[Senate Hearing 115-55]
[From the U.S. Government Publishing Office]





                                                         S. Hrg. 115-55


       COUNTERING RUSSIA: FURTHER ASSESSING OPTIONS FOR SANCTIONS

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                                   ON

          CONTINUING EXAMINATION OF EXISTING RUSSIAN SANCTIONS

                               __________

                             APRIL 27, 2017

                               __________





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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      MIKE CRAPO, Idaho, Chairman

RICHARD C. SHELBY, Alabama           SHERROD BROWN, Ohio
BOB CORKER, Tennessee                JACK REED, Rhode Island
PATRICK J. TOOMEY, Pennsylvania      ROBERT MENENDEZ, New Jersey
DEAN HELLER, Nevada                  JON TESTER, Montana
TIM SCOTT, South Carolina            MARK R. WARNER, Virginia
BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas                 HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
DAVID PERDUE, Georgia                BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina          CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana              CATHERINE CORTEZ MASTO, Nevada

                     Gregg Richard, Staff Director
                 Mark Powden, Democratic Staff Director

                      Elad Roisman, Chief Counsel
       John V. O'Hara, Chief Counsel for National Security Policy
               Sierra Robinson, Professional Staff Member

                Graham Steele, Democratic Chief Counsel
               Colin McGinnis, Democratic Policy Director

                       Dawn Ratliff, Chief Clerk
                     Cameron Ricker, Hearing Clerk
                      Shelvin Simmons, IT Director
                          Jim Crowell, Editor

                                  (ii)




























                            C O N T E N T S

                              ----------                              

                        THURSDAY, APRIL 27, 2017

                                                                   Page

Opening statement of Chairman Crapo..............................     1
    Prepared statement...........................................    32

Opening statements, comments, or prepared statements of:
    Senator Brown................................................     2

                               WITNESSES

R. Nicholas Burns, Roy and Barbara Goodman Family Professor of 
  Diplomacy and International Relations, Harvard University, John 
  F. Kennedy School of Government................................     4
    Prepared statement...........................................    33
        Senator Tester...........................................    43
Chip Poncy, President and Co-Founder, Financial Integrity 
  Network, and Senior Advisor, Foundation for Defense of 
  Democracies' Center on Sanctions and Illicit Finance...........     6
    Prepared statement...........................................    36

                                 (iii)

 
       COUNTERING RUSSIA: FURTHER ASSESSING OPTIONS FOR SANCTIONS

                              ----------                              


                        THURSDAY, APRIL 27, 2017

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met, at 10:04 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Mike Crapo, Chairman of the 
Committee, presiding.

            OPENING STATEMENT OF CHAIRMAN MIKE CRAPO

    Chairman Crapo. The hearing will come to order.
    This morning, the Committee will receive testimony on the 
smart use of sanctions to counter Kremlin military incursions 
in Ukraine, Syria, and its increased reliance on cyber warfare 
against many nations.
    The Committee met 6 weeks ago to begin an inquiry into the 
effectiveness of the United States sanctions regime imposed 3 
years ago against the Russian Federation for its invasion of 
Crimea, continuing violence and interference in the Ukraine, 
and cyber intrusions against the United States.
    At that hearing, we learned that, alone, United States-
imposed targeted sanctions have had a somewhat limited impact 
on the economy of the Russian Federation. That impact was 
magnified by the combined effect of sanctions imposed by other 
Western nations coupled with the severe drop in world oil 
prices.
    It was less clear, however, if the existing sanctions were 
affecting any change in the aggressive geopolitical 
calculations that President Putin continues to make.
    Some analysts say that the economic sanctions have had a 
deterrent effect on Putin pushing even farther into Ukraine 
territory, and that is a good start.
    Others look to Putin's continued actions in the Ukraine and 
Syria in the weeks since this Committee last met and conclude 
that we should target additional sanctions on the Russian 
Federation. Despite existing U.S. and Western sanctions, Putin 
has not shown any intention to cease his aggressive behavior.
    For the Committee, today's inquiry is not about punishing 
the people of the Russian Federation but, rather, those 
responsible for Russia's misbehavior.
    The goal now is to transform the initial, limited 
application of financial leverage into the next step of what 
must become a general campaign to impose real costs that impact 
Putin's ability to conduct hostile activities in an already 
troubled world.
    A good starting point might include a codification of 
existing Executive orders and a deepening and broadening of 
sanctions in
certain economic sectors, addressing cyber activity and 
financial corruption, and making mandatory certain existing 
discretionary sanctions.
    Vital in all of this is harmonizing the conditions to lift 
sanctions so that if Putin were to try to reverse course, 
overlapping or misdirected sanctions would not defeat the 
potential for meaningful change in Kremlin policy.
    Since sanctions were first imposed 3 years ago, the Obama 
administration, the U.S. Congress, and now the Trump 
administration have been prepared to impose additional 
sanctions as
circumstances warrant or until Putin follows through with his 
commitments to the Minsk cease-fire agreement. In fact, several 
rounds of new designations have been implemented under existing 
sanctions laws over the last 3 years.
    Make no mistake, these sanctions currently in place, and 
those that may yet come, are Putin's fault and a result of 
Putin's confused notions of Russian power and pride. Putin is 
not defending the interests of his people but exploiting 
opportunities to seize neighboring lands by fomenting disorder 
and seeking to perpetuate Mideast conflict to advance Russia's 
military influence.
    America must lead on the issue since the most successful 
sanctions result from a united front of the United States and 
EU
cooperation.
    Since the unlawful annexation of the Crimea, the years of 
destabilizing Eastern Ukraine through relentless war, the 
global spread of cyber intrusions, and Putin's indefensible 
support of Assad's leadership of Syria, particularly in light 
of the recent chemical attack, fewer are left in Europe to 
defend Putin's policies.
    The European Union must ask itself if it is prepared to 
join the United States to take the necessary financial actions 
in the foreseeable future to deny Putin the resources he needs 
to take whatever his next steps may be.
    The last thing the European Union, the United States, or 
this Congress can be is divided in the face of Putin's 
uncertain path. The times call for clarity of purpose and a 
correct amount of pressure.
    I thank our witnesses for coming here today to help the 
Committee understand what a next course of action might look 
like, what the repercussions of taking such actions might look 
like, and how even those may be mitigated.
    Senator Brown.

               STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman, for calling this
second important Committee hearing on Russian sanctions. I 
appreciate your willingness to explore how the current U.S. and 
multilateral sanctions regime is working and next steps to 
strengthen it while preserving unity among our allies.
    Mr. Poncy, welcome to our Committee. Ambassador Burns, good 
to see you again. Thank you for your public service.
    As witnesses underscored in the last hearing, U.S.-EU unity 
is critical if multilateral sanctions on Russia are to continue 
to be
effective. In our last hearing, witnesses discussed how 
Congress has worked together on a bipartisan basis to craft the 
current U.S. sanctions regime and to hold Russia accountable 
for its aggressive activity. This encompasses Russia's 
violations of international law and of the territorial 
integrity of Ukraine, including its illegal annexation of 
Crimea, its role in the brutal repression in the war in Syria, 
and the Assad regime's recent gassing of its own people and its 
cyber attacks on the United States, including on the U.S. 
financial system and on our elections.
    In the last hearing, witnesses also outlined their ideas on 
ways to strengthen the current sanctions in response to Russian 
aggression. We should focus today on the broader strategic 
questions,
including on what the Committee might do to strengthen our 
response to Russia, and for its continuing efforts to 
destabilize states in Europe and beyond. We should talk about 
what the Administration should be doing now on this front.
    Russia's interference in our election, confirmed 
unanimously by the U.S. intelligence community in a 
declassified report issued in early January, as we all know and 
recognize, poses a problem that goes far beyond foreign policy 
and strikes at the core of our democracy. It should not be a 
partisan issue. As their joint report made clear, there was no 
disagreement within the U.S. intelligence community about the 
Russian role, and it noted that similar efforts would likely be 
undertaken by Russia against U.S. allies and others. It is 
clear that it is happening in European elections now as Russia 
intervenes to bolster extreme anti-democratic forces there.
    Just this week, we see reports of cyber attacks against one 
of the French Presidential candidates, attacks that look very 
similar to the Russian attacks and disinformation efforts in 
our election last year. The same reportedly happened in the 
German elections. Earlier this week, we read of Russia's 
attacks on Danish military computer systems over the last 
couple of years.
    It is not subtle. It is a blatant, unprecedented attack on 
Western governments and on democracies. While we have started 
to impose sanctions for Russia's cyber attacks, we have not yet 
fully responded to these challenges. Congress must look 
backward, as various committees are doing, to determine and 
describe precisely what happened. But we must also look 
forward, strengthening our election processes and cyber systems 
to prevent future interference and imposing strengthened 
sanctions to deter the Russians from future activity like this.
    We should be clear-eyed. The Ukrainian community in my 
State and around the world knows firsthand, like our Baltic 
NATO allies Latvia, Lithuania, and Estonia, they know firsthand 
the dangers of unchecked Russian aggression. The recent 
escalation of violence by Russian-backed separatists in Eastern 
Ukraine, the lack of a consistent policy to deter further 
Russian aggression, those acts are dangerous.
    It seems clear from the surge of violence in recent months 
that Russia and its allies are testing our resolve. We must 
leave no doubt that Russia must comply with the Minsk 
agreement. Until it does, Russia deserves no sanctions relief 
for the conflict it
created.
    We should strengthen not weaken sanctions, and the 
President must work with Congress on a principled, bipartisan 
Russia policy that firmly counters this aggressive behavior.
    We are joined by two people today, Mr. Chairman: an 
accomplished former senior career diplomat who has held 
important positions in Republican and Democratic 
Administrations, and a former Treasury official and sanctions 
expert who will help us assess where we are and what effects 
the current sanctions regime is having on Russia's economy and 
behavior. We will discuss how stricter sanctions enforcement, 
how closing loopholes, how strengthening statutory requirements 
where appropriate, and how taking other measures can send a 
clear and unambiguous signal of U.S. resolve to deter future 
Russian aggressions.
    I welcome our witnesses. Thank you.
    Chairman Crapo. Thank you very much, Senator Brown.
    Before I introduce the witnesses, I again want to remind 
the Members of the Senate Committee that we want to be very 
careful about the 5-minute rule. I will try to remind you if 
you forget. And that is also a reminder to the witnesses. We 
ask you each to keep your testimony to 5 minutes. Your full 
statements will be included in the record, and you will have 
ample opportunity to respond to questions as well.
    First among our witnesses we will receive testimony from 
Ambassador Nicholas Burns, who is the Roy and Barbara Goodman 
Family Professor of the Practice of Diplomacy and International 
Relations--that is a long title, and I am not done yet--at the 
Harvard Kennedy School of Government. And he is a 27-year 
veteran diplomat at the United States Department of State.
    Next we will hear from Mr. Chip Poncy, who is the President 
and Co-Founder of the Financial Integrity Network and Senior 
Advisor at the Center on Sanctions and Illicit Finance at the 
Foundation for Defense of Democracies. Another long one. Mr. 
Poncy was also a Senior Advisor at the U.S. Treasury 
Department's Office of Terrorism and Financial Intelligence.
    To both of you, we welcome you here, and you may begin, Mr. 
Burns.

STATEMENT OF R. NICHOLAS BURNS, ROY AND BARBARA GOODMAN FAMILY 
  PROFESSOR OF DIPLOMACY AND INTERNATIONAL RELATIONS, HARVARD 
        UNIVERSITY, JOHN F. KENNEDY SCHOOL OF GOVERNMENT

    Mr. Burns. Mr. Chairman, thank you. Ranking Member Brown, 
Members of the Committee, thank you very much for this 
invitation to be with you. I will try to be very brief. You 
have my full testimony.
    Mr. Chairman, I would start by saying that Russia is the 
most dangerous adversary that the United States has in the 
world today, and I think that is pretty much agreed by most 
national security experts. And President Putin has used the 
power of the Kremlin to undermine America's global interests in 
the Middle East and Europe and around the world. He launched a 
deliberate assault on the heart of our democracy, designed to 
discredit the American Presidential elections in 2016. Russia 
is actively contesting the democratic peace that we established 
25 years ago with our allies and the people of Eastern Europe 
to create this peaceful, democratic, united Europe. That was 
the great victory at the end of the cold war.
    During the last 8 years, Putin has invaded Georgia and 
Eastern Ukraine and divided both countries. He invaded, 
occupied, and then annexed Crimea, and no European leader had 
annexed another country's territory since the Second World War. 
He has kept Moldova divided, and he has sought to undermine the 
internal stability--and you mentioned this, Senator Brown 
mentioned it--of Estonia, Latvia, and Lithuania.
    So, essentially, Putin has redivided Europe on a dotted 
line from the south and west of the Russian Federation, and 
that is a serious strategic challenge to the United States and 
to our European allies.
    I just returned from France last evening, and I would just 
repeat some of what Senator Brown said. Many leaders in the 
Netherlands and France and Germany are convinced that the 
Russian government is intervening right now in their elections, 
in this three-tiered election in Europe in 2017. He is 
attempting to do to them what he did to us: discredit, disrupt, 
and possibly alter the results of democratic elections in 
Europe as well as in our country.
    This is a blatant, unprecedented, and deadly serious attack 
on democracy, and that is why we need a vigorous bipartisan 
investigation by the Senate and House Intelligence Committees 
and, of course, an investigation by the FBI. And if bipartisan 
investigations in Congress are not possible, then the President 
and Congress should agree to form a bipartisan commission to 
study this issue, investigate, and report to the American 
people.
    Sanctions are one of the most important instruments we have 
to contain Russian power and eventually--and this may take 
quite a long time--roll back Putin's territorial aggression. 
That is why I support continuing without exception our current 
sanctions on Russia and Ukraine.
    I also recommend that Congress should consider a strong and 
unmistakable response, additional sanctions against Russia, 
following its interference in our elections. This is the only 
leverage, toughness, that President Putin understands.
    President Trump's response to Russian interference in the 
elections, however, has been extremely disappointing. I would 
say it has been weak. President Trump has repeatedly questioned 
the judgments of both the FBI and the intelligence community 
about Russia's attempt to undermine our elections. He has taken 
no initiative of his own to have the executive branch 
investigate these allegations. He has failed even to criticize 
President Putin in clear and harsh terms on this or any other 
issue, including Ukraine.
    I have worked, as you noted, for three American Presidents 
on the Russia issue: President George H.W. Bush, President 
George W. Bush, and President Bill Clinton. I cannot imagine 
any of President Trump's predecessors since the Second World 
War failing to act swiftly to let Russia know how unacceptable 
these actions are to the American people and to our Government. 
But that is the unfortunate reality with President Trump's 
administration, and it is why Congress must now take the lead 
on the sanctions issue on a bipartisan basis, because our 
national security depends on it.
    The American, Canadian, and European sanctions are having a 
negative impact on the Russian economy--not decisive, Mr. 
Chairman, as you noted, but they are an effective way to 
isolate and to shame and pressure the Russian government. 
Sanctions alone cannot contain Russian power, but we know that 
they can act in concert with other measures. We can provide 
lethal military support to Ukraine. We can make permanent the 
stationing of NATO forces in Poland and the Baltic States. We 
can rebuild the strength of the United States military in 
Europe. As the Congress funded in 2016, that package of 
initiatives to strengthen the U.S. military in Europe with the 
sanctions can help over the longer term to contain President 
Putin.
    So much depends on what Congress will do, and thank you for 
the honor of testifying today.
    Chairman Crapo. Thank you, Ambassador Burns.
    Mr. Poncy.

