[Senate Hearing 113-602]
[From the U.S. Government Publishing Office]






                                                        S. Hrg. 113-602

  UKRAINE_COUNTERING RUSSIAN INTERVENTION AND SUPPORTING A DEMOCRATIC 
                                 STATE

=======================================================================

                                HEARING

                               BEFORE THE



                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 6, 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

Corker, Hon. Bob, U.S. Senator from Tennessee, opening statement.     3
Farkas, Hon. Evelyn N., Ph.D., Deputy Assistant Secretary of 
  Defense for Russia/Ukraine/Eurasia, U.S. Department of Defense, 
  Washington, DC.................................................    16
    Prepared statement...........................................    18
    Responses to questions submitted for the record by Senator 
      Robert Menendez............................................    78
Glaser, Hon. Daniel L., Assistant Secretary for Terrorist 
  Financing, U.S. Department of the Treasury, Washington, DC.....    11
    Prepared statement...........................................    13
    Responses to questions submitted for the record by Senator 
      Robert Menendez............................................    77
Kramer, David, president, Freedom House, Washington, DC..........    58
    Prepared statement...........................................    60
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.     5
    Prepared statement...........................................     8
    Responses to questions submitted for the record by Senator 
      Robert Menendez............................................    74
Stent, Angela E., Ph.D., director, Center for Eurasian, Russian 
  and East European Studies, Georgetown School of Foreign 
  Service, Washington, DC........................................    52
    Prepared statement...........................................    54

                                 (iii)

  

 
 UKRAINE--COUNTERING RUSSIAN INTERVENTION AND SUPPORTING A DEMOCRATIC 
                                 STATE

                              ----------                              


                          TUESDAY, MAY 6, 2014

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 3:08 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Robert 
Menendez (chairman of the committee) presiding.
    Present: Senators Menendez, Boxer, Cardin, Murphy, Kaine, 
Markey, Corker, Rubio, Johnson, Flake, McCain, Barrasso, and 
Paul.

          OPENING STATEMENT OF HON. ROBERT MENENDEZ, 
                  U.S. SENATOR FROM NEW JERSEY

    The Chairman. This hearing of the Senate Foreign Relations 
Committee will come to order.
    Let me welcome today's panelists from the Departments of 
State, Defense, Treasury, Georgetown School of Foreign Service, 
and Freedom House who can provide a wide range of perspectives 
to help us assess Putin's actions in the Ukraine.
    Before I talk about the Ukraine and Russia, I want to note 
my grave concern about the cowardly and heinous kidnapping of 
some 276 young Nigerian women from their school and claims by 
Boko Haram's leader that many of the over 200 who remain 
missing are being trafficked to neighboring states and sold 
into child marriage. As a father, I am heartsick that these 
brave young women and their families are in a set of 
circumstances where they simply were getting an education and 
have been kidnapped. I look forward 
to the passage later today of a resolution authored by Senators 
Landrieu and Boxer condemning Boko Haram and this terrible act.
    Boko Haram is a brutal organization that is waging an 
escalating campaign of terror and war against its own people to 
tragic ends. Violence that they have fomented has contributed 
to an estimated 1,500 deaths in Nigeria this year alone. And 
just today, we have new reports that Boko Haram may have 
kidnapped an additional eight girls from their village homes in 
northeastern Nigeria.
    Later today, I will be sending a letter to the President of 
Nigeria, Goodluck Jonathan, pressing him to lead the effort to 
find the young women and hold the captors accountable. I urge 
him to work closely with the United States and international 
partners in this effort and welcome the offer today by 
Secretary Kerry to provide a coordination cell that would 
include U.S. military personnel and law enforcement officials 
with expertise in investigations and hostage negotiations.
    Turning back to the situation in Ukraine--I am pleased to 
have Ambassador Motsyk of Ukraine here. Ambassador, thank you 
very much for joining us.
    The situation in Ukraine is untenable, and there is no 
question that Russia and President Putin himself is supporting 
and instigating the conflicts that developed in southern and 
eastern Ukraine in the last days.
    Foreign Minister Lavrov's ruling out of additional talks 
today makes clear that Russia has no interest in resolving the 
crisis, leading us to conclude that the goal is to destabilize 
the country and potentially pursue further territorial 
ambitions.
    Our resolve, however, must be clear. Putin's actions must 
not stand and will not go unchallenged.
    These actions are an inexcusable breach of international 
law and a deeply aggressive gesture that sets a troubling 
precedent. Putin's tactics are not just about changing facts on 
the ground by sending in armed men to grab land. He has also 
launched a massive propaganda effort to distort the facts of 
this situation.
    In my view, President Obama's decision to impose sanctions 
and send hundreds of U.S. troops to our easternmost NATO allies 
is a correct response. There are several additional steps we 
could take.
    First, I believe enhancements should be made to NATO's 
defense posture. NATO and the United States need to take 
seriously the possibility that Russia will undertake aggressive 
actions beyond those in Georgia and Ukraine. And NATO should 
begin preparation to station forces in Central and Eastern 
Europe.
    Second, we should consider additional targeted sanctions. I 
am not shy when it comes to the use of sanctions because I 
believe they can be an effective tool of peaceful diplomacy, 
whether against Iran or Russian oligarchs who have made Moscow 
the home of more billionaires than anywhere else in the world.
    I would like to see additional targeted narrow sanctions, 
including on Rosneft and Gazprom, whose actions are causing 
economic havoc in Ukraine by manipulating prices and supply.
    We could also pursue other individuals in Putin's inner 
circle and the weapons exporter Rosoboronexports, which 
continues to send weapons to Assad.
    In my view, the next step could be sanctions. The next 
steps beyond that could be sanctions, as outlined by the 
administration, on Russia's financial, energy, and defense 
sectors.
    Thirdly, we need to examine further steps we can take to 
assist Ukraine at this critical juncture, including the 
provision of military assistance and equipment and body armor, 
as well as training and security assistance for Ukrainian 
forces.
    Now, I have to add that I am disappointed by some efforts 
to draw partisan lines around this issue. This committee very 
successfully reported legislation just weeks ago in a 
bipartisan manner supporting Ukraine and imposing sanctions. If 
additional legislation is needed, I would hope that we will 
work together to make that happen, rather than to make this an 
election year issue, which tends to work against productivity.
    In that vein, I am particularly concerned about language in 
a bill that would tie implementation of the New START treaty 
and, more broadly, the United States-Russian strategic nuclear 
balance to the crisis in the Ukraine. In my view, this would 
dangerously imply that the United States sees our strategic 
nuclear forces as a way to pressure Russia into withdrawal of 
its forces.
    I hope we can continue to move forward and work in the way 
that we have successfully done over the last 16 months, and 
today, I hope we can get the perspective of our panelists of 
where Putin's actions could lead and what options there are. I 
hope we can send a strong, clear bipartisan message to Putin 
that his repugnant behavior in Ukraine cannot stand.
    And with that, let me recognize the distinguished ranking 
member, Senator Corker, for his remarks.

             OPENING STATEMENT OF HON. BOB CORKER, 
                  U.S. SENATOR FROM TENNESSEE

    Senator Corker. Mr. Chairman, thank you, and I appreciate 
very much you calling this hearing and the way we have been 
able to work together.
    I like the way you laid out what we need to do to address 
this issue. I could not agree more that there needs to be a 
strategy that includes strengthening NATO. I have put a lot of 
effort into thinking about that. I think you know that, and I 
know you have too because we have had conversations together 
with leaders of other countries toward that end.
    I think we also need to sanction Russia and try to prevent 
their behavior from being such that we are forced to do 
something after the fact. And I know you just shared the same 
thing.
    And thirdly, we need to work to harden our allies like 
Ukraine, Moldova, and Georgia that are not part of NATO.
    I know we did the first round together. I think conditions 
on the ground certainly have changed dramatically since that 
time, and it would be my hope that, we would do something more 
robust. Based on the conversations that we have had, I know 
that we share these views.
    So I thank you very much for your opening comments.
    Secretary Nuland: Anne Patterson came in here 41 days ago. 
Anne Patterson is someone like you that I respect greatly. I 
really appreciate the work you have been doing in Ukraine since 
you were confirmed. You have been very diligent and certainly 
transparent with us.
    Anne Patterson had always been that way too, and she came 
in here and wanted to talk about a strategy on Syria and talked 
about the fact that they had one. Many of us have been very 
concerned about what has happened in Syria. As a matter of 
fact, it feels like in Ukraine we are watching the same kind of 
thing unfold that we watched unfold in Syria, and that is we 
talked big but we did not follow up. We did not do the things 
that we said we would do.
    And, of course, as I have said many times, the wisest thing 
Assad did for his own survival was to kill 1,200 people with 
chemical weapons. Today right now in Syria, someplace is 
probably dropping a barrel bomb on innocent civilians, killing 
and maiming people indiscriminately.
    So, you know, Anne said she had a strategy and they wanted 
to share with us this strategy. It has been 41 days. I have not 
gotten a phone call, Mr. Chairman. Have you gotten a phone call 
regarding a Syria strategy? I do not think so.
    So what I hope is going to happen today, with the 
tremendous respect that I have for you, you will lay out a 
strategy that will tell us exactly what the administration is 
going to do. The fact is that Breedlove, somebody that you work 
with very closely, is saying right now that Putin is 
accomplishing exactly what he wants to accomplish inside 
eastern Ukraine without moving any troops. And we know exactly 
what he is doing. We know he is fomenting what is occurring 
inside Ukraine. We do not think that; we know that. And the 
administration has stated that publicly.
    Since the sanctions went in place last Monday, the stock 
market has risen almost 4 percent in Russia. They are laughing 
it off. It has no effect whatsoever on Russia's behavior. As a 
matter of fact, I think it actually moves them in the other 
direction because they are just minor irritants. They are not 
the kind of things that change behavior. Almost 4 percent. I 
think 3.63 percent increase since the sanctions, which everyone 
knew had no effect, were announced.
    So, Madam Secretary, I hope today, with your great strength 
and the admiration that we all have for you, what you are going 
to do is lay out what the administration is going to do, not 
talk in heavy rhetoric. And you have never given that. But tell 
us what we are going to do to affect things on the ground.
    My thinking is that if we continue as we are, it is going 
to be just like Syria, when we could have nipped it in the bud 
and made it a much lesser issue. Instead we let it get out of 
hand, and I think that very thing is happening in Ukraine.
    I will close with this. When people speak like Chairman 
Menendez just did, when they speak like I do or Ron Johnson or 
John McCain, the President continues to say that we are 
warmongering. I would say it is just the opposite. If you let 
things fester until they get out of control, it is far more 
likely that we are going to find ourselves in a conflict that 
is of a much more severe nature than if we do those things to 
prevent Russia from doing the things that they are continuing 
to do on a daily basis.
    So I hope you are going to be very explicit about what the 
administration plans to do to change things on the ground 
today. And I thank you very much for coming to our committee.
    I thank the chairman for having this meeting.
    The Chairman. Thank you, Senator Corker.
    The only thing Senator Corker did not do with his southern 
charm is say ``God bless your soul'' before he went to the rest 
of the----
    [Laughter.]
    Senator Corker. God bless your soul. [Laughter.]
    Ms. Nuland. Thank you, Senator.
    The Chairman. I know my friends from the South, when they 
say that, I brace myself first after they say that.
    But on a serious note, I appreciate the ranking member's 
comments. We will hopefully get a fair amount of the way to 
understanding where we are headed.
    So let me start off by introducing our first panel: the 
Assistant Secretary of State for European and Eurasian Affairs, 
Victoria Nuland; the Deputy Assistant Secretary of Defense for 
Russia, Ukraine, and Eurasia, Dr. Evelyn Farkas; and Dan 
Glaser, the Assistant Secretary of Treasury for Terrorist 
Financing. Thank you all for being here.
    We are going to include all of your opening statements 
fully in the record, without objection. I would ask you to try 
to summarize your statement within 5 minutes or so, so that we 
can get into a panel discussion with each of you. And we will 
start off with you, Madam Secretary.

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, for inviting me today. I apologize for being late. As I 
usually do at such moments, I will blame Secretary Kerry. We 
were meeting with Lady Ashton.
    I also want to thank this committee for its bipartisan 
legislation, for its support for the people of Ukraine, for the 
many visits many of you have made. It has made a huge 
difference.
    I hope collectively we can answer your questions here, 
Senator Corker, and lay out a strategy.
    When I testified before the subcommittee on April 10, I 
laid out four pillars of U.S. policy to address the challenges 
in Ukraine: supporting Ukraine itself, reassuring our NATO 
allies, creating costs for Russian behavior, and keeping the 
door open for de-escalation through diplomacy. Collectively, we 
will speak to all of those things again today.
    But what I want to focus on here today are the events since 
we had our last diplomatic encounter to try to de-escalate, 
which was the U.S.-EU-Russia-Ukraine meeting on April 17 in 
Geneva and on the crucial 19 days from now until the May 25 
Presidential elections in Ukraine.
    For a quick reminder about the commitments that were made 
in Geneva, at its core the Geneva agreement was kind of a grand 
bargain that offered amnesty and deep and broad 
decentralization of power to Ukraine's regions through national 
dialogue and constitutional refrom if and as pro-Russian 
separatists ended their violence, ended their intimidation, 
left seized buildings, and gave up weapons, all of it to be 
guaranteed and overseen by the OSCE.
    As you all know, the Ukrainian Government began 
implementing its part of Geneva even before the ink was barely 
dry on the text. It introduced a broad amnesty bill into the 
Rada. Authorities in Kiev began dismantling barricades and 
opening streets on April 14, and on the 29th, the 
Constitutional Reform Commission held public conferences to 
which all the regions were invited about decentralization and 
reform. Ukrainian Security Forces even instituted an Easter 
pause in their clearing operations and sent senior officials 
out with the OSCE teams to the east to try to talk to 
separatists and try to get them to pursue their aims 
politically rather than through violence.
    In contrast, the Russian Federation fulfilled none of its 
commitments. None, zero. After we left Geneva, no one in Moscow 
at any level even issued a public statement calling for 
buildings and checkpoints in the east to be vacated and weapons 
to be turned in. Russia declined a request by the OSCE to send 
a senior representative to Ukraine's east to work with the 
separatists on compliance. And in fact, the separatists in 
Donetsk and Luhansk told the OSCE that they had heard no 
messages from Moscow urging them to step down.
    Instead, since April 17, as you have seen, the efforts of 
the Ukrainian side and the OSCE have been met with more 
violence, mayhem, kidnappings, torture, and death. Pro-Russian 
separatists have seized at least 35 buildings and three TV and 
radio centers in 24 towns. On Friday, the Ukrainian Government 
announced that separatists had used MANPAD's to shoot down a 
Ukrainian helicopter, killing the pilots. And Friday, as you 
know, also saw the deadliest tragedy of this conflict, the 
death of more than 40 in Odessa, following violent clashes 
reportedly instigated by pro-Russian separatist thugs attacking 
what was initially a peaceful pro-unity demonstration.
    Today, Russia claims it has no influence over the 
separatists and provocateurs rampaging in eastern and southern 
Ukraine, and 
yet, a week after eight OSCE observers were taken hostage in 
Slovyansk, when Moscow finally agreed that it would send an 
envoy to help the OSCE, the hostages were released within 
hours.
    In Odessa, it should come as no surprise that the Ukrainian 
authorities report that those they arrested for igniting the 
violence included people whose papers indicate they came from 
Transnistria, from Crimea, and from Russia itself.
    As Secretary Kerry told this committee in April, we 
continue to have high confidence that Russia's hand is behind 
the instability. Moscow is providing material support, funding 
weapons coordination, and there are Russian agents on the 
ground in Ukraine involved in this.
    Equally worrying today from Slovyansk to Odessa, the 
playbook is identical to what we saw in Crimea. First, you 
create the upheaval in the towns that were completely peaceful 
just 2 months before. Then you intimidate the local population. 
Then you hold a bogus independence referendum on 2 weeks' 
notice. And that is exactly what has been declared for May 11 
in the so-called Donetsk and Luhansk Peoples' Republics. And we 
all remember what came after that, what came next in Crimea. 
Russian peacekeepers swarmed in to protect the will of the 
voters.
    Just as we do not accept Russia's declared need for these 
so-called peacekeepers in Crimea, we will not accept any 
unilateral decision to deploy unsanctioned Russian peacekeepers 
to eastern or southern Ukraine.
    And yet, the polling indicates that the separatists do not 
speak for the populations of eastern and southern Ukraine. More 
than two-thirds of Ukrainians in the east report that they plan 
to vote in the May 25 election. They do not want little green 
men or separatists or Moscow deciding for them, and with more 
than 20 candidates running representing every viewpoint and 
every region in Ukraine, these elections offer Ukrainians a 
real democratic choice.
    That is why the United States and Europe and the 
international community are working so hard with the Government 
of Ukraine to help them ensure free and fair elections do take 
place across Ukraine. All told, the OSCE's Office of Democratic 
Institutions and Human Rights, ODIHR, is preparing to deploy 
more than 1,000 observers throughout the country to monitor the 
elections. The United States will provide one-tenth of these 
and 26 other OSCE states are also contributing. The United 
States is also supporting 255 long-term observers and over 
3,000 short-term observers, some of whom will provide a 
parallel vote tabulation.
    Free, fair elections on May 25 are the best route to 
political and economic stability in Ukraine. From Lviv to the 
Maidan to Odessa to Donetsk, the Ukrainian people want and 
deserve the right to determine their own future, and those who 
claim to be their protectors should stand up for the ballot box 
if they truly want the voices of eastern Ukraine to be heard in 
the political process rather than dictating to them through the 
barrels of a gun or barricades of burning tires.
    In this regard, it is more than ironic that today Moscow 
asserts that both the interim government in Ukraine and the May 
25 elections are illegitimate. It makes you wonder if Moscow is 
afraid to allow the Ukrainian people to participate in an 
election that is going to afford them far more choice than any 
recent elections in Russia's own history.
    As we work to empower the Ukrainian people to determine 
their own future democratically, we must also acknowledge that 
the people of Russia are being cheated of their democratic 
rights. Just since the Sochi Olympics, the Russian Government 
has taken new aggressive steps at home to tighten control of 
the media, curb dissent, criminalize free expression on the 
Internet, and to trample on human rights. Putin's formula is 
simple, as you both said: intervention abroad and repression at 
home.
    But, Senator, I would disagree with you with regard to the 
impact of sanctions. Russia's economy is already showing that 
this model does not lead to a great Russia. It leads to a broke 
one. Russia's credit rating is hovering just above junk. Fifty-
one billion dollars in capital has fled Russia since the 
beginning of the year, almost as much as in all of 2013 
combined, and that was a bad year for capital flight. Russian 
bonds are trading at higher yields than any debt in Europe, and 
as the ruble has fallen, the Central Bank has raised interest 
rates twice and has spent close to $30 billion from its reserve 
to stabilize the ruble.
    So at some point, the nationalist fever in Russia will 
break, and it will give way to a sweaty and harsh realization 
that there are economic costs to what Russia is doing. And the 
Russian people will start to ask their government what have we 
actually achieved. Instead of funding schools and hospitals and 
science and prosperity at home in Russia, we have squandered 
our national wealth on adventurism, interventionism, and the 
ambitions of a leader who cares more about empire than he does 
about his own citizens.
    But it does not have to be this way. Russia can still step 
back from supporting separatism and violence and do the right 
thing. Working closely with the Ukrainians, the OSCE, key 
European governments, including Germany, we are once again 
offering a diplomatic path forward, a rejuvenation of the 
Geneva agreement: amnesty for separatists and real political 
reform through elections and constitutional change in exchange 
for peace, security, and unity across Ukraine that all of these 
require.
    A Russia that truly cares about the fate of the ethnic 
Russians in Ukraine and the people of Ukraine's east, let alone 
its own citizens, will work with us on this. A Russia that does 
not will face a tightening grip of political and economic 
isolation from the international community. And as the 
President said standing next to Chancellor Merkel on Friday, if 
Russia further destabilizes the elections, they will face 
sectoral sanctions.
    In 19 days, the Ukrainian people will have the opportunity 
to make their choice. It is in the U.S. national security 
interest that the May 25 Presidential elections reflect the 
will of Ukraine's 45 million people. We stand united with the 
overwhelming majority of the international community in support 
of Ukraine's democratic choice. The stakes could not be higher 
for Ukrainian democracy, 
for European stability, or for the future of the rules-based 
international order.
    Thank you.
    [The prepared statement of Ms. Nuland follows:]

   Prepared Statement of Assistant Secretary of State Victoria Nuland

    Chairman Menendez, Ranking Member Corker, thank you for inviting me 
to testify today on our efforts to counter Russia's de-stabilizing, 
provocative actions in Ukraine and to preserve Ukraine as a united, 
democratic state.
    I want to express my deep appreciation to the members of this 
committee for the bipartisan support you have shown to Ukraine and its 
people since this crisis began. The Senate's passage of the U.S. loan 
guarantee legislation sent a strong signal of America's support. And 
the visits that so many of you have made to Ukraine reinforce America's 
bipartisan solidarity with the Ukrainian people during this critical 
time.
    When Assistant Secretary Chollet and I testified before the 
Subcommittee on European Affairs on April 10, I outlined four pillars 
of U.S. policy to address the challenges in Ukraine. Let me restate 
them again briefly. First, the United States is supporting Ukraine with 
financial, technical, and nonlethal security assistance as it prepares 
for democratic Presidential elections on May 25, and works to protect a 
peaceful, secure, prosperous and unified future for its people. Second, 
we are stepping up our effort to reassure our NATO allies--an area that 
DASD Farkas will address in detail--and we are providing support to 
other ``front-line'' states like Moldova and Georgia. Third, we are 
steadily raising the economic costs for Russia's illegal occupation and 
annexation of Crimea and its continuing efforts to destabilize eastern 
and southern Ukraine; Assistant Secretary Glaser will address the 
sanctions we've imposed and what's next. And fourth, we are working 
with Ukraine and our European partners to leave the door open for 
diplomatic de-escalation should Russia change course, and make a 
serious effort to implement its April 17 Geneva commitments.
    Today, I want to focus my remarks on events since the April 17th 
meeting in Geneva and on the crucial 19 days from now until the May 
25th Presidential elections in Ukraine. First, I will provide an update 
on the Geneva Joint Statement's implementation and events on the ground 
in eastern and southern Ukraine. Second, I will address how the United 
States and the international community are working with Ukraine to 
protect the May 25th elections even as Russia refuses to recognize the 
Ukrainian Government's legitimacy and Russian agents and surrogates sow 
mayhem and separatism from Slovyansk to Odesa. Finally, I want to speak 
about the other victim of President Putin's policies--the Russian 
people.
    First, a quick reminder about the commitments made in Geneva. At 
its core, it is a grand bargain that offers amnesty for those who 
vacate seized buildings and deep, broad decentralization of power to 
Ukraine's regions through national dialogue and constitutional reform, 
as the other half of Geneva is implemented: an end to violence, 
intimidation, the seizing of buildings and weapons, with both parts 
overseen and facilitated by the OSCE.
    The Ukrainian Government began implementing its part of Geneva even 
before the ink was dry on the text of the Joint Statement. The day 
after Geneva, the Government of Ukraine sent a draft amnesty bill to 
the Rada, and that bill would be law now if it had not been blocked by 
the Communists and the Party of Regions. Authorities in Kiev dismantled 
barricades and opened streets. Maidan activists peacefully vacated the 
Kiev city administration building. President Turchinov and Prime 
Minister Yatsenyuk made speeches confirming their commitment to 
decentralize an unprecedented amount of political and economic 
authority to Ukraine's regions through constitutional reform and to 
protect language rights, in offers far more sweeping than any Moscow 
affords its own regions and citizens. On April 14 and 29, the 
constitutional reform commission held public conferences to which all 
the regions were invited. Ukrainian security forces instituted an 
Easter pause in their operations in eastern Ukraine, and sent senior 
officials out with the OSCE teams to Donetsk, Slovyansk, Luhansk and 
other embattled cities to try to talk separatists into pursuing their 
aims politically rather than through violence.
    In contrast, Russia fulfilled none of its commitments--none, zero. 
After we left Geneva, no one in Moscow at any level even issued a 
public statement calling for buildings and checkpoints in eastern 
Ukraine to be vacated and weapons turned in. Russia declined a request 
by the OSCE to send senior representatives to eastern Ukraine to insist 
on separatist compliance with Geneva. In fact, separatists in Donetsk 
and Luhansk told OSCE observers that they had had no messages at all 
from Russia urging them to stand down.
    Instead, since April 17, all the efforts of the Ukrainian side and 
of the OSCE, have been met with more violence, mayhem, kidnappings, 
torture and death. Pro-Russia separatists have seized at least 35 
buildings and 3 TV/radio centers in 24 towns. Armed and organized 
Russian agents--sometimes described as ``little green men''--appeared 
in cities and towns across Donetsk and into Luhansk. At least 22 
kidnappings have been attributed to pro-Russia separatists--including 
the eight Vienna Document inspectors and their Ukrainian escorts who 
have now been released after 8 days as hostages. The bodies of three 
Ukrainians have been found near Slovyansk all bearing the signs of 
torture. Peaceful rallies have been beset by armed separatist thugs. 
Roma families have fled Slovyansk under extreme duress. As the violence 
grew, the United States and the EU imposed more sanctions at the end of 
April. On Friday, the Ukrainian Government announced that separatists 
used MANPADs to shoot down a Ukrainian helicopter, killing the pilots. 
And Friday also saw the deadliest tragedy of this conflict: the death 
of more than 40 in Odesa following an afternoon of violent clashes 
reportedly instigated by pro-Russian separatists attacking an initially 
peaceful rally in favor of national unity--similar to many that have 
happened in Odessa since the start of the Maidan movement.
    Today, Russia claims it has ``no influence'' over the separatists 
and provocateurs rampaging in eastern and southern Ukraine. In Odesa, 
it should come as no surprise that the Ukrainian authorities report 
that those arrested for igniting the violence included people whose 
papers indicate that they come from Transnistria, the Crimea region of 
Ukraine, and Russia. As Secretary Kerry told this committee in April, 
we continue to have high confidence that Russia's hand is behind this 
instability. They are providing material support. They are providing 
funding. They are providing weapons. They are providing coordination, 
and there are Russians agents on the ground in Ukraine involved in 
this.
    Equally worrying, today from Slovyansk to Odesa the playbook is 
identical to what we saw in Crimea: first you create upheaval in towns 
that were completely peaceful just 2 months before, then you intimidate 
the local population, and hold bogus independence referenda on 2 weeks' 
notice, as have just been declared for May 11 in the so-called Donetsk 
and Luhansk Peoples' Republics. And we all remember what came next in 
Crimea: Russian ``peace-keepers'' swarmed in to ``protect'' the will of 
the voters. Just as we do not accept Russia's declared need for these 
so-called ``peace-keepers'' in Crimea, we will not accept any 
unilateral decision to deploy unsanctioned Russian ``peace-keepers'' to 
eastern or southern Ukraine. Russia's military intervention in Ukraine 
thus far is a clear violation of international law, and Russia fools no 
one by calling its troops ``peace-keepers.'' Russia has a track record 
of using the term ``peacekeeping'' as a cover for occupation and 
unlawful military intervention without authorization from the U.N. 
Security Council and without the consent of the host government.
    And yet, the pro-Russia separatists do not speak for the population 
of eastern and southern Ukraine. More than two-thirds of Ukrainians in 
the east report they plan to vote in the May 25th elections. They don't 
want little green men or separatists or Moscow preventing them from 
making their choice freely. And with more than 20 candidates running, 
representing every viewpoint and every region in Ukraine, these 
elections offer a real democratic choice. That is why the United 
States, Europe, and the international community are working so hard 
with the Ukrainian Government to ensure free, fair elections take place 
across Ukraine, and in alternate locations for Crimeans, and if needed 
in eastern towns where that might be necessary, too.
    In March, the OSCE's Office for Democratic Institutions and Human 
Rights (ODIHR) deployed 100 long-term election observers to 26 
locations around Ukraine to monitor the lead-up to the election and 
help ensure the country's electoral process meets the highest 
international standards. An interim report from ODIHR on April 17 noted 
that the Central Election Commission had met all deadlines thus far, 
and that technical preparations were proceeding. For the first time in 
a Presidential election, Ukraine's 36 million voters can review their 
registration details online. All told, ODIHR is preparing to deploy 
1,000 observers throughout the country to monitor the elections in the 
largest monitoring effort in the organization's history. The United 
States will provide approximately one-tenth of the observers, and 26 
other OSCE states are also contributing. These 1,000 ODIHR observers 
will be joined by more than 100 members of the OSCE Parliamentary 
Assembly, including some of your colleagues here on the Hill.
    The United States is also working bilaterally to support free, 
fair, and informed elections. We have allocated $11.4 million for 
nonpartisan activities to improve the integrity of these elections, 
including efforts to support voter education and civic participation; 
assist the Central Electoral Commission administer the elections 
effectively and transparently; foster linkages between political 
parties and civil society; support election security; and help to 
guarantee a diverse, balanced and policy-focused media environment. We 
are supporting 255 long-term observers and over 3,330 short-term 
observers, some of whom will provide a parallel vote tabulation (PVT).
    Free, fair elections on May 25 are the best route to political and 
economic stability in Ukraine. From Lviv to the Maidan to Odesa to 
Donetsk, the Ukrainian people want and deserve the right to determine 
their own future. Those who claim to be their protectors should stand 
up for the ballot box if they truly want the eastern Ukraine's voices 
heard in the political process rather than dictating to them through 
the barrels of guns or barricades of burning tires. In this regard, it 
is more than ironic that today Moscow asserts that both the interim 
government and the May 25th elections are illegitimate. It makes you 
wonder if Moscow is afraid to allow the Ukrainian people to participate 
in an election that is going to afford them far more choice than any in 
recent Russian history. And as President Obama stated, ``the Russian 
leadership must know that if it continues to destabilize eastern 
Ukraine and disrupt this month's elections, we will move quickly on 
additional steps, including further sanctions that will impose greater 
costs.''
    Finally, as we work to empower the Ukrainian people to determine 
their future democratically, we must acknowledge that the people of 
Russia are being cheated of their democratic rights. The Russian 
Government's reckless actions in Ukraine have districted the world's 
attention from a new clamp down on civil society in Russia. Just since 
the Sochi Olympics, the Russian Government has taken new aggressive 
steps to tighten control of the media, curb dissent, criminalize free 
expression on the Internet, and to trample on human rights. Putin's 
formula is simple: intervention abroad, repression at home.
    The Russian economy is already showing that this model doesn't lead 
to a great Russia; it leads to a broke one. The IMF believes Russia may 
already be in recession. Russia's credit rating is hovering just above 
``junk'' status. The Russian central bank is reporting that $63 billion 
in capital has fled Russia since the beginning of the year, more than 
for all of 2013. As the ruble has fallen, the Central Bank has raised 
interest rates twice and has spent close to $50 billion from its 
reserves to stabilize it. Unless Putin changes course, at some point in 
the not-too-distant future, the current nationalistic fever will break 
in Russia. When it does, it will give way to a sweaty and harsh 
realization of the economic costs. Then, Russia's citizens will ask: 
What have we really achieved? Instead of funding schools, hospitals, 
science and prosperity at home in Russia, we have squandered our 
national wealth on adventurism, interventionism, and the ambitions of a 
leader who cares more about empire than his own citizens.
    But it doesn't have to be this way. Russia can still step back from 
supporting separatism and violence and do the right thing. Working 
closely with the Ukrainians, the OSCE, and key European governments 
including Germany, we are once again supporting a diplomatic path 
forward--a rejuvenation of the Geneva agreement: amnesty for 
separatists and real political reform through elections and 
constitutional change in exchange for the peace, security, and unity 
across Ukraine that these require. A Russia that truly cares about the 
fate of the ethnic Russians in Ukraine and the people of eastern 
Ukraine, let alone its own citizens, will work with us on this. A 
Russia that doesn't will face a tightening grip of political and 
economic isolation from the international community.
    Since 1992, we have provided $20 billion to Russia to support 
pursuit of transition to the peaceful, prosperous, democratic state its 
people deserve. We are not seeking to punish Russia. We support the 
rights of all individuals--those of Russians and Ukrainians, alike--to 
have a clean, open, accountable government rooted in democracy and rule 
of law.
    In 19 days, the Ukrainian people will have the opportunity to make 
that choice. As Vice President Biden said during his visit to Kiev, 
``This may be the most important election in the history of Ukraine. 
This is a chance to make good on the aspirations of the overwhelming 
majority of Ukrainians east and west and every part of this country.''
    It is in the U.S. national security interest that the May 25th 
Presidential election reflects the will of Ukraine's 45 million people. 
We stand united with the overwhelming majority of the international 
community--in the G7, in NATO, in the OSCE, in the U.N. General 
Assembly, in the Council of Europe--in support of Ukraine's democratic 
choice. The stakes could not be higher--for Ukrainian democracy, for 
European stability and for the future of a rules-based international 
order.

