[Senate Hearing 115-786]
[From the U.S. Government Publishing Office]
S. Hrg. 115-786
EMERGING EXTERNAL INFLUENCES IN THE WESTERN
HEMISPHERE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON WESTERN
HEMISPHERE, TRANSNATIONAL
CRIME, CIVILIAN SECURITY,
DEMOCRACY, HUMAN RIGHTS,
AND GLOBAL WOMEN'S ISSUES
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
MAY 10, 2017
__________
Printed for the use of the Committee on Foreign Relations
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web:
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U.S. GOVERNMENT PUBLISHING OFFICE
40-276 PDF WASHINGTON : 2020
COMMITTEE ON FOREIGN RELATIONS
BOB CORKER, Tennessee, Chairman
JAMES E. RISCH, Idaho BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin JEANNE SHAHEEN, New Hampshire
JEFF FLAKE, Arizona CHRISTOPHER A. COONS, Delaware
CORY GARDNER, Colorado TOM UDALL, New Mexico
TODD YOUNG, Indiana CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming TIM KAINE, Virginia
JOHNNY ISAKSON, Georgia EDWARD J. MARKEY, Massachusetts
ROB PORTMAN, Ohio JEFF MERKLEY, Oregon
RAND PAUL, Kentucky CORY A. BOOKER, New Jersey
Todd Womack, Staff Director
Jessica Lewis, Democratic Staff Director
John Dutton, Chief Clerk
SUBCOMMITTEE ON WESTERN HEMISPHERE,
TRANSNATIONAL CRIME, CIVILIAN SECURITY, DEMOCRACY,
HUMAN RIGHTS, AND GLOBAL WOMEN'S ISSUES
MARCO RUBIO, Florida, Chairman
RON JOHNSON, Wisconsin ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona TOM UDALL, New Mexico
CORY GARDNER, Colorado JEANNE SHAHEEN, New Hampshire
JOHNNY ISAKSON, Georgia TIM KAINE, Virginia
(ii)
C O N T E N T S
----------
Page
Rubio, Hon. Marco, U.S. Senator From Florida..................... 1
Menendez, Hon. Robert, U.S. Senator From New Jersey.............. 3
Emanuele Ottolenghi, Ph.D., Senior Fellow, Foundation for Defense
of Democracies, Washington, DC................................. 5
Prepared statement........................................... 7
Eric Farnsworth, Vice President, Council of the Americas,
Washington, DC................................................. 34
Prepared statement........................................... 36
(iii)
EMERGING EXTERNAL INFLUENCES IN THE WESTERN HEMISPHERE
----------
WEDNESDAY, MAY 10, 2017
U.S. Senate,
Subcommittee on Western Hemisphere, Transnational
Crime, Civilian Security, Democracy, Human Rights,
and Global Women's Issues,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:24 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. Marco Rubio,
chairman of the subcommittee, presiding.
Present: Senators Rubio [presiding], Gardner, and Menendez.
OPENING STATEMENT OF HON. MARCO RUBIO,
U.S. SENATOR FROM FLORIDA
Senator Rubio. Good morning. This hearing of the
Subcommittee on Western Hemisphere, Transnational Crime,
Civilian Security, Democracy, Human Rights, and Global Women's
Issues will come to order. The hearing today is entitled,
``Emerging External Influences in the Western Hemisphere.''
I apologize to the witnesses and to the members. It has
been an interesting morning, and navigating the hallways was
quite an adventure. But I appreciate your patience in being
here.
The panel today is going to feature Emanuele Ottolenghi,
the senior fellow at the Foundation for Defense of Democracies,
and, of course, Eric Farnsworth, the vice president of the
Council of the Americas. I welcome the opportunity to have them
testify here today.
I also want to thank all of you here today in attendance at
this hearing.
It is my hope that we can examine external political and
economic influences on our hemisphere from traditional state
actors such as Russia, China, Iran, and North Korea.
We will also consider the potential terrorist threat posed
by external terrorist groups such as ISIL, who are potentially
radicalizing susceptible individuals in small countries
throughout the hemisphere and, in particular, the Caribbean.
Some of these individuals are motivated to travel to join the
fight in Syria and Iraq, and others may pose a risk for
conducting attacks in their home countries, or even seeking to
enter the United States to do the same.
Countering radicalization online within a small factor of
the Muslim community and corresponding threat of homegrown
violent extremism is perhaps one of the greatest challenges
that we face in protecting innocent Americans at home from
lone-wolf terrorist attacks like those we have seen in Boston,
San Bernardino, and Orlando.
The fact that this terrorist threat is spreading to other
nations in our hemisphere should concern us all. For instance,
Trinidad and Tobago is a prime example of a small Caribbean
nation currently struggling with the threat of radicalization.
According to a New York Times article from 21 February of
this year, the Trinidadian Government recently introduced a
series of amendments that would criminalize membership in the
Islamic State and other extremist organizations. That is an
obvious legal reform that the United States must demand and
hope to achieve from other countries in the hemisphere for the
safety of their own citizens and our own. According to the New
York Times, this new Trinidadian law would stipulate people who
travel to certain regions would be presumed to be doing so for
terrorism.
Trinidad has a population of just 1.3 million, but it had
130 of its citizens travel to Syria to fight for ISIL. The U.S.
with 321 million people has seen 250 citizens travel to join
ISIL, by comparison.
I want to hear from our witnesses about what the United
States can do to work with Trinidad and other nations in the
region struggling with these challenges. In particular, I want
to hear what roles should the Departments of State, Justice,
Homeland Security, and the Southern Command and the Defense
Department be playing to reduce and confront radicalization.
This hearing is also an opportunity to consider the
continued illicit financial activities of Hezbollah, Iran, and
other actors enabled by some governments in the region with a
history of antidemocratic postures. I also want to hear the
current status of illicit financing and the financing of
Hezbollah, in particular.
What is its posture in Latin America today? How are
activities of Hezbollah supported by travel from Iranian
officials, particularly MOIS and the Quds Force?
More broadly, it is important to examine how our
adversaries in countries like Cuba, Venezuela, and Nicaragua
through new diplomatic military and intelligence cooperation
are affecting our standing in the region.
We will also examine the links between external actors and
the production of trafficking and selling of illegal drugs in
the Western Hemisphere and the bankrolling of global terrorist
activities. For instance, with the peace agreement in Colombia,
how are Mexican transnational criminal organizations filling
the void potentially left by the FARC?
In 2014, I led in the Senate the Hezbollah International
Financing Prevention Act of 2014 to prevent Hezbollah and
associated entities from gaining access to international
financial institutions, but there is more to be done, and I
look forward to hearing from our witnesses.
With that, I turn it over to the ranking member, Senator
Menendez.
STATEMENT OF HON. ROBERT MENENDEZ,
U.S. SENATOR FROM NEW JERSEY
Senator Menendez. Thank you, Mr. Chairman. I am glad we are
keeping the subcommittee active, exploring the myriad pressing
issues that we have in our own hemisphere even as we are
challenged by events elsewhere in the world.
Let me welcome our witnesses, Dr. Ottolenghi and Mr. Eric
Farnsworth, the vice president of the Council of the Americas
who has a great deal of expertise in the hemisphere that I have
found valuable over time.
As you and I both know, Mr. Chairman, this body and,
indeed, most of the headlines out of the foreign policy
community often overlook our own hemisphere and, by extension,
our closest neighbors and some of our most important allies.
Over the course of its history, the United States has
certainly influenced our neighbors to the south. And I will
acknowledge that this history, with some countries in
particular, is complicated and imperfect. Looking inward, it is
impossible to tell the history of the United States without the
immense influence of immigrants and migrants from the rest of
the hemisphere.
In general, over the past few decades, we have witnessed
relative stability between nations and the general trend toward
embracing democratic values that protect fundamental rights,
empower people, promote opportunity for citizens throughout the
hemisphere.
