[Senate Hearing 113-549]
[From the U.S. Government Publishing Office]
S. Hrg. 113-549
RUSSIA AND DEVELOPMENTS IN UKRAINE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JULY 9, 2014
__________
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COMMITTEE ON FOREIGN RELATIONS
ROBERT MENENDEZ, New Jersey, Chairman
BARBARA BOXER, California BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware RON JOHNSON, Wisconsin
RICHARD J. DURBIN, Illinois JEFF FLAKE, Arizona
TOM UDALL, New Mexico JOHN McCAIN, Arizona
CHRISTOPHER MURPHY, Connecticut JOHN BARRASSO, Wyoming
TIM KAINE, Virginia RAND PAUL, Kentucky
EDWARD J. MARKEY, Massachusetts
Daniel E. O'Brien, Staff Director
Lester E. Munson III, Republican Staff Director
(ii)
C O N T E N T S
----------
Page
Brzezinski, Zbigniew K., former U.S. National Security Advisor,
counselor and trustee, Center for Strategic and International
Studies, Washington, DC........................................ 35
Prepared statement........................................... 36
Chollet, Hon. Derek, Assistant Secretary of Defense for
International Security Affairs, U.S. Department of Defense,
Washington, DC................................................. 11
Prepared statement........................................... 13
Corker, Hon. Bob, U.S. Senator from Tennessee, opening statement. 2
Glaser, Hon. Daniel L., Assistant Secretary for Terrorist
Financing, U.S. Department of Treasury, Washington, DC......... 7
Prepared statement........................................... 9
Hadley, Hon. Stephen J., former U.S. National Security Advisor,
principal, Rice Hadley Gates, LLC, Washington, DC.............. 37
Prepared statement........................................... 39
Menendez, Hon. Robert, U.S. Senator from New Jersey, opening
statement...................................................... 1
Nuland, Hon. Victoria, Assistant Secretary of State for European
and Eurasian Affairs, U.S. Department of State, Washington, DC. 3
Prepared statement........................................... 5
Response to question submitted for the record by Senator Ron
Johnson.................................................... 48
(iii)
RUSSIA AND DEVELOPMENTS IN UKRAINE
----------
WEDNESDAY, JULY 9, 2014
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 9:45 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. Robert
Menendez (chairman of the committee) presiding.
Present: Senators Menendez, Shaheen, Murphy, Kaine, Markey,
Corker, Rubio, Johnson, Flake, and Barrasso.
OPENING STATEMENT OF HON. ROBERT MENENDEZ,
U.S. SENATOR FROM NEW JERSEY
The Chairman. This hearing will come to order.
We have two distinguished panels today to help us look more
closely at developments in the Ukraine. We are pleased to have
on our first panel the Assistant Secretaries from State,
Treasury, and Defense to brief us on the situation on the
ground, and on our second panel, two former National Security
Advisors to provide insights into the broader geopolitical
implications of Putin's actions in Ukraine.
In the past week, Ukraine appears to have mobilized around
its new President. Ukrainian Armed Forces have been actively
re-closing their border with Russia and pushing back Russian
separatists. At the same time, President Putin's instigation of
this conflict continues to breed uncertainty as to whether a
corner has, in fact, been turned. In my view, President Putin
is entirely capable of trying to divide Ukraine one day and
then, when the international community applies pressure,
withdraw from the scene long enough to avoid the international
community's scrutiny, while effectively continuing his
aggression to achieve his intended goal.
In June I wrote to President Obama, asking him to seriously
consider implementing additional targeted sanctions as soon as
possible to deter Putin from further destabilizing Ukraine. I
fully appreciate the importance of acting in concert with our
European allies to ensure that sanctions have their intended
effect, but, at the same time, we should not hesitate to act
unilaterally to support an independent Ukraine and counter
malign Russian interference when delay threatens these goals,
our strategic objectives, or our national interests. In the
long run, a stable and secure region will serve our national
interests and enhance opportunities for U.S. and European
businesses.
In my view, unless Putin is confronted with strong
disincentives, he will continue to ensure that the Ukrainian
Government will not be able to stabilize the situation and he
will position himself to fill the power vacuum when the
government cannot fulfill the needs of parts of the Ukrainian
people.
A question for our panelists today is, What steps and
measures must Putin take now to demonstrate his commitment to
resolving the conflict? And at what point would you call his
bluff and proceed with additional sanctions?
We are pleased to have distinguished panelists before the
committee. We look forward to gaining a deeper insight into
what is happening on the ground, as well as the broader
geopolitical ramifications of Russia's actions.
With that, let me turn to Senator Corker, the ranking
member, for his comments.
OPENING STATEMENT OF HON. BOB CORKER,
U.S. SENATOR FROM TENNESSEE
Senator Corker. Thank you, Mr. Chairman, and thanks for
calling the hearing.
I welcome our witnesses on both panels. I think we have got
an outstanding group of people here today that I know will be
very informative.
I know this is almost becoming a cliche, but Russia seems
to be a master at escalating and de-escalating at the same
time, acts of duplicity which keep the Western world off
balance. So, I look forward to hearing from our witnesses today
at what phase they think we are in relative to Russia.
We have some people here that are very committed public
servants that I respect, but, I have to say, sometimes I am
embarrassed for you as you constantly talk about sanctions, and
yet we never see them put in place. So, I hope you will
enlighten us today as to where we might be in that regard.
Media outlets have talked about another round of sanctions that
you are preparing. I hope that you will illuminate those today
and talk to us a little bit about, as the chairman mentioned,
what needs to occur, from Russia's standpoint, to either cause
those to be put in place or not put in place.
But, again, I really feel like the sanctions threats have
been very hollow; candidly, they have some of the same
characteristics of the redline we talked about in Syria. I
certainly hope that changes soon, because, in getting to my
final point, I worry that where we are going with Russia,
relative to Ukraine, is what a National Security Advisor in
Eastern Europe said to me recently; that he fears that our
policy is taking us to a place where we are going to have a
bitter peace with Russia, where, in essence, we sweep under the
rug the actions that have taken place in Crimea and continue to
take place in eastern Ukraine and we, basically, get back to
business as usual. It looks like that is where we may be
heading, which, over time, could lead to some more major
consequences in Eastern Europe and the world. I hope that is
not the policy that this administration is embarking on.
I thank the witnesses for being here today, and look
forward to your testimony.
The Chairman. Thank you, Senator Corker.
For our first panel today, we welcome back Assistant
Secretary of State for European and Eurasian Affairs, Victoria
Nuland; Daniel Glaser, who is the Assistant Secretary of
Treasury for Terrorist Financing; and Derek Chollet, who is the
Assistant Secretary of Defense for International Security
Affairs.
Let me remind our panelists that your full statements will
be included in the record. I would ask you to try to summarize
them in 5 minutes so we can enter into a dialogue.
In the course of just receiving your testimony, Madam
Secretary, I skimmed through it, and I hope that you will be
ready to respond, if not in your statement, then when we get to
Q&A, to this one line on the third page, where it says, ``we
are ready to impose more costs, including targeted sector-
specific sanctions, very soon if Russia does not decidedly
change course and break its ties with separatists.'' It seems
like we have heard that, ``very soon'' before. So, maybe you
can quantify that for us.
And, with that, we recognize you.
STATEMENT OF HON. VICTORIA NULAND, ASSISTANT SECRETARY OF STATE
FOR EUROPEAN AND EURASIAN AFFAIRS, U.S. DEPARTMENT OF STATE,
WASHINGTON, DC
Ms. Nuland. Thank you, Chairman Menendez, Ranking Member
Corker, and members of this committee, and thank you for the
opportunity to speak with you again today on the situation in
Ukraine.
As you said, longer statement will be submitted for the
record.
In previous testimony before this committee, I have
outlined four pillars of United States policy: support for
Ukraine as it tackles its urgent political, economic, and
security challenges; diplomatic efforts to try to de-escalate
the crisis; imposing further costs, including targeted sectoral
sanctions, on Russia and separatists who are fomenting violence
and unrest in Ukraine; and, number four, reassurance of
frontline NATO allies and friends, like Georgia and Moldova.
Today, in my statement, I will focus on the first two lines
of effort. Assistant Secretary Chollet will talk about our
security support for Ukraine and our allies. And Assistant
Secretary Glaser will talk about sanctions policy. But, of
course, we will all answer your questions.
Since I last appeared before you, voters from across
Ukraine took to the polls on May 25 and elected President
Poroshenko with 54.7 percent of the vote. Just weeks and days
earlier, many doubted that the elections would even take place.
It was the determination and courage of millions of Ukrainians
to choose their own future that made free, fair elections
possible along with the support of the international community.
But, as you know, Ukraine's security remains under threat as
fighting continues in eastern parts of the country, and Crimea
remains under occupation.
Against this backdrop, the United States is supporting
Ukraine in this hour of its need. We have stepped up our
security assistance, which Assistant Secretary Chollet will
discuss. However, the more lasting antidote to separatism and
outside interference, over the medium term, is for Ukraine to
succeed as a democratic, free-market state, and to beat back
the corruption, dependence, and external pressure that have
thwarted Ukrainians' aspirations for decades.
Since the onset of this crisis, with this Congress'
support, we have provided Ukraine with a billion-dollar loan
guarantee specifically targeted to soften the impact of
economic reforms on the country's most vulnerable. We are also
providing approximately $196 million in other assistance to
Ukraine this year. Of this, we have already authorized $75
million in support of economic reform, anticorruption measures,
nonpartisan electoral assistance, nonlethal security
assistance, and humanitarian aid for Ukrainians internally
displaced from Crimea and eastern Ukraine. We are now working
with President Poroshenko, Prime Minister Yatsenyuk, and their
team to direct the remaining $59 million in four key areas:
first, support for economic growth and reform; second,
countering corruption; third, energy diversification and
efficiency; and, four, constitutional reform and national
unity. We will be sending up a formal congressional
notification very shortly, but let me just give you some
highlights.
In the area of economic reform and growth, we will
complement World Bank and IMF programs by working to help
strengthen the Ukrainian banking sector, making the business
climate more competitive and attractive to investors, and
helping Ukraine diversify its export markets.
Our anticorruption support will help support the
government's new 3-year program and bolster its ability to
deter, to detect, investigate, and prosecute corruption
wherever it festers, and support civil society, the media,
business, and government as they work together to root it out.
In the energy area, we will help the government to
restructure the sector and to deploy new technologies to
increase energy yields and efficiency, and to assist Ukraine in
developing national plans for sustainable use of natural
resources.
And finally, we will help the government implement the
constitutional reform and broad decentralization of power at
the local and regional level that has been central to President
Poroshenko's peace plan and to rebuilding national unity.
As we support Ukraine economically, as you know, we have
also worked in lockstep with the Ukrainian Government and our
European allies and partners to try to de-escalate the tensions
with Russia and with Russian-backed separatists through
repeated rounds of diplomacy, which we have talked about here.
In successive settings, we have supported the Ukrainian
Government's offers to address those concerns that are
legitimate, of eastern Ukrainians and Russian speakers, by
political means, and to offer an off-ramp to separatists and to
their Russian backers. These efforts have culminated most
recently in President Poroshenko's broad-reaching peace plan,
which he first presented in his inaugural address, which offers
amnesty to separatists who lay down their arms, political
dialogue, broad decentralization of power--in short, virtually
all of the things that the separatists and their backers in
Moscow have said that are needed.
President Poroshenko, as you know, also initiated, on June
27, a 10-day unilateral cease-fire to try to provide space for
dialogue with separatists. But, as you also know, this cease-
fire was met with 10 days of violence, bloodshed, and
separatists land-grabs as Russia simultaneously allowed tanks,
heavy artillery, and fighters to flow across the border.
On June 27, EU leaders again called on Russia to end all
support for separatists, to control the border, to use its
influence with separatists to return the three border
checkpoints to Ukrainian authorities that they had taken, to
release hostages, and to launch substantial negotiations on the
peace plan. These are the same criteria that the United States
is continuing to use to measure Russia's willingness to de-
escalate tension in Ukraine. As President Obama has said, ``We
will judge Russia by its actions, not by its words.''
The United States and Europe have imposed repeated rounds
of sanctions to increase the cost Russia pays for its choices.
And, as you quoted, Mr. Chairman, we are ready to impose more
costs, including targeted sector-specific sanctions, very soon
if Russia does not decisively change course and break its
support for separatists.
As Russia's economy teeters on the bring of recession, in
part from the cost of its intervention in Ukraine and the
impact of our sanctions, as noted in the latest IMF report
released a week ago, Russians need to ask themselves what their
government's policy has really delivered for them or for the
people of Ukraine, other than economic hardship, violence,
kidnapping, and death.
Today, in Slovyansk, in Kramatorsk, and in other towns
recently retaken by Ukrainian forces from the separatists, the
Ukrainian Government is delivering humanitarian aid and
restoring services. They are also working to restore the
Ukrainian people's faith in their government's ability to
provide a better future. Ukraine's success or failure in its
struggle for peace, reconciliation, and human dignity will
impact the future of the entire region, and, with it, the
prospect for achieving America's 20-year objective of a Europe
whole, free, and at peace.
We, therefore, continue to have profound national interests
in supporting the people of Ukraine in their quest for a more
stable, democratic, and prosperous future. And, in this effort,
we deeply appreciate Congress' continued bipartisan support.
We look forward to your questions.
[The prepared statement of Ms. Nuland follows:]
Prepared Statement of Victoria Noland
Chairman Menendez, Ranking Member Corker and members of this
committee, thank you for the opportunity to speak to you today on the
situation in Ukraine and for your personal investment in the country's
future. As many of you know from your travels, Ukrainians deeply
appreciate this committee's bipartisan engagement on behalf of their
country's security, democracy, and sovereignty.
In previous testimony before this committee, I have outlined four
pillars of U.S. policy: support for Ukraine as it tackles urgent
political, economic, and security challenges; diplomatic efforts to de-
escalate the crisis and to encourage Russia to end support for
separatists; readiness to impose further costs--including targeted
sectoral sanctions--on Russia and separatists for fomenting violence
and unrest in Ukraine; and reassurance of frontline NATO allies and
friends like Georgia and Moldova. Today, I will focus on the first two
lines of effort. A/S Chollet will talk about our security support for
Ukraine and our NATO and partner reassurance measures. A/S Glaser will
discuss sanctions policy.
Since I last appeared before you, voters from across Ukraine took
to the polls on May 25 and elected President Poroshenko with 54.7
percent of the vote. Just weeks and days earlier, many doubted the
elections would take place, let alone result in such a strong
democratic mandate for change. It was the determination and courage of
millions of Ukrainians to choose their own future that made free, fair
elections possible, along with the steadfast support of the
international community, including intensive electoral monitoring. In
the weeks since, President Poroshenko has launched a 15-point peace
plan, reached out to the east with offers of dialogue and
reconciliation, and signed the final economic chapters of Ukraine's
historic Association Agreement/Deep and Comprehensive Free Trade Area
with the European Union. But Ukraine's security remains under threat:
despite regaining control of Slovyansk and Kramotorsk, fierce fighting
continues to rage in parts of eastern Ukraine; heavy weapons, materiel
and support have flown across the Russian border; Russia has thousand
troops deployed on Ukraine's eastern border, and Crimea remains under
occupation.
Against this backdrop, the United States is supporting Ukraine in
its hour of need. We have stepped up our security assistance, which A/S
Chollet will discuss. However, the most lasting antidote to separatism
and outside interference over the medium term is for Ukraine to succeed
as a democratic, free market state, and to beat back the corruption,
dependence, and external pressure that have thwarted Ukrainians'
aspirations for decades. Since the onset of the crisis, with your
support, we have provided Ukraine with a $1 billion loan guarantee
specifically targeted to soften the impact of economic reforms on the
country's most vulnerable. We are also providing approximately $196
million in other assistance to Ukraine this year. Of this, we have
already authorized nearly $75 million in support for economic reforms
and anticorruption measures; nonpartisan electoral assistance including
the OSCE's special monitoring mission and other election observers;
nonlethal security assistance; and humanitarian aid for Ukrainians
internally displaced from Crimea or the East.
We are now working with President Poroshenko, Prime Minister
Yatsenyuk, and their team to direct $59 million to efforts in four
target areas: support for economic growth and reform;
countercorruption; energy diversification and efficiency; and
constitutional reform and national unity. We will send up a
congressional notification very shortly, but let me share some
highlights.
In the area of economic reform and growth, we will complement World
Bank and IMF-led fiscal and financial sector reforms with programs to
strengthen the banking sector; to make the business climate more
competitive and attractive to investors, including in the agriculture
sector; and to help Ukraine diversify its export markets. We are also
looking at how we can support President Poroshenko's plan for economic
revitalization of the country's east and south.
Our anticorruption support will help the government implement its
recently announced 3-year anticorruption strategy and 6-month action
plan by bolstering Ukraine's ability to deter, detect, investigate and
prosecute corruption wherever it festers; and by supporting citizens,
civil society, media, business and the government as they work together
to confront this scourge.
