[Senate Hearing 115-822]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-822

                         U.S. - RUSSIA RELATIONS

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             AUGUST 21, 2018

                               __________


       Printed for the use of the Committee on Foreign Relations
       
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                 COMMITTEE ON FOREIGN RELATIONS        

                BOB CORKER, Tennessee, Chairman        
JAMES E. RISCH, Idaho                ROBERT MENENDEZ, New Jersey
MARCO RUBIO, Florida                 BENJAMIN L. CARDIN, Maryland
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        



                              (ii)        

  
                            C O N T E N T S

                              ----------                              
                                                                   Page

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

Menendez, Hon. Robert, U.S. Senator From New Jersey..............     2

Mitchell, Hon. A. Wess, Assistant Secretary, Bureau of European 
  and Eurasian Affairs, United States Department of State, 
  Washington, DC.................................................     4
    Prepared statement...........................................     7

Billingslea, Hon. Marshall, Assistant Secretary, Terrorist 
  Financing, United States Department of the Treasury, 
  Washington, DC.................................................     9
    Prepared statement...........................................    11

                   Additional Material for the Record

Responses of Assistant Secretary A. Wess Mitchell to Questions 
  Submitted by Senator Robert Menendez...........................    44

Responses of Assistant Secretary A. Wess Mitchell to Questions 
  Submitted by Senator Benjamin L. Cardin........................    46

Responses of Assistant Secretary A. Wess Mitchell to Questions 
  Submitted by Senator Rob Portman...............................    47

Responses of Assistant Secretary A. Wess Mitchell to Questions 
  Submitted by Senator Cory Booker...............................    49

Report to Congress Pursuant to Section 243 of the Countering 
  America's Adversaries Through Sanctions Act of 2017 Regarding 
  Interagency Efforts in the United States To Combat Illicit 
  Finance Relating to the Russian Federation.....................    50

Trump Administration Actions To Push Back Against Russia.........    60

NATO Summit Deliverables.........................................    62


                             (iii)        

 
                         U.S.-RUSSIA RELATIONS

                              ----------                              


                        TUESDAY, AUGUST 21, 2018

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:02 a.m., in 
room SD-419, Senate Office Building, Hon. Bob Corker, chairman 
of the committee, presiding.
    Present: Senators Corker [presiding], Risch, Rubio, Flake, 
Gardner, Young, Isakson, Portman, Paul, Menendez, Cardin, 
Shaheen, Murphy, Kaine, Markey, Merkley, and Booker.

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

    The Chairman. The Foreign Relations Committee will come to 
order. We want to thank our witnesses for being here today for 
the second in a series of hearings on Russia. This committee is 
attempting to get a clearer sense of the administration's 
overall posture on Russia. And again, we thank you both for 
being here. We have outstanding witnesses today.
    We would like to understand what was agreed to when the 
leaders of our two countries sat down in Helsinki, where there 
were discussions regarding current or future arms control 
agreements, what other promises or assurances were made.
    To date, we have received no real readout, even in a 
classified setting, of this meeting. We would like to 
understand the administration's assessment of the threat posed 
by Russia to us, to our allies, and to other countries and 
institutions around the world.
    Finally, we need a better understanding of how Russia 
sanctions this committee wrote last year, and the Senate passed 
by a vote of 98 to 2, despite strong objections from the White 
House, are being implemented. Russia has annexed Crimea, 
occupied parts of Georgia, interfered with elections, including 
our own, violated the IMF treaty, remains in violation, used 
chemical weapons to poison individuals in the United Kingdom, 
and even purportedly hacked U.S. utilities.
    These offenses are bad enough, but they leave us wondering 
what is next. What does the administration expect that they 
will next do? The past teaches us that even worse things may 
lay just over the horizon if we fail to push back now, and make 
clear to President Putin that our nation is united from the 
very top to the bottom in standing against his destabilizing 
behavior, both in policy and in public posture.
    It is my hope that today you will reassure the members of 
this committee that our Executive branch is doing all in its 
power to convince the Russians not to continue testing our 
resolve. We thank you both again for your service to our 
country, for being here today before this committee, and we 
look forward to your testimony.
    And with that, I will turn to our distinguished Ranking 
Member, my friend, Bob Menendez.

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

    Senator Menendez. Thank you, Mr. Chairman, and thank you 
for your opening statement. I join you in your words and your 
concerns. And for convening this hearing, which I hope is part 
of a series of hearings on U.S. policy towards the Russian 
Federation. I hope we can get clarity into our policy and 
effectively pursue oversight and legislation.
    More than a month after President Trump's Helsinki meeting 
with President Putin we remain in the dark about what the two 
leaders discussed. We continue to hear more information, 
accurate or not, from the Russian government than from our own.
    It is not only embarrassing, but I believe this lack of 
transparency has implications for our national security. I am 
not convinced that those who need to know in our own Executive 
branch have a full understanding of what happened. After more 
than 3 hours with Secretary Pompeo a few weeks ago, this 
committee has little more insight than we did before the 
hearing.
    Since the administration has failed to answer congressional 
requests or provide any information, I am today formally 
requesting that the department provide all classified and 
unclassified cable traffic related to the Helsinki meeting, 
memorandums, and policy directives.
    I will not spend time today running through Russia's 
ongoing transgressions. I think President Trump's cabinet, 
Secretary Mattis, Director Coats, Secretary Nielson, and 
others, have warned that Russia continues to undermine our 
democracy. Russia uses chemical weapons to attack its opponents 
abroad. It invades its neighbors and illegally annexes 
territory.
    Assad's murderous regime and Iranian proxy fighters inching 
closer to Israel rely on the Kremlin. And today, we learn from 
Microsoft that Russian hackers continue their attempts to 
attack the United States Senate and venerable American think 
tanks and NGOs.
    I have been disappointed by the cause by some on the other 
side of the aisle to ignore these threats and seek 
accommodation with Moscow. Sending mixed signals to the Kremlin 
and its allies only serves to undermine our pressure track and 
sanctions regime. I do not currently see the value in meeting 
with sanctioned members of the Russian Duma. They are 
sanctioned because of their support for the illegal annexation 
of Crimea, and they should remain on our sanctions list until 
Crimea is returned to Ukraine.
    I myself am sanctioned by the Russian government for my 
authorship of the Ukraine Freedom Support Act. And I would be 
happy to meet with the Duma when each of the goals of that law 
are accomplished. Till then, they can stay in Moscow.
    I would like to use this hearing to look forward. The 
administration often points to its record while ignoring the 
President's damaging rhetoric on Russia policy. With that said, 
I was pleased that Secretary Pompeo committed to work with us 
on new sanctions, as outlined in my bill, with Senator Graham, 
and many others on this committee.
    Today I would like to hear in detail specific provisions of 
the Defending American Security from Kremlin Aggression Act of 
2018 that you would commit to working towards. I want your 
views on how these measures could impact the Kremlin's 
decision-making calculus, and how the sanctions the bill 
imposes would impact the intended targets.
    The bill recognizes that our efforts to date have been 
insufficient. It includes tough measures, which we recognize 
have implications for U.S. companies and our allies. However, 
do we really believe it is acceptable or in our national 
interest for U.S. companies or those of our allies to be doing 
business in Russia, particularly supporting the very sectors 
that have aided and abet Kremlin aggression and interference? 
It is utterly ridiculous that President Trump would publically 
champion a U.S. Russia business council rather than condemn the 
Kremlin's outright aggressions.
    Second, I want to hear how you will support provisions to 
deepen cooperation with Europe on Russia sanctions' 
implementation. Our sanctions regime is only as effective as 
our ability to convince Europe to increase their pressure.
    Third, I continue to believe that our government is not 
properly constituted to address the hybrid threat posed by 
Russia. Our bill would establish a national fusion center to 
address maligned influence and hybrid threats, and also calls 
for the establishment of the sanctions coordinator office 
within the Senate. I look forward to your thoughts on how we 
can structure on national security institutions to maximize our 
ability to address complex threats.
    Fourth, I would like to hear about efforts to implement the 
current CAATSA sanctions law. The administration has argued 
that mandatory new provisions of CAATSA have not been invoked, 
because it is easier to use established executive order 
authorities. I would like to hear a clear reasoning for this, 
and assurances that the clear intent of Congress is being met, 
because as of now I am not convinced. Specifically, I am 
interested in sections 225, 226, 227, 228, 233, and 234.
    I strongly oppose a wavier provision and NDAA which allows 
the administration under certain circumstances to waive 
sanctions in section 231 on the defense and intelligence 
sector. In response I inserted a strong reporting requirement, 
demanding the State Department be more forthcoming and 
transparent on how it is implementing section 231. And I remain 
concerned that the conferees effectively gutted this important 
provision. So I hope that State can convince me otherwise.
    Finally, I want to end with a note of thanks. I do 
understand that there are many within our government who are 
dedicated to a more assertive approach with respect to Russia 
that is clear-eyed and well-intentioned. And at the risk of 
making their jobs more difficult, I would say that the 
individuals before us today fall into that category.
    Thank you, Mr. Chairman, for calling the hearing, and to 
our witnesses for appearing.
    The Chairman. Thank you. And thank you for your comments.
    Our first witness is Wess Mitchell, Assistant Secretary for 
the Bureau of European and Eurasian Affairs, U.S. Department of 
State. Again, we thank you for being here, and appreciate what 
you do for our country.
    Our second witness is Mr. Marshall Billingslea, Assistant 
Secretary for Terrorist Financing, U.S. Department of Treasury. 
We thank you for the same.
    We want to--we appreciate the fact you are sharing your 
thoughts and viewpoints with us today. Mr. Billingslea, for the 
committee's benefits, I understand you have returned early from 
travel to be here today. We thank you for that.
    We also originally had Assistant Secretary Chris Ford 
scheduled for this hearing, but we were asked that he be 
available to testify before the Senate Banking Committee. I 
think you know we have a simultaneous hearing happening. Since 
we had these two outstanding witnesses, we relented, and 
allowed Chris to go over to the Banking Committee. So that 
testimony will be taking place there. He likely will be before 
us again in the future to talk about some other issues that he 
is responsible for.
    So, again, we thank you. You know the order here. If you 
could summarize your comments in about 5 minutes. Any written 
materials you have, without--with unanimous consent will be 
entered into the record. And with that, Mr. Mitchell, if you 
would begin, we would appreciate it.

 STATEMENT OF THE HON. A. WESS MITCHELL, ASSISTANT SECRETARY, 
    BUREAU OF EUROPEAN AND EURASIAN AFFAIRS, UNITED STATES 
              DEPARTMENT OF STATE, WASHINGTON, DC

    Mr. Mitchell. Chairman Corker, Ranking Member Menendez, 
thank you for inviting me to testify today. If you will indulge 
me I want to start with a piece of welcome news that is 
unrelated to this morning's testimony.
    Yesterday, August 20th, the U.S. Government removed to 
Germany Jakiw Palij, a former Nazi camp guard at the notorious 
Trawniki slave labor camp for Jews and Nazi-occupied Poland. 
All this process took far longer than we wanted. The removal of 
this individual can bring some comfort to Holocaust survivors 
and others who suffered at the hands of those like Palij, who 
did the cruel bidding of the inhuman Nazi Regime.
    I will use my prepared comments today to outline in brief 
form the overarching strategy of the United States towards the 
Russian Federation. The foundation for this strategy is 
provided by three documents, as directed and approved by the 
President: The National Security Strategy, the National Defense 
Strategy, and the Russian Integrated Strategy.
    The starting point of the National Security Strategy is the 
recognition that America has entered a period of big power 
competition, and the past U.S. policies have neither 
sufficiently grasped the scope of this emerging trend nor 
adequately equipped our nation to succeed in it. The central 
aim of the administration's foreign policy is to prepare our 
nation to confront this challenge by systematically 
strengthening the military, economic, and political fundaments 
of American power.
    Our Russia policy proceeds from the recognition that to be 
effective, U.S. diplomacy must be backed by military power that 
is second to none, and fully integrated with our allies and all 
of our instruments of power. To that end, we have reversed 
years of cuts to the defense budget, begun the process of 
recapitalizing U.S. nuclear arsenal, requested close to $11 
billion for the European deterrence initiative, and worked 
within NATO to bring about more than $40 billion in new 
European defense spending.
    At the NATO summit we established two new NATO commands, 
including one here in the United States, new counter hybrid 
threat response teams, and major multi-year initiatives to 
bolster the mobility, readiness, and capability of the 
alliance.
    In tandem, we have worked to degrade Vladimir Putin's 
ability to conduct aggression by imposing costs on the Russian 
state and the oligarchy that sustains it. Building on Secretary 
Pompeo's testimony, I am submitting for the record a list of 
actions this administration has taken. These include to date 
217 individuals and entities sanctioned, 6 diplomatic and 
consular facilities closed, and 60 spies removed from American 
soil.

    [The information referred to is located at the end of the 
hearing.]

    Our actions are having an impact. Research by the State 
Department's Office of Chief Economist shows that on average 
sanctioned Russian firms see their operating revenue fall by a 
quarter, their total asset valuation fall by half, and they are 
forced to fire a third of their employees.
    Following the announcement of sanctions in April, the 
Russian company Rusal lost about 50 percent of its market 
value. In the 5 days following our August 8th announcement of 
Chemical and Biological Weapons Act sanctions, the ruble 
depreciated to its lowest level against the dollar in 2 years.
    Even as we have imposed unprecedented penalties for Russian 
aggression we have been clear that the door to dialog is open 
should Putin choose to take credible steps towards a 
constructive path. In Syria we created de-escalation channels 
to avoid collisions between our forces. In Ukraine we have 
maintained an effort under Ambassador Volker to provide the 
means by which Russia can live up to its commitments under the 
Minsk agreements.
    But in all of these areas it is up to Russia, not America, 
to take the next step. We have placed particular emphasis on 
bolstering the lines of the states of frontline Europe. In 
Ukraine and Georgia we lifted restrictions on the acquisition 
of defensive weapons. In the Balkans we have played a hands-on 
role in resolving the Greece-Macedonia name dispute, and 
engaging with Serbia and Kosovo to propel the EU-led dialog. 
From the caucuses to Central Europe we are promoting energy 
diversification, fighting corruption, and competing for hearts 
and minds.
    Our strategy is animated by the realization that the threat 
from Russia has evolved beyond being simply an external or 
military one. It includes influence operations orchestrated by 
the Kremlin in the very heart of the Western world. These 
activities are extensively resourced and directed from the 
highest levels of the Russian state.
    It is important to state clearly what these campaigns are 
and are not about. What they are not about is a particular 
attachment to U.S. domestic political causes. They are not 
about right or left, not about American political philosophy. 
As the recent Facebook purges reveal, the Russian state has 
promoted fringe voices on the political left and right, 
including groups who advocate violence, the storming of federal 
buildings, and the overthrow of the U.S. Government.
    Russia foments and funds controversial causes, and then 
foments and funds the causes opposed to those causes. Putin's 
thesis is that the American Constitution is an experiment that 
will fail if it is challenged in the right way from within. 
Putin wants to break apart the American Republic, not by 
influencing an election or two, but by systematically inflaming 
the fault lines within our society. Accepting this fact is 
absolutely essential for developing a long-term response to the 
problem. The most dangerous thing in the world we could do is 
politicize the challenge, which in itself would be a gift to 
Putin.
    What Russian efforts are about is geopolitics, the Putinist 
system's permanent and self-justifying struggle for 
international dominance. As stated by a handbook of the Russian 
Armed Forces, the goal is to, ``Carry out mass psychological 
campaigns against the population of a state in order to 
destabilize society and the government, and force that state to 
make decisions in the interest of its opponents.''
    Doing so involves a toolkit of subversive statecraft first 
employed by the Bolshevik and later the Soviet state, upgraded 
for the digital age. The State Department takes this threat 
very seriously. Countering it in both overt and covert form is 
among the highest priorities of the Bureau of European and 
Eurasian Affairs. As a co-chair of the Russian Influence Group, 
I work with General Scapparotti to bring the combined resources 
of EUR and EUCOM to bear against this problem.
    Under EUR leadership, all 49 U.S. missions located in 
Europe and Eurasia are required to develop, coordinate, and 
execute tailored action plans for rebuffing Russian influence 
operations in their host countries. Within the Bureau we 
recruited one of the architects of the Global Engagement Center 
legislation from the staff of a member of this committee. We 
formed a new position, the Senior Advisor for Russian Maligned 
Activities and Trends, or SARMAT, to develop cross-regional 
strategies across offices.
    EUR created a dedicated team to take the offensive and 
publically exposing Russian maligned activities, which since 
January of this year has called out the Kremlin on 112 
occasions. We are now working with our ally, the U.K., to form 
an international coalition for coordinating efforts in this 
field, and have requested over $380 million in security and 
economic assistance accounts in the President's 2019 budget.
    We recognize that Congress has an important role to play in 
providing the tools and resources needed to deal effectively 
with the Russian problem set. As Secretary Pompeo made clear in 
his recent testimony, we are committed to working with all of 
you to make headway against this problem, and align our efforts 
in support of the President's Russia strategy.
    Mr. Chairman, thank you again for inviting me today. I look 
forward to your questions.
    [The prepared statement of Mr. Mitchell follows:]

