Good afternoon, and welcome to the Brookings Institution. My name is Carlos Pascual and I am the Vice President and Director of the Foreign Policy Studies Program here. Today we have an opportunity to focus attention on issues related to Iran. At the Brookings Institution we have made a serious commitment to understanding the dynamics of war and peace in the Middle East. We have done that through the Saban Center on Middle East Studies, we have started an Iraq Policy Project which will sustain a focus of attention on issues related to Iraq. And today we look forward in this discussion with Nick Burns to be able to focus attention on how Iran fits into that equation. Obviously, Iran is presenting a challenge to international security and regional security at almost ever level, whether it is at the global level through its nuclear program, at a regional level through its support to Hamas and Hizballah, whether it is in Iraq as we have seen in the recent controversy of what Iran's might be in supply of weapons within Iraq, there are issues within Iran itself and the conundrum it presents, which the state which is half Persian and multiethnic with extraordinarily complex decision-making, there are questions of how all of these issues related to Iran play into international markets and global oil markets, and then there is the phenomenal challenge of diplomacy as well which involves the U.N., the European Union, Russia, China, and many other countries. The point person for this administration in addressing many of these questions is with us today, Undersecretary of State Nicholas Burns. Nick is familiar to many of us in the audience, not just in his role as undersecretary, but previously as Ambassador at NATO, Ambassador to Greece, spokesperson in the department, the senior director for Russia, Ukraine, and Eurasia at the National Security Council, he has been a leader in the transformation of NATO in looking at how we creatively and effectively use diplomacy in achieving American foreign-policy objectives, and it is a real pleasure to bring Nick to this podium today at the Brookings Institution. Nick? Good afternoon. I want to thank Carlos Pascual for the invitation to be here at Brookings this afternoon, and thanks to all of you for coming. I want to talk for a little bit about our policy toward Iran, and then I will be very happy to have a conversation and to respond to your questions and receive your comments on how our administration is doing vis-ˆ-vis Iran. I suppose some of you have questions. Some of you obviously have views maybe pro or contrary, but I look forward to that portion of this discussion. I am going to be brief because I do think the discussion part of it is going to be the most interesting this afternoon. I say first if you look around the world and look at where the United States critical and vital interests are engaged, you have to look to the Middle East, to Iraq first and foremost, to the challenge that we have in front of us to be successful in Iraq, to the conflict between the Israelis and Palestinians, and the quest for nearly 60 years now by various successive administrations to try to find a way toward peace, to the conflict in Lebanonnd today, of course, is the anniversary of the death of Rafik Hariri; you have seen the demonstrations peaceful in honor of him in Beirut this morningnd to the conflict that we have with Iran. It is those four issues that are at the heart of our engagement right now in the Middle East, and I would say that it is fair to say that our Secretary of State and most of the rest of us at the State Department are spending a huge percentage of our time trying to make sure that American interests are being watched and being protected on all four of these issues. I am going to speak today about Iran. I would say that next to the challenge that we have in front of us in Iraq, nothing is more important to the United States in the years ahead than to deal with this challenge which is multifaceted from the Iranian government. That challenge is an Iran that most of the world believes is trying to achieve a nuclear weapons capability, an Iran that continues to be in many respects the central banker of most of the Middle East terrorist groups, of Hizballah and Hamas, of Palestinian and Islamic Jihad, of the Popular Front for the Liberation of Palestine General Command, just to name four terrorist groups. And an Iran because of its recent policy in recent years, particularly through the statements and actions of President Ahmadinejad, that has caused instability in its relations with most of the Arab world and the countries of the greater Middle East. Those three aspects are the challenges that are in front of American foreign policy, in front of those of us in our government. Our policy is to deny Iran a nuclear weapons capability. It is to diminish Iran's capability of being successful in supporting these terrorist groups. It is as the president said this morning in his press conference on Iraq is to prevent Iran from providing the type of sophisticated IED technology that currently is providing that is a great threat to the American and British troops in Baghdad, in Basra and other places. It is also to help over the longer term we hope the creation of a society and a government in Iran that will be democratically-based and pluralistic, an Iran that wants to be part of the region in a positive