[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                   EMERGING THREAT OF RESOURCE WARS
=======================================================================


                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON EUROPE, EURASIA, AND EMERGING THREATS

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 25, 2013

                               __________

                           Serial No. 113-63

                               __________

        Printed for the use of the Committee on Foreign Affairs


Available via the World Wide Web: http://www.foreignaffairs.house.gov/ 
                                  or 
                       http://www.gpo.gov/fdsys/

                                 ______




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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
JOE WILSON, South Carolina           GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas             ALBIO SIRES, New Jersey
TED POE, Texas                       GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona                 THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania             BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina          KAREN BASS, California
ADAM KINZINGER, Illinois             WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama                   DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas                 ALAN GRAYSON, Florida
PAUL COOK, California                JUAN VARGAS, California
GEORGE HOLDING, North Carolina       BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas            JOSEPH P. KENNEDY III, 
SCOTT PERRY, Pennsylvania                Massachusetts
STEVE STOCKMAN, Texas                AMI BERA, California
RON DeSANTIS, Florida                ALAN S. LOWENTHAL, California
TREY RADEL, Florida                  GRACE MENG, New York
DOUG COLLINS, Georgia                LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina         TULSI GABBARD, Hawaii
TED S. YOHO, Florida                 JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

         Subcommittee on Europe, Eurasia, and Emerging Threats

                 DANA ROHRABACHER, California, Chairman
TED POE, Texas                       WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             GREGORY W. MEEKS, New York
JEFF DUNCAN, South Carolina          ALBIO SIRES, New Jersey
PAUL COOK, California                BRIAN HIGGINS, New York
GEORGE HOLDING, North Carolina       ALAN S. LOWENTHAL, California
STEVE STOCKMAN, Texas



                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Mr. Edward C. Chow, senior fellow, Energy and National Security 
  Program, Center for Strategic and International Studies........     5
Jeffrey Mankoff, Ph.D., deputy director and fellow, Russia & 
  Eurasian Program, Center for Strategic and International 
  Studies........................................................    13
Brigadier General John Adams, USA, retired, president, Guardian 
  Six Consulting, LLC............................................    21
Mr. Neil Brown, non-resident fellow, German Marshall Fund of the 
  United States..................................................    64

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Mr. Edward C. Chow: Prepared statement...........................     8
Jeffrey Mankoff, Ph.D.: Prepared statement.......................    16
Brigadier General John Adams, USA, retired: Prepared statement...    23
Mr. Neil Brown: Prepared statement...............................    66

                                APPENDIX

Hearing notice...................................................    82
Hearing minutes..................................................    83
Mr. Neil Brown: Material submitted for the record................    84