    The Chairman. Secretary Glaser.

  STATEMENT OF HON. DANIEL L. GLASER, ASSISTANT SECRETARY FOR 
     TERRORIST FINANCING, U.S. DEPARTMENT OF THE TREASURY, 
                        WASHINGTON, D.C.

    Mr. Glaser. Thank you, Chairman Menendez, Ranking Member 
Corker, distinguished members of the committee. Thank you for 
inviting me to speak today about the U.S. Government's response 
to Russia's illegal annexation of Crimea and its continued 
provocative actions in Ukraine.
    The Department of the Treasury is designing and 
implementing a strategy that uses targeted financial measures 
to raise the costs to Russia of its actions. Our approach is 
calibrated to impose immediate costs on Russia and to create 
conditions that will make Russia increasingly vulnerable to 
sanctions as the situation in Ukraine escalates. To this end, 
Treasury has targeted not only corrupt former Ukrainian 
officials, Crimean separatists, and their backers in the 
Russian Government, but also individuals and President Putin's 
inner circle who have important interests and holdings 
throughout the Russia economy. Russia is already feeling the 
impact of our measures.
    In my remarks today, I will describe Treasury's sanctions 
tools and how we are deploying them. I will also discuss the 
important measures we are taking to buttress the Ukrainian 
economy. By pursuing these dual tracks, the Treasury Department 
is using the tools at our disposal to contribute to the 
development of a strong and sovereign Ukraine.
    President Obama has signed three Executive orders that 
provide the Secretary of the Treasury with expanded authority 
to sanction individuals responsible for the continuation of the 
crisis in Ukraine, as well as entities under their control. In 
total, we have designated 45 individuals and 19 entities. The 
most important of these targets include those in Putin's inner 
circle and the companies they control or own. These include 
Igor Sechin, the chairman of the state-run oil company Rosneft; 
Sergei Chemezov, the CEO 
of the Russian weapons and metals conglomerate Rostec; and 
Gennady Timchenko who ran Gunver, one of the world's largest 
commodity trading firms. We have also targeted Russia officials 
directing the annexation of Crimea, as well as Crimean 
separatists and former Ukrainian Government officials.
    We have a range of options we can deploy, should Russia's 
leadership continue to destabilize Ukraine. For example, 
Treasury has additional authority authorized by President Obama 
under Executive Order 13662 to significantly enhance Russia's 
economic costs and isolation. This Executive order authorizes 
the targeting of entities operating in broad sectors of the 
Russian economy such as defense, metals and mining, finance, 
engineering, and energy.
    I should note the importance of coordination with our 
international partners, particularly those in the European 
Union and the G7. To be clear, the United States always stand 
ready to take the actions we deem necessary to safeguard our 
national security and to safeguard international security. We 
do, however, recognize that our financial measures are more 
powerful and effective when done in a multilateral framework. 
Our partners have taken sanctions measures of their own and 
have stated they are prepared to do more.
    We are working to ensure that our international partners 
continue and expand their measures as we move forward together 
to address Russia's aggression. For example, this week, as we 
speak, Under Secretary of the Treasury Cohen is coordinating 
with his counterparts in London, Paris, and Berlin, along with 
an interagency delegation, including from the State Department.
    But even as we lay the groundwork for expanded measures, if 
necessary, our sanctions are having an impact on Russia's 
already weak economy, as Victoria was just articulating. In 
fact, my numbers are going to be even a little bit worse than 
hers.
    As sanctions increase, the costs to Russia not only 
increase, but their ability to mitigate those costs will 
diminish. Already market analysts are forecasting significant 
continued outflows of both foreign and domestic capital and a 
further weakening of growth prospects for the year. The Russian 
stock market has declined by over 13 percent, and the Russian 
currency has depreciated by almost 8 percent since the 
beginning of the year. These are the worst numbers of any 
member of major emerging markets. The IMF has downgraded 
Russia's growth outlook to 0.2 percent this year, and I suggest 
that a recession is not out of the question. This stands in 
stark contrast to previous IMF forecasts which, as recently as 
February, were projecting 2 percent growth for Russia. The IMF 
has also indicated that they expect as much as $100 billion in 
capital flight from Russia which has caused rating agencies 
such as Standard & Poor's to downgrade Russia's sovereign 
credit rating to just a notch above junk status.
    In addition to our measures to isolate the Russian economy, 
the Treasury Department is working with the international 
community to support the Ukrainian Government in returning the 
country's economy to solid footing. Last week's approval of a 
2-year $17 billion IMF reform program is a positive first step. 
Treasury is also offering its expertise in identifying, 
tracking, and recovering stolen Ukrainian state assets in 
support of a Department of Justice-led effort. Expert Treasury 
advisors have also been deployed to Kiev to help the Ukrainian 
authorities stabilize the financial sector and implement 
reforms.
    As the United States and our international partners 
continue to confront Russia's illegal actions in Ukraine, we 
stand ready to further employ our arsenal of financial measures 
as the situation escalates. A diplomatic resolution to the 
crisis remains our goal, but if Russia chooses to continue its 
illegal and destabilizing actions in Ukraine, we can impose 
substantial costs on, and expand the isolation of, an already 
weak Russian economy.
    Thank you, Senators, for the opportunity to speak today, 
and I would be happy to answer your questions.
    [The prepared statement of Mr. Glaser follows:]

       Prepared Statement of Assistant Secretary Daniel L. Glaser

    Chairman Menendez, Ranking Member Corker, and distinguished members 
of this committee, thank you for inviting me to speak today about the 
U.S. Government's response to Russia's illegal annexation of Crimea and 
its continued provocative actions in Ukraine. The Department of the 
Treasury is designing and implementing a strategy that uses our toolkit 
of targeted financial measures to raise the costs to Russia of its 
actions. Our approach is a calibrated effort to impose immediate costs 
on Russia and to create conditions that will make Russia increasingly 
vulnerable to sanctions as the situation in Ukraine escalates. To this 
end, Treasury has targeted not only corrupt former Ukrainian officials, 
Crimean separatists, and their backers in the Russian Government, but 
also individuals in President Putin's inner circle who have important 
interests and holdings throughout the Russian economy. Russia is 
already feeling the impact of our measures. As the Kremlin's decisions 
concerning the situation in Ukraine leave us with little choice but to 
continue to ratchet up the pressure, we will use the full range of 
sanctions authorities at our disposal, which will expose the weakness 
and vulnerability of the Russian economy.
    In my remarks today I will describe Treasury's sanctions tools and 
how we are deploying them. I will also discuss the important measures 
we are taking to buttress the Ukrainian economy. By pursuing these dual 
tracks of imposing significant costs on Russia's illegal and 
destabilizing actions and facilitating the institution of the economic 
conditions necessary for a vibrant and prosperous Ukrainian economy, 
the Treasury Department is using the tools at our disposal to 
contribute to the development of a strong and sovereign Ukraine.
      imposing costs on russia: sanctions and financial isolation
    President Obama has signed three Executive orders that provide the 
Secretary of the Treasury with expanded authority to sanction 
individuals and entities responsible for the continuation of the crisis 
in Ukraine, as well as entities owned or controlled by such 
individuals. These Executive orders are as follows:

   E.O. 13660 provides the authority to block the assets of any 
        individuals or entities determined to be responsible for or 
        complicit in undermining democratic processes or institutions 
        in Ukraine; threatening the peace, security, stability, 
        sovereignty, or territorial integrity of Ukraine; 
        misappropriating Ukrainian state assets; asserting governmental 
        authority over any part of Ukraine, without authorization from 
        the Government of Ukraine; or providing material assistance to 
        any individual or entity that does;
   E.O. 13661 provides the authority to block the assets of any 
        individuals or entities determined to be an official of the 
        Russian Government; operating in the arms sector in Russia; or 
        providing material assistance to, or acting on behalf of, a 
        senior official of the Russian Government; or providing 
        material assistance to any individual or entity whose assets 
        are blocked;
   E.O. 13662 provides the authority to block the assets of any 
        individuals or entities determined to be operating in such 
        sectors of the Russian Federation economy as may be determined 
        by the Secretary of the Treasury, in consultation with the 
        Secretary of State, such as financial services, energy, metals 
        and mining, engineering, and defense and related materiel; or 
        providing material assistance to any individual or entity that 
        does.

    As noted above, we are implementing these Executive orders in the 
context of a pressure strategy designed to impose immediate costs on 
Russia, including at high levels in Moscow, and to create market 
conditions that will make Russia increasingly vulnerable to financial 
measures and accountable as the situation in Ukraine escalates. In 
total we have imposed sanctions on 45 individuals and 19 entities to 
date. Our targets can be organized into the following categories:
  Targeting Putin's Inner Circle and Certain Related Companies
   Igor Sechin, the chairman of the State-run oil company, 
        Rosneft, and close associate of Putin;
   Sergei Chemezov, a trusted ally of Putin, who is also the 
        CEO of the Russian weapons and metals conglomerate Rostec;
   Gennady Timchenko, who at the time of the designation ran 
        Gunvor, one of the world's largest commodities trading firms, 
        the funds of which may have been accessible to President Putin. 
        Treasury also designated Timchenko's Volga Group, one of the 
        largest investment groups in Russia, and Stroytransgaz Holding, 
        an engineering and construction company for Russia's oil and 
        gas industry, also controlled by Timchenko;
   The Rotenberg brothers, Arkady and Boris, who were 
        designated for their role in supporting Putin's personal 
        projects by receiving and executing high-price contracts for 
        the Sochi Olympics and for state-controlled energy giant 
        Gazprom. We also designated firms under the Rotenberg's 
        control, including banks InvestCapitalBank and SMP Bank, as 
        well as a gas pipeline company, SGM Group;
   Yuri Kovalchuk, who served as the personal banker for Putin 
        and many senior Russian officials, earning the moniker 
        ``Putin's cashier''; and
   Treasury designated Bank Rossiya for its close connections 
        to Putin's inner circle and the fact that it is controlled by 
        the inner circle's personal banker Kovalchuk. Before sanctions 
        were imposed, Bank Rossiya was among the 20 largest banks in 
        Russia, with approximately $10 billion in assets. As a result 
        of our designation, Bank Rossiya lost almost $1 billion in 
        deposits in March and was forced to sell almost $500 million 
        worth of bonds to maintain liquidity. The bank has also lost 
        access to its correspondent accounts in U.S. financial 
        institutions, and we are in close cooperation with our European 
        and global partners to ensure that other financial centers do 
        not provide services to this bank.
  Targeting Russian Officials Directing the Purported Annexation of 
        Crimea
    Our efforts have also targeted Russian officials in response to the 
    illegal annexation of Crimea. These officials include senior Duma 
    and Federation council officials, such as the Speaker and Deputy 
    Duma Speaker, key Duma deputies, and senior leaders in the 
    Federation Council. Treasury has also imposed sanctions on senior 
    Kremlin aides, including the Chief of Staff of the Presidential 
    Executive Office, Advisor to the President, and Head of the 
    Presidential Administration, as well as other senior Russian 
    Government officials, including the Head of the Russian Military 
    Intelligence Service, the Chairman of the Board of Russian 
    Railways, Director of the Federal Drug Control Service, and 
    Director of Russia's Protective Service.
  Targeting Crimean Separatists and Former Ukrainian Government 
        Officials
    We have also identified Crimean separatists and former Ukrainian 
    Government officials for their involvement in the illegal 
    referendum on Crimean secession and purported annexation by Russia. 
    These include Viktor Yanukovych, who, along with his regime's 
    cohorts, was responsible for actions that threaten the security, 
    stability, sovereignty, or territorial integrity of Ukraine, the 
    self-appointed ``Prime Minster of Crimea'' Sergei Aksyonov, 
    Vladimir Konstantinov the speaker of the Crimean Parliament, and 
    Viktor Medvedchuk, a political party leader responsible for pitting 
    supporters and foes of Russia's attempt to annex Crimea against one 
    another.

    As noted above, President Obama has given the Secretary of the 
Treasury additional authority to significantly enhance Russia's 
economic costs and isolation. Executive Order 13662 authorizes the 
targeting of individuals and entities operating in broad sectors of the 
Russian economy to be identified by the Secretary of the Treasury, in 
consultation with the Secretary of State, such as defense, metals and 
mining, finance, engineering, and energy. Treasury has been working 
closely with our colleagues within the U.S. Government, and with 
counterparts within the European Union and G7, to design a strategy to 
deploy our full range of tools to target the Russian economy should 
Russia's leadership continue to destabilize Ukraine, including by 
attempting to disrupt this month's Presidential election.
    In this regard, I should note the importance of coordination with 
our international partners, particularly those in the European Union 
and G7. To be clear, the United States always stands ready to take the 
actions we deem necessary to safeguard international security. We do, 
however, recognize that our financial measures are more powerful and 
effective when done in a multilateral framework. This is certainly the 
case in the context of Russia, which is financially and economically 
integrated with Europe and the G7 countries to a significant degree. 
Our partners have taken sanctions measures of their own, and have 
stated that they are prepared to do more should circumstances require. 
It will be important for them to do so, and the State and Treasury 
Departments are working tirelessly to ensure that our international 
partners continue and expand their measures as we move forward together 
to address Russia's efforts to destabilize Ukraine.
         impact: the costs of sanctions on the russian economy
    Sanctions, and the uncertainty they have created in the market, are 
having an impact, directly and indirectly, on Russia's weak economy. 
And as sanctions increase, the costs will not only increase, but 
Russia's ability to mitigate costs will diminish. Already, market 
analysts are forecasting significant continued outflows of both foreign 
and domestic capital and a further weakening of growth prospects for 
the year. The IMF has downgraded Russia's growth outlook to 0.2 percent 
this year, and suggested that recession is not out of the question. 
This stands in stark contrast to previous IMF forecasts, which as 
recently as February were projecting 2 percent growth. It is clear that 
our sanctions policy is working:

   Since the start of the year, Russia's stock market has 
        declined by over 13 percent;
   The Russian ruble has depreciated by almost 8 percent since 
        the beginning of the year, despite substantial market 
        intervention by the Russian Central Bank and an interest rate 
        hike, amid heavy capital outflows that have already exceed last 
        year's total;
   The Central Bank of Russia has spent nearly $50 billion (10 
        percent of its total foreign exchange reserves) in an effort to 
        defend the value of the ruble;
   The yield on Russia's 10-year government bond is up over 170 
        basis points;
   The government is feeling the bite of rising borrowing 
        costs. On April 23, Russia was forced to cancel a debt auction 
        due to a spike in the price investors demanded to buy Russian 
        bonds;
   IMF expects as much as $100 billion in capital flight from 
        Russia this year; the World Bank puts that estimate closer to 
        $130 billion;
   Citing recent large capital outflows and a deteriorating 
        economic outlook, S&P downgraded Russia's sovereign credit 
        rating to BBB^, or one notch above junk status, with a negative 
        outlook; and
   S&P has downgraded ratings and outlook for several Russian 
        banks and corporations on the deteriorating outlook for the 
        Russian economy.
                           supporting ukraine
    In addition to our measures to isolate the Russian economy, the 
Department of the Treasury is working with the international community 
to support the Ukrainian Government in returning the country's economy 
to solid footing. Last week's approval of a 2-year, $17 billion IMF 
reform program is a positive first step and has unlocked additional 
bilateral and multilateral financial support to help Ukraine as it 
undertakes essential reforms to set its economy on the path to 
sustainable growth.
    The IMF will be at the center of this international assistance 
effort and is best placed to support Ukraine's implementation of robust 
and market-oriented reforms. The Ukrainian authorities have already 
begun undertaking the necessary steps to build a secure economic 
foundation, including urgently needed market reforms that will restore 
financial stability, improve economic potential, and allow Ukraine's 
people to better achieve their economic aspirations.
    Total financial support from the international community for 
Ukraine is expected to reach $27 billion over the next 2 years, 
including support from the IMF, World Bank, European Bank for 
Reconstruction and Development, European Investment Bank, the United 
States, European Union, Canada, Japan, and possibly other bilateral 
donors. Financial support for Ukraine totaling $5.9 billion is 
estimated to be released in May, including $3.2 billion from the IMF 
and an estimated $2.7 billion from the United States, EU, World Bank, 
Japan, and Canada.
    Our $1 billion loan guarantee agreement with the Ukrainians was 
signed last month, and we continue to work expeditiously to enable 
Ukraine to issue the $1 billion in U.S. guaranteed debt by mid-May--the 
proceeds of which will allow the Ukrainian Government to insulate 
vulnerable Ukrainians from the impact of necessary economic reforms.
    In addition to this direct financial support, the international 
community is supporting Ukrainian efforts to recover billions of 
dollars in assets stolen by the former Yanukovych regime. At an 
international conference last week in London, Attorney General Holder 
announced that the FBI would form a ``financial SWAT team'' to assist 
the Ukrainian Government. In support of this effort, Treasury will 
offer its expertise in identifying, tracking, and recovering stolen 
Ukrainian state assets, following the Department of Justice's lead. 
Already, Treasury's Financial Crimes Enforcement Network (FinCEN) 
issued an advisory on February 26 reminding U.S. financial institutions 
of their responsibility to apply enhanced scrutiny to private banking 
accounts of assets related to Viktor Yanukovych. When the Ukrainian 
Government announced its criminal investigation against Yanukovych 
officials for misappropriation of state assets, we added those names to 
the list to be scrutinized as well.
    The United States has also pledged $50 million for new programs to 
address emerging needs in Ukraine. As a part of these efforts, expert 
Treasury advisors have been deployed to Kiev to help the Ukrainian 
authorities stabilize the financial sector and implement reforms. 
Treasury advisors are already working closely with the Finance Ministry 
and National Bank of Ukraine, helping to develop strategies to manage 
existing liabilities, resolve failed banks, improve banking 
supervision, and spur financial intermediation. As Ukraine's needs 
evolve, Treasury will be in a position to deploy additional advisors 
with expertise in areas such as budget and tax administration.
                               conclusion
    As the United States and our international partners continue to 
confront Russia's illegal actions in Ukraine, we stand ready to further 
employ our arsenal of financial measures as the situation escalates. A 
diplomatic resolution to the crisis remains our goal, but if Russia 
choses to continue its illegal and destabilizing actions in Ukraine, we 
can impose substantial costs on, and expand the isolation of, an 
already weak Russian economy.

    The Chairman. Thank you.
    Secretary Farkas.

  STATEMENT OF HON. EVELYN N. FARKAS, PH.D., DEPUTY ASSISTANT 
     SECRETARY OF DEFENSE FOR RUSSIA/UKRAINE/EURASIA, U.S. 
             DEPARTMENT OF DEFENSE, WASHINGTON, DC

    Dr. Farkas. Thank you very much, Chairman Menendez, Senator 
Corker, and all the members of the committee, for the 
opportunity to speak to you today on the crisis in Ukraine. 
Thank you also for your individual engagement on the crisis and 
for the committee's work in support of the administration's 
efforts and, of course, in support of Ukraine and the Ukrainian 
people.
    Russia's illegal annexation of Ukrainian sovereign 
territory and continued aggressive actions are not just a 
threat to European security, but a challenge to the 
international order.
    As demonstrated by the Vice President's recent visit to 
Kiev, the administration has made support for Ukraine a top 
priority. And as Secretary Nuland has just described, the 
United States has been working with the international community 
to address the most pressing political and economic issues 
related to the situation in Ukraine.
    Meanwhile, from a bilateral perspective, the Departments of 
State and Defense are working with Ukraine to review, 
prioritize, and respond to its defense capability needs. Our 
aim is to provide reassurance, deterrence, and support without 
taking actions that would escalate the crisis militarily.
    The first round of this process was completed on March 29 
with the delivery of 330,000 meals ready to eat to support 
Ukrainian forces in the field. Subsequently, the U.S. 
Government approved the requisition and delivery of uniforms, 
medical supplies, and nonlethal equipment to the Ukrainian 
Armed Forces and to the border guard services. Taken together, 
this represents about $18 million of security assistance to 
Ukraine from existing resources.
    Looking ahead, we will utilize all available tools to 
provide meaningful, cost-effective support to Ukraine's 
security institutions. We are working with the State Department 
to identify additional security assistance resources for 
Ukraine. We are mindful of the fact that we cannot fill all the 
gaps in Ukraine's security sector. Ukraine's requests for 
material assistance are far-reaching and vastly outstrip our 
ability to meet them under current authorities and 
appropriations. But we are also mindful of the fact that this 
committee and many of the members are trying to help us with 
those authorities and appropriations. So we thank you again for 
that.
    In addition to material assistance, the Department is 
maintaining our senior-level dialogue with Ukrainian 
counterparts, including multiple conversations between 
Secretary Hagel and the Ukrainian Minister of Defense. On April 
1, we held bilateral defense consultations in Kiev, and the 
U.S. European Command will reinforce this effort with a senior-
level dialogue in Ukraine next month.
    These initiatives represent only the most recent 
developments in our long-standing defense cooperation programs 
with Ukraine. Many of our existing programs are intended to 
build capacity over the long term, particularly those that 
focus on education and training. We continue to realize the 
gains from investments that we have made over the last 20 years 
in the International Military Education and Training program, 
one that this committee has a special responsibility for, as 
officers trained in U.S. military institutions have assumed 
positions of greater responsibility in Ukraine's Armed Forces. 
We saw this manifested in the great professionalism and 
restraint exercised by the Ukrainian military during the 
demonstrations on the Maidan when the Ukrainian military 
refused to use force against peaceful demonstrators and in 
their courage and restraint in the face of overwhelming force 
in Crimea.
    The United States has taken prompt and high-profile steps 
to reassure NATO allies in light of Russia's incursion into 
Ukraine. Measures so far include bolstering our maritime 
presence in the Black Sea and deploying additional combat 
aircraft to the Baltics and Poland. And last week, 600 
paratroopers arrived in Estonia, Latvia, Lithuania, and Poland 
to begin exercises requested by those nations. These exercises 
are the first in a series of activities that will take place 
over the next few months and beyond in addition to the 22 U.S. 
and NATO exercises already planned between April and June.
    We are also taking measures to support non-NATO security 
partners who feel directly threatened by Russia's actions. 
Moldova, for example, has Russian forces on its territory who 
support the unrecognized separatist regime in Transnistria. We 
recently held senior-level consultations--Secretary Nuland was 
there--with Moldovan officials and approved $10 million in 
additional funding for Moldova to help it maintain secure 
borders. We are also working to address Georgian concerns, 
given the ongoing Russian occupation of Georgian territory.
    Since the start of this crisis, our NATO allies have acted 
with resolve. Denmark, France, Germany, and the United Kingdom 
have offered aircraft for NATO's Baltic air policing. The 
Netherlands and Turkey have offered air-to-air refueling 
capabilities. Germany and Norway have offered ships for Baltic 
maritime security. And to ensure preparedness across the 
alliance, NATO is updating and expanding its contingency 
planning. As we approach the NATO summit in Wales this fall, we 
will continue to urge all NATO allies to increase support to 
these reassurance measures, including by bolstering their 
individual commitments to allied security through robust 
defense investment.
    As a coordinated effort, these measures represent a clear 
eastward shift of allied forces, a shift that is explicitly 
intended to counter Russia's aggressive actions.
    We are also further isolating Russia and imposing 
significant costs on Russia for its actions. The United States 
has led the international community in isolating Russia 
diplomatically and imposing financial and political costs for 
its actions, as my colleagues have laid out.
    At the Department of Defense, we have halted all military-
to-military engagements with Russia, including bilateral 
military exercises, bilateral meetings, port visits, planning 
conferences, although we do maintain channels for dialogue that 
can serve to de-escalate the crisis. So what I mean by that are 
senior levels of dialogue. While we have worked hard over the 
last two decades to build a cooperative, transparent defense 
relationship with Russia, its actions to undermine stability in 
Europe mean that we cannot proceed with business as usual.
    Chairman Menendez, Senator Corker, and members of the 
committee, Russia's actions stand as an affront to the 
international order that we and our allies have worked to build 
since the end of the cold war. Russia's illegal annexation of 
Crimea, followed by blatant and unconcealed efforts to 
destabilize eastern and southern Ukraine, signifies a paradigm 
shift in our relations with Russia. Despite Russia's efforts to 
portray the situation otherwise, this crisis is entirely one of 
its choosing. These actions represent a wholesale rejection of 
the goal of a Europe whole, free, and at peace.
    I want to conclude by thanking the Congress and the 
committee again for its resolute support through this crisis so 
far. In addition to legislative actions, the outreach by the 
members here to the countries on the periphery of Russia has 
provided reassurance in a time of great uncertainty, and I know 
many of you have traveled to those countries and we have taken 
note and we appreciate that. As we move forward, it will be 
important to continue to show resolve and to speak with one 
voice across our Government. And again, I appreciate that we 
are doing so now.
    I look forward to your questions.
    [The prepared statement of Dr. Farkas follows:]

