United States Department of State

Washington, D.C. 20520

AUG 5 2015

Dear Senator Tester:

Thank you for your July 29 letter to President Obama regarding the nucleardeal between the P5+ 1 and Iran. We appreciate the time you and your staff havetaken to read the details of the Joint Comprehensive Plan of Action (JCPOA), andwe appreciate the specific questions you have posed.

The JCPOA cuts off all of Iran's pathways to the fissile material for anuclear weapon and subjects Iran to the most rigorous access regime evernegotiated to monitor a nuclear program. If Iran attempts to break out, we willdetect it. This deal ensures continuous monitoring of Iran's declared nuclearfacilities, including Natanz, Fordow, and Arak. International inspectors will haveaccess to Iran's entire nuclear supply chain - its uranium mines and mills; itsconversion facility; its centrifuge manufacturing and storage facilities; and its otherdeclared nuclear sites. If there are concerns of suspicious activities at anundeclared location, the JCPOA requires Iran to provide the IAEA the necessaryaccess, as determined by 5 of the 8 members of the Joint Commission, within 24days. If Iran does not provide the IAEA with the access necessary to resolve itsconcerns, the United States can snap back sanctions, both domestically and at theUnited Nations. .

Regarding your first question, on Iran's research and development (R&D)activities: Under the JCPOA, Iran is only allowed to conduct a very limited set ofR&D activities. In addition, Iran is not allowed to engage in R&D activities thatcould contribute to a nuclear explosive device, and in fact, it has committed not toengage in a series of specific activities that would be needed to develop a nuclearweapon. The verification and transparency measures in place under the JCPOA

The Honorable,Jon Tester,

United States Senate.

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would allow us to know if such activities are taking place. If confirmed, suchactivities would violate the lCPOA and we could take the appropriate steps inresponse.

Furthermore, Iran already possesses a number of advanced centrifuges - theIR-2M, IR-4, IR-5, IR-6, and IR-8 - all in various states ofR&D. Iran will not beallowed to conduct R&D on any centrifuges more advanced than these for morethan a decade, and will only be allowed to do very small-scale R&D on thesecentrifuges, under continuous IAEA monitoring. These constraints willsignificantly limit the progress and pace of Iran's R&D program and providestrong and intrusive monitoring, while ensuring these R&D activities do not shrinkIran's breakout timeline for at least 10 years.

Additionally, after the initial 10 year period, Iran must abide by itsenrichment and R&D plan submitted to the IAEA under the Additional Protocol,which will ensure a measured, incremental growth in its enrichment capacityconsonant with a peaceful nuclear program. Iran's commitments under theAdditional Protocol, and the enhanced monitoring measures associated with it, lastindefinitely - there is no time limit. Taken together, this layered approachprovides the monitoring and enforcement mechanisms necessary to prevent Iranfrom conducting R&D related to nuclear weapons.

Regarding your second question on possible movement or hiding of nuclearrelated materials: In addition to the measures the IAEA currently has to monitorenrichment operations at the Natanz facility, Iran has committed to allow the IAEAto employ modem technologies such as online enrichment monitoring that willdetect in real-time if Iran attempts to use its 5,060 IR-l centrifuges to enrich tohigher than 3.67%. The IAEA will also be allowed to conduct remote monitoringof the facility through the use of electronic seals which send a signal in real time tothe lAEA if they are tampered with. There will also be monitoring of the entirenuclear supply chain, including increased IAEA access to uranium mines, andcontinuous monitoring of uranium mills and centrifuge production, assembly, andstorage facilities. It would be exceedingly difficult for Iran to divert materials orcomponents from its nuclear infrastructure to establish new clandestine siteswithout the IAEA promptly detecting such an effort.

Regarding your third question, about the national and multilateral tools tocombat transfers of arms and ballistic missile technologies, we will have manytools available to us after the expiration of the five and eight year restrictions put inplace by UN Security Council Resolution (UNSCR) 2231. On the national front,

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in conjunction with existing UNSCRs and other multilateral authorities, we willalso utilize bilateral cooperation with countries in the region to block Iranianaccess to their territory for activities related to the illicit shipping of arms ormissiles. For example, we are already taking steps with our Gulf partners to rampup regional interdiction activities related to Iranian missile and arms activity. ThePresident discussed this with Gulf leaders at Camp David in May and SecretaryKerry continued this conversation with the GCC Foreign Ministers in Doha thispast week.

Additionally, Executive Orders 12938 and 13382 authorize U.S. sanctionson foreign persons that materially contribute to the proliferation of missiles capableof delivering weapons (including efforts to manufacture, acquire, develop, ortransfer them), by any person or foreign country of proliferation concern, such asIran. These authorities also authorize sanctions on any person or entity thatprovides material support to such activities or sanctioned persons. The Iran, NorthKorea, and Syria Nonproliferation Act (INKSNA) of2006levies U.S. sanctions onentities connected to Iranian ballistic and cruise missile activity. The LethalMilitary Equipment Sanctions (2006) provision in the Foreign Assistance Act, theIran Sanctions Act of 1996, as amended, and the Iran-Iraq Arms NonproliferationAct (1992) all impose U.S. sanctions on individuals and entities involved in thesale or transfer of goods to Iran that may contribute to Iran's ability to acquire ordevelop conventional arms or missiles.

