[Senate Hearing 114-783]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 114-783

                       UKRAINIAN REFORMS TWO YEARS
                       AFTER THE MAIDAN REVOLUTION
                        AND THE RUSSIAN INVASION

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION
                               __________

                            MARCH 15, 2016

                               __________

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                COMMITTEE ON FOREIGN RELATIONS         

                BOB CORKER, Tennessee, Chairman        
JAMES E. RISCH, Idaho                BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida                 BARBARA BOXER, California
RON JOHNSON, Wisconsin               ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona                  JEANNE SHAHEEN, New Hampshire
CORY GARDNER, Colorado               CHRISTOPHER A. COONS, Delaware
DAVID PERDUE, Georgia                TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia              CHRISTOPHER MURPHY, Connecticut
RAND PAUL, Kentucky                  TIM KAINE, Virginia
JOHN BARRASSO, Wyoming               EDWARD J. MARKEY, Massachusetts


                  Todd Womack, Staff Director        
            Jessica Lewis, Democratic Staff Director        
                    John Dutton, Chief Clerk        


                              (ii)        

  
                            C O N T E N T S

                              ----------                              
                                                                   Page

Corker, Hon. Bob, U.S. Senator From Tennessee....................     1


Cardin, Hon. Benjamin L., U.S. Senator From Maryland.............     2


Nuland, Hon. Victoria, Assistant Secretary, Bureau of European 
  and Eurasian Affairs, U.S. Department of State, Washington, DC.     4

    Prepared statement...........................................     7

    Response to a Question for the Record Submitted to Assistant 
      Secretary of State Victoria Nuland by Senator Edward Markey    52


Ian J. Brzezinski, Senior Fellow, Brent Scowcroft Center on 
  International Security, Atlantic Council, Washington, DC.......    29

    Prepared statement...........................................    31


Herbst, Hon. John E., former U.S. Ambassador to Ukraine, 
  Director, Dinu Patriciu Eurasia Center, Atlantic Council, 
  Washington, DC.................................................    35

    Prepared statement...........................................    37


                             (iii)        
 
                      UKRAINIAN REFORMS TWO YEARS
                      AFTER THE MAIDAN REVOLUTION
                        AND THE RUSSIAN INVASION

                              ----------                              


                        TUESDAY, MARCH 15, 2016

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:03 a.m. in 
Room SD-419, Dirksen Senate Office Building, Hon. Bob Corker, 
chairman of the committee, presiding.
    Present: Senators Corker [presiding], Risch, Flake, Perdue, 
Gardner, Isakson, Barrasso, Cardin, Menendez, Shaheen, and 
Kaine.

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

    The Chairman. The Foreign Relations Committee will come to 
order.
    I want to thank our distinguished witness for being here 
and our panel that is coming after this. We appreciate all of 
the input on Ukraine we can get.
    And to our Secretary, you have been here on a number of 
occasions, and I think you know that Congress has tried to 
support Ukraine in their efforts. We have passed several pieces 
of legislation that have become law. All of them have been 
focused, at different levels with the lack of support for 
Ukraine, some of which has emanated from the administration. We 
know that you have been a strong voice. Sometimes your rhetoric 
has been beyond what the administration is actually doing, and 
we have had conversations about that. But we know that you are 
a career servant, and we appreciate the role that you certainly 
play in the region and throughout Europe.
    But again, our focus in the past has been to make sure that 
we are doing the things that we need to be doing to support 
Ukraine.
    Today's hearing is a little different because there are 
some things that Ukraine needs to be doing itself. And let us 
face it, 20 years ago, if Ukraine tried to focus on some of the 
same issues the rest of Europe had focused on then, it would be 
in a very different place. And so we have a country that needs 
to put tremendous reforms into place. The Minsk II agreement 
has been negotiated, and although there are a lot of concerns 
about Russia's adherence to this agreement, parts of it require 
the country of Ukraine to be taking steps on its own.
    So we are at a point again where I think Congress has been 
heavily pushing the administration to be more involved in 
helping Ukraine. We are now seeking a balance where Russia is 
still doing those things to create a frozen conflict, if you 
will, in eastern Ukraine. At the same time, there are things 
that Ukraine needs to do for its own good.
    As an advertisement, I do want to say that we had IMF 
reform as a part of one of our bills, and we were unable to 
pass a bill that dealt with IMF reform. But through the omnibus 
process, our office was able to work with the Treasury 
Department to put into place IMF reforms that have caused us to 
live up to our obligations. And let us face it, the IMF is 
playing one of the biggest roles in causing Ukraine to be able 
to move ahead with reforms by the carrot and stick approach.
    But again, we appreciate you being here today.
    I think there are concerns about Ukraine's own ability to 
fight corruption, to deal with the economic and fiscal issues 
inside the country. Certainly there have been some bold but 
isolated steps that have been taken. At the same time, we have 
had some resignations from people who feel like that those 
steps are not enough or feel like they are being marginalized.
    Simultaneously Russia continues to aid some of the 
corruption and, does things on the eastern border that keeps 
the Ukrainian Government sort of off step and not able to fully 
focus on their own internal issues.
    This hearing today, hopefully, will give us a much better 
sense of what type of pressure the United States should be 
placing, where we should be as it relates to Ukraine today.
    We thank you very much for being here, and with that, I 
will turn it over to our distinguished ranking member, my 
friend, Ben Cardin.

             STATEMENT OF HON. BENJAMIN L. CARDIN, 
                   U.S. SENATOR FROM MARYLAND

    Senator Cardin. Well, thank you very much, Mr. Chairman, 
and thank you for the way that you got our committee engaged in 
what is happening in Ukraine and Russia. It has truly been, I 
think, the appropriate oversight by the United States Senate. 
So I thank you very much, particularly for this hearing.
    Secretary Nuland, I thank you for your incredible service 
to our country. It is an interesting day for you to be here 
with the Chief of Missions in town. I do not know if that is 
good or bad that you can escape them for a little bit. But 
anyway, I know that you are very busy, and we very much 
appreciate you taking time to be with us today to go over the 
critical next step as it relates to Ukraine and U.S. policy in 
Ukraine.
    Since the Maidan demonstrations in 2013, the United States 
supported the people of Ukraine and reformers in the government 
as they withstood Russia's illegal annexation of Crimea and 
Russia's supported violence in the eastern Ukraine. Russia 
continues to wage war in the east.
    The popular sentiment in the West is that the Minsk 
ceasefire is holding, but I see reports of Ukrainian soldiers 
being killed and the overall level of violent attacks 
increasing. Tanks in the region circulate without restraint, 
while observers from the OSCE are severely limited in their 
movements.
    I understand that the Ukrainian friends must implement 
political elements of Minsk, constitutional reforms and 
elections. But we also must see commensurate progress from the 
Russians on the security and political fronts. The United 
States and the EU should maintain and even consider 
strengthening robust sanctions on Russia until it fully 
implements the Minsk agreements.
    Despite the persistent threat from the east, events over 
the course of the last few months have demonstrated that 
Ukraine's central struggle lies within. Earlier this year, 
Ukraine's reformist economy minister resigned due to the 
government's inability to root out entrenched corruption. The 
deputy prosecutor also resigned, citing similar concerns. There 
has been progress in the reform movement. There is no question 
about that, but it has been too slow.
    This committee has held several hearings on Ukraine since 
the start of the crisis that have sought to identify the 
security, economic, and technical assistance the United States 
can provide to help support Ukraine's internal reforms, as well 
as fight against Russia. Over the course of this time, the 
United States has committed $760 million of assistance to 
Ukraine, including security assistance.
    Ukraine's parliamentarians responded by passing critical 
pieces of reform legislation and have dramatically improved 
Ukraine's microeconomic situation. The government should be 
commended for reducing public expenditures by 9 percent, 
cutting the budget deficit to just 2 percent of GDP from 10 
percent, undertaking reforms in the energy sector to eliminate 
energy subsidies, and floating an exchange rate to eliminate 
Ukraine's current account deficit. Earlier this year, 
parliament passed broad-based tax reform, and the government 
adopted a budget for 2016 that is in line with the IMF 
requirements. So while Ukraine has made progress on the 
economic reforms, it has been hampered by entrenched interests 
that wish to maintain the corrupt system upon which they have 
built massive fortunes.
    I again call on Ukraine's leaders to show courage and 
resolve in pursuing progress against corrupt individuals who 
wield influence in the country. I believe the United States can 
play a role as well as exposing and pursuing corrupt Ukrainian 
officials who use U.S. financial institutions to direct their 
ill-gotten gains.
    An important step was taken when General Prosecutor Shokin 
resigned earlier this year, but parliament must now accept his 
resignation. And this must be followed by a commitment to take 
concrete steps towards judicial reform, civil service reform, 
law enforcement reform, and a transparent and open 
privatization process of Ukraine's 1,800 state-owned 
enterprises.
    The Ukrainian people have suffered under multiple corrupt 
regimes and took to the streets to demand good governance, 
democracy, respect for human rights, and rule of law. The 
current government, while having made substantial strides on 
the path to reform, is struggling with corruption. Simply put, 
the government is moving far too slow on the reform process. It 
is imperative that the government reenergize the reform process 
or it will lose the support of the international community, and 
more importantly, it will lose the support of the Ukrainian 
people.
    Mr. Chairman, I look forward to hearing from the Secretary 
and from our distinguished guests on the second panel.
    The Chairman. Well, thank you for those comments, and I 
think that if I could get to the essence of many of our 
concerns - and we expressed these directly to leaders who come 
here from Ukraine and those that we visit there - I think we 
are concerned about these sanctions in Europe being 
discontinued. We want them to be continued. Obviously, we 
consider Russia to be the villain in this process, but we are 
worried that without Ukraine taking steps forward, Europe will 
view them as the reason the Minsk II agreement is not being put 
in place. I believe that will fracture Europe's ability to 
continue working together to keep those sanctions in place.
    So, again, thank you for being here today. Our first panel 
witness is the Honorable Victoria Nuland, commonly called 
Toria, who serves as the Assistant Secretary for the Bureau of 
European and Eurasian Affairs, U.S. Department of State. We 
thank you for your distinguished service to our country and for 
being here today. And with that, if you would summarize your 
comments in about 5 minutes or so, without objection, your 
written testimony will become part of the record. Thank you.

STATEMENT OF HON. VICTORIA NULAND, ASSISTANT SECRETARY, BUREAU 
  OF EUROPEAN AND EURASIAN AFFAIRS, U.S. DEPARTMENT OF STATE, 
                         WASHINGTON, DC

    Ms. Nuland. Well, thank you very much, Chairman Corker, 
Ranking Member Cardin, members of this committee. Your 
bipartisan support, your visits to Ukraine, the assistance you 
have provided have been absolutely essential to the American 
goal of supporting Ukraine's democratic European future.
    Before I begin today, let us just take a moment, if we may, 
to honor the sacrifice of Ukrainian pilot and Rada Deputy 
Nadiya Savchenko, who was seized in Ukraine in 2014, dragged 
across the Russian border, and unjustly held and tried in 
Russia. Today, her hunger strike continues as the court in 
Rostov again delays an announcement of its verdict. Nadiya's 
struggle is a stark reminder of the pressures Ukraine continues 
to face, even as it works to build a stronger, more resilient 
country for its citizens.
    I want to thank this committee for its continued focus on 
Nadiya Savchenko and all Ukraine's hostages and for the passage 
of Senate Resolution 52. We call on Russia to release her 
immediately and return her to Ukraine and to her family before 
it is too late.
    Like Nadiya, all across Ukraine, citizens are standing up 
and sacrificing for the universal values that bind us as a 
transatlantic community: for sovereignty, for territorial 
integrity, for human rights and dignity, for clean and 
accountable government, and for justice for all.
    The United States has stood by Ukraine as Russia has sought 
to stymie its democratic rebirth at every turn. Today, however, 
as you both mentioned, Ukraine's European future is put at risk 
as much by enemies within as by external forces. The oligarchs 
and kleptocrats who controlled Ukraine for decades know that 
their business model will be broken if Maidan reformers succeed 
in 2016. So they are fighting back with a vengeance, using all 
the levers of the old system: their control of the media, 
state-owned enterprises, Rada deputies, the courts and the 
political machinery, while holding old loyalties and threats 
over the heads of decision-makers to block change.
    Against this backdrop, Ukraine's own leaders have been 
locked for months in a cycle of political infighting and 
indecision about how to restore unity, trust, and effectiveness 
in the reform coalition, and how to reboot the government and 
its program. Every week that Ukraine drifts internally, that 
reform is stalled, IMF and international support goes 
undisbursed, and those inside and outside the country who 
preferred the old Ukraine grow more confident.
    The ability of the United States and the international 
community to continue to support Ukraine depends upon the 
commitment of its leaders to put their country and their people 
first. So all those who call themselves reformers in Ukraine 
have to work harder now to rebuild consensus behind a 
leadership team and an IMF- and EU-compliant program of 
aggressive measures to clean up corruption, restore justice, 
and liberalize the economy. We continue to believe that 2016 
can and should be the year that Ukraine breaks free from the 
unholy alliance of dirty money and dirty politics, which has 
ripped off Ukrainians for far too long. But without that, 
Ukraine risks sliding backwards once again into corruption, 
into lawlessness, into vassal statehood.
    But here is the good news. Since I last testified before 
this committee about 5 months ago, Ukraine has stabilized its 
currency. It is rebuilding its reserves. It passed its first 
winter without relying on Gazprom gas. It approved a 2016 
budget that is in line with IMF requirements. It passed civil 
service reform. It broke its own record for wheat exports. It 
stood up an anti-corruption bureau and a special prosecutor. 
And it began to decentralize power and budget authority to 
local communities.
    The very week in February that the current government 
survived a non-confidence vote, Rada deputies also approved 
five critical pieces of legislation to stay on track with IMF 
conditions and EU requirements for their bid for visa-free 
travel, and they passed another piece of legislation just 
today.
    U.S. assistance has been critical to all of these efforts. 
As you said, Mr. Ranking Member, we have committed over $760 
million in assistance so far, plus two $1 billion loan 
guarantees. And U.S. advisors serve in almost a dozen Ukrainian 
ministries and localities helping to deliver services, 
eliminate fraud and abuse, improve tax collection, and 
modernize Ukrainian institutions.
    With U.S. help, newly vetted and trained police officers 
are patrolling the streets of 18 Ukrainian cities.
    In courtrooms across Ukraine, free legal aid attorneys, 
funded by the U.S., have won two-thirds of all the acquittals 
in the country.
    Treasury and State Department advisors have helped Ukraine 
shutter over 60 failed banks and protected the assets of 
depositors.
    And since there can be no reform in Ukraine without 
security, over $266 million of our support has been in the 
security sector, training 1,200 soldiers and 750 Ukrainian 
national guard personnel, and supplying lifesaving gear. In 
fiscal year 2016, we are continuing that training and equipment 
of more of Ukraine's border guards, military, and coast guard.
    But it is urgent that Ukrainian President Poroshenko, Prime 
Minister Yatsenyuk, and the leaders of the Rada come together 
now behind a government and a reform program that deliver what 
the Maidan demanded: clean leadership, justice, an end to zero-
sum politics and backroom deals, and public institutions that 
serve Ukraine's citizens rather than impoverishing them or 
exploiting them.
    In 2016, our U.S. assistance program, with your generous 
support, is designed to support all of these priorities. 
Specifically, we will support Ukraine as it takes further steps 
to clean up its energy sector; to appoint and confirm a clean 
and new prosecutor general who is committed to rebuilding the 
integrity of the PGO and indicting and prosecuting the corrupt; 
as it takes steps to improve the business climate and move 
ahead with privatization of state-owned enterprises and 
strengthen the banking system and strengthen judicial 
independence; and to improve services and eliminate graft in 
areas that affect every Ukrainian, including health care, 
education, and transportation; and also to modernize the 
ministry of defense.
    Of course, Ukraine's greatest challenge remains the ongoing 
occupation of its territory in Crimea and Donbas and its 
efforts to restore sovereignty in the east through the full 
implementation of the Minsk agreements. These agreements we 
believe remain the best hope for peace.
    The last time I came before this committee, Ukraine was in 
a better place. The September 1st ceasefire had largely 
silenced the guns, and some Ukrainians were even beginning to 
go back to Donbas. But as you both have said, today things are 
heating up again. We have seen a spike in ceasefire violations 
taking the lives of 68 Ukrainian military personnel and 
injuring 317. In February alone, the OSCE monitors reported 
15,000 violations, the vast majority of which originated from 
the separatist-controlled side of the line of contact. And 
despite President Putin's commitment to the other Normandy 
leaders, Russia and separatist forces continue to deny OSCE 
monitors access to large swaths of the Donbas.
    At the early March meeting of Normandy foreign ministers, 
Ukraine supported concrete steps to pull back forces from the 
line of contact, to increase OSCE monitors and equipment in key 
hotspots, and to establish more OSCE bases deeper in the Donbas 
and on the border. Taking these steps now and releasing 
hostages would greatly improve the environment for compromising 
Kyiv on election modalities and political rights for Donbas.
    In the meantime, though, neither Moscow nor the self-
appointed Donbas authorities should expect the Ukrainian Rada 
take up key outstanding political provisions of Minsk, 
including election modalities and constitutional amendments, 
before the Kremlin and its proxies meet their basic security 
obligations under Minsk.
    Here again, with will and effort on all sides, 2016 could 
be a turning point year for Ukraine. If security can improve in 
the coming weeks, if more hostages can be returned, if the 
parties can finalize the negotiations on the political issues 
of Minsk, we could see legitimate leaders elected in free, fair 
elections in Donbas by the fall and the withdrawal of Russian 
forces and equipment and the return of Ukraine's sovereignty 
over its border before the end of the year. We will keep 
working with Ukraine to do its part to implement Minsk and 
working with our European partners to ensure that Russia stays 
under sanctions until it does its part--all of it. And of 
course, Crimea sanctions must remain in place so long as the 
Kremlin imposes its will on that piece of Ukrainian land.
    Mr. Chairman, Mr. Ranking Member, members of this 
committee, we always knew that Ukraine's road to peace and 
sovereignty, to clean and accountable government, and to Europe 
would not be easy. Today the stakes are as high as ever. With 
strong leadership in Kyiv, 2016 can and should be a turning 
point year for Ukraine's sovereignty and its European future. 
If and as Ukraine's leaders recommit to drive the country 
forward, the United States must be there to support them. At 
the same time, we must be no less rigorous than the Ukrainian 
people themselves in demanding that Kyiv's leaders take their 
own responsibility now and deliver a truly clean, strong, just 
Ukraine while they still have the chance.
    I thank this committee for its support for Ukraine and for 
a Europe whole, free, and at peace.
    I look forward to answering your questions.
    [Ms. Nuland's prepared statement follows:]


               Prepared Statement of Hon. Victoria Nuland

    Thank you Chairman Corker, Ranking Member Cardin, members of this 
committee for the opportunity to join you today and for the personal 
investment so many of you have made in Ukraine's democratic, European 
future. Ukraine still has a long way to go to meet the aspirations of 
its people, but your bipartisan support, your visits to Ukraine, and 
the assistance you and your fellow members have provided have been 
essential to our policy.
    Before I begin, let us take a moment to honor the sacrifice of 
Ukrainian pilot and Rada Deputy Nadiya Savchenko, who was seized in 
Ukraine in 2014, dragged across the Russian border and unjustly held 
and tried in Russia. Today, her hunger strike continues as the court in 
Rostov again delays announcement of its verdict. Nadiya's struggle is a 
stark reminder of the severe pressures and violence Ukraine continues 
to face even as it works to build a stronger, more resilient country 
for its citizens. I thank this committee for its continued focus on 
Nadiya Savchenko and all Ukraine's hostages, and for the passage of 
Senate Resolution 52. We call on Russia to release her immediately, and 
return her to Ukraine and to her family before it's too late.
    Like Nadiya, all across Ukraine, citizens are standing up and 
sacrificing for the universal values that bind us as a transatlantic 
community: for sovereignty, territorial integrity, human rights, 
dignity, clean and accountable government, and justice for all. The 
United States has a profound national interest in Ukraine's success, 
and with it, a more democratic, prosperous, stable Europe.
    We have stood by Ukraine for more than two years as Russia has 
sought to stymie its democratic rebirth at every turn--with political 
pressure, economic pressure, and with unprecedented military aggression 
and violation of international law. Any set of leaders would be 
challenged to lead their country in this environment. Today, however, 
Ukraine's European future is put at risk as much by enemies within as 
by external forces. The oligarchs and kleptocrats who controlled 
Ukraine for decades know their business model will be broken if Maidan 
reformers succeed in 2016. They are fighting back with a vengeance, 
using all the levers of the old system: their control of the media, 
state owned enterprises, Rada deputies, the courts and the political 
machinery, while holding old loyalties and threats over the heads of 
decision-makers to block change.
    Against this backdrop, Ukraine's leaders have been locked for 
months in a cycle of political infighting and indecision about how to 
restore unity, trust and effectiveness in the reform coalition, and 
reboot the government and its program. Every week that Ukraine drifts, 
reform is stalled, IMF and international support goes undisbursed, and 
those inside and outside the country who preferred the old Ukraine grow 
more confident. More than 3 months ago, Vice President Biden spoke 
before Ukraine's Rada, its President and its Prime Minister and called 
on all of Ukraine's leaders to set aside their parochial interests, 
reminding them: ``Each of you has an obligation to seize the 
opportunity of the sacrifices made in the Maidan, the sacrifices of the 
Heavenly Hundred. Each of you has an obligation to answer the call of 
history and finally build a united, democratic Ukrainian nation that 
can stand the test of time.''
    The ability of the United States and the international community to 
continue to support Ukraine depends upon the commitment of its leaders 
to put their people and country first. All those who call themselves 
reformers must rebuild consensus behind a leadership team and an IMF- 
and EU-compliant program of aggressive measures to clean up corruption, 
restore justice, and liberalize the economy. With more unity and 
leadership, 2016 can and should be the year Ukraine breaks free from 
the unholy alliance of dirty money and dirty politics which has ripped 
off the Ukrainian people for too long. Without it, Ukraine will slide 
backwards once again into corruption, lawlessness, and vassal 
statehood.
    It is precisely because Ukrainians have worked so hard, and come so 
far already, that their leaders must stay united and stay the course 
now. And it is because the reforms already taken are cutting into ill-
gotten fortunes and cutting off avenues for corruption that the forces 
of revanche are fighting back. Here's the good news: since I last 
testified before this committee five months ago, Ukraine has largely 
stabilized its currency and is rebuilding its reserves; seen some 
modest growth in the economy; passed its first winter without relying 
on gas from Gazprom; approved a 2016 budget in line with IMF 
requirements; passed civil service reform to create competition and 
transparency; recruited a new corporate board for Naftogaz; broke its 
own record for greatest wheat exports; stood up an independent Anti-
Corruption Bureau and Special Prosecutor; and, begun to decentralize 
power and budget authority to local communities to improve services and 
policing for citizens.
    The very week in February that the current government survived a 
no-confidence vote, Rada deputies also approved five critical pieces of 
reform legislation to stay on track with IMF conditions and advance 
Ukraine's bid for visa-free travel with the EU, including laws on:


   Privatization of state owned enterprises;

   Improvements in corporate governance of state owned enterprises;

   Asset seizure and recovery;

   The appointment process for anti-corruption prosecutors; and,

   Mandatory asset disclosure for public officials, which the 
        President just sent back to the Rada with several fixes.


