Transcripts For CSPAN3 Politics And Public Policy Today 20240622

Strangle the Nuclear Program in the cradle as often as we could, including throughout the 1990s and beyond that. From the iranian perspective, they could not sign onto a deal that didnt enshrine their deal to have an indigenous Nuclear Energy Program Including enrichment. While that certainly would not have been my preference going into this conversation, i started my job as the guy going after iranian enrichment efforts. The practical reality is we faced a country that was not relinquishing this capability. Address the idea, is there an ail telternative to what were now . If we dont agree with this deal, do we have an alternative . If we dont agree to this deal, the iranians are going to start installing more centrifuges and if we get pack back to the table were going to be doing with centrifug centrifuges. What sanctions unilaterally have impact . I do not believe u. S. Sanctions would not stop irans original program. Senator, i think u. S. Financial power and influences is enormous and would have an impact. Would it stop a Nuclear Program alone, i dont think so. I have argued for a long time that the use of financial power and influence has to be part of a broader strategy of influence and leverage against the regime to bring them to the table and also to get them to stop Movement Toward a Nuclear Program. Im sorry, youre experts in this, both of you. Do you believe that they have to have enrichment capability in order to have a peaceful Nuclear Program in iran . Absolutely not. Im not a nuclear physicist, but it raises an interesting point because you talk about that having been a concession upfront. The other problem with the structure is we may be conceding most favored nation status in terms of a sanctions regime. Again, this is part of my problem with the structure. Given the structure, were now allowing iran a process and a vehicle to challenge the use of u. S. Financial power and oh, by the way, we put it in the context where the chinese and the russians which are no fans or in favor of u. S. Power, financial power in particular, have a voice and a vote. So i think the very structure of that is debilitating not just with respect to iran but to the use of our power for these other issues that we care about. It goes to the question of how weve given iran a most favored nation status in terms of how weve negotiated this deal. Mr. Chairman, im out of time but i want to echo senator mendez point. Im very troubled by the side deals. I know that side deals are deals directly done between the iaea inspectors and individual countries as normal practice. This is not normal practice. Were signing a deal for the future of america, and it assumes that we that those deals are part of this deal. The way i read this document, in this document, those special deals are not mentioned. I am really troubled that we are not going to be able to get the best advice from those people. I just dont know how we can make a decision without them, frankly. Id encourage more pressure to be put on someone to come before us to explain that. There may be very good explanations. But when i hear the type of inspection processes that are going to be done in places which are not mentioned in this document at all, im very troubled by that. I think almost everything thats occurred in this committee since chairman mendez was chairman and i became chairman and the senator became the Ranking Member has been done in a strong bipartisan way. Were going to craft a letter for everyone if they wish to sign that will be crafted in such a way that it wont hopefully affect anybodys sensibilities urging them to reconsider that and to come before us next week. Thats under way right now. Certainly i would like everybody to have the opportunity to sign that if they wish. Mr. Chairman, as long as were making requests, i would also ask that we request a confidential classified briefing by our intelligence agencies. Okay. Well do that and i appreciate it. Senator . Thank you for the spirit in which youre uconducting these hearings. I think theyre vitally important and the importance of our understanding their roles and the capabilities and some of the concerns that have raised are very central to our understanding of this agreement. Let me if my might just broadly touch on four questions i hope in the next six minutes. You had a vigorous disagreement about the grandfathering clause and what it means, will it lead to a gold rush as long as they are not explicitingly in furtherance of the sanctioned activity, contracts will be allowed to perform, or you wont be subject to sanctions for having entered into an agreement. Im a lawyer. Who decides and how does the outcome ive gotten answers from both folks in seniors levels of this government current and former, but the reality is this is a multilateral agreement and there are going to be disputes over this exact provision and it raises the larger question about the extent to which we can rely on our allies in despite resolution and the potential consequences of our ability to actually meaningfully enforce first, second. Mr. Nephew, in a previous exchange, you were saying that a certain proposal involving sanctions was not the best policy response to likely restrain iranian support. What is the best response . I think sanction relief, whether its 50 billion for 100 billion will lead to a significant flow of funds into the Iranian Central Bank and out regionally to support folks who we view as terrorists and who are significant bad players in the region. What would be the response if you were in a position to advise the administration . What would you do . Third, and i think this is an important question. If we go it alone, if we reject this deal and rely on u. S. Economic power to reimpose sanctions and seek to renegotiate tougher terms, what are the consequences for our role in the Global Financial system . The chinese have made efforts to suggest to others that our central role, the fact that the dollar is the reserve currency of the world system, the majority of transactions running through the United States should be lessened or weakened, can we use the leverage effectively and sustain it over time. The impact that the flows will have an iran, some suggest the relief from sanctions, they will overwhelmingly have to invest in restoring their own oil and gas sector. The oil sector has suffered a 50 drop in the price of oil over the past year. How will that influence their ability to finance and sustain their enduring commitment to promoting terrorism in the region and being a stabilizing force in the world. Gentlemen, please, have fun. Ill be quick. On the issue of grandfathering, the decision on whether or not to impose sanctions with respect to the issue of grandfathering is the u. S. The United States gets to make the decision as to whether or not sanctions can be imposed under our own laws. That doesnt mean that were not going to have response from our partners. If we were to sanction bp, a number of other institutions, i think we can expect a reaction from that. As weve done in previous instances, i imagine there will be at least consultation and engagement with our partners both to ensure that we deal with any particular concerns they have with the action as well as to protect our broader interests. But that does not mean that we cant curtail the activities of Partner Companies in iran, including with regard to oil and gas sectors and what not which we did with the use of comprehensive iran sanctions, accountability divestment act. My view is if we decide to reject this deal and use our sanctions, we will have an effect on iran, but i dont think it will be nearly as strong as we had if we had cooperation, particularly out of europe. Long term im very concerned about overuse of u. S. Sanctions, removing it as a tool. You spoke to the idea of the chinese and others looking for alternative Financial Systems. Thats my fear. My fear is that if we go it alone here as well as in other circumstances, we may actually invalidate the tool of financial sanctions in the future because people just create systems that dont have to involve us. On the issue of flows in iran and what theyll do with them, my view is they will use a lot on domestic Economic Needs and theyve got a lot of infrastructure problems there. I think rowhani was elected on the basis of solve is those problems. He wants to be reelected. More importantly, the iranian system doesnt want to have instability and conflict on the inside. They are very concerned about things like arab spring and the color revolutions in europe. The way you deal with that is through Domestic Development at home. That doesnt mean they wont support terrorism with these funds but i think theyll spend most of the money at home. I think this needs to be a multifacetted approach involving target sanctions on individual bad actors and financial flows but also it needs to be support such as weapon sales, logistical support, cooperation with partners in dealing with individual terrorist groups and the broader Regional Security architecture. It cant be choke off all iranian money and the problem is solved. Thank you. I think we run into a risk that the joint commission and the sanction subcommittee becomes the arbiter of how to interpret these sanctions which by definition is kind of how its set up. We certainly can impose sanctions but a lot of that becomes subject to discourse and debate in that context. Would you try to find ways to prelitigate that question . I think so. This is an important point i think for the congress. I think gaining clarity on what this all means, to ensure that youre a lawyer, sir that theres a meeting of the minds among all parties as to how this is actually going to work. You cant figure out all permutations of course but some of these fundamental questions should be answered before we move into the agreement. I think it gets harder over time to either buck the agreement or impose unilateral sanctions. I think were in the most effective and powerful position to actually determine how this goes and how its shaped. Its how customary International Law is created. You create the notes, et cetera, that explain how this is going to be applied. Otherwise, i think you create an incentive for iran to do what Saddam Hussein did in the oil for food scandal. I helped chase down his assets on behalf of the Treasury Department when i was there. What he did in the context of that sanctions regime was to pick winners and losers in part for geopolitical and diplomatic shielding. And so, you have the potential here of the iranians picking chinese, russian, and perhaps a selection of other european allies on the ground who are going to have vested commercial interest in ensuring that this is interpreted the right way. I think thats a real danger here. In terms of strategy, just to repeat richards point, it has to be multifacetted, has to involve strategic targeted financial measures, has to involve aggressive support to our proxies on the ground and our i will lallies which weve o do to date. Three, if we go it alone, its easier to do now than later because the sanctions regime sort of melts away. The reality is and i have written about this, there are potential longterm consequences. The russians and the chinese are clearly trying to challenge and create alternate payment flat forms, currency arrangements to circumvent the dollar and the u. S. Markets. On the margins, you talk to most treasury officials and theyll say this is marginally relevant and other factors will drive whether or not the u. S. Is the principle economy and the dollar is the principle economy around the world, rule of law, capital markets, the functionality of our congress for example. All those things matter perhaps more. Then finally on the flows