a process that's ongoing.

REP. ACKERMAN: I'm sorry. I've not run the meter on anybody. I'm going to run it on myself. But I've taken a lot of time and not gotten an answer as to behavior in Iran that's been changed or one company or one country that's been sanctioned.

I'll turn now to Mr. Royce. Maybe he will have a greater success.

REP. EDWARD ROYCE (R-CA): Thank you, Mr. Chairman. I appreciate it.

Last week there was a report in the Times of London. They had photos that they showed there. They were satellite photos of an Iranian missile site that, according to experts, was of similar size to the Taepo Dong long-range -- long-range missile assembly facility that is in North Korea.

And the report indicated that Iran was following the same path as North Korea, as they put it. And there's been an agreement, I think, in the intelligence community for a while that Iran and North Korea have had cooperation on ballistic missile technology, but it becomes a bit murky when we try to assess this cooperation.

And so I was going to ask: Is this a matter of observation or is it a matter of cooperation -- Ambassador Feltman?

MR. FELTMAN: We've seen the press reports that you mentioned as well. And we've had a long -- longstanding concern about the Iranian- North Korean relationship and what it means in terms of missile technology and things like that.

I would suggest asking for a classified briefing with the intelligence community on this particular matter.

All I can say --

REP. ROYCE: Yeah. I think we'd like to know if it continues to this day. I think that would be a very pertinent question, given our involvement right now in negotiations with Korea.

The State Department's position was, "We've long been concerned about North Korea's relationship in terms of assisting in the proliferation of missile technology in a variety of different countries, including Iran." And so I'm trying to -- I'm trying to get some indication about whether there's signs of curtailment or whether this continues. And if you're suggesting a classified briefing, I -- I'll go that route. But if you could tell me, Ambassador, I'd --

MR. FELTMAN: I mean, this is a very real concern, what you bring up, Mr. Royce. And the -- you know the Shahab-3 missile -- 1,300- kilometer range missile -- very similar to what North Korea has. This is -- these are issues of real concern. North Korea has certain obligations. There are -- and Iran has certain international obligations, but I would prefer that this subject be gone into more detail in a classified setting.

REP. ROYCE: Okay. Very well.

Let me go to another point and I'm going to turn to Mr. Glaser. And I've followed for a while the efforts to try to get the information out to the international community about the way in which Hezbollah and other terrorist organizations are funded, and the consequences of this in terms of the decisions made in the international community. But I was going to ask you about another aspect of this, and that is you mentioned in your testimony the warnings issued by the Financial Action Task Force about Iran and its shortcomings in anti-money laundering practices. And this seems to be an important step in internationalizing your efforts, so I was going to ask you to expand for a minute on FATF's role and the impact on their statements.

MR. GLASER: Mr. Royce, thank you very much for the question because I do think you've touched upon quite an important issue.

The Financial Action Task Force is the premier international body for setting standards in the area of money laundering and terrorist financing, and then working to ensure global compliance with those standards, and it does so in a number of ways. With respect to Iran specifically, the FATF and, frankly, the International Monetary Fund reviewed the laws that Iran has on the books -- or frankly, the lack thereof in terms of money laundering and terrorist financing. And FATF took the quite unusual step this past October and then reaffirmed it again in March this past -- or this past February of issuing an advisory to all FATF members. And then it took even the more unusual step of expanding that advisory to the entire international community to call upon countries around the world to advise their financial institutions of the very real risks that Iran presents in the area of money laundering and terrorist financing.

As a result of that -- as far was we know, over 40 countries around the world have issued advisories to their financial institutions. This is part of our overall effort to create a dynamic between the private sector and governments to spur governments to action, to spur the private sector to action and then create a dynamic in which it's a self-sustaining process. And I think we've seen success in that in terms of -- as has been mentioned before -- the fact that the leading financial institutions in the world and, in particular in Europe, are not doing business with Iran anymore, and they're not doing business because they understand the very real risks that they face.

I would also just add for Chairman Ackerman -- and I certainly share the chairman's frustration in terms of being impatient to see as much success as we can. I think we all share the chairman's impatience and I do think it's important to note -- and I certainly agree with Ambassador Feltman that the -- that multilateral efforts are the only way we're going to be successful in making our sanctions as effective as they can be. That said, we are prepared to act unilaterally when we have the information and when it makes sense to do so, and we then see our actions multilateralized. We designated Bank Sepah unilaterally. It was then picked up by the United Nations as an example.

And I'll also just note that in March -- just this part March, March 2008 -- the Treasury Department did sanction Future Bank in Bahrain for being a joint venture with Bank Melli and Bank Saderat. That might not be as big a target as the chairman has in mind, but I do think it demonstrates to the international community that when we have the information and when the time is right, we will take unilateral action, and I think that does nothing but under -- add legitimacy and credibility to the efforts that we're undertaking.

REP. ROYCE: Going to another question, Iran, of course, doesn't have the refining capacity -- it doesn't have the money to put into create the refining capacity they need for their own gasoline and it still maintains a rationing system on gasoline to curb overconsumption. And several months ago, after Iran announced the rationing of gasoline, we saw angry drivers stalled in the streets. They were setting fires to gas stations in Iran, in the capital, and I think poor management of the economy there -- the command and control, and we're familiar with the 50-some economists in Iran who wrote that president -- that letter to the president explaining to him that he was tanking the economy.

But that's resulted in hyperinflation, it's resulted in high unemployment -- over 20 percent -- and I was going to ask you, Assistant Secretary Glaser, what is the picture of the Iranian economy? Where are the vulnerabilities? How do we produce the kind of change that eventually came to Eastern Europe?

MR. GLASER: Thank you, Mr. Royce.