              Prepared Statement of Hon. A. Wess Mitchell

    Chairman Corker, Ranking Member Menendez, thank you for inviting me 
to testify today. I will use my prepared comments to outline in brief 
form the overarching strategy of the United States towards the Russian 
Federation. The foundation for this strategy is provided by three 
documents, as directed and approved by the President: the National 
Security Strategy, the National Defense Strategy and the Russia 
Integrated Strategy.
    The starting point of the National Security Strategy is the 
recognition that America has entered a period of big-power competition, 
and that past U.S. policies have neither sufficiently grasped the scope 
of this emerging trend nor adequately equipped our nation to succeed in 
it. Contrary to the hopeful assumptions of previous administrations, 
Russia and China are serious competitors that are building up the 
material and ideological wherewithal to contest U.S. primacy and 
leadership in the 21st Century. It continues to be among the foremost 
national security interests of the United States to prevent the 
domination of the Eurasian landmass by hostile powers. The central aim 
of the administration's foreign policy is to prepare our nation to 
confront this challenge by systematically strengthening the military, 
economic and political fundaments of American power.
    Our Russia policy proceeds from the recognition that, to be 
effective, U.S. diplomacy toward Russia must be backed by ``military 
power that is second to none and fully integrated with our allies and 
all of our instruments of power.'' To this end, the administration has 
reversed years of cuts to the U.S. defense budget, begun the process of 
recapitalizing the U.S. nuclear arsenal, requested close to $11 billion 
to support the European Deterrence Initiative, and, in the past year 
and a half, worked with NATO Allies to bring about the largest European 
defense spending increase since the Cold War--a total of more than $40 
billion to date. In addition to commitments from over half of the 
Alliance to meet NATO's 2 percent defense spending requirement by 2024, 
the United States achieved virtually all of our policy objectives at 
the NATO Summit, including the establishment of two new NATO Commands 
(including one here in the United States), the establishment of new 
counter-hybrid threat response teams, and major, multi-year initiatives 
to bolster the mobility, readiness, and capability of the Alliance.
    In tandem, we have worked to degrade Russia's ability to conduct 
aggression by imposing costs on the Russian state and the oligarchy 
that sustains it. Building on Secretary Pompeo's recent testimony, I am 
submitting for the record a detailed list of actions this 
administration has taken. These include, to date: 217 individuals and 
entities sanctioned, 6 diplomatic and consular facilities closed or 
kept closed, and 60 spies removed from U.S. soil. The State Department 
has played the lead role in ensuring that these efforts are closely and 
effectively coordinated with European allies through synchronized 
expulsions and the continued roll-over of sanctions related to Russia's 
ongoing aggression against Ukraine.
    Our actions are having an impact. Research by the State 
Department's Office of the Chief Economist shows that on average 
sanctioned Russian firms see their operating revenue fall by a quarter; 
their total asset valuation fall by half; and are forced to fire a 
third of their employees. We believe our sanctions, cumulatively, have 
cost the Russian government tens of billions of dollars on top of the 
broader impact on state-owned sectors and the chilling effect of U.S. 
sanctions on the Russian economy. Following the announcement of 
sanctions in April, the Russian company Rusal lost about 50 percent of 
its market value. In the 5 days following our August 8 announcement of 
Chemical and Biological Weapons Act sanctions, the ruble depreciated to 
its lowest level against the dollar in 2 years.
    Even as we have imposed unprecedented penalties for Russian 
aggression, we have been clear that the door to dialogue is open, 
should Putin choose to take credible steps toward a constructive path. 
In Syria, we created de-escalation channels to avoid collisions between 
our forces. In Ukraine, we have maintained an effort under Ambassador 
Kurt Volker to provide the means by which Russia can live up to its 
commitments under the Minsk Agreements. But in all of these areas, it 
is up to Russia, not America, to take the next step. Our policy remains 
unchanged: steady cost-imposition until Russia changes course.
    As with the overall strategy, the premise of these efforts has been 
that our diplomacy is most effective when backed by positions of 
strength. We have placed particular emphasis on bolstering the states 
of frontline Europe that are most susceptible to Russian geopolitical 
pressure. In Ukraine and Georgia, we lifted the previous 
administration's restrictions on the acquisition of defensive weapons 
for resisting Russian territorial aggression. In the Balkans, American 
diplomacy has played a lead role in resolving the Greece-Macedonia name 
dispute and is engaging with Serbia and Kosovo to propel the EU-led 
dialogue. In the Caucasus, Black Sea region, and Central Europe we are 
working to close the vacuums that invite Russian penetration by 
promoting energy diversification, fighting corruption, and competing 
for hearts and minds in the lead-up to the 30th anniversary of the end 
of Communism.
    Our strategy is animated by the realization that the threat from 
Russia has evolved beyond being simply an external or military one; it 
includes unprecedentedly brazen influence operations orchestrated by 
the Kremlin on the soil of our allies and even here at home in the 
United States. These activities are, as FBI Director Wray recently 
stated, ``wide and deep,'' being both extensively resourced and 
directed from the highest levels of the Russian state. We work closely 
with the Department of Homeland Security, the Department of Justice 
and, and the National Security Council to ensure that all relevant 
resources are being brought to bear to thwart and punish any Russian 
influence campaigns in the run-up to the elections.
    It's important to state clearly what these campaigns are and are 
not about.
    What they're not about is any particular attachment to specific 
U.S. domestic political causes. They are not about right or left or 
American political philosophy. The threat from Russian influence 
operations existed long before our 2016 presidential election and will 
continue long after this election cycle, or the next, or the next. As 
the recent Facebook purges reveal, the Russian state has promoted 
fringe voices on the political left, not just the right, including 
groups who advocate violence, the storming of federal buildings and the 
overthrow of the U.S. government. Russia foments and funds 
controversial causes--and then foments and funds the causes opposed to 
those causes. Putin's thesis is that the American Constitution is an 
experiment that will fail if challenged in the right way from within. 
Putin wants to break apart the American Republic, not by influencing an 
election or two, but by systematically inflaming the perceived fault-
lines that exist within our society. His is a strategy of chaos for 
strategic effect. Accepting this fact is absolutely essential for 
developing a long-term comprehensive response to the problem. The most 
dangerous thing we could do is to politicize the challenge, which in 
itself would be a gift to Putin.
    What Russian efforts are about is geopolitics: the Putinist 
system's permanent and self-justifying struggle for international 
dominance. As stated by a handbook of the Russian Armed Forces, the 
goal is ``to carry out mass psychological campaigns against the 
population of a state in order to destabilize society and the 
government; as well as forcing a state to make decisions in the 
interests of their opponents.'' Doing so involves an evolved toolkit of 
subversive statecraft first employed by the Bolshevik and later the 
Soviet state, which has been upgraded for the digital age. While these 
tools and technologies differ depending on the context, the key to 
their success is that the Kremlin employs them within a common 
strategic and operational framework aimed at leveraging all available 
means to achieve a decisive strategic effect.
    The State Department takes this threat very seriously. From my 
first day on the job, I have established for our team that countering 
this threat, in both its overt and covert forms, will be among the 
highest priorities for the Bureau of European and Eurasian Affairs. As 
a co-chair of the Russia Influence Group, I work with General 
Scapparotti to bring the combined resources of EUR and EUCOM to bear 
against this problem. Under EUR's leadership, all 50 U.S. missions 
located in Europe and Eurasia are required to develop, coordinate and 
execute tailored action plans for rebuffing Russian influence 
operations in their host countries.
    Within the Bureau, we recruited one of the architects of the Global 
Engagement Center legislation from the staff of a member of this 
committee; in addition, we formed a new position--the Senior Advisor 
for Russian Malign Activities and Trends (or, SARMAT)--to develop 
cross-regional strategies across offices. Early this year, EUR created 
a dedicated team within the Bureau to take the offensive and publicly 
expose Russian malign activities, which since January of this year has 
called out the Kremlin on 112 occasions. Together with the GEC, EUR is 
now working with our close ally the U.K. to form an international 
coalition for coordinating efforts in this field. The State Department 
requested over $380 million in security and economic assistance 
accounts in the President's 2019 Budget for Europe and Eurasia that can 
be allocated toward combatting Russian malign influence.
    In these efforts, we recognize that Congress has an important role 
to play in providing the tools and resources that will be needed to 
deal effectively with the combined Russian problem set. As Secretary 
Pompeo made clear in his recent testimony, we are committed to working 
with all of you to make headway against this problem and align our 
efforts in support of the President's Russia strategy.
    Mr. Chairman, thank you again for inviting me to speak today. I 
welcome your questions.

    The Chairman. Thank you, Mr. Secretary.
    Secretary Billingslea.

     STATEMENT OF THE HON. MARSHALL BILLINGSLEA, ASSISTANT 
SECRETARY, TERRORIST FINANCING, UNITED STATES DEPARTMENT OF THE 
                    TREASURY, WASHINGTON, DC

    Mr. Billingslea. Chairman Corker, Ranking Member Menendez, 
and distinguished members of the committee, first of all, it is 
great to be back. I got my start in Washington sitting on the 
bench back there some 20-odd years ago, and it is fantastic to 
appear before this committee. And thank you for the 
opportunity.
    At the outset I will say that those of us in the Treasury 
Department share the views that you, and the ranking member, 
and many in the Senate have expressed regarding the significant 
and continuing national security threat posed to the United 
States by the Russian Federation.
    Continuing occupation of Crimea, paramilitary operations in 
Ukraine, human rights abuses, malicious cyberattacks on U.S. 
and ally infrastructure and companies, elicit procurement of 
restricted U.S. technologies, violation of crucial arms control 
treaties, support to the Assad regime's barbarism, 
assassination of dissidents and defectors, including the 
unconscionable use of the Novichok nerve agent in London, 
United Kingdom, and ongoing efforts to interfere in our 
sacrosanct election processes, and those of our allies, are 
just some of the unacceptable behaviors of the Putin regime.
    Countering Russian aggression is a top priority for the 
Treasury Department. And consequently, the net effect of our 
actions over the past year-and-a-half is an unprecedented level 
of financial pressure mounted against the Kremlin, its oligarch 
proxies, and key sectors of the Russian economy. To date, this 
administration has applied sanctions on 223 Russia-related 
entities and individuals, ranging from Yevgeny Prigozhin, and 
the internet research agency social media troll farms, to FSB 
and GRU cyber actors, to Russia's state-owned defense 
conglomerate, Rosoboronexport, which has been supplying 
billions of dollars' worth of weaponry to the Assad regime.
    Additionally, Treasury has issued findings pursuant to the 
Patriot Act to Section 311 against a major Latvian bank that 
was laundering money for elicit activities based out of Russia. 
And we have engaged globally with partner nations to apply 
their anti-money laundering regimes to target financial flows 
directly associated with both Russian organized crime and the 
maligned behavior of the Kremlin.
    Russian aggression is ongoing, but the Treasury Department 
has demonstrated to Putin and his inner circle that their 
behaviors will not be tolerated, and they will incur 
significant costs. On April 6th, 2018, we sanctioned 7 Russian 
oligarchs who are part of the innermost circle, along with 12 
companies that they own or control. This included Oleg 
Deripaska and Viktor Vekselberg, as well as Putin's son-in-law, 
Kirill Shamalov. Unlike the previous administration, which 
shied away from targeting these actors, we have gone after the 
big fish.
    Rusal, controlled by Deripaska, is the second largest 
producer of aluminum and supplier of aluminum in the world. As 
a result of sanctions, Deripaska's estimated net worth, his 
personal net worth, has dropped by more than half. The share 
price of the holding company that controls Rusal was cut 
likewise by more than half on the London stock exchange on the 
day we took our actions.
    Similarly, Viktor Vekselberg's personal net worth has 
dropped by an estimated 3 billion, and his company has now been 
forced to divest from ventures in Switzerland and Italy. When 
Treasury acted, Moscow-traded stocks experienced their biggest 
plunge in years, and the ruble slid to its weakest position 
since 2016, and it still has not recovered from that.
    In all, our measures are taking a direct toll on the wealth 
of the elites who serve as Kremlin proxies, and on the Russian 
economy. Their growth is nearly stagnant. Foreign direct 
investment is down. There's limited willingness to invest 
further in their oil and gas sector, which is fundamental to 
their economy. The cost of borrowing for the Russian government 
is way up. And the central bank is increasingly forced to step 
in and prop up Russian financial institutions.
    Nor will we cease to ease up. We will not ease up for as 
long as this maligned behavior persists. As an example, over 
the past 2 weeks we have imposed additional costs on Russian 
entities. Namely, we sanctioned a Russian bank, which has 
facilitated millions of dollars in transactions for North 
Korea, and we designated a major Russian port operator, 
maritime port operator, for providing services to North Korean-
flagged vessels, and helping to evade sanctions.
    This morning, about 30 minutes ago, we took further 
measures. We are designating two Russia shipping--Russia-based 
shipping companies, who have been conducting ship-to-ship 
transfers of oil and circumvention of the U.N. Security Council 
resolutions, and we are blocking six Russian-flagged vessels.
    Second, as part of our ongoing effort to combat Russian 
cyber activities, we are designating two more individuals and 
two additional companies for their ongoing support to the 
Russian FSB for cyber behavior. So I think it is clear that the 
Treasury has been given a straightforward mandate to combat 
Russian aggression at every turn, and I assure the committee 
that we will continue to do so.
    Mr. Chairman, I appreciate the opportunity to testify 
before this committee, and to answer additional questions on 
this matter, which I think we all agree is of the utmost 
importance to our national security. With your permission, I 
ask that my longer prepared remarks, together with a copy of 
the CAATSA Section 243 Report on Russian elicit financial 
behavior, be submitted for the record. And again, I look 
forward to answering questions. Thank you, Chairman.
    [The prepared statement of Mr. Billingslea follows:]

            Prepared Statement of Hon. Marshall Billingslea

    Chairman Corker, Ranking Member Menendez, and distinguished Members 
of the Committee. It is my pleasure to be invited here today, and to 
speak about a very serious and continued threat to the security of our 
nation and our allies.
    The Treasury Department has a clear understanding of the continued 
threat posed by Russia's malign activities and works every single day, 
together with other agencies and foreign partners, to counter that 
threat. Russia's continuing occupation of Crimea, human rights abuses, 
malicious cyber-attacks, illicit procurement of sensitive defense and 
intelligence technologies, election interference and other influence 
efforts, as well as their support to the Assad regime's massacre of its 
own citizens, are unacceptable. Treasury has made countering Russian 
aggression a top priority, and consequently, our actions to date have 
resulted in an unprecedented level of financial pressure against those 
working on behalf of the Kremlin and in key sectors of the Russian 
economy targeted by U.S. sanctions. Treasury will continue to do its 
part to impose costs in response to Russian malign activity, leveraging 
all of the tools and authorities that we have. I am grateful to have 
the opportunity to share with you today some of what the Department of 
the Treasury is doing to support the administration's whole-of-
government Russia strategy.
    First, I'd like to take a moment to put the Russia challenge into 
context. Russia has spent decades developing complex and resilient 
networks to raise, transfer, hide, and obscure the origin and movement 
of the funds generated through illicit activity, including corruption, 
sanctions evasion, and arms sales. Their highly sophisticated apparatus 
relies on state and non-state agents and proxies; Russian oligarchs, 
for example, use their wealth and influence to advance the Kremlin's 
malign agenda at home and abroad.
    Russia, however, is also unique from other countries subject to 
broad U.S. sanctions in several important ways, including the 
sophistication and scale of its malign activity, and we have tailored 
our approach accordingly. We cannot, for example, counter Russian 
aggression in the same way we approach countries like North Korea or 
Iran. Russia's economy and resource base are more sizeable, and is 
fully integrated into the global economy and international financial 
system. North Korea and Iran, on the other hand, for decades have been 
largely or almost entirely isolated from the global financial system. 
Because Russia's integration presents an especially unique challenge, 
we've surgically deployed Treasury tools to balance maximizing pressure 
on Russia while minimizing unintentional spillovers to the United 
States, our European allies, and the global economy.
    For example, a number of Russia's state owned entities and 
oligarch-owned businesses are intricately integrated into other 
economies and global supply chains, including the economies of some of 
our closest NATO allies. We designated RUSAL, the second-largest 
producer and supplier of aluminum in the world, on April 6 for being 
owned and controlled by EN+, which is owned or controlled by the 
Russian oligarch Oleg Deripaska. As a result of our designations, 
Deripaska's estimated net worth has dropped by more than 50%, and the 
share price of EN+ fell from $12.20 to $5.40 on the London Stock 
Exchange following its designation.
    The core of our approach is to leverage every tool available to us 
to impose costs upon those acting on or behalf of the Kremlin against 
U.S. interests, and to increase financial pressure on Russia to advance 
our national security priorities while simultaneously mitigating 
unnecessary impacts on the United States, our European allies, and the 
global economy.
    Since January 2017, this administration has sanctioned 217 Russian-
related individuals and entities for a broad range of sanctionable 
conduct, 200 of which were sanctioned by Treasury's Office of Foreign 
Assets Control (OFAC). Of those, 136 were designated under Ukraine/
Russia-related sanctions authorities codified by the Countering 
America's Adversaries Through Sanctions Act, or CAATSA. During this 
administration, Treasury has used our sanctions authorities to counter 
a wide spectrum of Russia's destabilizing activities, including malign 
cyber activity, interference in U.S. elections, and support to rogue 
states. In total, OFAC has also imposed blocking sanctions on 14 
Russian banks and sectoral sanctions on 124 Russian financial 
institutions, including any 50% or more-owned subsidiaries. 
Furthermore, OFAC has imposed blocking sanctions on 20 Russian energy 
firms and sectoral sanctions on another 80 Russian energy firms.
    We've seen our actions have immediate effect. For example, the 
RUSAL designation in April was part of a much larger sanctions package 
of seven Russian oligarchs along with 12 companies they own or control, 
17 senior Russian government officials, and a state-owned Russian 
weapons trading company and that company's subsidiary, a Russian bank. 
Among those sanctioned on April 6 were oligarchs Oleg Deripaska and 
Viktor Vekselberg, as well as Putin's son in law Kirill Shamalov; and 
the heads of state-owned companies such as Gazprom, Gazprombank, and 
VTB Bank. One of Treasury's objectives in designating Deripaska and 
Vekselberg, and indeed our objective in targeting oligarchs more 
broadly, is to make it more difficult for them to wield their influence 
and power to engage in malign activities.
    The impact of our April 6 designation was felt within a single day. 
According to public reporting, the combined net worth of Russia's 27 
wealthiest people fell by an estimated $16 billion in 1 day, Moscow-
traded stocks had their biggest drop in 4 years, and the ruble fell to 
its weakest position since late 2016. Viktor Vekselberg's net worth has 
dropped an estimated $3 billion, and foreign governments have launched 
investigations in response to his designation and subsequently frozen 
Vekselberg's assets in their jurisdictions. Vekselberg's Renova Group 
was forced to divest from ventures in Switzerland and Italy.
    While our Russia sanctions program is among our most active, 
sanctions are not and cannot be the only tool on which we rely. The 
scale and sophistication of Russian malign activity is far more 
advanced than that of other states currently subject to broad U.S. 
sanctions. Further, the size of the Russian economy and its deep 
integration into the global economy and financial system present a 
unique challenge. As I've testified before, a key reason we have been 
so effective in countering malign activity and illicit finance is we 
implement comprehensive financial diplomacy. Accordingly, in certain 
circumstances other tools will either complement or far more 
effectively advance our national security interests in countering 
Russian aggression. For example:

   Engagement with foreign governments: Senior and working-
        level Treasury officials frequently engage and consult with 
        foreign counterparts regarding our Russia efforts. We leverage 
        relationships painstakingly built over many years to consult, 
        pre-notify of pending actions, share information regarding 
        observed typologies, and urge them to match U.S. designations. 
        Since the passage of CAATSA, Treasury has traveled extensively 
        to discuss the implementation of the Russia-related provisions 
        of that statute with foreign and finance ministries. When 
        appropriate, Treasury also supports foreign partners' 
        designations and enforcement actions, including by providing 
        financial intelligence. In some cases partners need more than 
        one-off support, and in these cases Treasury offers technical 
        assistance to build partners' institutional capacity to 
        effectively address procedural, legislative, or other gaps.

