    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

      THE VENEZUELA CRISIS: THE MALICIOUS INFLUENCE OF STATE AND CRIMINAL
                                     ACTORS

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

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                             THE WESTERN HEMISPHERE

                                     OF THE

                          COMMITTEE ON FOREIGN AFFAIRS
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 13, 2017

                                   __________

                               Serial No. 115-65

                                   __________

            Printed for the use of the Committee on Foreign Affairs

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Available via the World Wide Web: http://www.foreignaffairs.house.gov/
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                          COMMITTEE ON FOREIGN AFFAIRS

                     EDWARD R. ROYCE, California, Chairman
    CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
    ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
    DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
    STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
    JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
    MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
    TED POE, Texas                       KAREN BASS, California
    DARRELL E. ISSA, California          WILLIAM R. KEATING, Massachusetts
    TOM MARINO, Pennsylvania             DAVID N. CICILLINE, Rhode Island
    JEFF DUNCAN, South Carolina          AMI BERA, California
    MO BROOKS, Alabama                   LOIS FRANKEL, Florida
    PAUL COOK, California                TULSI GABBARD, Hawaii
    SCOTT PERRY, Pennsylvania            JOAQUIN CASTRO, Texas
    RON DeSANTIS, Florida                ROBIN L. KELLY, Illinois
    MARK MEADOWS, North Carolina         BRENDAN F. BOYLE, Pennsylvania
    TED S. YOHO, Florida                 DINA TITUS, Nevada
    ADAM KINZINGER, Illinois             NORMA J. TORRES, California
    LEE M. ZELDIN, New York              BRADLEY SCOTT SCHNEIDER, Illinois
    DANIEL M. DONOVAN, Jr., New York     THOMAS R. SUOZZI, New York
    F. JAMES SENSENBRENNER, Jr.,         ADRIANO ESPAILLAT, New York
        Wisconsin                        TED LIEU, California
    ANN WAGNER, Missouri
    BRIAN J. MAST, Florida
    FRANCIS ROONEY, Florida
    BRIAN K. FITZPATRICK, Pennsylvania
    THOMAS A. GARRETT, Jr., Virginia

         Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

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

                     Subcommittee on the Western Hemisphere

                     JEFF DUNCAN, South Carolina, Chairman
    CHRISTOPHER H. SMITH, New Jersey     ALBIO SIRES, New Jersey
    ILEANA ROS-LEHTINEN, Florida         JOAQUIN CASTRO, Texas
    MICHAEL T. McCAUL, Texas             ROBIN L. KELLY, Illinois
    MO BROOKS, Alabama                   NORMA J. TORRES, California
    RON DeSANTIS, Florida                ADRIANO ESPAILLAT, New York
    TED S. YOHO, Florida                 GREGORY W. MEEKS, New York
    FRANCIS ROONEY, Florida

                                C O N T E N T S

                                  ----------
                                                                       Page

                                   WITNESSES

    Mr. Francisco Toro, executive editor, Caracas Chronicles.........     9
    R. Evan Ellis, Ph.D., senior associate, Americas Program, Center
      for Strategic and International Studies........................    15
    Harold Trinkunas, Ph.D., senior research scholar and associate
      director for research, Center for International Security and
      Cooperation, Freeman Spogli Institute for International
      Studies, Stanford University...................................    43

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    The Honorable Jeff Duncan, a Representative in Congress from the
      State of South Carolina, and chairman, Subcommittee on the
      Western Hemisphere: Prepared statement.........................     4
    Mr. Francisco Toro: Prepared statement...........................    11
    R. Evan Ellis, Ph.D.: Prepared statement.........................    17
    Harold Trinkunas, Ph.D.: Prepared statement......................    46

                                    APPENDIX

    Hearing notice...................................................    72
    Hearing minutes..................................................    73
    Questions submitted for the record by the Honorable Jeff Duncan
      and written responses from:
      Mr. Francisco Toro.............................................    74
      R. Evan Ellis, Ph.D............................................    76
      Harold Trinkunas, Ph.D.........................................    80

                      THE VENEZUELA CRISIS: THE MALICIOUS
                        INFLUENCE OF STATE AND CRIMINAL
                                    ACTORS

                                  ----------

                         WEDNESDAY, SEPTEMBER 13, 2017

                           House of Representatives,

                    Subcommittee on the Western Hemisphere,

                         Committee on Foreign Affairs,

                                Washington, DC.

        The subcommittee met, pursuant to notice, at 2:08 p.m., in
    room 2200, Rayburn House Office Building, Hon. Jeff Duncan
    (chairman of the subcommittee) presiding.
        Mr. Duncan. A quorum being present, the subcommittee will
    come to order. I now would like to recognize myself for an
    opening statement.
        Today in Venezuela there are over 600 political prisoners.
    The country is a failed state and a humanitarian disaster.
    Since April, more than 125 people have died, over 2,000 have
    been injured in protests at the hands of the Venezuelan
    Government. Food, medical supplies, and basic goods remain
    scarce. The legitimate democratically elected National Assembly
    has been silence in favor of a sham constituent assembly full
    of President Maduro's supporters. The previous attorney general
    has fled the country after publicly opposing Maduro's abuse of
    power.
        Today, Venezuela has entrenched itself as a dictatorship,
    unmoved by international condemnation and the pleas of its
    people. The political economic human rights crisis in the
    country is appalling for the 30 million citizens of Venezuela,
    and it threatens to destabilize the region.
        The United States has very clear interests in Venezuela. We
    want regional peace without masses of refugee flows or public
    health threats from rising cases of malaria, diptheria, or
    Zika. We want to see a democratic country that represents the
    rule of law and that is accountable to its people. We want to
    see a country that doesn't use its power to beat up, imprison,
    torture, and kill its own citizens.
        We want to ensure that Venezuela does not become a
    narcostate that provides safe harbor to terrorists or
    transnational criminals. We want a stable energy market that
    promotes energy security. We also want to certify that
    Venezuela does not become a pawn for Russia, China, or Iran to
    exploit for their own geopolitical purposes. And bottom line,
    we care about the Venezuelan people, and we want to see them
    prosper. Let me repeat that. We care about the Venezuelan
    people, and we want to see them prosper.
        To those ends, the U.S. Congress has issued public
    statements in past legislation calling for the Maduro
    government to return to a democratic order. This subcommittee
    has held four hearings on Venezuela over the past 2 years.
    President Trump has affirmed that Venezuela remains a U.S.
    priority, and his many efforts, combined with Vice President
    Pence's recent visit to the region, underscore U.S. solidarity
    with our partners in the region and with the Venezuelan people
    in our commitment to see the Venezuelan Government end this
    embrace of tyranny.
        I commend President Trumpand his administration for their
    efforts, and I want to underscore that we support further U.S.
    and international action to pressure the Maduro regime and to
    convince those who follow his leadership that they will not
    succeed in destroying the country.
        While the United States under President Trump's leadership
    has been unwavering in our support for the Venezuelan people,
    many other countries in Latin America, Europe, and Asia have
    also demonstrated courage and conviction in jointly condemning
    the breakdown of democratic order in Venezuela and in offering
    full support and recognition for the democratically elected
    National Assembly. I believe it is critical that we continue to
    speak and act together in our support for the Venezuelan
    people. Dialogue alone is fruitless without a series of
    preconditions that level the playing field for democratic
    actors and without corresponding simultaneous multilateral
    pressure. Therefore, I strongly urge other countries to
    continue their efforts to step up said pressure.
        Recently, I, along with the ranking member Sires, led a
    congressional delegation visit, which included Ms. Kelly and
    Mrs. Torres and Mr. Espaillat of this subcommittee, to the
    Dominican Republic, Haiti, Colombia, and Peru. In our meetings,
    we emphasized U.S. congressional commitment to supporting
    democracy, rule of law, and human rights in Venezuela and urge
    greater regional cooperation to call out the Maduro government
    for its reprehensible behavior against its own people and to
    pressure the Venezuelan Government to restore the country's
    democratic institutions. Decisions like Mercosur's suspension
    of Venezuela and recent Lima Declaration, which was signed by
    12 Latin American countries, are important steps in that
    direction.
        With that in mind, I strongly urge the European Union to
    enact sanctions on the Venezuelan dictatorship to cut off
    another important source of financing and ratchet up pressure
    on the Maduro regime.
        Yet regardless of any strong measure the U.S. or other
    countries in the Western Hemisphere and the European Union may
    take against the Maduro government, various state and criminal
    actors have undermined those measures' effectiveness and
    blunted our objectives. Cuba, China, Russia, and Iran are the
    underlying supporters of the Maduro regime.
        Beginning with the rise to power of Hugo Chavez, the Cuban
    dictatorship has exported his system of oppression to Venezuela
    under the guise of medical doctors and teachers. For their
    part, Russia and China have funded the expansion of Venezuela's
    military arsenal and invested heavily in Venezuela's corrupt
    state-owned oil company, PDVSA.
        Iran has attempted to strengthen economic and diplomatic
    ties with Venezuela through visits in 2016 by Iranian President
    and Foreign Minister. Multiple reports exist of Hezbollah's
    activities in the country. Just earlier this week, President
    Maduro met with President Rouhani to strengthen their
    cooperation.
        In addition, criminal organizations also operate in the
    country with unfettered access, fueling corruption, graft, and
    an increase in narcotrafficking and other illicit activities. A
    few years ago, U.S. Government drug trafficking maps showed
    virtually all suspected drug trafficking flights from South
    America originated in Venezuela. Today, we are seeing drugs
    from Venezuela entering neighboring countries as well as
    heading to the United States.
        Yesterday, the State Department affirmed that in Venezuela,
    drug trafficking organizations have completely penetrated
    virtually every security, law enforcement, and justice-related
    institution in the country. And any solution to the Venezuelan
    crisis requires a solution to the drug trafficking organization
    presence.
        In February 2017, the U.S. imposed sanctions on the
    Venezuelan Vice President, designating him as a drug kingpin,
    and revealed the Venezuelan Government's complicity in drug
    trafficking. Questions remain regarding the Venezuelan
    Government's ties to foreign terrorist groups and concerns
    about Russian and Chinese arms falling into the hands of these
    or other criminal actors.
        Today, we want to examine the role these actors play in
    sustaining the Venezuelan dictatorship and consider what might
    constitute an effective U.S. and international response.
        With that, I will turn to the ranking member for his
    opening remarks. And I look forward to hearing from our
    panelists today. I turn to the ranking member for his
    statement.
        [The prepared statement of Mr. Duncan follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                  ----------