on iran, i think we should take the iranians at their word. Theyre going to support their proxies and allies. They have in the past. Theres no question that the sanctions restrictions that we put in place for oil purposes which richard was a part of and this administration did a great job on has impacted their ability to support hezbollah, the rejectionist groups and their proxies. They will no doubt and this is an expectation of folks like the secretary general of hezbollah to be receiving for funding from iran in the future as a result of the sanctions relief. Thank you both and thank you for your service. Thank you. Before turning to senator gardener, even though there may have been some ground work in advance, just for reporting back to New Hampshire as to your efficacy, the intel briefing will take place at 5 00 monday. Thank you. Senator gardener. Thank you, mr. Chairman. Mr. Chairman, i wanted to clarify on the iaea. They were both offered a classified setting. Is that correct . Yes, in any form. And i think, again, i think based on what we know about par cheen, all of us would like to dig into more. I know that these agreements generally speaking are between the country and the iaea but generally speaking were in sort of New Territory here all together. Again, well write a letter for all of us to participate in trying to get them to change their mind. Mr. Chairman, if my might to just clarify. In setting up with the chairman and our staffs how we would proceed on reviewing during the review period, our staffs, senator corker and myself, all felt that information about the iaea would be critically important and we should hear it directly from them. So from the beginning, its been our hope that we could get direct communications with the iaea. We know theres confidentiality between the iaea and the participating state. We understand that. We also understand that information is shared at times in a confidential way with other Member States. The United States because of separation of branches, it becomes a little more co complicated. We made that request from the beginning. We dont know how much is control of our federal government and how much is under the control of the iaea. We requested confidential documents between iran and the iaea that we think are important for us to be able to see and review. So its not just the direct contact with the iaea for our review which would be done, i would believe, in a confidential setting because of the information we would have to get. Well continue to press for that, but its an independent agency. Its not under control of the u. S. Government. Thank you for that and thank you to the Ranking Member for making sure that these hearings are successfully completed. I think its important that we have that opportunity and i cant imagine anybody, regardless of where you are in the government, would be opposed to us hearing the full details of the agreement. I think thats important. In the meantime, perhaps if the iaea is available, i know hes testified in the house i believe and i think our witnesses yesterday mentioned some of the comments he made about the agreement. If i could, weve had, as you can imagine all of us do this, i know we have experts in and out of our office and weve had him in but the problem is he hasnt seen the agreement. So its problematic. Thank you, mr. Chairman and thank you for that. I have a question. Under the terms of the nuclear agreement, we talked to secretary liu about some of the businesses that were dedesignated, delisted. One of the Companies Set to be delisted is controlled by the Supreme Leader and designated in 2013. Its known as the iko which is a group of Companies Including Ray Investment company, parse yan bank, the investment arm on the tehran stock exchange. This was originally listed under executive order 13599 which was a sanction addressing deceptive financial practices and the risk they impose to the integrity of the international Financial System. In 2013 the u. S. Treasury designated them along with 37 subsidiaries stating that they continued to control massive off the books investments in shield and 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 characterized being 100 billion to 150 billion. Secretary liu spent time talking about how that number may be around 55, 56 billion. I guess i wanted to hear, what in your view is the purpose of delisting these entities and from reuters studies and others, we know that eiko has 95 billion worth of assets and theyre coming off of this list. Obviously there may be some sanctions that the u. S. Will maintain to be in place against them directly. 52 billion in real estate portfolio, 3. 4 billion in publicly traded companies and more. So should that 95 billion that will be freed up it looks like be included in the 100 to 150 billion figure or the 56 billion figure that will be an impact to irans economy upfront . Senator, you raise a great question. As i go eiko and other elements of the first listing after imitatii imitatii implemei implementation day, some of them may have been captured by some of the nuclear executive orders but others had other problems that were making them subject to these sanctions and these other financial what i call preventative measures given the risks to the international Financial System. I think this is a fundamental challenge for how weve conduct 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, various elements, are able to do in the international Financial System. I think unfortunately what i see as the blunt unwinding here is really part and parcel of what is stated as the intent of the jcpoa which is the normalization of trade and the economy with iran. I want this deal to work. I dont want to be perceived as throwing stones at this. But i think what weve been with the examples youve described and others is weve thrown them into the 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 viewed in maximalist terms, weve given iran a get out of jail free card on some of these underlying issues. I have been critical of my own administration, our own actions which i was at the treasury in the white house. What we did in 2005, 2006 to let up too early on north korea, not forcing them to deal with the underlying conduct and not stopping commercial isolation on the back of a nuclear deal, that was a mistake. I said so and ive written about it. I thought it was a mistake at the time and i still think so. I dont think we should repeat those mistakes and ignore the underlying conduct that presents a risk to our National Security. One of the businesses that the Supreme Leader has under krl of this group is assets in europe that include a german factory that produces centrifuges. Under this lifting of sanctions they would be able to put money into that. Thats correct. Given how weve defined Nuclear Related sanctions, weve included elements of proliferation and duel use and even missile trade thats of concern to other sanctions. Weve ensconced and embedded a broad definition of what were calling Nuclear Sanctions which infects the deal. Thank you, mr. Chairman. Thank you very much. Thank you, mr. Chairman. I thank both the witnesses for your testimony today. Lets assume that a deal is approved, we go forward under the deal. What do you think the u. S. Needs to do to ensure that the snapback option remains a legitimate threat to iran for breaking the agreement and how can we work with the f 5 plus one to unsure we have International Buy in for the use of these sanctions if needed . My view again remains that context is important. So long as we are insisting on tough verification, interrogation of incidents of even modest violations of the terms of the deal we respond to them directly, both in the joint commission and dispute process, including through even potential more modest sanction snapback for those minor violations that we can address the broader issue of snapback. The iranians need to understand that we will respond by continuously monitoring the program, challenging them when there are questions, and using the dispute process. We have to do that with a high level of intention and with rigorous enforcement and monitoring. I think the congress has a role to play because i think congress can put in place measures that makes it very clear not just to the negotiating parties but the private sector that there are going to be sanctions and sanction provisions that are intentionally brought to bear if theres evidence and suggestions of illicit iranian activity. So creating a framework where the congress itself shapes the environment and shapes expectations around how the International Community may view doing business with the intelligence services. This grandfathering provision, getting clarity on that i think is really important and will shape the marketplace. To richards point, enforcing the elements of the deal quickly and often i think will be critical. One of the things that i think your testimony here that ive heard this morning highlights is that there definitely is a role for congress to play. You have the approve or disapproval of the agreement but if you move forward under the agreement, the role for congress in order to strengthen it, bring transparency, to plug holes that occur that we dont think are going to be there, would you agree with that . Absolutely. Whether or not you agree with the deal, i think congress has a role to play in clarifying the deal, maintaining our power, ensuring that its executed properly to deal with the risks that are very real, deal or no deal. Senator, i would agree. There have been concerns about what happens at year ten, year 15, year 20 under the deal. What are your thoughts on the sunset provisions and do you think the existence of a sunset is reason enough to reject the deal . Senator, i do not. I dont believe there is any arms control arrangement that is either possible or has been achieved thus far that does not include sunset. Even the original npt included a sunset. We had to go and get it extended permanently in the mid 90s only after demonstrating that it had been working for so long. So the idea that a country would voluntarily renounce its Nuclear Program or Nuclear Activities in perp tuty i dont think was ever credible. One element of the provision thats problematic and doesnt match with the 15year timetable and the presumption of the peaceful nature of the Iranian Regime is the cessation of chapter 7 obligations and scrutiny by the u. N. At year ten. Im a bit more skeptical and i think we should be presumptive of the iranians in terms of what theyre able to do with a covert Nuclear Weapons problem. To richards point, sunset provisions are a part of the International Legal landscape but in this case we are dealing with a unique circumstance, high risk and a suspect party that was subject to a number of Security Council resolutions that assumed that they were suspect subject party. Thank you both. Just as clarification, how would we appropriately understand the grandfather issue . In other words, if we wanted clarification, as we talk with people we have various opinions and obviously 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 quote or nongrandfather clause means in advance of voting . Its a great question. I thought about it a little but perhaps not enough. Im going to think outloud a little if thats okay, chairman. One is congress can sort of lay out what you think it is and have people push back and reshape the definition. A letter from the senator this committee proclaiming what it deems this to be actually has some impact and would force open reaction. Secondly, 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. As part of that process theyre going to have to put out interpretive notes or other regulatory guidance. Its probably in that context that the administration is going to have to be