James B. Steinberg

Deputy Secretary of State

Washington, DC

September 30, 2010

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MR. CROWLEY: Good afternoon and welcome to the Department of State. To start off the briefing today, our Deputy Secretary of State Jim Steinberg is here to highlight some additional steps on sanctions that we’re taking today against Iran and then we’ll pick up on other subjects.

DEPUTY SECRETARY STEINBERG: Good afternoon, everybody. I’m going to make a short statement and then I’ll take a few questions.

Today, the United States is taking steps in accordance with our law regarding foreign investment in Iran’s energy sector. The State Department is imposing sanctions on Naftiran Intertrade Company, sometimes known as NICO, for its involvement in the Iranian petroleum sector under the Iran Sanctions Act, or ISA.

In addition, I’m pleased to announce that we have received commitments from four international energy firms to terminate their investments and avoid any new activity in Iran’s energy sector, delivering a significant setback to Iran. These are the first public actions involving companies investing in Iran’s energy sector since the ISA was expanded by Congress on July 1^st when President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act into law.

The CISADA, as we call it, along with the United Nations Security Council Resolution 1929, and sanctions imposed by the EU, Japan, South Korea, Canada, Norway, and Australia, is part of our international consensus to raise the cost of Iran’s refusal to meet its international nuclear obligations. CISADA is consistent with the growing understanding, recognizing UN Security Council Resolution 1929, that the Government of Iran is using revenues from its energy sector to fund its nuclear program, as well as procurement for its energy sector to mask procurement of dual-use items. The act provides several different tools to encourage companies to end operations in Iran.

NICO, which is based in Switzerland, is an international trading company and a wholly owned subsidiary of the National Iranian Oil Company. NICO has provided hundreds of millions of dollars of financing for development projects in Iran’s petroleum sector, and sanctioning NICO today will further isolate the company from the international business community.

In addition to imposing sanctions on NICO, four major international oil companies – Total of France, Statoil of Norway, Eni of Italy, and Royal Dutch Shell of the United Kingdom and the Netherlands have pledged to end their investments in Iran’s energy sector. By making this pledge, companies are eligible to avoid sanctions under the so-called Special Rule in CISADA that is designed to encourage companies with activity in Iran to withdraw. These companies have provided assurances to us that they have stopped or are taking significant verifiable steps to stop their activity in Iran and have provided assurances not to undertake new energy-related activity in Iran that may be sanctionable.

We welcome and applaud the decision by these companies, and as a result, the Secretary has decided to use the Special Rule to avoid making a determination of sanctionability for these companies. As long as the companies continue to act in accordance with their assurances, the company[] does not regard them as companies of concern for their past Iran-related activities. The United States has taken these steps in compliance with our national legislation and in order to demonstrate further to Iran the consequences of its failure to comply with international obligations or to engage in constructive negotiations to resolve concerns with its nuclear program.

A nuclear-armed Iran would severely threaten the security and stability of a part of the world crucial to our interests and the health of the global economy. As a consequence, we believe that the international community should collectively abandon a business-as-usual approach towards Iran. However, some international oil companies have not yet committed to ending their activities in Iran’s petroleum sector. And for this reason, the State Department is launching investigations into those companies and will continue to engage with industry and the international community to implement CISADA to its fullest extent.

Okay. So that’s the statement.

QUESTION: Can I say something? Hold on. Arshad, hold on a second. Can I – the – already on the Hill, there are people who are upset with this move because, as you say, there are international companies that have not made these pledges. Why not just go after them now? Why not hit those companies?

DEPUTY SECRETARY STEINBERG: Well, I don’t know who you talked to who’s upset, but I found a chance to talk with a number of members of Congress who have been very positive about the actions that we’ve taken. We’ve acted fully in accordance with law. And what they understand is that the goal here is not to impose sanctions for sanctions’ sake, but to end companies from doing business within Iran. And so we believe the model that we would like to see every company follow, is to follow the model taken by the four European firms.

QUESTION: Right, but why not –

DEPUTY SECRETARY STEINBERG: And our goal is to – I’ll finish my answer, thank you. Our goal, if we can, is to achieve those results. And our efforts, as has been shown by the negotiations we’ve had thus far, is that we believe that we have an opportunity to do that. And while we have an opportunity to do that, we’ll use the full set of tools available to us. If we conclude that that cannot be done, and under the requirements of the law, that we need to impose sanctions, we will do it. And our decision today with NICO demonstrates that we’re prepared to do that.