                    EMERGING THREAT OF RESOURCE WARS

                              ----------                              


                        THURSDAY, JULY 25, 2013

                       House of Representatives,

         Subcommittee on Europe, Eurasia, and Emerging Threats,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 10 o'clock 
a.m., in room 2172 Rayburn House Office Building, Hon. Dana 
Rohrabacher (chairman of the subcommittee) presiding.
    Mr. Rohrabacher. I call to order this hearing of the 
Foreign Affairs Subcommittee on Europe, Eurasia, and Emerging 
Threats. Today's topic is the emerging threat of resources 
wars.
    After the ranking members and I each take 5 minutes to make 
opening remarks, each member present will have 1 minute to make 
their opening remarks, alternating between majority and 
minority members. And without objection, all members may have 5 
days to submit statements, questions, and extraneous materials 
for the record and hearing no objection, so ordered.
    And now for my opening statement, an increasing global 
demand for supplies of energy and strategic minerals is 
sparking intense economic competition that could lead to a 
counter productive conflict. Who owns the resources, who has 
the right to develop them, where will they be sent and put to 
use, and who controls the transport routes from the fields to 
the final consumers are issues that must be addressed.
    Whether the outcomes result from competition or coercion; 
from market forces or state command, we will be determining how 
to achieve and if we will achieve a world of peace and an 
acceptable level of prosperity or we won't achieve that noble 
goal. A ``zero sum world'' where no one can obtain the means to 
progress without taking them from someone else is inherently a 
world of conflict. When new sources of supply are opened up, as 
in the case of Central Asia, there is still fear that there is 
not enough to go around and thus conflict emerges.
    Additional problems arise when supplies are located in 
areas where production could be disrupted by political 
upheaval, terrorism or war.
    The wealth that results from resource development and the 
expansion of industrial production increases power just as it 
uplifts economies and uplifts the standards of peoples. This 
can feed international rivalry on issues that go well beyond 
economics.
    We too often think of economics as being merely about 
``business'' but the distribution of industry, resources and 
technology across the globe is the foundation for the 
international balance of power and we need to pay more 
attention to the economic issues in our foreign policy and what 
will be the logical result of how we deal with those economic 
and those natural resource issues.
    The control of access to resources can be used as political 
leverage, as we have seen with Russia and China. They both have 
demonstrated that. Indeed, China is engaged in an aggressive 
campaign to control global energy supply chains and to protect 
its monopoly in rare earth elements. This obviously indicates 
that Beijing is abandoning its ``peaceful rise'' policy. This 
is not an unexpected turn of events given the brutal nature of 
the Communist Chinese regime.
    This hearing will look into this and will look at the 
economic and geopolitical tensions underlining the competition 
that we see for natural resources and we need to discuss that 
competition and we need to understand what is in the national 
interest of the United States and what must be protected to 
ensure that our people can enjoy a level of peace and 
prosperity in the future.
    I now yield 5 minutes to the ranking member, Mr. Keating.
    Mr. Keating. Thank you, Mr. Chairman, and thank you for 
holding this timely hearing. Today's hearing topic provides us 
with an opportunity to look beyond Europe and Eurasia and 
examine the global impact of depleting resources, climate 
change and expanding world population and accompanying social 
rest.
    In March, for the first time, the Director of National 
Intelligence, James R. Clapper, listed ``competition and 
scarcity involving natural resources'' as a national security 
threat on a path and on a par with global terrorism, cyber war, 
and nuclear proliferation. He also noted that ``terrorists, 
militants, and international crime groups are certain to use 
declining local food security to gain legitimacy and undermine 
government authority'' in the future.
    I would add that the prospect of scarcities of vital 
resources including energy, water, land, food, and rare earth 
elements in itself would guarantee geopolitical friction. Now 
add lone wolves and extremists who exploit these scenarios into 
the mix and the domestic relevance of today's conversation and 
you can see the importance of this is clear.
    Further, it is no secret that threats are more 
interconnected today than they were, let us say, 15 years ago. 
Events which at first seem local and irrelevant have the 
potential to set off transnational disruptions and affect U.S. 
national interests. We saw this dynamic play out off the coast 
of Somalia where fishermen were growing frustrated from lack of 
government enforcement against vessels harming their stock and 
where they took up arms and transitioned into dangerous gangs 
of pirates. Now violent criminals threaten Americans in 
multinational vessels traveling through the Horn of Africa. 
Unfortunately, I don't see a near term end to the coordinated 
international response that this situation requires.
    I agree with Mr. Clapper that the depletion of resources 
stemming from many factors which above all include climate 
change has potential to raise a host of issues for U.S. 
businesses worldwide, for U.S. officials, and for individuals 
traveling abroad themselves. For this reason, Mr. Chairman, I 
have long advocated for alternate energy resources. It is 
representative of what will hopefully one day be our nation's 
first offshore wind farm.
    I deal daily with obstructive businesses and individuals 
trying to get in the way of this and other projects in exchange 
for increasing their companies' net profits. I would like to 
add that given our distinguished panel of witnesses today and 
our subcommittee's jurisdiction, I am sure we will be hearing 
about the tremendous energy reserves in Central Asia and the 
need for diversifying energy markets. In this regard, I would 
like to take note that I have and will continue to advocate for 
the importance of increasing democratic governance and rule of 
law in that region. Energy production can get you only so far. 
I would like to hear from our witnesses on how the United 
States can engage with Central Asian governments to improve 
governance and transparency in the energy sector, both 
bilaterally and through international organizations such as the 
Extracted Industries Transparency Initiative.
    However, as we discuss these important issues, I hope that 
we can continue to keep our own country's movement toward an 
energy-independent future and the obstacles in its path in mind 
itself.
    With that, Mr. Chairman, I will yield back my time.
    Mr. Rohrabacher. Thank you very much and we also have with 
us Colonel Cook today who is a new member of the Congress and 
making himself a very fine reputation. Colonel Cook, do you 
have an opening statement?
    Mr. Cook. Yeah, I will be very brief. I want to thank you, 
Mr. Chairman. You know, I want to thank you for having this 
hearing. I think it is an issue that doesn't get much 
attention. And in my former life besides being in the military 
for 26 years, I was a college professor and I have to admit I 
taught history and I always have got to give the old saw that 
people who do not understand history are bound to repeat it.
    If you look at the history of conflicts and wars and 
everything else and whether you go back to that famous book, 
The Haves and Have-Nots, it is always about resources and who 
has it and who doesn't have them and who wants them. And maybe 
you could make an analogy on that. But I think we as a country, 
at least have not picked up on those lessons of history and we 
are very, very naive about the motivations of certain countries 
and why they do certain things. And obviously, there are things 
going on throughout the world right now in Eurasia which 
underscores some of the things that we are going to talk about 
today.
    So I applaud having a hearing on this. I think the title 
says it all, resource wars, and if we don't have the war yet, 
we have had it in the past and we are going to have it in the 
future. So thank you.
    Mr. Rohrabacher. Thank you. And let me just note that 
Colonel Cook is a former Marine officer and my father was a 
Marine officer. I grew up on Marine bases.
    Mr. Cook. Is that why I am on the committee?
    Mr. Rohrabacher. But how that fits right in in the course 
of what you were saying, Carl, is that my father joined the 
Marines to fight World War II and it is very clear that natural 
resources had a great deal to do with the Japanese strategies 
that led to the Second World War and so we have some of our 
witnesses may be talking to us and will be talking to us on 
issues that are of that significance.
    We have with us today Brigadier General John Adams, U.S. 
Army retired, is president of Guardian Six Consulting, LLC, and 
the author of the report, ``Remaking American Security Supply 
Chain Vulnerabilities and National Security Risks Across the 
Defense Industrial Base,'' published by Alliance for American 
Manufacturing this May. General Adams served his final military 
assignment as Deputy U.S. Military Representative to the NATO 
Military Committee in Brussels, Belgium and on September 11, 
2001, General Adams was stationed at the Pentagon as Deputy 
Director of European Policy in the Office of the Secretary of 
Defense. And we know what happened on that day. During his 30 
years in the Army, General Adams' assignments have ranged from 
aviation to military intelligence. He is a veteran of Desert 
Storm. He also has three masters' degrees in international 
relations, strategic studies, and English. Excellent, General, 
that we have a General that has a degree in English. And is 
currently a Ph.D. candidate in political science at the 
University of Arizona.
    We also have with us Edward C. Chow. He is a senior fellow 
of the Energy and National Security Program at the Center for 
Strategic and International Studies. He spent 20 years with the 
Chevron Corporation in the United States and overseas including 
as the country manager for China from 1989 to 1991 and he was 
then based in Beijing. He holds a bachelor's degree in 
economics, a master's degree in international affairs from Ohio 
University. He has just returned last week from a trip to 
Central Asia.
    We also have with us Dr. Jeffrey Mankoff. He is deputy 
director and fellow in the Russian and Euro-Asian Program at 
the Center for Strategic and International Studies. He was a 
2010-2011 Council on Foreign Relations International Affairs 
fellow based in the Bureau of European and Euro-Asian Affairs 
at the United States Department of State. From 2008 to 2010, he 
was associate director of International Security Studies at 
Yale University and received a Ph.D. in diplomatic history and 
an M.A. in political science from Yale with his B.A. in 
international studies and Russian studies from the University 
of Oklahoma. Good to have him with us.
    And Neil Brown currently serves as non-resident fellow at 
the German Marshall Fund's Energy Transition Forum and Lugar 
Diplomacy Institute, senior advisor at the Goldwyn Global 
Strategies and is the founding director on the Board of the 
Lugar Center. He previously served as senior professional staff 
member for the Energy Security at the United States Senate 
Foreign Relations Committee and as a senior advisor to 
Republican Richard Lugar who we all remember very well and are 
grateful for his service and grateful for your service to him. 
He is also, I might add, a Rhodes Scholar.
    So we have a very distinguished panel. I would ask each of 
you to limit your spoken remarks to 5 minutes, put the rest in 
the record, and then we will have a dialogue about the issues 
you have brought to us today. We will start with Mr. Chow and 
you may go straight ahead, sir.

  STATEMENT OF MR. EDWARD C. CHOW, SENIOR FELLOW, ENERGY AND 
      NATIONAL SECURITY PROGRAM, CENTER FOR STRATEGIC AND 
                     INTERNATIONAL STUDIES