U.S. support in the energy area will include expertise and advice
to the government as it seeks to restructure and reform the sector, and
deploy new technologies to increase energy yields and promote
efficiency. And we will assist Ukraine in developing national plans for
sustainable use and management of natural resources.
And we will help the government with the constitutional reform and
broad decentralization of power that President Poroshenko has pledged
as an integral part of his peace plan and his effort to rebuild
national unity. This will include support and advice at the federal,
regional, and local level to implement political reform and
decentralization, and support for free and fair parliamentary elections
when they are called.
As we support Ukraine economically, we have also worked in lock-
step with the Ukrainian Government and our European allies and partners
to try to de-escalate tensions with Russia and Russian-backed
separatists. In successive settings, from Secretary Kerry's bilateral
meetings with Russian Foreign Minister Lavrov in March to the April
17th Geneva Joint Statement of U.S.-Ukrainian-Russian and EU Foreign
Ministers to the June 5th G7 declaration, we have supported the
Ukrainian Government's offers to address the legitimate concerns of
eastern Ukrainians and Russian speakers by political means, and to
offer an off-ramp to separatists and their Russian backers. These
efforts culminated in President Poroshenko's peace plan, which offers
amnesty to separatists who lay down their arms, political dialogue,
broad decentralization of power to Ukraine's regions and localities--
including over finances, language and culture, and local elections--in
short, virtually all the things that the separatists and Moscow had
demanded for months. President Poroshenko also initiated a 10-day
unilateral cease-fire from June 20-30 to provide the space for dialogue
with the separatists. But as you know, the cease-fire was instead met
with 10 days of violence, bloodshed, and land grabs by Russian-backed
separatists. Three Ukrainian border posts fell into their hands during
this period. Russia allowed tanks, heavy artillery, and fighters to
flow across the border, and continued to build up its forces and
weapons on Ukraine's border.
On June 27, EU leaders again called on Russia to end all support
for separatists; to control the border; to help establish an effective
OSCE monitoring regime; and use its influence with separatists to
return the three border checkpoints to Ukrainian authorities, release
the hostages they hold and launch substantial negotiations on the
implementation of President Poroshenko's peace plan. These are the same
criteria that the U.S. will continue to use to measure Russia's
willingness to de-escalate tensions in Ukraine. As the President has
said, we will judge Russia by its actions, not its words. Russia has
made too many commitments at the diplomatic table over the past 4
months that have been rendered hollow by the weapons, cash, and
fighters that continue to flow across the border to fuel the fight in
eastern Ukraine. In response, the U.S. and Europe have imposed repeated
rounds of sanctions to increase the cost Russia pays for its choices.
And we are ready to impose more costs--including targeted sector-
specific sanctions--very soon if Russia does not decisively change
course and break its ties with separatists.
As Russia's economy teeters on the brink of recession in part from
the cost of its intervention in Ukraine and the impact of U.S. and
international sanctions as noted in last week's IMF report, Russians
need to ask themselves what their government's policy has really
delivered for them or the people of Ukraine except economic hardship,
violence, kidnapping, and death. In Crimea, inflation has risen to 16.8
percent, tourism down 35 percent, and exports are plummeting. In
Donetsk and Luhansk, separatists have engaged in looting and bank
robbery, prevented the payment of pensions and wages, and held much of
the civilian population hostage in their homes. Now that separatists
are on the run, their tactics have become even more brutal as they set
up landmines and roadside bombs and destroy bridges and other critical
infrastructure.
Today, in Slovyansk, Kramatorsk and the surrounding towns that
Ukrainian forces have recently taken back from separatists' control,
the government is focused on delivering humanitarian aid, water, food
and supplies and reestablishing services from railway service to
pension payments. They are working to restore Ukrainian citizens' faith
in their democracy, their govenunent and its ability to serve people
who have been abused for too long.
Ukraine's success or failure in its struggle for peace,
reconciliation, and human dignity will impact the future of the whole
region, and with it, the prospect of achieving America's 20-year
objective of a Europe whole, free, and at peace. We, therefore,
continue to have a profound national interest in supporting the people
of Ukraine in their quest for a more stable, democratic, and prosperous
future. In this effort, we deeply appreciate Congress' bipartisan
attention and support.
The Chairman. Secretary Glaser.
STATEMENT OF HON. DANIEL L. GLASER, ASSISTANT SECRETARY FOR
TERRORIST FINANCING, U.S. DEPARTMENT OF TREASURY, WASHINGTON,
DC
Mr. Glaser. Thank you, Chairman Menendez, Ranking Member
Corker, and distinguished members of this committee, for
inviting me to speak to you again about the administration's
response to Russia's occupation and purported annexation of
Crimea, and its continued provocative actions elsewhere in
eastern Ukraine.
In my remarks today, I will discuss our continuing efforts
to impose additional costs on those who seek to destabilize
eastern Ukraine and maintain the occupation of Crimea. I will
describe the impact that our actions have had on those
targeted, as well as on the already faltering Russian economy.
I will also discuss the support we and the international
community have provided to Ukraine for its economic recovery.
President Obama has issued three Executive orders granting
Treasury authority to target those responsible for ongoing
unrest in eastern Ukraine. We have now issued five rounds of
designations under those Executive orders, responding to the
actions of Russia and Russian-backed separatists in Ukraine,
designating a total of 52 individuals and 19 entities,
including four banks. In so doing, we have sought to have the
greatest impact on those whose actions have threatened the
sovereignty and territorial integrity of Ukraine, mainly
separatist leaders, members of Putin's inner circle and the
entities that support them, and Russian Government officials.
Our actions have been complemented by designations announced by
other countries, including the EU, Canada, and Australia.
Most recently, on June 20, Treasury designated seven
individuals who attempted to establish illegal governments in
eastern Ukraine or assisted in arming separatist groups. The
United States is working with Ukrainian authorities to identify
and disrupt financing to those and other separatists.
As President Obama has stated repeatedly, the United States
remains prepared to impose additional sanctions, should
circumstances warrant. Currently, we are developing a number of
options, in the event Russia does not take immediate steps
toward de-escalation, including actions involving a broad range
of sectors. Of course, such preparation involves close
consultation with our partners to maximize the impact on the
Russian economy. In the past 2 weeks alone, I have personally
traveled to France, Germany, and the U.K. to advance
preparations. As Secretary Liu has said, ``If the moment comes
when we need to take additional steps, we will be prepared to
do so.''
Our measures and the threat of future measures have
exacerbated preexisting vulnerabilities of a Russian economy
weakened by years of mismanagement. IMF growth projections have
been downgraded twice this year and currently are close to
zero. The uncertainty created by the combination of Russia's
conduct in Ukraine and the ongoing threat of sanctions has led
to challenges for Russia's economic outlook, its most prominent
companies, and its economic policymakers.
President Putin himself has said that Western sanctions
imposed on Russia have had real impact on domestic businesses,
including limiting access to funding for many Russian
companies. As recently as this week, Russian Deputy Finance
Minister Sergei Storchak conceded that Western sanctions are
having a significant impact on the Russian economy. He went on
to say that, ``The effect of sanctions has intensified because
of the imposition of sanctions coincided with the fall in the
growth rate of the Russian economy.'' Indeed, we have witnessed
more than $50 billion in capital flight this year, and the IMF
and the Russian Central Bank project that net outflows will
reach $100 billion for the full year.
Increased risk premiums have caused a spike in borrowing
costs, shutting many Russian companies out of external debt
markets. While Russian politicians project confidence in the
face of sanctions, their government's actions show otherwise.
The Russian Central Bank has raised key interest rates twice
this year, and spent approximately $30 billion on foreign
exchange reserves since March to stabilize the ruble amid heavy
capital outflows in the first quarter. Despite these
interventions, the Russian ruble has depreciated by 5 percent
since the beginning of the year. President Putin admitted, last
month, that the Government of Russia may need to intervene with
budget funds to support Russia's banks.
As a result of sanctions, the Russian Government has openly
discussed diverting government funds to support Russian
industry. Recently, President Putin stated that Russia needs to
look into recapitalizing Gazprom by the amount it would cost to
build infrastructure in the Far East.
Taken as a whole, these measures indicate that the Russian
Government is focused on short-term crisis-fighting and that
its actions are costing Russia the investment needed to reverse
long-term downward economic trends.
In addition to our measures to isolate the Russian economy,
the United States Government is working with the international
community to support Ukrainian Government in returning the
country's economy to solid footing. We are working with the
IMF, World Bank, and others to ensure that Ukraine has the
support it needs over the coming months, as I outline in
greater detail in my written testimony.
By combining our efforts to impose financial costs on those
threatening peace and security in Ukraine with measures to
encourage Ukrainian economic recovery, the United States
Government is working to contribute to the development of a
strong, unified, and prosperous Ukraine.
Furthermore, we are prepared to take additional strong
measures to impose severe costs on Russia in defense of
Ukraine's sovereignty and territorial integrity.
Chairman Menendez, I would be happy to answer any
questions.
[The prepared statement of Mr. Glaser follows:]
Prepared Statement of Daniel L. Glaser
Chairman Menendez, Ranking Member Corker, and distinguished members
of this committee, thank you for inviting me to speak to you again
about the administration's response to Russia's occupation and
purported annexation of Crimea and its continued provocative actions
elsewhere in eastern Ukraine.
In my remarks today, I will describe our continuing efforts to
impose additional costs on those who seek to destabilize eastern
Ukraine and maintain the occupation of Crimea. I will describe the
impact that our actions have had on those targeted, as well as on an
already faltering Russian economy. I will also discuss the support that
we and the international community have provided to Ukraine for its
economic recovery.
imposing costs for continued instability in ukraine
The President has issued three Executive orders granting Treasury
authority to target those responsible for ongoing unrest in eastern
Ukraine and Russia's purported annexation of Crimea. We have now issued
five rounds of designations responding to Russia's actions and Russia-
backed separatists in Ukraine, designating a total of 52 individuals
and 19 entities, including 4 banks. In so doing, we have sought to have
the greatest impact on those whose actions have threatened the peace,
security, stability, sovereignty or territorial integrity of Ukraine--
mainly separatist leaders, members of Putin's inner circle and the
entities that support them, and Russian Government officials. Our
actions have been complemented by designations announced by others,
including the EU, Canada, and Australia.
Most recently on June 20, Treasury designated seven individuals who
attempted to establish illegitimate governments in eastern Ukraine or
assisted in arming separatist groups. These include: Denis Pushilin,
self-appointed leader of the so-called ``Donetsk People's Republic'';
Sergei Menyailo, who proclaimed himself ``acting governor'' of
Sevastopol and assisted in the formation of so-called ``defense
squads'' in Sevastopol; and Valery Bolotov, who proclaimed himself
``governor'' of the Luhansk region and publically ``declared war'' on
the government in Kiev. Additionally, the United States is working with
Ukrainian authorities to identify and disrupt financing to these and
other separatists.
As President Obama has stated repeatedly, the United States remains
prepared to impose additional sanctions should circumstances warrant.
Executive Order 13662 authorizes the targeting of individuals and
entities operating in sectors of the Russian economy as determined by
the Secretary of the Treasury, in consultation with the Secretary of
State. Currently, we are developing a number of options to take action
under this authority in the event Russia does not take immediate steps
toward de-escalation, including actions involving a broad range of
sectors. Of course, such preparation involves close consultation and
coordination with our EU, G7, and other international partners to
maximize the impact on the Russian economy. In the past 2 weeks alone,
I have personally traveled to France, Germany, and the U.K. to advance
preparations. As Secretary Lew has said, if the moment comes when we
need to take additional steps, we will be prepared to do so.
impact of measures
Our measures and the threat of future measures have exacerbated
preexisting vulnerabilities of a Russian economy weakened by years of
mismanagement. IMF growth projections have been downgraded twice this
year, and currently are close to zero. Moody's and Fitch have revised
the outlook on Russia's sovereign BBB rating from stable to negative,
while Standard and Poor's downgraded the sovereign rating by one notch
to BBB^, its lowest investment grade category. This downgrade forced
similar ratings cuts on such major Russian corporations as Gazprom,
Rosneft, and VTB Bank. The uncertainty created by the combination of
Russia's conduct in Ukraine--and the ongoing threat of sanctions--has
created challenges for Russia's economic outlook, its most prominent
companies and its economic policymakers.
President Putin himself has said that Western sanctions imposed on
Russia have had real impact on domestic businesses, including limiting
access to funding for many Russian companies. As recently as this week,
Russian Deputy Finance Minister Sergei Storchak conceded that Western
sanctions are having a significant, though indirect, impact on the
Russian economy. He went on to say that ``the effect of sanctions has
intensified because the imposition of sanctions coincided with a fall
in the growth rate of the Russian economy.''
Indeed, we have witnessed more than $50 billion in capital flight
this year and the IMF and Russian Central Bank project that net
outflows will reach $100 billion for the full year. The Russian Central
Bank has intervened heavily in order to stabilize the ruble amid
persistent outflows. Meanwhile, an increase in risk premium caused a
spike in borrowing costs shutting many Russian companies out of
external debt markets. Russia's Lukoil has indicated that it will cut
spending in order to reduce dependency on international debt markets.
Furthermore, the bottom lines of key Russian financial institutions
demonstrate the effects of a weakening ruble and deteriorating
investment climate. In late May, Russia's two largest banks by assets,
Sberbank and VTB, reported 18 and 98 percent drops in quarterly
profits, respectively. Finally, it is important to note that despite
the more recent recovery in asset prices, Russian asset prices continue
to underperform relative to their emerging market peers.
While Russian politicians project confidence in the face of
sanctions, their government's actions show otherwise. The Russian
Central Bank has raised key interest rates twice this year and spent
approximately $30 billion in foreign exchange reserves since March to
stabilize the ruble, amid heavy capital outflows in the first quarter.
Despite these interventions, the Russian ruble has depreciated by 5
percent since the beginning of the year. Likewise credit institutions'
liabilities to the Central Bank of Russia have increased by over $30
billion (25 percent) since February. President Putin admitted last
month that the Government of Russia may need to intervene with budget
funds to support Russia's banks.
As a result of sanctions, the Russian Government has openly
discussed diverting government funds to support Russian industry.
Recently, President Putin stated that Russia needs to look into
recapitalizing Gazprom by the amount it would cost to build
infrastructure in the Far East. Likewise, the Russian Ministry of Trade
and Industry has proposed an import substitution program increasing
annual domestic volume of production by more than $890 million starting
from 2015 in order to offset import losses. Taken as a whole, these
measures indicate that the Russian Government is focused on short-term
crisis fighting, which in addition to increasing the costs of Russia's
decision to intervene in Ukraine, is costing Russia the investment
needed to reverse Russia's long-term downward economic trends. To grow,
Russia needs foreign direct investment and to integrate with the global
economy. As a consequence, the isolation Russia now faces as a result
of its actions in Ukraine will have a significant impact on Russia's
growth prospects over the medium term.
support to ukraine
In addition to our measures to isolate the Russian economy, the
United States Government is working with the international community to
support the Ukrainian Government in returning the country's economy to
a solid footing. The approval on April 30 of a 2-year, $17 billion IMF
reform program has unlocked additional bilateral and multilateral
financial support and will set Ukraine on a path to sustainable growth.
The IMF is at the center of a broader, $27 billion international
support package, and is best placed to support Ukraine's implementation
of robust and market-oriented reforms. International assistance
totaling nearly $6 billion has been disbursed to date. The government
successfully issued $1 billion in 5-year, U.S.-backed debt at a
reasonable borrowing cost in mid-May. The first review of Ukraine's IMF
program began at the end of June, and provided Ukraine fulfills its
reform commitments, approximately $2 billion is expected to be provided
by the IMF, World Bank, and other donors by the end of July, with
additional resources scheduled for disbursement by the end of the year.
Ukraine's new government has already completed key policy reforms
that demonstrate its willingness to make the tough decisions necessary
to restore economic stability to Ukraine, and this momentum must be
maintained. Retail natural gas prices have been increased, a fiscally
responsible budget has been passed, the procurement law has been
amended to strengthen governance, and the central bank has allowed
market forces to determine the value of the currency. Still,
significant challenges remain, including continued implementation of
difficult reforms by the Ukrainian Government and ensuring Ukraine has
a stable supply of gas. At the same time, conflict in eastern Ukraine
is taking a significant toll on Ukraine's already vulnerable economy.
Economic activity in parts of eastern Ukraine has ground to a halt and
the security situation is undermining confidence and international
investment. We are working with the IMF, World Bank, and others to
ensure Ukraine has the support it needs over the coming months.