   Engagement with the private sector at home and abroad: 
        Treasury regularly meets with U.S. and foreign private sector 
        entities to explain our sanctions regulations and actions, and 
        share information, typologies of illicit activity, and best 
        practices, among other things. For example, we have held 
        roundtables with banks in jurisdictions at elevated levels of 
        risk for Russian money laundering, including Cyprus and Latvia, 
        to convey the risks and also to urge relevant industry 
        authorities to take steps to prevent the exploitation of their 
        respective financial sectors by bad actors. We also use private 
        sector engagement opportunities to communicate our intent to 
        aggressively enforce U.S. sanctions, and to pursue entities 
        that facilitate Russian malign activity.

   Advance multilateral efforts: Treasury works multilaterally 
        to strengthen international anti-money laundering and 
        countering the financing of terrorism (AML/CFT) standards and 
        to ensure that these measures are effectively implemented 
        around the world. For example, Treasury officials have engaged 
        with international partners under the G-7+ Contact Group, a 
        group of likeminded countries coordinating efforts to counter 
        Russian malign influence. The United States also currently 
        holds the presidency of the Financial Action Task Force (FATF). 
        At FATF, Treasury works to strengthen international AML/CFT 
        standards and ensure that these measures are effectively 
        implemented around the world. For example, the FATF's efforts 
        to ensure that all jurisdictions apply a high level of scrutiny 
        to the financial activities of politically exposed persons 
        (PEPs) and collect information on the beneficial owners of 
        legal entities helps to detect attempts by Russian officials to 
        launder, hide, or move the proceeds of corruption. Similarly, 
        the FATF's work to promote the global implementation of United 
        Nations (U.N.) sanctions and hold underperforming countries 
        accountable through its ``grey list'' process helps undermine 
        Russian attempts to circumvent international prohibitions on 
        dealings with North Korea, Iran, or other U.N.-listed programs. 
        Indeed, the U.S. named the countering of proliferation finance 
        as one of the priorities of the FATF during the current U.S. 
        presidency, in an effort intended to harden the world's 
        financial systems against the type of illicit procurement and 
        proliferation activity in which Russian actors are regularly 
        involved. All FATF members are evaluated against their 
        effectiveness in implementing FATF standards. Russia, as a FATF 
        member, will be subject to rigorous assessment and peer review 
        of its AML/CFT regime beginning in 2019.

   Deploy other authorities: As Treasury works aggressively to 
        deter and prevent illicit Russian financial activity abroad, we 
        are simultaneously protecting the U.S. financial system. For 
        example, on February 16, 2018, Treasury's Financial Crimes 
        Enforcement Network (FinCEN) issued a finding pursuant to 
        Section 311 of the USA PATRIOT Act that Latvia-based ABLV Bank 
        AS (ABLV) was a financial institution of primary money 
        laundering concern. In its public notice of proposed 
        rulemaking, FinCEN cited multiple instances of 
        institutionalized money laundering in which ABLV management 
        solicited high-risk shell company activity that enabled the 
        bank and its customers to launder funds. ABLV's facilitation of 
        shell company activity typically benefitted illicit actors 
        engaged in an array of illicit conduct, including transnational 
        organized criminal activity, corruption, and sanctions evasion, 
        emanating mostly from Russia and former Commonwealth of 
        Independent States. Pursuant to this finding, FinCEN proposed 
        the imposition of a prohibition on U.S. financial institutions 
        from opening or maintaining correspondent accounts for, or on 
        behalf of, ABLV.

   Public affairs engagement: Finally, Treasury officials work 
        with the domestic and foreign media to disseminate information, 
        including information on designations and sanctions evasion, to 
        ensure information is made available to appropriate audiences.

    Before concluding, I would be remiss if I did not speak to the 
tremendous effort it takes on the part of Treasury's professional staff 
to implement all of our programs, liaise with other country partners, 
and with the private sector. Our team travels around the world to 
ensure our sanctions are effectively implemented and the real-world 
risks of transacting with designated individuals and entities are fully 
understood. Treasury staff fields thousands of inquiries each year 
regarding compliance and licensing issues--many highly complicated 
questions that require substantial amounts of time and effort. On top 
of this, we are mandated to prepare and submit at least 80 reports to 
Congress in 2018--reports that require thousands of hours of work. 
Treasury's Office of Terrorism and Financial Intelligence is a small 
component compared to our interagency partners.
    As you can see, Treasury has aggressively targeted the range of 
Russian malign activity through our tools and authorities. In 
coordination with our interagency and international partners, we will 
continue to maintain pressure against the Kremlin. I would like to end 
my comments here, and welcome your questions.