                Prepared Statement of Dr. Evelyn Farkas

    Chairman Menendez, Senator Corker, and members of the committee, I 
appreciate the opportunity to speak to you today on actions taken by 
the United States, along with our allies, and international partners in 
response to Russia's incursion into Ukraine.
    Russia's illegal annexation of Ukrainian sovereign territory and 
continued aggressive actions are not just a threat to European 
security, but a challenge to the international order. The United States 
continues to pursue three main lines of effort, consistent with the 
President's direction, to achieve a negotiated, peaceful outcome. These 
lines of effort include: (1) demonstrating support to Ukraine's 
transitional government, (2) reassuring allies and de-escalating 
tensions in Eastern Europe, and (3) imposing costs on Russia for its 
actions. The Department of Defense has an important role in achieving 
U.S. objectives in all three areas.
                           support to ukraine
    As demonstrated by the Vice President's recent visit to Kiev, the 
administration has made support for Ukraine a top priority. The United 
States has been working with the international community including the 
United Nations (U.N.), the European Union (EU), the International 
Monetary Fund (IMF), the World Bank and allies to address the most 
pressing political and economic issues. From a bilateral perspective 
alone, the United States has pledged funding for a $1 billion loan 
guarantee to allow Ukraine to raise funding directly in private capital 
markets at a more affordable rate and $50 million for new programs to 
address emerging needs in Ukraine.
    The Departments of State and Defense are working with Ukraine to 
review, prioritize, and respond to its defense capability needs. Our 
aim is to provide reassurance and support without taking actions that 
would escalate the crisis militarily.
    The first round of this process was completed on March 29 with the 
delivery of 330,000 Meals Ready-to-Eat to support Ukrainian forces in 
the field. Subsequently, the U.S. Government approved the requisition 
and delivery of medical equipment, uniforms and individual equipment, 
water purification units, handheld radios, and Explosive Ordinance 
Disposal robots to the Ministry of Defense. We are also providing 
nonlethal assistance to the State Border Guard Service to procure 
monitoring and surveillance equipment, electric generators, shelters, 
vehicles, and engineering equipment. The Departments of State and 
Defense are working together to procure and deliver these items to the 
Ukrainian Armed Forces and State Border Guard Service. To date, we have 
purchased and delivered fuel pumps, concertina wire, vehicle batteries, 
spare tires, binoculars, and communications gear to the Ukrainian 
Border Guards. Taken together, this represents about $18 million of 
security assistance to Ukraine from existing resources.
    Looking ahead, we will continue to utilize all available tools to 
provide meaningful, cost-effective support to Ukraine's security 
institutions. We are working with the Department of State to identify 
additional security assistance resources for Ukraine. We are mindful of 
the fact that we cannot fill all of the gaps in the security sector. 
Ukraine's requests for material assistance are far-reaching and vastly 
outstrip our ability to meet them under current authorities and 
appropriations.
    In addition to material assistance, the Department of Defense is 
maintaining senior-level dialogue with our Ukrainian counterparts, 
including multiple phone conversations between Secretary Hagel and the 
Ukrainian Minister of Defense. On April 1, we held bilateral defense 
consultations in Kiev, at which we discussed our mid-term and long-term 
objectives for defense cooperation. U.S. European Command will 
reinforce this effort with senior-level dialogue in Ukraine in June to 
maintain focus and encourage progress towards our mutual goals.
    These initiatives represent only the most recent developments in 
our longstanding defense cooperation programs with Ukraine. Many of our 
existing programs are intended to build capacity over the long term, 
particularly those that focus on education and training. We continue to 
realize the gains from investments made over the last 20 years in the 
International Military Education and Training (IMET) program, as 
officers trained in U.S. military institutions have assumed positions 
of greater responsibility in Ukraine's Armed Forces. We saw this 
manifested in the great professionalism and restraint exercised by the 
Ukrainian military during the demonstrations on the Maidan and when the 
Ukrainian military refused to use force against peaceful demonstrators, 
and in their courage and restraint in the face of overwhelming force in 
Crimea. Now, more than ever, it is important to bolster Ukraine's 
security sector to give them the means to secure and defend their 
territory.
     reassuring allies and de-escalating the situation with russia
    The United States has taken prompt and high-profile steps to 
reassure NATO allies in light of Russia's incursion into Ukraine. 
Measures so far include bolstering our maritime presence in the Black 
Sea with the USS Donald Cook, USS Taylor, and an extension of stay for 
the USS Truxtun. We augmented the U.S. January-April rotation in the 
NATO Baltic Air Policing mission with six additional F-15s, and we 
deployed 12 F-16s and nearly 200 support personnel to Poland to 
supplement the U.S.-Poland Aviation Detachment training rotation. Our 
KC-135s are providing air-to-air refueling for NATO early warning and 
surveillance flights over Poland and Romania. And last week, 600 
paratroopers from the U.S. Army's Europe-based 173rd Airborne Infantry 
Brigade Combat Team arrived in Estonia, Latvia, Lithuania, and Poland 
to begin exercises requested by those nations. These exercises are the 
first in a series of expanded, land-based training activities that will 
take place over the next few months and beyond. These measures are in 
addition to 22 U.S. European Command and NATO exercises already planned 
between April and June.
    We are also taking measures to support non-NATO security partners 
who feel directly threatened by Russia's actions. Moldova, for example, 
has Russian forces on its territory, nominally peacekeepers, but who 
actually support the unrecognized, separatist regime in Transnistria. 
We recently held senior-level consultations with Moldovan officials and 
approved $10 million in additional funding for Moldova to help it 
maintain secure borders. We are also working to address Georgian 
concerns, given the ongoing Russian occupation of Georgian territory.
    Since the start of this crisis, our NATO allies have acted with 
resolve. Denmark, France, Germany, and the United Kingdom have offered 
aircraft for NATO's Baltic Air Policing. The Netherlands and Turkey 
have offered air-to-air refueling capabilities. Germany and Norway have 
offered ships for Baltic maritime security. And to ensure preparedness 
across the alliance, NATO is updating and expanding its contingency 
planning. As we approach the NATO summit in Wales this fall, we 
continue to urge all NATO allies to increase support to these 
reassurance measures, including by bolstering their individual 
commitments to allied security through robust defense investment.
    As a coordinated effort, these measures represent a clear eastward 
shift of allied forces--a shift that is explicitly intended to counter 
Russia's aggressive actions. As Secretary Hagel has said: ``The 
essential character and commitment of (our) alliance . . . remains 
unchanged, but we will look for new ways to collaborate and improve the 
alliance's capabilities and readiness.''
                        imposing costs on russia
    We are also further isolating Russia and imposing significant costs 
on Russia for its actions. Russia continues its illegal annexation and 
occupation of Crimea, and President Putin continues a campaign to 
destabilize eastern Ukraine from within using local pro-Russian agents 
and Russian special forces. Russia continues to deploy significant 
military assets along Ukraine's border in a menacing fashion, adding to 
the uncertainty and instability present in eastern Ukraine. Russia has 
clearly failed to abide by the commitments it made in the 1994 Budapest 
Memorandum commitments and violated the principles of the NATO-Russia 
Founding Act. In response, the United States has led the international 
community in isolating Russia diplomatically and imposing financial and 
political costs for its actions.
    At the Department of Defense, we have halted all military-to-
military engagements with Russia, including bilateral military 
exercises, bilateral meetings, port visits, and planning conferences, 
although we do maintain channels for dialogue that can serve to 
deescalate the crisis. While we have worked hard over two decades to 
build a cooperative, transparent defense relationship with Russia, its 
actions to undermine stability in Europe mean that we cannot proceed 
with business as usual. NATO and many allies have likewise suspended 
military cooperation and engagements with Russia.
                               conclusion
    Chairman Menendez, Senator Corker, and members of the committee, 
Russia's actions stand as an affront to the international order that we 
and our allies have worked to build since the end of the cold war. 
Russia's illegal annexation of Crimea, followed by blatant and 
unconcealed efforts to destabilize eastern and southern Ukraine, 
signifies a paradigm shift for our relations with Russia. Despite 
Russia's efforts to portray the situation otherwise, this crisis is 
entirely one of its choosing. These actions represent a wholesale 
rejection of the goal of a Europe whole, free, and at peace.
    As the crisis deepens, our European allies and partners will look 
to the United States to demonstrate resolve and to reinforce solidarity 
across the continent. In support of our broader national objectives, 
the Department of Defense will continue to strengthen ties and build 
capacity across the security sector in Europe, and we will carefully 
apply any additional tools that Congress puts at our disposal.
    I want to conclude by thanking Congress for its resolute support 
throughout the crisis so far. The Support for the Sovereignty, 
Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 is 
closely aligned with the administration's objectives, and demonstrates 
a unified position across the U.S. Government. And in addition to 
legislative actions, the outreach by members to our partner nations on 
Russia's periphery has provided reassurance in the face of great 
uncertainty. As we move forward, it will be important to continue to 
show resolve and to speak with one voice across our government, and I 
appreciate that we are doing so now.

    The Chairman. Thank you all very much.
    Let me start with you, Secretary Nuland. Just to set the 
record--and I do not want long answers to this first set of 
questions, if I can. We have no doubt that Russian agents are a 
part of creating unrest in the cities of eastern Ukraine. Is 
that fair to say?
    Ms. Nuland. In this setting, Senator, I can say that we 
have high confidence that Russia is involved as I said.
    The Chairman. And I think we can take public notice that 
they are waging a propaganda war on the airwaves in Ukraine and 
beyond to paint a picture that the Russians would like to paint 
as they painted in Crimea. Is that fair to say?
    Ms. Nuland. Absolutely. In fact, the Russian effort to 
block the airwaves of anything but their propaganda, 
particularly in eastern Ukraine, has been virtually complete. 
As you know, one of the early targets of the pro-Russian thugs 
were some of these TV towers in eastern Ukraine so that they 
could take pro-Ukrainian programming off the air. The 
government has now reclaimed two of those towers in its cordon 
operation, but it is a real problem.
    The Chairman. And there are public reports about Spetsnatz 
forces, which are special forces of Russia, among elements of 
some of these--I will call them ``rebels'' for lack of a better 
name, that are engaging. I am not going to even ask you to 
comment. I am going to acknowledge the public sources that have 
said that.
    And from everything we can tell, is it not fair to say that 
Russia continues to try to generate economic coercion on the 
Ukraine?
    Ms. Nuland. Yes. I mean, there have been efforts to close 
off access to the Russian market, et cetera. That actual aspect 
of Russia's efforts have been less successful because they are 
equally dependent on the Ukrainian market.
    The Chairman. But their potential risk on energy sources 
has been one of their threats.
    My point is this: there are a series of things that the 
Russians have done and are doing to destabilize eastern 
Ukraine. There are many who suggest that Putin does not have to 
send his 40,000 troops across the border because he is 
achieving what he wants by virtue of undermining elements in 
eastern Ukraine.
    And if it is the case that all of these different elements 
are taking place--in my mind, is a troubling scenario. And my 
question is: what ultimately triggers the sanctions that have 
been announced as a possibility, but have not been pursued. 
Does the administration look at the sanctions as a preventative 
effort to, or does it look at them as an element of consequence 
and punishment for doing something wrong?
    Ms. Nuland. Well, Chairman, the President, as you know, has 
talked about costs for Russian behavior, but obviously the 
sanctions escalatory ladder is designed also to have a 
deterrent effect. As Assistant Secretary Glaser made clear, we 
have already done a number of rounds of sanctions getting 
closer and closer to those who are close to Putin, who protect 
his money, who fund those aspects of the economy----
    The Chairman. I get what has been done, and I have 
applauded it----
    Ms. Nuland. Right.
    The Chairman [continuing]. And said I think the 
administration is definitely on the right path.
    My concern is the following. If we do not use this 
calibration on sanctions in a way to prevent further incursion 
into Ukraine, we will find ourselves using those sanctions as 
an aftermath as we did in Crimea. That is an after-fact that I 
do not want to envision. So as I look at these elections on May 
25 that you so aptly said are critical to laying a foundation 
for Ukraine's future, I see the Russians doing everything they 
can to disrupt those elections. It seems to me that there needs 
to be a consequence up front so that disruption does not 
continue to take place.
    Ms. Nuland. Well, Chairman, as you recall, when the 
President was in Europe in March, which was a month ago, we 
were talking, as you said, about sectoral sanctions kicking in 
and we talked to the Europeans about this in the context of 
Russian forces coming over the border. But we analyze the 
situation the same way you do, that Russia has demonstrated 
through its actions since then that it can destabilize eastern 
Ukraine without having to pour forces in.
    So that is why you saw the President and Chancellor Merkel 
talk about sectoral sanctions in the context of destabilizing 
these elections because, in fact, the elections are the 
Ukrainian people's choice, and it is how the people of the east 
of Ukraine actually express their will through the political 
process rather than having these little green men dictate 
their----
    The Chairman. Very quickly, what do we estimate is the 
ability of the Ukrainians to proceed with that election on the 
25th?
    Ms. Nuland. So we can talk about this at some length. We 
had an internal review of what the OSCE is now saying. In fact, 
the OSCE is giving the Government of Ukraine very high marks 
for election preparations across the country, and even is 
giving some of the hotter Oblast, Donetsk, and Luhansk 
relatively high marks for establishing electoral commissions, 
getting ready to receive ballots, for protecting the sites. 
There are, obviously, parts of Donetsk, Oblast, and some parts 
of Luhansk where if the election were held today, you would 
have to make alternative arrangements. But the Ukrainian 
Government is working very hard to try to minimize those but is 
prepared to consider alternative sites for places like 
Slovyansk.
    The Chairman. At this point, do we believe that the 
elections can take place on the 25th?
    Ms. Nuland. If the elections were held today, yes, in the 
vast majority of Ukraine. The news reporting distorts the fact 
that the vast, vast majority of Ukraine is stable and looking 
forward to elections. And as I said, three-quarters of the 
people of the east say we want to vote.
    The Chairman. Secretary Glaser, following Russia's invasion 
of Crimea, the Treasury Department suspended negotiations with 
the Russian Government over an intergovernmental agreement to 
bring Russia's financial sector into compliance with the 
Foreign Account Tax Compliance Act, known as FATCA. There have 
been several reports in Russian and United States press 
questioning whether Russian banks will be able to comply with 
FATCA before it takes effect on July 1, and raising the 
possibility that failure to do so would have a devastating 
impact on Russia's financial sector--worse than the impact of 
any U.S. or EU sanctions to date.
    Several Members of Congress, including on this committee, 
have cautioned Treasury not to restart FATCA negotiations with 
Russia as long as its forces are threatening Ukraine. What is 
the status of this issue with Russia?
    Mr. Glaser. Thank you, Senator Menendez.
    There are individual Russian banks that are able to bring 
themselves into compliance with FATCA requirements and that is 
a good thing in that it allows the United States to get 
information on taxpayers. That said, the United States at this 
point, the Treasury Department at this point, has no intention 
of restarting negotiations with Russia with respect to the 
reciprocity that Russia would get if they were able to enter 
into an agreement with us.
    The Chairman. Beyond those banks that may be able to put 
themselves in compliance, has Treasury analyzed how FATCA would 
impact Russian financial institutions without an IGA in place, 
or if the government does not change domestic laws to allow 
Russian banks to register with Treasury?
    Mr. Glaser. Well, if Russian banks do not register with 
Treasury because they are prohibited from registering with 
Treasury because they decide not to register with Treasury, 
then they would be subject to the same penalties that any other 
bank would.
    The Chairman. And those are pretty pervasive, are they not?
    Mr. Glaser. There are strong penalties, certainly.
    The Chairman. So you--meaning the Treasury Department--are 
not pursuing at this point in time any further negotiations 
with the Russian Government.
    Mr. Glaser. Correct.
    The Chairman. You are not pursuing negotiations.
    Mr. Glaser. Correct. We are not.
    The Chairman. Lastly, there was a very extensive article in 
Bloomberg about how Russia moves billions offshore, and a 
handful of tax havens may be critical to the question of our 
sanctions ability. Are you familiar with that issue?
    Mr. Glaser. I am generally familiar with the article.
    The Chairman. And are we looking at the potential of 
engaging those tax havens to have a consequential effect as it 
relates to the sanctions that we have already levied, and those 
which we might levy?
    Mr. Glaser. With respect to secrecy jurisdictions around 
the world, whether they are small islands or otherwise, this 
has been an initiative of the U.S. Treasury Department for 
almost as long as I have been at the Treasury Department, for 
many, many years. Through organizations like the Financial 
Action Task Force and directly, we make clear to jurisdictions 
that are secrecy havens 
for tax purposes, for money laundering purposes, for any other 
purpose that they risk access to the United States and 
international financial system if they are not able to comply 
by the international community's rules and norms with respect 
to information exchange. So certainly if we were to have 
information that an offshore jurisdiction was harboring 
sanctions evasion, whether it related to Russia or any other 
target, we would be quite concerned about that and we would 
pursue that quite vigorously.
    The Chairman. Well, I would like to follow up with the 
Department on that because between these two items that I have 
spoken to you about, FATCA, as well as the offshore tax havens, 
it seems to me that we would have a far more devastating effect 
than any potential sanctions impact that we might pursue.
    Senator Corker.
    Senator Corker. Thank you, Mr. Chairman.
    And I appreciate all of you for coming up here. Again, I 
have a lot of respect for the Secretary.
    I will say, after listening to the testimony, sometimes I 
think the only strategy the administration has is getting 
people who talk about Ukraine to look in the mirror and make 
sure they practice sounding tough. I really do not see any 
evidence of anything other than people trying to sound tough. 
Just as you mentioned, the President and Chancellor Merkel the 
other day talking--that is the way you referenced ``talking''--
about what we might do in Ukraine if things further 
destabilize.
    I would just ask you, Madam Secretary, are you satisfied 
with the United States response at present in Ukraine? You are 
a professional that we all respect. Are you satisfied with the 
response that is taking place today?
    Ms. Nuland. Senator, I think, as we have made clear, 
particularly on the cost side for Russia's actions, we will be 
far stronger if we move, particularly when we move sectorally, 
if we do it together with Europe. It is a matter of ongoing 
consultation between us and the Europeans at every level----
    Senator Corker. Yes, I got all that. But are you satisfied?
    Ms. Nuland [continuing]. To be ready for that.
    Senator Corker. Are you satisfied today with our response 
to the crisis in Ukraine, wherein we know that Russia is 
fomenting problems. We know that. When you say ``high 
confidence,'' I want the audience to understand that means you 
know it. That is about as high as it gets from the standpoint 
of understanding what is happening inside. We know that it is 
occurring, so are you satisfied with our response where we just 
keep talking?
    We have an Executive order for sectoral sanctions, none of 
which have been put in place.
    And again, I just want you to tell me, do you think we are 
doing what we should be doing right now in Ukraine to deter 
Russia from annexing other portions of eastern Ukraine like 
they did in Crimea?
    Ms. Nuland. I do not think any of us should be satisfied 
with what we are seeing on the ground in Ukraine. I think we 
have more work to do with our European partners to make the 
costs real for Russia on the sectoral side, if in fact we 
cannot have elections on May 25. And that is what we are trying 
to do right now.
    Senator Corker. So let me ask you this. I know that today 
you said the elections could be held in reference to Chairman 
Menendez's question. Mr. Glaser says that if Russia chooses to 
destabilize Ukraine--now, I think it is pretty self-evident 
that Russia has chosen to destabilize Ukraine--but he said if 
they do that, then we can do some other things. And you quoted 
what the President said the other day with Chancellor Merkel. 
If they continue disruptions and destabilization that impede 
the elections, on the trajectory that we are on today, will we 
have an election process that is credible?
    Maybe I will ask it a different way. When do you discern 
that they have crossed the line and are doing things that merit 
sectoral sanctions between now and May 25?
    Ms. Nuland. Again, the President, standing next to 
Chancellor Merkel--the two of them together declared that if we 
cannot have these elections, there will certainly be sectoral 
sanctions. If there is continued destabilization such that 
there cannot be elections--and that is 19 days from now. So the 
goal there was to set a deterrent.
    Senator Corker. So what we are going to do is, after the 
fact, we are going to respond, just as it happened in Syria. We 
are beginning to realize that in Syria, we have got 
counterterrorism issues. And because it has gotten so bad, it 
is now a threat to us.
    So what you are saying is when it gets really, really bad 
and Russia has done the things that they wish to do to 
discredit the election, which by the way is the most important 
thing for them to do right now--is that correct? Do you agree 
with that? I mean, that is the most important thing for them to 
do. We are watching them do it, and we are saying after they 
disrupt the election, then we are going to consider putting 
some sectoral sanctions in place. Is that correct?
    Ms. Nuland. Senator, what we are doing this week, including 
with teams in Europe--and I was in Europe last week working on 
this and will be back in Europe on Monday--is trying to develop 
this strong sectoral package on both sides of the Atlantic so 
that the Russians can see it, understand it, and understand its 
impact if they take further action to prevent these elections 
from happening.
    Senator Corker. And I have watched our country hide behind 
Europe. The chairman and I had dinner the other night with 
Chancellor Merkel and had an opportunity to listen a little bit 
to what she was thinking. Most of us have been to Ukraine 
recently and seen firsthand what is happening there on the 
ground. We are hiding behind Europe.
    I think everybody on the ground is appreciative of the 
things that we have done, but they know that Russia is far more 
interested in them failing than we are in them succeeding. They 
know that. They are watching. They are hearing people talking 
tough and doing nothing.
    So what I do not understand is on the sectoral sanctions. 
There are a few banks that we could hit, and I think you are 
going to have some witnesses who will come after you who will 
identify those. I think you have identified those. We do not 
have to hit entire sectors. They are second party sanctions. So 
they do not really implicate Europe.
    Typically the United States has led on these issues, and 
Europe does about 75 percent of what we do. I mean, that is the 
way things typically have worked.
    I do not understand. I truly do not get it. We have 40,000 
troops intimidating people on the inside. We have got black 
ops, little green men, doing the things they are doing on the 
inside. We know it. We know their goal is to disrupt the 
election and discredit it so there is a massive setback to this 
young government. You know that. We know it. We are watching 
them. Everybody is watching them. Today the German Foreign 
Minister said do not go to Ukraine. It is becoming a war zone. 
Other Foreign Ministers are doing the same thing. So we are 
watching this happen.
    We do these things last week that caused the stock market 
to go up 3.63 percent after we announced them.
    I do not understand. I really do not. I just do not 
understand the thinking of waiting until the damage is done and 
Russia has won to put in place things that matter. I do not get 
that. And I really would like for you to explain to me why you 
think that is a good way for us to be going.
    Ms. Nuland. Again, Ranking Member Corker, I think we are 
working currently on a lot of the things that you are 
interested in seeing. I think you know that we have already 
hit--was it four or five--banks in our previous rounds of 
sanctions. But as I said, it will be much stronger in the next 
round if we can coordinate with Europe. That is what we are 
working on right now.
    Senator Corker. Mr. Glaser, how are the separatists being 
financed right now?
    Mr. Glaser. I think that would be a question for the 
intelligence community, Mr. Senator.
    Senator Corker. Are you kidding me? Are you kidding me? 
That is the answer you are going to give me in this hearing 
with your responsibility knowing all of those things. That is 
an answer for somebody else. Do you not have a classified 
clearance? Is this not what you do? Tell me how the separatists 
are being financed right now.
    Mr. Glaser. Mr. Senator, I know that we could have a 
further conversation in a closed hearing.
    Senator Corker. Forty-one days ago that is what Anne 
Patterson told us on Syria. Will you tell us that this 
afternoon at 5 o'clock?
    Ms. Nuland. I do not actually have too much information----
    Senator Corker. Well, could he accompany you to the meeting 
today at 5 o'clock?
    Ms. Nuland. If you would like to invite him, we will see if 