To complement this international financial assistance, expert
advisors from Treasury's Office of Technical Assistance have been
deployed to Kiev to help the Ukrainian authorities stabilize the
financial sector and implement reforms. Treasury advisors are working
closely with the Finance Ministry, National Bank of Ukraine, and
Deposit Guarantee Fund to develop strategies to manage public sector
debt, resolve failed banks, improve banking supervision, and spur
financial intermediation.
conclusion
By combining our efforts to impose financial costs on those
threatening peace and security in Ukraine with measures to encourage
Ukrainian economic recovery, the United States Government is working to
contribute to the development of a strong, unified, and prosperous
Ukraine. Furthermore, we are prepared to take additional strong
measures to impose severe costs on Russia in defense of Ukraine's
sovereignty and territorial integrity.
The Chairman. Thank you.
Secretary Chollet.
STATEMENT OF HON. DEREK CHOLLET, ASSISTANT SECRETARY OF DEFENSE
FOR INTERNATIONAL SECURITY AFFAIRS, U.S. DEPARTMENT OF DEFENSE,
WASHINGTON, DC
Mr. Chollet. Thanks. Mr. Chairman, Ranking Member Corker,
members of the committee, thank you for inviting me here today
to discuss the ongoing crisis in Ukraine and how the Department
of Defense is working to help Ukraine address its security
needs.
We remain deeply concerned by the security situation in
Ukraine's east, where the Russian military remains very active
in facilitating the movement of forces, equipment, and finances
across the border. Additionally, Russian irregular forces and
Russian-backed local separatists remain active inside eastern
Ukraine, and both are supported by Russian financing. These
actions are not consistent with Russia's pledge to stabilize
the situation and seek a negotiated outcome.
It is in our interest to have a Ukraine that is stable and
secure. Across the spectrum, Ukrainian leaders have made clear
that they want our help, and we are committed to assisting
them, which is a message that President Obama, Vice President
Biden, Secretaries Kerry and Hagel have made clear in their
meetings with their Ukrainian counterparts in the past month.
On security, we are working to support Ukraine along three
lines of effort.
First, we will continue to support Ukraine's urgent supply
needs. President Obama has approved $33 million in security
assistance for Ukraine since the beginning of the crisis. This
is an order of magnitude beyond our assistance in previous
years to Ukraine, and more than four times what we provided
Ukraine last year. This assistance has started to flow. We have
delivered 2,000 sets of body armor, first aid kits, tactical
radios, and 5,000 uniforms. Soon, we will send night-vision
devices, thermal imagers, EOD robots, Kevlar helmets, and
additional radios. We are actively pursuing additional sources
of assistance, which we will apply to Ukraine's most pressing
needs.
Second, beyond the immediate supply needs, the Ukrainian
military needs support through enhanced training and exercises.
As President Obama made clear after his meeting with President
Poroshenko last month, we are discussing additional steps to
help train and professionalize Ukraine's military. To aid this
effort, U.S. European Command has established a Senior Steering
Committee with Ukrainian counterparts to identify areas where
we can improve our bilateral military cooperation, conduct
assessments, and identify requirements we can address through
training and development. And those meetings are underway in
Kiev this week.
Third, and perhaps most importantly, we will work with
Ukraine on reforming and, in some cases, rebuilding its defense
institutions. While I was in Kiev last month, meeting with
Ukrainian Defense and National Security officials, the
Ukrainian Defense Minister said that the biggest obstacle to
reform is the military mind-set still largely oriented toward
the old Soviet way of doing things. And he requested our
assistance in reform and improving military education. To do
so, United States defense advisors will help the Ukrainians
develop a feasible and sustainable reform program. To get this
started, a five-member initial scoping team visited Kiev a few
weeks ago and met with various Ukrainian defense and security
officials.
Additionally, embedded United States civilian advisors in
the Ukrainian Defense Ministry can help the government build a
national security strategy that provides a cohesive vision for
the Ukrainian military, border guards, national guard, and
other security institutions.
Another area of needed reform will be in the defense
industry. Ukraine is endowed with an advanced defense
industrial base, that employs more than 40,000 people, which is
in danger of collapse due to the current reliance on the
Russian market. Given Russia's aggressive actions in Crimea,
Donetsk, and Lugansk, and elsewhere, the Ukrainian Government
has understandably stopped
all military sales to Russia. To reverse the downward trend in
the Ukrainian defense industry, United States advisors can help
Ukrainians develop long-term investment plans to enable them to
attract other markets, develop long-term investment plans, and
shift away from reliance on Russia.
Mr. Chairman, members of this committee, the United States
cannot achieve success in these three areas of security
assistance by itself. We need others to join us. For example,
NATO allies who have experienced their own challenging defense
reforms over the past decade, such as Poland and the Baltic
States, can provide abundant expertise on similar reforms in
Ukraine. And we need other NATO allies to step up and help
Ukraine security forces to continue to reform and modernize and
professionalize over the medium to long term.
We will also continue to rely on the leadership from
Congress, especially in supporting the European Reassurance
Initiative, which President Obama announced on his trip to
Europe last month. If approved, this initiative of $1 billion
will help the U.S. military to increase its defense presence in
Europe and would cover enhanced training, readiness, exercises,
and facility improvements in Europe to reassure our allies. The
initiative would also bolster our materiel assistance to key
partners, such as Ukraine.
So, I look forward to working with this committee, and the
Congress as a whole, as we seek your approval on this important
effort. Thank you, and I look forward to your questions.
[The prepared statement of Mr. Chollet follows:]
Prepared Statement of Derek Chollet
Chairman Menendez, Ranking Member Corker, and committee members,
thank you for inviting me to discuss the ongoing crisis in Ukraine,
which was precipitated by Russia's occupation of Crimea and its ongoing
destabilization campaign in eastern Ukraine. Today I will update you on
the multiple lines of effort that the Department of Defense is pursuing
to help Ukraine meet its immediate security needs, and also to help
Ukraine develop a more professional and capable military for the
future.
We are many months into the crisis, and Russia's actions are as
unacceptable today as they were in February. Our commander in Europe,
General Breedlove, succinctly described Russia's posture and actions in
a recent press conference. He said that Russian regular forces are very
active along the border of Ukraine facilitating the movement of forces,
equipment, and finances across the border. Russian irregular forces,
and Russian-led and -backed local separatists, are active inside
eastern Ukraine, and they are supported by Russian financing. These
actions fly in the face of international commitments and standards
governing relations among states, so we have taken concerted actions as
a government to raise Russia's costs for these blatantly unacceptable
actions.
I visited Kiev just before the inauguration of Ukraine's new
President Poroshenko in June. Across the spectrum, Ukrainian leaders
made clear that they continue to want the U.S. Government's help, and I
assured them that we are committed to assisting them. Ukraine matters.
It is a European nation, bordering NATO member states. The Ukrainian
people freely elected a new President who has pledged to fulfill their
desire to increase cooperation with Europe both politically and
economically, and who has just signed a trade agreement with the
European Union to accelerate that process. Ukraine has a long history
of security cooperation with the United States, and it has been a
steadfast coalition partner in Afghanistan, Iraq, Kosovo, and Bosnia,
as well as in counterpiracy operations off the Horn of Africa.
We want Ukraine to continue on this trajectory, and to do so we're
helping in three ways.
First, though we have been clear that there is no military solution
to this crisis, Ukraine has the right to restore order and stability
within its territory through the use of its armed forces, internal
security forces, and border guards. Before he met with Ukrainian
President Poroshenko in June, President Obama approved an additional
tranche of $5 million in nonlethal security assistance for Ukraine on
June 4, and Vice President Biden announced an additional $10 million
for assistance to the State Border Guard Service on June 7, bringing
the total since the beginning of the crisis to $33 million currently
being used for nonlethal security assistance.
During the months of June and July, nonlethal assistance started to
flow. For example:
1,929 first aid kits were delivered to the military hospital
in Kharkiv, in eastern Ukraine, in late June.
80 multiband handheld radios, including batteries, arrived
in Kiev in late June, as did 1,000 sleeping mats and over 5,000
uniform items.
We completed delivery of 2,000 body armor vests to Ukraine
on July 4.
Over the next 2 months, we will purchase and ship 150 night-vision
devices, 150 thermal imagers, 1,000 Kevlar helmets, 5 explosive
ordnance disposal robots, and another 96 radios.
Second, beyond immediate needs, the Ukrainian military requires
support through training and exercises. Ukraine has been a member of
NATO's Partnership for Peace since 1994, and it has a long history of
hosting bilateral exercises with the United States and multilateral
exercises with NATO member states. But prior Ukrainian Governments,
especially that led by former President Yanukovych, starved the
military not only of modern equipment, but also of sufficient training.
The new Ukrainian Government, under President Poroshenko, is clear
about its desire for more military cooperation, including training and
development. The U.S. European Command (USEUCOM) has established a
senior steering committee with Ukrainian counterparts to identify areas
where we can improve our bilateral military cooperation, conduct
assessments, and identify requirements we can address through training
and development.
Third, and perhaps most importantly, we will work with Ukraine on
reforming and, in some cases, rebuilding its defense institutions. We
must help Ukraine spend its defense budget more wisely, plan for a new
navy to replace the naval assets unlawfully seized by Russia, and
expand and empower a cadre of noncommissioned officers. While I was in
Kiev, senior Ministry of Defense officials said that the biggest
obstacle to reform is a military mindset that is still largely oriented
toward the old, Soviet way of doing things, and requested our
assistance in improving military education. To do so, advisors from the
Department of Defense, including USEUCOM, will help the Ukrainians
develop a feasible and sustainable reform program. A five-member
initial scoping team, composed of civilian Defense personnel and
contracting experts, visited Kiev on June 15-19 and met with various
Ukrainian defense and security officials. Also, embedded U.S. civilian
advisors in the Ukrainian Defense Ministry will help the government
build a national security strategy that provides a cohesive vision for
the Ukrainian Armed Forces, border guards, National Guard, and other
security institutions.
Another area of beneficial reform will be in the defense industry.
Ukraine is endowed with a strong and advanced defense industrial base--
employing more than 40,000 people--which is in danger of collapse due
to its current reliance on the Russian market. Due to Russia's
aggressive actions in Crimea, Donetsk, and Luhansk, the Ukrainian
Government has understandably stopped all military sales to Russia.
U.S. advisors can help them diversify this industry to attract other
markets, develop long-term investment plans, and shift away from
reliance on Russia.
The United States cannot realize success in these three areas of
security assistance by itself. We need others to join us. New NATO
allies who have experienced their own challenging defense reforms over
the past decade, such as Poland and the Baltic States, can provide
abundant expertise on similar reforms for Ukraine. We will engage with
these allies and others to build a comprehensive and multifaceted
approach to help Ukraine defend itself adequately, and become a more
secure and capable partner.
Chairman Menendez, Ranking Member Corker, and committee members, we
need Congress' help too. The administration recently announced its
European Reassurance Initiative (ERI), which was reflected in the
budget amendment submitted last month. If approved, this $1 billion
initiative would help the Department increase its defense presence in
Europe and would cover enhanced training, readiness, exercises, and
facility improvements in Europe to reassure our allies. In addition,
ERI funds could be used to bolster our material assistance to key
partners such as Ukraine, so I urge congressional approval of this
important proposal.
Thank you for your time. I look forward to your questions.
The Chairman. Well, thank you all.
Let me start with you, Secretary Nuland. A month ago,
President Obama and the G7 promised more economic sanctions if
Putin did not stop inciting violence in eastern Ukraine. In a
pattern that seems increasingly familiar to all of us, Putin
made gestures that suggested the appearance of Russian
withdrawal, while simultaneously engaging in other actions,
such as having tanks cross the border and overseeing the cutoff
to gas supplies, that are hostile by anyone's standard. And
then, reading from your testimony, Russia has made too many
commitments at the diplomatic table over the past 4 months that
have been rendered hollow by the weapons, cash, and fighters
that continue to flow across the border to fuel the fight in
eastern Ukraine. And that element was also echoed by Secretary
Chollet.
So, I look at what the standards were, which was calling on
Russia to end all support for separatists to control the
border, to help establish an effective OSCE monitoring regime,
to use its influence with separatists to return the three
border checkpoints to Ukrainian authorities, to release the
hostages they hold, to launch substantial negotiations on the
implementation of President Poroshenko's peace plan. And yet I
see no advance in any of those standards.
So, what are we waiting for?
Ms. Nuland. Thank you, Chairman.
Well, I certainly do not disagree with your assessment that
we have not seen progress on any of the areas that I outlined
or, indeed, that the G7 outlined or that the EU Council
outlined. As I said, when President Poroshenko came into
office, he came in with his broad and deep peace plan and was
committed to testing it. His first aspiration was to test it in
concert with separatists. So, he first wanted to try to
negotiate a cease-fire that was bilateral. When, after a couple
of weeks of effort, that failed, he decided to initiate his
cease-fire unilaterally. And that was a test that he asked the
United States and Europe to support, to see whether separatists
would meet him halfway, to see whether, in fact, Russia would
meet him halfway after the meeting at Normandy, brokered by
Chancellor Merkel, President Hollande, between President Putin
and President Poroshenko. As you have noted--and as I noted in
my testimony--that cease-fire came and went, and, in the
process, Ukraine lost territory to separatists, it lost border
control posts, and the weapons continued to flow.
The Europeans continue to try to bring the sides together
to see if a cease-fire can be reestablished. They have failed,
over the last week, to do that, because separatists have
refused to meet in any location that is safe.
So, we are continuing to consult with our European allies.
The President, the Secretary, all of us, have been in constant
day-by-day discussion with the Europeans to assess. And I think
our analysis is the same, that we have not seen progress.
So, in that context, we are continuing to prepare the next
round of sanctions. As we have said repeatedly, and as the
President has said, these sanctions will be more effective,
they will be stronger, if the United States and Europe work
together. And we----
The Chairman. But, it begs----
Ms. Nuland [continuing]. Are working on those.
The Chairman. I appreciate your answer, and I have let you
go, to try to make it as substantive as possible, but it begs
the question, what are we waiting for? I understand all of
that. I think the Ukrainian Government has bent over backward
to try to get to a peaceful resolution that will get the
Russians to ultimately go along. But, all the Russians call for
are cease-fires, and then they take advantage of it, and they
do nothing in return.
What is this about a Ukrainian fighter pilot turning up in
Russian jails? How does Russia justify having a Ukrainian Armed
Force member acquired by separatists ending up in a Russian
jail? How is that an example of trying to resolve the problem?
Ms. Nuland. Well, thank you for citing that case, which is
clearly a violation of international law and human rights. This
is a Ukrainian servicemember who was taken hostage on the
battlefield by separatists about a month ago, and she has now
turned up, as you said, in a Russian prison, clearly making
obvious that link between Russia and separatists.
Senator, we are continuing the conversation with the
Europeans about the right moment for sanctions as they prepare
for the last meeting of European heads before the summer break,
which is on July 16.
The Chairman. So, if, per chance, on July 16, the European
Union heads do not come to a conclusion and move forward on
sanctions, which is only about less than a week away or so,
then will we have the summer lapse, and Putin will know that
there are no consequences, and the United States will stay on
the sidelines, waiting for the Europeans? Is that something
that we could actually expect?
Ms. Nuland. Chairman, as I said, our goal is to act in
concert with Europe, but the President has always made clear
that, if necessary, he will act on our own.
The Chairman. Let me ask you this. We see the Russians
creating a cessation of oil deliveries and gas deliveries to
the Ukraine. And I would love to hear what that looks like,
going into the fall, if it continues, which will not be too far
in the distance. We have American companies helping Russia
learn how to drill offshore in the Arctic and exploit their
shale resources. Now, I do not think we should necessarily
create a Russian shale revolution and thereby strengthen
Russia's energy weapon, which they have shown clearly that they
are willing to use, and threaten others in Europe to do. Where
is the administration on that issue?
Ms. Nuland. Chairman, we have made clear to U.S. business
the risks of continuing to provide high-tech investment in the
current climate. We have also, in the context of our sanctions
work internally and with the Europeans, focused intensively on
what we might do in the next round with regard to high-
technology investment. You are not wrong that Russia depends on
outside investment in order to take its energy exports to the
next level and to----
The Chairman. You know, Russia is basically an extracting
country. It does not create too much more. And that is the
biggest driver of its economy. It seems to me that if the
Russians have shown themselves willing to use energy as a
weapon, which they have--Ukraine is the perfect example of it,
but even the European reticence is, in large part, about energy
questions--then, at the
end of the day, why would the United States, with all of its
national interests and national security interests, allow
entities to ultimately help the Russians further develop their
energy resources so that they would have more energy to be able
to use as a weapon? Is anybody thinking about that?
Ms. Nuland. We are thinking about that, Chairman. This is
in the category of a set of measures one could take that would
only be effective, in terms of the goal that you seek, if they
were done in concert with Europe, because, while the United
States has this technology, so do some key European companies,
as well, and we would not want to be in a situation of denying
our companies and having Europeans backfill.
The Chairman. But, I think there is----
Ms. Nuland. So, we are having a conversation----
The Chairman [continuing]. Right now----
Ms. Nuland [continuing]. With Europe about it.