    The Chairman. Without objection.
    I am going to ask just a couple of questions, and then 
reserve the rest of my time.
    I think that the vast majority of this committee, in 
listening to the testimony of the two of you, would say that 
this was a very fact-based realistic view of what is happening, 
and presented by two very sober individuals, who understand 
Russia and their actions to be as they are.
    I would ask the question today, is your testimony today 
representative of the mainstream of the administration from top 
to bottom?
    Mr. Mitchell. Yes, Senator, I believe it is. It also 
reflects the policy that has been directed by the President.
    Mr. Billingslea. Senator, I agree with that. Chairman.
    The Chairman. So we obviously are putting tough measures in 
place, and I know many will advocate for more. We are seeing no 
behavior change; is that correct? I mean they're still doing 
the same things that they have been doing for years. Have we 
seen any behavior change as a result of what it is we are 
doing?
    Mr. Mitchell. I would not want to characterize that. In a 
classified setting I think the Intelligence community would be 
better positioned. But I would say is that by the net weight of 
our actions and sanctions, in particular, I think we are 
forcing the Russians, and specifically Putin, to reconsider his 
preferred strategy. The combined effect of our sanctions, 
together, by the way, with our larger defense establishment, is 
a cost and position strategy. And I think it is important to 
remember that cost and position is what won the Cold War.
    So I would argue that--I would argue very clearly by 
increasing the costs in these sectors for the Russian economy 
and state, but also forcing them to up their game in developing 
military technological advances to keep pace with the United 
States in both conventional and nuclear arms, I think we are 
absolutely having an impact on Vladimir Putin's preferred 
strategy.
    The Chairman. But, and again, I am not being critical of 
what it is you are doing, it just seems to me, and I know that 
there are discussions, the reason I am asking these questions, 
there are discussions about what we might do to prevent further 
involvement in our elections, which look like there is no way 
to stop involvement in our elections. We see it happening 
today. We see it happening with fringe groups.
    Is there something that is being discussed within the 
administration that you believe may have even greater impact 
than what we are doing that might possibly change their 
behavior, which is the point of all of this.
    Mr. Billingslea. Chairman, so we are constantly evaluating 
additional--deployment of additional pressure tactics and 
sanctions. And there are active discussions under way on--on 
those matters. I would not want to telegraph those at this 
stage, because if we do act we want it to have maximum 
financial impact.
    What I would offer is had we not been applying kind of 
massive pressure we are applying on the regime, their behavior 
would be even further off the charts. So we are at least 
circumscribing their freedom to act, and the amount of 
resources they have on hand to counter us, and to serve as a 
spoiler, as they are attempting to do in so many cases across 
the globe, whether we are talking about propping off Maduro in 
Venezuela, on the one hand, what they are doing with the 
Iranians and weapons trade there for Assad. So we are forcing 
them to make some pretty tough resource changes.
    Likewise, we do see clear indications that a number of the 
Oligarchs, who thought they would just simply get bailed out by 
the regime for the hit that they have taken, have, in fact, not 
been made whole. And that is perhaps due to the fact that the 
regime itself is struggling for the kind of resources that they 
would need to do that.
    The Chairman. I reserve the rest of my time. Thank you. 
Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman. Thank you both 
for your testimony. And Mr. Chairman, I would like to take up 
the Secretary's suggestion that maybe we should have a 
classified briefing on the impact of sanctions and behavioral 
change. I think that would be instructive for the committee.
    The Chairman. I know we had one in Banking, and a number of 
us attended that. And I think they, just for what it is worth, 
general speaking, I do not think it is as classified. They said 
it had not been any behavior change. But maybe we should have 
that for this committee, also. But go ahead.
    Senator Menendez. So Mr. Secretary, I think that in 
listening to your response to the Chairman's questions, I think 
we could generally agree, that despite our best efforts, both 
Congress's intention to the laws that it has passed, and the 
administration's enforcement of elements of that, that Russia 
continues to march on, both in destabilizing our democracy, 
other Western democracies, continues to have a frozen conflict 
in Eastern Ukraine, continues to occupy Crimea, and is engaged 
actively in Syria in a way that I think undermines our national 
interests. So is that a fair statement?
    Mr. Mitchell. I think that is a fair statement. And I would 
just add to it what Director Coats said, the assessment of the 
Intelligence community, that there is a pattern of--a campaign 
and pattern of pervasive influence. It is not at 2016 levels. 
And the administration is responding to that with a clear-eyed 
strategy.
    Senator Menendez. So if we are agreed that it has not, at 
least as it relates to all those things, changed its course of 
conduct, do you support stronger sanctions on the Russian 
energy and banking sectors?
    Mr. Mitchell. I support a continuation of the 
administration's current approach, which is to use the sanction 
authorities that we have. And I think we have a good track 
record to show for that.
    Senator Menendez. If you had the ability to have stronger 
sanctions on Russia's energy and banking sectors, would you 
welcome it?
    Mr. Mitchell. We make full review and use of all of the 
authorities at our disposal, and are always assessing for new 
targets.
    Senator Menendez. We had the Secretary of State here, who 
is your boss. And he actually said that he welcomed, as a 
result of my questioning, he welcomed--we did not specify which 
one, but he welcomed a new round of sanctions as it relates 
towards Russia. I assume that you are in agreement with him.
    Mr. Mitchell. I am. As I said, I would continue using the 
authorities that we have. I believe that we have excellent 
authorities. But we always use the tools that Congress gives 
us.
    What I would say from the Executive Branch perspective, and 
for effective diplomacy, is we need discretion with those 
sanctions. So sanctions without discretion, in my mind, is the 
enthuses of strategy. We have to have the flexibility to use 
them in a manner that reflects diplomatic realities, and I 
think we have done a good job of that.
    Senator Menendez. I get concerned when I have seen both 
this and previous administrations use waiver authority in a way 
that is far beyond discretion. It undermines the intention of 
Congress. So we have a different point of view as to exactly 
how much discretion you end up having.
    Do you support the establishment of a sanction coordination 
office at the State Department?
    Mr. Mitchell. I would reserve opinion on that matter. I 
think we are looking internally at how best to continue 
coordinating sanctions in the days ahead. I think we have done 
a good----
    Senator Menendez. We have heard a lot of complaints from 
European governments about the lack of senior level 
coordination on sanctions. I would like to commend it to your 
attention as well as the Secretary's.
    Let me ask you both. Do you support the establishment of a 
national fusion center to coordinate policy against maligned 
actors across the whole of government?
    Mr. Mitchell. I think there is something to the idea of a 
mechanism for increasing coordination within government. It is 
a problem that has a lot of different aspects. There is a cyber 
and technical aspect. There is a diplomatic and messaging 
aspect. There is an informational aspect.
    My caveat would be I think it is important to go about this 
in a way that does not get in the swim lane of current lines of 
effort, which I would argue you are doing a good job. So I 
think our team is preparing some structured feedback on the 
legislation that we have--the ideas that we have seen in the 
bill.
    Senator Menendez. We would look forward to that. Let me ask 
you this. Is it still the policy of the United States to not 
recognize the illegal annexation and occupation of Crimea?
    Mr. Mitchell. Indeed.
    Senator Menendez. I appreciate you saying that. Because 
then I see the President go ahead and veto elements of the 
National Defense Authorization Bill, or the President rejected 
Senate-approved language of non-recognition of the illegal 
annexation and occupation of Crimea. That is worrisome for 
some. I do not know why you would do that when it is the 
policy, the stated policy of the administration. Also, the 
Secretary of State has said that. And then you get a different 
message sent by the President.
    Let me ask you one last question. Under the Chemical and 
Biological Weapons Act, the administration imposed sanctions on 
North Korea for using chemical weapons against one of its own 
citizens, killing the brother of Kim Jong-un. The 
administration also designated North Korea a state-sponsored 
terrorist following that attack.
    Earlier this month the administration sanctioned the 
Russian Federation under the CBW Act for using chemical weapons 
against one of its own citizens, a former spy, Sergei Skripal, 
and his daughter. You have not, however, designated the Russian 
Federation to be a state sponsor of terrorism. Why not? What is 
the substantive difference between these two situations?
    Mr. Mitchell. Let me respond to the first part of what you 
said, Senator. I think the administration has been crystal 
clear on Crimea. I see no daylight here. I would refer you to 
the President's comments in the interview yesterday, when he 
said very clearly that every time he discusses Ukraine he talks 
about Crimea. I think the Crimea declaration speaks for itself, 
and we have been very strong in that regard.
    On the matter of designation of state-sponsored----
    Senator Menendez. Then I do not know why you reject the 
provision of the NDAA. It is just a codification of a view. I 
do not quite get it. It creates confusion in the world. But go 
ahead, second part of my question.
    Mr. Mitchell. On the second part of your question, with 
regard to a state sponsor of terrorism, I think--I do not want 
to get ahead of process. I think this is something that is 
always important to keep in our pocket. I think we are looking 
very carefully and sober mindedly at Russian behavior in all 
regards. And CBW sanctions speak for themselves.
    Depending on how the Russians now respond, there could be a 
follow-on to that, as per the law. So I would just say we 
reserve to ourselves all options with regard to Russian 
behavior.
    Senator Menendez. I just would say there is no 
differentiation between what happened in North Korea and the 
actions the administration took, which I applaud, and the 
Russian Federation. And there is no reason why we should not 
employ all the uses that we have, because we need to deter the 
Russian Federation from undermining our elections, and 
continuing to violate the international order.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. Senator Portman.
    Senator Portman. Thank you, Mr. Chairman. And let me start 
by reiterating what the Chairman and Ranking Member both said 
about both of you. I am glad you are there. And I thought that 
you gave us a sober, but very thoughtful and fact-based 
presentation today. My questions to you are really about why, 
given all the things we are doing, including sanctions, are we 
not making better progress?
    Let me start by saying, I appreciate that a couple of weeks 
ago the Secretary was able to make clear the findings of the 
investigation into the Russian involvement in the attempted 
assassination of Sergei Skripal and his daughter. And I think 
that is the sort of thing where, you know, we need to be frank, 
and be clear-eyed, and hold Russia accountable. And I 
appreciate the fact that that triggered some of the sanctions 
we have talked about today, but there is so much more.
    We talked about what is going on in the eastern border of 
Ukraine. The question was just raised as to how we continue to 
feel about Crimea. You talked about espionage, cyberattacks, 
disinformation, propaganda campaigns. You talked about the 
active Russian evasion of the North Korean sanctions, the 
influence operations at Facebook recently, talked about, does 
foment destabilization. It is not about right or left politics.
    And I think you make the good point that when we break this 
down on a partisan basis here in this body and in this country, 
that only comes to help Russia, not us. And I hope that we in 
this committee have been able to avoid that, and will continue 
to.
    Today, Microsoft announced it imported Russian-backed 
cyberattacks as an example on the IRI, the International 
Republic Institute, and also on the Hudson Institution. So this 
is ongoing even as we talk here today.
    I think sanctions are necessary. You talked about how firms 
are sanctioned or impacted, including, you said, on average a 
firm would lose one-third of its employees if it was 
sanctioned. The ruble has been devalued. But it is obviously 
not working the way we would like it to. I'm not saying it does 
not have impact. And, again, I think it is necessary. So my 
question to you really is, what would be more effective? Either 
additional sanction pressures or non-sanction pressures do you 
think would be most effective in countering what is going on?
    And specifically, I would like you, Secretary Mitchell, to 
talk a little bit about the Global Engagement Center. There was 
talk about a new fusion center. I am not necessarily against 
that, but we just set up this Global Engagement Center. Senator 
Murphy and I spent a lot of time on legislation over the years 
working on this. The idea there was to, at least with regard to 
push-back on the disinformation and propaganda, be able--on an 
interagency basis to be able to have better coordination and be 
more effective in pushing back.
    We have, frankly, much less resources than the Russians use 
every day here in Washington, DC even. But could you talk a 
little bit about that, or other ways we could deal with what is 
obviously a continuing problem with Russia.
    Mr. Mitchell. Thank you for those questions, Senator. Let 
me just respond in brief to the three things you have asked.
    On the first part, I am not sure I would characterize the 
efforts that we have made in quite the way that you have in 
terms of impact. I think the chilling effect on the Russian 
economy, and certainly key sectors, has been significant and 
measureable. Since 2013 foreign direct investment in Russia has 
fallen by 80 percent. It is a pretty stunning number. You know, 
at this point we are looking at an impact through the chilling 
effect of use of 231, from CAATSA, from $8 to $10 billion in--
for closed arms deals.
    I think your broader point on Putin and his view of the 
United States not having a partisan ax to grind is out. I do 
not think that Putin is a student of Jefferson or Adams. I 
think he is a student of Haushofer. I think it is about 
geopolitics. I think Microsoft revelations from yesterday show 
that Facebook expulsion--show that very clearly that the groups 
in question were fomenting violence from fringe left 
perspective. So I think that we have to understand that we have 
a competitor who sees us as strategic competition, and his 
interest is in dividing us internally. It is a strategy of 
chaos for strategic effect. And so I think it is incumbent on 
us to not politicize and make it partisan.
    In terms of GEC, we work very closely with GEC. As you 
probably know, the department has put $20 million of our own 
resources towards this effort in the period when we are waiting 
on the additional funds. We are really looking forward to 
seeing our colleagues at the Department of Defense move the 
additional 40 million, so that we can see the GEC be up and 
running in the way that it was intended in the areas related to 
Russian disinformation.
    Senator Portman. Do you feel like you have the right staff 
onboard at GEC to be able to punch back?
    Mr. Mitchell. I do. I think we have a very talented staff, 
some very capable and knowledgeable hands. We also work very 
closely with them from our bureau. In fact, when our colleagues 
in Russia were P&G'd and came back, we made excellent use of 
the talent base to do a temporary plus up in some of those 
areas.
    I mentioned the capacities that we have created at EUR, 
including the SARMAT role. SARMAT is the acronym for this 
person's role. It is also the acronym for a Russian missile. I 
think it make the point very clearly that we take--we take the 
problem seriously.
    Senator Portman. Yeah. Thank you, Mr. Chairman. I just 
think, in general, the measurements you are using; again, I 
appreciate all the hard work you are doing are the impact on 
the ruble, the impact on the economy, the impact on the direct 
foreign investment. Those are interesting measurements, and 
obviously they are having an impact.
    The question is, what are the consequences of that as to 
Russian behavior with regard to, again, their both overt and 
covert espionage, disinformation, propaganda, avoiding 
sanctions, and so on. And that is the question I have is, can 
we see a measureable result in terms of the actual problems 
that we hope to be able to address.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. Senator Cardin.
    Senator Cardin. Thank you, Mr. Chairman. I just want to 
concur with the leadership of this committee, and thank both of 
you for your service, and your testimonies today have been 
excellent, and I think this is what we want to hear. So I 
applaud your service.
    It has been 93 weeks since the presidential elections. And 
our Intelligence community made a pretty quick assessment as to 
Mr. Putin's involvement in our elections. Bipartisan support in 
Congress took very quick action on the CAATSA statute, 
recognizing the threat.
    I agree with Senator Portman that this committee and this 
Congress has acted in a very bipartisan manner, recognizing the 
threat of Russia. So I want to make that clear.
    And Mr. Mitchell, I appreciate--Secretary Mitchell, I 
appreciate the fact that the policy you are enumerating, one 
that I personally support, the way you articulate it, 
indicating it was directed by the President, the problem is the 
President has not followed it. That is the concern.
    There have been times when the President has made this a 
very partisan issue. We have not. He has. So I think we need to 
really drill down on this just a little bit more as to how this 
policy is being implemented.
    You point out, in a very sobering way, that Mr. Putin wants 
to break apart the American Republic. That is a pretty sobering 
statement you made. Totally consistent with a report that I 
authored on behalf of members of this committee in January that 
said that Mr. Putin's not only trying to compromise our 
democratic system here in America, but he has his eyes on 
democratic nations of Europe, trying to bring them down as 
well. That is pretty sobering.
    But our report pointed out that to counter that you need 
strong leadership. And I appreciate the fact that we have had 
arguments as to the effect of sanctions. One thing is clear to 
me, if you do not stand up to Mr. Putin, he will take the 
situation and move even further.
    So have we seen a change in behavior the way we want it? 
No. If we did not pass the sanctions could there have been even 
more activities by Mr. Putin? Probably yes. He will fill a 
void. So I think it is important for us to be very sober about 
Mr. Putin's activities and what he is trying to do.
    So let me get to this one point, because this really 
concerns me about the President's actions. I saw Helsinki, and 
the private meetings in Helsinki, and it is filling into the 
narrative of Mr. Putin and his concept of how governments 
operate, and compromising our democratic system by the manner 
in which that meeting took place. And after the meeting they 
were celebrating in Moscow, and they were scurrying in 
Washington to try to figure out how to handle some of the 
statements that were made.
    So first, try to assure me that--you say sanctions need 
discretion. I understand that, from the point of view of the 
Executive Branch of government, you need discretion, for them 
to have a policy. But the problem is one person can exercise 
that discretion, the President of the United States. And we saw 
that the President might very well--we know that there has been 
discussions about Magnitsky sanctions, and with Mr. Putin, et 
cetera.
    Have you been briefed as to what happened in Helsinki in 
regards to discussions on sanctions?
    Mr. Mitchell. I have been briefed on the appropriate 
information I need to carry out my job with relation to Russia. 
But the President's also been clear, as recently as in an 
interview yesterday, which I would direct you to, that this 
was--the question that you are asking, when he was asked in the 
interview, he was very clear about this.
    And beyond that, I would say----
    Senator Cardin. He was very clear, not in Helsinki.
    Mr. Mitchell. He was very clear with regard to raising with 
Vladimir Putin the unacceptability of interference in our 
elections. He has been very clear in his statements that he has 
not at any point raised the possibility of lifting sanctions.
    Senator Cardin. He did that when he returned to Washington. 
He did not do that in Helsinki.
    Mr. Mitchell. Sir, with all due respect, I am not going to 
litigate the specifics of every comment that the President has 
made. I would point you towards our policies that are directed 
by the president of the United States.
    I disagree with your overall characterization that the 
President has not followed his policies. These are the 
President's policies. There is no distinction between the 
administration and the President with--the President directed a 
Russia strategy, a strategy for countering Russian influence. 
The previous administration did not.
    I would point you to the 2010 National Security strategy on 
Russia, and compare it to our National Security strategy as it 
relates to Russia. I will point you to what President Obama 
said in Moscow in 2009. He called Russia a mighty river, and 
said that America wanted to ensure its rightful place among the 
great powers. And I would----
    Senator Cardin. Sir, I understand--sir, I understand the 
policy right now, you are assuring this committee that unless 
Russia changes its behavior, we will not only maintain all of 
our sanctions, you are looking for ways to strengthen those 
sanctions against Russia, and are prepared to work with this 
committee to give you additional tools in order to make it 
clear that without tangible specific results, these sanctions 
will be maintained and expanded.
    Mr. Mitchell. Yes. And I think that is also clear from our 
actions of the past year-and-a-half.
    Senator Cardin. Thank you. Thank you, Mr. Chairman.
    The Chairman. I am going to make one interjection before 
turning to the next person. My observation would be that some 
of the undisciplined comments that the President makes creates 
just as much trouble for these people as they do for us, and 
the rest of our country.
    Let me just give an example. The 232 Tariff issue, which I 
believe is an abuse of the President's authority, were you all 
involved at all in discussing the use of a national security 
waiver to put tariffs in place, which in your case, Mr. 
Mitchell, usually affects the portfolio that you are working 
on. Were you asked, or was your, was the State Department asked 
about the use of----
    Mr. Mitchell. There was an extensive interagency discussion 
and process on that matter. And both State Department and EUR 
had a voice in the process.
    The Chairman. And did you support it?
    Mr. Mitchell. With regard specifically to the European 
Union?
    The Chairman. Yes.
    Mr. Mitchell. What I supported was the President's trade 
policy overall. We informed that strategy. I think as you see 
from the current U.S.-EU dynamic and trade it is a strategy 
that is working.
    The Chairman. Well, I will take a little more of my time. 
How is it working?
    Mr. Mitchell. We currently have a conversation under way, a 
structured dialog with the European Union, about a lowering of 
EU barriers to American products and services.
    The Chairman. Well, it is my understanding that the 
European Union actually has to go to zero tariffs when they met 
with the president on automobiles, and he did not want to do 
that. He wanted to keep the 25 percent tariff in place on light 
trucks. So it is us that is pushing for tariffs, if my 
understanding is correct.
    Mr. Mitchell. The President has repeatedly and publically, 
in the company of senior European leaders, pledged to go to 
zero-zero if the Europeans were willing to do this.
    The Chairman. My understanding is they are willing----
    Mr. Mitchell. The Europeans have not even been willing to 
even engage in a process until the President used 232.
    The Chairman. So you support the use of a national security 
waiver to put tariffs in place on steel and aluminum?
    Mr. Mitchell. I support the president's trade policies, 
sir.
    The Chairman. And did the department recommend the use of 
the 232 waiver?
    Mr. Mitchell. I am not going to get into the deliberate 
process. This is one administration. There is an interagency 
process for everything related to what you are asking about, 
and we are on the same page.
    The Chairman. Senator Paul.
    Senator Paul. Thank you. You know, we have asked some 
important questions, and a really important question we have to 
ask is do sanctions change behavior. And so without the answer 
to that I think we cannot really decide whether we want more 
sanctions until we decide whether sanctions work. And that is 
another way of asking the question, do sanctions work?
    I think with regard to Iran, when the world had sanctions, 
there obviously is evidence that it worked to bring Iran to the 
negotiating table. In this case, there really is a question, do 
they work, and do more sanctions, well, work even better.
    I think one possibility is that they do not work. And if 
they do not work, what is the result of sanctions? One result 
of sanctions might be that it drives Russia more into the 
sphere of China, and drives countries such as Turkey more into 
the sphere of either Russia or China. And so I think there are 
arguments to be made that perhaps more sanctions are not the 
way to go.
    Sanctions are sort of the stick, and the question is, what 
is the carrot? I would say that one of the carrots might be 
considering whether or not we continue to insist that Ukraine 
and Georgia be in NATO. I think that if you really wanted to 
influence Russia's behavior, and you were talking on a one-to-
one basis with Russia, and you were to have some sort of 
agreement, I think an agreement not to have Ukraine and Georgia 
in NATO might lead to less conflict in both Ukraine and 
Georgia. There is the argument that much of the military 
conflict and fomenting of military conflict is because they do 
seriously fear, and worry, and are concerned, and are opposed 
to having them in NATO.
    It was George Kennan who said in 1998 that if the West 
insists on pushing NATO into Eastern Europe, and into the 
surrounding countries around Russia, that it will lead to the 
rise of militarism, nationalism, and ultimately an aggressive 
leader in Russia. And he said this in 1998. And I think, you 
know, his words had great prescience in the sense that some of 
the reactions, some of the things you see in the world are 
reactions to actions that we take.
    With that being said, if we are open to dialog, as Mr. 
Mitchell said, in addition to both having the sanctions, the 
stick, but we still show an openness to dialog, one of the 
things that I think we could and ought to consider is whether 
or not there is any element of the sanctions where we would be 
willing to negotiate lessening of sanctions in exchange for 
maybe a smaller change in behavior.
    If we wait for Russia to leave Crimea to lift any 
sanctions, we may well be waiting to the end of time. But 
perhaps there are some sanctions that already we could see that 
are counterproductive, and the ones that I would throw out are 
sanctions that prevent the travel of legislators, and their 
Duma, and their federation. And I think even in the midst of 
adding more sanctions, we ought to consider whether or not it 
is productive to dialog, to not have dialog.
    Even if you want to complain about election meddling, you 
would think that you would want to meet with the Russian 
legislators to complain about election meddling. And I think if 
we cut off dialog between the legislators in Russia and here, 
that I do not necessarily see that that is going to change 
their behavior, but it does block off the ability for us to 
have dialog with Russia from their foreign relations to our 
foreign relations.
    And so I would just ask that the members of the committee 
at least think about it as the push is towards more--is towards 
more sanctions, whether or not we ought to at least think about 
whether or not we want to prevent their legislators from 
traveling here, and then they do the same basically to our 
legislators.
    There are things that despite our differences, though, that 
I think we should continue to talk about, and this is, I guess, 
the basis of my question. The New START Treaty was completed in 
2010. It expires at the end of 2020. I guess I would ask Mr. 
Mitchell, where do we stand on discussions with Russia? Do we 
have ongoing discussions? Do we have negotiators? What is the 
status of the New START Treaty, and our discussions with 
Russia?
    Mr. Mitchell. Thank you for that question, Senator. And if 
I could respond briefly to the first part of what you said.
    I agree with you that sanctions are a tool of strategic 
statecraft. And right now the United States has 4,190 sanctions 
worldwide, and 580 against the Russian Federation. What that 
points us towards is the need for sanctions to always be linked 
to a clear strategy. I think the role for Congress is to 
continue to be very specific as you were in CAATSA about what 
change in behavior is needed in order for the sanctions to be 
lifted, and any forthcoming legislation.
    With regard to New START, we have been very clear that 
Russia's violation of the IMF Treaty has created a deficit of 
trust. And that extends across the arms control ecosystem in 
all of our conversations with the Russians.
    We are looking very carefully and closely at the question 
of the future of New START. I would just say at this point any 
decision regarding a potential extension will be made at the 
appropriate time, and we would determine whether extending the 
treaty is in the national interest of the United States and our 
allies.
    Senator Paul. We do not have a formal dialog on either IMF 
or New START with actual negotiators, or do we?
    Mr. Mitchell. Well, what we have at present is a line of 
sight to continuing the process on strategic stability talks. 
But we will only know more about that once National Security 
Advisor Bolton comes back from his meeting with Patrushev later 
this week.
    The Chairman. Before turning to Senator Shaheen, just to, 
Senator Paul, I would make you aware, and appreciate your 
perspective that we were in conversation with the former 
ambassador here from Russia about potentially reestablishing 
the parliamentary discussions. In lieu of waiving sanctions, 
what we had suggested was just meeting them in a neutral place, 
whether that be Israel or some other place.
    And so there were discussions of that type until the 
