[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]







                        THE IMPLICATIONS OF U.S.
                         AIRCRAFT SALES TO IRAN

=======================================================================

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON MONETARY

                            POLICY AND TRADE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              JULY 7, 2016

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 114-95





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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
               Subcommittee on Monetary Policy and Trade

                   BILL HUIZENGA, Michigan, Chairman

MICK MULVANEY, South Carolina, Vice  GWEN MOORE, Wisconsin, Ranking 
    Chairman                             Member
FRANK D. LUCAS, Oklahoma             BILL FOSTER, Illinois
STEVAN PEARCE, New Mexico            ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia        JAMES A. HIMES, Connecticut
MARLIN A. STUTZMAN, Indiana          JOHN C. CARNEY, Jr., Delaware
ROBERT PITTENGER, North Carolina     TERRI A. SEWELL, Alabama
LUKE MESSER, Indiana                 PATRICK MURPHY, Florida
DAVID SCHWEIKERT, Arizona            DANIEL T. KILDEE, Michigan
FRANK GUINTA, New Hampshire          DENNY HECK, Washington
MIA LOVE, Utah
TOM EMMER, Minnesota



























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 7, 2016.................................................     1
Appendix:
    July 7, 2016.................................................    45

                               WITNESSES
                         Thursday, July 7, 2016

Dubowitz, Mark, Executive Director, Center on Sanctions and 
  Illicit Finance, Foundation for Defense of Democracies.........     5
Goldman, Zachary K., Executive Director, Center on Law and 
  Security, New York University School of Law....................     8
Lorber, Eric B., Senior Associate, Financial Integrity Network...     6

                                APPENDIX

Prepared statements:
    Dubowitz, Mark...............................................    46
    Goldman, Zachary K...........................................    65
    Lorber, Eric B...............................................    75

              Additional Material Submitted for the Record

Huizenga, Hon. Bill:
    Letter from Timothy Keating, Senior Vice President, 
      Government Operations, Boeing, dated July 6, 2016..........    96
    Letter to Hon. Peter Roskam and Hon. Jeb Hensarling from 
      Timothy Keating, Senior Vice President, Government 
      Operations, Boeing, dated June 23, 2016....................    97
Guinta, Hon. Frank:
    Lettter to Senator Marco Rubio from Thomas Patrick Maloney, 
      Senior Advisor, Office of Legislative Affairs, U.S. 
      Department of the Treasury, dated June 7, 2016.............    99
Sherman, Hon. Brad:
    Letter from Fred P. Hochberg, Chairman and President, Export-
      Import Bank of the United States, dated November 4, 2015...   101
Dubowitz, Mark:
    Federal Ministry of the Interior report entitled, ``2015 
      Annual Report on the Protection of the Constitution''......   102
    Article entitled, ``German intelligence: Iran seeks illegal 
      nuclear technology, Germany's Merkel says Iran violating UN 
      missile regulations........................................   134

 
                        THE IMPLICATIONS OF U.S.
                         AIRCRAFT SALES TO IRAN

                              ----------                              


                         Thursday, July 7, 2016

             U.S. House of Representatives,
                           Subcommittee on Monetary
                                  Policy and Trade,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:03 a.m., in 
room 2128, Rayburn House Office Building, Hon. Bill Huizenga 
[chairman of the subcommittee] presiding.
    Members present: Representatives Huizenga, Pearce, 
Stutzman, Pittenger, Messer, Schweikert, Guinta, Emmer; Moore, 
Foster, Perlmutter, Murphy, Kildee, and Heck.
    Ex officio present: Representatives Hensarling and Waters.
    Also present: Representatives Royce and Sherman.
    Chairman Huizenga. The Subcommittee on Monetary Policy and 
Trade will come to order. Without objection the Chair is 
authorized to declare a recess of the subcommittee at any time.
    Today's hearing is entitled, ``The Implications of U.S. 
Aircraft Sales to Iran.''
    I now recognize myself for 3 minutes to give an opening 
statement.
    The U.S. State Department has consistently labeled Iran a 
state sponsor of terrorism, and in a report most recently 
released last month called Iran ``the world's foremost state 
sponsor of terrorism.'' In fact, Iran's state-owned national 
carrier, Iran Air, was sanctioned by Treasury in 2011 for 
transporting fighters and weapons of war on behalf of Iran's 
Revolutionary Guards.
    Under the Iran Nuclear Deal, formerly referred to as the 
Joint Comprehensive Plan of Action (JCPOA), the Obama 
Administration agreed to authorize exports of commercial 
aircraft to the Islamic Republic of Iran while keeping all 
other existing trade restrictions in place.
    These aircraft sales to Iran, purportedly meant to upgrade 
the country's aging fleet, expanded from 150 to 500 airplanes 
over the next 3 to 5 years.
    On March 24, 2016, the Treasury Department's Office of 
Foreign Assets Control (OFAC), issued a general license 
permitting Boeing to begin negotiations with Iran.
    On June 21st, Boeing announced it had reached a tentative 
sales agreement with Iran Air, the country's flagship state-
owned carrier. Iran Air intends to purchase 80 commercial 
planes with a value of $17.6 billion, along with the leasing of 
29 737s.
    However, any orders will remain contingent on the 
additional OFAC license authorizing the sale. OFAC regulations 
stipulate that such a license can also authorize financing 
``incident to a transaction.'' And last month OFAC Acting 
Director Johnny Smith suggested that Boeing sales may draw on 
U.S. banks.
    Opponents of Boeing's deal with Iran point to the country's 
continued sponsorship of terrorism, the use of its financial 
sector for international money laundering, and its support of 
the Assad regime in Syria, which has committed atrocities over 
the course of a 5-year-long civil war.
    Critics also argue that U.S. financing of aircraft sales, 
be it through a U.S. bank or agencies such as Export-Import 
Bank, would go far beyond the Administration's obligations 
under the Nuclear Deal.
    Today's hearing will examine the Obama Administration's 
nuclear agreement with Iran and how it opened the door for the 
sale of American-made aircraft to the world's leading state 
sponsor of terror. The subcommittee will also discuss 
legislation to prevent the facilitation of certain transactions 
by American financial institutions with Iran, as well as the 
prohibition of the Export-Import Bank from financing projects 
in Iran.
    I am extremely concerned that by relaxing the rules, the 
Obama Administration has allowed U.S. companies to be complicit 
in weaponizing the Iranian regime. I will look forward to 
hearing from our witnesses.
    With that, I yield back the balance of my time, and 
recognize the ranking member of the subcommittee, Ms. Moore 
from Wisconsin.
    Ms. Moore. Good morning, Mr. Chairman, and good morning to 
all of our witnesses. It is such a privilege to serve in 
Congress when you realize that you are going to be able to hear 
from really just experts on these topics. And I do welcome you 
here today.
    I just want you all as our witnesses to know that this 
committee had jurisdiction over the Iran deal and we waived it 
when the Iran deal was before Congress.
    The sale of these aircrafts to Iran is legal and it is 
transparent, and it is under close supervision of the U.S. 
Government in accordance with the express terms of the Iran 
deal, which China, Britain, France, all of our allies were 
party to.
    In accordance with the express terms of it. And it actually 
includes a special aircraft snapback provision, unlike the 
Reagan deal with Iran, which you might all recall, where there 
were arms traded for hostages. This, again, is transparent.
    And as Ronald Reagan said during the time, ``I told the 
American people I did not trade arms for hostages. My heart and 
my best intentions still tell me that is true, but the facts 
and the evidence tell me that it is not.''
    I now yield 2 minutes to my good friend, Mr. Heck.
    Mr. Heck. Thank you very much, Ranking Member Moore and 
Chairman Huizenga, thank you very much. I have a lot of things 
that I worry about that come within the jurisdiction of this 
subcommittee.
    I worry about stubbornly stuck wage growth, 30 years in 
fact. I worry about GDP growth that is stuck at about 2 
percent, more or less. I worry about that which I referred to 
the other day in a full committee hearing, the U-6 measure of 
unemployment stuck at just under 10 percent.
    And this subcommittee has jurisdiction over a lot of issues 
that could impact those factors which so affect middle class 
Americans, whether it is our monetary policy jurisdiction, some 
banking, some international financial institution jurisdiction 
and the like.
    And yet what we are focusing on today, the only hearing of 
this week in this subcommittee, is proposed policy to interfere 
in a private market transaction that is, and please remember 
these words, fully legal, fully compliant and scandal-free--
fully legal, fully compliant and scandal-free.
    I would much rather that we took our time focusing, 
frankly, on the things that create good paying jobs that put 
people to work in this country. In fact, what is happening here 
today is evident to everyone. We are relitigating JCPOA. 
Period.
    We are interfering in a private market transaction that is 
fully legal, fully compliant and scandal-free.
    Thank you Madam Ranking Member. With that I yield back the 
balance of my time to you.
    Ms. Moore. I yield back my time. Thank you.
    I just wanted to point out before we continue with the 
hearing, just raise the safety concerns. There had been over a 
couple hundred airplane crashes in the commercial area. These 
planes that Iran has were so rickety and so ragged that the 
parts were unavailable anywhere in the world to repair them.
    And so it is really important to note that number one, we 
are doing something that is saving lives of really innocent 
people, and itcould also be Americans who are traveling in that 
space as well.
    In addition to that, Boeing will be doing the inspections, 
have the inspections contracts so that if there is any effort 
to weaponize these planes we will be the first to know. And I 
think that that is really, really important to elucidate to our 
members here.
    And with that, Mr. Chairman, I would yield back the balance 
of my time.
    Chairman Huizenga. The gentlelady yields back.
    And the Chair at this time recognizes the chairman of the 
full Financial Services Committee, Mr. Hensarling of Texas, for 
2 minutes.
    Chairman Hensarling. Thank you, Mr. Chairman, and thank you 
for calling this hearing. For the past year this committee's 
bipartisan Task Force on Terrorism Financing has done excellent 
work in shedding light on sources of terror financing and 
offering legislation to improve U.S. Government efforts to 
choke off these funds.
    Undermining this work, news broke a few weeks ago that 
Boeing had reached a deal to sell and lease billions of 
dollars' worth of aircraft to Iran. This is the same Iran which 
the U.S. State Department in a report last month again called, 
``the world's foremost state sponsor of terrorism.''
    And the Treasury Department has labeled Iran ``a 
jurisdiction of primary money laundering concern.'' This is the 
same Iran behind the 1983 bombing in Beirut that killed 241 
American service members. The same Iran that fuels atrocities 
in Syria, where half a million lives have been lost. This is 
the same Iran whose government calls again and again for the 
annihilation of our ally, Israel.
    And yet, this Administration plans to authorize these 
transactions with Iran Air, the state-owned national carrier, 
which has been sanctioned by the United States for transporting 
fighters and weapons of war on behalf of Iran's Revolutionary 
Guard.
    The Administration also seems poised to allow U.S. 
financial institutions to provide financing for the deal, 
despite explicit assurances that Iran would not have access to 
the U.S. financial system when selling its nuclear deal.
    One of the last things we should be doing is allowing 
Boeing to export military fungible aircraft and providing 
access to the U.S. financial system to the Iranian regime.
    Boeing has been an iconic American company with a proud 
heritage. And I awoke just the other morning to watch Boeing's 
100th anniversary television commercial, which I have seen on 
numerous occasions. On it were patriotic images of Martin 
Luther King and one of the space shuttle rockets.
    Mr. Chairman, how tragic it would be for Boeing if, on its 
next anniversary, truth in advertising compelled it to replace 
Martin Luther King's image with that of the Ayatollah Khomeini, 
and to replace the space shuttle rocket image with that of 
Hezbollah rockets instead raining on Israel.
    Let us hope Boeing rethinks their decision, and if they do 
not, our work is clear. We must ensure that American taxpayers 
and depositors will not have their funds used to back financing 
for the Ayatollahs and the world's greatest state sponsor of 
terrorism.
    Thank you, Mr. Chairman. And I yield back the balance of my 
time.
    Chairman Huizenga. The gentleman yields back.
    And today, we welcome the testimony of Mark Dubowitz, 
executive director of the Center on Sanctions and Illicit 
Finance at the Foundation for Defense of Democracies; Eric 
Lorber, senior associate at the Financial Integrity Network; 
and Zachary Goldman, executive director of the Center on Law 
and Security at the New York University School of Law.
    I might also note that there was a fourth intention, and 
you will see an empty Chair that is sitting there. Timothy 
Keating, senior vice president at Boeing, was asked to join 
this panel.
    He was invited. He declined. He sent a letter that I would 
like to insert into the record, explaining that he had 
explained Boeing's position in a letter to Chairman Hensarling 
and to Representative Peter Roskam dated June 23rd.
    Unfortunately, I don't find that adequate. We would love to 
have had that opportunity to ask Boeing a few questions and let 
them explain where they were coming from. But their choice was 
to not be here today.
    So with that, each of you will be recognized for 5 minutes 
to give an oral presentation of your testimony. And without 
objection, each of your written statements will be made a part 
of the record.
    With that, Mr. Dubowitz, you are recognized for 5 minutes.