QUESTION: Right. Well, okay. I expect that you’ll be –

DEPUTY SECRETARY STEINBERG: Okay. Arshad.

QUESTION: You said that you were now investigating companies that have not pulled out of Iran. Which are those companies?

DEPUTY SECRETARY STEINBERG: As I indicated in my earlier answer, one of the strengths of the tool is that the act allows us to have the kinds of conversations with these firms to try to achieve those results. And we don’t believe that it would be productive or useful in the context of this, in terms of achieving our results to discuss specific firms. So we are engaging in conversations. We will sustain the confidentiality of those so long as we think it’s productive to achieving the results we’re trying to achieve.

QUESTION: And then a related question if I may. To what extent are you concerned that there will be a substitution effect for the four European companies that are pulling out or others that might also do so? There are other countries that have oil companies and oil services, related companies. To what extent do you see substitution or possible substitution from China or elsewhere?

DEPUTY SECRETARY STEINBERG: Well, without mentioning specific countries or companies, we’ve made clear to all the – our international partners that we are strongly discouraging substitution. And of course, were there to be substitution that came within the ambit of the act, it would raise questions under the Act. So in addition to our encouragement of people not to undertake so-called backfill type activities, we obviously make it clear to others the potential consequences if their firms were to do that in a way that would violate either now – now the new Act.

And as I think many of you know, Ambassador Einhorn is playing a particularly lead role in this. He’s in the process of having consultations with a number of key countries around the world to explain the provisions of the act, to explain why we would discourage countries and companies from picking up where others have come out, and identifying the potential consequences under our law if they were to do so.

QUESTION: Can you –

QUESTION: How do you measure –

DEPUTY SECRETARY STEINBERG: Go ahead.

QUESTION: How do you measure how valuable these sanctions can be? Ahmadinejad came up last week and he said – he basically dismissed any effective sanctions.

DEPUTY SECRETARY STEINBERG: Well, what would you expect him to say?

QUESTION: (Inaudible) to measure (inaudible) –

DEPUTY SECRETARY STEINBERG: Well, I think at the end of the day, what we most care about is how Iran responds to this in terms of its preparedness to engage in negotiations. Our goal, as I said, is not sanctions for sanctions’ sake, but to make clear to Iran that there are costs for the path that they’re pursuing.

But I think we have pretty good indications, not just in the energy sector, but across the board, that whether it’s in the financial sector or whether it’s in shipping and transportation, that these measures are increasingly having a significant impact on Iran. There’s no question that their ability to do business is being hindered in lots of different ways. And we have reporting from individuals that we talked to both within the country and around the world about the challenges that this has posed to Iran.

But again, I mean, even if we are fully successful in that, what we are focused on is to make it clear to Iran that the consequences are linked to their behavior on the nuclear program and that there is a way forward for them to avoid those consequences, and that they will only grow more serious over time as more and more companies – and the record is very clear, we’re talking today only about energy companies. But you’ve seen in public reporting and the public announcements of companies around the world, not just in the energy sector, but throughout the business sector, that people are increasingly reaching the conclusion that it’s simply not worth it to engage in activities with Iran. Their reputational costs and otherwise are sufficiently severe that they are taking prudential measures to limit their exposure, and we believe that that – clearly, that message is coming home to roost there.

Go ahead, sure.

QUESTION: I just wanted to ask you, how many firms are you investigating. Can you give us a ballpark figure?

DEPUTY SECRETARY STEINBERG: I can’t give you numbers.

QUESTION: And is it just the energy sector or it’s –

DEPUTY SECRETARY STEINBERG: This is – this – well, we’re investigating under CISADA, and the ones I was referring to today are energy-related activities.

QUESTION: Right. So – okay.

QUESTION: Do you have anything from the Syrian deputy foreign minister about the possibility of Syria distancing itself from Iran?

DEPUTY SECRETARY STEINBERG: I can only say that I had a very good conversation with my counterpart, the vice foreign minister. I made very clear that one of our dominant concerns in the region is Iran’s behavior, not only with respect to its nuclear program, but also with respect to its destabilizing activities, its unacceptable threats to Israel. And I made clear that an important part of moving forward in a positive direction in our relationship was Syria playing a constructive role in making clear to Iran that these are unacceptable behaviors.

QUESTION: And do you see any improvement in the relations with Syria?

DEPUTY SECRETARY STEINBERG: I’ll let the Syrians speak for themselves in that respect.

