1998 Congressional Hearings
Special Weapons
Nuclear, Chemical, Biological and Missile


SENATE FOREIGN RELATIONS COMMITTEE NEAR EASTERN AND SOUTH ASIAN AFFAIRS SUBCOMMITTEE HEARING REGARDING UNITED STATES POLICY TOWARD IRAN WITNESSES PANEL IMARTIN INDYK, ASSISTANT SECRETARY OF STATE FOR NEAR EASTERN AFFAIRS PANEL IIRICHARD MURPHY, SENIOR FELLOW, COUNCIL ON FOREIGN RELATINS MICHAEL EISENSTADT, SENIOR FELLOW, WASHINGTON INSTITUTE FOR NEAR EAST POLICY CHAIRED BY SEN. SAM BROWNBACK (R-KS) 145 P.M. (EDT) THURSDAY, MAY 14, 1998

SEN. BROWNBACK The hearing will be called to order. I appreciate all of you joining us today.

MR. Indyk, I appreciate you gracing our committee yet again. It seems as if we get very familiar with each other. Although today -- I know you've been involved a great deal in the peace process. We're not going to be talking about that today, unless you would choose to do so and make some great announcement of the United States removing any pressure on Israel and we're going to final-status talks. Absent that, we'll talk about Iran today. I've had a great deal of concern, as you know, and a number of members of the U.S. Senate have, of what the Iranians have been doing around the world. A recent State Department report on Iran -- (inaudible) -- the lead exporter of terrorism around the world. We have a visual up for you. Unfortunately, you can't particularly see it from where you are. If we could, why don't we give a sheet of this to

MR. Indyk so he can see the various places that we've put together a map of terrorism and fundamentalism being exported by the Iranians of activity around the world, which is substantial of what they are doing and all the places they've been involved in, many of them under your jurisdiction and review. The new leader of Iran seems to have some good intentions, but I also believe that the United States foreign policy is not about intentions; it's about actions. And in terms of actions, there's been no change. Iran remains a sponsor of terrorism. It's still pursuing weapons of mass destruction. And notwithstanding a very good interview on CNN, it still stands as one of the United States's most implacable enemies. We will make a mistake if we make any moves on Iran on the basis of impressions alone, I believe. When Iran changes their policies, I think we should be changing our policies. So I'm deeply concerned about some of the actions that I'm seeing the United States taking at this point in time when we continue to have a map that looks like this. And by all consideration of what I'm witnessing on the ground, of what I'm receiving of information, this map is not contracting. This map is expanding of Iranian influence and actions throughout the world, particularly in these most trouble spots, North Africa and Central Asia. So I hope you'll be able to make some responses to us about the administration's activities and reviews towards Iran. I question some of the issues of so-called national interest waivers that are being discussed, particularly regarding on (Ilsa?). In addition, in light of India's nuclear tests this week, it is all the more urgent that we do all that we can to alert the world, and Iran in particular, that the U.S. will not either tolerate an Iranian nuclear program nor foreign subsidies to the Iranian treasury to help it develop one. Iran is pursuing its weapons program with unabated vigor. Missile cooperation with Russia is increasing. Nuclear cooperation is continuing. Iran is cooperating with China and Russia on chemical and biological weapons development.

On the question of Iranian state sponsorship of terrorism and support for fundamentalist extremism, all we need do is look again at the map that we've posted. From Central Asia to Africa to Europe, as well as throughout the Middle East, Iran continues to sponsor assassinations, terrorism and Islamic radicalism. They do so with cash, military equipment, logistics and political support.

Ambassador, I'm open to believing Iran can change. I would like the United States to renew relations with one of the most important countries in the Middle East. But I and many of my colleagues can never support embracing a nation responsible for the deaths of so many Americans without proof positive that the terrorism has ended, the weapons programs have ended and the foreign policy of hatred is behind them for good. So I look forward to your statement today of U.S. position towards Iran. Hopefully you can tell me that the map is receding rather than expanding, and if it isn't, what we're doing to see that that takes place. I look forward to a good dialogue.

Senator Robb.

SEN. CHARLES ROBB (D-VA) Thank you,

MR. Chairman. I won't have any formal opening statement, but I think this is obviously a very important and timely hearing, perhaps not as strictly timely as the one that you called yesterday for India, but it is nonetheless of critical importance. And you've laid down a challenging agenda for Secretary Indyk in terms of the ground that we might cover in this hearing. There are some very tricky questions for the United States and United States policymakers for our relationship with Iran and Iran's relationship with all of its neighbors and some of the other countries that you referred to in terms of the export of terrorism and allegations along those lines. So there's plenty to talk about and update, and I look forward to hearing first from Secretary Indyk, who has a long and distinguished career in that part of the world, and then from our following panel as well.

SEN. BROWNBACK Good. Ambassador Indyk, thank you for joining us and we look forward to your statement.

MR. INDYK Thank you very much,

MR. Chairman. It's a pleasure to be back here in front of you again. And I always look forward to these opportunities and hope we'll have many more such to exchange views. But I also appreciate the opportunity you provide the administration both to present its approach to these issues that are vital to U.S. interests and also to hear your concerns and take them into account as we go forward. Today, as you've pointed out, we're going to focus on Iran. And I wanted to lay out to you how we address those concerns, give you a sense of how we view what is happening there and how we see the potential for change there affecting our own approach. United States concerns regarding some aspects of Iranian foreign policy practices remain unchanged, as does our determination to effectively address them. SEN. BROWNBACK

MR. Indyk, would you mind pulling that mike a little bit down and closer to you? I'm afraid it's -- I think it's pretty directional.

MR. INDYK How's that?

SEN. BROWNBACK Yeah, very good.

MR. INDYK As I said, our concern about some aspects of Iranian foreign policy practices, particularly in the area of weapons of mass destruction and terrorism, those concerns remain unchanged, as does our determination to effectively address them. As the State Department's recently-published annual report on terrorism made clear, Iran continues to be the most active state sponsor of terrorism. Throughout 1997, Iran continued to train and equip (nine?) terrorist groups, especially Hezbollah, Hamas, and Palestine Islamic Jihad, and to support their violent opposition to the Middle East peace process.

Iranian agents assassinated at least 13 Iranian dissidents abroad in 1997. At least two of those attacks occurred after President Khatami's inauguration. The fatwa against Salman Rushdie remains in place, along with a $2.5 million reward offered for his murder.

The Iranian regime still seeks to protect its regional influence through a conventional military buildup and through the development of weapons of mass destruction and advanced missile systems. Iran continues to pursue nuclear technologies, chemical and biological weapons components, and production materials. Iran's acquisition of ever-more sophisticated missile technologies presents an increasing threat to our friends and allies, as well as to our own military presence in the Gulf. In particular, Iran's pursuit of an indigenous capability to produce long-range ballistic missiles poses a threat to the stability of the Middle East, a region of vital interest to the United States. I know you, Senator Brownback, and you, Senator Robb, have both been particularly concerned about this development, as are we.

The international community remains deeply concerned by Iran's human rights record. While the U.N. special representative has documented some progress, particularly in the area of freedom of speech, the U.N. High Commission on Human Rights once again this year adopted a resolution expressing concern regarding continuing human rights abuses such as severe restrictions on freedom of religion, another issue which I know you are concerned about,

MR. Chairman.