   STATEMENT OF MARK DUBOWITZ, EXECUTIVE DIRECTOR, CENTER ON 
   SANCTIONS AND ILLICIT FINANCE, FOUNDATION FOR DEFENSE OF 
                          DEMOCRACIES

    Mr. Dubowitz. Thank you, Mr. Chairman. Chairman Huizenga, 
Vice Chairman Mulvaney, Ranking Member Moore, Chairman 
Hensarling, and committee members, on behalf of FDD and its 
Center on Sanctions and Illicit Finance, thank you for the 
opportunity to testify. It is an honor to be here and to 
testify alongside these two superb experts.
    There are a $25 billion deal between Boeing and Iran Air, 
and a similar size deal with Airbus, demonstrates the risk that 
companies and banks face in doing business with a regime with a 
long and continuing rap sheet of illicit conduct.
    These deals are a multi-billion backed by the Obama 
Administration and the Europeans for the economic benefits from 
the JCPOA will moderate Iran's behavior before the nuclear 
restrictions start expiring in 2023. That is a bad bet given 
Iran's aggressive behavior since the nuclear deal.
    By selling planes to Iran Air, Boeing and Airbus are 
partnering with an Iranian aviation company and an industry 
complicit in the regime's weapons proliferation and 
destabilizing adventurism. These Western aviation giants and 
the banks financing this deal face a due diligence nightmare.
    They cannot prevent the planes from being used by the IRGC 
for deadly airlifts to Syria's Bashar al-Assad, Lebanese 
Hezbollah and other terrorist entities.
    And it seems that Iran Air is not keeping out of trouble. 
Three times in June Iran Air flew routes known to be used by 
the IRGC to resupply Assad and Hezbollah.
    As recently as June 9, an Iran Air jet landed in Abadan, 
Iran, the logistical hub of the IRGC's airlifts, and then flew 
on to Damascus. The airline frequently uses false transponder 
information to hide these flights. So much for legal compliance 
and scandal-free.
    We know that Iran Air will not be the only recipient of 
these planes. It alone does not have the capacity to absorb the 
large orders from Boeing and Airbus. And it is likely that it 
will transfer these planes to the IRGC's Mahan Air and three 
other sanctioned airlines.
    These aircraft sales are not necessary. Iranian citizens 
and foreign travelers have other alternatives to Iran Air and 
Mahan Air, companies that are racked with corruption and 
mismanagement and implicated in a range of illegal activities.
    Indeed, over the past 3 years, Gulf and Turkish Airlines 
have increased their domestic and international routes in Iran 
by nearly 60 percent. And numerous European airlines are also 
resuming service. Iranians have other alternatives.
    These deals present another problem. They are preference of 
aircraft over smart state craft. They undermine the Obama 
Administration's much-touted economic snapback mechanism for 
enforcing the JCPOA.
    Last summer some of us raised concerns that Iran would view 
any imposition of non-nuclear sanctions as a violation of the 
deal and grounds to snapback its nuclear program. We warned 
that these threats would neutralize new non-nuclear sanctions. 
This is what I call Iran's nuclear snapback.
    These warnings have come to pass. Already, over the past 
year, the Obama Administration has failed to push back with 
meaningful sanctions against Iran's malign activities. And the 
Boeing and Airbus deals create a powerful lobby against any 
return to sanctions.
    If Iran Air illegally transfers planes to Mahan Air, for 
example, the U.S. and Europe will be constrained by concern 
that Tehran will walk away from both the nuclear deal and its 
outstanding debts to Western companies and banks.
    These threats are likely to motivate Boeing, Airbus and 
their banks to lobby against any return to sanctions to protect 
their investments.
    The financing of these aircraft sales provides another 
advantage to Iran. It is essential to the regime's demands for 
economic legitimacy. Iran wants American banks to finance the 
Boeing deal and for the Administration to permit the use of the 
U.S. dollar.
    Tehran wants to get the planes now. pay later, borrow the 
money from Western lenders, and secure its access to dollarized 
transactions. If the Administration provides this dollarized 
access and in the future Iran Air legally resells Boeing planes 
to Mahan Air, the next Administration will not be able to 
revoke Iran's access to dollarized transactions.
    Indeed, Tehran will argue that Washington provided this 
concession under the Nuclear Deal so it cannot later revoke it 
for non-nuclear reasons. Iran will threaten to walk away from 
the deal and deploy its nuclear snapback. This will effectively 
paralyze America's Iran policy for the next Administration.
    The Boeing and Airbus deals only serve to increase the 
Iranian regime's leverage over the Nuclear Deal while 
diminishing Western appetite for rigorous enforcement.
    I would conclude by noting that it is no small irony that 
the combined value of the Boeing and Airbus deals, about $50 
billion, is around the exact same amount that Iran refuses to 
pay to settle outstanding judgments for victims of Iranian 
terrorism, including Americans.
    Look for lawyers pursuing justice for these victims to 
target these aircraft deals. If these deals are permitted to 
proceed, the Administration will make two of the world's most 
respected companies and their banks accomplices to the world's 
leading state sponsor of terrorism.
    Thank you for the opportunity to testify. I look forward to 
your questions.
    [The prepared statement of Mr. Dubowitz can be found on 
page 46 of the appendix]
    Chairman Huizenga. Thank you, and the gentleman yields back 
his time.
    Mr. Lorber, you are recognized for 5 minutes as well.

   STATEMENT OF ERIC B. LORBER, SENIOR ASSOCIATE, FINANCIAL 
                       INTEGRITY NETWORK

    Mr. Lorber. Thank you, Mr. Chairman. Chairman Huizenga, 
Chairman Hensarling, Vice Chairman Mulvaney, Ranking Member 
Moore, and distinguished members of the subcommittee, I am 
honored to appear before you today to discuss the implications 
of U.S. aircraft sales to Iran.
    I would like to focus my testimony on the threats posed by 
Iran, both to the region and to the international financial 
community and the risks that the private sector faces when 
considering re-entering Iranian markets.
    I will also speak to the risks in providing commercial 
aircraft to the Islamic Republic. I would be happy to discuss 
my suggestions for the three legislative proposals during the 
question and answer period.
    Make no mistake. As we approach the 1-year anniversary of 
the signing of the JCPOA, Iran has not changed most of the 
underlying illicit activity that has led respectable financial 
institutions across the world to refuse to do business there. 
Iran continues to actively support Syrian President Bashar al-
Assad and international terrorist organizations including 
Hezbollah.
    Indeed, because of this underlying illicit activity, the 
international financial community remains broadly reluctant to 
re-enter the Iranian market, even if legally permitted to do 
so. This reluctance is justified. Doing business in Iran poses 
a unique and toxic combination of risks related to bribery, 
corruption, money laundering, and illicit finance.
    Such risks include, first, financial crime risk. Iran is 
well-known to present serious risks related to bribery and 
corruption and was recently ranked 130th out of 175 countries 
in Transparency International's Corruption Perception Index.
    In addition, the Financial Action Task Force continues to 
keep Iran on its black list as a jurisdiction lacking necessary 
financial crime compliance controls.
    Second, sanctions risk. The United States continues to 
maintain primary U.S. sanctions on Iran, which pose significant 
risks for any multinational corporation considering doing 
business there. U.S. jurisdiction is broad and U.S. regulators 
can use it to target transactions that may not initially appear 
to touch U.S. markets or involve U.S. persons.
    Similarly, U.S. secondary sanctions remain in force, 
particularly if foreign financial institutions do business with 
the Islamic Revolutionary Guard Corps.
    Given that the IRGC controls upwards of 35 percent of the 
Iranian economy and has established opaque corporate structures 
to hide its true ownership interests, companies returning to 
Iranian markets run a high risk of dealing with prohibited 
entities and running afoul of those regulations.
    Likewise, though it signed the JCPOA, Iran has not changed 
much of its underlying illicit conduct. It actively supports 
terrorism and engages a wide range of destabilizing activities, 
including ballistic missile development. Given such activities, 
a serious risk exists that additional sanctions will be imposed 
on the country.
    And third, snapback risk. If Iran cheats on the JCPOA, the 
U.S. Treasury Department has clear that it can partially snap 
sanctions back into place, meaning that firms that have re-
entered those markets would be suddenly forced to exit, likely 
at a significant financial loss.
    These risks, among others, are a significant part of the 
reason that the world's most reputable financial institutions 
have been unwilling to return to Iran.
    When speaking with these banks, the response has been 
remarkably uniform. While the banks recognize that there are 
commercial opportunities in Iran, the real and regulatory risks 
remain far too high to consider re-entering the country.
    In the case of Boeing's proposed sale of $25 billion worth 
of aircraft and associated services to Iran Air, these risks 
are even higher. Iran Air is well-known to have engaged in 
illicit activities on behalf of the IRGC and, as you noted, was 
designated by the Treasury Department in 2011.
    While Iran Air was delisted as part of the JCPOA, the 
illicit activity that led to the designation does not appear to 
have changed. As my fellow witness, Mr. Dubowitz, has noted, 
Iran Air continues to fly well-known arms and militant resupply 
routes to Damascus and into Lebanon.
    The heightened risks of dealing with Iran Air and other 
Iranian airlines are also likely the reason that Boeing and 
Airbus have reportedly had difficulty finding financial 
institutions willing to bank these sales. Financial firms' 
fears are well-founded.
    Foreign financial institutions can be subject to U.S. 
secondary sanctions if they provide services to the IRGC or its 
affiliates. If a global bank provides financial services for 
this deal and Iran Air uses these planes to transport arms or 
militants to Syria or Hezbollah, the bank could lose its access 
to U.S. markets, a death sentence for an international 
financial institution.
    In conclusion, companies considering re-entering Iran, 
including Boeing, face serious risks of doing business with 
sanctioned parties or in ways that directly or indirectly 
support Iran's destabilizing activities. Congress should take 
steps to limit that risk.
    The three legislative proposals are steps in that direction 
and with minor modifications can help the United States shape 
Iran's behavior and limit its ability to use this equipment for 
illicit purposes.
    I look forward to discussing them during our question and 
answer session. Thank you for your time. I look forward to your 
questions.
    [The prepared statement of Mr. Lorber can be found on page 
75 of the appendix.]
    Chairman Huizenga. The gentleman's time has expired.
    And Mr. Goldman, you are recognized for 5 minutes.

STATEMENT OF ZACHARY K. GOLDMAN, EXECUTIVE DIRECTOR, CENTER ON 
      LAW AND SECURITY, NEW YORK UNIVERSITY SCHOOL OF LAW

