February 23, 2012 | Canadian Senate Foreign Affaris and International Trade Committee

Canadian Foreign Policy Regarding Iran and Its Implications

Listen to the hearing here.

Sheryl Saperia, Director of Policy (Canada), Foundation for Defense of Democracies: Honourable senators, thank you for inviting me here today. CSIS has deemed the Iranian nuclear weapons programs one of the most significant, urgent threats of the proliferation of weapons of mass destruction, WMD, today. The United States and Israel are now of the shared view that Iran is within about one year of reaching the point where it will be able to assemble a nuclear bomb. Will Iran decide to build a bomb, and if so would Iran actually use it? Many security experts would probably be most confident in saying only that Iran is seeking to develop the option — that is, the capability — to build a nuclear bomb.

In my opinion, even a nuclear-capable Iran, which I distinguish from a nuclear-armed Iran, is extremely dangerous. Nuclear weapons capability could form a protective shield around the Iranian regime and further embolden it to continue and intensify its nefarious activities, such as assassination attempts of foreign government officials, support of terrorist groups around the world, meddling in other countries to foment violence and civil unrest, propping up repressive regimes like Assad's Syria, translating into action its vitriolic hatred of and threats against Israel, and state-sanctioned arrests, beatings, detentions, kidnappings, torture, and ever-increasing executions of its own citizens, including Iranians who also hold Canadian citizenship.

Moreover, a nuclear-capable Iran would likely set in motion rapid nuclear proliferation in the region. Saudi Arabia will surely not tolerate a scenario in which it is lacking weapons or capabilities that Iran possesses. Turkey and Egypt may take similar positions, and the greater the rate of proliferation, the greater the chance that weapons-grade material could fall into the wrong hands, such as non-state terrorist groups. A tense and nuclear Middle East is indeed a frightening prospect.

Let us briefly focus on the threat that Iran poses specifically to Canada and Canadians. Just last week, U.S. Director of National Intelligence James Clapper told a Senate committee that Iranian officials, including Supreme Leader Ali Khamenei, may be more willing to conduct an attack inside the United States. Similarly, Israeli Deputy Prime Minister Moshe Ya'alon believes that one of the reasons Iran is establishing bases in Latin America and creating links with drug dealers on the U.S.-Mexico border is to facilitate Iran's ability to bring weapons into and carry out terror attacks inside the U.S. Given our physical proximity, an attack on the United States is certainly a threat to Canada.

Reza Kahlili, a former member of Iran's Revolutionary Guard who is now living in the United States, maintains that Canada is a major target of Iranian espionage. Kahlili has said that Iranian intelligence agents spy on Iranians in Canada and report on those who oppose the Islamic Republic. These individuals may be arrested when they return to Iran or their families still in Iran may be punished.

This is consistent with the concern about the presence of Revolutionary Guard members in Iranian embassies throughout the world. When Iran recently wanted to open up more consulates across this country, many Iranian diaspora members recognized the attendant risks, namely increased intelligence activities in Canada and increased spying on diaspora members.

Most recently, Israeli and Jewish facilities in North America are on high alert against Iranian attacks. An Israeli security report states that they are operating “according to the information that Iran and Hezbollah are working hard and with great intensity to release a quality attack against Israeli and Jewish sites around the world,” including in Canada.

Zafar Bangash, Director of the Islamic Society of York Region, seems to concur. He ominously announced recently that

. . . if there were an attack on Iran, and obviously the fact that Israel would be involved in it, [the] US would be involved in it, it is quite possible that, you know, members of the Jewish community might be targetted. . . . We will not want that to happen at all but, you know, you cannot control the emotions of the people.

I therefore proceed with my remarks on the assumption that Canada has great incentive to combat the Iranian threat, not just as a matter of principle or as a dutiful member of the international community, but also as a country that could be impacted directly by Iran's activities.

So what can Canada do to reduce the Iranian threat? Honourable senators, if we are serious about dealing with the Iranian threat, we must focus on the IRGC, the Islamic Revolutionary Guard Corps. This entity is not only in charge of Iran's nuclear program, it is also responsible for severe human rights violations and for the 2009 violent suppression of Iranian protesters. It trains and finances terrorist groups like Hezbollah and Hamas and, counterintuitively, even al Qaeda. It was behind the recent attack on the British embassy in Iran, and it has been implicated in the attempted assassination plot of the Saudi ambassador in Washington.

