Good afternoon and welcome to the foundation for defense of democracies. My name is toby dershowitz. Many of you know we are a nonpartisan policy institute focusing on National Security issues. We are a source for research, and analysis and policy options for congress and the administration and for the media and certainly for the National Security community. We take no Foreign Government or Corporate Funding and never will. To learn more about fdd, please visit fdd. Org. I want to welcome the online lifestream audience and also those watching on cspan today. We invite everyone to join in on the conversation which we will be live tweeting fdd. The center on economic and financial power. We provide 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, david peyman, deput,deputy assistant secretarf state for counterpart finance sanctions. Mr. Peyman oversees 25 sanctioned 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 the sanctions. Fdd appreciates the playe playet for you and your team undertake. After his remarks, we will have a conversation about the threat environment and the administrations approach to addressing them. The challenges we face in this area. Eric is the senior director of fdd center on economic and financial power. He previously served as the Senior Adviser to the undersecretaradvisor to theunded Financial Intelligence at the u. S. Department of treasury. Please join me in warmly welcoming the secretary of state. [applause] thank you very much for the introduction and good afternoon. Let me start by thanking you for having me here this afternoon. I believe that they were founded shortly after 9 11 to help protect the country from all threats and i believe youve done a fantastic job empowering policymakers with thoughtful analysis and investigative reporting that has helped keep the country safe and make the country safer. I think what distinguishes fdd is that you publish not only insightful and thoughtful analysis, that your products are operational and i can assure you that they are read throughout the government and we look forward to reading more. I would like to touch upon three topics today. First, the role of my division threat of financial sanctions and implementation. Second, i would like to discuss the approach with respect to iran and third enforcement posture more generally an make n announcement with respect to the maritime industry. The maritime industry is the key artery for sanctions globally for multiple policy areas including the sanctions against north korea or against venezuela and iran and syria as well. My division consists of two offices. Toby mentioned one. The policy implementation managers programs ranging from venezuela, north korea, iran, russia, syria, nicaragua and other sanctions. The countermeasure deals with illicit financing for the use of conflict so we are a government representative to the process and we are also at the state Department Representative to work very closely with our treasury colleague to implement antimoney laundering standards within the status. One of our goals is to help design the architecture of the framework for the respective sanctions regimes and we do so by working very, very closely with our special representatives on iran, special representative abrams on venezuela, and the deputy special representative on north korea as well as obviously the Close Partnership with our treasury colleague as well. We were instrumental in helping to draft recent executive order 2984 which allows us to make factors contributing to the situation in syria but it allows us to do more. It allows us to recognize that this regime along with other dictatorial regimes are moving the wealth of their own people and to not only enrich themselves by their families and we intend to hold them accountable. We also play an honest role. We dont want to see sanctioned underlining the National Security priority to the policies of the president and secretary and another policy area. So, for example when we decided to sanction the Venezuela Oil sector we worked closely with our Energy Colleagues to ensure the sanctions would cause instability in price or supply of oil. If it does obviously it has economic consequences for us here at home and consequences with respect to other sanctions policies including iran. We conducted the analysis and determined that it wouldnt have a negative impact and i think that time has proven that to be true. One thing we have done that is quite historic at the state department over the last year is we created an economic sanctions targeting team within my bureau to focus on designating those that violate sanctions granted to the secretary of state. So, this team undertook the largest ship owner in the world iand Major Chinese stateowned enterprise that was violating the sanctions against iran and i think the clear message was we were focused on strategic sanctions that have an impact beyond the designated target itself and has an impact across the industries and across sectors and to create the message but i think we are trying to send the secretary pompeo tried to send is that no company is too big to fail when it comes to protecting u. S. National security. No company is to save when it comes to protecting homeland and american people. And so, we undertook the designation notwithstanding the fact its a considerable increase in shipping costs globally not only with respect to china to send the clear message. One of the most important things we do in the state departmen sts to use actionable intelligence to engage with foreign actors to determine if there is an opportunity for them to change behavior before we have to resort. And its a fantasti fantastic rt often times that comes quicker and more efficiently than undertaking the designation. For example we engage