    Mr. Chow. Thank you, Mr. Chairman, members of the 
committee. It is my distinct honor and privilege to testify 
before you today. I understand that you wish me to address the 
issues related to resource competition in Central Asia 
including on pipeline transportation to markets outside the 
region. I will stay within my competence on issues related to 
international oil and gas, although I understand the committee 
is interested in other natural resource competition which will 
be addressed by other witnesses.
    When the Soviet Union collapsed in 1991, Central Asia 
offered a unique opportunity for western oil companies to enter 
a known oil- and gas-producing province which was previously 
closed to them. The Soviets had made a number of world-class 
discoveries, which they did not have the technical capability 
to exploit, most notably onshore Kazakhstan and offshore 
Azerbaijan. At the same time, these newly independent countries 
needed investments to enhance their economic autonomy and 
thereby protect their future political sovereignty. Oil and gas 
resources represented obvious immediate opportunities for 
Western investments.
    The United States was also interested in helping these 
countries preserve their political independence by increasing 
their economic options away from over reliance on Russia. 
Additionally, as the largest oil importer in the world, we had 
an interest in seeing incremental oil and gas supplies outside 
of the Middle East and OPEC flow into global markets, whether 
we ourselves import those volumes or not.
    With the help of Western investments, Central Asia and the 
Caucasus today produce around 3.5 percent of global oil supply 
and hold around 2.5 percent of the world's known proven 
reserves in oil. For comparison, this is equivalent to four 
times that of Norway and the United Kingdom combined. Another 
way of looking at this is to say the region produces around 8.5 
percent of non-OPEC oil and holds around 9.5 percent of non-
OPEC oil reserves. In other words, oil production in Central 
Asia has added significantly to global supply and will continue 
to do so in the future.
    In many ways, the energy future of the region lies as much 
or more in natural gas than in oil. Central Asia is estimated 
to hold more than 11 percent of the world's proven gas 
reserves, mostly concentrated in Turkmenistan which has lagged 
behind Kazakhstan and Azerbaijan in attracting outside 
investments. The region currently produces less than 5 percent 
of global gas supply, so there is tremendous potential for 
growth.
    In addition to production from Soviet-era discoveries, new 
discoveries of major oil and gas fields have been made in the 
region. Deserving special mention are Kazakhstan's Kashagan 
field offshore Caspian Sea, which is the largest oil discovery 
in the world for over 30 years; Turkmenistan's Galkynysh gas 
field, which is the largest onshore gas field in the world; 
and, Azerbaijan's Shah Deniz gas/condensate field.
    Given its landlocked geography, Central Asia has to rely on 
long-haul pipelines to take its oil and gas to market. 
Previously Soviet pipelines in the region almost all head to 
European Russia either to feed the domestic Soviet market or 
for trans-shipment to European markets. Control of these 
pipelines continued to give Russia leverage over transit of oil 
and gas from the region to market after the end of the Soviet 
Union.
    However, Western investments in oil and gas production also 
led directly to investments in new pipelines, which are not 
controlled by Russia's Transneft for oil and Gazprom for gas. 
These include a number of projects I have put into the record 
which I will in the interest of time not discuss right now.
    These new pipelines have diminished Russian control of oil 
and gas exit out of Central Asia and the Caucasus and helped 
achieve the objectives from the 1990s of giving the region more 
economic options and allowing its oil and gas production to 
flow freely to world markets.
    When the Soviet Union collapsed in 1991, China was just 
about to convert from a net oil exporter to net oil importer. 
It was slow off the mark in the race for Central Asian oil and 
gas. By the time it focused on this region, most of the large 
production opportunities have already been acquired by Western 
companies. From a Chinese point of view, they have been playing 
catch up ever since.
    Today China is the second largest oil importer in the world 
and an increasingly important importer of gas. With stagnant 
Chinese domestic production and rapidly growing energy demand, 
China is destined to replace us as the world's largest oil 
importer in a decade or so. Its companies have been investing 
in oil and gas around the world, including in neighboring 
Central Asia. Chinese companies now produce around 30 percent 
of Kazakhstan's oil, although from smaller fields than those 
operated by Western companies, and hold the only onshore 
concession in Turkmenistan.
    In part because of disappointments in dealing with Russia 
on oil and gas, China has focused on pipeline development from 
Central Asia including an oil pipeline from Western Kazakhstan 
and gas pipeline from Turkmenistan through Uzbekistan and 
Kazakhstan to China. China has replaced Russia as the largest 
importer of Turkmen gas and this volume is slated to double or 
triple in the coming years.
    The next growing source of competition for Central Asia oil 
and gas is likely to come from India, which follows closely 
China in growth in oil and gas demand and consequently oil and 
gas imports. Indeed, as Chinese demographic growth slows and 
population ages, India's energy demand is commonly forecasted 
to grow faster than China's in a decade or so.
    With all due respect to the committee, the concept of 
resource wars is often exaggerated. The investments I referred 
to in Central Asia oil and gas production and pipeline 
development require tens of billion dollars and many years to 
mature. Conflict generally freezes such investments and 
resources are then stranded for many years. It is true that 
there is resource competition in Central Asia, as is true 
around the world.
    Our policy concern should be for such competition to be 
conducted in a rule-based manner, without political coercion, 
as the chairman mentioned, or non-transparent business 
practices, to the disadvantage of the citizens of the host 
countries and global consumers. As long as the rules of 
competition are fair, our oil, services and equipment companies 
can compete in Central Asia, where they are doing rather well, 
and market competition will drive economic efficiency to the 
benefit of all. Observing the nature of resource competition 
and assessing its political consequences will remain an 
important task for your committee. In Central Asia itself, my 
humble opinion is control of water resources are more likely to 
lead to direct conflict than with oil and gas.
    Thank you for your attention.
    [The prepared statement of Mr. Chow follows:]

    
    
    
    
    
    
    
    
    
    
                              ----------                              

    Mr. Rohrabacher. Thank you for your testimony and I might 
add that we have had already one hearing on water in Central 
Asia and we do plan several more hearings focused on water 
there and elsewhere in the world, but especially focused on 
Euro-Asian needs because it is the Eurasia Subcommittee.
    And now Dr. Mankoff.

   STATEMENT OF JEFFREY MANKOFF, PH.D., DEPUTY DIRECTOR AND 
  FELLOW, RUSSIA & EURASIAN PROGRAM, CENTER FOR STRATEGIC AND 
                     INTERNATIONAL STUDIES