Canada's current sanctions under SEMA, which target many individuals and entities, including some associated with the IRGC, have been imposed in response to Iran's nuclear activity. However, the IRGC is a terrorist organization, and should be designated as such under the Public Safety list of terrorist entities. Even if Iran were to cease its illegal nuclear program tomorrow, this does not alter the fact that the government has a nine-digit budget line for international terrorism that is channeled through the IRGC. Canada needs to use every non-military tool in its toolkit at this critical time, and that includes listing the IRGC as a whole, as well as individual senior commanders and members, as terrorist entities in Canada.

I would be happy to address all the benefits of listing the IRGC during the question and answer session. For now, let me say that the decision not to designate the IRGC promotes a culture of impunity. The IRGC is the spine of the Iranian regime, and we must not countenance any interaction with the organization. Listing the entity diminishes its legitimacy, as well as that of the Iranian regime. It also provides important moral support to Iranian dissidents who may feel isolated and alone in their efforts to affect change within the country.

What else can Canada be doing? We need to do more to stop the bloodshed in Syria, not only because thousands of civilians have been killed in the last year but also as part of our response to confronting the Iranian threat. Syria is Iran's greatest regional ally and strategic asset, and the collapse of the Assad dynasty would be a blow to Iran's reach. That may be why Qassem Suleimani, the commander of the Revolutionary Guard's Quds Force, is reportedly in Damascus right now to help Assad suppress the growing uprising.

Tehran also continues to help Syria evade oil sanctions, enabling revenues from illegal oil sales to fill the government's coffers — funds that allow Assad to continue his murderous repression of protesters. Canada and the West need to strength the Syrian opposition. This could mean providing the rebels with more sophisticated equipment, like secure means of communication with one another, or considering international tools like the Responsibility to Protect doctrine.

Canadian energy security is another piece of the puzzle. Iran has threatened to close off the Strait of Hormuz, a critical passageway for much of the world's seaborne oil.

The Canadian government has rightly tried to convey the message that stable Canadian resources are an essential component of any solution to American and Asian energy needs. At the same time, Canada needs to consider its own energy security in a more serious way. While its oil exports are substantial, Canada depends in part on Middle Eastern oil, such as that from Saudi Arabia, for domestic consumption. It may now be appropriate for the government to come up with ways of improving our own energy security and thereby diminishing the salience of any Iranian threat to cut off the Strait of Hormuz.

Lastly, economic sanctions have become the most adopted measure against Iran by Western countries. Canadian sanctions are very good but could likely be tightened further. I will leave discussion of sanctions against Iran to my colleague Mark Dubowitz, who is a world expert on this subject.

I commend the members of this committee for examining Canada's foreign policy regarding Iran and hope you will consider greater measures in confronting the Iranian threat. Now is the time to take bold and responsible action in protecting Canada and the world from a nuclear-armed, or even a nuclear-capable Iran.

Mark Dubowitz, Executive Director, Foundation for Defense of Democracies: Thank you very much, honourable senators, for having me here. It has been five years toiling in obscurity working on Iran sanctions issues, and clearly sanctions have now become the dominant tool that the United States and its international allies are using to confront the Iranian nuclear threat.


I am pleased to be here with you. I want to confine my remarks to a few minutes and leave room for questions to give you a lay of the sanctions landscape with respect to what is happening in Washington, what is happening internationally, whether or not sanctions could actually work in confronting this challenge, and what Canada could be doing in addition with respect to sanctions.

There are three clocks that are now ticking. There is the Iranian nuclear clock as the Iranians move forward aggressively on their nuclear program. There is the military option clock, which is the extent to which Israel and the United States decide at some point that there are no other peaceful alternatives but to use military force to confront the Iranian nuclear program. There is a difference in those two clocks, the U.S. clock and the Israeli clock, and I will address that in some detail in my remarks but also in the question and answer period. Then there is the sanctions clock, which has been ticking away for years and years but has rapidly accelerated in recent months.

Let me address the first clock, the Iranian nuclear clock. My colleague, Ms. Saperia, has talked about nuclear capability versus a nuclear-armed Iran. I think it is important to understand that the actual red lines that we are dealing with are also very different from a U.S. perspective and an Israeli perspective.

You have heard the Israeli defence minister, Ehud Barak, talk about a zone of immunity, which refers to the point at which the Iranians have buried their nuclear facilities underground in a facility called Fordo near Qom, which would make it impenetrable to Israeli military ordinance. It is at that point that the Israeli military option would be off the table. It would be perhaps another six to eight months where the Americans, with much heavier ordnance, would be able to penetrate that Fordo facility, but there will be a zone of immunity that the Iranians will eventually reach that will take the military option off the table. It is important to understand again the red lines with respect to that option, and the differences between the United States and Israel.