Again, I think you're absolutely right. The Iranian economy is doing very poorly. You mention the inflation. They're having a hard time finding foreign investment to engage in the types of products that they want and that they need. Their banking system is subject to increased international pressure. They have recently dismissed key economic ministers. So I think it's a fairly bleak picture for their economy. What -- the cause of that is difficult to disaggregate between the utter mismanagement of the Iranian economy by the Ahmadinejad regime and the financial pressure that we in the international community are placing on them. I -- there is still a lot that we can do. There are -- as several Congressmen noted, there remain Iranian banks that have not been targeted by us and there remain Iranian banks that have not been targeted by the international community. And we're certainly looking at all of those.

REP. ROYCE: We really encourage you to move on that front on every banking institution that's involved in any way. I mentioned one in my opening statement that is involved in supporting terrorism. And to the extent that the international community can move on that front, it will be very, very helpful.

Thank you, Mr. Glaser.

Thank you, Mr. Chairman.

REP. ACKERMAN: Chairman Sherman

REP. SHERMAN: Thank you.

Let me first ask unanimous consent to put in the record these two charts that I have off to the side.

REP. ACKERMAN: Without objection.

REP. SHERMAN: The first illustrates what I said earlier, and that is that Iran has enormous natural gas reserves, does not have the capacity to export them, produces natural gas as a by-product of producing oil and flares 10 times as much natural gas as it would take to generate all the electricity they're claiming that they wanted to generate out of the Bushehr reactor. The second chart shows that both the last administration and this administration is violating federal law by failing to at least name and shame the companies investing over $20 million in the Iranian oil sector. That is to say, they're violating U.S. law to protect Tehran's business partners.

Mr. Glaser, the Financial Crimes Enforcement Network issued an advisory opinion to U.S. banks specifically warning that the Central Bank of Iran was using an array of deceptive practices to hide the bank's involvement in nuclear proliferation and terrorist activities. The governor of that bank made it easier when he said on February 5th that he was proud that his bank assisted private Iranian and state- owned banks to, quote, "do their commitments regardless of the pressures on them." In effect, he's announced that his Central Bank is helping those other banks evade the various sanctions that you've applied.

Why would we have FinCEN issue a warning about the Central Bank of Iran and their involvement in terrorism proliferation and not designate that bank pursuant to Executive Order 13224 or 13382, dealing with terrorism and proliferation?

I'll ask you to give a brief answer. I think I also have an answer.

MR. GLASER: Okay, I'll try to keep my answer brief. I'll tell you, Chairman Sherman, that we do share your concerns about the Central Bank of Iran. As you noted, they engage in deceptive financial practices. They try to strip names off of wire transactions. They assist designated banks conducting transactions. And as we've also noted before, they work with Bank Saderat to funnel money to Hezbollah. So --

REP. SHERMAN: Now you're repeating my question. I want the answer to the question. Why haven't you designated it?

MR. GLASER: Well, the simple answer is that we're in the middle of a campaign to apply financial pressure to Iran. The United States, through that FinCEN advisory that you're talking about, which came out very recently, is the first time the United States or anyone in the world has made a formal statement about the Central Bank of Iran. And I think it's very important that we did that.

It is also important that we -- taking action against the central bank is an extraordinary step. It is certainly something that is within our tool box. But I think it's also important that we work with our partners around the world to ensure that when we do take steps --

REP. SHERMAN: I think you've given us your answer.

Ambassador, you've said that our current campaign is working. It's obviously not working to change Iran's policy. The centrifuges are turning. It is working to get the press and the public off the backs of the administration and to fool them, and to even fool them to the point where we get answers like those given by your colleague.

Clearly at some point the Central Bank of Iran will be designated. We will dribble out these little tiny actions each time it's necessary politically to prevent any significant action. And so I'm sure that we'll eventually do the right thing with regard to the central bank, but as long as we put about six months or a year in between each tiny action we take, we can avoid taking any significant action until Iran tests a nuclear bomb.

Now, I said in my opening remarks that I hypothesized that the Bush administration has been seized by extremists in the defense of corporate liberty. Ambassador, what's the biggest example you can give me of when the Bush administration voluntarily inconvenienced -- really put a crimp in the style of any multinational corporation in an effort to deal with the Iran problem? Can you name any that go beyond just begging the corporation to change its policies?

MR. FELTMAN: Mr. Chairman, I'll get back to you after I talk to my colleague in the economic bureau about that. I don't have a ready answer for you.

REP. SHERMAN: I assure you, I've asked everyone at the State Department -- and oh, by the way, in my opening statement, everyone in this room -- to identify any circumstance where the Bush administration had voluntarily inconvenienced a multinational corporation to protect our security. And so far we're at 0.0 as an answer.

Now, there are five bills that have been introduced in Congress -- H.R. 957 from Ileana Ros-Lehtinen, to apply the Iran Sanctions Act sanctions to financiers, et cetera; H.R. 1357, requiring federal divestment; H.R. 1400, Chairman Lantos's bill -- may he rest in peace -- known as the Iran Counterproliferation Act; H.R. 2347, Congressman Frank's bill, the Iran Sanctions Enabling Act; and finally, H.R. 2880, Mark Kirk's bill, adding refined petroleum to the triggers for the Iran Sanctions Act.

Ambassador, does the -- can you name any of those bills which the administration either supports or is neutral about?

MR. FELTMAN: Mr. Chairman, I know you have --

REP. SHERMAN: That's a yes or no question.

MR. FELTMAN: You had an exchange with the secretary of State on these sorts of issues a few weeks ago. The secretary of State made it clear she's not afraid of using sanctions. She doesn't hesitate --

REP. SHERMAN: Sir, I asked you a yes or no question. I have very limited time here. Does the State Department take a support or neutral position on any of the five pieces of legislation I identified?