incredibly clear, i hope, for the marketplace to then determine. Those are three ways that i can think of off the top of my head that might help. Thank you very much. Thank you, mr. Chairman. I appreciate the issues you and the Ranking Member have raised and senator mendez, i agree with you entirely. Im not a Nuclear Scientist and certainly not an expert in this subject. I was, however, a Real Estate Broker for 33 years and brokered a lot of deals and ive run for office. Theres a frontrunner and a challenger and ive been both but eventually the press wants to challenge both of you to a debate toward the end of the campaign. So you appoint your best guy to negotiate your position and they appoint their best guy and they negotiate whether youre sitting or standing, whatever it might be. It appears to me that the iranians negotiated a lot of wiggle room in this agreement for them to do a lot of na fair yus things if they wanted to. I think theres a paragraph in your testimony where it says the problematic construct in iran is a coequal which illustrates what im talking about. As i understand it and you can correct me if im wrong, if somebody challenges the iranians to an inspection over a suspected violation of the agreement, they first of all can question, object, install any challenge that they want to. They can interrogate the people making the request. They can object to the reimposition of sanctions, and they can appeal anything they want to the joint commission which they sit on. Am i reading that correctly . Yes, sir, thats my reading of it as well. Not only is there a potential 24day period of time to get to an inspection by the iaea which can include an american inspector, but theres an outside extended period of rope adope to keep that in place. There are others who have done an analysis as to how many days really that means and it means certainly more than the 24 days given the potential for stall and challenge. Of course whats been negotiated in the letter of the jcpoa is the right of iran to walk away. They get the nuclear snapback and i call it the hecklers veto. They get the ultimate sanction here which is they get to start a Nuclear Program if they dont like it. When the senator read part of the opening preamble to the agreement where the iranians say they will not develop a Nuclear Weapon but from the day that jpoa is skieigned, theres a gl path for them to get where they want. Either way, you take that and 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 asked the question yesterday about is there an alternative to 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 have negotiated things for them to run into if something pops up. Were pretty much exposed. I want to call everybodys attention to one other thing that was in the testimony. Thats paragraph 29 of the preface of the entire agreement. It says the eu and its Member States consistent with their respective laws will refrain from any policy specifically intended to directly and adversely affect the normalization of trade and economic relations 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 us to have any snapback reimposition of sanctions or any other economic tool we might want to use if we suspect the iranians violated the agreement. Thats correct. The reason i highlight that paragraph, its social because it reinforces and illuminates what the intent of the deal is for iran which makes sense. They want reintegration into the international and financial global order. What im arguing is that the reason these sanctions have been so darn effective post 9 11, a regime thats been subject to sanctions for three decades has come to the table because they were unplugged from the Global Financial and commercial system. We messed with, interfered, 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 and the rest, we may have negotiated away the effective use of those measures. That was my point. We all know what got them to the table to negotiate with us was not that they liked us or they respected us but that we were squeezing them. They were calling uncle. When they got to the table to negotiate, they were brought up to be a coequal with the United States when it was our power and leverage and got them there in the first place. Weve raised and elevated their stature and position and given them various windows along the way to be able to violate exactly what they promised in the preamble which is not develop a Nuclear Weapon. Thank you very much. Thank you, senator. Am i out of order . No, go ahead. Thank you. Since i last saw you i havent finished reading treasurys war but i have enjoyed reading it and i would recommend all to read the book about the significant advance in how treasury has been an implement of our Foreign Policy with sanctions. Wonderful book. Thank you, very much. Three points. I agree with the comment that senator mendez made in following up on the chair and ranking about iae and the need to dig more into their situation, whether it be agreements they have made with iran as they do with other members or just to get Comfort Level with how they inspect but i dont want to leave this room with an unstated what i think would be an inaccurate impression that we dont trust the iae 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 weve 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, in instability in the region. Because the administration said, we have better intel. They do have a program of weapons of mass instructidestru Nuclear Weapons. We need to worry about the Mushroom Cloud and we need to begin this war. The iaea was right, the United States was wrong. And there was a significant generationaltering consequence of that. I completely get the notion that we want to dig into what the iaea is going to do on this. I dont want to leave this room with the impression that they havent demonstrated their chops. They havent been perfect either. There were weaknesses in the north korean negotiation, especially with respect to north korea covert programs but the iaea and the International Community went back to add the Additional Protocol to fix challenges. So lets not leave the impression that the iaea doesnt know what theyre doing because in one of the most critical decision that we have made as a nation in our Foreign Policy history, we trashed their conclusions, they were right, we were wrong in a war that should never have been started, thats an editorial opinion, was the result. Would the senator yield . Yes. I dont want you to think and i dont know if youre referring to my no, actually not you. Because i agree except that i want to know what theyre going to do and do they have the wherewithal financially and otherwise. I agree. Actually your point, very good. The agreement says they will put between 1 30 and 150 inspectors into iran to carry out the inspections. They have the financial ability to do that. Thats critical. I was worried there was an unstated point and i wanted to clarify that. I think you both hinted at this but i wanted 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 before negotiations started or before the public phase of the jpoa began. I looked at the speech that Prime Minister netanyahu gave to the u. N. In september of 2012. He had a quote that i thought was interesting. Seven years of International Sanctions have hurt irans economy but lets be honest, theyve not stopped irans Nuclear Program. I think the evidence suggests that the sanctions have been incredibly effective in hurting irans economy and getting them to the table to negotiate. Certainly the congressional sanctions have been at the core of it but also the International Sanctions and the compliance of all allies. However, i think the Prime Minister was honest and as you look at the data, it would suggest that the sanctions did not stop Irans Nuclear development in some way because of a resistance mentality or a defiance mentality, the sanctions may have accelerated Centrifuge Development to 19,000, enriched uranium develop, the process on the iraq previ plutonium reacting. Did sanctions slow down the Nuclear Program . They did have an impact in terms of supply and procurement efforts but i think your point is exactly right. If you look at the end of 2011, iran had about 9,000 installed centrifuges. At the end of 2013 they had 20,000. This is while our sanctions were as intense as they possibly could have been given oil prices and so forth. My view is that sanctions were always a means to an end and the end as a diplomatic outcome that probably wasnt the end of the iranian Nuclear Program but was putting it under significant restrains and aggressive monitoring. I dont think sanctions was a Silver Bullet here, was ever going to be a Silver Bullet. Ive argued that weve needed multiple points of leverage. Sanctions have multiple purposes. To richards point, they can throw sand in the gears of what a country is trying to do, help deter actors willing to act with sanction parties, and it can hopefully change behavior and policy. I think the reality is the iranians were brought to the table because of the sanctions but they were also facing the reality of internal economic dismanagement, demographics that were not conducive to the stability and the very threat to the regime of internal inabil y instability is what drove president rowhani and his team back to the table. Youre absolutely right, sanctions alone wasnt going to do it but was a necessary element in getting them to the table. The reason i ask about your thoughts about the Prime Ministers statement is this is a risk analysis and a complicated one where every option has predictable upsides and downsides and unpredictable upsides and downsides. One of the alternatives we have to contemplate is if we walk away from a deal and we think that reimposing sanctions assuming we can get the International Partners to completely go along and thats a big assumption, but reimposing sanctions, getting everybody to go along is going to lead to a better deal, it could lead to a better deal. It could also lead to the same kind of acceleration. I think in that same speech the Prime Minister said theyre months away from crossing the nuclear threshold. Now the critique is in 15 years they could be months away from crossing the nuclear threshold. Even some of the critics acknowledge that the deal has moved the needle. Sanctions could get us a better deal. They could. Sanctions could lead to an acceleration of a iranian Nuclear Program that could put us in a worse position. Actually, we might assign different percentages to that, but we are dealing with, again, some upside risks and Downside Risk and some are known and some are unknown and this is a very complicated analysis for that reason. Thank you. Thank you. Thanks for that line of questioning. Just to further clarify the iaea situation, all of us can reach out and talk to former people nonstop to get a comparison between the inspection regime that is going to take place in iran versus the ones that have taken place in other places. I know the secretary of state mentioned this is by far the best weve ever had. I think most people dispute that. The one youre talking about in iraq was actually the much better inspection regime, much better. I know the other day in his testimony he tried to well, he twisted around i dont know if thats what he was trying to do to indicate that we had a lot of eyes on the ground when we invaded. Thats not what i was talking about. Its back in that 2003 time frame and the ability to go anywhere, anyplace, was much better with iraq than exists with this. I think thats all the more reason that we need to get them in to understand or at least let me say this, the elements that we know thus far about par cheen certainly is much better and the inspection thats been alluded to that could be 24 days, could be 74 days, is very