quite considerably with countries and private sectors around the world to ensure they practically implement u. S. Sanctions. Can i mollify the president ial decree last year that allows it to withdraw from any ship within 24 hours used to this update terrorism and progress financing without the right of appeal to the ship owner. To appeal the decision to be flagged that decision will now come immediately to. One success was the implementation of the risk. The registry information sharing compact that was initially signed by a panel into liberia among the registries to help them share information about bad actors. So, then ill decide to be flagged the ship for violating sanctions and they will tell the other parties about that to ensure they do not flagged path. Icann announced today theyve signed ont onto the risk and otr countries are currently in negotiations to sign onto the risk as well. Let me move on to respect to iran and the sanctions regime towards iran they are to deprive the regime of funding is to engage its host of online maligd activities all around the world from developing Ballistic Missiles to engaging in a proxy war. To the sponsorshithrough the spf terrorist organizations from hezbollah on down. To come to the negotiating table and address the points laid out clearly goes towards the five key objectives. Objectives. No one comes to the sponsorship of terrorism. Number two come, stop for a pror in the region. Number three, gav give a full accounting of the Nuclear Program with inspection of all sites and number four, stop your development of Ballistic Missiles and number five, release all hostages including of course the u. S. Hostages. The. Funding the militia hezbollah for the first time is making desperate pleas for donations to fund its activities but look at the numbers. Oil revenues were down 80 . It isnt going to be in the regime to fund its maligned activities abroad and connect the human rights abuses at home. They are now putting some productions. We will target and designate anybody but stores iranian soil, petrochemicals or Refined Petroleum in violation of u. S. Sanctions no matter where they are and we will soon be announcing a sanction advisory on exactly that topic on the risk they face in others face in the storing oil in violation of u. S. Sanctions. We have been quite successful in the campaign to take the wheel of the market and that has led to iran resorting to the petrochemicals and Refined Products as a major source of revenue. We have now also adjusted the enforcement posture to protect those two sectors as well as the metal and construction and others are sanction as well. The regime does not have any good options to fund a modest budget. According to the imf, it is estimated that irans economy contracted by 9. 5 in 2019. However, that number is based on an audio export of approximately 600,000 Barrels Per Day. We know the iranian exports are less than that. Some analysts indicate it is closer to 12 to 14 . 10 is a depression. Inflation isnt a double digits and has been hovering around 40 . Unemployment is a doubl in doube digits. 17 out of every 18 iranian Pension Funds are bankrupt. That has resorted iran to issue being a false budget. Oil exports have comprised 30 of the revenues and the sanctions are bringing this number close to zero. The regime itself says that experts around 300,000 Barrels Per Day so curious why the regime put out the budget assumes 1 million per day. Shortly after they released a state budget it tanked and cannot be trusted to run its own economy. This regime cannot be trusted on its own economy. Iran has a few options to respond. They could cut the subsidies and we sold ou saw that when it wasd to raise gas prices that led to mass protest against the Iranian Regime for the first time we heard death to a dictator. Or it could tack the regime cronies or affiliated companies which it is not deciding to do instead it is shifting the burden to the middle sector. Iran has a multibilliondollar charity and Foundation Run by the cronies whose wealth doesnt reach the iranian people. 99 of 100 of these private companies have an affiliation to the regime. Failing state companies are continuing to be subsidized and protected from taxes further draining their cover so they have a choice to make. If the regime continues to divert money from the missiles into terrorist sponsorship proxy wars in the region it occurred to him so that it would hav he o start printing money which will force the economy to completely collapse or it could be spending on salaries, benefits and Economic Development but it cannot do both. This is why we here in the streets death to a the regime must swallow the bitter medicine of sanctions in order to finally change behavior. They know corrupt officials that are mismanaging the economy over responsible for their plight. All of these results have happened since the reimpositionf the sanctions in november, 2018 since the secretary decided not to issue waivers for several countries that were continuing to import iranian oil. That stopped in may of last year and so its been less than a year but we have seen these results. We also made it clear we leave open a channel for the export of food and medicine into iran while cautioning in 2017 and 2018 at the designated for the socalled humanitarian companies and iran and lebanon for funneling millions to the ir gc. Weve created a swift mechanism to help facilitate more humanitarian exports to iran while implementing Due Diligence to ensure it isnt coopting the export of humanitarian aid. The u. S. Maintains a broad exception to facilitate the flow of food and medicine and of this mechanism is one option. Special representative and the departmenrepresentative and thae public statements that we are willing to help the