While we certainly cannot take full credit, the United
States' active engagement in the region in support of
governments transitioning from dictatorship to democracy, of
partnerships, training, and shared responsibility for
supporting democratic institutions, combating criminal
networks, of economic development programs that help foster
resilient communities, has served our national security
interests in tandem with supporting a stable and prosperous
hemisphere in general.
To consider external influences on the whole hemisphere is,
of course, ambitious in one subcommittee hearing, but there are
trends we see throughout. The United States is a constant.
So I hope we can use this hearing as an opportunity not
just to hear from our esteemed witnesses on their particular
expertise but to use this as an opportunity to highlight the
importance of American and, in this subcommittee let me say,
United States' leadership and engagement.
There are, of course, a few notable exceptions to the
trends I have spoken about. We have watched with horror and
frustration as Nicolas Maduro continues to oppress the people
of Venezuela, drag its economy and future further into the
quagmire that the Chavez legacy created. Bolstered by shady
bond purchases, Russia seems more than willing to help him in
this effort.
In Cuba, despite diplomatic efforts from the past
administration, people are still jailed for expressing their
opinions, still unable to earn meaningful incomes to improve
their lives.
As the Washington Post reported last month, Russia is
increasing its presence in Nicaragua into the welcoming arms of
Daniel Ortega. While I am not convinced we are living in a new
Cold War, we certainly have not yet fully escaped Russia's
influence here in the United States or in the hemisphere. It is
no coincidence that these countries in which citizens are
suffering, and whose fundamental human rights are oppressed,
all share an affinity for a particular country and the failed
ideology pushed in the middle part of last century.
On the other side, China, whose foreign policy objectives
in the region seem confined to trade deals, has also steadily
increased its presence in the region. China, however,
notoriously cares little for the rule of law, governance
structure, or environmental and labor protections that
ultimately secure long-term economic interests for a nation.
As we build our own trade relationships, we must prioritize
these components to best facilitate long-term mutually
beneficial relationships. Bloviating about reneging on trade
deals or throwing around threats of tariffs does nothing to
improve the economic outlook of American business. In the worst
case, it pushes our would-be partners toward other countries.
I recognize there are those who would look to Chinese or
Russian presence in our hemisphere and point out that the
United States maintains an active presence well beyond our
borders. Our interests, however, and intentions are clear. It
is rooted in our principles and values, defensively supporting
our allies in Europe, Asia, and the Middle East; seeking
investment opportunities for American businesses overseas;
supporting nations who actively seek that support; and building
democratic institutions and governance structures.
So I look forward to hearing from our witnesses their
assessments of the intentions and motivations of some of the
primary external actors in Latin America.
Mr. Farnsworth, in your written testimony, you note that
most of China's actions do not pose a direct ``threat'' per se
to the United States, but influence in soft power can be very
commanding tools.
Mr. Ottolenghi, I am curious to hear your assessment about
whether some of the actions you have studied are confined to
country-specific goals or are in pursuit of broader regional
ambitions.
I will conclude by saying that, as with the rest of the
world, American engagement, investment, and aid to the Western
Hemisphere is in our own national interests. It is our economic
interest to support the growth of vibrant middle classes around
our hemisphere who are more eager to do business with the
United States than they are with China. It is in the interests
of our national security to support stable and resilient
countries that share our democratic values and our sense of
shared security against external threats.
With that, I look forward to hearing from our witnesses.
Thank you, Mr. Chairman.
Senator Rubio. Thank you, Senator Menendez.
Dr. Ottolenghi, we will begin with you. I would, just for
the witnesses' purposes, and it is the pot calling the kettle
black as a Senator about to say this, but if we could limit to
about 5 minutes, because it gives us more time for questions.
We have your written statements. I imagine all three of the
Senators here and others who may not be in attendance have
already read it. But it is important, as there may be other
points you may want to raise throughout the testimony.
But the question-and-answer part is the one where we really
get to the heart of the matter. I know members have other
engagements as well, and you are both veteran witnesses at
these hearings.
So, Doctor, we will begin with you. Thank you for being
here.
STATEMENT OF EMANUELE OTTOLENGHI, PH.D., SENIOR
FELLOW, FOUNDATION FOR DEFENSE OF DEMOCRACIES, WASHINGTON, DC
Dr. Ottolenghi. Chairman Rubio and Ranking Member Menendez,
members of the subcommittee, I thank you for this opportunity.
The convergence of Iran-sponsored radical Islam with
transnational organized crime in Latin America should be
recognized as a serious threat to the national security of the
United States and the integrity of its financial system.
Congress and the executive branch have a panoply of tools
at their disposal to address this threat. What has been missing
is a coherent foreign policy that recognizes the importance of
Latin America as a key arena of competition with Iran and puts
in place the needed resources to blunt Iranian and Hezbollah
threats.
In his 2015 posture statement before Congress, General John
Kelly lamented that, and I quote, ``Our limited intelligence
capabilities make it difficult to fully assess the amount of
terrorist financing generated in Latin America or understand
the scope of possible criminal terrorist collaboration.''
To date, there is still no accurate assessment of how much
Hezbollah makes from illicit activities in Latin America, but
this involvement is known and growing. That needs to change.
Hezbollah's involvement in illicit trade is not just a law
enforcement problem. Behind Hezbollah stands Iran, which seeks
to leverage the group's networks to gain political influence
while helping it expand its base of supporters and protect
their illicit activities.
Iran's and Hezbollah's operation in Latin America thus
intersect and mutually reinforce one another. Both pursue goals
that are not only diametrically opposed to U.S. interests but
also clearly pose a direct threat to American national
security.
In my written testimony, I discuss specifically the case of
four Hezbollah suspects recently arrested on drug trafficking
charges in the tri-border area of Argentina, Brazil, and
Paraguay, otherwise known as TBA. They may also have been
involved in human trafficking, counterfeiting, and immigration
fraud. This adds to the growing evidence of Hezbollah's
involvement in multibillion-dollar illicit trade schemes that
often generate from the TBA and whose revenue Hezbollah seeks
to launder through the U.S. financial system.
That should be a wake-up call to Congress to make the
necessary means available for intelligence-gathering and
assessment of what is a significant national security threat.
The recent designation of Venezuela's Vice President Tareck
El Aissami under the Kingpin Act is a stark reminder of our
vulnerabilities. El Aissami was designated alongside 13 U.S.
companies he allegedly used to run his fraudulent activities
through the U.S.
Authorities froze substantial assets in his name here. That
move should worry our enemies, but it is also significant that
a Latin American politician with reported links to Iran and
Hezbollah and drug cartels felt confident enough to park his
wealth in the U.S.
Part of the problem with U.S. policies is that U.S.
sanctions against Hezbollah operatives in the TBA, the hub of
Hezbollah's illicit finance, are more than a decade old, and
those targeted are still able to travel, transact, and conduct
business as if there were no sanctions.
It is important that the U.S. rectify this state of affairs
for two reasons. Sanctioned operatives may continue to engage
in nefarious activities, and lack of sanctions enforcement
undermine their credibility in deterrence.
Another problem the U.S. needs to address, in Latin
America, Hezbollah has benefited from a permissive environment
where corrupt local officials connive with Hezbollah's illicit
finance for their own gain.
A November 2017 $1.2 billion money laundering
investigation, which a 2017 State Department report cites as
evidence of corruption in Paraguay, offers proof of ongoing
trade-based money laundering in the TBA and cover-up by local
authorities. Local sources told me that the investigated
companies were given 48-hour advanced notice about the search
warrants against them.
U.S. officials familiar with the case privately complained
of subsequent obstructionism at the highest levels of power,
preventing attempts by U.S. law enforcement agencies to gain
access to files. U.S. offers to cooperate were politely but
decisively rebuffed.
In such a corrupt environment, Hezbollah thrives. The U.S.
should demand that local governments put an end to this type of
impunity or face consequences. These could include: one, impose
designations under Section 311 of the Patriot Act on financial
institutions known to be used by Hezbollah financiers to move
the revenues; two, designate banking sectors of countries that
facilitate Hezbollah's terror financing zones of primary money
laundering concern; three, work with allies potentially through
international forums like the Financial Action Task Force to
blacklist government entities that cooperate with Hezbollah;
revoke or deny visas from those implicated in Hezbollah
activity, including local politicians who facilitate or fail to
prevent Hezbollah's illicit finance in their own jurisdiction;
engage Latin American governments to ensure they have adequate
legislative tools to investigate terrorist activities and
combat terror finance; and, finally, persuade allies in the
region to list Hezbollah as a terrorist organization.