The United States has sought to address these issues by first obstructing Iran's ability to acquire the technology and materials necessary to develop the weapons of mass destruction and missile systems. This has been one of the highest priorities for the Clinton administration, a challenge that the president, the vice president and the secretary of state have devoted considerable energy to confront. We have made real progress with China and with the Ukraine in restricting their nuclear cooperation with Iran. We have begun to see the Russian government taking tangible steps to shut down the cooperation Iran has received from Russian companies for its (Shihab?) long- range missile program. But more needs to be done. We will continue to pursue this issue with the greatest vigor with the new government in Russia, which has recommitted itself to a cooperative effort to end assistance by Russian entities to the Iranian missile program. In recent days, President Yeltsin has made strong comments on the need to enforce export controls on WMD and missile technology. Further, the Russian government appears to be issuing the necessary decrees and regulations to implement the January 22nd, 1998 executive order issued by then- Prime Minister Chernomyrdin expanding the authority to control technologies of concern. You may have seen press reports today of those decrees being issued which would provide, amongst other things, for the establishment of monitoring agencies within each company that is involved in these areas of concern. We also -- but I should emphasize again that full implementation of all of these measures will be critical. We also work assiduously with our international partners to improve cooperation between law enforcement and intelligence organizations to impede the ability of Iran or its surrogates to carry out terrorist attacks, and also to punish the perpetrators in the event of successful attack. These measures are by no means fool-proof, but due to strong international cooperation, they are becoming highly effective. Although we have an obligation to take the lead, we cannot be fully effective in our non-proliferation and counter- terrorism efforts if we act only alone. We need the cooperation of others in the international community. We continue to apply unilateral economic pressure on Iran to make the point that there is a price to be paid for pursuing policies which violate international norms.

Unilateral sanctions have proven costly to American business. However, we believe that Iran poses threats so significant that we have no choice but to accept those costs. Economic pressure has an important role in our efforts to convince Iran to cease its efforts to acquire weapons of mass destruction and missiles and its efforts to sponsor terrorism. We will continue to seek the most effective means of using this policy to further our goal of changing Iran's policies on terrorism, weapons of mass destruction and missile development and other areas of concern. Our basic purpose is to persuade Iran that it cannot have it both ways. It cannot benefit from participation in the international community while at the same time going around threatening the interests of its neighbor states. It cannot improve its relations and standing in the West and in the Middle East while at the same time pursuing policies that threaten the peace and stability of a vital region.

MR. Chairman, Iran can play a constructive role in the Middle East, and we would welcome that.

Iran can have a constructive relationship with the United States, and President Clinton has made clear that he would welcome that. We continue to advocate a government-to-government dialogue in this regard as the most effective means of addressing the concerns of both countries. But as long as Iran threatens the interests of the United States and our friends in the Middle East, we will continue to oppose those policies. We will continue to press for enhanced international cooperation to counter the threat of Iranian weapons of mass destruction and the threat from terrorism and to address the human rights situation in Iran.

These are issues of fundamental import to the United States. For almost a year now, since the election of President Khatami, we have watched events unfold in Iran with great interest. Will Iran's government change anything? We believe -- (brief audio break) -- in May of 1997 reflected this desire to change on the part of a large majority of the Iranian electorate. Khatami was not the candidate of the regime's dominant conservative faction. And since his election, he has continued to make clear that he intends to challenge the rule of the conservative clergy by meeting the demands of the Iranian people for greater freedom, for more respect for the rule of law, and for a more promising economic future. The new government's power and ability to achieve such objectives has been questioned. Yet since Khatami's inauguration, one surprise seems to have followed another. Parliament, first of all, approved all of his cabinet choices, including the placing of a woman in a significant cabinet portfolio. The United Nations special representative on human rights in Iran noted in his most recent report that public debate in Iran has now become more open.

There is a vigorous exchange in the Iranian press, even on delicate subjects such as the rule by the clergy and the role of women in an Islamic society.

President Khatami has spoken out on foreign policy issues, and his rhetoric on terrorism in particular, the Middle East peace process and the desirability of people-to-people dialogue with the United States has been in sharp contrast to previous Iranian government positions. Iran's new government has made it clear that it wants increased cultural contacts between the United States and Iran, which in itself is a significant change, if one remembers the taking of American hostages and the burning of American flags.

Some steps have already been taken on both sides to encourage such exchanges, and we expect these steps to continue. Perhaps the most revealing incident since President Khatemi's inauguration was the arrest and then subsequent release of Tehran's Mayor, Karabashi (sp), whom the Iranian public considers to be one of Iran's most effective public servants and reformist. His arrest on corruption charges sparked a potentially serious confrontation between the supporters of President Khatemi who believed the arrest to be politically motivated and opponents of the presidents from the conservative flanks. University students demonstrated in support of Karabashi (sp) and President Khatemi. The crisis clearly showed the fault lines within Iran and the very real challenge that Khatemi faces in reforming Iran's domestic, as well as its foreign, policies. Although President Khatemi is challenging the conservatives on important issues, the presidency of Iran has not typically controlled national security policy, nor the critical Iranian institutions -- like the military, the police, security and intelligence services, and the Revolutionary Guards, all of which have a critical role in national security policies. These institutions remain the domain of the supreme leader, Ayatollah Khameni. And it is not clear how far President Khatemi is able to go to exert control in these areas. Yet it is precisely in the national security domain that Iran continues to pursue policies of greatest concern to us. If President Khatemi is able to turn his constructive rhetoric into real change in these areas of concern to us, that would lay the foundation for an appropriate response on our side, including better relations between our two countries. To sustain any effort to improve relations, however, such changes in actions and policies are essential, and in the meantime we will continue to focus our energies on countering the threat from Iran in these areas. Thank you very much,

MR. Chairman.

SEN. BROWNBACK Thank you very much,

MR. Indyk. If I could get somebody on the staff -- I want to get this chart around here so we can both look at it, because I want to go through some of the places where Iran is operating. I appreciate your statement and the difficulty of dealing with the present situation that we have, and the hope and the promise of new leadership that is in Iran. Yet the actions that go contrary to that. And you seem to struggle with the same issues in your statement. I don't know, frankly, that you quarrel any with my point that Iran is operating on our map that we have here in 21 different countries around the world or has actions in 21 different countries around the world today. Is that correct? Or do you know the number?

MR. INDYK I don't have the number off hand, but when I look at your map I think that is a pretty good depiction of many of the areas of concerns.

SEN. BROWNBACK And actually I've even heard reports of additional countries that are not on this map of operation by the Iranians. So they are there, they are active, they are pursuing expansionist desires. I was in Uzbekistan recently, I've been in Azerbaijan -- very concerned about the expansion of Iranian- supported groups in Central Asia and the South Caucasus in these weak, weak countries.

What I am concerned about, ambassador, is it seems that the statements coming out of the administration and the rumors that I am getting are that we are trying to make nice with the Iranians at this point in time when they continue a very expansionist agenda -- the statements coming out. And I support dialogue and discussion, and rassling is good -- glad to see that. But then I hear of pretty reliable rumors that the administration is making a decision on the Iran Libya Sanctions Act regarding Total (sp) and Gazprom deal, that they are looking at a national interest waiver under 9(c) with that. I would hope you would illuminate me as to is the administration going to grant that. And this seems quite a strong, positive step given what actions the Iranians are currently taking around the world.

