The Cable

Inside the conference negotiations on Iran sanctions

House and Senate leaders are meeting this week behind closed doors to work out language for new sanctions on the Central Bank of Iran (CBI), and the administration is  pressing key Democrats hard to adopt their position, which aims to weaken the sanctions measures.

The debate is taking place as part of the negotiations over the fiscal 2012 defense authorization bill, which passed both the House and the Senate and is in conference right now. The legislation will probably emerge from conference next week and pass both chambers, at which point President Barack Obama will be under heavy pressure to sign the "must pass" defense bill, with whatever Iran sanctions language the conferees agree on.

The current sanctions language at the center of the closed door debate is the amendment by Sens. Mark Kirk (R-IL) and Robert Menendez (D-NJ), which passed the Senate by a rare 100-0 vote over the very public objections of top Obama administration officials. The amendment would direct the Obama administration to take punitive measures against foreign banks that do business with the CBI, but gives the administration more leeway to implement the sanctions than Kirk's original language.

The administration urged Kirk and Menendez to come up with a compromise amendment but then came out against that very compromise last week, angering and alienating Menendez, who needs to be tough on the issue ahead of his re-election bid next year. The Cable has obtained the administration's private communications to the conferees spelling out the changes they want to the Kirk-Menendez amendment; they can be found here and here.

Basically, the administration wants to delay the implementation of sanctions not related to oil purchases from 60 to 180 days, and wants to water down the severity of sanctions measures if and when they are put into effect.

Initially, the administration turned to House Foreign Affairs Committee ranking Democrat Howard Berman (D-CA) to help them with the changes. Berman, who is inside the closed conference, initially indicated that he wanted to work with the administration to change the Kirk-Menendez amendment.

But Berman also has a tough reelection fight coming up against Rep. Brad Sherman (D-CA), who he must face after their districts were combined, and he can't afford to seem weak on Iran. Today, Berman announced that he does not want to want to water down the Kirk-Menendez language at all. In fact, he said he wants to strengthen it.

"Every administration wants total discretion on foreign policy, but that is an impulse that Congress must always resist," Berman said at a conference on Thursday sponsored by the Foundation for the Defense of Democracies (FDD), a conservative policy and research organization. Berman spoke just after a panel on Syria, moderated by your humble Cable guy.

"I will not, and Congress should not, give into entreaties from the administration or elsewhere ... to dilute our approach to sanctions on the Central Bank of Iran's petroleum transactions," Berman said to applause. "The Kirk-Menendez amendment is a good amendment."

Berman said the only change he wants to the Kirk-Menendez amendment is to shorten the administration's window for implementing sanctions on those who do oil business with the CBI from 180 days, as the Kirk-Menendez bill specifies, to 120 days.

Sherman, in a Thursday interview with The Cable, accused Berman of flip-flopping on the issue and said the Kirk-Menendez language should be sent to Obama's desk exactly as it is.

"Berman was helping the administration and now he's made a 180 degree change, which is good," Sherman said.

"We need to protect the Menendez-Kirk language," he said, making sure to name the Democrat first. "The White House doesn't want to do it. And the White House will be trying to stop the Menendez-Kirk amendment from being in legislation that the president has to sign."

Having lost Berman, the administration then turned to other senior Democrats to carry its water inside the conference. We're told by a senior GOP congressional aide close to the conference negotiations that House Armed Services ranking Democrat Adam Smith (D-WA) and Senate Armed Services Committee Chairman Carl Levin (D-MI) are now arguing inside the conference for changes to the Kirk-Menendez amendment to satisfy the administration's concerns.

"Right now the Republicans want to adopt the Menendez/Kirk amendment while the Democrats, specifically Congressman Smith and Senator Levin, are working to incorporate the Obama administration's changes even though Senator Levin already voted for the current language," the aide said. "At some point enough is enough - Let's send it to the President's desk for signature as it is."

The administration has argued publicly that the Kirk-Menendez amendment could alienate foreign countries, make it more difficult to form an international coalition to pressure Iran, and raise oil prices, which could actually help the Iranian economy. They have argued in private meetings with lawmakers that the effort could hurt the U.S. economy.