 STATEMENT OF CHIP PONCY, PRESIDENT AND CO-FOUNDER, FINANCIAL 
 INTEGRITY NETWORK, AND SENIOR ADVISOR, FOUNDATION FOR DEFENSE 
    OF DEMOCRACIES' CENTER ON SANCTIONS AND ILLICIT FINANCE

    Mr. Poncy. Thank you, Mr. Chairman.
    Chairman Crapo, Ranking Member Brown, distinguished Members 
of the Committee, thank you for inviting me to testify here 
today. It is truly an honor. And it is an honor to testify 
alongside a career diplomat and distinguished public servant, 
Mr. Ambassador Nicholas Burns.
    I was extraordinarily privileged to serve at the United 
States Department of the Treasury for 11 years following the 
terrorist attacks on 9/11. I worked with an extraordinary group 
of individuals across the Government, the private sector, and 
allied governments to develop sanctions policies and financial 
and economic authorities to protect our national collective 
security.
    With bipartisan leadership across the Congress and four 
Administrations, we further developed and institutionalized 
financial and economic power as an increasingly important 
component of our foreign policy and our national security.
    I have continued to focus on this work in the past 4 years 
with an extraordinary group of colleagues at the Financial 
Integrity Network and the Center on Sanctions and Illicit 
Finance. These experiences inform the recommendations in my 
written testimony, which focuses on specific sanctions-related 
steps that the Congress can take to protect our national 
collective security moving forward.
    However, it is critical at the outset to recognize that 
sanctions cannot be effective in isolation. To be effective, 
sanctions policy should be crafted within a broader strategy--a 
strategy that incorporates regulatory, diplomatic, law 
enforcement, intelligence, military, and positive economic 
power in pursuit of clear national security and foreign policy 
objectives.
    Moving forward, there are steps that we can now take to do 
this, and with a unified approach to a broader strategy in 
pursuit of clear objectives, these steps can include sanctions 
against
dangerous, illicit, and aggressive actions taken by the Russian
Government.
    Many of these steps are consistent with those set forth in 
the Senate bill proposing the Counteracting Russian Hostilities 
Act of 2017. I will take a minute to review these.
    First, Congress should prioritize targeted sanctions 
against illicit conduct by the Russian leadership. This 
includes calling for the establishment of a Russian Counter-
Illicit Financing Task Force dedicated to tracing, mapping, 
tracking, sanctioning, and prosecuting
illicit flows from Russian leadership that touch our financial 
system. Such a task force should also work with allied 
governments to similarly track and trace illicit flows abroad.
    Congress should also codify, consolidate, and expand 
existing sanctions authority to specifically target Russian 
leadership engaged in illicit conduct, including conduct that, 
with respect to any state, undermines democratic processes or 
institutions; threatens the peace, security, territorial 
integrity, or political sovereignty of our allies; or 
misappropriates state assets.
    Congress should also create specific funding for 
publication of studies and research on the corruption of 
Russian leadership. And Congress should call upon Treasury to 
consider applying Section 311 of the USA PATRIOT Act to any 
foreign financial institution, including Russian financial 
institutions, that engage in substantial transactions 
associated with illicit conduct by Russian leadership.
    Beyond these steps targeting illicit conduct by the Russian 
leadership, there are steps that Congress can take to heighten 
controlled pressure on the Russian economy. This should include 
steps that build upon the sectoral sanctions issued by the 
United States, the European Union, Australia, Japan, and Canada 
in 2014.
    To strengthen the effectiveness of U.S. sanctions in 
general, Congress should take additional steps. This includes:
    Providing funding for Treasury to expand its sanctions 
targeting, compliance, and enforcement resources and 
capabilities. Sanctions are here to stay, and we need to 
resource them appropriately.
    Authorize Treasury to issue regulations specifying 
sanctions program and training requirements for global 
financial institutions operating in the United States and for 
other sectors vulnerable to sanctions evasion. We have had over 
$20 billion of enforcement actions levied against banks for 
breakdowns in controls that have led to sanctioned parties 
getting access to our financial system.
    Congress should call upon FinCEN to finalize pending anti-
money laundering (AML) rules that enhance the transparency of 
the financial system. That transparency is critical to allow us 
to understand where illicit flows are, including sanctioned 
assets.
    And Congress should issue a report--Congress should call 
upon Treasury to issue a report offering recommendations for 
expanding information sharing in ways that reduce costs and 
enhance the effectiveness of our illicit finance analysis 
efforts.
    These recommendations are based in large part upon key 
developments, conditions, and challenges evident in the recent 
evolution of sanctions policy and implementation as discussed 
in greater detail in my written testimony.
    I am grateful for the opportunity to testify before you 
today. I look forward to your questions. Thank you.
    Chairman Crapo. Thank you, Mr. Poncy.
    The first question I have is for both of you, and either of 
you please respond as you choose. There are elements in the 
Russian Federation that are unparalleled in black and gray 
market operations, bulk cash smuggling, and general corruption 
practices. And it is equally clear that Russia will put up a 
significant resistance to sanctions pressure.
    Could you comment on to what extent and through what 
mechanisms the Kremlin is able to evade or circumvent 
sanctions, particularly those relating to its oil, financial 
sectors, and individual oligarchs?
    Mr. Poncy. I will take the first shot. Thank you, Mr. 
Chairman. It is a great question. Sanctions evasion is an area 
about which we do not know a lot. What we do know is that there 
are holes in our financial system, globally and at home, that 
prevent us from really understanding whose assets we are 
holding and transacting, and we have seen this with cases that 
law enforcement has brought. We have seen this with regulation 
that is targeting vulnerable sectors, including geographic 
targeting orders against high-end real estate where we know we 
have had Russian organized crime buying high-end real estate in 
Manhattan and Miami. We have also seen this in regulatory 
rulemaking around customer due diligence, the final rule that 
is going to impose beneficial ownership requirements on due 
diligence for financial institutions next year.
    These actions turn the lights on in our financial system. 
That is going to allow us to get smarter on where money, 
whether it is Russian organized crime or Russian leadership or 
other illicit assets, may be in our financial system.
    What is clear--and I do not know if you have seen the 
expose from ``60 Minutes'' last year on Anonymous, Inc., or 
obviously everyone has heard of the Panama Papers or the 1MDB 
scandal on corruption--is that we are exposed at the highest 
levels of the financial system, high end, capital markets, 
gatekeeper accounts, top-tier firms--not willingly, but 
exploited because of a lack of understanding or diligence or 
requirements to understand who to do business with. Closing 
those loopholes will give us a better understanding.
    That said, I do not think that the sanctions that we have 
imposed have been ineffective. I think how we define a success 
here is making it harder, costlier, and riskier to do business 
in the United States if you are conducting illicit activity 
abroad. And I think we have done a decent job of that.
    Chairman Crapo. Ambassador?
    Mr. Burns. Mr. Chairman, I would just add very quickly--
because Chip is the sanctions expert and I agree with what he 
said--one thing that Congress could do, as we reflect on the 
interference in our elections and the Ukraine sanctions issue, 
is to ask the Administration to step back--it is a good thing 
for the Trump administration to do, too--assess the 
effectiveness of the sanctions so far, and how effectively they 
are being implemented and how tightly and comprehensively they 
are being implemented by the United States. That is the first.
    Second, to make sure that the European governments are 
making sure that their companies are actually implementing the 
sanctions, so that the sacrifices made by European companies 
are equal to the sacrifices made by American companies, because 
we all know there is sometimes a double standard.
    And, third, this is an opportunity, I think as both of us 
have said, and you have also said, to tighten and strengthen 
the sanctions in 2017. So it is an opportunity for Congress to 
ask the Administration, and hopefully the Administration would 
welcome that, to do a fundamental review.
    Chairman Crapo. Thank you very much.
    Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    Ambassador Burns, I would like to start with you. In 
January, the U.S. intelligence community unanimously said, and 
I will quote, please:

        Russian efforts to influence the 2016 U.S. Presidential 
        election represent the most recent expression of Moscow's 
        longstanding desire to undermine the U.S.-led liberal 
        democratic order, but these activities demonstrated a 
        significant escalation in directness, level of activity, and 
        scope of effort compared to previous operations.

