JAMES STEINBERG, DEPUTY SECRETARY, STATE DEPARTMENT

"...You're seeing a coming together of countries around the world to recognize that this is Iran's last opportunity and if they fail to take it there is a greater openness to this. I don't want to underestimate the difficulty. It's very critical that we get the support of the Security Council if we can because that really strengthens the effectiveness.

"...how to impose sanctions and have them be effective is a -- is a matter of judgment and not science. We've had a lot of experience as you said over the years with sanctions. We know that sometimes they have an impact on the population and the government is able to insulate itself from those sanctions.  Other times they can provide leverage by putting additional pressure on the governments. And I think that's something that we're going to have to fine tune as we go forward. I think it's important that we have a broad range of tools available to us, but I think we do need to have a -- a more refined judgment about precisely how to exploit the kind of vulnerabilities that Undersecretary Levey talked about to see which are the smart sanctions that have the biggest impact. So for example, the undersecretary talked about the role of the IRGC. That may be a place where we could be particularly effective. And I think we want to work with you, working with the experts in this area as we develop this toolkit to think about how the targeting is most effective in both supporting those we want to support in Iran and putting the pressure on those who need to make the decisions desist from the program that they're currently involved in."

"...I do think we always have to worry about the humanitarian impact and the political impact [of proposed sanctions] because we want to take advantage of the dynamic there and not to undercut the opposition, not to hurt those who are being courageous...And I think part of it will be a judgment call as Undersecretary Levey has said about whether there's a broad international consensus, whether this is seen as the international community taking an action so that it's not the United States alone singling them out that I think we'll have an impact on the political dynamic within Iran.  It may also depend on what other measures are taken and how obvious it is that Iran is refusing to -- to take any kind of positive action. So I think it is a delicate judgment. There may be other steps that we want to take first. We need to look at the full suite of -- of tools that are available to us both in terms of the sequence and how it applies in the circumstances."

"...the most important thing is I think we have a better chance of getting broad-based sanctions, broad-based economic and political pressure because we've demonstrated that -- that we have made every effort to solve this through diplomacy, and that the burden is clearly on Iran, and that they have clearly rejected any attempt to solve this peacefully. I think that's an enormous tool for us to get others to act and at the end of the day, not only is -- because not only is a sanction more effective when they're -- when they're broad-based, but it also takes away the political argument that the Iranian government may try to make, which that this is American hostility.  This is -- this is clearly an international rejection of their unwillingness to be straightforward and open about their program, their unwillingness to prove that it is peaceful. And so I think that affects not only our ability to get others to join us, but the dynamic that we've all been discussing today about how this plays to Iran itself, becomes harder for them to -- to try to use that line with their own people about why these painful measures are now being employed."

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Sen. Corker (R-TN): ...Senator Bayh [D-IN] had asked a good question about what might happen with the sanctions on refined product as far as the people go. As a just a tool itself, I mean, do you think the -- the keeping of refined product from actually coming in from other places to Iran is an effective sanction, period? I mean, is it -- is it an effective sanction?  And then the reason I ask, there have been a lot of people that say that they can easily get around it and, you know, there's all kind of -- they have subsidies in place that they could remove and that would contain, you know, the amount that would actually be utilized. There's, you know, a lot of smuggling that goes on to other countries which they could stop. I mean, is it -- is it or is it not an effective sanction?

STEINBERG: Senator, I think -- I think, we still have not reached a -- a firm judgment on whether that would be the best way to go. In part because we have to -- we need a better understanding of what the efficacy would be, in part because it would depend on how -- the degree to which others participated in this. Obviously this is a hard thing to do in a vacuum.

CORKER: Sure, but -- but if everybody participated, I know right now China's the -- the major assistor (ph), if you will, but if -- if everybody participated and the companies that have just recently stopped continued to stop, would it be an effective sanction or not?

STEINBERG: Again, I think -- I think we have not reached a firm conclusion about whether the net benefits and the net costs would have the effect, because the -- the challenge is always to try to translate the economic impact into what the political impact would be.  And our goals, as we think about what we might want to do going forward is to think, as -- as Secretary Levey said, but how does the government make its calculations? What would have the biggest impact on them? Whether it's transmitting it through its impact on the people or whether it's directly affecting their own activities.  We found in many cases, for example, and the reason I think a lot of us are focused on the IRGC, is if you can focus on the kind of the cost-benefit calculation of the individuals who are making these decisions, sometimes that has a more targeted impact, sometimes cause more sanctions than things that have to work as a transmission belt through the pain they impose on the public. But I don't think we want to take it off the table. I think it's one of the things that we need to do.

CORKER: Let me ask you this, have you asked for Congress to act and the reason I ask that, I -- my guess is with all the testosterone, if you will, that -- that shows itself as it relates to Iran and other kinds of things, if you ask for sanctions, they'd be passed out of here in about 24 hours, maybe more quickly.  So -- so -- so the question is, have you asked for us to take any actions in Congress as it relates to sanctions?

STEINBERG: I think, Senator, the key for us will in part be timing, which is...

CORKER: No, no, no, but have you asked yet? Just yes, no.

STEINBERG: We're going to ask for additional measures.

CORKER: So you'd like for Congress to prescribe what needs to be done, or would you like for Congress to enable you if you make decisions as it relates to sanctions?

STEINBERG: Senator, we -- they -- the president would like to have the maximum flexibility in part because of his ability to...

(CROSSTALK)

CORKER: He'd like to be enabled.

STEINBERG: Would like to be enabled.

CORKER: In an essence just to get to the legislation we had before us, you would oppose, then, the Lieberman-Kyl Bill that says you shall -- you shall keep refined product from coming into Iran.

STEINBERG: Again, Senator, I think what we'd like to do is work with the committee to -- to give the president the appropriate flexibility and I know the chairman and others have indicated some ways to look at that...

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STUART LEVEY, TREASURY UNDERSECRETARY, TERRORISM AND FINANCIAL INTELLIGENCE

"...some of the...lessons that we've learned are that to the extent we can focus on illicit conduct of the -- of the government in Iran, we'll have a better chance of not only getting better support within Iran but getting a better multi-lateral coalition to impose the measures with us, which is my second point, that, you know, if we can do this with other countries we're much, much better off than if we do it unilaterally. So as we go forward, as the deputy secretary said, we need to be very careful and craft this plan in as careful a way as possible to make sure we have the desired effect."

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Sen. Schumer (D-NY): But the concept, I'm not asking you for language. I'm asking, would the administration support the concept of putting pressure on oil companies gas -- that sell gasoline to Iran and making it virtually untenable for them to do that by not selling here?

LEVEY: Again, Senator, I think we have to, in terms of which of the potential measures of sanctions, whether they're more targeted on individual entities in Iran as opposed to a broad-based thing that would affect the Iranian economy like that, I think we have not reached a judgment as to which of those might be the most effective. In part because, not only do we want to have the impact on the economy, we want to make sure that that's going to affect the decision making in Iran and not target the wrong people in Iran and similarly, to make sure that we -- that we maximize the chance of getting international support for these things because there is obviously a risk in these things. And if -- if we do not have international support, that there'll be diversions. There'll be work -rounds, and the efficacy of the sanctions will not nearly be as effective."

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