I thank you for your attention, and I very much look
forward to your questions.
[The prepared statement of Mr. Ottolenghi follows:]
Prepared Statement of Emanuele Ottolenghi
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Rubio. Thank you very much, with one second on the
clock. Excellent.
Just as a reminder to members, the minority, as is their
right under our rules, has invoked the two-hour rule, so we
will have to conclude this hearing at 11:30. So we are going to
chop through it fairly quickly here, but I think we will have
plenty of time.
Mr. Farnsworth, thank you.
STATEMENT OF ERIC FARNSWORTH, VICE PRESIDENT, COUNCIL OF THE
AMERICAS, WASHINGTON, DC
Mr. Farnsworth. Mr. Chairman, thank you, Mr. Ranking
Member, thank you for the invitation to appear before you.
Let me also upfront thank you for your leadership on
addressing the most salient issues in the hemisphere, including
Venezuela, which is a humanitarian crisis developing before our
eyes. So thank you for your leadership in highlighting those
issues.
As requested, I will address the issue of China in the
Americas.
Let me give you, if I may, the bottom line first. China's
entrance into the Americas has been one of the most significant
developments of hemispheric affairs in this century. While
there are other important developments such as populist
governance, which may be on the way out, China's engagement is,
if anything, intensifying.
China's dramatic economic rise has necessitated new
commercial and economic partners worldwide. This has broad
implications particularly for the commodities-producing nations
in South America. Nations such as Brazil, Chile, and Peru count
China as their top trade partner. China's the second largest
trade partner of Argentina, Colombia, and others.
This has helped a number of nations to diversify their
trade relations, proving beneficial, for example, during the
global economic crisis of 2009. But because the Chinese
approach to date has been overtly mercantilistic, it has also
negatively impacted regional producers who now face
supercharged competition in manufactured products while
weighting the balance toward the production of primary goods
just when Latin America is looking to move up the value chain.
China's activities on the investment side are also having
an impact, particularly in sectors including energy, mining,
and agriculture, where China feels the need to lock in access
to supplies which sustain its economy. Of particular interest
is energy, where China is an active participant most recently
in the deep water off the Gulf of Mexico but also from
Argentina to Venezuela and virtually every regional energy
producer in between.
Increasingly, China is also looking to expand its regional
investment portfolio with a heightened focus on infrastructure
development.
Mr. Ranking Member, as you mentioned, this is not
necessarily a security threat per se to the United States,
although it does change the competitive framework; and it does
have broader implications for U.S. policy interests,
particularly as China looks to dominate industries that will
increasingly form the backbone of the global economy, including
artificial intelligence, cloud computing, and clean energy.
The Chinese investment model differs from others. To
oversimplify, Chinese entities often pay a premium above market
value for purchases in order to lock in assets. Once an
investment is confirmed, Western investment values of job
creation on the local economy, technology and management
transfer, corporate governance, respect for labor rights,
environmental protection, anticorruption, and corporate social
responsibility are not necessarily priorities.
There are larger implications as well. Progress in Latin
America to solidify democratic governance has been uneven but
generally positive. It is unquestionably in the U.S. interest
to support these efforts. China's entry into the Americas has
complicated this agenda.
For example, efforts to promote labor and environmental
reforms through sound business practices and formal trade
agreements are undermined when nations sign agreements with
China that do not include similar provisions, and Chinese
businesses are not expected to operate necessarily under the
same prevailing conditions.
Multilateral lending agencies, like the World Bank, IMF,
and Inter-American Development Bank that promote financial
reforms and good governance, become less relevant if borrowing
nations can receive funds from China or Chinese-led
institutions without conditionality.
China's huge purchases of commodities and the provision of
credits on favorable terms allow regional leaders the
flexibility to postpone necessary economic and policy reforms
consistent with open market, democratic governance, or to take
actions that even harm democracy itself. They can also embolden
anti-American leaders.
The best example, of course, is Venezuela, which today is
in the midst of a humanitarian crisis. The so-called Bolivarian
Revolution has been enabled at least in part and until recently
by high oil prices as well as plentiful external financing from
sources other than the United States and traditional
international financial institutions. Financial support from
China of well in excess of $50 billion, according to some
estimates, has allowed the Venezuelan regime to accelerate its
antidemocratic repressive course.
At the same time, China's vision for the region is
expanding. While engagement heretofore has primarily been
economic and educational, such as language training through
exchanges and its regional Confucius Institutes, there are
indications that political and security considerations,
especially on cyber issues, are also growing in importance.
China issued its latest policy paper on Latin America and
the Caribbean on November 24, 2016, which is a serious and
ambitious effort to strengthen ties with the region from trade
and economic development to space cooperation, to health care
and global epidemics, and global governance.
This means that the United States must do a better job
contending for the region. We need a more strategic approach
based on the values that we hold dear and that we share with
the majority of citizens across the Americas.
Let me put this as succinctly as I can: The street
protesters in Venezuela who seek outside support to end
repression and restore democracy do not write their banners in
Chinese or Russian or Persian. Protesters against the Castro
regime do not fly the Chinese or Russian or Iranian flags
during May Day parades.
The example of the United States remains powerful for the
citizens of the Americas. That is, so long as we do not forget
that the promotion of our traditional values supports rather
than undermines U.S. national security efforts, and we work to
promote them.
In many cases, Latin Americans and others prefer the United
States as a more natural partner than China. But as is often
said, you cannot beat something with nothing. China is playing
a multidimensional game. The United States should seek to
compete on the playing field of greatest advantage to us,
namely democratic governance and meeting the common aspirations
of the people of the region.
Meanwhile, we would also do well to reactivate an ambitious
economic partnership agenda for the hemisphere focusing on,
among other things, energy and agriculture, as well as the rule
of law and anticorruption.
We also need to reconsider the regional paradigm, frankly,
that limits actions to the lowest common denominator as a means
to achieve regional consensus on most issues, which has become
essentially a straightjacket to U.S. policy implementation.
Broadly speaking, a reenergized approach to the region, in
my view, is required.
Mr. Chairman, thank you again for the opportunity, and I
look forward to your questions.
[The prepared statement of Mr. Farnsworth follows:]
Prepared Statement of Eric Farnsworth
Good morning, Chairman Rubio, Ranking Member Menendez, and Members
of the Subcommittee. It is a privilege to appear before you again
today. Let me also thank you, up front, for your strong, bipartisan
leadership to promote hemispheric democracy and to address the
worsening political, economic, and humanitarian crisis created by the
Chavista regime in Venezuela.
As you know, the Council of the Americas (``Council'') is a leading
policy voice on Latin America, the Caribbean, and Canada. For over 50
years, our mandate has been to promote democracy, open markets, and the
rule of law throughout the Americas.
Thank you for the invitation to appear before you to discuss the
very important topic of emerging external influences in the Western
Hemisphere. As requested, I will address the issue of China in the
Americas.
china's presence in the americas is recent but already well established
Mr. Chairman and Mr. Ranking Member, let me give you the bottom
line first: China's entrance into the Americas has, in my view, been
one of the most significant developments in hemispheric affairs this
century. And, while other important developments such as the siren call
of populist governance may be on the wane, China's engagement is, if
anything, intensifying.
China's dramatic economic rise has necessitated new commercial and
economic partners worldwide, to procure the raw materials needed to
fuel China's domestic growth while opening new markets abroad both to
sell finished products and also to invest significant dollar and other
international hard currency reserves. This has broad implications
particularly for the commodities producing nations of South America,
which have benefited from sales to China and other developing markets.