        Mr. Sires. Thank you, Chairman, and thank you for holding
    this timely hearing. Thank you to our witnesses for being here
    today.
        We have watched week after week Maduro continue to expand
    his authority at the expense of the Venezuelan people. Just
    last month, the National Constituent Assembly, the fraudulently
    elected puppet Congress orchestrated by Maduro, approved a
    Presidential decree giving itself authority to pass
    legislation, replacing the opposition dominated in legitimate
    elected National Assembly. Political prisoners continue to be
    kept under lock and key, while families are unable to access
    basic necessities such as food or lifesaving medicines.
        Despite all this, Venezuela continues to enjoy the support
    of some Latin American and Caribbean nations, in addition to
    others which help prop up the Maduro autocracy.
        When the Organization of the American States recently tried
    to press Maduro to take concrete steps to improve the human
    rights situation and restore democratic institutions, the
    resolution failed because a number of small countries abstained
    or voted against the measure. It is worth noting that 95
    percent of the Western Hemisphere lives in countries that have
    voted to strongly condemn the Maduro regime's actions. There is
    a consensus among the majority of the hemisphere, multilateral
    institutions such as the OAS, the United Nations and the
    European Union, that Maduro is destroying democracy and
    violating human rights.
        In order to reach a sustainable political situation, it is
    imperative that we work with our allies in the region and
    around the world to present a unified condemnation of Maduro's
    autocratic regime and fight together for a restoration of
    democracy for the Venezuelan people.
        I am encouraged that regional leaders in Brazil, Colombia,
    Peru, Canada, and many others are criticizing Maduro for this
    gross abuse of human rights, and hope that more will join their
    neighbors in calling for a resolution to this crisis and
    productive engagement with the opposition.
        Maduro's descent into authoritarianism has not only
    jeopardized the lives of innocent Venezuelans; it has also
    created an environment ripe for dangerous foreign influence
    from countries such as Iran, Russia, China, and Cuba.
        The State Department has already noted that Venezuela is
    home to several individuals linked to designated foreign
    terrorist organizations, including Hezbollah. As a continued
    sponsor of terrorism, Iran's interest in Venezuela should be a
    concern to the Western Hemisphere. As Cuba continues to imbed
    itself deep within the Venezuela security network, Chinese and
    Russian presence in the country's economic activities provide
    new opportunities for influence within the region.
        I believe that it will take a coordinated effort amongst
    the Western Hemisphere nations to present a viable solution to
    the ongoing crisis in Venezuela. I am hopeful that more
    regional partners will come forward in denouncing the Maduro
    regime.
        I am eager to hear how our panelists view the role that
    external actors play into the gang situation in Venezuela and
    look forward to their recommendations as we continue to grapple
    with this complex issue. Thank you.
        Mr. Duncan. Thank you, Ranking Member Sires.
        The Chair will now go to Mr. DeSantis for an opening
    statement.
        Mr. DeSantis. Well, Mr. Chairman, thank you for having the
    hearing and your attention to this issue. It is very important.
        The more and more we have seen the Venezuela piece, the
    more and more we can say that the Obama administration deal
    with Cuba has been a total failure, because Cuba and the Cuban
    military are driving a lot of the bad things that are happening
    in Venezuela right now. And, of course, we have these reports
    of diplomats being harmed in Havana. We still don't have all
    the facts on that, but I don't know how you can spin that as
    anything other than an attack. The evidence is just too
    overwhelming.
        So we obviously need to hold Maduro accountable, but we
    need to hold the Cuban Government accountable too, because they
    are the root of a lot of these problems. I yield back.
        Mr. Duncan. I thank the gentleman.
        No other members have opening statements.
        So before I recognize the panelists, you will notice a
    lighting system in front of you. Five minutes is what you will
    be recognized for. When it starts to get down to a minute, the
    yellow light will come on. And when you run out of time, it
    will be red. If you could acknowledge that and start wrapping
    up your statement, it will help us stay on time.
        Members, all the bios for the witnesses are in your binders
    and provided earlier, so I am not going to read those. And once
    the witnesses offer testimony, all three, we will go into the
    question-and-answer portion of it, and each member will be
    recognized for 5 minutes.
        So I will start with Mr. Toro. You are recognized for 5
    minutes.

