[inaudible conversations] larry metz remarks from treasury secretary jack lew. Hes expected to discuss Lessons Learned in these distinctions on international inc. To tease. Hes speaking at the Carnegie Endowment for International Peace did we expect this to start in just a moment life here he spent two. Cspan2. It is a great pleasure to welcome all of you here this morning. A special pleasure to welcome my friend and colleague, secretary of the treasury, jack lew. But the open above the market that promise to make the introductions very worried the distinguished career and all of you know what an enormous mark is made on our country. Im not even referring to the idiosyncratic signature on the dollar bill. A handful of people who have served including a series of important jobs that the department is in a common management and budget and not treasury. Only a person of extraordinary conviction, integrity and it is only secretariat jack lew can coop attended this year. During our time together at the state department, and i grew to admire enormously checks go in that community. He is a magnetic force. A brilliant but attractive problem with the precision and steady hand of a surgeon. He embodied tip oneills charge to take the job seriously but not yourself in a truly embodied everything one could ever want. Secretary lews experience was across the executive ranch, making him uniquely suited to talk about the past and future of the u. S. Sanctions policy. My own 33 years in Diplomatic Service would become smarter, sharper, more strategic. Ive seen them affect me in total avail. Ive heard concerns from our own Business Community about the effects of sanctions and competitiveness and about the risk to the health of the economy and criticisms about the weaponization of finance and words of praise and thanks from activist to Senior Leadership change course at least in part to sanctions. The call policy tolls, sanctions have Great Potential in the next. As the resume power a new economic actors reshape the International Political landscapes, its only appropriate to pause and reflect how we might be this true in the future to best effect. We could not ask for a better person to help us think through this important question. I hope youll join me and give me a warm welcome to the secretary of the treasury, jack lew. [applause] thanks so much for that very kind introduction. As you now, ambassador burns and never close colleagues at the state department. Hes one of the great diplomats of our day in his good friend. He is here with all of you today. Id like to thank the Carnegie Endowment for hosting me this morning. They done so much to strengthen understanding of International Affairs in the nation to the difficult National Security issues. As we continue to confront complex global challenges in the months and years ahead, your work will remain vital to our efforts. 75 years ago, one day after germany invaded norway and denmark, president roosevelt established an office of the Treasury Department to freeze the assets of the governments of norway and denmark and eventually the assets of many other u. S. Allies. The executive order signed on the day in 1940 prevented from seizing the assets of terror spread across europe at that time, but threats changed in the International Economy has involved a move or find capacity to sanctions. Not that long ago, conventional but then dismiss sanctions upon an effective instrument. The old model of old model of the countrywide embargo which provided little flexibility with innocent civilians close in the targeted countries and here at home. At the same time, early efforts to ensure humanitarian but they fell short of the goal. The sanctions we employed today are different. They are informed by financial intelligence, strategically designed with public and private partners to focus pressure on back or even create clear incentives while limiting collateral. Recent sanctions program of the listed groups including narcotics traffickers as well as shattering companies and stopping facilitators and traveling. Sanctions concentrated that mimic lowpressure abusing their own population in places like sudan, burma and libya. They form the internationally sponsored russia and ukraine can muster not to play with the International Community we put in place sanctions that impose massive class on in helping to bring it to the negotiating table and culminated in a comprehensive understanding that both active Nuclear Program and ensure that it is and will remain useful. Economic sanctions have become a powerful force with clear and coordinated Foreign Policy objectives. Smart power for situations where the end military force, not the on. They must remain a powerful option and that is why the lessons weve learned from our experience need to guide our approach to sanctions and we must be strategic in how we apply sanctions challenging the situations around the world. The power of our sanctions is inextricably linked to a leadership all over the world. They should interpret the context of our conditions somewhat lethargic economy and the predominate role of the u. S. Financial system plays. We must guard against the impulse to reach her sanctions where they will have impacts. And the with the overuse of sanctions and undermine Leadership Vision within the Global Economy and the effectiveness of our sanctions as