    U.S. assistance has been critical to these efforts. Since the start 
of the crisis, the United States has committed over $760 million in 
assistance to Ukraine, in addition to two $1 billion loan guarantees. 
U.S. advisors serve in almost a dozen Ukrainian ministries and 
localities and help deliver services, eliminate fraud and abuse, 
improve tax collection, and modernize Ukraine's institutions.


   With U.S. help, newly-vetted and trained police officers are 
        patrolling the streets of 18 cities;

   In court rooms across Ukraine, Free Legal Aid attorneys, funded by 
        the U.S., have regained their credibility and won 2/3 of all 
        acquittals in Ukraine in 2015.

   Treasury and State Department advisors embedded in Ukraine's 
        National Bank and related institutions helped Ukraine shutter 
        over 60 failed banks out of 180 and protect assets.

   The U.S. and our EU partners are supporting privatization, freeing 
        up about $5 billion in Ukraine's coffers and pushing the 
        largest state-owned enterprise, Naftogaz, to form an 
        independent supervisory board that operates without 
        interference.

   And, since there can be no reform in Ukraine without security, over 
        $266 million of our support has been in the security sector, 
        training nearly 1200 soldiers and 750 Ukrainian National Guard 
        personnel and providing: 130 HMMWVs, 150 thermal goggles and 
        585 night vision devices, over 300 secure radios, 5 Explosive 
        Ordnance Disposal robots, 20 counter-mortar radars, and over 
        100 up-armored civilian SUVs. In FY16, we plan to train and 
        equip more of Ukraine's border guards, military, and coast 
        guard to help Ukraine secure its border, defend against and 
        deter future attacks, and respond to illicit smuggling.


    But first, Ukraine, President Poroshenko, Prime Minister Yatsenyuk, 
and the Rada must come together behind a government and reform program 
that delivers what the Maidan demanded: clean leadership; justice; an 
end to zero-sum politics and backroom deals; and public institutions 
that serve Ukraine's citizens rather than impoverishing or exploiting 
them.
What Ukraine Must Do
    The 2016 U.S. assistance program is designed to support all these 
priorities. Specifically, we will support Ukraine as it takes steps to:


 1. Clean up its energy sector by passing legislation to establish an 
        Independent Energy Regulator, reduce unsustainable energy 
        subsidies, and accelerate de-monopolization of the gas market, 
        efficiency of procurement and revenue management, and the 
        unbundling of services;

 2. Appoint and confirm a new, clean Prosecutor General, who is 
        committed to rebuilding the integrity of the PGO, and 
        investigate, indict and successfully prosecute corruption and 
        asset recovery cases--including locking up dirty personnel in 
        the PGO itself;

 3. Improve the business climate by streamlining the bureaucracy, 
        moving ahead with the privatization of the largest state-owned 
        enterprises in a manner that meets international standards, and 
        further recapitalizing and strengthening the banking system;

 4. Strengthen judicial independence, including the certification, 
        dismissal, and recruitment of judges;

 5. Improve services and eliminate graft in key service areas that 
        affect every Ukrainian: healthcare, education, and 
        transportation; and

 6. Modernize the Ministry of Defense, squeeze out corruption in 
        logistics and supply chains, and move toward western standards 
        of command and control and parliamentary oversight.

Minsk Agreements
    Of course, Ukraine's greatest challenge remains the ongoing 
occupation of its territory in Crimea and Donbas, and its efforts to 
restore sovereignty in the East through full implementation of the 
September 2014 and February 2015 Minsk agreements. These agreements 
remain the best hope for peace, and we continue to work in close 
coordination with the ``Normandy Powers''--Ukraine, Russia, Germany, 
and France--to see them fully implemented.
    The last time I came before this committee, Ukraine was in a better 
place. The September 1 ceasefire had largely silenced the guns, and 
some Ukrainians were even returning home to Donbas. But today, things 
are heating up again. In recent weeks, we have seen a spike in 
ceasefire violations, taking the lives of 68 Ukrainian military 
personnel and injuring 317. In February alone, OSCE monitors reported 
15,000 violations, the vast majority of which originated on the 
separatist-controlled side of the line of contact. And, there were more 
recorded ceasefire violations in the first week of March than at any 
time since August 2015. And despite President Putin's commitments to 
the Normandy powers last October, combined Russian-separatist forces 
continue to deny OSCE monitors access to large portions of Donbas and 
to harass and intimidate those who do have access.
    At the last meeting of Normandy Foreign Ministers in early March, 
Ukraine supported concrete steps to pull back forces on the line of 
contact, increase OSCE monitors and equipment in key hotspots, and 
establish more OSCE bases deeper into Donbas and on the border. Taking 
these steps now and releasing hostages will greatly improve the 
environment for compromise in Kyiv on election modalities and political 
rights for Donbas. In the meantime, neither Moscow nor the self-
appointed Donbas authorities should expect the Ukrainian Rada to take 
up key outstanding political provisions of the Minsk agreement, 
including election modalities and constitutional amendments, before the 
Kremlin and its proxies meet their basic security obligations under 
Minsk. Although the U.S. is not a party to the Normandy process, we 
maintain a very active pace of diplomatic engagement at all levels with 
Kyiv, Moscow, Paris and Berlin to facilitate implementation of both the 
security and political aspects of Minsk, and to help the parties 
brainstorm solutions.
    Here again, with will and effort on all sides, 2016 can be a 
turning point for Ukraine. If security can improve in coming weeks, if 
hostages are returned, if the parties can finalize negotiations on 
election modalities and other political issues, we could see legitimate 
leaders elected in Donbas by fall, the withdrawal of Russian forces and 
equipment, and the return of Ukraine's sovereignty over its border 
before the end of the year. We will keep working with Ukraine to do its 
part to implement Minsk, and working with our European partners to 
ensure Russia stays under sanctions until it does its part--all of it. 
And of course, Crimea sanctions must remain in place so long as the 
Kremlin imposes its will on that piece of Ukrainian land.
    Mr. Chairman, Mr. Ranking Member, members of this committee, we 
knew Ukraine's road to peace, sovereignty, clean, accountable 
government and Europe would be difficult and rocky.
    Today, the stakes are as high as ever. With strong, unified 
leadership in Kyiv, 2016 can and should be a turning-point year for 
Ukraine's sovereignty and European future. If and as Ukraine's leaders 
recommit to drive the country forward, the United States must be there 
to support them, in our own national interest. At the same time, we 
must be no less rigorous than the Ukrainian people themselves in 
demanding Kyiv's leaders take their responsibility now to deliver a 
truly clean, strong, just Ukraine while they still have the chance. I 
thank this committee for its bipartisan support and commitment to the 
sovereignty and territorial integrity of Ukraine and to a Europe whole, 
free and at peace. I look forward to your questions.