Nations such as Brazil, Chile, and Peru count China as their top trade
partner; China is the second largest trade partner of Argentina,
Colombia, and others. This has helped a number of nations to diversify
their trade relations, proving beneficial, for example, during the
global economic crisis of 2009. But because the Chinese approach to
date has been overtly mercantilistic, it has also negatively impacted
regional producers who now face supercharged competition in
manufactured products from China, while weighting the balance toward
the production of primary goods just when Latin America is looking to
advance upward along the value chain.
China's activities in Latin America on the investment side are also
having an impact. In the first instance, some of the promised
investment has not yet materialized, leading to unmet expectations.
Still, investment is flowing and it is increasing, particularly in
those commodities sectors including energy, mining, and agriculture,
where China feels the need to lock in access to supplies which sustain
its economy. Of particular interest is energy, where China is an active
participant, most recently in the deep water of the Gulf of Mexico, but
also from Argentina to Venezuela and virtually every regional energy
producer in between. China is also looking to expand its regional
investment portfolio with an increasing focus on infrastructure
development.
all investments are not made equal
This is not at this point a security threat per se to the United
States, although it does change the competitive framework for investors
and it does have broader implications for U.S. policy interests
particularly as China looks to dominate industries that will
increasingly form the backbone of the global economy, including
artificial intelligence, cloud computing, and clean energy.
The Chinese investment model differs from others. To oversimplify,
Chinese entities often pay a premium above market value for purchases,
in order to lock in assets. Once an investment is confirmed, Western
investment values of job creation on the local economy, technology and
management transfer, corporate governance, respect for labor rights,
environmental protection, anti-corruption, and corporate social
responsibility are not necessarily priorities. This can unfairly put
U.S. and other companies at a disadvantage by lowering the costs of
Chinese production vis-a-vis the competition.
But there are larger implications, as well. Since the end of the
Cold War, Latin America has worked diligently to promote democratic
governance. Progress has been uneven but generally positive; it is
unquestionably in the U.S. interest to support these efforts. Open
market democracies that broadly share values tend to make the best
long-term partners of the United States in the promotion of shared
interests. China's entry into the Americas has complicated this effort,
not just in the conduct of business but also in the conduct of foreign
policy.
changing the calculus for policy implementation
For example, efforts to promote labor and environmental reforms
through sound business practices and formal trade agreements are
undermined when nations sign agreements with China that do not include
similar provisions, and Chinese businesses are not expected to operate
under the same prevailing conditions. Multilateral lending agencies
like the World Bank, IMF, and Inter-American Development Bank that
promote financial reforms and good governance become less relevant if
borrowing nations can receive funds from China or Chinese-led
institutions without conditionality. China's huge purchases of
commodities and the provision of credits on favorable terms allows
regional leaders the flexibility to postpone necessary economic and
policy reforms consistent with open market, democratic governance, or
to take actions that harm democracy itself. It also emboldens anti-
American leaders to pursue policies at home and across the region
contrary to U.S. interests.
The best example is Venezuela, which today is in the midst of
humanitarian crisis. While it is clearly the responsibility of Hugo
Chavez and the course that he and his followers including Nicolas
Maduro have set, nonetheless the so-called Bolivarian Revolution has
been enabled, at least until recently, by high oil prices as well as
plentiful external financing from sources other than the United States
and traditional international financial institutions. Financial support
from China of well over $50 billion, according to some estimates, has
allowed the regime to accelerate its anti-democratic, repressive
course.
At the same time, China's vision for the region is expanding. The
upcoming May 14-15 Belt and Road Initiative meeting is just the latest
high level diplomatic initiative that will include Latin America; at
the APEC meetings last November in Lima, Peru, which I attended,
China's leader Xi Jinpeng went beyond the usual methodical courting of
the region by publicly laying out a strategic approach to Latin America
that, if fully realized, would position China as a new guarantor of
open markets and international governance in the Asia-Pacific region.
During the November visit, Xi strongly supported renewed progress
toward the long-stalled Free Trade Area of the Asia Pacific, an
initiative until recently subsumed by the now-shelved Trans-Pacific
Partnership, he worked to build momentum toward the Beijing-led
Regional Comprehensive Economic Partnership which is a roadmap for
trade and economic linkage within Asia that excludes the United States,
and he offered the Asian Infrastructure Investment Bank as a partner
for infrastructure and other initiatives in Latin America, adding to
pre-existing Brazilian membership in the BRICS Bank. In addition to his
State Visit to Peru, he also declared Ecuador and Chile to be
``comprehensive strategic partners'' of China. Soon after, on November
24, 2016, China issued its latest Policy Paper on Latin America and the
Caribbean, a serious and ambitious effort to strengthen ties with the
region from trade and economic development to space cooperation to
healthcare and global epidemics to global governance.
a competitive commercial environment calls for a more strategic
approach
China's interest in the Americas will continue to develop rapidly,
as it has since the beginning of the century. And, while China's
engagement heretofore has primarily been economic and educational, such
as Chinese language training through exchanges and also its regional
Confucius Institutes, there are indications that political and security
considerations, especially on cyber issues, are also growing in
importance. This means that the United States must do a better job
contending for the region. We need a more strategic approach based on
the values that we hold dear and that we share with a majority of
citizens across the Americas. Let me put this as succinctly as I can:
the street protesters in Venezuela who seek outside support to end
repression and restore democracy do not write their banners in Chinese
or Russian or Persian. Protesters against the Castro regime do not fly
the Chinese or Russian or Iranian flags during May Day parades. The
example of the United States remains powerful for the citizens of
oppressive regimes in the Americas. That is, so long as we do not
forget that the promotion of our traditional values supports rather
than undermines U.S. national security efforts and we work to promote
them.
the united states remains the preferred regional partner
In many cases Latin Americans and others prefer the United States
as a more natural partner than China, given history, economic
opportunity, geography, culture, language, and values, but
circumstances going forward will dictate policies and actions. As is
often said, you can't beat something with nothing. The APEC meetings in
Lima clearly showed that strategic economic and political re-evaluation
if not realignment is underway. China is playing a multi-dimensional
game. That is even more reason why we should seek to compete on the
playing field of greatest advantage to us, namely, democratic
governance and meeting the common aspirations of the people of the
region. And we should not be shy about speaking out on principle when
required, ideally with the coordination and support of regional allies
and also the Organization of American States.
Meanwhile, the United States would also do well to deepen further
not alienate our economic relations with Canada and Mexico, nations
that engage in common business practices with the United States and
Europe, as partners in the promotion of a common agenda that share
common values. More broadly, we also need to re-activate an ambitious
economic partnership agenda for the hemisphere. Rethinking U.S. support
for the Trans-Pacific Partnership gives us an opportunity now to re-
envision a strategic initiative for the Americas, not just Asia.
Initiatives would include stronger emphasis on energy and agriculture
partnership, as well as the rule of law and anti-corruption. We also
need to reconsider the regional paradigm that limits actions to the
lowest common denominator as a means to achieve regional consensus on
any issue, a paradigm that has become more of a straightjacket to U.S.
policy implementation. And, we need to build on previous bi-partisan
successes, including movement toward full and lasting peace in
Colombia, and also a more effective approach to addressing the deep
security, economic, and social concerns in Central America while
maintaining security commitments to Mexico and the Caribbean.
The battle for the soul of Latin America continues. If anything,
the United States is potentially better positioned than we have been
for some time given recent changes in regional governance and the
decreasing allure of populism. But China's entrance into the Americas
has changed the game. The United States must engage in a positive, pro-
active manner to offer the region a vision for cooperation consistent
with our values. A re-energized approach to the region is required.
Mr. Chairman, thank you again for the opportunity to testify before
you this afternoon. I look forward to your questions.
Senator Rubio. Thank you, Mr. Farnsworth. You have shamed
yourself here today. You went a minute over. The doctor was a
second under. Of course, I am joking.
Again, I thank you both for your testimony. I am going to
defer to the ranking member.
Let me just say I am glad that Senator Gardner is here. He
has numerous responsibilities today. He has been a leader on
the issues of the Asia-Pacific region. What is interesting is
the interplay between the Asia-Pacific region and the Western
Hemisphere, in particular with China. So I know he has another
meeting he has to get to, but his presence here today shows how
all these things are interlinked.