    Mr. Goldman. Chairman Huizenga, Chairman Hensarling, Vice 
Chairman Mulvaney, Ranking Member Moore, and members of the 
committee, thank you very much for the honor of appearing 
before you today with my friends and colleagues, Mr. Lorber and 
Mr. Dubowitz.
    Last year, the United States and its partners in the P5+1 
realized an important diplomatic accomplishment when they 
agreed to the Joint Comprehensive Plan of Action with Iran.
    In the JCPOA, Iran committed that it would never seek, 
develop or acquire nuclear weapons, and the agreement 
represents the first time in over a decade that Iran's nuclear 
program is subject to limits agreed upon with the international 
community.
    Under the terms of the JCPOA Iran limited the number of 
centrifuges that are operating, limited the degree of enriched 
uranium it can possess, limited the amount of enriched uranium 
that can be in the country at any given time, substantially 
modified its existing nuclear facilities, all under the 
supervision of the IAEA. In exchange, the United States and its 
partners agreed to limited sanctions relief.
    The agreement does not resolve all concerns about Iran's 
behavior. Indeed, Iran remains one of the principal strategic 
adversaries of the United States in the Middle East. Since 1984 
Iran has been and today remains designated as a state sponsor 
of terrorism. It provides substantial support to the regime of 
Bashar al-Assad as he prosecutes Syria's brutal civil war.
    It routinely engages in gross human rights abuses, commits 
malicious cyberattacks inside the United States, and continues 
its support for terrorist groups like Hezbollah and the Houthi 
rebels in Yemen.
    Until the adoption of the JCPOA last year, Iran's pursuit 
of an advanced nuclear program compounded these other ways in 
which Iran threatened American interests and the stability of 
the Middle East.
    Seen in this context, however, the JCPOA ameliorates one of 
the most important components of the threat from Iran, namely 
the menace posed by its nuclear program and the possibility 
that its nuclear program could have been used to intensify the 
other ways in which Iran threatens the U.S., its allies and its 
interests.
    And there was a significant chance that Iran's further 
development of its nuclear program would have sparked an arms 
race in the Middle East.
    The constraints embodied in the JCPOA lengthen the time 
needed for Iran to break out from 2 months at the time the deal 
was signed to roughly a year under the terms of the agreement. 
In exchange for these concessions, the U.S. committed to lift 
nuclear-related secondary sanctions on Iran while it retained 
its primary sanctions program with some exceptions.
    One of those exceptions is at issue today, the commitment 
by the U.S. Government to establish a licensing regime for the 
sale of aircraft and related parts and services to Iran.
    To be clear, such sales are risky for the reasons Mr. 
Lorber and Mr. Dubowitz identified. Iran Air was designated in 
2001--or 2011, excuse me, for providing support to the IRGC and 
other proliferation-related entities.
    And that is why it is incredibly important to focus on 
contractual and licensing conditions and stringent monitoring 
and enforcement in the event a sale of aircraft goes forward.
    And indeed, the JCPOA itself states that any licenses to 
sell aircraft to Iran will be contingent on those aircraft 
being used exclusively for commercial passenger aviation.
    The U.S. has put Iran on notice that a breach of those 
conditions would be grounds for the U.S. to cease performing 
its obligations under that section of the JCPOA.
    The risks involved in selling aircraft to Iran are similar 
to the risks generally attendant with doing business there, the 
risks of becoming involved in illicit financial activity and 
the reputational risk that comes from doing business in a 
regime that routinely represses the human rights of innocent 
people at home and abroad.
    These risks and Iran's failure to address the shortcomings 
of its own financial system are some of the reasons that Iran 
says it has not gotten as much benefit from the JCPOA as it had 
anticipated. It is Iran's responsibility to address those 
shortcomings.
    But as long as Iran adheres to the terms of the JCPOA and 
the IAEA has not raised concerns that Iran is out of 
compliance, the JCPOA has significant value in the U.S.'s 
overall national security strategy, even while the U.S. must 
continue to act to limit Iran's malign influence elsewhere in 
the region.
    And the U.S. retains the full suite of national security 
tools including sanctions to enable it to do so. For as long as 
that is true we must work to maintain the integrity and 
viability of the JCPOA and to resist efforts to undermine it.
    Thank you very much for allowing me to join you today. I 
look forward to your questions.
    [The prepared statement of Mr. Goldman can be found on page 
65 of the appendix.]
    Chairman Huizenga. The gentleman yields back the balance of 
his time.
    And with that, I would like to ask for unanimous consent 
that any member of the full Financial Services Committee who is 
not a member of the subcommittee be allowed to participate and 
ask questions of the witnesses. Without objection, it is so 
ordered.
    The Chair now recognizes himself for 5 minutes. I was 
hoping to address this to Mr. Keating from Boeing. I have a 
series of questions from his letter to our chairman, Chairman 
Hensarling and Peter Roskam.
    First of all, it is in his first opening paragraph, he 
talks about from the onset that consultation with Boeing the 
Administration ``made it clear that implementation of the JCPOA 
was critical to the national security interests of the United 
States.''
    Then later, at the bottom of this first page, it says, 
``Boeing will continue to follow the lead of the U.S. 
Government with regard to working with Iranian airlines.'' I 
was hoping to ask him what kind of pressure they had been 
feeling from the Administration to do this deal?
    I also wanted to ask him as he was talking about the 
Memorandum of Understanding or of Agreement to express Boeing's 
intent to help Iran Air lease 29 737s, how were they going to 
do that? What structure? Was it going to be directly or third-
party?
    And finally, at the end they have stated repeatedly, 
``Should the U.S. Government reinstate sanctions against the 
sale of commercial passenger airlines to Iranian airlines we 
will cease all sales and delivery activities as required by 
U.S. law.''
    And I wanted to get their opinion on what that would look 
like? What would Boeing do if a new Administration did come in 
and do that? Would they be passive? Would they be aggressive to 
push back against that, that snapback?
    And then finally, there is quite a bit of discussion about 
where this financing is going to be going? And this is 
something I would like to have you all address.
    They say, ``We have not reached any decisions on how 
payment from Iranian Airlines will be affected,'' as they are 
looking at the financing of it.
    And that they do properly lay out Export-Import Bank as 
prohibited from any dealings with Iran. So I think we all ought 
to be agreeing that we are going to be able to codify that.
    But they are talking about other financing options pursued 
by the customer. And I think that leads into those bank 
situations that Mr. Lorber was talking about.
    And Mr. Lorber, you talk about that. You write in your 
testimony it is an underlying mix of money laundering and 
financial crime in Iran remains in place and that even after 
sanctions relief the list of Specially Designated Nationals 
remains long.
    In your testimony you note that there is a big difference 
between permitting the sale of commercial aircraft and 
proactively telling U.S. and foreign banks that they can 
finance these sales.
    You are a former Treasury lawyer, I believe, and did the 
the U.S. Government commit to the JCPOA to provide Iran with 
economic benefits and facilitating transactions or merely will 
they not prohibit the trade? I am curious what your take is on 
that.
    Mr. Lorber. Thanks, Chairman. It is a great question and in 
fact this goes to the heart of the JCPOA because much of the 
language within the agreement itself is actually fairly 
ambiguous. I think it is paragraph number 26 of the agreement 
says, and I can quote it for you here if you would like?
    Directly on this point it says, ``The United States will 
make best efforts in good faith to sustain this JCPOA and to 
prevent interference with the realization of the full benefit 
by Iran of the sanctions lifted specified in annex two.''
    I read that to mean that the U.S. Government must ensure 
that the sanctions specified in annex two are lifted. Full 
stop. That does not mean the United States needs to go above 
and beyond and facilitate U.S. financial institutions providing 
financing in this way.
    Chairman Huizenga. And you would view this as above and 
beyond?
    Mr. Lorber. Correct. I would consider permitting U.S. 
financial institutions to bank this deal as above and beyond 
the obligations contained in this.
    Chairman Huizenga. Now, in a letter to Senator Marco Rubio 
last month, Treasury Department wrote, ``The administration has 
not been and is not planning to grant Iran access to the U.S. 
financial system.'' But I am curious. They seem to leave doors 
open as you walk down that hall all the time. And I would like 
someone to address this as well.
    From a financial institutions perspective, what kind of 
risks are there and what are the dangers if the United States 
is seen as advocating for trade with Iran?
    Mr. Lorber. Mark, do you want to--
    Mr. Dubowitz. The problem with the Treasury Department's 
answer is they left the door open for offshore dollarization. 
And so that there may not be what is called a U-turn 
transactions for the U.S. financial system, but it is possible 
then to provide access to dollarization through offshore dollar 
trading.
    Chairman Huizenga. Like a third party?
    Mr. Dubowitz. Right. And so the issue of course with that 
is that Iran never negotiated that as part of the JCPOA. So now 
we are going above and beyond what was committed to in the 
JCPOA.
    We are giving Iran access to the U.S. dollar offshore. And 
in doing so we are effectively neutralizing the ability to use 
non-nuclear financial sanctions in the future.
    So the next Administration's hands are going to be tied. If 
they try to take away dollarization the Iranians will cry foul, 
that that is a violation of the JCPOA and the Iranians will 
threaten to snapback their nuclear program.
    And we won't be able to use financial sanctions in the 
future to deter Iranian behavior, whether it is on the nuclear 
side or on the non-nuclear side.
    Chairman Huizenga. So my time has expired, but it is your 
understanding or your belief that any new Administration coming 
in, whomever that may be, will have their hands tied by this if 
this moves forward?
    Mr. Dubowitz. That is correct.
    Chairman Huizenga. With that, my time has expired.
    And I now recognize the gentlelady from Wisconsin for 5 
minutes.
    Ms. Moore. Thank you so much, Mr. Chairman. And I 
appreciate you are going to add this to the record, the letter 
that you read from Boeing, right? Yes.
    Chairman Huizenga. Without objection so moved.
    Ms. Moore. Okay. I guess what we are hearing, at least if 
we are to follow the lead of the chairman's questions, that 
Boeing did not have to make these sales in order to be in 
compliance with the agreement.
    So I guess I would ask you, Mr. Goldman, to comment on why 
commercial passenger aircraft were included in the deal related 
to preventing Iran from acquiring the nuclear capacity?
    And how central were these provisions in terms of lifting 
the sanctions related to Iran's willingness to give grounds in 
other areas? How key was this to an agreement?
    Mr. Goldman. Thank you, Ranking Member Moore. I think you 
identified earlier an important reason the provision committing 
the U.S. to establish a licensing regime for aircraft sales was 
permitted in the agreement, and certainly a core reason was 
questions of aircraft safety.
    In 2010 the E.U. actually went so far as to bar certain 
Iran Air aircraft from overflying the European Union because of 
concerns about aircraft safety. And indeed, a licensing regime 
for parts and services was included in the Joint Plan of 
Action, the interim agreement that was reached in 2013.
    I read the provision that allows the licensing of aircraft 
sales to Iran effectively as standing on its own. The U.S. 
committed to establishing a licensing regime contingent on 
certain restrictions on how the aircraft parts and services 
would be used.
    And in a footnote to that provision said that if those 
conditions are violated the U.S. would view itself as freed of 
the obligations in that specific provision. So to my mind I 
think that that provision can be seen as somewhat self-
contained.
    Ms. Moore. Mr. Goldman, just let me continue to pursue this 
line of questioning. The other witnesses have talked about the 
Gulf and Turkish Airlines as being able to provide the air 
capacity and that there would be no need essentially for there 
to be an Iranian commercial fleet.
    I guess my question is is that under the terms of the G-5 
agreement would Airbus and other makers of aircraft be able 
under the terms of the agreement to make these sales to Iran 
were Boeing to step out of the picture?
    Mr. Goldman. Certainly as a legal matter if they are 
appropriately licensed Airbus would be permitted to sell the 
aircraft to Iran. My sense, however, is that the U.S. 
Government's ability to monitor and enforce whatever deals are 
ultimately struck might be greater in the event a U.S. company 
makes the sales than in the event that the foreign company 
makes the sales.
    Ms. Moore. So it gives us greater leverage--
    Mr. Goldman. Sure.
    Ms. Moore. --for an American company to make these sales 
than it would be to just leave it out there for other countries 
to do it.
    Let me just ask you one other question. Would you regard it 
as kind of a breach of the deal if there were legislation that 
would somehow clawback the sale of aircraft to Iran? Is that in 
our best interests and would it be a breach of the agreement?
    Mr. Goldman. Iran thus far, as certified by the IAEA, has 
adhered to its nuclear-related obligations under the deal. The 
U.S. committed to establishing a licensing regime for aircraft 
sales to Iran. It did not commit to actually issue those 
licenses. It committed to establish a licensing regime.
    If legislation were to bar the U.S. Government from 
establishing such a regime, that could put at risk our 
obligations under that specific provision of the JCPOA.
    Ms. Moore. And just your comment, your opinion perhaps, on 
the timeliness of this hearing? As you may recall, I indicated 
that this committee had jurisdiction to have had this hearing 
prior to the execution of the deal. Is this kind of an untimely 
hearing in your opinion?
    Mr. Goldman. Ranking Member Moore, the Boeing deal was just 
announced in the last several weeks and certainly this is an 
issue on which this committee has been and is appropriately 
very focused. And so this hearing seems to me to be an 
important exercise in oversight.
    Ms. Moore. Thank you so much.
    And I yield back, and thank the chairman for his 
indulgence.
    Chairman Huizenga. The gentlelady yields back.
    And just to be clear, it really wasn't a motion but I am 
happy to enter into the record without objection the June 23rd 
letter from Boeing to Congressman Roskam and Chairman Jeb 
Hensarling. Without objection, it is so ordered.
    Chairman Huizenga. With that, I recognize the chairman of 
the full Financial Services Committee, Mr. Hensarling from 
Texas, for 5 minutes.
    Chairman Hensarling. Thank you, Mr. Chairman.
    Some who defend the Boeing Iranian Air deal point to the 
commercial and civilian nature of of these airplanes. I would 
note, Mr. Dubowitz, that a senior fellow at your organization, 
Emanuele Ottolenghi, has written just last month that Iran Air 
flew ``known weapons resupply routes to Syria,'' not just once 
but three times.
    And I believe it is for this very reason that Iran Air was 
sanctioned by Treasury in 2011. So this is the ``civilian 
airline.''
    Could I have the first slide please?
    In addition, Jane's Defense Weekly has written that Iran is 
capable of reverse engineering from its planes. They write, 
``The country's domestic aerospace industry has made great 
strides in indigenously manufacturing what it requires to 
sustain the country's military capabilities.''
    And then this is a publication of Boeing itself, and I know 
it is a little difficult to read. This was from a few years 
ago, a Boeing Frontiers publication.
    In the upper left-hand corner, it says, ``Building on 
success, Boeing's commercial jetliners make an ideal platform 
for a variety of military derivative aircraft.'' This is in 
Boeing's words.
    Next slide, please? And this apparently is a picture of the 
P8, which is a derivative of the Boeing 737 commercial jet. 
This is also in Boeing's words: ``I believe we are well-
postured to take commercial military development to the next 
level.'' This is the Royal Australian Air Force using Boeing's 
737 platform.
    So I guess my question is, do the Boeing sales risk 
weaponizing Iran directly or giving the country technology that 
can be used to strengthen its military know-how?
    Mr. Dubowitz, would you please comment on that?
    Mr. Dubowitz. Mr. Chairman, the short answer is absolutely. 
It is only in the month of June that Iran Air flew three 
flights, its resupply flights through Abadan, Iran, an IRGC 
resupply base, to Assad and Hezbollah. Iran Air was listed for 
reasons that had to do with the IRGC and missile proliferation.