    The Chairman. Thank you very much for that testimony and 
for your efforts on our behalf.
    I am going to focus on one issue and then save the rest of 
my time for interjections along the way.
    On the issue of the sanctions we, along with the European 
Union, have put in place against Russia, there is no question--
is there--that Putin is sewing some degree of discord there and 
that keeping those in place beyond June is something that is 
very important to see this through. Is that correct?
    Ms. Nuland. Absolutely.
    The Chairman. My observation is that the announcements 
yesterday in Syria by Putin, relative to their withdrawal is 
intended to somehow influence that. Is that correct?
    Ms. Nuland. We continue to look at the Syria theater and 
the Ukraine theater as two separate places. We will judge the 
Ukraine action based on what is done in Ukraine. And as you 
know, the sanctions are linked to Ukraine. So from our 
perspective, what is done in Syria should not impact choices 
with regard to Ukraine.
    The Chairman. Do you agree that Putin is trying to be 
perceived as someone who is working well with the international 
community and that some of his actions are intended to, over 
time, break the resolve of the European Union in regard to the 
sanctions?
    Ms. Nuland. I think there is no question that he is 
lobbying hard inside Europe to come out from under sanctions.
    The Chairman. So if you could give us guidance as we meet 
and talk with Ukrainian officials because I think everyone on 
this committee certainly understands what happened on the 
Maidan. We understand what took place in Ukraine and herald 
that, but at the same time, there are concerns about the 
progress. That is what this hearing is about.
    If you were to look at the Minsk II agreement, what are the 
pieces of the agreement that are in Ukraine's hands that 
southern Europe or other components of Europe might look at and 
say, well, Ukraine is not fully doing the things that it needs 
to do and therefore, maybe we ought to consider lightening up 
Ukraine? What are the things that worry you the most?
    Ms. Nuland. I think what is worrying me the most are the 
comments that we hear from some parts of Europe that as, week 
after week, Ukraine's leaders are unable to come together 
behind a refreshed government, that the country is drifting, 
that there is not the will to drive forward with Ukraine and 
therefore, there probably will not be the will to implement 
Minsk. We do not agree with that, but it causing doubt in 
Europe about whether continued support for Ukraine is 
warranted.
    The Chairman. We've had many interactions with Ukraine. We 
obviously have passed legislation. I know that the 
administration is working to support efforts, and the IMF is 
doing the same. Is the formation and stabilization of the 
Ukrainian government itself, in essence, the most important 
thing that we can push for? Is that correct?
    Ms. Nuland. Absolutely, but not just coming together in 
terms of reloading the government, but reloading the government 
and the leadership coalition in the Rada behind an aggressive 
program of IMF-compliant reform. There is, as I said, a lot 
still to do. So it is not just about the people. It is about 
the program.
    The Chairman. Thank you.
    I will reserve my time.
    Senator Cardin?
    Senator Cardin. Well, again, thank you very much for your 
testimony.
    I want to follow up on what Senator Corker is referring to 
because it seems to me if Europe does not extend the sanctions 
and if Minsk is not implemented and if Europe is not willing to 
extend the sanctions in June, it has a profound impact on 
Europe, let alone Ukraine. Here we are seeing Russia's 
influence in Europe for its national sentiments growing. We 
have seen that in some of the recent elections in some of the 
European countries. So I am deeply concerned that our 
strategies during the next couple months need to be focused on 
European unity and focused on the culprit in Ukraine, which is 
Russia. They are the ones who caused the current violent 
activities that are taking place in that country.
    So I want to focus on how we can be more effective in 
getting Ukraine to implement the critical reforms that they 
have not been able to do. I agree with you. The economic 
reforms, the budget, the monetary--they have been on schedule 
doing a lot of the important changes. And this winter, without 
the reliance on the energy issue, that is a huge change in 
behavior in the country at incredible cost politically. It is 
not an easy thing to implement these changes.
    But the oligarchs still control the political process. And 
when a country is coming towards reform, you always have the 
problems within the civil service that you need to root out the 
corruption there by adequate budgets and paying civil servants 
adequate salaries. But in Ukraine, the problem stems from the 
top, and that is the relationship between the business 
interests and the political system to preserve a corrupt system 
which the elitists benefit from and want to continue to benefit 
from.
    How does the United States be more effective in rooting out 
that type of corruption and supporting leaders in that country 
that take the brave stands and the right stand that the people 
of Ukraine want? How specifically can 2016--you say it could be 
a great year. What can the United States do to make 2016 that 
type of a year?
    Ms. Nuland. Well, the first thing that we do is what we 
have done throughout this, which is to peg our assistance to 
those things that the IMF and the EU need to see for reform. So 
in particular, we have pegged our next $1 billion loan 
guarantee, first and foremost, to having a rebooting of the 
reform coalition so that we know who we are working with, but 
secondarily, to ensuring that the prosecutor general's office 
gets cleaned up, as I said. The current prosecutor general, as 
you mentioned, has resigned. We need to see a clean model 
citizen who is really going to take justice forward in Ukraine 
appointed there and confirmed. We need to see the next stage in 
de-oligarching the economy, if that is a word, and by that, it 
is some of the things that I mentioned, including privatization 
of these state-owned enterprises that are used to siphon off 
money. It is cleaning up the tax service, the customs service, 
all of these places where money is siphoned off. It is creating 
transparency in media holdings and these kinds of things. It is 
shoring up the banking system further so that it cannot be used 
to rip people off. It is strengthening private agriculture so 
that agriculture cannot persist as an oligarchic haven and more 
unbundling in the energy sector. And all of our assistance 
programs are designed to support those concrete steps, as 
Ukraine takes them, but if they do not take them, then we will 
not be able to disburse in those areas.
    Senator Cardin. Let me ask you specifically about judicial 
reform. The judiciary historically in Ukraine has not only been 
a facilitator of corruption, it has been a source of 
corruption.
    Ms. Nuland. Right.
    Senator Cardin. So what do we do to specifically hold 
Ukraine accountable on judicial reform?
    Ms. Nuland. Well, as I said, the first thing is to see that 
the prosecutor general's office gets cleaned up. We had 
advisors in that office, which have helped us to better 
understand what needs to happen. It will start with new 
leadership. It will start with a review of all the justices.
    We are also supporting the constitutional amendments to the 
judicial aspects of Ukraine's leadership. It has passed the 
Rada in the first reading and needs to pass in a second 
reading. That will help create more accountability for 
justices, more transparency in terms of their own ownership, et 
cetera. And we are doing a lot of judicial retraining and would 
like to do more.
    Senator Cardin. As I also understand, in Ukraine there is a 
history of loyalty of judges to particular political interests 
rather than to an independence. Are the reforms aimed at giving 
judges the independence they need to make independent choices 
rather than just following the will of the political elite?
    Ms. Nuland. Well, as you know, Senator Cardin, because you 
have been a champion of this across Europe, it is a long 
process but absolutely, and it starts with transparency in 
their own financial holdings. It also goes to stress-testing 
the qualifications of all justices. It goes to breaking the 
link between politics and their appointments, all of those 
kinds of things that we have had to support in other parts of 
Europe. And we are really just at the beginning in Ukraine.
    Senator Cardin. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Senator Perdue?
    Senator Perdue. Well, it is good to see you again. Thank 
you for being here. And your testimony is always very direct 
and enlightening.
    I also appreciate your recent trip to the European defense 
conference in Munich, and some of your off-the-record comments 
were very helpful.
    But I want to talk about two things that I did not hear 
talked about there, and I know you have a heart for both of 
these. But I would like to get just an update for the 
committee. One is Crimea and the other is Georgia.
    You know, it is hard to believe it has been 2 years since 
Russia went in and illegally annexed, in my opinion, Crimea and 
have basically cut them off from their Ukrainian news and also 
Internet providers and so forth. Russia submitted their control 
of Sevastopol, their warm water port there, in connection with 
what they are doing in Tartus and Latakia in Syria, as well as 
Kaliningrad in Murmansk. It is easy to see what Russia is doing 
and why Crimea is so important to them militarily.
    My question is very simple. Can you give us an update about 
where we are with Crimea? Is there an active conversation about 
returning Crimea to Ukraine, and what other pressures can we 
put on Russia to actually entertain a conversation about 
returning Crimea to Ukraine?
    Ms. Nuland. Well, thank you, Senator. We obviously share 
your concerns not only about what is happening inside Crimea 
and human rights for citizens and particularly minority 
populations, but also the militarization of Crimea which has an 
impact.
    So the primary lever that we have are the continuing U.S. 
and European Union sanctions that preclude any investment by 
any of us in Crimea and put under sanctions any entities that 
would try to trade. So, again, the theory of the case here is 
that if you bite off a piece of another country's territory, 
that it dries up in your mouth.
    Senator Perdue. Is it the position of the administration, 
though, that Crimea and the occupied portions of eastern 
Ukraine are all one and the same in the conversation with 
regard to the sanctions in Russia?
    Ms. Nuland. Well, we are pursuing them in parallel but 
separately. The Minsk accords govern how the Donbas conflict 
could be settled and sovereignty could be returned to Ukraine. 
We have made clear that we will never recognize Crimea's 
occupation and incorporation into Russia and that sanctions 
will stay in place until that is resolved.
    Senator Perdue. Good. Thank you. That clears that up.
    Let us talk about Russia just a minute--or Georgia just a 
minute. You know, it is, I guess, technically a frozen 
conflict, as some people term it, and Russia has a history of 
creating these frozen conflicts. It is hard also to believe it 
has been 8 years since Russia invaded Georgia. And now today, 8 
years on, one-fifth of Georgia's territory and about a third of 
the population resides in Russian controlled territory within 
Georgia.
    Our own State of Georgia has a National Guard relationship 
and a partnership with the country there. And I know there are 
some forward-moving activities this spring in Georgia. And I 
spoke recently with our own adjutant general about their 
efforts there.
    Can you give us an update? You know, Georgia's defense 
minister, Tina Khidasheli--and she is talking about ongoing 
concern. This is the former chief I guess--the recent 
occupation of the territory and what efforts we can make there 
to bring that back into an active conversation. I understand 
these are part of the sanctions, but can you give us an update 
on that frozen conflict?
    Ms. Nuland. Well, thank you, Senator, and thanks for what 
Georgia does for Georgia. It is a great partnership, and the 
people of Georgia very much appreciate it.
    I think you know that in the early days of the U.S. and the 
NATO partnership with Georgia, our security assistance was 
primarily directed towards helping Georgia to deploy with us to 
Afghanistan and other places, make them interoperable, able to 
go a distance, et cetera.
    We have in the recent period both in U.S. assistance to 
Georgia and in NATO assistance to Georgia, as we head towards 
our NATO summit in Warsaw, reoriented that assistance on the 
security side at Georgia's request to help strengthen 
resilience, self-defense, address their concerns about not only 
the continuing Abkhaz issues, but the fact that there may be 
efforts to move the lines, et cetera. So we are very much 
focused on the self-defense aspects of that relationship.
    Senator Perdue. Sorry. Do we oppose the Russian effort to 
put that rail line down to Armenia through occupied Georgia?
    Ms. Nuland. The Georgians are trying to work with the 
Russians now on a more appropriate rail link that can be of 
positive benefit to everybody and not exploit the situation.
    One thing I would say, though, is that we have encouraged 
the government in Tbilisi to continue to reach out particularly 
to the people of Abkhazia and to help them to benefit from the 
new arrangements that they have with Europe and ensure that 
they increasingly see benefits from those kinds of 
arrangements, which stand the chance to make Abkhazia far more 
prosperous than anything Russia has to offer.
    Senator Perdue. Well, in meeting with the Defense Minister 
from Georgia, Khidasheli--she is the current, not the former, 
but the current Defense Minister--she is very concerned about 
that rail line, as I am sure you guys are aware.
    Ms. Nuland. Yes.
    Senator Perdue. One last question with the time remaining. 
Let us go back to Russia. Last year, the administration had 
Ambassador Paula Dobriansky, former Under Secretary of State 
for Democracy and Global Affairs, actually propose to this 
committee that the West impose an embargo on spare parts for 
Russian oil refineries.
    I know this is getting in the weeds a bit, but as we look 
at having these sanctions have more bite in Russia and to 
actually get them to moderate their activity, Russia is heavily 
dependent on western spare parts for their refining industry. 
Is this something that we are thinking about? Is this a 
possibility for things like pumps, compressors, catalytic 
agents, and so forth within their refining industry?
    Ms. Nuland. Senator, as you know, we have maintained an 
active list of the kinds of future sanctions we might need if 
Russia were to go further in Ukraine, et cetera. I will talk 
to, if I may, in a separate setting about those kinds of 
things.
    Senator Perdue. Okay. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Shaheen?
    Senator Shaheen. Good morning. Thank you for all of your 
work on a daily basis and for being here this morning, 
Secretary Nuland.
    I wanted to pick up on Senator Corker's question about the 
impact of Russia's actions in Syria and how that affects 
Ukraine. I was in Ukraine with several other Senators back in 
October, and it was shortly after Russia made its move into 
Syria. And the Ukrainians that we talked to were convinced that 
that was a diversion and that once they decided to leave Syria, 
they were going to be refocused back on Ukraine and heat up the 
conflict in Ukraine again.
    So do we not have to assume that whatever Russia is doing 
is going to have some impact on what happens in Ukraine?
    Ms. Nuland. Well, I would argue, Senator, as I said in my 
opening, that in recent weeks and months, we have seen a good 
level of low-level violence perpetuated primarily by Russia and 
the separatists they support on the line of conflict. So it 
never really calmed down in Ukraine. I think the world's 
attention has been more focused on what Russia has been up to 
in Syria. So I think the question becomes whether there will be 
more bandwidth now to pay attention as well to what is 
happening in Ukraine.
    Senator Shaheen. You talked about a number of things that 
need to happen in Ukraine, the kinds of things that you 
mentioned, judicial reform, reducing the influence of the 
oligarchs in the economy, agriculture reform, the whole list of 
things. Those are things that take time. And as I am watching 
what is happening in Ukraine, people want to see something 
happen now.
    So as you assess where things are, what is the most 
important change that you think would have an impact on the 
public so that they would feel like there is positive momentum 
there to address their concerns?
    Ms. Nuland. Improvement across the board in the justice 
system so that individual people feel like justice is served, 
locking up some big, corrupt fish, including some folks from 
the Yanukovych era. Improving services. You know, people are 
still ripped off when they go to the hospital, when they try to 
get education, et cetera, things that impact human beings. That 
is why the police reform has been so impactful because 
everybody sees it on the street.
    But also cleaning up graft in the tax system, in the 
customs service because everybody trying to do business gets 
ripped off at every stage.
    And then really beginning, as could happen in 2016 and 
2017, to first create transparent boards for all of these 
state-owned enterprises and then to privatize them.
    Senator Shaheen. So are we concerned by the IMF's decision 
to delay their planned disbursement of debt assistance to 
Ukraine, that that will have a negative impact on some of these 
initiatives?
    Ms. Nuland. I think the IMF, like the U.S. Government, does 
not have a choice right now so long as we are not sure who our 
partner will be on the other side of the table.
    Senator Shaheen. And how aware do you think President 
Poroshenko is of these realities? And let me just preface that 
with when we were there in October and we met with him, he was 
all about we have got to address corruption. But when we said 
to him, you know, that starts with you, he did not seem to have 
any--he did not acknowledge any awareness that that was 
important to setting a model for the public.
    Ms. Nuland. I would commend to you the speech that Vice 
President Biden gave on the floor of the Rada in the middle of 
December. He could have been clearer or more public about what 
our support depends on. I also joined his meeting with 
President Poroshenko in Davos where the same points were made, 
and he has made the same points in repeated phone calls over 
the last couple of weeks with both President Poroshenko and 
Prime Minister Yatsenyuk, as has Secretary Kerry in his meeting 
with President Poroshenko at Munich.
    Senator Shaheen. Again, I also want to explore some of the 
issues that have been raised relative to Russia's continued 
narrative that Ukraine is the problem with resolving Minsk II, 
it is not Russia, and what more we can do to support Ukraine, 
assuming they can take the steps that we are interested in, but 
to try and change that narrative in Europe. And let me just ask 
as part of that, obviously, the challenges that Europe is 
facing with the migrant crisis and certainly the impact that 
that has had in Germany on Chancellor Merkel--how does that 
affect her focus on what is happening in Ukraine and resolving 
Minsk II?
    Ms. Nuland. Well, just to start with the last part first, 
we have been very gratified by the Chancellor's incredible 
resolve with regard to Ukraine and her willingness to call it 
out honestly in terms of who is at fault and to support real 
negotiations on how to implement Minsk.
    As I said in my opening, the number one thing here is to 
stop the violence on the line, get OSCE access all the way to 
the border like they are supposed to have. We have been 
encouraging the Ukrainians to listen to some of the ideas that 
the OSCE has had because the forces are too close in certain 
hotspots to pull them back, get more OSCE in there, so that it 
is more obvious when the firing starts, where it initiates 
from, make it harder for separatists with Russian support to 
mask the initiation of violence. That is one thing.
    Second, to continue to support the negotiations that France 
and Germany are doing on election modalities under Ukrainian 
law and compliant with OSCE standards that include things like 
elections security, that include free access to media, et 
cetera because without those things and without a clear obvious 
evidence to the Rada that these are going to be Ukrainian 
elections, not some fake elections, they will not be ready to 
support the underlying legislation. So we are working on all of 
those things.
    Senator Shaheen. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. I want to thank Senator Shaheen 
for her line of questioning and go back to the comment you made 
about how we look at Syria as one issue and Ukraine as another.
    While in Munich--and I know Senator Perdue and several 
other people were there--General Breedlove reiterated the point 
that he has made to me on multiple occasions, and that is that 
the problem with U.S. policy right now, is that Russia looks at 
what is happening. They look at the entire blanket. We tend to 
look at little patches and deal with them as if they are 
independent and not connected to the other. And that is why 
Putin, with the small amount of resources that he has, a 
country--let us face it, whose economy is in shambles--has been 
able to have the impact that they are having right now on 
Europe. And I would just say that Europe is probably at the 
lowest level of self-confidence seen in modern times. And Putin 
has a huge effect on that.
    So, again, I appreciate your comments about Syria and 
Ukraine being different. Russia does not view it that way 
because they are looking at the entire portfolio in a way that 
has been very successful, and they have undermined our 
interests in the region by doing so. So I would just ask that 
instead of looking at them separately, we look at them as a 
continuum. With our NATO policy and everything else we are 
doing in Europe, we have to look at the entire blanket and not 
look at these as isolated issues, as General Breedlove says so 
forthrightly.
    With that, Senator Barrasso.
    Ms. Nuland. Senator, may I just quickly say that I did not 
mean to imply that we do not look at the totality of Russian 
actions and intentions. Of course, we do and how the things 
interact. My point was simply because they are withdrawing or 
have said they are withdrawing troops in Syria, it should not 
mean that we let them off the hook in terms of sanctions vis-a-
vis their activity in Ukraine. That was my point.
    The Chairman. I understand that is us. I am just saying 
that when he has used refugees as a weapon of war, when he has 
done the things that he has done with energy and other assets 
that gives him leverage over Europe, all of these things are 
playing a role and weakening Europe's resolve relative to these 
sanctions. With us doing $50 billion a year in trade with 
Russia and Europe doing $450 billion to $500 billion a year in 
trade with Russia, obviously the U.S. helping them keep that 
resolve in place is very, very important. And again, I think 
Putin is looking at the entire blanket as he looks at these 
issues and hoping that somehow in June he is going to be able 
to break down Europe's resolve in combination with the other 
things that he is doing in the region.
    With that, Senator Barrasso.
    Senator Barrasso. Thank you, Mr. Chairman.
    Great to see you again, Madam Secretary.
    I agree with Senator Corker. Putin has been very obvious. 
His objective is to restore the former Soviet Union and show 
his strength. Everything else, as Senator Corker just pointed 
out, are just tactics to do that. And it is very aggressive and 
opportunistic, and no matter where he is playing that game, 
that is, I think, based on his objective and everything else is 
a tactic. And we ought to take a look at the overall objective.
    With regard to Vice President Biden's statements in 
December with regard to Crimea, he made the speech, and he said 
let me be crystal clear. He said the United States does not, 
will not, never will recognize Russia's attempt to annex the 
Crimea.
    So what additional sanctions should we put in place? What 
actions is the administration taking right now to press for the 
return of Crimea?
    Ms. Nuland. Well, Senator, just to say that our sanction 
regime vis-a-vis Crimea with the European Union is pretty much 
complete. We do not allow any investment, any trade by any of 
our people. We do not allow tourist travel or any of that in 
Crimea. So it really is an investment-free zone for all of us, 
and we will continue to maintain that strong regime.
    We also try to speak out as we learn about what is 
happening inside and particularly human rights abuses against 
minority populations, expropriation of libraries, those kinds 
of things.
    Senator Barrasso. It does not seem to be having the 
intended effect. So we are just looking to see what 
additionally can be done.
    Ms. Nuland. I think we will continue to look at what else 
we can do.
    Senator Barrasso. With regard to energy security, I wanted 
to visit about we have seen Russia. They continue to 
demonstrate over and over again willingness to use energy 
resources as a weapon. And Putin has used Russia's natural gas 
to extort, to threaten, to coerce our allies, as well as our 
partners. The international community saw Putin use natural gas 
as a political weapon against Ukraine in 2006, 2009.
    Talk a little bit about support the United States could 
have in assisting Ukraine to advance its energy independence, 
to support energy diversification, and reforming in the energy 
sector because it continues to be a problem in my trips there 
visiting with folks on the ground. And the ability of Russia to 
control and command has a huge impact.
    Ms. Nuland. Well, first just to say that Ukraine has made 
really terrific progress on the energy front. As I said in my 
opening, this was the first winter that they did not have to 
depend on Gazprom gas which, for those of us who follow 
Ukraine, is pretty miraculous.
    There is obviously much more work to be done. Just to go 
through some of the things they have already done, they have 
taken the first steps towards unbundling the state-owned 
company, separating it into two entities. By linking our 
assistance to their willingness to take energy steps, we have 
now encouraged the establishment of an independent board of 
Naftogaz. They have begun to increase gas tariffs to market 
levels if they need to. They are improving the corporate 
governance of Naftogaz.
    Next, they have to fully unbundled the market. They have to 
liberalize it. They have to privatize more of it. They have to 
establish an independent regulator, which is one of our main 
reform requests at this next stage. They need a separate 
electricity market law. They have to do more to harmonize with 
EU regulations.
    So we have assistance in the 2016 budget to help them do 
all of those things. But again, it is going to depend on having 
a strong government committed to those things that is unified 
behind them.
    Senator Barrasso. You know, when I was there, they were 
asking about us exporting some of our----
    Ms. Nuland. LNG?
    Senator Barrasso.--LNG. We have certainly an abundance in 
this country, and we should be using this as the master 
resource that it is. Do you agree that natural gas exports from 
the United States can serve as an important diplomatic tool for 
us to strengthen our national security and assist our allies 
and helping them alleviate some of the manipulation and the 
threats from Russia?
    Ms. Nuland. I absolutely do. And now that we have reverse 
flow gas back into Ukraine, it is very important. We have folks 
all over Europe hoping some of that gas that is now available 
will make it, whether it is to Lithuania or Poland or other 
parts.
    Senator Barrasso. Well, they built that regasifier with the 
independents that has been not built but brought into the 
waters to be able to--they are just waiting for us to be able 
to export.
    Ms. Nuland. And I think you know that we have for the last 
2 years worked really aggressively. I have as have Secretary 
Kerry and Secretary Moniz and Amos Hochstein, our special 
advisor, on all kinds of projects to help diversify European 
energy markets and make them more open to other forms of gas 
than Russian gas.
    Senator Barrasso. Bring us up to date, if you could. I was 
just thinking in the middle of December, Ambassador to the 
United Nations Samantha Power said Russia continues to violate 
ceasefires daily. And in October, General Breedlove told 
reporters that what we have not seen is Russia removing any of 
its forces from the Ukraine. And he said you have not heard me 
report at this podium before command and control air defense, 
artillery spotting support, artillery support, personnel 
supplies, all still supplied to Donbas by Russia.
    Are these assessments still true today as they were in 
October and they were in December? And is Russia continuing to 
send its mercenaries, its troops, its tanks into Ukraine?
    Ms. Nuland. Absolutely. We still have hundreds and hundreds 
of pieces of Russian heavy equipment in Ukraine. We still have 
thousands of Russian forces and support in Ukraine.