The ranking member.
Senator Menendez. Thank you, Mr. Chairman.
Thank you both for your testimony. There are so many
avenues here to pursue.
I know that listening to you, Mr. Farnsworth, about China,
it sounds like we are in a competition in economics. I get
that, but in some respects, whether purposely or not, China's
engagement in investments are more nefarious, in my mind. For
example, they do not observe the Foreign Corrupt Practices Act,
which American companies do. And in that reality, as well as in
giving money without conditionality, it changes the dynamics of
what we want to see countries do in the hemisphere, so that
while I have always been an advocate for American business and
investment in our hemisphere, in the interests of U.S.
businesses and the jobs that are created from them and the
profit that can be derived, I also have always viewed a
corollary to that is the better business practices that U.S.
businesses bring, the preserving of the Foreign Corrupt
Practices Act, in essence, all of those elements of good
governance, in a sense, that they contribute in the countries
that they engage in. China does not really care about that.
So when we are competing with the Chinese in the
hemisphere, the challenge is not just, in my mind, an economic
one, but it is the influence that they extend undermining the
very essence of principles that we want to see countries build.
Is that a fair concern?
Mr. Farnsworth. Thank you for the question. I think that is
a keen observation. I would say that is not the intent of
Chinese investment into the Western Hemisphere. I mean, their
intent is to, in some cases, deploy the massive reserves of
foreign capital that they have and to put it to productive use,
whether it is in Latin America or Africa or East Asia or what
have you.
That is legitimate, but the implications of that are, Mr.
Ranking Member, as you implied. So what we are seeing across
Latin America is, in countries with strong institutions, we see
a recognition that sometimes the investment might look good on
paper but the implications for some of the values of Latin
Americans that we hold dear as well can be undermined. So you
are seeing some pushback. You are seeing some legislation. You
are seeing some recognition that all investment is not created
equal.
You are also seeing the Chinese, in my view, move up the
learning curve. They recognize that Latin America is different
from other parts of the world and that there are expectations
along the lines that you are indicating. So it is an evolving
process.
Senator Menendez. It is challenging when you want to have
the Inter-American Development Bank and the World Bank
promoting some critical core values in governance and rule of
law opportunities as well as economic development. If I have to
live with the burden of this and I can have this without the
burden, human nature is it is going to go to the least
consequential response. I look at this, and I look at it in a
combination of different ways.
Why does China, and for that fact Russia, make huge
investments in a country like Venezuela who clearly is on a
huge downward spiral economically, as well as in terms of civil
unrest and human rights and democracy of its people?
Senator Rubio and I recently sent a letter to the Treasury
Department about Russia's state-owned oil company Rosneft's
stake in Venezuela's state-owned oil company, PDVSA. But China
has also provided financial support to Venezuela, as you
mentioned in your remarks.
So when you see a country that is ultimately taking its
most significant national asset, which is its oil, to PDVSA,
sells nearly 50 percent of it, potentially, to Russia, to
Rosneft, if it defaults, Rosneft will own 49.9 percent plus
whatever they purchase on the open market, which very well
could lead to a 50, 51 percent ownership. And they own Citgo in
the United States of America, which has very significant oil
infrastructure in our country. And then that is just the
Russian side. Now the Chinese come in and invest a lot of
money.
Other than raw material, are there other concerns that we
should have? I invite either one of you to make a comment about
that.
Mr. Farnsworth. Let me just make a brief comment, and then
if my colleague would care to as well.
I think the China and Russia situation is different.
China, because of its own domestic issues, has been looking
worldwide to find and procure guaranteed access to natural
resources wherever they are, and Venezuela has the world's
largest supply of oil. So, by definition, China is going to be
interested in that and has been playing a long game in
Venezuela.
I do not think that China is particularly enamored with the
leadership in Venezuela. In fact, I think that they would
prefer something different, but they are not there for
political purposes. They are there for natural resources, just
like they are in other countries in Latin America for similar
purposes.
One of the things that we found is that the Chinese
investors do not really care that much about the governments in
the countries that they are operating in, so long as they are
allowed to do business and so long as they are allowed to get
the upside from that that they are looking for.
From the perspective of, what does that mean? Well, it
means they have invested a whole lot of money in the country
that they may not get back but they have amortized that against
future deliveries of oil.
So from the Venezuelan regime, it makes a lot of sense,
because they get the money up front. They spend it for their
own political purposes. And then they give the bill to a later
generation of Venezuelans, and it is all good for them. So it
is a marriage of convenience.
Senator Menendez. I worry about the continued--when the
bill comes due----
Mr. Farnsworth. Absolutely.
Senator Menendez.--and Maduro is not in power anymore, what
China will demand of the future governance of the country.
Mr. Farnsworth. I think that is fair.
Senator Menendez. I have more questions, but I will wait.
Thank you.
Senator Rubio. Senator Gardner?
Senator Gardner. Thank you, Mr. Chairman.
Senator Rubio and Senator Menendez have been leaders on
this issue, and I thank you for the partnerships we have been
able to forge as it relates to China and other activities
around the globe.
China has provided Venezuela with over $60 billion in
financing over the past decade--you have talked about that--
most recently a $2.2 billion loan for oil development in
November 2016. News events talk about involvement of fake news
in Europe, elections, hacking, the United States, Russia's
involvement in placing news stories in the United States.
To what extent does the Chinese Government participate in
those kinds of activities in South America, Venezuela in
particular, providing either antidemocratic government
assistance, any signs of that in what you see, and how the U.S.
can play a role in pushing back?
Mr. Farnsworth. I personally do not see that. China has a
very robust global effort in terms of media and in terms of
news. I personally have not seen an overt effort to promote,
for example, the Maduro regime in Venezuela.
Again, from my perspective, China's interests in the region
have primarily been economic. In fact, what they have tried to
do assiduously is to stay away from the politics of the region
because they do not want to get wrapped up in it. That is not
why they are there. They are there to do business and benefit
themselves.
At some point, that bleeds into politics. We have been
talking about that a little bit, but that overt engagement is
something that, from my perspective, they try to avoid.
Dr. Ottolenghi. If I may add, sir, the actor that is
perhaps most actively involved in Venezuela and also elsewhere
in Latin America in promoting strident antidemocratic values
and a very militant anti-American rhetoric and posture is the
Islamic Republic of Iran. And for the Islamic Republic of Iran,
Venezuela is perhaps the closest ally alongside Evo Morales of
Bolivia in Latin America.
It is Iran's forward operating base. It is the place where
the Iranian missionary network really has begun building its
own infrastructure. It is the place where the Iranian regime
launched its Spanish-language propaganda network, Hispan TV, in
2012. That network shares a considerable amount of human
resources, starting from journalists and production material,
with TeleSUR, which is the Venezuelan equivalent.
Some of that propaganda spills over into other areas of the
world. There is clear evidence of connections between the
Spanish propaganda network for Latin America and its use in
Spain, so that is a bridge into Europe.
Therefore, I think from an ideological perspective, the
focus of concern should really be Iran.
Senator Gardner. Thank you. Admiral Kurt Tidd, the
Commander of SOUTHCOM, stated in SOUTHCOM's 2017 posture
statement to Congress that China, and I quote, ``cooperates
with Latin America on space, potential nuclear power projects,
and telecommunication networks, which could pose security
concerns to the United States.''
Could you talk a little bit about Admiral Tidd's comments?
Mr. Farnsworth. He is accurate, and China is not shy about
saying that. In their most recent policy paper toward Latin
America, which was released late last year in November, space
cooperation was clearly one of the aspects of priority.
Latin America, in some ways, sees this as good for
themselves. It transfers technology. It gives them the
opportunity to participate in some of these issues.
Again, I think we have to see what the real intent is
there. The question of cooperation toward technology and toward
space exploration is, on its face, potentially dual-use. But I
think we have to recognize where that may or may not be going.
So, yes, it is a very open part of their strategy. And if
you look at what the Chinese have laid out very publicly, it is
a comprehensive approach to Latin America.