well. While every situation will require an approach come at the underlying goal of the law sanctions in the effort to change behavior, sanctions are not meant to dole out punishment for past action through their intended to keep up with the context out of our system and create pressure to change future behavior. The foundational principle is different which are meant to address. Building on its principle, three bbravo lessons across a wide spectrum. First, we learned that sanctions are most effective at changing behavior when we were close with our partners to build a port for common object is. The more International Support there is her sanctions and further underline the fact is, the more effective they will be. We learned this lesson of the last decades of our unilateral embargo in cuba. Not only did we feel International Support, we saw our closest partners like canada and the European Union enacts legislation forbidding Domestic Companies and following sanctions. As a result, foreign subsidiaries of u. S. Companies were subjected to ball and we were at odds with many neighbors in latin america. The outcome has been an effective sanction. We have the best chance of success when Government International bodies align their sanctions. In some cases, u. N. Security Council Resolutions that the best way to reach content is as we achieved in december against isaf and last month again to you. The best approach may involve sanctions by the g7 or an Informal Group of allied countries. While it must always reserve the right to act alone to protect the National Security, unilateral action should be the exception, not the rule. Our sanctions against iran Nuclear Program at the most powerful example of how broadbased effort coupled with serious he can proceed. As i went Nuclear Ambition to focus and repeated the deprived calls of the international accord, successive administration has been trying to change the calculation through various tools of Foreign Policy including sanctions. The United States began by imposing its own sanctions and own sanctions on complicit iranian banks and businesses but it quickly became clear we needed to work with partners around the world to shut down safe havens and increase pressure on irans economy. We travel to explain the threat posed by ambition and with support for common action get allies in the European Union, canada and oster alea is a country with close ties with china, russia and india. By 2010, for annuity security Council Resolutions raise pressure on iran economically in the world banks are increasingly weary of participating in iranian transactions. The u. S. Congress and the administration were together to amplify the pressure, implementing measures that can very sanctions that threaten Foreign Companies to serious penalties for offshore transactions even if no u. S. Persons were involved. The new measures targeted Irans Crude Oil sale, Financial System and other key sectors with the iranian economy in the Nuclear Program. Working with governments and banks around the world come to sanctions on iran had a powerful effect. They damaged irans few remaining ties to legitimate initial systems. The next step is to slow down irans oil revenue. An immediate halt to all it ran an oil text for wouldve looked much tougher than an incremental approach that is what is imposed an intolerable burden like china, japan and south korea wouldve likely fail from the start. So the sanctions pressed the International Partners to ratchet down their important every six months over two years to the efforts resulted in the 60 drop in the most expert putting massive pressure on iranian government revenues while preserving the option to further read by pressure. By building pressure over time, we maintain broad International Support, maximize impact and effectively restricted or blocked nearly all of the central bank of the foreign reserves. Ultimately irans choice pursue an illicit Nuclear Program or rejoin the Global Economy. In 2012 we opened a narrow window to see the diplomatic solution was possible. That possible. Back when bill prince and deputy secretary of state and i served as white house chief of that, we broke up a small group. The process which was set which was about idea raining people guide to which froze nuclear can be the diplomatic efforts by secretary kerry as well as former undersecretary Wendy Sherman with the support of the department of state treasury and energy in our International Partners we should try to comprehensive engagement to cut off pathways of Nuclear Weapons and the threat of further destabilization. The goal of sanctions is to pressure bad actors to change their policy. They must be prepared to guide relief. If the followthrough we followthrough we undermine her credibility and damage our ability to sanctions should drive policy change. The experience with iran demonstrate that difficult this can be, essential as it is very to achieve its goal of lifting sanctions, iran had to accept a comprehensive nuclear deal is to help achieve on change in iran calculation and that in and give coupled with tough print above diplomacy worked. If tehran cap defended the deal, the responsibility to uphold ours. This reason it is vitally important in vitally important indentation debris lifted the sanctions that profit to provide guidance to make clear where congress can resume. The