way and not a disruptive force in the region. Finally, I think one of the other imperatives of our policy is that we have to engage the Iranian people. As a country, certainly our government has an interest in doing that. It is the world's most unusual diplomatic relationship. We have an American diplomatic presence in Havana; we have found a way over the last couple of months especially to talk directly to the North Koreans through the efforts of our Ambassador Chris Hill who was so successful yesterday in helping to bring about this achievement on the Six-Party Talks. We have an improving relationship with Libya. We talk to governments that we do not like or admire like the government in Zimbabwe. And yet we have no relations to speak of with Iran. It is not possible now for us to have formal diplomatic relations with the Iranian government, but it is possible for us to in effect end the estrangement which is going on three decades now between the American people and the Iranian people. In addition to putting forward the policy ambitions that I have talked about in the nuclear, on terrorist in Iraq, and the wider region of the greater Middle East, we do have an ambition to try to bring Americans and Iranians together. The Congress was nice enough to respond to this by giving us some money to do just that. The United States Wrestling Team, the national team, recently went with our strong encouragement to Iran to compete over a week's time and to break down some of the barriers that have existed between us. We have brought groups of Iranian doctors and nurses here, and we soon are going to be bringing disaster relief officials here. These are programs sponsored by our government to bring Iranians to our country, and it is important to break down the division and separations between the two peoples. I say that because history weighs upon this relationship. A lot of you of course are experts on Iran, many of you have been there, but the two years 1953 and 1979 have taken on a huge importance in the psychology of this relationship, and if we cannot make a breakthrough in the medium term, and I think we probably will not be able to in official relations with the Iranian government, surely we can work to try to bring people together and to try to bring the societies together so that we understand each other better, because I am impressed by the fact that it has been since January 20, 1981, that we have had any official contact on any sustained basis with the government, and that has also shut down a lot of the private avenues for contact between the two societies. Let me just say a word about each of these issues and then go on to a discussion. The nuclear issue has been an abiding concern of ours and it has been now 2 years since President Bush and Secretary Rice decided in February and March 2005 that we would support the effort by the European Union, three countries, Britain, France, and Germany, to try to achieve a negotiated settlement of the nuclear program. We supported it for that first year before Ahmadinejad took power later in 2005 a very active diplomatic dialogue between the EU-3 and Iran. After Ahmadinejad's accession to power in August and September 2005, most of those contacts shut down, the Iranian government in fact unilaterally walked out of the talks with the EU-3, and that led us to believe that we had to create a wider diplomatic coalition to deal with the problem of Iran's nuclear weapons ambitions. It led our president to talk to President Putin and President Hu Jintao about creating a permanent five and German coalition of countries that would focus on the question of nuclear weapons, that occurred in late 2005, and all throughout the last year, 2006, you saw the foreign ministers of those six countries, the permanent five and Germany, get together to put forward several propositions. First from the IAEA Board of Governors that Iran had to meet the requirements and demands of Mohammed AlBaradei and the IAEA Board, and you saw two votes in September 2005 and February 4, 2006, where Iran was effectively repudiated by the IAEA because it had violated the commitments it had made to them. That of course has continued until this very day. It was very interesting to see particularly in that second vote a year ago, February 4, 2006, in Vienna, that Egypt, Brazil, Argentina, India, Ecuador, Peru, Tanzania, Japan, and Australia joined China and Russia, the European countries, the United States and Canada, in sending one message to the Iranians, we do not want you to become a nuclear weapons power, we do believe you have a right to civil nuclear power and we are willing to help you in that regard, but we want you to abide by the restrictions that the IAEA is trying to impose on you. Very often in our press and public dialogue there is an image created of the U.S. versus Iran on this nuclear issue. We have been able to achieve in 2 years of diplomacy a very wide international coalition of countries from all continents with all of the largest countries in the world included sending one message to Iran. I think the only four countries that I can find that are supporting the Iranians saying let them proceed with nuclear research at Natanz, let them string together 164 or 3,000 centrifuges in a cascade in order to master the enrichment process, those countries are Venezuela, Cuba, Syria, and Belarus, but everybody else is giving