Now not all of the commitments that China has made over
recent years have come to pass, particularly announcements of
multibillion dollars of investment. You get the news reports
and you get the media, but those investments do not always
necessarily flow. So we have to see what actions follow these
words.
To the extent that it does become dual-use and becomes a
threat to the United States, we certainly have to be aware of
that.
Senator Gardner. Dr. Ottolenghi, if you would like to
comment?
Dr. Ottolenghi. The only thing that I would like to add,
again, in relation to Iran, is, of course, especially during
the sanctions era and perhaps at the height of the Venezuelan-
Iran bilateral relation with the late Chavez and the former
President Ahmadinejad of Iran in power, and their very close
relationship, Venezuela was used by Iran not just for sanction
evasion in the financial sector but also for joint projects in
the missile program.
These projects, as far as I am concerned and as far as I
can tell, are still ongoing. Their relationship is not just
economic and ideological. There is obviously a clear component
of military and technological cooperation, which should
continue to be monitored.
Senator Gardner. Dr. Ottolenghi, in terms of the sanctions
lifting under the Iran nuclear deal, what kind of uptick did
you see in that activity in Venezuela?
Dr. Ottolenghi. It is interesting to see that during the
entire duration of the Rouhani presidency, while the
negotiations were ongoing, you did not have the same level of
bilateral visits and delegations from Venezuela to Iran and,
more importantly, from Iran to Venezuela occurring at the same
speed and seniority you saw during Ahmadinejad.
That combined with the fact that the volume of trade
between Iran and Latin American countries, and the fruition of
a lot of the projects that were signed during that era did not
happen, was interpreted as a sign that Iran's interest in the
region may be waning or perhaps that the failure of all those
ambitious projects to come to fruition indicated a
disenchantment by Latin American leadership towards the
Iranians.
I see a very different picture. First of all, since the
agreement was signed, you have seen important visits by
President Rouhani, by Foreign Minister Zarif to the region.
Beneath the surface, the amount of formal diplomatic relations
and also what you could call nongovernmental relations that, in
those countries are really sort of driven by the regime through
nonofficial means, have continued at pace.
We see a continuation of investment by Iran in the region.
We see a continuation of dedication of resources by the Iranian
regime in the ideological struggle, in the export of the
revolution. They see a priority in the region to flip countries
to their side. We see the transfer of funds and political
support to anti-American movements in the region, and certainly
the continued partnership with Bolivarian regimes and anti-
American regimes.
So I think that the overall assessment is that the
infrastructure the Iranians created during the sanctions era
and the infrastructure that Hezbollah continues to develop,
particularly its partnership with organized crime, are there
and are being leveraged as need be.
Senator Gardner. Thank you.
Thank you, Mr. Chairman.
Senator Rubio. Thank you.
I have a quick meeting to attend to in the anteroom, so I
know Senator Menendez, the ranking member, has a couple
additional questions. I am going to turn it over to him, but I
am not leaving. I will be back.
Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman. I am not going
to ask unanimous consent for anything.
Senator Rubio. Objection.
[Laughter.]
Senator Menendez. I have a question. I know neither of you
are Russia experts, but maybe you can shed light or thoughts.
Russia's recent actions in Nicaragua, as reported in the
Washington Post last month, the article cites a number of
officials who think that this new ground tracking station
ultimately is to be used to increase Russian influence or
surveillance of Americans and/or the United States. Do you have
any insights into that? Any perceptions?
Mr. Farnsworth.
Mr. Farnsworth. Thank you for the question. I also saw the
report, and I suppose that is certainly a possibility. I do not
have access to the intelligence, which I think would probably
paint a clearer picture.
From my perspective, the Russian engagement in Latin
America, since the Cold War but until now, has essentially been
tactical and it has been a way to promote, particularly in the
arms industry, arms sales and the procurement of hard currency.
A lot of what was sold to Venezuela was clearly not for
Venezuelan military interests. They do not need any of that
material except to impress their own citizens. But the Russians
are very happy to sell it because it brings hard currency to
industries that they want it to support.
We have seen a lot of that. It did not seem to have much of
a political component. To the extent that there is a benefit to
the regime in Venezuela, okay, they probably are reasonably
happy about that. But what we may be seeing a little bit more
of now is a more robust presence of Russia into the region. It
is hard to speculate on what the purpose of that may be.
But from my perspective, I do not necessarily see it
because they want to return to the Cold War or have Latin
America as their chief allies, but rather, frankly, to annoy
the United States and to keep track on some of the things we
may be doing because of what they perceive us to be doing in
some of the countries around them and in Europe. So it is a way
to kind of play part of the global chess game with Latin
America, again, as the playing field.
Senator Menendez. That is interesting. I hope it is only
that. An annoyance is an annoyance.
By the same token, I wonder what Ortega is thinking about
when he has an MCC agreement with the United States that has
served Nicaragua well, to be inviting the Russians in for a
monitoring and tracking station. I do not think it is for other
neighbors in the hemisphere except for the United States.
So it makes me wonder whether or not sometimes, whether it
be China, whether it be Russia, whether it be Iran, that the
way in which they seek to use their economic influence is far
different than the way we seem to. We seem to be pretty up and
up in the way in which we use our influence. But they seem not
necessarily to care about those elements of using their
influence.
I sometimes get concerned that, in our desire to have good
governance and rule of law, which I am a big supporter of,
human rights, democracy, that we do not use, in pursuit of
those goals, our economic levers sufficiently enough to engage
countries, because I would be looking at Ortega, if there is a
new compact to be reviewed or the conditions of this compact,
and say, what are you doing?
Would that be an unfair use of American power?
Mr. Farnsworth. I do not think it is unfair at all. I think
it is entirely within our rights to take a look at how we are
spending our money, our taxpayer money.
Senator Menendez. Dr. Ottolenghi, last question, do you see
the concerns that you have raised as it relates to Iran,
Hezbollah, and related entities as a foothold? Or do you see a
greater regional ambition? And if you see a greater regional
ambition, do you see the work being laid, the foundation being
laid, to fulfill that greater regional ambition?
Dr. Ottolenghi. Thank you for your question, which is a
very important one. I do see both points playing out. The
networks that Hezbollah is building, developing, expanding,
enhancing in Latin America serve mainly the purpose of
maintaining the loyalty of expatriate communities there on the
one hand, and provide steady flows of financial support for its
operations back home.
So there is, of course, a political dimension there to
ensure that the local powers that be will leave this operation
in place, will not try to dismantle them, will not interfere
with them.
There is a concerted effort to use the money that these
networks yield to buy political influence and to ensure
impunity. That, of course, has an impact on the quality of
governance in the specific countries.
There is also a broader design when it comes to Iran. That
is Iran views the entire region as a place where American
influence can be pushed back and rolled over. They believe and
they have always believed the operation that the Iranians
mounted in Latin American began in the early days of the
Iranian Revolution.
The first envoy that was dispatched for this purpose came
to Buenos Aires in 1982, and the idea was that Latin America is
a fertile ground for the export of the revolution because there
are both governments and movements which are wedded to a
similar political agenda of diminishing U.S. influence in the
region, of fighting Western imperialism, as they call it. The
Iranians viewed that perhaps as the most promising area for the
export of the revolution.
At some point in the process, they also realized that they
could somehow expand and export not just revolutionary values
but their faith as a vector to fulfill the revolutionary ideals
of Latin America.
So in a way, they repackaged the Shia iconic founding
figure of Hussain as an Islamic variant of Che Guevara and
built a whole panoply of tools to promote this idea and to
actually recruit people to their cause.
This is a four-decade-long project that is ongoing. There
is actually literature produced by the people involved that
says Latin America is a continent that, 500 years ago, was
conquered by the Catholic religion in less than a century
through violence and conquest at times. We can do it too.
So I think the design there, the project, is a lot broader.
It is strategic. And the target is to push back American
influence in the region and export the values of the Iranian
Revolution.
Senator Rubio. Thank you.