MR. INDYK Thank you,

MR. Chairman. First of all I would emphasize our public record. As you very well know, there are a lot of rumors that were produced by the rumor mill, particularly in this town. But I appreciate the opportunity to come before you so that we can deal with what the reality is. And I think that you would agree that we pulled no punches in our State Department report on terrorism. The question that you asked on ILSA is one that is difficult for me to answer at this moment. It is an issue which is under active consideration. I think it's correct to say that a decision is imminent.

Undersecretary Eizenstat will be briefing you and other senators and congressmen I think in the next few days. But because a decision has not been made, it is not appropriate for me to talk about it in public session, the decision itself. What I will say, however, in response to your question, is that it is important to understand that whatever the decision turns out to be it will be made on the basis of a commitment of the administration to uphold the law and the purposes of this particular piece of legislation. This ILSA legislation purpose, as I think you are very familiar with, was to encourage cooperation to help us in our efforts to prevent the activities that you are talking about, particularly terrorism and weapons of mass destruction proliferation, and at the same time to discourage foreign investment in Iran's oil industry.

SEN. BROWNBACK If you could,

MR. Ambassador, in looking at that map do you know of another country anywhere in the world that is as expansionist or as terrorist-oriented as Iran?

MR. INDYK It is our judgment that Iran continues to be the leading sponsor of terror.

SEN. BROWNBACK Is there another country in the world that is any more expansionist-oriented than Iran at the present time?

MR. INDYK I'm not sure what you mean by "expansionist- oriented," because --

SEN. BROWNBACK The spread of their ideology and philosophy to other nations.

MR. INDYK I think that in that regard we have seen a change under President Khatemi. There has been an effort since the hosting in Tehran of the OIC, the Organization of Islamic Countries summit, by the government of Iran, to reach out particularly to its neighbors -- many of the countries on this map, and to try to turn a new page in their relations with those countries, particularly in the Gulf where the -- actually you could color in some more of the map here I see, because countries like Kuwait, Bahrain, the UAE -- there has been some real concern on their part, and of course Saudi Arabia, on the activities of Iran to promote terrorism and subversion. And you can be sure that when these governments, our friends and allies in the region, receive these overtures from the new government of Iran that the issues that you are talking about that we are discussing today are uppermost on their agenda. And I think that they made clear to the Iranians that if there was to be an improvement in relations then this kind of activity had to cease. And the interesting thing is that although the jury is still out on this, that what we hear from those governments is that the level of activity has decreased, the level of concern has decreased in this area. So I don't want to exaggerate it, but there is a change afoot in terms of Iran's efforts to repair its relations with its near neighbors and terrorism and support for subversive elements is very high on their agenda in that regard.

SEN. BROWNBACK

MR. Ambassador, with all due respect I don't see how it's in our national interests for a national interest waiver under ILSA to put a waiver in place for Iran -- operating in this map, 21 different countries, and as you know we could -- there are some others we could operate or put on here -- to allow Iran to have several billion dollars flowing into their coffers off of the proposal to allow Total and Gazprom to operate, so they could pour that into weapons programs or terrorism programs. They are the lead sponsor of terrorism around the world. How can it be in our national interest to provide a waiver? The United States expects to deter any other companies from operating and investing in Iran, given our willingness to roll over on this issue. Or how can it be in our national interest to provide a waiver so you can justify the all-out U.S. embargo on Iran, which denies profits to American companies, and then waive on this issue for Total or Gazprom? I realize decisions are imminent, and that's why we are holding this hearing, and that's why I am trying to make these points to you, is that I have failed to see how under any category -- under any category that you could see that this is in our national interest to provide a waiver to Gazprom or Total under ILSA. I don't see how that could possibly be interpreted as being in our national interest.

MR. INDYK I hear you,

MR. Chairman. I hope you understand my difficult in responding given that the decision has not yet been made. So I will have to make it a general response, which I started to make before, which is whatever the decision there -- the assessment of the administration in making this decision will be based on an assessment of how this is to promote the purposes of the legislation, which is not only the law but its objectives are those that we hold in common with you. There's no disagreement about the objectives of wanting to find ways to discourage Iran's efforts to acquire weapons of mass destruction or sponsor terrorism. And the judgment will have to be made by the secretary of State based on that assessment. But the objective is clear. And the assessment has to take into account how best we can achieve one of the objectives of the legislation, which is cooperation from other members of the international community in the pursuit of those objectives that I just outlined.

SEN. BROWNBACK Senator Robb.

SEN. CHUCK ROBB (D-VA) Thank you,

MR. Chairman. I'd like to compound the difficulty for just a moment, if I may, on that subject and look at the other side of the equation. And I understand your reluctance to be more definitive, given the fact that the decision has at the very least not been formalized and announced at this point. And recognizing that there is frequently a constructive interplay between the executive and the legitimate branches where the legitimate branch gets to play bad cop and the administration can play good cop and elicit some cooperation under a variety of different circumstances from various nations, in part under the threat that we'll just let that nasty Congress have their way with you, see what we're saving you from, and it has worked, or at least arguably it has worked in a number of cases, I'm thinking that I don't want to give any final judgments on any of these. But I'm just thinking of the recent -- I think it was a sense of the Senate that we did with respect to China and the Human Rights Commission, and what-have-you, that was raised. And of course, we have a number of instances under Helms-Burton that have given almost everyone indigestion, no matter how they came down on it. Let me just ask you to speculate, if you will, on the reaction of, say, the French if we were to carry out the sanctions on Total and other European allies, and what kinds of reaction that we might expect from the international community, just so that we can look at both sides of the question, some of the things that you're obviously putting on the table as you prepare to provide advice and counsel to the president, who will have to stand behind this recommendation, although it may be announced by the secretary of State or yourself at the appropriate time.

MR. INDYK I don't think it will be announced by me. The issue of secondary boycotts, which the ILSA legislation effectively provides for, is something that no governments particularly welcome, and we ourselves haven't welcomed it in other cases. In fact, we've --

SEN. ROBB That particular statement does not elicit any controversy, I can assure you.

MR. INDYK (Laughs.) And so when you ask about the reaction of the French, I don't have to speculate. We know pretty clearly what the reaction of the French government and other EU countries is to this legislation and Helms-Burton. We've seen their vigorous opposition and a considerable heartburn about it. And in this particular case, even among our closest allies, the sanctions under ILSA are seen as an attempt by the United States to penalize their companies, companies from their countries, for activities that their governments regard as not only legal but, from their point of view, even desirable. That is clearly not out point of view. And that is why we have worked with the Congress, first of all, to tailor the legislation in a way that would make it effective and then have worked with Congress to implement it. But you asked about their view, and their view is very (hard/hot over ?). They do not see why their companies should be punished for things which they consider to be the right thing to do in terms of international commerce. And they view the legislation as an issue of extra-territoriality, where we are trying to extend our law to other countries and other companies. So their reaction is very negative.