QUESTION: From your point of view?

DEPUTY SECRETARY STEINBERG: As I said, I think I made clear, as my counterparts have, as the Secretary did with Foreign Minister Mualem a few days ago, that these are important issues that, if we could see progress, they would clearly contribute to a better relationship between the United States and Syria.

QUESTION: Jim, you referred to you’ve got indications or reports from individuals of pressure starting to work. Can you be – and others have done it before you. Can you be any more specific and tell us what these indications are? I mean, nobody – they always – everybody says we have indications, but we don’t really get specifics. Can you be more specific?

DEPUTY SECRETARY STEINBERG: I mean, again, Charlie, I think the problem is I don’t think anybody thinks there’s a single metric we can use. We can – what we can point to are the large number of banks, firms, and the like who publicly announced that they’re no longer going to do business with Iran, and that we obviously recognize that Iran is going to try to find others to take their place, but the more that pull themselves out, the fewer and fewer options they have. And we continue to go in places where we think that they might be looking for a substitute. So I think – and because the nature of the effect that we’re trying to produce here is not trying to take down the Iranian economy or harm ordinary Iranians, what we’re looking at is direct impact on the kind of people who can make significant investments in their energy sector, who can contribute to their procurement networks, and the like.

And so those are the things that we see and we’re pointing to. And you’ve seen lists and we can continue to provide those as we get more reports of companies, banks, and others who have constricted their activities with them. And that – again, the only effect that matters at the end of the day will be the political decisions that the Iranians make, and so we are trying to make clear to them that if they don’t, that they will continue to face these difficulties, which we are quite confident they are beginning to face.

QUESTION: You mentioned this sanctioned entity has a subsidiary in Switzerland. Have you had discussions with your Swiss counterparts –

DEPUTY SECRETARY STEINBERG: The entity is in Switzerland.

QUESTION: Right.

DEPUTY SECRETARY STEINBERG: It is a subsidiary of the National Iranian Oil Company.

QUESTION: And have you had discussions with your Swiss counterparts about the fact that this is in Switzerland?

DEPUTY SECRETARY STEINBERG: I can’t answer that question. I’m not aware of whether we have or not.

Doug?

MR. HENGEL: (Off-mike.)

DEPUTY SECRETARY STEINBERG: And the answer is apparently yes. (Laughter.)

QUESTION: All right.

DEPUTY SECRETARY STEINBERG: Yes. Okay, the answer is yes. (Laughter.) Okay, I’m ready to do one more.

QUESTION: Okay. There are members in Congress who have been urging you to take on Russian and Chinese companies who they think are doing a lot of business with the Iranians. Have you chosen not to do that for fear of the fallout on other aspects of your relations with these two countries?

DEPUTY SECRETARY STEINBERG: Not at all. Again, I can’t discuss specifics, but I think we – first of all, we – there are a lot of reports of companies that people have concern where we have looked into. We just found that there aren’t sanctionable activities. So I think that the range is perhaps not as great as some might assume in terms of actually activities which may fall under the statute. But what we are doing, we are following the process outlined in the statute, which is we are trying to identify whether there’s credible evidence. It’s a threshold question about whether there’s credible evidence of sanctionable activity. If we find credible evidence, then we go to the next stage, which is to conduct an investigation as to whether, in fact, the statute has been violated, and then we would make a decision. So it’s a two-step process.

And we also have the ability under the statute to do what we have done with these European firms, which is essentially to negotiate for them to remove themselves from the coverage of the statute by agreeing to withdraw. So all of those things are in play as we look – as we get reports from reading the media, from reports from others about particular activity, we look into these. We make first a threshold determination, and then we go from there in terms of deciding under the statute whether to actually impose sanctions or whether to take other measures.

QUESTION: Can you say if you are in negotiations with any of these other companies that are being currently investigated?

DEPUTY SECRETARY STEINBERG: We are certainly talking to other companies about our – because our goal in the end is not to sanction. Our goal is to get people to – and if we can get – persuade them on their own to do it, we think that’s a much more effective way. And we’ve been very encouraged, and I applaud the leadership of these four companies, who worked very constructively with us. They took seriously our concerns and came forward with a very responsible measure. And I hope by the announcement today that this will have a very positive and exemplary effect on other companies, where they see that this is what responsible companies are doing and that they should follow in those footsteps.

Unfortunately, I’m going to have to go. Thank you.

QUESTION: What were the four companies again, please?

