Delisted is controlled by the Supreme Leader khomeini. It was designated in 2013 as the known as the eiko a group of companies, includes Gray Investment company, a couple of banks, and their investment arm which is the investment arm on the tehran stock exchange. This eiko was listed under an executive order which was not a Nuclear Related sanction but it was a sanction addressing deceptive financial practices and the risk they posed to the integrity of the International Financial system. In 2013, the u. S. Treasury designated them, along with 37 subsidiaries, stating that they continue to generate and control massive off the books investments shielded from the view of the iranian people and international regulators. Weve also talked about the amount of money that will be freed up to iran. Its been characterize being between 100 billion to 250 billion. Secretary lew spent time at the hearing last week talking about how it may be around 55 billion or so, not 100 billion. Whats the purpose of delisting these entities, and from reuters studies and other well, know that eiko has 95 billion worth of assets and theyre coming off of this list. There may be some sanctions the u. S. Will maintain to be in place against them directly, but 52 billion in real estate portfolio, 3. 4 billion in publicly traded companies and more, so 95 billion. Should that 95 billion that will be freed up, it looks like, be included in the 100 billion to 150 billion, or 56 billion figure that will be an impact to irans economy up front . Mr. Zarate you raise a great question. Eiko presents a challenge. They may have had elements of and support dimensions to the Nuclear Program. Some of them may have been captured by nuclear executive orders. Others had other problems attendant to them making them subject to sanctions and other financial, what i call preventive measures, given the risks to the International Financial system. And i think this is a fundamental challenge for how weve constructed the unwinding because in some ways, weve given up on much of the underlying conduct that weve worried about in terms of what these entities, owned and controlled by the regime and various elements, are able to do in the International Financial system. And i think, unfortunately, what i see as the sort of blunt unwinding traunches here is really part and parcel of what stated as the intent of the jcpoa, which is the normalization of trade and economy with iran. Now, i want this deal to work. I dont want to be sort of perceived as throwing stones at this. Because this is incredibly hard and the unwinding of the sanctions which is the most sanctions regime out there is incredibly difficult. But i think what weve done work with the example you described and others, is weve thrown them into a lot of unwinding without having the iranians contend with the underlying conduct that is still a risk to the International Financial system and our National Security. Again, this is why i worry that, you know, viewed in maximalist term, weve given iran a get out of jail free card on some of these underlying issues. Ive been critical of even my own administration, our own actions, when i was at the treasury and at the white house. What we did in 2005, 2006, to let up too early on our Financial Leverage against north korea, not forcing the North Koreans to deal with the underlying conduct, and stopping further financial and commercial isolation on the back of a nuclear deal, that was a mistake. And i said so and ive written about it. I think it was a mistake at the time. I still think so. So i dont think we should repeat those mistakes and ignore the underlying conduct that still presents a real risk to our National Security. Senator gardner and one of the businesses the leader has under control in this group, is a german group with machinery iran needs for centrifuges. Under this lifting of sanctions theyd be able to put money into that. Mr. Zarate thats right. And given how weve defined unwinding and Nuclear Related sanctions, i put that in quotes, weve included elements of proliferation and dual use and even missile trade that is still of concern and still is subject to other sanctions. So weve in some ways ensconced and embedded a broad definition of Nuclear Sanctions which infects the rest of the implementation of the deal. Senator gardner thank you, and i have to go vote on energy committee, so thank you, mr. Chairman. Senator corker thank you. Senator udall. Senator udall i thank both witnesses for the testimony today. Lets assume the deal is approved what do you think the u. S. Needs to do to ensure the snapback option remains a legitimate threat to iran for breaking the agreement, and how can we work with the p5 plus one to ensure we have international buyin for the use of these kinds of sanctions, if needed . Mr. Zarate i believe so long as we are insisting on tough verification i think as long as we insisting on tough verification and respond to them directly, even with more modest snapback for minor violations. The bottom line is the iranians need to understand that we will respond at all times, and it starts by continuously monitoring the program prompting and challenging them when we see things that are inconsistent with the terms of the deal or that causes question, and vigorously using the dispute process we have put in terms of the deal. We have to do that with high level attention and we need to do that with rigorous enforcement and monitoring. Mr. Zarate i think congress has a role to play here, congress can put in place measures that makes it clear not just to the negotiating parties but also the private sector that there are going to be sanctions and sanctions provisions that are potentially brought to bear if theres evidence and suggestions of illicit iranian activity. So creating a sanctions framework where congress itself shapes the environment and shapes expectations around how the