And that is what I was suggesting when I said that one of the purposes of the legislation is to try to encourage cooperation from these countries. And we are only going to be effective -- I mean, there are certain things that we can do on own, that we're doing, unilaterally. But in order to be effective against the threat that we see here, we need international cooperation. And there's always the question of what is the best way to achieve that international cooperation. We --

SEN. ROBB (Inaudible) -- this question essentially, though, was what if we don't get it? What does that say to others, and what does that say to US companies that might have similar economic interests in developing their trade with a targeted country, in this case Iran?

MR. INDYK Well, we have to do our best to get it. That's the objective here. And, you know, if we don't get that cooperation, then the purposes of the act are not going to be fulfilled and we have to then look at it. I'm not sure whether that answers your question, but --

SEN. ROBB Well, I'm not sure that I think I really want you to answer the question quite as fully as I'd like you to answer the question, because it would, number one, end up resulting, I guess, in additional speculation and I'd make your job even more difficult. I fully appreciate the difficulty that you're in, but since you're already dealing with the question, I wanted to try to at least look at it from both sides so that we could have a reasonable representation of the kinds of factors that you're going to be considering when you make that decision. But --

MR. INDYK Yeah.

SEN. ROBB -- my time has expired on this round. I don't mean to interrupt you.

MR. INDYK If I might,

MR. Chairman, just respond again, is to say that one of the reasons that this process has taken some time is that we have been engaged in intensive efforts to stop investments and to gain the cooperation of our allies and friends in the international community that can affect Iran's behavior. And the legislation itself --

SEN. ROBB Excuse me? May I interrupt just one second? Do you consider progress on a separate front to be significant enough to offset a lack of cooperation in the specific entity, in this case the gas programs for Total and Gazprom and the Malaysia --

MR. INDYK I'm not sure what you mean by separate front --

SEN. ROBB Well, in other words --

MR. INDYK If you mean progress on cooperation against terrorism or --

SEN. ROBB Some --

MR. INDYK -- (inaudible) -- yes, that is the --

SEN. ROBB -- (inaudible) -- some other objective that would in effect mitigate your concern about the specific violation of ILSA?

MR. INDYK Well, you know, we have to be careful with terms here. But if I understand your point, what I am saying is that the purpose of the legislation --

SEN. ROBB Is to --

MR. INDYK -- is to achieve a change in Iranian behavior in these areas of concern that we share. And the purpose of the legislation is encourage cooperation in that regard. That is why the legislation has built into it -- it has built into it a very extensive waiver provision, with all sorts of different options, because the legislators recognized that this could be used as a vehicle for trying to achieve the ultimate objective. And so that's the context in which we have been trying to work with countries, not just the countries that were involved in -- that have companies involved in the particular transactions, the south -- (location inaudible) -- field, but also other countries, to try to ensure a maximum effort to counter these areas of concern by Iran.

SEN. ROBB I guess -- and I'm not trying to split hairs here, but, I mean, progress with respect to the targeted country or progress with respect to Iran on countering terrorist or terrorist-related activities?

MR. INDYK Progress with regard to the policies pursued by countries that are affected by this legislation or other countries that have dealings with Iran and can therefore influence Iran. It's in that sense an indirect approach. We are obviously trying to deter investment in Iran. That is also part of the purposes of the legislation. And that's, as it were, the direct approach. But the indirect approach is to try to change the policies of the countries involved to step up their cooperation in these areas of concern.

SEN. ROBB Thank you,

MR. Secretary. Thank you,

MR. Chairman.

SEN. BROWNBACK Yes, thank you, senator. Thank you, Ambassador. Appreciate your appearing in front of the committee. And I appreciate your comments. And hopefully we can have a good decision coming out of the administration and not waiving ILSA in this regard. Thank you for joining us. I have a need to get to the floor. There's a proposal that's up that I have to be on at the present time. So we need to take a break, if we could, before our next panel comes up. I'm looking at the clock, hoping that we can get restarted at a quarter till 3. So if we could, let's take a short recess. I apologize to the witnesses and those in the audience, but we have the India matter up on the floor now, with the defense authorization bill, and I have to be over there for a moment of that. We'll reconvene at a quarter till 3. (Raps gavel.) (Recess.)

SEN. BROWNBACK (Raps gavel.) If I could, before we get everybody out, it's turned out I got queued UP later in the line. So we are going to go ahead and proceed at this point in time, which would be better for everybody involved. I apologize, and I beg your indulgence. Our second panel will be

MR. Michael Eisenstadt, senior fellow of the Washington Institute for Near East Policy; the Honorable Richard W. Murphy, a senior fellow on the Council on Foreign Relations; and

MR. Stephen Emerson, Middle East affairs analyst and an author and expert on terrorism. So I appreciate very much this panel. I apologize for the back and forth to the United States Senate. These things happen, it seems like, fairly often.

MR. Eisenstadt, we appreciate your joining us. I think we'll run the time clock at a five-minute interval. We can accept your written testimony into the record. If you'd like to summarize, if you'd like to read off of it, the clock will give you some indicator of where you are. We don't want to rush you. But at the same time, we would like to get succint comments put into the record. So,

MR. Eisenstadt, thank you for joining us.