people fight the coronavirus and that offer unfortunately hasnt been accepted by the regime. With me move on to the third topic. The sanctions enforcement posture more broadly i would like to announce today that we will soon be issuing a Global Maritime sanctions advisory. The shipping sector, the maritime sector at large from fighting registries to Insurance Companies to ship owners and operators to Terminal Operators to managers and companies have more work to do to ensure that their vessels are not financing and contributing to terrorism or violating sanctionby deleting sh large. The sanctions as well. In this Global Maritime advisory, we are going to focus on the use of the ais. The transponders that provide the location of the schools should never be turned off. If they are, that presents a risk that requires heightened diligence. They should be asking from those that seek to register their vessels. They should see the history of this int and because been turnef or manipulated that maybe the reason to deny services. There are highrisk jurisdictions where they engage in the ship to ship transactions in order to invade included the persian gulf off the coast of china in false bills awaiting for accused to disguise and i would encourage anybody in the private sector who is suspecting a false document to contact the u. S. Government can could conty division, contact to determine if there is guidance on whether that documentation is indeed fraudulent. Private sector actors and port authorities should be using identification and tracking radar as appropriate to ensure they are tracking all vessels in the area of operation. So, for example if you were in the persian gulf is used 24 hours a day. If they thought the iranian port or stop the waters to conduct was just outside of the waters to conduct the transfer. We are encouraging ship captains and crews to take pictures but the exchange with. So, if you are getting oil from another ship it may not be appropriate to take pictures of the captain and crew of the ship and transparently inform them of the cargo ends up being sanctioned we would release that information and pictures to the appropriate authorities. Legal representation about the sanctions compliance are always appropriate in its appropriate to obtain the Beneficial Ownership information of the vessels and owners and those that are providing services to in the maritime sector. Not only the information about the Front Companies that might be seeking the flag or the parent of that front company. Rather the ultimate owner of the individual principles that own and control that entity that ultimately get the benefit of the flight. Its also to determine if your counterparty has their own sanctions compliance policies that are not as robust as yours should be. And those that are used in conjunction with other policy tools to achieve our Foreign Policy objectives. This administration has not penetrated use the full weight of the Great American economy to protect the National Security. Thank you very much. [applause] thank you that was a breaking announcement we appreciate you doing that here with us. And for those following us online if you have a question please feel free to tweet us i will check my phone to try and incorporate those in the conversation. To big announcements. And that advisory and then to focus on in the iran and venezuela context. And those in the good actors. There needs to be a greater appreciation and with those Economic Risks and dont have that infrastructure to protect themselves to be sure they are proactive so to have expert advice to meet those requirements the second step that they are before policy tools so it isnt necessarily enough to be compliant with the letter of the law. Perhaps in terms of the risk analysis and health of the business to the letter of the law is important to understand where it is going in the future. We have tried to engage and then to provide financing to ships to send a very clear message. And we want to have an open door policy and we want to see the questions from the private sector and there is much more space that it should be in business was conducted in a certain way or even ten years ago and the use of us sanctions has escalated and we are shown to undertake strategic targeting. The maritime advisory is to answer questions and to get people started on what they must do to where they need to be. Turning to venezuela is to engage in a significant Sanction Campaign so what are you planning with the economy to allow for free and Fair Elections . And to hold those accountable to undermine the democratic process with the dictator and those that are interfering in venezuela and for the continuing operations of venezuela we continue to hold them accountable for their behavior and interference for the maduro regime cronies and hold them accountable for the venezuelans wealth and property and assets block those out for the number one of a legitimate government that can run the country without interference. There is a lot of interesting things. First, it seems like this is a targeted pattern with the administration for those regimes that we dont like of National Interest so you have the trading designation in context of venezuela and then another designation in context of iran is that something your office in particular targets the Material Support network . Absolutely. Wherever we can we will pursue them. The first do not tell anybody what to do. And then to decide who we do business with who gets to use our financial system. And then to make sure we have the strongest and most reliable currency in the world and the strongest economy in the world. And those who decide to do business with terrace and those human rights abuses while undermining global peace and stability. With your comment