implementation weve engaged in widespread global outreach to help governments and businesses provided them critically sanctions in place. We can support terrorism and regional destabilization and human rights violations. Irans Nuclear Program poses a special threat to Many Companies have globally and for countries that get to a potentially at essential threat. Theres no question that removing the Nuclear Threat can make the region and world safer. As attorney general knows, and i put it, without a doubt the nuclear joe between iran and historic turning point is a big change in terms of the direction that everyone was headed and in the way that we saw. Following through the other actors changing behavior. Two years ago when regrets in life and matched in Eastern Ukraine and occupied, it was clear that the world needed to raise bond. It was also quickly apparent that economic sanctions to be the most superb route to respond. While it u. N. Security Council Major is on through the u. N. Security council impossible, work is other likeminded partners the International Plan to respond to russia with the gold a change in russias policy choice. Russias economic promise of Global Financial and powerful sanctions would need to be carefully designed to avoid consequences and spillovers in the Global Economy. While some call for it to respond with every intersections arsenal, president obama developed a coordinated concert with our allies that would deliver strong but measured pressure in which good preserve our options if they ratcheted up or down over time, depending on russias behavior. We moved quickly to impose sanctions on key officials in the crisis in ukraine with a particular focus on the inner circle of russias leadership and associated company. In broader measures, we sat at asymmetry, the russian by don the financing with the smallest possible spillover effect on us, our allies in the russian people. The impact has been significant. Sanctions have contributed to financial initiatives of our investment in russia. While russias very deep economic amplified a dramatic drop in oil prices, targeted sanctions have worked imposing gray costs on russia with the limited macroeconomic effect of the u. S. And european economies. The password will depend on russias economy. Russia has made commitment in the sanctions will be lifted. If not, sanctions will continue along with the pressure they imposed over time. A third lesson we have learned is they are in is shown not to be effect is, sanctions programs required an investment in infrastructure to support and implement efforts. Powerful sanctions require investigators and analysts to track how key actors move and store their money and build detailed cases drawing on intelligence analysis. They rely on investigating violations and penalties. Targeted sanctions means the commitment will be freezing assets and separate access as a powerful step that requires decisions to be appropriately reviewed in reverse where appropriate. This requires a careful review of evidence in a rigorous legal process. Finally using mice and as we can protect against unintended effects on the innocent. To authorize exports of food, medicine and medical devices as we did in the aftermath of the earthquake in iran and burma. Here at home, we spent decades building a system to them to implement sanctions and foreign governments to understand how sanctions applied to a complex range of industries and transaction. We were closely to maintain Twoway Communications with companies wellpositioned to observe the effect of our sanctions and often assess where they can be approved. This behind the scenes for this but its an effective program. We need more partners internationally to help which is why we are working to build capacity in countries around the world. At the outset it ensures sanctions primarily inaccurately targeted continues inevitably seek to evade sanctions. Internationally we must work with the council and expert Monitoring Team in the task force with the best practices to deal with a list of those. They have the most developed capability combining intelligence, regulatory and worse than under one roof. We need to enhance and it will work with counterparts in other government to build their own capability. We must take the Lessons Learned and apply them to the critical threat of today and tomorrow like north korea and no lesson is more important when it comes to north korea than the need for International Support. The United States were closely with china and other members of the u. N. Security council this month unanimously adopt a resolution that significantly ratchet up the sanctions on pyongyang and underlined the north korean regime the result of the International Community that stops it Nuclear Missile program. The president then issued an executive order to implement the resolution and astrologist nation passed a congress. Taken together, these multilateral sanctions will increase the pressure on north korea and several key Economic News including banking, transportation, mining and metal in labor. We are mindful that north koreas leadership has prioritized Nuclear Weapons over just about anything else including Economic Growth of the daytoday lives of its own people. It is precisely because of that we must work closely with china and others in the region to ensure a strong implementation of the new