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 Remarks by Acting Under Secretary Adam Szubin at the Foundation for Defense of Democracies Annual Forum


4/13/2016

WASHINGTON - Thank you, Mark, for the kind introduction, and for the invitation to be with you all today. 

 
And thank you to FDD for hosting me.  I am honored to be here among so many valued colleagues and old friends. 
 
Today, I’d like to take stock of our Iran sanctions program, and describe how it helped pave the way to the Joint Comprehensive Plan of Action (JCPOA) – the diplomatic achievement we reached with our key partners and Iran.
 
I’ll begin with a brief overview of our Iran nuclear sanctions, describing our decade-long effort to determine whether diplomacy could prevent Iran from obtaining a nuclear weapon.  I’ll lay out what made this a sanctions success story, explaining how our persistent sanctions and diplomatic efforts helped remove the threat posed by Iran’s nuclear program under the deal we ultimately struck.  And I’ll close by outlining the role sanctions continue to play in our approach to Iran.
 
I.                   Iran Sanctions:  An Overview
 
First:  a brief history of our Iran sanctions.
 
Since I started at Treasury, 12 years ago, preventing Iran from acquiring a nuclear weapon has been a national security priority of the highest order.  By the time we reached the JCPOA, that meant convincing Iran to fully and transparently restrain and re-orient its nuclear program in a way that cuts off its potential pathways to develop a bomb. 
 
A key first step was designing a sophisticated, targeted sanctions regime. 
 
We began by exposing and sanctioning the banks that Iran was using to advance its nuclear program.  In response, Iran soon moved its illicit procurement activity to other banks and front companies.
 
Our sanctions followed.  By 2008, our own sanctions list included more than a hundred targets linked to Iran’s nuclear program.
 
That was a start.  But we needed to persuade our partners to join us in this effortSo at President Obama’s direction, we traveled the world to enlist support for a global approach to Iran’s nuclear program, including sanctions and a viable path to a diplomatic solution, clarifying both our willingness to negotiate with Iran and the limited but critical objective of the JCPOA negotiations: preventing Iran from obtaining a nuclear weapon.  And we found that the prospect of an Iranian nuclear weapon was seen as a serious security threat all over the globe.  Not just by our traditional allies, but also by China, Russia, and others with close business ties to Iran. 
 
By 2010, the State Department and our talented team at the UN had secured four UN Security Council resolutions to address Iran’s non-compliance with its international obligations.  With these resolutions as a foundation, and buttressed by a sustained diplomatic campaign, many other countries adopted their own domestic sanctions that applied even greater pressure on Iran.  We saw strong sanctions imposed by the EU, Canada, Australia, Japan, South Korea, and the list goes on.
 
With the international community behind us, Congress then passed – with overwhelming bipartisan support – the Comprehensive Iran Sanctions, Accountability, and Divestment Act (“CISADA”) of 2010.  The resulting secondary sanctions first targeted Iran’s financial sector, and forced foreign banks to choose:  they could either do business with U.S. banks, or Iranian ones.  But not both.  For almost all foreign banks, the choice was clear.
 
The pressure increased after 2010, as Iran continued to expand its nuclear activities without adequate international oversight, despite calls to the contrary from the UN Security Council and IAEA. 
 
We continued to work with our international partners to cooperate on tighter sanctions, including the EU embargo on Iran’s oil.  Congress complemented this approach with expanded secondary sanctions that targeted Iran’s energy sector, restricting Iran’s ability to generate revenue through oil sales.
 
As the international community remained united in applying and expanding this pressure, we ultimately reached a critical turning point in November 2013 with Iran’s agreement to the Joint Plan of Action (JPOA).
 
The JPOA halted progress on Iran’s nuclear program, rolled it back in many respects, and provided for enhanced inspections of Iran’s nuclear facilities.  In exchange, Iran received limited and reversible sanctions relief.
 
Most importantly, the JPOA gave us time and space to negotiate a comprehensive agreement that dealt with Iran’s nuclear program in its entirety.
 
And after nearly two more years of tough negotiations – and with the tremendous leadership of our colleagues from the White House, the State Department, the Energy Department, and the rest of the P5+1 – we reached the JCPOA.
 
It is worth recapping this history because it demonstrates some essential points
 
First, our sanctions are not meant as punishments, or ends in themselves.  They are specific, targeted efforts to improve our national security by helping to change another country’s calculations about its actions.  Some of our sanctions on Iran were aimed at preventing Iran from getting a nuclear weapon.  Those are the sanctions we used to reinforce our diplomatic efforts in negotiating the JCPOA, which achieves that objective, and those are the sanctions we relieved on Implementation Day.
 
Second, our sanctions regimes are more effective, by far, when they are part of a broad international effort with clear support from key partners, rather than a step taken by the United States alone. This was perhaps the biggest factor in increasing the pressure we were able to generate on Iran over time. In the early years of our sanctions effort, before we had clarified our approach and objectives, the United States was somewhat isolated from a skeptical international community. By the time we reached the interim agreement, a sound strategy and deft diplomacy meant the U.S. and a broad range of partners stood as one.
 