election issues began in 2016. So I did want you to know that 
those conversations had taken place in the past. There were no 
discussions that I remember of waiving sanctions, but certainly 
meeting in neutral territory to begin a dialog. Whether that is 
something we want to discuss again, we can talk about that 
internally, but those have taken place in the past.
    Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman. Thank you both 
for being here. And like other members of this committee I 
applaud the policy positions that you have outlined today. I 
think the concern and confusion among Americans and the world, 
actually, has come because of the contradictory statements and 
actions of the President, because of his behavior in Helsinki, 
because of his frequent Tweets, because of his failure to 
consistently acknowledge Russia's actions to influence the 2016 
elections, and their ongoing meddling in 2018.
    So I appreciate the opportunity to explore the policy 
positions that are under way, but I think until we see a change 
in that behavior we are going to continue to see confusion and 
concern. And I am not asking you to respond to that. That was a 
statement, not a question.
    Can you, Mr. Billingslea, tell me the status of the Skripal 
sanctions that were announced on August 8th? Have they actually 
been imposed?
    Mr. Billingslea. Senator, the sanctions in response to the 
use of the nerve agent in the United Kingdom, those have been 
imposed. They were actually imposed under a State Department 
authority, and I would defer to Secretary Mitchell on that. We 
were in close consultation with the State Department in the 
run-up to that. And as Secretary Mitchell has indicated, 
depending on how Russia reacts, there is a menu of additional 
follow-on options that range in potential severity, which we 
are continuing close discussion on as well.
    Senator Shaheen. And Secretary Mitchell, are we supporting 
Foreign Minister Hunt's call for the EU to impose greater 
sanctions against Russia in line with the United States has 
done? And are we also working to try and encourage the EU to do 
that?
    Mr. Mitchell. Yes, we are, Senator, very much so. We are in 
close consultation with our British counterparts at this point 
on an almost daily basis, and have been both with regard to the 
Skripal expulsions, and next steps on sanctions.
    And I would just add, we were encouraged to see that the 
Europeans, partly because of U.S. engagement, created their own 
distinct chemical weapons-related sanctions authorities, which 
was a new and important step.
    Senator Shaheen. I agree. I think that is positive.
    Mr. Billingslea. Senator, could I also offer on that, one 
of the things that----
    Senator Shaheen. Only if it is new. You are using my time.
    Mr. Billingslea. I will revert back to you, Senator.
    Senator Shaheen. Okay. Thank you. I appreciate that.
    Secretary Mitchell, as we have discussed before, I had the 
opportunity to visit Syria and see the stabilization efforts 
that have taken place in Northeast Syria, along the Turkish 
border, and how much the Syrian people have benefited from 
that, from throwing ISIS out of that. And continued to be very 
troubled by the fact that the administration has on hold the 
stabilization funds for that part of Syria.
    How does continuing to deny efforts to support 
stabilization in that area fit with our Russia policy? Because 
does that not give Russia, and Assad, and Iran all, and Turkey, 
for that matter, all the opportunity to go into that part of 
Syria, which has a chance now with continued stabilization, and 
continued support to be a place where the Syrians can enjoy 
some level of freedom from violence, and from Assad, and his 
regime, and from all the other actors in the region. How does 
that make sense in terms of a policy for Syria and Russia?
    Mr. Mitchell. Thank you for the question. No. I appreciate 
the question. And I would say nothing would be better from a 
Russian perspective than to see U.S. aid flowing in Syria in 
many different regards. Prior to a clear commitment to a 
political process at Geneva. This is part of the stock Russian 
approach to next steps on Syria, to see the United States 
essential bankroll various forms of stabilization 
reconstruction before we see the Russians do their part in 
committing to a political process.
    Senator Shaheen. Well, I am not talking about all of Syria. 
I am talking about that----
    Mr. Mitchell. I understand the question. But you asked how 
it was related to the whole----
    Senator Shaheen.--northeast area that we have actually 
committed to.
    Mr. Mitchell.--Russia strategy.
    Senator Shaheen. How does allowing other foreign influence 
to go into that area and undermine everything we have done to 
stabilize the region post-ISIS to work with the Syrian 
democratic forces? How does that benefit a policy that says we 
would like to get people to the table? If anything, I think it 
would encourage the Russians to go to the table, because they 
see what we have been able to do working with the Syrian people 
there.
    Mr. Mitchell. Senator, what I would say is we take very 
seriously taxpayer resources as they relate to the Syria 
problem in its entirety. We are cognizant of how that fits with 
the larger Russia strategy. And it is not clear to me that the 
actions that we are having are widening or creating a vacuum 
for other players.
    Senator Shaheen. Have you been there?
    Mr. Mitchell. No, ma'am.
    Senator Shaheen. I would encourage you to go. I think it 
would be very illuminating in terms of the difference that we 
have been able to make with our military on the ground there, 
with other coalition forces. And to give up the playing field 
there, and to allow other influences to go back in, I think it 
is not in our interest or the Syrian people's interests.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. Senator Young.
    Senator Young. Secretary Mitchell, welcome. I would like to 
return to what you have indicated in your written statement is 
Putin's thesis, ``That the American Constitution is an 
experiment that will fail if challenged in the right way from 
within. Putin wants to break apart the American Republic,'' you 
say, ``not by influencing an election or two, but by 
systematically inflaming the perceived fault-lines that exist 
within our society.''
    This is, indeed, a very serious point. Can you elaborate on 
that point?
    Mr. Mitchell. Well, I think what we see in Russian 
strategic behavior, as it relates to influence operations, is 
more or less consistent with standard Russian operating 
procedure and influence operations all the way back to the 
1930s. The Bolsheviks, and later the Soviet State--I mean, 
look, even within the United States, before the social media 
age, Russians have been at this since at least the 1960s or 
'70s. This is not particularly in that regard. What is new is 
the tools and the scale. So the digitization of this, digital 
means, and social media, and the fact that this is being 
directed from a very high level, with a lot of State resources 
behind it.
    I think what we have seen in Russian approach to the United 
States in influence operations is very much not a partisan 
effort. I think it is a very cynical effort to pit preexisting 
political camps against one another. I would just refer you to 
some of the groups that Facebook made the decision to shut 
down. Look at what they were promoting. Look at what they stood 
for. These particular groups were on the far left.
    We are aware very much from media of those on the far 
right. These were from the far left. They were putting money 
and organizational efforts behind groups that stood for really 
heinous and hideous causes inside the American polity.
    We have seen since January of last year, after the 
President was elected, the Russians have put money behind 
groups that have fomented anti-Trump protests, including the 
one at Madison Square Garden that drew thousands of people 
immediately after the election.
    So the point is that from our competitor's standpoint, the 
goal is to divide us internally. There is not any reflective 
political philosophy as it relates to American politics. It is 
an effort to divide us.
    Senator Young. We have heard from members various documents 
produced from the Intelligence community in the past as well 
that the difference here is not in the attempt to influence the 
United States, but is, indeed, in the tools. It is the breadth 
and extent to which the influence operations have been tried. 
It may also have something to do with the interaction between 
those tools and a particular moment in political history as 
well.
    Secretary Billingslea, I welcome you as well to this 
committee. Great to have you. You write in your prepared 
written statement that Russia's continuing occupation of 
Crimea, human rights abuses, malicious cyberattacks, elicit 
procurement of sensitive defense in intel technologies, 
election interference, and other influence efforts, as well as 
their support to the Assad's regime, massacre of its own 
citizens are all unacceptable.
    You know, my colleagues have already asked in a couple of 
different ways whether or not the sanctions are working. I 
think there has been an acknowledgement that the purpose of the 
sanctions is not just to influence the Russian economy. It is 
to deal with these other objectives, these continuing problems 
we have.
    Have we seen improvement with respect to any of these? 
Crimea, human rights, cyberattacks, procurement of sensitive 
technology, so on, and so forth. Election interference on 
account of our implementation of sanctions.
    Mr. Billingslea. Senator that is a great question. There is 
a difference between working and having an effect. Our 
sanctions are working to the extent that they are integrated 
into a larger strategy that the administration is executing to 
deal with these Russian malign behaviors. But our sanctions are 
also having a clear and measureable effect.
    I will give you some examples. Rosoboronexport, which is 
their huge defense conglomerate that was selling fighter jets 
dropping the barrel bombs of chlorine on the populations in 
Syria, they are having a hard time getting paid for a number of 
their deals. So we are impairing--we are impairing the 
effectiveness, and we are constraining the Putin----
    Senator Young. Yeah.
    Mr. Billingslea.--regime, and their--and their freedom of 
maneuver. But, again, the extent to which it is all working 
depends on the synchronization of a lot of other measures----
    Senator Young. Yeah. I understand there ought to be a 
broader strategy. So can you name some of the other tools that 
are being implemented, utilized, to effect change in these many 
continuing areas of challenge? And perhaps you can tell us what 
additional steps we might take vis-a-vis the Russians to 
implement that change.
    Mr. Billingslea. Chairman, if I might, and I will kind of 
sneak in what I wanted to say to Senator Shaheen as well here, 
which is in the capacity, is this committee, the work that you 
do, it is incredibly important that we message very clearly to 
a number of European allies, particularly Eastern European 
allies, that it is crucial that they shore up their anti-money 
laundering regimes, and that they clamp down and tighten down 
on how they regulate money coming out of Russia.
    There is an enormous amount of money that is still being 
filtrated from Russia by both organized crime and cronies 
surrounding Putin. And so to the extent that you have 
parliamentary relations with Latvia, or you engage with Cyprus 
and Malta, or other offshore jurisdictions, I think reinforcing 
that message would be incredibly helpful.
    We really need to clamp down globally on these money flows 
that are associated with the movement of large amounts of money 
out of Russia.
    Senator Young. Thank you.
    The Chairman. Thank you. Senator Murphy.
    Senator Murphy. Thank you very much, Mr. Chairman.
    Mr. Chairman, I thought that our hearing with Secretary 
Pompeo was extraordinary, and I frankly wish that it had gotten 
more attention. I thought it was extraordinary in a number of 
respects. But chiefly, in the argument that the secretary was 
making to us, that we should ignore what the President says and 
pay attention only to what the State Department does. And we 
are hearing a strain of that today.
    But the argument is extraordinary because it essentially 
admits that there are two different American foreign policies 
today. There is one articulated by the President in his 
statements that he makes standing next to President Putin, or 
on his Twitter feed.
    Just yesterday, to Reuters, the President once again said 
that it might not have been the Russians that interfered in the 
U.S. election. And then there is the, I would argue, much more 
mainstream foreign policy that is being administered in part by 
the two incredibly capable patriotic representatives of the 
American government standing here today.
    And so I wanted to pose a question, I guess, to you, 
Secretary Mitchell. In the context of how this plays out on the 
issue of propaganda, building off of the question that Senator 
Portman asked you, I thank you for the work that you have done 
to stand up the GEC while you are waiting for the transfer 
authority. You have gone and worked with Secretary Pompeo to 
find some money to get that up and running. And I agree that it 
is going to make a difference.
    But there was a really interesting poll from--about a week 
ago in this country that showed that 43 percent of Republican 
voters believe that the President should have the authority to 
close news outlets engaged in bad behavior, which is reflective 
of this obsession, especially over the past few weeks, that the 
President has with what he calls the enemy of the people, which 
is a really, really terrible term, given the fact that is 
rooted in a Stalin era murderous campaign against journalists 
and anyone that opposed the Russian government at that point.
    And so I feel like you are doing some great stuff on the 
GEC. You are doing some innovative work to push back on Russian 
propaganda. But then the President is handing the Russian 
government a gift by his regular attacks on the free press, 
which seems to endorse the same kind of work that Putin is 
doing in his own country, and around the periphery.
    So I guess the question is, you know, is not Putin's 
assault on the free and independent press inside Russia and in 
the Russia periphery emboldened by President Trump's 
regurgitation of the Stalin-era attacks on American media?
    Mr. Mitchell. Thank you for your questions, Senator. Let me 
respond to the two things that I have heard you say.
    The first, I just want to push back on this idea that there 
is a strategy that is separate from the views of the President. 
This is the President's administration. This is his foreign 
policy. National Security strategy, national defense strategy, 
the directives that we have for policy are coming from the 
President. The strategy overall I would characterize on Russia 
in one sentence. Continue raising the costs until Russian 
aggression ceases, while keeping the door open to dialog.
    I think if you look at the last 18 months, that is exactly 
what we have done. I look at the President's efforts at dialog 
within the context of an administration that is increasing 
defense spending by $700 billion, recapitalizing a nuclear 
arsenal, and has had 217, 222 sanctions today on Russian 
individuals and entities, in contrast to the previous 
administration that sought dialog, but did so while gutting our 
military, talking about global zero in nuclear weapons.
    So I think the context matters. I think the strategy 
documents send a very clear signal about what we are trying to 
accomplish vis-a-vis Russia, and I think it is the right 
approach.
    Senator Murphy. Yeah. But the President said yesterday that 
it might not have been Russia that interfered in the 2016 
elections. That is not the policy of the U.S. State Department, 
right? But that is what the President said yesterday.
    Mr. Mitchell. I have a list in front of me with dates that 
I would be happy to submit for the record of the instances on 
which the President of the United States has been very clear in 
attributing to Russia interference in our elections, and 
pushing back on that interference.
    Senator Murphy. Got it. Yesterday. But tell me how it plays 
out in the context of propaganda, and specifically talk about 
whether you have any fears about what the President's rhetoric 
on the American free press being an enemy of the people has on 
your work? Because, again, I think you are trying to do the 
right thing here and trying to work with us. But if you think 
it is no problem, tell me that it is no problem.
    Mr. Mitchell. Well, look, Senator, I mean, in point of 
fact, I would like to be clear that what the President has said 
is not that the free press quote is the enemy of the people. He 
said the fake news is the enemy of the people.
    Senator Murphy. Clearly, The New Yorker, The New York 
Times, Washington Post, CNN, MSNBC have not all been----
    Mr. Mitchell. A healthy fourth estate is a fundamental 
bulwark of a representational republic. I think today's media, 
we would all agree, is unprecedently polemical. And the 
political debate in this country has gone beyond the pale of 
what we have seen on the part of the media in a very long time. 
That is part of a healthy democracy.
    If what you are asking me to do is comment on politics, I 
am going to stick to my job, which is policy.
    Senator Murphy. Thank you, Mr.--I was not--I do not want to 
lead you down this road, because I frankly know what you 
believe. I know that you do not believe that the press is the 
enemy of the people, and I just want to make sure that this 
committee understands that we have a tough job trying to give 
you the resources while your work is being compromised by the 
statements of the President.
    So, again, I think we are all very appreciative of the work 
that you are doing. I just think it is important in these 
hearings to acknowledge the separation between the President's 
rhetoric and the policy of the State Department.
    Mr. Mitchell. Again, I just want to say we--the foreign 
policy of the United States, we are executing the policy 
directives of the President full-stop.
    Senator Murphy. Got it.
    The Chairman. If I could, we do appreciate the work both of 
you do, and you know that. I think that, you know, what we see 
happening is--well, George Kennan said in his telegram, the 
long telegram, back in 1946, I mean this is what Russia has 
been carrying out for years. And to foment disunity in our 
country, but also disunity with other Western powers, I mean 
this has been a long term--we had some glimmers of hope at 
points in time. It has been a long time since we had those 
glimmers of hope. But it has basically been the same policy. 
And I think sometimes the President's comments create--help 
create additional disunity with the West. And I think that is 
what people are referring to here. And we know that makes your 
job difficult.
    But we have these policies that are put in place. We are 
unified behind those policies. You are unified. But our 
commander-in-chief continues to undermine those with either 
undisciplined comments, or purposeful comments. And that is 
what the committee is referring to.
    Senator Isakson.
    Senator Isakson. Thank you very much, Mr. Chairman. And I 
would love to follow-on with Senator Murphy's comments from the 
press, but they have talked to me more about the cost of 
newsprint than they have talked to me about the--with the 
President. So we will leave it at that. They are winning--
hopefully, they win one of those arguments soon.
    Secretary Mitchell, let me ask you a question. In your 
prepared statement, I will read the following quote. And it is 
in quotation marks. ``Military power that is second to none, 
fully integrated with our allies, and all of our instruments of 
power,'' referring to the strength of America's foreign policy, 
lies in ``Military power that is second to none, fully 
integrated with our allies, and all of our instruments of 
power,'' is that correct?
    Mr. Mitchell. Yes, sir.
    Senator Isakson. And I agree with that. And do you feel 
like at this point in time in history we are at that point 
where we are fully integrated, and we are fully funded, working 
towards NDAA. I realize it is not all funded yet, but we are on 
the right--you think we are on the right track?
    Mr. Mitchell. I think we are on the right track. I think we 
disagree with our allies on a lot of areas of policy, but on a 
daily basis we see a lot more commonality between the United 
States and European allies than we see differences.
    Senator Isakson. And it seems to me that there is no policy 
that is going to work anyway unless America's strength 
militarily is not strong, and is the ultimate fallback 
position.
    Mr. Mitchell. Yes, sir.
    Senator Isakson. You do not want it to be your opening 
hand, but you want it to be the ace in your hole.
    Mr. Mitchell. Well, I think it provides the basis and 
context for everything else you do in your strategy. And again, 
you can see this by contrasting this administration with the 
previous administration.
    If you have an attempted dialog with Russia in the form of 
reset while you have sequestration under way, you are operating 
from a position of weakness. And while you are trying to go to 
nuclear zero, you are operating from a position of weakness.
    If you have an attempted dialog with the Russian Federation 
in the context of a strong national defense establishment, 
where you have got tremendous $700 billion increase under way, 
and you are recapitalizing your nuclear arsenal, I think you 
are operating from a position of strength.
    Senator Isakson. You are sending the right signals, no 
doubt about it, in my opinion.
    Talking about nuclear weapons, on the New START Treaty, I 
was in the Senate in I guess 2010, Mr. Chairman, when we did 
the New START Treaty. It is coming up in 2021, I think that 
treaty expires, is that correct? 2020?
    I think you were asked a minute ago by Senator Paul if 
you--if the administration had taken a position yet on moving 
forward on renegotiations for the 2020 reauthorization of the 
New START Treaty. Have you?
    Mr. Mitchell. We have not.
    Senator Isakson. Okay. Have the Russians engaged any 
conversation about it?
    Mr. Mitchell. They have raised it on more than one 
occasion. The Russians canceled the previous attempt at 
strategic stability talks, which we saw as a broader indicator 
of where we are at on arms control. As you probably know, it is 
publically known, they have some questions about various 
aspects of American compliance with New START that we see as 
being nefarious.
    Short answer to your question is at this point there is not 
an administration position on what we are going to do on New 
START. We will make that decision at the appropriate time, 
consistent with U.S. national interests.
    Senator Isakson. In the New START Treaty we negotiated a 
unique identifier on warheads, which we never had before. How 
has that worked since its implementation?
    Mr. Mitchell. I would want to provide a fuller response in 
a classified setting.
    Senator Isakson. I would like to have that, if we could. 
Because in the end, that is going to get the foundation--if we 
ever go far enough with North Korea that we are in effect 
removing wet nuclear weapons, we are going to need to have some 
systems like that to make sure we can check and verify, and 
trust and verify. And I think that was a good program that we 
established in the New START Treaty.
    Lastly, I have seen the horrible pictures on TV almost 
every night in the last week about the gas and chemical weapons 
used in Syria. And I know the Russians have pretty much gotten 
their--I think they have gotten their least established on--is 
that correct? They were meddling in Syria for a lot of reasons, 
but one of them was access to a port, if I'm not mistaken, is 
that correct?
    Mr. Mitchell. I am sorry. Can you repeat the question, sir?
    Senator Isakson. I understand that Russians have negotiated 
some access with Syria to a port that they sought very badly, 
to get out of the conflict with Syria, is that correct?
    Mr. Mitchell. I'm sorry. I still do not fully understand 
the question.
    Senator Isakson. Okay. Then I will----
    Mr. Mitchell. In Syria?
    Senator Isakson. Yes.
    Mr. Mitchell. Yes. That is correct.
    Senator Isakson. Did I say something wrong?
    Mr. Mitchell. No. I just misunderstood.
    Senator Isakson. Okay. Good.
    What do you think is the future prospects in the Syrian 
situation for Russia continuing engagement, and further 
engagement by Iran and Syria? It appears that is going from a 
situation they have got to a reasonable case of hope, to an 
unreasonable position--being fulfilled. What do you see?
    Mr. Mitchell. We see two things. On one hand you do see 
some modest constructive steps on the part of the Russians. I 
would call in particular attention to engagement with Israel, 
looking into some of our Israel security concerns, as they 
relate to Syria.
    On the other hand, you see Putin aiding and abetting a 
murderous regime, not supporting the Geneva--the legitimate 
process of Geneva, and creating a parallel process in Astana. 
So on balance, the Russians are not being a constructive actor 
in Syria.
    Senator Isakson. Thank you very much. Thank you both for 
your service.
    The Chairman. Senator Booker.
    Male Speaker: Not here.
    The Chairman. Senator Merkley.
    Senator Risch. They are arguing over there as to who is up.
    Senator Merkley. Thank you, Mr. Chairman, and thank you 
both for your--your testimony.
    In February, the State Department put out a statement that 
New START enhances the safety and security of the U.S. While 
you have not reached a decision on whether it is going to be 
extended, is that a statement that you--you feel comfortable 
continuing to assert?
    Mr. Mitchell. Yes, sir.
    Senator Merkley. Thank you. We have various reports 
circulating of the conversations that took place in the 
President's one-on-one meeting with President Putin. Has there 
now been for the assistance of the departmental interagency 
process a sense of a clear memo of what was discussed and what 
should flow from those discussions?
    Mr. Mitchell. Both Secretary Pompeo and Assistant--or, I'm 
sorry--National Security Advisor Bolton have been clear that 
they received extensive debriefing by the President. That has 
trickled through in the form of policy directives.
    There has been extensive interagency process in the period 
since Helsinki, and communication with all of our posts.
    Senator Merkley. Can you share a couple of those policy 
directives that have flown from that one-on-one meeting?
    Mr. Mitchell. So the policy directives after Helsinki are a 
continuation of previous policy. With regard to Ukraine, the 
centrality of Russian compliance with the Minsk agreements, as 
the gateway to any forward movement----
    Senator Merkley. You are saying those were specifically 
things discussed by the President at that meeting.
    Mr. Mitchell. Sure. The only agreement in Helsinki was an 
agreement for the two National Security Councils to meet.
    Senator Merkley. That was not the question. But you can go 
on in confusing the situation between the one-on-one meeting 
and the broader meeting. But it is not helpful when that is not 
what we are asking.
    Now let us turn to Myanmar. This Saturday is the one-year 
anniversary of the launch of the massive ethnic cleansing that 
took place. And right now we understand there is a State 
Department report that is being held and possibly is going to 
be released. Is it going to be released? I am not sure which 
one of you would like to respond to that.
    Mr. Mitchell. I would be happy to get you more information 
on this, sir. It does not fall under my area of responsibility, 
but I follow the issue broadly, and would be happy to follow-up 
with you.
    Senator Merkley. Yes, please.
    Mr. Billingslea. Senator, at Treasury we are tracking this 
very closely, and we have just last week sanctioned a number--
two, actually two of the army units involved, and a number of 
the--the officials who have been involved.
    Senator Merkley. Four, specifically, and two army units, 
but not the heads of them, which both Canada and Europe have 
sanctions. So we still have not reached the same point that 
Canada and Europe reached far earlier. Is it your sense that 
this State Department report will be released on the 
anniversary?
    Mr. Billingslea. It is a State Department question, 
Senator.
    Senator Merkley. Let me just share with you that bipartisan 
members of this committee weighed in with a letter to the State 
Department, saying specifically, ``Seize the opportunity with 
this 1-year anniversary. Seize this opportunity to release the 
report. Seize this opportunity to provide more aggressive 
sanctions. Seize this opportunity to reinforce our support for 
Bangladesh, which is struggling with the--during the middle of 
a monsoon with housing, refugee camp for 700,000 additional 
Rohingya. Seize this opportunity for the President to speak 
specifically to this issue,'' because outside of a confidential 
setting, he has not done so. And this is really a place in the 
world when there is massive genocide, ethnic cleansing. If 
America is to be respected in the world, our president needs to 
speak to the issue.
    So I will just ask each of you, do you support the idea 
that the United States show some leadership in response to this 
ethnic cleansing?
    Mr. Mitchell. Yes.
    Senator Merkley. Thank you.
    Mr. Billingslea. Absolutely.
    Senator Merkley. Thank you. The challenge we face on the 
election hacking continues to be substantial, but also there is 
a lot of discussion about how Russia is continuing to aggravate 
social divisions in this--in this country to basically set 
Americans against Americans on a host of social issues.
    Do you feel like we are doing all we can to--to take on 
this effort by Russia to tear big holes in the social fabric of 
our nation?
    Mr. Mitchell. I do. We have a whole of government approach, 
and a strong interagency process, but I will add, as you have 
heard from Secretary Pompeo, we welcome additional tools from 
Congress, and use them with all appropriate authorities.
    Mr. Billingslea. On top of that, Senator, as--as we 
continue to refine the evidence on the entities and individuals 
who are engaged in this kind of unacceptable behavior, we are 
going to go after them.
    Senator Merkley. Okay. Thank you very much.
    The Chairman. Senator Risch.
    Senator Risch. Thank you very much. Gentlemen, thank you 
for your service. This has been very productive, I think, as 
you have gone through these things.
    First of all, I hope the American people will take note of 
the effect, the direct effect that our sanctions have had so 
far. I think that was a really good explanation of this effect, 
which really is not reported very widely in the national media, 
and I expect it probably will not be this time. But the more 
exposure that we can give them is really important.
    I think that obviously the sanctions have two purposes. One 
is a direct effect to inflict pain, but the real objective is 
to change conduct. And, you know, you also did a good job, I 
think, of listing the conduct that we are attempting to change. 
And that is really a stunning list of some awful things that 
the Russians are doing, and continue to do. And I think that 
one of the--one of the points that has been made here, I think, 
is the frustration that everyone has, that the--that the 
sanctions are not causing immediate change in conduct.
    But I think our experience over the years has been that 
sanctions are not like a kinetic--are not like kinetic action. 
They do not spur immediate change in conduct, but really take 
time. I think the best example of that right now is the 
sanctions have been placed on Iran. And they have been in place 