MR. FELTMAN: I'm not familiar with all five, sir.

REP. SHERMAN: As to any that you are familiar with.

MR. FELTMAN: Our policy is trying to use flexibility and firmness together to try to change Iran's calculus on its nuclear (thinking ?). I'm sorry I do not have the details on the legislative --

REP. SHERMAN: Well, I will ask you to respond for the record as to the five pieces of legislation. Just for your information -- I thought you'd be involved in these bills since they affect Iran -- the State Department is working to undermine and prevent the passage of each of these pieces of legislation, as far as I can tell, sometimes officially, sometimes unofficially.

To have all this talk about Iran and then to have the administration oppose every action and never take any action that inconveniences a multinational corporation is reflective of a duplicitous policy. I should point out that this is not the first administration.

Let's return to the Iran Sanctions Act. The charts are there showing over 40 investments that should have triggered that act. Some go back to the prior administration. We have a law that requires, at a minimum, the administration to identify, name and shame the companies involved. To not take that action is to violate American law, to protect Tehran and its business partners.

Without telling me how wonderful you think your sanctions are, can you tell me why the State Department has not even identified any of these transactions?

MR. FELTMAN: What I will say, Mr. Chairman, is there's lots of information that's under review right now, much of which you've provided to the State Department. But the offices involved are reviewing a lot of information in --

REP. SHERMAN: Some of these transactions go back to the Clinton administration. It is not my job to be the intelligence officer. These were provided chiefly by the Congressional Research Service. This is not because I have spies in the boardrooms of European oil companies. This is information that you have known about before I did; you have known about for a decade. And the State Department, under both administrations, has decided to commit the illegal act of refusing to take even the minimum steps required by law.

I think my time has expired. My patience has expired.

REP. ACKERMAN: If the gentleman would yield me 30 seconds of his remaining --

REP. SHERMAN: I yield you all my remaining time, Mr. Chairman. You can (define ?) how much it is.

REP. ACKERMAN: Let me just piggy-back on what you said, Mr. Chairman, in further response to Mr. Glaser's comment to the question of another member that he could appreciate the chair's impatience. It's basically not impatience. It's more of a frustration that the administration seems to have a deficit of impatience.

You seem to be acting -- and I know it's not the case -- but acting as if you believe that time was not running out, that you had all the time in the world, that the answer to the question by the ambassador, "We're going to look into it; we're going to check; we're not sure," not being able to come up with answers, and yet when there are legitimate legislative proposals, some of which are great, some of which are lousy, some of which are in between that the only response by the administration is they don't want any meddling or interference with this highly active process that's in the purview of the administration and nobody else should be involved.

Maybe one of us or one of them or one of someone will have an idea that somebody might want to latch onto.

But some of us, being accused of being impatient, realize that there's an impending disaster, there is an onrushing train, and you do not have all the time in the world, but you do know what time you all are getting off the tracks. And that'll be a problem then for the rest of us, whoever that president, Congress, administration, or set of our children and grandchildren if the planet goes that far, will be. And some of us, being accused of running out of patience, want to avoid that disaster.

No good will come of Iran's developing a nuclear weapon. Patience is a commodity whose value is in the fact that, at one point, it has to expire. And you all have to come to the conclusion that there are deadlines here, whether it's counting to five or waiting out the two years or so. And not coming up with an action plan and saying we're making progress because we're thinking about it when no evidence is there at all that progress is being made because you measure progress in altered behavior. And if behavior doesn't change, there are intolerable consequences that we all are going to face.

So I think what you're hearing here is more frustration than impatience. We're all on those tracks and the world is facing an impeding disaster. We don't really believe you're going to get back to us. How's that? We like you, you're nice, you're well intentioned. Your predecessor and your predecessor's predecessor and your predecessor's predecessor and to my colleagues across the aisle, throughout administrations have not gotten back to us. And we're more than peeved because the stakes are growing higher. So don't take us lightly. We are not the enemy, we're just getting pissed.

REP. SHERMAN: Mr. Chairman, reclaiming my time, I've been told orally by the State Department, "We're not going to do anything and you can't make us." I think that pretty well indicates the status of the situation. And I yield back.

REP. ACKERMAN: We shall move on. I believe Mr. Wexler was here first.

REP. ROBERT WEXLER (D-FL): Thank you very much Mr. Chairman.

I would like to ask Secretary Feltman if I could first about a specific case, very troubling case of Mr. Robert Levinson who lives in Coral Springs, Florida who disappeared from Kish Island, Iran more than a year ago, on March 9th 2007. As I know you are aware, despite attempts to track down Mr. Levinson, there is scant evidence that has surfaces regarding his whereabouts. His family and those who care deeply about him have become extremely anxious with respect to his safety and health, as you can imagine.

Mr. Levinson is a true patriot, a former FBI agent. His family has traveled to Iran, his wife and others, where they received the assistance of Swiss officials in Tehran. They visited the hotel where Mr. Levinson was last seen. They passed out flyers in Farsi with pictures and photos of Mr. Levinson. They met with local Iranian authorities to ask their assistance but the Iranian authorities have essentially said they know nothing and have not been particularly helpful.

I was wondering, in that context, if you could provide an update in terms of what is the situation with Mr. Levinson as far as we know, and what is it that the State Department is doing on his behalf?

MR. FELTMAN: Congressman, thank you for raising what's a very, very painful difficult case. And, in fact, this morning, as I was preparing for this hearing, I learned that, in fact, you've just sent a letter to the State Department as well, so we'll be responding formally by letter as well. But I'm glad you raised the case today.