II.                The JCPOA:  A Sanctions Success Story
 
Our nuclear-related sanctions campaign against Iran was as unprecedented as it was effective.  It combined clear objectives, the broadest possible international coalition, and an investment in the resources necessary to implement those sanctions across the globe. 
 
This effort, coupled with serious diplomacy, worked as intended. 
 
The JCPOA represents a tremendous diplomatic breakthrough – a peaceful means of effectively cutting off all of Iran’s potential pathways to a nuclear weapon.  Iran has reduced its stockpile of enriched uranium by 98 percent; removed 2/3 of its centrifuges; disabled its reactor at Arak, filling it with concrete; and accepted a robust and comprehensive transparency regime.
 
In January, on Implementation Day, the IAEA verified that Iran had done all this, pushing its breakout time from less than 90 days to beyond one year.  We know that Iran has kept its commitments under the deal – not by taking Iran’s word for it – but by verifying its compliance through unprecedented access and inspections.
 
None of this was preordained.  In fact, in the early days of our Iran sanctions program – I’m thinking back to 2006, 2008, and 2010 – many questioned whether sanctions would be able to make any real impact on Iran’s strategic calculus. 
 
Later, many said that Iran would never actually negotiate in good faith, or comply with the commitments it made under the interim JPOA.  And most recently, as we neared a final agreement, many predicted that Iran would never really agree to shut down its centrifuges; to disable its plutonium reactor; to ship out its uranium; or to allow real-time monitoring of its nuclear sites.      
 
These predictions were simply wrong.  Our strategy worked.  For two years, Iran complied with the terms of the JPOA.  And, in the time since we finalized the JCPOA, Iran has complied with all of the nuclear-related commitments made by its negotiators.      
 
This is a massive accomplishment.  It is a sea change in terms of both what Iran’s nuclear program looks like, and what we know about it through inspections and real-time access.  And it is the most powerful example we’ve got of how a persistent and broad-based sanctions effort, coupled with serious diplomacy, can succeed.
 
III.             The Benefits of the Bargain
 
From the outset of the negotiations, we were clear – with Iran, and with our international partners – that our nuclear-related sanctions would be lifted if Iran meaningfully and transparently reoriented its nuclear program under a verifiable diplomatic agreement.   
 
Lifting nuclear sanctions was the incentive for Iran to change its strategic calculus on nuclear issues.  And since Iran has kept its end of the deal, we must uphold ours, not just in letter but also in spirit. 
 
We’ve done so by lifting the sanctions we promised to lift, once Iran delivered on its nuclear-related commitments – first with the JPOA, and then again with the JCPOA.  We’ve also issued guidance to banks and governments around the world explaining the scope of the sanctions relief we have provided to Iran in the JCPOA, so that they understand what is currently permissible and what is not.
 
It is important to keep our promises, and to ensure that the Iranian people see the economic benefits of this deal.  To do otherwise would undermine not just Iran’s incentive to stick to the deal and undermine its long-term viability, but also our own international credibility, and our corresponding ability to use sanctions to help change behavior in the future.
 
We have been, and will continue to be, very careful to deliver on the promises we made to Iran throughout the negotiations.  That means proactively providing clear guidance about the type of commerce that is now permitted. 
 
Let me reiterate what Secretary Lew, Secretary Kerry, and the President have all made clear: we are not standing and will not stand in the way of permissible business activities involving Iran or the kinds of transactions that Iran is entitled to work towards under the JCPOA.  What that means is very clear in the JCPOA itself and in the regulatory documents, public guidance, and FAQs we have issued. 
 
We understand, though, that many questions persist – in part because of the remaining primary embargo and non-nuclear sanctions on Iran, which I will return to in a moment. 
 
When governments and companies come to us with questions, we answer them honestly, and with precision.  That’s what we do for all of our sanctions programs – it is our responsibility as a transparent regulator.  It is what we have done specifically on Iran since Implementation Day, and what we’ll continue to do.
 
More than that, in the context of an international agreement, it is especially important that the sanctions relief we agreed to under the JCPOA is well understood around the world.  It is not in our interest to create artificial barriers to transactions that we agreed in good faith to allow so long as Iran is upholding its end of the deal.
 
For example, we issued General License I to allow civil aviation firms to explore business opportunities with less regulatory burden. 
 
We have also seen indications that some non-U.S. banks lack an understanding about the scope of U.S. sanctions with regard to Iranian funds that were formerly restrained.  We will continue to take steps to clarify our policy as necessary.  We are in no way blocking Iran’s access to these funds, and we are not encouraging banks or other partners to do so.  We will continue to work in good faith with Iran, foreign banks, and other partners to ensure that Iran has practical access to the funds unblocked by the JPOA and JCPOA. 
 
The JCPOA needs to work for all participants. It’s in our national security interest that the JCPOA is in effect and is adhered to by everyone.
 
Some misinformation persists.  For example, claims were made that Iran would receive a $150 billion or $100 billion windfall.  Those have proven wrong, as we said they would.  And more recent claims that we are about to provide Iran access to the U.S. financial system are also untrue.  We will not provide Iran access to the U.S. financial system and we will not restore the “U-turn” authorization.
 