The Chairman. And I doubt that there is anyone in the world
as advanced as the United States on the specific technologies
as it relates to shale exploration. It seems to me that we
fight with one hand behind our back, maybe two, with a leader
who has no limitations, from what I can gather, other than when
he is faced with an equivalent countervailing force that is
either military--and which we are not talking about, in this
case--or economic. And so I do not get it. I do not know how
much longer there are going to be those of us willing to wait
before we act independently.
Senator Corker.
Senator Corker. Thank you, Mr. Chairman. And some of your
questions really are the kind of questions I want to pursue.
And, Secretary Nuland, I know that you do a good job of
staying in touch with us, and I appreciate that. And yet,
seriously, I sometimes wonder whether Foreign Service officers
feel like resigning when you are put out there to continue to
sort of sound tough, but know that nothing is really going to
happen.
I am just curious, knowing that you are serving in the
State Department and have responsibilities, if you, to the
degree that you can, would tell us what really is happening
here with the sanctions? The fact is, everything we said we
were going to put sanctions in place for, relative to Russian
actions, has occurred. Every single thing. They have never
responded to the threats, the hollow threats that we put out
there. What is really driving our sort of feckless sanctions
policy right now? Is it the internal debate in the
administration between the economic folks, who are so worried
about the elections this fall that they do not want to do
anything that might blow back on us economically, and the
security folks, who are concerned about that very bitter peace
that we are basically establishing right now with Russia? Is
that what is driving it? Or is it the fact that we know Europe
is never going to come to the table?
What is keeping us from doing some of the things that the
chairman has mentioned, that I have talked to you about on the
phone? What is keeping us from going ahead and putting
sanctions in place, when we know that there is Russian military
equipment on the ground in eastern Ukraine? You all know that,
and have said it publicly. They are funding separatists. What
else is it that we need to see happen and know happen before we
actually put biting sanctions in place?
Ms. Nuland. Well, first of all, Chairman, just to say, it
is my great honor to serve in this position at this very vital
moment.
Senator Corker. I know it has to be very frustrating,
though, to continue to wake up in the mornings and look in the
mirror and practice talking tough, but know that nothing is
going to happen. I really respect your service. I would just
love for you to share with me why nothing is happening.
Ms. Nuland. First, Ranking Member Corker, I think it is
important to go back and look at the last few months and take
some appropriate look at what might have happened, had we not
had the rounds of sanctions that we have had.
Senator Corker. I do not want to hear that. I read the
papers, and I talk to you. Tell me what the rub is within the
administration that is keeping it continuing to lay out
redlines and make threats, but not act, continuing to undermine
our credibility, continuing to move toward this bitter peace I
alluded to. Tell me what is keeping us from taking action today
like putting military equipment on the ground. We know they are
funding separatists. We know they are playing this duplicitous
game of escalation and de-escalation. Why are we not acting?
Ms. Nuland. Again, as I said, with regard to this next
round, it was the desire, first, of President Poroshenko, to
test his peace plan. He has now done that. We are quite clear
that we have not seen the results that we are seeking from
Russia, so we are now talking to the Europeans about when it is
appropriate to move together. As I said----
Senator Corker. When is it appropriate?
Ms. Nuland. As I said, their last heads meeting of the
summer is next week. It is on July 16. And they very much--and
we very much--prefer to move together.
Senator Corker. Yes.
Ms. Nuland. So, we are looking at the evidence, and we are
building the package as we move forward.
Senator Corker. You remember you told me, that the last
meeting we were going to have was the end of June. And that is
when we were going to take action. And I know that everybody on
this panel has to be incredibly frustrated. Again, so we can
understand the dynamic within the White House, within the
administration, I just wish that you would explain to me what
it is, internally, that is keeping us from going ahead and
putting sanctions in place, when we know exactly what is
happening.
Ms. Nuland. I think the primary desire, at the moment, is
to stay tightly coordinated with Europe as we move forward,
because the sanctions will be stronger if we move together.
But, Chairman, if I might, for a minute, just remind that
we--you know, there was a moment, where we had 40,000 Russian
troops ringing the border. We threatened sanctions, and those
troops moved back----
Senator Corker. That is absolutely untrue. That is
absolutely untrue. They stayed on the border----
Ms. Nuland. Some of them----
Senator Corker [continuing]. Weeks and weeks and weeks
afterward. And they kept saying they were moving away, and our
NATO friends kept saying they are not moving away. That is
absolutely not true, what you just said.
Ms. Nuland. There was a moment when we had 40,000 combat
units ready to move. A lot of them moved back, but you are not
wrong that we have a significant number returned. There was a
time when we thought we would not have an election in Ukraine.
And it was the solidarity between the United States and Europe,
including the threat of sanctions, that helped preserve the
space for those elections.
So, we have, when we work together with Europe, been able
to provide time and space for Ukraine to recover. We need to,
to the extent that we can, continue to work with Europe,
because that will make this policy as effective as possible.
Senator Corker. I am embarrassed for us. And I just wish
the administration would quit saying publicly, through you and
others, the things that are being said, when we know that we
are not going to act. We do not act.
Secretary Glaser, you talk about the damage we have done to
the economy. I just had someone look--and maybe we read the
chart wrong--and I just looked at it briefly, and I apologize
for not having done it an hour or so ago--but, the Russian
stock market is up 22 percent since March. Whenever I talk to
people at the White House, they tell me how damaging this has
been to the Russian economy, and then I keep citing stats that
point to something very, very different.
Am I correct that the Russian stock market is up 22 percent
since March? Am I reading the chart wrong?
Mr. Glaser. The Russian stock market is up. I do not know
if that is the exact right number, but I am sure that is
correct.
Senator Corker. Okay.
Mr. Glaser. But----
Senator Corker. So, just out of curiosity--I know there are
a few oligarchs, that probably are having some unpleasant
travel experiences and maybe having some assets frozen. But,
how is this affecting Putin's calculation, when the economy is
booming? Because I guess people around the world realize that
our threats are hollow, that we are never going to do anything.
Germany sees itself as a bridge between us and Russia. Chairman
and I were at a dinner one night, where that was clearly
pointed out. They are not going to take action. So, how can you
say that the sanctions that we have put in place already have
had any effect whatsoever on Russian behavior?
Mr. Glaser. Well, thank you for the question, Mr. Senator.
I do not think that short-term gains in the Russian stock
market counterbalance the long-term real damage that we have
done, and are continuing to do, to the Russian economy. That is
been recognized by the Russian Government, as I note in my
testimony. It is recognized by foreign investors, as
demonstrated by the fact that Russian businesses, Russians
banks, are having a hard time raising capital in international
capital markets. It is recognized by the Russian people,
themselves, as reflected by the $50 billion in capital flight
we have seen already, estimated to be at $100 billion by the
end of the year. So, that is the Russian Government, the
Russian people, and international investors, who all recognize
that the Russian economy has been severely damaged, both by
Russian mismanagement and by our sanctions and threat of future
sanctions.
So, I do think that we could point to real impact that we
have had. And I think it is a fair question, At what point does
this start to impact Russian strategic calculations? And you
are absolutely correct. I do think that, at this point, as
Toria said, we have had some deterrent impact on Russia,
particularly in terms of tactics. But, it is clear to all of us
that, as a broad strategic matter, their strategy remains the
same. And that is why, as Toria said, we are working so hard
internally and working so hard with our friends and partners in
Europe and in the G7 to make sure that, when the time comes, we
have a very strong package of measures. And I am quite
confident that, at that time, we will have a strong package of
measures, and it will do severe damage to the Russian economy.
Senator Corker. Mr. Chairman, thank you for the time.
I just want to close by saying that, again, I respect each
of your service to our country. I know that each of you have to
be somewhat disappointed in the actions that have not been
taken.
And, Secretary Chollet, I mean, $33 million in assistance
to the Ukrainian military, I think that is nice. We still have
not done the things that they have really asked us to do.
And I would just say, to Secretary Glaser, the damage you
are talking about that the Russian economy will see, I think
our country acting like such a paper tiger to the world on this
and so many other fronts is doing incredible long-term damage
to our Nation. And I do hope, at some point, the administration
will actually follow through on the things that it continues to
tout publicly.
Thank you, Mr. Chairman.
The Chairman. Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman.
Thank you all for being here.
Secretary Chollet, there were a number of reports over the
weekend about successes of the Ukrainian military. And I wonder
if you could talk a little bit about how substantive we think
those successes were, what we attribute those to, and what
response we are seeing out of Russia.
Mr. Chollet. Thanks, Senator.
You are absolutely right, there have been, over the last 4
or 5 days, some significant successes by the Ukrainian military
in the east. A major city, Slovyansk, was liberated and is in
control now of the Ukrainians. There are several other key
cities that are now largely surrounded by the Ukrainian
military. We are watching that situation very closely.
I think there is probably not one single answer to why we
have seen the tide turn, at least for the moment. And I want to
stress that we are not--this is not over yet. So, although the
trendline is good for now, we need to watch this very closely.
It could be that the cease-fire period allowed the Ukrainian
military to regroup, orient itself. As you have seen, President
Poroshenko has been very active in the planning and the
leadership of this. He was, just yesterday, dressed in military
fatigues in the field, talking to his troops and his generals.
But also, I think you can see that, although there is a
significant Russian presence on the border, that has been
reduced. We are still seeing weapons appear on one side of the
border, and then mysteriously appear on the other side of the
border, that are clearly Russian origin.
But, so, I think it is a combination of a little bit of a
lessening of support by Russia, but then also an opportunity
for the Ukrainians to regroup after this very quickly cascading
crisis over the previous months. The cease-fire, I think
helped.
Senator Shaheen. Well, again, if I could ask you to answer
on what do we think--why do we think Russia has pulled back
somewhat, and what do we think their continued response will be
if the Ukrainian military continues to be successful?
Mr. Chollet. So, on why Russia has pulled back, I do think
the sanctions have helped. I think this was--they did have an
effect, and they certainly changed Putin's calculation on how
much support he would be willing to give and how deep he would
get into this. The Ukrainians have also been able to improve
their border security. They have said that their border is
sealed along the east. That has been a very porous border. When
I was there, a month ago, and was briefed by the head of the
Border Security, it was described how, in many cases, it is not
even demarcated, the border between Ukraine and Russia, so that
I think that has helped.
I think we have to be very mindful of what the Russian
response could be, and that is why we are watching this so
closely. It is a very dangerous situation. And, of course, the
Ukrainians need to be vigilant, themselves, on how they handle
the situation, in terms of civilian casualties in the
surrounding of these cities. And they have stressed to us that
they are going to be very careful about how they handle this
situation.
But, I think we have to really expect the worst, in terms
of Russian response; and that is why we are watching it so
closely.
Senator Shaheen. Secretary Nuland, can I ask you to respond
to that, too? Assuming that the Ukrainians continue to be
successful in throwing the rebels out of the cities that they
are holding and actually forcing them, many of whom are
Russian, back into Russia, what do we think Putin's response
will be? And are we concerned that their success means that
Russia will be more aggressive in coming into eastern Ukraine?
Ms. Nuland. Again, Senator, I think it depends on how Putin
ultimately calculates his interests. He has other ways to
create pressure and destabilization on Ukraine, including the
energy card and the economic card. But, our hope would be that,
as the Ukrainians, as Assistant Secretary Chollet said, harden
the border and make it more difficult to covertly support the
separatists, that the choices become more stark for Russia, at
least on the military side.
Another factor that I think has contributed to the
Ukrainian success is that, in the towns that separatists have
held, Slovyansk and Kramatorsk before they were liberated,
human rights abuses, looting, abuse of the civilian population
have gravely turned those in the east who may have had affinity
toward Russia, who may have had affinity toward the
separatists' agenda at the beginning, firmly against them. And
the Ukrainian military has benefited from improved intelligence
from the population that wants these guys gone.
So, it is a matter of the Ukrainians continuing to deploy
careful, judicious tactics to make a success and restore good
livelihood in places like Kramatorsk and Slovyansk, that are
free, and make them an example in Donetsk, but also continuing
to raise the cost of military intervention by raising that
border, by making it clear that, in the international
community, we will sanction against more military--more
transfers of heavy metal and those kinds of things.
Senator Shaheen. And are we seeing Poroshenko being willing
to address corruption within the country? And what kinds of
concrete steps has he taken and has he committed to take?
Ms. Nuland. The government, just last week, published its
3-year anticorruption plan and its 6-month action plan. As you
know, Senator, they have already started to put a legislative
base in place through the Rada that was part of the IMF
conditionality. There is more legislative base required as part
of their association with the European Union. The key focuses
of the 6-month action plan are preventing conflict of interest
for public servants, strengthening punishment for corruption,
judicial reform, going after some of the most corrupt folks in
the system, e-governance, creating transparency, those kinds of
things. And we are committing significant U.S. assistance to
help in the anticorruption effort, as is the European Union.
But, we will have to judge them by how they implement. It is a
very difficult, pernicious problem throughout society, as you
know.
Senator Shaheen. And is that an agenda that is helpful as
they are taking back cities in eastern Ukraine, to be able to
show very specific actions? And are they willing to do that?
And do they have support from local officials in those
communities?
Ms. Nuland. It was the number one plank on which President
Poroshenko ran for office. Anticorruption, clean government,
clean Ukraine, Europe, and peace--those were his three
platforms. So, they have now got to prove it on all sides.
In eastern Ukraine, the number one concern is economic
opportunity and the fact that it is been, essentially, a rust-
belt, heavy-industry economy. So, as the Ukrainian Government
takes back parts of eastern Ukraine, they are reaching out to
us, they are reaching out to the European Union, asking for
support for microprojects and other things that will quickly
jump-start the economy and, over the longer term,
diversification of that economy away from heavy industry and
extractive, and into things that will bring innovation and
technology and opportunity to the Donbas.
Senator Shaheen. My time is up. Thank you.
I would suggest that energy efficiency, as they are looking
at projects, is one great opportunity that they should take
advantage of.
The Chairman. Senator Flake.
Senator Flake. Thank you.
Secretary Nuland, I think we are all buoyed by what we have
heard in the last couple of weeks, particularly the military
successes, and how we attribute that. I think we are all
surprised that the Ukrainian military is showing more strength
then they seemed to have before. But also, I think a lot of it
is the fact that the elections were good, went well, the
government has legitimacy, people have some hope, in the east
at least. With regard to further action by the Russians and
their calculations and our own sanctions, I could not agree
more that the sanctions are more effective, I have always felt,
in other areas of the world as well, when they are
multilateral, not unilateral. And it is far more effective if
we work hand in glove with Europe.
Say the same situation that we have today, roughly,
persists, that Russia kind of plays this game, maybe the
Ukrainian military is successful on and off, taking another
city or pushing back a little. I just want your honest
assessment of where Europe is, here. Will they move forward,
imposing tougher sanctions, if we have anything approximating
the status quo in Ukraine?
Ms. Nuland. It is my judgment, based on hours and hours and
hours of consultation with Europeans and trips across some 20
of the 28 European Union countries, that, if Russia does not
stop rearming separatists, does not stop its financial support,
that we will have European support for another round of
sanctions. It may not be completely parallel to everything that
we want to do, but this is a process moving forward. There is
no one in Europe who thinks that what is happening in eastern
Ukraine is in the EU's interest or Europe's interest, and
everybody wants to get back to a place where there are
civilized relations between Russia and Ukraine. So, we have to
make it cost if Putin continues to go down that road.
Senator Flake. Can you describe, outside of sanctions, what
efforts are being made to push back on Russia's failure to--
pull back, I should say, further than they have? Aside from
sanctions, what efforts is the State Department undertaking?
Ms. Nuland. We have also, working with Europe, put in place
an intensive campaign of diplomatic and political and, to some
extent, economic isolation. For example, as you know, the
United States has ceased virtually all military-to-military
cooperation with Russia. We have ceased virtually all economic
cooperation at the government level--high technology, all that
kind of thing. The Europeans have largely matched that. You
will recall that we downgraded the G8 back to a G7, and had it
in Brussels without the Russians. None of us, with the
exception of Normandy and a couple of other things, have been
welcoming senior-level Russians in our capitals. We have been
restricting the work we do together to those things that are
clearly in our global shared interest.
Senator Flake. Mr. Chollet, the Ukrainian military benefits
from--I guess it is the Partners for Peace Program with NATO.
Can you describe that? How is that helping them prepare and
grow and have the capabilities that they need?
Mr. Chollet. Absolutely. It has helped them over 20 years
that they have been a NATO partner, and they have operated with
United States and NATO forces in places like Kosovo and Iraq
and Afghanistan still today. And so, there is no doubt that
their partnership with NATO has helped them in the course of
this crisis. The fact that they were a partner with NATO has
helped us diplomatically and militarily, in terms of supporting
Ukraine in various meetings in Brussels of both Secretary Kerry
and Secretary Hagel, around the NATO Ukraine Council. So, there
is a lot of support that they get, and there is practical help
that they get. And NATO--in addition to United States bilateral
efforts, NATO is also seeking ways to continue to help Ukraine
reform and further professionalize its military.
Senator Flake. Is the Ukrainian military and the government
satisfied with our efforts to bolster the military there?