MR. EISENSTADT (Washington Institute for Near East Policy) Thank you,

MR. Chairman. And thank you for inviting me to address the subcommittee. I would like to make a few comments about American policy. I have in my written comments, my assessment of what we've seen in terms of the Khatami government's activities in the areas of weapons of mass destruction, terrorism and the Arab-Israeli conflict. In short, I would say there is a lot more continuity than change in that area, a propos to your comments before and the statement by Ambassador Indyk. With regards to U.S. policy, I would say this. Overall, I think the most important achievement of U.S. policy towards Iran to date is its success in containing Iran; that is, limiting its trouble-making potential, its ability to threaten U.S. allies and interests in the region, the denying it of access to arms, technology and to hard currency necessary to acquire these arms and technology. U.S. pressure, diplomatic demarches and interdiction operations have thwarted several major conventional arms transfers and countless smaller ones to date. Moreover, Iran's economic woes, which have been exacerbated by U.S. sanctions, have forced Iran to cut procurement since 1989 by more than half, and delayed its efforts to acquire conventional arms and weapons of mass destruction. Lacking the funds to sustain a major across-the- board military buildup, Iran has had to content itself with selectively enhancing its military capabilities. Continuing these efforts to deny Tehran loans, credit, and hard currency at a time of economic distress caused by low oil prices, will compel Iran to spend more on butter than guns in the coming years, so that it could meet its debt-service obligations and heightened expectations among its people that President Khatami can improve living conditions in that country. President Khatami's election and his opening to the American people, however, have greatly altered the rules of the game, and greatly complicated Washington's calculations in a way that will require the United States to modify its approach towards Iran. Washington will need to muster a degree of sophistication and subtlety that has been largely lacking in U.S. policy towards now, if it is to avoid the dangers and grasp the opportunities created by these new circumstances. Past efforts to deny Iran arms technology and funds have yielded a number of important achievements, and such efforts should remain at the heart of U.S. policy towards Iran. However, the United States can no longer rely exclusively on such measures. In formulating its policy towards Iran, the U.S. needs to consider the implications of its efforts on three sets of actors one, the Iranian government; two, the Iranian people; and three, key third parties, such as the Arab Gulf states and our Western European allies. Specifically, the United States needs to better understand how its policies toward the Iranian government affects its standing in the eyes of the Iranian people, and its relations with the Arab -- Gulf Arabs and its Western European allies. Most Iranians like Americans and admire the United States and what it stands for. This reservoir of good will is a precious American asset that must not be squandered, and, because the Iranian people is the main engine for political change in that country, it is a source of leverage over the Iranian government. The potential offered by this leverage was most clearly manifested by President Khatami's CNN address to the American people, which, more than anything else in my mind, at least, was a nod to public opinion in Iran, which strongly favors normalizing relations with the U.S. Moreover, to the degree that the recent Saudi-Iranian rapprochement was motivated by Saudi desires to distance itself from the U.S. following the Khobar Towers bombing, to avoid being caught in the middle of an Iranian-American clash, efforts to reduce tensions with Tehran would reassure some of our Arab Gulf allies that we are in fact not headed towards confrontation with Iran. This is crucial, since ongoing efforts -- ongoing efforts to contain Iran will require the continued cooperation of our Arab Gulf allies. Finally, demonstrating a willingness to increase contacts with the Iranian people, and to explore the possibility of official contacts with Tehran, would strengthen America's case with its European allies, since it would demonstrate that U.S. policy towards Iran is not driven by domestic politics, and that the U.S. is eager to test Iranians' intentions. This would better enable the U.S. to make the case to its European allies that dialogue and pressure can go hand in hand. On the other hand, it would be a severe setback for U.S. policy, if the Iranian government could make a credible case to the Iranian people and to our Arab Gulf and European allies, that the United States had spurned President Khatami's call for a dialogue between peoples, and other Iranian gestures. Small, tangible steps by Washington to relax tensions with Tehran would thus help the United States test Iranian intentions, and perhaps more importantly, avoid an erosion in its standing with both the Iranian people, and key allies. Moreover, through its actions, the United States must make it clear to the Iranian people that it is their government that is the main obstacle to increase the contacts and better relations between the two countries. This could lead to additional pressure for change in Tehran. Now, what does this mean in terms of specific policy recommendations? First, with regard to the Iran-Libya Sanctions Act, the U.S. should avoid issuing a determination of sanctionability regarding the total -- (inaudible) -- for as long as people, to retain deterrent value, to avoid a fight with Europeans, and to avoid the appearance of responding -- of responding to Khatami's opening to the American people with what could be perceived or portrayed as a slap in the face. Second -- and I'll wind it up now -- in responding to these new circumstances in Iran, the U.S. should be flexible in areas where it can afford to, while continuing to maintain pressure in areas where it needs to. That is, with regard to weapons of mass destruction, terrorism, and obstruction of the Arab-Israeli peace process. I give a number of steps we could take, such as streamlining -- streamlining visa applications, when this is consistent with U.S. security concerns, support for people-to- people contact, a presidential speech along the lines of Khatami's CNN interview. And then finally, Russia and China have demonstrated repeatedly a disturbing tendency to violate commitments made to the U.S. by transferring sensitive arms and technology to Iran when they apparently believe they can get away with it. Therefore, sanctions that punish Russian and Chinese companies that engage in such transfers, and that deny Iran the hard currency required to fund these transactions, will have to remain an essential component of U.S. policy towards Iran for the foreseeable future. Thank you.

SEN. ROBB Thank you,

MR. Eisenstadt. The chairman unfortunately was given Plan Three, which was like Plan One and unlike Plan Two, which mean that he had to go to the floor with an amendment. I agreed to remain in my post, and to continue to take testimony so we wouldn't, in effect, be jerking you back and forth, in terms of timing, and perhaps delay other commitments you might have.

MR. Emerson, would yo proceed.

MR. EMERSON Thank you very much. Ever since the election of Mohamad Khatami as president in May 1997, the world has been debating the meaning of his victory and the significance of his statements and actions. Has Iran's support for terrorism diminished? How has Khatami affected the Iranian terrorist apparatus? And has there been any quantifiable, measurable change in the conduct of Iran? What can we say, if anything, about Khatami and the effect of American sanctions over the past year on his personal effects in Iran? The new openness and bold expressions of dissent seem to have been bursting at the seams in the Iranian society. It is very, very encouraging, and something very welcome to the West. There have been public statements issued by President Khatami that, relative to other statements by others in Iran, have sounded soothingly moderate, particularly to Western ears accustomed to the steady drumbeat of the demonization of the West. Although President Khatami may -- and I emphasize may -- be the first Iranian leader since the revolution to seek a genuine accommodation with the United States, the fact remains that he does not speak for, nor represent, the other domains of power in the Iranian regime, where support for anti-American and anti-Western policies remains a staple of the Islamic Revolutionary identity. As the United states grapples with a genuine policy conundrum, as to how best encourage Khatami and other moderate forces, the enthusiasm bred by the prospect of engaging in a dialogue with a post- revolutionary leader, if we can call him that, ought not blind us to the realities that the Iranian terrorist apparatus is very much alive, intact, and presently engaged in supporting acts of terrorism and violence against the United States and our European allies. Iran continues to fund and train members of the Hamas and Palestine Islamic Jihad, in carrying out mass terrorist operations and planning them against Israeli civilians. Iran has recently, in the last seven months, developed a network of militant recruits in Jordan, designed and orchestrated to attack Jordanian, Israeli, and other targets. Iran continues to operate training camps for terrorists in Iran for attacks against U.S. targets in the Persian Gulf, and against pro-Western Arab regimes. Iran has provided weapons and training to the vast network of growing Hezbollah terrorist infrastructure now operating in Jordan, Saudi Arabia, Bahrain, and as well as Europe, Asia, and even North America. Iran's extensive network of front companies -- religious organizations, student groups -- throughout the Western countries, continue to collect intelligence, carry out surveillance, threaten or attack Iranian dissidents, prepare for future terrorist operations, and acquire illicit advanced technology for Iran's chemical, biological, and nuclear programs. Tehran continues to serve as a central meeting place and sanctuary for top Middle Eastern terrorist leaders. And finally, Iran continues to affirm the death sentence and bounty against the writer Salman Rushdie. Iranian agents have been implicated in the deaths of Americans abroad, and they continue to work in the senior levels of Iranian intelligence Achmed Sharifi (sp), a senior Iranian intelligence officer and a top official in the Revolutionary Guard, met with Hani Abed Rahim Sayeg (sp), the getaway driver, the alleged getaway driver, in the Khobar bombing in Saudi Arabia, which killed 19 American servicemen. Sharifi reportedly met with Sayeg (sp) in Qom, Iran, and later met with him in Damascus. Sharifi also recruited members for the military wing of Hezbollah Bahrain in Qom, and later wrote checks to these -- to Bahraini members of the Hezbollah. The notion of Iran's support for terrorism is something that we must keep at the fore, despite any attempts to be lulled into a sense that there is a new post-revolutionary Iran. Iran provides direct military and financial supplies to the Hezbollah, the Hezbollah as well in southern Lebanon for attacks against Israel, attacks against Jordan, as well as Hezbollah operators in Europe and South America. One of the vehicles, the primary vehicles, is through weapons flows to Hezbollah in Lebanon. The precise amount that Iran provides is probably impossible to ascertain, but most reliable intelligence estimates claim that the yearly subsidy between Iran and Hezbollah in Lebanon is between $75 and $150 million. Iranian military supplies are usually delivered through an air bridge through Damascus. According to Western intelligence, more than 50 military supply flights were conducted from Iran to Syria in October 1997 alone. There are up to 11 terrorist training camps operating in Iran during the past year, where militant volunteers from around the Middle East have participated in operational training. Iran's support to Hamas and Jihad continues unabated, and continues to this very day. Just last week -- two weeks ago -- Shagafad Yassim (sp), the leader of Hamas, was entertaining in Iran, where he received promises of support, military and financial, from the Iranian leadership. I would say that in the end, we face the prospect of maybe changing our policy. But the bottom line is that the U.S. should not change its overall policy of sanctions against the regime at this point. We should, perhaps, approach a policy of what I call incremental reciprocity, exchanging ad hoc economic and political incentives for demonstrable changes in Iran's regime's support for terrorism. The economic sanctions thus far have caused serious dislocations to the Iranian economy, which in fact breed -- which have bred mass content (sic), which have led in turn to the election of President Khatami. Loosening of these sanctions at this point, would only result in the resolidifcation of the power base of the radicals. Thank you very much.