    It was wrongly delisted because this was a nuclear deal and 
that sanction should have remained because we promised to keep 
our non-nuclear sanctions relating to the IRGC and missile 
proliferation. But even if Iran Air is considered to be a 
legitimate airline, which it clearly is not, Iran's entire 
fleet is only 36 planes.
    So the order for Airbus and Boeing is 200 planes. And the 
Iranian minister who is responsible for this says it could go 
up to 500 planes. So even if Iran Air were to double their 
fleet to 70, they would still be somewhere in the neighborhood 
of 130 to 430 planes that they are not going to be using.
    So the question is where do those planes go? Well, there 
are four other sanctioned airlines in Iran, Mahan Air and three 
other Iranian sanctioned airlines that still remain sanctioned 
under U.S. law. There is every reason to believe that those 
planes are going to go either in a lease or a sale to these 
other sanctioned airlines.
    Chairman Hensarling. My time is running out. On page 12 of 
your testimony, Mr. Dubowitz, you write, ``The financing of 
Boeing's aircraft sales through access to the U.S. dollar is 
central to Iran's demands for economic legitimacy.''
    You go on to say, ``But Iran wants the U.S. Government to 
specifically authorize payments for aircraft sales in dollars 
with each class of transactions that are dollarized, Iran is 
slowly undermining the ban on Iranian access to the U.S. 
financial system.'' Would you please elaborate?
    Mr. Dubowitz. The Administration claims that they have 
prohibited Iran's access to the U.S. dollar. We know from press 
reports that Secretary Kerry and his team had been briefing 
reporters that they were going to offer a general license to 
provide access to the U.S. dollar entirely.
    That got essentially stalled when Congress found out about 
it. Now what they are trying to do is try to provide access to 
the U.S. dollar through a class of transactions approach. And 
this is one of the central classes of transactions which is 
access to the U.S. dollar, to facilitate the financing of these 
aircraft sales.
    If that happens, Iran is going to get access to the U.S. 
dollar for a major transaction, $25 billion, Airbus as well, 
$50 billion. Iran is effectively now moving into our dollar. 
The Administration is greenlighting the greenback and we will 
never be able to revoke that access again.
    And as I testified earlier, that undercuts our ability to 
use financial sanctions in the future against the IRGC, against 
missile proliferation, things that Hillary Clinton herself has 
actually promised to do if she were president.
    Chairman Hensarling. My time has expired. Thank you.
    Chairman Huizenga. The gentleman's time has expired.
    The Chair recognizes Mr. Foster of Illinois for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman, and thank you to our 
witnesses. Just first sort of a big picture question, so you 
mention one future where Iran is operating a potentially large 
fleet of Airbus and Boeing planes, completely dependent on the 
spare parts and technical support, all this sort of stuff, for 
that continued operation.
    And then they say maybe we are going to break out for all 
of the reasons that people are worried about, for good reason. 
Does that increase or decrease the leverage that the West has 
that the moment that they break out they will be in violation 
with all this.
    Presumably their spare parts and everything will be cut off 
immediately. And their potentially very large airplane fleet 
will not be serviceable anymore. Compared to, say, an alternate 
future where they buy Chinese and Russian airlines to 
accomplish the same thing.
    Which do you think gives the West the largest leverage to 
prevent a breakout scenario?
    Yes, Mr. Lorber, that would be you.
    Mr. Lorber. Sure. I will take it. Thank you, Representative 
Foster. I think that the first situation you mentioned if we do 
sell Boeing aircraft and then have service contracts there, 
that actually doesn't provide us with much leverage in case 
they do decide to break out.
    And the logic is Iran has become fairly adept, excuse me, 
over the past 30 years for finding workarounds to service the 
current Boeing aircraft that they do have.
    And so I would fully expect them to attempt to stockpile 
spare parts, attempt to stockpile expertise, frankly, on how to 
maintain these aircraft such that if you did see a circumstance 
where they broke out and Boeing did cut off the contracts they 
would be able to keep those airplanes flying for a significant 
amount of time.
    Mr. Dubowitz. And Congressman, if I could just add to that? 
If Iran is breaking out to a nuclear weapon, I don't think we 
are going to be worrying about servicing Boeing aircraft. I 
think we are going to be worrying about servicing U.S. fighter 
jets to stop that break out.
    So I think that the area of breakout means that we will 
have zero economic leverage to stop Iran from pursuing a 
nuclear weapon. I think to your question is do we have leverage 
in the context of Iranians cheating on the deal, where they are 
trying to incrementally cheat, and I think Mr. Lorber is 
exactly right.
    The reality is that in May of 2015 the U.S. Treasury 
Department sanctioned nine aircraft that were being delivered 
from Iraq Air to Mahan Air. And despite that sanction, right, 
which was supposed to be a powerful sanction, those planes not 
only were delivered but they are currently landing in European 
airports.
    So we have had no leverage despite the fact that we have 
had those sanctions in place.
    Mr. Goldman. Congressman, if I may? I think that the 
dynamic that you identified is an important one. I would add a 
few more. One, I would just to respond to Chairman Hensarling's 
comments, the dynamics that he identified are undoubtedly a 
risk.
    I would also say that equally they would be a clear 
violation of the JCPOA, either redirecting aircraft to SDNs or 
repurposing civilian passenger aircraft for other purposes 
would be a clear violation of Iran's obligations under the 
terms of the deal.
    Mr. Foster. Sure. No.
    Mr. Goldman. That is not absolute--
    Mr. Foster. No. It is my understanding that Boeing at this 
point has a letter of intent and not final agreement. So you 
could have, for example, it is not unreasonable to expect that 
there be very detailed monitoring agreements in terms of making 
sure the jets aren't repurposed or sold to someone else.
    Mr. Goldman. I would expect--
    Mr. Foster. As part of the leasing and/or sales agreements. 
I don't know that that is going to be a fact, but it is an 
entirely reasonable expectation.
    Mr. Goldman. Congressman, I also don't know. I haven't seen 
the term sheets, but I would expect that those would be 
conditions both of the license and of the contract between 
Boeing and whatever Iranian entity is its counterparty.
    I would also note that the size of the deal provides some 
degree of leverage to the United States and to Boeing. And so I 
don't expect 109 airplanes to be delivered on day one to the 
extent that these planes are delivered over a course of many 
years, involve pre-payment, involve large down payments, 
involve escrow payments to Boeing, things like this give Boeing 
additional leverage.
    Again, none of this eliminates the risk. There are 
substantial risks, as my colleagues have noted, of engaging in 
business in Iran as a general matter and of engaging in this 
deal specifically.
    Mr. Lorber. Representative Foster, do you mind if I weigh 
in on your question as well?
    Mr. Foster. Certainly.
    Mr. Lorber. Thank you. So I think that the question of what 
is contained in the contract is going to be incredibly 
important between Boeing and Iran Air.
    But I think given that we don't know what will be contained 
in that contract this committee does have an important 
responsibility to play to actually pass legislation which 
requires OFAC issue certain licenses pursuant to particular 
conditions.
    So for example--
    Mr. Foster. Oh, right. Yes. I agree, but I see a very large 
difference between legislation that effectively has us walk 
away from the JCPOA and something that sets significant 
conditions on the sort of contracts, the monitoring, provisions 
like that, to make sure that these are exclusively civilian for 
the exclusive intended end user.
    Mr. Lorber. I--
    Mr. Foster. That is where I see our main oversight role.
    Mr. Lorber. But Congressman, the problem is of course is 
that in theory that sounds good. In practice the reality is 
Mahan Air has been under U.S. sanctions. The U.S. Treasury 
Department has been traveling around the world trying to 
convince our European and Gulf allies to stop Mahan Air from 
landing in their airports.
    And if you bring Adam Szubin here, who is the under 
secretary of Treasury, he will tell you that he has had no 
success in convincing the Europeans, our Gulf allies, to block 
the landing of a designated airline, Mahan Air, which is 
controlled by the Revolutionary Guard.
    So you can put all the provisions you want and monitoring 
provisions you want in the contract, but the reality of what is 
happening on the ground today is the U.S. Government has been 
unable to stop sanctioned airlines from traveling to even 
allied airports. That is the reality.
    Chairman Huizenga. The gentleman's time has expired.
    With that, the Chair recognizes Mr. Pearce of New Mexico 
for 5 minutes.
    Mr. Pearce. Thank you, Mr. Chairman. I have been listening 
with great interest. I really appreciate the viewpoints 
expressed by my friends on the other side of the aisle.
    I probably draw a different conclusion because the 
suggestion was made that we shouldn't be having the hearing. 
And really one of the intersections of probably an important 
discussion for the country and that is the need for jobs as 
opposed to the national security concerns.
    Now, for me it is somewhat more personal. Back in 1970 I 
went into Airforce training, pilot training, and we had in our 
class several Iranian pilots, became good friends with several 
of the people during my year there.
    When the Shah was overthrown I have tried randomly through 
the years to try to find out what happened to any of my friends 
and have never been able to contact, even as a Member of 
Congress, been able to establish a trail for any of them.
    And so the idea of a sponsor of terrorists, of a government 
like that is one that is personal to me. And so I think that it 
would be important for us to drill down.
    But I do understand what our friends are saying about the 
jobs. Now, one of the things that I have a concern about is, 
and Mr. Goldman, I am probably going to ask you to address 
this, but after the deal was done, the JCPOA, Ben Rhodes, who 
is the National Security Advisor for Strategic Communication 
for the president said, yes, we had to lie to the American 
people in order to get their consent.
    His further quote quoted as saying in the spring of last 
year, and that was some time back, ``The legions of arms 
control experts began popping up in think tanks. We literally 
created an echo chamber that became key sources for often 
clueless reporters and reporters who literally knew nothing.''
    Now, given that background for the underlying agreement, 
how can we believe anything that the Administration says about 
the use of the airplanes or the intended use of the airplanes?
    You surely understand that we come with a bit of 
skepticism, but then when the President's own adviser says yes, 
we did this, do you understand why we might have some concerns 
on this side?
    Mr. Goldman. Congressman, thank you for your question. I 
look to the terms of the agreement itself.
    Mr. Pearce. No, I am just talking about Mr. Rhodes' comment 
that--forget the terms. The people were lied to about the terms 
and what will make sure that we are not being lied to about the 
elements of this agreement?
    Mr. Goldman. Congressman, I think your committee and those 
of your colleagues is well-positioned to request information 
about monitoring of the agreement, both in public settings and 
in private settings from the Administration.
    Mr. Pearce. Okay. With all respect, we request a lot of 
information from the Administration and almost never, never get 
anything, whether it is CFPB, the Treasury or whoever. And so 
my question then, just a rhetorical question is how in the 
world can our allies trust us if this thing moves forward?
    So I would like to separate in the rest of the time 
separate the discussion into two pieces. You have one the sale 
of the assets, but then the secondly is the financing of the 
assets. Now, if we don't finance those here internally in the 
U.S. who is going to finance those?
    Mr. Lorber, do you have an opinion about that?
    Mr. Lorber. I do. So I don't think it is going to be any of 
sort of the major international financial banks, the Wolfsburg 
Group, so-called Wolfsburg Group. I think you have been seeing 
in the case of other aircraft sales to Iran, so some of the 
smaller aircraft companies, Embraer, APR--
    Mr. Pearce. Okay. I am maybe running out of time so I am 
going to--
    Mr. Lorber. Yes. It is smaller German, Austrian, Italian 
banks, for example, that are not nearly as reputable and 
cannot--
    Mr. Pearce. So do you think it is better that we have the 
financing done from in the U.S. if the sale occurs rather than 
forcing the financing there?
    Mr. Lorber. I don't. No. I don't think the United States 
should be in the position of--
    Mr. Pearce. Mr. Dubowitz, do you have an opinion on that?
    Mr. Dubowitz. I don't think U.S. financial institutions 
should be risking their reputation and risking potential 
illegalities by financing a deal to airlines that are 
controlled by terrorist organizations.
    And if you want to know someone who is telling the truth to 
you, Congressman, listen to Angela Merkel's speech to the 
Bundestag today, where based on German intelligence she said 
Iran is violating the deal because they are continuing to 
procure nuclear and missile technology in Germany in violation 
of the requirement of the JCPOA to use their procurement 
channel.
    Mr. Pearce. Wait, which kind of feeds back into my initial 
point that the whole deal was sold to the American public based 
on lies and now then there appear to be lies that are--it is a 
very difficult question.
    Again, I respect our friends on the other side pointing out 
the balance between national security and jobs. At the end of 
the day, truth does matter, so thanks.
    And I yield back, Mr. Chairman.
    Chairman Huizenga. The gentleman's time has expired.
    It has come to my attention that we have been talking about 
a number of letters, and in an effort to make sure everybody 
has all the information about the various letters, I would like 
to enter into the record without objection the letter to Dennis 
Muilenburg of the Boeing company dated June 16, 2016, by Peter 
Roskam and Chairman Jeb Hensarling that was the basis of a 
number of the letters that we were discussing earlier.
    And without objection, it is so ordered.
    The Chair now recognizes Mr. Perlmutter of Colorado for 5 
minutes.
    Mr. Perlmutter. Thanks, Mr. Chairman.
    So is it true, gentlemen, that the JCPOA is--and I am just 
going to call it the agreement, okay, is in effect today?
    Mr. Lorber, is it in effect?
    Mr. Lorber. Yes, I believe so.
    Mr. Perlmutter. Okay.
    Mr. Dubowitz:
    Mr. Dubowitz. It is and it is being violated.
    Mr. Perlmutter. Okay. So you think it would be your 
position that Iran has breached the agreement?
    Mr. Dubowitz. Actually it is Angela Merkel's position in 
her speech today because--
    Mr. Perlmutter. I asked for your position?
    Mr. Dubowitz. In my view that is exactly right. Iran is 
supposed to be using--
    Mr. Perlmutter. And you are a lawyer, right?
    Mr. Dubowitz. I am.
    Mr. Perlmutter. Okay.
    Mr. Goldman?
    Mr. Goldman. Yes, it is in effect.
    Mr. Perlmutter. Okay.
    Mr. Lorber, do you think it has been breached by Iran?
    Mr. Lorber. I think that Iran has generally lived up to the 
terms, though I think that there are points on the margin where 
Iran definitely is pushing the boundaries and may be in slight 
breach, yes.
    Mr. Perlmutter. All right. Now, none of you disagree--well, 
let us see if you do or you don't, because there is the 
legislative piece which is obviously us and what we might do 
about agreements going into the future.
    There is also the judicial piece which Mr. Dubowitz thinks 
it has been breached and he has quoted the German prime 
minister. Is Angela Merkel a prime minister or--
    Mr. Dubowitz. Chancellor.
    Mr. Perlmutter. Yes.
    Mr. Dubowitz. German chancellor.
    Mr. Perlmutter. So my question is I looked at what Mr. 
Lorber referred us to Section 5.1.1 of the agreement which 
seems to be pretty straightforward. And maybe I am missing 
something. ``The United States commits to allow for the sale of 
commercial passenger aircraft and related parts and services to 
Iran by licensing the export, re-export, sale, lease or 
transfer to Iran of commercial passenger aircraft for 
exclusively civil aviation end use.''
    And then it goes on, ``export, re-export,'' keeps going and 
then it has a footnote: ``Licenses issued in furtherance of 
Section 5.1.1 will include appropriate conditions to ensure 
that licensed activities do not involve and no licensed 
aircraft goods or services are resold or re-transferred to any 
person on the SDN list.''
    That is the operative language. That is what we are dealing 
with in this hearing, is it not?
    Mr. Goldman. But Congressman, it is fully in the purview of 
the U.S. Congress and the U.S. Treasury Department to put in a 
condition--
    Mr. Perlmutter. Is this, this the--
    Mr. Dubowitz. So--
    Mr. Perlmutter. --operative language that we are dealing 
with?
    Mr. Dubowitz. It is the operative language, but let me 