he is available. I think somebody from Treasury is coming to 
the meeting.
    Mr. Glaser. I am going to be at the meeting. Mr. Senator, 
though, I do think this is a question that the intelligence 
community will be able to answer.
    Senator Corker. Do you know the answer to the question? Do 
you know the answer to the question? If you do not, then we 
have problems in Treasury since that is your focus.
    Mr. Glaser. Mr. Senator, I do not think the issue is how 
the separatists are being funded right now. It is clear that 
the separatists are being supported by Russia in every way, 
shape, and form.
    Senator Corker. So is Russia financing the separatists?
    Mr. Glaser. I think it certainly stands to reason that 
Russia is funding the separatists. I do not think the question, 
though, is whether Russia is funding the separatists. The 
separatists are controlling territory right now. I think what 
our focus has been, Mr. Senator, is imposing costs on Russia, 
not on breaking financial links between Russia and the 
separatists, which I think we have far less ability to do.
    Senator Corker. If I could, are those not the people that 
are destabilizing the country?
    Mr. Glaser. Are the separatists destabilizing the country?
    Senator Corker. Yes.
    Mr. Glaser. Absolutely.
    Senator Corker. I guess I am missing something.
    But let me move to Ms. Farkas. And I know my time is up.
    You said, ``within all the authorities that you had.'' I 
think there are plenty of us that would love to give you 
authorities, if you need authorities to help Ukraine defend 
itself. Would you please outline the kind of authorities that 
you would like?
    By the way, there is not a person on this committee that 
has ever talked about boots on the ground or sending in 
military. Nobody has ever said that.
    I will say that Yatsenyuk, in talking to all of us, would 
like to have the ability for Ukrainians to at least defend 
themselves. I think you said you saw the President the other 
day say that they have lost control of the country.
    So I would love for you to share with me what authorities 
the Pentagon is seeking to help Ukraine harden itself.
    Dr. Farkas. Thank you, Senator. Thank you for the question.
    And I would like to say, in answer to a comment that one of 
you made about the United States taking the lead and working 
with the Europeans, I think one of the things that we are 
actually very proud of--the United States is as a Government--
is that we have moved out very strongly bilaterally on the 
military front to do certain things to reassure our NATO 
allies. And our European colleagues have actually followed, and 
they are joining us in those efforts.
    Senator Corker. So I rest my case.
    Dr. Farkas. So I just wanted to----
    Senator Corker. Okay, I rest my case. But answer the 
question. I know we have got to move on.
    Dr. Farkas. Yes, I am sorry. I just could not resist.
    With regard to your particular question, it is more in the 
area of appropriations and the amount of funding that we have 
because we are looking at existing accounts in order to find--
--
    Senator Corker. What would you like to do?
    Dr. Farkas. Well, we would like to ideally--one thing that 
we are trying to do right now is we are trying to get the 
global security contingency fund--get a proposal together, and 
we have a draft one that we are working on right not, get it up 
to the Hill, and get some funding for Ukraine and also for 
Moldova.
    Senator Corker. I am going to give time to other people 
here, but you never answered my question. You never told me 
what you would like to do. Forget the gobbledygook about the 
funds. What would like to do in layman's language?
    Dr. Farkas. What we would like to do is use those 
authorities with the right amount of appropriations to support 
Ukraine and, as I mentioned, another neighboring country. The 
problem is that we have to work within the existing funding 
streams that we have. So we are working to find the necessary 
funding, and we always welcome additional help with that.
    Senator Corker. That was a nonanswer, but thank you.
    The Chairman. As I turn to Senator Cardin, maybe before it 
is over here--I think what Senator Corker is looking for is not 
only do you need authorities and funding, but what would you do 
with that funding? What would you do that we are not doing 
today? Do not answer it right now because in fairness to other 
members, I need to move on. But we may want to get you to that 
at some point in the hearing.
    Senator Cardin.
    Senator Cardin. Well, thank you, Mr. Chairman. I first want 
to thank you for mentioning the kidnapping in Nigeria, which 
shocks all of us. My work on the Helsinki Commission is focused 
on human rights globally, and what happened there with Boko 
Haram kidnapping girls that are just going to school should be 
shocking to the entire world. And I just want to note the 
Senate this afternoon did pass the resolution, and this will be 
a matter that we will certainly continue to follow. And our 
strategy needs to be to get these girls released. Human 
trafficking is one of the worst crimes in modern times, modern 
slavery, and we will certainly be focused on that.
    In regards to Ukraine, Ms. Nuland, I first want to talk a 
little bit about the OSCE mission whether we believe that they 
are now getting access and whether they are safe. I also want 
to talk a little bit about what you anticipate happening in the 
next 19 days, what are the risk factors, how can we mitigate 
those risk factors. You are correct that they will be one of 
the largest international groups ever to monitor an election. 
We expect that the Helsinki Commission will be participating in 
monitoring, including Members of Congress.
    So can you just bring us up to date as to OSCE's 
involvement in Ukraine, their access and what we anticipate in 
the next 19 days and how can we mitigate the risk factors for 
an open, free, and fair election?
    Ms. Nuland. Thanks, Senator Cardin, and thanks for what you 
have done throughout the Euro-Atlantic space to support OSCE 
and to support ODIHR.
    OSCE is busier than it has ever been as a result of the 
Ukraine crisis. As you know, they are deployed in a number of 
ways. We have the special monitoring mission which has been 
deployed all over Ukraine, but primarily in the cities of the 
east to, first and foremost, bear witness to what is happening 
with the separatists, but as you know, the idea had been to 
have them implement the April 17 Geneva agreement and try to 
support the Ukrainians in negotiating amnesty, on the one hand, 
for building releases.
    That has not been successful, as you know and as I said in 
my testimony, in part we believe because Russia has not 
sufficiently supported the OSCE mission, including by rejecting 
the request of the chairman of that mission to send a senior 
level Russian diplomat to tell the separatists that Russia 
supported Geneva and wants them out of these buildings.
    Nonetheless, having the OSCE bear witness to what is 
happening has made a manifest difference in all of our ability 
to assess who is at fault here and to make many of these 
assertions we have made about Russian involvement. They also 
played a crucial role in Odessa in bearing witness to what 
happened on Friday.
    In addition to that, we have, as I said, one of the most 
massive election preparation and monitoring missions the 
transatlantic community has ever mounted in the last 25 years 
being planned by ODIHR, the OSCE, and thanks to all of you 
through the Helsinki Commission as well. They are doing 
everything from supporting the development of the list, the 
development of the ballots, getting things out to the regions, 
ensuring that there are election commissions in all of these 
towns that are constituted properly. They are working with the 
Ukrainians on this question of whether there will be an 
additional question on the ballot now regarding unity, but 
decentralization.
    Senator Cardin. It sounds like the Ukrainians are preparing 
for the election and they will succeed in having a free 
election unless there is outside influence that disrupts that 
process.
    What can we do to mitigate that risk factor?
    Ms. Nuland. I think the biggest concern that they have, 
that the Ukrainians have, that OSCE has flagged, obviously, is 
the issue of security. As I said a little bit earlier on--I do 
not know if you were in the room--they do assess that if the 
election were held today, it can be held in the vast majority 
of Ukraine, absent Crimea where special arrangements have been 
made. And, in fact, in most of Luhansk and at least a third of 
Donetsk, there may have to be special arrangements made for 
some of these areas in Donetsk. And they are working, as are 
we, as are IFE's with the Ukrainians on----
    Senator Cardin. Did the international community help in 
providing this guidance on security and alternatives in those 
areas where it is not secure?
    Ms. Nuland. That is one of the things we are working on. In 
fact, Prime Minister Yatsenyuk asked Ambassador Pyatt yesterday 
for some advisors to come who have had experience doing 
elections in difficult security environments in the past, for 
example, in Iraq and Afghanistan, and we will be supporting 
that in the coming days.
    Senator Cardin. Thank you.
    Secretary Farkas, you mentioned what you would like to see 
done, and it was interesting. We talk about helping countries 
in the region as far as perhaps additional U.S. support, which 
may require appropriations. You probably have the authority, 
but you may need appropriations.
    But we all have NATO. You have also mentioned NATO. NATO's 
resources are available. Clearly Russia has violated all of our 
agreements, including the most recent one in Geneva to de-
escalate. What are we doing in regards to NATO resources to 
make it clear to Russia that we are prepared to defend our NATO 
allies and are prepared to make sure that they understand that 
there are security issues that we cannot allow them to 
compromise?
    Dr. Farkas. Thank you very much for the question, Senator.
    As you know, first of all, we, as I mentioned, have done 
several things militarily to show our support to the eastern 
allies within NATO. We have augmented our participation in the 
Baltic air policing. Many of the other NATO countries, the 
noneastern NATO countries, have joined us in this effort. The 
same goes for the aviation detachment training in Poland, as 
well as a number of other things which I outlined a little bit 
in my earlier testimony.
    We also have at the moment ongoing an effort to essentially 
establish a continuous rotational presence through the end of 
the year. And General Breedlove is essentially working on this 
right now. The North Atlantic Council approved 16 reassurance 
measures, and those will be sourced by all of the countries.
    Senator Cardin. Have you seen any Russian response to the 
reallocation of NATO resources?
    Dr. Farkas. Yes, absolutely. They have taken some military 
measures to show that they have taken note of what we have 
done. So clearly, colloquially I guess we are getting under 
their skin, and they have made comments about our various 
rotations and our military deployments.
    I should also mention the maritime ones. We have also 
deployed at least two ships to the Black Sea. So we have a 
presence there as well.
    Senator Cardin. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Rubio.
    Senator Rubio. Thank you.
    Thank you all for being here today.
    Secretary Nuland, let me start with this. Here is what we 
see evidence of. First of all, we see an all-out effort--I want 
to focus on this referendum, which is a farce, on the 11th. So 
what we see is Russian efforts to try to unite eastern Ukraine 
and establish this unified political structure there that they 
can control. We see them working to bring all the institutions 
that would be responsible for carrying out those elections 
under pro-Russian control. We see them working to protect their 
deniability by recruiting external groups to be a part of some 
of this including, by the way, we have had reports of 
mercenaries and even some organized crime figures to be part of 
the efforts that are going on in eastern Ukraine.
    Last, but not least, we now see this term becoming 
increasingly used in Russian political circles. The term is 
``new Russia,'' which I think is a 19th century term for 
eastern Ukraine.
    So this is in my mind--and I think Senator Corker was 
getting there, actually got there in his comments--I do not 
think there is any doubt on the minds of anybody on this 
committee, nor probably on this panel, for that matter, what is 
going to happen next there, or at least what Russia is going to 
attempt to do. And you actually speak about it in your 
statement, at least the written statement. You said just as we 
do not accept Russia's declared need for these so-called 
peacekeepers in Crimea, we will not accept any unilateral 
decision to deploy unsanctioned Russian peacekeepers to eastern 
or southern Ukraine. This you say in the aftermath of any sort 
of referendum on May 11 where as a result of everything I have 
just outlined, we can surely expect--I do--that on May 11, the 
pro-Russian elements will win that referendum fraudulently 
because they control all of this. They will declare the people 
of eastern Ukraine, or at least these two regions that have 
asked for them to come in. And then they come in with their 
peacekeepers. You say we will not accept that.
    We will not accept that or what? What will we do when that 
happens?
    And I guess my second question, as part of the first 
question, is why would we not just do it now if we know that is 
where it is headed?
    Ms. Nuland. Thank you, Senator.
    As I said in my statement, this is something we are 
watching intensely. Secretary Kerry spoke to this today in his 
press conference with High Representative Ashton that this is 
the Crimea playbook all over again, that if there is a 
referendum--and it is not clear that it will actually be held, 
but they are broadly mooting it on Sunday to declare the 
independence of the Donetsk and Luhansk Republics--then the 
scenario would mirror Crimea where you could conceivably see 
Russia then recognize that and then come in with peacekeepers 
to defend it. Obviously, that would trigger sectoral sanctions.
    Senator Rubio. So that would trigger the sanctions. So the 
reason why we are holding back on those sanctions is to 
hopefully serve as a deterrent to keep them from doing that?
    Ms. Nuland. Senator, as I said--I do not know if you were 
in the room--we are working very intensively now with our 
European partners to develop that package of sanctions as we 
judge that it will be a stronger package if we can do it 
together with Europe. I was in Europe last week working on it. 
We have a senior Treasury and State team in Europe today. As I 
said, Secretary Kerry has been burning up the phone lines, and 
we have a European Foreign Affairs Council on Monday.
    Senator Rubio. Just to clarify, when we talk about Europe, 
the three most influential governments in terms of moving the 
community in that direction is the U.K., France, and Germany. 
Is that right?
    Ms. Nuland. Yes.
    Senator Rubio. Would we expect that if those three move in 
one direction, that is the way the community would go by and 
large?
    Ms. Nuland. Yes, absolutely, and certainly Germany has been 
the center lodestar of this. But I will say that there are very 
diverse opinions and very diverse vulnerabilities across 
Europe. So keeping the cats herded is a challenge for 
Europeans, and they are having intense conversations among 
themselves, including if we move to sectoral, the need to share 
the pain across Europe because some are more vulnerable on the 
energy side, some on the banking side, et cetera.
    Senator Rubio. But the actions we are contemplating would 
not be--we are prepared to move unilaterally on those. Is that 
right?
    Ms. Nuland. Well, again, the EU would move as a bloc. We 
would move nationally, but they will be stronger if we do it in 
coordination with each other.
    Senator Rubio. And then, Secretary Glaser, I wanted to ask 
you about the currency situation within Ukraine. I know that 
that is having a major impact on their banking sector's ability 
to provide loans to get them out of this recession. Today I 
wrote a piece in the Wall Street Journal calling for us to 
encourage them to set up a currency board to help them 
supervise the value of their currency and perhaps reestablish 
some confidence.
    Do you have any openness to that? Have you opined on it? 
Has the administration or the State Department--Treasury--I 
apologize--opined on it? I mean, do you see value in that and 
is that something that we should explore?
    Mr. Glaser. Thank you, Senator Rubio. I did read your 
editorial in the Wall Street Journal, and I know that you also 
have a letter in to Secretary Lew on this precise question that 
you sent in a few weeks ago.
    It is an issue that we are examining very carefully, and I 
suppose the question becomes whether that is the path to it or 
whether to have a more free-floating currency as the path to 
it. But the actions that we are doing that I articulated in my 
written statement with respect to the IMF program on Ukraine is 
going to the same direction that I think we are all pulling 
for, which is to have a strong and vibrant Ukrainian economy as 
possible.
    With respect to currency boards, it is an idea that we are 
examining. It is an idea that we know we owe you an answer to, 
and we are going to get you an answer to as soon as we can.
    Senator Rubio. Thank you.
    And then finally, Dr. Farkas, I want to get back to the 
question that Senator Corker had asked and Senator Menendez had 
asked you to address, and that is, if you had the funds 
available, what precisely would we do? What is the best use for 
the funds?
    Dr. Farkas. Thank you, Senator. Thank you for your 
question, and again, thank you for your personal engagement on 
the issue of supporting Ukraine.
    What we would do is essentially what we have been doing in 
the building which is evaluating all of the Ukrainian requests 
that are coming from the Ministry of Defense. And as you may 
know, we have quite a lot of requests. We cannot take care of 
all of them, but we work to prioritize them in close 
conjunction with the Ministry of Defense and our Embassy team 
in Kiev. So we would essentially address those priorities.
    And we have been working through them gradually. As you 
know, there is already $18 million of assistance, 
approximately, that we have approved and is on its way to 
Ukraine. So we would continue with that effort.
    The other part of it, which is a bigger component--it would 
require more money. We are working also on providing more 
medium- and long-term assistance to Ukraine. As you know, for 
20 years, we have been working very closely with the Ukrainian 
Ministry of Defense. Again, as I mentioned in my earlier 
testimony, it is one of our successes, at least to the extent 
that we have worked with them on professional military 
education.
    Where we have not been able to make as much progress is on 
defense institution-building and frankly on converting the 
Ukrainian military from a post-Soviet model to a more modern 
one. There are elements of the Ukrainian military that can 
deploy and have deployed. Actually they should be proud. They 
are in Kosovo right now. They are in Afghanistan. They have 
deployed also as part of the EU antipiracy missions, and they 
are very active also in U.N. missions.
    So we would aim to increase the number of Ukrainian forces 
that can do that, that can be interoperable and then, 
obviously, also now help them with their internal problems. So 
it would be a package that would address not just the crisis 
but also move into a more long-term, sustainable path for 
Ukraine.
    The Chairman. Thank you.
    Senator Boxer.
    Senator Boxer. Thank you, Mr. Chairman.
    Before I ask my question, I am going to kind of follow up 
on what Senator Rubio discussed with you, Ms. Farkas--Dr. 
Farkas I should say.
    But first, I wanted to thank the chairman and the ranking 
member from the bottom of my heart because they worked together 
and they got this resolution out of this committee, which calls 
for more assistance to help free those 270-plus Nigerian girls 
who were kidnapped by terrorists. And we just had a prayer 
vigil on the Capitol steps, but that bore fruit because the 
Senate passed the resolution unanimously. That is rare and we 
are thrilled. On behalf of Mary Landrieu and a bipartisan team 
that worked on the resolution, thanks to both of you, 
particularly Senator Corker who I know really helped. So 
thanks.
    I am going to kind of press on the answer that you gave to 
Senator Rubio. So we know the Russian military holds a 
significant advantage in both size and strength compared to 
Ukraine. That is obvious. And since March, Russia has amassed 
at least 40,000 combat troops and heavy equipment on the 
eastern border with Ukraine. And today the Russian Defense 
Minister stated Russia will take steps to increase its presence 
in the Black Sea with additional warships and submarines.
    Now, in response to a request by the Ukrainian Government, 
last month the administration announced $8 million in nonlethal 
military assistance. We know that this aid package was welcomed 
there. It included bomb disposal equipment, handheld radios, 
engineering equipment, communications equipment, vehicles, and 
nonlethal tactical gear for Ukraine's border guard service.
    Now, Deputy Assistant Secretary Farkas, in your testimony 
you state that the Defense Department is working to ``identify 
additional security assistance resources for Ukraine,'' but 
that ``Ukraine's requests for material assistance are far-
reaching and vastly outstrip our ability to meet them under 
current authorities and appropriations.'' So I need to press 
you. What is it that they are asking for and what is it that we 
are not giving them?
    Dr. Farkas. Thank you very much, Senator, for your question 
and for your interest.
    The Ukrainian Government has given us pages of letters and 
requests for specific things ranging from gear for personnel, 
helmets and things of that nature, all the way through the 
gamut. We have gone through the list and prioritized with them. 
I am sure you are well aware of that.
    Senator Boxer. No, I am not. I am not aware of that.
    Dr. Farkas. Oh, okay. We have gone through those lists and 
prioritized them. Again, our Embassy in Kiev has worked very 
closely with the Ministry of Defense so that we know that we 
are addressing their priorities----
    Senator Boxer. Well, how much do you think we should be 
giving them, given what I just said about what Russia is doing 
today even, increasing their military presence? Forget the 
money for a minute because that is our problem. Okay? So tell 
us what you think we need to do right now. Right now. Supposing 
there were the votes to do an emergency package--I do not know 
that there are. I certainly would vote for it I think if it was 
smart. What are we talking about moneywise?
    Dr. Farkas. There are a couple of points, Senator. One is, 
of course, we will never be able to, in a short period of time, 
build up the Ukrainian military to be a modern, agile, ready 
military in the near term. And obviously, Russia's posturing on 
the border is one that we hope to de-escalate through our 
diplomatic and economic measures. So it is not a question of 
matching----
    Senator Boxer. Well, can I suggest it might de-escalate 
more if they knew they would be paying a price because people 
need to defend themselves. If they are paying a price, it might 
de-escalate the situation. So can you not give me an answer? I 
do not have a lot of time left.
    Dr. Farkas. Yes, Senator.
    Senator Boxer. What do you think you should be asking us 
for that you cannot give right now?
    Dr. Farkas. I think part of the issue has to do with the 
actual dollar amounts. We are looking for more money----
    Senator Boxer. That is what I am asking you.
    Dr. Farkas [continuing]. Within our couch cushions, if you 
will, because we are restrained by the existing budget and 
where the dollars are allocated.
    Senator Boxer. I did not ask you about your couch cushion. 
I am saying suppose suddenly the couch cushion was filled. I am 
not saying it would be, but I am just saying it might be. What 
would it be? Give me a number, please, or a range. Or would you 
rather answer in writing?
    Dr. Farkas. I can certainly answer in writing. I can tell 
you that to give you a number would be irresponsible because it 
has to do with Ukraine's requirements. It also has to do with 
their ability to absorb assistance. So I could pull a really 
big number out, but they could not implement.
    Senator Boxer. I ask you to respond to this, please, and I 
will put it in writing. I am not asking you to be 
irresponsible. I am asking you to act responsibly in this 
situation where we all know the constraints. We are not sending 
troops in there. We have told them they have to defend 
themselves. I am asking you what it would take in the short run 
to be credible. I mean, I am going to ask you to write me, as 
soon as you can, on that.
    Now, I am also deeply concerned about the natural gas 
situation. Ukraine wants to begin reverse-flow deliveries of 
natural gas from Europe through neighboring Slovakia. And last 
week, Ukrainian and Slovak pipeline operators signed an 
agreement that would allow for some reverse-flow deliveries of 
natural gas from Europe to Ukraine. According to the New York 
Times, pipelines in Slovakia ``could move up to 30 billion 
cubic meters of gas from Europe to Ukraine a year--more than 
all the gas Ukraine is expected to import from Russia this 
year.''
    So while I have colleagues here who want to take our 
natural gas away from us--we have a little dispute about that 
because I think we need it here for our manufacturing and so 
on--here you have a situation in a neighboring country, and yet 
they will only give Ukraine a very small percentage. I think it 
is just 10 percent? One-tenth of what they have asked for. 
Okay? One-tenth.
    So I guess I would ask you, Ms. Nuland, Ambassador, if you 
could please help us here. The Slovak company that controls 
natural gas flows has only offered to provide a tenth of the 
gas Ukraine has requested from Europe. The reverse-flows cannot 
begin until engineering work is completed. How important are 
these reverse-flows, and why are we meeting this resistance?
    This should be Europe's problem. It should not be at our 
doorstep. We have to deal with it because of humanitarian, 
moral reasons and everything else. But why is Europe not doing 
more to help on the natural gas front?
    Ms. Nuland. Senator, thanks.
    Reverse gas to Ukraine is absolutely an essential piece of 
the strategic protection of Ukraine in the short run and over 
the longer term until they can get to the point where they can 
get the gas out of the ground. As you know, we have fracking 
operations there as well.
    So we have borne down very intensely with, as you said, 
Slovakia, Poland, Hungary. We now have--I am going to get the 
numbers wrong, but about 3 billion cubic meters coming in from 
Slovakia through the pipe that has now been reverse-flowed. We 
have got about 10 coming from a combination of Poland and 
Hungary. That will start to fill the tanks over the summer in 
Ukraine. There are other things that can be done including 
potentially more from Slovakia. The problem there has to do 
with Slovakia's contractual obligations to Gazprom because 
Gazprom owns the codes that would open the spigots.
    So we are also working with Europe in its larger 
conversation with Gazprom on what might be done. It obviously 
works against Gazprom's market interests because they want to 
keep the price high.
    More broadly, it is a strategic priority of the President 
to accelerate our support for a more dynamic energy market 
within Europe which will reduce the price and make more reverse 
flow available.
    Senator Boxer. My time is up. So if you were to sum it up 
in 2 seconds----
    Ms. Nuland. We have started. We have more to do.
    Senator Boxer. Yes, but why is Slovakia not doing more?
    Ms. Nuland. Slovakia is doing what it can legally under its 
contractual arrangements with Gazprom. We can, with Europe, put 
more pressure on Gazprom but also on others to help accelerate 
reverse flow into Ukraine and we will.
    Senator Boxer. We have to.
    Thank you.
    The Chairman. Thank you.
    Before I turn to Senator Johnson, Dr. Farkas, I think there 
is a degree of frustration here. So let me try to get to the 
heart of what many of us are looking for which is we would like 
to hear from the Department--based upon your comment about 
authorities and resources--what it is that you would want, 
meaning the Department, and for what purposes. We are not 
talking about the long-term modern Ukrainian Army. That is 
another longer term purpose. We will have budgetary times for 
that. Talking in this window, what can be done now to assist 
the Ukrainian security so that it can provide internal security 
and, at the same time, send a message that there is a 
consequence to the Russians? Because Crimea was bloodless and 
therefore, back at home--yes, rah, rah, it was great--but when 
Ukrainian soldiers are potentially at risk, it changes the 
dynamics back at home.
    What we would like for you to tell the committee is: what 
are the amounts of money and what would they buy? If what we 
are talking about are MREs, well, that is great. The reality 
is, though, there will be members of this committee who will 
want to see far more than that. If we are talking about a 
certain type of weaponry, then there will be greater support. 
For us to be able to calibrate assisting Ukraine in a foreign 
policy context to understand this one dimension on the security 
side, we need to get a better sense of: ``it means X dollars 
and it means this is what we would do with it.'' If we do that, 
then I think members can make a judgment. Provide that through 
the chair to the committee.
    Dr. Farkas. I can provide that to the committee for the 
record.

[Editor's note.--The written response to the requested 
information can be found on page 78 in the ``Additional 
Material Submitted for the Record'' at the end of the hearing.]