Mr. Chollet. In my talks, a month ago, with the then-
Ukrainian Defense Minister--we have a new Defense Minister--
but, as well as the National Security Advisor, we talked a lot
about the support that they were looking for, and some of which
is support that has been delivered since my visit, particularly
in the body armor, which they were very focused on. There are
other items that are on the way. We have pledged to do--we can
pay for--things like night vision, and border security is
something that they are very, very focused on. They have a very
long list of asks, as you have probably seen. And part of the
point of the discussions that I have had, that Secretary Hagel
has had, that our European Command team is having today in
Kiev, is to talk with them in more detail about further needs
that they have.
Senator Flake. All right.
Thank you, Mr. Chairman.
The Chairman. Senator Murphy.
Senator Murphy. Thank you very much, Mr. Chairman.
You know, this is not the cold war. The world does not
revolve around who is with the United States and who is with
Russia any longer. There are paradigms that matter a lot more
to us than that. But, it has similarities, in the sense that
this is a long-term engagement in which we are creating a
contrast with Russia for the countries that lie along the
faultline between East and West. And what matters most, really,
is the work that we do over years and decades to rebuild the
economic and military capacity of those countries so that they
truly have a choice.
I join with Senator Corker in lacking envy for the position
that you are in, but for different reasons. I think we want to
be careful not to be too responsive in the short run so as to
pollute the efforts that we need to make in coordination with
the Europeans to win the long-term game. The Russians used to
be the best at playing the long game; that is how they expelled
Napoleon from Russian territory. Today, they are all about
short-term return. We now have the advantage, hopefully, of
seeing the long-term game.
However, Secretary Nuland, I want to challenge a little bit
of your optimism about where Europe is heading. I agree with
Senator Flake that we have to do this, to the extent possible,
in coordination with Europe. But, they seem to be moving
backward in some ways. The French are arming the Russians.
There are about a half-dozen EU countries now that are
considering building the South Stream Pipeline even though it
contravenes the third energy package directives out of the EU.
I think that further complicates your work. It is more the
reason why I am not envious of the position you are in, because
I think that you are working with a continent in which they
fundamentally disagree as to what kind of existential threat
Russian aggression presents them. We tell them that they have
to be serious about this, and they turn around and have a very
different view.
So, am I wrong to think that, in some ways, Europe is
moving in the wrong direction rather than, in your estimation,
kind of holding a neutral position, pending new developments?
Ms. Nuland. Senator, as you know, because you have traveled
to a very large number of the countries under my
responsibility, there are lots of different views and lots of
different situations within Europe, in terms of their historic
structural dependency on Russia. What we are trying to do in
the conversation is make the point that you have made, that
everything is connected to everything, that what we offer is a
democratic free-market model, and that is what we need to
support in Ukraine, in Moldova, in Georgia.
On things like South Stream, you made a good impact when
you were in Bulgaria, and that was very important for U.S.
diplomacy. I would, though, give a shout-out also to the EU,
which has suspended support for South Stream until it can
further evaluate the larger dependency impact of that project.
And we are working intensively with the European Union on the
larger issue--and with the nation-states--of energy
diversification, giving them other options--interconnectors,
LNG, other sources of energy to reduce their dependence--major
line of effort of what we are involved with.
So, I think it is an issue of continuing to talk to the
Europeans about our larger strategic interest of creating less
dependency on countries that are autocratic and countries that
use trade as a weapon and countries that use energy as a
weapon, and more of a vibrant market set of principles within
Europe.
Senator Murphy. My default is to do this in concert with
the Europeans, but when we were in Bulgaria, we did see the
effect of unilateral United States sanctions. We sanctioned a
Russian individual, Timchenko, who was potentially going to be
connected to the construction of the South Stream Pipeline into
Bulgaria. I am not exactly sure why Bulgaria decided to halt
construction, but there is a lot of speculation that part of it
was that they were worried about the consequences of doing
business with an individual who was sanctioned unilaterally by
the United States.
So, maybe a question to you, Mr. Glaser. As you think about
the impact of unilateral sanctions, there certainly seems to be
some evidence that, if the Europeans are not willing to move
with us, that there is some impact when the United States acts
alone.
Mr. Glaser. Absolutely, Mr. Senator. And, as Assistant
Secretary Nuland said, President Obama has repeatedly
emphasized that we will be prepared to act alone if we need to
act alone. And, you are right, the United States plays a
pivotal role in the international economy, we play a pivotal
role in the international financial system, and that does give
us power, and it gives us leverage. And it is leverage that we
have been using, as you point out, Mr. Senator, in the case of
Russia, frankly, through many of our sanctions programs across
a wide range of issues. We have repeatedly shown that, when we
act alone, we can act in a meaningful way and we can have real
consequences, as I tried to outline in my testimony.
All that said, as you point out, it is obviously the case
that we will be more effective and more powerful, both
politically and as a practical matter, if we move forward with
the European Union, if we move forward with the G7. So, I do
think that the time spent trying to put all that together is
time well spent.
Senator Murphy. And listen, by the way, we have a lot of
other irons in the fire when it comes to the work that the
State Department is doing with Europe, some that actually
matter more to United States national security interests than
Ukraine. For instance, the Iranian nuclear negotiations.
We had a great hearing yesterday, Secretary Nuland, on
European energy security. And thank you for sending your Deputy
to join us. Last question, for you: There was some dispute
amongst our second panel as to who benefits and who is hurt by
a continued dispute over gas supply from Russia into Ukraine
through to Europe. Some think that that will ultimately hurt
Ukraine, because they will be seen as having to make a choice
between their own citizens and passing along the gas to Europe.
Others thought that maybe that would move Europe more quickly
to energy independence if they continue to see the downside of
reliance on transit through Ukraine. What is your guess on who
stands to lose the most from a prolonged dispute over gas
transit through Ukraine?
Ms. Nuland. I would say, in the short run, both Russia and
Ukraine lose, because they do not have other options than to
deal with each other. And Ukraine, as you know, makes valuable
revenue by being a transit country. Over time, Ukraine,
obviously, has to focus more effort, and that is part of the
assistance that we are providing on diversifying, including
diversifying as a transit hub. Does not just have to be a
transit hub for Russia; it can also, through reverse flow, be a
transit hub into other countries from Europe, if we can
energize the market.
But, obviously, the best outcome will be if--with the
European Union's help and European Commissioner Ettinger, as
you know, is trying to midwife negotiations between Russia and
Ukraine--if they can come to an agreement on a fair European
market price in stable conditions for the next year, year and a
half, and demonstrate to the world that they are both reliable
in this regard--but, as you know, Russia has not been willing,
as yet, to guarantee a year-long price to Ukraine.
The Chairman. Senator Rubio.
Senator Rubio. Thank you, Mr. Chairman.
Thank you all for being here. I know you have a difficult
job.
I wanted to, Secretary Nuland, focus on a bill that has
been filed in the Senate that Senator Corker's taken the lead
on. It is called the Russian Aggression Prevention Act of 2014.
And I was still hopeful that we can get the administration's
support. Let me give you the thinking behind it. First, I am
going to describe kind of how I view the situation. I would
love to have your input on it.
But, it seems to me that what Putin is playing, here, is a
very careful game. His ultimate goal, of course--and I do not
think you would disagree with this--is, he wants to coerce
Ukraine and Kiev into an agreement that guarantees Russian
influence over Ukraine's foreign policy. So, they have a two-
pronged plan to do this. On the one hand, they provide support
for separatists. In fact, I have seen, just in the last 48
hours, open-source reporting of evidence that they are making
significant transfers again of heavy weapons to separatists in
eastern Ukraine, such as tanks and armored combat vehicles. And
there are signs that they intend to do more of that.
At the same time, they are also keeping alive the threat of
military intervention. They have already created in their
minds, the rhetorical groundwork for that sort of intervention,
for humanitarian reasons that they have made up, but there are
now also open-source implications that they are beginning to
redeploy military units along the northeastern Ukrainian border
for the first time since the May withdrawal of forces. And that
includes armored vehicles, artillery, air defense units. My
sense is that, given the recent offensive gains made by Kiev,
the threat of military intervention will rise again.
The flip side of it is, they play this very careful game
of, you know, this public role that they now have of calling
for a cease-fire so they can appear like they are the mediators
and Kiev is the aggressor. Up until now, they have actually, I
think, quite frankly, played that game fairly well. For
example, when Putin asked that the force of authorization--the
use-of-force authorization be lifted, immediately thereafter,
the EU Foreign Ministers decided not to impose additional
sanctions. And, by the way, I think this is part of a broader
strategy that they have of cutting into Western unity on the
idea of new sanctions.
But, I also think--this is my guess, here, but I would be
curious to your input on it--that there is probably some
serious divisions in Moscow about the way forward. On the one
hand, you have got these hardliners, of which Putin may be one
of them, that want to see a tougher stance. And you probably
have the separatists, themselves, feeling like, as much as
Moscow has done, it should be more. On the other hand, you
probably have a bunch of elitists in the government in Russia
that worry about the broader implication of more sanctions.
One example, especially in the energy sector, is that Asia
is going to soon overtake Europe as Russia's leading export
market, especially after this latest deal. But, they are going
to really struggle, I believe, to meet their demands and the
commitments that they have made. Sanctions have made it harder
for them to access foreign financing and Western technology.
For example, one of the ways they choose to--they plan to meet
their commitments to China is in the eastern Siberia fields
that they intend to use, and--but, this field is going to be
harder to develop than most others, because they have high
levels of deposits of helium and so forth. It is similar to a
challenge they are already facing off the coast of--I think it
is the--am I pronouncing it right?--the Sakhalin Islands, where
they are having--I think they are 10 years off base, in terms
of doing that. And China, by the way, knows this. I would--
again, I do not know, and they obviously have not shown me the
deal. But, I would bet you that, in the deal that they have
done with China, the Bank of China has probably reserved the
right to revoke lines of credit if Russian companies cannot
access credit or cannot access the technology because of
broader Western sanctions.
So, if we know this is the game that they are playing, and
we know this is the balance they are going through in deciding
what to do next, why would we not just put in place now,
through legislation, very specific consequences for what will
happen if, in fact, they move forward? In essence, why do we
not--instead of leaving it an open question of what might
happen, via the United States if Russia moves forward with
military intervention or continues to arm these separatists,
why not just put specifically in writing what that will be,
including specifically, as I outlined, the access to advanced
United States oil and gas technologies, so that as they are
having this debate in Moscow, they do not have to guess or have
conjecture about what it would mean, but they will know for a
fact what it would mean if they continue? And I believe this
would also have an impact on China and other Asian countries
who are trying to cut deals or figure out how to access more
Russian energy. Why not just put that in place in writing now
so that it is clear what the consequences will be for them to
continue on the course they are on?
Ms. Nuland. Senator, thank you for that.
Let me say that we have been absolutely clear in our
diplomat conversation, and quite specific, including at the
level of the President in his conversations with President
Putin, about the kinds of additional sanctions that we are
considering, including in the high-technology area.
As I said before you came in, we are also working
intensively with Europe on these kinds of measures, because it
is not just American companies that have this technology that
Russia needs, so do European companies. So, if we move in the
direction of those kinds of sanctions, they will be stronger
and more effective and nonpunitive, vis-a-vis our companies, if
we do it together with Europe. So, it is very much on the
docket, it is very much in the conversation with Russians and
with the European Union, as the kind of thing that we are
looking at moving forward.
Senator Rubio. But--so, your answer has two aspects to it.
The first is, if we go on our own, if we do this by ourselves,
it may undermine the Western unity that we seek, in terms of
other countries in the region that also have similar
technologies they can provide.
Ms. Nuland. Yes. On the one hand, if we deny U.S. companies
the opportunity to invest, but European companies continue to
invest, then we not only have an ineffective sanction, we
have----
Senator Rubio. No, no, I understand that that is what
happens.
Ms. Nuland. Right.
Senator Rubio. It would be ineffective. But, is the concern
that, if we act alone, if we just put this in legislation
alone, without working with them, that it would somehow make
them less likely to join us in that endeavor?
Ms. Nuland. Senator, as I have made clear to the chairman
and to the ranking member, I think, as an administration, we
are open to working with you on a bipartisan piece of
legislation in this regard, but we need to make sure that, if
we go in this direction, that whatever we put forward, we can
implement, that it does not disadvantage United States
companies, vis-a-vis others, that it will be effective on
Russia----
Senator Rubio. What do you mean ``disadvantage U.S.
companies''?
Ms. Nuland. As I said, that if we----
Senator Rubio. Because that sounds like you are saying,
``Well, we are not going to--we do not want to sell you
technology, but if other people are selling you technology,
then we might as well make some money on it, too.''
Ms. Nuland. No. My point is that if we were to move forward
with some kind of work together on bipartisan sanctions
legislation, we would want to make sure that whatever we had in
that bill, we could implement together with Europe and/or we
would not put ourselves in the position of hurting the American
economy without hurting the Russian economy.
Senator Rubio. Well, I guess I would just close by saying
that my view on it--and I hope I can convince others of this,
as well--is that, when the United States is specific--if we
specifically put out there, in legislation--of course it would
have to be bipartisan to pass in the Senate--if we specifically
make clear, ``This is what will happen if you continue to do
this or if you do this,'' then it is no longer just Secretary
Kerry, you know, on the 26th of June, saying, ``You should
disarm separatists, or else.'' It is actually in place and will
happen. And I think that sort of American leadership will, in
fact, bring us closer to the kind of unity we seek from our
allies.
So, I truly hope that this is the direction that we will
head, Mr. Chairman.
The Chairman. Senator Kaine.
Senator Kaine. Thank you, Mr. Chairman.
And thank you, to the witnesses.
One of the events in 2013 that was a precipitator of the
massive street protest was Yanukovych's unwillingness to sign
the EU association agreements, both the political and economic
agreements. We have not yet gotten into this. In March, the
political association agreement, I guess, was signed. And then,
in June, the economic association agreement was signed between
the new Ukrainian Government and the EU, which suggests both
some EU cooperation and the effect of this election in
continuing the Ukrainian path toward greater associations with
the EU.
What is the significance of the signing of those
association agreements, both for Ukraine and what has the
reaction been in Russia to those signatures after they were
balked at in the end of 2013?
Ms. Nuland. Overwhelming support, needless to say, in
Ukraine. It was one of the major tenets that President
Poroshenko ran on and that made him a popular and overwhelming
candidate. Europe has offered Ukraine, through these
agreements, not only the potential for visa-free travel for all
of its citizens, but also virtually tariff-free entry to--for
its products to the European market and the other way. So, it
is a real economic, political, and people-to-people boost. It
will require a good amount of hard work to prepare
implementation.
The Russians, throughout this process, expressed some
concern that, because they have tariff-free trade with Ukraine
now, that there would be unintended impacts on their economic
situation. They pushed very hard for consultations on the
implementation of the agreement. And the European Union and
Ukraine have now agreed to those. And I think, tomorrow, at the
level of Trade Minister, there will be trilateral discussions
among the EU, Ukraine, and Russia on how to implement the
agreement in a way that has least market disruption across the
region and potentially might benefit Russia, as well, so that
it might begin to see this in less zero-sum terms.
Senator Kaine. Right at about the same time as the June
agreement was being signed with the EU, shortly thereafter,
NATO met and announced that no new nations were going to be
coming into NATO--Georgia, Moldova, Ukraine--anytime soon. And,
in particular about Ukraine, what has the reaction been in the
Ukraine to this? Was that sort of understood among all parties,
that this is a time where we move toward further European
integration on the economic and political front, however we
kind of put NATO aside for now? Is that sort of, you know,
generally understood by the Ukrainians? Or did they object to
that decision?
Ms. Nuland. Senator, both in his election campaign and
since, President Poroshenko has made clear that the--for his
administration, the question of closer integration between
Ukraine and NATO is not on the table. So, it has not been a
demand of the Ukrainian side, and the alliance respects that.
As you know, this has to be a matter of choice for all nations.
Senator Kaine. I want to associate myself with some of the
comments made both by the chairman and Senator Rubio on, I
think, the virtues of more exploration of energy- and
technology-related sanctions. And I look forward to continuing
those discussions.
But, it is important for us, as we weigh sanctions, and
particularly if we might have to do sanctions unilaterally, if
we consider doing them ahead of Europe, that that does have
effects on American companies. The last time we had a hearing
on this matter here, I hypothesized, naively, not knowing
anything, what a potential economic effect of financial
sanctions could be on United States credit card companies
that--especially the big two--that govern about 90 percent of
current credit card transactions in Russia. And after just
blithely hypothesizing it, I got a call the next day from one
of the American companies, saying that, actually, as a result
of the sanctions that have been done thus far, the Russian
Government is now pursuing the creation of its own credit card
infrastructure and putting laws in place that will really
punish and hurt the business of the two major American-based
credit card companies.
And I was wondering, Assistant Secretary Glaser, if you
could talk about that a little bit, because unilateral
sanctions from our side do pose some significant risks if they
are not done carefully.