I met with Christine Levinson, Mrs. Levinson and her sister, other family members, on March 6th, just over a month ago. And we've stayed in contact -- the Department and the FBI have stayed in contact with the Levinsons' family ever since the disappearance of Mr. Levinson in March of last year. We have used a variety of channels to ask the Iranians to investigate this.

Formally we have sent diplomatic messages through the Swiss -- diplomatic notes through the Swiss. The most recent one was on March 28th. Communication back from Iran, I would characterize as not very satisfying. They last sent us a message on this on January 1st, and basically said they have no idea what happened to Mr. Levinson after he disappeared from the hotel on Kish Island in March of 2007. We don't find this a very credible answer.

The Iranians also promised the Levinson family when they visited Kish Island in December -- they promised them to investigate. So we've asked the Iranians and we call on the Iranians to share the results of the investigation with the Levinson family. I assure you, Mr. Wexler, this is a case that we are following continually -- we will keep in touch with the family, share any development, share any leads, compare notes with them about how to get to this, but the Iranians need to share the results of any investigation with the Levinson family and respond credibly to our requests for information.

REP. WEXLER: I appreciate your response. I would urge you to use every tool at your disposal to push this matter as vigorously as possible. Obviously, this has lasted for more than a year.

If I could broaden my questioning -- if I may, I would like first to associate myself with the remarks of the chairman, Mr. Ackerman, and the chairman, Mr. Sherman. And would like to ask you a question maybe from a bit of a different perspective. I couldn't agree more with Mr. Ackerman in terms of his characterization of the scenario that we face, which is we are facing a pending nuclear disaster.

I would ask you this. Seems to me the legacy of the Bush administration on Iran is fairly simple. President Bush will leave office; Iran will be a stronger nation than when he took office; Iran will be far closer to becoming a nuclear power than it was when Mr. Bush took office; and Iran, unfortunately, plays a much more prominent role in supporting the financial terror network in the region and throughout the world than it did even as troubling as it was before Mr. Bush took office. So on almost any litmus test with respect to Iran, the Bush administration, in my view has been an utter failure. I recognize the progress that you have talked about in terms of the financial sanctions, and I applaud those efforts, although in the context of the threat that we are facing, it is still a somewhat limited accomplishment.

My question would be this. Mr. Glaser you talk about create a dynamic in which leading world institutions do not do business with Iran. Ambassador Feltman talks about a policy of flexibility and firmness. If I understand it correctly, we have engaged at very high diplomatic levels directly with Iran on two issues -- Iran's involvement in Iraq and Iran's involvement in Afghanistan. But this administration still refuses to engage with Iran on the two most pressing issues in terms of threatening nuclear capacity, we do not engage with Iran on the issue of their nuclear proliferation and we do not engage directly with Iran on the issue of their support for financial terror networks.

In the context of creating a dynamic, we have witnessed seven years of the Bush administration's policy of non-engagement -- diplomatic or otherwise, with Iran, with respect to their nuclear program, and we see the result: Iran is closer -- too close to becoming a nuclear power. And with respect to their support for terror, the Bush administration policy has not prevented their support -- it has not reduced it, it has not minimized it. The result, unfortunately, has been an increased financial support.

So the question is, to create that dynamic, wouldn't it be wise at this point to engage Iran with a system of carrots and sticks on the very issue that we're talking about here -- the very issue that threatens America, Israel and our allies the most, and that is the nuclear proliferation ambitions of Iran? Or, are we going to continue to keep the same path, continue the same behavior, and expect a different result, which I think many people define as insanity?

Please?

MR. FELTMAN: Congressman, thank you. Thank you for the question, and the way you framed the question, because, in fact, you've put it more eloquently than I did. This is what we're trying to do.

The choice for dialogue is Iran's choice. We have made the offer. And we've made the offer on the basis as you've described. We have, both unilaterally -- Secretary Rice's offer almost two years ago, as well as the P5+1, multilaterally.

What we have said to Iran is: Live up to your international obligations. These are not simply U.S. concerns; these are not simply U.S. obligations. Live up to your IAEA, your Security Council obligations, in terms of proliferation sensitive activities. Suspend enrichment now. We will talk tomorrow. We'll talk about anything. But we will also provide assurances on a nuclear fuel supply for a verifiable civil, peaceful nuclear program.

The scenario that you've described, in fact, is the scenario that has been proposed to the Iranians, and it's the Iranians who've said no. But we have offered -- we have offered a dialogue along those terms, and the Iranians have not said yes, because the Iranians have not suspended the enrichment that's required by the Security Council and by the IAEA.

REP. WEXLER: Mr. Chairman, may I have 35, 40 seconds more, if I may?

REP. ACKERMAN: (Off mike.)

REP. WEXLER: Thank you.

I would accept that answer except for one factual problem. The factual problem is, that six or seven weeks after we invaded Iraq, we now know that the Iranians sent an offer to then Secretary of State Powell offering to discuss their nuclear program, offering to discuss their financial support for terror.

And we know that Vice President Cheney crunched up the offer -- after it was authenticated by our State Department as being deemed approved by the highest authorities in Iran, and he chucked-up that offer, threw it in the wastepaper basket, and said, our policy is regime-change and regime-change only.

So now Secretary of State Rice, with all due respect, hides behind a policy that failed -- seven weeks after the Iraq war, we blew an opportunity then, and now we find ourselves with an Iran on the brink of becoming a nuclear power, and yet we continue the same policy.

REP. ACKERMAN: (Off mike.) -- (inaudible) --

REP. RUSS CARNAHAN (D-MO): Thank you, Mr. Chairman. Thank you, gentlemen for being here.

Back last November we had a briefing, some of us from the committee, from a member of parliament, Mike Gapes, who's chairman of the House of Commons, Foreign Affairs committee. And he had led a delegation to Iran to meet with some of their officials; talk about relations with the West; and especially express concerns about their nuclear program.