They then noted they expected similar efforts by Russia against 
U.S. allies.
    Talk about their grand strategy. Talk about, if you would, 
how best we increase the cost of that strategy to Putin, how we 
change his calculus, how we deter that behavior, and wrapping 
that into fundamentally what you would suggest the State 
Department does and what you would recommend that President 
Trump personally do.
    Mr. Burns. Thank you, Senator. As I said in my full 
testimony, there is no question--and we saw this in the Bush 
administration; I think the Obama administration had the same 
assessment--no question that President Putin has set out to 
undermine the basis of America's power position around the 
world. He knows that we are by far, by a great extent, much 
more powerful militarily, politically, economically than Russia 
will ever be. But he is trying, in essence, to cut us down to 
size. He thinks he has an opportunity to do that.
    One way he has done it is through the last 8 years these 
territorial attacks on Georgia, Moldova, Ukraine, Crimea, 
pressure in the Baltics.
    A second way is to discredit the ability of the United 
States to be a good allied leader, so he is really preying upon 
the weaker members of both NATO and the EU--Bulgaria, Greece--
trying to convince them not to uphold the unanimous sanctions 
that the European Union has voted.
    And he is also trying to undercut America's democratic 
leadership. We saw that by the interference in our elections. 
We have seen it--he alleges that the United States does not 
protect its allies. We saw that in his response to the Arab 
revolutions. He has tried to move into Egypt to replace the 
United States, now into Libya to replace American influence 
there.
    This is a concerted campaign. He is skillful. He is very 
opportunistic. He is cynical. And he is attempting to weaken 
the United States, and I think he believes that there is a 
rising tide of authoritarianism--China, Turkey, Russia itself, 
and nationalism in other countries--and he can take advantage 
of that.
    So that is part of the strategy of President Putin, is to 
cut the United States down to size, to limit our effectiveness, 
especially in Europe. But he has also displaced us in the 
Middle East.
    What can we do to respond to it? Well, I think that 
President Obama and the Congress, Republicans and Democrats, 
had a good start: strengthen the American military in Europe. 
We hollowed it out to fight the two wars after 9/11. We need to 
rebuild our armor and our army capacity and our air capacity in 
Europe, and there is a congressional appropriations to help the 
U.S. military do that. Make permanent the stationing of our 
forces in Eastern Europe. These are very small contingents, our 
battalions in Poland and in the Baltic States. But they are a 
signal to him that we are going to defend the NATO allies. And 
we set a red line, must defend the red line--and the red line 
is the territory of the Baltic States themselves.
    I would also say, Senator, I testified before House Foreign 
Affairs last month. The idea that you reduce the budget of the 
State Department and aid by 31 percent at a time like this, 
when we need our diplomats to be on the front lines, we need 
Radio Free Europe, Radio Liberty to be fully funded, to fight 
the intelligence war and the information war against fake news 
that the Russians are propagating, this is a comprehensive 
strategic response that the United States needs to make, and I 
think President Trump has done well to put in place a strategy 
against the Islamic State, and he has a theory of the case on 
North Korea, which you heard about yesterday.
    What we have not seen from the Trump administration is how 
do we strengthen America's strategic position militarily and 
diplomatically in Europe, how do we respond to Putin, and that 
is what needs to happen from Secretary Mattis, Secretary 
Tillerson. I think both of them have been very tough-minded, 
but we have not seen that from the White House and the 
President.
    Senator Brown. And if you were advising the President and 
he were listening, what would you say he should say?
    Mr. Burns. As I said in my testimony--and I am not 
accustomed as a career Foreign Service Officer to be publicly 
critical of a President in the way I was in my opening remarks, 
but I feel quite profoundly that his reluctance to be critical 
of President Putin is a mistake strategically and tactically, 
that Putin does not respect nice, flowery words. He respects 
strength. And what we need now from the American President is 
strength, especially on this issue of Russian interference in 
our election. There has been no response from President Trump 
except to question the intelligence community and the FBI.
    So that would be my recommendation, a toughening of 
American policy toward Russia.
    Senator Brown. Thank you, Ambassador.
    Chairman Crapo. Thank you.
    Senator Shelby.
    Senator Shelby. Thank you.
    I believe both of you are spot on, on what you are talking 
about about Russia, but the fact remains that there has been no 
real response, real concrete response to Putin's moves in 
Georgia, in the Ukraine, the threats of the Baltics, the other 
stuff. But how do we really do this without sweeping, biting 
sanctions? And that would take our European allies to go all 
the way with us.
    Of course, they are dependent, as you guys know well, on 
Russia for energy, and that is Russia's lifeblood for money. 
Their economy is based on that, and their military comes from 
that, too, everything funded.
    So how do we do it? I could see sanctions if they were 
sweeping and if they meant something, they were not porous, not 
tepid sanctions. You would get somebody's attention, including 
Putin's. But short of that, Putin is an opportunist. He is 
tough, he is smart, he is tactical. He looks for opportunities, 
and he has found some. But how do we get our allies behind us 
when they are doing business in different ways with Russia? And 
how do we get them, including Germany, of all people, the 
biggest economy there and the biggest population, to come forth 
with more defense money? You know, a lot of them are not even 
meeting the 2 percent, as you well know. Secretary Burns?
    Mr. Burns. Thank you, Senator. I think three things in 
answer to your question.
    Number one, the most direct thing we can do to change the 
game with Putin is to help arm the Ukrainians, lethal, 
defensive weaponry--not offensive. They can defend themselves 
from these attacks, and the attacks have actually accelerated 
over the last 3 months, instigated by Russia inside Eastern 
Ukraine.
    Number two, I think you are exactly right. We need to act 
in tandem with Europe and hopefully some of the Asian allies--
Japan, Australia, South Korea. Germany is the key, so the 
President needs to have a close strategic relationship with 
Chancellor Merkel as long as she is in power. We will see what 
happens in the September elections. Whoever is in power in 
Berlin is going to be the key European leader. There are some 
weak states. Germany is the key to act in tandem with the 
United States on sanctions to make them that much more 
effective. And so I think those are the most important 
principles we have got to follow right now.
    Senator Shelby. What about financial crimes and financial 
sanctions? I do not believe we have done enough in the banking 
area as far as Russia is concerned, because you can choke off 
an economy fast if we had sweeping sanctions, could we not?
    Mr. Poncy. There are certainly steps that we can take to 
elevate and escalate our pressure on Russia. What I tried to 
outline in my testimony is sensitive to what you have raised 
about the possibility of blowback, particularly on our allies 
that are highly exposed to Russian potential retaliatory 
sanctions. So how do we escalate this pressure in a way that is 
going to be strategically meaningful in addition to tactically 
significant?
    I really think that the starting point here is to go after 
the conduct that we see in Russian leadership associated with 
corruption. We have not studied this with the resources that we 
should be applying toward this. I do think the creation of a 
task force that is dedicated, that has protected funding, and 
that does this for the longer term--this is a 17-year picture 
that we have seen evolving, as you pointed out. And rather than 
wait for a regime change and trying to find assets after the 
fact or hope that the policies that we have had over the past 
17 years, which have not necessarily been dissuasive, let us 
figure out where Russian leadership money actually is. Let us 
figure out where the corruption is that we can highlight. Let 
us go after that illicit conduct, and let us make it very 
public. We need to make investments into investigations, 
analysis, tracking, tracing here, and we need to get our allies 
to do the same abroad. If we focus on that, that is one 
element.
    A second element would be to look at the pressure that we 
have put through our sectoral sanctions in 2014 and ways that 
we could ramp that up, but calibrate it in a way that is 
sensitive to blowback that we may get.
    I do not know that we know enough about this either. It is 
clear that the Russian economy has been reeling. It is also 
clear there are a lot of contributing factors to that. 
Sanctions are one of those factors, but, clearly, depressed oil 
prices were a big part of the picture.
    Ways that we could ramp this up depend on, one, additional 
designations in sectors we have already identified as critical. 
To your point, finance is one of them; energy is another, and 
so is defense. There are other industries that may also be 
relevant, whether it is mining or it is aerospace or other 
industries that we should understand are highly exposed to 
vulnerability in sanctions that we could impose.
    At the same time, there are ways to broaden the sectoral 
sanctions by taking sectoral-wide investment bans against 
anyone who is going to be investing in the Russian energy 
market as an example.
    Again, the bill on counteracting Russian hostilities 
proposes this sort of a ban on any person. And to the 
Ambassador's point, you do not want U.S. businesses sitting on 
the sidelines while the Europeans that we are trying to assist 
are investing in energy markets that are lining the pockets of 
the Russian government. At the same time, I do not know that 
the Europeans can join us politically in that because of the 
blowback.
    So you know more than anyone, sir, how effective secondary 
sanctions can be in sanctioning regimes that we have problems 
with. We have to be very careful how we do it, but this might 
be an instance where we provide the cover by saying that we 
will sanction anyone who is going to be investing in the 
Russian energy sector. And we do that in a way that we can 
manage and be flexible with, but that also starts to heighten 
the economic pressure on Russia.
    Senator Shelby. Thank you, Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Cortez Masto.
    Senator Cortez Masto. Thank you.
    To follow up on that conversation, do you anticipate FinCEN 
would be an integral partner of any task force that would be 
created? And along with that question, also, are there 
additional
resources or tools that FinCEN needs now to be able to go after 
any type of illicit Russian money or activity?
    Mr. Poncy. Thank you, Senator. I do think FinCEN is a 
critical component of the task force, but I also think that the 
task force needs to rely on all the assets that we have in the 
investigative and analytic community.
    I would propose putting that task force in Treasury itself 
where the office that I came from, Terrorism and Financial 
Intelligence, of which FinCEN is a part, relies on joint 
analysis across FinCEN, the Office of Foreign Asset Control 
that administers and implements our sanctions, the Office of 
Intelligence and Analysis that has a dual reporting function to 
the Director of National Intelligence in addition to the Under 
Secretary for TFI. That will allow us to do the joint analysis 
where we are at our best at Treasury and to merge that or 
combine it with the investigative assets and expertise from the 
Department of Justice. At Justice, you have a National Security 
Division and a Criminal Division that are highly skilled in 
these issues as well.
    So the funding should be at a level where we are demanding 
the interagency support and participation and prioritization 
that this task force will need across intelligence, law 
enforcement, and analysis. FinCEN is a part of it, but it is 
only a part.
    So I do think it is important to dedicate that funding in a 
way that everyone can participate. I think it is important to 
provide the leadership at a senior level to include the Under 
Secretary for TFI and potentially the Deputy Attorney General 
of the United States to co-chair something like this, and to 
give it a 2- or 3-year mandate with regular reporting so that 
this is a long-term and sustained commitment against a regime 
that has had 17 years to consolidate its power around this.
    Senator Cortez Masto. Thank you. And further discussion on 
this topic. At the earlier hearing of this Committee, there was 
discussion of possible options for Congress in countering 
Russian aggression, and at that time witnesses urged that we 
move cautiously on imposing further, more draconian sanctions. 
In particular, one witness noted the possible profound 
consequences for all large U.S. global banks if we targeted 
President Putin and his associates' direct and indirect assets.
    How concerned should we be in Congress about potential 
systemic risk to large banking institutions if we impose 
significantly tougher sanctions?
    Mr. Poncy. Thank you, Senator. I do not think that there is 
risk to our financial institutions for going after illicit 
conduct. The Russians themselves, the entire international 
community has agreed upon the criminality associated with 
corruption, associated with fraud, associated with organized 
crime and the interests that we should be pursuing in the task 
force. I do think those issues are front and center when we 
start talking about pressure on the Russian economy. But that 
is where I believe the experience we have gained in sectoral 
sanctions has been critical.
    Those sanctions, having worked in the industry for the past 
4 years across the global banking community, have been 
implemented effectively and responsibly, in ways that have 
produced economic pressure, and that can be ratcheted up in 
ways that global banks understand.
    There are going to have to be sensitive and ongoing 
consultations with industry as that happens. There is going to 
have to be a broader strategy that also looks at engaging our 
foreign partners so that we can calibrate this as we go. We 
have to be careful how we do it, but we can certainly do it. 
And I do think the notion that we have to go this alone is 
inaccurate when you look at the fact that we have the European 
Union, Japan, Australia, and Canada that have moved in lockstep 
with us on these sectoral sanctions. So we will have support 
experience from the global banking community and not just U.S. 
banks.
    Senator Cortez Masto. Thank you.
    Ambassador, anything else to add?
    Mr. Burns. Senator, I would say there has to be a response. 
Putin acts in a zero-sum fashion. He is expecting a response. 
And I agree with Chip that it has to be multilateral, it has to 
be with Europe and our Asian allies. And we can start with some 
of the sanctions that President Obama put in place at the very 
end of his term, deepen them and broaden them, go to different 
areas like mining, expand the energy sanctions, expand the 
number of individuals in the Russian government that we 
identify for personal sanctions, travel bans, that kind of 
thing.
    I did not think the Obama sanctions went far enough, and 
certainly what we have seen in the three European countries and 
the United States merits a tougher American response.
    Senator Cortez Masto. Thank you.
    Chairman Crapo. Thank you.
    Senator Rounds.
    Senator Rounds. Thank you, Mr. Chairman.
    Gentlemen, before Russia invaded the Ukraine, clearly Mr. 
Putin would have thought about what the responses would have 
been. Part of that planning perhaps would have been how they 
could defend their assets against the possible retaliation for 
their invasion. They knew there had to be something. I am just 
curious. Prior to the implementation of the sanctions following 
Russia's invasion, how exposed was Russia's targeted assets to 
both U.S. and EU sanctions? Basically what I am trying to ask, 
I guess, is: To what extent did Mr. Putin have the opportunity, 
along with his supporters, to protect or isolate their assets 
from the reaches of our proposed sanctions?
    Mr. Poncy. Thank you, Mr. Senator. That is a great 
question, and it is one of the reasons why I feel there has to 
be urgency around this task force.
    Hindsight is always 20/20, but it is very clear that 
President Putin had allegations associated with corruption when 
he was in St. Petersburg pre-2000, investigations the Russians 
themselves were running. They were shut down when he was 
elected President. It is very clear that he has marginalized, 
that he has intimidated, that he has expelled oligarchs that do 
not share his political pathway or support for his political 
leadership. And this is a picture, when you look in hindsight, 
you see has emerged where he strengthened and consolidated his 
power and protected his assets over 17-plus years. So I do 
believe that when the invasion happened in 2014, he was already 
in a great position of relative
security.
    That said, without any effort to combat that, that pathway 
continues. And as a G-8 economy, there are only so many steps 
he can take to protect the Russian economy from exposure to 
heightened sanctions pressure.
    The challenge for us is, I think, how effective can we be 
in going after illicit assets--right?--of the Russian 
leadership, and that is what the task force is designed to do, 
is to figure that out, and at the same time, ramp up what is 
not targeted at illicit conduct, what is very deliberately 
targeted at economic pressure on key sectors, and to do that in 
a way that minimizes the possibility for blowback, which may 
require, even with broad-based political support, the United 
States taking a unilateral position on the most aggressive 
measures where we would apply secondary sanctions against 
European companies or others that would be investing in sectors 
that are important for the Russian economy, because the 
Europeans, if they were to do something like this, would 
probably engender blowback in a retaliatory sanctions manner.
    We do not have as much exposure. For us to do that well and 
to do it carefully, I think we need to have a study of our 
economic exposure, that of our allies, and the exposure of the 
Russian economy beyond the steps we have taken. But those are 
recommendations I have advocated in my testimony to take 
immediate actions to escalate responsibly, but to take 
immediate actions to also get a better picture of illicit 
assets and of our exposure, our allies' exposure, and the 
exposure of the Russian economy to where we can be most 
effective in ramping up economic pressure while minimizing 
blowback.
    Senator Rounds. Mr. Ambassador?
    Mr. Burns. Senator, I think it is reasonable to assume that 
President Putin did not anticipate that the European Union, 
Canada, the United States, and some of the Asian countries 
would actually come together in a coherent sanctions package. 
He thought he could divide the Europeans, because 
traditionally, as you know, the Germans, the Italians, the 
business communities have resisted these types of sanctions. I 
think he was surprised by Merkel's view and her toughness.
    And so we have got to keep that coalition together. I am 
here to support stronger U.S. sanctions across the board 
against Russia. But if we maximize it with the others, we will 
be in much better shape.
    Senator Rounds. Can we identify who his most important and 
influential associates are, the people that really are the 
decisionmakers? Can we identify them appropriately now?
    Mr. Burns. I think so, after so many years in power. There 
is a group around him from his youth in St. Petersburg. He has 
enriched them. They run some of the big state enterprise firms. 
We know who they are. Treasury knows who they are. They can go 
after them. He also has loyalists from the KGB----
    Senator Rounds. The reason why I ask is--and I am going to 
run out of time, but we have heard talk about sectorizing it 
and going after particular segments of the industries that 
really do impact Russia as a whole. But some of the reports we 
are getting and some of the recommendations we are receiving is 
that we need to go after the decisionmakers and after their 
assets. There is a difference between the two--and I would 
really like to hear just very, very briefly--what your thoughts 
are on that.
    Mr. Burns. I think we should investigate that possibility. 
That is one way to toughen sanctions, is to make it direct, 
somebody in his inner circle is hurt financially because of 
what they have done.
    Chairman Crapo. Thank you.
    Senator Rounds. Thank you.
    Chairman Crapo. Senator Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman.
    I want to get to the issue here that goes beyond kind of 
sanctions but our own, I think, vulnerability. I think Putin 
understands that the greatest vulnerability we have internally 
in this country is hyper-partisanship, is that you can say one 
thing and people will believe it because we have no longer let 
foreign policy happen at the water's edge. We just keep sending 
a message that we cannot get along and we cannot get things 
done, and so it gets easier to drive a wedge through.
    I want to applaud the Chairman for these hearings. I think 
they have just been very--not bipartisan. They have been 
nonpartisan. And when you read the questions, you would not 
know if it was a Democrat or a Republican asking the questions. 
This is our challenge to send that message.
    And so my question is: Do you believe that today Vladimir 
Putin believes that there is a unified U.S. internal policy to 
combat his aggression? Ambassador.
    Mr. Burns. I do not believe that President Putin sees a 
unified response by the Congress and the Administration to what 
he has done on the hacking issue and in a way even the Ukraine 
issue. And I believe he now thinks that maybe the Congress is 
the party that might take action and the Administration is the 
party that might not. He might seek to divide the two, just as 
he has divided us, tried to, from the Europeans. That is a 
danger, that we have to act on a bipartisan basis and between 
the Congress and the Administration on both grounds, on Ukraine 
as well as on the interference in our election.
    Senator Heitkamp. Mr. Poncy?
    Mr. Poncy. Thank you, Senator. I could not agree more that 
unity is essential. It is essential for sanctions policy to be 
effective for the industry to understand that these are 
intended, expected, and will be enforced as operational 
measures, for our allies to understand that these are not 
sanctions where they can sit on the sidelines with their 
investments ready to go in, but where they have to start to 
impact their long-term business strategies, and sanctions where 
our adversaries understand that until there is a serious change 
in behavior, there is no serious discussion of sanctions 
relief. I fully agree with all of that.
    I have confidence that if we were to do that, our sanctions 
would be much stronger. I have confidence that President Putin 
has misjudged us. I think our best unifying moments are often 
in the face of adversity, and the question is--it is like 
family. The minute that somebody outside the family starts 
yelling at your brother or sister or your mom or dad, you 
forget about whatever quarrels you had over the dinner table. 
And I am hoping that is what happens here.
    Senator Heitkamp. In the 2 minutes that I have left, what 
more can we do to send the signal, other than hearings like 
this, where we come together and you do not know who is on 
either side here, what more can we do in Congress, absent 
passing additional sanctions or doing something legislatively, 
that will send a clear message that we stand united in this 
country against this aggression?
    Mr. Burns. Well, there has to be new legislation.
    Senator Heitkamp. Right. I agree with that.
    Mr. Burns. There has to be a response. Right now, there has 
not really been a significant response by the Congress or the 
White House, either President Obama or President Trump, to what 
happened in the interference in our election. So that has to 
happen, a unanimous denunciation of what the Russians did by 
both the Administration and both parties in Congress on a 
nonpartisan basis.
    Senator Heitkamp. OK. Mr. Poncy?
    Mr. Poncy. Thank you, and I fully agree with that. I think 
just for simplifying it as clearly as possible, the response 
should include immediate legislation to codify what we have 
already done. There is no going back. Two, to escalate as 
aggressively as possible on illicit conduct.
    In response to Senator Rounds' question earlier, that 
conduct should focus on the nepotism associated with the Putin 
regime. The fact that the sanctions we have issued have 
translated into the passage of assets from those who are 
closest to him to nominal accounts held by their kids or their 
nephews or their close associates is something that we can 
track and trace, but we need the resources to do it. That is 
what the task force is about.
    Senator Heitkamp. Can I just ask, there is a young 
gentleman in the audience. I do not know whose son or nephew he 
is, but we welcome you. And I want you to know when you are 
watching this that all these people really want to create a 
very safe America for you in the future. So thank you for 
coming.
    Is he related to either one of you?
    Mr. Poncy. I believe the proud mom is right behind you.
    Senator Heitkamp. Oh, great.
    [Laughter.]
    Senator Heitkamp. Anyway, I want to acknowledge--you know, 
sometimes when we get into this, we forget that this is about 
our children and about our future and our country and making 
our country and the world safe for them to thrive.
    Chairman Crapo. Thank you, Senator Heitkamp.
    Senator Scott.
    Senator Scott. As Senator Heitkamp has pointed out, today 
is ``Bring Your Kid to Work Day.'' I would imagine that the 
Banking sanctioning hearing is an interesting and perplexing 
conversation----
    [Laughter.]
    Senator Scott.----for many of us on this side of the aisle, 
much less this attentive young man. I will say that Senator 
Heitkamp also mentioned the fact that the need for legislation, 
enhanced sanctions, is important, and I know that Senator 
Lindsey Graham and others have been talking about that for the 
last couple of months from my perspective.
    I do thank you both for being here, and, Mr. Chairman, I 
thank you for having another hearing on such a critical topic. 
Whether it be unwarranted aggression in Eastern Europe or 
propping up the Assad regime in Syria or meddling in our 
elections here at home, Russia's actions have shocked the 
entire free world.
    I would like to counter one of the main arguments used 
against the sanctioning of Russia. In 2014, the United States 
and the European Union deployed targeted sanctions against 
Russia in response to its actions in Ukraine. Targets were 
determined by Treasury and State after a careful investigation 
and vetting process. Russia's economic growth slowed 
dramatically, and critics of our targeting claimed that we 
unfairly hurt neighboring countries and innocent parties. These 
critics conveniently ignore the dramatic drop in oil prices 
that occurred during the same time. And my understanding is 
that the drop of the oil prices had about a 4-percent impact on 
Russia's economy; whereas, our sanctions had about a 1.4-
percent impact, thereabouts, on the Russian economy, at least 
under 2 percent. So the drop in the oil prices had a 
significant impact, and our targeted sanctions had a targeted 
impact.
    The State Department released a report in December 2016 
detailing the strong evidence it found that our targeted 
sanctions, and I quote, ``affected the financial health of the 
targeted firms or firms associated with sanctioned individuals, 
while causing minimal collateral damage,'' which I think is 
consistent with the impact of 1.4 or 1.5 percent of the GDP.
    Mr. Poncy and Mr. Burns, you have already spoken to part of 
this. I want to ask you a similar question. I would like to get 
your thoughts. Can targeted sanctions be used to effectively 
pressure those who threaten our national interests while 
limiting collateral damage on innocent parties or other 
countries?
    Mr. Poncy. Thank you, Mr. Senator. I could not agree more 
that the evolution of sanctions--and I spent a lot of time on 
this in my written testimony--but the evolution of sanctions in 
recent years has clearly reflected a migration toward conduct-
based sanctions that are targeted on behavior and are intended 
to minimize collateral damage on innocent parties or 
populations.
    I do think that the advent of sectoral sanctions we have 
seen in Russia, they are a new breed of targeted sanctions 
because they are not targeting illicit conduct. They are 
targeting pressure points in an economy, but they are 
attempting to do it in a way that is still tailored. And I 
think we have had some success with that. If they are 
sophisticated, our sanctions implementation, our compliance, 
our oversight in the market and in authorities here at home 
have made those sanctions effective.
    I think combining the two is the best approach, and the way 
we do that is to identify the key firms that are owned or 
controlled by the close associates of Vladimir Putin. To do 
that well, we need resources that are targeting what we call 
derivative designations. This is how this works. We identify at 
a primary level close associates that are associated with the 
illicit activity of the Russian government, that are the 
decisionmakers in the regime that are engaged in illicit 
conduct, and they put all their assets in the hands of others, 
right, that are not named as sanctions, that evade our filters 
and our controls, the way that we operationalize this stuff. 
And then it is a game of cops and robbers, and as fast as we 
can identify those who are acting for, on behalf of, or 
supporting the regime, the faster they continue to change 
color, change shape, change form.
    We can keep up with them, but we need the resources to do 
it. And when you have got Iran on the radar screen and North 
Korea and ISIS and all the other challenges that we face, this 
is why we need the task force. And in getting to the task 
force, we should also make sure that we are resourcing 
targeting over at OFAC and at TFI to specifically go after 
sanctions--to levy sanctions against those who are close to the 
regime and are holding assets in the names of others that are 
materially significant to the Russian economy. I think that is 
the strategy.
    Senator Scott. Thank you. I will skip to my last question 
because I think you really have hit on the whole nepotism 
nature of the sanctions and what we have to do to pull a larger 
net to get more folks. But, Mr. Burns, you talked a little bit 
earlier about the necessity of not only our sanctions being 
enhanced, but perhaps the European Union and others joining 
that team. Can you talk a little bit more about----
    Chairman Crapo. Briefly, please.
    Senator Scott. Briefly. No more than 7 or 8 minutes, sir.
    [Laughter.]
    Mr. Burns. I will be very brief, Mr. Chairman and Senator 
Scott. The key is going to be built on this consensus that is 
growing in Europe that they have been hacked, in the 
Netherlands, France, and Germany. And the key country is always 
going to be Germany. Germany has enforced the sanctions 
implementation against Putin. A lot of countries have wanted to 
cut and run, and Chancellor Merkel has not let them. So I think 
consolidating that relationship is going to be key for us.
    Senator Scott. Thank you.
    Chairman Crapo. Thank you.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman. And thank you 
both for your testimony.
    You know, I am amazed that the Congress and the 
Administration has not responded to a cyber attack on the 
United States seeking to affect its national elections. Whether 
or not one believes they succeeded at it is not the question. 
The mere fact of launching a cyber attack with that purpose 
should create an outrage from the President of the United 
States on down. If we had any other form of attack, believe me, 
we would have imminently responded. And yet in this context, 
there seems to be a reticence to ultimately pursue what is one 
of a handful of peaceful diplomacy tools, which is the use of 
sanctions. And as the architect of the Iran sanctions, I can 
tell you that that brought Iran to the table. And we have just 
touched the surface on Russia as it relates to a sanctions 
policy.
    That is why I was a co-author of the Countering Russian 
Hostilities Act, which I think would go a long way toward 
moving us in the right direction here. And when former 
Secretary Burns says this statement--this is an extraordinary 
statement: ``Russia is the most dangerous U.S. adversary in the 
world today.''
    ``Russia is the most dangerous U.S. adversary in the world 
today.'' Wow. And we seem to be frozen in time.
    So I strongly believe that where we are missing the boat, 
at least as it relates to a sanctions policy, is where 
sanctions work the best, which are financial sanctions--and 
sectoral sanctions, of course. I mean, Russia's economy is 
basically an extraction economy, so it depends overwhelmingly 
on its oil and related enterprises.
    And so while we have had some sanctions in that regard, 
there are far more pervasive sanctions that could be pursued 
there. And above all, Putin and his cronies care about where 
their money flows. And so, therefore, sanctions against 
financial institutions, of which we have at best scratched the 
surface, is sorely, sorely missing.
    Mr. Poncy, would you agree that sanctions against financial 
institutions that are appropriately designated would go a long 
way toward moving our policy along?
    Mr. Poncy. Thank you, Senator, and thank you for all of 
your work on the Iran sanctions campaign. It was tremendous, 
and I was proud to be a part of that when I was at Treasury. 
And I fully agree. I think that there is plenty of powder in 
the keg to apply in sanctions if the intent is to disrupt and 
overwhelm the Russian economy. We can do that. The question is: 
How do we do it in a way that preserves a multilateral approach 
that will ultimately be necessary within a broader strategy 
that allows us to escalate in a manner that drives settlements 
toward whatever the aggression is, whether it is Georgia or it 
is Ukraine or it is Syria or it is cyber. And there is a lot, 
obviously, with the Russian government.
    What you have in the Counteracting Russian Hostilities Act 
I think is a tremendous start. My written testimony supports 
virtually everything in there. I want to focus on two issues 
that you have just identified in particular. One is the 
investment ban in the energy sector. I think that is a very 
interesting idea because it is a ban in which we would sanction 
any person who invests in energy. And as I tried to say 
earlier, I think that is an area where we are going to have to 
lead unilaterally, just as we did in the Iran campaign, because 
of the blowback on the Europeans.
    Senator Menendez. And if you can briefly talk to the second 
one, because there is one more question I want to ask before my 
time runs out. You said the investment----
    Mr. Poncy. The second one is sovereign debt, and you have 
got that one in there as well.
    Senator Menendez. Now, the United States imposed sanctions 
on state-owned oil company, Rosneft, and its effective owner, 
Putin crony Igor Sachin. Russian owns 69 percent of Rosneft and 
sanctions that both the United States and European countries 
have imposed intend to prevent financing of Rosneft. However, 
Rosneft, as well as other Russian state-owned enterprises, they 
are still operating.
    For example, Rosneft recently purchased nearly 50 percent 
ownership of Venezuela state-owned oil company PDVSA, which, 
incidentally, wholly owns and operates Citgo in the United 
States, which has a large amount of critical infrastructure in 
the United States, with the possibility that Venezuela may 
collapse in its economic standings and default. And I have no 
doubt that Rosneft purchased on the open market other shares to 
put them over 50 percent ownership. Is that not something that 
we should be taking as an action to make sure that Russian 
state-owned companies cannot further expand into international 
markets?
    Mr. Poncy. I could not agree more. That is part of the 
study that needs to be done, not just the task force to track 
and trace illicit finance, but to better understand the points 
of vulnerability that we have to Russian economic and financial 
influence, that our allies have, our exposure, and the leverage 
that we have on a Russian economy that is, as you say, highly 
extractive.
    I do not think we have studied this enough. I do not think 
our defenses are up where they need to be. I think those sorts 
of actions are actions that we need to be highly attentive 
toward, and where we see those, escalate with a sanction where 
we are not allowing a vulnerability like our own dependence on 
imported oil, with Venezuela in particular, to be controlled by 
a regime that we are trying to sanction.
    Senator Menendez. Thank you.
    Senator Tillis. [Presiding.] Senator Cotton.
    Senator Cotton. Thank you. Gentlemen, thank you for your 
testimony today.
    In November 2015, I wrote an article in Foreign Affairs 
talking about how to counteract Russia's aggression across the 
world. It was caused most immediately by their surge into Syria 
and their attacks on the proxy forces that we were supporting 
there. But it ranged more widely--security, intelligence, 
economic, legal, diplomatic measures.
    I would like to go through some of the measures I suggested 
there. Ambassador Burns, I know you state in your testimony 
that you are not an economist or a sanctions expert, so maybe, 
Mr. Poncy, if I could just run through those discrete items 
with you, and then, Ambassador Burns, you could back him up on 
the kind of geopolitical implications of that basket of 
measures.
    So, first, I called for expanding individualized sanctions 
against regime cronies much further than they had been, but 
also to include immediate family members, spouses and children, 
so wives can no longer have apartments in Paris and villas on 
the French Riviera and kids can no longer go to private schools 
in the United Kingdom. Is that still a feasible option?
    Mr. Poncy. It is not only feasible; it is part of the 
targeting criteria now under, I believe, Executive Order 13661. 
The challenge there, Senator--and I fully agree with that as a 
point that we ought to be pressing--is putting these dedicated 
resources in place where they are not getting pulled into Iran 
and North Korea and ISIS, which are equal national security 
threats, as you are aware, but that require resources to map 
that transfer from principal to family to close associate to 
front company to shell company to offshore. That takes a lot of 
homework, as you know, and under the legal principles that we 
operate under, we have to have evidentiaries in place before we 
can take those actions, and that takes time.
    So given the urgency of the threat, given the importance of 
the issue, we should be investing the resources to make that 
work.
    Senator Cotton. Direct and secondary sanctions against the 
energy sector, in particular the refining industry?
    Mr. Poncy. Absolutely, and very much in support of some of 
those provisions in the Counteracting Russian Hostilities Act.
    Senator Cotton. Reciprocal provisions of arms, so, for 
instance, if Russia sells weapons to Iran and Syria, then 
Ukraine gets defensive anti-armor, anti-tank weapons?
    Mr. Poncy. That certainly makes sense to me. I will defer 
to the Ambassador on that.
    Senator Cotton. Extending the long arm of U.S. law to 
Russia? As you know, since I wrote that article, Russia was 
punished severely by the World Anti-Doping Agency not only in 
the Olympics but in the Paralympics. They cheated in the 
Paralympics. They are hosting the World Cup next year. I 
suspect that bid was greased with all kinds of kickbacks and 
other bribes. Should our investigators, as they did with FIFA 
and in the Olympics, extend the long arm of U.S. law into all 
Russian activities?
    Mr. Poncy. Targeting all illicit conduct by the Russian 
leadership should be a priority.
    Senator Cotton. Finally, one other example, and there are 
many more in the article: Extending laws in the direction of 
the Helms-Burton Act or the Alien Tort Claims Act to open U.S. 
courts to victims of Russian aggression, theft, war crimes, and 
so forth, exposing the regime to reputational and litigation 
harms and costs?
    Mr. Poncy. Expanding the intent of the Magnitsky Act in 
that direction makes sense to me.
    Senator Cotton. OK. As I said, there are many more measures 
in the article, but just after giving you a flavor of those, 
Ambassador Burns, would you like to now give your geopolitical 
take on what that kind of approach to Russia might yield from 
Russia?
    Mr. Burns. Thank you, Senator. First, I sense strength in 
the Congress in both parties on this issue; not so much from 
the White House. I hope we could close that gap, number one.
    Number two, we are going to have to ask the allies to do 
more. In 2007, I took Stuart Levy with me to meet the European 
allies on the Iran sanctions. The Europeans were very 
resistant. They came around when they saw the effectiveness of 
what congressional and Administration sanctions did with Iran. 
We have to replicate that on the Russia side, and Germany will 
be key.
    Third, yes to deeper sanctions by the United States on 
energy, in mining, and sanction more of these individuals who 
are Putin cronies throughout the Government. And you have 
written about that.
    And, finally, yes to arms to Ukraine. We have got to do 
more on the military side, and you know a lot about this, 
strengthen the U.S. military in Europe to be a deterrent to 
Putin, defensive arms to Ukraine. That puts pressure on Putin, 
and he will respond to that. He will understand that. In a way 
we will have greater deterrent power over him.
    Senator Cotton. Thank you. I have just a few seconds here, 
so I will ask one final question along these lines coming out 
of recent news. What are the implications of Gazprom receiving 
the approvals and financing that it needs to proceed with Nord 
Stream 2 in Europe?
    Mr. Burns. This does get back to the question of having 
Europe make the same kind of sacrifices that we are making and 
having an identical policy with Europe, which we do not have at 
the present time.
    Senator Cotton. And European action matching European 
rhetoric.
    Mr. Burns. Right.
    Senator Cotton. Thank you.
    Senator Tillis. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    We all know that there are a lot of unresolved questions 
about the disturbing ties between this Administration and the 
Russian government, and the President has suggested that he 
might unilaterally start waiving sanctions against the 
Russians. Thanks in part to the pressure from Congress, the 
Trump administration is currently enforcing those sanctions. 
The Treasury Department recently rejected Exxon-Mobil's request 
for a waiver from our Russian sanctions so it could get its 
hands on more Russian oil.
    But just 2 months ago, their CEO bragged that, and I am 
going to quote him here, ``In Russia, we are there for the long 
term. We have got a successful business there, and we will 
continue to invest in that business.'' This sounds like Exxon 
does not plan to give up on this deal.
    So the Trump administration could face more requests for 
waiving Russian sanctions in the future. So let me ask the 
question. We have talked a little bit about pending legislation 
here, but let me ask, Ambassador Burns, given the questionable 
ties between the Trump administration and Russia and the fact 
that the Trump administration has wide latitude to waive our 
Russia sanctions, would a law to require congressional review 
before the President can waive or suspend our sanctions on 
Russia be a good insurance policy here?
    Mr. Burns. Thank you, Senator. Before I answer, I want to 
let you know that I informed Committee staff a couple of days 
ago that I consult with the Cohen Group in Washington. The 
Cohen Group has a client relationship with Exxon-Mobil, and I 
wanted to disclose that to the Committee.
    Senator Warren. All right.
    Mr. Burns. Having said that, I very much supported what the 
Administration did in denying the license to Exxon-Mobil. I do 
not think that we should have any kind of waivers or weakening 
of the sanctions regime. I generally am a disciple of executive 
branch power, having been a creature of the executive branch. 
But in this case, given the weakness of the President's 
statements on Russia, I do favor a law that would require 
congressional consent, congressional review, whatever, before 
the Administration could waive sanctions, either on the hacking 
of our elections or on Ukraine.
    Senator Warren. That is powerfully important. Thank you.
    I think it is also clear that our sanctions work better 
when we coordinate with our allies and our partners, a point 
you have made. Right now, the United States and the European 
Union coordinate their sanctions on Russia's energy, financial, 
and defense industries, and those sanctions were designed to 
try to push back on Russia's actions in the Ukraine.
    Ambassador Burns, if we ease our sanctions on Russia 
without meaningful changes in Russia's behavior, does that 
increase or
decrease Putin's ability to destabilize the countries along its 
border and in the rest of Europe and, frankly, around the rest 
of the world?
    Mr. Burns. Senator, it would increase Putin's ability to be 
aggressive against the countries around his borders, mainly 
because he would not have paid a price; and, second, because 
some of the countries in the European Union that do not really 
want to implement tough sanctions would have an excuse, if the 
United States eased up, they would argue in the EU councils--
and they have to agree by unanimity on these sanctions. They 
would argue that Europe should weaken correspondingly. So it 
would not be in our interest.
    Senator Warren. Right. And let me just ask a related 
question on this. Obviously, one of our strongest tools against 
Russia is the U.S.-EU economic pressure. If we unilaterally 
ease our pressure on Russia without meaningful changes in 
Russia's behavior, can Europe on its own effectively hold 
Russia accountable?
    Mr. Burns. I do not think so. Europe has a greater trade 
relationship, as you know.
    Senator Warren. Yes.
    Mr. Burns. But Europe does not have the political and 
military weight to be an effective deterrent. It needs the 
United States. That is why we have had NATO since 1949. So we 
have got to have an integrated strategy.
    Senator Warren. Good. Thank you very much. You know, I am 
very glad that the Administration denied Exxon this recent 
waiver from our current Russian sanctions for now. But we have 
to be clear about the broader context for this. Our 
intelligence community has determined that Russia engaged in 
cyber attacks on the United States to interfere with our 
election. The FBI has active and ongoing investigations into 
connections between Russia and the Trump campaign. Members of 
the Trump administration and campaign have questionable ties to 
Russia and were forced to resign in disgrace. And there is good 
reason to believe that President Trump himself has substantial 
financial relationships with Russia, but we will not actually 
know the details of that so long as he will not release his 
taxes.
    If ever there was a time for Congress to serve as a check 
on any attempts to roll back sanctions against Russia, now is 
that time. I have cosponsored the legislation to do that, and I 
hope we can pass it. Thank you.
    Thank you, Mr. Chair.
    Senator Tillis. Thank you.
    Mr. Ambassador, I think this should be directed to you. I 
just want to clarify for the record on what Exxon sought. I 
thought they sought a license from Treasury, not a waiver from 
State. Is that correct? And they were denied that license back 
in March under the Trump administration?
    Mr. Burns. I am not the best person to answer that. I am 
not aware of what the specific obligation----
    Senator Tillis. I believe that is right. So I do think you 
are right that at least particularly last year some of the 
words about Russia out of the then candidate concerned many of 
us here. But it seems like that action is an action that you 
agree was an appropriate action. Thank you.
    Mr. Burns. I certainly do.
    Senator Tillis. Yeah. I have a question about when we 
identify targets--are the people in Russia that we identify as 
targets of potential sanctions aware--are they aware--they know 
that they are actually a part of people that we may go after? 
And if they are, how do they behave? What do they do 
financially to try and inoculate themselves from the effect of 
some of those sanctions?
    Mr. Poncy. Thank you, Senator. I think they are keenly 
aware, and in the discourse with Senator Rounds, I was 
explaining that the Putin regime has had 17 years to 
consolidate its power around behavior that has been remarkably 
consistent, marginalizing anyone that does not support the 
regime and rewarding those that do. And as our sanctions were 
levied, they followed years of investigations into corruption 
by the regime, initially by the Russians themselves, then 
through opposition parties, all of which have been suffocated. 
And so this is not a new game for them. They understand how to 
do this.
    By the time that we started issuing sanctions, they were 
well insulated into the financial system, into the global 
economy, with holdings that are derivative in nature. And I do 
think we can get to those holdings, but that requires a lot of 
research, analysis, and intelligence. And this is the point 
about funding the task force again on illicit finance, but also 
funding the task force on the economic ties and relationships 
between their economy and their leadership and between their 
economy, ours, and that of our allies, so that we can start to 
connect the dots, understand where the pressure points are, and 
then start to go after it.
    It is not going to be an immediate picture. We have got to 
get smart before we shoot. But I think we can get there with a 
dedicated investment from the Congress, a dedicated commitment 
from the Administration. And given that this has been a 17-year 
behavior pattern and it does not look like it is going to 
change, this is what we should be doing.
    Senator Tillis. Another question I thought about as Senator 
Menendez was talking about some of his concern with the lack of 
action. One area that I have a significant concern with is the 
lack of action of using our energy assets as a tool that begins 
to put us in a different posture with European nations. You 
know, it is easy for us to say that they need to join us. It is 
a little bit more difficult if, I do not know, a quarter of our 
energy supply was coming from the very nation that you want me 
to put pressure on.
    So, you know, for the last 8 or so years, we have more or 
less made it very difficult to extract natural gas, to export 
natural gas, to wean European nations off of Russian energy. Do 
you believe that that is a very important part of how we change 
the dynamic and make it more likely that people in Europe will 
work with us when it will not have the kind of consequences it 
could have if they came down too heavy? Ambassador?
    Mr. Burns. I agree with you. The Europeans are trying to 
diversify through Norway, natural gas through Algeria, but they 
do want to have natural gas exports from the United States. 
They want to over the long term reorient their energy 
dependencies and escape it. So I agree this is an option for 
us.
    Senator Tillis. And to the extent that we reduce some of 
the regulatory barriers, responsible, environmentally sound 
regulations, but reduce the regulatory barriers and reduce the 
underlying cost of natural gas, doesn't that also directly 
affect the resources that Russia has available for any malign 
activities? In other words, if gas is cheaper, they are making 
less money?
    Mr. Burns. Well, that certainly is the case, and the 
Russians have a stranglehold on the European market and have 
had for 35 years.
    Senator Tillis. The last question that I have in my time 
remaining is--we have focused a lot on how we can create new 
sanctions, enforce the sanctions regime--but what other things 
would you encourage us to think about that go beyond the 
traditional sanctions regimes that we have used in the past 
that maybe we have not thought about? And to the extent that it 
would require congressional approval, what advice could you 
give this Committee?
    Mr. Burns. We have to have greater capacity to resist 
Russia's propaganda efforts, Sputnik and RT, and we need to 
rebuild our ability to have an effective information program of 
our own. This gets to the Broadcast Board of Governors, with 
Radio Free Europe, Radio Liberty. It gets to reconstituting in 
the State Department a much more effective organization to try 
to distribute factual facts around the world and combat the 
fake news of the Russian Federation. State is being defunded 
right now, a 31-percent proposed budget cut by this 
Administration. And I hope the Congress will resist that 
because we need a strong State Department in order to counter 
Russia in that sphere. That is very important.
    Mr. Poncy. Thank you, Senator, and I fully agree with that. 
Again, I think the Counteracting Russian Hostilities Act and 
the dedication of what I believe was $100 million in 2017-18 to 
go toward these sorts of programs, and not only information 
programs but programs to highlight the corruption that we know 
is associated with Russian leadership, we have to be much more 
aggressive in the public messaging campaign here. Sanctions, as 
I was saying earlier, cannot work in isolation. It requires a 
very strong diplomatic push, a very strong push on law 
enforcement, which the task force will also use the long arm of 
U.S. jurisdiction to go after anyone associated with corruption 
in Russia. It has to be part of a broader strategy.
    Senator Tillis. Thank you.
    Senator Donnelly.
    Senator Donnelly. Thank you, Mr. Chairman, and I want to 
thank the witnesses for being here. It is clear to me that 
Russia actively engaged and actively interfered in United 
States elections this past election, that they worked nonstop 
in that effort, and in my book, among many other reasons, that 
certainly gives us the right to impose sanctions. And my 
question would be, Ambassador, what do you think is the most 
effective sanction that could be imposed right now?
    Mr. Burns. Senator, first, we need to be better aligned 
with the Europeans, the Japanese, the Australians, and others 
to have maximal impact, and I think there is work to be done 
diplomatically to do that.
    Second, deepen the sectoral sanctions and even broaden some 
of them into mining, for instance, deepen the energy sanctions, 
make it more difficult. Senator Tillis talked about this. This 
is Russia's comparative advantage. Make it more difficult for 
them in their supposed area of strength.
    And, third, we do have--Congress voted sanctions, and the 
President did as well, initiated sanctions in 2014 to go after 
certain individuals around Putin. Other Members have raised 
this today. I think that is an area where we begin to pressure 
Putin personally. He is not--he does not govern alone. He 
actually in a way has----
    Senator Donnelly. And there is a real perception that it is 
just him.
    Mr. Burns. It is not. I mean, he has got full autocratic 
power over the machinery of the state, but for his continuation 
as President, he depends on the oligarchs, he depends on the 
people who run these state enterprises. He needs to keep them 
happy by throwing them contracts. If you go after those people, 
you are more liable to really influence the thinking and the 
behavior of Putin.
    Senator Donnelly. Mr. Poncy?
    Mr. Poncy. Thank you, Senator, and I fully agree with that. 
I believe the most immediate step is to codify sanctions in a 
way that sends a strong message. And this is not about 
politics. It is just about unity and saying, look, this is a 
position where the United States is not going to be 
entertaining any sort of a walk-back. That is not a message 
that I would weigh in on internally. It is a message I want to 
weigh in vis-a-vis an external audience that says the United 
States is united on this. We have open discourse disagreements, 
sometimes very hostile, as a democracy does. But on this issue 
we are united. So that is step one, no rollback, we are united 
on that.
    Two, we are going after illicit assets by the Russian 
leadership.
    Three, we are going to prioritize task forces to look into 
where that money is, and our economic vulnerability and 
opportunities associated with interconnections with the Russian 
economy and that of our allies. And we are going to heighten 
economic pressure responsibly, using the sectoral sanctions we 
have, expanding them where it makes sense, and doing that in 
concert with our allies; all that makes sense.
    That entire package has to sit within that broader strategy 
that we were just talking about with military reinforcements in 
Europe, with an intelligence capability, law enforcement ramped 
up, diplomatic outreach to our allies, and positive economic 
power, something that we have not talked a lot about, but how 
do we reinforce opposition? How do we counter this not just 
playing defense but some offense? How do we use our export 
credits to--how do we do a substitution for the European----
    Senator Donnelly. It is about a five- or six-front effort.
    Mr. Poncy. Yes, exactly. And that is really what has been 
missing, is a prioritization of that, the integration of that, 
and the consistency behind it from a unified Government.
    Senator Donnelly. Ambassador, let me ask you this: How 
powerful is denying access to things like the SWIFT transfer 
payment system for his oligarchs and for the country? And is 
that something that, if we do, sets off a whole cataclysm of 
events at that point?
    Mr. Burns. I do think this gets into the range from a 
national security perspective. We are going to have to be 
careful and think through this. I am all for tougher, deeper, 
broader sanctions. He needs to feel the pain.
    If you go to SWIFT--that is just one example--he may take 
that as an existential threat against the Russian state, not 
just against himself but the Russian state. And I am not sure 
the United States wants to go there. This is a very dangerous 
adversary. They have nuclear weapons. He is not unpredictable. 
He is rational. But he would, I think, in a rational sense take 
that as a blow to undermine the very existence of this 
particular Russian government. So I think the Congress needs to 
be careful here but tough.
    Senator Donnelly. So how do you best ensure that--
obviously, we hope he rolls back in Ukraine and in Crimea, but 
how do you ensure that he does not go further, do you think?
    Mr. Burns. I think the place he would have gone further 
would have been the Baltic countries had we not deployed forces 
there and had President Obama not gone to Tallinn in September 
2014 to say we will defend these countries. And you have to 
make that meaningful. That gets to building up the American 
military in Europe right now and adding to the strength of our 
armor and our air capacity now because he is testing us there. 
So strategic deterrence of the type we practiced in the cold 
war is definitely back in this equation.
    Senator Donnelly. Mr. Poncy?
    Mr. Poncy. Just to reinforce the Ambassador on this, 
particularly with respect to the SWIFT action, not only would 
that be a potential existential threat, but it is also one that 
starts to lose the message campaign that we want, which is this 
is not about Russia, this is about a leadership that we can and 
should be targeting more aggressively than we have been and 
where we can be dissuasive by focusing on their illicit 
conduct, their cronyism, and then the key ties between that 
leadership and the Russian economy rather than a broad-based 
hit against a G-8 economy that has a lot of people who may be 
on our side on this.
    Senator Donnelly. Thank you.
    Thank you, Mr. Chairman.
    Senator Tillis. Senator Cortez Masto, I want to apologize. 
I am surprised Senator----
    Senator Brown. She went already.
    Senator Tillis. You have already gone? OK. Then I withdraw 
the apology.
    [Laughter.]
    Senator Tillis. I thought I skipped over--I will save it 
for another time, but I thought I skipped over you for Senator 
Donnelly.
    Senator Van Hollen.
    Senator Van Hollen. Thank you, Mr. Chairman, and thank you 
both for your testimony today. Thank you for your service both 
in and out of Government, and I appreciate your comments.
    I think there is a growing consensus, at least in the 
Congress, that we need to not only codify the existing 
sanctions that are currently operating through Executive order, 
but also that we need to go further as a result of the 
interference in our democratic process, something that concerns 
Democrats and Republicans alike, both for what happened and the 
potential for it to happen again. So I am hoping that the 
Congress is moving quickly in that direction.
    As you have indicated, we have also seen this kind of 
interference among our Western European allies. We know that 
the pro-EU centrist French Presidential candidate Emmanuel 
Macron's campaign was hacked by the Russians. We know that 
Russians targeted Angela Merkel and the Christian Democratic 
Party and also hacked into the German parliament. We know that 
the Russians provided more than a million euros to the National 
Front Party in 2014, and, Ambassador Burns, as you indicated, 
President Trump made some very positive remarks just recently 
about Le Pen's campaign, even though the Russians would love to 
see a victory by that particular party because, as you have 
indicated, their overall strategy is to undermine the 
democratic processes within Europe and try to increase the rise 
in authoritarianism more to Putin's liking. So I am glad that 
we are focusing on how we can make sanctions more effective.
    I want to focus for a minute on developing a broader 
strategy to combat cyber attacks and hacking. Punishing via 
sanctions for past behavior is one thing. How can we develop a 
strategy going forward? I had hoped we were moving forward very 
early on. President-elect Trump said he was going to establish 
an anti-hacking plan. He asked for a plan to be put forward 
within 90 days. That deadline passed last week, and apparently 
there is no team in place, no plan, and nobody at the White 
House has been able to indicate who, in fact, would be in 
charge of that plan.
    I am in the process right now of finalizing some 
legislation with Senator Cory Gardner to try to establish a 
working group and strategy with the United States and our 
allies to really coordinate our efforts with respect to 
responding to cyber attacks. And as you indicated in your 
testimony, Ambassador Burns, we have a right to sanction 
Russian individuals and firms. The tougher question is, of 
course, how to address the Russian state.
    But we also need to try to find a way to not only respond 
but deter going forward, and I would ask both of you, beyond 
economic sanctions and financial penalties, what diplomatic 
measures, what counter cybersecurity actions can be taken to 
sort of set up rules of the road so the Russians know that when 
they try to interfere in American elections or European 
elections, there will be a response? What suggestions or ideas 
do you have in establishing a kind of structure that could do 
that?
    Mr. Burns. Senator, thank you, and let me just say I agree 
with all of your comments about the need for bipartisanship, 
the fact that the Europeans are being harassed and interfered 
with right now in these elections. And I agree with your 
comments on Marine Le Pen. I cannot remember a time when an 
American President said anything positive about an anti-
democratic leader in Europe, but it happened last week.
    Your question is the key question. I think we know what to 
do on Ukraine sanctions, less clear what to do on cyber 
sanctions. A couple of thoughts.
    One is we know that the United Kingdom, Germany, France, 
and Israel have capacity here. We should be working in tandem 
with them and have a common response with them. That will 
impress the Russians more, first.
    Second, we have got to strengthen defense, obviously. We 
are in a defensive mode. We have to think about our offensive 
capabilities as well, as the Trump and Obama administrations 
have been trying to do.
    Third, you are right that some of the new sanctions 
proposed by Congress have to be directed at the Russian state, 
not just Russian companies that might be working in a cyber 
capacity, a wink and a nod with Russian security services, but 
with the state itself and the people and organizations around 
Putin.
    And, finally--and this is going to be difficult--President 
Obama did succeed in having a conversation with President Xi 
Jinping on the cyber issue, what we will not do against each 
other, kind of unwritten rules of the road. President Trump is 
going to have to have that conversation with President Putin. 
President Trump should want to be in a position of strength and 
not weakness, and right now he is in a position of weakness. 
And I am sorry to say that, because if we are going to be 
effective, we have to have a tougher-minded and much more 
serious approach by our Government.
    Senator Van Hollen. Thank you for raising the example of 
President Xi, and I know my time is up, but I would like to 
continue the conversation about whether you think that model, 
backed up with the kind of sanctions we are talking about, can 
actually be effective in dealing with Putin.
    Thank you.
    Senator Tillis. Any other questions on the part of the 
Members? Senator Cortez Masto.
    Senator Cortez Masto. This is for the Ambassador. Yesterday 
we had a briefing on North Korean, and last week the Russian 
Federation vetoed a resolution at the United Nations seeking to 
condemn North Korea for their nuclear tests. At the same time, 
this week, unconfirmed reports indicate that Russia may be 
moving troops to the North Korea border for fear of military, 
potential military conflict and/or refugees flowing across the 
border into Russia.
    Do you think that with respect to North Korea the United 
States' and Russia's interests may be aligned in terms of 
constraining North Korea? And if so, do you think that that 
should be a consideration when we are looking to impose severe 
economic sanctions against Russia?
    Mr. Burns. Thank you, Senator. For a long time, when I was 
involved in the Bush administration in our policy to try to 
work with Russia on North Korea, the Russians did not deviate 
much from what we wanted to have happen. This was back in 2007 
and 2008. The same was true with the Agreed Framework in the 
Clinton administration. But, you know, now, I think because 
President Putin does have this objective of trying to undercut 
and undermine American power, we have seen it in Egypt, we have 
seen it in Libya, we have seen it in Syria, we may now be 
seeing it in North Korea.
    And your question also gives me the opportunity to say I 
think that Russia is important in North Korea, China is much 
more important. I think President Trump has been right to 
publicly
challenge China to do more. I worry, however, that China is 
going to disappoint him the way it disappointed President Obama 
and President George W. Bush. In the end, the Chinese prefer 
the status quo in the Korean peninsula to the potential 
collapse of the North Korean regime and the emergence of a 
unified Korean peninsula under the control of a democratic 
government, our ally in Seoul.
    And so I think that the Administration should temper public 
expectations that China is going to resolve this for us. I do 
not think that is going to happen. But I do agree with 
President Trump that we have to face this squarely. I believe 
that putting THAAD into operation makes sense. That is going to 
happen, as I understand from news reports, this week, and to up 
the pressure on both the Chinese and North Koreans over this 
unacceptable threat to the west coast, to Nevada, to the 
Mountain States, to the west coast of the United States, maybe 
in the next 5 to 6 years from North Korea.
    Senator Tillis. Mr. Ambassador, Mr. Poncy, thank you both 
for being here.
    This will conclude the hearing. The record will remain open 
for a period of 1 week for follow-up questions. Thank you 
again, and thank you for your service.
    The hearing is adjourned.
    [Whereupon, at 11:39 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
               PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
    Chairman Mike Crapo delivered the following opening remarks during 
the full Committee hearing:

