The foundation for defense democracies. Good afternoon and welcome to the foundation for defense of democracies. My name is toby and im the Senior Vice President for Government Relations and strategy. As many of you know, f. D. D. Is a nonpartisan policy institute focusing on National Security issues. We are a source for research, analysis and policy options for congress for the congress, for the administration and for the media and certainly for the wider National Security community. We take no Foreign Government or foreign Corporate Funding and never will. To learn more about f. D. D. , please visit fdd. Org. I want to welcome the online live stream audience and also those watching on cspan today. We invite everyone to join in on the conversation which will be live tweeting at fdd. Todays event is hosted by f. D. D. s center on economic and financial power. Cefp provides actionable recommendations to policymakers on how the u. S. Can leverage its economic and financial power to achieve its National Security objectives. In a moment, well hear from our featured speaker, Deputy Assistant secretary of state, for counterthreat finance and sanctions. He overseas oversees 25 sanctions programs at the department of state. He works very closely with our department of treasury to implement current and new sanctions. He also interacts with governments around the globe and with the private sector to ensure effective and strategic implementation of our sanctions. F. D. D. Really appreciates the tirlse work you and your team undertake. After his remarks, there will be a conversation about the threat environment and the administrations approach to addressing the myriad of challenges we face in this area. Eric is the senior director of f. D. D. s center on economic and financial power. He previously served as Senior Advisor to the undersecretary for terrorism and Financial Intelligence at the u. S. Department of treasury. Please join me in warmly welcoming Deputy Assistant secretary of state, david payman. [applause] david thank you very much. For the nice introduction. Good afternoon. Let me start by thanking f. D. D. For having me here this afternoon. I believe you were founded shortly after 9 11. To help protect our country from all threats. And i believe youve done a fantastic job in empowering policymakers with thoughtful analysis and investigative reporting. That really has helped keep our country safe and make our country safer. I think what distinguishes f. D. D. Is that you publish not only insightful and thoughtful analysis, but your products are operational and theyre actionable. And i can assure you that theyre read throughout our government and we look forward to reading more. I lectured upon three topics today. First, the role of my division, threat finance sanctions and sanctions policy and implemeptation. Second, id like to discuss our sanctions approach with respect to iran, and third, id like to discuss our enforcement posture more generally. And make an announcement with respect to the maritime industry. The maritime industry is the key artery for sanctions of asian globally. For multiple policy areas, including our sanctions against north korea, our sanctions against venezuela, and our sanctions against iran and syria as well. My division consists of two offices, toby mentioned one. The office of sanctions policy implementation manages programs ranging from venezuela, north orea, iran, russia, syria, nicaragua and other sanctions. My office of threat finance countermeasures deals with illicit financing through the use of conflict minerals and conflict diamonds. So we are the government representative to the kimberly process. Were also the state Department Representative to where we work very closely with our treasury colleagues to implement antimoney laundering standards within the fatf. One of our key roles is to help design the arc techture, the framework for our respective sanctions regimes and we do so by working very, very closely with our special representatives, special representative hook on iran, special representative abrams on venezuela, Deputy Beegan and department spi special representative wong on north korea, as well as obviously a close partnership, a day to Day Partnership with our treasury colleagues as well. So we were instrumental in helping draft the recent syria executive order 13894, which allows us to designate bad actors who are contributing to the worsening situation in syria. But it allows us to do more. It allows us to designate family members of bad actors. We recognize that this regime, along with other dictatorial regimes, are looting the wealth of their own people and theyre using that wealth to not only enrich themselves, but enrich their families and we intend to hold them accountable. We also play an honest broker role. We dont want to see sanctions in one policy area undermine the National Security priorities and the policies of our president and our secretary in another policy area. So, for example, when we decided to sanction Venezuelas Oil sector, we worked closely with our Energy Colleagues to ensure that Venezuela Oil sanctions will not cause instability in price or supply of oil. If it does, obviously it has economic consequences here at home and in other policies including iran. We conducted that analysis and determined it would not have a negative impact and i think time has proven that to be true. One thing weve done that sing quite historic at the state department in the last year is that we created an economic sanctions targeting team within my bureau to focus on designating those that violate sanctions and sanctions authorities granted to the secretary of state. So this team undertook to the largest ship owner in the world, a Major Chinese state