And some of these observations I wanted to ask you about. He thought there was some great potential for change in Iran, especially with their very young society -- the majority of their population was less than 30 years old, had no memory of the U.S. embassy incidents in the late '70s, early '80s; growing drug problems, especially with, emanating from Afghanistan; that opportunities for the West to be engaged in those efforts. And that their power structure there was very restrictive at the top, that plural -- more pluralistic below, and a lot of competing power centers. And thought there were opportunities to engage in some dialogue there.

I'd like to have your assessment of opportunities for dialogue, and change in -- with regard, in the context of Chairman Gapes observations from that visit.

MR. FELTMAN: Thank you, Mr. Carnahan.

This is a part of the U.S. policy toward Iran we haven't talked about much today, which is our hope to engage directly with the Iranian people, just as Chairman Gates (sic) told you when he -- when you saw him last November.

We agree that there are opportunities here. And, in fact, with the appropriations from Congress, we have been able to do things like increase broadcasting into Iran. So, Voice of America is now broadcasting 24 hours a day in Persian, with an increase of original Persian broadcasting from two hours a day to eight hours a day. Radio Farda, which is aimed at a, at a young audience, with music and things like that, Radio Farda has -- we've been able to improve the broadcasting into Iran because of support from the Congress.

We have also renewed exchange programs with Iranians for the first time since '79. So, we are looking for these opportunities, as described to you but Chairman Gates (sic). We agree there are opportunities --

REP. CARNAHAN: But, what about -- what about cooperation with the drug trade emanating out of Afghanistan?

MR. FELTMAN: There could -- there may be opportunities there as well, because we certainly have a deep concern about the drug problem out of Afghanistan. But out bigger concern in Afghanistan right now, frankly, is that the IRGC -- the sort of, you know, the terrorist outreach group of Iran, is working with the Taliban and shipping weapons, in violation of various Security Council resolutions, into Iraq -- into Afghanistan.

So our concern on Afghanistan right now, with Iran, is different than the drug problem.

REP. CARNAHAN: I want to ask also about the National Intelligence Estimate that was issued in November of last year stating that Iran suspended work on weaponization in 2003. Is that still the position of the State Department?

MR. FELTMAN: You know, I'd have to defer to the intelligence community on this, but I think the National Intelligence Estimate is also clear that they could start their weaponization up at any time, and that some of the long-term infrastructure things, like enrichment, they were still committed to doing.

So, I wouldn't want to be complacent by some of the Press reports that came out after the NIE. The findings in the NIE were still very stark and very -- and of great concern, and it's helped us continue this international coalition that we talked about, in terms of trying to restrain Iran's nuclear ambitions.

REP. CARNAHAN: Finally, I wanted to ask about China and their recently providing -- provided the IAEA with intelligence on Iran. Does this, do you believe, signal a shift in their willingness to cooperate?

MR. FELTMAN: China is part of the P5+1, and China has voted for all three of these Chapter 7 resolutions we talked about -- 1737, 1747 and now 1803. China has to be part of the multilateral effort to help persuade Iran to change its calculus. And so far China is part of this international -- international consensus. It's not an easy -- it's not an easy process we've talked about, but China is part of the international consensus.

REP. CARNAHAN: Okay. Thank you, gentlemen.

MR. FELTMAN: Thank you.

REP. ACKERMAN: (Off mike.)

REP. DAVID SCOTT (D-GA): Thank you.

Last week, when General Petraeus and Ambassador Crocker came before our full Foreign Affairs Committee, and they asked him the question, specifically, if they were preparing for -- if the administration was preparing for a possible shift in policy, with the anticipation of the upcoming presidential elections.

You know, much has been mentioned about time. And we're at a very critical point. We're at a very crucial point, because we know the presidential elections are before us; and surely as we know it, the world knows it. And we've got some significant decisions to make here.

In the face of all of this, we have a 200 -- 2007 estimate, National Intelligence Estimate that comes out and reverses almost everything we had been talking about we've been running. What's the whole point? What validity did the sincerity and the seriousness of economic sanctions carry with other nations when we've used the whole pretense that they're moving towards acquiring nuclear weapons, and then we come out with a National Intelligence Estimate that says, no, that's not true. They stopped that in 2003. What in the world? What kind of messages? How stupid is this administration looking to the world? And then you expect other countries to take us seriously?

Well, when I asked that question of General Crocker -- General Petraeus and Crocker, they said, well, no. We only serve one boss at a time. Well, they may have that luxury, but I don't nor do the members of Congress. I serve about 500,000 or 600,000 bosses. Collectively, as the Foreign Affairs Committee, we represent about 300 million bosses. And these bosses are growing very, very impatient!

Now, we've got an election coming up. We've got to change policy. We need to have and send a clear message to the word -- what in the world are we going to do with Iran? Iran is the elephant in the room of China, of Russia, the United States -- of everybody in the world. I mean, they are the apex of everybody's concern, because if they get a nuclear weapon, a cascade rolls. It'd be a cascade of events, because then Egypt and Saudi Arabia get nervous -- they got to have one. And they get one, then Turkey's got to have one.

Then you've got the -- Iran is so unique and it is Muslim, it's Islamic. But it's not Arab. It's Persian. It's Shi'a. When the opposition in that much of the region is concerned about the Shi'a from Sunni to Sunni -- from Sunni to Shi'a, it's very, very critical. So this is a very, very critical situation.

So I guess what I'm saying here is that, how realistic -- what are you saying -- I understand your answer in reference to the National Intelligence Estimate was rather muddled. I mean, what's the point of that? How could the administration not know what the estimate was in 2003? And for four long years we carried on a policy that was based just to the opposite of what that -- how do you explain that?