      STATEMENT OF MR. FRANCISCO TORO, EXECUTIVE EDITOR, CARACAS
                               CHRONICLES

        Mr. Toro. Okay. Thank you so much, Chairman Duncan.
        I wanted to focus today on the role of Cuba. I think when
    we talk about foreign influence in Venezuela, it is really Cuba
    and then everyone else. The influence of Cuba has been so
    overwhelming.
        On Sunday, October 14, in 2007, then President Chavez made
    a startling statement during his famous Alo Presidente show,
    which was broadcast from Santa Clara in Cuba then. He was
    addressing Fidel Castro directly across from him when he said,
    ``Deep down, yes, we are just one single government. Venezuela
    has two Presidents, but we are one single government. We are
    advancing toward a confederation of republics.''
        Now, that is obviously a bit of overstatement. They are
    separate governments and separate juridical traditions, et
    cetera, but the ambition that Chavez and Fidel Castro had was
    something beyond the normal alliance, and we have seen it play
    out in over the last 10 years in really nefarious ways.
        And it is important to understand that Venezuela always had
    four traditional service branches in the armed forces: The
    army, navy, air force, and the national guard, which is like a
    military police. But on Cuban advice, in 2005, a fifth service
    branch was added called the Milicia Bolivariana, the Bolivarian
    militia, which was an avowedly political arm of the ruling
    party organized, trained, and armed as a military force. Okay.
        The Bolivarian militia has been derided over the years as
    sort of a grannies army, that they don't seem to be much of a
    fighting force, but there are hundreds of thousands of
    terrorista political activists under arms. And we have seen
    this, and in the last couple of years, the Bolivarian militia
    has become more powerful. President Maduro has made a
    calculated decision to strengthen the Bolivarian militia.
        And what is really concerning about this, and what I think
    the committee should really sink its teeth into here, is that
    there have already been a series of leakages of weapons from
    the Venezuelan military to nonstate actors. Okay?
        So we have seen criminal bans in Venezuela that are
    dedicated to extortion, drug trafficking, but local drug
    trafficking, buying weapons, buying assault rifles, buying C-4
    plastic explosives from the military. And we see the Venezuelan
    military getting more and more powerful weapons under its
    control.
        Now, early last year, it was reported--Reuters reported
    that Venezuela had acquired over 5,000 surface-to-air shoulder-
    mounted MANPADS missiles, heat-seeking missiles that a single
    person could shoot. Those have been under the control of the
    Army for the last several years, since they were bought.
        We understand that as many as 1,000 of those MANPADS
    systems could be transferred to the Bolivarian militia in the
    coming weeks. And while the ARMY has leaky ways of keeping
    track of its stock of weapons, the militia has no system that
    we know of to log these weapons.
        So while weapons have been subtracted from the Venezuelan
    army for sale to criminal networks, the Venezuelan army, at
    least in the Venezuelan security forces know that and have a
    way of tracking it. Once hundreds or perhaps as many as 1,000
    MANPADS are transferred to the control of the militia, you can
    kiss them good-bye. There is no more tracking them.
        A few weeks ago, when there was some tension with the
    United States following President Trump's declaration, it was
    very clear that the militia was given assault rifles to take
    home. There is a question, are we looking at a scenario here
    where Venezuelan military could be handing political activists
    surface-to-air missiles, heat-seeking missiles that can bring
    down an airliner at 20,000 feet to take home?
        You have to understand that many of the Bolivarian militia
    members are rank-and-file Chavista activists. These are people
    who are often hungry, penniless and hungry. So we would be
    looking, then, really at a buyers market for these
    extraordinarily dangerous weapons. And that is a debate that I
    don't see happening anywhere, really, and that I think that
    should change.
        [The prepared statement of Mr. Toro follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                     ----------

        Mr. Duncan. Thank you for that. I am sure members will like
    to delve more into that.
        Now we will go to Dr. Ellis for 5 minutes.

     STATEMENT OF R. EVAN ELLIS, PH.D., SENIOR ASSOCIATE, AMERICAS
        PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES

        Mr. Ellis. Thank you, Chairman Duncan.
        Chairman Duncan, Ranking Member Sires, distinguished
    committee members, thank you for the opportunity to share my
    analysis with you today. I will summarize what are my written
    remarks for the committee and would emphasize that these are
    strictly my own opinions and not those of my employer.
        I would like to emphasize how both Russia and China, in a
    pursuit of their commercial and strategic interests in
    Venezuela, have provided capital, goods, services, and
    political backing that has indirectly enabled the populist
    regime to ignore and ultimately destroy, as you alluded to, the
    mechanisms of democratic accountability.
        Between Russia and China, the PRC, in my judgement, holds
    the greatest leverage over the fate of Venezuela, with the
    control of financial instruments and loan-funded projects, as
    well as flows of goods important to the regime's survival.
        First, the PRC has become Venezuela's principal banker,
    with PDVSA moving current accounts from Portugal's Banco
    Espirito Santo to China's CITC Bank in August 2014. Venezuela
    has also stored a portion of its gold reserves in China. Both
    actions potentially protect Venezuela's assets partially from
    international legal claims. However, they also give China
    influence over Venezuela in how it responds to such claims.
        Also, the PRC is Venezuela's major source of credit, as is
    widely known, having extended an estimated $62.2 billion to the
    regime since 2005 in the form of revolving credit relationships
    repaid by shipments of Venezuelan oil.
        As the majority of international companies have withdrawn
    from Venezuela, the work performed by Chinese entities funded
    by such credit has become increasingly critical for building
    and maintaining the oil, electricity, and transportation
    infrastructure to get Venezuela's oil to market.
        Indeed, just days ago, the China-Venezuela High-Level Mixed
    Commission met and authorized an additional $2.7 billion in
    such new projects, including the construction of the Jieyang
    refinery in China to process Venezuelan heavy oil. China has
    further provided Venezuela with billions of dollars of military
    goods on credit, displacing Russia as Venezuela's principal
    arms supplier. Systems sold, just to name a few, include JYL-1
    radars, K-8 fighter trainers, Y-8 and Y-12 transport aircraft,
    SM-4 self-propelled mortars, SP-5 multiple rocket launchers,
    VN-1, VN-18, and CS/VP-4 armored combat vehicles, CS/LMG heavy
    machine guns, plus antisubmarine and antitank weapons, which
    are, frankly, concern for neighboring Colombia if war should
    ever break out between the two.
        In addition, Chinese arms also include VN-4 armored cars
    and VN-16 light tanks, which have been very publicly used by
    the Venezuela national guard to suppress antiregime
    demonstrations in recent weeks.
        Russia. Russia's activities in Venezuela have been more
    limited than those of the PRC, yet are still significant.
    Russia has sold over $11 billion of military hardware to
    Venezuela since 2006, including 10 Mi-35 attack helicopters, 38
    Mi-17 transports, 3 Mi-26 heavy transports, 24 Su-30 fighter
    aircraft, 100,000 Kalashnikov rifles, 92 T-72 tanks, and
    approximately 200 BMP-3 and BTR-80 armored personnel carriers.
        Russia has also sold, as my colleague rightly alluded to,
    between 2,000 and 5,000 Igla-S anti-aircraft missiles, which
    also I would agree with my colleague could gravely threaten
    civil aviation were they to fall into the hands of terrorists.
        Russia has also used its relationship with Venezuela to
    project a military force into the region. Examples include the
    deployment of two nuclear capable Tu-160 backfire bombers in
    2008, later a flotilla of warships the same year into
    Venezuela, and another deployment of Tu-160s to Venezuela in
    October 2013, and farther, the second sending of warships to
    Venezuela in March 2015 to conduct exercises.
        With respect to commercial support, the Russian state-owned
    company, Rosneft, has been a key financier for the Venezuelan
    oil sector, providing an estimated $17 billion since 2008.
    Indeed, as the liquidity crisis in Venezuela has deepened,
    Rosneft has provided an additional $6 billion in loans to PDVSA
    for future delivery of oil, in addition to the $1.5 billion
    that it loaned in December 2016 in exchange for the 49 percent
    interest in the PDVSA subsidiary, CITGO.
        In formulating the U.S. whole-of-government strategy to
    restore democratic governance to Venezuela, and I also would
    commend the administration's efforts in that, I believe that
    the U.S. must structure its sanctions and other actions and
    strategic communication with an eye to convincing Russia and
    China that their continued support for Venezuela's anti-U.S.
    authoritarian regime will not get those countries to a stable,
    internationally accepted successor, which would legalize and
    make sustainable the deals that they have struck with those who
    hijack the Venezuelan state and its resources.
        While sanctions should be imposed, in my judgment, broadly
    and not only against U.S. purchases of Venezuelan petroleum,
    but also at the regime's access to the international financial
    system. In that, I concur with your remarks about Europe, Mr.
    Chairman.
        While this course of action is harsh, I believe that it is
    the best among imperfect options, short of military
    intervention, to bring about change that most rapidly ends the
    suffering of the Venezuelan people, and with that same
    rapidity, would deny Russia and China time to advance their
    position in the country through their own incremental deals
    which continue to prop up the regime.
        Thank you, Mr. Chairman. Thank you.
        [The prepared statement of Mr. Ellis follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                  ----------

        Mr. Duncan. Thank you for your testimony.
        The Chair will now go to Dr. Trinkunas. Did I pronounce
    that correct?