explain the operative language.
    Mr. Perlmutter. I just--is that a yes?
    Mr. Dubowitz. That is the language, but--
    Mr. Perlmutter. Thank you. All right. Now, you can expand 
on that if you will?
    Mr. Dubowitz. It is entirely within the purview of the U.S. 
Government, both Congress and the Executive Branch, to put, for 
example, in a certification that the President has to make that 
Iran is not using these civilian aircraft for illicit military 
purposes.
    It is also entirely within your purview to put in a 
requirement that these sales not be made until Iran is no 
longer a state sponsor of terrorism.
    And since Iran is in violation of the agreement, as we 
learned today from Ms. Merkel, in illicitly procuring missile 
technology from Germany in violation of the procurement 
channel, Iran is in clear violation of the agreement--
    Mr. Perlmutter. All right. So--
    Mr. Dubowitz. --in the letter in spirit.
    Mr. Perlmutter. --and I appreciate that. So if they are in 
violation then it may allow us to not have to proceed further 
with our obligations under the agreement. Okay. So I appreciate 
that legal position. I got it.
    Because we are dealing with a contract. Okay? And I 
appreciate from a legislative point of view we may want to 
change that contract in the future. We may want to add some 
things. But we do have a contract today, but you say it has 
been breached.
    Mr. Dubowitz. The contract has been breached.
    Mr. Perlmutter. And therefore it might eliminate any 
responsibility for the U.S. to have to fulfill Section 5.1.1?
    Mr. Dubowitz. No. You can fulfill that provision to the 
letter by putting in a certification requirement and a 
condition that this only take place once the president has 
certified and once Iran is no longer a state sponsor of 
terrorism.
    Mr. Perlmutter. So--
    Mr. Dubowitz. That is entirely within the purview of that 
agreement.
    Mr. Perlmutter. All right. All right. Wait a second. We 
either have responsibilities under this agreement or we don't. 
And we can always amend the agreement in the future if you get 
Iran and the other countries to agree to the amendment. Isn't 
that true?
    Mr. Dubowitz. No, because the licensing construct that is 
contemplated in that agreement gives Treasury and gives the 
U.S. Congress the ability to set up the licensing regime with 
conditions as the footnotes explains.
    Those conditions could be and should be that Iran is not 
violating the requirement that these aircraft not be used to 
support the Revolutionary Guard and Bashar Assad and designated 
terrorist organizations.
    Mr. Perlmutter. So if a--
    Mr. Dubowitz. That is not a violation of the agreement.
    Mr. Perlmutter. So if that were placed in the license, 
okay, and I appreciate that point, if that were placed in the 
license you are not going to use this for any bad purposes, 
then would you say go forward with this sale Boeing or not?
    Mr. Dubowitz. So my recommendation would be that there be a 
certification put in, that there be a 5-year rehabilitation 
period so that we can actually track these planes to make sure 
that they are not being used for illicit purposes.
    If Iran satisfies that certification requirement after 5 
years and the President can then certify, then we can move 
ahead on a incremental basis allowing certain planes to be 
delivered.
    But I think it is actually foolhardy that the day after 
Iran is--June the 9th, 1 month after Iran has continued to 
conduct illicit activities with these planes, we greenlight the 
sale and we hope and a prayer that Iran will change its conduct 
when there has been no evidence that Iran is going to be 
conducting itself--
    Chairman Huizenga. The gentleman's time has expired.
    Mr. Dubowitz. --in a legal way.
    Chairman Huizenga. The gentleman's time has expired.
    Mr. Perlmutter. And I appreciate your answers. Thank you.
    I yield back.
    Chairman Huizenga. The gentleman's time has expired.
    With that, the Chair recognizes Mr. Schweikert of Arizona 
for 5 minutes.
    Mr. Schweikert. Thank you, Mr. Chairman. And I know you had 
touched on this earlier, but I would like to get my head around 
the financing mechanics. And so I thought we would do just a 
little experiment. What is the total value that would be 
financed first on the U.S. aircrafts to be sold? Anyone throw 
that out for me?
    Mr. Lorber. So the total value of the deal, we have heard 
two numbers. We have heard $17.8 billion for the actual sale of 
aircraft and then a leasing provision with a total market 
value, we are not sure what it is, but market value is up to 
$25 billion.
    Mr. Schweikert. Okay. Just for the fun of it, 25. The 
Airbus products?
    Mr. Lorber. I believe the Airbus deal was initially valued 
at $27 billion.
    Mr. Schweikert. Okay. So now we have $27 billion. Airport 
improvements, runways, fuel delivery systems, fire suppression, 
all the list of the other infrastructure that goes when you 
have updated a fleet, updated the types. Everything from the 
jet ways--
    Mr. Lorber. Yes.
    Mr. Schweikert. --will have to all be updated. Has there 
been any estimate of how much additional infrastructure 
borrowing there will be needed?
    Mr. Lorber. Not that I have seen as public source or have 
been released by Iranian authorities, who I think would be 
responsible for that.
    Mr. Schweikert. Okay. So we are already basically at just 
our quick calculation here, we know there is somewhere around 
$52 billion.
    Mr. Lorber. It is actually more than that because there are 
other airline companies or other airplane companies that are 
selling airlines to Iran, too. Embraer I know--
    Mr. Schweikert. Okay. Embraer?
    Mr. Lorber. --ACP and a couple other smaller ones.
    Mr. Schweikert. Okay. So do we have a guess of the total if 
we were to look back a decade from now how much international 
borrowing would ultimately come from, let us call this opening 
up.
    Mr. Lorber. If I had to back of the envelope guess I would 
say probably between $65 and $70 billion.
    Mr. Schweikert. Okay. So just for the fun of it let us use 
the 70 because it is an easy number. So $70 billion and how 
much of that is going to come from the international 
marketplace? Almost all of it.
    Mr. Lorber. I would assume, yes.
    Mr. Schweikert. If for the three panel members, are we 
comfortable that this is money that is substantially going to 
be inbound capital into Iran?
    Mr. Goldman. Presumably some portion would be.
    Mr. Schweikert. Okay.
    Mr. Goldman. I couldn't speak to what portion.
    Mr. Schweikert. Okay, but we are sort of doing a thought 
experiment here. What is the risk premium? What is the threat 
to the financial markets of the world when at any given moment 
a bad actor, international sanctions come back.
    How do you insure this sort of debt? How do you actually 
design an understanding of the risk mechanics on it? Are, is 
Iran going to be paying some huge interest rate premium because 
of their risk profile?
    Mr. Lorber. So there is--
    Mr. Goldman. Oh, go ahead.
    Mr. Lorber. This is actually exactly the reason that most 
of the major global financial institutions have not gone back 
into Iran is that they don't--for a variety of reasons, but one 
important one is that they do not know how to appropriately 
price that risk.
    Mr. Schweikert. Okay. So--
    Mr. Lorber. Financial--
    Mr. Schweikert. --so are they going to have to use 
alternative sources of capital to raise $70 billion?
    Mr. Lorber. I think that is exactly why I think Iran is 
trying to go to smaller banks with less U.S. sanctions exposure 
in order to try to sort of create a hodge podge financing 
scheme to pay for the sales.
    Mr. Schweikert. Okay. Now--
    Mr. Dubowitz. Congressman, it is also why the Export-Import 
Bank and other export development banks in Europe, for example, 
are probably going to have to backstop these deals because the 
private financial institutions are not willing to risk their 
money. So instead you are going to risk taxpayer money on this.
    Mr. Schweikert. So functionally then you have just 
sanctified with populations in the Western world a guarantee on 
the risk premium of a regime that we already know is an 
international bad actor? I guess where I am going from this is, 
look, other members of the committee have done a much better 
job than I can on the types of bad acts that we believe come 
through the regime.
    My concern is do you hand $70 billion, whether it be 
taxpayer guaranteed dollars or smaller institutions that you 
would have to at least conceptualize would be much more fragile 
if all of a sudden there becomes, oh, sanctions went back on 
because of this bad act and the Iranian government because 
these are functionally an Iranian-owned airline, government-
owned airline, says, well, fine. We are just not going to pay 
our debt.
    Mr. Dubowitz. Yes. There is going to be--
    Mr. Lorber. Congressman, you are absolutely right that the 
financing I think is going to be the trickiest piece of the 
puzzle should Boeing decide to actually proceed with the sale.
    Mr. Schweikert. And I want to keep this in context of even 
beyond Boeing. The--
    Mr. Goldman. Absolutely.
    Mr. Schweikert. The savings, the capital, the 
infrastructure we have built to finance our society in the West 
is now going to functionally be financing--
    Mr. Goldman. Right.
    Mr. Dubowitz. Yes.
    Mr. Schweikert. --really dodgy debt. And yet the number, 
the hundreds and hundreds of hours we have in this committee 
screaming at each--excuse me--discussing with each other--on we 
don't believe we should finance this type of bad actor called 
Wall Street, or we shouldn't finance this or finance this. If 
you actually take the types of rhetoric that have been in this 
room--
    Mr. Goldman. Yes.
    Mr. Schweikert. --the discussion we are having here should 
be absurd on the financing. So look, that is the benchmark I am 
laying down.
    I yield back, Mr. Chairman.
    Mr. Goldman. Congressman, I would just note--
    Mr. Schweikert. I'm sorry. It--
    Chairman Huizenga. The gentleman's time has expired.
    Mr. Goldman. $70 billion--
    Chairman Huizenga. So far, there is no yelling. That is 
good.
    But with that, the Chair does recognize Mr. Heck of 
Washington for 5 minutes.
    Mr. Heck. Thank you, Mr. Chairman. I would like to begin by 
correcting the record of my own remarks that I delivered at the 
top of this discussion in which I asserted that it was self-
evident what we were really doing here today was relitigating 
passage of the JCPOA notwithstanding the fact that this 
proposed transaction is fully legal, fully compliant and 
scandal-free.
    But it is also pretty clear to me by the remarks made by 
several people that it is a red herring to relitigate 
reauthorization of the Export-Import Bank despite the fact that 
both the Export-Import Bank and Boeing have asserted clearly, 
explicitly and definitively that the EX-IM will not be 
involved. Let us get that on the record.
    One of my premises is that passage of this package of 
bills, which would effectively block this transaction, would 
have no effect insofar as Airbus would just fill the void. So 
we wouldn't have a real world effect and that that would cost 
America a lot of jobs.
    The U.S. Department of Commerce estimates that for every 
billion in exports, 6,000 jobs are created. So we are talking 
about 100,000 jobs.
    Some of my friends who are supportive of this package of 
bills respond, well, no, Denny. That is not true because the 
Office of Foreign Asset Control would not authorize the Airbus 
sale because more than 10 percent of the content of them would 
come from G.E. engines.
    However, Mr. Goldman, I think I prefer to direct this to 
you. Sir, I recognize that you are a legal expert on trade 
sanctions, but doesn't it seem plausible if not likely that 
given that both Rolls Royce and CFM, a combined G.E. and 
French-based company make engines that would be suitable for 
this Airbus frame would just fill this void, especially given 
the fact that the magnitude of this sale would make it kind of 
a smart financial and economic move? And that therefore Airbus 
would find a way to rejigger production to in fact fill the 
void?
    Mr. Goldman. Congressman, I can't speak to the requirements 
of Airbus planes. I understand though that they do presently 
contain greater than 10 percent U.S. parts, therefore they 
require a license from OFAC. And it is my understanding that 
that license application is pending.
    Mr. Heck. And that you have no opinion on whether or not if 
they did not approve it that the market would do what the 
market often does, which is just adapt by having either Rolls 
Royce or the CFM?
    All right. Let me go to another point.
    Mr. Lorber. Congressman, can I--
    Mr. Heck. No, because I have other questions.
    Mr. Goldman, I read your testimony essentially to be the 
world is safer as a consequence of Iran not acquiring nuclear 
weapons under the JCPOA and that generally speaking therefore 
we are better off with the JCPOA to monitor this so that the 
world is safer, not more dangerous. Is that fair?
    Mr. Goldman. That is my belief, Congressman. And I would 
note that the U.S. Government retains all of the tools at its 
disposal including sanctions to address all of the other 
malicious behavior on the part of the Iranian government that 
we abhor, its support for terrorism, its cyberattacks, its 
human rights abuses.
    And that several times this year the Administration has 
imposed sanctions on Iranian entities for ballistic missile 
procurement and other misdeeds.
    Mr. Heck. Okay. So let us take this one step further. If 
the transaction, fully legal, fully compliant, scandal-free 
goes through, given a sales or a service and part contract that 
would be a part of that sale, not speaking to Dr. Foster's 
inquiry about leverage.
    But doesn't it seem more plausible to you that American 
employees of an American company or contractors of an American 
company providing either parts replacement or servicing on the 
part of the purchase by Iran would give us a better opportunity 
to discover whether or not there had been some adaptation of 
that airplane for a sanctionable purpose?
    As opposed to if there are no eyes on these aircraft over 
time?
    Mr. Goldman. That would be my assumption, as would my 
assumption be that the monitoring and reporting conditions that 
could be imposed in a license or in Boeing's contract with 
Iran--
    Mr. Heck. Okay. So that is a clear answer to my question. 
So let me just summarize. Passage of these bills which would 
effectively block this sale will cost America up to 100,000 
jobs and render both the world and the immediate geographic 
region of Iran, where they do bad things, fully acknowledge, 
less safe? Fewer jobs, less safe.
    With that I yield back the balance.
    Chairman Huizenga. The gentleman's time has expired.
    The Chair now recognizes and welcomes Mr. Royce from 
California, chairman of the House Foreign Affairs Committee.
    Mr. Royce. Thank you, Mr. Chairman, and I thank the panel 
here. Let me begin with this question because I am going to the 
June 2011 Treasury designation of Iran Air that it was used by 
the Iranian Revolutionary Guard Corps and Iran's Ministry of 
Defense to transport military-related equipment.
    Iran Air has shipped military-related equipment on behalf 
of the IRGC, says the report, ``since 2006. And in 2008 Iran 
Air shipped aircraft-related raw materials to a Ministry of 
Defense-associated company, including titanium sheets, which 
have dual use military applications and can be used in support 
of advanced weapons programs.''
    It further stated that ``rockets or missiles have been 
transported via Iran Air passenger aircraft.'' So I would ask 
Mr. Dubowitz, from what you know has Iran Air continued in its 
process of engagement here in prohibited activities related to 
Iran's support for terrorism to include the transport of 
conventional weapons and ballistic missiles within the last 2 
years? Do we have the intel on that or information about it?
    Mr. Dubowitz. Chairman Royce, in fact just last month three 
Iran Air flights went from the IRGC's resupply base in Iran to 
Damascus. So that illicit activity continues.
    Mr. Royce. So in terms of the question, has Iran provided 
weapons to the Syrian government using Iran Air? I take it the 
answer is probably--
    Mr. Dubowitz. It appears to be so unless they are ferrying 
civilians on sightseeing tours from a resupply base from the 
IRGC. And probably we need to look into that.
    Mr. Royce. So has Iran Air engaged in activities within the 
last 2 years in support of the Iranian Revolutionary Guard 
Corps?
    Mr. Dubowitz. Yes.
    Mr. Royce. Okay. Now my second question, last question has 
to do with the ownership status because despite these clearly 
terrorism-related designations, the Administration removed 
sanctions on Iran as part of the nuclear deal as we all know.
    And in addition, Iran Air has not been designated as being 
owned or controlled by the government of Iran despite the fact 
that we have seen little evidence that Iran Air has either been 
privatized or changed its ownership structure.
    So Mr. Lorber or Mr. Dubowitz, I would ask what is Iran 
Air's ownership structure? Is it still owned or controlled by 
the government of Iran? And are any members of the--and I guess 
this would be of great interest to me, of the Iranian 
Revolutionary Guard Corps specifically designated nationals, 
shadow SDNs, or other political exposed persons in any of the 
senior management positions?
    Mr. Dubowitz. So Chairman Royce, Iran Air is still used by 
the Revolutionary Guards. Iran was designated in 2011 because 
it was being used by the Revolutionary Guards.
    There is every evidence it continues to be used by the 
Revolutionary Guards. And there was no reason it was delisted 
since that was not part of a nuclear agreement. And there is no 