owned enterprise, that was violating our sanctions against iran. And i think the very, very clear message this designation sent was that we are focused on strategic sanctions, sanctions that have an impact beyond the designated target itself, that have an Impact Across Industries and across sectors and the clear message i think were trying to send, that secretary pompeo was trying to send is that no company is too big to fail when it comes to protecting u. S. National security. No company is too safe when it comes to protecting our homeland and the american people. And so we undertook that designation, not wid standing the fact that it was a considerable increase in shipping costs globally not only with respect to china, to send that very, very clear message. One of the most important things we do at the state department is to use actionable intelligence to engage with foreign actors to determine if theres an opportunity for them to change behavior before we have to resort to enforcement actions. And if they do change behavior, thats a fantastic result often time bus comes quicker and more efficiently than undertaking undertaking a designation. We also take a multilateral approach to sanctions enforcement. So for example, we engage quite considerably with countries and private sectors around the world to ensure that they not only comply with but proactively implement u. S. Sanctions. Panama signed a president ial decree last year that allows it to withdraw its flag from any ship within 24 hours that violates sanctions or is used to facilitate terrorism and terrorist financing. Without the right of appeal to the ship owner. Before ship owners would have 30 to 60 days to appeal a decision to deflag that decision will now come immediately and it will not be appealable. We have also worked with flag registries across the world to help them share information. So one key success was the implementation of the risk. Risk is the registry information sharing compact. An agreement that was initially signed by panama, the Marshall Islands and liberia. Among the three largest flag registries in the world. To help them share information about bad actors. So panama or liberia decide to deflag a ship for violating sanctions, they will tell the other parties in the risc about that deflagging action to ensure that bad actor doesnt flag hop. I can announce today that st. Kitts, nevis, honduras and paulau have signed onto the risk and other countries are couldntly in negotiations to sign on to the risc as well. Let me move on to our approach to iran. Our objectives have been quite clearly laid out by secretary pom teo and the special representative. They are number one to deprive the regime of funding used to engage in its host of malign activities all over the world from developing Ballistic Missiles to engaging in proxy wars in syria, to supporting and sponsoring hue tee rebels in yemen, Houthi Rebels in to terrorist organizations from his boll lo on down. Our sanctions are designed to incentivize the regime to come to the negotiating table and address the 12 points laid out clearly by secretary pompeo which go toward five key objectives. You were in one, stop your sponsorship of terrorism. Number two stop your proxy wars in the region. Number three, give a full accounting of your Nuclear Program with inspection of all sites. Number four, stop your development of Ballistic Missiles. Number five, release all hostages including, of course, u. S. Hostages. What were really asking iran to do is to come to the table and act like any other normal country in the world. And how have we got ton achieving our objectives . Well, iran has said they are no longer funding certain shia militias in iraq. Hezbollah for the first time is making public pleas for donations to fund its activities. Lets look at the numbers. Oil revenues are down by 80 . Weve taken two Million Barrels a day of oil off the market from iran. That has amounted to 50 billion per year that is not going to the Iranian Regime to fund its malign activities abroad and commit human rights abuses at home they have regime is running out of options to store oil we have sanged and they are now cutting some production. We will target and designate anybody that stores iranian oil, petrochemicals or Refined Petroleum in violation of u. S. Sanctions no matter where they are and we will soon be announcing a sanctioned advisory on exactly that topic. On the risk private Sector Companies face and others face in storing iranian oil in violation of u. S. Sanctions. We have been quite successful in our campaign to take iranian oil off the market and that has led to iran resorting to petrochemicals and Refined Petroleum products as a major source of revenue. And we have now also adjusted our enforcement posture to attack those two sectors as well as the metal sector and the construction sector and other sectors that are sanctioned as well. The regime does not have any good options to fund an even modest budget. According to the i. M. F. , it is estimated that irans economy contracted by 9. 5 in 2019. However that number is based on oil exports of approximately 600,000 barrels per day. We know iranian exports are less than. Less than that. Some analysts estimate the contraction is closer to 12 to 14 . 10 is a depression. Inflation is in double digits and has been hovering around 40 . Unemployment is in double digits. 