    Senator Barrasso. So Russia is currently in violation of 
its political agreements since ceasefire commitments to 
Ukraine.
    Ms. Nuland. So those forces and that equipment will have to 
be withdrawn before Minsk is fully implemented, yes.
    Senator Barrasso. So are there additional things we should 
be doing to, again--I asked the question regarding Crimea. I 
ask the same question with regard to Ukraine. Are there 
additional things we should be doing? You said we have done 
everything we can with Crimea to stop--you know, with the 
sanctions, but it does not seem to have the impact that we 
would like. Anything additionally we should we doing with 
Ukraine?
    Ms. Nuland. On the security side, I think the training that 
we have now been doing for more than a year with Ukrainian 
forces has helped to give them confidence, has helped to give 
them better understanding of how to defend their territory, how 
to handle the line of contact to the best of their ability. I 
think what we need to do now, as I said in answer to Senator 
Shaheen, is help to get forces separated enough so that we can 
get more OSCE in there and we can truly demonstrate who is 
starting it when these flares happen. But we also have to push 
for more OSCE all the way up to the border because there are 
large parts of Donbas where we have no eyes and ears still.
    Senator Barrasso. And then in terms of prepare to provide 
lethal aid?
    Ms. Nuland. So, as you know, no decision has been made on 
that, but we are continuing to train and we will have a big 
training budget for 2016 as well.
    Senator Barrasso. Thank you, Mr. Chairman.
    The Chairman. It is my understanding--thank you for those 
questions. It is sad to me that we have not made a decision 
yet. It has been several years now.
    But it is my understanding our training also is not really 
helping them in any offensive way. It is all about defensive 
issues. Is that correct?
    Ms. Nuland. Well, again, we have not provided lethal 
assistance, but we have----
    The Chairman. But they have some lethal capabilities 
themselves.
    Ms. Nuland. They do.
    The Chairman. It is my understanding that one of the big 
complaints in the region is they have assets, but we are not 
really helping them relative to any kind of offensive training 
that might need to take place, again being concerned that 
Russia might view us as being proactive more so than they would 
like to see.
    But with that, Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Madam Secretary, thank you for your service.
    You know, I want to explore a bit of a different set of 
questions here. And they are premised on the fact that I have 
strongly supported and have said in my visits to Ukraine, as 
well as those who have visited from Ukraine to the United 
States, that there is a need to continue vigorously on the path 
to reform and not only to pass laws but to implement them. And 
I totally believe in that.
    However, I also understand the realities. If I was sitting 
in the equivalent of our Congress, their Rada, and seeing what 
the Russians are still doing and talking about doing all of 
these things, including the decentralization legislation, I do 
not know how far in that process, without reciprocity, that I 
am going to be able to succeed at the end of the day.
    So I look at the eve of the second anniversary of Russia's 
invasion of Crimea, which is March 16th, and I believe that 
Russia maintains control by one means or another over the 
autonomous regions, which it seeks to fortify in one way or 
another. Ceasefire violations are on the rise. I look at your 
own written testimony, and you talk about OSCE monitors 
reporting 15,000 violations in February alone, the vast 
majority of which have originated on the separatist-controlled 
side of the line of contact is your testimony. And I wonder, 
while we are focused, and rightfully so, in getting the 
Ukrainians to do what is necessary to reform, that the other 
side of the equation is lacking.
    And so the administration and you have often here talked 
about four pillars: support financial, technical, nonlethal 
security assistance, support other frontline states from 
Russian aggression, raising economic costs for Russian 
behavior, and leaving the door open for diplomatic de-
escalation, should Russia commit to its commitments.
    And so in that regard, on the third pillar, raising 
economic costs for Russia's behavior, it still seems to me that 
our efforts are not creating the conditions where Minsk can be 
successful. And we have heard from many Ukrainian officials who 
have circulated through the Senate about their challenges with 
this. And I think one of the reasons we saw a vote of no 
confidence take place, although it was ultimately beaten back, 
but thinly, that we have a great challenge there.
    How can we expect Ukrainians, with all the obstacles they 
face, not the least of which is occupation by hostile and 
violent foreign forces, to muscle the political capacity and 
capability to meet their Minsk obligation when Russia still 
controls parts of Ukraine and holds military superiority and is 
not meeting, from my perspective, their elements of Minsk?
    And secondly, as a corollary to that, I am concerned to 
read in Jeffrey Goldberg's recent ``Atlantic'' article entitled 
``The Obama Doctrine,'' where the President said, quote, the 
fact is that Ukraine, which is a non-NATO country, is going to 
be vulnerable to military domination by Russia no matter what 
we do.
    Now, I am not sure how well that was received in Kyiv, and 
I certainly hope that we have not resigned ourselves to that 
that is going to be the reality at the end of the day. When we 
train but we train in a way that does not provide lethal 
assistance for the ability to self-defense, because nobody 
believes that Ukrainians are going to go invade Russia--right--
so but for self-defense, to give night vision goggles to be 
able to see the enemy but not be able to do anything to stop 
them, well, that is pretty challenging.
    So I am really concerned that on that one pillar, between 
the President's comments and our actions, that we are 
undermining the rest of the pillars at the end of the day. So 
speak to me about that.
    Ms. Nuland. Well, first, on Ukraine's ability to meet its 
obligations, as I tried to set out clearly in the testimony, 
before the Ukrainian Rada can be asked to pass the next stage 
of political agreements for Donbas, whether it is election 
modalities, whether it is the last reading on the constitution, 
we have got to see Russia and the separatists meet their 
obligations in terms of security. So we clearly see a sequence 
here for Minsk.
    It is in that context that we are, as I said, trying to 
encourage the Ukrainians to work with the OSCE to put forward 
these ideas of pull-back so that we can continue to help them 
demonstrate where the security problems lie. But you know, for 
months and months and months now, the Russians have been saying 
that they will ensure that their proxies give full access to 
the territory to the OSCE, and that still has not happened.
    So this has to happen in the sequence that it was agreed at 
Minsk, and that is what we expect of the Ukrainians.
    At the same time, we are working with them to ensure that 
as they negotiate the terms of what an election might look 
like, that it also truly meets the Minsk obligations that it be 
under Ukrainian law, that it be OSCE-compliant, and that we not 
be having some kind of fake election out there.
    With regard to the security assistance that we are 
providing, our assessment is that the training that we are 
offering first to the national guard, now to the regular army 
and to the special forces have manifestly improved their self-
defense capability, their unity of command, et cetera.
    Senator Menendez. Let me stop you because I have less than 
a minute left.
    You have not satisfied me about what we are doing to get 
Russia to move on its obligations. And I know I hear that you 
say we expect that the sequencing will happen in the manner in 
which Minsk envisions, but the reality is I hear a lot about 
the Ukrainians and what we expect the Ukrainians to do.
    Ms. Nuland. Right.
    Senator Menendez. What I do not hear virtually anything 
about is about getting the Russians to live up to their 
obligations. And it just seems to me that if we saw progress on 
the Russians living up to their obligations, that we would see 
greater political will in the Ukrainian congress, the Rada, to 
achieve the things we want them to do. But largely, I get the 
sense this is a pretty unilateral pressure. Get the Ukrainians 
to do--which I agree they should do some of these things, but 
there is no question that doing them, with the countervailing 
reality of Russia as it exists today, is an enormous challenge. 
And I get a sense we have sort of like, you know, moved on. And 
that is a problem. And that is a problem.
    Ms. Nuland. Senator, I have to just disagree with that 
premise. The President raised these issues, including the 
importance of ending violations and allowing full OSCE access 
with President Putin yesterday. We raise this in every single 
conversation with the Russians, and of course, the number one 
issue is maintaining unity of sanctions with the European 
Union, which we have been able to do, and making it clear who 
is at fault on the security side, which we will continue to do.
    Senator Menendez. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Risch?
    Senator Risch. Ms. Nuland, that article that Senator 
Menendez referred to by the Atlantic Council painted a pretty 
bleak picture of the situation. Are you familiar with that 
article? Did you read that?
    Ms. Nuland. I am.
    Senator Risch. Are you in general agreement that that is an 
appropriate assessment of where things stand today?
    Ms. Nuland. Senator, I am not sure that it is appropriate 
for me to comment on a journalist's interpretation of where the 
President stands or does not stand. I think the testimony that 
I gave today speaks to where the administration is on our 
policy towards Ukraine.
    Senator Risch. Well, let me set the journalist issue aside. 
Is the article generally accurate as far as the current 
situation in the Ukraine?
    Ms. Nuland. I am not sure what aspect you are referring to. 
But I would simply say that the President has led on the issue 
of maintaining sanctions until Minsk is fully implemented, and 
that is going to continue to be the administration's policy 
until we see all aspects of Minsk, including return of 
sovereignty.
    Senator Risch. I wanted to change subjects for a minute. I 
want to talk about the Open Skies Treaty. Starting February 
22nd, the administration has 120 days to make a decision on 
this upgrade that the Russians have asked for for infrared and 
some other things that will greatly enhance their ability when 
they do overflights in the United States. You are familiar with 
that I assume.
    Ms. Nuland. I am.
    Senator Risch. Where are you in that process?
    Ms. Nuland. There are still interagency discussions going 
on. We can brief you in a classified setting, if you would 
like.
    Senator Risch. I suppose it is not surprising to you that 
there is a lot of angst here in this body and in your own 
administration regarding allowing that enhancement. You are 
aware of that, I assume.
    Ms. Nuland. I think we would have settled it if it were an 
easy question.
    Senator Risch. Correct.
    And I can tell you that in the very near future, you are 
going to be getting some input from members of this body, and 
it is going to be not just one-sided. That is going to be very 
bipartisan, stating real concerns about it.
    Are you familiar with the testimony that General Stewart 
gave in the House Armed Services Committee, the Defense 
Intelligence Agency Director? Are you familiar with his 
testimony?
    Ms. Nuland. Forgive me, Senator. I am not.
    Senator Risch. Well, he was pretty tough on it. He thought 
that this is a really bad idea. Are you getting that from 
anywhere else? Have you heard that from anyone else within the 
administration?
    Ms. Nuland. Well, again, interagency discussions are 
continuing on how to manage this.
    Senator Risch. I think most Americans would be surprised to 
hear that there is such a treaty and that we allow actually 
Russian spy planes to fly over the United States and do the 
kind of intelligence gathering that they do.
    To be fair, the door swings both ways. That is, we are 
supposed to be able to do the same. But the Russians routinely 
prohibit flights over the Russian territories in the Caucasus, 
around Moscow, in Kaliningrad, and some other places. Do we 
deny them any access here in the United States?
    Ms. Nuland. Senator, I am going to have to take that 
question. I have not looked in a while at whether we have had 
denials of those flights.
    [The information referred to above was not received in time 
to be included in this transcript.]
    Senator Risch. In your assessment as to whether or not you 
are going to allow this, are there discussions going on about 
the fact that they are routinely prohibiting us from doing what 
they are doing here? Do you know whether that is the case?
    Ms. Nuland. We do try to maintain reciprocity. In general, 
that is what the treaty is about, as you said. So when we have 
concerns about constraints, we look at how we can ensure that 
there is a reciprocal response.
    Senator Risch. Who is the lead person in your agency 
handling this issue?
    Ms. Nuland. It would be Under Secretary for Security 
Affairs, Rose Gottemoeller.
    Senator Risch. Thank you very much.
    Thank you, Mr. Chair.
    The Chairman. Thank you.
    Senator Murphy?
    Senator Murphy. Thank you very much, Mr. Chairman. Thank 
you for all your work.
    Madam Secretary, thanks for coming back again.
    Just to try to square the circle on this question of the 
Syria-Ukraine connection, because I think it is important to 
underscore what you said, I think there is no doubt that there 
is a connection in Russia's mind between their policy in Syria 
and their policy in Ukraine. If you ask our friends on the 
ground in Ukraine, they will tell that when Russia started to 
move on Syria, it was like a clicker. It was switched in 
eastern Ukraine for a period of time. Russia was very focused 
on Syria, and that did mean a diminution of offensive activity 
in eastern Ukraine.
    But to underscore what you said, that does not mean that we 
should start blending the boxes together. The worst mistake we 
could make is to concede that Russia's policy in Syria is tied 
to our sanctions regime in Ukraine. If you do blend those boxes 
together, you start to let Europe off the hook.
    And so I do not think there is really a distinction, at 
least as I see it, between some of the feelings being 
articulated by members of the committee and what you are 
suggesting. We all acknowledge the connection that Russia is 
trying to make. That does not mean that we allow for the 
Europeans, those that are in the sanctions regime with us, to 
look at it that way as well.
    My question is on this continuing conversation of 
conditionality of IMF and U.S. support. And let me be slightly 
contrarian on this fact.
    I worry that onerous conditions upon our aid and the IMF's 
decision to do the same thing in some way plays into the hands 
of Russia. You know, let us take, for example, the reforms that 
we require and that Minsk requires to devolve power to the 
contested regions. That becomes politically unpalatable the 
more that Russia inflames tensions along that border. The more 
people that are killed by Russian snipers, the less willing the 
Ukrainians are to come together on those necessary reforms. The 
more news there is about Savchenko and her captivity, which of 
course is controlled by the Russians--her future is controlled 
by the Russians--the less willing that Ukrainians are to come 
together to make some of these reforms.
    So I guess I put this question to you before, but do you 
worry that by placing all these conditions upon U.S. aid, that 
we essentially put the Russians in charge of whether it is 
released or not because their ability to sort of play politics 
inside Ukraine is maybe most determinative or at least 
substantially determinative on whether the Ukrainians can 
actually come together and make these reforms?
    Ms. Nuland. Well, Senator, here again I think we need to 
split the apples and the oranges. So on the one side, there is 
implementation of Minsk, as you said, where Russia has the 
ability with their proxies in Donbas to heat up the line and 
make it politically harder for Ukraine to meet the political 
obligations it has to Donbas, which is why we have to maintain 
the integrity of the sequence of Minsk as it was negotiated, 
that there has to be real quiet on the line. There has to be 
real access before Ukraine can be expected to take the next 
steps in the political package on Minsk.
    That is a different matter than whether we have a strong, 
unified governing coalition of unity between President, Prime 
Minister, and the key Rada factions on the next step of reform 
for Ukraine internally, the breaking of corruption, the 
cleaning up of institutions, all of those things.
    So frankly, the IMF program is conditioned on Ukraine 
staying the course on reform, and our assistance is conditioned 
on them being inside their IMF program. So I think we have to 
stay rigorous because otherwise we are just funding the 
continued oligarchic capture of the country, and those folks 
are certainly not interested in Minsk either.
    Senator Murphy. We are just playing a dangerous game of 
chicken here, which is at some point their reserves run out, 
and we will be faced--of course, this is the game that Russia 
is playing. They are hoping to undermine unity inside Ukraine 
so long as is necessary to prevent this assistance from 
becoming real. And so at some point, we may just have to 
reconcile our desire to keep Ukraine economically afloat and 
our desire to push them at the speed that we would like on 
reforms that are admittedly very difficult, if not impossible, 
to make while your country is being occupied.
    And my last question is on our committee's path forward 
here and Congress' path forward as to how we can be most useful 
in support for Ukraine. There is always a feeling of paranoia 
inside Kyiv that the U.S. Congress and the U.S. Government is 
going to focus its attention somewhere else. And I hope that we 
have answered most of those concerns.
    But what I hear is that the most important thing that we 
can do is to pass a multiyear assistance commitment to Ukraine 
so that they know that we are partners with them, not just on 
the military side but on the economic and anti-corruption 
program.
    And so I know there are discussions here about what a new 
Ukraine support bill could look like, but is some sort of 
multiyear commitment not some signal that we are, as a 
Congress, still willing to put money into this endeavor, 
whether it be in IECA or some other source, an incredibly 
important message to send?
    Ms. Nuland. Well, we very much appreciate the plus-up of 
IECA and the reestablishment of IECA that we have now. There is 
some hope in the Department at large that it would be flexible 
enough for all kinds of global contingencies. You know, we do 
budget on a year-by-year basis, but we always welcome multiyear 
commitments by the Congress to the projects that we share an 
interest in, including Ukraine.
    Senator Murphy. Thank you as always for your service, an 
advertisement again for our great staff inside Kyiv who are 
continually working 24/7. Ambassador Pyatt got to visit with 
some of us this week. We are very lucky to have you and to have 
your team on the ground there.
    Thank you very much, Mr. Chairman.
    The Chairman. Thank you, Senator Murphy.
    Senator Gardner?
    Senator Gardner. Thank you, Mr. Chairman.
    Thank you, Secretary Nuland, for being here and your 
testimony today.
    In September of 2014, President Poroshenko was addressing a 
joint session of Congress, and I believe he had made this 
statement urging lawmakers to provide more political support, 
as well as military equipment, both lethal and nonlethal, to 
Ukrainian soldiers. And the quote that was so memorable from 
that speech was blankets and night vision goggles are 
important, he said, but one cannot win a war with blankets.
    I know the conversation that we have had before this 
committee, you have talked about a decision on military 
equipment and lethal equipment not being made yet. Could you 
talk a little bit--that decision to do that has not been made 
yet. If you were to decide to allow lethal weapons--well, first 
of all, do we have a time frame for that decision?
    Ms. Nuland. Well, first of all, Senator, let me just say 
that since the appearance by President Poroshenko before the 
joint session, we really have, with all of your support, plused 
up what we are doing in Ukraine and not just in terms of the 
1,200 soldiers and 750 national guard. We have already trained 
in the next stage going into the army and the special forces, 
but also in terms of the kind of equipment that we have 
provided, including HUMVEEs and UAVs and two counter-artillery 
radars and mortar radars and all kinds of thermal vision 
devices and secure radios and exploded ordnance, robots, and 
all these kinds of things. So we are rally giving a lot more 
than we were at that time.
    I do not have a timetable for you on a lethal decision.
    Senator Gardner. If a decision was made to allow lethal 
weapons, what would that allow? What would Ukraine forces be 
able to accomplish with those lethal weapons?
    Ms. Nuland. Well, again, I do not want to speculate on what 
we would actually go for if that decision were made, but there 
are a range of things that they have asked for in the past.
    Senator Gardner. Again, I am not saying you would do it, 
but I mean, if some of those were allowed, what the Ukraine 
forces be able to accomplish?
    Ms. Nuland. I think the original proposals that they made, 
at a time when the separatist forces and Russia were still 
taking additional territory quite aggressively, were things 
that would deal with the weapons superiority in terms of 
dealing with GrADS, dealing with tanks advancing, et cetera. 
They also have always wanted more on the ISR side.
    Senator Gardner. And if this assistance were granted, they 
would be able to push back on those territorial gains, as well 
as the equipment advantage you are talking about?
    Ms. Nuland. Conceivably, but as you know, we do not have 
offensive combat now. We have skirmishing on the line, but the 
hope both on the Ukrainian side and in the international 
community is that we can settle this through implementation of 
Minsk and the withdrawal of Russian forces.
    Senator Gardner. And I believe you may have had this 
conversation with Senator Perdue in relation to his questions. 
But what has sort of our position and our inability to really 
effect change in Crimea--what has that done to our allies in 
the region from their perspective when it comes to U.S. 
assistance or aid like Georgia and others?
    Ms. Nuland. Well, I think we are, as I said earlier, trying 
to change the way we approach Georgia. So our security 
assistance is less about preparing them to deploy elsewhere and 
now more about hardening their self-defenses, their resilience, 
their ability to ensure that they do not lose further 
territory. So that is very much in keeping with what they want. 
I think there is concern in the region with the increased 
militarization that we are seeing in Crimea, and that is 
something that we are concerned about and allies and partners 
are raising with Russia as well.
    Senator Gardner. I guess this past January I had the 
opportunity to visit NATO headquarters in Brussels, visited 
directly with General Breedlove and talked about sort of the 
Russian situation both in Ukraine and beyond, threats to 
Estonia, the Baltics, and others. How well prepared do you 
believe NATO is to counter the Russian threat if it does, 
indeed, lead to aggression in the Baltics or Poland?
    Ms. Nuland. Well, Senator, I think this is one thing we can 
all be proud of, is the work we have done through the European 
Reassurance Initiative with your terrific support. And as you 
know, the administration has put forward a fourfold increase 
for $3.4 billion this year for European Reassurance. We now, as 
compared to just 2 years ago, have U.S. forces and other NATO 
forces, land, sea, and air, in all of those countries. We have 
prepositioned equipment. We have a much more aggressive 
training schedule. We have worked with each of those countries 
bilaterally on the continuum of security from border security, 
civilian security, to military security. We now have NATO 
headquarters elements in each one of those six countries. So it 
is a much tougher and harder target for Russia, and we have 
made clear that that deterrent will continue.
    Senator Gardner. With that being said, though, do you agree 
or disagree with the assessment? I believe it was a RAND study 
just a few months ago that said if Russia decides to move on 
Europe, that it would just take a matter of days before they 
could overpower NATO. Is that an inaccurate assessment then?
    Ms. Nuland. Again, I have not read the--I have read the 
summary, but not the details of the RAND study that you saw.
    I think a Russia that challenged NATO would ultimately come 
to grief over that.
    Senator Gardner. But, I mean, the assessment said it would 
take 3 days. There is going to be grief over that. I agree. I 
mean, it would be disastrous.
    Ms. Nuland. I mean, I have seen various studies that say 
that Russia would take some territory in the initial phases, 
but I have every confidence that NATO would be able to restore 
sovereignty.
    Senator Gardner. Do our allies in the Baltics share that 
confidence?
    Ms. Nuland. What they want from us is continued presence, 
particularly presence of American forces. So these rotational 
elements that we have been able to maintain through the ERI are 
extremely important where we have had 700 young Americans out 
there in these countries on a regular rotational basis. So it 
is on that basis that we ask you to continue to support ERI and 
particularly the very big increase that we have asked for in 
2017.
    Senator Gardner. And what do you anticipate in terms of the 
agreements to fulfill their 2 percent requirement in Europe 
that will be ultimately achieved?
    Ms. Nuland. It remains a problem. We are doing better at 
reversing the slide. We have very few allies now, just a 
handful, who are still cutting, and we are now starting to 
see--I think we have 12, 13 allies who have started to grow 
their defense budgets again. But this is very much a focus of 
all of our bilateral/multilateral work, as we head to the 
Warsaw Summit, to be able to say that we have definitively 
started to grow back to 2 percent all across the alliance.
    Senator Gardner. I am running out of time here, but I would 
like to ask you this. If you could get back to me on this 
point. With the RAND assessment, I would like to know whether 
or not you agree, at this point in time, whether or not that is 
an accurate assessment of NATO's capabilities in Europe.
    Ms. Nuland. We will take a look at that and get back to 
you.
    Senator Gardner. Thank you.
    The Chairman. Well, thank you, Madam Secretary. We 
appreciate you being here today and your service to our 
country. I think, you know, obviously, the topic today was the 
reforms inside Ukraine that need to occur. And we want to see 
those happen but on the other hand understand the constraints.
    I think you heard from people on both sides of the aisle 
that a concern exists relative to our pushback against Russia 
and their ability to punch way beyond their weight. No doubt 
some of this--a lot of this is right in their neighborhood and 
causes them to have greater influence than they would 
otherwise.
    But I think again the balance here is that, yes, we need to 
continue to encourage and work with Ukraine to create the 
necessary reforms inside the country. But I think there is 
still dissatisfaction, generally speaking, with the pushback 
that has taken place relative to Russia, and we still want to 
push the administration to assist Ukraine as much as possible.
    I am very disappointed with the outcome in Syria and 
Russia's ability to take advantage of a vacuum that we allowed 
to exist. They have played an outsized role there in a way that 
has put us in a very difficult situation.
    So, anyway, we thank you for your service. We appreciate 
your comments. We look forward to working with you.
    And with that, we will call on panel two.
    Ms. Nuland. Thank you very much.
    The Chairman. We thank you for sitting through that and 
hopefully it will be somewhat helpful with your questions in a 
moment.
    We want to thank our second panel for being here. Our first 
witness is Mr. Ian Brzezinski, Brent Scowcroft Center on 
International Security at the Atlantic Council in Washington, 
D.C. Mr. Brzezinski served as Deputy Assistant Secretary of 
Defense for Europe and NATO policy from 2001 to 2005. We thank 
you for your continued involvements in helping us with this 
topic.
    The second witness is the Honorable John E. Herbst, 
Director of the Dinu Patriciu Eurasia Center also at the 
Atlantic Council from 2003 to 2006. He served as our Ambassador 
to Ukraine. We thank you for the knowledge you are going to 
share with us today.
    If you could, summarize your comments in about 5 minutes, 
and without objection, your written testimony will be a part of 
the record. And if we could begin in the order you were 
introduced, we would appreciate. Again, thank you both.