reason why it should remain unlisted.
    And I just would note one other thing very quickly. There 
are four other airlines being used by the Revolutionary Guards 
that remain sanctioned. And there are no--as we have no ability 
to stop Iran Air from transferring leasing or reselling those 
aircraft to four other Revolutionary Guard aircraft.
    Mr. Royce. Mr. Lorber?
    Mr. Lorber. Thank you, Chairman Royce. I would also add to 
that that there is a provision of secondary sanctions 
regulations which are still in force that prohibit foreign 
companies from doing business not just with Iran Air but also 
with agents and affiliates of the IRGC.
    So if Iran Air is transporting goods on behalf of the IRGC 
it is an agent and an affiliate and therefore entities doing 
business with it are also subject to U.S. secondary sanctions.
    Mr. Royce. And Mr. Dubowitz, when was that last flight or 
the last three flights that you referenced?
    Mr. Dubowitz. It was--
    Mr. Royce. --to Damascus?
    Mr. Dubowitz. --June the 9th.
    Mr. Royce. June the 9th.
    Mr. Dubowitz. One month ago.
    Mr. Royce. Okay. My time is expiring. I--
    Chairman Huizenga. But will the gentleman yield?
    Mr. Royce. I will yield.
    Chairman Huizenga. Thank you. I appreciate that.
    Mr. Lorber, I just wanted to give you a quick opportunity. 
Mr. Heck had a line of questioning that you wanted to jump in 
on and I thought you could take this last 30 seconds?
    Mr. Lorber. Thank you, Chairman. It was to your point, 
Representative Heck, as to whether or not the market would 
prevail and whether they could, for example, simply swap out 
engines from European manufacturers.
    It would depend on the type of aircraft, but my 
understanding is that aircraft engines are generally 
manufactured specifically for a particular aircraft. And so 
there might not be, for example, a different manufacturer to be 
able to swap in an aircraft very easily. Thank you.
    Chairman Huizenga. All right. The gentleman's time has 
expired.
    Mr. Royce. I think--Mr. Dubowitz, were you seeking time to 
reply on that as well?
    Mr. Dubowitz. Yes. I just wanted to add as well that--and 
it gets to a previous question before. My big concern is that 
we may face in the coming years a $70 billion Iran bailout 
where the U.S. taxpayer is going to have to stand behind all of 
the unpaid debts from Iran Air and other Iranian airlines.
    So when you think about jobs and exposure of the U.S. 
economy, I would hate to have U.S. taxpayers have to step up 
for a $70 billion bailout when Iran reneges on its commitments 
or alternatively we have to snapback sanctions because of 
Iranian cheating--
    Mr. Royce. I thank the panel. My time has expired. Thank 
you.
    Chairman Huizenga. The gentleman's time has expired.
    With that, the Chair recognizes the ranking member of the 
full Financial Services Committee, Ms. Waters, for 5 minutes.
    Ms. Waters. Thank you, Mr. Chairman.
    To Mr. Goldman and Mr. Lorber, I would like to raise this 
question to the two of you. Although the Iran deal clearly 
commits the U.S. to license the sale of commercial passenger 
aircraft and related parts and services to Iran, the deal also 
makes clear that any license for the sale of passenger aircraft 
will, ``include appropriate conditions to ensure that licensed 
activities do not involve, and no licensed aircraft goods or 
services are resold or re-transferred to any person on the 
Special Designated National list.''
    So I would welcome the views of any of the witnesses, 
really, with respect to what kind of conditions should be 
included in any potential license to ensure that aircraft sales 
do not involve persons subject to U.S. sanctions.
    Mr. Goldman. Thank you, Congresswoman. I would divide the 
types of leverage that we might have should Boeing continue 
down this path and sell aircraft into two different categories. 
One are business dynamics, and those include the ongoing 
contracts for maintenance services and spare parts, as well as 
the length of time required to actually deliver the planes.
    The second are both licensing and contractual conditions. 
Contractual conditions to address a concern that Mr. Dubowitz 
raised might include things like liquidated damages provisions 
if Iran Air violates the terms of the contracts, prepayment 
requirements, large down payments, escrow arrangements, things 
like this that would prevent financing for this type of deal 
should it go through from being a burden on any financial 
institution sufficiently large to constitute a systemic 
concern.
    From the licensing perspective, you could include 
requirements that any company selling aircraft into Iran 
describe due diligence processes, issue ongoing reports, 
potentially even contain route restrictions, certainly full 
clarity and transparency as to the banking and financing 
arrangements involved, things like this.
    Ms. Waters. Let me just deviate for a minute and say that 
my greatest desire is to avoid a nuclear disaster in this 
world. And so I was very pleased when we finally reached an 
agreement with Iran that I believe will allow us to avoid a 
nuclear disaster and would create better relationships and 
allow us to live in this world even if there are some different 
philosophies about religion, about life in general.
    Don't you think it is worth it to honor this agreement and 
let it go forward and make it work for the good of all of us 
rather than try and pick it apart and undo the hard work that 
has been done by all of the nations that were involved in this 
agreement? Don't you think it is better to give it a chance? 
Anybody.
    Mr. Goldman. Congresswoman, while I share the concerns that 
everybody has articulated about Iran's malicious and 
destabilizing activities throughout the world, I do agree with 
you that the limitations imposed on its nuclear program by the 
JCPOA are significant and I would not want to see as long as 
Iran is adhering to the terms of the agreement I would not want 
to see anything jeopardize the ability of the United States to 
uphold its end of the bargain.
    Ms. Waters. Anyone else?
    Mr. Dubowitz. Congresswoman--yes. If I could answer that? I 
agree with you that we should uphold the agreement. The 
agreement allows us to put in provisions in the licensing 
structure that I think are sensible.
    For example, how about a provision that says none of Iran's 
airlines are designated by the U.S. Government for malign 
activities, and only after the U.S. Government can certify that 
has taken place should these sales be allowed to proceed.
    I would also add--and I am not sure if you were here when 
we talked about this, but today Chancellor Merkel rose in the 
Bundestag and made it very clear that according to German 
intelligence Iran is violating the JCPOA by procuring missile 
and nuclear technology from Germany in contravention of the 
procurement channel that they are supposed to be using and that 
they agreed to under the terms of the JCPOA.
    So we had the ability in the agreement to put in sensible 
restrictions on the licensing. At the same time, Iran is today 
flagrantly violating their requirement.
    Ms. Waters. Have we done our own verification?
    Mr. Dubowitz. Of what, Congresswoman.
    Ms. Waters. Of what you just described, about Ms. Merkel--
    Mr. Dubowitz. I don't know if the CIA has. This was based 
on a German intelligence report that Chancellor Merkel referred 
to.
    Ms. Waters. This is I believe a six-nation agreement. And 
where we are supposed to be cooperating and if one nation has 
some complaints I don't know what the agreement says, but it 
would make good sense to me if we would come together and there 
would be verification before we attempted to do anything to 
modify or undermine the agreement. Does that make good sense?
    Mr. Dubowitz. In fact, it makes good sense. So I would call 
the German ambassador and I would ask him about Chancellor 
Merkel's speech. I would ask him about German intelligence 
findings that the Iranians are contravening the JCPOA.
    And I would also have Congress use its statutory authority 
to provide requirements that are allowed by the JCPOA to ensure 
that we are not transferring Boeing aircraft to the 
Revolutionary Guards to be used to kill Syrian women and 
children. I think that is our obligation.
    Chairman Huizenga. --the gentlelady's time has expired.
    Ms. Waters. I think it is how and when.
    Chairman Huizenga. The gentlelady's time has expired.
    Ms. Waters. Thank you. I yield back.
    Chairman Huizenga. All right. We are minute over, but thank 
you for yielding back.
    With that, the Chair recognizes Mr. Pittenger of North 
Carolina for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman, for this important 
hearing. I would like to clarify, Mr. Dubowitz, right over here 
to your right, good morning. Angela Merkel and Germany, they 
were a central player in the JCPOA agreement. Is that correct?
    Mr. Dubowitz. Yes, sir.
    Mr. Pittenger. In fact, she was a strong advocate of this 
agreement. Was that not correct?
    Mr. Dubowitz. That is correct.
    Mr. Pittenger. So in that spirit of her advocacy, her 
judgment was counted on and followed and applauded by this 
Administration. Is that not correct?
    Mr. Dubowitz. That is correct.
    Mr. Pittenger. To that end, now we learn that she finds 
that Iran is breaching this agreement by their own 
intelligence. Yes, we do need to follow up with our own 
intelligence, but it seems to me that the better part of wisdom 
is to appreciate the leadership that she gave at that time at 
the formation of this agreement and the leadership that she is 
showing today. Would that make sense to you?
    Mr. Dubowitz. Congressman, it makes sense, and I think what 
it reveals is something more profound. As we set up this very 
sophisticated procurement channel that would provide all the 
checks and balances to make sure the Iranians don't engage in 
illicit activity, everybody agreed to it. The Iranians were 
supposed to use the procurement channel to buy things legally.
    What have they done? They have gone around the procurement 
channel, and according to Angela Merkel, they are procuring 
nuclear and missile technology illicitly in Germany. So when we 
all talk about these great sophisticated monitoring schemes 
that we are going to set up for Boeing aircraft, we should keep 
that in mind.
    The Iranians have a long rap sheet of sanctions evasion and 
illicit activity. They don't stick to sophisticated monitoring 
regimes. They in fact violate them egregiously.
    Mr. Pittenger. So the same person who was a strong advocate 
for this agreement now is the one who is stating we have a 
major problem.
    Mr. Dubowitz. She is saying according to German 
intelligence the Iranians are illicitly procuring missile and 
nuclear technology in her country.
    Mr. Pittenger. Thank you.
    With Iran receiving these 200 aircraft, up to 200, what you 
do you believe will be the effect in terms of regional 
instability of the impact, and not only in Syria, but in Iraq, 
Libya, Yemen, Sudan, all--the entire region where there is 
enormous instability? And you find a more provocative Iran? 
Could you kind of outline to us what your concerns may be?
    Mr. Dubowitz. So my concern is that Iran is going to get 
upwards of about 500 aircraft.
    Mr. Pittenger. Hmm.
    Mr. Dubowitz. Iran Air needs 36. So that leaves the 
remaining 464 aircraft, if my math is right, for other airlines 
who are sanctioned by the U.S. Government to use them.
    Now, some percentage will be used for civilian flights, but 
if past is prologue they are going to use some percentage of 
those for military transport of Revolutionary Guard fighters, 
Hezbollah militants, missile technology and weapons to continue 
to destabilize the Middle East and contribute to what we have 
already seen, which is the slaughter of Syrians and the 
instability in Iraq, the arming of the Houthis in Yemen and an 
environment that suits the JCPOA. It has not gotten better but 
it actually has gotten worse.
    Mr. Pittenger. Mr. Lorber, would you like to comment on 
this?
    Mr. Lorber. Thank you, Representative. Yes, I think that 
Mr. Dubowitz is exactly right.
    I think that the stated need for the number of aircraft 
seems a bit exaggerated for civilian purposes and that at the 
very least what you would continue to see is with the delivery 
of aircraft if they are used for illicit activities the 
sustaining of Iran's position in Lebanon, the sustaining of 
Iran's position in Syria in a way that we have seen over the 
past few years, longer than the past few years but in 
particular in Syria in the past few years, has helped prop up 
Syrian President Bashar Assad and contributed significantly to 
frankly the large scale death of Syrian civilians.
    Mr. Pittenger. Mr. Goldman, if Chancellor Merkel's 
assessment is correct and is validated, do you believe that 
that warrants us no longer being obligated to this agreement?
    Mr. Goldman. Congressman, I have not unfortunately had a 
chance to read her speech.
    Mr. Pittenger. If she has, if what she has stated is 
correct what would your--
    Mr. Goldman. If Iran violates its commitments under the 
JCPOA we should take appropriate action, absolutely.
    Mr. Pittenger. Yes, sir. Do you also concur with the role 
that Iran can plan in terms of instability in the region?
    Mr. Goldman. Iran is certainly a destructive influence 
throughout the region.
    Mr. Pittenger. Thank you.
    I yield back.
    Chairman Huizenga. The gentleman yields back.
    The Chair now recognizes Mr. Sherman of California for 5 
minutes.
    Mr. Sherman. I want to thank the chairman for allowing me 
to participate although I am not a member of this subcommittee. 
Iran Air continues to support the Iran Revolutionary Guard 
force, its Quds forces and Assad and Hezbollah and other 
terrorist groups.
    We should at a minimum not license the sale of the aircraft 
knowing that they are going to go to an airline that is likely 
to use them to support terrorism.
    The United States designated Air Iran under Executive Order 
13382 in June 2011, that is President Obama's executive order, 
for providing material support to the Iran Revolutionary Guard 
Corps. There is no reason to believe that Iran Air is going to 
change its conduct.
    But we have to visualize how much blood is on the hands of 
Iran Air. Think of that boy on the beach in Turkey fleeing the 
deaths in Syria.
    Hundreds of thousands of people killed, millions of people 
internally displaced, millions of people made so desperate that 
they are willing to risk their lives to flee from this civil 
war, all because Assad gets aid ferried to him on Air Iran. It 
shouldn't be on newly provided American planes.
    And we should remember that in 1990 Air Iran was there as 
the transport arm for a terrorist case, a terrorist 
assassination of an opposition leader in Switzerland.
    There are three bills before us. One is the easiest and 
that is to prohibit EX-IM Bank financing. I have been in this 
room. I have supported EX-IM Bank, but not if it finances the 
air force of the Iran Revolutionary Guard Corps.
    And that is why before I voted I obtained a letter from the 
chairman of the EX-IM Bank saying that they do not anticipate 
any scenarios in which the bank would seek the necessary waiver 
for a transaction involving a state sponsor of terrorism. And 
there are three such state sponsors; one is Iran.
    Without objection, I would like to put this letter into the 
record.
    Chairman Huizenga. Without objection, it is so ordered.
    Mr. Sherman. I think that legislation which locks this 
decision in is beneficial and it saves time over at the EX-IM 
Bank. They won't even have to think about whether to seek such 
a waiver that they have already said that they would not seek.
    The second issue is whether we should provide financing. 
Nothing in the JCPOA says we are supposed to finance Iran or 
any of its entities. If American banks make multi-billion 
dollar loans to Iran, two things happen.
    First, that is bad prudential management by our banks, and 
second, those banks then have to become advocates here in 
Congress for the U.S.-Iranian relationship. We don't need that. 
We didn't promise that.
    The third issue is whether we should even allow the sale of 
these planes. And I am focused on prohibiting Airbus and 
Boeing. There has been some difference here as to whether a 
Airbus would require a license, but there is one way to cut the 
Gordian Knot here. I believe that they would because of the 
U.S. technology.
    But we could ask if there is any doubt on this we could 
have companion legislation. No American airline can buy a plane 
from any airline manufacturer that sells to Iran Air. That 
would eliminate any issue and make sure that this is put on an 
even playing field.
    Finally, there is the issue of whether we have this 
obligation under the JCPOA. The JCPOA 5.1.1 makes it clear that 
we would transfer planes exclusively for civil aviation use.
    Now, if Iran wants to provide $5 billion or $10 billion in 
gold to be held as a security deposit by the United States, 
provide U.N. monitors 24/7 on every plane, and contract that if 
one of these planes is used for anything that helps the Syrian 
regime that all that gold becomes the property of the American 
taxpayer, then maybe we could comply with 5.1.1.
    Iran has offered none of that. We are being asked to 
transfer planes to a company or an entity, Iran Air, that has 
served as an air force for terrorism. And we are being told, 
oh, but just trust them or just trust that we will be able to 
do something if they violate.
    And when Iran comes forward with a plan to guarantee that 
these planes are not used for terrorism or to support Assad, 
then we could consider changing any statute that we consider 
now. But I don't see any such plan being proposed by the 
Islamic Republic.
    I yield back.