sanction only with Robust International cooperation can we convince pyongyang to change and stop its activities. Would also put section wasnt learned to use over the past two years in our campaign against socalled islamic state. Conscious of the fact sanctions will never be used again every threat. As a birthday derives most of its revenues from within, isil is not as acceptable to the facilitator focused approach we use that other terrorist organizations such as al qaeda or had the love. Isil has vulnerabilities using sanctions or just one part of a much broader effort to cut it off from the international Financial System and curtail its renewable sources. Isil started out using territory and money from banks and work closely with the central bank of iraq to cut off the 90 big ranches that the controlled territory in iraq for the international Financial System. Much of isil strength comes from funding internally through extortion of global population. Over the past year the government of iraq has taken an important step to curtail access of the Public Sector salary payments, helping to ensure isil cannot extort those funds. In recent months the Coalition Led by the uss targeted the entire oil applied line going after oil fields, refineries and tanker truck to transport across the country. These actions of admin pack. Late last year isil leaders in the ricotta and happy salaries sighting in a letter exceptional circumstance. To ensure broad International Support at operation in december, pitcher the firstever u. N. Security Council Meeting where we adopted a resolution to expand the longstanding sanctions regime against al qaeda to increase focus. This resolution will keep isil cut off from the Financial System and impose sanctions on anyone caught doing business with it. Just last week, military action to one of isils top initial leaders of the battleground. Clear eyed about the challenge we face going after isils finance is, successful implementation will take determination by local partners in other countries facing threat and Broad International cooperation to make sure isil is denied resources it needed to and create ongoing pressure to shrink operations. Three targeted multilateral effort builds on years of international coordination, weve accomplished a great deal but we still have much work to do. Just as with the other ways the United States projects power, imposing sanctions involves cost. Sanctions should not be used lightly. The constraints it romantic relationships, introduce stability in the global pose companies here and abroad. Of course they carry a risk of retaliation to trigger u. S. Sanctions must constitute a threat to National Security, Foreign Policy or cant and even then imposed over what we have confidence that they will achieve their intended policy goals in only when the balance of cost and benefit is in our favor. Its important to make sure these tools remain available in effect to and there is a risk that overuse the capabilities. While sanctions are a valuable alternative to more severe measures including lawful use of force, it can make the Business Environment too complicated or predictable, Financial Transactions may begin to move outside of the United States entirely which could threaten the central role of the u. S. Financial system globally, not to mention the effectiveness of sanctions in the future. We need to be cautious of rising expectations in this arena and be on guard with the ultimate Iran Nuclear Sanctions taken after eight years of building International Support for tougher action should not become a starting point when we confront each new crisis. We dont Foreign Policy and security threats are critical we have scalable options at our disposal. Secondary sanctions prompt particular concern. On the primary sanctions which focus on it to babies, secondary sanctions generally are correct did with measures threaten to cut out for individuals with companies from the u. S. Financial system is engage in conduct with a sanctioned entity. Even a with a touch of you directly. As a result, they are viewed by the closest allies that territory that a u. S. Aid to the rest of the world. The risk that sanctions overreach will ultimately drive business and dignity from the u. S. Financial system could become more acute if alternatives to the United States as a center of financial activity of the u. S. Dollar as the worlds preeminent Research Community and a larger role of the global Financial System. Global markets are hard to reshape. Alternatives are not well in numerous u. S. Markets and there are many factors that will continue to make the United States the most attractive Financial System in the world. Our central role with foreign jurisdictions feel that we will deploy sanctions within appropriate reasons, secondary sanctions in particular, we should not be surprised if they look for ways to avoid doing this is in the United States dollars. Her condition using the dollar in our Financial System to u. S. Foreign policy, the more the risk of migration and other currencies and other Financial Systems in the medium term grows. Such outcomes would not be in the best interest and we should be careful here is since world war ii, centrality of our Financial System has shown tremendous strength for our economy, benefit or u. S. Companies and the driver of u. S. Global leadership. Given the