for a long, long time. And, again, one of the underreported 
stories is the effect that the sanctions are having internally 
on the financial affairs in Iran. It is stunning when you find 
out what the details of that are. But, again, for whatever 
reason, it is not being reported. And I think the same thing is 
going to take place here.
    And the question that I have for you is, you know, when you 
do do these sanctions, and it does inflict pain on a populous, 
it takes time for the--for that pain to trickle up, if you 
would, and the populous start to pressure the people that are 
actually in charge. Obviously, when you are in a country that 
is--that is influenced more by a religious fervor, a radical 
religious fervor, like it is in Iran, that is different than in 
Russia, where the dollar--where money is really important.
    What are your--I would like to hear each of your opinions 
on time that this is going to take, because we--over the years, 
I know we have sat in this room and talked about the patience 
that it takes as we were attempting to influence Iran. I would 
like to hear your thoughts on the time that this is going to 
take before it does actually start to pressure the people at 
the top, where there will be some change in behavior.
    Mr. Billingslea, could we start with you, please?
    Mr. Billingslea. Thank you, Senator. You know, you raise 
exactly the--the key point, which is that sanctions are 
designed to induce a change in behavior. And very seldom, I 
think, do we see that sanctions have an instantaneous effect in 
that respect. But the cumulative effect over time can, in fact, 
be a noteworthy change in behavior. And that is what we are 
seeking to accomplish in all of the different sanctions regimes 
that we are implementing, whether we are talking about 
executive orders related to Venezuela, or we are talking about 
the North Korea campaign, or the Iranian campaign, or in the 
case of Russia.
    The challenge we face, though, with Russia is that we are 
dealing with a markedly different scale here, in terms of the 
size of the economy. This is the world's thirteenth largest 
economy. It is a trillion-dollar economy. There are the 
foremost oil producer. They are the second largest oil 
exporter. They hold Europe, in effect, hostage to energy supply 
in so many respects. They also are deeply into the supply 
chains relating to copper, even titanium, with us. So it is a 
different--it is a different calculus and a different 
calibration than we would be dealing with the hermit kingdom of 
North Korea, or the Iranians.
    So, again, I just recommend that the way we, I will say, 
attack the Russia challenge has to--has to take this into 
account.
    Senator Risch. Yeah. Mr. Mitchell?
    Mr. Mitchell. I would concur with that. And I appreciate 
you raising that point. We always differentiate between the 
Russian people and the Russian State and oligarchy. I think the 
Russian people have suffered enormously. We look for every way 
possible in our bureau to engage the Russian people. That is 
often difficult. I recently attended the commemoration of the 
Boris Nemtsov Street in front of the Russian Embassy. I think 
it is incredibly important to keep up that engagement.
    I think your broader question is apt. There is a certain 
calculus, I think, on Putin's part that he and those around him 
can weather, to some extent, sanctions, because of the 
insularity of the regime. This is a fairly insulated regime and 
oligarchy.
    We have gone more deeply into the territory of going after 
those individuals than previous administration. We have gone 
after Putin's son-in-law, Vekselberg, Deripaska. I mean my own 
view of this is when you see Putin's popularity ratings falling 
by 15, 20 percent since he was elected, that does not mean 
change comes immediately. But I think it does underscore that 
the pain is starting to have an effect.
    I think this administration has been clear that we are 
prepared to take additional steps. There is an escalatory 
ladder to sanctions. We are aware of what additional steps 
would be needed to make an even bigger point. And I think if 
you look at our actions over the last year-and-a-half they have 
been escalatory and progressive, and we are willing to take the 
steps necessary to further penalize Russian behavior.
    Senator Risch. Thanks. Thank you both for what you are 
doing.
    The Chairman. Thank you. Senator Markey.
    Senator Markey. Thank you, Mr. Chairman. Russian 
spokesperson this morning said they have been advised that 
there is no evidence of collusion between Russia and the United 
States in the election. So they are clearly in denial, and that 
continues to be their--their posture. And we are hearing that 
their behavior continues, and, in fact, may be intensifying 10 
weeks before an election in the United States of America.
    So if that is the case, how--how much more authority do you 
need to ratchet up the sanctions against Russia. It is 10 weeks 
to go. Time is of the essence. Do you intend on doing that, 
given the evidence that you have right now? We do not have time 
for a long deliberative process here. We have to make sure, 
especially in the final 4 weeks of the election, that the 
sanctions are in place.
    Mr. Mitchell. The first part of what you said, I will just 
say I think the public statements from the Russian government 
are deliberately obfuscatory. We can voke the Russian charge' 
immediately after the Facebook expulsions. And I think the 
general Russian official posture is one to deliberately mislead 
and say we have no idea what you are talking about.
    I would say in response to your question----
    Senator Markey. It just says to me--it just says to me they 
are not responding. They are not listening. Only the infliction 
of additional sanction pain is going to get them to change 
their behavior. We need an intervention in the underlying 
pathology here.
    Mr. Mitchell. I would not read into the public statements--
--
    Senator Markey. Obfuscation in the defense--obfuscation in 
the defense of interjection of a foreign power into our 
elections is an obvious strategy. So what do we do now?
    Mr. Mitchell. So I would not--I understand your point, and 
I agree. I would not confuse the statements that are being made 
by the Russian Foreign Ministry publically with the question of 
whether we are having an impact. To answer your question, I 
would say we have the authority that we need, and we are using 
that authority.
    Senator Markey. Yeah. So I am asking you, is the impact 
working right now, or are they just continuing and escalating, 
in your opinion?
    Mr. Mitchell. Well, I would reference what Director Coats 
said, and what Director Ray said, that this is broad and deep. 
It is ongoing. We are not at the levels that we saw in the 
lead-up to the 2016 election. It is a very serious threat. It 
is an ongoing threat. We have an interagency process and set of 
structures to confront it.
    Senator Markey. Well, I think that it is time to have the 
interagency meeting that--ten weeks out, that makes the 
decision as to whether or not we increase those sanctions.
    With regard to the discussion between Mr. Putin and Mr. 
Trump, and the New START Treaty. Can you tell us what--what 
happened in that discussion between the two of them?
    Mr. Mitchell. These were not deeply substantive 
discussions. The only agreement that came out of Helsinki was 
for the two National Security Councils to meet again, which 
they are doing this week.
    Senator Markey. So you are saying there was no extensive 
discussion about New START between the two of them?
    Mr. Mitchell. I think both the President and the Secretary 
have been clear on that publically.
    Senator Markey. OK. Now with regard to the IMF Treaty, was 
there a discussion between Putin and Trump on that issue?
    Mr. Mitchell. I am not sure what has been said publically 
about that by the President, and I want to respect executive 
prerogative, and not get into the private details of a 
conversation between these two leaders.
    Senator Markey. Have you been briefed on any conversation 
that took place between Trump and Putin on the IMF Treaty?
    Mr. Mitchell. I have received the information I need to do 
my job as it relates to Russia.
    Senator Markey. Does that mean that you have been briefed 
on the IMF Treaty, if--did the President say to Putin that 
Russia is in violation of a treaty that deals with nuclear 
weapons threat to the United States? Did he say those words 
to----
    Mr. Mitchell. I am not aware of any part of the 
conversations that was devoted to the subject of IMF.
    Senator Markey. You are not?
    Mr. Mitchell. No.
    Senator Markey. OK. Do you believe that the IMF Treaty is 
in our national security interest?
    Mr. Mitchell. I do. I also believe that Russian compliance 
with the IMF Treaty is in our interest.
    Senator Markey. Well, by definition. And do you feel the 
same way about the START--the New START Treaty?
    Mr. Mitchell. I do. And similar caveat.
    Senator Markey. And, again, obvious. And that it should be 
extended. I was pleased to see this morning sanctions against 
Russia for aiding North Korea. That was a positive step, but I 
still worry about enforcing existing sanctions, for example, on 
North Korean slave labor. Recent reports indicate Russia is 
still using North Korea labor regularly.
    Mr. Billingslea, are you considering additional sanctions 
against Russia because of their use of that North Korean labor?
    Mr. Billingslea. Senator, thanks for the question. We 
continue to press, together with the Department of State, 
Russia to abide by the U.N. Security Council Resolutions, which 
call for a wind-up of the labor licenses, and the return of 
those workers out of Russia. We are concerned about the slow 
roll that we are observing in connection with that. We also are 
very, very--extremely concerned about other evasion behaviors 
that are in practice.
    Senator Markey. Are you considering new sanctions?
    Mr. Billingslea. On Russia. We are.
    Senator Markey. Because of this North Korean labor issue?
    Mr. Billingslea. Senator, I would have to get back to you 
on that.
    Senator Markey. Okay.
    Mr. Billingslea. I will get back to you on that.
    Senator Markey. Well, I think that is----
    Mr. Billingslea. I do not want to telegraph punches 
publically, but we are actively looking at evasion scenarios 
across the board.
    Senator Markey. Okay. Very good. Thank you. Thank you, Mr. 
Chairman.
    The Chairman. Thank you. Just to give you a chance, Mr. 
Mitchell, to--Secretary Mitchell to clean up.
    When you said the elections, the interference right now is 
not as it was in 2016, what you are saying is the interference 
that we are seeing is less intense. Is that correct?
    Mr. Mitchell. Yes. That is correct. And I was referencing 
Director Coats' comments.
    The Chairman. Yeah. Thank you. Senator Gardner.
    Senator Gardner. Thank you, Mr. Chairman. Thanks to both of 
you for being here today. I want to commend the State 
Department for following up on Senator Markey's comments, 
sanctioning Russian ships for their continued trade violations 
of sanctions when it comes to North Korea. But I also would 
point out additional articles of The Wall Street Journal and 
others that talk about the depths of continued acceptance into 
Russia of North Korean laborers.
    It does not seem to be lessening. In fact, it seems to be 
increasing. And I would hope that you would take a look, 
Secretary Billingslea, at the C4ADS report. I am sure you are 
very familiar with it. It identifies names of businesses that 
are asking for Korean translators, hiring Korean translators to 
deal with a number of foreign workers they have coming in from 
North Korea.
    We know that as much as 80 percent of the salary that the 
North Korea worker is supposed to receive is being siphoned off 
and going to prop up the Kim Jong-un regime for a grand total 
of over $2 billion. That goes into directly the nefarious 
activities that he continues to pursue, including reports today 
from the U.N. watchdog, IAEA, that there is no indication that 
North Korea is slowing down or stopping its nuclear program.
    And so if we are going to have and say that we have a 
doctrine of maximum pressure, then perhaps it is time that we 
start saying publically that we are going to sanction these 
companies in Russia, in China, and around the globe that 
continue to violate sanctions when it comes to North Korea.
    And I think if we are going to be trying to get Russia and 
China to follow through on their commitments to U.N. sanctions, 
then perhaps we can take a look at the names of these companies 
and start sanctioning them. I mean here is one right here. I am 
not going to be able to pronounce it, but there is Zenco, 
Genco, Sakorenma. I mean these are all companies that continue 
to take North Korean laborers, and it would be nice to see the 
Treasury starting to sanction them.
    On August 2nd, as you know, CAATSA was signed last year by 
the President. Section 324 of CAATSA requires determination 
with the 90 days whether North Korea should be designated as a 
state sponsor of terrorism. That determination was made on 
November 20th. President Trump announced North Korea designated 
a state sponsor of terrorism, stating, ``North Korea has 
repeatedly supported acts of international terrorism, including 
assassinations on foreign soil.''
    February 2nd, 2018, ``The United States determined under 
the Chemical and Biological Weapons Control and Warfare 
Elimination Act of 1991 that the government of North Korea used 
the chemical warfare agent VX to assassinate Kim Jong Nam, Kim 
Jong-un's half-brother, in the Kuala Lumpur airport. The 
Treasury Department subsequently imposed sanctions against 
North Korea for that attack.
    On March 4th, 2018, the Russian government attempted to 
assassinate two Russian nationals in Salisbury, United Kingdom. 
On August 8th, 2018, the State Department determined that the 
Russian Federation has used chemical or biological weapons in 
violation of international law, or has used lethal chemical or 
biological weapons against its own nationals in the Salisbury 
attack. The Treasury Department subsequently imposed sanctions 
against Russia for that attack.
    On April 24th I introduced, along with Senator Menendez, I 
know he has talked about this today as well, the language 
identical to the CAATSA provisions regarding North Korea, 
requiring the State Department to make a determination whether 
Russia should be designated as a state sponsor of terror.
    Language was also included in the Defending America 
Security from Kremlin Aggression Act, DASKA, introduced by 
Senator Graham on August--myself and others, August 2nd.
    I wrote an op-ed not too long ago that the moral case for 
such a designation is sound, designation of Russia as a state 
sponsor of terror. Russia has invaded its neighbors Georgia and 
Ukraine. It supports the murderous regime of Bashar al-Assad 
and our enemies in Afghanistan. And it is engaged in active 
information warfare against Western democracies, including 
meddling in the 2016 United States election. And as we have 
talked about here, continuing to attempt to influence the 
elections going forward.
    To both of you, do you believe that the Russian Federation 
has repeatedly supported acts of international terrorism, 
including assassinations on foreign soil?
    Mr. Billingslea, yes or no?
    Mr. Billingslea. Senator, they have definitely engaged in 
outrageous behavior. The Salisbury attack is unacceptable.
    Senator Gardner. They have engaged in attempted 
assassinations on foreign soil.
    Mr. Billingslea. More than once.
    Senator Gardner. Mr. Mitchell? Secretary Mitchell?
    Mr. Mitchell. I agree with the premise of your question. I 
do not want to get ahead of our deliberative processes on what 
we do about that. But there is no contesting the fact of 
Russian behavior in these categories.
    Senator Gardner. Do you agree that the Salisbury attack is 
not the only instance where Russia has attempted assassinations 
on foreign soil? Secretary Mitchell?
    Mr. Mitchell. I would not be prepared to answer that 
definitively in this setting.
    Senator Gardner. Secretary Billingslea?
    Mr. Billingslea. I think we would need to go into closed 
session, but I would be comfortable saying it is--they engaged 
in this behavior more than once.
    Senator Gardner. Do you agree that Russia is an otherwise 
maligned actor whose actions undermine U.S. national security, 
global peace, and stability? Secretary Billingslea?
    Mr. Billingslea. Senator, I do.
    Senator Gardner. Secretary Mitchell?
    Mr. Mitchell. Assuredly.
    Senator Gardner. Do you agree the Kremlin has violated 
international law, Ukraine, Syria, and elsewhere around the 
globe?
    Mr. Mitchell. Yes.
    Senator Gardner. Secretary--both of you, yes. Would you 
support a process that would allow the State Department 90 days 
to determine whether or not Russia should be designated as a 
State sponsor of terror? Secretary Mitchell?
    Mr. Mitchell. I would need more information, and would want 
to consult with our team, and know the Secretary's views. I 
understand the direction that you are going with this, and I 
think the appropriate way to go about it would be when our team 
in the next week or so comes over and gives a structured 
response to some of the legislation that is being considered.
    Senator Gardner. Secretary Billingslea?
    Mr. Billingslea. Senator, that is a State Department call 
on designation, right? However, it is important to know that if 
we have any evidence that a Russian actor is supporting a 
terrorist, we will go after them regardless of state sponsor 
level designations.
    Senator Gardner. Secretary Billingslea, just quickly, what 
additional sanctions would Russia face if such a designation 
were to be made?
    Mr. Billingslea. If State Department were to determine 
that----
    Senator Gardner. Yeah.
    Mr. Billingslea.--they are a state sponsor? I would say 
there would not be an immediate waive of actions. We would have 
to work with the Department of State to then identify which 
prongs within the Russian government would be viewed as the 
enablers of those behaviors. Much the way we have done that in 
other cases.
    Senator Gardner. Thanks, Mr. Chairman.
    The Chairman. Thank you. Senator Rubio.
    Senator Rubio. Thank you both for being here.
    My question is going to be about deterrence, but I want to 
lay the framework that I think is already embedded in your 
testimony. One of the things I think--we are struggling with 
two things as we debate it broadly, and even here on the 
committee, and beyond.
    The first is that I do not think we fully accept that we 
are back to sort of a historically normal era of great power 
competition. For 25, 27 years, we have been in a unipolar 
world, and we had difficulties with certain countries. Now we 
have a near peer competitor in China for the first time in a 
quarter century, and we have, at least in the military realm, a 
near peer competitor in certain spheres, geopolitically as 
well, in Russia.
    And in that realm, the second thing I think we struggle 
with is the notion that informational warfare is not warfare. 
It is warfare by different means. It has always been a part of 
warfare. The difference now is that propaganda and efforts to 
divide, demoralize, confuse the enemy, you can do it 
electronically now.
    And so what is happening now is not a part of an effort to 
help republicans, democrats, independents, vegetarians, 
whoever, whatever party you wanted to take, it is an effort to 
help divide us against each other, and weaken us internally, 
and from within. It is a tactic.
    And in terms of our policies, you see some of the 
simplistic way people approach this. There is one group that 
almost argues we should not be talking at all to them, right? 
Which I think is, despite my deep antagonism towards Vladimir 
Putin, what he represents, and the things he has done, I do not 
want to see a shooting war, because it would be catastrophic 
for the world.
    And so at a minimum, that should keep you engaging and 
talking, and working, where possible, within the context of 
understanding you are in a competition, more of his making, 
than ours, but nonetheless, one that he believes in, a zero sum 
one, in which he can only get stronger if we get weaker.
    And the flip side of it is if we just talked, if we just--
we are nicer to each other, we would be able to get along 
better, which is also false, because at the end, it goes back 
to what I just said, he uses the zero-sum competition, and the 
only way he can be stronger and restore Russia to greatness, at 
least his vision of it, is by us to be weaker.
    And so in that competition, everything we are debating here 
is about the tactics they are using, right? They cannot compete 
with us economically. They cannot necessarily compete with us 
militarily, in terms of projecting power all over the world. 
But what they do very intelligently is a low investment in 
military intervention in exchange for influence in the Middle 
East. So he is now becoming a power broker in Syria, in Libya, 
in different parts of the world, because he has enough 
airplanes and enough troops on the ground to make a difference 
there. He is even trying to finagle his way somehow into the 
North Korea talks. He wants to be a player in that.
    You see in Europe, there was an article yesterday about a 
growing number of European countries, after new elections, far 
left and right parties who have come to power, that are 
potentially moving those countries closer to--I think he went 
to the wedding--is it the Austrian prime minister, or 
president? Foreign minister. And then, of course, the 
asymmetrical means that we are discussing, which are part of 
it. To them it is a very low-cost way of getting, in our heads, 
and in our society, and dividing us against each other.
    So in the context of all of that, if we can finally accept 
the fact that we are in a great power competition with China. 
And in some ways a similar competition with Russia. They are as 
big as China. They do not pose the same economic challenge as 
China, but nonetheless, enough that we have to address it.
    If we can just wrap our brains around the fact that we are 
in a competition, and that the one thing we want to do in that 
competition is what we did in the Cold War, and that is avoid a 
third world war. Then we begin to design what we do. We punish 
what they have done, but we also try to deter what they have 
done. It was a key component of the Cold War, is a fact that 
both parties understood the price was so high for a nuclear 
exchange that neither party pursued it, despite a couple of 
close calls.
    It is why I, along with Senator Van Hollen have put out 
this idea of laying out ahead of time specifically what the 
penalties would be, what is the price if Putin does this again. 
And it has to be a high enough price so that he does not do it 
again. And the notion of it is if you know ahead of time how 
much it is going to cost you if you do it, you might be less 
likely to do it. I cannot guarantee he will not, but I can 
guarantee that if he does not think the price is high enough, 
he will.
    In that realm, do you have any views, either one of you, 
about the role that deterrence can play in terms of changing 
the cost benefit analysis that Vladimir Putin undertakes before 
he conducts what he did in 2016, again in 2018, or beyond?
    Mr. Mitchell. I agree with the premise of your question and 
characterizing this as a big power competition. I think 
deterrence is absolutely critical. And so when the 
administration has gone after Deripaska, and Vekselberg, and 
Putin's son-in-law, I think that sends a very clear message. 
When we tightened the sectorial sanctions, I think that sends a 
strong message.
    I think we could do more collectively to look at cyber 
deterrence. I think there is a growing awareness that we have 
not done enough in that regard. But I think the tools that can 
be brought to our disposal to increase the message of 
deterrence, we are supportive of that.
    There is a lot in the Deter Act that is very positive. It 
moves in the right direction. There is some aspects of it that 
we are not comfortable with. I mean the vesting new mandates, 
almost entirely in a single intelligence official, the DNI, 
rather than a Senate-confirmed cabinet official, is 
problematic.
    As I said earlier, we take the view that National Security 
waivers are very important for diplomacy. Our team is preparing 
some structured responses to legislation we will be providing 
in coming days, and look forward to engaging with you more 
closely on it. But I agree overall with what you said, 
deterrence is critical.
    Senator Rubio. And I know I am over time, I just want to 
comment that as far as the Deter Act is concerned, I recognize, 
at least speaking for myself, I think Senator Van Hollen does 
as well, that if we want to pass it and turn it into law there 
are changes we will need to make, because we need the 
administration to sign it, and we want to do it. Our goal is to 
pass a bill that deters, not to necessarily have the original 
product become the law, per se, but it needs to be strong 
enough.
    The Chairman. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman. I have a few 
other questions.
    Secretary Billingslea, let me ask you. Expectations, I 
think, among the Senate whereas that you would continue to 
impose sanctions on oligarchs, but clearly you have decided to 
diminish pressure. You have not designated any oligarchs since 
April 6th. You have delisted Estonian banks. Now there are 
reports that you may delist Rusal.
    What kind of signal does that send to the Kremlin? We are 
told to judge the administration by its actions, and not by the 
President's words. But these actions seem to be more aligned 
with an accommodating and disturbing rhetoric that the 
President has versus a tougher approach.
    Mr. Billingslea. Senator, I am unaware of any intention to 
``delist'' Rusal. If anything we are pushing forward to see 
Deripaska completely removed from any ownership or control of 
both Rusal and EN+ as a way forward.
    We are far from easing up. We continue to accelerate. If we 
just look at the cyber-sanctions, we have sanctioned three 
times----
    Senator Menendez. Let me interrupt you for a moment.
    Mr. Billingslea. Yes.
    Senator Menendez. I want to focus specifically on 
oligarchs.
    Mr. Billingslea. On oligarchs.
    Senator Menendez. And in that respect, unless I am wrong, 
there has been no designation since April 6th, and you have 
delisted Estonian banks. I am glad to hear you are not 
delisting Rusal. At least not intending to. But, you know, you 
do not become an oligarch in Russia unless Putin makes you one, 
right? So at the end of the day, this is his satellite universe 
of people who support him, and maybe even part of his monies at 
the end of the day. So I hope you will create a greater focus 
on that, because that is, I think, critical towards our goals 
here.
    Let me also ask you, while I am directing questions to you. 
The Obama administration imposed sanctions on the FSB and GUR 
following the 2016 election. How many of those officers' 
accounts have been frozen, do you know?
    Mr. Billingslea. On the GRU officers, I--I do not have that 
information.
    Senator Menendez. Could you get it--and FSB officers as 
well.
    Mr. Billingslea. Yes, sir.
    Senator Menendez. And how much money did those individuals 
lose as a result of any sanctions, if there are any, as it 
relates to them.
    Mr. Billingslea. I will have to take that for the record, 
sir.
    Senator Menendez. Okay. Now Secretary Mitchell, let me--you 
know I have a high regard for you, but it gets a little 
diminished when you do things that I think are political in 
nature.
    You mentioned the mighty river comment as it relates to the 
previous administration. Well, that was 2009. That was before 
Crimea. That was before the invasion. That was before the Obama 
administration leveraged sanctions against Russia for its 
invasion of Crimea. That was before the president ultimately 
went ahead, and that is why Russia is not part of the G7 today.
    It is also when we--when it became aware that Russia was 
interfering with our elections, that it did pursue sanctions 
against the GRU and the FSB. That is why it made a commitment, 
reaffirming NATO's commitment to extend membership to Georgia. 
And I could go through a long list.
    So I am not sure that that type of comparison that you 
attempted to make is in our collective interest at the end of 
the day. But I do want to ask you, the President, at the 
Helsinki press conference, announced the establishment of a 
high-level working group to include business and economic 
leaders from Russia and the United States.
    I thought it was our policy to put economic pressure on the 
Kremlin to stop attacking our elections, its illegal occupation 
of Ukraine, its war crimes in Syria. Why are we promoting 
business ties with a regime that we are actually trying to 
severely sanction?
    Mr. Mitchell. Let me respond to the things that you have 
said, Senator.
    Senator Menendez. Well, I only have one question.
    Mr. Mitchell. Okay. I will respond to the second thing you 
said.
    Senator Menendez. And I have limited time. So you can 
respond to my question.
    Mr. Mitchell. Look, I think Helsinki, what, what came out 
of Helsinki, other than an agreement for the two National 
Security Councils to meet, was to explore the concept of two 
things. A business council of some kind, details to be 
determined. And an academic exchange, a track two Dartmouth-
type thing, like we did during the Cold War. We are assessing 
right now what, if anything, would be the composition or way 
forward on either of these.
    Senator Menendez. Well, it just seems counterintuitive that 
we are trying to affect the Russian economy, and then we are 
trying to create business ties.
    Let me ask you this. Increasingly, Russia provides a vital 
source for oil and aviation fuel to North Korea. And there have 
been reports that at a time when China has slowed its exports, 
Russia has stepped up to fill the breach. So whether it is part 
of a broader strategy to increase Russian influence in Asia, or 
merely an effect to make mischief and complicate our efforts to 
deal with and constrain Pyongyang, it is clear that Moscow 
intends to play a role in North Korea, and not one that is 
helpful.
    What are your thoughts in this regard in how we best deal 
with that?
    Mr. Mitchell. I agree with that characterization. Russia is 
not being helpful in many regards with North Korea. Look, I 
mean on one hand they are part of the United Nations Security 
Council consensus that is critical for maximum pressure. On the 
other hand, they appear to be working against many of the 
measures that they themselves have supported in the National 
Security Council.
    What I would say is on an ongoing basis we are looking very 
carefully, whether it is Russian behavior on DPRK, Syria, 
across the board, we are looking on an ongoing basis at all of 
these things, and the authorities at our disposal for 
responding to it.
    Senator Menendez. And finally, Mr. Billingslea, 
congratulations. I just got notification that you have been 
nominated to be the undersecretary for Civilian Security 
Democracy and Human Rights. I look forward to our conversation 
as it relates to that potential new role.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Menendez. Thank you both 
for your testimony today. We hold lots and lots of hearings 
here. Very seldom do we get as clear and direct answers as we 
have got from you. And you are both great representatives for 
the United States of America, and this committee sincerely 
appreciates your service on behalf of the American people. 
Thank you for that.
    That concludes this hearing, and the record will stay open 
for questions for the record until 5:00 p.m. tomorrow evening.
    With that, the committee is adjourned.
    [Whereupon, at 11:56 a.m., the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record