    Mr. Mankoff. Chairman Rohrabacher, Ranking Member Keating, 
members of the committee: Thank you for the opportunity to 
testify before the subcommittee on Europe, Eurasia, and 
Emerging Threats.
    The discovery of new offshore oil and gas deposits in the 
Eastern Mediterranean Sea is one of the most promising global 
energy developments of the last several years. Handled wisely, 
these deposits off Israel and Cyprus, as well as potentially 
Lebanon, Gaza, and Syria, can contribute to the development and 
security for countries in the Eastern Mediterranean, and across 
a wider swathe of Europe. Handled poorly, these resources could 
become the source of new conflicts in what is an already 
volatile region.
    According to the United States Geological Survey, the 
Levant Basin in the Eastern Mediterranean holds around 122 
trillion cubic feet of natural gas, along with 1.7 billion 
barrels of crude oil. While these currently recognized volumes 
are comparatively small relative to those found in the Persian 
Gulf, Russia, or the Caspian sea basin, they are large enough 
to have a significant impact on the energy security of states 
in the Eastern Mediterranean and to make some, albeit more 
limited contribution to energy security in Europe.
    The oil and gas resources of the Eastern Mediterranean sit, 
however, at the heart of one of the most geopolitically complex 
regions of the world. The Israeli-Palestinian conflict, 
tensions between Israel and Lebanon, the frozen conflict on 
Cyprus, and difficult relations among Turkey, the Republic of 
Cyprus, and Greece all complicate efforts to develop and sell 
energy from the Eastern Mediterranean. The Syrian civil war has 
injected a new source of economic and geopolitical uncertainty, 
and standing in the background is Russia, which is seeking to 
enter the Eastern Mediterranean energy bonanza, and to maintain 
its position as the major supplier of oil and gas for European 
markets.
    Amidst all this uncertainty, however, the recently 
discovered gas fields in the Eastern Mediterranean are starting 
to come into production. A second exploration well was recently 
drilled off of the coast of Cyprus, while Israel's Tamar field 
started production in June. With mounting uncertainty in Egypt, 
and indeed, across much of the Arab world, the ability to meet 
its energy needs from domestic sources is a critical 
contribution to Israel's energy security.
    Yet, Israel's transformation into a significant energy 
producer is not without its challenges. Most immediate perhaps 
is the question of how Israel will sell its surplus gas on 
international markets. The most economical option, at least in 
the short term, would be the construction of an undersea 
pipeline allowing Israeli gas to reach European markets through 
Turkey. Such a pipeline from Israel to Turkey pipeline would be 
less expensive to build than new Liquified Natural Gas 
facilities, would reinforce the recently strained political 
ties between Turkey and Israel, and would contribute to the 
diversification of Europe's energy supplies by bringing a new 
source of non-Russian gas to Europe.
    Such a pipeline, however, would likely either run off the 
coasts of Lebanon and Syria, or have to go to Turkey through 
Cyprus. Both options are fraught with peril. Though Lebanon and 
Israel have not demarcated their maritime border, Beirut argues 
that Israel's gas fields cross into Lebanese waters, and 
Hezbollah has threatened to attack Israeli drilling operations. 
Syria, of course, is in a state of near anarchy. In this 
perilous environment, finding investors willing to build a 
pipeline will be challenging, and even if built, such a 
pipeline would be difficult to secure. Going through Cyprus is 
also difficult, largely because of the difficult relationship 
between the Republic of Cyprus and Turkey. However, Cyprus's 
own gas fields represent another potential source of conflict. 
Turkey has not recognized the Republic of Cyprus's exclusive 
economic zone and in fact has pressured companies seeking to do 
business there, and recently also began its own exploratory 
drilling off of the de facto Turkish Republic of Northern 
Cyprus without permission from the government in Nicosia. The 
revenues from Cypriot energy could benefit communities on both 
sides of the island, but only if a political agreement can be 
worked out in advance.
    The major alternative to a pipeline from Israel to Turkey 
would be to build an LNG, a Liquified Natural Gas facility to 
liquefy gas for sale to markets in Asia and the Middle East. 
Russia, in particular, backs this idea.
    The push to build new LNG facilities though is only one way 
in which Moscow and its energy companies are seeking a larger 
role in the Eastern Mediterranean. In addition a February 2013 
marketing agreement signed with the Israelis at Tamar, Russian 
companies are also interested in Israel's much larger Leviathan 
field, as well as in the offshore oil and gas off of Lebanon. 
Of course, given Russia's interest in preventing competition 
for its gas in Europe, there are legitimate questions about 
whether Gazprom would actually follow through on developing any 
of these concessions that it might win in the Eastern 
Mediterranean.
    One reason the United States has cared about Eastern 
Mediterranean gas is because of its potential to bolster the 
energy security of U.S. allies in Europe. Today, this concern 
is less pressing than in the past. The recent announcement of 
the Trans-Adriatic Pipeline, connecting to the
    Trans-Anatolian Pipeline heralds the beginning of the long-
awaited Southern Gas Corridor, which will bring news supplies 
from the Caspian to Europe. While small, these projects can be 
scaled up in the future. The United States itself is also 
poised to become a significant gas exporter. Finally, the 
ongoing implementation of the European Union's Third Energy 
Package is creating a more competitive, liberalized and deeper 
market in Europe itself.
    While all these developments promote European energy 
security, as the Congressional Research Service has noted, 
Russia will remain the principal supplier of Europe's gas for 
many years. The potential volumes from the Eastern 
Mediterranean could bolster European energy security around the 
margins, but they are not sufficient not to change this 
fundamental reality. For that reason, Washington's main 
objective in the Eastern Mediterranean should be less about 
Europe and more about ensuring that energy does not become a 
source of new resource conflicts, whether between Israel and 
its neighbors or over Cyprus. The United States' push for 
Israeli-Turkish reconciliation, which the promise of energy 
cooperation has helped facilitate, is a good example of the 
positive role that the United States could play. U.S. diplomacy 
in Cyprus should proceed in similar fashion.
    Likewise, sharing the benefits of energy should also be one 
element in an settlement of the conflict between
    Israelis and Palestinians.
    The United States has no reason to oppose the role of 
Russian companies in the Eastern Mediterranean in principle, 
however, it should work with partner governments in the region 
to ensure transparency and that the promised production does, 
in fact, occur. Eastern Mediterranean energy can advance a 
range of U.S. interests in the wider region. Absent sustained 
diplomatic engagement, however, it can also be the source of 
new conflicts in what is already a very dangerous area. 
Avoiding that outcome should be the primary focus of U.S. 
engagement on the future of Eastern Mediterranean energy.
    Thank you.
    [The prepared statement of Mr. Mankoff follows:]
    
    
    
    
    
    
    
    
    
    
                              ----------                              

    Mr. Rohrabacher. Thank you very much. Now we have about 10 
minutes before a vote is called. And so it is intention of the 
chair to finish the testimony. We will then retreat to the 
floor where we will be casting our ballots on very important 
issues and then we come back immediately thereafter, for the 
question and dialogue session of this hearing.
    Gentlemen, you may proceed. We are about to have some 
votes, so if you can keep it to 5 minutes that would be great.

   STATEMENT OF BRIGADIER GENERAL JOHN ADAMS, USA, RETIRED, 
            PRESIDENT, GUARDIAN SIX CONSULTING, LLC

    General Adams. Chairman Rohrabacher, Ranking Member 
Keating, and members of the subcommittee, I want to thank you 
for taking the time to examine emerging foreign threats to the 
national security and interests of the United States related to 
the irresponsible and predatory actions of other nations in 
their pursuit for national resources.
    I am a 30-year veteran of the United States Army and my 
firm Guardian Six Consulting recently partnered with the 
Alliance for American Manufacturing, a labor-management 
partnership between some of America's leading manufacturing 
companies and the United Steelworkers to take a look at 
vulnerabilities to the American defense industrial base.
    Our report, ``Remaking American Security,'' examined a 
range of vulnerabilities and in particular instances in which 
reliance on offshore companies deepen the supply chain, puts 
U.S. national security at risk. The defense industrial base 
really needs to be managed as a part of our force structure. 
Our report took the approach of linking strategy to forces that 
we need to win to the capability those forces possess to the 
programs that enable those capabilities. Then we drill deeper. 
Which supply chains do we need in place and secure so that 
those programs can be successful?
    Remaking American security examines 14 defense industrial 
base nodes vital to U.S. national security. We investigated 
lower-tier commodities and raw materials and subcomponents 
needed to build and operate the final systems. Based on our 
research, the current level of risk to our defense supply 
chains and to our advanced technological capacity is very 
concerning. The bottom line is this, foreign control over 
defense supply chains restricts U.S. access to critical 
resources and places American defense capabilities at risk in 
times of crisis.
    In the report, we devote a chapter to the importance of 
access to specialty metals and rare earth elements. 
Increasingly, these resources are central to modern life and 
central to modern defense preparedness. And each year, the U.S. 
Department of Defense acquires nearly 750,000 tons of minerals 
for an array of defense and military functions. In spite of 
this clear demand, over time, the United States has become 
dependent on imports of key materials from countries with 
unstable political systems, corrupt leadership, or opaque 
business environments. The United States used to have 
relatively easy access to many mineral ores, but this situation 
has changed dramatically as the United States has neglected to 
preserve its mining base and global demand for minor and 
unusual chemical elements has surged.
    Compounding the tensions over access to specialty metals, 
many countries rich in natural resources take a stance of 
resource nationalism. Within the past decade, countries have 
attempted to leverage and manipulate extractive mining by 
threatening to impose extra taxes, reduce imports, reduce 
exports, nationalize mining operations and restrict licensing. 
Moreover, the countries themselves, notably China, have taken a 
more aggressive posture toward mineral resources and now 
compete aggressively with Western mining operators for 
extraction control.
    Meanwhile, advanced industrialized countries, including the 
United States, have abandoned mining and mining exploration 
even though global demand for economically and militarily 
significant ores and chemical elements has risen and will 
continue to rise. These factors, taken together, present a 
dangerous and unsustainable situation for our economic and 
national security.
    Specialty metals are used in high-strength alloys, 
semiconductors, consumer electronics, batteries, armor plate, 
and many more defense-specific and commercial applications. We 
possess significant reserves of many specialty metals with an 
estimated value of $6.2 trillion. However, we currently import 
over $5 billion of minerals annually and are almost completely 
dependent on foreign sources for 19 key specialty metals.
    The United States must maintain strategic reserves of those 
defense-critical elements, strategic elements, that face likely 
shortages while seeking alternative sources. Congress is 
beginning to give appropriate attention to this issue and 
shifting more toward a bottom-up approach to securing the 
supply chains of key materials but more must be done. The 
Federal Government has not formulated a comprehensive policy 
approach to address the national security risks of inadequate 
access to many of these key minerals.
    In the middle of a complex defense drawdown, as well as 
sequestration which cuts budgets and deprives our defense 
planners flexibility, the defense industrial base can seem like 
a distant and abstract concern, but it is not. Preserving a 
robust and innovative defense industrial base is a national 
imperative and that starts at the most basic level.
    Thank you. I look forward to your questions.
    [The prepared statement of General Adams follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Rohrabacher. General, you were right on 5 minutes.
    Now Mr. Brown, can you do the same?