    ``This morning, the Committee will receive testimony on the smart 
use of sanctions to counter Kremlin military incursions in Ukraine, 
Syria, and its increased reliance on cyber warfare against many 
nations.
    ``The Committee met 6 weeks ago to begin an inquiry into the 
effectiveness of the United States sanctions regime imposed 3 years ago 
against the Russian Federation for its invasion of Crimea, continuing 
violence and interference in Ukraine, and cyber intrusions against the 
United States.
    ``At that hearing, we learned that alone, U.S.-imposed targeted 
sanctions have had a somewhat limited impact on the economy of the 
Russian Federation.
    ``That impact was magnified by the combined effect of sanctions 
imposed by other Western nations coupled with the severe drop in world 
oil prices.
    ``It was less clear, however, if the existing sanctions were 
affecting any change in the aggressive geopolitical calculations that 
President Putin continues to make.
    ``Some analysts say that the economic sanctions have had a 
deterrent effect on Putin pushing even farther into Ukraine territory. 
That is a good start.
    ``Others look to Putin's continued actions in Ukraine and Syria in 
the weeks since this Committee last met and conclude we should target 
additional sanctions on the Russian Federation.
    ``Despite existing U.S. and Western sanctions, Putin has not shown 
any intention to cease his aggressive behavior.
    ``For the Committee, today's inquiry is not about punishing the 
people of the Russian Federation, but rather those responsible for 
Russia's misbehavior.
    ``The goal now is to transform the initial, limited application of 
financial leverage into the next step of what must become a general 
campaign to impose real costs that impact Putin's ability to conduct 
hostile activities in an already-troubled world.
    ``A good starting point might include a codification of existing 
Executive orders, and a deepening and broadening of sanctions in 
certain economic sectors, addressing cyber activity and financial 
corruption, and making mandatory certain existing discretionary 
sanctions.
    ``Vital in all of this is harmonizing the conditions to lift 
sanctions so that if Putin were to try to reverse course, overlapping 
or misdirected sanctions would not defeat the potential for meaningful 
change in Kremlin policy.
    ``Since sanctions were first imposed 3 years ago, the Obama 
administration, the U.S. Congress, and now the Trump administration 
have been prepared to impose additional sanctions as circumstances 
warrant, or until Putin follows through with his commitments to the 
Minsk cease-fire agreement.
    ``In fact, several rounds of new designations have been implemented 
under existing sanctions laws over the last 3 years.
    ``Make no mistake, these sanctions currently in place, and those 
that may yet come, are Putin's fault and a result of Putin's confused 
notions of Russian power and pride.
    ``Putin is not defending the interests of his people, but is 
exploiting opportunities to seize neighboring lands by fomenting 
disorder and seeking to perpetuate Mideast conflict to advance Russia's 
military influence.
    ``America must lead on the issue, since the most successful 
sanctions result from a united front of U.S. and EU cooperation.
    ``Since the unlawful annexation of Crimea, the years of 
destabilizing Eastern Ukraine through relentless war, the global spread 
of cyber-intrusions and Putin's indefensible support of Assad's 
leadership of Syria, particularly in light of the recent chemical 
attack, fewer are left in Europe to defend Putin's policies.
    ``The European Union must ask itself if it is prepared to join the 
United States to take the necessary financial actions in the 
foreseeable future to deny Putin the resources he needs to take 
whatever his next steps may be.
    ``The last thing the European Union, the United States or this 
Congress can be is divided in the face of Putin's uncertain path.
    ``The times call for clarity of purpose, and a correct amount of 
pressure.
    ``I thank our witnesses for coming here today to help the Committee 
understand what a next course of action might look like, what the 
repercussions of taking such action might look like, and how even those 
may be mitigated.''
                                 ______
                                 