volume of trade in the u. S. Dollar comic even ordinary our primary sanctions carry enormous waste influence beyond our borders. Sanctions have become a powerful way to protect u. S. National security. One in sanctions so that they are due solely to address significant threats to our National Security to our economy and only from the cost of an offense carefully adopted. Secondary sanctions should be used only in the most exceptional circumstances where is that i ran we have international and sanctions have fallen sure. Todays economic tools are sophisticated, but they are not the answer to every threat we face. When he thoughtfully and cons are with National Power can protect our Financial System and applied its initial pressure against her most troubling National Security threat. There are powerful alternatives which should remain the option of last resort, not the first. To observe the effectiveness of sanctions over the long term, we must use and clearly articulate are provide relief for most goals are met. Future president s will need the sophisticated tools to deal with urgent National Security object is. I must continue to build diplomatic relationships in the operation needed for implementation and private sector ordinations. If we adhere to our principles and continue to learn what has worked and what is not work, we will be able to use these tools to protect our citizens and values for many, many years to come. Thank you again for hosting me here this morning and i look forward to the conversation. [applause] jack, thank you for thoughtful set of remarks. I know we have to wrap up at 9 30, so theres not a lot of time for questioning conversation. Let me just start by reemphasizing the obvious, which is you have a unique perspective on this issue going back to the 1990s in various senior positions at olympia, white house, treasury and state. I wanted to ask strine on this personal experiences over that stretch of time, how you have seen the kind of evolving roles of executive branch players, especially treasury defaulting on a tooth key policymakers and members of congress and their effectiveness. , bill. As i said in my remarks, the increasing development of knowledge implication in the tools we have, in the 1990s, with iraq there was an oil for food program that wasnt very good. It ended up being circumvented and instead of providing the relief on the humanitarian basis, it ended up enriching many of saddams cronies. You compare that to the experience with russia where we went to target his action and went right to the inner circle and had very little impact on the public. We learned a great deal. The unit which in so many ways punches beyond its weight of 200 people in a world where organizations interact with thousands of people. It is the kind of work that just requires a lawyer of the approach to building a case to apply it. Its not just on january throwing out there to implement itself. The relationship to the administration and congress is also appalled. It is not news that congress is interested in these issues, whether it was issues like south africa decades ago or i ran in more recent years for north korea in recent months. There has to be healthy interaction between congress and the administration. There also has to be an understanding that the kind of incremental approach is the kind of scalable approach that i described is the way to be must affect. There has to be cautious not to measure toughness by their new use everything you can possibly do, but whether you do it in a way that is designed to be good in giving you the ability to ratchet up and achieve your results. Thanks very much. Why dont we open up the time we have and raise your hand and a microphone will come to you. Just identify yourself and please remember to add with a question mark. Hold on for the microphone right behind you. Thanks. Globally for sanctions. Secretary lew, how would you address the concern of the Business Community who wants to take advantage of the sanctions wrote used against iran, that yet thinking about a possible snapback of sanctions . Will there be significant government yearning and an opportunity to wind down business without the consent of a potential asset worries on investment activity. Situation in iran is complicated because one has to make one phone calculation is a business person of whether you want to do this or not. Weve listed the new air sanctions. We cant warrant irans future behavior. I think that the agreement is one that should stick and we are going to do everything we can to make it stakes out the environment when plans for should reflect ones own judgment of confident in that. It is also a complicated landscape because while we looked at the Nuclear Sanctions, but not Nuclear Sanctions remain in effect. We have been very clear to indicate in which sanctions are gone and which sanctions remain. We respond to questions when we get them if they sending me for clarification. Ultimately the business judgment is one that the firms have to make on their own. What we have done it should do is make clear what is and is not in place. Weve tried to do that with precision. We have done it and we have done it by posting a great deal and additional elaboration and being available to respond. The challenge of doing business with iran were complicated than just the sanctions environment. Obviously i cant