   STATEMENT OF MR. NEIL BROWN, NON-RESIDENT FELLOW, GERMAN 
               MARSHALL FUND OF THE UNITED STATES

    Mr. Brown. Being fourth in the batting order and knowing my 
problems at baseball, I know that I won't be able to follow the 
General quite so well as that precision.
    It is a real pleasure to come to this side of the Capitol 
and join this distinguished committee. When I joined the Senate 
committee staff in 2005, we held a lot of hearings on these 
sorts of issues and at that time it was a lot of doom and 
gloom. For decades, really, we had become conditioned as 
Americans to be on the receiving end of oil and gas, 
particularly oil decisions with governments that did not have 
our best interests at heart.
    So I am particularly grateful for this committee, for you, 
Chairman and Ranking Member, for holding this hearing at a time 
where Americans are doing what we do best which is changing the 
rules of the game through innovation in oil and gas and 
unconventional sources, efficiency, alternative energy, we are 
giving ourselves not only economic opportunities, but much more 
significant foreign policy flexibility and opportunities around 
the world, including in Central Asia which is important both 
for the issues that Ed mentioned in terms of the volume of oil 
and gas and other minerals the region has, but also for the 
strategic benefits and importance given that it sets above 
Iran, Pakistan, and Afghanistan.
    There are, I think, two major energy forces happening in 
Central Asia. One is China which is using its financial clout 
to access resources and the other is Russia. Russia is after 
power of a different sort which is political power, by 
maintaining as much control as possible over transit, in 
particular, it wants to further its own interests in keeping 
its friends in power.
    I thought that some context might be useful. Congressman 
Keating mentioned that local events around the world can really 
impact the prices Americans pay at the pump, our economy, our 
national security. And really what has happened in the global 
oil market in particular is that the rising demand of emerging 
economies, particularly China, India, and in the Middle East, 
ironically, has over time really narrowed the margins in the 
global oil market which meant particularly in the mid-2000s 
that even small disruptions, attacks in the Niger Delta on 
Shell's facilities could have an impact right here at home. Now 
the recession, I guess one good side of the recession is that 
demand slowed down so that we got a bit more of a window and 
also more recently the U.S. has boosted supply, again giving 
more flexibility. But that structural shift in markets has not 
changed. So we can expect more of the same, unfortunately, when 
the economy picks up.
    Now I want to skip to--seeing my time--skip to what is 
happening with Russia. And really what you have is on the 
Central Asia side, pipelines running north and that is Russia's 
lever of control, one of its most important levers of control 
over those governments and on the eastern side of Europe, the 
supply routes. So we have major concerns in Central Europe, 
Eastern Europe, the Balkans, the Baltics, and dependence on 
Russia for gas, in particular. Now if Russia were simply to 
allow markets to work, that dependence would still bring 
economic detriment, but it would not be, I suppose, a strategic 
concern. But unfortunately, that is not the way Russia 
operates. We have seen time and again their willingness to use 
energy as a weapon or for coercion.
    So the U.S. strategy has really focused on diversification.
    It was mentioned previously the Southern Corridor which 
recently has had a boost in picking of a pipeline route to 
deliver Caspian gas on into Europe, but there is still much 
more work to be done.
    I would like to have entered into the record a report that 
the Foreign Relations Committee on the Senate side put out in 
December that goes into this in great detail so that if my 
testimony, when you read that, doesn't cure your insomnia, then 
the report will definitely take care of it.
    Mr. Rohrabacher. Without objection the report will be 
submitted for the record at this point in the record.
    Mr. Brown. Thank you. Three key recommendations from that 
report and the analysis is for the first time, the United 
States has the ability to directly aid our allies on gas 
supplies. We have an abundance of natural gas and those allies 
want that gas whether that is Turkey which would like to reduce 
its dependence on Iranian gas or Central Europe that would like 
to reduce its dependence on Russian gas. The Congress is 
currently considering a bill that Congressman Turner put out 
that would automatically grant export licenses, so I recommend 
that to you.
    The second recommendation is that even as we think about 
our own LNG exports, we also have to focus on pipelines. And to 
that extent we need much more high-level engagement on a 
concerted basis because decisions in these regions on energy 
are made at the highest levels of government, so you need to 
have that kind of constant attention and the loss of the 
Nabucco project which would have delivered gas directly into 
Central Europe means that we need to think of new ways to make 
sure that we have pipeline interconnections to help our allies 
there.
    And finally, we need to reemphasize the prospect of a 
Trans-Caspian pipeline to link infrastructure that originates 
now in Baku to Turkmenistan. It has been talked about a long 
time and it is extremely challenging, but without U.S. 
leadership the opportunity will be lost and I know this 
committee is also considering a resolution on that issue, so 
that is well on your radar. Thank you.
    [The prepared statement of Mr. Brown follows:]
    
    
    
    
    
    
    
    
    