     STATEMENT OF HAROLD TRINKUNAS, PH.D., SENIOR RESEARCH SCHOLAR
     AND ASSOCIATE DIRECTOR FOR RESEARCH, CENTER FOR INTERNATIONAL
        SECURITY AND COOPERATION, FREEMAN SPOGLI INSTITUTE FOR
               INTERNATIONAL STUDIES, STANFORD UNIVERSITY

        Mr. Trinkunas. Yes. Yes, you did, Mr. Chairman.
        Chairman Duncan, Ranking Member Sires, members of the
    subcommittee, it really is an honor to be here today to discuss
    the negative influence of external actors in the crisis in
    Venezuela. I am providing this testimony in my private capacity
    as an expert on Venezuela, its politics, and its foreign
    policy.
        Mr. Chairman, Ranking Member Sires, I concur with your
    assessment of both the situation in Venezuela and U.S.
    interests at stake here, so I will not dwell on those further.
        In my written testimony, which I am summarizing here today,
    I focus on the role of China, Cuba, Russia, Iran, and illicit
    nonstate actors in Venezuela. I am happy to go into further
    detail on those in the Q&A, but I would like to make some broad
    remarks here before we go into specifics.
        The first thing I will say is that each of these actors in
    Venezuela plays a slightly different role, of course, as I
    detail in my testimony. But the important thing to note is they
    are all in Venezuela at the invitation of Hugo Chavez as part
    of his governing strategy back in the day before he was
    deceased. Chavez's plan was to use these actors to increase
    Venezuela's capabilities and to resist U.S. influence.
        The thing to keep in mind is when oil was at $120 a barrel,
    Chavez had the upper hand. Now that oil is at a third to half
    of that, it is Maduro's aspiration that really makes Venezuela
    vulnerable.
        I would like to make four main points at this time about
    the negative role of external actors in Venezuela. I concur
    with you that these actors are principally enablers. They
    basically provide capabilities to the Venezuelan regime that
    allow them to pursue catastrophic policies for longer and at
    less cost to the regime than would otherwise be possible.
        The second thing is that the Castro-Chavez policies we now
    observe in place in Venezuela are primarily designed to benefit
    President Maduro and his allies. We should not assume that they
    are the result the ignorance or external influence. They are
    very much designed to support the regime's coalition, transfer
    public resources into private pockets, and, in fact, this is
    involvement in corruption, some officials are linked to drug
    trafficking, some now are linked to human rights abuses, that
    these actors cannot afford a transition back to democracy. They
    fear being held accountable.
        That said, I do think that at this point in time, and here
    I am focused principally on how these actors can keep the
    present regime in power. Their primary motivation for working
    with the Maduro government is economic. They want to secure the
    biggest possible return on their investments for interacting
    with the Venezuelan regime. Of course, geopolitical interests,
    ideological interests, may derive welcome benefits from that
    participation of Venezuela, but that is relatively secondary to
    their economic motivation.
        With that said, I concur with Dr. Ellis that there may be
    some opportunities there in the sense that they may fear that
    these deals that they are making now may be invalidated in the
    future.
        Finally, I would say that not all of these external actors
    have an equally negative role. I think that if you look at
    China's involvement over time, they have become more skeptical
    of the Venezuelan regime. They are more concerned about its
    ability to pay back the existing loans. They are somewhat
    disenchanted, as opposed to let's say the case of Russia, which
    I really do think is playing a very opportunistic role these
    days, picking up Venezuela's oil assets for pennies on the
    dollar. There may be an opportunity there that the United
    States should be exploring.
        The final thing I would say is that I concur with you and
    with the ranking member that we are seeing the most positive
    external environment for international collaboration to address
    the crisis in Venezuela since President Maduro took office, a
    decided shift against the Maduro regime, not just in Latin
    America, but also increasingly in Europe, and that is something
    the United States, I agree with you, should capitalize on.
        That said, I am skeptical that there are solutions in the
    short and medium term to the crisis in Venezuela, and that
    guides a set of recommendations that I would like to make now.
        The first is, I do think it is time to begin serious
    contingency planning to address a full-scale humanitarian
    crisis in Venezuela. This means collaborating with efforts
    already underway in Colombia and Brazil to deal with Venezuelan
    economic and political refugees. It means shoring up the
    efforts of small island states in the Caribbean, which have
    already been badly affected by the recent hurricanes. It means
    increasing monetary assistance to credible civil society
    organizations that can actually get food and medicines to
    Venezuelans, maybe initially just on the border, but there may
    be other opportunities.
        And finally, I would say that we should talk to the states,
    including the ones that have a negative influence, who have
    significant personnel present in Venezuela, the Chinese, the
    Cubans to understand exactly what the limits of their support
    are. Are they willing to support at all costs, no matter what,
    or is there some room short of that that could be explored?
        Second, deepen, accelerate strategic engagement programs in
    the Caribbean. I commend the subcommittee's work on that. I
    know you have been doing important work in that area. The time
    after these hurricanes is, I think, an important time to
    capitalize on that forward-leaning effort that this
    subcommittee has supported.
        I concur with you on the need to build on the international
    consensus. Any U.S. diplomacy is magnified if we work with our
    partners in the region.
        And finally, I would consider targeted sanctions against
    individuals and businesses that are enabling the Maduro regime.
    The Maduro regime is enabling external actors that have not
    paid much cost for supporting Venezuela so far, and individual
    sanctions and sanctions against businesses might produce less
    of a diplomatic blowback than general sanctions.
        I conclude my remarks there.
        [The prepared statement of Mr. Trinkunas follows:]