                PREPARED STATEMENT OF R. NICHOLAS BURNS
Roy and Barbara Goodman Family Professor of Diplomacy and International 
  Relations, Harvard University, John F. Kennedy School of Government
                             April 27, 2017
    Mr. Chairman and Ranking Member Brown, it is an honor to testify 
before the Senate Committee on Banking, Housing and Urban Affairs on 
United States sanctions against the Russian Federation.
    The United States should maintain sanctions on Russia due to its 
continued aggression in Ukraine. The Congress and the Trump 
administration should now also consider additional sanctions over the 
Russian government's interference in the 2016 U.S. Presidential 
elections.
    Russia is the most dangerous U.S. adversary in the world today. For 
more than a decade, Russian President Vladimir Putin has used the power 
of the Russian state to undermine American interests in Europe, the 
Middle East and now in the heart of our democratic system here in the 
United States.
    Russia is attempting to undermine the democratic peace in Europe 
that the United States helped to bring about after the dissolution of 
the former Soviet Union and communism in Eastern Europe a quarter 
century ago. In August 2008, Russia invaded Georgia and has kept that 
country divided since. Russia has imposed a false territorial conflict 
in Moldova. In 2014, Russia invaded and then annexed Crimea, violating 
the territorial integrity of Ukraine. This was the first outright theft 
in Europe of one country's sovereign territory by another since the 
Second World War.
    Russia has helped to instigate, fund and arm an insurrection 
against the Ukrainian government in Eastern Ukraine through the 
continued presence of Moscow's military forces in that region. Russia 
has also attempted to undermine the internal stability of our NATO 
allies, Estonia, Latvia, and Lithuania.
    To the south and west of the Russian Federation, Putin has acted to 
undermine neighboring states and to gain effective control over their 
futures so that they may not seek closer ties to either the European 
Union or NATO. He wants to attain what the Tsars and Stalin sought in 
the past--strategic depth along his borders to separate Russia from the 
West. In this regard, he views the United States as his most serious 
competitor for power and influence in Europe. He understands that the 
United States, as the leader of NATO, is the pivotal country in 
organizing an effective defense against his plan to expand Russia's 
sway in Eastern Europe.
    In response to Russia's invasion of Ukraine, President Obama was 
right to join European countries and Canada in imposing economic 
sanctions on Russia in 2014. The Trump administration should not lift 
those sanctions until all the provisions of the Minsk agreements have 
been implemented fully.
    These sanctions are a critical component of the ability of the 
United States to counter Russia in Europe and to assist those European 
countries that are victims of Russian aggression. Helping to create a 
free, united and democratic Europe has been one of America's most 
important and historic global objectives for a century. The United 
States fought in the First World War, World War Two and during the long 
decades of the cold war to secure freedom in Europe.
    Putin has now put that all at risk. Europe has been divided again 
by his illegal actions. It is thus a vital national interest of the 
United States to contain Russian power in Eastern Europe. Sanctions are 
one of the principal tools the United States and Europe have to ensure 
the success of this common strategy.
    Russia's clear interference in the American Presidential election 
in 2016 should also strengthen our determination to undercut Putin's 
ambitions and to raise the costs to his government of this 
unprecedented assault on American sovereignty. The U.S. Intelligence 
Community report to the country in January was unequivocal. Russia 
attempted to undermine the credibility of our 2016 election by 
intervening through a variety of nefarious means.
    This is a blatant, unprecedented and deadly serious attack on our 
democracy. Vigorous investigations by the FBI and the Senate and House 
Intelligence Committees are necessary to unearth the full truth of this 
attack on our electoral system. It also warrants a response from the 
Congress by the imposition of further and stronger sanctions in 
addition to those already in place.
    The United States must respond swiftly and with conviction or 
Putin's government will only be encouraged to continue its campaign to 
undermine our democracy and those of our allies. Indeed, there is ample 
evidence that Moscow has already been interfering in the Dutch, French, 
and German elections this year on behalf of extreme anti-democratic 
populist parties. Russian Television, Sputnik and other organs of the 
Russian state have been dispersing fake news, misleading articles and 
outright lies about those democratic leaders in Europe that oppose 
Russian policies. The Russians will very likely continue these 
activities unless we work together with the European Union to impose 
substantial costs on them for doing so.
    The response by President Trump to Russia's actions has been 
extremely disappointing.
    President Trump has repeatedly contested the judgments of the 
intelligence community and of the FBI on this issue.
    He has downplayed the need for investigations by the Congress. He 
has ordered no serious investigation of his own and has not 
demonstrated any sense of urgency to discover the extent of Russia's 
interference in our election. He has failed to criticize President 
Putin for this brazen attack on our democracy. Based on my experience 
working for Republican and Democrat Presidents on Russia, I cannot 
imagine any of President Trump's predecessors adopting such a weak 
approach on such a grave national security challenge.
    One of President Trump's fundamental responsibilities as President 
is to defend our country from foreign aggression. He has failed to do 
so in not responding to a serious attempt to undermine American 
democracy.
    That is why Congress must now act by undertaking a comprehensive, 
bipartisan investigation of Russia's actions and by adopting a far 
stronger and more forceful response than the Trump administration has 
to date. Indeed, a recent NBC/Wall St. Journal poll showed that 73 
percent of the American respondents supported an independent 
investigation into this attack.
    With this in mind, I support many of the goals of the proposed 
bipartisan Russia Sanctions Review Act of 2017. Congress should 
consider imposing more comprehensive sanctions on Russia to build on 
the cyber sanctions initiated by President Obama in late December 2016.
    At the very least, the President and Congressional leaders must 
make clear directly to the Russian government that interference in our 
elections or attacks on our critical infrastructure will not be 
tolerated by the United States. We must warn that the United States 
will retaliate further if these attacks continue. And we should 
coordinate our response with our key allies to maximize its impact.
    The United States has every right to sanction those Russian 
individuals and firms who have carried out hacking attacks during our 
election campaign on behalf of the Russian government. But, the far 
greater challenge is to decide how to respond to hacking attacks, the 
use of false information, fake news sites and other interference by the 
Russian state itself. Depending on the results of the FBI and 
Congressional investigations, our response must be forceful and 
unmistakable in our determination to deter future attacks.
    As a career Foreign Service Officer, I worked for three American 
Presidents as they sought to respond to challenges from Russia. From 
1990 until 1995, I served in the Administration of President George 
H.W. Bush as Director for Soviet Affairs at the National Security 
Council and then in the Administration of President Bill Clinton as 
Special Assistant to the President and Senior Director for Russia, 
Ukraine, and Eurasian Affairs.
    During the Administration of President George W. Bush when I was 
Ambassador to NATO (2001-2005) and Under Secretary of State for 
Political Affairs (2005-2008), I worked extensively on our often 
difficult relationship with the Russian Federation. While we cooperated 
reasonably well with the Russian government for a time after the 9/11 
attacks, President Putin eventually adopted a much more aggressive, 
competitive and distrustful attitude toward the United States and 
Europe. Our relationship with Moscow has suffered as a consequence.
    All three Presidents worked within a carefully constructed and 
bipartisan strategic framework that emphasized the freedom and security 
of our allies and friends in Europe as a primary priority. President 
Trump has not made these principles a point of emphasis in his first 
months in office. He is the first American president in seven decades 
who has not made clear his unequivocal commitment to NATO and the 
European Union and to the preservation of democratic governments in 
Europe. He has been reluctant to embrace U.S. leadership of the NATO 
Alliance. He has been even more lukewarm on our historic support for 
European integration. Just last week, he made laudatory comments about 
the French anti-democratic populist, Marine Le Pen. This is an abrupt 
and misguided departure from seven decades of resolute American policy 
in support of democratic governments in Europe.
    Congress must thus remain vigilant on the issue of U.S. sanctions 
against Russia over its outright violation of Ukraine's sovereignty. 
Congress should make it difficult for the Trump administration to lift 
sanctions without Congressional concurrence. And if the Russian-
supported separatist forces continue to expand their territorial 
control in Eastern Ukraine, Congress should consider adding sanctions 
in response. A December 2016 report by the Atlantic Council (where I am 
a board member)
details a variety of options from strengthening sanctions on key 
individuals in the Russian government to expanding financial sanctions, 
including in energy. It would also be beneficial for Congress to 
request from the Trump administration a full accounting of Russia's 
ongoing violations of the Minsk accords during recent months.
    I am neither an economist nor a sanctions expert and am thus not in 
a position to judge the precise impact of the sanctions on the Russian 
economy to date. Many experts believe lower world oil prices have been 
the main factor contributing to Russia's negative economic growth 
during this period. But, many also believe sanctions have had an impact 
in helping to slow Russia's GDP growth rate and robbing its economy of 
badly needed investment capital in energy and other areas.
    Sanctions have not been sufficiently robust to cause the Russian 
government to withdraw its military forces from Crimea and Eastern 
Ukraine. But, the sanctions have isolated Russia internationally and 
have been a unifying factor in galvanizing Western opposition to Putin 
and in ensuring nonrecognition of Russia's land grab in Ukraine.
    The fact that Putin and his government have worked so hard to have 
the sanctions lifted is an indication that they are a cause of great 
concern for Moscow. The Russian government continues to attempt to 
divide the European Union on this issue. German Chancellor Angela 
Merkel has been the key leader in insisting that Russia meet all of its 
Minsk agreement commitments before sanctions can be lifted. She 
deserves our full support in maintaining unanimity within the European 
Union in the months ahead.
    As Congress debates the right mix of sanctions in response to 
Russia's actions in Ukraine as well as its interference in our 
elections, it will be important to integrate U.S. sanctions with those 
of Canada and the European Union. Congress should request a full report 
on sanctions implementation by the United States and all the other 
countries to ensure they are being carried out in a rigorous manner. 
The United States would be right to insist that the sanctions also be 
equitable on both sides of the Atlantic so that the sacrifices made by 
European companies are equal to those being made by American companies.
    Sanctions are the main tool the United States and Europe can employ 
to send a message of tough opposition to Russia's territorial 
aggression in Eastern Europe. When Russian military forces entered 
Crimea and then Eastern Ukraine in early 2014, President Obama, 
Chancellor Merkel, and other allied leaders made the right decision not 
to use military force in response. As Ukraine is not a member of NATO, 
we had no legal or ethical obligation to do so. And military force 
would have created a dangerous confrontation between two nuclear 
weapons powers. Sanctions were the only effective way the United 
States, Canada, and Europe could respond forcefully to Putin and 
inflict economic damage that might, over time, cause him to rethink his 
strategy.
    For now, however, Russia is far from compliance with the Minsk 
accords. During the last 3 months alone, Moscow has instigated more 
intensive fighting by the separatist movements it supports directly. 
Indeed, the Russian government took an unprecedented step earlier this 
year of treating passports of the separatist government in the Donbass 
region as legitimate. It has even acquiesced in the use of the Russian 
ruble in territory that clearly belongs to Ukraine under international 
law. The trends are both obvious and ominous in Ukraine, Moldova and 
Georgia-Russia is attempting to subvert the independence of all three 
countries.
    The United States must now mount a renewed strategy to combat this 
dangerous Russian campaign. The first step is for the Administration to 
maintain and possibly increase sanctions on Russia. A second step is 
for Congress and the Administration to agree to provide lethal 
defensive arms to Ukraine so that it can defend its people and its 
borders. A third step is to make permanent the recent stationing of 
NATO military forces on the territory of Poland, Estonia, Latvia, and 
Lithuania. Finally, the Trump administration should also continue the 
policy of President Obama to rebuild the strength and armored capacity 
of U.S. military forces in Europe as a deterrent to Putin's truculent 
behavior.
    While there will be some issues where cooperation with Russia may 
be possible--implementation of the Iran Nuclear Deal, North Korea, and 
counter-narcotics are examples--we will likely remain in a competitive 
and hostile relationship with Russia until Putin's Soviet-trained and 
inspired generation passes from power some years from now.
    Our long-term goal must thus be to contain Russian power in Eastern 
Europe to preserve, in the words of President George H.W. Bush, the 
``Europe whole, free, and at peace'' that was the historic result of 
the end of the Cold War in 1991.
    Russia, however, is clearly attempting to rebuild its power base in 
Europe and the Middle East at the expense of the United States and its 
allies. Its brutal air campaign in Syria has resulted in the deaths of 
thousands of civilians. By
weakening both NATO and the European Union, Moscow also hopes to 
undermine the credibility of our democratic systems.
    Finally, Mr. Chairman, these aggressive Russian actions are a 
warning to the American people and our Government. We must be vigilant 
in defending the Western values upon which our country was founded and 
on the Transatlantic Alliance that is critical to our long-term 
security.
    Just as during the Cold War, Russia's assault is focused on our 
concrete interests in Europe but also on the values that are at the 
heart of our democratic system of government. Russia is contesting the 
victory of the democratic countries at the end of the Cold War. Putin's 
actions are a carefully coordinated power move to divide the West and 
reduce American power in the world.
    With this in mind, I hope President Trump will speak and act more 
resolutely in defense of those values--freedom of speech and of the 
press and the separation of powers, including an independent judiciary. 
The United States is the natural leader of the West and is an 
exceptional global power. We must give confidence to the American 
people, as well as hundreds of millions of Europeans who are our treaty 
allies, that we will act to protect the freedom and independence of the 
Western democracies against a cynical and opportunistic Russian 
autocrat.
    We urgently need a principled, bipartisan American response, led by 
the Congress, to the threat of Russian attacks on our friends in Europe 
and on our democracy at home.
                                 ______
                                 