Iran a very different message. We have tried in a very patient, painstaking way to assert that a diplomatic coalition of all of these countries can help the Iranians to think through their isolation to give the Iranians a way out of that isolation toward a negotiating framework. After this very big IAEA vote in February of last year, on June 1st the permanent five countries got together in Vienna and they put something even more ambitious on the table, a proposal for the Iranians that would allow the Iranians to create with an international consortium a civil nuclear industry in their country because the Iranians have been saying, their public line is, we do not want nuclear weapons, we want civil nuclear power, and based on some proposals that President Putin had made in late 2005, the P-5 offer, and the United States of course was a big part of this offer, said to the Iranians we will help you create a civil nuclear industry and capacity in Iran for your people. We will do so in a very transparent way through the IAEA. The most sensitive aspects of the fuel cycle of course will be offshore, and that became a very important issue in the subsequent talks with the Iranians. I dwell on this for a reason. The entire world community is sending one message, the entire world community is behind a negotiated solution, and our country, the United States, is very much a part of that. I think when Secretary Rice up the day before this announcement was made, May 31st, here in Washington, to say that she would be at the table when Iran accepted these negotiations, that the United States would dedicate itself to a long-term negotiation, that we believe that diplomacy could succeed in trying to dismantle Iran's nuclear weapons ambitions, that was I think perhaps the most significant American government offer made to Iran since 1979 and 1980 on any issue, but it was certainly the most significant offer made on the nuclear issue, and that offer is still on the table. What happened to that offer? We asked Javier Solana to represent the United States, China, Russia, and the Europeans. He had a series of conversations in June of last year with Ali Larijani, the Secretary of the Iranian Security Council, and we said to them take a few weeks and look at this and get back to us. They took 4-1/2 months. They finally got back to us in the second week of October 2006, and the answer was, no, we cannot accept the offer. The offer was if you, Iran, will suspend for the life of the negotiations your nuclear efforts at Natanz, we the six countries will negotiate with you, and we provided them with a three-page offer of inducements. Beyond this creation of a civil nuclear program there were other factors, other inducement involved, and Iran said no. Why did they say no? We believe that there was a debate within the Iranian government which is not monolithic throughout the summer of last year and the early autumn, and that those who said that they did not want to accept that offer obviously prevailed in that debate. We have kept the offer on the table since then. The Iranians of course have not accepted it. We passed a Chapter VII Security Council resolution on December 23 which for the first time places Iran with I think 10 other countries of the 192 in the U.N. General Assembly under official Chapter VII U.N. sanctions, and the Iranians have effectively said no since then. Next week, on February 21st, Mohammed ElBaradei will report to the Security Council at our request on whether or not Iran is complying with the terms of Resolution 1737. The obvious answer will be no, because we know that Iran has kicked out some of the IAEA inspectors, particularly, by the way, inspectors from our countries, the countries of the six that made this proposal, which is curious and interesting. ElBaradei will make that report, and then I think those of us on the Security Council will have to entertain the possibility of a second Security Council resolution that will gradually increase the pressure on Iran, but always leaving this exit door for the Iranians that the offer remains on the table that we do want to negotiate with you and that all of us believe, including the United States, that a negotiated solution is possible. So that is the nuclear issue from an international perspective over the last 2 years, and it remains the most important issue that we deal with on Iran policy because of course the possibility that an Iranian government led by someone like Mahmoud Ahmadinejad might become nuclear-armed capable has really concentrated the minds not only of our country, but of all the countries of the Middle East, certainly of Israel, but also of all the Arab states with which we deal. And there is not a single country in that region, again with the exception of Syria, who says that they think that it is okay for Iran to become a nuclear weapon state. I wanted to spend a little bit of time on that issue. I thought it was worth it just to give you a perspective of how hard we have tried over 2 years now to try to engineer a diplomatic solution, and we are not going to give up. We are convinced that sooner or later the cost to Iran of its isolation are going to be so profoundly important to them, destructive to their economic potential, that they are going to have to come to the negotiating table. What have we done to try to accompany this nuclear diplomacy? One thing we have