    The Chairman. Senator Johnson.
    Senator Johnson. Thank you, Mr. Chairman.
    I would like to thank the witnesses.
    I want to concentrate on just acknowledging the reality of 
the situation here. I made little notes here. One of the little 
scribblings I put was too little too late. We threatened 
serious consequences with Crimea. They have done it. We 
instituted sanctions. Senator Corker basically talked about the 
currency strength and the stock market rose slightly.
    I have heard the President repeat words that I know a lot 
of us have also repeated as well. We need to change Putin's 
calculus. I am not hearing anything discussed here today that 
is going to change Putin's calculus. When we were in Ukraine, I 
was asking the Prime Minister what can we do to do that, and he 
was very clear in saying, well, Vladimir Putin will not respond 
to words. He will only respond to action.
    So, Secretary Nuland, let me just ask you first and 
foremost, why do we continue to only talk about providing 
nonlethal military support?
    Ms. Nuland. Well, I think, first, it is a question better 
directed to Dr. Farkas, but let me----
    Senator Johnson. No. This is diplomatic because early on 
before Crimea was annexed, we were told; we better not supply 
small arms and ammunition because that could provoke Vladimir 
Putin into taking over Crimea. Has the administration changed 
its calculus in terms of the fact that Vladimir Putin does not 
need provocation? He will create his own provocation. Are we 
recognizing that reality as we are seeing this thing spin out 
of control? Have you changed your calculus in terms of what you 
think may or may not change Vladimir Putin's calculus?
    Ms. Nuland. Senator, I think you know from our private 
conversations, I am not persuaded personally that he can be 
deterred in the ambition that he has, but what we can do is 
make it cost for Russia for these actions that he has already 
taken. And as I said in my testimony, I think whether he 
realizes it or not, there have already been significant costs 
to the Russian economy; $51 billion in capital outflow in the 
first quarter alone, a credit rating just above junk. As I 
said, I was in Europe last week and had a chance to talk to a 
number of European business folk who say that nobody in Europe 
is investing in Russia anymore, that their products are too 
expensive for Russians to buy.
    Senator Johnson. Let me just point out--Secretary Glaser, 
when did those capital outflows start flowing? When did that 
capital start fleeing Russia?
    Mr. Glaser. The number that Victoria gave--and I think the 
number is actually closer to $63 billion--are year-to-date 
numbers.
    Ms. Nuland. So this is first quarter of 2014 alone.
    Senator Johnson. My point being is the stock market had 
their Black Monday on March 3, 2 weeks before we instituted 
sanctions. The currency had already devalued before we ever 
instituted sanctions. My guess is the capital took flight out 
of Russia certainly before we ever instituted sanctions. I am 
not sure sanctions had any effect whatsoever other than the 
Russians have mocked them.
    So we are threatening greater sanctions, but, Secretary 
Nuland, you said there are diverse opinions. It is herding 
cats. I am not in any way, shape, or form convinced that the 
Europeans will ever agree to sanctions that would have any 
possibility of changing Vladimir Putin's calculus. So I am 
asking what else could we do that actually would change his 
calculus because sanctions will not do it because we will never 
institute the types of sanctions that might.
    Ms. Nuland. Senator, as I said, we are hopeful that working 
with Europe we will have a strong package. But, obviously, if 
that work is not successful, we will have to move forward, and 
that is what we plan----
    Senator Johnson. It will be too little too late because 
this has spun out of control and Vladimir Putin will have 
accomplished what he wanted in eastern Ukraine. And then what?
    Ms. Nuland. Senator, I think we are in this with this 
Russian leadership for the medium term, and we need to buckle 
our seat belts for that. And this economic approach is going to 
take some time.
    Senator Johnson. The economic approach is going to fail. So 
that is what I am saying. When the economic approach fails, 
then what do we do? Are we ever going to consider providing 
even small arms to the brave and courageous people of Ukraine? 
I know you share that opinion. You have been over there. You 
see the desperation in their voice. Are we ever going to 
consider doing more than just threats, talking tough?
    Ms. Nuland. I think there is a question whether in the 
short run what we are talking about, the 19 days between now 
and the election, even with all the will in the world, one 
could pour enough in there to tip the balance vis-a-vis the 
mighty Russian military if he chooses to use it. So again, we 
need to make it clear what the costs are going to be and 
continue to escalate them going forward.
    Senator Johnson. We are not making it clear, though. We are 
not making it clear at all. Again, we are threatening sectoral 
sanctions, whatever that means, with a bunch of allies that 
have diverse opinions and are a bunch of cats. What is clear 
about that at all? Why would that change Vladimir Putin's 
calculus?
    Ms. Nuland. With respect, whether he has registered this 
yet or not, the ruble is down 20 percent against the dollar 
since the new year. They are in recession now.
    Senator Johnson. Exactly. What does that tell you? He seems 
to be impervious to the economic harm. He is not going to 
respond to that. What might you do that he might respond to?
    Ms. Nuland. Again, we are on an escalatory ladder here and 
we need to continue to raise the pressure if he continues to 
pursue an aggressive path vis-a-vis Ukraine.
    Dr. Farkas. If I could just add one thing, Senator. It is 
not as if the Ukrainian military does not have small arms and 
ammunition or that they do not have their own lethal equipment. 
And when they came to us with their list of desired equipment 
and other support, they prioritized it for us, and frankly, 
they did prioritize a lot of nonlethal assistance.
    Senator Johnson. That is because when we were there, the 
Prime Minister specifically said he is not going to ask for 
something that he knows will be refused. So if he knows it is 
going to be refused, he is not going to ask for it. If you were 
in that position, what type of lethal weaponry do you think 
Ukraine needs to change Putin's calculus? Antitank weapons? 
What might actually work?
    Dr. Farkas. Senator, I think I am not going to disagree 
with my colleague. Frankly, it is not the military balance that 
is going to change the calculus for President Putin. He will 
know that it will be bloody if he chooses to intervene 
militarily in Ukraine. Make no mistake. It will be bloody and 
it will be a disaster tactically and certainly strategically. 
So I think that adding more lethal military equipment into the 
equation, into the balance is not going to change things.
    Senator Johnson. Thank you.
    Thanks, Mr. Chairman.
    The Chairman. Senator Murphy.
    Senator Murphy. Thank you very much, Mr. Chairman.
    Thank you all for being here.
    Madam Secretary, as you know, I along with a few others on 
this panel were amongst the earliest to advocate for sanctions 
against the Yanukovych regime. I have argued from the very 
beginning for a robust American response to this crisis.
    But I think it is important for us to recognize a simple 
fact, and that is this. The future of Ukraine matters more to 
Russia than it matters to the United States. It is a neighbor 
of Russia. It is on the other side of the world from us. And I 
sometimes worry that the hand-wringing that happens over those 
who want a much more robust response risks viewing the world 
through an extinct prism in which Russia is our chief 
adversary, whereby our actions have to be equal maybe not in 
exactitude of tactics, but in proportion to the tactics that 
Russia uses.
    That is not the world we live in any longer. We should 
respond. We should be robust in that response, but we should 
not be expected to care about this as much as the Russians do.
    So let me posit a slightly complicated hypothetical for you 
here. Let us say that we and the international community are 
not successful in changing Putin's mind in the medium term, and 
Crimea stays effectively within Russian control. Like he has 
done in South Ossetia and Abkhazia and Transnistria, he is able 
to effectively cloud the title to eastern Ukraine, compromising 
the future of their direction toward Europe. But his economy 
continues to hemorrhage because we ratchet up sanctions. The 
rest of the world, to the extent that they are dictated by 
rational actions, receives a message that if you try to change 
your boundaries, there is an economic price to be paid, and 
Europe decides to move even faster toward energy independence 
because they have received this monumental wakeup call that 
they are not dealing with a rational actor themselves on the 
other side of the European Union.
    If that is the hypothetical 6 months from now, is Russia in 
a better position than they were 6 months ago? Are U.S. 
security interests in a better position than they were 6 months 
ago?
    Ms. Nuland. Well, Senator Murphy, thank you for that and 
for your commitment throughout these many months on Ukraine.
    I think you have just made the point that Putin has done 
more in the last 6 months to galvanize and unify the 
transatlantic community than we have seen in years and years in 
terms of the commitment to NATO and NATO reassurance, in terms 
of the renewed energy that is going into energy security both 
within Europe and across the Atlantic, in terms of the energy 
that is going into the Transatlantic Trade and Investment 
Partnership because people understand that that offers real 
opportunities to shore up the economic underpinnings of our 
model, and in terms of the unity that we have had so far in the 
first rounds of sanctions. So I am not sure what President 
Putin intended, but he is now reaping a lot of what he has 
claimed to be concerned about over all of these years.
    And as I said in testimony, there is going to come a time 
after this nationalist fever in Russia breaks where the Russian 
people are going to turn around and say what has all of this 
adventurism abroad brought to us. Where are our schools? Where 
are our roads? Where is our investment as we are building 
expensive bridges between Crimea and Mother Russia? So I do 
think over the medium term, this will turn out to have been a 
grave mistake. Unfortunately, the Russian people are going to 
pay as well.
    Senator Murphy. I do not claim to be a historian of the 
cold war, but I know that we played the long game. And for the 
Ukrainians, they do not have that luxury, and that is why we 
need to be certain about the level of military support and 
economic support and diplomatic support that we are going to 
lend them today. This is not an argument to abandon them in 
their time of need, but we emerged from the ``cold war,'' 
victorious because we did play that long game, and I think that 
those dynamics still play to our benefit here.
    I ask this question to both you, Secretary Nuland and 
Secretary Farkas. You probably both have thoughts on this. Some 
of us did get the chance to sit with Chancellor Merkel, and one 
of the queries we had for her was her thoughts on the direction 
of NATO. You can send messages in a crisis to your enemies or 
your adversaries, and you can also send messages to your 
friends. And it seems that there is a tremendous opportunity 
with an application, for instance, for a membership action plan 
from Georgia that we can send a clear message to our friends 
that we are not going to allow this tactic, which is where 
Russia tries to invade half a country with provocations so as 
to make it less attractive toward membership in EU or NATO.
    Is there a way to get a membership action plan to Georgia 
given the fact that that application will be compromised by the 
continued strange state of two territories there? You want to 
talk about messages. You want to talk about clear signals. That 
would be a very clear signal that if you think that by muddying 
up the waters in a section of a former republic, you are going 
to forever take away their ability to join NATO, if we were 
able to find a pathway to bring Georgia into NATO, give them a 
membership action plan, that is a very strong signal as to what 
Russia may have in store for the future of a country like 
Moldova, et cetera.
    Ms. Nuland. Well, Senator, thank you for raising that with 
Chancellor Merkel. I would be interested in her response.
    As you know, it does take 28 affirmative votes in the 
alliance to grant MAP status. Certainly Georgia has done an 
enormous amount for the alliance as a partner and has made 
enormous strides. So they are working very hard to build that 
consensus. But as you know, they are not there yet.
    Dr. Farkas. And if I could just add to that. We are 
incredibly impressed with Georgia's progress on the defense 
reform front. Secretary Hagel is actually meeting tomorrow with 
his counterpart, Minister Alasania. They will go over and 
review everything that Georgia has done. It is not just defense 
institution-building, which is really the building blocks of a 
real strong, modern professional military, but it is also, of 
course, their interoperability and their willingness, their 
steady willingness to deploy with us to Afghanistan, and they 
have actually held their hand up for a number of other 
missions, U.N., EU, NATO response force. So we absolutely 
commend all of Georgia's efforts.
    Thank you.
    Senator Murphy. I would not categorize her response as 
hyper-encouraging, but clearly this is important to the 
Europeans as well.
    The Chairman. Having been at the dinner with Senator 
Murphy, I think he is optimistic. [Laughter.]
    The Chairman. Senator Barrasso.
    Senator Barrasso. Thank you, Mr. Chairman.
    Secretary Farkas, a recent Wall Street Journal editorial 
entitled ``Ukraine Needs U.S. Military Aid. It Needs it Now''--
Mr. Obama, it says, is so worried about upsetting Mr. Putin 
that he refused to send even night vision goggles, offering 
300,000 meals ready to eat. The Ukrainians are battling to free 
themselves of Russian domination and build a European 
democracy. They deserve more than Spam in a can from America.
    So the United States currently provides night vision 
goggles even to the Afghan National Army even though they could 
fall into the hands of the Taliban.
    What military assistance up to this point has been provided 
to Ukraine from the United States?
    Dr. Farkas. Thank you, Senator.
    As I outlined in my testimony, I think maybe you were not 
here yet, but we have provided them--we are in the process of 
providing them with $18 million worth of assistance. Some of 
that is going to their border guard. It is everything from 
engineering equipment to binoculars to gear for personnel. We 
have also provided them with some equipment also for their 
armed forces. And we have not said no to anything. We are 
essentially reviewing on an ongoing basis all of the Ukrainian 
requests. So it is an ongoing process, and as we identify 
opportunities, we are moving forward with those packages.
    Senator Barrasso. We have seen over the weekend the 
situation Ukraine continues to spiral out of control. Pro-
Russian forces once again take over local government facilities 
in eastern Ukraine.
    Last week, I joined Senator Corker and a couple of dozen 
other Senators in introducing the Russian Aggression Prevention 
Act. It is authorizing up to $100 million for direct military 
assistance to Ukraine, including antitank, antiaircraft 
weapons, small arms.
    And I made two visits to the region. During a recent visit, 
along with Senator McCain and other members, the committee 
heard directly from the Ukrainian Government officials 
specifically requesting this kind of additional assistance. So 
we have a group that has come forward with this Russian 
Aggression Prevention Act.
    Why has the administration decided not to provide this 
additional military assistance?
    Dr. Farkas. I think the administration is going to provide 
additional assistance. We are reviewing the Ukrainian requests.
    With regard to lethal assistance, that is an area where we 
are more careful, again because we do not want to escalate the 
situation militarily and we do not believe that it will change 
the balance of military force.
    Senator Barrasso. Secretary Nuland, Friday the Russian 
Energy Minister announced Gazprom is going to require an 
upfront payment for natural gas deliveries in June. In April, 
Russia almost doubled the cost of natural gas for Ukraine. So 
with Gazprom's history of cutting off natural gas supplies to 
Ukraine--they did it 
both in 2006, 2009--how likely do you think it is that Russia 
is going to cut off Ukraine for now non-payment of debts or 
refusal 
to pay the outrageous price increases from Russia that they are 
demanding?
    Ms. Nuland. Thanks, Senator.
    Well, as you know, if they do a complete cutoff, it hurts 
Russia far more over the medium term than it hurts Ukraine, 
which is why the second time they did it, it did not last very 
long. That said, there are many other levers, economic levers, 
at their disposal.
    This is why the whole question of appropriate Ukrainian gas 
debt to Russia has been part of the IMF discussion with the 
Ukrainians. I think they have worked through with the 
Ukrainians what is legitimate and what is not legitimate.
    With regard to advance payment, this is a question that has 
to do with the complicated gas history back and forth. We are 
gratified that we now have a Ukrainian-EU-Russian conversation 
about gas because it is also of manifest importance to Europe 
that there not be a gas cutoff. And that conversation has 
begun, and collectively together with the IMF, there is 
considerable leverage there for a fair and equitable resolution 
of this with a willing Russia.
    Senator Barrasso. I think you saw yesterday's New York 
Times front page above the fold, ``Kiev Struggles to Break 
Russia's Grip on Gas Supply.'' I just wanted to visit a little 
bit about that. The article highlights the problems facing 
Ukraine in attempting to free itself from Russia's strategic 
weapon, natural gas. And it is interesting today that Senator 
McCain and I and some others on this panel were in Ukraine. 
This was a bipartisan group. It was the day even before the 
election was held in Crimea, if you want to call it an 
election, but it is when the helicopters landed and took 
control of the gas facility just north of Crimea. So this is 
something that has been high on our minds.
    Ukraine has been seeking help from countries in the 
European Union to secure gas supplies through reverse flow 
deliveries, as we have discussed. Poland and Hungary have 
already started helping.
    The article, though, from yesterday New York Times 
highlights the difficulties in getting the reverse flow 
deliveries of gas to Ukraine due to the vulnerability of some 
countries to Russia, as well as the power and reach of Gazprom. 
Senator Boxer asked some questions earlier about another 
country and activities. And a lot of that to me seems to be 
just the fear of dealing with Putin and specifically Russia.
    So how is the administration now helping Ukraine break 
Russia's grip on their energy supplies and energy security?
    Ms. Nuland. So, Senator, this is, as you know, a very 
important priority for us both in the short term and in the 
medium term. In the short term, Secretary Kerry had a meeting 
with High Representative Ashton and the EU Commissioner 
Ettinger, and as a result of that, they agreed to intensify 
support for Ukraine in reverse flow. That resulted in new 
contracts for reverse flow from Poland and from Hungary and 
this initial reverse flow from Slovakia that can be expanded 
with more investment, although the big flow from Slovakia, as 
you said, is dependent on a Gazprom deal.
    More broadly, we need to intensify and accelerate intra-
European work on the dynamism of their energy market. We are 
talking to them as a Presidential priority now about increased 
investment in the kinds of interconnectors in LNG terminals 
that would allow more gas from more locations, including the 
United States, to get in there to lower the price so that 
Gazprom gas has to be more competitive, including reverse flow.
    But you know that the medium-term game in Ukraine is its 
intense investment with U.S. companies in fracking, and if that 
goes well, Ukraine could be energy independent in as little as 
8 years.
    Senator Barrasso. Thank you, Mr. Chairman.
    The Chairman. Senator Kaine.
    Senator Kaine. Thank you, Mr. Chairman.
    To the witnesses, we are not making your life easy or any 
of our lives easy in terms of the options. No troops on the 
ground. We have made that clear. And that is a view that you 
and the President share, but Congress has made that very clear.
    Military aid costs money. I mean, I am on the Armed 
Services Committee. You ought to hear our Armed Services 
Committee testimony about the effects of sequester on the 
military budget. I mean, we are cutting pay, looking at 
benefits cuts that affect our active servicemembers. But we are 
going to talk theoretically about we are going to do all kinds 
of military aid to the Ukraine? I mean, I know that that is 
what we want you to do, but we want you to do it for free 
because we are sure--if we do not eliminate the sequester in 
fiscal year 2016 and out, we clearly do not want you to do 
anything with respect to military aid to the Ukraine or anyone 
else. We can say everything we want about how we should be 
tough in the provision of military assistance, but if we let 
the sequester continue, our actions are telling you we do not 
want you to do anything with respect to significant military 
aid to the Ukraine or anything else.
    So that is why it is down to economic sanctions. So let us 
talk about economic sanctions for a minute, and I want to get 
your opinions on some.
    Here is something we could do economically that would 
really hurt Russia. Ninety percent of credit card transactions 
in Russia are through two American companies, Visa and 
MasterCard. So we could do a sectional sanction that would say 
our American companies should stop doing credit card 
transactions. If you eliminate consumer credit in Russia, that 
would blitz their economy, at least until they built their own 
indigenous consumer credit capacity, which would probably take 
them about a year. It would be hugely expensive. They would not 
build it near as well as their folks are getting served right 
now. It would accelerate capital outflow and hurt the economy 
in a very significant way.
    It would also hurt two American companies. They are making 
hundreds of millions dollars in profits, as they should, 
servicing these customers. They probably would not get paid the 
monthly bills from the customers if they said we are going to 
have a sanction and we are going to servicing credit. But that 
is an economic option at our disposal if we choose to do it.
    We could stop all of the American multinational oil 
companies from doing joint ventures with Russia over energy 
issues. That would have some significant effect on the Russian 
economy, but it would also affect American companies.
    I wonder if we have got the stomach to do some of the 
economic sanctions that we could do that would affect the 
economy pretty significantly. This credit card thing would have 
an immediate and very dramatic effect on their economy, and 
they would not be able to quickly recover and serve their 
consumers in the way that their consumers are being served now. 
But it would affect American companies as well.
    I tend to agree with Senator Barrasso that there is a lot 
of energy things we can do over the medium and long term that 
will wean countries and others away from Russian monopolies, 
especially helping Europe develop their own energy assets or 
Ukraine. But if we get down to economic sanctions that we could 
do that would really be tough, a lot of those sanctions--I 
mean, let us be honest--they hurt American companies too. Is 
that not the case, Secretary Glaser?
    Mr. Glaser. Thank you, Senator, for the question.
    Let me begin by saying I know that there has been some 
skepticism expressed about the efforts and the sanctions we 
have put in place to date, but as Secretary Nuland has 
articulated, I do think we are beginning to see a very dramatic 
impact on the Russian economy.
    Senator Kaine. You are seeing an impact but it is not yet 
changing the tactical calculus. It may change it next month. It 
may change it 3 months--but it is not yet changing the tactical 
calculus.
    Mr. Glaser. I do think it is important. I do want to say I 
have been working on sanctions for a long time, and oftentimes 
when we initially impose a set of measures, when we initially 
begin a strategy, what we see from the target, we see laughter, 
we see bravado, we see taunting. But that normally is very 
short-lived when they start to realize what they are up 
against.
    Senator Kaine. We saw that from Iran at the start of this. 
They said it was not going to be serious, but it started to 
tighten them down. It brought them to the table.
    Mr. Glaser. We see it all the time. And then when they 
start to realize what they are up against, they start to 
realize what our capabilities are, and they start to realize 
our seriousness of purpose. They start to understand that this 
is, indeed, a very serious threat that they are up against.
    Senator Kaine. But these sanctions are only going to be 
powerful if Europe gets on board. It was ultimately getting the 
support of the world community that made the sanctions against 
Iran really bite. It was not just that we came up with a great 
sanctions regime. If you cannot get Europe on board in these 
economic sanctions, there is little we can do short of this 
credit card thing, unilaterally, that will really come down 
hard on that economy. Would you not agree with that?
    Mr. Glaser. Well, I think that we have a number of tricks 
up our sleeve. I mean, the credit card idea that you are 
articulating is certainly one of the levers that we have with 
respect to Russia. We have a variety of economic and financial 
levers with respect to Russia. But as has been pointed out----
    Senator Kaine. Did I state it correctly that 90 percent of 
their credit card transactions are done with these two American 
companies?
    Mr. Glaser. I do not know the exact percentage. I am sure 
we could get you the exact percentage. But Visa and MasterCard 
are very, very, very significant.
    Senator Kaine. Does that number surprise you?
    Mr. Glaser. If that is the correct number, it would not 
surprise me, but I do not know what the correct number is.
    The point, though, is that this is going to be effective if 
it is done in a deliberate fashion. Now, Russia may or may not 
have acted deliberately with respect to its decisionmaking with 
respect to Crimea and with respect to Ukraine. They may or may 
not be acting deliberately with----
    Senator Kaine. You say deliberately. You mean with a lot of 
advance planning. They are not in Crimea by accident.
    Mr. Glaser. With a lot of thought about what the costs will 
be to them in the future. But in understanding what our tools 
are and how we can deploy them in the best, most effective way, 
as you point out, they are going to be more effective if done 
in conjunction with the Europeans, but we have a lot of 
authorities ourselves too. And I think the President made quite 
clear that should the elections be disrupted, that we are 
prepared to impose quite significant costs on the Russian 
economy, and I think we have shown we can do that. And we will 
do that and we can do that. It is a matter of taking very 
seriously, as you say, what the impact is within Europe, within 
the United States, within the international financial system, 
trying to minimize those impacts, but understanding that there 
are going to be some of those impacts and taking the 
appropriate measures anyway. And that is exactly what we are 
working on. We are working with the Europeans as we speak. We 
are working on it within the administration, and we have every 
intention to move forward on it as we need to.
    Senator Kaine. Thank you, Mr. Chairman.
    The Chairman. Senator McCain.
    Senator McCain. Thank you, Mr. Chairman.
    Ms. Farkas, my understanding is that we have committed $3 
million worth of MREs, $7 million of health and welfare 
assistance, $8 billion worth of nonlethal military assistance 
for Ukraine's Armed Forces and state border guard service. Is 
that correct?
    Dr. Farkas. It is $18 million total.
    Senator McCain. Then my numbers are correct.
    Dr. Farkas. They probably are, Senator.
    Senator McCain. I just asked if that is correct. The MREs 
have been delivered. Right?
    Dr. Farkas. The MREs have been delivered. Correct.
    Senator McCain. And how were they delivered?
    Dr. Farkas. They were delivered through EUCOM by a German 
company.
    Senator McCain. By a German company. They were not flown in 
by U.S. aircraft into the airport at Kiev. Right?
    Dr. Farkas. They were not.
    Senator McCain. Of course, not. That might be provocative.
    Now, how much of the rest of the $7 million and $8 million 
have been delivered so far?
    The Chairman. Excuse me, Senator McCain. Excuse me a 
minute.
    Expressions of approval or disapproval of any remarks at 
this hearing are not in order.
    Senator McCain.
    Dr. Farkas. Senator, I do not have the exact data for you. 
I can tell you that the border security assistance--it is $3 
million. That has already been delivered to the Ukrainians 
because that is sourced locally. The rest of the assistance is 
done through U.S. Government contracting.
    Senator McCain. Has it been delivered yet?
    Dr. Farkas. It has not all been delivered yet.
    Senator McCain. That is what I thought.
    Now, Secretary Nuland, is it the administration's argument 
against providing body armor, night vision capabilities, and 
similar nonlethal assistance--obviously, that was not provided. 
Right?
    Ms. Nuland. Senator, as you know, we are continuing to look 
at those issues.
    Senator McCain. Was it delivered or not?
    Look, I have watched you----
    Ms. Nuland. It has not been delivered----
    Senator McCain [continuing]. Testify. I would like just 
answers to the questions.
    Has body armor, night vision capabilities, and similar 
nonlethal military assistance been delivered?
    Ms. Nuland. No.
    Senator McCain. It has not.
    And can you explain to me how it might be provocative to 
provide some body armor to soldiers whose countries are being 
invaded by Russian special forces?
    Ms. Nuland. Again, I do not think anybody has called those 
items provocative. I think we are continuing to review.
    Senator McCain. Then why would we not supply them? They 
have asked for them repeatedly and begged for military 
assistance as their first priority in order to defend 
themselves. They reject the argument that they cannot win 
anyway. So why give them any capability? Can you explain to me 
why we have not given them even body armor or other equipment 
that they so badly need?
    Ms. Nuland. Again, I think we are continuing to look at 
those things.
    Senator McCain. I see. And that invasion took place when? 
Of Crimea. How long ago? Weeks ago. Good. I am glad you are 
going to continue to look at it.
    Now, as I understand it, the announcement made by the 
President and Angela Merkel was, ``that if the U.S. and Germany 
would impose additional sanctions on Russia, it continues to 
destabilize eastern Ukraine and disrupt this month's 
Presidential election.'' Given what is going on in Odessa 
today, would you say that that probably would disrupt the 
Presidential election in Odessa?
    Ms. Nuland. Again, in the view of the OSCE, an election, if 
it were to be held today, could be held in Odessa.
    Senator McCain. It could be held in Odessa.
    Ms. Nuland. It could be held in Odessa in the view of the 
OSCE, and we checked that before coming here, Senator. That is 
not to say that it could be held in all of Donetsk.
    Senator McCain. Do you think that they are trying to 
disrupt the elections in Odessa?
    Ms. Nuland. As I made clear in my opening, we certainly 
think that there were pro-Russian elements and there were 
aspects of Odessa that were far from indigenous.
    Senator McCain. So then they are trying to disrupt the 
elections in Odessa.
    And our strategy seems to be, Mr. Glaser, we will just let 
the Russian economy fail. And I was pleased to note--and all 
three of you have repeated it--how the Russian ruble and the 
flight of--has declined. But since the sanctions were imposed, 
actually the ruble has strengthened and the Russian stock 
market has gone up. I think those facts speak for themselves.
    So would you agree that in fact Putin continues to increase 
tensions and aggression in Ukraine as the recent unrest in 
Odessa suggests, Secretary Nuland?
    Ms. Nuland. As I made clear in my testimony, we believe 
that since the Geneva agreement, the aggressive actions of the 
Russian Federation have continued in the east and in the south.
    Senator McCain. So tell me what would it take between now 
and the elections for these sanctions that President Obama and 
Chancellor Merkel talked about to be triggered. What action? 
Obviously, there was just a building burned in Odessa and 30 or 
40 people were killed. More people are being killed. 
Helicopters are being shot down by Russian--excuse me--pro-
Russian in Ukraine. What does it take to say, hey, this is 
enough? They have gone to Odessa. They are continuing to foment 
combat and conflict in eastern Ukraine, and they are shooting 
down helicopters. Tell me what action on the part of Putin 
would trigger these--specifically what action in order to 
trigger these sanctions that are supposed to be so severe.
    Ms. Nuland. Well, as you know, we have continued to 
escalate sanctions as we have seen more aggression. We 
instituted a new package of sanctions--what was it--10 days 
ago.
    Senator McCain. I am asking specifically what the President 
and Chancellor Merkel said, that if they continue to disrupt 
the elections and cause tensions--I can quote it to you again. 
What would it take to impose a new round of sanctions?
    Ms. Nuland. The expectation is if the elections do not go 
forward, if we cannot have elections----
    Senator McCain. So if it is the elections do not go 
forward, and so he can do anything he wants to prior to that. 
Is that right?
    Ms. Nuland. I think I made clear that we are watching this 
May 11----
    Senator McCain. What are you watching for? What is the 
destabilizing moment that says, okay, we will impose these 
sanctions?
    Ms. Nuland. Again, we are developing the sanctions now with 
the Europeans. I think we will have them at the ready very 
soon, and we will be able to impose them as we watch the 
continued destabilization.
    Senator McCain. That is a total nonanswer to my question. 
My question is not what you are developing. My question is--and 
I am sure you understand me--what action would Vladimir Putin 
take, in addition to what he is already doing, which is a lot, 
in order to trigger the sanctions?
    Ms. Nuland. First, if we have a separatist referendum that 
is recognized by Russia and results in Russian peacekeepers, 
that will be a trigger. If there is the inability to have 
elections in broad swaths of Ukraine, whether that happens 
earlier or later, if the elections do not go forward, all of 
these are the kinds of triggers that we are talking to the 
Europeans about.
    Senator McCain. So if there is a referendum in eastern 
Ukraine that says they want to be part of Russia or independent 
of Kiev, that will trigger additional sanctions?
    Ms. Nuland. If that referendum is recognized by Russia and 
they move, as they did in Crimea, and we have a scenario where 
they go in to protect the----
    Senator McCain. Oh, so not only do they have the vote, but 
then Russians have to move into eastern Crimea?
    Senator McCain. Again, Senator, I think we will evaluate 
events as they move forward, and we are very much----
    Senator McCain. So the answer is that you cannot tell me 
what specific action Russia would take in order to trigger 
sanctions outside of the actual elections being disrupted 
themselves. You are not answering the question, Madam 
Secretary.
    Ms. Nuland. We have steadily increased packages of 
sanctions as the Russians have destabilized. Even before we get 
to sectoral, there is more we can do in the crony and name 
sanctions efforts, and we are prepared to do some of that on a 
shorter string.
    Senator McCain. May I express my deep disappointment on 
your failure to answer the questions. I had hoped better as a 
witness when I strongly supported your nomination for your 
present position.
    The Chairman. Senator Markey.
    Senator Markey. Thank you, Mr. Chairman, very much.
    It is pretty clear that Russia is using natural gas as its 
weapon, not just against Ukraine but in trying to influence the 
response from the EU, and that is the Achilles' heel of the 
Ukraine. It is the Achilles' heel that the Russians are seeking 
to exploit across the spectrum.
    And I am not going to talk about LNG exports here except to 
say, one, we do not have a terminal built in the United States 
to export to Ukraine. Two, if we did have a terminal, Ukraine 
does not have a terminal to accept it. And if we were trying to 
send it though the Strait of Bosporus, the Turks say they would 
block it for safety reasons. And third, even if we did put it 
out in the open seas, it would go to the highest price which is 
Asia. We do not control where it goes. The Senate Foreign 
Relations Committee, the administration, no one controls where 
it goes on the open seas. So I am just being realistic about 
LNG.
    What we can do, however, is recognize that Ukraine is the 
second-least energy efficient country in the world. Uzbekistan 
is last. The Ukraine is second from last out of 180-190 
countries. Pretty sad shape.
    Now, we also know that if Ukraine just increases its energy 
efficiency to Poland's level, it backs out three-quarters of 
the natural gas it has to import. Let me say that again. If it 
increases its energy efficiency to Poland's level, it backs out 
three-quarters of natural gas it has to import from Russia, and 
that is because right now they are using Soviet era boilers, 
Soviet era buildings, Soviet era standards. Russia moved after 
1990, so did Poland. Ukraine just stayed right where they were 
largely because of the fact that energy subsidies are actually 
unbelievably 8 percent of their gross domestic product, which 
are energy subsidies from Russia. So they had no stake because 
that subsidy it kept them addicted.
    So I guess my question is this. What can we do with the EU 
and other countries to put together a set of incentives that 
moves in a telescoped timeframe the Ukraine economy to a modern 
energy efficient economy? And what is the goal that you think 
makes the most sense? And what is that timeframe? And what will 
we have to do in order to meet it? And I would like the goal to 
be as big and bold as you can make it because the bigger we 
make it, let me just tell you, the more frightened Russia is 
going to get. The more frightened. Gazprom is running their 
policy. That is who Putin is meeting with every day. So the 
bigger you set this, the more frightened they will be. Can you 
just give me some hope here that with the EU we are going to 
announce some huge goal for the Ukrainian economy to transfer 
over to a much more energy efficient model?
    Ms. Nuland. Well, Senator, energy efficiency is one of our 
main lines of effort with the Government of Ukraine with our 
assistance. If you have ever spent time there in the winter 
where the heat is blazing out of the radiators and all the 
windows are open in government buildings, this speaks to the 
inefficiency.
    But as you know from your own work, fixing a problem like 
that is a medium-term problem. It involves giving them new 
technologies. It involves giving them lots of advice about tax 
incentives and the kinds of things that create change in the 
way buildings are heated and the way energy is used. But it 
also speaks to--so we are working on all of those things, and 
part of our AID assistance is very much targeted on this issue, 
as is the work of a number of U.S. companies who specialize in 
energy efficiency.
    But as you say, the most important thing is to reduce the 
price of Gazprom gas in Europe, which speaks to this larger 
effort that we have going with the EU and in the transatlantic 
space to encourage more building of interconnectors, more 
building of LNG terminals for gas from anywhere----
    Senator Markey. As I said, LNG is just a red herring. We 
might as well put an aquarium out here to hold LNG storage. It 
just is not going to be something that works in the free market 
in the world that we live in. It is going to the highest price.
    I just want to come back to energy efficiency.
    Ms. Nuland. If I could just say on this one, though, you 
are talking about U.S. LNG to Europe, but the price of gas is 
going down as a result already of Algerian and other LNG going 
to Europe, and that we need to encourage.
    Senator Markey. Well, that is good. But the big thing here 
is energy efficiency.
    Ms. Nuland. Yes.
    Senator Markey. The big thing.
    In the United States, I was in hearings in the late 1970s 
where our Department of Energy was saying we need 200 new 
nuclear power plants by the year 2000 or else we are going to 
have blackouts and brownouts in the United States. We did not 
build one new nuclear power plant. Not one new power plant was 
ordered from 1979 on in the United States. Why? Because we just 
doubled our energy efficiency.
    So what can we do here for the Ukrainians so that they can 
say to the Russians, we do not need your natural gas any more 
than we need your soldiers here in Ukraine? And the smartest 
way to go is energy efficiency in the short run. And all I 
would urge you is that you announce the goal publicly and that 
you do so with the European Union and the United States 
standing there with the Ukraine leaders and you make it 50 
percent reduction in 10 years, 25 percent over 5 years, 
whatever it is, but on this pathway toward backing out all that 
natural gas. And that is just keeping your windows down, having 
thermostats that are smarter, having insulation that is 
smarter, having all new buildings be smarter. And it will work 
because they are so inefficient. Uzbekistan, my God. That is 
where they are. It is pathetic.
    We know it is the most corrupt energy sector perhaps in the 
world--Ukraine. And we just have to basically say to the people 
who have been on the take in their country from the natural gas 
sector that you are out, and we have got to condition it 
publicly that they are out and we are putting in people who 
come from this newer mentality. And I just say it. It is 
basically as clear as can be that their sector was so corrupt, 
so tied into the Russian gas mafia, that there was no way in 
which this day was not going to arrive.
    So I guess what I can ask from you is that you set a goal. 
And I do not know amongst the three of you if you have a goal 
yet that you publicly announced in terms of the reduction of 
energy consumption in the country.
    Ms. Nuland. I think it is certainly a worthy thing to take 
up with the newly elected President of Ukraine, assuming we 
have free, fair elections on May 25, to set a firm goal for the 
country. But we are very much on the case, and we agree with 
you on all of these points.
    Senator Markey. Amongst yourselves and the Europeans, set a 
goal that you would like to see achieved so you can talk to the 
president of the country in the first meeting that you have 
with him. I think it is the most important signal you can send 
to Russia.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Markey.
    I understand Senator Corker has a brief comment he wants to 
make and then we will let this panel move on.
    Senator Corker. Mr. Chairman, I want to thank you for 
having the hearing, and I certainly appreciate the way the 
members asked the questions they did.
    I know there was some discussion about Russia blocking 
information coming into eastern Ukraine. I hate to say this, 
but from a national security standpoint and a global stability 
standpoint, I almost wish this testimony today was blocked and 
the rest of the world could not see what took place.
    This is the kind of testimony I would expect in a third 
world country, not the United States. And while I think the 
witnesses probably are good people, I think what we are seeing 
today is that we have no strategy and no policy toward what is 
happening in Ukraine, that we are reacting with as little as we 
can possibly react with.
    And I just want to close with this final statement. I think 
that all of us are very concerned, and I think it is the type 
of policy that we have seen here today, which is to say no 
policy, that actually takes the world into a much more 
dangerous place. So I do not envy people who come up here as 
witnesses when the administration evidently--very, very evident 
to everyone here--has no strategy and no policy. And I hope 
that something will change. I hope this hearing will be such an 
embarrassment to this administration that somehow they will 
decide that they have to, as a great nation, put forth some 
policy that is coherent so that others can understand it, so 
that Russia can understand what price they will actually pay if 
they continue what they are doing. But I certainly do not know. 
I do not think anyone here does, and I am very disappointed 
that the three of you had to come up here and act as witnesses 
when there is no policy to really discuss.
    So thank you.
    The Chairman. Let me, first of all, thank this panel. I 
think there were a lot of important insights here that help us 
get to where we collectively want to be.
    I have a bit of a disagreement with my ranking member. I do 
not think that it is fair to say that there is no strategy and 
no policy. We may have different views as to what we would add 
to the strategy or the policy. Some on one side want to do the 
LNG that Senator Markey does not think is going to make a 
difference because the Ukrainians cannot receive it. You know, 
others would like to engage more militarily with the 
Ukrainians. Some of us, including myself, think we could be a 
little bit more forward-leaning, even though I commend the 
administration who acted first. No other country in the world 
acted as quickly as the United States of America in response to 
what happened in the Ukraine.
    Now, I think we can have different views as to what is the 
standard that we would ultimately like to get to, but I think 
it is unfair to say that this administration did not act in a 
precipitous manner--in a timely manner, I should say, in a way 
that was very significant. It took on all of Putin's circle 
with Putin standing in the middle, and it went ``boom, boom, 
boom, boom, boom.'' And if you do not get the message of what 
that means, you have to be more than blind.
    Now, I think it is also fair to, just for the record--I 
know sometimes it is easy to whip witnesses and to ask them to 
get to points that are either beyond their pay grade, or for 
which a policy is evolving.
    There are 28 nations in the European Union. It became very 
clear to me at dinner with Chancellor Merkel the other night 
that as much as we would like them to be more forward-leaning, 
they are going to get there on their timeframe. Now, that is a 
challenge. That is a challenge. I think, in fairness, the 
President would like to get them there a little quicker than 
they are willing to get there. But we have a $40 billion 
marketplace with Russia. The European Union has a $500 billion 
marketplace with Russia. In terms of effects, there is no doubt 
that having the European Union be alongside us in this effort 
is going to be critical to the ultimate pain we want to elicit 
so that Putin will change his calculus.
    I think people of good will on both sides want to get to 
the same goal: preserve Ukraine, have it be able to move 
forward with its election, be able to exercise its own freedom, 
and for its people to exercise its own judgment for the future. 
We may disagree on how to get there, but we share that goal.
    So I do appreciate this panel's testimony. I appreciate the 
insights. I know that there is going to be a classified 
briefing in 10 minutes or so, which I understand the Assistant 
Secretary, as well as others, will be. We still have a panel 
here, which I think is very important, so I will get there a 
little later. I will have my staff there at the beginning, and 
I look forward to hearing what you have to say. And we look 
forward to a continuing engagement. Thank you, with the 
appreciation of the committee. This panel is excused.
    Let me call up Angela Stent, the director of the Center for 
Eurasian, Russian and East European Studies at Georgetown 
School of Foreign Service; and David Kramer, the president of 
Freedom House. I appreciate both of you having the staying 
power to go through 2\1/2\ hours before you got to testify. But 
I think both of your testimonies are very important to the 
dimensions of what we are considering. And so we will have you 
come up as our panel is leaving.
    I would urge members of the press or the public who want to 
try to get any of the panelists who are leaving to do so 
outside of the hearing room.
    Both of your statements will be fully included for the 
record. I would ask you to try to summarize them in about 5 
minutes or so so the panel can engage in a conversation with 
you. And, Dr. Stent, we will start with you.