Mr. Glaser. Well, that is absolutely correct, Mr. Senator.
I would say that some of the retaliatory or countermeasures
that Russia takes to protect itself from sanctions really are
just examples of Russia imposing sanctions on itself.
Senator Kaine. Yes.
Mr. Glaser. It is examples of Russia pulling itself out of
the international financial system, isolating itself from the
international economy, which is the exact opposite of what
Russia
needs to be doing in order to address its fundamental economic
difficulties.
That said, we are aware that the actions we take could have
impact on American business and American companies, and it is
something we take quite seriously. I think American businesses
and American companies understand what is at stake, and they
understand that it is not business as usual with respect to
Russia. And they understand what we are trying to accomplish,
in terms of the future of Ukraine and the future of Europe and
the future of the international community. So, they understand
these are important matters. And, I think, as always, we are
prepared to move forward if we need to. But, again, it should
go without saying, but I think it bears repeating, it is always
going to be more effective, both politically, practically, and
in terms of fairness to American companies, if we can move
forward multilaterally, which, again, is why I think it is time
well spent, and effort well spent, to try to achieve that.
Senator Kaine. Let me just make sure. Do I have my facts
right on this? Because I was just hypothesizing last time. I
understand that the U.S. financial sanctions have led Russia to
do legal reforms that would essentially make it near impossible
for Visa and MasterCard, which now cover 90 percent of credit
card transactions in Russia--the effect of our sanctions has
been for Russia to move forward with legal measures that will
make it virtually impossible for Visa and MasterCard to operate
in that country. Am I right about that?
Mr. Glaser. Well, one of the things that Russia has done as
a result of this overall situation, certainly to include United
States sanctions--U.S. unilateral sanctions what we have
imposed--has been to move forward on ideas that, frankly, have
been circulating within Russia for quite some time, in terms of
a variety of measures that would require credit card companies
or other types of financial entities to locate within Russia.
And yes, that would create serious problems for companies like
Visa and MasterCard.
Senator Kaine. I was watching the interaction between
Senator Corker and Secretary Nuland on this. You know, and the
Senator was asking a very appropriate question, Why is it hard
to do these things? I do not think the answer is that hard. I
mean, I think unilateral sanctions without the EU could have
some effect on Russia, but it also has very significant effects
on us. And then, if it opens up opportunities for European
businesses to take the business that we are doing, then we at
least have to grapple with that kind of cost-benefit equation
in moving forward.
The best sanctions are ones where we are together with the
EU. That does not mean we should not do unilateral sanctions,
but the ones we have done already have not only affected the
European economy, but they have already had a pretty
significant effect on some fairly important American
businesses. And we just have to balance that out.
Thank you, Mr. Chair.
The Chairman. Senator Markey.
Senator Markey. Thank you, Mr. Chairman. Thank you for
holding this very important hearing.
Two weeks ago, I, along with some of my colleagues on this
committee, sent a letter to the President, urging him to make
energy security the centerpiece of our engagement with the new
leadership in the Ukraine. This is urgent. And I am concerned
that there are two threats that may be more powerful than
Russian troops when it comes to the challenges facing the new
Ukrainian Government, and they are both related to energy.
First, Russia has shut off the natural-gas spigots to
Ukraine. That is half of Ukraine's supply. Gone. When winter
arrives and natural-gas demand spikes, this could become a
crisis.
Second, Ukraine has begun eliminating their energy
subsidies. Energy subsidies provided by the Ukrainian
Government are massive, amounting to 8 percent of the country's
entire GDP. The $17 billion loan package approved by the IMF to
stabilize the Ukrainian economy includes requirements that
Ukraine gradually eliminate these subsidies. As a result,
retail natural-gas rates in Ukraine will rise by 56 percent
this year, another 40 percent next year, and another 20 percent
in 2016 and 2017. That is a potential new source of
instability. Ukraine's subsidies do make energy markets opaque,
inefficient, and susceptible to corruption, but they are also
extremely popular. They keep energy affordable for many
households.
Now we are talking about a brand new government coming in
and ushering in a doubling of energy prices. This is, of
course, music to Putin's ears. He wants nothing more than a
Ukrainian population distrustful of their government and
looking for alternatives.
Ukraine needs an Apollo-project-like effort to become more
energy efficient and increase production within their borders
in order to get off of Russian gas. And, like the Apollo
project, failure is not an option in this area, either. There
is a narrow window of time to help this new government
consolidate support and give Ukrainians a credible bulwark
against Russia.
So, Ambassador, are you concerned about the reaction from
middle- and low-income people in Ukraine when their energy
bills skyrocket 56 percent right after the new government takes
control?
Ms. Nuland. Well, Senator, thank you for your commitment to
this issue in Ukraine. It is also a priority of the Ukrainian
Government and it is a priority of the assistance efforts that
we have going with the Ukrainians.
As you know, I think, these price hikes in energy were part
of the IMF requirement for Ukraine to get healthy, which is
why, when we came to the Congress to ask you for the billion
dollars for the loan guarantee, we earmark, in coordination
with the Ukrainian Government, the vast majority of it to help
insulate the most vulnerable in the Ukrainian population from
these kinds of adjustments, particularly in household energy
prices. So, we have already made a huge downpayment there.
When you get our congressional notification, that I make
reference to in my testimony, for the remaining $59 million we
have this year for assistance, you will see a large chunk for
the whole complex of energy issues, from energy efficiency to
restructuring the sector, to diversification. You, yourself,
have said in previous hearings, accurately, that Ukraine wastes
a third of its energy out the windows and in other inefficient
ways. But, we are also working aggressively with European
allies and partners on reverse flow. We have had good success
in beginning reverse flow gas into Ukraine from Bulgaria,
Slovakia, Hungary. We are going to continue those efforts, in
coordination with the European Commission.
Senator Markey. Thirty-five Ukrainian mayors sent a letter
urgently requesting assistance in increasing the energy
efficiency of their buildings and district heating systems. We
are talking about inefficient Soviet-era boilers, buildings
without thermostats, uninsulated steam pipes, really the lowest
of low-hanging fruit all right there, with these mayors begging
for help. Are you finding an appetite within the new Ukraine to
move rapidly and to have additional United States assistance to
help with this project? Because, ultimately, we need to have
some kind of goals that the government is establishing. And
perhaps you could give us some sense of what you believe is a
reasonable goal for the Ukraines to reach, in terms of
increased energy efficiency, perhaps over the next 2 years,
over the next 5 years, et cetera.
Ms. Nuland. Senator, we will get you the Energy
Department's assessment of how quickly they can move.
But, they are making this a priority. As you know, they
have to change the tax base, they have to change the incentive
structure for Ukrainian industry, in particular, to reform.
Interestingly, in the conversations we have had with the
Ukrainian Government about the challenges of revitalizing
Ukraine's east and recovering if they can bring peace and
security back, one of their focuses is on energy efficiency and
recapturing revenue that is lost in these rust-belt industries.
So, let me just do a shout-out to one of the requests that
we have made of the Congress, which is to be able to use
funding from
the Western New Independent States Enterprise Fund for
microprojects in the east, some of them targeted specifically
at retooling old factories.
Senator Markey. Okay. Well, I think----
Ms. Nuland [continuing]. I would just ask you to support
that.
Senator Markey. I think that that is an excellent request.
But, I would like to see enhanced, increased attention to this
area, because, obviously, with a 56-percent increase in
natural-gas prices coming up this winter, and with 35 mayors
writing about their old Soviet-style buildings and boilers,
there is a big appetite right now to make a quick change. A
quick change. And I just think that we have to front-burner
this issue to help them to move very, very quickly. Because,
again, that is what will keep Putin and Gazprom sleepless at
night, if they do believe that they are responding to their
mayors, who realize the bills, which are going to be run up.
And so, again, I urge you to have a program of that nature,
and to set real goals. I think there has to be real goals that
are set in this energy sector. Same thing is true, by the way,
for natural gas. I think if we are going to be helping them
with new technologies--and we should have a telescoped
timeframe that we create, then, for a doubling of natural-gas
production inside of Ukraine. And we should set those goals,
set benchmarks, and then let us meet them. Because that is the
real threat to Ukraine from Russia. And once we do that, I
think that country will feel a lot better about its ability to
be able to cope with this threat that is almost primarily
energy related.
And so, I think, perhaps by the next time we have a hearing
on this subject, Mr. Chairman, if we could have the concrete
goals that are being set, especially for this winter, and the
message that are being sent to the Ukrainian people. That will
counter the propaganda that is going to come in from Putin as
to the suffering that he will say is unnecessarily being
inflicted by the Ukrainian Government on his own people. I just
think we need a counter message that is very concrete and not
vague.
I thank you, Mr. Chairman.
The Chairman. Thank you, Senator. And I appreciate your
ideas. I think we will take them and try to move them forward
here in the committee.
Let me just say, I appreciate the thoughtful remarks of
Senator Murphy and Senator Kaine. As we close this panel,
because I want to go to our second distinguished panel before
the 12 o'clock vote that is coming up next, I understand that
there are never simple or great choices in these matters. But,
time is on Putin's side. And I say that because he certainly
believes he can wait out the United States and the European
Union and maintain enough instability in the Ukraine to damage
its economy, to frustrate its public--such as in the context of
energy, as Senator Markey just talked about--and to undermine
the government's political cohesion.
In short, Putin does not have to win today. He only needs
to generate a frozen conflict in eastern Ukraine that he can
exploit when the world has moved on. And that has been his
standard operating procedure for years--Russia has used it in
Georgia and in Moldova, where Russian troops continue to occupy
territory and back separatists. By giving the world the
appearance of responsibility and reasonability by asking the
Parliament to withdraw the law authorizing the use of military
force in the Ukraine, Putin successfully gave those who wish to
avoid the G7 sectoral sanctions at the end of June ammunition
to argue against action at the time.
So, we have seen this movie before, and he has been
successful in it. And I would just hope, as I said to
Chancellor Merkel when we had the opportunity to have dinner
with her--as I have said to others who have come to visit with
us from the European Union, and to our own government--that if
we have seen this movie before, and we know how it plays out,
we should be able to not have the movie repeat itself with the
same ending. And that is really my concern here. I do not see
us, at this point in time, where we are headed, changing the
course of events in a way that this will not play out in--
nobody even talks about Crimea anymore.
Thank you all for your testimony. We will look forward to
continuing to engage with you on this issue.
Let me call up our next panel. We have two very
distinguished former National Security Advisors: Stephen
Hadley, the former National Security Advisor to President Bush
and now a principal at Rice Hadley Gates, LLC; and Zbigniew
Brzezinski, counselor and trustee at the Center for Strategic
and International Studies, the author of countless books, to
give us the benefit of his profound insight into world history
and world affairs.
We are incredibly pleased to welcome both of these
gentlemen back to the committee. We look forward to your
testimony.
If I could have my friends in the press--so that I can see
our witnesses. Thank you.
We welcome you back to the committee. We would remind you
that your full statements will be included in the record. As
you can see, members have a lot of questions on these issues
and would like to take advantage of your expertise, and we want
to have time for that, especially since there is a 12 o'clock
vote.
So, with that, Dr. Brzezinski, we will start with you, and
then we will go to Mr. Hadley, and then we will get to
questions.
Just push the button there, yes.
STATEMENT OF ZBIGNIEW K. BRZEZINSKI, FORMER U.S. NATIONAL
SECURITY ADVISOR, COUNSELOR AND TRUSTEE, CENTER FOR STRATEGIC
AND INTERNATIONAL STUDIES, WASHINGTON, DC
Dr. Brzezinski. Thank you, Mr. Chairman, Senators.
Since I know your time is very limited, I do not think I am
going to read to you my statement, even though it is actually
fairly short. I will merely summarize the three key points that
I try to make in it.
I acknowledge the fact that what Putin tried to do 3 months
ago in regards to Crimea is not the same thing as he is trying
to do in regards to Ukraine as a whole. Nonetheless, at the
time, it generated enormous enthusiasm in Russia; and, in fact,
a session of the Russian Parliament at which he presided on
March 18 was really like a jamboree on the subject of
chauvinism, Russia's world role, the unity of all Russian
speakers around the world, and the role of Russia as a global
civilization.
Since then, I think realism has begun to intrude more
directly, namely that Ukraine will not fall quickly, that
Ukraine is not resigned to being simply a member of a renamed
version of the Soviet Union or of the tsarist empire, and that
there is a rising will in Ukraine to deal with their legacies
of wasted 20 years of Ukrainian independence, and that major
reforms are necessary, but also acts of will designed to show
Ukrainian determination to be an independent nation.
This is the context. And I think Putin has to realize by
now that he has to think of alternative choices. I outline them
more fully in my statement, but the first is, of course, some
sort of an accommodation with the West. And I try to outline in
my statement what might be the principal features of such an
accommodation, one which does not meet the maximum objectives
of those in the West who would like to see Ukraine a member of
the European Union, but also of NATO, but it certain does not
meet, also, the maximum objectives of Russia, which would like
to see Ukraine subordinated to Moscow in the context of the so-
called Eurasian Union. There are other specifics that would
have to be considered, but that, in a sense, strikes me as a
possible framework for an accommodation.
Failing that, Putin has the option of continuing more
directly to destabilize Ukraine. He has done this recently.
That has not worked that well. He could attempt it on a larger
scale. But, if he does, I rather expect, from what one knows of
the attitudes specifically of Chancellor Merkel and of
President Hollande, of France, on this subject, that acts of a
more overt and drastic type on the larger scale to destabilize
Ukraine would precipitate the kinds of sanctions that had been
planned and which the United States would like to see
implemented sooner rather than later. And that remains a bone
of contention in the alliance, but they are there. And the
initial sanctions have sent at least ominous signals to the
Russians not to take these issues lightly.
The third alternative, of course, is a complete showdown,
militarily, on the model, perhaps, of Crimea, but overlooking
the reality that all of Ukraine is far more complicated than a
relatively small peninsula, the object of a sudden and
unexpected attack. I think it is quite clear that if there were
to be a larger Russian intervention, the Ukrainians would
resist on a protracted basis; and especially, the risk of urban
warfare for taking Ukraine over would entail the necessity of
occupying the large cities--ultimately, Kiev itself--is
something that no Russian leader can contemplate lightly. It
could become protracted, bloody, very costly, and the result
would be a disaster, both for Ukraine and for Russia. Both
would be basket cases as a consequence of anything of this
sort.
So, the choices that Mr. Putin has to make are not easy,
but they are there, and they reflect the fact that I think it
is becoming increasingly clear to him that he should not
confuse a brief triumph in which he exalted, a few months ago,
in Crimea, with the larger dilemma of Ukraine and the longer
range relationship of Russia to the global community.
As it is--and I will end on this--Russia's international
position has deteriorated. It is certainly no longer a serious
partner with the United States. There are more and more
questions about Russia's role in the world in Europe. And
insofar as China is concerned, it is increasingly evident that,
if there is any relationship between Russia and China that has
any degree of depth to it, it is an asymmetrical relationship
in which China, by far, is the senior partner that can insist
on terms favorable to it, as was the case in the recent energy
agreement with Russia. And Russia is a junior partner,
geographically, culturally, and demographically, culturally and
borderwise vulnerable to Chinese pressure.
So, I think that is where I will stop. The statement goes
into these issues at greater length.
Thank you, Mr. Chairman, for giving me this opportunity.
[The prepared statement of Dr. Brzezinski follows:]
Prepared Statement of Dr. Zbigniew Brzezinski
More than 3 months have passed since Putin's triumphalist speech to
the Russian Parliament. In it, he exalted in his military seizure of
Crimea while basking in an orgy of unleashed chauvinistic sentiments.
Putin clearly relished the enthusiasm and apparently gave little
thought to the larger and longer term strategic consequences of what he
unleashed.
Three months later, with continuing uncertainty regarding the
future of Russo-Ukrainian relations, but also growing international
costs for Russia itself, Putin faces three basic choices.
(1) To accommodate with Ukraine by terminating the assault on
Ukrainian sovereignty and economic well-being. This will not be easy to
do, and it will require wisdom and persistence both from Russia as well
as Ukraine and the West. Essentially, an accommodation should involve
the termination of the Russian efforts to destabilize Ukraine from
within, not to mention ending possible threats of a larger military
invasion--as well as some sort of an East-West understanding which
entails Russia's tacit acceptance of Ukraine's prolonged journey toward
eventual EU membership. At the same time, it should be made clear to
all concerned that Ukraine neither seeks nor the West contemplates
Ukrainian membership in the NATO alliance. It is reasonable for the
Russians to feel uncomfortable about that prospect.
At the same time, it would be made clear that Russia no longer
expects Ukraine to become part of the ``Eurasian Union,'' a designation
which is a transparent cover for the recreation of something
approximating the former Soviet Union or the Tsarist Empire. An
understanding regarding this issue should not preclude, however, a
Russian-Ukrainian trade deal, based on the fact that from a purely
economic point of view, both countries can benefit from normal and
increasingly cooperative trade as well as financial relations.