And then why don't we have contingency plans in place? You're going to be, certainly in your positions, for six, seven more months. We're going to have a new administration. The American people have already spoken. We've got to have a new direction, a new policy. And what we've got to do as members of Congress and members of this administration -- we've got to put all these differences aside.

We've got to get some honest dialogue going between this branch of government and the executive branch of government to get all our information tighter, because I'll tell you the other thing: If this country continues to lose the credibility that we once had, I mean, then you've got people going to their own means.

And I guess my question, as I get around to it, is: Within this policy, I want to get a clear understanding of what is the assessment? Are they getting nuclear weapons? What is the intelligence saying? I sit on the NATO Parliamentary Assembly and we have our NATO -- everybody's up in arms about building this missile defense system in Eastern Europe for what? To stop Iran in the case of nuclear weapons! But yet we have an estimate here that says they're not having nuclear weapons. So you've got Russia up in arms -- what's the point? Why are building this thing next to us? Are you coming after us?

So I think there's a lot of mixed signals that are going forward. I think we do need a shift in policy. It needs to be direct and then we need to seriously consider about the military option. Is there -- is there a need to have that military option on the table dealing with Iran? Do we weaken ourselves when it is not? And I'm not advocating any preemptive war as we did in Iraq or anything else.

I am saying that the rest of the world is looking to the United States to set the curve on this, and gentlemen, we are falling mighty, mighty, mighty short.

So my pointed question is this: how serious -- what is the situation in Iran and their ability for nuclear weapons today? How much credibility is there still in this report from the National Intelligence Estimate? Do we believe that or where are they in their nuclear capacity? And then thirdly, what about that military option? Is it there? Is it not there.

If you could address those three points for me, please.

MR. FELTMAN: Congressman Scott, thank you.

Iran has never come clean on what it's doing or has done in terms of weaponization. That's the basic issue. The international community can have no confidence when Iran states that it is establishing a peaceful, civil nuclear energy capacity like any other country would have the right to have. None of us can have confidence that those statements are true without IEA -- IAEA verification, without a credible statement from Iran of what it has done in the past and what it's program is about now.

The NIEA -- I'm sorry -- the National Intelligence Estimate that you referred to from December made it clear that Iran did have a weaponization program. Iran has never come clean with that information. Iran has never answered the International Atomic Energy Agency's questions about the weaponization program that proceeded 2003, 2002. So how now could we have any confidence in what Iran says today?

The NIE -- the National Intelligence Estimate also made clear that there were other parts of the Iranian nuclear program that were continuing apace. So weaponization could start again at any time and perhaps already has started. I don't -- none of us can be complacent about what it is that Iran's up to, because none of us really know what Iran is up to, because Iran has never shared the information as Iran is required to do so under its international obligations.

REP. SCOTT: Ambassador, the point is, though, why would not the --

REP. SHERMAN: Mr. Scott, I believe your time is --

REP. SCOTT: Could I just ask this one -- just take 10 seconds on this. It's very important. Then I'll be finished.

REP. SHERMAN: I'll tell what -- ask a 10-second question for the record. And then we'll add --

REP. SCOTT: The 10-second record for the question is your points are very well taken, which begs the point of why it is a part of the current United States policy not to even talk with Iran about its nuclear program! I don't understand how we can complain and not have --

REP. SHERMAN: I thank the gentleman for his question.

REP. SCOTT: Thank you, Mr. Chairman.

REP. SHERMAN: We look forward to an answer for the record.

And we now call upon the gentleman from California.

REP. ROYCE: Thank you very much, Mr. Chairman.

I'd like to -- we've talked a lot about the sanctions issues. I'd like to turn it in a different perspective.

In terms of the international and U.S. sanctions imposed on Iran on date -- would either one of you care to comment briefly as to an observable change or effect that it's had on the Iranian decision- making process?

MR. GLASER: Thank you.

I think it's certainly an important question. And as I said in my opening statement, I think when we look at the financial pressure we're trying to bring to bear on Iran, we all understand that this is one component of what needs to be --

REP. ROYCE: No, no. I understand that. It's a simple question. Is there any observable change in the decision-making process among the leadership in Iran on the sanctions? I mean, you don't need to restate the question. Yes or no?

MR. GLASER: Yes. I think that there has been an observable --

REP. ROYCE: Mr. Ambassador, would you like to respond?

MR. FELTMAN: Okay. We think there has been -- insufficient so far.

REP. ROYCE: And what's the evidence that you'd cite on the observable change in the decision-making process?

MR. FELTMAN: Things like how the banking system is working, how they're trying to find other channels, things like that. They're a bit off-balance. It's not sufficient yet, I agree.

REP. ROYCE: Well, on that point, if they're now exploring other channels, wouldn't that suggest that we explore other channels as well? I mean, if you look at the evidence that has been provided thus far and you look at what, in my interpretation, is somewhat of a sieve that has taken place -- i.e., these sanctions -- because there's a lot of folks that just aren't participating or there's a lot of things that are going under the table. I would suggest that it seems to me that they're not having the impact they ought to be having.

Let me ask you this question. The meetings last with the group of six took place in Shanghai. Is that not correct? What progress was made on that point? Can you respond quickly? I have a couple more questions.

MR. FELTMAN: Basically the political ministers of the P5 plus 1 reaffirmed this dual-strategy approach; try to offer Iran a strategic choice using carrots and sticks. It was basically a renewal of --

REP. ROYCE: I understand what they did, but what was the outcome of the meeting?

MR. FELTMAN: What I would say that the outcome of the meeting was was that this international commitment to dissuading Iran remains strong and that we're all waiting for the June 3rd IAEA report.