Supporters of the Kirk-Menendez amendment point to an extensive report on CBI sanctions compiled in the midst of the negotiations by the FDD.  

"The (once) confidential report was provided to the administration and select members of Congress during the discussions on the Menendez-Kirk Central Bank amendment," FDD's Mark Dubowitz told The Cable. "The report concluded that, even if the Saudis did not release additional oil supplies, it was still possible to reduce Iran's oil revenues without spooking oil markets and driving up the price of oil."

Sherman's view on that tension is shared by most lawmakers. "You can't stop Iran from getting a nuclear weapon without breaking some eggs," he said.

The Cable

State Department unveils new super-office: economics, energy, and the environment

The State Department formally rolled out a new plan today for how it will tackle economic, energy, and environmental issues -- by combining them all into one bureaucratic structure.

Undersecretary Bob Hormats is the leader of the newly expanded "E" team in Foggy Bottom, making him the undersecretary for economic growth, energy, and the environment. Before today, Hormats was the undersecretary for economic, energy and agricultural affairs. The change moves several offices under Hormats' umbrella, and also places him in charge of two new offices that never existed before.

Hormats is now in charge of three bureaus led by assistant secretaries and their teams: the Bureau of Oceans and International Environmental and Scientific Affairs (OES), led by Assistant Secretary Kerri-Ann Jones, the Bureau of Economic and Business Affairs (EB), led by Assistant Secretary Jose Fernandez, and the brand new Bureau of Energy Resources (ENR), led by State's Coordinator for International Energy Carlos Pascual, pending the confirmation of an assistant secretary. 

The new "E" family will also, for the first time, include the Office of the Science and Technology Advisor, led by E. William Colglazier, and a new Office of the Chief Economist, which will be led by someone who hasn't been hired yet - interviews are ongoing.

Hormats could have as many as 150 to 200 new people under his leadership, but the changes are basically cost neutral. The idea is to combine these three bureaus into a cohesive team, which can take advantage of the increasing overlap between energy policy, environmental policy, and the economy.

"If this was only moving the bureaucratic boxes around it wouldn't be worth the effort," Hormats told The Cable in an interview. "This really responds to Secretary Clinton's challenge to break down silos and to create greater efficiencies within the State Department and focus attention in developing economic statecraft."

The changes in the State Department's bureaucracy were spelled out in the Quadrennial Diplomacy and Development Review, which was released last year, but also fits perfectly into Secretary of State Hillary Clinton's new favorite initiative, "Economic Statecraft," as laid out in her speech in October.

"America's economic strength and our global leadership are a package deal," Clinton said. "A strong economy has been a quiet pillar of American power in the world. It gives us the leverage we need to exert influence and advance our interests. It gives other countries confidence in our leadership and a greater stake in partnering with us."                               

Hormats said the State Department was currently evaluating several ways in which the new offices could work together. For example, the United States could use economic strategies to promote access for U.S. energy technology companies in Africa, he said. The environmental experts could also chip in to make sure development in the African energy sector is ecologically sound.

Another initiative State is thinking about, Hormats said, is an effort to strengthen science and technology cooperation with the European Union in areas such as nanotechnology, smart grids, and electric cars. The idea is to play a role in setting industry-wide standards for new green technologies, helping U.S. businesses establish an international foothold in these emerging industries.

The conventional wisdom is that environmental and business objectives are at odds with each other, but Hormats is aiming to disprove that. He made the case that environmentally conscious companies are more energy efficient, and therefore more economically successful. President Barack Obama's Energy and Climate Partnership of the Americas is an existing example of this type of thinking, and a project that will be managed in his shop.

Hormats has also been meeting over several months with environmental groups to assure them that their concerns will not be made subservient to the overwhelming drive to seek economic gains and greater energy independence.

"The last thing we want to do is make the environmental bureau a subsidiary of the economic or energy bureaus," Hormats said. "The goal is to find synergies among co-equals. That's the key."

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