The international community, specifically the West, could in some
fashion reiterate their support for that outcome, not to mention the
full scale resumption of more normal relations with Russia itself,
including the lifting of existing sanctions.
(2) Putin's second choice is to continue the effort to destabilize
Ukraine by sponsoring thinly veiled military intervention designed to
disrupt normal life in portions of Ukraine. Should Russia continue on
this course, obviously the West would have to undertake a full scale,
prolonged, and truly painful application of sanctions designed to
convey to Russia the painful consequences of its unwarranted violation
of Ukraine's sovereignty. In effect, this very unfortunate outcome
would likely produce the emergence of two basket cases in Eastern
Europe: in Ukraine because of deliberate Russian actions; and in Russia
itself as a justified consequence of the needed Western reaction to its
aggression.
(3) Putin's third choice could involve the decision to invade
Ukraine across the board, exploiting Russia's obviously much larger
military potential. Such an action, however, would not only prompt
sustained retaliation by the West but could provoke prolonged Ukrainian
resistance, especially based on spontaneous outbursts of anger in its
larger cities. In these conditions, it is unlikely that the West would
remain entirely passive. If the resistance was sustained and intense,
there would be growing pressure on the members of NATO to provide
various forms of support for the Ukrainians, thereby making the
conflict much more prolonged and costly to the aggressor.
For the Kremlin, the consequence of the third option would be not
only a permanently hostile Ukrainian population of more than 40 million
people, but also an economically retarded and politically isolated
Russia, facing the growing possibility of increasing internal unrest.
In brief, the obvious choice for everyone concerned is to find a
formula for international accommodation, and that has to involve the
abandonment of the use of force against Ukraine by Russia. The issue of
Crimea will remain unresolved for the time being, but it will be an
enduring reminder that chauvinistic fanaticism is not the best point of
departure for the resolution of larger and more complex issues. This is
why Putin's actions are a threat not only to the West but ultimately
also to Russia itself.
The Chairman. Thank you, Dr. Brzezinski.
Mr. Hadley.
STATEMENT OF HON. STEPHEN J. HADLEY, FORMER U.S. NATIONAL
SECURITY ADVISOR, PRINCIPAL, RICE HADLEY GATES, LLC,
WASHINGTON, DC
Mr. Hadley. Thank you very much for the opportunity to be
with you this morning.
I have a statement, which I have submitted, that talks
about what Putin is up to, how far he is likely to press his
current actions, what should be our objectives and strategy for
dealing with it. I will just leave that for the record.
The bottom line I try to make is that we have seen in the
past that Putin's objectives escalate as he succeeds and is not
met with resistance or counter pressure. And therefore, I think
it is important that we be putting together the elements of a
strategy that will put on that counter pressure.
I thought what I might do with my time is try to answer
some of the questions that you have raised in the first
session, and give you my answers to them, for what it is worth.
Why is the administration so----
The Chairman. Mr. Hadley, could you just take that
microphone and put it closer to you?
Mr. Hadley. Yes, sir, sorry.
The Chairman. There we go, perfect. Thank you.
Mr. Hadley. So, why is the--thank you, Mr. Chairman--why is
the administration reluctant on sanctions? I think it is
partly, one, they want to have unity with the Europeans,
because they do not want to let Putin drive a wedge between the
United States and Europe. And I think that is right.
Second, I think it is an effectiveness point. If you look
at foreign direct investment, 75 percent of foreign direct
investment in Russia comes from the EU. The United States only
has about $10 billion a year. We are 10th, in terms of foreign
investment. If you look at trading relations, we are the 12th
export partner, the 5th import partner of Russia. So, we do not
have the economic clout. And if you really want to be
effective, you want to have the Europeans along, because that
is where the investment and the trading relations are.
Third, I think they are reluctant because sometimes
sanctions are more effective in the anticipation than they are
in the execution.
So, I think that explains the reluctance.
I think, though, as I say in the statement, we have
telegraphed this punch so often without delivering it, I think
it raises a question of credibility. And therefore, I think,
Mr. Chairman, in response to your point, if the Europeans do
not act on July 16, I think we are going to be forced to go
ahead unilaterally. But, I would hope we would do it in the
following way: having worked with Chancellor Merkel, who has
the lead on this within Europe, with an understanding that we
will go first and she will do her best so that the Europeans
will follow.
Similarly, the legislation, Senator Rubio, that you talked
about that Senator Corker, I think, is sponsoring, a kind of a
roadmap of what will happen if Putin persists in this activity,
I think that can be a very useful tool, but I would hope it
would not only have bipartisan support within the Congress, but
is something we would have worked with the Europeans so that
it, in fact, becomes a roadmap for what we and the Europeans
will do together if Russia and Putin persist. That does not
mean that it has to be unilaterally--has to be multilateral at
the time it is adopted. It--what we would hope is--many times,
we have to lead the Europeans by taking action, but with an
understanding that, hopefully, in the end of the day, we will
end up on the same page.
Last two points and one I think--I saw Dr. Brzezinski's
article in the Post this morning, and I thought it was a very
good statement. I only have one small quibble with it, which
answers one of the questions Senator Kaine asked. We ought to
be strengthening Ukraine's capacity to defend itself, and other
states that are at risk from pressure from Russia. The issue of
NATO enlargement is not on the table. The Ukrainians have not
asked. For them to join NATO would be a long process, years in
the future. So, it is not on the table. But, I would also not
explicitly take it off the table and say that the door is
closed to Ukraine, because I would not like to reward Putin for
his pressure. And I think we need to stick to the principle
that countries should be free to select the alliances they
choose, free of coercion, pressure, or the use of force.
Finally, last point--as I say in my statement, I think
there are elements of policy that we need to put in place that
are probably even more important than sanctions. And sanctions
over the long term, I think, we want to do in a way that does
not close the door on Russia, does not say to Ukraine that,
``If you come West, you have to sever your historical and
economic ties with Russia.'' I do not think that is smart. I
think we need to leave the door open for a Russia that will
change its policies and come back to the post-cold-war
consensus and want to move West. And I think we should do that
to keep faith with those people in Russia that hope for a more
democratic and a more Western-oriented future for their
country.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Hadley follows:]
Prepared Statement of Stephen J. Hadley
russia and ongoing developments in ukraine
It is a great privilege to have the opportunity to appear before
the committee this morning. I would like to discuss briefly what
Russian President Putin is seeking to achieve by his actions in
Ukraine, how far he is likely to press these actions, what should be
U.S. and allied objectives in dealing with the Russian challenge in
Ukraine, and what would be the elements of a strategy to achieve these
objectives. The views I will express are my own and not the views of
any organization with which I may be affiliated.
What is President Putin Seeking To Achieve By His Actions in Ukraine?
President Putin is often quoted as saying that one of the greatest
tragedies of the 20th century was the dissolution of the Soviet Union.
He gives as a principal reason for this conclusion the fact that it
left hundreds of thousands of ethnic Russians and Russian-speakers
outside the borders of Mother Russia. For two decades he has said his
interests were in better treatment of Russian nationals living as
ethnic minorities in countries outside Russia. But when he ordered the
invasion of Georgia in 2008, the invasion and annexation of Crimea in
2014, and the active subversion and destabilization of eastern Ukraine,
President Putin went way beyond any reasonable action aimed at
improving the situation of these minorities. Instead President Putin
has attacked, violated, and repudiated the basic principles of the
post-cold-war settlement in Europe: acceptance of existing borders,
respect for the sovereignty and territorial integrity of all states,
and the right of all states to choose their affiliations and alliances
free of coercion and the threat or use of force.
President Putin has an alternative vision for Europe that is less
the recreation of the Soviet Union than the restoration of Russian
greatness. Through the Eurasian Union, the Eurasian Customs Union, and
the Collective Security Treaty Organization, President Putin hopes to
establish a Russian-dominated confederation of states between the
European Union on the one hand and China and the Asian States on the
other. With Belarus, Kazakhstan, and Russia as core members, and
Armenia, Kyrgyzstan, and Tajikistan likely additions, he is off to a
good start. But he needs Ukraine to give the organization real economic
and geopolitical heft. That means he must prevent Ukraine from becoming
part of the economic and security organizations to its West, namely the
European Union (EU) and the North Atlantic Treaty Organization (NATO).
And that is what his efforts in Ukraine--as well as Georgia--have been
about.
How Far is President Putin Likely To Press These Actions?
During the crisis provoked by President Putin's invasion of
Georgia, his initial objectives were somewhat limited. But as the
operation succeeded, and when he thought his actions might not be
effectively opposed, his objectives expanded accordingly. Indeed, he
ultimately embraced the objective of toppling the democratically
elected Georgian Government in Tbilisi. Efforts by the United States
and its allies, among other factors, caused the Russians ultimately to
stop short of this objective. Similar ``objective escalation'' occurred
in the wake of his ``success'' in Crimea and could expand in connection
with Russian action in eastern Ukraine or elsewhere.
One concern would be if Russia's active subversion and
destabilization campaign were to succeed in Ukraine, President Putin
might try something similar in one or more of the Baltic States, such
as Latvia. The objective here would be to show that the article 5
security guarantee given to these countries as NATO members was not
worth the paper it is written on and could not protect these countries
from being destabilized and perhaps even losing part of their
territory.
At the most extreme end of the ``objective escalation'' spectrum,
President Putin might even seek to split or destabilize the European
Union itself. We know that he has been cultivating relations with
extremist political parties in Europe particularly on the political
right. These extremist parties have mostly only one thing in common--
they oppose the European Union. Destabilizing the European Union could
be attractive in its own right. But it could also preoccupy the EU with
its own internal survival so as to distract it from efforts to reach
out and embrace Ukraine, Moldova, Georgia, and other countries between
the European Union and Russia's Eurasian Union.
The best way to seek to prevent President Putin from moving up the
``objective escalation'' ladder is to seek to deny him success in his
current efforts and to show that any future efforts will be effectively
opposed.
What Should Be U.S. and Allied Objectives In Dealing With the Russian
Challenge in Ukraine?
The United States should work with its friends and allies to seek
to:
Deter Russia from further action against Ukraine or any
other state--in violation of the basic principles of the post-
cold-war settlement in Europe.
Deny targets of opportunity that President Putin can exploit
to advance his agenda or, to put it another way, either
eliminate or harden Europe's vulnerabilities against further
Russian action.
Reassure those NATO allies vulnerable to Russian pressure of
NATO's article 5 commitment to their security.
Reenergize the historic vision that the United States and
its friends and allies share of a Europe whole, free, and at
peace as an alternative to President Putin's vision of Russian
domination of its neighbors and of increasing authoritarianism
at home.
Distinguish between Putin and Russia and thereby avoid re-
dividing Europe or seeking to exclude or isolate Russia from
Europe by disregarding or disrupting the historical and
economic ties between Russia and its neighbors to the West.
I understand that this last point will be controversial in some
quarters given the total unacceptability of President Putin's actions.
But it is in the interest of the United States and the rest of Europe
to keep the door open to Russia to take its place in a Europe based on
the post-cold-war principles on which a Europe whole, free, and at
peace can be built. This will require Russia to change its current
behavior, either because of a change of heart on the part of President
Putin (however unlikely) or because of the efforts of those in Russia
committed to a more democratic and peaceful future for their country.
We must leave the door open to them--to give them hope.
What Would Be the Elements of a Strategy To Achieve These Objectives?
Briefly, a comprehensive strategy seeking to achieve these
objectives could include the following elements:
Complete the Transatlantic Trade and Investment Partnership
(TTIP) as a way to bind Europe together and to the United
States in a relationship of economic growth and prosperity--
extending the agreement to include those European countries
with customs unions or free trade agreements with the EU
already, such as Ukraine and Turkey, while leaving the door
open for, ultimately, a more peaceful and democratic Russia.
Develop a joint transatlantic energy strategy that will
reduce the EU's dependence on Russian oil and gas--through such
things as liquid natural gas (LNG) shipments from the United
States, the development of shale oil and shale gas in Europe,
better use of existing pipeline infrastructure to reduce
dependence on Russia, and construction of new non-Russian
controlled pipelines.
Resume the European Union's ``open door'' to association
agreements and ultimately membership for those countries to its
east that seek such membership--and include them in a way that
does not require them to sever existing and historical economic
ties to Russia.
Recommit the United States to the security of Europe in both
word and deed, through additional deployments and exercises of
American forces in Europe along with our NATO allies and other
friends.
Revitalize the NATO alliance by additional planning,
exercises, and military capability--especially on the part of
America's NATO allies--directed to NATO's core mission of
maintaining security in Europe--while maintaining an open door
to new members that meet its criteria.
Help nations subject to Russian pressure to strengthen their
own capacity to defend their territory from either armed attack
or subversion/destabilization including by providing military,
paramilitary, and police training and equipment.
Help the Ukrainian people to overcome two decades of
squandered trust and missed opportunity by their leaders and to
build an inclusive, democratic, and noncorrupt government and
market-based economy that can provide security and prosperity
to all Ukrainians.
There has been a lot of talk about economic sanctions against
Russia. These are an important element of a comprehensive strategy. So
far, the United States and its allies have threatened more sanctions
then they have delivered, undercutting the credibility of this element
of strategy. But sanctions are only part of a strategy not the sum
total of it. The level of the sanctions imposed on Russia in the short
term should not be the measure of the success or failure of the overall
strategy. For the goal of the strategy should be to change over time
what might be called the ``correlation of forces'' in Europe so as to
reduce Russia's leverage and deter the kind of Russian actions we have
seen in Georgia and Ukraine. In this context, the other elements of a
comprehensive strategy outlined above are perhaps as important if not
more important than short-term economic sanctions.
The Chairman. Well, thank you both. It takes tremendous
talent to be able to synthesize major concepts in such a short
period of time. And I have read the testimony, and it is very
instructive.
My concern--I always prefer multilateral sanctions, when we
can get them. I prefer not to have sanctions if we do not even
need them in order to achieve our goals. If diplomatic
discourse can ultimately lead us to a point where we can
negotiate an agreement that is acceptable, obviously that is
desirable as well. But, looking at Russia's history here, with
Georgia, Moldova, and now the Ukraine, at some point--and I
think you may have alluded to this by saying we may have to go
first--at some point, if there is to be no significant arming
of the Ukrainian military so that the challenges of the
Russians trying to take them on are further exacerbated--Dr.
Brzezinski has already said the Ukrainians will fight tooth-
and-nail, especially in urban centers, and that that would be a
concept that no Russian leader could fathom doing. But this
would enhance that possibility.
Also, if we are not to, at the end of the day, pursue any
sanctions because the Europeans are unwilling to, what is to
stop Putin from continuing on a course of destabilization? Not
invasion, but destabilization. And what is it that sends him a
message that the next place that he picks, he is free to do so,
because, at the end of the day, he will get condemnation, but
no other consequences?
Either one of you, I am happy to----
Dr. Brzezinski. Well, Mr. Chairman, let me just----
The Chairman. If you would put your button on; your
microphone.
Dr. Brzezinski. Let me briefly make one comment on your
observation of guarding the NATO issue. I think there is a
misunderstanding here. I make it very clear that NATO
membership can be forsaken. The Ukrainians are not asking for
it. A large proportion of the Ukrainian people do not want to
be in it. And, in any case, if it were to transpire that there
is an accommodation, I think, in that context, it would be
possible to negotiate it with the Ukrainians not being promised
or having door open for them in the future regarding NATO. One
can, I think, understand the Russian concerns here if one look
at the map. NATO membership would jut a large, large new area
deep into what traditionally has been the Russian Empire and
create an altogether new geopolitical situation, which I cannot
see the Russians ever accepting unless there is a significant
accommodation of--larger sense. And that is all I had in mind.
On the question of the arms, my view is that we should be
very open about it, and not secretive. If the Ukrainians need
arms for their defense, we should be willing to provide them,
although in a manner which does not provide for a capacity of
the Ukrainians to undertake offensive actions. The Russians
would exploit any transfer of arms to the Ukrainians as a
threat to their security. If we are very deliberate, in terms
of what we convey to the Ukrainians, we can enhance their
capacity, particularly to defend their cities, and make the
attempt to occupy any large cities by the Russian Armed Forces
prohibitively expensive. And that will have, then, political
consequences of a prolonged conflict, financial consequences
internationally, mobilization of public opinion internationally
against Russia, which I think would make any rational Russian
Government think twice of that option.
Mr. Hadley. Mr. Chairman, I think sanctions are an
important element of a comprehensive policy, and at some point
we may have to go out ahead to lead by example as a way to
bring the Europeans along. But, I think we must focus equally
on the other elements of a comprehensive strategy that, over
the long term, are going to be more important in reducing
Putin's leverage and his ability to pursue these kinds of
activities. Completing the TTIP negotiations has been talked
about; developing a joint transatlantic energy strategy that
reduces the EU's dependence on Russian oil and gas; resuming an
open door to accession to the European Union; the United States
recommitting to the security of Europe, in word and deed, by
some of our deployments and exercises; revitalizing the NATO
alliance; getting Europeans to make more of a commitment and to
refocus on the core mission of preserving and protecting the
security of Europe; helping the nations that are subject to
Russian pressure to build self-defense forces; and finally,
helping Ukraine succeed as a democratic, prosperous country
able to provide security and prosperity for its people. Those
long-term commitments are what are really going to eliminate
the opportunities for Putin to make mischief in the future.