REP. ROYCE: Do you have anything else to add to that, Mr. Glaser?

MR. GLASER: No, certainly not on --

REP. ROYCE: Okay. Well, no, that's fine.

Let me pose another thought, and that is, you know, under the category of what's working and what's not working. It's my understanding that Saudi Arabia has greater trade by a large amount than Iran does with China. Saudi Arabia has much more economic activity going back and forth with China than does Iran and China.

It seems to me that with our influence with Saudi Arabia and China that we ought to maybe develop another alternative, i.e., thinking out of the box with Russia and with others, that we would be willing to reconsider some of the issues in terms of direct communication with Iran for a verifiable agreement that there would be no more expansion or development of nuclear weapons and their other missile capability.

I mean, it would have to be -- I think we'd have to have some of our partners really come together on this. But it just seems to me that if you say they're exploring other channels down, if you think that's been part of the effect of the sanctions that I think have had a limited impact, then maybe this is the time to change the strategy to really force them to come up with an option where they can have an opportunity to make a deal or not. Mr. Ambassador?

MR. FELTMAN: I think the Iranians have been presented with a deal -- "Suspend enrichment and you've got all these incentives. We'll work with you in a variety of different ways." The Iranians so far have not made that strategic choice that we all want them to make.

We're all trying to find the right formula, the right combination of pressure and non-pressure. And all options remain on the table to try to help persuade Iran to move in this direction, to make the right strategic choice.

You know, it's not an easy process, as I think --

REP. ROYCE: No, we understand that.

MR. FELTMAN: -- this hearing today has made clear, as the testimony today has made clear. But I'm somewhat skeptical of some of the press releases that come out of Iran. Iran is trying to project to the world that it really is business as usual. Then we find out that, in fact, some of these things haven't happened. You know, Iran announces that the China national offshore oil companies made some deal, and then nothing ever happens.

You know, we listen to Ahmadinejad's really offensive comments about 9/11 or about Israel, but then somehow we take his comments about centrifuges as though these must be credible, even though his stuff on 9/11 and Israel is not credible. And I note a Reuters report from today from Mohamed ElBaradei, the head of the IAEA, has said that Iran's centrifuges are working well below capacity, which is good news so far.

But I think we are having an impact. Iran hasn't made that choice we want them to make, that Iran must make. But I believe that the combination of the unilateral things that we're doing, the multilateral things we're doing, the work with the Gulf, with the Arabs on their own security requirements, on what we're doing to try to reach the Iranian people together directly, talking to the Iranian people through exchange programs, through broadcasting -- our work with the IAEA is important in this regard. I think all of these things together are having an impact. It's not sufficient yet, but this is an incremental process.

REP. ROYCE: Well, I have other questions, but my time has expired.

Thank you very much, Mr. Chairman.

REP. SHERMAN: Ms. Jackson Lee.

REP. SHEILA JACKSON LEE (D-TX): Let me thank the gentlemen for their presence here today, and realize that any delay by members are overlapping meetings and presence on the floor.

As the hard work that you have to do, I want to start out by thanking you and Secretary Rice, for I certainly believe that the State Department and diplomacy, along with the work that the Treasury Department does on these issues, is a vital complement to times when there is no other option but to engage in a war.

I happen to think that we have done the American people a disservice, and I might read a headline that is comprised of a number of articles, but it reads, "With a political surge, Bush ducks hard choice." And the byline is "Ending the Iraq war will be the next president's problem."

What it says is that it could be solved by this administration, but there are choices that the administration has made. And from my perspective -- and you are good public servants -- that the administration has selected a war strategy.

And I would just chronicle for my colleagues and for the witnesses -- and I'll have one simple yes-or-no answer at the end -- is that a fledgling democracy, as we were, with commitment and dedication, can fend off an economic and military giant. We did that, the Revolutionary War against England. And I don't know why we think that we can win against what seems to be small and fractured nations.

So I ask the witnesses whether they've looked at Iran in this manner. And I heard this discussion earlier this morning, and I have sort of soaked it in and find it to be very reasonable.

One, Iran has a very poor economy. It's in a mess. The government is poor. The president is not the most stellar leader. And frankly, if you pierce the structure of government, which is something I was aware of even before the discussion this morning, the mullahs are really in charge. They can overturn presidential action. They can overturn parliamentary action. And so they have the real power.

One asks the question, has anyone attempted to sit down with this cautious body of religious leaders to negotiate with them from a position of force? We are a nuclear power. Has anyone suggested that Russia has a stake in ensuring that Iran does not become a nuclear power, and therefore coordinating with Russia to put pressure?

There's nothing wrong with negotiation through pressure, through using the stick. But I think there has to be an enormous caution about even throwing down the attack mode. Yes, we have the capacity to do it. They're reading everything that is going on in this hearing and everything we say publicly and all that we say in a classified manner, so nothing that we say is in secret.

The constant battering of a military threat reminds me of the saber being rattled, but to no avail. I think it is important to note that Iran is not Iraq. To try and occupy Iran would be an impossible task. It has a massive army. The army is ready to go. It is a guerrilla-type army.

So I think we're fooling ourselves when we suggest that that is the option we would like to take. That doesn't say it is not an option. And I am as concerned with a safe Mideast, the protection of Israel, peace in the Mideast, but I think that we have been on a wrong track from the time we decided to hand over the authority of war, if you will, as interpreted by this administration, in 2002. We were right after 9/11. We were wrong in the fall of 2002, and we continue to be wrong.

My question, then, to you gentlemen, if I've given at least a limited analysis that may have some glimmer of correctness -- the mullahs, the economic mess that we're in, and the fact that the Iranian people, many of them, have exhibited their frustration with their own government -- why are we not using the long, strong arm of negotiation? Why are we not at the level that you're at, the level that -- the number of secretaries that we have in the State Department, why are we not in the long, hard arm of negotiation?