                    PREPARED STATEMENT OF CHIP PONCY
President and Co-Founder of the Financial Integrity Network, and Senior 
         Advisor to the Center on Sanctions and Illicit Finance
                             April 27, 2017
    Chairman Crapo, Ranking Member Brown, and other distinguished 
Members of the Senate Committee on Banking, Housing & Urban Affairs, I 
am honored by your invitation to testify before you today.
    This is the Committee's second hearing in the past several weeks on 
assessing next steps and further options for U.S. sanctions on Russia. 
I commend your attention to this issue of growing urgency to our 
national security and to the collective security of the international 
order that the United States has led since the founding of the United 
Nations over 70 years ago.
    I am also grateful for the substantial contribution of the expert 
witnesses who testified before you on this topic last month. Their 
prior testimony and ongoing work, together with the contributions of 
other dedicated experts studying this topic, continue to inform our 
thinking at the Financial Integrity Network and the testimony that I 
will deliver to you today.
    The primary basis of my testimony, however, is the experience that 
I have gained in helping to shape and implement sanctions policy over 
the past 15 years, in the U.S. Government, the international community, 
and in the private sector. Based on this experience and as explained in 
greater detail below, I believe there are important steps that Congress 
should take to protect our national and collective security by 
clarifying and strengthening sanctions on Russia, summarized as 
follows:

    1)  Prioritize targeted sanctions against Russian leadership 
        engaged in illicit conduct. Congress should target sanctions 
        against Russian leadership engaged in illicit conduct by:

    (i)  Calling for the establishment of a Russian Counter-Illicit 
        Financing Task Force dedicated to tracing, mapping, 
        sanctioning, and prosecuting illicit Russian financial flows 
        that intersect with the U.S. financial system, and for working 
        with allied governments to similarly track, trace, and combat 
        illicit Russian financial flows, largely as proposed in the 
        Countering Russian Hostilities Act Bill;

   (ii)  Providing specific funding for the Russian Counter-Illicit 
        Financing Task Force, to be managed by Treasury and the 
        Department of Justice to ensure interagency participation and 
        support as needed across law enforcement, intelligence, 
        regulatory, and financial authorities;

  (iii)  Codifying and consolidating existing sanctions authority to 
        specifically target Russian leadership engaged in illicit 
        conduct, largely as proposed in the Countering Russian 
        Hostilities Act Bill;

  (iv)  Expanding existing sanctions authority to specifically target 
        Russian leadership engaged in illicit conduct that, with 
        respect to any foreign state: (a)
        undermines democratic processes or institutions; (b) threatens 
        the peace, security, territorial integrity or sovereignty; or 
        (c) misappropriates state assets;

  (v)   Prioritizing and expanding derivative sanctions against persons 
        and entities owned or controlled by; acting for or on behalf 
        of; or materially, financially, or technologically assisting 
        Russian leadership engaged in illicit conduct, including by 
        calling upon Treasury to lower the ownership threshold for 
        derivative designations from 50 percent to 25 percent, 
        consistent with Treasury's final rule on customer due diligence 
        for U.S. financial institutions;

  (vi)  Creating a Europe and Eurasia Democracy and Anti-Corruption 
        Fund as proposed in the Countering Russian Hostilities Act, and 
        further creating specific funding for publication of studies 
        and research on corruption of Russian leadership.

    Prioritizing targeted sanctions against illicit conduct by Russian 
leadership will expose, contain, disrupt, and potentially deter such 
conduct. Efforts that can expose corruption of Russian leadership may 
be particularly powerful in raising opposition to such conduct in 
Russia. Prioritizing derivative designations in particular will give 
much greater economic impact to primary designations against Russian 
leadership by going after the networks that support and benefit from 
illicit conduct engaged in by such leadership.

  2)  Call upon Treasury to consider designating under Section 311 of 
        the USA PATRIOT Act any Russian financial institutions engaging 
        in substantial transactions associated with any illicit conduct 
        by Russian leadership;

  3)  Heighten controlled pressure on the Russian economy. Congress 
        should consider building upon Treasury's sectoral sanctions 
        program to heighten controlled economic pressure on Russia, 
        including by:

    (i)  Calling upon Treasury to expand designations of Russian 
        financial institutions, defense firms, and energy companies 
        under the sectoral sanctions program;

   (ii)  Applying new sanctions against any persons with respect to 
        purchase, subscription to, or facilitation of the issuance of 
        sovereign debt of Russia, as proposed in the Countering Russian 
        Hostilities Act bill;

  (iii)  Applying new sanctions against any persons with respect to 
        investments in the Russian energy sector, as proposed in the 
        Countering Russian Hostilities Act bill;

  (iv)  Considering new sanctions against any persons with respect to 
        investments in the Russian financial or defense sectors;

  (v)   Calling upon Treasury and the intelligence community to produce 
        a study of key Russian sectors exposed to economic sanctions 
        and U.S. and allied countries' exposure to potential counter-
        sanctions by Russia; and

  (vi)  Based on such a study, considering new sectors for possible 
        designations under the sectoral sanctions program.

  4)  Strengthen the effectiveness of U.S. sanctions in general. 
        Congress should strengthen the operational effectiveness of 
        U.S. sanctions by:

    (i)  Providing funding for Treasury to expand its sanctions 
        targeting, compliance, and enforcement resources and 
        capabilities, particularly with respect to derivative 
        designations of key node primary sanctions targets;

   (ii)  Considering requiring Treasury to issue regulations specifying 
        sanctions program and training requirements for global 
        financial institutions operating in the United States and for 
        other sectors vulnerable to sanctions busting and sanctions 
        evasion;

  (iii)  Calling upon FinCEN to issue final anti-money laundering (AML) 
        rules on the reporting of cross-border wire transfers and on 
        AML program, SAR reporting, and customer due diligence (CDD) 
        requirements for investment advisors to heighten the 
        transparency of the U.S. financial system in accordance with 
        international standards;

  (iv)  Calling upon FinCEN to consider rulemaking extending AML 
        requirements to title insurance companies and/or others 
        involved in the sale of high-end real estate as necessary to 
        close proven sanctions evasion and money laundering 
        vulnerabilities in the U.S. real estate market;

  (v)   Calling upon Treasury to issue a report offering 
        recommendations for expanding information sharing under Section 
        314 of the USA PATRIOT Act to enhance the effectiveness and 
        reduce the costs associated with counter-illicit financing 
        analysis by U.S. authorities and across the U.S. financial 
        system.

  5)  Facilitate operational sanctions capability in allied countries. 
        Congress should enhance foreign partner capacity in key allied 
        countries by providing funding to Treasury to launch a Foreign 
        Partner Training Program across sanctions administration, 
        implementation, and enforcement.

    These recommendations are based in large part upon key 
developments, conditions, and challenges evident in the recent 
evolution of sanctions policy and implementation, as discussed in 
greater detail below.
Background
    I was extraordinarily privileged to serve our country at the United 
States Department of the Treasury for 11 years following the terrorist 
attacks of 9/11. I worked for and with an immensely talented and 
dedicated group of individuals from across the U.S. Government, the 
financial services industries, and various governments with shared 
interests in our collective security. This was a pivotal period in the 
development and institutionalization of financial and economic power as 
an increasingly important component of our national and global 
security.
    With bipartisan leadership across the Congress and four 
Administrations, we collectively constructed, secured, and deployed an 
unmatched capability to exploit
financial information and apply financial and economic pressure to 
identify and attack threats to our national security. We also secured, 
strengthened, and expanded enduring multilateral support for these 
efforts, including through global frameworks, relationships, and 
mechanisms that continue to protect the international financial system 
from a wide range of illicit activity and actors. Developing and
applying a broad array of financial and economic sanctions against 
various threats to our collective security constituted a core component 
of these efforts.
    For the past 4 years at the Financial Integrity Network, our 
mission has focused on assisting allied governments, the global banking 
sector, and critical industries in developing and implementing 
financial policies that advance our collective security and protect the 
international financial system from abuse. A key area of our work has 
been collaborating with clients and partners to design, implement, 
assess, and strengthen effective and workable sanctions policies within 
broader financial security risk management regimes.
    Throughout my experiences in Government and the private sector over 
the past 15 years, U.S. sanctions policy has continued to evolve, 
benefiting from lessons learned over time. My recommendations above for 
strengthening sanctions against Russia are based on this recent history 
of sanctions evolution, and how this history has revealed key 
conditions and challenges to strengthening the effectiveness of 
sanctions policy in general, including with respect to sanctions 
against Russia.
Important Developments in the Recent Evolution of Sanctions Policy
    Designing, implementing, assessing, and strengthening current 
sanctions programs requires an understanding of the recent evolution of 
sanctions policy within the broader rise of financial power and 
economic statecraft. This evolution is marked by four inter-related and 
fundamental developments:

   (i)  The emergence of sanctions and targeted financial measures as a 
        core component of foreign policy, national security, and 
        collective security strategies;

  (ii)  Shifting expectations of sanctions policy as an increasingly 
        operational, targeted, and nuanced tool designed to achieve 
        real financial and economic impact;

  (iii)  Expanded application of sanctions against a broader range of 
        illicit conduct, and

  (iv)  The increased blending and interdependence of sanctions and AML 
        regimes.