    
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    Mr. Rohrabacher. I want to thank all of you for giving us 
some food for thought and we will go and vote and it is the 
chair's intention to call this hearing back to order 5 minutes, 
Mr. Keating, 5 minutes after the last vote, is that all right 
with you, Mr. Keating? Okay, so 5 minutes after the last vote 
which we expect to have ready at around 11:30. We should be 
back around 11:30. So this hearing is now not adjourned, but in 
recess.
    [Recess.]
    Mr. Rohrabacher. The hearing will come to order. I want to 
thank you for holding off. The ranking member, Mr. Keating, 
will be joining us momentarily. He gave us permission to 
proceed in the meantime without him.
    I found all of the witnesses to be offering some very 
compelling testimony today and I think the record of this 
hearing will be of great value to all of us and to a great 
number of people will be looking through this record.
    One major truism of our era is we are now living in a time 
that is different than it was 50 years ago in that we have huge 
chunks of the world population that seem to be perched and 
ready to uplift their standard of living, especially in India 
and China. And we are talking about together they represent 
maybe half of the world's population I believe. And half of the 
world's population which in the past seemed to be relegated to 
living the rest of eternity in poverty and deprivation.
    This will obviously, if indeed, their well being and their 
economic well being is to be uplifted, that will, will it not, 
create a huge drain on natural resources. It takes energy to 
have prosperity for normal people. It takes clean water as 
well, I might add. And it takes industrialization or at least 
the production of wealth using technology to uplift large 
populations. So thus, we face a world now that is going to have 
if, indeed, India and China are to increase their standard of 
living, this will create a major--it will exacerbate everything 
we have been talking about today.
    And for example, Mr. Chow, you mentioned in your testimony 
the growing competition in Central Asia for Central Asian oil 
and that India is part of this for this oil and gas competition 
for that. There are different ideas. We have heard testimony 
today about pipelines that could then maybe connect India and 
China to this oil and gas in Central Asia. But any pipeline 
that would go through or get to India from Central Asia it 
seems like it would have to come through and what is being 
looked at now as an Afghan--Turkmenistan-Afghan-Pakistan-Indian 
pipeline, TAPI, I think they call it.
    And is that realistic, Mr. Chow, that they could--is that 
pipeline really a pipe dream, considering the fact of what is 
going on in Afghanistan and the turmoil that pipeline would 
have to go through?
    Mr. Chow. Thank you, Mr. Chairman, for that question. I 
think in my written testimony I made clear to you that I am 
helping the Department of State in figuring out how to advance 
this pipeline project and challenges for that project is indeed 
daunting for quite obvious reasons that we don't need to go 
into detail here.
    I think the fundamental reason why this might work, and I 
say might, is that you have a country in Turkmenistan that has 
the fourth largest gas resources in the world that seeks 
diversification of its export routes so that it doesn't become 
over reliant on China as it once was over reliant on Russia for 
its natural gas exports. And at the same time, as you have 
already mentioned, we have got this booming energy market in 
India. If it is possible to connect the two, and geography 
dictates that therefore you have to go through Afghanistan and 
Pakistan, then there are fundamental ingredients that would 
make that project work economically if you can manage the 
political and security risks involved.
    So I think the economics are there. The interest of the 
government to seek alternative export routes is there. By the 
way, it converges rather well with U.S. national interests in 
the sense that our interests and the stability of the region in 
integrating Afghanistan into both South and Central Asian 
economies and also to promote better relationships for Pakistan 
with its neighbors, most prominently India and Pakistan. So it 
is a very challenging project.
    I have worked in this industry quite a long time. The 
fundamental economics are there. Whether politically and in 
terms of security it is achievable we will have to find out.
    Mr. Rohrabacher. So let us note that you are saying it is a 
challenging project, but it is not challenging engineering-
wise, is it? The challenge has to do with political decisions 
and political stability and within Afghanistan and that region. 
India would certainly have an important, let us say be an 
important customer for that oil, but at the same time wouldn't 
that be something the Chinese would not want to have developed?
    Mr. Chow. I think that that is fair to assume.
    Mr. Rohrabacher. So what we have, Dr. Chow, is the great 
powers of that region, India and China, have conflicting 
interests over what to do with that natural resource and again, 
that is what this hearing is all about and we should take note 
of that and learn from it and maybe try to project what that 
means in the future.
    Do any of the other panelists have a comment on that?
    Mr. Chow. I would just add, Mr. Chairman, if you will 
permit me, that we should not underestimate the interests of 
the national leaders of the countries involved in Central Asia 
to balance the interests so that they are not overly dependent 
on any one of the regional powers. So they have a fundamental 
interest in diversity of export groups.
    Mr. Rohrabacher. Yes. Mr. Brown?
    Mr. Brown. Maybe to add just a couple thoughts to that 
because you have hit on something that is both a positive and a 
negative in this world which is, even on just a humanitarian 
basis, we want poor people to rise up out of poverty. And who 
can blame them for wanting air conditioning and cars and all 
the sorts of things that they want?
    Mr. Rohrabacher. Refrigerators or clean water.
    Mr. Brown. Exactly. And in an ironic sort of way, when we 
see China, India, and other emerging economies go out searching 
for these resources, it is an indicator of economic activity 
which on the other side benefits the United States in terms of 
being a strong trading partner where we can sell our goods and 
services. So it really is a double-edged sword.
    In my prepared testimony, I mentioned one manifestation of 
energy and conflict that we do see happening and that is around 
the issue that you have raised which is electrification and 
access to power. We see in countries like Pakistan, we just saw 
it in Egypt where the inability of governments to provide such 
a basic resource as power can lead to instability that can then 
overthrow those governments and directly impact U.S. 
activities. That is why the work that Ed is doing on TAPI, 
there is also discussions that the World Bank is working on in 
electrification to bring from Central Asia, that is essential.
    There is also a huge multi-billion person market out there 
that U.S. companies can access to provide power, whether that 
is from big stationary plants that might use coal or natural 
gas or renewables. It is much like the telecommunications and 
kind of personal goods, soaps and what not, industries found in 
emerging markets where these may be poor people, but they do 
have purchase power. And so unlike countries that just want to 
take natural resources, the U.S., we have a position to really 
invest and also make money in the trading relationships.
    Mr. Rohrabacher. Let us hope that there will be some 
stability enough so that those natural resources and that is 
what this is all about, will be able to be utilized to help 
human beings.
    If I was, however, if I was in India and I was trying to 
calculate what I should be doing strategically considering that 
what seems to be an adversarial relationship with China and 
Pakistan, but China, it seems to me that I would want to help 
those elements in Turkmenistan and Afghanistan that might be 
willing to align themselves with India's interests. And again, 
we are talking about fundamental reasons for conflict.
    Mr. Mankoff, you mentioned the gas off of the Israeli 
coast, would that gas, and we heard mention of Egypt a moment 
ago, would that gas be something that could be used for 
bringing peace between Egypt and Israel and especially now that 
maybe you have a different potential direction for Egypt rather 
than the Muslim Brotherhood and anti-Israeli government? Could 
perhaps Israel step forward and try to say that that gas could 
be used for Egypt as well in a peaceful endeavor?
    Mr. Mankoff. Yes. Thank you for your question. The 
fundamental challenges that face that part of the world are 
ultimately rooted in politics. And energy, I think, can play a 
role in addressing the conflicts between Israel and her 
neighbors, but in and of itself is not sufficient to do that. I 
think you have to have political agreements, political 
solutions to some of the problems between those countries and 
energy can be a carrot or an inducement for reaching those 
agreements.
    There has been discussion in Israel about exporting some of 
this gas to Jordan, for example, although apparently that has 
now been caught up in internal Israel politics.
    Mr. Rohrabacher. Right now, Israel is in negotiations on 
water with Jordan.
    Mr. Mankoff. Yes.
    Mr. Rohrabacher. And especially about--this has been going 
on for a few years now, between the Red Sea to Dead Sea project 
which there has been step-by-step, but they have been 
negotiating at a time when there are other factors that were 