DEPUTY SECRETARY STEINBERG: The four companies that agreed?

QUESTION: Yes.

DEPUTY SECRETARY STEINBERG: Yes, it’s Total of France, Statoil of Norway, Eni of Italy, and Royal Dutch Shell, which is a British –

QUESTION: What can NICO not do today that it could do prior to the sanctioning?

DEPUTY SECRETARY STEINBERG: P.J. will give you –

QUESTION: Do you know the answer to that, P.J.?

DEPUTY SECRETARY STEINBERG: They have some specific – there are specific sanctions.

QUESTION: Why don’t – if you don’t mind, that way we’re done with this subject.

DEPUTY SECRETARY STEINBERG: I just want to get this. The company will be prohibited from receiving export assistance in the ExImBank, licenses from export from the United States, private U.S. bank loans exceeding $10 million in any 12-month period, and will be barred from any procurement contracts with the United States.

QUESTION: Thank you.

DEPUTY SECRETARY STEINBERG: Thank you.

QUESTION: Thank you.

QUESTION: Here’s a question that you can maybe refer to the Deputy Secretary’s staff, and since I don’t know if you’re going to know it off the top of your head, but did that company get any of those four things that he just described? I mean, I find it hard to believe that American banks are lending to the Swiss subsidiary of the Iranian National Oil Company or that ExImBank was providing anything to them. I mean, is there anything real here that’s actually being stopped?

MR. MORTLOCK: (Off-mike.) Most of that activity was already prohibited; however, this is another way to show that it’s not a company that others should be partnering with, which has been the case with past activities (inaudible).

QUESTION: So what was not, then? What were they actually doing that you’re actually stopping here? Is there anything? You said most of it, so there must be something that they were doing – they were getting from those four categories.

MR. MORTLOCK: (Off-mike.) I mean, the companies – the companies are already – U.S. companies are already restricted –

QUESTION: I’d like to see them do this properly or not.

MR. CROWLEY: Okay. Come on up, guys.

QUESTION: Thanks.

MR. MORTLOCK: Companies – U.S. companies are already restricted from dealing with –

MR. CROWLEY: Can you introduce yourself?

MR. MORTLOCK: Oh, sorry. My name is David Mortlock from the Legal Advisors Office.

MR. HENGEL: I’m Doug Hengel from the Economic Bureau.

MR. MORTLOCK: Companies are – U.S. companies are already restricted from doing much business with Iranian entities under the Treasury sanctions that are in place under executive order. This will – these additional sanctions that are in place will be on top of those, and so most of this activity was already prohibited. However, it does demonstrate to other companies that if they’re partnering in – with NICO in Iran, they could be subject to the same restrictions.

QUESTION: So what wasn’t prohibited, then? I mean, you said that most of this activity was already prohibited under other sanctions. What wasn’t?

MR. MORTLOCK: Well, I don’t want to get into too much of the technicalities. Activity could be licensed by Treasury, but in general, there was a prohibition of this activity.

QUESTION: So why shouldn’t we see this, therefore, as simply a gesture void of real content or meaning when most of the activity, if not all – I mean, I realize Treasury can grant licenses, but again, I really doubt Treasury’s been granting a whole lot of licenses for people to do business with Iran or the Iranian State Oil Company. Therefore, why shouldn’t one view this as simply a gesture but that has no real substantive import because the vast majority of these activities are already covered by existing U.S. sanctions?

MR. HENGEL: They fall under the law. They have engaged – the Secretary has judged that they have engaged in sanctionable activity, and it does send a message to others not to work with them.

QUESTION: Even if nobody was really working with them anyway?

MR. HENGEL: Companies have been working with them.

QUESTION: U.S. companies?

MR. HENGEL: Not U.S. companies.

QUESTION: Okay. So then the main import then here would be sending a message to non-U.S. companies?

MR. HENGEL: U.S. companies are not permitted to do almost anything with Iran.

QUESTION: Okay. So the whole point then, ultimately, is going after the potential partner – is that fair – or dissuading?

MR. HENGEL: Further discouragement to do business with them.

QUESTION: Okay. And thank you.

QUESTION: And can I follow up on the Swiss question? What sort of discussions have you been having with the Swiss about this company?

MR. HENGEL: We can’t get into the diplomatic exchanges, but they were aware that this designation was coming.

QUESTION: Thanks.

QUESTION: Thank you both.

MR. CROWLEY: Thank you. Gentlemen, thank you.
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