So as a continuation here, unless any other members appear,
we will spend the next 20 minutes pretty much off the clock
back and forth here on a dialogue and go from there.
Senator Menendez may need to go somewhere. But if he is
here, I am more than happy for him to jump in.
We have a lot of topics to cover. I want to start
particularly with Venezuela. We talked a lot about outside
actors. If you look at their financial situation, their debt
service, which they have a real problem making, the financing,
their ability to make those payments appears to be coming from
three sources at this point. One is private banks, whether it
is an investment bank or a broad multinational. The hope there
is that we can make and send a very clear message to these
banks that they are active participants in funding repression
when they conduct that sort of financial transaction.
But the other are state actors--Russia and China. I think
both of these nations, despite their interests in creating a
foothold in the hemisphere, also want to get paid. They want
their money back. They do not view this as a gift. They view it
as a loan that gives them influence, but they want their money
back. Particularly in the case of Russia, they cannot afford to
be making loans that do not get paid back. In the case of
China, I have found that nothing offends them more than the
loss of face, and to basically be making bad loans that do not
get paid back is a face-losing embarrassment.
How would you advise members of the Senate and the Congress
about articulating that message, because here is the bottom
line: China and Russia are lending the Maduro regime money that
is never going to be paid back. They are never going to get
that money back.
I understand that the hope of shaming them into not funding
a repressive regime, that standard is probably too high to meet
in the case of Russia and China. But I do think they understand
not getting paid back.
So how would you best argue to them? Or what is the best
strategy that you would advise us on moving forward to let both
of those nations know that not only is this something that
affects our bilateral relationship with them but they are not
going to get paid? I mean, these guys simply do not have the
funds and the resources to pay them, and they are going to
eventually default one way or the other, and they are going to
get stuck with this bill.
Mr. Farnsworth. If I may, Mr. Chairman, I think this is a
fundamental question that you have hit on. This is why I keep
saying that China's fundamental or primary interest in the
Western Hemisphere is pragmatic. They want what they need to
fuel their own economy. They are not that interested in the
politics of the country in which they are engaged, so long as
they are able to do business. Part of doing business is getting
paid, obviously, just as you have articulated.
So from the perspective of an outside observer, I think,
first of all, the United States--certainly the Senate but also
the executive branch--should be in active dialogue right now
with China, and I have been urging this for a long time, that
China has a huge interest in Venezuela for precisely the
purposes you have said, and to bring China into the discussion
of not just debt repayment but what comes after the Maduro
regime, because from my perspective, the best workout plan that
you are going to be able to get for international creditors for
Venezuela will be with an opposition that is in power, that is
democratically elected, and that is sustainable and has the
authority of the Venezuelan people to meet its debts.
Now it is unclear whether they will be able to meet all
their debts. There may be a haircut that is required. Who
knows? That is down the road.
But from my perspective, I would work with the Chinese to
say, look, let's work this out together. But the current path
is unsustainable. So the earlier that we have free and fair
elections in Venezuela, the earlier that we have the political
prisoners released, the earlier that there is a sustainable
government in place, the better prospects we together have for
getting paid.
Now I think the Russian scenario is different, as we have
discussed. I think they do have more of an interest in terms of
the government in power, but they have also a different debt
profile with reference to Venezuela, and it is less of the
official loans and it is more direct engagement in the energy
sector.
But to me, the most viable outcome for economic gain of
debtors is a viable, democratically-elected government in
Venezuela, and we do not have that right now.
Senator Rubio. Doctor.
Dr. Ottolenghi. Thank you, Mr. Chairman. I do have an
additional point to make with regard to Iran in Venezuela,
rather.
During the sanctions era, Iran used Venezuela as a money-
laundering place, as a place to evade sanctions. The entities
that Iran created with Venezuela jointly for this purpose were
delisted under the nuclear agreement. I think that gives us
leverage because the Iranians do not have any desire to see
entities relisted. That is something that could be used as a
threat to diminish their involvement.
The second point that I would make is that, of course, the
Venezuelan regime has plundered its own natural resources in
partnership with Iran and others by using these tools, and it
is also getting revenues by increasingly becoming involved with
drug cartels. The revenues from those illicit activities that
we have seen in the case of Vice President El Aissami end up
often in the financial system of the United States.
So here you have additional leverage going after these
assets, going after more individuals in the Venezuelan regime
involved in this type of illicit activities on the side, going
after entities that the Iranians have created, including joint
ventures in the industrial sector as sanctionable activities
that support the Maduro regime and are complicit in the
repression inside the country.
Senator Rubio. As an additional point on this topic, we are
talking about external factors from outside the Western
Hemisphere, but these are somehow interrelated also within the
Western Hemisphere.
In the case of Venezuela, one of the external actors within
Venezuela is the Government of Cuba, which has both provided
sort of expertise and personnel on the intelligence, passport,
internal security side and also all sorts of logistical support
on intelligence and the like. One of the phenomena that has
emerged from that is the so-called colectivos, or these citizen
militias, for lack of a better term, who, in many cases, are
well-armed and sometimes actually undertaking much of the
repression that is now going on.
I think there is a broader conversation to have about what
happens down the road even when those groups spin out of
control. In essence, there will come a point when those groups
establish, if they have not done so already, an independent
character independent of state control so that Maduro cannot
even control them anymore or tell them, even if he wanted to
tell them to stop, he would not be able to. You could foresee a
conflict between these groups and, for example, the national
guard.
But in the interim, when you have a bunch of well-armed
individuals in the street, they also need to make a living.
When the Venezuelan Government is no longer able to pay them to
conduct repression, then what happens? Then these groups turn
to illicit means. You now have well-armed individuals who
perhaps initially entered this for purposes of money and/or
ideology who now understand how to use weapons, how to conduct
violence, and are looking forward a revenue source, and the
experience of that in the hemisphere has been they turn to
illicit activities such as drugs and trafficking and the like.
Further complicating it is the possession of sophisticated
weaponry. For example, there is a Miami Herald article from the
24th of April this year. It talks about the Venezuelan
Government's decision to arm civilians to defend the country's
socialist revolution is rekindling fears of terrorist and
criminal organizations acquiring part of the nation's arsenal,
which includes a large stockpile of shoulder-fired surface-to-
air missiles.
I would say that we may not view this as an external factor
per se. It is something that an external actor, be it a
transnational criminal group or an international terrorist
organization looking to buy such weaponry, could take advantage
of, and perhaps is a topic that is unfair because it is an
emerging topic and one that neither one of you perhaps has
spent a tremendous amount of time on. But your initial
impressions about whether that is something that is speculative
or the existence of a large amount of weaponry in the hands of
individuals looking to make a buck, isn't that always a recipe
for disaster in terms of whether it is an outside actor coming
in and buying them or those groups using it to fund other
activities, to conduct other sorts of activities within the
region?
Mr. Farnsworth. Mr. Chairman, I do not think that is an
idle concern at all. I think that is a very real concern.
In fact, it is precisely the phenomenon we saw in Central
America coming out of the civil wars in the 1980s and early
1990s.
You had peace processes. You had peace accords. But you
also had a number of generally young men with no marketable
skills except the ability to pull a trigger and live on the
local economy. Once they could not find jobs in 1995, 1996,
1997, many of them began to turn to gangs and began to turn to
crime to sustain themselves.
As we know, Central America right now is wracked with some
of the highest criminal rates certainly in the hemisphere but
even worldwide. This is a real problem that we are all
wrestling with now in terms of financial support and other
things to try to help resolve that issue.
That developed out of the peace accords that were not
necessarily fully implemented but, nonetheless, even to the
extent they were implemented, did not touch all of the
combatants and provide a way to make a living in the legal
economy. So that is not an idle concern at all.
The other issue that I would mention, you brought Cuba into
the conversation. I think that is precisely right. It is
fascinating to me how many of the people who are so quick to
condemn the possibility that the United States might do
anything on Venezuela as interventionism then are precisely the
same people who turn a blind eye to what Cuba has clearly been
doing in Venezuela now since President Chavez was elected at
the end of the last century. So that is a double standard that
I wish did not exist, but I think you are right to point it
out.