done is our treasury department has designated certain Iranian financial institutions under the authorities given to us by the Patriot Act, prohibited those institutions from doing business in dollars, doing business with American financial institutions. We have also seen several European banks, Credit Suisse, Credit Lyonnais, and HSBC, shut down all lending to Iran over the last year, and increasingly we are seeing a nervousness in the international financial community about doing business with Iran. And we are actively of course encouraging this trend because we do want to send a message to the Iranians that it cannot be business as usual, that we should not be content to see the Iranians prosper from an active and open engagement with our financial community without a price to be paid for it. So Treasury under Secretary Paulson's leadership continues to take the lead on these very effective financial measures and sanctions, and we believe they are having an effect. The Iranians are telling people in Japan, Europe, and the Arab world, that they are worried about this. Their worry is not just the United States pulling back from an open and continual economic relationship; it is a variety of countries around the world. So that is an effective measure that we have taken. We also would like to see institutions like the E.U. and the European countries, Japan, and some of the Arab countries, take their own measures, and we have begun to see that. Two days ago the European Council passed a series of implementing measures for the Chapter VII sanctions resolution to have the Europeans going beyond the terms of the U.N. resolution to strengthen what they do to try to limit the ability of Iran to have a business-as-usual relationship with the Europeans. So that is another important avenue for us to try to show the Iranians that there is a way out, there is an exit door, but there is going to be increasing pressure on the Iranians economically if they do not deal with the rest of the world on the nuclear issue. We are also of course because of our interest in the Middle East, because of our strong commitment to Israel, our strong commitment to our Arab friends, trying to encourage the Iranians to see their role in supporting terrorism in a different way. Iran is the major supporter of the major terrorist groups in funding and in direction. The United States has been the object of some of those terrorist attacks in the 1980s and the mid-1990s. Right now what Iran is doing is attempting to destabilize the government of Lebanon, the democratically elected government of Prime Minister Siniora, and is using their funding for Hizballah to that air. Their funding for Hamas is actually disrupting the attempt in the Palestinian community to unite and to put aside their differences. It is also disrupting all of our ambitions for a positive way forward in potential negotiations between Israel and the Palestinians. And the actions of the Quds Force, and President Bush talked about this this morning, in providing very sensitive and sophisticated explosive technology to Shia insurgent groups inside Iraq has led to the deaths of American soldiers when those Shia insurgent group use that technology, armor-piercing, against our own soldiers. So the president said this morning in his press conference that of course we have a responsibility to disrupt those networks inside Iraq. We have a fundamental responsibility to protect American soldiers, men and women in uniform, and that message has gone out to the Iranians and we hope that they will hear that message. We also obviously want to continue to express to the Iranians that they have a choice. They can continue to operate as they are as the most disruptive, negative force in the Middle East, and I think what they will continue to do if they proceed in this fashion is to make themselves very unpopular with the Arab world, with Europe, with our allies in Asia, and of course with the United States, there is a price to be paid there as well. As we go forward, I believe that a diplomatic solution to the nuclear problem and all the other problems that I have mentioned is possible. If you look at the history of the last 2 years which we believe has been successful in creating a multifaceted American policy to deal with these many challenges from Iran as well as an international policy, we believe that a patient, carefully applied, skillful diplomatic approach by our country in concert with others can be successful in convincing the Iranians that there is another way forward with he international community. In that respect, I do not believe a conflict with Iran is inevitable, it is certainly not desirable, and we are trying to give every possible signal we can, the president this morning, Secretary Gates when he was in Werkunde, at the NATO Defense Ministers' meeting in Seville last week, Secretary Rice in her multiple comments over the last 2 weeks, our signal has been to the Iranians we are looking for a diplomatic way forward here and we hope the Iranians are going to respond to that. That is a brief and albeit somewhat simplistic overview of the variety of American interests that we have tied up in this very complicated relationship with Iran. I hope I have given you a sense of how we are trying to proceed, and I would be happy, Carlos, to respond to questions and ideas on this issue. Thank you very much.
member. 