The Chairman. I appreciate that.
Let me ask one last question. From the end of the cold war,
attempts have been made to draw Russia into the community of
nations as a stable, prosperous, and democratic partner. But,
given Putin's high level of domestic support in recent polls, I
guess there is some allure, among Russians, of the empire or
power over other countries as being attractive. Could we have
done things differently that would have changed the course of
events, or was Putin's Russia inevitable? And what kind of
policies would you advocate--and you were referring to keeping
the door open, Mr. Hadley--that
the United States and international community should follow to
encourage Russia to forsake imperial aspirations and to get
back into an international order, which they have upended by
virtue of their invasion in Crimea and what they are doing in
the Ukraine?
These questions are for both of you. I would like to hear
from both of you on this.
Dr. Brzezinski. Basically, I think we have to maintain the
policy that we have adopted in the wake of the collapse of the
Soviet Union, which is to create opportunities for Russia's
closer association with the West, but without compromising our
fundamental principles and while entertaining the hope that,
over time, internal change in Russia will contribute to the
gradual democratization of Russia itself.
There is some evidence to indicate that this, in the longer
run, is not only possible, but even probable. There is
developing a Russian middle class which increasingly thrives on
essentially adopting as much as possible of the Western
lifestyle and of connectivity with the West. It sends the
children to the West. It travels to the West. It sends its
money to the West. And perhaps that is most persuasive of all.
Basically, a process is taking place which is demonstrated
by the scale of the social opposition, the demonstrations, the
increasing number of commentators speaking up openly on this
issue. And that is part of a process of change which one can
cultivate.
Putin's current moves are, in my judgment, a retrogressive
aberration connected very much with his personality, his
previous institutional connections, in particular with the
instruments of compulsion, perhaps a certain touch of
megalomania on a personal level. And he appeals on that basis
to those elements of Russian society which feel themselves
vulnerable, which are very nationalistic, which are susceptible
to chauvinistic appeals. And we saw exactly that manifesting
itself in the wake of the seemingly very easy
so-called, ``triumph'' in Crimea.
But, the crisis with Ukraine, I think, is beginning to send
signals, particularly to the more intelligent internationally
minded parts of the Russian elite, that Russia is being drawn
into something that could prove utterly debilitating to Russia
itself. And this is why, in the longer run, I anticipate that
there will be some inclination to experiment, to check out, to
investigate the possibility of some sort of an accommodation
once it dawns, not only on the Russian elite itself, but
increasingly maybe on Mr. Putin himself, that the policy of
violence, either selective or all-out, is, in the long run, not
the road to success, but a guarantee of Russia as a basket case
economically and politically.
The Chairman. Mr. Hadley.
Mr. Hadley. I agree very much with what Dr. Brzezinski has
said. Putin views himself as a strong leader who wants to
return to Russian greatness, but he has a definition of Russian
greatness, I would say, that is 19th century, it is sort of a
new neo-Russian Empire. We have to show him that, whatever his
short-term tactical successes, his actions involve a long-term
strategic loss and the real future for Russia as a secure and
prosperous state is going to be, not on 19th-century
principles, but on 21st-century principles. And those--and we
need to, therefore, deter him from his 19th-century agenda and
leave the door open for those who want Russia to actually have
a 21st-century role of--as--and path for a secure and
prosperous state.
The Chairman. Thank you both.
Senator Corker.
Senator Corker. Thank you, Mr. Chairman.
And thank you both for being here. We always appreciate
having distinguished National Security Advisors here, and
appreciate your comments.
And, Dr. Brzezinski, when you say ``accommodation,'' in
answering the last question, an accommodation to Russia once
the thinking of the elites permeates the rest of society or
Putin, what kind of accommodation would that be?
Dr. Brzezinski. Well, are we talking specifically, in your
question, about Ukraine, or more generally?
Senator Corker. Specifically relative to Ukraine.
Dr. Brzezinski. Well, it seems to me that increasingly it
is a fact, and no longer a speculation, that Ukraine, as an
independent state, is going to be moving toward the West. That
is the predominant predisposition of the Ukrainian people. I
think the regime that has now emerged in Ukraine is generally
democratic. It is determined to correct the errors of the last
20 years. For, I am sad to say, over the last 20 years, Ukraine
has been governed very badly.
Senator Corker. Right.
Dr. Brzezinski. And I think that it is evident to all
concerned that the regimes that have dominated the political
scene were self-serving, self-enriching, and not dedicated to
Ukraine's well-being. This is now changing, in part, to the
challenge from the outside. The use of force against Ukraine by
the Russians was a stunning experience for the Ukrainians.
Historically, they have not been anti-Russian. But also, over
the last 20 years, they have started to enjoy the fruits of
independence. And that is especially the case with the younger
generation. And that younger generation asserted itself in the
Maidan. And I think that increasingly defines Ukraine today.
So, the Russians will have to come to terms with that new
reality. But, otherwise, they will embroil themselves in a
prolonged adventure, which, as I have tried to stress, would be
self-debilitating.
So, I am, on the whole, an optimist. I believe an
accommodation is possible, because the costs of imposing a
unilateral solution by the Russians themselves are simply
disproportionately high to the benefits that could be achieved
thereby.
They are beginning to learn this already in the case of
Crimea. There was this exaltation when they occupied Crimea--
liberation, reunification, all sorts of slogans. What is the
reality 3 months later? Prices have risen three times. Tourists
are not coming. They come every year, on a scale of 6 million,
including a great many from abroad. They are not showing up.
They have difficulty even in getting there.
Investments in Ukraine are very difficult to make the
moment they involve any international deal, because the
international community has not recognized the incorporation of
Crimea, which means there will be endless legal suits connected
with any kind of development in Ukraine--tourism, exploration
for more energy, or whatever.
In brief, what seemed like a great success 3 months ago is
now becoming, I think, increasingly a source of concern. And
this is where I sort of feel more confident about what is
happening. I am frustrated that we have not adopted the
sanctions that we should. I would like to see the Europeans act
more decisively. I think we could, too. But, by and large, we
are pointed in the right direction, and I think it is becoming
more clear to more Russians that Putin is pointed in the wrong
direction.
Senator Corker. If I could--I know Hadley has to leave here
soon, and I know Rubio wants to ask some questions--I will just
ask one more.
One of the things that was most poignant to me on a recent
trip was a comment I referred to in my opening comments, and
that was a National Security Advisor in eastern Europe
referring to the fact that if we allow Russia to continue with
this bad behavior without the sanctions that I think both of
you have alluded to, we, in essence, will accommodate a bitter
peace. In other words, we return to business as usual. Nothing
is really done about what has happened in Crimea and other
places. Just since both of you have to think for the long haul,
and have done that within differing administrations, what are
the risks there, from your perspective, over the longer haul?
And that is a bitter peace with Russia, where their actions
have never been countered, where they just kind of fester, if
you will, in Eastern Europe.
Mr. Hadley. You know, I think one of the things that we are
tripping over is the word ``accommodation,'' which suggests
giving in to Russia. I would rather talk in terms of outcomes.
I think it is very important that Russia be seen as not to be
able to succeed with what it is doing and, as I say, that Putin
sees that, and the Russian people see that, that this 19th-
century nationalistic binge he has been on is not working for
them. The outcome I think we want is, you know, a Ukraine, that
if it decides to move West, join the EU and Western
institutions, is able to do so, an outcome where Ukraine is
prosperous and secure, an outcome where the Russian people
within Ukraine can enjoy that security and prosperity, in which
the Russians see that it is a Ukraine that is not against
Russia, but is allowed to maintain its historical economic and
historical ties with Russia.
And I think that if that happens, the Russian people, at
some point, are going to decide that maybe Ukraine is a better
model for their future than this kind of nationalistic, neo-
Russian Empire that Putin is talking about. That is the outcome
I think we ought to be striving for here.
Senator Corker. Thank you both for being here.
Thank you, Mr. Chairman.
The Chairman. Senator Rubio.
Senator Rubio. Thank you, Mr. Chairman.
Thank you both for being here. Thank you both for your
service to our country over an extended period of time, both in
government and outside. I appreciate your presence very much.
Dr. Brzezinski, of course, your service to our country is
well documented, although these days you are increasingly known
as Mika's dad. [Laughter.]
And we watch you quite often in the morning.
I wanted to ask you both, first, in the previous panel--and
I know it was kind of simplistic in the way I described it, and
I do not think it is inconsistent with anything you were
saying, but--in my mind, the--kind of the 5,000-foot view of
what Putin is trying to pull off, here, is to reach a point
where he has exorbitant influence over Kiev's foreign policy,
vis-a-vis his relationship to Russia. It is what we have all
been talking about. And, as I have described earlier, I think
that involves the combination of support for separatists and
the threat of military engagement, on the one hand, and then
these sort of things he is doing--calling for cease-fires and
so forth--to make himself appear as the reasonable conciliator
in the--juxtaposed against an image he is trying to create,
that Kiev is the aggressor, and so forth.
And then I said that I thought--and this is where I hope
your insight will be helpful--that, within Moscow now, within
the people making these decisions, I would venture to guess--
obviously, I do not know, but I would venture to guess, and I
am pretty certain, that they, themselves, are kind of looking
at this dynamic, and there is two opposing schools of thought.
One group probably is pushing very hard for more aggressive
action, and another group is probably saying, ``You know, but
these sanctions are going to hurt our pocketbook and our
ability to do things.'' I mean, we should not underestimate how
important the Asian markets are going to be for Russia's future
short-term, quite frankly, ability to export energy. And, in
fact, the estimates are that Asia will become its leading
export market. To do that, they have got to have the capacity.
Means they have got to go and explore. I pointed to the fact
that they are going to struggle in eastern Siberia, because
some of these gas deposits there have high amounts of helium,
and that requires extensive work. And so, they need access, not
just to financing, but some of the Western technology.
What it leads me to is--as we view this dynamic, they are
having this debate in Moscow about, ``We are worried about
sanctions, but we also have this group that is pushing for
more''--and, by the way, I would guess that, despite all the
assistance they are getting, some of these separatists probably
feel like Moscow is not doing enough; they want them to do
more.
So, given all these pressures, it is my view that the best
way to nudge it, or to influence this in the direction we would
like to see it head, is not simply to threaten sanctions, but
to make very clear what those sanctions would look like so that
it is not a guessing game about what will happen if they do
this; that, in fact, they know for a fact what it would look
like. And I know that the ideal scenario is that if we do it,
others will join us in it. But, my sense of it is that,
potentially, the best way to ensure that is through American
leadership, that if America is willing to--at least the
American Congress is willing to graphically spell out what the
specific consequences will be of specific actions--
automatically, not what the President may decide to do--that it
would strengthen our hand in that regard. And I think, Mr.
Hadley, in your testimony, you said we may be getting closer to
that point anyway.
So, that was the question I asked of Secretary Nuland, and
I was hoping that you would both expand.
And then, if time permits, I just had an issue related to
Russia, but not directly to Ukraine. And it may seem like it is
out of left field, but I am curious, given the amount of
knowledge that you both have about Russia, What do you think
their response would be, given events in Iraq that have
happened recently, if the Syrians asked the Russians to conduct
airstrikes in Syria against ISIL? How open would they be to
that sort of measure?
And that is a separate question if we have time to get to
them. But, I really want to focus on this question of whether
specific sanctions by Congress would further the direction of
decisionmaking in Moscow.
Mr. Hadley. I would make three points. One, I think your
description of his strategy is accurate, and it is very, very
important that it be seen to fail. Because if it succeeds, he
will do it again elsewhere. You know, when he went into Georgia
in 2008, we all said, ``Today Georgia, tomorrow Crimea, and the
day after, the Baltics.'' Well, you know, he is two-thirds of
the way there. So, one, it is important he fail.
Two, I think it would be very useful, as I said in my
opening comments, to have that kind of roadmap, ``If he takes
these activities, or fails to stop what he is doing, these are
the kind of sanctions he would face.'' I think that would be a
useful thing.
I would hope, though, we--as much as possible--we could
coordinate it with the Europeans so that Angela Merkel would be
leading the Europeans so they would follow our roadmap. That
does not say we do not do it without them, but it will be more
effective if we can bring them along.
Third----
Senator Rubio. Well, they are probably in a good mood in
Germany after last night's game. So, we should jump on that.
Mr. Hadley Yes, and they may be even better after the
finals.
Third, I will go back to what I said before, this is not
only about sanctions. But, if we are going to be effective
against Putin's strategy, we need the other six or seven items
that I outlined in my statement, that are elements of a
comprehensive, long-term approach to this problem. That is what
we need. So, sanctions, yes; but, take a look at the other
things, and let us be moving out on the other elements of a
comprehensive policy.
Dr. Brzezinski. I agree very much with Mr. Hadley.
Senator Rubio. What is your view on, if the Syrians asked
the Russians to conduct airstrikes against ISIL in Syria,
whether they would do that?
Dr. Brzezinski. Well, the first question that would come to
my mind immediately is, Where would they stage it from? You
know, they do not have the sea-born capability for air
operations that we have. So, it would have to be done in some
fashion from Russian territory.
Senator Rubio. Or from Syrian territory that the Syrians--
--
Dr. Brzezinski. Or--well, what facilities are really
available for them on Syrian territory?
Senator Rubio. Other than the seaport, that--the naval
facility.
Dr. Brzezinski. They would have to be secure, and they are
probably very vulnerable, and they are probably not in very
good shape.
Now, would they be tempted to do it? I rather suspect not.
I think the Russians want to avoid an entanglement with the
whole host of issues that are being unleashed in the Middle
East, and they much prefer us to become more entangled. And
this is one of the reasons why I have been urging restraint in
our part, because it seems to me that these are issues that are
not likely to be solved entirely by the use of force. And
certainly, we have already learned from both Afghanistan and
Iraq, that the use of force in these very complex ethnic,
religious, national circumstances is a very, very costly and
unpredictable undertaking.
Mr. Hadley. It is a murky area, and press reports say that
Russian SU-22s, I think, are flying strikes in Iraq. That is
press reports. And it is unclear, are they flown by Iraqi
pilots, by Russian pilots, or Iranian pilots? This is a murky
and confused situation.
The Chairman. Well, thank you both for your insights and
your expertise. It is always a tremendous value to the
committee.
This hearing will remain open until the close of business
on Friday.
And, with the thanks of the committee, this hearing is
adjourned.
[Whereupon, at 11:55 a.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Response of Victoria Nuland to Question
Submitted by Senator Ron Johnson
Question. Investment bank Credit Suisse released its ``Global
Wealth Report 2013'' October 9 that showed 35 percent of all wealth in
Russia was controlled by 110 people. The amount is equivalent to $420
billion, according to the bank. By contrast, billionaires around the
world control between 1 percent and 2 percent of total wealth. The full
report can be found here: http://www.scribd.com/doc/174860081/Global-
Wealth-Report-2013.
Are we prepared to sanction all 110 of these individuals?
Which, if any, of these 110 people have already been
sanctioned? Of these individuals, who will be added and
specifically when? Why have we not immediately added all 110
people?
Answer. In response to Russia's ongoing violations of Ukrainian
sovereignty and territorial integrity, the United States has imposed
targeted sanctions on Russian individuals and entities, as well as a
set of carefully calibrated sanctions on Russia's financial, energy,
and defense sectors that the President announced on July 16. Since the
start of the Ukraine crisis, the U.S. has sanctioned 57 individuals (18
Ukrainians, 39 Russians), six Russian banks, 14 other crony-related
entities, eight defense firms, two Russian energy companies, separatist
groups in Donetsk and Luhansk, and two Crimea-based energy companies
under Executive Orders 13660, 13661, and 13662. Designated Russian
individuals include high-ranking government officials, business
executives, and members of the Russian leadership's inner circle.
Broader sectoral sanctions may be deployed if Russia fails to stop
destabilizing Ukraine.
The President's Executive orders with regard to the situation in
Ukraine do not, however, direct that sanctions determinations be made
based on an individual's net worth. Though our sanctions have targeted
some of the wealthiest Russian citizens, an individual's net worth is
not an independent basis for a sanctions designation under Executive
Orders 13660, 13661, and 13662.
The United States and our international partners continue to press
Russia to end all support to separatists in Ukraine, control the
border, call on separatists to lay down their arms, return the border
checkpoints, and release all remaining hostages. Until Russia takes
these actions, the United States and our partners remain prepared to
impose additional, tougher sanctions.
[Editor's note.--A copy of the full report mentioned above was too
voluminous to include in the printed hearing. It will be retained in
the permanent record of the committee.]