SEN. ROBB Thank you,

MR. Emerson.

MR. Murphy, there was a time when you'd have appeared on Panel I, instead of Panel II, but we're delighted to have you here in this capacity, and we would welcome your testimony.

MR. MURPHY Thank you very much,

MR. Chairman. It's a pleasure to be back, in no matter what position. And your lights are just as bright as ever. Let me just comment, in passing, at this map that you've been looking at all this time. I think it would be a lot more meaningful if that map had some dates on it. I'm not disputing the fact of incidents, but I think it's relevant to see how these incidents have occurred in the timeframe, and in particular, to look at very closely -- and I do not have access to this intelligence -- but to press our intelligence sources for information on who died last year at the hands of Iranian services, and where. But that said, I have made a -- submitted a brief statement for the record. Let me make even briefer comments. I think the time is at hand for a re-evaluation, and possibly some moves by the United States, concerning our relations with Iran, for two reasons the political developments in Iran over the past year, and the increasing tensions with some of our closest allies over the way we are dealing with that country. That said, there are constraints both in Washington and in Tehran over how to move in the new direction. Suspicions continue in both capitals about the other's intentions, over what -- what they're trying to do. Now President Khatami set the scope for contacts, no official exchanges. He's encouraged the cultural/educational representatives to come, journalists to visit. Washington has been positive in its response, though hoping for official exchanges. One of the three main charges we've had against Iran, has been its support for violent opposition to the peace process. I would draw the subcommittee's attention to two statements over the past several months, one on Lebanon and one on the peace process more broadly. When the Iranian foreign minister said about Hezbollah that its mission would be over when the Israelis withdrew from Lebanon -- quite welcome news, I would think, in Washington to have that statement of principle out there. And that would imply, obviously, a cutoff in Iranian training, funding, equipping of that militia. And the second was concerning the Israeli-Palestinian negotiations, if they are able to reach an agreement, and he did say acceptable to the Palestinians. And obviously there won't be agreement unless it is acceptable on both sides. That would not cause any problem for Iran. They would accept what the Palestinians accepted. We talked and heard a good deal of references to terrorism. I would like to look at certain other areas where I think the Congress, working with the administration, should at least have a look at the possible moves by us. We are caught in the position right now of saying, "Those words are very nice, but what about some actions?" Well, they're saying just the same thing in Tehran about us. President Clinton's statement was welcomed. His messages to Tehran over the radio have been welcomed. But where's the American actions? And four actions -- I would like to suggest four things to keep in mind. One is -- it may sound to you as far out, but to give some thought to an arms control regime for the Persian Gulf; Iran, Iraq, and the six states of the Gulf Cooperation Council. Whether we can play a useful lead role, I am not sure. But I think it'll take considerable input from our part to get it going. But that area remains dominated by fear, fear on the part of each state of its neighbor. And part of it certainly is fear of the weapons of mass destruction. Now, the Iranians have expressed interest in the past in a nuclear-free zone. Some Iranians have alluded to having a weapons-of- mass-destruction free zone in the Gulf. Let's examine how that might be built upon and see how much substance there is behind those statements. The statement today out of Tehran that I read showed the deep concern about the Indian testing, and I'm sure that's related to what Secretary Cohen referred to just yesterday as the potential chain reaction should Pakistan follow in Iran's steps. Well, the Pakistani- Iranian relationship is edgy, and you would see the chain reaction moving in that direction. Second, on the pipelines, that question has been under very intense study here and in the executive branch. I would ask that everyone take a step back and, recognizing how negative the state of mindset is here about Iran, this isn't necessarily forever, but a pipeline is for a good long time in the future. And once that line is decided, in place, it's going to determine political and economic relations for a generation. So unless the companies themselves are pressing for a decision, unless they have to move because of the nature of their investments, the timing of their investments, I would hope that Washington would not move preemptively at this point in time, closing the door on a possible moving across Iran. Third, the long-running Hague tribunal in effect trying to settle Iranian- American claims against each other has had considerable success over the years. It ought to be closed down with a global settlement, and we should be ready again to test how serious the Iranians are about their interest in a global settlement. I understand their representative at the Hague, at this tribunal, has hinted that they might be interested in an overall settlement, a fair package. And finally, obviously the Iranian situation is of deep concern to Israel. it's of deep concern -- and not just to our government. And I would urge that we stay in close touch with Israel, in close touch with AIPAC, to explore ways to identify and build on trends which would be favorable to our interests, to Israeli interests. MORE There has been public debate in Israel some months back about the possible improvement of Iranian-Israeli relations. AIPAC certainly played a key role in past congressional consideration of sanctions on Iran, and its support for any change in direction would obviously be desirable. Thank you,

MR. Chairman.

SEN. ROBB Thank you very much,

MR. Murphy. That's a very thoughtful, and not provocative in the usual sense, but at least a thought-provoking list of matters to consider in this particular venue. I was attempting to take a number of notes here as we proceeded, and I have specific questions. Let me work back, if I may.

MR. Murphy, you mentioned this map and suggested that we try to get some sense of dates that were associated with numbers that were killed or specific terrorist activities that were carried out. Implicit in that comment, at least to me, was that we may be looking at some very old actions or grudges. If I'm not interpreting that correctly, then please --

MR. MURPHY No, just so, just so. It doesn't mean their support for terrorism is over and done with; by no means. But --

SEN. ROBB In other words, in terms of active promotion of terrorist activities in each of these countries, you're suggesting that we ought to consider whether or not they've done anything recently or whether they appear to be continuing that type of activity?

MR. MURPHY Correct. And can you graph out the intensity of the incidents since '79?

SEN. ROBB

MR. Emerson, would you respond to that, because that's your particular field of expertise? You've painted a pretty active picture. Are there areas that might be included in this map or another map that certainly could include a number of additional countries in which some type of terrorist activity is known to have taken place either -- well, certainly in open sources?