   STATEMENT OF ANGELA E. STENT, PH.D., DIRECTOR, CENTER FOR 
EURASIAN, RUSSIAN AND EAST EUROPEAN STUDIES, GEORGETOWN SCHOOL 
               OF FOREIGN SERVICE, WASHINGTON, DC

    Dr. Stent. Thank you very much, Chairman Menendez, Ranking 
Member Corker, members of the committee. Thank you for giving 
me this opportunity to testify before you today at a very 
critical time, and I am going to very briefly cover three 
topics: Russia's goals in the Ukraine crisis, the current 
situation in Ukraine, and U.S. policy going forward.
    It is important to understand that the current Ukraine 
crisis is the latest iteration of a problem that has bedeviled 
the United States-Russian relationship since the end of the 
cold war, namely that four resets that we have had since 1992 
have foundered because of conflicts over the situation in 
Eurasia. Russia believes that it has a permanent right to a 
sphere of privileged interests in areas that were historically 
dominated by, or allied to it, and that neither NATO nor the 
European Union should encroach on its neighborhood. And of 
course, the United States and its allies do not accept that.
    Since Crimea's annexation, we are living in a dangerous new 
geopolitical reality: Russia's actions in Ukraine, the 
annexation of Crimea, and the active support of the separatists 
in eastern Ukraine that are systematically destabilizing the 
country. These actions are part of a broader Russian challenge 
to the legitimacy of the entire post-cold-war order.
    President Putin has torn up the 1994 Budapest Memorandum 
guaranteeing Ukraine's territorial integrity in exchange for 
Ukraine's renouncing its nuclear weapons. Putin has reserved 
the right for Russia to protect what he calls compatriots, 
fellow Russians and Russian speakers in Ukraine and other parts 
of the former Soviet Union, whenever they feel threatened. 
Russia's actions also challenge the nonproliferation regime 
enshrined in the Budapest Memorandum. Even during the Soviet 
era, there were rules of the game that both sides observed. Now 
no one knows what those rules of the game are anymore.
    And so what are Russia's goals in the Ukraine crisis?
    In the short run, as we have heard, the Kremlin wants to 
undermine the May 25 election in Ukraine. There is already a 
creeping civil war in eastern Ukraine, as groups of 
separatists, as we have seen, seize municipal buildings and 
declare that they will hold their own referendum on May 11 to 
secede from Ukraine.
    In the longer run, Russia in the best case seeks a 
permanently neutral Ukraine with a loose federal structure that 
will weaken the central government's ability to impose its 
control over its eastern regions and maximize Russian influence 
there.
    Now, a couple of words just about the situation in Ukraine. 
Unfortunately, in the past 22 years, Ukraine has not succeeded 
in modernizing its political institutions, society, or economy 
sufficiently to create a strong, well-functioning state. And 
how difficult it has been is just if you compare Ukraine to 
Poland. In 1992, Ukraine and Poland had the same per capita 
GDP. Today Poland's per capita GDP is three times larger than 
that of Ukraine, and it is, of course, a thriving market 
democracy.
    The current Ukrainian interim government is in acute need 
of substantial economic assistance, both to avoid default and 
to help Ukraine deal with Russia's recent raising of gas prices 
by at least 80 percent. It needs political support to move 
toward and successfully hold the May 25 election, and it will 
need much more guidance and support afterwards as it implements 
constitutional reform, which it has recognized it needs to do.
    As we have seen in the past few weeks, Ukrainian military 
and law enforcement agencies have found it extremely 
challenging to reimpose control over those areas seized by the 
armed separatists in the east, and these law enforcement groups 
will need to be reconstituted in a much more effective way. So 
these are huge, enormous challenges that Kiev will face in the 
next few years.
    And finally, a few words about U.S. policy. It is in our 
national interest to support a strong, independent Ukraine with 
effective institutions of modern governance that can live in 
peace with its neighbors, both to the west and to the east. And 
we should focus on three major objectives, and these were 
already outlined by Secretary Nuland.
    First, to give robust political, economic, and logistical 
support to Ukraine and to help it recover from the assault on 
its sovereignty and economy in the past few months.
    The second U.S. objective must be to reassure our NATO 
allies, especially the new members, that despite the challenge 
to the post-cold-war Euro-Atlantic security order that Russian 
actions pose, that despite these, the alliance remains 
committed to the robust collective defense of all of its 
members because the Russians are trying to call into question 
the validity of article 5 particularly in the Baltic States.
    And the third U.S. objective must be to deter Russia from 
launching a military invasion in Ukraine and from further 
destabilizing Ukraine through supporting the separatists who, 
in fact, are rendering eastern Ukraine ungovernable. And in 
addition to the punitive measures, which we have heard about, 
particularly the sanctions, we also do need to leave open the 
door for a diplomatic solution with Russia, were the Russians 
interested.
    Crisis management is very important. In the deteriorating 
situation in Ukraine, it is possible that local groups could 
take actions that trigger a more wide-ranging armed conflict. 
Now, there are a lot of historical analogies made. I think 
about the one leading up to the outbreak of war in 1914 where 
you have some similarities.
    Although it appears that the current sanctions have not 
changed Russian policies yet, they may have a longer term 
impact on the domestic economic situation in Russia. Again, we 
already heard about that. The Russian Finance Minister himself 
has forecast that there is going to be probably a negative 
growth rate this year and going forward, and the outlook 
further down the road for the Russian economy is much more 
negative.
    In the longer run, we are going to have to work with our 
European allies to restore the sense of stability and 
predictability that existed when we believed that we had moved 
beyond the cold war with Russia. And another immediate goal has 
to be to work with Europe to reduce its dependence on Russian 
energy supplies and therefore reducing its vulnerability to 
Russian pressure.
    So in conclusion, Mr. Chairman, Russia has broken the rules 
of the game by annexing territory from another country, 
supporting groups that are challenging its sovereignty. We will 
have to think about new rules of the game. We will have to 
devise these going forward, and this will require a U.S. 
recommitment to a robust defense of Europe, of a Europe that 
aspires to be whole, free, and at peace.
    Thank you.
    [The prepared statement of Dr. Stent follows:]

               Prepared Statement of Dr. Angela E. Stent

    Chairman Menendez, Ranking Member Corker, members of the committee, 
thank you for giving me this opportunity to testify before the Foreign 
Relations Committee at this critical time. I will cover three topics: 
Russia's goals in the Ukraine crisis, the current situation in Ukraine, 
and U.S. policy going forward.
    Before turning to Russian goals, however, it is important to 
understand that the current Ukraine crisis is the latest iteration of a 
problem that has bedeviled the U.S-Russian relationship since the end 
of the cold war--namely that Washington and Moscow have had a very 
different understanding of what a productive relationship would look 
like because, among other reasons, of their contrasting attitudes 
toward Russia's neighborhood. Since the Soviet collapse, U.S-Russian 
relations have been on a rollercoaster, a cycle of political booms and 
busts, with periods of high expectations followed by disappointments. 
There have been four resets since 1992. Each U.S. President has sought 
to find a more productive way of interacting with the Kremlin, only to 
see his efforts end in disillusionment and mutual recriminations.
    The resets foundered because of discord and conflict over the post-
cold war settlement. Russia believes that it has a continuing right to 
a ``sphere of privileged interests'' in areas that were historically 
dominated by or allied with Russia. The United States does not accept 
that. During the Clinton administration, Russia deeply resented NATO's 
1999 bombing of Serbia, a traditional ally, in support of Kosovo, 
something that Vladimir Putin invoked in his March 18, 2014, speech 
announcing the annexation of Crimea. During the Bush administration, 
U.S. support for Georgia's and Ukraine's ambitions to move closer to 
NATO and the European Union provoked the Kremlin's ire, ending in the 
rubble of the 2008 Russo-Georgia war and the dismembering of Georgia's 
territorial integrity. During the Obama administration, U.S. support 
for the Maidan protestors and the interim government in Kiev that led 
to the ouster of Viktor Yanukovych has similarly incensed the Kremlin. 
Simply put, Russia wants to ensure that neither NATO nor the European 
Union move into the post-Soviet space and that these countries maintain 
close political and economic ties with Moscow and remain within 
Russia's orbit.
                  russia's goals in the ukraine crisis
    Since Crimea's annexation, we are living in a new geopolitical 
reality. Russia has upended the agreements and understanding within the 
international community that ended the cold war. Russia's actions in 
Ukraine--the annexation of Crimea and the active support of separatists 
in Eastern Ukraine that are systematically destabilizing the country--
are part of a broader Russian challenge to the post-cold-war 
settlement. Because of the unprecedented way in which the U.S.S.R. 
disintegrated in December 1991, many Russians refuse to believe that 
the Soviet Union perished and died of its own failures and self-
inflicted wounds but rather that the United States deliberately 
engineered its demise, as Mr. Putin has recently argued. The Kremlin 
has served notice that it has the right to review and reconsider the 
arrangements that have governed the post-Soviet space since 1992.
    Moreover, most Russians have never viewed Ukrainians as a separate 
nation and Ukraine as a separate country. Indeed, at the 2008 NATO 
summit in Bucharest, Vladimir Putin said, ``Ukraine is not even a 
country. Part of its territory is in Eastern Europe and the greater 
part was given to us.'' In his March 18, 2014, speech announcing the 
annexation of Crimea and in subsequent pronouncements, President Putin 
has questioned legitimacy of the actions that led to the 1991 agreement 
dissolving the U.S.S.R. With his annexation of Crimea, he tore up the 
1994 Budapest Memorandum guaranteeing Ukraine's territorial integrity 
in exchange for Ukraine's renouncing its nuclear weapons. Setting off 
wider alarm bells, he has also reserved the right for Russia to protect 
what he calls ``compatriots''--fellow Russians and Russian-speakers in 
Ukraine and other parts of the former Soviet Union who feel threatened. 
The claim to have the right to protect one's fellow ethnics living in 
other countries with force, if necessary, evokes disturbing historical 
reverberations. Russia's actions also challenge the non-proliferation 
regime by nullifying the 1994 Budapest Memorandum. Even during the 
Soviet era, there were rules of the game that both sides observed. Now 
no one knows what those rules are any more.
    Ukraine is also a domestic issue for President Putin. Ten years ago 
there was a popular uprising in Kiev--the Orange Revolution--to protest 
the results of an election that Viktor Yanukovych--the recently ousted 
President--claimed he had won, but whose results many Ukrainians 
believed had been falsified. After a rerun of the election in December 
2004, Mr. Yanukovych's rival, Viktor Yushchenko, won the Presidency. 
The Kremlin was convinced that the United States had engineered the 
Orange Revolution in order to bring its candidate to power. During 
Ukraine's Orange Revolution, the question in the Kremlin was--if a 
popular uprising can depose an unpopular government in Kiev, could the 
same thing happen in Moscow? Although today Mr. Putin's popularity 
rates have soared above 80 percent after the Crimean annexation, the 
2014 Ukrainian revolution raises once again the same threat about the 
example of opposition groups in a post-Soviet state overthrowing the 
ruling government.
    It is important to remember that Ukraine and Russia are closely 
integrated economically. The industrial eastern part of Ukraine 
provides much of the hardware for Russia's military-industrial complex 
and Russia's orders for these goods provide employment for Ukrainians 
living in these eastern regions. More than 50 percent of Ukraine's 
total machinery exports go to Russia. Moreover, when President 
Yanukovych was ousted, there was concern in Moscow that the new Kiev 
government might revisit the basing agreement for the Russian Black Sea 
fleet in Crimea. Mr. Yanukovych extended the lease from 2017--when it 
was originally set to expire--to 2042, but the Kremlin was concerned 
that this could be changed.
    What are Russia's goals in the Ukrainian crisis? In the short run, 
the Kremlin wants to undermine the May 25 Ukrainian Presidential 
election by destabilizing eastern Ukraine and challenging the 
legitimacy of the interim government in Kiev and its election process. 
There is a creeping civil war in eastern Ukraine, as groups of 
separatists seize municipal buildings and declare that they will hold 
their own preemptive referendum about seceding from Ukraine on May 11. 
In the longer run, Russia seeks a Ukraine with a loose federal 
structure that will weaken the central government's ability to impose 
its control over its eastern regions and maximize Russian influence in 
the East. It also will insist on Ukraine declaring permanent neutrality 
with no aspirations to join NATO or the European Union. Moscow's goal 
is to cement its ``sphere of privileged interests'' in Ukraine and 
other post-Soviet countries and to minimize U.S. or EU presence in its 
neighborhood. It wants to create a new set of relationships in the 
post-Soviet space where Russia will dominate, including areas with 
significant Russian populations such as the Transnistria separatist 
enclave in Moldova.
                        the situation in ukraine
    In 2008, a high-level transatlantic group undertook an assessment 
of Ukraine's development since 1992 and concluded ``Ukraine still has a 
significant path to travel to complete its transformation into a 
modern, democratic, European state,'' citing the lack of transparency 
in government structures as a major problem. There has been little 
improvement in the 6 years since. In 2013, Transparency International 
ranked Ukraine 144 out of 175 countries in the Corruption Perceptions 
index. How poorly Ukraine has done can be seen in a comparison with 
Poland. In 1992, Ukraine and Poland had the same per capita GDP. Today, 
Poland's per capita GDP is three times larger than that of Ukraine. In 
the past 22 years, Ukraine has not succeeded in modernizing its 
political institutions, society and economy sufficiently to create a 
strong, functioning state.
    Ukraine' development, like that of many other former Soviet 
republics, has been hampered by the persistence of ``the post-Soviet 
syndrome,'' whereby the transition away from communism has produced 
governments run by small groups of people where personal ties are much 
more important than the institutions of government and the rule of law 
is weak and in which corruption is endemic. The economy is controlled 
by a small elite with close ties to the political leadership, and 
between them they control substantial assets. In Ukraine's case, 
successive governments since 1992 have failed to create the 
institutions of effective, modern government, nor have they been able 
to forge a consensus on national identity in what remains a country 
divided between East and West, as we have vividly witnessed in the past 
6 months. Anger at the corruption of the previous government produced 
the opposition in Kiev that eventually helped to topple President 
Yanukovych. ``Anticorruption'' is also refrain that the pro-Russian 
militias in the East have picked up.
    The current interim government is in acute need of substantial 
economic assistance both to avoid default and to help Ukraine deal with 
Russia's recent raising of gas prices for Ukraine by 80 percent. It 
needs political support as it moves toward the imminent May 25 election 
and it will need guidance as it contemplates constitutional reform. 
Ukraine's Constitution states that it is a unitary state, but the 
current government apparently understands that the constitution has not 
given enough power to Ukraine's different regions, which seek more 
control over their local administration. A new government could 
introduce reforms that achieve a better balance between the center and 
the regions. Electing governors instead of appointing them from Kiev 
and devolving more budget authority to local administrations would be a 
start. As we have seen in these past few weeks, Ukrainian military and 
law enforcement agencies have found it extremely challenging to 
reimpose control over those areas and buildings seized by armed 
separatists in the East and they will need to be reconstituted in a 
more effective way. Ukraine is a highly inefficient user of energy, 
which increases its dependence on Russian gas. The next government 
should, with the assistance of the EU and United States undertake a 
far-reaching reform of its energy sector.
    Above all, the next Ukrainian Government will need to move 
decisively away from the post-Soviet syndrome, introduce effective 
anticorruption measures, promote and support the rule of law and reform 
the political system. These are enormous challenges that Kiev will face 
as it confronts the instability and insecurity promoted by the 
separatists and their supporters in the East. The new government will 
have to deal with those forces that seek to keep Ukraine permanently 
weak and in a state of near anarchy.
    And realism is necessary about healing the ethnic divides. 
Historically around the world, language is often a critical element in 
ethnic identity. About 17 percent of the population is identified as 
``Russian'' although a larger percentage of the population uses Russian 
as their primary language.
                   u.s. policy in the ukraine crisis
    It is in the U.S. national interest to support a strong, 
independent Ukraine with effective institutions of modern governance 
that lives in peace with its neighbors, both East and West. U.S. policy 
should continue to focus on three major objectives. The first is to 
give robust support to Ukraine and help it recover from the assault on 
its sovereignty and economy during the past few months. Financial 
assistance from the U.S., the European Union and the International 
Monetary Fund is essential, However, it must be carefully disbursed to 
ensure that it is used to the greatest effect and does not disappear, 
as has previous assistance, into a black hole of corruption. The United 
States should also provide training for law enforcement agencies and, 
either bilaterally or through the NATO-Ukraine Commission, for the 
Ukrainian Armed Forces. It should seek to ensure that the May 25 
election is held and provide whatever legal assistance the next 
government requests as it begins the process of constitutional reform. 
We should also support Ukraine through advice on best practices in 
reforming its energy sector to become less dependent on Russian gas 
supplies--and more efficient. Ukraine will need a long-term commitment 
from the United States to ensure that it can survive this current 
crisis.
    The second U.S. objective must be to reassure our NATO allies--
especially the new members--that, despite the challenge to the post 
cold war Euro-Atlantic security order that Russian actions pose, the 
alliance remains committed to the collective defense of all its 
members. The policy of military and political reassurance through the 
presence of U.S. troops and aircraft in the Baltic States and Poland is 
an essential element in this commitment. Hopefully this will also 
prompt a broader debate among our NATO allies about raising their own 
defense spending. We need to ensure that Article Five guarantees--that 
NATO will come to the defense of any member state that comes under 
attack--remain credible.
    The third U.S. objective must be to deter Russia from launching a 
military invasion of eastern Ukraine and from further destabilizing 
Ukraine through supporting separatists who are rendering Ukraine 
ungovernable. If Russia is pursuing the goal of the long-term 
destabilization of Ukraine, then U.S. policy, like that of Europe, will 
have to make use of a full arsenal of measures to deter Russia. In 
addition to punitive measures, however, the United States has to leave 
open the possibility of a diplomatic solution. Crisis management is 
important. In the deteriorating situation in Ukraine, it is possible 
that local groups could take actions that trigger a more wide-ranging 
crisis.
    Although it appears that the current sanctions have not changed 
Russian policies toward Ukraine so far, they may have an impact on the 
domestic economic situation in Russia. The question is how long can 
patriotic fervor be a substitute for economic well-being. Putin's 
compact with the Russian people is that, under his rule, their living 
standards have risen even if their political freedoms have been 
curtailed. If this is no longer the case--as growth rates are forecast 
to be negative this year--can he still maintain these popularity rates 
and at what point does the Russian population become restive? From 
2000-2008, Russian GDP rose by 7 percent a year, largely due to rising 
oil prices. Since the financial crisis, they have fallen and were 
forecast to be 1.3 percent this year. Recently, the Russian Finance 
Minister forecast that Russia's growth rates would be zero or negative 
this year. The longer term prospects for the Russian economy and 
society are not favorable--if one looks at its declining birth rate 
and, health and mortality for youths and adult men, its antiquated 
infrastructure and lack of modernization, its capital flight ($51 
billion in the first 3 months of this year)and the brain drain. These 
realities should not be forgotten amidst what appear to be Putin's huge 
surge in popularity.
    Although most U.S. measures will be punitive, Russia is not going 
away and the United States will have to continue to seek ways to end 
this crisis. It will also be important to leave open channels of 
communication that Russia could use were it to decide to back away from 
its confrontational stance--especially once the sanctions have a more 
palpable effect. It will also be important to explain to the American 
people why deterring Russia and supporting Ukraine is a priority for 
the United States. Russia remains the other nuclear superpower, with 
thousands of nuclear warheads and is also endowed with critical natural 
resources, such as the titanium used in building airplanes. Moreover, 
we should not jettison activities that are strongly in America's own 
national interest. We share with Russia an interest in nonproliferation 
of weapons of mass destruction and continue to negotiate over Iran's 
nuclear program.
    The United States cannot bolster Ukraine and reduce the crisis 
situation by itself. The immediate challenge is to work as closely as 
possible with our European allies to present a united front both in 
assisting Ukraine and in deterring Russia from further destabilizing 
actions. In the longer run, the United States will have to work with 
Europe to restore the sense of stability and predictability in Europe 
that has existed as we have moved beyond the cold war. Another 
immediate goal should be to work with Europe to decrease its dependence 
on Russian energy supplies, thereby reducing its vulnerability to 
Russian pressure.
    But there is also an important political-military dimension. Russia 
has broken the rules of the game by annexing territory from another 
country and supporting groups that are challenging its sovereignty. The 
goal going forward is to maintain what is left of Ukraine's territorial 
integrity and to prevent further annexations of territory in the post-
Soviet space and re-commit to the territorial integrity of Russia's 
neighbors. Russia is a multiethnic and multiconfessional state which 
has already fought two wars in Chechnya in the name of preserving its 
own territorial integrity, and it should be in Moscow's interest to 
minimize the possibility of future separatist movements in its 
neighborhood. New rules of the game are necessary, and this will 
require a U.S. recommitment to Europe, even as we look toward Asia and 
grapple with the other global challenges we face.

    The Chairman. Thank you.
    Mr. Kramer.

             STATEMENT OF DAVID KRAMER, PRESIDENT, 
                 FREEDOM HOUSE, WASHINGTON, DC

    Mr. Kramer. Mr. Chairman, Ranking Member Corker, members of 
the committee, thanks very much for the opportunity to appear 
before you today to discuss what I consider to be the gravest 
crisis the international community has faced in decades.
    Vladimir Putin's brazen disregard for Ukraine's territorial 
integrity and his threats to defend Russian speakers beyond 
Crimea and other parts of Ukraine and even into other 
neighboring states represent an assault not only on the very 
concept of freedom, but also on the ability of people to choose 
their own political destiny.
    At the heart of all this I think is the nature of 
governments, which matters enormously, and the way a leadership 
treats its own people is often indicative of how it will behave 
toward others along its borders and on the world stage. 
Vladimir Putin oversees a thoroughly corrupt and increasingly 
authoritarian regime that actively seeks to undermine and offer 
an alternative to universal values such as fundamental freedoms 
of expression, association, and belief. Putin's regime is 
diametrically opposed and a threat to our own democratic rule 
of law based societies exactly because we treasure freedom, 
accountability, justice, checks and balances, all concepts 
alien to Vladimir Putin.
    When Ukrainians turned out in the streets, starting in 
November leading to Viktor Yanukovych's removal from power as 
President in February, Putin's sense of insecurity and paranoia 
rose exponentially. Ukrainians' demands, represented by the 
hundreds of thousands of protestors over the last few months, 
for more democratic and transparent government and closer ties 
with the European Union posed the biggest challenge to Putin's 
grip on power in Russia. Without Ukraine, after all, Putin's 
Eurasian union vision will not be realized, but even more 
urgently, Putin worried that what happened in Ukraine could be 
replicated in Russia itself. Thus, to prevent a genuine popular 
democratic movement from taking root in Ukraine, Putin invaded 
Crimea, fabricating the justification that he was protecting 
the rights of fellow Russians.
    The irony, of course, is that Putin does not give a damn 
about the welfare of Russians inside his own borders, and the 
crackdown against human rights in Russia since Putin returned 
to the Presidency has been the worst since the breakup of the 
Soviet Union. Staying in power is what drives Putin's actions 
internally and also across Russia's borders. His foreign policy 
is in many ways an extension of his domestic policy, and he 
justifies his way of governing Russia by perpetuating the 
absurd notion that the West, NATO, and the United States, in 
particular, are a threat to Russia.
    Until late February, Ukraine was not facing ethnic unrest, 
nor was it on the verge of splitting between east and west. 
Much too much has been made of a divided Ukraine among 
journalists and commentators, even some officials in the West. 
To be clear, those living in the east while not huge supporters 
of the interim government do not want to be under the Russian 
thumb. They want Ukraine to stay united despite the efforts by 
Putin to fabricate these justifications for his actions.
    The current crisis is the creation of Vladimir Putin whose 
goals are to retain Crimea, destabilize Ukraine to make it 
unattractive and unappealing to the West, and force the 
postponement of the Ukrainian Presidential elections scheduled 
for May 25. This underscores even more, as you have said in 
your questions of the previous panel, the importance of keeping 
those elections to May 25.
    Now, the West has taken some steps, but they simply have 
not been enough. Overall, I would argue the West has been far 
too reactive to events on the ground, letting Putin set the 
agenda. We need to take a more proactive stance to prevent and 
preempt further Russian aggression, punish Putin and his regime 
for the terrible damage they have already caused in Ukraine, 
and seek to return to the status quo ante, difficult though 
that may seem to be. United States strategy should shift to 
preventing Putin's next moves by imposing crippling sanctions 
against more Russian banks, energy firms, and state-owned 
entities. I support broad sectoral sanctions as well.
    It is a mistake in my view to wait either for Putin to move 
Russian tanks across the border, as some have been concerned 
about, or for him to disrupt the May 25th Presidential 
election, as President Obama and Chancellor Merkel spoke about 
last Friday. He has already done the latter. We have set too 
high a bar. Putin has found other means short of full-scale 
invasion, though that too cannot be ruled out, by which to 
accomplish his goals.
    So I would recommend the following: that we go after more 
high-level officials and businessmen, including people such as 
Aleksei Miller, the head of Gazprom; Alexander Bortnikov, the 
head of the Russian security services, FSB; Sergei Shoigu, the 
Minister of Defense. And then I would go after a number of 
enterprises including Gazprombank, Vneshekonbank, 
Vneshtorgbank, Sberbank, Rosoboronexport, Transneft, Novatek, 
Gazprom, Rosneft.
    By imposing further sanctions now, we might be able to 
preempt rather than react to the possibility that Putin will 
invade other parts of Ukraine or even Moldova, Kazakhstan, or 
stir up trouble in the Baltic States. Sanctions could be lifted 
in return for the status quo ante.
    In response to criticism about the administration's 
sanctions being too mild, we have heard President Obama say 
that he does not want to get too far out ahead of the 
Europeans. I too would like to see a united front, the United 
States, Canada, and the European Union moving forward. But the 
simple reality is that it is much more difficult for the EU to 
do this given the trade interests they have and given the 
difficulty of getting agreement among 28 member states. It is 
easier--not easy, but easier--for the United States to do this.
    So for all these reasons, I would argue the United States 
has to take the lead, and the extraterritorial nature of U.S. 
sanctions, I think, should also not be underestimated.
    There are several steps I would argue in closing, Mr. 
Chairman, that we should do to help Ukraine as well, and that 
includes pressing for the elections to take place on May 25, 
doing whatever we can to ensure that that happens. Aiding local 
civil society organizations that do election monitoring, 
assisting development of real democratic institutions so that 
Ukraine does not squander yet another opportunity as it did 
after the 2004 Orange Revolution, refusing to give up on Crimea 
by demanding a return to the status quo. All too many 
conversations these days do not talk about Crimea because we 
are focused now on eastern and southern Ukraine. Disbursing 
funds from the international finance agencies is also very 
critical.
    In March during his visit to Washington, Acting Prime 
Minister Arseny Yatsenyuk said, ``It's all about freedom. We 
fight for our freedom, we fight for our independence, we fight 
for our sovereignty and we will never surrender.''
    If Ukraine, with Western help, is able to fend off Putin's 
aggression, then freedom in Ukraine and, for that matter around 
the globe, will have secured a major victory against one of the 
biggest threats posed by authoritarian regimes and one of the 
biggest challenges to confront the democratic community of 
nations. This is about Ukraine's aspirations to be free, 
Putin's efforts to deny them that possibility, and the West's 
willingness and courage to rise to the challenge.
    Thank you.
    [The prepared statement of Mr. Kramer follows:]