different than we had in iraq. Youre absolutely right, but we purchased those inspections with a war. We got the significant inspections of iraq as a result of gulf war one. I dont want to have to go to war to get a slightly better inspections regime. I want this regime to be as strong as it can be. Im having sort of a nonsecond wa tore but i got it. I want to continue with that point. The choice before us was two things. On the one hand was to continue with what we thought was the strategy which is this International Sanctions that had an impact on irans economy. They continued to make progress in their enrichment capabilities and so forth but it was the combination of International Sanctions and the threat of military force. No one wants to talk about it but that was on the table that if it came down to it, the u. S. Would do that if it were necessary, versus what we have now that basically argues, if they comply with it, it will slow them down and in ten years if they want to break out, it buys us ten years of time and avoids, assuming everybody complies with everything. Heres my problem with that analysis. In 8 to 10 years which sounds like a long time to all of us here. Its nothing. Ten years goes quickly. In ten years iran will be in a much stronger position. In fact, i think in ten years theyll be immune from International Pressure compared to where they are today. Heres why. First of all, they are going to use the sanctions relief and the billions of dollars that it frees up and i know Everyone Wants to believe theyre going to invest in hospitals and roads and social services in order to win their next election. I promise you theyre going to win their next election. I dont think theyre worried about that as much as they are about their need, k to moderniz their enrichment capability into a 21st century industrial revolution. The Supreme Leader said dont agree to anything thats irreversible. Theyll have less centrifuges but theyll be better and modernized and retain that infrastructure which is the hardest part of any Nuclear Program, the hardware that it takes to do this. Theyre going to continue to build their conventional capabilities. We dont think about that enough, but iran in ten years will have conventional capabilities, maybe less, that could potentially drive us out of the persian gulf because the price of being there will be too high. They can buy chinese asymmetrical capabilities that allow them to kill ships, add to these swift boat things they have come up with that can threaten an aircraft carrier. Theyre going to continue to build long range rockets. Are they going to put a man on the moon . No. Theyre building it for purposes of targeting the continental United States and they look at north korea and say, the north core r cory yans have a long range rocket and theyre going to continue to build up their surrogates in the region which already even now has given iran tremendous leverage over u. S. Policy. As an example, iran has laid out clear red lines. They are going to hold back the shia militia in iraq from aattacking americans troops or going after americans, they will agree to hold them back if we dont cross red lines that theyve made clear. For starters, they dont want to see u. S. Combat troops in iraq. If we make a move towards a permanent presence, were going to get attacked. If they see us moving toward getting assad out of power, were going to get hit by their. If we take steps to try to help put in place an Iraqi Government that actually unifies that country and isnt a puppet of iran, not to mention one that may be hostile in the region, theyre going to attack us. They already have leverage over our policy, now extrapolate that 8 to 10 years from now where theyre conventional forces are higher, groups are better armed, when hezbollah in a couple of years doesnt just have rockets, guided rockets, guided missels that dont just hit somewhere in israel, hit what they want to hit. Imagine a world in ten years where iran decides or eight years or 12 years where they decide, you know what, were building a Nuclear Weapon because we believe israel has one or because we think someone else is going to threaten us. What can the world do then . Well, then, then all these compani companies. What will the price be of actually going after their systems. Itll be worse than the price of north korea now. Do we have an option today to target the program . We know that the price of going after the north Korean Program through a credible military option, the price of that is tokyo, the price of that is seoul, the price of that is hawaii. Theyll hit us back. Well, imagine iran where the price of going after the Iranian Program in ten years, if they decide to break out will be washington, d. C. Or new york city, not to mention tel aviv and jerusalem and any number of places in the region. My argument is that, in fact, what i think weve done here is walked right into the situation they wanted to lay out. They didnt want a Nuclear Weapon next week. We have created a system where in 8 to 10 years, they will have the capability to quickly bec e become, walk into the Nuclear Weapons club, not sneak in, walk into the Nuclear Weapons club with a world class industrial enrichment capability. A much more powerful, conventional force capable of actually asymmetrically and immune from military action because if we attack them, the price is going to be a nuclear devastating strike, potentially on the on the continental United States. Membership point is that when people vote on this deal in a few weeks, youre going to live for this for the rest of your life. In ten years, 12 years when iran has a Nuclear Weapon and we cant target them, people are going to remember this vote. I believe that these banks, if they were forced to choose between access to the American Economy and access to the iranian economy, thats not going to be a hard choice for them. Other than the 30 seconds i have left, i would ask you, do you have any doubt when the sanctions are removed and the billions of dollars flow in that a significant percentage of that money will be used for the things ive outlined. To develop long range rockets, the conventional capabilities and better equip the surrogate groups in the region . Senator, i dont know what the percentage is going to be. This is a regime thats the other elements of the security infrastructure. And theres no doubt in my mind theyre going to use some of the relief and the actual flow of capital to support their proxies. As i said, my testimony from the goal on to yemen. Its going to be significant. Thank you, i dont have additional questions. Wed be glad to entertain those for a moment. I dont want to let the war thing hang, though. I hope you are not trying to indicate that there are some of us who would like to see a war. No, no, actually yeah, let me be real clear what i meant about that. Mr. Chair, if you dont mind, you are absolutely right, the inspections in iraq were the gold standard. And this deal is not at that level. But the the inspections flowed from our winning gulf war one. There was a war, we won, and then it set a pattern of inspections regime in iraq that we used the intel from the inspections to bomb iraq in the late 90s. But it there was a war that led to this super comprehensive inspections regime. Its not a comment on i dont think anybody we all want the same thing. I would say, just in response that i think we all know that from the meetings, they never thought the threat of force was real. Thats what were all trying to assess, an agreement that keeps us from that. Maybe theyve purchased something that is certainly at a minim minimum. It was because he was first and having started out at the end of the row here, i appreciate how challenging it is when somebody comes in with more seniority and bumps your questioning. Thank you both for being here. And senator rubio presented a fairly stark doomsday scenario in his time. And i just want to go back and see if i can clarify a couple of things with respect to what he said. First of all, does this agreement in any way affect our ability to take any military action in iran should we choose to do so . Senator, no it does not. Do you agree with that . I do, senator. And are you both in agreement with what i understand to be the intelligence assessments that today before we enter into this agreement that iran is 2 to 3 months away from breakout to build a Nuclear Weapon. Thats my understanding. Two to three months. I havent seen the recent estimates, but thats my understanding based on whats been published. Based on estimates ive seen that should we enter into this agreement that iran will be between 8 and 12 months away from building a Nuclear Weapon, is that your understanding . Yes, senator, thats my understanding. Yes, senator, but at the end of the restrictions can quickly shrink that timetable back to, you know, 2 months or sooner. And they wont be able to shrink that timetable because they already have an enrichment program. And they have built, or are in the process of building a plutonium program at the iraq site because of the work that they are doing right now not because of what theyre going to be able to do over the next tenyear time period. Is that your understanding . That is. But its also the case that they are likely going to be able to accelerate their activities given the modernization, in particular, around the centrifuge program and the enrichment. Thats actually not my understanding based on the testimony from secretary moniz. But mr. Nephew . My understanding is that from years 10 to 15, the iranians will be constrained with respect to the research and Development Activities as well as the uranium stockpile. And the path will be more closed down since they cant do any of that. Were still going to be in that 6 to 8month time frame for the iranian breakout. But were going to be years and years away. So i want to go back and see if i can understand. The u. S. Wouldnt have inspectors on the ground as part of those activities. Are there other agreements weve entered into where we have inspectors on the ground . And can you describe those . Mr. Nephew . So i am aware of some. Things like, for instance, bilateral arms control efforts with the soviet union. Had inspectors come here and when it became russia, obviously russians. But, again, there were constrictions and constraints placed upon those inspections because there are National Security interests involved there. From the iranian perspective, my understanding is that they have concerns with americans tromping around the military sites. And i think from their perspective, there is some reason to be concerned. But i dont think that should imply we wont have access to information from those inspections. The iaea will be asked to provide reports and information both to the members of the p 5 1 and the board of governors, of which we are one. With respect to our activities in russia, which is since you gave that example. And with respect to iran. We will continue to have intelligence assessments about activities going on there. I think itll still be one of the most watched targets in the u. S. Intelligence community. Thank you. I want to go now to the sanctions question. Because you all have testified. And i think ive heard this at every hearing that ive been in. Its more likely that, if we agree to the negotiated, the jcpoa that iran would most likely violate that in an incremental way rather than in a flagrant way. Therefore, as you testified, mr. Nephew, the situational challenge will be how do we respond to that and how do we get the International Community to go along with this. You mentioned options with respect to sanctions and other disincentives that we can engage in with iran. And i wonder if we can get you to talk a little bit more about that. And so, mr. Nephew, do