    These developments, briefly explained below, help shape the 
conditions and challenges that sanctions policymakers should consider 
in developing, assessing, and strengthening sanctions programs, 
including with respect to sanctions against Russia.
The emergence of sanctions as a core component of foreign policy, 
        national security, and collective security strategies
    The emergence of sanctions and targeted financial and economic 
measures as an essential component of foreign policy and national and 
collective security strategies is evident in the relatively recent and 
rapid expansion of sanctions programs at global, multilateral, and 
national levels. Since the terrorist attacks of 9/11, virtually every 
United Nations Security Council resolution addressing various threats 
to
global peace and security has included heightened sanctions and other 
targeted financial and economic measures. This includes global 
responses to illicit activities ranging from terrorism to the 
proliferation of weapons of mass destruction, as well as global 
responses to rogue regimes and destabilizing elites in various 
countries such as Afghanistan, the Central African Republic, the 
Democratic Republic of the Congo, Iran, Libya, North Korea, Somalia, 
Sudan, South Sudan, and Yemen.
    In addition to this global expansion of sanctions programs, the 
United States has prominently coordinated multilateral sanctions 
campaigns targeting collective security threats associated with the 
Bashar al-Assad regime in Syria and Russian aggression in the Ukraine. 
The United States also continues to work with the European Union and 
other partners in maintaining other multilateral sanctions programs 
against oppressive and corrupt governing regimes in countries such as 
Belarus and Zimbabwe, and in implementing conduct-based sanctions 
against designated terrorist groups and their support networks.
    At a national level, the United States continues to impose broad 
economic sanctions against Cuba, notwithstanding the substantial 
relaxations introduced in the last years of the second Obama 
administration. The United States has also introduced and heightened 
unilateral sanctions against oppressive and corrupt elements of the 
governing regime in Venezuela. And the United States has expanded 
conduct-based sanctions against threats ranging from drug trafficking 
and terrorism to proliferation and malicious cyber-enabled activities, 
as well as against transnational criminal organizations more broadly.
    Similarly, other jurisdictions, most notably the European Union, 
have developed unilateral sanctions programs to advance foreign policy 
interests such as combating kleptocracy, including with respect to 
ongoing asset recovery efforts against the former Mubarak regime in 
Egypt.
    This broad expansion of various types of sanctions programs 
underscores the increasing importance of sanctions as a core component 
of global, multilateral, and jurisdictional strategies to advance 
fundamental foreign policy interests and address various threats to 
national and collective security.
Shifting expectations of sanctions policy
    The emergence of sanctions as a fundamental component of foreign 
policy and national and collective security strategies is due in part 
to the shifting expectations of sanctions policy. This is 
notwithstanding the historically consistent overarching purpose of 
sanctions as a means of advancing core foreign policy interests and 
addressing threats to national and collective security.
    In general and with a few notable exceptions, expectations 
associated with sanctions policy have shifted in two fundamental ways. 
First, sanctions have evolved from primarily political ``name and 
shame'' symbolic measures to operationally meaningful tools to deter, 
change, disrupt, and/or contain activity that threatens core foreign 
policy or national or collective security interests. As operational 
rather than purely political or symbolic measures, sanctions are 
increasingly expected to create real financial and economic pressure on 
their intended targets.
    Second, as sanctions have become more operational, they have also 
become more tailored and nuanced, targeting specific actors or conduct 
of concern while minimizing collateral damage to third parties or 
related interests. Policymakers increasingly craft, tailor, and adapt 
specific types of sanctions to address specific types of threats, 
maximizing the effectiveness of sanctions while minimizing collateral 
harm. This is evident in the rise of conduct-based sanctions and the 
general move away from comprehensive jurisdictional embargoes and 
toward regime-based sanctions, targeting specific elites responsible 
for the threatening behavior of concern.
Expanded application of sanctions against a broader range of illicit 
        conduct
    As sanctions have shifted toward a more operational and targeted 
approach, they have been applied against a wider range of illicit 
conduct previously addressed exclusively by criminal law enforcement, 
or occasionally by the use of force. Such illicit conduct includes drug 
trafficking, terrorism, the proliferation of weapons of mass 
destruction, cybercrime, and transnational organized crime more 
broadly.
    This emergence and expansion of such conduct-based sanctions have 
been driven by both necessity and opportunity. Such sanctions are 
increasingly necessary to protect and advance core foreign policy and 
national and collective security interests against an expanding array 
of threats that have become more sophisticated and globalized in an 
increasingly globalized economy. And such conduct-based sanctions 
provide us with an opportunity to apply our considerable financial and 
economic power in a manner that directly attacks these threats, in 
support of law enforcement, foreign policy, and other national security 
interests.
    The emergence of conduct-based sanctions has also been critical in 
targeting jurisdictional sanctions programs against government elites 
that are responsible for a targeted country's threatening behavior. 
Such sanctions have increasingly targeted a sanctioned country's 
government officials and related individuals responsible for activities 
such as: (i) threatening the peace, security, territorial integrity or 
sovereignty of other states; (ii) misappropriating state assets; (iii) 
undermining democratic processes or institutions; or (iv) engaging in 
gross human rights abuses.
Increased blending and interdependence of sanctions and AML regimes
    As sanctions have become more expansive, operational, and targeted, 
they have also increasingly depended upon and overlapped with AML 
regimes. This is particularly true with financial sanctions or economic 
sanctions that are primarily implemented and enforced through the 
financial system. At a fundamental level, the effectiveness of such 
sanctions depends critically on the financial transparency achieved 
through sound implementation of robust AML preventive measures by the 
banking and financial services industries. The customer and 
transactional due diligence conducted by financial institutions 
pursuant to AML regulation enables such institutions to identify and 
manage risks associated with sanctioned parties, activities, and 
jurisdictions. Without the financial transparency achieved through 
implementation of such AML requirements, compliance with many sanctions 
policies would be substantially limited or even unachievable.
    In addition to this fundamental reliance of operational sanctions 
effectiveness on financial transparency gained through implementation 
of AML preventive measures, most conduct targeted by sanctions is also 
criminalized as predicate offenses to money laundering. This includes 
drug trafficking, terrorist financing, WMD proliferation (smuggling/
violation of export controls), organized crime more broadly, and 
corruption. This overlap enables sanctions policy to benefit from the 
support of AML regimes across governments and the global financial 
system, where such conduct is targeted for as a basis for suspicious 
activity reporting, investigation, prosecution, and asset forfeiture.
    Finally, sanctions policy may focus on targeted financial measures 
that may also be required or authorized by AML authorities. Depending 
on the particular sanctions program and scenario, sanctions may not 
require an asset freeze, but may prohibit certain financial 
relationships, investments, or transactions, akin to certain AML 
measures such as in applying Section 311 authorities of the USA PATRIOT 
Act. And as a practical matter, sanctions implementation increasingly 
requires AML risk management measures, such as certifications, 
representations, and enhanced due diligence.
    This is particularly true with respect to the sectoral sanctions 
levied by the United States, the European Union, Canada, and other 
countries against Russia. While such sectoral sanctions do not require 
asset freezing or outright prohibition of relationships or dealings 
with sectoral sanctioned parties, they do impose certain debt or equity 
financing prohibitions with respect to such designated parties, as well 
as other restrictions. These complex sanctions were deliberately 
designed to enable ongoing relationships with sanctioned parties while 
putting financial and economic pressure on key parts of the Russian 
economy. Financial institutions that must comply with these sanctions 
while remaining engaged in business with sectoral sanctioned entities 
rely upon a combination of sanctions screening and AML-like enhanced 
due diligence measures and controls.
    These developments in the recent evolution of sanctions policy as 
described above can assist policymakers understand conditions and 
challenges that impact sanctions effectiveness.
General Conditions and Challenges for Assessing Sanctions Effectiveness
    The recent evolution of sanctions policy reveals general conditions 
and challenges for assessing sanctions effectiveness as follows:

    First, effective sanctions policy and implementation 
        requires clear sanctions objectives and criteria. With respect 
        to sanctions against countries, the evolution of sanctions 
        policies and programs, and in particular the complex 
        combination of sanctions relevant to some countries such as 
        Russia, has raised challenges of clarity and common 
        understanding regarding sanctions objectives and criteria. 
        Policymakers should ensure that objectives and criteria for 
        specific sanctions programs are clear, and that these remain 
        clear as underlying circumstances change. Policymakers should 
        also ensure that sanctions objectives and criteria are well 
        understood, including among allied countries, across affected 
        business communities and the compliance industry, in the 
        popular media, and within sanctioned countries--particularly 
        when sanctions target corruption by ruling regimes. Such 
        clarity and understanding may facilitate greater
        compliance with and more active support for various sanctions 
        programs among allied countries, within affected industries, 
        and among the general public.

    Second, as sanctions programs have become more operational 
        and nuanced, they must be flexible to adapt to changing 
        circumstances. Such flexibility is crucial to maintain the 
        effectiveness of sanctions against intended targets while 
        preserving their workability for compliance and implementation 
        purposes. Policymakers should ensure that authority is 
        delegated to the Treasury with sufficient discretion to manage, 
        administer, and implement sanctions programs in a dynamic and 
        complex environment.

    Third, the general shift away from classic jurisdictional 
        embargoes and toward regime-based sanctions targeting illicit 
        conduct by governing elites not only minimizes collateral 
        damage to innocent parties, but also highlights and holds 
        accountable specific individuals engaged in such illicit 
        conduct. When such illicit conduct includes corruption, it may 
        make it more difficult for sanctioned regimes to blame the 
        United States or sanctions programs for economic problems that 
        are likely due to the corruption and failed policies of the 
        sanctioned regime.

     Policymakers should generally favor developing such regime-based 
        programs targeting illicit conduct over comprehensive 
        jurisdictional sanctions. Derivative designations associated 
        with such targeted programs can still introduce largely 
        prohibitive jurisdictional risk in such countries for outside 
        markets; however, the cause of intended or collateral economic 
        pain in the sanctioned regime's country may be more visibly 
        attributed to the illicit conduct of the regime and its control 
        over the country's economy. This may help create internal 
        pressure for the ruling regime to change its behavior.\1\
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    \1\ For similar reasons, policymakers should also consider 
converting existing comprehensive
jurisdictional sanctions against Cuba and Sudan to regime-based 
programs targeting illicit
conduct.

    Fourth, the growth and complexity of operationally focused 
        sanctions have put substantial pressure on sanctions 
        implementation, administration, and enforcement resources, both 
        within the Government and across the private sector. As 
        policymakers consider strengthening or expanding sanctions 
        programs, they should ensure that appropriate Government 
        resources are available to implement these programs 
        effectively, including for purposes of providing clear and 
        workable guidance for the financial community and other 
        industries whose compliance systems are critical in making 
---------------------------------------------------------------------------
        sanctions operationally meaningful.

    Fifth, effective implementation of and compliance with 
        increasingly complex sanctions programs and requirements demand 
        specialized expertise, particularly in global finance and other 
        industries exposed to sanctioned parties, activities, and 
        jurisdictions. Policymakers should support sanctions 
        implementation and compliance by considering requiring training 
        programs that specifically focus on developing such expertise 
        in highly exposed industries.

    Sixth, the disparity between the United States and the rest 
        of the world in sanctions administration, implementation, and 
        enforcement--including with respect to global and multilateral 
        sanctions programs--weakens sanctions effectiveness and 
        heightens the burden of sanctions compliance for U.S. persons 
        and authorities. Policymakers should prioritize not only global 
        or multi-lateral political support for sanctions, but global 
        and multi-lateral operational capability in sanctions 
        administration, implementation, and enforcement. It is 
        astonishing that 16 years after 9/11 and the adoption of United 
        Nations Security Council Resolution 1373 requiring all 
        countries to develop targeted sanctions against global 
        terrorism, that only a handful of countries have invested in 
        any meaningful sanctions administration, implementation, 
        oversight, guidance, or enforcement. By and large, the 
        Treasury's Office of Foreign Assets Control (OFAC) remains a 
        singular source of expertise, authority, and capability on 
        sanctions administration, oversight, and enforcement, and the 
        Treasury's broader Office of Terrorism and Financial 
        Intelligence remains a unique institutional authority in 
        targeting and implementing sanctions programs within a broader 
        financial security approach and framework.

     Policymakers should consider training budgets and personnel to 
        assist foreign partners who commit to developing operational 
        sanctions capabilities, particularly within a broader financial 
        security framework. Facilitating such foreign capability may 
        also make it easier to engender political support for using 
        such capabilities against common threats to collective 
        security.

    Seventh, notwithstanding the need for greater multilateral 
        capability in sanctions administration, implementation, and 
        enforcement, the increasing use of sanctions by authorities 
        around the world may expose the United States and its allies to 
        retaliatory sanctions by countries subject to U.S. and allied 
        sanctions. This concern should limit our consideration of 
        technical assistance to allied countries and should drive a 
        proactive study of our exposure to retaliatory sanctions by 
        countries currently or potentially subject to U.S. sanctions. 
        Policymakers should consider financing such a study.

    Eighth, the increased blending and interdependence of 
        sanctions and AML regimes underscore the importance of 
        investing in AML regimes not only to combat money laundering 
        and financial crime, but also to facilitate compliance and 
        implementation of sanctions policy. Where holes in AML 
        regulation, implementation, supervision, or enforcement prevent 
        financial institutions from truly understanding their customers 
        or transactions, sanctions evasion becomes an elevated and real 
        risk. In recent years, several enforcement actions resulting in 
        billions of dollars of fines levied against global financial 
        institutions for breakdowns in sanctions and AML compliance 
        underscore this reality.

     To facilitate effective sanctions implementation, policymakers 
        should ensure that sound and robust AML regimes extend across 
        the financial system and deliver the financial transparency 
        required to identify and manage sanctions risk.

     Sanctions policymakers should also leverage AML authorities and 
        resources to provide investigative, analytic, and prosecutorial 
        expertise and support to combat illicit conduct targeted by 
        both sanctions and AML regimes.
Conclusion
    Over the past generation, the United States has led the global 
development and institutionalization of global and national frameworks 
to combat financial crime, exploit financial information, and leverage 
financial and economic power, including through the development and 
implementation of sanctions policy. We must continue to invest in this 
capability, at home and abroad, and fully utilize this capability to 
combat threats to our national security, including with respect to 
dangerous behavior by the Russian government. I am hopeful that my 
testimony will assist the Congress and the Administration in continuing 
to lead these efforts.
    I am grateful for the opportunity to testify before you today, and 
I look forward to your questions.

 RESPONSE TO WRITTEN QUESTIONS OF SENATOR TESTER FROM NICHOLAS 
                             BURNS

Cyber-Deterrence
Q.1. During a recent meeting with sanctions experts, a few 
Senators discussed the concept of ``cyber-deterrence.'' We are 
fighting and fending off--at all levels of Government and 
industry--a persistent and growing threat from foreign 
government hackers and armies of online trolls. This endangers 
our financial systems, our interconnected infrastructure, and 
our electoral process.

   Do you believe there are any number of sanctions we 
        could place on Russian entities or officials that could 
        deter further cyberattacks?

   What other actions do you believe the United States 
        could take, such as increasing our ``cyber-offense,'' 
        that could deter future meddling and cyber-attacks from 
        Russia?

A.1. Did not respond by publication deadline.
European Support for Sanctions
Q.2. Our allies in Europe depend on us to spearhead efforts 
against Russian aggression. For decades, they have relied on 
American leadership and the promise that we are going to be 
there to back them up. Now, in order for the current sanctions 
regime against Russia to work, we need our allies to back us 
up. But right now, there does not seem to be a unified voice 
for foreign policy coming out of the White House and the State 
Department.
    What message does this lack of a leading, unified voice 
send to our allies in Europe? How is Russian domestic and 
foreign policy leadership reacting to current U.S. foreign 
policy in Europe?

A.2. Did not respond by publication deadline.
Russian Energy Production
Q.3. Many of our allies in Europe, despite having sanctions on 
Russia for its incursions into Ukraine, are still highly 
dependent on natural gas from Russia. Clearly, this reduces the 
European Union's leverage to levy sanctions where it really 
hurts Russia the most.
    What policy recommendations would you make to us in 
Congress that would help our allies in Europe to wean 
themselves from Russian natural gas?

A.3. Did not respond by publication deadline.