driving Israel and Jordan apart. They had this mutual interest 
in negotiating for water. Perhaps would Egypt and now in the 
situation that it is and the Government of Egypt is now in a 
precarious situation, perhaps this would be a good time to try 
to demand some positive ties based on economic dual interest.
    General, did you have a comment on those things?
    General Adams. No sir.
    Mr. Rohrabacher. Any comment on the Chinese part with 
Central Asia and the pipeline?
    General Adams. No, sir. That is not something we covered in 
our report.
    Mr. Rohrabacher. All right, thank you very much. I will now 
turn to my ranking member, Mr. Keating.
    Mr. Keating. Thank you, Mr. Chairman, and as you can see, 
the chairman knows the shortcuts better than I do coming back 
from votes.
    I find this whole issue very important for two reasons 
because the effects of it can go either way. These can be areas 
of conflict that make the situation worse, but they could also 
be areas as your testimony indicated where if things fall the 
right way, that these countries could be--have greater control 
over their own economy, their own energy sources, for instance, 
and make them more stable and profitable and being able to do 
more ancillary business from this. So how this breaks is not 
just unilateral. It can go both ways.
    Along those lines, General Adams, coming from Massachusetts 
we are very proud to have John Adams in front of us testifying. 
But you mentioned the issue of corruption. One of the things in 
this region that could inhibit business investment are these 
corruption issues. If you would like to address what we could 
do to help in that regard and then any of the panel members if 
you would like to comment on that. Because I see that as one of 
the real issues that could hinder private investment in that 
area.
    General Adams. Thank you, Congressman Keating, and the 
opportunity to answer that question. Allow me to answer the 
question in the context of what we investigated in our report, 
specifically the lack of access that the United States has to 
key minerals and materials that we need for our defense supply 
chains. And there is, in fact, concerns and we are concerned 
based on our research that corrupt business practices and 
manipulation of markets is one of the reasons that we have a 
lack of access to key raw materials, specifically rare earth 
elements.
    As you know, China decided two decades ago that they would 
shore up their extraction industry, their mining industry for 
rare earths and they were successful in doing that. And they 
were also able to basically drive other mining countries out of 
business of doing rare earth minerals. The last U.S. mine, the 
Molycorp mine in California, went out of business in 2002. 
There were other reasons than the fact that the Chinese were 
driving the prices so that the mine was not economically 
competitive, but that was certainly a huge factor. And then 
having attained a near monopoly in the mining of key rare earth 
elements and minerals, China continued to not only involve 
themselves in the extraction industry, extraction of oxides, 
but the entire supply chain for rare earth elements and 
production of such things as advanced magnets which is a key--
we have advanced magnets in all modern defense electronics. 
Smart bombs, for example, have to have advanced magnets. China 
pulled that supply chain into China. Now is that corrupt? 
Certainly, there is manipulation. Is that something that we 
allowed to happen because we had our eye off the ball? I would 
argue that that is the case. And I will come back to that in 
just a moment.
    There is a another example I would like to give where the 
platinum group of metals, platinum is used in a wide variety of 
applications, but the commercial application we are all 
familiar with is the catalytic converter. But almost every 
modern engine has to have platinum group of metals in it, small 
parts of it, but there has to be platinum group of metals, 
minerals in every modern engine. Most of it is mined in South 
Africa. And I don't want to go into a long, political 
discussion of the instability in South Africa, it is what it 
is. And we have to remember the role of the Chinese in that as 
well. The Chinese have established over the last 20, 30 years, 
excellent ties with countries in sub-Saharan Africa. Is that 
something that again we should note at this point, especially 
in this august committee. I would argue, yes, we should.
    So the platinum group of metals comes largely from South 
Africa. We need that for our defense materials, our defense 
equipment and again, is the market being manipulated or is it 
corruption? I would argue certainly it is manipulation.
    What we need to do and I won't belabor the point, but what 
we need to do is to go to strategy and base our need for our 
strategic materials in the need for defense strategic that fits 
the threats of the next 20, 30 years. We are pretty good at 
doing strategy. We have got a lot of people over across the 
river who do that pretty well and they get a lot of help from 
this building as well. But we are good at that. And we are good 
at designing programs that let us execute the strategy. But 
what we need to do is decide what are those key strategic 
materials? And if we find that market manipulation is part of 
the reason we don't have access, then we need to enforce fair 
trade laws and we need to make sure that we have protection of 
existing laws and regulations and provide for domestic sourcing 
for key industries. We have to have a coherent strategic at the 
U.S. Government level to determine what those critical raw 
materials are. And then we need to act upon that to make sure 
that we have got secure access to them for our war fighters. 
Thank you.
    Mr. Keating. I am reminded, General, with your comments 
what some of the top military people in our country said when 
they said what is our greatest threat and many of them have 
come down to the fact it is our economy. And I think that is 
part of what you are saying.
    Mr. Brown?
    Mr. Brown. Congressman, I appreciate you bringing up 
corruption. It is one piece of a very ugly side of natural 
resources, particularly in oil and gas, but also in some 
minerals where they can be a magnet for some of the worst 
governance practices in the world. They can embolden 
authoritarian leaders that may choose to be authoritarian 
against their own people's interests or against our interests. 
And we see that around the world.
    In the extreme, it can even lead to conflict. It undermines 
political stability and you see internal conflict around the 
use of those resources and the revenues. So the best example of 
that, of course, is the Niger Delta. And as you mentioned, that 
is a good example of a major company then having its 
infrastructure, its oil be shut in because of that violence.
    Central Asia, fortunately, does not face that level of 
violence, but we all know that the revenues from these 
resources are supporting some rather poor governance practices 
and of course you see the same thing in Russia. I think the 
unfortunate side is that we have limited leverage on governance 
of resources, precisely because the governments are rich 
because of them so we have very little aid money going in. At 
the same time, we have competing priorities, we have strategic 
needs in Central Asia, so we can only do so much.
    But there is a good news story which is that Congress a 
couple of years ago took the step to institutionalize norms 
that are focused on the fact that information is the necessary 
first step to improve governance in these countries, to empower 
civil society, to empower the press and to empower investors. 
So laws are now in place that will bring to light the revenues 
that are paid to these governments so that then that 
information can be used effectively.
    In your opening comments, you also mentioned the voluntary 
Extractive Industry Transparency Initiative. Well, probably not 
that many people know, but the U.S. now has decided to lead by 
example. And so the government led by the Department of the 
Interior, companies, and civil society are, just yesterday 
actually, there was the most recent meeting. They are coming up 
with common practices so that we can show the American people 
what the Federal Government is bringing to bear. And that is 
going to have tremendous impacts in our diplomacy because one 
of the things when you go talk to these governments and say 
well, you should be more transparent, etcetera. They say, 
``What you doing?'' I am happy to say that the U.S. Government 
is now going to be at the lead of that and I encourage Congress 
to become involved in those discussions because you are the 
people who are going to have to explain it to Americans when 
they ask.
    Mr. Keating. Yes, Doctor.
    Mr. Mankoff. I would just like to add a word about Central 
Asia. For the last decade plus, the United States' engagement 
in this part of the world has been driven very heavily by the 
conflict next door in Afghanistan and that has created a kind 
of dependence if you will on these relatively untransparent, 
corrupt, and often brutal governments in Central Asia. But 
because of the dependence that we have had on them for security 
cooperation, it has been difficult for the United States to 
place issues of transparency in governance at the top of the 
bilateral and regional agenda in dealing with these countries.
    As we begin the transition to the withdrawal of 
international forces from Afghanistan over the next year and a 
half, one of the benefits of this change is that we will be in 
a position where we are less dependent upon these countries for 
achieving our core security objectives. And that means that the 
United States will have increased leverage to push on some of 