  STATEMENT OF IAN BRZEZINSKI, SENIOR FELLOW, BRENT SCOWCROFT 
CENTER ON INTERNATIONAL SECURITY, ATLANTIC COUNCIL, WASHINGTON, 
                               DC

    Mr. Brzezinski. Chairman Corker, Ranking Member Cardin, 
members of the committee, I am honored to participate in this 
hearing addressing the progress of reform in Ukraine after the 
Maidan Revolution and the launch of Russia's invasion of that 
country.
    Those two events transformed the course of history in 
Ukraine.
    The Maidan Revolution was a powerful demonstration of 
popular demand for democracy and good governance and also the 
nation's desire to be a fully integrated member of the West.
    The second event, Russia's unprovoked military invasion of 
Crimea and eastern Ukraine, stands among the most dramatic 
actions in President Putin's campaign to reestablish Moscow's 
control over the space of the former Soviet union.
    What is at stake is of critical interest to the United 
States. If allowed to succeed, Putin's ambitions will lead to a 
new confrontational divide in Europe between a community 
defined by self-determination, democracy, and rule of law and 
one burdened by authoritarianism, corruption, hegemony, and 
occupation.
    It is in this context that Ukraine launched its most 
aggressive effort at comprehensive economic and political 
reform since attaining independence. This undertaking has been 
only made more challenging by the tragedies caused by Russia's 
invasion: 9,000 Ukrainian deaths, countless wounded, 1.6 
million internally displaced persons, and the loss of 
economically valuable territory.
    Ukraine's reform efforts have also been undermined by 
Russia's decades-old campaign of subversion, one that includes 
information warfare, energy embargoes, economic sanctions, and 
terrorist and cyber attacks.
    Despite these challenges, Ukraine has made progress. Its 
tax collection, pension, government procurement systems have 
improved. New vetted and trained police forces operate in Kyiv, 
Lviv, Odesa, Kharkiv, and elsewhere. Anti-corruption laws have 
been passed, and a government austerity program is being 
implemented.
    With that said, and as was pointed out by Assistant 
Secretary Nuland, the process of reform is far from complete. 
It moves too slowly and remains too easily reversible.
    A strategy to assist Ukraine must integrate initiatives to: 
1) impose greater costs on Russia for its aggression; 2) 
enhance Ukraine's capacity for self-defense; 3) assist 
Ukraine's efforts at reform; and 4) further its integration 
into the Euro-Atlantic community.
    Towards these ends, current targeted sanctions against 
Russian individuals and firms should be escalated toward 
broader and more comprehensive sectoral sanctions, including 
against the Russian financial and energy sectors. Today's 
sanctions may be hurting the Russian economy in the context of 
low oil prices, but if their intended outcome has been to deter 
Russian aggression, they have failed.
    One specific step that was mentioned earlier today is to 
embargo the sale of spare parts to Russia's vulnerable oil 
refinery industry. This step, first proposed to this committee 
by former Under Secretary of State Paula Dobriansky, would 
degrade an important source of revenues that help sustain 
Russian military operations.
    Second, NATO should significantly reinforce its presence in 
Central Europe. Larger and more responsive exercises and 
operations and the establishment of bases in Poland and the 
Baltic States equipped with brigade and battalion-level 
capacities, respectively, are in order. These are reasonable 
steps in light of Russia's military buildup and the magnitude 
of its aggression in the region.
    Third, western assistance has been helpful to Ukraine's 
armed forces, but the time is long overdue to grant Ukraine the 
lethal defensive equipment it has requested. The provision of 
anti-tank, anti-aircraft, and other systems would complicate, 
add risk, and increase the cost of operations against Ukraine. 
In light of Moscow's rhetoric and its belligerent force 
posture, this requirement has not lost its urgency.
    We must do more to counter Russia's significant information 
campaigns. This is not just a media battle. It is also a matter 
of physical presence. U.S. consulates should be established in 
key cities such as Odesa and Kharkiv. This would expand 
economic ties between these cities in the West and provide us 
greater situational awareness of the surrounding regions.
    Fifth, we should work to link Ukraine's energy sector to an 
emerging north-south corridor of gas and oil pipelines in 
Central Europe. This corridor linking the Baltic, Black, and 
Aegean Seas promises to unify Central European energy markets 
and bind them into the broader European energy market. A robust 
Ukrainian link to the North-South corridor would further 
diversify Ukraine's energy supplies, facilitate Ukraine's 
integration into an emergent single European energy market, and 
actually strengthen Europe's energy resiliency--Europe as a 
whole--by enabling it to leverage Ukraine's significant gas 
storage facilities.
    Sixth, we should assist Ukraine to design a national 
strategy to restructure its defense industry, a very 
significant element of its economy, so that it can become 
better aligned with western business practices and western 
market structures.
    Finally, assistance to Ukraine and its reform efforts 
should rest upon a firm embrace of Ukraine's transatlantic 
aspirations. Those aspirations are powerful drivers of reform.
    Mr. Chairman, the recommendations I listed are prudent, 
defensive, mutually reinforcing, and consistent with the 
desires of the Ukrainian people to live in peace, freedom, and 
under the rule of law and to see their nation become a fully 
integrated member of the West. They, thus, also enhance the 
prospects of peace in Europe.
    Thank you.
    [Mr. Brzezinski's prepared statement follows:]


                Prepared Statement of Ian J. Brzezinski

    Chairman Corker, Ranking Member Cardin, members of the committee, I 
am honored to participate in this hearing addressing the progress of 
reform in Ukraine following the Maidan Revolution and Russia's invasion 
of that country.
    Two years ago, the course of history in Ukraine was transformed by 
those two events. The Maidan Revolution, also known as the Revolution 
of Dignity, was a powerful demonstration of popular demand for 
governance defined by democracy, transparency, and rule of law. That 
demand's articulation also underscored Ukraine's desire for full 
integration into the Western community of democracies.
    The second event, Russia's unprovoked military invasion of Crimea 
and eastern Ukraine, stands among the most dramatic actions in Russian 
President Vladimir Putin's sustained campaign to reestablish Moscow's 
control over the space of the former Soviet Union. A central objective 
of this campaign has been to reverse Ukraine's western orientation and 
re-subordinate the country to Moscow's dominion.
    We should have no doubt that this aggression has profound 
implications for the security interests of the transatlantic community, 
including the United States.
    President Putin's seizure and continued occupation of Crimea and 
eastern Ukraine violates the principles of sovereignty that have 
sustained peace in Europe since World War II.
    Second, this invasion shattered the 1994 Budapest Memorandum in 
which the United States, the United Kingdom, and Russia committed to 
respect and protect the territorial integrity of Ukraine in return for 
Kyiv giving up the significant nuclear arsenal it inherited from the 
USSR. Moscow's aggression, thus, is a serious blow to the efforts to 
curb the proliferation of nuclear weapons via international accords.
    Third, President Putin has justified the invasion of Ukraine on his 
assertion of a unilateral right to redraw borders to protect ethnic 
Russians. This reintroduces to Europe the principle of ethnic 
sovereignty, a dangerous principle that provoked wars and resulted in 
countless deaths in earlier centuries. We had all hoped it had been 
relegated to the past.
    Fourth, Russia's incursion into Ukraine is a direct threat to the 
vision of an Europe, whole, free, secure and at peace. For the second 
time in a decade, Putin has invaded a country simply because it wanted 
to join the West. If allowed to succeed, his ambitions will create a 
new confrontational divide in Europe between a community defined by 
self-determination, democracy, and rule of law and one burdened by 
authoritarianism, corruption, hegemony and occupation.
    It is in this context that that Ukraine launched its most 
aggressive effort at comprehensive economic, political and legal reform 
since attaining independence. This undertaking has been made both more 
challenging and more urgent by Russia's military aggression. The 
invasion of eastern Ukraine caused over 9,000 Ukrainian deaths, left 
countless wounded and traumatized, and generated 1.6 million internally 
displaced persons. Russia today occupies some 9% of Ukraine's 
territory, including some of the latter's most important industrial and 
tourist zones. These tragedies, needless to say, impose significant 
burdens upon the nation's struggling economy.
    In recent weeks, the military standoff in eastern Ukraine--which 
despite the Minsk agreements has one been of sustained low intensity 
warfare--has deteriorated. We are once again seeing an increase in 
active combat featuring sniper, mortar and artillery fire and other 
aggressive Russian operations along the line of contact. EUCOM 
Commander General Phillip Breedlove recently testified that Russia has 
moved over 1,000 pieces of military equipment into the occupied areas 
over the last twelve months.
    Since its occupation, Crimea has experienced a steady and 
significant build-up of Russian military forces. It is being steadily 
transformed into the hub of an anti-area/access denial zone extending 
deep into Ukraine-proper and much of the Black Sea region. Large-scale 
Russian snap ``exercises'' in its Western Military District and the 
Black Sea remind Ukrainians that their country remains at risk to 
deeper aggression.
    Ukraine's reform efforts are not only challenged by these military 
incursions, they are undermined by Russia's decades old campaign of 
subversion, one that has only intensified over the last two years. 
Moscow has conducted an aggressive disinformation effort intended to 
disillusion Ukrainians with their own government, independence, and 
their aspirations to become part of the West. This ``full spectrum'' 
campaign includes: energy embargoes and gas price escalations; economic 
and trade sanctions; and terrorist and cyber-attacks, among other 
elements.
    Despite these challenges, Ukraine has made progress in reform since 
the Maidan revolution. Its government has taken measures to improve tax 
collection, its pension systems and the transparency and fairness of 
its procurement systems. New, vetted, and trained police forces have 
been introduced in major cities, including Kyiv, Lviv, Odesa, and 
Kharkiv. Anti-corruption and public asset disclosure laws have been 
passed, and a government austerity program is being implemented that 
features a significant reduction in energy subsidies and social 
benefits.
    With that said, the process of reform is far from complete, is not 
moving fast enough, and remains easily reversible. Significant 
challenges remain, including systemic corruption, oversized state-owned 
enterprises, powerful oligarchs, and a weak judicial system lacking 
robust prosecutorial institutions. Political dysfunction, as evidenced 
in recent weeks, reflects the endemic character of these impediments.
    However, as we assess Ukraine's progress it is useful to compare 
how its situation today differs from that of Poland, one of Central 
Europe's post-Cold War success stories. When Poland emerged from Soviet 
domination, it was warmly received by Europe and the United States. Its 
aspirations to join NATO and the European Union were robustly embraced, 
encouraged, and supported. Its aggressive ``big bang'' reforms were 
undertaken in a geopolitical environment that was by and large benign. 
It faced no real force that was capable of actively undercutting its 
independence and integration into the West.
    Ukraine has faced a different context. Its initial pursuit of 
independence generated warnings of caution against national extremism. 
After attaining independence in 1991, its expressions of interest in 
NATO and the EU membership were largely dismissed. And, it was 
confronted by a Russia that refused to recognize Ukraine as an enduring 
reality. From day one of Ukraine's reemergence as an independent 
nation, Moscow worked to undermine its government, its soveriegnty, and 
its ties to the West. These efforts increased as Russia's economy and 
military became more robust, particularly over the last decade and a 
half, the period corresponding with President Putin's rule.
    The transatlantic community, including the United States, has a 
significant stake in assuring Ukraine's trajectory as a modern, 
democratic and prosperous European state. A strategy to assist Ukraine 
in accomplishing that objective must integrate a set of immediate and 
longer term initiatives that will impose greater economic and 
geopolitical costs on Russia for its aggression, enhance Ukraine's 
capacity for self-defense, and assist Kyiv's efforts to reform its 
political and economic institutions, and integrate the nation into the 
Euro-Atlantic community. These initiatives should include:

    Increased economic sanctions against Russia: Current economic 
sanctions imposed on Russia have proven insufficient. For two years, 
Moscow has refused to withdraw from Crimea and eastern Ukraine. In 
fact, it has used that time to consolidate its control over those 
regions and has sustained, if not increased, its other coercive 
activities against Ukraine and other nations, including Georgia and 
Moldova. Today's sanctions may be hurting the Russian economy in the 
context of low oil prices, but if their intended outcome has been to 
deter Russian aggression, they have failed by that measure.
    Instead of debating whether or not to sustain sanctions against 
Russia, the West should move to escalate those measures from targeted 
sanctions aimed against specific Russian individuals and firms to 
broader and more comprehensive sectoral sanctions against the Russian 
financial and energy sectors.
    One step in that direction that should be taken is to target 
Russia's vulnerable refinery industry. While Russia is a top producer 
of oil, its refining capacities are antiquated, have little spare 
capacity and are dependent upon Western, particularly U.S., spare 
parts. Former Under Secretary of State for Global Affairs Paula 
Dobriansky proposed to this committee that the West impose an embargo 
of exports to Russia of such equipment, including pumps, compressors, 
and catalytic agents.\1\ Such an embargo would significantly impair a 
key sector of the Russian economy from which Moscow derives revenues to 
sustain its military operations, including those conducted against 
Ukraine.
---------------------------------------------------------------------------
    \1\ Dobriansky, Paula. Testimony before the Senate Foreign 
Relations Committee: The Economic and Political Future of Ukraine. 
October 8, 2015.

    A more robust NATO posture in Central and Eastern Europe:  Today, 
NATO's response--including that of the United States--to Russia's 
assertive military actions across Central and Eastern Europe remains 
underwhelming. When Moscow invaded Crimea, it deployed 20-30,000 troops 
and mobilized over 100,000 on its western frontier. Since then Russia 
has conducted ``snap'' exercises in Europe involving 50,000 and more 
personnel. Western counter-deployments to Central Europe have involved 
primarily rotational deployments of company level units. Their limited 
character been unnerving to our Central European allies and have 
yielded no constructive change in the operational conduct of Russian 
forces.
    NATO should increase its military presence on its eastern 
frontiers, including through the establishment of bases in Poland and 
the Baltic states that feature permanently positioned brigade and 
battalion level capacities, respectively.
    These steps, some of which may be under consideration for approval 
at NATO's upcoming summit meeting in Warsaw this July, would build a 
context of greater security and confidence to Ukraine's immediate West. 
They are reasonable in light of Russia's long-term military build-up in 
the region and the magnitude of its aggression against Ukraine. They 
would constitute a geopolitical setback for Moscow's regional 
aspirations, at least those defined by President Putin

    Military Assistance to Ukraine:  Since the 2014 invasion of Crimea 
and eastern Ukraine, the Ukrainian military has evolved into a more 
effective fighting force. This has been particularly evident at the 
tactical or field levels where Ukrainian units have learned at great 
human cost how to innovatively and effectively counter Russian tactics 
and operations.
    Training and equipment provided by the United States and other 
nations have clearly been helpful, used effectively by the Ukrainians, 
and should be expanded. At the institutional and strategic levels, 
particular emphasis should be directed to assisting the Ukrainian 
defense establishment improve its personnel structures, logistics 
systems, medical capacities, intelligence organizations, and command 
and control systems.
    The time is long overdue for the United States and others to grant 
Ukraine the ``lethal defensive equipment'' it has requested. Russia's 
large-scale ``snap'' exercises underscore the challenges the Ukrainian 
military would face should Putin decide to drive deeper into Ukraine, a 
possibility that cannot be discounted in light of Moscow's rhetoric and 
belligerent military posture.
    The provision to Kyiv of anti-tank, anti-aircraft and other weapons 
would complicate Russian military planning by adding risk and costs to 
operations against Ukraine. Moreover, the failure of Washington to 
provide such equipment is not only disillusioning to Ukrainians, it 
signals a lack of determination by the United States to counter this 
Russian aggression--particularly when such equipment is shared with 
U.S. state and non-state partners elsewhere in the world.

    Reinforced Public Diplomacy/Information Warfare: A key priority 
must be to counter Russia's significant information campaign aimed to 
foster dissension, fractionalization, and turmoil. Russia's propaganda 
and disinformation war against Ukraine (and other nations in Europe) is 
being waged at levels not seen since the Cold War.
    Left unaddressed, the campaign threatens political unity in 
Ukraine, including that necessary to undertake essential and painful 
economic reforms. There is an urgent need to expand Ukrainian, U.S., 
and international dissemination of accurate, credible information and 
news in local languages via all forms of media throughout the country.
    Information and public diplomacy operations are also a matter of 
presence. The international community should increase its physical 
presence throughout Ukraine, particularly in those regions where 
Russia's subversive operations are most active and concentrated. Toward 
this end, the United States should establish consulates in key cities, 
including Odesa and Kharkiv. Such a presence would communicate U.S. 
resolve to support Ukraine's sovereignty, would help expand this 
region's economic ties to the West, and provide greater situational 
awareness in these regions.

    Ukraine's Economic Integration into the West: The U.S. has done 
well in mobilizing international financial support needed to mitigate 
the costs of Russia's military and economic aggression against Ukraine 
and to assist that the latter undertake challenging and painful 
economic reforms.
    A fundamental objective of this assistance and these reforms should 
be to facilitate Ukraine's full integration into the European economy. 
Toward this end, two dimensions of Ukraine's economy warrant focused 
attention: the energy and defense industrial sectors.
    Ukraine has made real progress in reducing its dependency upon 
Russian energy supplies, particularly gas. Last year, Kyiv began to 
import natural gas through Poland, Hungary, and Slovakia via pipelines 
that had been reconfigured for ``reverse flow.'' These imports 
underscore the powerful potential of linking Ukraine to an emerging 
Central European North-South Corridor of gas and oil pipelines that 
will traverse the energy markets that lie between the Baltic, Black and 
Aegean seas. This network promises to unify what are still-today 
divided Central European energy markets and integrate them into the 
broader European energy market.\2\
---------------------------------------------------------------------------
    \2\ Completing Europe: From the North-South Corridor to Energy, 
Transportation, and Telecommunications Union. The Atlantic Council and 
Central Europe Energy Partners, November 2014.
---------------------------------------------------------------------------
    Establishing a more robust Ukrainian link to the North-South 
Corridor would further diversify Ukraine's energy supplies, facilitate 
the integration of Ukraine into the emergent single European energy 
market, and strengthen Europe's energy resiliency by enabling it to 
leverage Ukraine's significant gas storage capacities.
    A second important dimension of Ukraine's economy is its defense 
industry. As recently as 2012, Ukraine was the fourth largest arms 
exporter in the world with total deals valuing $1.3 billion. Originally 
built to supply and sustain the Soviet military, Ukraine's defense 
industry remained after independence heavily focused on the Russian 
market. Today, the industry, even with the loss of the Russian market 
and manufacturing facilities seized in eastern Ukraine and Crimea, 
continues to be a significant element of the Ukrainian economy. With 
its sophisticated rocket works and heavy equipment and aviation design 
and production centers, Ukraine's defense industry ranks in the top ten 
of global arms exporters.
    Like the rest of the economy, Ukraine's defense industry suffers 
from cronyism and corruption, aging, megalithic assets and near total 
state ownership. A central objective of Western assistance should be to 
help Kyiv design, promulgate and execute a comprehensive national 
strategy to restructure that industry so that it becomes more oriented 
toward the West and better aligned with Western business practices and 
market structures.

    Supporting Ukraine's Euro-Atlantic Integration: Finally, assistance 
to Ukraine and it reform efforts must reflect an embrace of Ukraine's 
transatlantic aspirations. Those who protested and sacrificed 
themselves on the Maidan were very much motivated by their nation's 
aspiration to become a fully integrated member of Europe and its key 
institutions. Indeed, it is this aspiration that Moscow today is trying 
to crush.
    That vision serves as a powerful driver of Ukraine's reform 
efforts. Both NATO and the EU should use their respective summit 
meetings this Spring and Summer to underscore their support the 
eventual integration of Ukraine in to their respective communities. The 
Alliance, for example, should use its Warsaw Summit meeting in July to 
reiterate its vision that Ukraine and Georgia ``will become members of 
NATO.''
                               conclusion
    The Maidan was a powerful demonstration of the Ukrainian peoples' 
commitment to democracy and its sovereignty as a European state. That 
commitment has been challenged by Russian aggression, including the 
occupations of Crimea and portions of Eastern Ukraine. From this 
conflict, Ukraine has emerged more unified and more determined to 
become a full member of the Western community of democracies. They 
deserve our full support.
    The recommendations outlined above are prudent, defensive, mutually 
reinforcing, and consistent with the aspirations of the Ukrainian 
people to live in peace, freedom, and under the rule of law and to see 
their nation become a fully integrated member of the transatlantic 
community. They, thus, also enhance the prospects of peace in Europe.


    The Chairman. Thank you very much.
    Ambassador Herbst?