International Community may view doing business with the irgc or the intelligence services, that actually i think would be incredibly helpful. This grandfathering provision, getting clarity on that, i think is really important and will shape the marketplace, and then to richards point, enforcing the elements of the deal quickly and often and demonstrably i think will be critical. Senator udall one thing your testimony here this morning highlights is there definitely is a role for congress to play. You have the approval or disapproval of the agreement but if you move forward on the agreement, the role for congress to play in order to strengthen it, to bring transparency, to plug holes that occur that we dont think are going to be there would you agree with that . Mr. Zarate absolutely. Whether you agree with the deal or not, congress has a role to play to deal in clarifying the dealing, and dealing with the risks that are very real, deal or no deal. Mr. Nephew i agree. Senator udall there have been concerns about what happens at year 10, year 15, year 20 under the deal. What are your thoughts on these sunset provisions, and do you think the existence of a sunset is reason enough to reject the deal . Mr. Nephew senator, i do not. I dont think theres any arms control arrangement thats possible that does not include sunset. Even the original n. P. T. Included a sunset. We had to get it extended permanently in the mid 1990s only after demonstrating it had been working for so long. The idea that a country would voluntarily renounce its Nuclear Program in perpetuity i dont think was ever credible. Mr. Zarate one element of the sunset provision that is problematic and doesnt match with the 15year timetable and the presumption of the peaceful nature of the regime is the cessation of chapter 7 obligations and scrutiny by the u. N. At year 10. Again, im a bit more skeptical and i think we should be presumptive of ill intent on the part of the iranians, or at least an intent to push the envelope in terms of what theyre able to do in terms of a overt or covert Nuclear Weapons program. So i think that in and of itself is problematic. To richards point, sunset provisions are part of the International Legal landscape but thing this case, we are dealing with a unique circumstance, we are dealing with high risk and we are dealing with a suspect party that was subject to a numb of Security Council resolutions that assumed that they were a suspect party. Senator udall thank you both. Thank you, mr. Chairman. Senator corker as a clarification, how would we appropriately understand the grandfather issue . In other words, if we wanted clarification, as we talk with people, we have, you know, various opinions and obviously this is were in the selling mode at this moment, how would we best clarify that issue . What would be the responsible way for us to know what the true meaning of the grandfather clause or nongrandfather clause means . In advance of voting . Mr. Zarate ive thought about that a little bit but not a lot. So ill think out loud a little bit. One is congress could have people push back and shape the definition. A letter from the senate or this committee proclaiming what it deems this to be actually has some impact and would force open reaction. Secondly, getting asking for, in writing, the interpretation from the various parties to the agreement. In particular our allies. How do they interpret this deal and how are they going to enforce it . Third, i would suggest that the Treasury Department is going to have to have a role in clarifying how the sanctions unwinding is going to play out. So as part of that regulatory process, theyre probably going to have to put out interpretive notes or other regulatory guidance, and so its probably in that context that the administration is going to have to be incredibly clear i hope for the marketplace to then determine system, so those are three ways that i can think of off of top of my head that might help. Senator corker thank you. Senator isakson. Senator isakson im not a Nuclear Scientist and certainly not an expert in this subject. I was a Real Estate Broker for 33 years. Ive run for office 17 times. When you run for office, you get to a opponent where if youre in the final two, theres a frontrunner and a challenger. Ive been both at one time or another, but eventually the press wants to challenge both of you to a debate toward the end of the campaign. And so you appoint your best guy to go negotiate your position on the debate, they appoint their best guy, they negotiate whether youre sitting or stand, talking english or french, whether you can have a prop or anything else. It appears to me that the iranians negotiated a lot of wiggle room in this agreement for them to do a lot of nefarious things if they wanted to. I think you made theres a paragraph in your testimony where it says, irans problematic construct of iran as a coequal, illustrates what im talking about. If somebody challenges the iranians to an inspection other a suspected violation of the agreement, they first of all can question, reject, stall any challenge they want to. They can interrogate people making the request. They can object to the reimposition of sanctions. And they can appeal anything they want to to the joint commission which they sit on. Am i reading that correctly . Mr. Zarate yes, sir, thats my reading as well. Senator isakson so not only is there a potential period of time to get to the iaea which cant include an american, but theres an additional way to do ropeadope for an expended period of time to keep that from taking place. Mr. Zarate yes, sir. And theres been analysis of how many days that means, and its more than the 24 days given the potential for stalling an challenges. Whats been negotiated in the letter of the jcpoa is the right of iran to walk away. They get the ultimate, whats been called the nuclear snapback by my colleague mark