With respect to the sanctions clock, it has only been in recent months, for those of us who have been working on sanctions for years, that we have finally seen potentially crippling economic sanctions being discussed, passed and imposed. There I want to focus very specifically on the most important sanction, which is the sanction relating to Iran's oil sales.

Iran is, for all intents and purposes, a one-crop country. All Iran really does is sell its oil. It represents about 60 per cent to 70 per cent of the government budget, about 80 per cent of hard currency export earnings and about 25 per cent of Iran's GDP. It is a critical short-term source of the hard currency the Iranians need to run their regime, sustain their currency and deal with some of their enormous economic challenges.

Sanctions in the past have been designed to go after Iran's production capacity, its ability to produce oil. The more Iran can produce oil, the more oil it can sell in international markets. Over the years, sanctions have been quite effective in draining capital investment and technology from the Iranian energy sector and decreasing Iran's ability to produce this oil. However, those are medium to long-term sanctions. Those are sanctions that, over the next five years, the International Energy Agency and the U.S. government project Iran will lose about $14 billion a year in annual oil revenues as a result of restrictions on its production capacity. We do not have five years with respect to this challenge. We may not even have five months. The real question is, what sanctions are on the table that can target Iran's oil revenue and drain that Iranian treasury of the critical hard currency it needs to sustain its program?

We are really talking about the Central Bank sanctions that were recently signed into law by President Obama. You have now seen Europeans freezing Central Bank assets. The Canadian government has essentially cut all financial ties between the Canadian financial sector and the Iranian financial sector. These sanctions have had an enormous consequence already. They have led to a cascade of oil sanctions and oil market reaction. The Europeans imposed a voluntary oil embargo. There are now discussions between the U.S. Treasury Department, the Japanese, the South Koreans, the Indians, the Chinese, and others about reducing their purchases of Iranian oil. There are a number of other mutually reinforcing measures that have been introduced recently — in Congress and in Europe — under discussion internationally that would ratchet up the hassle factor associated with buying Iranian oil.

At the end of the day, come the end of June, President Obama has to make a determination. Under the existing Central Bank law, he has to decide whether countries have significantly reduced their purchases of Iranian oil in order to be granted exceptions from the sanctions passed by the U.S. Congress, or whether to sanction countries that have not met that threshold. Those discussions are now under way. There is intensive diplomatic activity taking place both in Washington and in international capitals. You should keep your eye on that activity, because the Israelis are keeping their eye on that activity. If by June or the beginning of July those sanctions have not created that kind of cascade in the oil markets that has led to a significant reduction in Iranian oil revenue, the determination will be that sanctions have failed. If oil sanctions do not work, no sanctions will work. That is a very key point to keep in mind. I can get into more detail in question and answer, but that is number one with respect to sanctions.

There are also financial sanctions. Relating to the central bank sanctions, there is a consideration on the table now in the U.S. Congress to go after an international financial settlement mechanism called SWIFT. SWIFT is a Belgium-based company that provides secure financial messaging to 10,000 financial institutions. To put it in simple terms, senators, if you are moving money from one bank to another you cannot do so without going through the SWIFT system. There are 44 Iranian banks currently using the system to circumvent international sanctions and to move money. They use it for trade with the international community. They transacted over $35 billion worth in bilateral trade with the Europeans. If you cut the Iranians from the SWIFT system, in theory the Iranians will not be able to do or facilitate any international financial transaction, for oil sales or anything else.

Removing the Iranians from that system is currently a subject of intense debate in Washington and with our European allies.

The board of directors of SWIFT is comprised of major financial institutions. There is a Canadian who sits on that board representing a major Canadian financial institution. That board of directors has the power to make the decision — under its own bylaws — to remove these Iranian banks. There is an important Canadian angle to the story that is worthy of consideration.

There have been years of sanctions and months of very intense sanctions. Clearly the Iranian economy is under intense pressure with hyperinflation and high unemployment, and the currency has dropped by 50 per cent in the past two months. You are finally starting to see the impact of tough, crippling economic sanctions. However, I would suggest to you that time is running out. The sanctions clock has been ticking too slowly, the nuclear clock has been ticking too quickly, and the military option clock is coming potentially closer to midnight as we move into the spring and summer season. I will conclude with that.

I welcome your questions and thank you for the opportunity.

Transcripts from the hearing are available here.