  STATEMENT OF HON. JOHN E. HERBST, FORMER U.S. AMBASSADOR TO 
   UKRAINE, DIRECTOR, DINU PATRICIU EURASIA CENTER, ATLANTIC 
                    COUNCIL, WASHINGTON, DC

    Ambassador Herbst Chairman Corker, Ranking Member Cardin, 
members of the committee, thank you for the invitation.
    For more than 2 years, Ukraine has faced a double 
challenge: Kremlin aggression and the crisis of reform.
    In May of 2014, newly elected President Poroshenko faced 
economic catastrophe and in advancing Russian led finance and 
supplied offensive of the Donbas.
    Ukraine's sharp economic decline bottomed out in the third 
quarter of last year, which was a year of substantial reform 
and economic stabilization.
    Today there is a largely stabilized line of contact in the 
east between Russian forces and their proxies in the occupied 
territories and Ukraine's troops to the west. In short, Ukraine 
has pulled back from the brink of disaster, but its 
circumstances remain difficult.
    For a year and a half, the Minsk process has been a key 
factor in the effort to bring peace to the east. Ceasefires 
have been in effect officially since September of 2014, but 
both the Minsk I and Minsk II ceasefires have been violated 
regularly with most violations coming from the Russian side.
    The terms of the Minsk II agreement were similar to Minsk I 
but worse for Ukraine. Under the Minsk II ceasefire, 375 
Ukrainian soldiers have died, 1,500 have been injured. Since 
the Minsk I ceasefire went into place, Russia has seized over 
700 additional square kilometers of Ukrainian territory. This 
has not been a real ceasefire.
    Minsk II's terms are worse than Minsk I, but they are 
adequate as long as the EU insists that sanctions imposed on 
Moscow remain in place until Minsk II is fully implemented. 
Thus far, sanctions have been the most effective tool that the 
West has used to encourage Moscow to end its war in the Donbas. 
They are responsible for a 1 to 1.5 percent drop in the Russian 
GDP. Last year, Russia's GDP dropped 3.7 percent, wages dropped 
up to 10 percent, and the IMF expects Russian GDP to fall again 
this year.
    It is essential that sanctions stay in place. Chancellor 
Merkel has been key in this. She says that Russia's operations 
in Syria will not affect sanctions policy, but Chancellor 
Merkel's political standing is weaker as a result of the 
immigration crisis. If she becomes substantially weaker, the EU 
sanctions on Russia are in jeopardy. Her drubbing in Sunday's 
provincial elections was not a good sign.
    President Poroshenko and Prime Minister Yatsenyuk are the 
best senior team in Ukraine's history, but they must make the 
right decisions for reforms to succeed. Ukraine's vibrant civil 
society, an impressive cohort of young reformers in the Rada 
and in minister and deputy minister slots have been encouraging 
the president and the prime minister to make those decisions.
    Ongoing advice and assistance from the EU, the United 
States, and especially the IMF are critical in helping 
Ukraine's leadership to make the right choices.
    2015 was ultimately a successful year for reform. The 
budget passed in 2015 reduced public expenditures by 9 percent 
of GDP and cut the budget deficit from 10 to 2 percent. 
Parliament passed a host of laws that were also very reform-
minded. Ukraine's GDP dropped 11 percent, but most of that was 
in the first half of the year. In the fourth quarter, there was 
no decline in GDP, and the IMF projects modest growth for 
Ukraine this year.
    While reform was substantial in 2015, it was not enough for 
many Ukrainians. Critics focused on the absence of any change 
in the prosecutor general's office and the judiciary and 
claimed that the president and the prime minister were not 
interested in going after these major sources of corruption.
    Early this year, three reform ministers resigned quietly. 
Then Economic Minister Abramavicius resigned complaining that 
he could not do his job because of corruption, and that 
corruption went all the way to the top. Reformers in civil 
society spoke up for Mr. Abramavicius, so did the U.S., the EU, 
and the IMF. In response, President Poroshenko called for the 
removal of Prosecutor General Viktor Shokin, and the Rada 
passed reform legislation that had been blocked for months.
    In February, two parties resigned from the coalition. Since 
then, President Poroshenko's party has been negotiating with 
other parties to ensure that it retains the majority. Those 
negotiations continue. The president has to name a prime 
minister who can gain a majority of votes in the Rada and who 
is acceptable to the West and especially the IMF.
    This whole affair, starting with the resignation of the 
economic minister, has damaged Ukraine's reform credentials. 
Many observers read the headlines and assume that reform in 
Ukraine has not made progress, but that is not true. Progress 
has been made consistently since 2014, and even during this 
crisis, the Rada passed reform legislation.
    Under the current lineup in the Ukrainian Government and in 
the Rada, there will always be one step backwards before you 
get to two steps forward for reform. This is the way that 
progress will take place in Ukraine, and we need to understand 
that.
    The Obama administration has a mixed record regarding 
Moscow's aggression and its support for Ukraine. It has been a 
strong and effective advocate for imposing and maintaining 
sanctions on Russia. Dan Fried and Toria Nuland should get 
credit for that.
    The Obama administration has also provided important 
military training and some hardware to Ukraine, as Toria 
outlined. And the administration also understands the way 
reform will move in Ukraine. Vice President Biden has been a 
great advocate for reform in Ukraine.
    But the Obama administration has failed to recognize the 
magnitude of this crisis. President Obama has said that the 
crisis in Ukraine is a regional crisis. This is false. When a 
nuclear super power changes borders in Europe by military 
force, this is a global crisis requiring strong American 
leadership.
    Mr. Putin has not hidden his goal of changing the post-Cold 
War order in Europe, which is a vital threat to American 
interests. To increase the odds that Mr. Putin does not commit 
aggression elsewhere in Europe, we must help Ukraine defeat 
Moscow's war in the Donbas. At an absolute minimum, we should 
make the war on Ukraine by Russia as painful as possible for 
the Kremlin.
    With these goals in mind, we should provide Ukraine with 
robust military support, at least $1 billion a year for 3 
years. Ukraine needs four to six more units of counter-battery 
radar for long-range missiles. Ukraine needs lethal defensive 
weapons to defeat Russia. If the U.S. had provided 25 Javelins 
to Ukraine in January of 2015, Ukraine forces would have 
defeated Moscow's Debaltseve Offensive. If we gave Ukraine 50 
Javelins today, we would make it very, very painful for Russia 
to continue its territorial aggression in Ukraine.
    There is another reason for thwarting the Kremlin 
aggression. Moscow's war against Ukraine, the seizure of Crimea 
is the single greatest blow to the nuclear nonproliferation 
movement ever. Ukraine gave up its nuclear weapons in return 
for assurances from Russia, from Great Britain, from the United 
States, and from France, and we have ignored those assurances.
    Our economic assistance should also be much greater. It 
should be seen as an investment in our security, a point that 
former Treasury Secretary Larry Summers has made in advocating 
$10 billion of western aid for Ukraine. The U.S. should 
shoulder up to $5 billion of this package. It should consist of 
loan guarantees, direct budget support, debt swaps, as well as 
assistance to support reforms in key sectors such as banking.
    Coupled with strong military assistance and the maintenance 
of sanctions on Moscow, a large aid package would help Ukraine 
defeat the Kremlin's aggression and transform itself into a 
prosperous democracy with close links to the West.
    Thank you. I am sorry for going over my time.
    [Ambassador Herbst's prepared statement follows:]


         Prepared Statement of Ambassador (Ret.) John E. Herbst

    Chairman Corker, Ranking Member Cardin, members of the committee, 
thank you for the invitation to speak this morning. It is an honor.
    For over two years, Ukraine has faced a double crisis. The first 
concerns the war of aggression waged by the Kremlin; the second is the 
crisis of reform. The two are related because it was the determination 
of the Ukrainian people, in the face of the corrupt and increasingly 
authoritarian Yanukovych government, to pursue reform that ultimately 
led Viktor Yanukovych to flee Ukraine in February of 2014. This, in 
turn, prompted the Kremlin to annex Crimea in March of 2014 and to 
launch an increasingly open hybrid war in the Donbas.
    In late May of 2014, newly elected reform President, Petro 
Poroshenko, faced an advancing Russian-led/financed/supplied offensive 
in the east and economic catastrophe throughout the country. Ukraine's 
international reserves dropped steadily through 2014 and reached a low 
of $5 billion in February of 2015. Today, there is a largely stabilized 
line of contact in the east between Russian forces and their proxies in 
the occupied territories and Ukrainian troops to their west.
    Ukraine's economic decline of nearly 10 percent in 2015 bottomed 
out in the third quarter, with zero growth in the fourth quarter and 
actual growth projected for 2016. And thanks to a raft of reform 
legislation that passed the Rada, Ukraine's parliament, in early 2015, 
the International Monetary Fund, the European Union, the United States 
and other countries provided $5 billion in economic assistance to 
buttress Ukraine's foreign reserves. As of today, Ukraine's reserves 
are $13 billion. The IMF is expected to release the next tranche of its 
$17.5 billion package in the coming months.
    In short, whether looking at the war, the economic condition of the 
country, or the state of reform, Ukraine has pulled back from the brink 
of disaster, but its circumstances remain difficult. Still, the 
understanding of Ukraine's circumstances and the West's interests in 
Ukraine remain rudimentary--although much better in Congress than in 
many European capitals.
                    the military situation and minsk
    For a year and a half, the Minsk process has been a key factor in 
the military situation in the east. To understand the present situation 
in the Donbas, it is useful to review briefly the origins and evolution 
of the war.
    The problem starts, of course, with the Kremlin's decision first to 
seize Crimea and then to launch a covert war in Ukraine's east in April 
of 2014. The Kremlin believed that it would be able to turn much of the 
east and--from Luhansk in the north to Donetsk and Kharkiv to its south 
and all the way to Odesa in the southwest--into a zone of influence by 
providing leadership, money, and arms for an uprising against the 
reform government that took office after Mr. Yanukovych fled Kyiv. This 
ambitious effort to create a ``Novorossiya'' failed as the residents of 
the area were not interested in fighting against the government in 
Kyiv. Indeed, polls taken in the Donbas in January of 2014 showed that 
no more than 25 percent of the population favored either independence 
from Ukraine or joining Russia (similar polls in Crimea at that time 
showed that no more than 40-43 percent of the population there favored 
those options).
    While this ersatz rebellion failed in most of Ukraine's east and 
south, with the help of Russian ``political tourists'' and 
``volunteers,'' it enjoyed some success in the Donetsk and Luhansk 
Oblasts. For six weeks, with little and ineffective Ukrainian 
resistance, this rebellion marched westward taking the cities of 
Kramatorsk and Slovyansk. The Kremlin's objective in conducting this 
covert war was to produce political changes in Kyiv that would lead to 
the installation of a government beholden to Moscow; or, if that was 
too difficult, to destabilize the reform government that replaced Mr. 
Yanukovych.
    Shortly after taking office in late May of 2014, Mr. Poroshenko 
launched a counteroffensive to halt the advance of Russian forces in 
the Donbas and to retake lost territory. For two months the 
counteroffensive went from victory to victory, despite the Kremlin 
taking increasingly hostile measures to thwart it. These measures 
included the introduction of T-64 and then T-72 tanks, the dispatch of 
the ``volunteer'' Vostok battalion of Chechens, the firing of long-
range artillery by Russian forces in Russia, and the deployment of 
increasingly sophisticated anti-aircraft batteries, including the BUK 
missile that shot down the Malaysian airliner in mid-July of 2014.
    In mid-August of 2014, with Ukrainian troops on the verge of 
encircling the Moscow-supported forces in Donetsk and Luhansk, several 
thousand regular Russian troops invaded and defeated the Ukrainian 
troops within three weeks. The shoot-down of the Malaysian plane and 
the Russian invasion prompted the European Union to join the United 
States in imposing sectoral sanctions on Russia--serious measures that 
the Kremlin had hoped to avoid by keeping hidden its role in Ukraine's 
war.
    Under OSCE auspices, Ukraine and Russia negotiated the Minsk I 
ceasefire in September of 2014. The agreement called for an immediate 
ceasefire, an end to offensive operations, the withdrawal of heavy 
weapons 15,000 kilometers behind the line of contact, the withdrawal of 
all foreign fighters and equipment from the occupied areas, the passage 
of decentralization legislation in Ukraine and the holding of elections 
in the occupied areas, freedom from prosecution for those involved in 
the fighting in the Donbas, OSCE monitoring of the ceasefire and the 
border between Russia and Ukraine, and the return of the border to 
Ukrainian control.
    The senior group for negotiations on the Kremlin's hybrid war in 
Ukraine is the so-called Normandy format, consisting of German 
Chancellor Angela Merkel, French President Francois Hollande, Russian 
President Vladimir Putin, and Mr. Poroshenko. This format was 
established in June of 2014, when the four leaders met in Normandy to 
celebrate the 70th anniversary of the Allied invasion of Nazi-occupied 
France. This setup suits France, Germany, and Russia. Ukraine would 
prefer to include the United States. But Washington has never insisted 
on joining the talks.
Violations of Minsk I Lead to Minsk II
    The Minsk I ceasefire was violated from the very beginning. While 
both sides committed violations, it was the Russian-backed side that 
conquered an additional 500 square kilometers between September of 2014 
and February of 2015, when the Minsk II protocol was signed. Indeed, 
negotiations on Minsk II began as result of the Russian offensive to 
take Debaltseve in southeast Ukraine, which began in early January of 
2015.
    The terms of the Minsk II agreement were similar to Minsk I, but 
worse for Ukraine. Specifically, Minsk II gives the authorities in the 
occupied areas the right to organize and control their own militia. Mr. 
Poroshenko's motivation for signing Minsk II may have been to save the 
Ukrainian army that was defending Debaltseve. It was nearly encircled 
by Russian forces. German and French officials claim that they put no 
pressure on Mr. Poroshenko to sign these unfavorable terms, and that 
Chancellor Merkel even asked him if he wanted to accept these onerous 
conditions. Ukrainian officials state that the French and the Germans 
were anxious for Mr. Poroshenko to sign.
    It is noteworthy that while Minsk II was signed on February 12, the 
Russian side insisted that the ceasefire only go into effect February 
15. Moscow wanted to use the additional three days to capture 
Debaltseve. This tactic did not work. On February 15, Debaltseve was 
still in the hands of Ukrainian forces. So Moscow and its proxies 
violated the Minsk II ceasefire from its first hours as they continued 
the offensive to take the town, which required a few more days.
    After the Kremlin's minions took Debaltseve, violations of the 
Minsk II ceasefire continued, averaging 70 to 80 incidents a day. The 
majority of these violations were committed by the forces in the 
occupied territories. In September of 2015, Moscow decided to dial down 
the violence in the Donbas as it turned its military attention to 
Syria. But even that did not lead to a true ceasefire. Daily firing 
incidents averaged 30 to 40. Moscow was hoping that by reducing the 
violence, it might persuade the EU to lift, or at least ease, the 
painful sectoral sanctions that would be reviewed in December. Moscow's 
hopes were not fulfilled as the sanctions were renewed for an 
additional six months.
    In January, Moscow chose to up the pressure in the Donbas and the 
number of daily violations jumped again to over 70. The authorities in 
the Luhansk and Donetsk Peoples' Republics have continued to hinder the 
work of the OSCE's Special Monitoring Mission (SMM) in verifying the 
removal of heavy weapons and in observing the Ukrainian/Russian border. 
Since the Minsk II ceasefire went into effect, Moscow's forces have 
taken hundreds of square kilometers of Ukrainian territory, and killed 
over 375 and wounded over 1,500 Ukrainian soldiers.
    The number of Russian troops in the Donbas is a matter of dispute. 
Ukrainian intelligence has regularly reported that number as between 
8,000 and 12,000. In late 2014, Western sources were putting that 
number at 400-800. But in March of last year, LTG Ben Hodges, 
Commanding General of U.S. Army Forces Europe, put that number at 
12,000. Earlier this month, Assistant Secretary of State for European 
and Eurasian Affairs, Victoria Nuland, spoke of ``thousands'' of 
Russian soldiers in Ukraine.
    The Kremlin has devoted much attention and energy to hiding its 
aggression in the Donbas--just as it did in Crimea until Putin decided 
to boast about his success in a triumphal documentary on the ``return'' 
of Crimea to Russia in March of 2015. At a press conference last 
December, Putin also publicly acknowledged that the Russian military 
was in Ukraine. ``We never said there were not people there who carried 
out certain tasks including in the military sphere,'' Putin said. But, 
he asserted without elaboration, this was not the same as regular 
Russian troops.
    In their military operations, the Kremlin was surprised first by 
the unwillingness of the people in the east, including ethnic Russians, 
to join the rebellion against Kyiv and then the stubbornness of 
Ukraine's defense. That defense has been a source of pride to the armed 
forces and people of Ukraine. Moscow now has no expectations that it 
can somehow engineer a sympathetic government in Kyiv. It also 
understands that it would take a large, conventional offensive 
involving hundreds of tanks and/or airpower to make a major 
breakthrough Ukraine's well dug in lines. That option is inexpedient 
for domestic and international reasons. But Moscow is still seeking to 
wear out Mr. Poroshenko's government by constant military pressure, 
including small seizures of territory.
Minsk and Sanctions
    The terms of Minsk II are weak and unfavorable for Ukraine, but 
they are adequate as long as the EU insists that the sectoral sanctions 
imposed on Moscow will remain in place until the terms of Minsk are 
fully implemented, including the withdrawal of all foreign equipment 
and fighters, the restoration of Kyiv's sovereignty over the entire 
Donbas, and Ukraine's control of its border with Russia.
    Thus far, sanctions have been the most effective tool that the West 
has used to encourage Moscow to end its war in the Donbas. According to 
Russian economic officials, the sanctions are responsible for a 1-1.5 
percent drop in Russia's GDP. Sanctions have proved a particular 
problem for Russian firms turning over debt or seeking new credit. 
Russian GDP dropped 3.7 percent and Russian wages dropped 9.5-10 
percent in 2015. Sanctions were an important reason for this, although 
the drop in hydrocarbon prices played a larger role. The IMF expects 
Russian GDP to fall another 1-1.5 percent this year, but other 
observers think that GDP contraction this year may be the same as in 
2015.
    It is essential that the sanctions continue. To the Kremlin's 
unpleasant surprise, sanctions have been renewed three times. But some 
EU nations are growing restive with the sanctions regime. When Moscow 
intervened in the Middle East last September, some prominent European 
voices spoke of the need to remove sanctions in order to secure the 
Kremlin's support for dealing with issues like Syria.
    It quickly became clear, however, that Moscow's military campaign 
was directed almost exclusively against the weak and moderate 
opposition supported by the West, not against the Islamic State of Iraq 
and the Levant (ISIL) or other extremist groups. And by the end of the 
year, even that intervention had not achieved much--it only enabled 
Bashar al-Assad's regime to recover .004 percent of Syrian territory.
    In January, however, the Kremlin took a page from Putin's war in 
Chechnya in the late 1990s. It began a massive bombing campaign against 
the secular opposition and the civilian population among whom it lived 
in the small cities and towns in northwest Syria. This operation has 
produced large civilian casualties and prompted major movements of 
people out of these locations. This has had two consequences: It has 
enabled Assad's forces to take back territory leading to Aleppo, and it 
has greatly exacerbated the refugee crisis in Europe.
    Without a doubt, the refugee crisis is the greatest political issue 
in Europe today. There is some understanding on the continent that 
Kremlin policies are contributing to the crisis. For those who do not 
like sanctions on Russia, this is another reason to lift them--to 
somehow ``trade'' this for an end to Moscow's migration-inducing 
bombing campaign. (Of course, Moscow denies it is conducting such a 
campaign, so it is not clear that such a deal is possible.)
    But for the German Chancellor and others who insist that the 
sanctions must remain in place until Russia implements its Minsk 
obligations, Moscow's Syria operation will not, in and of itself, lead 
to a weakening of sanctions policy. It is true, however, that the 
Chancellor's political standing is weaker as a result of her policy of 
accepting migrants from Syria and other hot spots to the south. If she 
becomes substantially weaker, it could threaten the sanctions policy. 
The provincial elections in Germany March 13 were a clear set-back for 
the Chancellor. The impact of the election on here political fortunes 
and, possibly, sanctions policy will play out in the months ahead.
    If this danger appears, it will come in the form of the pseudo-
sophisticated argument that neither Russia nor Ukraine are meeting 
their Minsk commitments; therefore, why should only one side (Russia) 
be punished with sanctions? Those who dislike sanctions are already 
pointing out that Ukraine's Rada has yet to pass a local election law 
for the occupied areas or constitutional reform on decentralization, 
which would give autonomy to those areas. This argument overlooks the 
fact that the Russian side is:


   currently occupying Ukrainian territory;

   responsible for the most immediate and important violation of the 
        Minsk agreement--the ongoing fighting in which they continue to 
        advance into Ukrainian territory; and

   hindering the essential monitoring activities of the OSCE.