you want to start . Sure. So i believe at the base principles, we still have the ability to impose sanctions with respect to particular bad conduct. Now, the terms of the deal require us to engage iran on the terms of its violation. If it is a valve thats out of place, we may not wish to impose draconian sanctions for that or sanctions at all. Instead, there may be other restrictions that are imposed on iran as a result of that violation. Like what . Can you give some additional monitoring, for instance. If a valve is found out of place, it might be because the monitoring regime is not sufficient. In my opinion, you can use the dispute process to tailor further the deal to make sure you dont have those problems in the future. But overall, if you have violation upon violation, its ticky tack, and there are lots of little ones that add up. And then you can go down the path of iran is trying to undermine the deal. Which may push you in a direction of more aggressive sanctions response options. Senator, i think there are variety of things you can do. Certainly unilaterally you can impose different types of sanctions. If the snapback had an element of tailored snapback as opposed to blunt snapback. Potentially, thats one way of dealing with relatively minor, yet material infractions. I think the bigger question is going to be systematically how infractions are viewed. Will they be viewed as iran really trying to cheat . Or is it simply kind of iran being iran, pushing the envelope. And i think thats going to be the biggest challenge. I think those who dont want the deal to fail, and certainly may have commercial interest, et cetera, will make the assumption that these are forgivable offenses. Those that are more suspicious of iran, obviously, will see these as just the tip of the iceberg reflecting what iran may or may not be doing covertly, for example. So i think how all those infractions are viewed actually in total becomes really important. Okay. So if you were going to divide can i continue . Sure. If you were going to youre already having such an impact on things with the intel briefing. We need to let you go as long as you can. Thank you. If you were going to divide the p5 1 so the negotiators who are part of this agreement, would you put certain of them in one camp . People who think iran is looking to violate the deal and people who think, well, they we want to give them some slack on these things. And how would you divide that out . And what options would we have as were looking at those partners in negotiation to try and bring them around to our point of view. Well, senator, i think i would say this. I think every party to the p5 1 wants to see the deal work. I think they would treat any violation as being a potentially serious one. Now, if on the one hand, if its a valve issue, we will probably react more seriously to that than, for instance, russia would. But, i think a real very substantial, significant violation of the deal would be as big a problem for the russians and the chinese as it would be for the p5 1. And itll come d context of the violation and what were suggesting in response. If were able to be proportional and reasonable and serious about how were handling this, i think the p5 1 will stay together. Do you agree . I have a slightly different view. In part because i think theres a question of how the Nuclear Program and iran is viewed in the context of the negotiation. And richards right. Everyone wants the deal to work. But then, there are other factors that i think create gradations among the parties. And one of the gradations is actually how willing the parties are to allow sanctions to be used effectively is the way i would put it. And i would put china and russia in a camp where they certainly do not want to see the effective use of sanctions wantonly, and they certainly dont want to encourage the u. S. To use these powers effectively. And i think thats a real challenge in terms of the sanction framework. On the other excuse me for interrupting, but on the other hand, they have been effectively working with the u. S. In terms of imposing those sanctions on iran, is that not the case . Yes, because theyve had to. In many ways, theyve had to not only because of u. N. Chapter 7 obligations, but also because of the market implications. The rest of the regime imposed by the u. S. Government has really forced the choice. Are you going to do business in the u. S. Or are you going to do business in iran . I think that choice has been stark for most market actors to include russian and chinese actors. Thank you, both, very much. Thank you. Are we good . Sure. I do want to say we because of the chinese relations, we did grant some significant flexibilities of them. So to say that they have held firm to this would be a little bit of an exaggeration because we, they were not going to hold firm, so we granted them some flexibilities. But with russia, maybe so. Senator menendez. Just a quick question and a comment. If its true that sanctions did not stop irans Nuclear Program, and neither does this negotiated agreement. It may delay it. But it doesnt stop it. So lets look at what standard were trying to look at in terms of judging. I have a concern that think of snapback as an instantaneous reality. And yet, in page 6 of your testimony, talking about how we got to the point, you say this approach took time, patience and coordination within the u. S. Government with allies. It would not be a financial shock and awe campaign using a series of coordinated steps to isolate elements of the economy starting with shipping, insurance, and finally the oil sector. So my question is, how instantaneous is assuming we have all of the laws in place, which is still a big question for me. How instantaneous is snapback . In terms of both the actual, you have to give notice to the world and to companies, right . That youre now in violated space in sanctioned space, we used to give people at least 6 months notice of that. Im trying, you know, this idea that its an instantaneous, give me a sense of that. Its a great question, senator. I think i there are two different answers. One is the mechanics. Youre absolutely right is the implementation of a snapback would have legal and mechanical implications and youd have to allow for contracts to be unwound, investments to be moved, et cetera. There are mechanics of that that will take months, potentially. The second part, which is perhaps the most important is as we get further along in the implementation of this deal, and the erosion of the sanctions architecture, you begin to lose the ability to affect the marketplace and its risk aversion to doing business with iran. That would take even longer to reinstitute even though the snapback would certainly help. And i think that would depend on enforcement. That would depend on expansion of sanctions list. A whole set of other measures. With the market understanding that iran is being not only punished for the violations, but also being isolated from elements of the financial and commercial system. That in some ways would be in violation of the current reading of the jcpoa which is in part why i have grave concerns. In any event, i think those are the two elements that do add delay to any snapback. I generally agree that instantaneous is not how this works. Youre right. Theres going to be some wind up period to the sanctions immediate effect. I dont anticipate the process is going to be a secret. Certainly when a Security Council consideration begins, therell be attention paid to this. In my mind, that is part of the warning time and preparation time that companies and banks and businesses will have to build into their snapback calculations. They will see this coming and that 30, 50, 60, 80 days of this period is a lot of time for them to start preparing for response to snapback. That doesnt mean that on day 80 i think youre going to have zero Economic Activity with iran. But it doesnt mean, i dont think, if there is a sixmonth windup period, some of that is in the process. The second point i would make in reaction to juans comment, i think its true that over time the market is going to normalize the expectations of iran. But i think its going to be a much longer time than we might have time. Because our secondary sanctions are still in effect. And so banks and companies are still going to have to be screening against the Treasury Departments sdn list. Theyre going to have to do their Due Diligence and having to treat iran as different. As were calculating here. This sense of instantaneousness. Theres going to be months involved. Which means, you know, this whole breakout period months involved to have an effect before you try to move the iranians into changing their course if theyre violating is a lot less. Even in a case of snapback. Youre talking about a limited window in the future. And that has a real consequences for judgment at the end of the day. Well, certainly between yourself and the two people at the table, theres a vast amount of experience and how long it takes for these things to kick in. No question. And i want to thank our witnesses, been an outstanding hearing. Were going to leave the record open for questions if its okay through a close of business monday. And hope that you would respond. But we thank you both for your service to our country. Its been an important service. We thank you for being here today. And, again, its been an outstanding hearing. Thank you. Thank you, mr. Chairman. Thanks for your leadership. Were adjourned. When the senate takes its august break, well feature book tv programming weeknights in prime time on cspan 2 beginning at 8 00 eastern. And at the end of the summer, look for two book tv special programs. On saturday, september 5th, were live from our Nations Capital for the 15th annual National Book festival. Followed on sunday with our live, indepth program with former second lady and senior fellow at the American Enterprise institute lynn cheney. Book tv on cspan 2. Television for serious readers. The Brookings Institution host a discussion this afternoon on the current and future state of the afghan conflict. The u. S. Commander in afghanistan, general John Campbell will discuss the countrys security landscape. Cspans live coverage begins at 3 00 eastern. Through the month of august, cspan will look back at the cities and towns weve visited this year, looking at the history and cultural life of the area. Today, we show you austin, texas. That begins at 6 00 eastern. Tomorrow, the Senate Banking committee holds a hearing on sanctions relief thats part of the iran nuclear agreement. Witnesses include the lead negotiator for the u. S. , wendy sherman, under secretary of state for political affairs. You can see live coverage here on cspan 3 tomorrow morning at 10 00 eastern. Sunday night on q a. Talking about detroits Financial Issues and his job overseeing the largest municipal bankruptcy in u. S. History. If detroit had taken that 1. 