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        Mr. Duncan. I thank all of our panelists, and great
    testimony.
        Dr. Ellis, the deteriorating economic situation in
    Venezuela makes investment in the country increasingly risky
    for anybody, especially as Venezuelan oil production continues
    to decline. In your opinion, why is Russia willing to take
    these risks?
        Mr. Ellis. Thank you, Chairman Duncan. I believe that
    Russia itself is not the one taking the risk, but rather,
    specific Russian companies, Igor Sechin with Rosneft,
    presumably with the backing of Vladimir Putin.
        I believe, frankly, that in addition to the economic
    interest, both Russia and China have a long-term strategic
    interest in having a relatively anti-U.S. actor close to U.S.
    shores that grants them privilege access, not only to the arms
    market and the oil market, but other markets as well. And so to
    the extent that it is in both of those countries' interest to
    sustain that, you know, the small amount of capital,
    relatively, that is being invested is a minor price to pay, in
    my judgment.
        Mr. Duncan. One thing I have always thought about is, I
    mean, Russia is a gas station masquerading as a country. They
    don't need the oil. It is not about that geopolitical dynamic
    of a natural resource.
        So with their investment in PDVSA, if Venezuela defaults on
    the loans, then, basically, Rosneft will have controlling
    interest, or 49 percent interest in CITGO. What does that mean?
        Mr. Ellis. That is an excellent question, Mr. Chairman. I
    believe this illustrates an opportunity in part of the Russian
    strategy. I think in many ways, Russia became somewhat careless
    as it advanced the last $6 billion in advance loan payment. And
    I think at the point in which they put in the money for CITGO,
    what they failed to understand was that, you know, the degree
    to which, for example, with CFIUS review, that their ability to
    actually take control over CITGO holdings in the U.S. could
    actually be denied.
        So I think Russia finds itself in a difficult position, and
    indeed, public information indicates they are currently
    negotiating actually to swap the access to CITGO for
    potentially other assets, which might include Petropiar, which
    might include expanded access to Petromonagas and others, which
    really goes to Russia's farther strategy, in my judgment, which
    is to use Venezuela's time of need, not only to sustain the
    regime, but to broaden the holdings that they have to
    Venezuela's 300 billion barrels of oil.
        And I think their calculations really come down to whether
    they think, at the end of the day, I believe that Russia and
    China as much as everyone else wants to transition away from
    the Maduro regime. But what they want to transition to is very
    different. I believe that they are hoping that they can get a
    transition to an equally anti-U.S. authoritarian regime that
    will let them legally legitimize their holdings. And so to the
    extent that they believe that they can get that and not be
    forced to cooperate with the United States toward a more
    democratic regime, I think they will still continue to play
    this game to fund the regime as they have.
        Mr. Duncan. So you mentioned a lot of the weapons. Is there
    any possibility those weapons could fall in the hands of the
    criminal element or the narcoterrorists at all?
        Mr. Ellis. They already have, Mr. Chairman. Especially with
    respect to small arms. I mean, everything from----
        Mr. Duncan. Beyond small arms. I am talking about some of
    the larger, more capable weapons that you mentioned.
        Mr. Ellis. Indeed, as my colleague Mr. Toro also mentioned,
    one of the particular concerns are the Igla-S anti-aircraft
    munitions, which, especially to the extent that they are
    transferred away from the regular Army, there is the
    opportunity for those to begin to be sold to other people.
        So it is certainly that, especially as there is a
    deterioration in order. And what is particularly concerning not
    only is the black market sales, but if there is a collapse of
    order, a split in the military as part of a succession crisis,
    that becomes one of the moments in which those type of arms
    could begin to even more rapidly disappear into other hands.
        Mr. Duncan. My time has expired. I will turn to the ranking
    member.
        Mr. Sires. Thank you, Chairman.
        You know, as I look at Venezuela, I see the same game plan
    that was implemented in Cuba. First of all, in Cuba, they
    started out with the Communist assembly. In Venezuela, it is
    called the National Constituent Assembly. Basically, that is to
    take away power from any kind of democratic effort to put it in
    the hands of these groups.
        The second step is, basically, to eliminate the opposition.
    They eliminated the opposition in Cuba. They eliminated the
    opposition, putting them in jail in Venezuela.
        And the third thing is this whole structure of committees
    that they are setting up throughout the country, where the
    committees basically tell on the activity of the public, you
    know, what the people are doing, and then they can go and put
    them in jail.
        So I see the same formula, actually, being implemented in
    Venezuela. Now, what can we do about it? I think we pretty much
    have to depend on all the other countries around Venezuela to
    continue to put the pressure and prohibit them from using the
    World Bank and so forth. But I think other than that, we are
    kind of limited on what we can do, you know, in the country. So
    would you agree with that?
        Mr. Ellis. First of all, Mr. Chairman, I would thoroughly
    agree. Clearly, not only Hugo Chavez, as my colleagues alluded
    to, but continuing with Nicolas Maduro, who have continued not
    only to follow the Cuban playbook, but indeed, have received
    the benefit of their consultation as well as the active
    presence of the Cuban DGI, the Avispas Negras, and various
    other organizations to include those introduced through the
    doctors. And so if it looks like Cuba, that is not entirely by
    coincidence.
        But beyond that, I actually believe that we are at a unique
    moment where, although oftentimes sanctions are not effective,
    sanctions may have a particular opportunity to be effective in
    this case, specifically because PDVSA is at the brink of a
    cascading liquidity crisis.
        You have a series of events, whereby which, for example,
    certain bond payments, the $3 billion that are due in October,
    that if PDVSA goes into technical default, you have a situation
    where the creditors, including of course, Rosneft that you
    alluded to, and the other PDVSA creditors from the bond from
    last year, as well as other international claimants such as
    Crystallex and others, all begin to jump on international
    assets, which effectively shuts down the regime.
        I fundamentally believe that there is some point at which,
    if the money flow that accounts for 96 percent of Venezuela's
    ability to import the food and medicine it needs for its people
    is effectively shut down through that international legal
    battle, you do force a situation in which you may have regime
    change. And the way that we structure sanctions may impact how
    that comes about.
        Mr. Sires. Mr. Toro?
        Mr. Toro. I think it is important to understand that the
    U.S. has a lot of leverage. The United States buys 720,000
    barrels a day from Venezuela. I read in the Washington Post
    last month that there is scope for creativity here if people
    are willing to explore it. It is nowhere written that the
    United States has to buy this oil. And if it does buy it, you
    could think creatively about conditioning payments to some kind
    of mechanism where the National Assembly, the duly-elected
    National Assembly in Caracas approves the use of those
    payments. You could think of escrow systems. You could think of
    different ways of leveraging the fact that, yes, the United
    States needs this oil. Yes, Venezuela needs to sell this oil,
    but not under just any old conditions.
        Mr. Trinkunas. Thank you, Ranking Member Sires. I concur
    with you that collaboration from the countries in the region is
    important. We know from sanctions that they are more effective
    the more that the key parties are present. I also think there
    is an opportunity to put pressure on individuals and businesses
    that facilitate and serve as fronts for the officials in the
    Venezuelan Government that have engaged in corruption or
    benefit from drug trafficking. Cooperation with regional
    financial centers, especially in places like Panama would be
    important. So I do think there is room for creativity both in
    the kinds of sanctions and then how the earnings of Venezuela--
    --
        Mr. Sires. In terms of the game plan that I described at
    the beginning of my comments, do you agree with that? Do you
    see similarities?
        Mr. Trinkunas. To----
        Mr. Sires. To the Cuban game plan.
        Mr. Trinkunas. I do think that there is a similar level of
    effort to achieve authoritarian control. I do see a lot of
    similarities also to what Hugo Chavez did in 1999. It is just
    when Hugo Chavez shut down the Congress and the Supreme Court
    in 1999, it was popular, and now it is not popular. So I don't
    let the Venezuelans off the hook, sir.
        Mr. Sires. Mr. Toro, do you agree with that game plan that
    they are implementing?
        Mr. Toro. Absolutely. The difference is that in Cuba in the
    late 1950s and 1960s, they had firing squads, and so things
    went much more quickly. If you are trying to do the same thing,
    but you are not going to have firing squads, it is going to
    take you 17 years or 18 years instead of 6 months or a couple
    of years. But you see the procession.
        And Venezuela now is at a very peculiar point in its
    history in that it still has an organized independent political
    opposition hanging on just barely in the Mesa de la Unidad
    Democratica, in MUD. They are trying to figure out ways to stay
    relevant and to stay united and to stay cohesive and to stay
    effective under a lot of pressure.
        It is not a given that Venezuela will always have that kind