    Chairman Huizenga. The gentleman's time has expired.
    The Chair recognizes Mr. Stutzman of Indiana for 5 minutes.
    Mr. Stutzman. Thank you, Mr. Chairman and I thank the 
panelists for being here today and for helping us gain some 
more insight on this particular transaction, which I frankly 
find concerning. And I would like to talk a little bit about 
H.R. 5608, that no EX-IM financing for Iran that Congressman 
Peter Roskam from Illinois has sponsored.
    First of all I would just ask all of the witnesses if you 
would agree that the Export-Import Bank should not subsidize 
any aircraft exports to Iran?
    Mr. Dubowitz. Should not.
    Mr. Lorber. Should not.
    Mr. Stutzman. Should not?
    Mr. Dubowitz. I agree.
    Mr. Goldman. Should not.
    Mr. Stutzman. So, to follow up on that position, if the 
Administration claims that U.S. banks should finance aircraft 
because the legal and reputational and regulatory risks are 
manageable, then what is the Administration's argument against 
involving the Export-Import Bank, which in 2014 devoted 40 
percent of its authorizations to Boeing?
    Mr. Goldman. Congressman, EX-IM Bank is already prohibited 
by statute from financing deals involving Iran because Iran 
remains designated as a state sponsor of terrorism.
    Mr. Stutzman. So, would you support 5608 then and codify 
that into law?
    Mr. Lorber. So I think that I would support and codify in 
5608 in particular because the current statutory basis for EX-
IM Bank being unable to deal with a state sponsor of terrorism 
permits a presidential waiver.
    And obviously H.R. 5608 does not allow for that waiver so 
it codifies and makes sure that the President cannot in certain 
circumstances provide for EX-IM financing for this deal.
    Mr. Stutzman. Mr. Goldman, would you support 5608?
    Mr. Goldman. I do not support EX-IM Bank financing a deal 
like this.
    Mr. Stutzman. Okay. Mr. Dubowitz, any comments?
    Mr. Dubowitz. I support the bill and I would also note on 
the waiver issue that the President has used the waiver through 
the JCPOA to waive sanctions that were not nuclear sanctions. 
They were sanctions that were imposed for terrorism, money 
laundering, missile development, et cetera.
    And so it is of great concern to me that the President has 
already used his waiver to waive sanctions that were not 
nuclear sanctions and that contravene his commitment to you and 
to Congress and the American people that he would only waive 
nuclear sanctions.
    Mr. Stutzman. Well, yes. I think if we don't want 
taxpayers--this is what I think is really important. Can we 
guarantee that to the American taxpayer, that there is no 
backdoor deal that we have seen in previous years EX-IM has 
financed Boeing sales to large leasing companies abroad 
including China and Russia?
    The end user airline for these planes were not identified. 
Is there a risk that Iranian carriers will lease planes from 
such companies including carriers that remain sanctioned? Is 
there some way that Export-Import financing to another entity 
would find its way into Iran deals?
    Mr. Lorber?
    Mr. Lorber. I absolutely do think that that risk exists. I 
know there have been considerations of finding third-party 
leasing companies. I am--and the concerns that EX-IM Bank could 
finance those as a way to facilitate the sale.
    So I do think in addition that there is no guarantee that 
if EX-IM decides or if EX-IM finances this deal through a 
presidential waiver that the aircraft are for sure certainly 
not going to end up being used by the IRGC or its agents or 
affiliates to help support Iran's terrorism.
    Mr. Dubowitz. And Congressman, I would add to that, Boeing 
is already punting the responsibility to the U.S. Government 
where they said a few weeks ago that the U.S. Government has 
much greater intelligence capabilities than they have with 
respect to due diligence.
    So they are already starting to maneuver themselves into a 
position where they can claim in the future, look, we don't 
have the intelligence capabilities to do that kind of due 
diligence. That is up to the U.S. Government to do.
    So you could imagine a scenario of he said, she said when 
U.S. Government and Boeing get into a dispute in the future 
over who had responsibility to prevent the transfer of that 
aircraft to designated entities.
    Mr. Stutzman. So do you believe then that if 5608 were to 
become law that that would prevent any of this potentially 
happening or not?
    Mr. Dubowitz. I think with respect to this legislation at 
least it prevents the U.S. taxpayers from being on the hook for 
a $70 billion bailout when that actually happens. With respect 
to some of the other pieces of legislation here, again, the 
certification requirement on a rehabilitation period I think 
makes sense.
    Again, as Congressman Sherman said, Iran continues its 
illicit conduct. Why are we betting the farm that on the day 
after that deal all of a sudden Iran and the regime are going 
to turn to the side of good--
    Mr. Stutzman. Right.
    Mr. Dubowitz. --and stop conducting these illicit 
activities? At least give them a 5-year cooling period like we 
do in the criminal justice system where there is a 
rehabilitation period before you are ``released'' into the 
general population?
    Mr. Stutzman. Thank you.
    I yield back, Mr. Chairman.
    Chairman Huizenga. The gentleman yields back.
    Seeing we are in the first round of questioning here, we 
are contemplating a second round if the witnesses are able to 
stay. And seeing no other Members on the Democrat side, we will 
go back to the Republican side and recognize Mr. Guinta of New 
Hampshire for 5 minutes.
    Mr. Guinta. Thank you, Mr. Chairman, and thank you to the 
witnesses for being here today.
    Are you all familiar with the letter the Treasury sent on 
June 7, 2016 to Senator Rubio?
    Mr. Goldman. I am familiar with it but don't have a copy of 
it in front of me.
    Mr. Guinta. Okay.
    Mr. Lorber. Yes, same here.
    Mr. Guinta. Maybe before the hearing concludes, we can 
provide the witnesses with a copy. And I would like to make 
sure it is entered into the record without objection.
    Chairman Huizenga. Without objection, it is so ordered.
    Mr. Guinta. Thank you, Mr. Chairman.
    Here is my concern. It seems like there is general 
agreement that there should not be taxpayer-funded dollars 
going to support or assist Iran in any way. Is that clear? Is 
that in agreement, Mr. Goldman? Do you agree with that?
    Mr. Goldman. Yes. I agree with that.
    Mr. Guinta. I am particularly interested in your response 
because I have read your testimony and in your testimony you 
refer to the JCPOA as a ``significant diplomatic 
accomplishment.'' You also then state, ``Since 1984 Iran has 
been and remains designated as a state sponsor of terrorism,'' 
which you have stated verbally.
    But then you also note a couple paragraphs later that, 
``Iran retains the ability to enrich uranium subject to 
international supervision.'' So I guess my question would be 
this.
    First to Mr. Dubowitz, in your opinion has Iran lived up to 
the agreement?
    Mr. Dubowitz. So again, Iran is in violation of the 
agreement in two ways. One, it is procuring illicit nuclear 
missile technology outside of the established procurement 
channel established by the JCPOA.
    Two, it is in violation of the implementation U.N. Security 
Council resolution that actually implements the deal by 
continuing to test missiles capable of carrying a nuclear 
warhead. So no, in my assessment Iran is in violation both of 
the JCPOA and the underlying U.N. Security Council resolution.
    Mr. Goldman. Congressman, I believe that was in my 
testimony that you were reading.
    Mr. Guinta. Yes.
    Mr. Goldman. So the IAEA has certified that Iran is in 
compliance with all of its obligations under the JCPOA. It has 
done so on three occasions. First on implementation day and 
then subsequently in two quarterly reports submitted by the 
director general to the board of governors.
    Mr. Dubowitz. So I would just add that the IAEA is not 
required to certify about Iran's missile tests so that is 
irrelevant. And the second issue is based on the procurement 
channel issue that has been raised by Chancellor Merkel, we 
will have to see what the IAEA's response will be, but that 
actually is a matter for the Joint Commission of the JCPOA, 
which is supposed to determine whether Iran is in violation of 
the provisions of the JCPOA, specifically in this case the 
procurement channel provision.
    Mr. Guinta. And quite honestly I am not sure that the IAEA 
shares or enjoys the same credibility today that it has in the 
past. And I know that there are members in this House on both 
sides of the aisle that question their capacity to provide an 
honest and true and fair assessment of the agreement. But that 
is a different debate.
    I want to go back to this letter of June 6. In the second 
paragraph from Treasury to Senator Rubio. It says, ``To be 
clear, until Iran has addressed other concerns we have with its 
behavior outside of the nuclear file, the U.S. financial 
system, including the branches of U.S. financial institutions 
abroad, will remain off limits to Iran.''
    Based on that, I read the last paragraph of that same 
letter, which says, ``When we speak to the private sector, 
including financial institutions about the sanctions relief 
under the JCPOA, it is not to encourage them to do business 
with Iran, which is a business decision that they need to make 
on their own. Rather, the purpose of such discussions is to 
provide further clarity on what is permitted in the sanctions 
that remain in place.''
    It seems like the letter doesn't synch. The first page and 
second page. On the one hand they are saying a business needs 
to make a decision whether they are going to do business with 
Iran, however, on the first page of the letter it says, ``We 
ensure that that will not occur.
    So that is the concern I have with the letter from Treasury 
to a Senator just last month. So I think the frustration and 
concern relative to the need for passage of 5608 is not only 
necessary but it needs to expand to third-party leasing 
companies because there is a possibility and a potential that 
EX-IM could do business with Iran and they might not even know 
it. Was that a fair assessment, Mr. Dubowitz or Mr. Lorber?
    Mr. Dubowitz. So correct. So not only can EX-IM do business 
with Iran if the President uses the national security waiver, 
but if you look at the last sentence of the second paragraph of 
that letter where it says, ``without explicit authorization''--
    Mr. Guinta. Correct.
    Mr. Dubowitz. --permits the U.S. Treasury Department to 
authorize--
    Mr. Guinta. Exactly. That is what I wanted.
    Mr. Dubowitz. --the U.S. dollar through the U.S. financial 
system. And by the way, the letter is also not quite precise in 
that we do actually have jurisdiction over dollars that 
circulate around the world because those dollars actually 
originate in our financial system and return to our financial 
system.
    And so banks are not going to put dollars in or take 
dollars out unless they have gotten authorization from OFAC 
that they won't be hit with penalties in doing so.
    So the letter provides, as you would imagine, a series of 
outs for the Administration to do exactly what we are concerned 
about, which is to provide dollarized transactions for the 
Boeing deal and other deals as well as providing EX-IM 
financing to put U.S. taxpayers on the hook.
    Mr. Guinta. Thank you. I yield back.
    Chairman Huizenga. The gentleman's time has expired.
    And with the indulgence of the witnesses we would like to 
continue with a second round. We have a bit less of a stacked 
list of questions, but if there is no objection I would like to 
continue and recognize myself for 5 minutes.
    Again, and I don't mean to harp on this, but I would love 
to have had Boeing here to start talking about what they are 
going to do if the terms of the JCPOA are not being upheld has 
been asserted by Angela Merkel and what does that mean? I would 
love to have the Administration here talking about this to find 
out what this would mean for this particular deal.
    We have already seen bipartisan support for making sure 
that the indications that EX-IM has given would be codified. I 
think that that is a positive.
    There has been some discussion about the role that the 
United States has in not just stopping or questioning the 
Boeing transaction but also the Airbus transaction and what 
that would mean.
    And as has been pointed out by my colleague from Arizona 
and my colleague from California on the other side of the 
aisle, this could very well be some bad prudential management 
decisions if we see financial institutions move forward.
    And I would like to--I was starting to talk about this, Mr. 
Lorber, with you earlier and I want to touch on this. And I 
also want to go back to talk about how some of this works with 
leasing through other companies.
    But let us talk a little bit about that financial 
responsibility and risk that comes with these and for these 
institutions that may choose to be a part of this.
    Mr. Lorber. Thank you, Mr. Chairman. So I think that the 
risks facing financial institutions for banking is 
particularly--this deal in particular and then doing business 
in Iran more generally, are very significant.
    As I mentioned in my opening statement there are at least 
three risks relating to sanctions, relating to illicit finance, 
risks that underpin the Iranian economy, and then also 
specifically to risks of future sanctions. So snapback, for 
example, or additional sanctions that are a result of Iran's 
continued support of terrorism or its ballistic missile tests.
    In this particular case I think the primary risk that 
foreign financial institutions, so non-U.S. financial 
institutions, face is that they could be doing business with an 
agent or an affiliate of the IRGC and therefore lose their 
access to U.S. markets. I think that is a very significant risk 
that is frankly coloring their decision to engage or not engage 
in any of these types of transactions.
    It is why, for example, you have seen a large number of the 
European banks refuse to bank the Airbus deal. You had Airbus a 
couple of months ago, I think it was in February, publicly 
pleading and telling European banks to get back in the game and 
yet the major ones have not moved in.
    Chairman Huizenga. In fact and under secondary sanctions 
enacted in 2010, the U.S. told foreign banks you can deal with 
Iran or you can deal with the United States, but the choice is 
yours. And it--
    Mr. Goldman. That is not quite--
    Chairman Huizenga. --it seems to me that maybe that also 
ought to apply to EX-IM and if a foreign company wants to be 
eligible to work with EX-IM, I don't believe it should be 
making profits with the Iranians. It would seem to make sense 
for me that would also hold especially on a leasing company's 
fleet. And would that not seem to be a good idea?
    And I know, Mr. Goldman, you have been defending the 
transaction but have stated that you would not support EX-IM 
support of advancing that. I am curious if the three of you 
would care to weigh in about making sure that we can maybe belt 
and suspenders this particular EX-IM provision that we are 
talking about today?
    Mr. Goldman. Sure. Chairman, just to clarify one point, 
whether the transaction proceeds or not is a business decision 
that is for Boeing to make. It is clear to me that issuing 
licenses to Boeing should it wish to proceed with the deal is 
consistent with the JCPOA and consistent with U.S. law.
    I would agree with my colleagues--
    Chairman Huizenga. But you also said if we could show and 
demonstrate that they violated it as Angela Merkel has asserted 
today or we believe has asserted, then you would also support 
that those sanctions being re-imposed, correct?
    Mr. Goldman. If Iran violates the JCPOA we should take 
appropriate action in response absolutely.
    Chairman Huizenga. Okay.
    Mr. Goldman. I am completely also in agreement that any 
entity, if the deal proceeds, any entity involved in that deal 
whether it is a bank or a leasing company or an agent, needs to 
steer clear of the kinds of risks that Mr. Lorber and Mr. 
Dubowitz have identified. And as the Treasury Department in its 
letter noted, there are a couple of different ways in which 
those risks can materialize.
    The U.S. Government has jurisdiction over transactions 
involving U.S. persons or that touch the U.S. financial system. 
As the department notes, it does not have jurisdiction over 
physical dollars held outside the United States not in the 
possession of U.S. persons.
    So somebody walking down the street in Johannesburg with a 
$10 bill in his pocket does not for that reason alone become 
subject to U.S. jurisdiction.
    Chairman Huizenga. I fully understand. I think this 
chairman would like to make sure that everybody watching and 
listening to this understands that we will be watching very 
closely what our financial institutions are going to be doing 
and trying to hold them responsible for those decisions.
    My time has expired. The Chair recognizes the ranking 
member of the subcommittee for 5 minutes.
    Ms. Moore. Thank you, Mr. Chairman, and I am not sure I am 
going to use the entire 5 minutes.
    I just want to reiterate how grateful I am to the witnesses 
for their appearance here today and for withstanding this 
second round of questioning. I do know that I have learned a 
great deal and it has been very provocative in terms of some 
stuff that we might really want to do with regard to tightening 
up on the licensing.
    We have talked an awful lot about Boeing, which is an 
American company. We have talked a little bit more about Airbus 
and about the perhaps dearth of funding that Airbus would 
suffer were they to try to fill that void and fill the order 