And my question to you is, will this government, this administration, before January 20th, midday, and the swearing in of a new president, have the capacity to alter its thinking and even begin discussions. And I guess I don't want to hear we've begun to begin discussions at a reasonable level that suggests the structure that I've just said -- the mullahs and others.

REP. SHERMAN: The time of the gentlelady has expired.

REP. JACKSON LEE: Can I get them to answer yes or no, please?

REP. SHERMAN: I'll give the ambassador 30 seconds to respond, or hopefully a yes or no would be better, and any additional response can be furnished for the record.

REP. JACKSON LEE: I thank the chairman.

MR. FELTMAN: Yes, we are committed to a diplomatic negotiated solution to this problem. That's the yes answer.

REP. JACKSON LEE: Will you do it before you get out of office?

MR. FELTMAN: There are talks, as we've seen, in Iraq, tripartite talks. They have not been promising. We are committed to a negotiated solution to this problem, but there must be a solution to this problem. That's the basic issue. There must be a solution --

REP. JACKSON LEE: You're talking about Iran?

REP. SHERMAN: The time of the --

REP. JACKSON LEE: Is he talking about Iran?

REP. SHERMAN: Iran, yes.

REP. JACKSON LEE: All right. I don't think so.

I thank you, Mr. Chairman.

REP. SHERMAN: The time of the gentlelady has expired.

I would quickly point out that even those that are talking about any military action -- I'm not amongst them -- talk about an effort to destroy nuclear facilities, perhaps by Air Force action. I don't know anybody who's talking about the idea of invading, occupying and remaking Iran. And the gentlelady is wise to point out just how difficult a task that would be.

I now yield to the gentleman from --

REP. JACKSON LEE: Thank you. I hope not.

REP. SHERMAN: -- (inaudible).

REP. JACKSON LEE: Thank you.

REP. SHERMAN: The gentleman from New York is recognized for five minutes.

REP. ELIOT ENGEL (D-NY): Thank you very much.

Gentlemen, I know there has been some talk here about the National Intelligence Estimate which was issued in November of last year, which I'm told blindsided the administration and blindsided many of us, including myself.

I wonder if we could revisit it. The estimate was essentially that Iran has suspended its moves in terms of making nuclear weapons when in reality it only suspended one thing and continues to do at least two others, and many, many more.

Some people have said that the National Intelligence Estimate report has resulted in the unfreezing of certain deals involving Iran's petroleum sector. In your view, has there been an increase in the number of deals finalized with Iran over the five months since the estimate?

MR. FELTMAN: No, Congressman Engel, it's not. The National Intelligence Estimate required us to do a lot of consultations with, you know, with allies, with the U.N., with the IAEA, et cetera. But the basic issue, a lack of confidence in what Iran is doing, is clear in the NIE.

As we were talking about earlier, the NIE made clear that there was, in fact, a weaponization program that Iran was carrying out, and perhaps is carrying out again. It could restart at any time. Iran has never come clean with this sort of information.

So this is what we have discussed with other concerned countries and to the international community, the fact that until Iran comes clean, until Iran allows the IAEA to verify and inspect all claims, all past activities, we have no confidence in what they're saying.

REP. ENGEL: Yeah. Let me say personally, I think that the National Intelligence Estimate was an outrage, quite frankly. I think that it led people who want to continue to have their head in the sand vis-a-vis Iran to bolster that view. And I just think it was an outrage.

But let me mention one other thing when we talk about the nuclear program with Iran. I mean, when I think of Iran, not only do I think of their attempt to get nuclear weapons, but I also think of their support for terrorism. I believe that they are the leading supporter of terrorism around the world. And for many years the State Department has named Iran not only as the world's leading state sponsor of terror but as the, quote, "central bank for terrorism," unquote.

Can you tell us what is the state of Iran's support for international terrorism today in general, and specifically for Hamas and Hezbollah?

MR. FELTMAN: I would stand by those descriptions of Iran. It's difficult to find any place where Iran's influence regionally or internationally is constructive. Iran is supporting Hamas, undermining the prospects for Israeli-Palestinian peace. Iran is supporting Hezbollah, something that I saw every day for three and a half years as ambassador to Lebanon.

Iran is supporting special groups in Iraq, fighting against coalition forces against the Iraqi government. Iran is using its Qods Force to support -- to transfer weapons to Taliban, to transfer weapons into Afghanistan, killing NATO troops. Iran is still the major, the number one state sponsor of terrorism in the world.

REP. ENGEL: Mr. Glaser?

MR. GLASER: I certainly associate myself completely with the remarks of the ambassador. Iran provides financial material support to Hamas, to Hezbollah, to the Palestinian Islamic Jihad, to other Palestinian terrorist groups, to Taliban. We at the Treasury Department have designated Bank Saderat, which is an Iranian bank, for facilitating that type of activity. We have designated the Qods Force for its participation in that type of activity.

So I think you're exactly right, Congressman. I think that Iran presents a threat to the international community on many, many levels. The nuclear issue is one issue. Terrorism is certainly another one.

REP. ENGEL: Thank you.

I see my time is up, Mr. Chairman, so thank you.

REP. SHERMAN: I thank the gentleman from New York.

I want to thank our witnesses. The State Department selected you for your courage and your high tolerance for pain. They sent you here to defend a feckless policy that you did not choose but have had to defend.

I look forward to you getting us the answers to the questions for the record as promptly as you can. I'm particularly anxious to get that list of occasions in which multinational corporations have been seriously inconvenienced and have lost significant profit opportunities as a result of the action taken voluntarily by the Bush administration.

With that, our hearing is concluded.