to make sure on day number one legitimate government of with the government for those that has been stolen by the maduro regime, how do you go about securing those assets to figure out where they are and if they will be available the day after . So the Treasury Department with the freeze to be continue to be frozen and blocked and not by those malign actors to the detriment of the people and we are closely tracking globally the Money Worldwide to ensure those are preserved for the venezuelan people. We have seen over the last few months the reinvigoration of the program with the appearance at the state of the union. Can you give us our preview . Maybe not mentioning a specific target, but where you see the Venezuela Sanctions Program going over the next few months . So to send a really clear message last few years that took the aeschylus tory approach. The aeschylus tory approach. And now they will ramp up. And then to contribute to the situation in venezuela but also that could be a substance wide to potentially include other sectors and other areas obviously cant get in the details to forecast other than to say everything is on the table. So turning to iran, based on your comments and the economic figures, it is clear the maximum Pressure Campaign has a Significant Impact on the iranian economy and also on the iranians ability to finance terrorism throughout the region. So i have a question. Is there more the private sector can do to amplify the pressure . Theres more the private sector can do. They are all key components to produce metals that they export for significant revenue the state department issued an advisory on a particular topic i encourage them to carefully read this advisory and then selling the intellectual rights to chinese companies. Its good to have good export controls around high risk products i think its important for the ports across the globe to make sure they have sufficient programs while whether it is petrochemicals or petroleum or metals or construction material. Anything that would potentially put them. And to understand more broadly because we understand what the rules are and with the direction of us Foreign Policy for the maximum amount of Pressure Campaign with the super maximum economic Pressure Campaign ramping up law enforcement. So just to use the target is one example, cosco Major Chinese state on enterprise so i think that was important because it sent a message of two big to fail. So after we engaged in several discussions to ensure Going Forward to create compliance programs they change behavior for more sanctions that are not necessarily meant to punish but to become consistent with us Foreign Policy. Let me follow up on that so they change their compliance behavior. Have you seen other shipping companies in the industry who says we dont want that to happen to us . Are there any indications of that as well . We sing that with private Sector Companies because cosco exports cargo so those that rely on the ships to carry the cargo is the construction or energy sector. And then they ask themselves what is happening with respect to us policy . And is open to answering those questions. And companies are beefing up with the integrity of the system but at the same time talk about to be easily identified who may actually be bad actors. It is such a critical point for the health of any sector it some point not to take advantage. The Economic Cost to comply with sanctions and the company that has to bear the cost but to have that disadvantage so the more youre able to create a comment about what good compliance means and buy into the program those that are protecting themselves from bad actors and not letting others to take advantage. Lets go back quickly to your point of the Pressure Campaign. Sometimes you hear the criticism that in terms of authorities we are maxed out there is nothing we can do from the Authority Perspective to ramp up pressure. Of course we heard this argument following the full snapback of provisions in 2018 and there were steps taken afterwards but is this a super Pressure Campaign . Are there other steps. So just looking objectively i think if you look at iran there are other opportunities. Understood. And we have had a number of questions come in from the audience before the session. I want to turn to some of those now. The first question we received was a question about china in the context going back to the cosco discussion and how can we push china further to make sure they are not provided support to iran and in particular in the context of importing iranian origins. One more announcement we will be issuing and providing storage for iranian oil the sanctions will lift. So we hope to be transparent where we see the risk and what we intend to do about it with the enforcement will produce changing behavior before we have Enforcement Actions but very broadly through all behavior whether that is the ship owner or terminal operator or refiner refinery. And from the beginning and then to hold everybody responsible sends a very Important Message to the industry that time to claim ignorance is over. So pulling up on that i apologize because there were two major announcements so now maybe there are three so the bunkering is that separate and apart . So those are the three. So following up on the prior conversations from china we have some questions from the tweet handle about the impact over the prices a last few days and what that means for to ron as they continue to withstand the current sanctions regime. Nobody should be imploding sanctions there was no price fluctuation nobody should be in the business but in terms of those sanctions and their assessment of where is the risk and if it is worth it into a gate on engage those distinctions for potentially decreased profit margin. I