U.S. Policy and Minsk
    The Obama administration has a mixed record in this crisis. On the 
one hand, it has been a strong and effective advocate for imposing and 
maintaining sanctions on Russia for its aggression in Ukraine. In 
encouraging the EU to impose and maintain sanctions, the administration 
has demonstrated leadership and skill.
    At the same time, U.S. President Barack Obama has said famously, 
and incorrectly, that the crisis in Ukraine is a regional crisis; when 
a nuclear superpower changes borders in Europe by military force, it is 
a crisis of global import.
    Mr. Putin has not hidden his goal of changing the post-Cold War 
order in Europe--a vital threat to American interests. As part of his 
revanchist agenda, Mr. Putin has invoked his right and duty to protect 
ethnic Russians and even Russian speakers wherever they live--a 
principle he used to justify aggression in Georgia and then Ukraine. If 
emboldened, he could use that principle to intervene in Estonia or 
Latvia, where ethnic Russians total 25 percent of the population. We 
have an Article 5 obligation to protect our Baltic NATO allies in the 
face of Kremlin aggression. Therefore, it is in our interests that 
Moscow's aggression in Ukraine fails. At an absolute minimum, we should 
make it as painful as possible for the Kremlin.
    With this in mind, we should be providing Ukraine with robust 
military support to the tune of at least $1 billion a year. We are 
providing some military training and some equipment and hardware, but 
more needs to be done. Most importantly, Ukraine needs more units of 
counter battery radar for long-range missiles. Last September, the 
Obama administration sent two such units to Ukraine. Washington should 
send an additional four to six units.
    It is also long past time for the Obama administration to send 
lethal defensive equipment to Ukraine. Russia has seized over 700 
square kilometers of additional Ukrainian territory since the Minsk I 
ceasefire. Their most effective tactic for these offensive actions is 
the massing of tanks. According to military experts, if we had provided 
25 Javelins to Ukraine by January of 2015, Ukrainian forces would have 
defeated Moscow's Debaltseve offensive.
    Providing defensive lethal weapons would either persuade the 
Kremlin to stop seizing more Ukrainian territory or it would force 
Moscow to accept more casualties and to greatly escalate to secure 
territorial gains. But that would be politically risky for Mr. Putin 
because his public does not want its soldiers fighting in Ukraine and 
the Russian president has been hiding this fact from them. The bottom 
line is that providing such weaponry to Ukraine raises the cost of 
Moscow's aggression and reduces the odds of Kremlin provocations 
against our Baltic allies.
    To help ensure that the Minsk negotiating framework does not 
disadvantage Ukraine, the Obama administration should be seeking to 
join as a full partner. It is true that our diplomats keep a close 
watch on Minsk, but that is not the same as being part of the process. 
Assistant Secretary Nuland met Vladislav Surkov, a senior Kremlin 
official responsible for policy in the Donbas, in January. But there 
was no clear outcome to those talks or announced plans for follow-up 
meetings.
    There is one more reason for a robust American role in thwarting 
Kremlin aggression in Ukraine. It is especially appropriate to broach 
this reason now, with a nuclear summit looming in Washington. Moscow's 
war against Ukraine and seizure of Crimea is perhaps the single-largest 
blow to the nuclear nonproliferation movement ever.
    In 1994, Ukraine, along with Belarus and Kazakhstan, voluntarily 
gave up its nuclear weapons. In exchange, Russia, the United States, 
and the United Kingdom provided assurances for Ukraine's sovereignty 
and territorial integrity. Russia's aggressions violated this 
memorandum, and various international treaties. Washington's 
insufficiently resolute response to that aggression demonstrated, I am 
sorry to say, the hollowness of our assurances. This whole episode 
provides a clear and negative lesson to nations on the dangers of 
denuclearization.
                         reform and the economy
    Petro Poroshenko is a Ukrainian businessman and politician who has 
been successful financially and politically under every government in 
Ukraine since President Leonid Kuchma. He was a member of the Rada in 
the Social Democratic Party, which supported Mr. Kuchma. He was a 
founding member of the Party of the Regions--the party later headed by 
Viktor Yanukovych. He then became part of President Viktor Yushchenko's 
political team and had a number of responsible positions in Mr. 
Yushchenko's government. And he had enough political agility to serve 
in the government of Mr. Yanukovych after that.
    When the political crisis began in November of 2013, with the 
demonstrations against Mr. Yanukovych's rejection of the Deep and 
Comprehensive Free Trade Agreement with the EU, Poroshenko busied 
himself maintaining ties with the EU. He was not involved in the day-
to-day demonstrations. This was a plus for Poroshenko because the 
mainstream politicians supporting the demonstrators did not burnish 
their reform credentials. Their instincts were always more cautious 
than the crowd's. This was particularly evident at the climax of the 
crisis in mid-February of 2014, when snipers murdered scores of 
demonstrators. At that point, politicians like Arseniy Yatsenyuk and 
Vitali Klitschko were willing to accept the compromise suggested by the 
EU that Yanukovych would stay in office until the end of 2014, when 
there would be new elections. A week earlier, that deal would have been 
acceptable to the protesters. After the bloodshed, it was not.
    So Poroshenko's distance from the Maidan turned into an advantage, 
as did his work with the EU. He became the near-consensus candidate for 
the presidential elections planned for late May; and he won a stunning 
victory, receiving over 50 percent of the vote on the first ballot, 
which had never happened before in Ukraine's history. Moreover, he won 
over 30 percent of the ballot in every oblast in Ukraine, including in 
the east. He was truly a president of the entire nation, something that 
Yanukovych or Yushchenko or Kuchma were not. (Yanukovych had very small 
support in Ukraine's west, and Yushchenko very little in the east.) 
Poroshenko ran on a reform, pro-European agenda.
    Poroshenko announced, shortly after assuming office, that he would 
not be able to proceed with a strong reform agenda as long as the old 
Rada remained in place. Plans were accepted for parliamentary elections 
in October. Those elections proved to be a stunning referendum for 
reform. Six parties made it into the Rada, of which four ran as pro-
Western reformers. The Poroshenko Bloc won 132 seats; Mr. Yatsenyuk's 
People's Front 82; the Self Reliance (Samopomych) Party 33; and Yulia 
Tymoshenko's Fatherland Party 19--a total of 266 out of 450 seats in 
the Ukrainian parliament.
    While Poroshenko's party won a large plurality of seats, Mr. 
Yatsenyuk's party won the plurality of votes (22.12 percent to 21.82 
percent). A large number of Poroshenko's seats were won in one-man 
constituencies without party voting. Mr. Yatsenyuk's strong showing 
made him the clear favorite to become prime minister, even though the 
president would have preferred a prime minister from his own team. With 
political rival Mr. Yatsenyuk in office, tensions between the prime 
minister and the president were inevitable. This proved a complicating 
factor in reform. Like the President, Mr. Yatsenyuk was a very 
successful politician prior to his becoming prime minister. While only 
41, he was Minister of Economy and Minister of Foreign Affairs under 
Mr. Yushchenko, and Speaker of the Rada.
    Both the President and Prime Minister are intelligent and worldly. 
They know the language of reform that the West values. They campaigned 
and won office as reformers; but were successful too in the old 
Ukraine, too. In short, they are classic transitional figures in the 
move from the old Ukraine to the new, reform Ukraine.
The Dynamic of Reform in Ukraine
    Poroshenko and Yatsenyuk represent the best president-prime 
minister team in Ukraine's 25-year history. They must make the right 
decisions for reform to succeed. They are encouraged to do so by 
Ukrainian civil society, by the impressive cohort of young reformers 
who became ministers and deputy ministers, and by the approximately 40 
young reformers who became Rada deputies. These are the core drivers of 
reform.
    There is also a critical foreign element in the reform process. It 
consists of those providing assistance and advice for reform in the EU, 
the United States, other Western governments, and the IMF and other 
international financial institutions. Given the pressures of the old 
system on Ukraine's top leadership, it was inevitable that young 
reformers in the Ukrainian government and the Rada, and the country's 
outside partners would have to be active to keep reform on track. That 
is how the reform process has played out over the last 15 months.
Overall Progress in 2015
    After the October 2014 Rada elections and the formation of a 
government in December, the reform process began in earnest. The 
decision to appoint Aivaras Abromavicius as Minister of Economy, 
Natalie Jaresko as Minister of Finance, Oleksiy Pavlenko as Minister of 
Agriculture, Andriy Pyvovarskiy as Minister of Infrastructure, and 
Alexander Kvitashvili as Minister of Health put a solid core of 
reformers in key spots. Another key appointment had taken place six 
months earlier--the naming of Andriy Kobolev, a known reformer, as the 
head of Naftogaz, the national gas company and ground zero for major 
corruption in Ukraine.
    The government budget presented to the Rada in December of 2014 was 
a major vehicle for change; it was also essential to demonstrate to the 
IMF that Ukraine was not just pursuing reform, but taking control of 
its current account and budget deficits. Without that control, the IMF 
would not likely approve the $5 billion loan that Ukraine needed 
instantly to service its international debt obligations. As a result of 
years of financial mismanagement and the domestic crisis, Ukraine's 
reserves had shrunk throughout 2014 and fell to $5 billion by February 
of 2015.
    Efforts to pass a reform budget ran into problems in the Rada both 
from old, vested interests and from populist politicians, who saw the 
political value in opposing the cuts in social expenditures and, in 
some instances, the increased taxes needed to meet IMF requirements. 
Mr. Yatsenyuk and his reform ministers lobbied hard for the budget and 
the various reforms, but it was perhaps the IMF that provided the 
essential push by simply holding off providing the financial assistance 
until the budget passed. In March of 2015, the IMF transferred $5 
billion to Ukraine.
    The budget that finally passed in February was a large victory for 
reform. It reduced public expenditures by 9 percent of GDP--almost all 
of its subsidies -- and cut the budget deficit from 10 to 2 percent. An 
astonishing achievement. It passed along with legislation moving toward 
market pricing for natural gas. The law calls for the move to market 
pricing to take place in tranches over two years; but the important 
first step went into effect in April. This legislation was one reason 
for the sharp drop in gas usage in 2015 of 20 percent and the much-
reduced dependence on imports of Russian gas. (Ukraine had been the 
most energy inefficient consumer of natural gas in the world. The 
destruction of Ukraine's industry in the east because of Moscow's war 
was another reason for the drop in gas consumption.)
    March of last year witnessed another a political development with 
significant, positive reform implications: the firing of oligarch Ihor 
Kolomoisky as governor of Dnipropetrovsk Oblast. Mr. Kolomoisky was 
named governor in the spring of 2014 after Mr. Putin began the war in 
the Donbas. One of Ukraine's richest men with substantial assets in 
Dnipropetrovsk, Mr. Kolomoisky was seen as someone who could 
effectively prevent Moscow's minions from taking over in 
Dnipropetrovsk. And the expectations were met as he formed and funded 
his own battalions that kept his oblast secure. Between his wealth and 
(battalion-backed) political power, he was widely seen as the most 
powerful oligarch in the country.
    When the Rada passed legislation enabling a simple majority of 
shareholders to make changes in the management of state owned 
companies--another reform measure--Mr. Kolomoisky decided to test his 
power. He controlled 42 percent of the shares of Ukrnafta. Under the 
old rules, which required 60 percent of shareholders to make management 
changes, Mr. Kolomoisky controlled the company, even though the state 
owned the majority of shares. When the new legislation opened the way 
to changes threatening his control, he sent armed and camouflaged young 
men to seize Ukrnafta. In the political storm that followed, Mr. 
Poroshenko sacked Mr. Kolomoisky as governor and affirmed the 
government's new control over Ukrnafta. Ukraine's most powerful 
oligarch was taken down two pegs.
    Other important reform measures were introduced in 2015. The 
Ministry of Economy greatly simplified procedures for opening a 
business--and thereby reducing the number of hands looking for a 
handout from new businesses. The government also introduced a system 
for government e-procurement known as ProZorro. This transparency is a 
major impediment to corruption. In 2015, the cleanup of the banking 
system that had begun in the spring of 2014 continued. This cleanup had 
led to the closing of 67 insolvent or non-transparent banks out of a 
total of 180 banks.
    Another reform gathering interest and support was the introduction 
of new traffic police in Kyiv, Odesa, Lviv and other major cities. The 
new police refrained from the habit of their predecessors and did not 
seek bribes from motorists.
    The year 2015 was a difficult, but ultimately successful one for 
reform in Ukraine and for Ukraine's economy. While Ukrainian GDP 
dropped 11 percent, most of that was in the first half of the year and 
in the fourth quarter there was no decline in GDP. Despite the 
expenditures for defense and the destruction caused by Moscow's 
aggression, the IMF projects a modest 1-2 percent growth for Ukraine in 
2016.
    The improvement by the end of 2015 was significant enough to give 
at least some politicians the thought that they could take a populist 
approach to the 2016 budget and increase government expenditures and 
reduce taxes. Once again, the IMF proved an invaluable ally to 
Ukraine's reformers, letting Kyiv know that only a responsible budget 
would lead the institution to release the next round of financial aid. 
A responsible budget passed in January.
The Storms Hit, And Yet More Progress
    While reform progress was substantial in 2015, it was not enough 
for many in civil society and at least some reformers in the Rada and 
the government. Critics focused on the absence of any real changes in 
the Procurator General's Office and in the judiciary and claimed that 
the president and prime minister were not interested in going after 
these major sources of corruption. Both institutions were known to 
facilitate corruption. They pointed to the failure of the government--
through the Procurator General-- to indict any major figures from the 
Yanukovych administration for corruption. They complained, too, that 
Procurator General Viktor Shokin was a compromised figure who had 
served as Procurator General in the Yanukovych administration.
    By late fall of 2015, the EU and the United States joined the 
chorus of those seeking Mr. Shokin's removal as the start of an overall 
reform of the Procurator General's Office. U.S. Vice President Joe 
Biden spoke publicly about this before and during his December visit to 
Kyiv; but Mr. Shokin remained in place.
    Early in the new year Mr. Pavlenko, the Minister of Agriculture; 
Mr. Pyvovarskiy, the Minister of Infrastructure; and Mr. Kvitashvili, 
the Minister of Health, quietly resigned. This had little impact on the 
reform debate. But in early February Mr. Abromavicius, the Minister of 
Economy, resigned and complained that he was tired of fighting 
corruption. He said that the immediate cause for his decision was an 
effort by close presidential aide Ihor Kononenko to install a crony as 
Deputy Minister of Economy with responsibility for the newly-cleaned up 
Naftogaz. Mr. Kononenko denied the charge, but civil society and other 
reformers took Mr. Abromavicius' side.
    So did the West. The United States, the EU, and eight Ambassadors 
of other countries expressed regret at Mr. Abromavicius' resignation. 
So did IMF Managing Director Christine Lagarde. In response to the 
controversy, Mr. Poroshenko called for Mr. Shokin's removal and for an 
investigation into the charges against Mr. Kononenko. The efforts to 
place someone as Deputy Minister of Economy to oversee Naftogaz died. 
The Rada passed reform legislation that had been blocked for months. 
This legislation was required by the EU for the implementation of the 
Deep and Comprehensive Free Trade Agreement.
    What is more, Mr. Yatsenyuk engaged with all the reform ministers 
to bring them back into the government. Kvitashvili, Pavlenko and 
Pyvovarskiy agreed; Abromavicius did not. Pro-reform Deputy Prosecutor-
General Vitaliy Kasko also resigned.
The Political Crisis
    The crisis engendered by Mr. Abromavicius' resignation soon became 
a political crisis when the Fatherland Party and then the Self Reliance 
Party resigned from the ruling coalition. Both are polling well and 
believe that they would profit from new elections for the Rada. Mr. 
Yatsenyuk's poll numbers are in low single digits and he would like to 
avoid new elections. Mr. Poroshenko's numbers are much better, but he 
too does not want the distraction of new elections. Mr. Poroshenko's 
party has been negotiating with some success with the Radical Party and 
with independents to make sure that it has a majority. But negotiations 
have not been finalized as of this writing (March13) because all 
concerned want to know who will be the prime minister.
    The president has to name a prime minister who can gain 226 votes 
in the Rada AND who is acceptable to the West and in particular the IMF 
as the head of a reform government. The IMF has been withholding the 
next tranche of aid pending the outcome of this crisis. That is where 
we are now.
    This whole affair, starting with Mr. Abromavicius' resignation, has 
been a public relations nightmare for Ukraine. Many observers, 
including some in responsible positions in the West, read the headlines 
and assume that reform in Ukraine has not made much progress and is 
currently moribund. That is simply false. Much progress has been made 
since Mr. Poroshenko assumed office and even the unseemly tale of the 
past few weeks has led to the net reform gain discussed above.
    Given Ukraine's stage of development, the continuing (but weaker) 
influence of oligarchs, the ongoing dependency on oligarchs for 
political funding, and the transitional nature of the country's top 
leadership, progress towards reform is bound to be uneven, confusing, 
and ugly. None of this should be surprising nor a reason to say that 
nothing has changed in Ukraine. The problems of this government are 
serious, but this is not a repeat of the failures of the Orange 
Revolution. There is a solid core of reformers in the Rada, at the 
ministerial and deputy ministerial level in the government, and a 
sophisticated civil society.
U.S. Policy: Plus and Minus
    Washington's approach to reform and the Ukrainian economy is also 
mixed. On the plus side, the Obama administration understands well the 
nuances of Ukrainian reform. It recognizes that the government in Kyiv 
needs outside encouragement and, at times, tough love, to make the 
right reform choice. Mr. Biden, in particular, has devoted a great deal 
of time to promoting reform in Ukraine, and he has not been reluctant 
to tell Mr. Poroshenko and Mr. Yatsenyuk when they have shirked the 
hard choices that need to be made. This was evident in the 
conversations regarding Mr. Shokin and the Office of the Procurator 
General.
    The United States has also provided substantial, but insufficient, 
economic support for Ukraine. In FY 2015, we provided $361.8 million in 
economic assistance. The budget that has been approved for FY 2017 
reduces that to $294.9 million. Both are substantial sums, but not 
sufficient to help in the present crisis and not consistent with our 
interests.
    As Gen. Joseph F. Dunford, Jr., Chairman of the Joint Chiefs of 
Staff, has stated, Mr. Putin's revisionist policies make Russia the 
greatest national security danger to the United States. We need to 
blunt this danger, and the first place to do that is in Ukraine. 
Moscow's aggression against Ukraine has greatly increased the burden on 
that country's economy. We should consider economic assistance to 
Ukraine as an investment in our security, a point that former Treasury 
Secretary Larry Summers has made in advocating a Western aid package of 
$10 billion.
    The United States should shoulder up to $5 billion of this package. 
It should consist of loan guarantees, direct budget support grants, and 
debt swaps, as well as assistance to support reforms in key sectors, 
such as banking, energy, and the judiciary. It could also be used to 
encourage investment in Ukraine. Loan guarantees, which have been the 
preferred method of support approved by Congress to date, should only 
constitute part of the package. There is a limit to how much debt 
Ukraine can take on before default. Loans could be paired with direct 
budgetary support to assist with balance of payments and debt swaps, 
which have a proven track record of helping sustain young democracies: 
The United States granted them to Poland in the 1990s.
    This aid package is quite large, but not when seen as an investment 
in our security or a step to meet our obligations to Ukraine under the 
Budapest Memorandum. Coupled with strong military assistance and the 
maintenance of sanctions on Moscow, this aid would help Ukraine defeat 
the Kremlin's aggression and transform itself into a prosperous 
democracy.