MR. EMERSON Well, I think it's not a bad idea to have more details. But I would say that, for example, if you look at the Iranian terrorist activity in Argentina, Iran is believed behind -- and Hezbollah -- behind the 1992 bombing of the Israeli embassy, as well as the (Omnia?) Center. And there is a Hezbollah presence in the (tri-border?) area. However, there has not been any noticeable terrorist activity by Iran in Buenos Aires since the bombing. So the question would become, should that be considered sort of on the chart? I would say with the right statement, yes, because Iran continues to deny any responsibility, as well as to harbor an intelligence network that can be activated in any of the places that's listed on this map. And you could have certainly added Canada and the United States. There was a recent case in Canada where Canadian court documents revealed that Hezbollah members, under the direction of Iran, were taking surveillance video of potential targets in Canada. Now, that was back in 1991-'92-'93. The question is, is it happening today? I have no open-source information on that. However, based on the pattern of how Iran operates and the use of front groups that periodically report to Iran and that can be activated, it's fair to assume that even if they have not been active in the violent sense in the last two years in one country, that violent intrusion can be felt within a matter of hours if Iran so desires. So I would say that, yes, I would like to see -- I think it would be helpful to have dates attached to the last violent activity, but that doesn't account for the existence of the infrastructure that can be activated at any moment and that continues to be in existence at this very time in most of those countries.

SEN. ROBB How about the question of the statement made, if the mission, in effect, that Hezbollah was pursuing was because of Israeli occupation in the -- putting it in the context of Hezbollah; if that were removed, there would be no need, in effect, for Hezbollah and its activities? Do you believe that that ought to be given particular weight?

MR. EMERSON It should be given a certain amount of weight. But in the context of looking at everything else, there also is a continuous flow of weapons, very advanced weapons, by Iran to Hezbollah, including weapons now that really are very -- if used against the United States in the Persian Gulf, would cause a lot more casualties than we've seen. And so actions speak louder than words. I mean, I know that even Khatami has questioned the value of the Hezbollah role in terms of the long-range military confrontation with Israel. On the other hand, he has also talked about the need to firmly implant Iran's influence in Lebanon permanently by infusing more money into social welfare groups, into the political process. So he's essentially thinking about transforming Iranian influence. Now, whether that becomes a hot spot of continued Iranian revolutionary activity remains to be seen. Even with the issue of the Middle East peace process, there have been some welcome statements relative to others. On the other hand, the statements that were just issued in the past month and a half, in conjunction with Ahmed Yeshim's (ph) visit, are very discouraging. They promised additional weapons. They promised additional funds. They talked about liberating all of Palestine. And their notion of what is a satisfactory solution to the Palestinian conflict is something that is really much more attuned to the ideology of Hamas than it is to the PLO.

MR. EISENSTADT Excuse me, Senator Robb, could I jump in here?

SEN. ROBB Please. And I've got a question for you, but go ahead.

MR. EISENSTADT There were -- just on the issue of Foreign Minister Harizi's (ph) statement about Lebanon and the map, I have here a quote of his statement about Lebanon. Now, on the one hand, I would say it's important to say that in the past, Iranian officials would have welcomed an Israeli withdrawal as a first step on the road to the liberation of Jerusalem. So against that historical context, this statement is relatively moderate and it's, you know, perhaps a welcome, you know, small change over past statements. On the other hand, you could read the statement in a way which was -- you know, he said if his role was to withdraw, quote, "(and that the resistance?) would have been achieved in reality," that's simply a statement of fact. And it doesn't judge the issue of whether, you know, Hezbollah would continue operations. So it's positive in the historical context, but the way it could be read, it's just, you know, simply a statement of, you know, "Well, yeah, they would have achieved their goals." It doesn't say what would happen after that. The other point I would like to make has to do -- with regard to the map, the other thing I would point out, in addition to the statements made by my colleagues, is that it does not portray intensity of effort. Now, my understanding -- I don't focus on Central Asia very much, but my understanding, in talking to people who do, is their impression is that Iran's level or intensity of activity in terms of efforts to proselytize and export the revolution in Central Asia is much lower than in other areas such as Turkey in recent years, among the Palestinians. Anyhow, so I think it's important to look at the map in that light. There's another -- I think there's a deeper truth which is also portrayed by the map. I know this is a map which attempts to show Iran's exports of fundamentalism. The important thing, though, is that Iran is not (colored?) in this. I think that shows a deeper truth. We've seen in recent years that the revolution in Iran is a (spent force?). And the fact is that I heard recently from an Iranian academician who went to Turkey who said he was surprised to find that he felt that Turkey was a more Islamic society than Iran was today, meaning that the majority of Iranians are fed up with having religion forced on them. The Islamic revolution has alienated the majority of the Iranian people from Islam. And this affects Iran's ability to serve as a model for Islamic movements elsewhere. And as a result, I think in the '80s and early '90s, our concerns about Iran's ability to support the revolution were much greater than they should be today. I think the terrorism, their ability to engage in terrorism worldwide, still exists. They do maintain infrastructures that they could activate. We know they're stalking our people in various different places. And, in fact, the (Rev?) Guard commander, Hafazi (ph), in October of last year, I think, said that if Iran was attacked, they would respond on a worldwide basis. And I think they have the ability to do so. So I think that certainly still is an area of concern for us.

SEN. ROBB Let me ask you a question. You raised in your opening comments about communication. You separated into three groups -- the Iranian government, the Iranian people and the Gulf Arabs and Europeans -- as three different groups that we have to consider separately as we consider what we say and what others say in terms of how they're --

MR. EISENSTADT And what we do, yes.

SEN. ROBB -- and what we do. Tell me how we communicate effectively with the Iranian people if we're not -- the government-to- government communications, while they have been broadly encouraged on our side, they have not been welcomed by anybody else, probably under pressure from the ayatollah still. But in any event, that level of communication is not currently open. They're not going to open up in quite the same way that CNN did, and don't have quite the same for Khatami's interview here. And indeed, he clearly was using that to target the broader U.S. audience; didn't seem to follow up in other comments that he made that were not targeted in quite that way. But in what way can the U.S. government or representatives of the U.S. government or those who espouse the essential philosophy that we're trying to suggest in terms of a non-Islamic, as opposed -- and I don't mean in the religious sense, but a secular, pluralistic approach in terms of government -- and some sense of what our democratic principles stand for? How can we communicate if we don't have any lines of communication and the government won't permit government-to- government or won't permit us to communicate directly?

MR. EISENSTADT Actually, I think there are a number of routes that we have available; for instance, the Farsi service, the Persian service of the Voice of America, is one very effective means. And there is also a TV -- Voice of America TV service, I understand. In addition, we know that there's proliferation of satellite stations in the region which carry American programs. And we know that there are many Iranians who have satellite dishes. There's also the Internet. And finally, there's an Iranian-American community of 1 (million) to 2 million strong, depending on who you talk to, who are in contact with their relatives back home.

SEN. ROBB Okay, I'm aware of all of those. And, indeed, we're doing all of those things now. You're not talking about some new medium of exchange, though, that would reach the people other than the links that are already there, some of which the government really can't control. North Korea is probably the only country that can truly control what their people hear, and even they're having difficulty.

MR. EISENSTADT I guess what I was saying is less devoted to, you know, the medium rather than the message. And I was saying we need to present a different image and different demeanor in the way of dealing with the initiatives of, you know, the government.

SEN. ROBB Increased awareness or consciousness on the part of U.S. government representatives that their message might be misinterpreted by the Iranian people, even though it's delivered --

MR. EISENSTADT To the government.

SEN. ROBB -- to the government.