On the multilateral front, we will still be able to rely on a series of otherUNSCRs that levy arms embargoes against key areas of concern. Iranian armstransfers to the Houthis in Yemen, Shia militants in Iraq, Hizballah in Lebanon, orto Libya or North Korea would still violate UNSCRs and for that reason could besusceptible to interdiction. We will work with the 100-plus countries around theworld that have signed the Proliferation Security Initiative (PSI) to help limitIranian missile-related imports or exports. The Missile Technology ControlRegime (MTCR) also plays a critical role in preventing the spread of criticalmissile technology. The MTCR Guidelines maintain a strong presumption ofdenial for the transfer of Category I systems, which include ballistic missiles. Wewill continue to rely on countries' adherence to the MTCR Guidelines fortransports in support of Iran's missile program.

All of these multilateral and national tools remain in place and are in no wayimpacted by the JCPOA or any phase of its implementation. The JCPOA alsoexplicitly prohibits the activities needed to produce a nuclear warhead for amissile. Iran has agreed not to undertake the steps needed to build a nuclear

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explosive device, and by extension, not to have the ability to field a missile with anuclear weapon.

Regarding your fourth question, about how we will work to prevent aconventional arms buildup in the region, we will continue to use all of the toolsoutlined above specific to transfers of arms and missile technology, as well asother national and multilateral tools. The JCPOA does not provide Iran relief fromU.S. sanctions on terrorism or Iran's destabilizing activities in the region. Theexisting sanctions authorities that will remain in place under the JCPOA includeExecutive Order (E.O.) 13224 (counter-terrorism), E.O. 13553, E.O. 13606, E.O.13628 (human rights abuses in Iran); E.O. 13582 (support for Syria's Asadregime); E.O. 13572 (human rights abuses in Syria); E.O. 13438 (fomentinginstability in Iraq); and E.O. 13611 (threatening the stability of Yemen). Iranianindividuals and entities that have been sanctioned under these non-nuclearsanctions authorities will continue to be sanctioned under the JCPOA. U.S.persons will continue to be prohibited from dealing with such persons, and non-U.S. persons that deal with such persons will risk being cut off from the U.S.fmancial system. Furthermore, as I mentioned above, there are several otherUNSCRs that prohibit arms transfers to various unstable areas of the Middle East.We will continue to use those authorities to help prevent the spread of conventionalweapons. Importantly, we will also fully uphold our unshakeable commitment tothe security of the region, and we will continue to protect our core interests andconfront challenges that emerge. That is why we will continue to maintain a strongforce posture to deter aggression; build partner capacity; bolster the security of ourregional friends and allies; and continue to work to create more integrated regionalsecurity architecture.

Finally, regarding your fifth question, on the first part I would refer you toour most recent "Country Reports on Terrorism" for 2014, in which Iran isincluded in Chapter 3, State Sponsors of Terrorism. As we found in our report,Iran continued its terrorist-related activity in 2014, including support forPalestinian terrorist groups in Gaza, Lebanese Hizballah, and various groups inIraq and throughout the Middle East. The specific area where we noted an increasewas with respect to Iran's assistance to Iraqi Shia militias in response to theIslamic State in Iraq and the Levant (ISIL) incursion into Iraq. This specificincrease in assistance to militias battling against ISIL in Iraq is perhaps indicativeof the serious threat that Iran sees in ISIL at its doorstep. We believe that Iran hasused most of the JPOA-related sanctions relief on domestic needs.

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Regarding the second part of your final question, on how Iran may use anyJCPOA sanctions relief it would receive if it meets its nuclear commitments, wehave reserved the necessary sanctions authorities to block Iran's assets if wereceive information that Iran is diverting or utilizing these funds for sanctionableactivities. We estimate Iran has $100 billion in such assets, but it will only be ableto access about $50 billion of that amount freely. Much of the remainder willremain inaccessible to Iran based on economic obligations Iran has incurred withother nations, including $22 billion in assets held by China's central insurancecompany as collateral to finance Chinese investments in Iran.

Iran has many pressing domestic needs for these funds. These reservesconstitute the country's long-term savings, and not a budgetary allowance. As amatter of financial reality, Iran cannot simply spend the usable resources as theywill likely be needed to meet international payment obligations, such as financingfor imports and external debt. Moreover, President Rouhani was elected on aplatform of economic revitalization and faces a political imperative to meet thoseunfulfilled promises. Rouhani faces over half a trillion dollars in pressinginvestment requirements and government obligations, and he presides over one ofthe worst business environments in the world: these will demand Iran's urgentattention.

Regardless of how Iran chooses to spend its money, to which it wouldreceive access only after it takes key nuclear steps, our commitment to our allies'security will remain unwavering. Our security relationships with our Gulf partnersand Israel remain close and enduring. We have worked with our Gulf partners fordecades to train and plan to address regional threats; our militaries have anincreasingly high degree of interoperability, as demonstrated by a robust scheduleof joint military exercises; broad range of training activities; and day-to-daycoordination in the counter-ISIL coalition and in Yemen. This past week,Secretary Kerry was in Doha to further our implementation of the strategicpartnership between the United States and the countries of the GCC which thePresident outlined at Camp David. Critically, Israel remains the leading recipientof U.S. Foreign Military Financing (FMF), has privileged access to advanced U.S.military equipment, and enjoys an unprecedented level of cooperation within thedefense and intelligence arenas. This special partnership was underscored bySecretary Carter's recent visit to engage with his Israeli interlocutors, and one thatwe will continue to look to enhance going forward.

We will take every step necessary to protect our regional interests and thoseof our allies and will respond to all threats as appropriate, including continuing to

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vigorously enforce our terrorism-related sanctions and holding Tehran accountablefor its destabilizing activities in the region.

The level of engagement with Congress that we have maintained on thenuclear deal has been unprecedented and we look forward to continuing our closeconsultations. We hope this information is useful to you. Please do not hesitate tocontact us. if we can be of further assistance.

Sincerely,

Julia FrifieldAssistant SecretaryLegislative Affairs