    Responses of Assistant Secretary A. Wess Mitchell to Questions 
                  Submitted by Senator Robert Menendez

    Question. Do you commit to working within State and the interagency 
for full implementation and enforcement of CAATSA? Do you support the 
use of existing CAATSA sanctions mandates that have not yet been 
utilized?

    Answer. Yes. We are committed to the comprehensive implementation 
of CAATSA. Together with the Department of the Treasury, the State 
Department is using the Russia sanctions authorities under CAATSA to 
impose costs on Russia for the totality of its malign behavior. Since 
January 2017, the administration has sanctioned 229 Russia-related 
individuals and entities for their involvement in Russian malign 
activities; 136 of these designations were done under sanctions 
authorities codified by CAATSA. In addition, the threat of sanctions 
has prompted other states to abandon billions of dollars in planned or 
announced arms deals with Russia, imposing additional financial costs 
on the Russian government.

    Question What is your view of the best way to further increase 
sanctions pressure on Russia? Do you support new sanctions authorities?

    Answer. We have robust sanctions authorities at our disposal. We 
are using these authorities in close coordination with our allies and 
partners to impose costs on Russia for the entirety of its malign 
behavior.
    Sanctions are a powerful foreign policy tool, and are most 
impactful when used in coordination with allies and partners to 
maximize their effectiveness. Transatlantic unity is the cornerstone of 
our sanctions against Russia; providing the State Department with 
flexibility in implementation allows us to engage with allies, maintain 
unity, and maximize sanctions pressure on Russia. It is important that 
the U.S. government have tools available to quickly mitigate unintended 
consequences of sanctions to maintain stability in global markets as 
well as key relationships with our Allies and partners.

    Question. How else is the administration pressuring Russia and what 
more is needed in this regard?