    of opposition. Venezuela could end up just like Cuba with only
    dissidents and not an organized----
        Mr. Sires. My time just ran out, but I do think that
    Venezuela is going to move on private property in the next
    year.
        Thank you, Chairman.
        Mr. Duncan. I thank the ranking member.
        Now we will go to Mr. DeSantis from Florida.
        Mr. DeSantis. I thank the witnesses.
        And just following up on the Cuba stuff. How do the Cuban
    military officers and soldiers exert power and influence over
    the Venezuelan military government? Doctor?
        Mr. Trinkunas. So Venezuela invited in 40,000 Cuban
    personnel during the Chavez regime. Most of those were doctors,
    but a significant number were intelligence officers and
    military advisers. The most important role that they play is
    really as spies on the activities of the Venezuelan officer
    corps. It makes it very difficult for anybody in the Venezuelan
    officer corps to remain independent or nonideological or
    nonsupportive of the regime. So they have also taught the
    Venezuelans themselves how to conduct surveillance of their own
    officers. So it is really in support of maintaining regime
    control that they play a role.
        Mr. DeSantis. You want to----
        Mr. Toro. I think it is important to understand also that I
    think if we go back 5 years, that was very much the case. You
    had Cuban military personnel, spies, pretty much in every
    Venezuelan army unit. And in the last 3 years, that has changed
    a little bit, because that was generating a lot of resentment
    inside the Venezuelan military. It is humiliating to be spied
    on openly by foreigners.
        So in the last 3 years, what we have seen there is a move
    away from this unit-by-unit surveillance. And the way I put it
    in my written statement is the Cubans used to be everywhere,
    now they are just at the top. So you have, in Miraflores in the
    Presidential palace in Caracas, you have the situation room
    where intelligence gathered mostly by Venezuela, it is a little
    bit by Cubans, is funneled and analyzed and fed to the top
    leadership, really by Cubans. So they have become a kind of
    mechanism for dictatorship, if you want to put it that way.
    They are playing a consultancy role, but a very high-level
    consultancy role. High-level decisions are never made without
    asking the Cubans for advice first, and Venezuelan high regime
    officials are traveling back and forth to Havana all the time.
        Mr. DeSantis. So the Cuban military officials and
    intelligence officials, are they shaping the oppression of the
    Venezuela people and the opposition?
        Mr. Toro. Very clearly.
        Mr. DeSantis. And what specifically do they do to do that?
        Mr. Toro. Well, it is just day-to-day management of the
    political crisis. It has taken a lot to break the Venezuelan
    opposition to set it against the various groups against one
    another. It has taken a lot to identify the fracture points
    inside the Venezuelan opposition and play on those.
        If you read Venezuelan news over the last couple of days,
    we have one part of the opposition now at semi-open warfare
    with another part. That is not casual. That is the result of a
    Cuban strategy to sow divisions in a very canny kind of way.
    Because we know that to the degree that the Venezuelan
    opposition splits, it becomes harder for people like you to put
    pressure--for the United States to put pressure, because, you
    know, if half the Venezuelan opposition is accepting the
    National Constituent Assembly, how exactly does the Lima group
    or the United States or anyone else get off saying, no, this is
    an illegitimate assembly?
        So I think the Cubans are very good at this kind of work,
    understand it very well, and have in Nicolas Maduro a real
    hardliner, I mean, a man whose entire political vision was
    built in Cuba.
        Mr. DeSantis. So if you did not have any of this Cuban
    influence and Cuban support, what would that mean for the
    viability of the Maduro regime?
        Mr. Toro. I think to some extent, because Maduro and the
    inner clique around Maduro, they came up through the Liga
    Socialista, this Cuban satellite party in Venezuela in the
    1970s, but they thought like Cubans. They have been trained to
    think like--Maduro never went to university, but he did go to
    the school of international cadres in Havana for a year between
    1996 and 1997. That was his university. So he thinks like a
    Cuban Communist. The inner clique around him thinks like Cuban
    Communists. And in a way, you know, the Cuban vice has been
    embedded in the way that the Venezuelan security services do
    their work and certainly in the way that the leadership clique
    thinks.
        Mr. Trinkunas. I would just add that, basically, the Cubans
    enable President Maduroand his supporters to do what they want
    to do sort of faster or better or more effectively. But,
    basically, I agree with Mr. Toro, that this is their preferred
    course of action. It is not being forced upon them.
        Mr. DeSantis. But it makes their course of action more
    viable against opposition because of the Cuban support.
        Mr. Trinkunas. Correct. And, in fact, right now, they are
    engaged in the strategy of shaping the opposition. It is an
    opposition that they can easily manage by pruning off the parts
    they don't want to deal with.
        Mr. DeSantis. Great. Well, I thank you, thank the
    witnesses. And I yield back.
        Mr. Duncan. Dr. Ellis, do you want to chime in on that?
        Mr. Ellis. Yes. I just want to say very briefly that, in my
    judgment, that the Cubans are only able to imperfectly
    compensate for the bad management of Maduro team. But at the
    tactical level what becomes critical as the crisis deepens is
    the DGI and others who are monitoring whether or not there is a
    fracture in the military. Because I think with that, that
    element of the support, basically, a collapse can occur more
    readily with respect to the military split, it is a vehicle for
    ending the regime.
        Mr. Duncan. Thank you.
        The Chair now will go to Ms. Kelly from Illinois.
        Ms. Kelly. Thank you, Mr. Chairman.
        While the U.S. has taken action to sanction individuals
    profiting from the Maduro regime, other nations like China and
    Russia have enabled Venezuelans actions. Venezuela is accounted
    for 44 percent of total lending by Chinese banks in the region.
    For Russia, Venezuela has been a major market for Russian
    sales, armed sales with over $11 billion in sales since 2001.
        Mr. Trinkunas, you stated that most outside actors that
    trade with Venezuela do so to secure the biggest possible
    return. As the economic outlook deteriorates in Venezuela, do
    you expect outside countries to have more interests to exploit
    a weak state or fear of possible default? And are there any
    indications that China would inject capital into Venezuela to
    keep the Communist (ph) government informed?
        Mr. Trinkunas. That is a very good question, Congresswoman
    Kelly. And I believe there is a difference between China and
    Russian on this. I think China has become more reticent in
    recent years. They are still providing some level of support.
    They are not willing to totally completely cut and run, because
    they are concerned about how that would be viewed by other
    potential and existing partners around the world. They think of
    themselves as a rising global power, and they know what they do
    in Venezuela will affect their relations with other countries.
    So they are reluctant to invest more money, but they don't want
    to completely leave.
        On the other hand, Russia, and specifically Rosneft, have
    been behaving very opportunistically this year in terms of
    acquiring stakes in joint ventures in Venezuela, as Dr. Ellis
    and Mr. Toro explained. The one thing to understand about the
    Constituent National Assembly, in addition to supporting the
    completion of authoritarianism in Venezuela, it is a vehicle by
    which the Maduro regime can try to provide some legal cover for
    what the Russians, for example, are doing in Venezuela.
        Mr. Ellis. If I could jump in, ma'am. I also believe that
    China is now continuing to inject capital. The idea that
    although China has become more cautious and has not extended
    new loan vehicles; however, it is interesting the current $2.7
    billion in new projects that was just authorized last week
    actually is basically money that was paid down out of one of
    the existing tranches of one of the heavy investment fund. And
    so China is proceeding cautiously.
        But I also believe that because the majority of those $62.2
    billion that were lent was actually lent on generally 3-year
    repayment terms and largely on a--you know, repaid out of
    China--out of Venezuelan oil deliveries, that China is not as
    worried about losing money as many think. As a matter of fact,
    the amount that could be still owed to Venezuela may be--or to
    China may be as low as $15 billion. And when you consider the
    China investment corporation itself has a $900 billion loan
    portfolio. For China, you know, taking a loss on $15 billion,
    which is actually only half of the loans that Russia took as a
    write-down when it wanted to reestablish its own relationships
    with Cuba.
        So my suspicion is that China is continuing to support the
    regime; it is just doing so in a less overt way than people
    like Igor Sechin are on the Russian side.
        Mr. Toro. We should note that as far as we know, Simon
    Zerpa, the PDVSA vice president for finance who was named as
    part of the latest round of OPEC sanctions, is in Beijing now
    and has been for a couple of weeks negotiating a--trying to
    negotiate some kind of support deal. The--Beijing is--
    obviously, it is difficult to get information out. It is hard
    to know if it is going well or not. We will have much better
    answers to the question when Mr. Zerpa comes back.
        But it should be noted that sanctions, individual sanctions
    against Simon Zerpa and against the national treasurer, Erick
    Malpica Flores, the first lady's nephew also, have been very
    effective in limiting their capacity to look for financing in
    traditional ways. And so we have Simon Zerpa camping out in