Tell Companies what they should do as a matter of business judgment. What i can do is be clear about what sanctions do and do not apply. In the back. Yes, maam. In the past few weeks, theyve complained about the fact that they havent been getting the promise. In particular Things International bank. Are you concerned about the longevity of the nuclear deal and what is treasury doing if anything to it here to what they are and are not allowed to do when it comes to iran. Wouldve tried to be clear about what sanctions have been lifted and what commercial activity that was prohibited is now permitted. You know, i think that our brand is encountering challenges in the Business Environment that are partially related in the history of sanctions and partially related to the history of irans business relation. That is something they are going to have to work through overtime. As i said in my remarks, it is critical that we be clear that once the Nuclear Sanctions are lifted, there is not a |verticalbar desert not give these included the bank in a two days in the past. That wont affect some banks with sanctions with issues related to terrorism. Things that were sanctioned because the nuclear dvds, weve been clear the sanctions are lifted. I have heard a lot of the comments coming out of iran. And we have tried to be very clear about what our actions have been. I think we are doing what we need to do to comply as i said with a letter in the spirit of the agreement. Notwithstanding the fact that it is not the case that we embrace irans other activity. We are in a world where we just last week had additional action. Iran sanctions were implemented on the committees related to missile launches and activities that support regional destabilization and terrorism. So we are going to continue on those matters if we will be very clear what is and is not sanctioned. I think it will take some time, but we are sticking to the agreement and i believe we need to. Yes, maam. Kelsie roskam and masters is not american university. He touched on this a little bit in your speech. I was wondering if you could expand on how you are putting the people in the country on trade with the u. S. And speaking specifically of the criticism of sanctions and mostly hurt the citizens who are suffering already. So, if you go back to early sanctions programs, it was pretty much on our off. He cut a country often have brought capson the general public. Fast forward to the russian sanctions after ukraine. Very highly engineered and targeted. The first round of sanctions didnt target major financial is to tuition that affect consumers where the disruption would be felt by average citizens. They went to a bank were the leaders headed to bed and with those who are part of the policy that is being targeted to be effect is. The industry is up by sanctioned and russia, email, where not the food industry. It was russias retaliation or they cut off food imports from europe which didnt hurt their own people. We were very careful to design the sanctioned in a way that would have not mount pressure with minimum spillover even within russia. The closer you come to a full embargo, i think what weve learned is to have a variety of tools for a variety of purposes and we know how to do things now that we didnt know how to do 10 or 20 or 30 years ago and that is one of the reasons it is so important to reduce sanctions to scale them out. The ability in europe to maintain unity and functions on russia. If we were kind of heavyhanded at the beginning. I dont think it would have the unity of the beginning. The reason there is still a fact that im still paying attention to that end we maintain the unity notwithstanding the fact that europe has more of an exposure of spillover effect than the United States because of the amount of commerce between russia and europe. It is an area where we have learned how to be much more engineered in the way we apply pressure. Unfortunately anything in time for one last question way in the back. Hi, secretary lew. Wondering if you could elaborate on your position on the russian sanctions. Underwent a chances, scaling back or perhaps offering actions. We have tried to be very clear that we think implementing would be the right outcome in terms of restoring the geopolitical situation that is acceptable. And it would be a pathway towards relieving sanctions. That is an agreement by russia negotiated with ukraine. There are actions you need to be taken from both sides, but russia has not complied with all of its commitment. If they do, we would not relent to boot, but we would be anxious because the sanctions would accomplish their purpose. That is the message we have tried to deliver clearly and its why i think as i said in my remarks it is so that we not hesitate when we achieve our goals for sanctions than respond by lifting the sanctions themselves. It is just not tenable to have a sanctions regime that works if you suffer the same price if you comply or dont comply. So if russia implements, ms. Compliance with its international obligations. That will be a pathway towards lifting the sanctions. Chat, thank you very much. I promise you i predict. Takes for a really thoughtful set of remarks on a very important subject and thanks for your extraordinary service. I hope you will all join me in 18. Thinking. 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