5 billion that it borrowed in 2005 and 2006. Dow jones industrial index, stock markets trading at 18,000, almost three times what it was. Not only wouldve tripled their money, they could have paid the prejudices in full and gotten back in the business of declaring whats called the 13th check. Used to be a practice of giving pensioners a 13th check at the end of the year in addition to the 12 theyre due. So it could have fixed itself if thered been some sort of sober management Going Forward just like any organization in the United States, as well. If you have some strong leadership and some focused leadership, you can resolve these problems. But it takes a lot of effort. Sunday night on cspans q a. The Panel Discusses if these threats are an evolution of Economic Warfare targeted against the u. S. The Hudson Institute hosts the twohour forum. All right. Good afternoon. Im the Principal Investigator on this project and i want to thank everyone for attending. I want to thank the hudston institute. And i want to thank the coauthors. Some are going to be speaking today. And on the following panel, mark dubowitz, some may be in the audience,. I dont know if tiffany is here. If you havent seen it, tiffany was quoted extensively in a recent Washington Post on the cyber vulnerabilities of the auto sector. A few housekeeping notes before we get started. The first panel will begin momentarily. And about one will roll into the second panel. There is a short survey, if you could, if you havent taken it already, we would really appreciate it. Its anonymous, short. Fill it out and leave it in the box. It will give us a better idea about how people are thinking about cyber enabled Economic Warfare and where resources should be put to it. We will be publishing both a synopsis of the seminar and the results of the survey. So stay tuned. Let me set the stage for a few minutes on how it really got started. It really is its genesis back to the mid1990s. In discussions with incredibly smart people like manager and Nadia Shadlow at the organization that sponsored this work about economics and security. So in 1997, the Asian Financial crisis hit, if you remember. It began in thailand and contagion quickly spread to indonesia, south korea, malaysia, other countries throughout the region. Foreign debt to gdp ratios rose over 180 . During the worst of the crisis, riots occurred, governments fell. The causes of the crisis were varied. But most experts think it was the combination of crony capitalism and flooding the market with cheap money and simultaneous slump in Semi Conductor prices with the rise of the value of the u. S. Dollar. From our perch in west port, connecticut we discussed how economic destableation in asia could protect larger regional securities. What would it mean for relations. China and taiwan. What would it do to radical separatists lake guam, indonesians, and the philippines. It was the malaysian Prime Minister at the time, what he was saying that really got us thinking. He directly pinned the blame on international financiers. Saying they purposely sabotaged the malaysian economy. He used the words attacked and said the economic fires were no accident. But a western conspiracy to rule the world until other countries have run their affairs. We discounted the malaysianspecific diatribe, rhetoric and thinly veiled semitistm if you remember that part. We thought back on americas use of Economic Warfare against the nazis and then against the soviet union. We began to think if and how the u. S. Would need to think differently about the threats and capabilities as the world Financial Markets became more automated and integrated. Over the next decade, the conversation waxed and waned. And then came back as evidence started piling up on u. S. Banks, u. S. Defense contractors, u. S. Intellectual property, electric grid, our health care system, the most sensitive parts of our government. Were we seeing something new. There has always been Economic Warfare. One goes after the economy to another to effect and weaken its overall strength. But the rise of the global electronically networked economy and the growing cross porter integration and interdependence has produced sizable opportunities for various actors to develop new methods and strategies of Economic Warfare. Increasingly could contemplate new possibilities for using pernicious cyber economic assets and systems in order to cause harm to a target state security capabilities. So we label this new class of security threats cyber enabled Economic Warfare. The attempt at achieving political and security goals through cyber enabled economic aggression. And in this type of warfare, the United States is particularly vulnerable. As former dni said if we were in a cyber war today, the United States would lose. It is not because we do not have talented people or cuttingedge technology, but we are the most dependent and most vulnerable. So we started this project with a few organizing questions. One, within the escalating Cyber Attacks is there lurking a new type of action. A strategy to undermine the u. S. Economically. Two, are there adversaries whose strategies are specifically designed to cause economic harm to weaken or significantly debit tate u. S. Security capabilities. Three, is the u. S. Prepared to identify and address such strategies effectively. And four, if not, what can and should be done. So we did not attempt to provide definitive answer through the monograph and the seminar. Rather, what we wanted to do is start a robust, much needed debate on this topic. The chapter authors and those who have participated in some of the seminars we have held have been willing to put novel and creative approaches on the table. Some workable, some might not yet be workable. But critical for new ways to be explored to address this problem. To a person, we are certain that u. S. Intelligence, defense, treasury, and Homeland Security departments and agencies appear to be inadequately constructed or attuned at present to address the way these threats are evolving. The u. S. System for detecting, evaluating and addressing cyber to weaken or significantly debit tate u. S. Security capabilities. Three, is the u. S. Prepared to identify and address such strategies effectively. And four, if not, what can and should be done. So we did not attempt to provide definitive answer through the monograph and the seminar. Rather, what we wanted to do is start a robust, much needed debate on this topic. The chapter authors and those who have participated in some of the seminars we have held have been willing to put novel and creative approaches on the table. Some workable, some might not yet be workable. But critical for new ways to be explored to address this problem. To a person, we are certain that u. S. Intelligence, defense, treasury, and Homeland Security departments and agencies appear to be inadequately constructed or attuned at present to address the way these threats are evolving. The u. S. System for detecting, evaluating and addressing cyber enabled economic threats seems structurally in adequate and in sufficiently focused on the matter. This raises concerns about americas preparedness for identifying and responding to existing Economic Warfare threats. Even more so that its ability to match the rate of their evolution. All right. And with that i want to turn to our first panel that examines the evolving nature of this debate. Were honored to have three highly knowledgeable and well regarded individuals. So our format is that each will speak for about 10 minutes. And we will open it up to q a for another 20, 30. So first up is the honorable juan zarate. My good friend. First ever assistant secretary of the finance. He served as Deputy Assistant to the president and deputy combatting terrorism. His phenomenal book treasuries war discovers the new economic era of war far. So thank you. Thank you very much. Thanks to all of you for coming. This is a wonderful turnout and wonderful event. I want to thank the Hudson Institute. Mark dube wits. Thank you for shepherding the authors in the production of this very important piece of work i think. I would commend all of you in the room and those watching online to pick it up and to read it. The contribution, at least from the other authors, are incredibly important. And im honored to be here today, especially with steve and mike to discuss these issues. I want to thank sam, too. Because she gave me an opportunity to write more about some of the details i explored at the tail end of my that i think are critical as we look forward. I want to discuss with you and maybe open up the discussion for the panel to talk about the convergence of financial and cyber warfare. Sam has laid out one of the interesting dynamics of the 21st century is how dynamic, fluid, inter connected both the Global Financial and cyber domains have become and how inter dependent they are. And the reality is the more dependent u. S. Economies become on those globalized inter connected Cyber Systems the more vulnerable we also become to the potential asymmetric impact of those who may try to attack or effect u. S. Interests. What i want to do is talk a little bit about what that convergence looks like, starting first with a discussion about the nature of the threats. And then what this means strategically. I think where we are now is were facing very dynamic and shifting Threat Landscape. But also a dynamic and strategic landscape where the threat of asymmetric capabilities is really on the u. S. It has been identified by the u. S. Intelligence community. So let me start with the Threat Landscape itself. And in particular, the actors involved in the space. Its clear that actors around the world show asymmetric tools, Economic Warfare to their advantage. To think about the use of these. It was really dominated by financial dominance but a dynamic where the u. S. Found creative and innovative ways to use financial power and influence and reach in situation to isolate rogue actors and activities from the global commercial and Financial System. We are seeing this play out obviously in the negotiations with iran. Were seeing this play out to a certain extent in the dearound russia. The ability to isolate rogue behavior has largely been the province of the u. S. Government and u. S. Policy. But u. S. Competitors and threatening actors realize that those very same is tools, those very same mechanisms, some of the same strategies can be used against the u. S. For asymmetric advantage. So you see a full spectrum of actors playing out in the space, realizing this dynamic. Super empowered individuals, hackers and activists for political or other reasons profit often using these tools to go after the Financial System. In particular, banks. Sophisticated organized crime groups using deep expertise found easily on the internet beginning to infiltrate banks in the Financial System. Intelligence services figuring out how to use these tools for profit and political services. And some of them major powers, russia and china, others marginalized like iran, north korea. We have seen plenty of examples of that. One of the advantages to these actors is the low barrier to entry. As we often say, its not very costly to get into this game or to be on the offense. It is incredibly costly to be defending against these. But there is a supply of expertise available on the internet. Often sold to the highest bidder. There is the dark web that provides access to those willing to play in the dark alleys of the internet and to connect with those with expertise. Open source protocols and programs that allow individuals and small groups to have global reach. And weak defense globally. Whether its at opm or in other systems around the world where small or relatively weak actors can gain access to prized you have seen d dot attacks. You have seen malware begin to evolve in pretty dramatic and important ways. In particular, attacking the sector. And trojan horse attacks which may pore tend malware attacks. These are not just hypotheticals. We have begun to see them. The jpmorgan attack last summer. A good example of the potential for vulnerability as well as destruction. The dark seoul attack. The denial of service attacks led by the iranians and syrians against Western Banks, which continue to this day. The gaos attack in 2012. Nasdaq hack, which has not been fully determined or figured out in october 2010. Matched with significant infrastructure attacks like ramco and other. Portend a real series of attacks on a Financial System in a way that is systemic and important. Now, let me just move very quickly to discuss why the Financial System, and in particular banks, have become