    Beijing for 2 weeks trying to solve that problem.
        Ms. Kelly. I have used up all my time.
        Mr. Sires. You have----
        Ms. Kelly. I yield back the balance of my time.
        Mr. Duncan. She yields back.
        So the Chair will go to Mr. Yoho from Florida.
        Mr. Yoho. Thank you, Mr. Chairman. Thank you, gentlemen,
    for being here.
        I hail from Florida, so we are very, very concerned with
    this. We have got--in my past life as a veterinarian--I will
    always be a veterinarian--and I had several clients from
    Venezuela, and we have been following this, and it has only
    deteriorated in this first half of the century.
        And it is very disturbing to see what is going on there,
    from the breakdown of the rule of law, the Communist state that
    is developing, the dictatorship. The liberties that they had
    are gone. They are already usurping the property and taking the
    personal property. And I agree with Mr. Sires that this is the
    prelude of what Cuba did with the Castro regime.
        There are so many different avenues that I am concerned
    with. You know, the terrorist networks that are developing
    there from the Middle East, the Chinese influence, the national
    security--these all tie into national security, but what I see
    with the CITGO deal that was made with the loan--and I want to
    touch on that just briefly--if Venezuela defaults, CITGO has
    three oil refineries here, nine pipelines, and 50 petroleum
    platforms. Are we to believe that if they were to default,
    Russia takes that over in this area? Is that something that we
    would anticipate? Or China, if China were to--if they were to
    default to China?
        Dr. Ellis?
        Mr. Ellis. Yes. Well, first of all, my understanding is
    there is a pending CFIUS review.
        Mr. Yoho. Right.
        Mr. Ellis. And I think, you know, heavy attention to that
    would be merited to potentially blocking that, and I think
    there are strong grounds for blocking the takeover by Rosneft
    of those assets. And I think--my understanding is that out of
    concern for that potential blockage, Rosneft is actually
    working right now to switch out those assets for broader assets
    in Venezuela.
        Mr. Yoho. Okay. You know, and we have had personal contacts
    with people that used to work for the Venezuelan generals that
    were working with our Government through different agencies, I
    won't mention them, that have firsthand information that the
    Vice President Asami, when he was a Foreign Minister, was
    printing Venezuelan official passports for ISIS and Hezbollah
    members that were entering our country.
        And to me, this is just a very severe national security
    risk. And I look back at the words of John Kerry when he said
    the Monroe Doctrine was outdated and not needed. I think we
    need to bolster it and really put an influence and, you know,
    make sure we secure the Caribbean base in South America with
    our policies.
        And let's see. The corruption scandals. I mean, they are
    widespread down there. And you brought up, there are over--Mr.
    Toro, over 1,000 MANPADS that have gone missing. Is that--did I
    hear that correctly?
        Mr. Toro. No, no. Let me restate. There are 5,900 Russian
    MANPADS, is the latest information I have, they are under the
    control of the Venezuelan army. The question is what happens--
    there is a plan now to shift about 1,000 of them to the
    Bolivarian militia where they will not be as well safeguarded.
    And we know that there are contacts between illicit groups,
    drug trafficking groups, Colombian groups, groups that have
    expertise shipping drugs from the northern coast of South
    America to the United States. If you want to hide a MANPADS
    system, they want to send it to the United States, just hide it
    under a sack of cocaine. You can do that. So this hasn't
    happened----
        Mr. Yoho. Yes. That is not comforting.
        Mr. Toro. It is not comforting. It is deeply concerning,
    because it is--it is not just that there are these external
    actors that are very worrying, it is a way they can overlap and
    interact. If you have the drug trafficking route, because you
    set it up for illicit narcotics, what else can you put on that?
        Mr. Yoho. Mr. Chairman, I have got one more question. Do I
    have time? I don't have a timer in front of me.
        What we have heard is that the Maduro regime, and even
    Chavez, had the Cuban soldiers around him because he felt they
    were more loyal to them, because they are a student of
    Castro's. Do we still find that today? Is the Cuban militia
    that is around him and the military around him, are they more
    loyal and protective of Maduro than the Venezuelan generals?
    What are your opinions on that?
        Mr. Ellis. I have heard similar things. And, you know, to
    some degree, that may be the case, and it depends on which
    specific loyalists. One of the difficult issues with many of
    those, especially the Venezuelan national guard generals, is
    they have become so deeply entwined in narcotrafficking and
    other profiteering from the regime's economic, you know,
    policies that, you know, their fate in many ways is actually
    tied to Maduro's, although they are looking for transition to a
    more rational management.
        There is also some speculation, though, whether some, for
    example, the Avispas Negras, the elite Cuban guard, are they
    actually guarding Maduro, or are they actually guarding their
    own, you know, Cuban personnel from the Venezuelans? So that is
    a little bit of concern.
        Mr. Yoho. All right. I yield back.
        Thank you, sir.
        Mr. Duncan. I thank the gentleman.
        The Chair will now go to Mr. Espaillat from New York.
        Mr. Espaillat. Thank you, Mr. Chairman.
        I guess, how many Cubans are there? How many Cuban
    operatives are there right now in Venezuela? Do you have an
    approximate number?
        Mr. Trinkunas. Congressman Espaillat, that is a very good
    question. The assessment was in 2012 there was about 40,000.
    However, at that time, Cuba-Venezuela trade was about $7.5
    billion, more or less. Trade has dropped to about $2.2 billion.
    And a lot of those personnel were being paid for by Venezuela
    through subsidized oil. So those personnel, some likely have
    been withdrawn just because Venezuela is not paying anymore. In
    fact, there was a 8-month oil moratorium last year and early
    this year, that is--Venezuela started shipping oil at a reduced
    rate. But if those personnel are not in Venezuela, they have
    likely been redeployed to the Middle East or Africa or
    elsewhere in Latin America, because that is how--one of the
    ways that Cuba earns money is through providing those
    personnel.
        Mr. Espaillat. And during the--is there a sign that there
    is a crack in the wall, if you may, in the military, are there
    any solid noncorrupt military professionals that are showing
    signs of potentially objecting to Maduroand his ways?
        Mr. Trinkunas. Let me just briefly say that there is--the
    senior leadership is selected for ideological loyalty, and also
    as Dr. Ellis and I am sure Mr. Toro agree, there is the issue
    of connections to drug trafficking among the Guardia Nacional.
    The junior officers are heavily ideologized at the national
    Bolivarian Military University. It is those middle ranks that
    have not been completely captured by the revolution, and that
    is where you see this occasional small uprising, the
    helicopter, the raid on the base. It is that set of officers
    that, I think, are sort of most open to all these, but they are
    being watched.
        Mr. Toro. I think it--well, about 4 months ago, there was a
    video--or 6 months ago, there was a video that, with little
    notice outside the Venezuelan military, that showed a couple of
    soldiers outside the main army base in Maracay rummaging
    through sacks of garbage looking for food. Okay?
        The video was not very much noticed outside the military,
    but inside the military where everyone has WhatsApp, because
    they are South Americans, it went viral. Everybody inside the
    military saw it. And there was a moment when people in
    different units inside the military realized, wow, it is not
    just in this unit where we don't have quite enough to eat.
        For middle-ranking officers, keeping morale and
    preparedness and just basic discipline in a situation where you
    can't always feed your troops is very difficult. And for the
    army, again, trying to secure weapon systems when the troops
    are hungry is, again, very difficult. So some of the people, I
    don't doubt--I don't know if you can find very many people who
    are not at all corrupt inside the Venezuelan military, but what
    you can find is many officers who find that the current
    government setup is unsustainable and find it difficult to
    understand why they should try to continue to sustain it.
        Mr. Espaillat. My last question is, I am kind of losing a
    little hope on the sanctions positions, because as just stated
    here, China has been substantially present there and may look
    to bail them out. And, in fact, if we sanction them, that
    provide them--provides them with a platform to then go out
    there and demonize the U.S., and then here comes China and
    bails them out. So is there any way that we can--what is the
    objection to not buying their oil, for example? That is a
    significant part of their economy.
        And second, the second question is, what can we do about
    the international--the smaller countries that have benefited
    from petro [off mic] that seems to be bailing them out in the
    international community both at the Organization of American
    States as well as the United Nations?
        Mr. Ellis. Congressman Espaillat, that is a great question.
    I strongly believe that we are in a moment where sanctions can
    make a difference, but only if done right and coordinated with
    an effective strategic communications, not only to Venezuela,
    but also to Russia and China.
        First of all, I believe that it is actually important that
    we do sanctions in a relatively quick fashion. I believe that
    what you said is absolutely on track, that we need to move
    forward with sanctions that cut off Venezuela's oil flow.