dubowitz, i call it the hecklers veto. Whatever you call it, they get to start a program if they like it. Senator isakson from the day that jpao is signed, theres a place for them to get to a position where they can. It may be as long as 15 years, or 8 1 2 under the most liberal interpretation, but either way you take that, combined with the wiggle room theyve negotiated with the joint commission where you can make the appeal or other things, give them a glide path to being able to have a Nuclear Weapon. Which is why when the chairman asking the question yesterday about is there an alternative about agreeing to the deal or war, there should be. Because we need to reclaim some of the equality we ought to have in standing in this agreement once its signed. There will be bumps and bruises. The iranians negotiated a lot of excellent rat holes for them to run into if something pops up, but were pretty much exposed. I want to call everyones attention to one other thing in mr. Zarates testimony, where it says the e. U. And its Member States and the United States of america, consistent with their respective laws, will refrain from any policy intended to directly and adversely affect the normalization of trade with iran inconsistent with their commitments not to undermine the successful implementation of the jcpoa. It looks like from the beginning theres a speed bump for all of us to be able to have any snapback, reimposition of sanctions or any other economic tool we want to use if we suspect they violated the agreement is that correct . Mr. Zarate thats right, senator. The reason i highlight that paragraph, its essential. It reinforces and illuminates what the goal of the deal is for iran. Which makes sense. They want reintegration into the global order. What im arguing is that the reason these sanctions have been so darn effective post9 11, a regime thats been subject to sanctions for three decades has come to the table. Why . Because they were unplugged from the Global Financial and commercial system. We messed with, we interfered, we interrupted their very trade and economy. My point is, if we want to preserve that power moving forward for terrorism, human rights, support to assad proliferation, we may have just negotiated away the effective use of those kinds of measures. And that was the point of that portion of my testimony. Senator isakson that was my point. We all knew what got them to the table was not that they liked or respected us, but we were squeezing them. When they got to the table to negotiate from day one, the construct of it brought them up to be a coequal with the United States when in fact it was our power and leverage that brought them there in the first place. Thats what concerns me so much about the way in which the negotiations ended up. Weve raised and elevated their stature and position and given them various windows along the way to violate what they promised in the preamble which is not to develop a Nuclear Weapon. Thank you both very much. Senator corker senator shaheen. Am i out of order . You all can politely decide. Mr. Zarate, ive enjoyed reading treasurys war, i havent finished it but i recommend all read the book hes written about how treasury has been important to our negotiations. I agree with the comment senator menendez made about the iaea and the needing to dig more into their situation, whether it be you know, agreements they may have with iran as they do with other members or to get Comfort Level with how they inspect. I dont want to leave this room with an unstated what i think would be an inaccurate impression that we dont trust the iaea or they dont know what theyre doing. If i can, just, to remind everybody of a painful history in march of 2003, the iaea issued an opinion that they said to date, the iaea has found no evidence or plausible indication of the revival of a Nuclear Weapons program in iraq. That was in march of 2003. The administration at that time immediately jumped out, trashed the iaea, said they were wrong. And said that the United States needed to initiate a war that has proven highly costly in american lives, in treasure, and in instability in the region because the administration said, no, we have better intel. They do have a program of weapons of mass destruction and Nuclear Weapons. We need to worry about the mushroom cloud, and we need to begin this war because they wont disarm. The iaea was right and the United States was wrong, and there was a significant generation altering consequence of that. So i completely get the notion that we want to dig in to what the iaea is going to do on this i dont want to leave with the impression that the iaea hasnt demonstrated their chops. The iaea hasnt been perfect either. There were weaknesses in the north korean negotiation especially with respect to north korean covert programs, but the iaea and International Community went back to add the Additional Protocol that iran is obligated to ratify to fix challenges. Lets not leave the impression that the iaea doesnt know what theyre doing because in one of the most critical decisions we have made as a nation in our Foreign Policy history, we trash their conclusions, they were right, we were wrong, and a war that should never have been started thats an editorial opinion was the result. Would the senator yield . Senator kaine i dont want you to think yes. I dont want you to think because i dont know if youre referring to me, but i want to know what theyre going to do. Senator kaine the agreement says theyll put between 130 and 150 inspectors into iran to carry out inspections. They have the financial ability to do that. I think thats critical. But i was worried that there was an unstated point, and i wanted to clarify that. I think you both hinted at this but i want to ask your opinion on this statement. I was intrigued. I was going back as part of understanding this deal, trying to understand the status quo an