In a memo it circulated in connection of hearings in the Senate and House on Iran and Syria, the heavyweight pro-Israel group AIPAC is defending Koch Industries after a report that a Koch subsidiary did business in Iran until 2007 in spite of U.S. efforts to isolate the Islamic Republic.
The memo is composed of "suggested questions" for legislators to ask top State and Treasury department officials testifying today before the House of Representatives, and one suggested question -- they're phrased as actual questions legislators could ask -- deals specifically with the Koch issue:
The full AIPAC memo is after the jump. AIPAC is far from the only interest group to circulate this sort of thing to legislators, but this is a particularly thorough example of the type, and offers a glimpse of where those apparently well-briefed members of Congress are getting some of their briefings.
UPDATE: There are in fact two AIPAC memos, identical except for the passage about Koch. The first went to the Hill several days ago, and it specifies Koch as a bad actor; the second seems to clarify the first, making clear that the issue isn't Koch, it's the policy. An AIPAC spokesman declined to comment on the two memos, and on what had prompted the change.
Suggested Questions
“Iran and Syria: Next Steps—Part II”
House Foreign Affairs Committee
October 14, 2011
Witnesses:
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David Cohen, Undersecretary of the Treasury for Terrorism and Financial Intelligence
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Wendy Sherman, Undersecretary of State for Political Affairs
Iran’s Nuclear Program – An Assessment
We have been focused on Iran’s nuclear program for a long time. It appears that various efforts by our government havehelped slow Iran’s progress. Nonetheless, the Iranians are getting steadily closer to a nuclear weapons capability. They are installing much more efficient centrifuges; building up their defenses, enriching more uranium to 20%, and continuing work on militarizing their program. I believe time is growing increasingly short.
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What is your assessment of Iran’s nuclear program? What timelines are you focused on?
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How do our assessments match or diverge from those of our allies most concerned with this?
A Nuclear Iran – Where is the Urgency?
This administration, like previous ones, has stated that it will not allow Iran to acquire a nuclear weapon. In spite of the fact that this administration has implemented sanctions with somevigor, we are simply not doing enough. The Iranians continue to make progress on their program and will soon reach a breakout capability.
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If we’re serious that we won’t allow Iran to become a nuclear state, business as usual just isn’t enough. Do you share our sense of urgency?
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Have you begun to consider what could be done to shock the system to bring about a change in Iran’s behavior?
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If we are serious about not allowing Iran to gain a nuclear capability and we don’t want to resort to military action – what’s the plan?
Breakout Scenario
Iran is nearing a dangerous tipping point in its effort to acquirea nuclear weapons capability. Given the progress in Iran’s enrichment program, it is likely that they will soon be in a position to quickly break out and produce a nuclear weapon. Once Iran possesses this breakout capacity, it will be able to act as if it already has a nuclear weapon – it can be much more aggressive in its support for terror, more active in its efforts to destabilize its neighbors and more brutal in its repression of domestic dissent.
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Undersecretary Sherman, the Administration has rightly said we will prevent Iran from acquiring a nuclear weapon. Are we also committed to denying them this breakout capacity? How can we ever be sure that our efforts are successful if they stand on the threshold of acquiring nuclear weapons?
The Limits of Engagement
For at least the first two years of this administration, there wasa major effort made to engage Iran in negotiations. I think the record is clear – Iran has refused to negotiate and is not interested in any meaningful talks about its nuclear program. The regime in Tehran has also ignored elections and brutally repressed its population.
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Do you still hold out hope that this Iranian government will actually negotiate and will change its behavior on its nuclear program, its support for terrorism, and its repression of human rights?
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CISADA clearly requires the Administration to sanction individuals in Iran that are responsible for carrying out or directing serious human rights abuses. Why has this provision not been fully enforced? Why have we not sanctioned President Ahmadinejad or Supreme Leader Khamenei?
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Should the U.S. suggest it is time for new leadership in Iran, as we have in Syria, Egypt, Tunisia and Libya?Is not the regime in Tehran more brutal, more repressive, and more dangerous than these others?
Central Bank of Iran
In August, 92 Senators wrote a letter to President Obama urging him to sanction the Central Bank of Iran (CBI). The Bank has been heavily involved in the funding of terrorism and proliferation and has assisted numerous sanctioned entities to bypass sanctions. Secretary Geithner, in response to our letter,wrote, “all options to increase the financial pressure on Iran are on the table, including the possibility of imposing additional sanctions against the CBI.”
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Is there a timetable for making a decision regardingthe CBI?
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If indeed the CBI is engaged in terrorist funding and proliferation, do you not have an obligation to designate them?
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Have you discussed this possibility with our allies thathave joined us in imposing meaningful sanctions? If so, what have been the responses?
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What advice would you give to foreign banks that continue to work with the CBI?