for the Iranians.
    But I am wondering, Mr. Goldman and others, if there is 
anything--the P5+1 agreement which includes, of course, China, 
France, Russia, of course us, and the U.K., Germany in the 
E.U., well is there anything that would prohibit China, which 
is being said to be developing some of these wide-body planes, 
could China fulfill the commitment under the JCPOA to supply 
aircraft?
    Mr. Goldman. The provision of the agreement that we have 
been discussing this morning, 5.1.1, speaks specifically to 
obligations of the United States, which are ``to establish a 
licensing regime that could permit the issuance of licenses to 
sell U.S. origin aircraft, parts, equipment, services, et 
cetera.
    I can't off the top of my head think of any specific 
provision of the JCPOA that would prohibit China, Russia or any 
other party from selling and aircraft to Iran--
    Ms. Moore. But--
    Mr. Goldman. --as long as--sorry. Go right ahead.
    Ms. Moore. Right. And I guess that is my point, that this 
was a historic deal struck. Everybody was amazed at how we get 
Russia and China into this kind of international agreement.
    But to the extent that there has been some sort of 
agreement that this was a central piece of it, is there 
anything that would prohibit China from filling that gap if 
somehow we were to legislate here in the United States, prevail 
against providing those? Would there be anything that would 
prohibit China from filling that?
    Mr. Goldman. So the only thing would be the remaining 
secondary sanctions. So for example if China sold a plane to 
the IRGC, the Chinese entity that it sold that plane could be 
subject to U.S. secondary sanctions.
    Ms. Moore. Okay.
    Mr. Lorber, yes.
    Mr. Lorber. There are two other points I would add to that 
as well. Another potential way that China could be prohibited 
from selling aircraft to Iran or the IRGC would be if, for 
example, components, as we were discussing before, of those 
Chinese aircraft were manufactured in the U.S. or contained 
U.S. technology.
    And in sort of the interconnected globalized manufacturing 
world that is fairly likely so you have to actually look at the 
underlying technology and components.
    The one other point I would also make is that just from a 
technical and feasible perspective the likelihood that China 
and Russia in the short term anyway can deploy attractive wide-
bodied aircraft that Iran is going to want to buy probably in 
the next 5 years I think is fairly low. But after that I think 
it is a very valid point.
    Mr. Dubowitz. And Congresswoman, I would just add to this. 
What we are really talking about here from a humanitarian point 
of view is can we get safe, non-corrupt, compliant, transparent 
airlines to fly in and out of Iran to service Iranians? And I 
would just note again that today 44 percent of the flights are 
provided by Gulf and Turkish Airlines.
    In the past few months Air France, British Airways, 
Lufthansa and Alitalia have all resumed service to Iran, both 
international and domestic routes. And there are reportedly 
nearly 30 carriers operating in Iran.
    So a good alternative to this would be encouraged, 
transparent compliance, legal airlines with a good safety 
record to service the Iranian market, but have a period of time 
where we are not actually allowing our companies to provide 
aircraft to the Iranians to set up their own domestic fleet 
when we have outstanding concerns about how that fleet will be 
used in corrupt, non-transparent, non-compliant, illicit ways.
    Ms. Moore. Okay. Well, thank you.
    I would yield back the balance of my time. Thank you, 
gentlemen.
    Chairman Huizenga. The gentlelady yields back.
    With that, the Chair recognizes Mr. Stutzman of Indiana for 
5 minutes.
    Mr. Stutzman. Thank you, Mr. Chairman, and I just want to 
go back again to H.R. 5608. A report last month revealed that 
Iran was able to purchase Boeings even before sanctions were 
lifted thanks to backdoor deals with foreign airlines.
    And I am just reading a part of this report that was 
uncovered, that these backdoor dealings were uncovered by 
International Business Times. Sales data obtained by IBT shows 
that seven Iranian airlines purchased a combined 23 or more 
Boeing and Airbus aircraft before the historic nuclear deal 
between Iran and the U.S. was signed in October.
    So while Iranian citizens were suffering under U.S. and 
European sanctions that affected a range of goods, the 
country's airline industry bypassed U.S. export laws and 
purchased aircraft through international intermediaries.
    And it goes on down to describe how flights disappear from 
tracking systems once they enter Syrian airspace, but radar 
reveals that they have landed in Damascus and are, according to 
David Cohen, the U.S. under secretary for Terrorism and 
Financial Intelligence, ``ferrying Islamic Revolutionary Guard 
Corps along with weapons and funds.''
    So it appears that there is plenty of evidence out there. 
So doesn't this just underline the risk that U.S. aircraft can 
find their way into Iranian hands even if they haven't 
subsidized by EX-IM in an unrelated transaction?
    Mr. Dubowitz. It not only underscores that, Congressman, 
but it also shows because the U.S. Treasury Department, as I 
mentioned, in May 2015 it actually sanctioned some of those 
illicit purchases. And despite those sanctions Iran continued 
to fly those airlines.
    It also underscores that the Iranians have for years used 
false transponders, not only for planes but for the national 
Marine Tanker Company for the Islamic Republic of Iran shipping 
lines in order to actually hide their deceptive behavior. And 
they are continuing to do so as of June the 9th.
    So this is the issue that you have an Iranian industry, the 
airline industry, that has been historically and is currently 
engaged in illicit and deceptive conduct and yet we are being 
asked to support through EX-IM a multi, multi-billion dollar 
deal using the U.S. taxpayer money on the hope and the prayer 
that somehow it is all going to change for the better. And I 
think that is an enormous risk for the U.S. economy.
    Mr. Stutzman. So, Mr. Chairman, I am trying to understand--
we go back to what the Administration has said regarding the 
U.S. banks financing aircraft. So it is okay for accountholders 
at U.S. banks to do the dirty work where obviously we are not 
giving Export-Import Bank legal means to participate in any of 
these transactions when we do know that there is some backdoor 
dealings.
    Mr. Chairman, I guess I just conclude that it seems to me 
that this--I appreciate your hearing of this particular 
transaction but we need to continue to dig even deeper and ask 
more questions.
    So I don't know what the intelligence from the White 
House--or what our intelligence departments and what the White 
House--what does the White House say when they have evidence of 
this that doesn't that cause them some concern to pause or to 
do something about it, I guess is frankly what I am asking.
    Why do we move forward with this deal with Iran and doing 
more business with them when we know they are more than likely 
messing with the equipment and continuing to move around the 
Middle East supporting terrorism?
    Mr. Dubowitz. Congressman, I mentioned earlier in my 
testimony this notion of a nuclear snapback. And I think what 
it has done is it has deterred the White House from actually 
using sanctions at all to push back in any meaningful way 
against Iran's malign behavior because Iran has set up a 
dynamic where they keep threatening to walk away from the deal 
if we take any steps against their malign activity.
    Mr. Stutzman. Yes.
    Mr. Dubowitz. And so the White House has gotten ourselves 
in a position which I fear the next President is going to have 
to try to unwind where we can't even use non-nuclear sanctions 
against terrorism, against missiles, against the illegal 
procurement of nuclear missile technology or planes or any 
kinds of sanctionable activity.
    The White House is actually not using non-nuclear 
sanctions. There have been no human rights sanctions since the 
JCPOA. There have been a handful of procurement sanctions 
relating to missiles that do nothing because the Iranians can 
reconstitute those sanctions.
    There have been no terrorism sanctions. So the White House 
actually I am afraid today for whatever reason, lives in fear 
that the Iranians will walk away from the deal if we do 
anything.
    Mr. Stutzman. Yes.
    Mr. Dubowitz. That is a very troubling dynamic that I think 
the next President is going to have to deal with in ways that I 
hope won't paralyze his or her statecraft.
    Mr. Lorber. I would just add to that.
    Mr. Stutzman. Sure.
    Mr. Lorber. I think we are potentially even beyond a 
position of just refraining from engaging in enforcement 
action. Our designations as a result of Iran's behavior and to 
the point now where we are significantly concerned that, based 
on Iranian officials' comments that they are not seeing the 
economic benefits of the deal and therefore they are 
considering walking away.
    And so you move from sort of what was promised to be an 
aggressive enforcement posture almost to a situation where you 
have the United States actively trying to go out and assure 
European companies, for example, that they can absolutely go 
back into Iran, basically being a cheerleader.
    Mr. Stutzman. I thank the witnesses for your insight and 
the information on this today.
    Chairman Huizenga. The gentleman's time has expired, and 
the Chair duly notes that the gentleman from Indiana I think is 
correct. There are a number of questions that remain and should 
be pursued with the Administration and others.
    The Chair now recognizes Mr. Perlmutter of Colorado for 5 
minutes.
    Mr. Perlmutter. Thanks again, Mr. Chairman, and thanks for 
this hearing. It has been very interesting, gentlemen. 
Appreciate your testimony. I want to correct my calling the 
chancellor the prime minister so let us get that out of the 
way. That has been bothering me for the last half hour. So I am 
sorry about that.
    And Mr. Goldman, I would like to ask you a couple questions 
I didn't get a chance to ask you. So, Mr. Dubowitz and I were 
sort of jousting about breaches and anticipatory repudiation 
and who has violated this and who has violated that.
    Now, under the agreement there is some kind of dispute 
resolution process, is there not?
    Mr. Goldman. Under the JCPOA there--
    Mr. Perlmutter. Yes.
    Mr. Goldman. --is a dispute resolution process.
    Mr. Perlmutter. So I am calling JCPOA--
    Mr. Goldman. Yes.
    Mr. Perlmutter. --the agreement. You guys can use the 
letters. I am going to call it the agreement.
    Mr. Goldman. Great.
    Mr. Perlmutter. Is there?
    Mr. Goldman. Yes.
    Mr. Perlmutter. Okay. And do you know if that provision has 
been in any way exercised or by any of the parties in 
connection with the chancellor's comments? Has Germany done 
anything? Has China? Has the U.S.?
    Mr. Goldman. To my knowledge no, but--and I was not aware 
of the chancellor's speech. According to Mr. Dubowitz it took 
place today, so--
    Mr. Perlmutter. So and I guess that then turns to a couple 
of housekeeping items I would ask of you, Mr. Dubowitz. Do you 
have a copy of her remarks? Do you have a text of her remarks?
    Mr. Dubowitz. Congressman, I have the text. I also have the 
German intelligence report on which her assessment is based.
    Mr. Perlmutter. So you have the 317-page report?
    Mr. Dubowitz. I do.
    Mr. Perlmutter. Okay.
    Mr. Goldman. In German and a--
    Mr. Perlmutter. I would rather have it in English.
    Mr. Dubowitz. I was about to say and a summary of it in 
English.
    Mr. Perlmutter. Okay. Mr. Chairman, if we could have those 
things be part of the record since there has been such 
extensive conversation about them? If you could provide those 
to us--
    Mr. Dubowitz. Sure. It would be my pleasure.
    Mr. Perlmutter. --would you do that?
    Chairman Huizenga. Yes. We will be getting to that as we 
wrap up about written additional questions and so we can 
probably orchestrate that, get a written question and for them 
to request that. I think there are going to be a number of 
other inquiries that the Chair plans to do as well with the 
Germans.
    Mr. Dubowitz. And Congressman, could I just add to this? 
The chancellor, in her speech, is not making a determination 
based on what the JCPOA says. She is not making a determination 
based on the dispute resolution mechanism.
    I am assuming that she is going to then reach out to her 
partners and maybe they will then invoke this joint commission 
that Mr. Goldman talked about. She is merely presenting the 
evidence of the German intelligence services that have been--
    Mr. Perlmutter. Right. And that is why I am asking you for 
a copy of her text, but you and I were sort of talking about 
breaches and who has responsibility--
    Mr. Dubowitz. Right.
    Mr. Perlmutter. --to do what. And at this point the dispute 
resolution mechanism has not been invoked.
    Mr. Dubowitz. To the best of our knowledge--it may have 
been done so privately and we don't know, but there has been no 
public reporting on any invocation of it.
    Mr. Perlmutter. Okay. So let us go back, Mr. Goldman, if I 
could to you on the licensing process. So where are we in the 
licensing process to actually conduct a sale of one, two or 20 
planes?
    Mr. Goldman. So my understanding is that Boeing was issued 
a license I believe in March to conduct the negotiations. 
Several weeks ago they announced that there had been a 
Memorandum of Understanding, a Memorandum of Agreement reached 
for the Iran Air. In order to actually consummate the sale 
there would need to be another license issued and I don't know 
where that stands with OFAC.
    Mr. Perlmutter. And each of us I think has some level of 
skepticism, some level of suspicion. These have been two very 
different countries, the United States and Iran, for a lot of 
years where there hasn't been any dialogue or any conversation 
other than saber rattling.
    What kinds of things would you expect to see in the license 
to make sure that planes are not available for any kind of 
illicit or illegal activities under the agreements or under any 
of our other sanction legislation or regulations?
    Mr. Goldman. So I might expect to see requests about the 
type of due diligence Boeing did, a description of what the 
financing arrangements are, perhaps some reporting 
requirements, things of that nature.
    And then I think there is a second category of conditions 
which would be the conditions that exist in any contract 
between Boeing and whatever its Iranian counterparty would be.
    I would think that there would be terms in that contract to 
ameliorate some of the financial risks that Mr. Dubowitz and 
other of your colleagues have identified this morning.
    Those would involve things like liquidated damages 
provisions, perhaps requirements for upfront payments or escrow 
payments of things of the like to ensure that in the event Iran 
violates its undertakings under the JCPOA or the contracts, 
that they stand not to reap a windfall.
    Mr. Perlmutter. Okay. And I thank you.
    I would yield back, but with this closing remark, Mr. 
Chairman. There has been a lot of discussion, a lot of kind of 
interesting conversation, a lot of it at this point conjecture 
and I think we have to do some additional research into these 
kinds of things. And I thank you very much.
    Chairman Huizenga. I appreciate that, and the Chair duly 
notes that it sounds like we have tentative support for another 
hearing about this.
    Mr. Perlmutter. Sure.
    lLaughter]
    Chairman Huizenga. Which I think would actually be an 
excellent question. We need to hear from Treasury. Has Germany 
reached out? We need to hear from OFAC. What are their 
timeframes? What is their process that they would go through 
both for Boeing and for Airbus in this situation.
    So it seems to me that there are a number of unanswered 
questions, but gentlemen, thank you. You have spent a 
tremendous amount of time and given us a lot of education about 
a number of questions that have been put forward today. And I 
would like to thank our witnesses for their testimony.
    Mr. Dubowitz, you can anticipate a question from the Chair 
for a copy of the report both in German and the English 
summary. And so it is the report and I am sorry, Mr. 
Perlmutter, what else had you--
    Mr. Perlmutter. And the text of the speech.
    Chairman Huizenga. And the text of the speech. Well, I 
think that will be--
    Mr. Dubowitz. Mr. Chairman, if I could just add to that, I 
would also want to send for the record, if it is okay, the 
evidence that there are still $50 billion in outstanding 
judgments against Iran on behalf of victims of terrorism that 
the Iranians are refusing to pay.
    They are challenging the $1.7 billion decision of the U.S. 
Supreme Court to hand over monies to American victims of the 
Khobar Towers, the Marine barracks bombing, so it is very 
interesting.
    We are talking about $50 billion, $60 billion that the 
Iranians are going to get and yet they refuse to not only pay 
victims of Iranian terrorism, they are taking us to the 
international court of justice challenging that. I would like 
to just add that to the record.
    Chairman Huizenga. The Chair duly notes that and the Chair 
will be asking you that question formally for you to respond 
to.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    And with that, again I would like to say thank you to our 
witnesses for your time here today and the attention of our 
Members on this very important issue.
    With that, we are adjourned.
    [Whereupon, at 12:15 p.m., the hearing was adjourned.]







                            A P P E N D I X



                              July 7, 2016




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