                 Prepared Statement of David J. Kramer

    Mr. Chairman, Ranking Member Corker, members of the committee, it 
is an honor to appear before you once again, this time to discuss what 
I consider to be the greatest global challenge we have faced in 
decades: Vladimir Putin's invasion of Ukraine. Putin's brazen disregard 
for Ukraine's territorial integrity and his threats to defend Russian-
speakers beyond Crimea, in other parts of Ukraine, and in other 
neighboring states represent an assault on the very concept of freedom 
and the ability of people to choose their own political destiny. The 
democratic community of nations has faced no greater test since the end 
of the cold war.
    Not since World War II has one European country seen its territory 
forcibly annexed by another, as Putin did with Crimea and may be trying 
to do with parts of eastern Ukraine. Putin has shattered numerous 
treaties and agreements and sought to unilaterally alter the 
international system that has been in place since the collapse of the 
U.S.S.R. more than two decades ago. Full-blown war between two of the 
largest countries in Europe cannot be ruled out, and the spillover 
effects of that are incalculable, given the common borders that Ukraine 
and Russia have with several NATO member states.
                     origins of the current crisis
    To understand the current crisis requires stepping back and 
understanding the Putin regime. After all, the nature of governments 
matters enormously, and the way a leadership treats its own people is 
often indicative of how it will treat neighbors and interact on the 
world stage. Vladimir Putin oversees a thoroughly corrupt and 
increasingly authoritarian regime that actively seeks to undermine and 
offer an alternative to universal values such as fundamental freedoms 
of expression, association, and belief. Putin's regime is diametrically 
opposed and a threat to our own democratic, rule-of-law-based society 
exactly because we treasure freedom, accountability, justice, and 
checks-and-balances--all concepts Putin views as alien. With our two 
systems going in such fundamentally opposite directions, the reset 
policy of the Obama administration was bound to exhaust early on the 
list of areas of common interests. Seeking a strategic partnership with 
Russia, as some have called, is simply unachievable and undesirable--
unless we sacrifice our principles--as long as the Putin system remains 
in place.
    Beyond the Putin regime is Putin himself. He possesses a 
paradoxical, if not dangerous, combination of arrogance and self-
assuredness with paranoia, insecurity, and hypersensitivity. His 
paranoia increased--and with it his assault against civil society in 
Russia--following the ``Color Revolutions'' in Georgia and Ukraine in 
2003-04, which scared him into thinking that Russia was next. His 
insecurities were fed by developments in the Arab world in 2011, when 
he watched like-minded leaders in Tunisia, Egypt, and Libya fall from 
power as a result of popular movements. After major protests against 
him in Russia in December 2011 and March-May 2012, Putin, since 
returning to the Presidency in May 2012, has launched the worst 
crackdown on human rights in Russia since the breakup of the U.S.S.R.
    Fast forward to last November when Ukrainians turned out in the 
streets again, as they did almost a decade before, forcing out Viktor 
Yanukovych as President and heightening Putin's sense of insecurity. 
Ukrainians' demands, represented by the hundreds of thousands of 
protestors over the last few months, for more democratic and 
transparent government and closer ties with the European Union pose the 
biggest challenge to Putin's grip on power in Russia. Without Ukraine, 
Putin's Eurasian Union vision will not be realized, but more urgently, 
Putin worried that what happened in Ukraine could be replicated in 
Russia. Thus, to prevent a genuine, popular, democratic movement from 
taking root in Ukraine, Putin invaded Crimea, fabricating the 
justification that he was protecting the rights of fellow Russians. His 
use of energy exports as a political weapon and further moves into 
eastern Ukraine reveal his determination to destabilize his neighbor as 
much as possible.
    The irony is Putin's professed concern for the welfare of Russian 
speakers in Crimea and eastern Ukraine to justify his takeover of 
Crimea when he shows no such concern for the welfare of Russians living 
inside Russia itself. On the contrary, Putin has ratcheted up pressure 
inside Russia on opposition figures and civil society activists. 
Critics of Putin at universities are losing their jobs, opposition 
figures are facing new politically motivated investigations, news 
outlets and Web sites are being shut down with greater controls being 
imposed on the Internet, and anti-Westernism and anti-Americanism are 
reaching their highest levels in the post-Soviet period.
    Reflecting his zero-sum thinking, Putin views efforts by Ukraine, 
Georgia, Moldova and other neighbors to Westernize and democratize as a 
threat to Russia's ``zone of special interests'' and to the political 
model he has created in Russia. Thus, Putin lends support to fellow 
authoritarian regimes, whether in Kiev under Yanukovych or Damascus 
under Bashar al-Assad. By cracking down at home and interfering with 
(or invading) neighbors, Putin tries to strike the pose of a confident, 
assertive leader. In reality, his actions reflect a worried 
authoritarian willing to resort to any means necessary to stay in 
power. And staying in power is what drives Putin's actions internally 
and across Russia's borders. His foreign policy is, in many ways, an 
extension of his domestic policy, and he justifies his way of governing 
Russia by perpetuating the absurd notion that the West, NATO, and the 
U.S. in particular are threats.
    In fact, contrary to the claims of some Western and Russian 
commentators that NATO enlargement over the years is to blame for the 
current situation, Russia's most stable neighbors are the three Baltic 
States and Poland, all members of the EU and NATO. And yet Putin 
considers them a threat--in his military strategy in 2010, NATO 
enlargement was considered the greatest ``danger'' to Russia--because 
of what they represent: namely, democracy, transparency, rule of law, 
and respect for human rights. These are concepts that clash with the 
corrupt, authoritarian model Putin is intent on creating in Russia and 
along his borders. Greater democracy in neighboring states, he fears, 
could generate demand for meaningful freedoms inside Russia itself. And 
that is something he will not tolerate.
                        the situation in ukraine
    Responsibility for this crisis lies with Vladimir Putin, but ex-
Ukrainian President Viktor Yanukovych deserves blame as well. 
Yanukovych's decision in November to spurn the European Union triggered 
hundreds of thousands of Ukrainians to turn out in the streets of Kiev 
and other cities around the country to protest his thoroughly corrupt 
and increasingly authoritarian rule. Unlike during the Orange 
Revolution of 2004, however, Ukrainian protestors this time suffered 
terrible losses as Yanukovych, egged on by Putin, ordered snipers to 
mow down defenseless citizens; Yanukovych should be returned from 
Russia to Ukraine and put on trial. Democratically elected in early 
2010, Yanukovych forfeited his legitimacy over the years through the 
massive corruption he and his family engaged in, his unconstitutional 
actions, and his decision to use force against peaceful protestors as 
early as November 30-December 1. Yanukovych put his personal, corrupt 
interests above those of his country.
    I was in Kiev last month and walked through the Maidan, where there 
are makeshift memorials for the more than 100 Ukrainians who lost their 
lives fighting for a better future for their country. It is a deeply 
moving experience. Since November, they and hundreds of thousands of 
others who took to the streets have demanded freedom and the rule of 
law, dignity and respect for human rights, an end to corruption, and an 
opportunity to deepen integration with Europe--in short, the opposite 
of everything that Viktor Yanukovych and Vladimir Putin represent.
    Until late February, Ukraine was not facing ethnic unrest nor was 
it on the verge of splitting between east and west. Much too much has 
been made of a ``divided'' Ukraine among journalists and commentators, 
even among some Western officials. To be clear, those living in the 
east, according to recent surveys, are not supportive of the current 
interim government in Kiev, but they reject the claims, fabricated by 
Putin, that they were under attack or facing threats because of their 
ethnicity or the language they speak. A survey carried out April 8-16 
by the Kiev Institute of Sociology (KIIS) revealed that 71.3 percent of 
those polled rejected the notion that their rights were being 
infringed. At the same time, these surveys also show that the majority 
of people living in the east and south do not want to be taken over by 
Russia and do not support Russian intervention. The KIIS survey showed 
only 8.4 percent residents in the south and east would like Russia and 
Ukraine to unite into one state; 69.7 percent of the respondents oppose 
such a union. Only 11.7 percent of people in the region support the 
Russian troops' incursion. In the Donetsk region, a hotbed of Russian-
instigated problems, the Russian incursion is supported by only 19.3 
percent of the respondents.
    The current crisis, in other words, is the creation of Vladimir 
Putin, whose goals are to: retain Crimea (though Putin may rue the day 
given the costs involved), destabilize Ukraine to make it unattractive 
and unappealing to the West, and force postponement of the Ukrainian 
Presidential elections, scheduled for May 25. Such a delay in voting 
would enable Putin to maintain his line that the current government in 
Kiev is illegitimate. This underscores even more the importance of 
conducting the election on May 25, even under such trying 
circumstances, so that Ukraine will have a legitimate, democratically 
elected leader.
                     the western response to russia
    As events were unfolding with Russia's invasion of Crimea, I wrote 
in the March 2Washington Post: ``President Obama faces the gravest 
challenge of his presidency in figuring out how to respond to Russia's 
invasion of Ukraine. How he responds will define his two terms in 
office, as well as determine the future of Ukraine, Russia and U.S. 
standing in the world. After all, if the authoritarian tyrant Vladimir 
Putin is allowed to get away with his unprovoked attack against his 
neighbor, a blatant violation of that country's sovereignty and 
territorial integrity, then U.S. credibility . . . will be down to 
zero. Allies won't believe in us, enemies won't fear us and the world 
will be a much more dangerous place.''
    More than 2 months later, the situation has only worsened. The 
violence in the last 4 days as Ukrainian central authorities have 
sought to regain control over cities in the east and south has been 
accompanied by the increasing possibility that the tens of thousands of 
Russian troops just across the border will be mobilized, leading to 
further bloodshed. I support the actions of the Ukrainian Government to 
retake government buildings and try to restore order--they have a right 
and responsibility to do so; it is their country, after all. But they 
are being challenged by resistant Russian special forces and Russia-
sponsored provocateurs. We should be providing military assistance 
beyond MRE's (meals-ready-to-eat) to include night-vision goggles as 
well as antitank and antiaircraft missiles; none of this would involve 
actual troops on the ground. We should also be sharing intelligence so 
that the Ukrainians pushing back against Putin's aggression literally 
have a fighting chance.
    The joint statement emanating from the April 17 Geneva meeting 
among Ukraine, Russia, the EU, and U.S. is dead and never offered 
promise in the first place. The statement made no mention of the tens 
of thousands of Russian troops massed along the Russian-Ukrainian 
border or Russia's illegal annexation of Crimea. It lacked any call for 
respecting Ukraine's sovereignty and territorial integrity. There was, 
however, a reference to the need for Ukraine's constitutional process 
to be ``inclusive, transparent, and accountable,'' even though this 
played right into Putin's desire to meddle in Ukraine's affairs. There 
were no clear mechanisms for implementing the agreement, and pro-
Russian forces immediately declared that it did not apply to them. I 
see no reason to support German Foreign Minister Frank-Walter 
Steinmeier's call over the weekend for another Geneva meeting any time 
soon; in fact, I would argue that such a session would be 
counterproductive at this time since it would likely lead to a delay in 
imposing additional sanctions against Russia, just as the first Geneva 
meeting did, with no prospect of solving the crisis.
    Overall, the West has been far too reactive to events on the ground 
and letting Putin set the agenda. We need to take a more proactive 
stance to prevent and preempt further Russian aggression, punish Putin 
and his regime for the terrible damage they have already caused in 
Ukraine, and seek to return to the status quo ante, difficult as that 
may seem. For decades, the United States never recognized the 
absorption of the Baltic States into the U.S.S.R. and now those 
countries are members of the European Union and NATO. We must take a 
similarly principled stand on Crimea even while currently focused on 
eastern parts of the country.
    The problem with the current Western approach is that we have not 
done well at anticipating what Putin will do next. Let's recall that 
there were many observers here in the U.S. as late as February and into 
March saying that Russia would not move against Crimea. Then, in late 
March and into April, some analysts were arguing that Putin wouldn't 
move into eastern and southern Ukraine. Here we are in early May with 
Crimea having been annexed and the situation teetering on the edge in 
places like Slavyansk, Donetsk, and Odessa--all as a result of Putin's 
further efforts to destabilize the situation and stir up unrest. U.S. 
strategy should shift to preventing Putin's next moves by imposing 
crippling sanctions against more Russian banks, energy firms, and 
state-owned entities; I support broader sectoral sanctions as well. It 
is a mistake, in my view, to wait either for Putin to move Russian 
tanks across the Ukrainian border or for him to disrupt the May 25 
election, as President Obama and German Chancellor Angela Merkel said 
in their joint press conference last Friday, May 25; he has already 
done the latter. We have set the bar too high, for Putin has found 
other means short of full-scale invasion--though that cannot be 
completely ruled out--by which to accomplish his goals.
    I support the legislation introduced last week by Senate 
Republicans designed to deter further Russian aggression by, as Senator 
Corker described it, taking a three-pronged approach to ``strengthen 
NATO, impose tough sanctions to deter Russia, and support non-NATO 
allies of Ukraine, Moldova, and Georgia.'' I hope it wins bipartisan 
support, just as previous sanctions legislation did, including back in 
2012 involving the Sergei Magnitsky Rule of Law and Accountability Act.
    The outcome of the Russia-Ukraine crisis--and the response of the 
West--may determine the prospects for democracy for Russia's neighbors 
and well beyond Eurasia. While Western states have shown some resolve 
through imposition of visa bans and asset freezes on a limited number 
of Russian Government officials, businessmen, and a number of Russian 
entities, what has been done so far is simply not enough and is taking 
too long. We must go after more high-level officials and more 
businessmen close to Putin such as Aleksei Miller, head of Gazprom, 
Alexander Bortnikov, head of Russia's security services (FSB), and 
Sergei Shoigu, the Minister of Defense. Sanctions against Russian banks 
and state-owned enterprises, especially any doing business in Crimea, 
should be adopted, and broader economic sanctions should be considered. 
As part of an informal Friends of Ukraine Task Force, I joined a number 
of colleagues in recommending to officials at the State Department and 
White House the following companies to be targeted:

   Gazprombank
   Vneshekonbank (VEB)
   Vneshtorgbank (VTB)
   Sberbank
   Rosoboronexport
   Transneft
   Novatek
   Gazprom
   Rosneft

    All members of the Federation Council beyond those already 
sanctioned who voted for the use of force against Ukraine, and all 
members of the Duma beyond those already sanctioned who voted for 
annexation of Crimea should be included. Finally, Putin himself needs 
to be added to the list if he refuses to stop his aggression and return 
to the status quo ante. By imposing further sanctions now, we would aim 
to preempt, rather than react to, the possibility that Putin will 
invade other parts of Ukraine, or even Moldova, Kazakhstan or even stir 
up trouble in the Baltic States. Sanctions could be lifted in return 
for the status quo ante.
    In response to criticism that his administration's sanctions have 
been too mild so far, President Obama has cited his desire to avoid 
getting too far out ahead of the Europeans on sanctions and instead 
present a united U.S.-EU response to Putin. I, too, would like to see 
the U.S., along with Canada, in closer coordination with the EU, but 
the simple reality is that it is much more difficult for the EU to get 
agreement among its 28 member states to impose tougher sanctions for 
various reasons, not least the fact that EU-Russia trade is more than 
ten times that between the U.S. and Russia. A number of European 
countries are heavily dependent on Russia for their energy needs, and 
others simply want to continue business-as-usual and not let the events 
in Ukraine get in the way of making profits.
    For all these reasons, the United States has to take the lead. The 
extra-territorial nature of U.S. sanctions has an impact in its own 
right: European companies and financial institutions would have to 
choose between staying in the good graces of the U.S. Treasury 
Department and doing business with sanctioned Russian enterprises; my 
bet is that they would choose the former. Thus, while joint U.S.-EU 
sanctions are naturally preferable, unilateral American sanction can 
deliver a solid punch. We must not let the aspiration to have U.S.-EU 
unity on sanctions impede us, the U.S., from doing the right thing now. 
I dare say that the EU will follow, but only if the U.S. leads; naming 
and shaming those holding the EU back should also be considered.
    Since Putin's move into Ukraine, the Russian economy, already 
facing serious problems, has seen the ruble drop sharply, the Russian 
stock market fall some 20 percent, capital flight soar--possibly as 
high as $70 billion this quarter alone compared to $63 billion all of 
last year--and Russia's credit rating lowered to near-junk status. 
Investor confidence is badly shaken. Putin and his circle are 
vulnerable to imposition of such sanctions, given that many of them 
keep their ill-gotten gains in the West. Closing that option to them is 
certain to get their attention and possibly lead them to rethink their 
position, even if it may not lead to an immediate turnaround in Putin's 
takeover of Crimea. Russia is significantly integrated into the global 
economy, particularly with Western states, leaving them vulnerable and 
giving us leverage over Russia, if we choose to exercise it.
    This is no time for business as usual. It was appalling to see the 
leadership of the German conglomerate Siemens travel to Moscow to meet 
with Putin in mid-March when its own government in Berlin was 
supporting the first round of sanctions, essentially embracing the 
Russian leader and reassuring him of their continued business no matter 
what steps the West might take. Other corporate executives should think 
twice before doing the same.
    Putin's appetite will show no limits unless we impose a serious 
price for his aggression. Many more countries with sizable ethnic 
Russian populations, including Moldova, Kazakhstan, and even the Baltic 
States will be at greater risk unless Putin suffers serious 
consequences for what he already has done and is deterred from going 
further.
                            helping ukraine
    Addressing the Putin challenge is critical, but no less important 
is the need to help Ukraine recover from the turmoil of the last few 
months, the corrupt leadership of the last two decades, and the 
economic crisis that it faces right now. Making life doubly difficult 
for the interim authorities in Kiev are three facts: the threatening 
presence of tens of thousands of Russian forces along the border, the 
instability in the industrially important east, and the loss of Crimea. 
Nevertheless, the interim government and parliament have no choice but 
to adopt various reforms required by the IMF and to ensure that Ukraine 
advances toward democracy and rule of law. The West can and must help. 
Over the next weeks and months, the U.S. and the EU can best aid 
Ukraine by taking these steps:

   Pressing for the Ukrainian Presidential election slated for 
        May 25 to stay on schedule. Some parties in Ukraine, and in 
        Moscow, are urging postponement of the election, arguing that 
        the country needs more time to prepare and cannot hold them as 
        long as Russia occupies part of the country. This would be an 
        enormous setback to Ukraine's need to elect a legitimate, new 
        leadership as soon as possible. The sooner Ukraine votes for a 
        new President in a credible, democratic fashion, the better off 
        the country will be.
   Aiding local civil society organizations that do election-
        monitoring kinds of work as well as long- and short-term 
        observers, working closely with the OSCE/ODIHR. Independent 
        media must be able to operate during the electoral period to 
        ensure that the public is informed both about the conduct of 
        the elections and the important policy issues around which the 
        elections revolve; this is especially needed in the regions 
        where information is scarce and violations plentiful. Special 
        scrutiny should be devoted to the formation of an impartial 
        election commission and unhindered participation in the voting 
        process by all registered Ukrainian voters wherever in the 
        country they may be located.
   Assisting development of real democratic institutions so 
        that Ukraine doesn't squander yet another opportunity, as it 
        did after the 2004 Orange Revolution, for lasting rule of law 
        and liberalization. This would include strong support for 
        Ukrainian civil society and a free press, both of which played 
        critical roles in the protests. It would also entail protecting 
        the country's religious and ethnic minorities, combating hate 
        crimes, and promoting tolerance. The presence of some radical 
        elements in the opposition movement and the new governing 
        structure should not give license to any extreme statements and 
        actions by radical groups.
   Refusing to give up on Crimea by demanding a return to the 
        status quo ante. Conducting a rushed referendum under the 
        barrel of Russian guns, without any efforts to involve 
        Ukraine's central government, is both illegal and illegitimate. 
        No reputable government or body has recognized the referendum, 
        and none should give the impression that this issue is settled.
   Disbursing funds from the financial package that the U.S., 
        European Union, Canada, IMF, and World Bank have put together, 
        totaling more than $25 billion, to help stabilize the Ukrainian 
        economy. Adding to the challenge is Russian economic pressure, 
        trade cutoffs, and a spike in the price for Russian gas. 
        Equally important is assistance in recovering stolen assets 
        from ousted President Viktor Yanukovych and his cronies, 
        estimated in the tens of billions of dollars, and assistance 
        with energy reforms and development of alternate energy 
        sources.
   Preparing for delivery of humanitarian assistance to Crimea, 
        especially on 
        behalf of ethnic Ukrainians and Crimean Tartars living there, 
        who together constitute some 35 percent of the region's 
        population. They effectively have been disenfranchised from 
        their country. The Crimean Tartars in particular, whom Stalin 
        exiled to Siberia in 1944 and only returned to Ukraine's Crimea 
        as the Soviet Union was collapsing, are distraught at falling 
        under Russia's thumb once again.

    There are some who have argued that the best way to respond to 
Putin is to help Ukraine succeed, implying that sanctioning Putin is 
unnecessary. I strongly support doing what we can to help Ukraine, the 
interim government, civil society and soon a newly elected leadership, 
but helping Ukraine requires simultaneously pushing back firmly against 
Putin and his regime. Ukrainian authorities would have their hands full 
without having to worry about further Russian aggression and 
territorial loss. That they are confronted with a massive threat from 
Putin requires us to both support Ukraine and push back on Putin.
    During his visit to Washington and his meeting with President Obama 
in March, Acting Ukrainian Prime Minister Arseny Yatseniuk said the 
following: ``It's all about freedom. We fight for our freedom, we fight 
for our independence, we fight for our sovereignty and we will never 
surrender.''
    If Ukraine, with Western help, is able to fend off Putin's 
aggression, then freedom in Ukraine and, for that matter, around the 
globe, will have scored a major victory against one of the most 
threatening authoritarian regimes in the world and one of the biggest 
challenges to confront the democratic community of nations. This is 
about Ukrainians' aspirations to be free, Putin's efforts to deny them 
that possibility, and the West's willingness to rise to the challenge.

    The Chairman. Well, thank you both for your testimony.
    Let me ask you, Dr. Stent. Two things that you said in your 
testimony that makes me question.
    One is that you talk about a diplomatic solution, and you 
added ``if the Russians were interested.'' What is the 
diplomatic solution? I thought the beginning of the effort that 
took place in Geneva was an effort at that, and they basically 
went there and said they would do a series of things and then 
left and totally dismissed it. Where is the diplomatic leverage 
here to get them to act in a different way? If sanctions to 
date have not gotten them to deter from some of their actions, 
including creating greater instability in eastern Ukraine, 
where is the diplomatic leverage here?
    I often hear my friends talk about diplomatic efforts, and 
I am always for that as long as they have some possibility of 
moving forward at a given point in time because the environment 
is right. Where is the environment for that? Where are the 
circumstances for that?
    Dr. Stent. Thank you for the question, Mr. Chairman.
    I agree that it does not look very likely now. Clearly the 
Geneva negotiations were thought of as a potential framework 
for all the parties sitting down and then people fulfilling 
what they agreed to do. Right now, that does not appear very 
likely.
    But I think one should never say that one takes this off 
the table, and I think we heard again from the previous panel--
--
    The Chairman. I am not suggesting that.
    Dr. Stent [continuing]. That it is not taken off the table.
    Personally I do not believe that the sanctions that have 
been imposed so far will have an economic impact on Russia, and 
they are clearly not going to deter at the moment the Kremlin 
from doing whatever it wants to do. And so I think we are in a 
position where we do not have that many levers, and if we do 
impose sectoral sanctions, those could have a longer term 
economic impact, but they will not have an impact on Russian 
actions in the very near term. And so holding diplomacy open as 
an option is something that we should continue to do but 
understanding that in the short run, it is not likely to have 
much of an impact.
    The Chairman. Let me ask you a different question. You said 
something about adjusting ourselves to the new rules of the 
game. I would like to hear you define that a little bit for me. 
In my mind, just because somebody violates the rules of the 
game, you do not make new rules. You just make sure that if the 
rules were worthy of being upheld, which is international law, 
territorial integrity, and rights of people to make their own 
decisions for their future--that is my sense of the rules of 
the game. How are you referring to we have to adjust ourselves 
to the new rules of the game? What do you mean by that?
    Dr. Stent. Thank you for that question.
    Well, what I mean is, that Mr. Putin has now called into 
question the agreement in 1991 that dissolved the Soviet Union. 
He has called into question the 1994 Budapest Memorandum. So we 
are going to be living with a Russia that has served notice 
that it has the right to defend its fellow ethnics and fellow 
Russian speakers in places like Transnistria, maybe Kazakhstan, 
as we heard. Not that we should accept this, but we have to 
understand that our assumptions that we are dealing essentially 
with a Russia that more or less accepts the boundaries of the 
new states in Eurasia that were agreed upon in 1991, that it no 
longer accepts that.
    So that will require at least, first of all, with our own 
allies sitting down and figuring out how do we deal with this 
and then moving forward to prevent further erosion of the 
territorial status quo. This is not now. This is somewhere down 
the road. How are we going to deal with Russia on this? What we 
have to do is contain Russia from repeating the Ukrainian 
scenario in some other part of the former Soviet Union.
    The Chairman. So we are not making new rules. What we are 
saying is there are internationally accepted rules. Russia has 
violated them. They seem to have their own doctrine which they 
believe that they can pursue. We do not accept that. And we 
will have to deal with the new realities of a Russia that no 
longer wants to play by international norms.
    Dr. Stent. Right, and then how do we get them maybe to 
change their mind?
    The Chairman. Okay. Now I am in sync.
    Mr. Kramer, you are very forward-leaning on sanctions, and 
there are probably very few people in the Congress that have 
been as forward-leaning on sanctions as I have because I 
believe they are a tool of peaceful diplomacy. There are very 
few tools that are available to any country in diplomacy 
abroad. First of all--international opinion--the extent that 
one could move a country or a leader by virtue of that 
international opinion. Secondly, the use of aid and trade to 
induce a country to act in certain ways. And then the denial of 
aid or trade, which is basically a sanction, as well as other 
elements beyond aid and trade, which is access to markets by 
financial institutions or whatnot.
    I am generally of the belief that if you do not want to do 
military action, which certainly we are not talking about in 
this case, then you do have to think about how you use 
sanctions robustly.
    The one question I have for you is if you do the 
blunderbuss, for sake of a metaphor, and put all the sanctions 
out there, is there not the consequence as well that Putin will 
say, ``well, I have already been sanctioned for everything that 
I possibly can be sanctioned, let me get something forward''? 
Let me go into eastern Ukraine and ultimately take over. There 
is always a calibration element here. At some point, it is a 
question of providing enough deterrence and consequences that 
one does not want to take the risk. At another point, it is 
going so far to one direction that the result is that, ``well, 
I have already lost everything; let me get something forward.''
    Give me a little bit of thought on that.
    Mr. Kramer. Sure. Thank you, Mr. Chairman.
    I would start with a list of entities that I identified in 
my testimony before going to broader sectoral sanctions, but I 
would not wait very long to do that. As I mentioned, I think we 
have been too reactive in doing this.
    The Chairman. Those are a series of companies and 
individuals who you listed, many of which I have said myself: 
Rosneft, Rosoboronexport, and Gazprom. I get that.
    Mr. Kramer. Yes. But sanctions, to be clear, are both 
punitive and a deterrent, but they are also psychological. And 
the point of them is for the target of the sanctions to think 
that if he or she continues down the path that he or she is on, 
that they are going to get hit with more sanctions. And so it 
is not sufficient, though, to come out with the kinds of 
sanctions, I would argue, the administration has so far because 
as a number of you have mentioned, the reaction last Monday was 
that the ruble went up a little bit in value and the stock 
market went up as well. The expectation was that Russia was 
going to get hit with harder sanctions than what was announced.
    The Chairman. Although I think it went up when the 
Europeans announced their set of sanctions, which were maybe 
less than what the Russians expected.
    Mr. Kramer. I think I can go back and check. I think Monday 
afternoon, the market in Moscow went up. The EU announced 
Monday that it also would sanction. It did not announce against 
whom until Tuesday.
    On what Putin might do, I have nothing to lose. There is 
always that possibility. I would argue that Putin is not all-
powerful. He is certainly powerful. He is like a chairman of 
the board, and he needs the approval of the other members of 
the board around him. I would argue that those members of the 
board have not signed up to a scenario in which they lose all 
their ill-gotten gains because of sanctions in the West. They 
will say to Putin we actually want to benefit. We want to be 
able to go to the West. We did not sign up for this. That is a 
calculation. I cannot sit here and promise you that that will 
be the outcome.
    The Chairman. Those other members of the board that you 
described--for the most part, they are his oligarchs and he 
made them oligarchs.
    Mr. Kramer. He did and he is one himself. There was a story 
in the New York Times about 8-9 days ago saying that the 
administration knew roughly where Mr. Putin's money was. I hope 
we are going after it. I think we should not wait too long 
before we put Putin himself on the list. That might get his 
attention. I think one of the things he is most concerned about 
and one of the reasons he wants to stay in power at any cost is 
he does not want to lose what he himself has gotten, and he 
does not want the people who have supported him and are around 
him to lose what they have gotten either. It is a thoroughly 
corrupt, rotten regime, and I think what it values more than 
anything are the assets that it has stolen over the years. And 
if we threaten those assets, then it might force a 
recalculation on Putin's part, or at least those around him.
    The Chairman. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman.
    And thank you for your testimony.
    Dr. Stent, Mr. Kramer was pretty forward in his opening 
comments about the importance of what has happened, that what 
Russia is doing relative to its neighboring countries is as 
dramatic as anything since the agreements that were put in 
place in 1991, and in 1994.
    You have witnessed today that the United States is really 
only willing to do so much. I think that is pretty evident. And 
someone said earlier that this is far more important to Russia 
than it is us. I liken it to Maslow's letter. To him, it is 
food, clothing, and shelter. To us it is self-actualization. 
And there is a different level of perceived interests certainly 
by the citizens of the two countries.
    From your perspective, how important is this to the United 
States? And how big of a thing, if you will, from a global 
stability standpoint is it that Russia has embarked upon?
    Dr. Stent. Thank you for the question, Senator.
    I think if we look back in the past few years, you could 
say that this part of the world was important for the United 
States, but it has not been a top priority just because we have 
other priorities we were concerned with like Syria, like Iran, 
like Afghanistan, and before that Iraq. And so I think we have 
come somewhat late to the focus on what was happening in this 
region. Before last November, we assumed that the European 
Union, because it was negotiating with Ukraine, was bearing the 
burden of most of these negotiations.
    We have understood that what Russia has done by violating 
agreements that were signed, particularly in 1994, by violating 
principles of international law, annexing another country's 
territory, that this is very significant and it is a problem 
for us. But still, as you have said and other people who were 
testifying today have said, this is in Russia's neighborhood 
and it is not in our neighborhood. And we are a long way away 
and we have many other international crises and issues that we 
have to deal with. Therefore, it is inevitable that this ranks 
number one for Russia and it does not for us. And that is 
something that we have to deal with as we try and formulate an 
effective policy to try and get Russia to step back from this.
    Senator Corker. So you use the words ``effective policy.'' 
Just in listening to your testimony and much of what has been 
said here, I almost feel that many people, hopefully not 
everyone, but many people accept what is going to happen as a 
fait accompli. Do you think there is an effective policy that 
we could put in place today that would change Putin's behavior 
on the ground in Ukraine?
    Dr. Stent. Thank you.
    I think that at the moment, it is very hard to see what we 
could do in the next months to deter Russia from continuing to 
interfere in eastern Ukraine. I see this as a crisis that is 
going to continue. Hopefully there will be an election on March 
25 and it will be recognized as legitimate by most of the 
population. But that does not mean that the next day the 
separatists are going to leave the buildings and hand over 
their arms.
    So I think we need a longer term policy strategy and that 
can include, obviously, the sanctions and some of the other 
measures helping build up capacity in Ukraine. But there are no 
easy solutions to this, and there is nothing in the short run 
that is going to deter Mr. Putin.
    Senator Corker. And do you get the sense that the 
administration has come to the same conclusion and that is why 
they are talking big, if you will, but do not really believe 
that there is anything they can do to change Putin's behavior?
    Dr. Stent. Well, I think the administration is obviously 
implementing sanctions. They are doing that. They are again 
reassuring our NATO allies, which is very important at least to 
deter Russia from thinking that it could maybe move beyond 
Ukraine certainly to the Baltic States. So the administration 
is doing a number of things. But I think it is probably doing 
as much as it believes it can, given the limitation that no one 
is prepared to use military force in a conflict like this 
because it involves a very large country with thousands of 
nuclear weapons.
    Senator Corker. And as part of that longer term strategy, 
you would agree that having a European strategy--I think you 
alluded to the fact that we were late to the game and basically 
focused on other things--but having a European strategy that 
focused on strengthening NATO, that did focus on punishing 
Russia with sanctions, but also hardening and strengthening 
Ukraine, Moldova, and Georgia would be a good thing for us to 
do?
    Dr. Stent. Yes. I think that is really all we can do, and I 
think we do have to persuade our European allies that if they, 
indeed, have woken up in this crisis that we really have a 
problem, they should be willing to spend more on defense. And 
that is going to be very difficult.
    Senator Corker. So I agree with that. I know the chairman 
made some comments on the front end, and hopefully all of us 
can work toward that end.
    Mr. Kramer, do you agree that, in essence, we are at a 
place today where there is really nothing we can do to change 
Russia's behavior and they are going to have their way in 
eastern Ukraine either through military force or doing what 
they are doing right now?
    Mr. Kramer. Senator, I do not agree with that, and I think 
it would be contrary to U.S. interests to take that position. 
Ukraine is critical to a decades-long vision of a Europe whole, 
free, and at peace, as Dr. Stent referred to at the end of her 
testimony. Ukraine is in the heart of Europe. It borders 
Russia. It borders members of NATO and the EU. The spillover 
effects of a conflict breaking out worse than what we have 
already seen could entail article 5 commitments if it were to 
spread to NATO member states. The implications of this I think 
are enormous.
    Russia has annexed territory and we have not seen this in 
Europe since World War II. There is the Budapest Memorandum, 
which has been mentioned, which involved Russia, the United 
Kingdom, the United States, and Ukraine. In exchange for giving 
up Ukraine's nuclear weapons, the other three signatories 
promised to respect Ukraine's territorial integrity and 
sovereignty. One of those signatories has violated that 
agreement. There are no treaty implications. There is no 
article 5 obligations.
    But if we do not respond and come to Ukraine's defense 
through providing military support and the necessary means by 
which Ukraine can defend itself, then I do have concerns about 
what signal that sends to other countries that might be 
interested in acquiring nuclear weapons or countries that may 
be trying to pursue them but decide we are not going to give 
them because we saw what happened to Ukraine.
    I think the implications of this are absolutely enormous, 
and this is being led by a leader who, I would argue, on the 
one hand is acting out of weakness. He is paranoid and 
insecure. He was terrified by what happened in 2003 and 2004 
with the Rose and Orange Revolutions in Georgia and Ukraine, 
and yet, at the same time, he thinks right now, weak as he may 
be, he is stronger than we are, that he has the upper hand. And 
I think it is critical for us to change that thinking and those 
dynamics.
    Senator Corker. Thank you both for your testimony and for 
being here today.
    The Chairman. Senator Murphy.
    Senator Murphy. Thank you very much, Mr. Chairman.
    Thank you, both of you.
    I want to continue along this line of questioning with you, 
Mr. Kramer, because this is all an exercise in priority-setting 
for this committee, for the administration, for the Secretary 
of State in terms of what he talks about with our European 
allies when he is across the table with them.
    And I, too, was impressed with the gravity to which you 
ascribe the crisis. You, I think, referred to it as the 
greatest crisis that the United States has seen in decades, 
which strikes me as surprising because to me the world is not 
aligned any longer around who is with the United States and who 
is with Russia, who is with the West and who is with the East. 
There are paradigms that matter much more to us than that, who 
has nuclear weapons, who does not; who is aligned with Shia, 
who is aligned with Suni. What are we doing to try to downgrade 
the ability of terrorist groups to attack this country? Those 
seem to be the things that should be first and foremost. This 
does not strike me as the gravest crisis we have seen in 
decades. It is important. It deserves all of the time that we 
are spending on it.
    But why do you believe that of all of those crises that are 
facing the United States today that this is the most important?
    Mr. Kramer. Senator, thanks for the question.
    My organization, Freedom House, has documented 8 straight 
years of decline in freedom around the world since the previous 
administration in which I served. Russia is one of the 
leading-- 
not the only, but one of the leading--authoritarian regimes 
that is actively and aggressively pushing back against efforts 
to advance freedom and human rights around the world. We see it 
not just along Russia's borders. We see it in Syria where 
Russia not only blocks U.N. Security Council resolutions but 
arms, aids, and abets Assad's slaughter of the Syrian people. 
So the threat that Russia poses goes well beyond Ukraine. It is 
a threat that is global in nature.
    It is not to say that we cannot cooperate with Russia in 
some areas. There are some areas where we have common 
interests. 
But I come back to the point I made earlier. It is the nature 
of 
the Putin regime that really significantly inhibits our ability 
to cooperate.
    And if left unchallenged, I worry about Putin's appetite. I 
worry how easy Crimea was, the annexation of Crimea, and I 
worry, to borrow a Stalinist phrase, that Putin, even though I 
have described him as acting out of weakness to an extent, may 
get dizzy with success and decide Crimea was easy. I will try 
my bet at eastern and southern Ukraine. I will stir up trouble 
with Transnistria and Moldova. I will show the EU and NATO that 
I can even cause problems in those member states. And when we 
get to that point--and this is why I think it is the gravest 
crisis we face--we have article 5 obligations that if we do not 
fulfill, the NATO alliance is finished and our credibility as 
an ally is irreparably damaged.
    Senator Murphy. And I think it just speaks to the end that 
we are trying to effectuate because you are right. It may be 
the gravest crisis that we face, should the end be an invasion 
of an article 5 country. Thereby, what we may be trying to do 
is to prevent that line from being crossed. The invasion of 
Ukraine or the invasion of Crimea is not the gravest political 
crisis that we have faced, but the potential next steps, should 
we not take actions to draw a line, certainly may be.
    I want to ask a very specific question about facts on the 
ground. We did not talk a lot in our opening panel about this 
May 11 referendum that has been called in, I guess, Donetsk and 
Luhansk. What do you know about what we should fear or not fear 
about that referendum, about how active the Russians may be in 
trying to make sure that there is enough turnout so that it has 
some veil of legitimacy? We are talking about a week from 
today. How much of our focus should be on May 11 rather than on 
May 25 at this point?
    Mr. Kramer. I did not refer to May 11 in my testimony, 
Senator, because I think it is a joke. The notion of holding a 
referendum on such short notice under such conditions I think 
is not even worthy of mention. I think not even Ukrainians will 
take it seriously. Russia might recognize it. If they do, that 
to me is yet another reason to move ahead, although I frankly, 
again as I said, would not wait for that.
    Can I just take 1 minute to respond to the first point 
about the Baltics? I think it is less about Russian tanks 
crossing the border into Latvia. As we have seen in Crimea, as 
we have seen in eastern Ukraine, it is not so much tanks 
crossing borders. Putin has found other means and methods by 
which to destabilize these states. In 2007, Estonia was the 
target of a cyber attack from Russia. There now has been much 
more thought given to what the western NATO reaction would be 
to a cyber attack against a member state. I applaud the 
administration for beefing up the defenses of NATO allies. But 
I do worry that if Putin psychologically thinks he has gotten 
away with Ukraine, that he will then test the waters in other 
places, and that is why I think this is so critical.
    Senator Murphy. I think that is a very fair point. I think 
you have to ask why is he doing this in the countries that he 
has done it in. And the answer is partially because they have 
not yet made the decision as to whether to join NATO and the 
European Union, and he is trying to prevent that. So the 
question would be whether those kind of provocations are as 
necessary or as useful to him in countries that have already 
made that decision. But I think it is a very important 
distinction to make because we clearly see that he does not 
believe he needs to send tanks in in order to gain influence, 
in order to stymie behavior that may be contrary to Russian 
instincts.
    Mr. Kramer. Senator, can I just--but Yanukovych even had 
made the decision. Ukraine was expecting to sign those 
agreements with the EU until, under pressure from Putin and 
also because the EU had not backed down on the Tymoshenko case, 
he decided to do a U-turn. That is what triggered the protests. 
Ukraine had made its decision, and Putin saw Ukraine's moving 
toward closer ties with the EU as a threat to him and his 
vision for a Eurasian economic union.
    Senator Murphy. Ms. Stent, on this question of May 11, do 
you share Mr. Kramer's views?
    Dr. Stent. I think there will be something on May 11, and I 
think there will be groups who will support the referendum. As 
in all cases like this, you have a small active group of 
militants who think that they can call the shots. The majority 
of people in the eastern part of Ukraine do not want to join 
Russia, and they want to be in a Ukrainian state. I think there 
will be some kind of vote. I am assuming that those people who 
vote will be supporting the separatists and they will declare 
that they want these regions to be independent, join Russia. I 
am not sure what the questions on the ballot are, and I am not 
sure that we have seen that. And Russia will, no doubt, come 
out with some statement about it.
    I do not take this very seriously, but I think it would be 
a way of further destabilizing Ukraine. And I think what the 
Russians want is not to have the May 25 election either held, 
or if it is held, regarded as legitimate. And this would be 
part of the arsenal in 
de-legitimizing the May 25 election.
    The Chairman. Senator McCain.
    Senator McCain. Just to follow up, what do you think the 
odds are that the May 25 election will be held?
    Dr. Stent. I think from what we have heard today, it will 
be held. I think it would be very difficult now for either the 
separatists or their Russian supporters to prevent it from 
being held. The question is will people in the eastern part of 
Ukraine be so intimidated that they will not be able to go to 
the polling places and vote. There will be an election, but I 
am not sure how many people in the east will be able to vote.
    Mr. Kramer. Senator, I think, if I had to bet today, the 
election will take place. I think it will take place under very 
adverse circumstances, but I think Ukrainian authorities are 
doing the best they can to have a credible election.
    Senator McCain. So Kiev and other parts of Ukraine but 
impossible in eastern Ukraine and maybe increasingly difficult 
in Odessa.
    Mr. Kramer. Absolutely. I think holding a credible election 
in the eastern parts of the country now is seriously 
challenged.
    There is also the issue of Crimea which all too often gets 
forgotten. There are the Crimean Tartars and the ethnic 
Ukrainians there, roughly 40 percent of the population in 
Crimea. What happens to them? How are they going to be able to 
participate? They are disenfranchised from their country.
    Senator McCain. Well, I mean, since they have been taken 
into Russia, then maybe an election will not even take place 
there.
    Mr. Kramer. I do not see how voting could be held in 
Crimea. I think that is exactly right, Senator.
    Senator McCain. So when does Vladimir stop?
    Mr. Kramer. Unless he came out today--there is an 
interesting fact, which is he has not been in public in the 
past 5 days. There was a tape of him meeting with a governor, 
but the suspicion is that was taped a while ago. If you 
remember back in 2000 with the sinking of the Kursk submarine, 
he disappeared for several days. He has an odd way of handling 
crises. And I am not suggesting he is hiding under a bed or 
something, but it is an odd way to lead a country through a 
crisis. Maybe--and this may be wishful thinking on my part--he 
is starting to think he has bitten off more than he can chew, 
but I do not think we should count on that. I think we should 
be anticipating more of his steps and trying to preempt them 
rather than react to them.
    Senator McCain. Ms. Stent.
    Dr. Stent. Senator, I heard Mr. Putin today on the radio 
saying that the CIA invented the Internet and that Russia now 
has to have new controls on the Internet because this is all a 
CIA plot. So he may not have appeared in public but he is 
around.
    Senator McCain. That is something that I have thought for a 
long time. [Laughter.]
    Well, I thank you both very much. I think that is a $64 
question, but I would make an argument when you look at what 
actually in reality the punishment that he has received so far 
versus what he has accomplished so far--and it is hard for us 
to put ourselves into his shoes, but if I were him, I could not 
help but be encouraged by the course of events so far.
    Mr. Kramer. Senator, I agree with that. And again, weakness 