such an interesting and important part of this landscape. As i have often said, in many ways, the International Global banks are now at the center of the cyber storm. And thats for a few reasons. One, banks in the Financial System is where the money is. If you want to profit, if youre an organized criminal ring that just wants to make money, you want to engage in fraud, thats where you hack. Thats where you attempt to get access to data and to money. Its also where intellectual property, sensitive data, reputational data thats important to banks and intellectual property important to deals and Companies Engaged in mergers and acquisitions and attempts to enter new markets. So that information becomes valuable to a whole host of actors. Banks over the last 15 years have also become protagonists and many of the debates that effect rogue actors and countries. So the very isolation of iran, for example, from the Global Financial system has been driven in part by what the Western Banks decided to do or not do in terms of business with the revolutionary guard or Iranian Companies and fronts. And also actors in the space, the full spectrum that i described, that the banks and Financial System are part of the key vulnerability and Systemic Risk for the west and the United States. Some actors no doubt, the most destructive among the spectrum would find it incredibly a advantageous, if not helpful, to destroy the trust at the core of the international Financial System. What hank paulson called the magnificent glass house. And so the banks, the Financial System, find themselves in the middle of the cyber storm at a time when the asymmetric environment is evolving. Evolving in some interesting ways. As sam mentioned and as the report lays out, u. S. Vulnerabilities increasing over time, not decreasing with our defenses not keeping up. With hybrid warfare and gray zones of warfare beginning to evolve as part of national doctrine. We see this clearly with the russians and how they think about the use of proxies as well as cyber capabilities. And you see this as well in the environment where theres much more fluidity than in the past with rogue actors able to profit with and for each other. They claim deny blts of those attacks. The syrians and the iranians developing their own capabilities, perhaps relying on others. And North Koreans developing capabilities, as seen in the sony hack attack of last year. So due to the technologies, due to the Global Connectivity of the system, but also strategically with these rogue actors, challenging states thinking aggressively about how to use these tools. And i know the next panel is going to get into some of the defensive dimensions. But i do think it is worth mentioning at least some of the ideas that i put forth in my piece and i know what we will discuss here there has to be a new way of thinking about this strategy. There has to be a new way of thinking about these tools in ways that mott only puts us on the defense but also on the offensive. And private and Public Partnerships paradigms. Using financial tools like the president s executive order from april 1st. Perhaps cyber warrants when the government gives license to the private sector to protect its systems, go and destroy data thats been stolen. Or maybe even something more aggressive. And then finally, developing the redundancy of our systems so it becomes less attractive as a strategyive cool tool for our adversaries. It is a much more dynamic not just in terms of the threats. I look forward to both the q a from this panel and rolling into the next one to discuss some of those things that juan laid out at the end. Next up, we have steve, who is general counsel and chief risk officer for the Cyber Security Technology Firm crowd strike. Prior to joining crowd strike he served over 15 years with the fbi, where he helped shape many of americas cyber and Infrastructure Protection laws. As deputy of the fbi cyber division, he helped oversea fbi strategies, intelligence analysis, budget and policy development and execution and major outreach efforts protecting United States from Cyber Attacks. Steve. Thank you. Those remarks were so good all you left me to do is really a tour deforce as an overview. Where you ended is where im going to start. Strategy. Where are we . Where should we be . We actually have a failed strategy. The way we know it is we put more people, more effort, more policies in place and the problem keeps getting worse. It doesnt compare to where the threat is going. That keeps getting further. And i want to address why i think were there. I want to summarize my view what those are doing to us from an Economic Warfare. What we are doing in response that makes this worse and what it portends to our future. It goes across a full spectrum of activities from stealing highly Sensitive Information, intellectual property that gives our businesses not only fair market condition but over time we have seen a lot of us become economically powerful enough to sustain our military capabilities. And private information about individuals that were seeing can be used both to defeat consumer and citizen confidence as well as used against some people, depending how Sensitive Information can be used for blackmail and extortion. The ability to capture information also shows the ability to change information destroy information. The ramco case, a couple in the middle east, wakes up to find 30,000 computers essentially destroyed overnight. But it is not only about data. It is is about physical systems being run. So if you change the integrity of nuclear enrichment, which we have seen capabilities that could be used, which could be used against it. And changing chips, components going into military fighters which we have seen through supply chain attacks. What that shows you is there are a number of ways for adversaries to react to come out of and how they get into systems. It can be remotely. You hear about the fishing. It can be through the supply chain. Products being created all over. Either in the design, the manufacturing, the delivery stage. Or insiders sent to our country. In terms of work visas. Going into military fighters which we have seen through supply chain attacks. What that shows you is there are a number of ways for adversaries to react to come out of and how they get into systems. It can be remotely. You hear about the fishing. It can be through the supply chain. Products being created all over. Either in the design, the manufacturing, the delivery stage. Or insiders sent to our country. In terms of work visas. So the vulnerabilities are enormous. And now let me step back to how we have responded to that. Economically we have responded in the worst possible way. What we have done is we have sunk billions of dollars into our budget into the least probable success for cyber strategy. We are expanding through the internet of things. Biomedical devices could be hacked. One brand that the other day u. S. Government told all hospital toss use a particular type of infusion pump. They are worried through the hospitals enterprise network, hackers could get in and start changing the delivery of medicine to patients. And the demonstration of a car being taken wildly off course. And vulnerability mitigation is a full errant against determined, sophisticated all spectrum actors of the type that we are up against. And it doesnt work in the physical world. What we do in the physical world is you do a certain amount of vulnerability, you lock doors, windows, maybe change the quality of your doors and windows. There is a point where if an adversary wants in badly enough, getting through the roof, cutting through the ground, and we change quite quickly to threat deterrents, which juan also mentioned. The idea that we concede the we are up against. And it doesnt work in the physical world. What we do in the physical world is you do a certain amount of vulnerability, you lock doors, windows, maybe change the quality of your doors and windows. There is a point where if an adversary wants in badly enough, getting through the roof, cutting through the ground, and we change quite quickly to threat deterrents, which juan also mentioned. The idea that we concede the ground. No longer is this about me protecting myself. It will be about me going after you. It involves detection. If you dont know theyre there, it is pretty hard to deter them, right. We are seeing routinely organizations, agencies, corporate industry very mature taking in excess of 200 days to even know there is an attacker on their system. You have to be able to attribute it down to the person, who is behind it. We dont know if its you but youre responsible for stopping it because its coming from your area. And then penalties. Some penaltybased deterrents. The worst that can happen to a hacker currently from what we are seeing in the advanced phase is they get caught and they get to drive again. They dont succeed at first but they try, try again. That model has to change. On the physical world, we put up alarms. And so that immediately says its for deprotection, right . You put up cameras for attribution. When your alarm rings at 2 00 in the morning and goes to the Monitoring Company, the Monitoring Company calls the police. They dont call the locksmith. Because its about penaltybased deterrents. And youll note from an Economic Perspective that what we have done to our response in response, we are bleeding ourselves dry financially with our response because it has led to two. One is diminishing returns on our Cyber Security investment. Meaning it is no longer worth the same amount as when you start off. At the beginning of a program, just like in the beginning of physical security, it might be worth 100 of protection or even more. Maybe 100,000 worth of protection. It inches slowly and slowly to have a dollar represent a dollars worth of security. Thats the dimensions return aspect we are seeing. We are now in the system of negative returns. Meaning every dollar is actually making things worse. It has proliferated and escalated the problem. And we see this every day played out in the newspapers. Those of us seeing victim clients as the bad guys, when you defeat them, they tonight just give up. Okay. I used to have a life of crime. Now let me he see life of law. Is that a phrase . It doesnt happen. They find alternate routes. They are using codes based in pictures in twitter accounts for botniks. We have spent our money. It resulted in an escalation of the problem. Similar, for example, if someone were to break into your place of business and the response was, why dont you put up a 10foot wall at the price of a Million Dollars around the complex. And then they go up and purchase a 15 foot ladder for 30. And then the response is, you know what, 15 foot ladder. Make it a 20 foot wall. We all know what is happening next. That is happening to us here. Not only are we falling victim but our intellectual property is being stolen. Our banking and finance is vulnerable, as is the rest of the critical infrastructure. But our response has furthered our economic dependencies at a loss of viability for our security. So where do we go from here . Thats really where the second panel will answer the questions. But certainly that threat deterrents have to be the predominant focus using all hours of national. And consideration of private sectors role. It can be very influential. That is not just a u. S. Problem of course. And as we think about that strategy, the other thing that we really have to be concerned with is how the political and Economic Warfare that were facing can result in a crisis of confidence in our country, which could of course be a severe or more severe than actual consequences. I think we are facing real potential of a crisis of business confidence, the ability to be protected in todays