IV.             The Way Forward:  Combating the Threats That Remain
 
Now, we did not guarantee economic outcomes, or a flood of immediate business into Iran.  Nor could we.  That outcome depends on the business judgment of thousands of market participants.  Ultimately, the JCPOA is an international arrangement, not a cashier’s check. 
 
It’s worth remembering that our nuclear-related sanctions were not the only impediment to international business returning to Iran.  As President Obama said recently:  “Iran has to understand what every country in the world understands, which is businesses want to go where they feel safe, where they don’t see massive controversy, where they can be confident that transactions are going to operate normally.” 
 
If Iran wants to take full advantage of its economic potential, it’s up to Iran to cure systemic problems in its markets.
 
To its credit, Iran has publicly recognized that its financial transparency measures lag behind international standards, and has begun an attempt to improve them.  But it’s only just begun; problems remain. 
 
We also have not promised to change the primary U.S. embargo on Iran – which long predates our concerns with Iran’s nuclear program – beyond what was agreed in the JCPOA with regard to the sale of civil aviation goods and services and the purchase of agricultural products and carpets as well as longstanding humanitarian exceptions.
 
Finally, and crucially, we have not promised to lift any non-nuclear sanctions, which are designed to counter Iran’s actions that concern us outside of the nuclear file.  Quite the contrary:  as we made clear to Iran from the beginning, the JCPOA did not affect our non-nuclear sanctions. 
 
Unfortunately, those sanctions remain necessary. 
 
Iran continues to support terrorist groups and militant proxies in the region.  It continues to abuse human rights at home.  And it continues to conduct ballistic missile tests, in defiance of UN Resolution 2231. 
 
Under our current sanctions regime, more than 200 Iran-linked firms and individuals remain sanctioned on non-nuclear grounds.  That number includes the IRGC, the IRGC-Qods Force, and their subsidiaries and senior officials.  It includes Mahan Air, Iran’s second largest airline, which acts on behalf of the IRGC-Qods Force and carries deadly weapons to Hizballah.  And it includes major Iranian defense entities, like MODAFL, DIO, and AIO – which have done much of Iran’s ballistic missile work. 
 
Ballistic missile testing is a key example.  Shortly after we lifted nuclear-related sanctions in line with the JCPOA, we imposed sanctions on 11 individuals and entities for supporting Iran’s ballistic missile program.  And, after Iran conducted yet more ballistic missile tests last month, we imposed sanctions against additional entities involved in the missile program.
 
Thanks to the President and Congress, we have all the sanctions authorities we need already in place to address Iran’s destabilizing activities.  We will continue to use existing sanctions as a tool, among others at our disposal, to oppose Iranian actions that threaten our interests.  Along these lines, new mandatory non-nuclear sanctions legislation would needlessly risk undermining our unity with international partners.  As Secretary Lew has recently stated, it is important to make sure our sanctions tools remain effective and are not overused.   We must continue to balance the costs and benefits of our sanctions regime in our favor.
 
We are clear-eyed about the nature of the threats posed by Iran, and we will continue to combat these threats – including by enforcing existing sanctions, and by designating new targets when appropriate. 
 
As we do so, we always keep in mind that such sanctions are not mere means to punish or vent frustration.  They are intended to push Iran toward a shift in policies - on terrorism and destabilization, on ballistic missiles, and on human rights.
 
We don’t expect to see this shift overnight.  But remember, we didn’t get to the JCPOA overnight either.  We spent more than a decade building a sustained, global sanctions campaign targeting Iran’s illicit nuclear activity, and then we used hard-nosed diplomacy to achieve our national security objective.
 
I want to be clear.  We don’t relish these sanctions.  In fact, as someone who’s spent his career designing and enforcing sanctions against Iran, I hope to one day see a world where we have no sanctions whatsoever targeting its conduct – because it has changed.
 
I might be out of a job in this scenario – although something tells me many of you would help us find plenty of sanctions targets elsewhere in the world.  But I’d be thrilled.  Because this scenario would mean that Iran had chosen to step off the destructive path of destabilization, and to instead continue down the path of progress embodied in the JCPOA.  
 
That choice is Iran’s to make. 
 
V.                Conclusion
 
Let me close by turning back to the JCPOA.
 
At nearly every major turning point in our long and winding negotiation history, some questioned whether Iran would fully and transparently restrain and re-orient its nuclear program without the use of force.  The JCPOA is a resounding answer.  It shows that a defined and determined sanctions program can be sophisticated, can be powerful, and – when done right – can help us achieve important and difficult national security objectives even with long-time adversaries.
 
In the case of Iran’s nuclear program, we got the policy right.  We combined a clear strategic objective with strong sanctions and deft diplomacy, which resulted in a deal that removed the threat posed by an Iranian bomb – a most destabilizing threat in an already unstable region.
 
That is a testament to the importance of knowing when and how to use sanctions as foreign policy tools. And it is also a testament to the importance of meaningful sanctions relief as a foreign policy tool.  While Iran continues to implement its commitments, we will continue living up to the letter and spirit of our commitments under the JCPOA.
 
Thank you again for hosting me today.
 
 
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