Enforcement of Financial Sanctions
Undersecretary Cohen, in response to questions for the record at your confirmation hearing, you expressed concern that a limited number of banks may be continuing to engage in activity that could result in findings under CISADA. You testified that investigations into these banks were moving toward conclusion within the next month or so. It has now been five months since that statement and no conclusions have been made public. Last week, FinCEN issued a press release that again stated Treasury has reason to believe several foreign banks may be engaged in sanctionable activity.
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Can you please update the committee on the status of these investigations? Why have no sanctions been issued? How many investigations are ongoing? Are there no banks that are facilitating Iranian financial transactions?
Last month, you travelled to China where you reportedly warned Chinese financial institutions that they could face sanctions if they do not end certain business with Iran. You were quoted as saying that Chinese financial firms were "as much in jeopardy as a bank anywhere else of being the subject of a CISADA action."
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Is there evidence that Chinese financial institutions have carried out transactions in violation of CISADA, or any other Iran sanction provision?
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If so, why have the banks not been sanctioned?
Iran Financial Sanctions – India, Turkey, Oil Payments
It was reported that the State Bank of India utilized the Iranian bank EIH located in Hamburg, Germany to pay for certain Indian oil imports. At the time EIH had been sanctioned by the Treasury Department for its involvement in aiding Iran’s proliferation activities.
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Can you confirm whether the State Bank of India conducted significant financial transactions with EIH after EIH was sanctioned by the U.S?
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If so, why has the State Bank of India not been sanctioned as required under CISADA?
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Subsequent reports indicate the Turkish Halk Bank took over the processing of payments for Indian oil imports. Has the Treasury Department investigatedHalk Bank and other Turkish financial institutions for violations of CISADA or other financial sanctions?
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How are China, South Korea, and Japan making payments for their oil imports from Iran? Can you shed light on media reports that significant arrears have accumulated as nations have been unable to find banks willing to transfer payments for Iranian oil? Are reports that China is using a barter system to pay for Iranian oil accurate?
Iranian Support for Syria
There have been various media reports over the past few months highlighting the role of Iran in aiding President Assad suppress public dissent in Syria.
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What can you share with the committee on the role Iran is playing in Syria?
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What are the potential ramifications for Iran, Lebanon, and Hizballah if the Assad regime were to fall?
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Why has Europe issued sanctions against more individuals responsible for human rights violations in Iran and Syria than the U.S.?
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Why has the U.S. sanctioned the Syrian state-owned General Petroleum Corporation, and not the Iranian state-owned National Iranian Oil Company (NIOC)?
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The European Union has barred the importation of Syrian oil, is the U.S. encouraging the E.U. to also ban the importation of Iranian oil?
Bank Tajarat
Iran’s Bank Tajarat continues to operate in France, facilitating substantial portions of Iran’s European trading activity. BankTajarat has an affiliation with Iranian-owned bank EIH, located inHamburg, Germany. EIH has been sanctioned by both the U.S. and E.U. for providing financial services to Iranian WMD proliferators and facilitating transactions on behalf of other sanctioned Iranian banks.
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Why has the U.S. not taken action against BankTajarat? Are we encouraging France to close the bank?
FinCEN Banking Regulations
Last week, the Financial Crimes Enforcement Network (FinCEN) issued a final rule to fulfill Section 104(e) of CISADA. I am deeply disappointed in the rule. The rule requires U.S. banks, only when asked by Treasury, to inquire of their foreign correspondent banks whether they conduct certain prohibited activities related to Iran. Several members of Congress sent FinCEN a letter in May after the rule was first proposed and expressed concerns that it did not go far enough to implement the letter and spirit of law. Unfortunately,FinCEN choose not to take our advice. As we stated on our letter, it is “inexplicable” that Treasury has interpreted the law to be discretionary.
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Undersecretary Cohen, why shouldn’t U.S. financial institutions have to certify on a regular basis that to the best of their knowledge their correspondent banking partners do not conduct business with sanctioned Iranian banks or IRGC?
Refined Petroleum Deliveries
A major component of CISADA was the new sanction on foreign companies that provide refined petroleum products to Iran. The provision was initially successful in that it dramatically reduced Iran’s ability to import gasoline. However, as time has passed and despite Iran’s claims to be fully self-sufficient in gasoline production, the volume of gasoline imports to Iran has gone back up. In fact, Reutersreported on September 7 that, “Iran has been importing four to five cargoes of gasoline per month, with most of it supplied by China as the Islamic Republic finds ways to get around the U.S.-led sanctions, three industry sources familiar with the matter said.”
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This represents a clear violation of U.S. law, yet no action has been taken against any Chinese companies. Why?
Energy Investments
Undersecretary Sherman, in June 2010 your predecessor and current Deputy Secretary of State William Burns, told the Senate Foreign Relations Committee, “…there are a number of cases, less than 10, in which it appears that there may have been violations of the ISA.” We have now sanctioned two companies and used the special rule to waive sanctions against five other companies.
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How many investigations for violations of the Iran Sanctions Act (ISA) are currently open?