or strength are relative, and I do worry that he feels that he 
is stronger than we are, that he is in the driver's seat and he 
is setting the agenda. And so I do share your concern. And his 
interest is to have those elections postponed so that he can 
continue his claim that the interim government is illegitimate, 
took over in a coup, and I think we have to everything we can 
to make sure those elections take place. It is in the best 
interest of Ukraine.
    Senator McCain. I thank the witnesses.
    The Chairman. Thank you both for your insights and your 
testimony. I think it is very helpful to the committee. We 
appreciate it.
    This hearing's record will remain open untill the close of 
business on Thursday.
    And with the gratitude of the committee, this hearing is 
adjourned.
    [Whereupon, at 6:10 p.m., the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record


               Responses of Victoria Nuland to Questions 
                  Submitted by Senator Robert Menendez

    Question. In late March, the Congress approved a bill calling on 
the Obama administration to increase objective international media 
programming to Ukraine, Moldova, and Eastern Europe in order to push 
back against Russian propaganda saturating the region.

   What efforts have been taken to date by the State 
        Department, in consultation with the Broadcasting Board of 
        Governors, to define a strategy that strengthens our public 
        diplomacy programs and expands the work of the Voice of America 
        and Radio Free Europe/Radio Liberty in the region?

    Answer. The Department of State has taken a series of steps to 
highlight and confront Russian distortions and falsehoods, including 
the creation of our Ukraine Communications Task Force, which uses 
social media and other tools to aggressively counter Russian 
propaganda, advocate with global audiences for our Ukraine policy 
positions, and demonstrate our steadfast commitment to the people and 
legitimate Government of Ukraine. The Department of State has also 
launched a Russian-language social media campaign in support of 
Ukraine.
    In addition, the Department of State has been working with the 
Broadcasting Board of Governors (BBG) to strengthen its capabilities, 
including expanding domestic distribution in Ukraine and neighboring 
countries and increasing Russian-language content, and has transferred 
$550,000 in Public Diplomacy funds to the BBG toward this end. 
Additionally, the Department has provided assistance to BBG 
representatives in the region as they work to add affiliate radio and 
television partners within Ukraine and neighboring countries. We will 
continue to explore other options to support these efforts.
    The BBG has expanded its Ukrainian and Russian television and video 
news products for the region, increased its digital and social media 
presence--especially with new digital video/audio products that counter 
Russian misinformation with accurate reporting and analysis--and 
improved the media environment through sponsored training of 
journalists, sometimes in cooperation with USAID.
    The BBG leverages the expertise, knowledge, and access of Voice of 
America and Radio Free Europe/ Radio Liberty in Ukraine and the region 
to work with affiliates to expand audience reach and impact. Surveys 
show their programs are consistently ranked as credible, making them 
key channels of essential information in support of key U.S. national 
security interests.

    Question. In the last 3 weeks alone, anti-Kiev forces abducted more 
than 50 people--Ukrainian and foreign journalists, activists, local 
officials, and members of Ukraine security forces. Some have been 
released, but the fate and whereabouts of at least two dozen people 
remain unknown. Most are believed to be held in the office of the 
Ukrainian security service, SBU, in Slavyansk, which the anti-Kiev 
forces turned into their headquarters.

   What are Ukrainian authorities, Russian authorities, and 
        the Europeans who managed to get the OSCE observers out now 
        doing to pursue the release of other illegally held captives?

    Answer. Pro-Russia militants are holding more than 40 people 
hostage in the Donetsk and Luhansk regions. These include a number of 
local politicians, several journalists, police officers, civil society 
activists, and international monitors. Dozens of others have been 
kidnapped and released after several days, often after being beaten. 
For example, separatists briefly took hostage seven Red Cross 
volunteers and members of the OSCE Special Monitoring Mission but later 
released them on May 9. Eleven more OSCE monitors were detained and 
released on May 28. Separatists kidnapped another four OSCE monitors on 
May 26, as well as four more, along with their Ukrainian translator, on 
May 29. These two groups remain hostage. Others among the kidnapped 
have been murdered--including Horlivka City Councilman, Volodymyr 
Rybak; Maidan activists, Yury Popravko and Valeriy Salo; and a 
Ukrainian Orthodox Church-Moscow Patriarchy priest. Most are held in 
Slovyansk, where bodies of the murdered were found. This is also where 
militants kidnapped the OSCE Vienna Document observers and their 
Ukrainian escorts, and an American journalist, all of whom were 
subsequently released.
    The United States, Ukraine, and our European partners condemn 
hostage-taking as illegal and destabilizing, and call on Russia to use 
its influence to release all hostages. Secretary Kerry has underscored 
this message in multiple interactions with Russia's Foreign Minister 
Lavrov. The United States closely monitors reports of hostage taking 
and routinely raises this in its Senior-level discussions with European 
leaders as one of many illegal and destabilizing actions that must 
cease in order to de-escalate the situation in Ukraine.

    Question. Russia's intervention in Ukraine has been preceded by a 
systematic campaign to bring newspapers, television and radio stations, 
and social networks under Russia control, to silence dissenting voices 
and control the information that the Russian people receive. By 
creating a closed information space within Russia, the Kremlin has thus 
been free to act without fear of domestic opposition or constraint. We 
have seen armed men taking over TV stations and towers, journalists 
kidnapped and brutally attacked.

   What are we and our partners doing to counter this 
        dangerous narrative in Russia and Ukraine? What direct 
        assistance and training are we providing journalists operating 
        now in this space?

    Answer. Long before the current crisis, the Department of State and 
USAID were providing assistance to help Ukrainian media outlets (in 
both the Ukrainian and Russian languages) and journalists develop high 
standards of professionalism and journalistic independence.
    In December, the Department and USAID increased assistance to 
journalists and independent media and news reporting--especially in the 
Russian language--in the east and south of Ukraine to ensure that 
citizens in those regions had access to objective information about 
rapidly changing political and economic events. This assistance 
strengthened independent media through grants and legal assistance, 
fostered Ukrainian ties to U.S. counterparts, enhanced programs working 
with journalism students, and trained journalists on issues such as 
professionalism, ethics, and the use of new information and 
communications technologies. We also continue to support local 
Ukrainian media organizations to generate unbiased, facts-based 
reporting for Russian and Ukrainian language content delivered through 
TV, radio, print, and online media, including coverage of the upcoming 
Ukrainian Presidential elections and the critical period after the 
elections.
    State and USAID efforts are complemented by Radio Free Europe/Radio 
Liberty (RFE/RL) and Voice of America programming. The RFE/RL's 
multimedia Web pages are ``go to'' sources of up-to-date and accurate 
information in Ukraine, Russia, and internationally, and VOA provides 
timely and accurate television coverage of U.S. policies, statements, 
and actions to audiences in Ukraine, Russia, and other countries in the 
region. RFE/RL has launched a Crimea-focused Web site, krymr.org 
(``Crimea Realities'') with content in Russian, Ukrainian, and Crimean 
Tatar, which is attracting a significant audience in Crimea and 
elsewhere.
    From both Washington and our Embassy in Moscow, we routinely engage 
with and advocate on behalf of journalists and bloggers who have been 
attacked, arrested, imprisoned, or otherwise harassed for doing their 
work in Russia. For example, on April 25, in the context of the 
Department's global ``Free the Press'' Campaign in honor of World Press 
Freedom Day, we spoke out to call attention to the little-known case of 
Sergei Reznik, a Russian journalist who is serving an 18-month jail 
sentence after uncovering local corruption and abuse.
    The Department of State has taken a series of steps to highlight 
and confront Russian distortions and falsehoods, including the creation 
of our Ukraine Communications Task Force, which uses social media and 
other tools to aggressively counter Russian propaganda, both in Russian 
and in English.

    Question. With the recent outbreak of violence in Odessa and the 
threats against journalists and activists growing in eastern Ukraine, 
it is clear the situation is deteriorating rapidly beyond just 
geopolitical concerns. Once again Russia and Ukraine are launching 
allegations at each other without presenting any evidence, which raises 
tensions and encourages violence in an already divided region.

   While the administration continues its diplomatic efforts, 
        what steps are underway to help ensure the OSCE and U.N. human 
        rights monitors on the ground carry out an urgent, independent 
        investigation into recent clashes in Odessa and, more 
        generally, press for criminal prosecutions for those most 
        responsible for violence?
   In addition, what is the likelihood that both the OSCE and 
        U.N. monitors will present their findings publicly, and is this 
        something the administration is calling for?

    Answer. The United States has emphasized the importance of 
conducting a full, credible investigation into the events of May 2 in 
Odessa. The Government of Ukraine has launched an investigation into 
the violence in order to establish culpability and bring those 
responsible to justice. The United States has raised with the 
Government of Ukraine the possibility of providing international 
assistance with the investigation, and has urged the Government of 
Ukraine to involve the OSCE Special Monitoring Mission in the 
investigation and to publicize the facts and results of a preliminary 
investigation as soon as possible. The OSCE Special Monitoring Mission 
team visited the site on May 6 and was informed that a total of 46 
bodies had been transferred to the morgue of the Regional Bureau of 
Forensics.
    More generally, in its May 12, 2014, report on the Office for 
Democratic Institutions and Human Rights (ODIHR) Human Rights 
Assessment Mission in Ukraine, the OSCE recommended that the Ukrainian 
authorities cooperate with international human rights monitoring and 
judicial bodies in matters related to allegations of human rights 
violations and criminal responsibility. The report noted a significant 
number of serious abuses and infringements of human rights, including 
murder and physical assaults, as well as cases of intimidation and 
enforced disappearance. The victims were primarily pro-Maidan activists 
and journalists. The report also highlights instances of violence and 
intimidation against persons in Crimea, including Ukrainian military 
personnel and members of the Tatar community.
    The United Nations Office of the High Commissioner for Human 
Rights' (OHCHR) Human Rights Monitoring Mission in Ukraine is scheduled 
to release its next monthly report on or around May 15. The United 
States has expressed its support for the mission as an impartial 
mechanism to shed light on the human rights situation throughout 
Ukraine. At the same time, however, the United States has also 
expressed to the OHCHR its concern about the mission's current 
reporting schedule, noting that the mission is one of the only sources 
of neutral reporting on human rights and that, given the rapid pace of 
events, monthly reporting could be irrelevant by the time it becomes 
available.
                                 ______
                                 

              Responses of Daniel L. Glaser to Questions 
                  Submitted by Senator Robert Menendez

    Question. Potential for Sectoral Sanctions.--Last Friday President 
Obama and Chancellor Merkel suggested that sectoral sanctions might be 
in the offing if Russia continues to support actions making Ukrainian 
elections on May 25 impossible. What authorities might the President 
invoke and what precedents could be used for the implementation of 
sanctions?

    Answer. The President can invoke a wide range of authorities, 
including those of the Treasury Department, to respond flexibly to 
events in Ukraine. The Treasury Department has a range of authorities 
to respond flexibly to events in Ukraine. As President Obama has 
stated, we are prepared to impose further sanctions against Russia if 
necessary, in particular if Russia does not work in good faith with new 
Ukrainian President and does not cease its support for separatists and 
the flow of weapons and irregular forces across the border.
    The Treasury Department's primary authority in this regard is based 
on three Executive orders issued to respond to the situation in 
Ukraine--E.O.s 13660, 13661, and 13662. These provide broad authority 
to impose costs on Russia for its actions in Ukraine. E.O.s 13660 and 
13661 give the Secretary of the Treasury the authority to target 
Ukrainian separatists, Russian officials, and Putin's inner circle, as 
well as the companies they own or control. E.O. 13662 authorizes the 
Treasury Secretary to identify sectors of the Russian economy and 
impose sanctions on individuals and companies within those sectors.

    Question. Impact of Sanctions.--Can you describe to us what 
negative repercussions Russian officials and firms have had to confront 
as a result of our existing sanctions? In what ways has the Russian 
economy been affected adversely?

    Answer. Sanctions, and the uncertainty they have created in the 
market, are affecting the Russian economy through both direct and 
indirect channels. Sanctioned Russian individuals and entities have had 
their assets blocked and are prohibited from dealing with U.S. persons. 
Some individuals targeted by our sanctions have sold their shares in 
their companies, in an effort to avoid the negative impacts of our 
measures. We assess these decisions were made hastily and with a 
substantial cost for the sanctioned individuals.
    More broadly, market analysts are forecasting significant continued 
outflows of both foreign and domestic capital and a further weakening 
of growth prospects for the year. Economic activity contracted on a 
quarterly basis in the first quarter of the 2014, and many analysts 
predict that the Russian economy will fall into recession this year. 
Overall, the IMF has downgraded Russia's growth outlook to 0.2 percent 
this year and has suggested that recession is already happening. This 
stands in stark contrast to previous IMF forecasts, which as recently 
as February were projecting 2 percent growth. The IMF also expects as 
much as $100 billion in capital flight from Russia this year, although 
that number could be closer to the World Bank's estimate of $130 
billion. Combined with the fact that the Central Bank of Russia has 
spent $30 billion, or 7 percent of its total foreign exchange reserves, 
in an effort to defend the value of the ruble, it is clear that our 
sanctions policy is having an impact on the Russian economy.

    Question. Asset Recovery.--It was reported that Yanukovych and his 
associates stole as much as $70 billion from the Ukrainian state. What 
have we done to assist the Ukrainian authorities in the recovery of 
their money? Have we made any progress?

    Answer. The United States has been a leader, along with the United 
Kingdom, in helping Ukraine recover the state assets stolen by the 
Yanukovych regime. These efforts have been led by the Department of 
Justice, with the Treasury contributing through technical assistance 
and by sending Treasury advisors to Ukraine to assist their Financial 
Intelligence Unit to identify, track, and recover assets. Efforts are 
ongoing. Ukrainian officials have noted that over 100 investigations 
have been opened, including those involving at least 17 former high-
ranking officials.
    In addition to direct assistance to Ukrainian investigations, the 
United States is working with partners throughout the world to be of 
additional assistance. Treasury joined the Department of Justice at the 
Ukraine Forum on Asset Recovery April 29-30, 2014, hosted by the U.K. 
Government in London. The meeting brought together Ukrainian officials 
and representatives from over 30 governments around the world, as well 
as from the Stolen Asset Recovery Initiative (StAR) of the World Bank 
and U.N. Office on Drugs and Crime. During the conference, Attorney 
General Holder announced the formation of a dedicated kleptocracy squad 
within the FBI, which, with the assistance of the Treasury's Financial 
Crimes Enforcement Network (FinCEN) and the U.S. Marshalls Service, 
will aggressively investigate and prosecute corruption cases in Ukraine 
and around the world.
                                 ______
                                 

              Responses of Dr. Evelyn Farkas to Questions 
                  Submitted by Senator Robert Menendez

                     requests for lethal assistance
    Question. What lethal military equipment has Ukraine requested from 
the United States? What, in the opinion of the Department of Defense, 
are the biggest equipment and training deficiencies that exist in 
Ukraine's military forces to adequately defend itself from a Russian 
military incursion, as well as domestic insurrection?

    Answer. Ukraine has requested a wide range and large quantities of 
a variety of both lethal and nonlethal equipment from the United States 
and other NATO member countries. Ukraine's requests for lethal 
equipment include: small arms (e.g., assault rifles, grenade launchers, 
and sniper rifles), ammunition, and aiming devices, such as laser 
target pointers. Ukraine's requests for nonlethal equipment include: 
Meals Ready-to-Eat (MREs), medical equipment, aviation fuel, armored 
vests and helmets, wheeled vehicles, communications gear, digital 
thermal binoculars, and basic soldier gear (e.g., uniforms, tents, 
etc.).
    The United States Government has approved procurement and delivery 
of nonlethal assistance valued at approximately $18M, using current 
authorities such as Foreign Military Financing, and the Emergency and 
Extraordinary Expenses. Such assistance includes MREs, medical 
equipment, basic soldier kit, radios, and robots for explosive ordnance 
disposal. In addition, DOD's Cooperative Threat Reduction Proliferation 
Prevention Program has provided assistance to Ukraine's State Border 
Guard Service for border security and nonproliferation activities.
    Ukraine's military has multiple deficiencies as the result of years 
of underfunding, poor management, and force structure that is too large 
to be adequately trained and equipped within the country's resource 
constraints. Almost all major combat equipment is more than 20 years 
old, and Russian-origin spare parts are in short supply. Key 
deficiencies exist for communications gear, Navy force structure (as a 
result of Russia's seizure of Ukrainian naval installations in Crimea), 
armored vehicles, and personal soldiering equipment.
    Defense institutions also need reform. The United States Government 
is currently working with the Government of Ukraine to develop a 
multiyear effort to address some of these deficiencies bilaterally and 
also working within NATO to encourage NATO member countries to offer 
advice and assistance.
              stationing nato in eastern allies territory
    Question. In 1997 NATO-Russia signed the Founding Act to establish 
a working relationship in the post-cold-war era. In this agreement NATO 
pledged not to permanently station forces in new NATO members in 
Central Europe and not to make changes to NATO's nuclear posture or 
basing. The United States and NATO have carried out these pledges. 
Russia, on the other hand, suspended its participation in the 
Conventional Forces in Europe treaty in 2007, increased the number of 
tactical nuclear weapons on NATO's borders, conducted a series of 
missile tests which may be a violation of the INF treaty, and of course 
is using military and paramilitary forces to destabilize Ukraine.

   In light of the changed security environment in Europe, 
        isn't it time for NATO to revisit the decision not to 
        permanently station forces in our Baltic allies, Poland, 
        Romania, and Bulgaria?

    Answer. Since the end of the cold war, Euro-Atlantic security has 
been based on a number of assumptions that we and our allies believe 
need to be reassessed in light of recent Russian behavior. Although 
this reassessment does not necessarily require stationing substantial 
combat forces permanently on the territory of the aforementioned 
allies, or changes NATO's nuclear posture or basing that are 
inconsistent with the Founding Act, it is clear that all of our NATO 
allies must also take concrete steps to strengthen deterrence in 
Europe. We cannot depend upon good will alone to guarantee allied 
security.
    As emphasized by President Obama in Brussels in March and then by 
Secretary of State Kerry at the NATO Foreign Ministerial, the United 
States wants to make sure there is a regular presence, at least through 
the end of the year, of NATO air, land, and sea forces to reassure 
those allies that feel most vulnerable of our commitment to collective 
defense. To maintain a persistent presence of U.S. forces in Europe, 
especially on the territory of the Central and Eastern allies, the 
United States will commit to a rotation of a significantly greater 
number of U.S. forces to Europe for training and exercises focused on 
readiness and reinforcement. We are also looking at our collective 
defense planning so we are prepared for any contingency to meet our 
Article 5 obligations to our NATO allies.
                           threat to baltics
    Question. Could Russia utilize the same military and paramilitary 
tactics it is using in Ukraine against the Baltics States? What steps 
is the United States taking to bolster the Baltic States' ability to 
resist Russian aggression?

    Answer. Russia's unlawful military intervention in Ukraine and use 
of nontraditional military methods are a challenge to international 
order. It is critical that the United States and its NATO allies are 
properly postured to meet short-notice challenges such as we have seen 
in Crimea.
    As emphasized by President Obama in Brussels in March 2014, and 
then by Secretary of State Kerry at the NATO Foreign Ministerial 
conference in April 2014, the United States has taken steps to ensure a 
continuing presence, at least through the end of the year, of U.S. air, 
land, and sea forces on the territories of, on the seas near, and in 
the skies above our Central and Eastern European allies for training 
and exercises that are focused on readiness and reinforcement. We are 
also updating our collective defense planning with our allies so that 
we are prepared for any contingency requiring us to meet our 
obligations under Article 5 of the NATO Charter.

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