    The Chairman. No. Thank you very much for your testimony.
    Obviously, the title of this hearing has been more about 
reforms in Ukraine and concerns that Europe may utilize the 
lack of some of those reforms occurring as a reason to loosen 
sanctions, which we do not want to see happen.
    But could you follow up, Mr. Herbst? It appears that in 
your testimony--and I want to ask Mr. Brzezinski the same 
thing--that right now you feel that our push towards Ukraine's 
reformation process is not balanced, and that we are not doing 
enough on the other side of the equation to push Russia. Is 
that correct?
    Ambassador Herbst Absolutely. Our military support for 
Ukraine has been growing, and it is much better today than it 
was a year ago, but it is still inadequate. And we still worry 
far too much about, quote/unquote, annoying or provoking Russia 
than about defending our interests in Ukraine because Mr. Putin 
is vulnerable in Ukraine. His people do not want the Russian 
army fighting in Ukraine. And there are thousands and thousands 
of Russian soldiers right now.
    The lethal defensive equipment we would provide would make 
it much more painful for Russia to commit its next offensive 
action. And while I am not expecting a major offensive, the 
Russians are grabbing land every week or trying to grab land 
every week. They have taken at least 700 additional square 
kilometers under the Minsk ceasefires. We want to make it much 
more painful for them to do that.
    The Chairman. You heard Secretary Nuland speak to the fact 
they have not made decisions yet relative to lethal defense 
weaponry. What do you think is stalling the administration's 
process? It is evident it is not going to happen. But what is 
the reasoning for that?
    Ambassador Herbst I think the administration and the 
President do not want to provide defensive lethal equipment to 
Ukraine because, quote/unquote, it will provoke Moscow. And I 
think there is a fundamental geopolitical misunderstanding at 
the top. If you understand that changing borders in Europe by 
aggression is a major crisis, then you will take steps to deal 
with that major crisis.
    We have taken good steps, although not enough, to 
strengthen the position of NATO, especially the Baltic States 
and Poland and Romania. But the point is the Kremlin has been 
emboldened, first, by our weak reaction to its aggression in 
Georgia, then our weak reaction to the seizure of Crimea. If we 
provide Javelins to Ukraine, if we provide, as Ian suggests, 
serious anti-aircraft capacity to Ukraine, it would make it 
much more painful for the Kremlin to continue its aggression in 
Ukraine.
    If you believe the article that Jeff Goldberg did in the 
``Atlantic'' that Senator Menendez referred to, the President 
believes that that will lead to war with Russia. That is simply 
false. If we permit the Kremlin to succeed in Ukraine, they 
will be embolden to commit provocations in the Baltics where we 
have an Article 5 obligation to defend them. And that is more 
likely to lead to war, giving the Russians a free hand in 
Ukraine, than a policy of helping Ukraine defend itself.
    The Chairman. To coin a phrase one of my colleagues used, 
it appears that Russia's appetite is growing by eating. In 
other words, as they continue to do what they are doing, their 
appetite grows for just that.
    Mr. Brzezinski, do want to respond to the balance issue and 
the lack of lethal defensive weaponry?
    Mr. Brzezinski. Yes, sir.
    If you look at our current posture and our policies towards 
Russia, they have not succeeded in achieving their stated 
objectives with regards to Ukraine. After 2 years, Russia still 
occupys eastern Ukraine, still occupys Crimea. It has used the 
last 2 years to consolidate its position in both. In eastern 
Ukraine, over the last year, General Breedlove, the SACEUR 
Commander, reported that Russia has moved in over 1,000 
additional pieces of heavy equipment. Moscow has tightened its 
command and control capacities. Coordination remains deep. 
Resupply continues. They have continued to amass forces on 
Ukraine's eastern frontier. In Crimea, Moscow has used the time 
to transform Sevastopol and the other bases on Crimea into 
basically the hub of an A2/AD zone, anti-area/area denial 
access zone, that reaches deep into Ukraine and much of the 
Black Sea region. So our policies have not had the desired 
effect.
    And on lethal assistance, while the U.S. military 
assistance to Ukraine has been useful at the institutional 
level, helping the Ukrainian ministry of defense and general 
staff further develop their doctrines, their personnel 
structures, their logistical capabilities and such, there is a 
real need, an urgent need, for lethal assistance at the 
tactical level.
    Why? Just look at Russia's force posture. It has massed 
forces on Ukraine's eastern frontier and increased its forces 
in Crimea. The Russian military regularly conduct snap 
exercises involving tens of thousands of forces to demonstrate 
the capability to rapidly mobilize and deploy and conduct 
offensive operations into a neighboring country like Ukraine. 
And Ukraine right now does not really have the capacity, as 
John pointed out, to really impose significant costs on an 
aggressor. And through the provision of lethal assistance 
including anti-tank weapons, anti-aircraft weapons, advanced 
forms of artillery, better UAVs, and targeting systems, the 
West would enable Ukraine to place itself in a better position 
to deter such aggression. It is long overdue.
    The Chairman. Both of you talk to officials inside the 
country, as we do, but from your own perspective. Obviously, we 
want to see reforms take place inside Ukraine. They have been 
their own worst enemy. They would be in a very different place 
had they moved along with reforms like much of Eastern Europe 
did years ago. We understand it is a problem. I mean, it is 
endemic in their society. It is a holdover from the Soviet 
Union in many ways.
    So they have issues that they have to deal with. We want to 
push them along. We want their country to be better. We want 
the things that happened on the Maidan to be realized through a 
country that is certainly western-oriented and it has those 
types of values.
    And at the same time, we are concerned about Europe 
responding to the lack of progress by shifting blame, to 
Ukraine away from Russia.
    On the other hand, you just listed a host of things that we 
are not doing to help Ukraine with the frozen conflict. 
Actually after listening to your testimony, it seems to ne not 
that frozen, as Russia takes additional land.
    What are the conversations that you hear within as we push 
for needed reform on one hand and on the other hand, we do not 
fully support their efforts to push back against Russia? What 
does that generate internally in Ukraine?
    Mr. Brzezinski. I think it sends a mixed message. When we 
ask Ukrainian leaders to undertake aggressive, systemic, 
political and economic reform, we are asking them, we are 
encouraging them, to undertake changes that involve a certain 
amount of risk. Change creates opportunities and 
vulnerabilities, even as you are pursuing higher ends. And if 
we do not complement our efforts to support and pressure reform 
in Ukraine with a stronger position against Russia, I think we 
are actually creating risk to the reform process.
    Russia's actions are not just designed to seize territory. 
They are designed also to undercut the prospects of reform. And 
so we have to impose a higher penalty on Russia.
    It is stunning to me that after 2 years in which Russia has 
not only been occupying territory of Ukraine, but also 
sustaining a campaign of information warfare, economic 
embargoes, cyber attacks, even terrorism, we have not increased 
the pressure on Russia. We have not escalated our sanctions 
from targeted sanctions that basically hit a limited number of 
individuals and entities, including entities that have very 
little relationships with the West such as their arms industry, 
to broader, harder hitting sectoral sanctions. We have not 
really leveraged the full weight of our economic power against 
Russia. That resonates in Ukraine and I think makes them less 
confident to take the steps that are inherently risky, albeit 
necessary.
    The Chairman. Mr. Herbst? Ambassador. Excuse me.
    Ambassador Herbst I would endorse Ian's points on the 
impact of our reluctance to provide more military assistance 
and our less, not as aggressive as it could be sanctions 
policy.
    But I would add one more dimension. We provide Ukraine 
substantial economic assistance, but just not nearly enough. We 
are asking them to make reforms that are politically dangerous, 
although in their interest. And if we provided greater 
assistance, it would make the risk of those reforms less.
    And again, the justification for greatly increasing our 
already substantial assistance is this of direct interest to 
our security because, again, if the Kremlin succeeds in 
Ukraine, the odds go up that they will do something nasty vis-
a-vis a NATO country. And we want to defeat them or stop them 
in Ukraine.
    The Chairman. Thank you, both.
    Senator Cardin?
    Senator Cardin. Well, thank you both for your testimony. It 
is very interesting.
    Both of you have a common theme here that we have to be 
more aggressive in supporting Ukraine and isolating Russia's 
influence. You point out, Mr. Brzezinski, that the existing 
sanctions, although they have certainly had an impact and they 
have not had the desired results, therefore, we should look at 
more targeted sanctions in addition to the current sanctions 
and be more aggressive in regards to isolating Russia.
    You also point out I thought a very good suggestion about 
public diplomacy by setting up consulate offices in different 
parts of Ukraine to counter the public relations battle that 
Russia has been waging within Ukraine. I thought that was a 
good suggestion.
    And, Ambassador Herbst, you have been pretty aggressive. $5 
billion. That is a pretty big number of additional aid. And of 
course, the military assistance, which is something our 
committee has looked at in the past and have been very 
sympathetic to military assistance for Ukraine.
    When we look at this realistically, it looks like it is 
moving in the other direction, that the budget funds are tight 
and the chances of getting that type of support from the United 
States is not likely. And we are confronting a June deadline in 
Europe as to whether they will continue the sanctions, the 
existing sanctions, let alone strengthening those sanctions. So 
it looks like we are moving in the opposite direction.
    So I would welcome your observations of what the impact 
would be on Ukraine if Europe does not extend its sanctions in 
June and the current status quo remains, that is, that Minsk II 
has not been implemented.
    Ambassador Herbst That would be a disaster. That would 
remove the one substantial reason that the West has given to 
Russia to back off its aggression. It would also greatly 
dishearten the whole political class in Ukraine, whether 
dealing with the war in the east or dealing with reform.
    While I think that we should increase sanctions and we 
should tie that to specific Russian actions, I suspect, if we 
can retain sanctions--or keep them in place, that may be enough 
on that front. And while it would be a disaster if they are 
removed, I would say as long as Chancellor Merkel's position 
remains solid, they will stay in place. But, again, we have 
just seen regional elections in Germany which weakened her. How 
much? We will wait and see. But this is something very 
important.
    There is one other element, though, that could keep 
sanctions in place. The United States holds a trump card. It is 
a very controversial trump card, and that is the SWIFT option. 
We run the international payment system. We could suspend 
Russia from SWIFT. I suspect that if Europe were to truly 
weaken in its resolve to maintain sanctions, America putting 
into play the notion that in that case, we might have to use 
SWIFT would help strengthen the European spine.
    Senator Cardin. Thank you.
    Mr. Brzezinski?
    Mr. Brzezinski. Sir, if Europe were to abandon the 
sanctions that it currently has imposed on Russia for its 
aggression against Ukraine and its occupation of part of 
Ukraine, it would amount to a de facto acceptance of a new 
partition of Europe. The West will have communicated to Russia 
that it is willing to live with a Russia that occupying and 
trying to assert hegemony over its neighbors. And that would 
return us back to an era we thought had long passed.
    If the West shows the will necessary to sustain those 
sanctions, I am not convinced that is a satisfactory situation 
because I think what we should then expect is continuation of 
the status quo, with Russia using its proximity and its 
geopolitical leverage, its economic leverage, its energy 
leverage, its military power to further eat away at Ukraine, to 
further weaken Ukraine, to destabilize Ukraine, and not just 
Ukraine, but Georgia and maybe other states along its 
periphery.
    That is why I think we need to move to a new stage in our 
engagement with Russia on this issue, which means imposing 
harsher penalties for Russian aggression. I think moving to 
SWIFT--I mean, that is long overdue. I think sectoral sanctions 
on the energy and the financial sectors are long overdue. We 
have an economic advantage, almost 15 to 1. If you tally up the 
GNP of Europe and the United States, it is higher than that 
against Russia. We should be leveraging that.
    Senator Cardin. So I do not disagree with your assessment 
of the impact if the sanctions in Europe were removed under 
current circumstances and that we should be more strategic and 
stronger in our messaging.
    But let me get to the second part of this. The concern that 
we have on the extension of sanctions in Europe is that there 
will be justification given that Ukraine has not implemented 
its aspects of Minsk as it relates to decentralization, but 
also its dealing with good governance reforms that have yet to 
be fully implemented, as we have already pointed out with 
Secretary Nuland.
    Russia has been systematic in marginalizing civil 
societies, the classification of civil societies, its foreign 
agents or undesirables cutting off the opportunity for civil 
society activities within their own country. But we have seen 
over the last couple decades a weakening of the transatlantic 
ties between civil societies and our support. In Ukraine, it 
would be helpful if we had stronger community connections 
between the United States and civil societies, recognizing that 
historically we are going to be judged by how aggressive we 
were in the reforms in Ukraine.
    I just would like to know your comments as to whether there 
should not be greater efforts made to help civil societies in 
Ukraine and in Europe, I might say, as well, of course, as our 
connections within Russia.
    Mr. Brzezinski. Let me address two points that you raised: 
the one on civil society and then one on the Minsk.
    I think it is important to remember that the failure of 
Minsk has not been because of Ukraine. It has been a failure of 
Russia to live up to the very agreements it signed.
    Senator Cardin. I do not disagree with that. I just say it 
could be used as justification by Europe because there has not 
been full compliance by Ukraine. I agree with you that Russia 
is the aggressor. Russia is the one that invaded Crimea and 
took it over and invaded eastern Ukraine. I recognize that. I 
am concerned about what might be happening in Europe.
    Mr. Brzezinski. I think your fear is justified, and we 
actually see that happening. We see Europeans placing more 
pressure on Ukraine to, quote/unquote, live up to its 
dimensions of Minsk and not applying equal pressure on Russia 
to live up to its side of Minsk.
    But to counter that dialogue requires, I think, stronger 
American leadership. We need to make clear to the Europeans the 
pressure needs to be directed in the sequence that Toria Nuland 
articulated--should be first on Russia fulfilling its 
dimensions of the Minsk agreement, withdrawal of forces, 
release of prisoners and hostages, allowing the OSCE to get 
full access, allowing Ukraine to control its borders. Then the 
other steps will come into play.
    Regarding civil society, I think that is an area that 
really needs deeper exploration and perhaps direct support. If 
we are going to fight corruption in Ukraine, it is a very 
useful course to work with existing authorities. But the key to 
fighting corruption in a democracy, an emergent democracy, I 
think really is to build up civil society, its NGOs, its press 
to facilitate greater transparency so that the people 
themselves feel that they have a greater grip on how money is 
being used, how decisions are being made, and can then leverage 
that knowledge to force more effective change. So I think you 
are spot-on. If more assistance can be directed to NGOs, we 
should do that.
    Senator Cardin. Thank you.
    Ambassador Herbst My view is, not surprisingly, rather 
similar to Ian's.
    On Minsk, the most important thing to remember is that the 
immediate commitments that Russia has undertaken have not been 
fulfilled. They are shooting every day, most of it coming from 
the Russian side. There has been no real pullback of Russian 
military equipment. It is Russia and the separatists who do not 
permit the OSCE to move around the occupied territories. There 
is no way you can expect to hold an election under those 
circumstances. So Ukraine's commitment logically comes second. 
And this is a point which simply needs to be reiterated 
forcefully and clearly to our European friends.
    Regarding reform, you are absolutely right, Senator, that 
civil society is critical. I believe the U.S. has done a pretty 
good job in terms of promoting civil society in Ukraine, and I 
think that the administration understands that to ensure that 
there is reform in Ukraine, you need to have regular contact 
with civil society and with reformers in the government. And I 
think Vice President Biden has done a very good job on this 
account.
    Regarding reform and implementation of Minsk, you are 
absolutely right that those in Europe who do not want sanctions 
will point to the ugly headlines in Ukraine and say, look, they 
are not reformers. Why should we be doing sanctions? But, 
again, if you understand the stage of history that Ukraine is 
in right now where you have senior levels in the government, 
senior members of the society, especially the oligarchs not so 
keen on fast reform, but reform is necessary, then you will see 
steps backwards, steps to the side before there is progress. 
And again, the crisis of the past 6 weeks has been very ugly, 
but in this crisis, serious reform legislation has been passed 
and there has been progress. We simply need to repeat this to 
our friends in Europe so they understand it.
    Senator Cardin. Thank you. I appreciate your comments.
    The Chairman. Ambassador, we thank you for being here. Mr. 
Brzezinski, thank you.
    Look, I do want to correct one thing for the record. The 
SWIFT system is a European system, not an American system. So 
just for what it is worth, as we have in the past, we would 
need to work with Europe on that if we are ever to utilize it.
    I think the essence of today's hearing is to look to the 
reforms in Ukraine that need to take place. I do want to say 
the context of almost all of our hearings have been about 
pushing back against Russia and the kind of things we can do to 
support Ukraine. I think the hearing should not be 
misunderstood. We are concerned about the issue that Senator 
Cardin brought up, myself, and others, and that is that we are 
concerned about Europe looking to the lack of reforms in 
Ukraine as a reason to back away from some of the sanctions 
that are in place against Russia. We are only speaking to what 
we are seeing happen right now in Europe as they probably have 
the lowest self-confidence they have had in 50 years. And there 
are concerns about what is happening in the region to them, you 
know, what is happening with Chancellor Merkel, what is 
happening with Brexit, what is happening with refugees, what is 
happening with their economic and fiscal issues, and we are 
looking for ways to encourage Ukraine to continue on.
    At the same time, we understand that the pressure by the 
administration on Russia has not been what most of us would 
have liked to have seen.
    So we thank you again for adding context and adding a 
bookend to the earlier testimony. We hope that you will answer 
questions promptly. I know you will.
    We are going to keep the record open until the close of 
business Thursday.
    Thank you again, both, for being here. You have been a 
valuable addition to this hearing, and we look forward to 
seeing you again.
    With that, the committee is adjourned.
    [Whereupon, at 12:03 p.m., the hearing was adjourned.]


                              ----------                              


              Additional Material Submitted for the Record

     Response to a Question for the Record Submitted to Assistant 
      Secretary of State Victoria Nuland by Senator Edward Markey

    Question. What kind of progress has there been in implementing the 
following requirements in the Ukrainian Independence from Russia Energy 
Act?:


 1. The Secretary of State and the Secretary of Energy, in 
        collaboration with the Administrator of the United States 
        Agency for International Development and the Administrator of 
        the Federal Emergency Management Agency, shall work with 
        officials of the Government of Ukraine to develop a short-term 
        emergency energy assistance plan designed to help Ukraine 
        address the potentially severe short-term heating fuel and 
        electricity shortages facing Ukraine in 2014 and 2015.

 2. Assistance--The Secretary of State, the Secretary of Energy, and 
        the Administrator of the United States Agency for International 
        Development are authorized to provide assistance in support of, 
        and to invest in short-term solutions for, enabling Ukraine to 
        secure the energy safety of the people of Ukraine during 2014 
        and 2015.

 3. The Secretary of State, in collaboration with the Secretary of 
        Energy and the Administrator of the United States Agency for 
        International Development, shall work with officials of the 
        Government of Ukraine to develop medium- and long-term plans to 
        increase energy production and efficiency to increase energy 
        security by helping Ukraine reduce its dependence on natural 
        gas imported from the Russian Federation.

 4. Prioritization--The Secretary of State, the Administrator of the 
        United States Agency for International Development, and the 
        Secretary of Energy should, during fiscal years 2015 through 
        2018, work with other donors, including multilateral agencies 
        and nongovernmental organizations, to prioritize, to the extent 
        practicable and as appropriate, the provision of assistance 
        from such donors to help Ukraine to improve energy efficiency, 
        increase energy supplies produced in Ukraine, and reduce 
        reliance on energy imports from the Russian Federation, 
        including natural gas.

 5. The Overseas Private Investment Corporation shall (A) prioritize, 
        to the extent practicable, support for investments to help 
        increase energy efficiency, develop domestic oil and natural 
        gas reserves, improve and repair electricity infrastructure, 
        and develop renewable and other sources of energy in Ukraine; 
        and (B) implement procedures for expedited review and, as 
        appropriate, approval, of applications by eligible investors 
        (as defined in section 238 of the Foreign Assistance Act of 
        1961 (22 U.S.C. 2198)) for loans, loan guarantees, and 
        insurance for such investments.

 6. The President shall, to the extent practicable and as appropriate, 
        direct the United States Executive Directors of the World Bank 
        Group and the European Bank for Reconstruction and Development 
        to use the voice, vote, and influence of the United States to 
        encourage the World Bank Group and the European Bank for 
        Reconstruction and Development and other international 
        financial institutions (A) to invest in, and increase their 
        efforts to promote investment in, projects to improve energy 
        efficiency, improve and repair electricity infrastructure, 
        develop domestic oil and natural gas reserves, and develop 
        renewable and other sources of energy in Ukraine; and (B) to 
        stimulate private investment in such projects.


    Please provide an update on each of these requirements, and provide 
additional information on reasons in cases when the requirement was not 
met.

    Answer. The United States, led by the Department of State in 
coordination with the Department of Energy (DOE) and the U.S. Agency 
for International Development (USAID) has strengthened diplomatic and 
assistance efforts aimed to address short term concerns and develop 
long-term solutions. These efforts are designed to improve Ukraine's 
energy safety and security, establish competitive markets and fair 
regulations, and bring Ukraine closer to European Union (EU) 
integration. While Ukraine has made significant progress in reform and 
diversification, the country's energy sector remains vulnerable to 
corruption, inefficiencies, and dependence on Russia. Therefore the 
United States remains committed to enhancing Ukraine's energy security.
    As an example, U.S. assistance funded a Department of Energy (DOE) 
program to support emergency management and contingency planning, 
bringing in expertise from the Federal Emergency Management Agency 
(FEMA) and national laboratories, as well as experts from Canada. The 
program provided technical expertise to the Government of Ukraine (GOU) 
that led to the development of a Winter Action Plan, a roadmap of steps 
which needed to be taken in preparation for possible fuel shortages 
during the winter of 2015-2016. DOE also provided technical expertise 
to the GOU's Anti-Crisis Cell, a cabinet-level entity in charge of 
managing the GOU's contingency planning efforts and supervising energy 
sector reform. A USAID program also supported strategic communications 
and public messaging to educate Ukrainians on energy efficiency 
practices and to inform citizens of social benefits to help offset 
increased energy prices due to tariff adjustments needed to meet EU 
requirements. These efforts greatly increased the GOU's capacity to 
handle potential emergencies.
    Similarly, the Department of State's Bureau of Energy Resources 
(ENR) continues to provide assistance to Naftogaz (Ukraine's national 
oil and gas company) and its upstream gas production subsidiary, 
UkrGazVydobuvannya (UGV), in order to increase domestic gas production 
by improving field and technical operations, reforming the company's 
operating practices, and improving corporate governance. These efforts 
will help reduce dependence on Russian natural gas.
    We are also implementing other medium- and long-term programs 
through USAID, State, and DOE. These efforts are closely coordinated 
with other United States government entities including the Overseas 
Private Investment Corporation, international donor partners including 
the European Union, World Bank, International Monetary Fund, and the 
European Bank for Reconstruction and Development, and the Ukrainian 
government. We are finalizing our FY 2016 budget allocations and expect 
to increase our support for these activities. Programs support energy 
efficiency, EU-compliant regulatory reform, diversification of 
resources, corporate governance reform, privatization of state-owned 
enterprises, and cybersecurity improvements.
    We are very concerned about the Nord Stream II pipeline, which 
would undermine European energy security, divert gas shipments from 
Ukraine, and eliminate Ukraine's transit revenue. This is not a 
commercial project to Moscow, but a way to enhance Russia's leverage 
over Europe. We have encouraged the European Commission to scrutinize 
Nord Stream II thoroughly on legal, environmental, and competition 
grounds.


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