got you. So that price plunge word impact chinese buying of iranian oil . I will not speculate on the complexities of the Energy Markets especially in china. But we know we want to be sanctioning iranian cargo. And turning to those conversations that you had with our european counterparts for the last few months the decision to withdraw the jcpoa between Great Britain and france and germany but it seems the last few months there has been less protest about the us sanction policy toward iran and i want to get your sense of where they stand in terms of the maximum Pressure Campaign are they still there or reluctant followers . We have had very healthy continued engagement with our partners in europe on areas that we can align. And there are areas that we could work on together in the size of the Nuclear Context so with the Ballistic Missile proliferation and the bad acts that the iranians are committing so you had that a couple years ago with an assassination attempt in denmark and then they show they are willing and able to respond to those sanctions so those opportunities will continue but from partners all around the world there is a misconception that the sanctions are unilateral but we have a fantastic approach all over the globe from southwest asia who not only comply with us sanctions but are proactively helping to implement our sanctions so even then they are more multilateral. We wouldnt see that if they arent. And then to see the multilateral not only with precision in some ways but i know when i was at treasury and we were implementing sanctions are looking to see how many European Companies were not willing to continue to do operations. So we would pull out. Absolutely looking at leadership with a moral compass, and then we say either business with the United States were with the regime and then to engage in the proxy wars. And for many of those. And those to have massive operations and with the wind down. And in that argument and we are overusing sanctions and with exhibit a and exhibit b and with cryptoturn currency but i think we are and how we use sanctions and how we use sanctions what is the goal we year tribe to achieve . The secretary pompeo to have this extremely clear and specific policy. And we have been extremely clear and for the Foreign Policy objective. And then to move target. How that doesnt move the ball forward they could be strategic with the help of the Intelligence Community when the multilateral with the transatlantic unity and with north korea and a fantastic job. And then inactive actively hoping that sanction. And listen to the voices where we have targeted sanctions. For those who are supportive. The voices of the people of iraq the way we are demonstrating him and his cronies so to have conversations with our foreign partners with appropriate use of the sanctions. There is no reason why the United States has to be one of the few countries in the world for infrastructure we are having conversations on why its important for countries to have that so when the time comes for National Security and to protect the hemispheres you try to do with venezuela. And to have the tools necessary to implement. And to stand by them every step of the way. The only other major sanctions that are in place so it will be interesting to see if you ramp up that enforcement activity and moving into the future. Absolutely. And in response to your response come at treasury we would say if we see bad activity to disrupt here and now with action we will take that action. It doesnt necessarily mean we dont think about those longterm implications within the state department and inter agency but if we think the action will stop this terrorist from getting money or hundreds of millions of dollars we will not pull that punch because of the longterm impact in potentially in a faroff world that is much of the mindset. So we are in the business to enforce us law and then to look forward to in tort on and forcing that so just because you think you are getting away with it. Dont hold your breath to take some time and we do have to get through the process for that process is continuing. So within 2017 everyone was reading the tea leaves so everybody so this must be the deregulatory approach it is a concerted effort so who knew in the back of our minds you just couldnt turn on or off that activity but it takes years for these cases. Absolutely you are correct. And that raises the need for private sector actors. That could have been legitimate term of policy to have conversations or with the state department so i read a lot in the press and the fact it was economically unsustainable. Who shoulo longer had ownership or control. Sanctions are a great rehabilitative tool to change the thinking of costbenefit analysis of private sector actors and as long as we can bring them on the right side of the railroad track. I want to turn in the remaining meant to a couple things from the audience weve had some questions over the hotline. One concern is the Financial Action task force so as you know, and congratulations i think that it was part of a long playoff strategy that called for the imposition of countermeasures on iran two weeks ago. Assistant secretary of the treasury deserves much of the credit fo for giving a lot of te heavy lifting with respect to the countermeasures against iran that has a tremendous impact. This is not a regime that can be trusted or a Financial Sector that can be trusted. There has to be antidebate co enhanced even thinking about potentially engaging in a non sanctioned act and so we will see how that plays out and how the entities that are linked up with mom sanctuary may be reacting to the block listing. There are a number designated not subject and they will likely be impacted potentially and that raises another question