    Although that will damage U.S. industrial interests, I believe
    that in some ways that not only doing so shows that we do not
    have a, you know, moral ambiguity in the game, but it also
    accelerates the rate at which you force a crisis to the regime.
        And, frankly, we also need to signal strongly to China,
    because China watches this with one eye in the relationship
    with the United States. And if they believe that we see this as
    a strategic play on their part, they may or may not be willing
    to put in that cash. They have been very cautious about that.
        I believe also that we do need, as you pointed out--and, of
    course, Dominican Republic, as you know that--and I was just
    actually in Santo Domingo just a couple of weeks ago right
    after your visit, sir, the committee's visit, and was struck by
    the number of Venezuelans that you see. And so you have this
    ironic situation in which friendly governments continue to go
    along with the Venezuelan regime, while at the same time they
    are suffering from the crisis that is created by the Maduro
    regime. I think we need to manage that diplomacy carefully
    through a bit of--you know, through a bit of tough love, if you
    will.
        Mr. Duncan. We have time for another round if members would
    like.
        I would like to just raise a point. So under Chavez we saw
    the Air Caracas flights, Caracas to Tehran, stopping in Beirut.
    And Beirut is the lead country for Hezbollah. I mean, Party of
    God, Iranian proxy.
        How much activity is Hezbollah conducting in Venezuela? Is
    there still as much Iranian influence as there was under Chavez
    with Maduro? And are we aware whether the Air Caracas Tehran
    flights are still going on?
        Dr. Ellis.
        Mr. Ellis. Chairman, that is a wonderful question. And I
    believe there are two dimensions to this, the Iranian and the
    Islamic extremists. And they are overlapping but somewhat
    separate. Certainly, with the shift from----
        Mr. Duncan. Some of us think they are one in the same.
        Mr. Ellis. Yes. They are certainly reinforcing. And
    certainly with the change in style in Iran from President
    Ahmadinejad to President Rouhani, what you see is at least a
    low profile.
        But I believe that Iran's strategy in the region is
    fundamentally the same. They are continuing to recruit
    personnel for the Iranian madrassas from places like Venezuela.
    They are continuing to introduce Quds Forces into the region,
    although at a somewhat lower level. They are continuing to
    work, many of us believe, on missile proliferation.
        And one of the concerns is--and I think you have already
    seen it--with President Rouhani's reelection in Iran, and the
    freeing up of $150 billion in resources, and indeed the meeting
    with Maduro just a short time ago, I think you are beginning to
    see a renewed willingness of Iran to drop a little bit of the
    caution that it had previously adopted when it was negotiating
    the end of the sanctions regime.
        Related to that, clearly, I am very concerned not only
    about Hezbollah, but other Islamic radicals. As you rightfully
    pointed out, Tareck El Aissami, the Vice President, is one of
    the key people not only in terms of the religious activity, but
    also with the criminal radicalization.
        Hezbollah, both in Syria and Lebanon, but also in Latin
    America, is a major drug-dealing and money-laundering
    organization with ties in Colombia, Venezuela, elsewhere, that
    is reinforced and plays with Iran, but also has their own
    criminal agenda, which really leads to the growth of illicit
    networks which fundamentally undermine and threaten the United
    States.
        So I am glad that you brought that up, sir, because that
    emphasis has received probably less attention than it should
    recently, the role that is being played.
        Mr. Duncan. That has been an issue with me, the Iranians'
    activity in the Western Hemisphere, not just Venezuela. We are
    not going to take our eye off the ball with the things you
    mention and what Iran, Quds' Force, their proxy, Hezbollah, are
    doing here closer to home.
        Last question. India, they are buying a lot of oil, I
    understand. Are they propping up the Maduro government? Is it
    anything we ought to be looking into?
        Mr. Trinkunas, that is fine. Yeah.
        Mr. Trinkunas. I was just going to make a brief point, that
    I think India is an interesting signal of the change that you
    are seeing, I think, in the Iranian relationship. When Iran
    reentered global oil markets after sanctions were lifted under
    JCPOA, a competitive dimension was introduced into the Iran-
    Venezuela relationship because they are competing for markets.
    And, in fact, India was traditionally an Iranian market that
    would later on become a Venezuelan market.
        So we shouldn't ignore the fact that there is a new
    dimension to the Iran-Venezuela relationship where Iran is
    competing for markets after being locked out for so long.
        Mr. Ellis. Sir, India is a wonderful point. Thank you for
    bringing it up. And it is interesting because even though
    India's orientation toward the region, including under Prime
    Minister Modi, has been relatively apolitical, it is
    interesting that until the Jieyang refinery comes on in
    Guangdong, in China, really it is the Reliance Refinery in
    India that has one of the few capabilities in the world to
    bring on and process Iranian heavy oil coming out of the
    Orinoco Tar Belt.
        It is also of interest that actually Rosneft has a play,
    the Russian company, to actually buy a stake in that. And some
    of us believe that part of Igor Sechin's play is to actually
    refine Venezuelan oil in India.
        But India, to the extent of which--there is probably as
    much of an impact on Indian potential sanctions and cooperation
    as there is from U.S. sanction. And so to the degree to which
    India is willing to cooperate with us toward the Venezuelan
    regime, that would bring a big deal of help in bringing
    pressure on the Venezuelan regime.
        Mr. Duncan. Thank you, gentlemen.
        I said earlier Iran and Islamic extremism were one and the
    same. Maybe not one and the same, but not mutually exclusive, I
    guess is what I meant by that.
        Any other members have any followup questions?
        Mr. Yoho.
        Mr. Yoho. Thank you again.
        What is your recommendation with Goldman Sachs, who bought
    $2.8 billion in bonds? Is that something that we should
    discourage from American financial institutions, bailing out a
    country that suspends or gets rid of their Constitution?
    Thoughts?
        Mr. Toro. I think the latest--well, the first round of
    financial sanctions is narrowly constructed to prevent that
    from happening again. It is unfortunate that it happened once.
    But as I understand it, sanctions will not allow that to happen
    again.
        Mr. Yoho. Okay.
        Mr. Trinkunas. Congressman Yoho, I think that is a very
    interesting point, because I think you highlight a mechanism by
    which you discourage financial institutions in the future of
    taking the risk of dealing with the Venezuelan Government. You
    don't have to prevent very many of these actions to discourage
    many of them.
        Mr. Yoho. Make an example out of them. I am a firm believer
    in that.
        One last thing, and I don't know if you touched on this.
    Again, with the Citgo operations in the United States, and with
    the Venezuelan Government suspending or changing their
    Constitution, which I feel is through an illegitimate election
    and process, would you sanction those companies, the Citgo
    companies here, and prevent them from processing Venezuelan
    crude and replacing it with U.S.? And I know you said it would
    disrupt our system, but I think we could probably fill that
    fairly quickly.
        Mr. Toro. I am a Venezuelan national. I have family and
    employees and friends there. I cannot support any such move.
        And I think it is important to understand clearly the
    mechanism through which stopping Venezuela from selling oil to
    the United States is supposed to create pressure. I mean, this
    is a hunger strategy. This is let us starve out the Venezuelan
    population, let us put a hard stop to food and medicine imports
    into Venezuela, and then they will overthrow the government. I
    don't think that is a viable or defensible strategy.
        Mr. Yoho. Dr. Ellis.
        Mr. Ellis. Frankly, I wrestled with a lot of this in my own
    testimony, because, obviously, we don't want to do anything
    that hurts either U.S. companies or the Venezuelan people,
    because at the end of the day our interests are in the well-
    being of the Venezuelan people.
        My two concerns is that a go-slow strategy of individual
    sanctions, while certainly sending messages, prolong the rate
    at which you have the suffering of the Venezuelan people while
    giving Russia and China the opportunity to incrementally bail
    out and advance their position more and more and more.
        Whereas, the faster that we do sanctions, although
    immediately painful, it creates a situation in which Russia and
    China do not have the time nor the scope for being able to bail
    it out. And, frankly, it sends a very strong message not only
    to companies like Goldman Sachs, but companies such as Citgo as
    well.
        Mr. Yoho. Thank you.
        Mr. Duncan. I thank the gentleman.
        Before we end up, hurricanes have affected a lot of our
    members on this subcommittee and their districts. So our
    prayers are out to the State of Florida and Texas. And also to
    the Caribbean, which we have jurisdiction over, has experienced
    a lot of damage from the hurricanes. So our prayers are with
    them, as well.
        Pursuant to Committee Rule 7, the members of the
    subcommittee will be permitted to submit written statements to
    be included in the official record.
        Without objection, the hearing record will remain open for
    5 days to allow statements, questions, extraneous materials for
    the record, subject to the length limitation in the rules.
        There being no further business, the subcommittee will
    stand adjourned.
        [Whereupon, at 3:17 p.m., the subcommittee was adjourned.]

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