MR. EISENSTADT Or it could be spun by the government in a way which undercuts our standing in the eyes of the Iranian people. And, again, that's our most precious asset and it's a source of leverage over the government there. And there was an article by Robin Wright in the LA Times a few days ago which discussed how Iranian officials are disappointed by the lack of American response to their initiatives and the like. I think it was a tendentious listing on their part. I think we've been more forthcoming than was given by them in their article. But it raised in my mind the possibility that we could be losing out on or we could be losing the war for the hearts and minds of the Iranian people, which right now we've won. And it's very important in considering our actions towards the Iranian government that we be aware how what we do is perceived, mainly by the Iranian people, and then also by our Arab Gulf allies and the Europeans as well. But it's mainly the Iranian people because they're the engine for change in Iran today.

SEN. ROBB Let me ask a question that any of the three of you could respond to, if you will. In my dealings with all of the surrounding countries and those in the region, almost without exception they're certainly willing to give a honeymoon period, whatever, in terms of developing a new relationship. How about the Iranian people, the two-thirds or so that preferred him, notwithstanding the ayatollah's desires in that particular election? How soon does he have to deliver? Is there a time frame that he loses credibility and the -- whatever possible mechanism for change? Anybody want to take a shot at that? In other words, does Khatemi have to deliver to the people that elected him? And, if so, how soon, and what criteria might be used by the people to evaluate whether or not this is the kind of departure we want to make from what we have?

MR. EMERSON If I can point out, to a certain extent he has already delivered, to the point that there has been an introduction into Iranian society which is intellectual and very independent -- of new publications, of new television programming, books, of previously banned foreign periodicals. So he's really open to the free market approach. He is introducing the free market approach in terms of intellectual ideas. There is more pluralism debate going on. So to a certain extent that has reinforced and solidified his popular appeal. So one of the questions I guess that you are getting at is are there other incentives or other things that would help solidify his base, or is this not going to be sufficient if the economic dislocations caused by the sanctions or whatever continue to undermine the Iranian people's belief that the government is representing them. The U.S. has got a major dilemma here, because to a certain extent we have to definitely encourage whatever trends are there. On the other hand, we don't want to jump the gun prematurely here, and it might end up in the long run that Iran is willing to only go so far and that's it, and that it's revolutionary Islamic identity will not change. Do we wipe the slate clean on the terrorists who carried out attacks on Americans who are now living freely in Tehran, for which there have been some sealed indictments? I mean, are we prepared to do that? Is the Iranian government prepared to extradite them? I doubt that. And that's going to be an issue that is going to be very, very sore if it ever comes down to that -- even that level of discussion. Another level of discussion for us relates to what the ambassador referred to in terms of the dispute over assets. I don't know whether a general settlement is possible, but a discussion is worthwhile here. But in the end I think we have to make sure that we pace ourselves that, yes, there should be incremental approaches here. But they are going to have to deliver. If we save the regime and save Khatemi or resolidify him there really needs to be a quid pro quo in practice.

SEN. ROBB Is Khatami in a position to establish a dialogue? At this point he can't. But will there come a time when he could accept the U.S. offer of a government-to-government dialogue?

MR. MURPHYI think there is no question the time will come. He didn't feel it was possible when we restated our readiness to meet with an authorized representative. He is not in sole control. I mean, there is no -- can't make much more of a statement than that. But how soon does he need to deliver and what does he need to deliver, it's jobs. That was -- the economic situation is not good, and the economic situation is probably not -- its deterioration is not to be credited to American sanctions. I mean, there is mismanagement, there's problems. And, above all, for this past several months, and unfortunately for the foreseeable future, there's stagnant oil prices. And with an economy that is so heavily dependent upon its oil production exports, he has a tough job to fulfill some of the hopes that were placed in his election a year ago this month.

SEN. ROBB But does he have to in effect to get additional jobs, or whatever the case may be, bring about through some actions that he would take, or at least that would happen on his watch, that would cause the sanctions to be lifted, which would be the likelihood of I assume the biggest creation of jobs that could occur? Is that ultimately the quid pro quo for his success and continued popularity?

MR. MURPHY I think it would be a major element in his success as president. But if you lift the sanctions -- if we lift the sanctions, and that's -- I don't sense any great tearing urgency --

SEN. ROBB No, there's not. That's the reason I was wondering if the goal is realistic or is it something -- is he going to end up being in effect sort of a Gorbachev that puts a kinder face but really doesn't have any major impact?

MR. MURPHY Well, this is possible, to be honest. He could be a transitory figure between the early days of the revolution and what lies ahead. But he has made some statements which I think are encouraging from the standpoint of American interests, and I hope we can find a way to move ourselves. And I don't think we've moved in any significant way yet. So when I hear this concern that we are going to overturn the apple cart and totally change our course, that's the least of the dangers. But the oil crisis -- that's not our control. He would do better economically if American sanctions didn't exist; and, perhaps more importantly, if Americans were not discouraging the World Bank, the IMF, from investments in that country. That's -- we do have major agreements there.

SEN. ROBB They tend to go hand in hand.

MR. MURPHY Yes, yes. We certainly --

SEN. ROBB May I ask you just one more question? Unfortunately there is a vote on, so we are being constrained by forces of at least two different directions, and we are going to have to close down here in just a minute. Your suggestion of an arms control council with Iran, Iraq and the GCC states -- has anything like that been tried within that group, and would you -- in terms of arms control would you anticipate Iran and Iraq each negotiating arms control agreements -- except for the GCC states presumably because they've got an existing framework they'd probably negotiate in one body, although they have trouble getting closure on a lot of matters as well. But is this something that you bring it in in the sort of United Nations fashion, or is it -- I am just trying to flesh out in my own mind what you have, because it's an intriguing thought, and clearly security questions about neighbors permeates all of their thinking.

MR. MURPHY Right.

SEN. ROBB I agree with your premise.

MR. MURPHY This is just a concept at this point. It needs a lot of study, a lot of fleshing out. There are some pegs out there, such as the Iranian statements on interest in a nuclear or weapons of mass destruction free zone. How serious? We are not going to know until they are probed. I mean, you are in the odd situation where they deny they have any nuclear program. Iraq says they disposed of all of their weapons of mass destruction and the Iranian gun battle with the UNSCOM on that issue. But with depressed oil prices and the fact that you don't have as far as I am aware any weapons of mass destruction in the GCC states. We may see some common ground here. I think it's -- anyway, we are going to be carrying out some discussions within my own organization as the council.

SEN. ROBB Gentlemen, I apologize again. The chairman had to go over to be on the floor to argue an amendment, and unfortunately we all have to go to the floor at this point to vote. I am not sure that it's entirely possible -- there may be more than one -- I'm not sure that he'll get back, and I think all three of you have had a chance to at least present your oral testimony. We have your full statements in the record. We will rely on those. It is entirely possible that any member of the committee may wish to follow up with you in some written communication if they may, but because of the constraints of the floor vote, and not wanting to have you wait unnecessarily for some additional questions, I think we'll go ahead and bring this hearing to a close. On behalf of the chairman, may I thank you for your willingness to come and share your thoughts with us today? I think that they were obviously timely. We'll have a decision here in the next couple of days that will at least reverberate with some of the testimony that we heard, and we thank you for your participation. With that the hearing comes to a close. (Sounds gavel.)

END