in light of everything that is happening in iran right now related to the coronavirus. What has been the administrations response within iran and then more broadly how have they answered the critique of u. S. Sanctions and therefore we are responsible for the issues. Stack we have been quite clear that the channel has always been open and well remain open and we are encouraging the export of food and medicine and the mechanism was intended to provide to ensure that channel stays open. We cannot tell them what to do but we can make it clear. I can tell you all so this is an area where i encourage specific transactions who may have some concern to reach out to the government. My division hasnt received a lot of calls from people that are interested so if there is perceptioaperception that therer compliance i would say theres s an interest on a specific transaction there may be space to provide guidance to ensure that could be accomplished. Thats useful advice. When anyone suggests they should reach out about a proposed transaction or business deal the First Response is always look at the signs and enforcement activity. What is your response to that . We dont use those opportunities to play and to go after a good intentioned actorss that are looking for sound advice on how to comply if we dont use those opportunities to say how can we get to them. Thats not the approach we take and i will tell you something the best conversations ive had, and i think the ones ive been most fruitful are those operating in the high jurors actions including lebanon and iraq and come to my office and have a frank conversation about how they could be doing the right thing without violating the sanctions. Those are tremendously helpful and to your point about the coronavirus that has made have e repeated public statements about the desire to help address this i think they put out some guidance on the approaches we have been quite clear they are ready to offer whatever assistance we can. I dont think theyve taken us up on previous offers of humanitarian ai aid would be refacing other natural disasters. Another question from the audience builds on the conversation we were having of those that want to be compliant, how do they actually come to you and your office to get the guidance they need and how would you recommend people get in touch with your team . There is Contact Information and an opportunity you go to the state to sign up for sanctions alerts and i will make sure when i go back but you can reach out and we will help facilitate that dialogue especially if it is time sensitive and i would encourage anyone reaching out with a specific set of facts on a particular transaction. Its hard to give any advice on the hypothetical if we can make an honest assessment Going Forward. To everyone watching the advice is reach out with all the information ready to go because if you dont, all you are going to do is have additional questions arise. From a personal perspective are you fairly responsive in terms of getting back to the inquiry . I think we try to be. When folks have reached out to us i spent a significant portion of my time communicating with private sector actors, Foreign Companies middle eastern companies, government run institutions in asia and other parts of the globe, so i suspect a considerable amount of time on the topic is important because these are people that are responsible for a lot of Business Activities in the key strategic sectors where we want them to comply so if we can get them there and create a threshold we have accomplished many objectives. We have a couple more from the audience. I want to ask a final question all of us are thinking about what is ahead for sanctions in 2020 because i want your thoughts on what you think is ahead of Christmas Giving away the specific targets and before we get to that question the one from the audience i do want to touch on his walk us through how you think of economic pressure as one tool in the foreignpolicy toolkit and in the role at stake how do you see them complementing other elements of National Power . Where do i see us going i think it depends on the sanctions program so it goes back to ensuring the sanctions response is a specific policy objective and determining what kind of progress we are making with respect to how they work with other policy tools it is not a Silver Bullet it is one to achieve objectives in terms of diplomacy i think it gives us the leverage that we need to have good engagements and achieve positive results without resorting to Enforcement Actions, so the sanctions tools are very and i think weve made good examples of private sector entities and wev theyve showny are not hesitant no matter who you are or what country you are located in. So we have those discussions with those that could be doing more to comply with the sanctions. We have expanded the Resource Base and aggregated to the secretary of state and work closely handinhand with our treasury colleagues as well that leads to more fruitful discussions being proactive with foreign counterparts on what they should be doing to comply before we need to resort to enforcement. Im sure theyve been grateful for that. On a daily basis more like an hourly basis is there anything you would like to convey to the audience to a . I think creating more transparency and more communication with the private sector is indispensable the best way we can protect us through private partnership and cooperation and thats what we tend to do Going Forward. Please join me in thanking the deputy secretary david peyman. [applause] fbi and Cyber Security officials testified about chinas influence on the u. S. Tech industry with applications like tiktok and any National Security threat. The Senate Judiciary subcommittee is just under an hour and a