17 out of 18 iranian Pension Funds are bankrupt. Theyre in the red. That has led to iran issuing a false budget. Oil exports typically comprise 30 of irans revenues, and our sanctions are bringing this number close to zero. The regime itself says it exports about 300,000 barrels per day. So its curious why the regime put out a budget a draft budget that assumes exports are one Million Barrels per day of oil. Shortly after they released the state budget, the real tanked. Iran cannot be trusted to run its own economy. This regime cannot be trusted to run its own economy. Iran has a few options to respond. It could cut subsidies and we saw that when it was forced to raise gas prices. That led to mass protests against the Iranian Regime. For the first time we heard chants of death to the dictator, death to khomeini. Or it could sensibly tax its wealthy elite, regime cronies, or irgc affiliated companies which it is not deciding to do. Instead it is shifting the burden to the middle sector. Iran has has a dark economy. It had multibillion dollar socalled charities and foundations run by coe khomeini and his cronies that are untaxed and whose wealth doesnt reach the iranian people. 99 of 11 99 of 100 of irans purported companies have a an affiliation to the regime or the irgc. Failing state companies are continuing to be us is diesed and protected from taxes, further draining irans coffers. Iran has a choice to make. If the regime continues to divert money to Ballistic Missiles, terrorist sponsorship, proxy wars in the region, it could do so but it will have to start printing money. Which will force its economy to completely collapse. Or it could delay spending on salaries, benefits and economic development. But it cannot do both. This is why we hear today in the reets of tehran and across iran, death to khamenei. The people know that the regime must swallow the bitter medicine of sangs in order to finally change behavior. They know that corrupt officials that are mismanaging the economy are respondable for their plight. All of these results have happened since the reimposition of sanctions in november of 2018, the full reimposition. But actually i would argue its been less than a year since the secretary of state decided not to issue waivers for several countries continuing to import iranian oil. That stopped in may of in may of last year. Its been less than a year we have seen all these results. Weve also made clear that we stand with iranian people and we leave open a humanitarian channel for the export of food and medicine into iran. While cautions that in 2017 and 2018 the Treasury Department designate sodcalled humanitarian companies in iran and libya sorry, lebanon, for funneling millions to the irgc. Weve created a swift mechanism to help facile kit more humanitarian exports to iran while implementing enhanced Due Diligence to ensure the irgc is not coopting the export of aid to the iranian people. The u. S. Maintains broad exceptions to facilitate the flow of food and medicine into iran and this mechanism is one option. Special representative hook and our department have recently made public statements that were willing to help the iranian people fight the coronavirus disease and that offer has not, unfortunately, been accepted by the regime. Let me move on to the third topic. Our sanctions enforcement posture more broadly. Id like to announce today that well soon be issuing a Global Maritime sanctions advisory. The shipping sector, the aritime sector writ large from flagging registries, to insurance company, ship owners, to port operateors, to Terminal Operators to managers and other companies have more work to do to ensure their vessels are not financing and contributing to terrorism or violating sanctions writ large. U. S. Sanctions, u. N. Sanctions and e. U. Sanctions as well. In this Global Maritime advisory, we are going to foe tchoins use of a. I. S. A. I. S. Tran sponders that provide the transponders that provide the location of vessels should never be turned off. If they are that presents a risk that requires high Due Diligence. Flag registries should be asking for a. I. S. From those seeking to register their vessels with flagging countries. They should see the history of ample i. S. If the a. I. S. Has been turned off or manipulated that my may be a reason to deny services. Same for Insurance Companies and Financial Institutions. There are certain obvious highrisk jurisdictions where vessels engage in shiptoship transactions in order to evade u. S. Sanctions. These include the persian gulf, the u. A. E. , iraq, malaysia, hong kong, off the coast of china. False bills of laiding are used to disguise the original source of cargos. I encourage anybody in the private sector who is suspecting a false document to contact the u. S. Government. Contact my division, contact ofac, determine if theres some guidance we can provide on whether that bill of laiding or that documentation is indeed fraudulent. Private sector actor, port authorities, should be using longrange identification and tracking radar as appropriate to ensure theyre tracking all vessels in their area of operation. So for example if you are a port operator in the persian gulf, lirt can be used 24 hours a day, seven days a week to determine if all ships in that area have docked in an iranian port or stopped in iranian waters to conduct an s. D. S. Transfer or have stopped just outside iranian waters to conduct an s. D. S. Transfer. We are encouraging ship captains and crews to take pictures of the captains and crews of the ships that i do an s. D. S. Exchange with. If youre getting oil from another ship, it might be appropriate to take pictures of the captain and the crew of that ship and to transparently inform them if that cargo ends up being sanctioned, you will release that information and those pictures to appropriate authorities. Legal representations about sanctions compliance are always appropriate. Importantly, its appropriate to obtain the Beneficial Ownership information of vessel owners and those youre providing services to in the maritime sector. Not only the information about the