these issues that you raised in your comments.
    Now certainly as Mr. Chow said, the governments in Central 
Asia are very interested in diversifying their engagement so 
that they do not become overly reliant, either economically or 
politically on either the Russians or the Chinese which means 
that they all have and have all expressed a very strong 
interest in continued and deepening engagement with the United 
States. In a post-Afghan Conflict environment that means that 
the United States has the opportunity to push harder to be more 
insistent and to make its engagement more conditional on these 
governments meeting their obligations on issues of governance 
and transparency including their management of natural 
resources.
    Mr. Keating. I would just have one other last comment, if I 
could, Mr. Chairman, and that would be many of these resources, 
these rare minerals are there, but there aren't transportation 
networks. There aren't infrastructure support to get them. It 
would be too expensive. So one of the things that came to my 
mind is if we are engaged somehow in assistance that is private 
or the governmental side in these, maybe there can be linkages 
between some of those infrastructures being built and making 
sure this transparency with the mining and the development of 
many of these rare materials.
    General, that is my last question.
    General Adams. Sir, if I may respond to that? You may know 
that we have looked closely at Afghanistan for possible 
extraction of raw materials, specifically rare earth elements 
in Kandahar and how difficult that would be. And what I want to 
mention is that the search for alternate sources is a good 
thing and we should continue to do that and we should do that 
first here domestically. We have got great alternate sources 
for rare earths in Alaska and in northern Great Plains as well 
as California.
    And I said the last mine in California closed in 2002. Of 
course, it opened again, the Molycorp mine opened in 2012, so 
the search for alternate sources for specifically rare earths 
should continue. That is a very good thing for us to do. But it 
begs the question here that we ought to consider as we are 
looking at sequestration and limited budgets, the U.S. 
Geological Survey is key to that and it was key to evaluating 
the potential for rare earth extraction in Afghanistan as well 
and they get a lot of help from the Department of Defense 
especially when we are talking about security.
    I have met with our Department of Defense executive for 
working with economic aspects of our Afghanistan involvement. 
It looks like it is going to be prohibitive for us to get rare 
earths from southern Afghanistan for security reasons. But the 
search is the important thing and I would like to just put a 
plug in for the USGS, the U.S. Geological Survey. Absolutely 
essential. It is like the canary in the mine. They are so 
essential to our being able to detect and identify and to 
program how we identify these key raw materials for our use. If 
we are going to use strategy to determine which ones we need to 
protect, USGS is key.
    Mr. Keating. Thank you, General. I yield back.
    Mr. Rohrabacher. And now we have Mr. Duncan.
    Mr. Duncan. Thank you, Mr. Chairman. Thanks for this 
hearing. Most of my questions were answered during the dialogue 
so I don't have a lot of questions, but I am on the Energy and 
Minerals Subcommittee of the Natural Resources Committee here 
in the House and so the rare earth issue has been something 
that we have been following for at least the last 3 years that 
I have been here. I do concur with the General that we have 
missed some opportunities over the last 30 years, but if the 
administration and Congress will look forward to developing 
those relationships with the countries that China currently has 
the relationships with, that have the rare earths, but I will 
also say that and you just touched on it, we have got a lot of 
rare earths in this country that are currently the mining areas 
and the resources are currently off the table for mining 
activity and production just due to a lot of policies, current, 
and in the past. And so I believe we need to open up more of 
those resources here in America. It is not only an energy-
independence policy, but a security policy with regard to rare 
earths.
    I also want to mention, Mr. Chairman, I am co-chair of the 
Transatlantic Working Group with members of European 
Parliament. And we had members of European Parliament in 
Washington last week and one of the topics of conversation was 
their reliance, European countries' reliance on the natural gas 
coming from Russia and how concerned they are about stability 
of that going forward. And we talked about opportunities that 
United States' oil and natural gas companies have to export LNG 
to Europe to supply the needs of natural gas to our European 
traditional allies. And how Europe is definitely looking to the 
U.S. as a source for that.
    So there is opportunity if we can expedite LNG terminal 
applications in this country. We have an abundance of natural 
gas and everyone is aware of that. We have got opportunity to 
export that to countries that are more friendly and it is not 
only the European Union countries that I talked to, but my 
understanding is that some of the V4 countries, Hungary, 
Czechoslovakia, Poland, Slovakia, are very interested in those 
LNG exports as well which kind of raises my awareness that it 
is a real issue because they are sitting so close to those 
pipelines that come through those countries from the resources 
to the East. And so I think there is an opportunity for 
American companies in the energy sector, but also think America 
can take advantage of the resources we have got here, but also 
echo the General's comments.
    And let me pause to thank you for your service to our 
nation, sir. I appreciate it.
    To echo your comments, we have got to go forward and think 
about the relationships we have with the countries, South 
Africa, sub-Sahara countries, but also all across the globe 
that have the rare earths that we are so reliant on in the 
automotive sector and the technology sector.
    You had mentioned cell phones, cell phones that operate 
with numerous rare earth minerals that make them work. Without 
those rare earth minerals, they don't work. They don't hold 
that data or they don't transmit that data.
    So Mr. Chairman, I am not going to ask any questions, but I 
want to thank you because these gentleman have done a fabulous 
jobs of answering my questions. You guys have done a good job 
of asking questions that were along the lines, so I thank you 
so much for this important topic. And with that, I yield back.
    Mr. Rohrabacher. All right, well, thank you very much.
    General, if my notes are correct, you testified that there 
were--Mr. Duncan, oh, he is off.
    I was going to say underscoring Mr. Duncan's point, your 
testimony was that we important 750,000 tons of vital minerals 
and material every year. Is that annually?
    General Adams. 750,000 tons.
    Mr. Rohrabacher. Whew. All right. I want to thank the 
witnesses as well. I think that this should be viewed, and the 
subject should be viewed in terms of national security, but 
also in terms of in humanitarian terms as well because as I 
emphasized earlier on, unless we succeed in this arena, 
ordinary people who now live in total deprivation around the 
world have no chance at all of improving their standard of 
living.
    And while we may, for example, it might be a good thing and 
it is a good thing that if we can bring some competition to the 
Russian pipeline that now supplies the natural gas to Europe, 
it would be a good thing that Azerbaijan and others have a 
competition with that. Competition is good for people's 
standard of living, and as we have found out in the United 
States.
    And so those of us who support the idea of pipelines and 
helping develop transportation systems for these things, it is 
not anti-Russian to do that, but it is pro-human being to try 
to develop more availability of resources, of natural gas to 
people everywhere and especially those that are currently under 
the domination of one source for a vital material like natural 
gas and such.
    That is, by the way, one of the reasons why President 
Reagan opposed that natural gas pipeline from Russia during his 
administration because he did not want to provide a country 
that didn't have free elections which was the Soviet Union to 
have such a dominant role over Western Europe. Whether or not 
it is a country that has free elections or not, it is a good 
idea to have several sources for gas and several sources for 
the vital minerals and materials that we have been talking 
about today.
    So with that said, I want to thank all of you for your 
testimony. This has been one of the many hearings we will have 
on the need for us to focus on water resources and other 
resources that are necessary to preserve the peace and to make 
sure that people have a right to improve their standards of 
living throughout the world. So with that said, this hearing is 
adjourned.
    [Whereupon, at 12:22 p.m., the subcommittee was adjourned.]
                                     

                                     

                            A P P E N D I X

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     Material Submitted for the Hearing RecordNotice deg.




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   Material submitted for the record by Mr. Neil Brown, non-resident 
           fellow, German Marshall Fund of the United States



[Note: The entire report is not reprinted here but is available in 
committee records and on the Internet at http://www.gpo.gov/fdsys/.]

                                 
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