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Due to the State Department’s failure to complete investigations under ISA, Congress in CISADA enacted a statutory 180-day period in which investigations of sanctions violations must be completed. Has the State Department complied with this statutory deadline? If not, why not?
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Those companies for which the special rule was used committed to ending their sanctionable activities in Iran. Have any done so? Do you have a timetable in mind for those that have not before you rescind the usage of the special rule?
Chinese Energy Investments in Iran
The State Department has praised Chinese companies for not backfilling business in Iran as other companies exit the market. While I agree this is positive, it is insufficient. If Chinese companies are violating U.S. law they need to be sanctioned. They have been given ample time to do the right thing and leave Iran, but that has not happened.
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Has the State Department investigated Chinese companies including SINOPEC and the China National Petroleum Corporation for violations of ISA?
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If so, why has the State Department delayed issuing sanctions on Chinese companies?
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Do you believe the law grants the Administration the authority to delay making sanction determinations, without the issuance of an official sanctions waiver?
Arms Embargo on Iran and Syria
The administration has voiced its support at the U.N. for an arms embargo on Syria. A partial U.N. arms embargo already exists for Iran. Currently, U.S. law requires the Administration to impose sanctions on foreign entities that assist Iran to acquire or develop destabilizing numbers and types of advanced conventional weapons.
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Would the Administration support legislation that seeks to impose penalties on foreign firms that supply any conventional weapons to Iran or Syria?
Iranian Oil Imports to the U.S.
U.S. sanctions ban the importation of Iranian petroleum directly to the U.S. and indirectly through third countries. However, if the Iranian oil is exported to Europe and refined into gasoline or various petrochemicals, it can be legally imported to the U.S.
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Should U.S. sanctions be updated to bar the importation of crude oil, refined petroleum, and other petroleum byproducts, if they were produced using Iranian origin oil?
Mahan Air – Export Violations
The Commerce Department has issued multiple export denial orders in an effort to prevent the diversion of U.S. origin aircraft, and aircraft with substantial U.S. components, from illegally reaching Iran’s Mahan Airline. Unfortunately these efforts have been unsuccessful and many aircraft have been illegally exported. Some of these aircraft are now registered in European nations and make regular flights to European destinations, including France and the United Kingdom.
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Have we reached out to our European allies and asked them to seize these aircraft or prevent their return to Iran?
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There are reports that Mahan Air may be controlled by the IRGC and may be assisting Iran’s proliferation efforts, has the U.S. looked into these reports?
Commercial Trade – IRGC, Tidewater, Iran Air
In June, the Treasury Department issued sanctions against Iran Air, the country’s largest airline, and Tidewater Middle East Company, the country’s largest port operator. Both companies were accused of ties to the IRGC and involvement in Iran’s proliferation activity.
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What has been the impact of these sanctions?
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What are the legal consequences for companies that continue to conduct business with Iran Air?
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Under the law, are airports that provide landing rights to Iran Air liable to sanction under the material support provision of Executive Order 13382?
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Are ships that dock at Tidewater ports liable to sanction under the material support provision of Executive Order 13382?
U.N. Sanctions
It has been more than fifteen months since the passage UN Security Council Resolution 1929. While many nations are working to fully enforce the sanctions within the Resolution, many are not.
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What are the consequences for nations that fail to adequately enforce U.N. sanctions? Should the U.S. adopt punitive measures against those nations that don’t abide by the resolution?
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Given Iran’s intransigence, is it time to pursue additional U.N. sanctions?
Subsidiaries of American Companies
Last week, the Bloomberg Markets Magazine ran a story titled, “Koch Brothers Flout Law Getting Richer With Secret Iran Sales.” The article alleges that a foreign subsidiary of the U.S.company, Koch Industries Inc., sold petrochemical equipment to Iran. My concern today is not with the Koch Brothers. That company did the right thing in 2007 and voluntarily ended all of its subsidiary’s business in Iran. However, I am concerned that other American companies continue to use foreign subsidiaries to profit from sales to Iran, and it is completely legal. It is my understanding that U.S. companies are free to use their foreign subsidiaries to conduct business in Iran and collect the profits so long as no U.S. persons are involved in the work, and the subsidiary was not established, or acquired, with the intent to bypass the sanctions.
· Do you know which American companies have foreign subsidiaries conducting business with Iran that would be illegal for their parent companies to do? Do you do anything to discourage this practice?
· Why should we allow subsidiaries of American companies to do business that would be illegal for the parent company to do? Would the Administration be open to Congress changing the law to prohibit foreign subsidiaries of U.S. companies from conducting business in Iran?
· Shouldn’t U.S. companies at a minimum be required to disclose to their investors if they have foreign subsidiaries that conduct business in Iran?
· How does the Treasury Department ensure U.S. companies are complying with the law regarding the activity of their foreign subsidiaries and ensure no U.S. persons are involved in the Iranian business?