global economy. Consumer confidence. The ability actually to do anything on line any longer, to take advantage of technology. Injection pumps. Automobiles. Right . So the economy thats being driven through technology can pay for Consumer Confidence backlash. Unfortunately citizen confidence if we feel the country cannot protect us. And its actually subject to extortion at any given time. In this country organized criminals are breaking into police force computers and telling them if you dont pay us our ransom, we will delete, destroy it or never have access to your records. They are paying extortion to foreign criminals. What happens when that happens against us . Is it already happening and you just havent been apprised of it. And with those remarks, well pass it off to the distinguished congressman. Good afternoon. We are pleased to have chairman mike rogers addressing us today. Former member of the u. S. Congress, 8th congressional district. Fbi special agent. Mike really is in a unique position to shape the National Debate on a wide variety of issues, including this one. He hosts the nationally syndicated, something to think about, house wood 1. And he chaired the powerful house intelligence committee, was a member of energy and commerce. Mike built a legacy of his tireless and effective leader on Cyber Security counterterrorism and National Security policy. We welcome you, mike. Thank you, sam. Steve was an fbi agent to catch smart criminals. I was the one apparently to catch the dumb ones. As a matter of fact, i have had the opportunity to meet and spend time with all of your panelists you will see today and all the authors of the book. And i highly recommend this. Ive read a ton. This is to the point. Provides you unique talking points. Out of the box. I love that thing. When i walked into the room with all the panelists it struck me that the iq on average went down 15 points. Now, i dont know why that happened. Oh, come on, people. Lighten up. I know its pretty serious. Two things happened in the last decade we dont want to talk about. We have strategic erosion in our dominance in both cyber and space. In 2007 when the chinese took out a rocket at about 11,000 Miles Per Hour and hit the target, thankfully their own, a whole host of activities, including killer satellites, americans dominance in space came to an end. We were no longer uncontested in space. You think about how reliant we are on space for everything we do in our economy. That was a fundamental change. We had to figure out how do we step up and counter that . Now you have to launch a satellite that not only can do its mission set but protect itself. That is a whole new ball game when it comes to space. About half of all the satellites up there dont belong in the United States. Some are up to pretty nasty things. Then you take cyber. We watched this problem happen year over year over year. Heres the thing. Heres the good news about the former mcconnells comment if we were in a cyber war we would lose. If we were in a cyber war we would lose. But here is the bad news. Were in a cia war and were not winni winning. And that is that about a and getting worse. You any of where we are today. Most of our Financial System is under attack, some successfully, and some not. Youll hear from other panelists how the new technology, which we pride ourselves in, is now susceptible. Airlines have been hacked. Our electric grid has been attacked and is susceptible. And they dont tell you dont worry, nothing to see here, dont worry, move along, we have it fixed. Why . Because they dont. The fbi came out with a report over 13 over year 14 there was a 50 increase in economic targeted American Business espionage. 53 increase over one year. And the bad news is it was outrageously bad the year before. Why . No consequence. Right . They have been absolutely been able to get away with it. China has built an economy on stealing intellectual property, not only from us, but from any allies who have intellectual property had a subject to getting it ripped off and likely they have. And so we watch this problem get worse. And get worked up about this. I just read today where department of Homeland Security has issued a letter in opposition to the one piece of legislation that the senate is ready to move here called sisa, for those of you who are familiar with our bill called cispa, that tells you we have problems right with acronyms in congress and it allows companies to directly go to certain intelligence agencies to share malicious threat code which has been happening in the past. So the one thing that we looked at in congress assaying we have to foster sharing. Sharing is the key word everybody says. If we can share malicious course code, machine to machine, zeros and one at light speed, we might be able to put a dents in this. And what you are seeing and why we watched it happen year over year is there is a bill out there that could be productive and allows an protects the relationships so companies can knowing their information is safe and saying we have this malicious source code and you have to help with us and now our government will work against itself for god knows how long over the details of how we come up with a cyber sharing bill in the United States. And i think the first bill was by dutch rupersberger and myself, and were going on two years, likely three years and we still cant come together and the white house cant talk to the senate, and the senate cant talk to the house and how many tril yonz of dollars have we lost in potential economic gain and real dollar loss . Billions. Billions and billions and billions of dollars. And the one trump card they will throw down and they did it in the dhs letter to stop the legislation is quote, we have privacy concerns. That stops everything. In the meantime, the russians, the china and the iranians and now the North Koreans, we could list about 15 other nation states, are already on your networks. They are stealing your information pretty much daily, as ease, again, with no consequences. So think about where we are today versus where we were ten years ago. Space were no longer the dominant player. It is now contested. Our technology is better clearly in many cases. But now we have to worry about the safety and the security and survive ability of the old systems an the relatively new systems that we launched into space. Big problem for any business anywhere in the world let alone how ties we are to the economy. On cyber, getting our clocks cleaned, now the Intelligence Community will set up its own version of a cyber center to police up the act. And i think this is a good idea. We didnt even know the capabilities amongst our own intelligence folks. Why . Because people threw down the privacy note and we stopped everything for two years. We couldnt share information in a real and meaningful way, realtime, machine to machine, to push back on what we know is a serious and growing threat to the United States. Couldnt quite get ourselves there. And the last part of this, in 2014, was a huge policy shift that we all, as americans, kind of yawned and move add long. We had two nation states, not the most capable on our list of nation states we worry about make the calculated decision they were going to use their nation state capability of exacting a punishment on a single United States business. Normally if somebody went in and blew up somebodys warehouse or fired a missile or sent some sabotage group from across the world into the United States to do that, it would be an act of saba toth or war or terrorism. A political entity using destruction to further its political gains. Clearly fits in the definition of terrorism at the very least. We saw nation states in 2014 and then both of those cases are public. One is the sans resort casino and the other is the sony case. Both of those involved nation state cyber capability and cyber actors. An the problem, what all of the panelists have said today is where is the deterrence to doing that . There is no deterrence. They will not stop. They will increase the ability to have the capability to conduct their kind of attacks. And they will continue to Pick Companies they find vulnerable to do economic and real destructive harm. And when you think about the sans resort casino, it was a similar type arrangement where the ceo gave a speech about why iran should not get a Nuclear Weapon. They decided that was an affront enough they would use their nation state capability to tack the sans casino and it took them a long time and they started out with a casino in pennsylvania and started with headquarters and worked their way back before they did millions of dollars worth of damage at that headquarters for a political purpose. Americas response not much. And so we have kind of yawned at this motion we have this problem but as long as i can get to starbucks with my app and pay for my parking on my iphone, everything must be okay. The problem is every day we erode our ability to protect a growing and more complicated system. Lastly, we are getting ready to add 28 billion billion new applications no the internet. The internet of things. Everything from your garage door opener, and i dont know about you, but every time i walk by my refrigerator, i think it is working against me and let alone thinking it is on the internet working against me as well this is a huge problem for us. And youll hear about this in the second panel, especially with the automotive focus. And well add these devices and not one ounce of security has been planned in any of it. And when you have an application on your network and if you talk to your security folks, they probably dont know that application is on their network. There are Good Companies coming out now and understanding how you adequately map and realtime and network. It is harder than it sounds. No one has completely 100 mastered it. There are a couple that are close. But that means on your networks, your private Sector Networks there are huge vulnerabilities built in that even the best Security Company and so you ask why does a Serious Financial Institution on the west coast get penetrated, they spent 250 million on Cyber Security alone. 250 million. And they get penetrated. Why . Because of the complicated nature of network and how you manage the network and even understanding what application is on it. I say this is not just a technology problem, it is an anthropology problem too and a people problem. If you wonder why the china has stolen as much data that isnt related necessarily to a criminal act, anthem medical, and the list is pretty long, we could be an hour going down the lit, certainly opm, a lot of detailed personal information, why would they do that . 85 of the success race of a chinese penetration of your network coming from a phishing email. Man the email i can create if i know everything about you for the last ten years and i mean everything. And i also know when the last time you went to the doctor and exactly what you had done at the doctor and what your billing status is. Imagine that email that comes to you at work that said last week, mike you had your knee xrays and i think i verified, would you verify this is your email. Yes, i was there. The email came from my doctor and i click on it and they are in. 85 of the chinese rate. And they just increased their rate by 53 . Im not the smartest guy in the room but in the fbi we would call that a clue. We have problems abreuing so i appreciate the discussion and thanks for including me. That is fantastic. We have about 15 minutes or so to really open up for questions. Focus on the evolving threat and from this panel it became clear the threat is from our adversaries from ourselves against ourselves as well. I dont know if someone has a mic or a small enough room. Sir. Hello. My name is georgetown morneau and