Dr. Ottolenghi. If I may just add, Mr. Chairman, watching
the dramatic images of repression that come through social
media from Venezuela, I cannot help but see the similarity in
the images with the repression we saw in 2009 right after the
fraudulent elections in Iran that brought Ahmadinejad to his
second term.
The militias that you refer to do not only benefit from
training by the Cubans, but they seem to follow the model of
the Basij popular militias that Iran has created as a kind of
passive defense, a popular defense army in the country, which
is designed specifically to counter and put down civil
opposition, organized civil opposition.
In Iran, it worked very well, and part of the reason why
the Iranians have advised the Chavez and then the Maduro
regimes on this issue is that they know how to put down a
revolution because they successfully produced one in their own
time. I think that that highlights the problem of the external
interference you have, but it should also invite some measures
well short of the kind of interventionism that America often
unfairly is accused of, namely to, again, use economic warfare
against those in Iran and perhaps in other places closer to
home such as Cuba that are dispatching military advisers that
are providing the weaponry and the financial resources to make
these militias operate.
Senator Rubio. So we have about 9 minutes left before
turning into pumpkins. So let me try to cover three quick
topics. They are all important.
The first is, when we speak about Iran, one of the things
people do not realize is part of their statecraft is
asymmetry--in essence, the asymmetrical ability to attack the
United States. Both of you alluded to it in your testimony.
What that means, for people who may not be aware of the
terminology, is they are not going to try to build 10 aircraft
carriers. What they are going to try to do is to have cells or
groups, friendly and under their direction, throughout the
world who, in the case of conflict with the United States or
the West, could conduct attacks in the homeland. Obviously, the
Iranian regular army or even the Quds Force cannot transplant
10,000 fighters to come into somewhere in the United States and
fight us, but they could potentially flip a switch and give the
signal for groups they have implanted in the region and
throughout the world to attack us.
One of the places where we are concerned that would occur
is here in the Western Hemisphere where individuals and/or
cells and capacities, be it through safehouses or the like,
have accumulated either weaponry or explosives or both, and
personnel with the capacity that at a moment of conflict could
conduct attacks against the United States and/or its interests
in the region, potentially in the homeland benefiting from
visa-free travel to attack us.
That is something we do not talk about nearly enough, but
that remains a threat that we should be vigilant of.
Perhaps both of you could comment on that briefly, so in
the 8 minutes we have left we can get to the other two.
Dr. Ottolenghi. Thank you for your question. It is a very
important point.
Again, I would like to refer to a case I discussed more
extensively in my written statement of a recent arrest in
Paraguay of a suspect Hezbollah trafficker. The individual in
question was arrested a month ago. He is in custody. In
addition to being a drug trafficker, it turns out he was
accredited by the local ministry of immigration as a mediator
to facilitate applications for permanent residency and
citizenship, which is fairly easy to obtain through a small
investment to begin with.
The rumor from sources down there is that this individual
was involved in as little as 500 and possibly many more
applications throughout the years by Lebanese men, mostly,
coming from South Lebanon to reside permanently and to get
involved in business locally along the frontier between
Paraguay and Brazil, which is, of course, a hub for illicit
funds for Hezbollah.
So here is the concern. The concern is that the networks
that are in place, which could help the Iranian asymmetric
model you described, are actually bringing in people more and
more through the lax immigration rules in South America. These
people are in place. They are building infrastructure.
Over time, they acquire citizenship, which makes it easier
for them to apply for a visa and come into the United States.
They are using the status they have gained already to develop
money-laundering networks, sometimes building companies,
establishing companies here in the United States and using the
financial system here.
But they are also there to provide the logistical
infrastructure support when Iran decides that such terrorist
actions are called for, to provide the local support network
for cells that come from Iran or from Lebanon in order to carry
out these attacks.
So the danger is very much there, and it should require
additional attention from the U.S.
Senator Rubio. Just in the interest of time, because I have
to limit it to one more topic, but it is one I talked about in
my opening statement, and that is Trinidad, which by far has
the largest per capita contribution to ISIS of foreign fighters
of any Nation in the Western Hemisphere. It is actually a
startling number--125 for a nation whose population is just a
percentage, a small percentage of ours.
In the United States, you have 240 times their population,
and yet they have about half as many ISIS fighters. So it is
just significant per capita, and you do not hear a lot of
discussion about this.
But the concern, of course, is that these individuals would
return back to Trinidad and, at some point, are a 3-hour flight
away from South Florida where I live in my home State, but also
the mainland of the United States.
So I know that the risk of radicalization in Trinidad is
not new. In fact, I believe it was a radicalized group that led
a coup there in the 1990s, if I am not mistaken, the early
1990s. But how has that evolved? Is it getting enough attention
beyond a couple articles? And is it your view that the Trinidad
Government understands the threat posed by this and is prepared
to work with us to confront it?
Dr. Ottolenghi. I am not entirely familiar with the
situation specific to Trinidad. I do see, however, the broader
picture across the region where, on the one hand Iran, and on
the other hand radical Sunni movements, both backed by states
and otherwise, are actually conducting a very aggressive drive
to radicalize, to convert, and to recruit.
We see the presence of radical Sunni preachers from Mexico
all the way down to the Southern Cone. Equally for that
Iranians, they are probably competing for recruits. But the
phenomenon is very much there and is underreported.
And I think that governments in Latin America, perhaps for
a lack of understanding, capacity, are not treating the problem
seriously enough. There is plenty of open source evidence of
radical preachers flying in from Qatar, from the Gulf, from
Iran straight into Latin America. There are direct flights now
from the Gulf into Latin America.
They come. They preach. There is plenty of evidence of
radicalization in local mosques. And they come back.
I assume that Trinidad and Tobago, the problem is the same.
And because it is such a small nation with limited resources
for governance, their capacity to confront this problem, even
if there is political will, is limited. So help building
capacity I think is a key component of what U.S. policy should
be.
Mr. Farnsworth. Mr. Chairman, only two quick things, if I
may.
The first is to thank you again for your leadership on
these issues. It is tremendously important, and it is noticed,
and it is very much appreciated, so thank you.
The second is, with that specific reference to Trinidad,
this is an issue I think--there is an issue of cyber that, if
we look forward in terms of emerging potential threats for the
region, and we bring in Russia and other countries like that,
to the extent that there are political interests that can be
manipulated in the electoral process, et cetera, that is
something I would encourage people to give increasing attention
to because, as we go down the road, we have seen what has
happened in Europe, et cetera. This is a potential for
mischief-making in Latin America to the extent people are so
inclined.
Senator Rubio. That is an interesting point because many of
these countries, unlike the United States, have centralized
voting systems. People do not realize we have over 9,000
separate jurisdictions that conduct elections at the county
level primarily.
In many countries around the world, and certainly in the
Western Hemisphere, the elections are conducted by a central
entity. The council votes for the whole country. So you do not
need to hack 9,000 or the strategic parts of the 9,000
infrastructure in terms of the United States. You can very much
do it--and that is just on the hacking front not to mention the
influence part.
We appreciate both of your testimony. I apologize. There
are probably other topics we could have touched on. We have
this situation here today where the 2-hour rule has been
invoked, so that would end our hearing here any moment now. I
do not know what happens, but I guess if we get 1 minute past,
I may go to jail or something. I do not know, at least Senate
jail.
But I appreciate both of your willingness to come here
today and talk about this topic. I wish it got more attention.
I hope it will get more attention. As I said yesterday, and you
were there, Mr. Farnsworth, that I think in many ways the
Western Hemisphere is an answer, not a problem.
Today, we talked about some of the challenges in the
region, but this committee spends a lot of time talking about
the opportunities. I hope we will spend more time.
The record for this hearing is going to remain open for 48
hours. You may receive a written question from some of the
members who were not able to attend. If you can, we ask you to
answer so it can be part of our record for future
consideration.
Senator Rubio. With that, I thank you both, and the members
who came, and this hearing is adjourned.
[Whereupon, at 11:30 a.m., the hearing was adjourned.]