    Answer. The United States utilizes a whole-of-government approach 
that combines diplomatic, foreign assistance, intelligence, and law 
enforcement lines of effort to deter and defend against Russian malign 
activities. We will continue to communicate to the Russian government 
when its behavior is unacceptable, work with our interagency partners 
to impose costs in response, and build international coalitions to 
actively deter malign Russian activities. Examples of current efforts 
include expulsions of Russian intelligence operatives from the United 
States, sanctioning 229 individuals and entities in Russia since 
January 2017, increasing funding for initiatives designed to bolster 
our European Allies, working with NATO Allies to increase spending and 
strengthen NATO deterrence posture, investing in projects like the 
Global Engagement Center (GEC) in an effort to counter Russian 
disinformation, and many more. For more exhaustive information, please 
refer to the previously provided document, Trump Administration Actions 
to Push Back Against Russia.

    Question. How would you assess U.S. coordination with European 
allies in countering malign influence? How can we improve?

    Answer. The U.S. government is working closely with Allies and 
partners to deter and defend against Russian malign activities. As part 
of those efforts, the Department is targeting U.S. foreign assistance 
to increase the resilience of U.S. partners to resist and counter 
Russian pressure; working with Allies and partners to share information 
and exchange best practices, including through multilateral Centers of 
Excellence; providing concrete support to partner countries in response 
to specific threats; and enhancing partner capacity to mitigate cyber 
vulnerabilities and respond to threats through technical assistance and 
bilateral and multilateral diplomatic engagement.
    Sanctions and other cost-imposition measures against Russia are 
most effective when they are coordinated with our European allies. We 
continue to work hard to encourage our European allies to join us in 
sanctioning Russian individuals and entities responsible for Russian 
malign activities so that we can blunt Moscow's influence in a more 
united fashion.

    Question. Do you consider Hungary to be a healthy democracy? Do you 
believe there are threats to independent media in the country, as State 
Department reporting describes, and do you think such threats undermine 
democracy in the country?

    Answer. Hungary is a NATO Ally and OSCE participating member state 
that shares longstanding interests, both bilaterally and regionally, 
with the United States. As the President and Vice President have made 
clear, strong partnerships require that Allies meet all their 
commitments to uphold the values enshrined in the Washington Treaty. 
The State Department has engaged the Hungarian government on a range of 
issues, including the importance of a free and independent media as a 
fundamental pillar of democracy. I will continue to identify 
opportunities to support independent media and NGOs as well as to 
combat corruption, Russian pressure, disinformation, and malign 
influence in Hungary.

    Question. Have you authorized grant awards to support independent 
media in other Central or Eastern European countries? Does the role of 
independent media in those countries differ from its role in Hungary, 
and if so, how?

    Answer. As the National Security Strategy emphasizes, we believe an 
informed and engaged citizenry is a fundamental requirement for 
societies to be free, resilient and prosperous. Freedom of expression, 
including freedom of the media, and strong, diverse and unhindered 
civil society are key components of democratic governance and underpin 
the strength of our alliances. The Department regularly engages with 
governments on these issues to stress the importance we attach to 
compliance with international obligations and commitments to promote 
and protect fundamental freedoms. The Department also has a range of 
programs, including grants, which support independent media in Central 
and Eastern Europe, both to build the capacity of independent media to 
provide objective reporting as well as to support local and regional 
efforts to counter disinformation. I will continue to identify 
opportunities to support and promote independent media and civil 
society throughout the region, as well as tailored efforts to combat 
corruption, Russian pressure, disinformation, and malign influence.

    Question. Do you support U.S. foreign assistance being directed to 
democratically orientated Hungarian civil society activists, 
journalists, and independent media who are pushing back against anti-
democratic trending in Hungary?

    Answer. As the National Security Strategy emphasizes, we believe an 
informed and engaged citizenry is a fundamental requirement to a free 
and resilient nation. Civil society actors have an important role to 
play in the democratic process, including by promoting public awareness 
and public discourse. The U.S. is working to strengthen pro-America 
voices in Hungary. I will continue to identify opportunities to support 
independent media, combat corruption, and counter the pressure, 
disinformation, and malign influence of Russia and China in Hungary.
                               __________

    Responses of Assistant Secretary A. Wess Mitchell to Questions 
                Submitted by Senator Benjamin L. Cardin

    Question. Special Envoy Volker is well known to this Committee and 
does solid work. How exactly would you describe his mandate at this 
point?

    Answer. Special Representative Volker's goal remains the same: 
restoring Ukraine's territorial integrity and ensuring the safety and 
security of all Ukrainians, regardless of language, religion, or 
ethnicity. Secretary Pompeo and APNSA Bolton have directed Special 
Representative Volker to work with France, Germany, and Ukraine to 
develop a proposal for an international security force that could 
facilitate the implementation of the Minsk agreements once Russia 
chooses peace and agrees to withdraw its forces. Special Representative 
Volker is also coordinating with the Secretary and APNSA on talks with 
Russian Presidential Advisor Surkov, but the Russian side has not yet 
demonstrated a willingness to engage seriously

    Question. Overall, what is the U.S. strategy on Ukraine at this 
time?

    Answer. Ukraine faces the external challenge of 4 years of Russian 
aggression and the internal challenges of an economy that has been 
hobbled by high-levels of corruption and centralized under the control 
of a handful of politically powerful oligarchs. The United States 
intends to continue bolstering Ukraine's resilience to Russian 
aggression by supporting the Ukrainian defense sector, pushing for 
continued Transatlantic sanctions unity, pursuing negotiations to end 
the conflict in the Donbas, and making high-profile symbolic 
demonstrations of our long-term commitment to Ukraine. We will continue 
to support the IMF's reform program and add to our focus a broader 
effort to reduce the influence of oligarchs in key economic sectors.

    Question. President Putin has reportedly said that he proposed to 
President Trump that a referendum be held in rebel parts of Ukraine. 
Can you confirm this? Do you know if President Trump and other national 
security leaders are considering this proposal?

    Answer. The administration will not support a referendum in eastern 
Ukraine. The State Department and NSC have publicly rejected this 
proposal. Russia and its forces need to stop the fighting, withdraw 
from eastern Ukraine, and implement the Minsk agreements. Russia signed 
on to the Minsk agreements, which are the basis for resolving the 
conflict in the Donbas, and these agreements do not include any option 
for a referendum. Furthermore, any so-called referendum in a part of 
Ukraine that is not under government control would have no legitimacy.

    Question. Does it remain U.S. policy that the whole of Ukraine's 
territorial sovereignty, including Crimea, should be restored?

    Answer. U.S. support for Ukraine's territorial integrity is 
steadfast. Secretary Pompeo laid out an unequivocal statement of U.S. 
policy in his July 25, 2018 Crimea Declaration: that we do not, and 
will not, recognize the Kremlin's purported annexation of Crimea. We 
reject Russia's attempted annexation. The Declaration and subsequent 
show of support from partners are clear signals of the permanence of 
the international community's commitment to Ukraine's territorial 
integrity. We are also focused, in coordination with France and 
Germany, on pushing for implementation the Minsk Agreements, but have 
been frustrated at every turn by Russian intransigence.

    Question. Are you aware of any conversations at the White House or 
within the administration regarding recognizing Crimea as Russian 
territory, as some quid pro quo for one of President Trump's goals?

    Answer. The United States remains committed to Ukraine's 
territorial integrity. We reject Russia's attempted annexation of 
Crimea and pledge to maintain this policy until Ukraine's territorial 
integrity is restored--a position Secretary Pompeo made clear in his 
July 25, 2018 Crimea Declaration. Respective U.S. sanctions on Russia 
for its aggression in Ukraine will remain in place until Russia fully 
implements the Minsk agreements and returns control of the Crimean 
peninsula to Ukraine.

    Question. You and I have discussed previously the report I 
commissioned 7 months ago of the Foreign Relations Committee Democrats 
regarding Putin's assault on democratic values, the rule of law, and 
universal values in his own country and throughout Europe over the last 
nearly 20 years. Are you aware what if any recommendations have been 
taken, or even strongly considered, by the administration?

     Answer. The U.S. government's efforts to deter and defend against 
Russian malign activity both at home and abroad are coordinated with 
our Allies and across the interagency at every level to ensure a 
comprehensive approach. This whole-of-government approach combines 
diplomatic, foreign assistance, intelligence, and law enforcement lines 
of effort to:

   Expose Russian malign behavior and combat misleading 
        narratives in the press.

   Target our foreign assistance to increase the resilience of 
        our partners to resist and counter Russian pressure. We support 
        programs to improve good governance; expand civic engagement 
        and independent media; enhance cyber security; increase defense 
        capabilities; strengthen rule of law and anti-corruption 
        measures; and promote European integration, trade 
        diversification, and energy security.

   Promote positive, truthful narratives about the United 
        States and its Allies to reinforce the importance of Western 
        institutions and values to partner governments and populations 
        that are most vulnerable to Russian influence.

   Develop and fund programs that help foreign audiences 
        recognize false narratives and stave off attempts at influence.

   Work with Allies and partners to share information and 
        exchange best practices, including through multilateral Centers 
        of Excellence.

   Provide concrete support to partner countries in response to 
        specific threats.

   Enhance partner capacity to mitigate cyber vulnerabilities 
        and respond to threats through technical assistance and 
        bilateral and multilateral diplomatic engagement.

    Question. Do you consider the report to be a valuable tool in the 
U.S. government's discourse and deliberations on how to push back 
against the growing Kremlin threat?

    Answer. I share the same concerns about Russia as those raised in 
the report. Russia has shown through its aggressive actions that it 
rejects the post-Cold War order. Russia's efforts have extended beyond 
traditional military campaigns to encompass a suite of ``hybrid'' tools 
used to gain influence. Safeguarding the United States and our Allies 
and partners from Russian malign influence campaigns is a core 
component of the administration's Russia strategy, our diplomatic 
engagement, and our foreign assistance. I agree that Russia's efforts 
to undermine democratic processes and the sovereignty of its neighbors 
are unacceptable and require a whole-of-government response. We are 
working across the U.S. government, as well as closely with Allies and 
partners, to deter and defend against these activities both at home and 
abroad.
                               __________

    Responses of Assistant Secretary A. Wess Mitchell to Questions 
                    Submitted by Senator Rob Portman

    Question. Given Patriarch Filaret's recent announcement regarding 
possible terms for an autocephaly agreement for the Ukrainian Orthodox 
Church, as well as the Kremlin's proclivity for using the Russian 
Orthodox Church as a means of spreading Russian influence, what is the 
State Department doing to support Ukraine's religious independence from 
Moscow?

    Answer. The United States is a staunch supporter of religious 
freedom, and engages with a broad array of religious communities as 
part of our outreach to civil society. We support the freedom for 
leaders and members of religious groups to govern their religion 
according to their beliefs and practice their faiths freely. We believe 
any decision on autocephaly is an internal church matter. We respect 
internal church procedures and the ability of Ukraine's Orthodox 
religious leaders and believers to pursue autocephaly according to 
their beliefs.
               enhanced u.s. military presence in europe
    I think that we should explore new ways to bolster our military 
deterrent in Europe. This might include re-establishing a permanent 
corps-level headquarters in Europe that could provide our soldiers with 
a true warfighting command, one that can utilize many more assets than 
our current division-level headquarters.

    Question. Do you support enhancing the U.S. military footprint in 
Europe? Do you think that this would help deter potential Russian 
aggression?

    Answer. The National Defense Strategy calls for increased and 
sustained military investment due, in part, to the magnitude of the 
threat Russia poses to U.S. security and prosperity today, and the 
potential for that threat to increase in the future. U.S. forces play a 
critical role in deterring Russian aggression, including efforts to 
exercise malign influence over our Allies and partners. NATO's enhanced 
Forward Presence has provided deterrence and significant opportunities 
for exercises and training to strengthen interoperability and 
capabilities. U.S. capabilities in the European theater deter 
aggression by strengthening NATO's posture at a time when our Allies 
are also expanding their defense-capacity.

    Question. If so, are you currently engaged in any conversations 
about this, and what is the status of those conversations?

    Answer. The United States constantly assesses its force posture to 
address emerging challenges and ensure we have a combat-credible 
posture in Europe. We will continue to engage Congress as well as 
Allies and partners to address the challenges that arise in this 
competitive strategic environment.

    Question. How can Congress be helpful on this issue?

    Answer. Congress has played a vital role in shoring up European 
security, particularly under the European Deterrence Initiative. These 
funds have enhanced our deterrent and defense posture, but there is 
more the United States can do to build Allied and partner capacity and 
ensure we have the right capabilities in the right locations. We would 
welcome Congress's help in increasing the State Department's FMF budget 
to ensure the United States can work with our NATO Allies, especially 
our Baltic Allies, in procuring U.S. equipment that meets core NATO 
capability shortfalls, such as air defense.

    Question. What is the status of your talks with the Europeans, and 
what is your assessment of Europe's willingness to establish these 
CFIUS-like mechanisms?

    Answer. Over the past year, State and Treasury have had robust 
engagement with the EU and with numerous EU member states on CFIUS 
reform in the United States, the updating of national legislative 
authorities and policies to conduct more robust investment screening, 
and the EU's proposal to introduce a framework for coordinating 
investment review. We have sent interagency teams to European capitals, 
including Brussels, The Hague, London, Paris, and Stockholm, for 
outreach on investment screening to countries that have an investment 
screening mechanism in place and want to strengthen it or are just 
beginning to implement a national screening mechanism. We have also 
welcomed groups of Europeans to the United States for intensive multi-
week discussions under our flagship International Visitors Leadership 
Program, and are preparing for another group in September.
    Overall, we have seen an increased awareness across Europe of the 
need to protect sensitive technology, intellectual property, data, and 
critical infrastructure from strategically-motivated foreign investment 
that could undermine security and threaten national and EU-wide 
interests. We will continue to engage and share best practices from the 
U.S. perspective as the EU and its member states continue to develop a 
more robust response to these pressing challenges.

    Question. Do we assess that the Russians will ever return to 
compliance with the [Intermediate-range Nuclear Forces (INF)] treaty?

    Answer. The INF Treaty is under threat today. The Russian 
Federation has developed, tested, and deployed a ground-launched cruise 
missile system that can fly to ranges prohibited by the INF Treaty. In 
2014, the United States declared the Russian Federation in violation of 
its obligations under the INF Treaty. Despite repeated U.S. efforts to 
engage the Russian Federation on this issue, Russian officials have so 
far refused to discuss the violation in any meaningful way, take 
substantive steps to return to compliance, or provide a credible answer 
to the information provided by the United States regarding this 
missile.
    The United States does and will continue to abide by its INF Treaty 
obligations. We call on the Russian Federation to take concrete steps 
to return to compliance, preserve the INF Treaty, and restore 
confidence in the role of arms control to manage strategic stability 
between our two countries.

    Question. What is the goal of our diplomatic efforts regarding the 
Russian violation?

    Answer. Our goal is for the Russian Federation to return to 
compliance with the INF Treaty and to deny them a military advantage. 
There are two diplomatic tracks underway to achieve this goal. The 
first track is direct diplomatic engagement with the Russian Federation 
through all viable channels, including the INF Treaty's Special 
Verification Commission (SVC) established to ``resolve questions 
relating to compliance with the obligations assumed.'' Over the last 5 
years, we have provided detailed information to the Russian Federation 
outlining U.S. concerns and engaged up to the highest levels of 
government.
    The second track is diplomatic engagement with our key allies and 
partners to increase the pressure on the Russian Federation. We have 
shared available information with our allies and partners regarding the 
SSC-8 ground-launched cruise missile system, which the United States 
assesses to be designated by the Russian Federation as the 9M729. At 
the July 2018 NATO Summit, allies affirmed that ``in the absence of any 
credible answer from Russia on this new missile, the most plausible 
assessment would be that Russia is in violation of the Treaty.''
    While the United States will continue to pursue a diplomatic 
solution, we are also pursuing economic and military measures intended 
to induce the Russian Federation to return to compliance. This includes 
a review of military concepts and options, including research and 
development for conventional, ground-launched, intermediate-range 
missile systems, which would enable the United States to defend 
ourselves and our allies, should the Russian Federation's failure to 
return to compliance result in the dissolution of the Treaty. This step 
will not violate our INF Treaty obligations. We are also prepared to 
cease such research and development activities if the Russian 
Federation returns to full and verifiable compliance with its INF 
Treaty obligations. Should the Russia Federation's actions result in 
the collapse of the Treaty, these efforts will prepare the United 
States to defend itself and its allies.

    Question. Can you speak further to the larger international context 
regarding other countries that are not party to the INF Treaty and 
their interest in developing weapons within the scope of the INF 
Treaty?

    Answer. The United States has long expressed concern about the 
proliferation of ballistic and cruise missile technology, including for 
weapons within the scope of the INF treaty. The United States uses all 
available means, including military capabilities, nonproliferation 
activities, and arms control to reduce and mitigate the threat to 
itself, deployed forces, and allies and partners.

    Question. How should that influence our actions regarding the long-
term strategy with INF and the Russians?

    Answer. The United States regularly reviews its international 
agreements and the international security environment to ensure 
continued U.S. participation in these agreements further the security 
of the United States. The INF Treaty gives each Party the right to 
withdraw if it decides that extraordinary events related to the subject 
matter of the Treaty have jeopardized its supreme interests.
                               __________

    Responses of Assistant Secretary A. Wess Mitchell to Questions 
                    Submitted by Senator Cory Booker

    Question. How does Russia ``enable'' the Taliban? Do you see 
Russian support to the Taliban trending upward?

    Answer. We are aware of reports that the Russians continue to 
provide weapons and other support to the Taliban. We believe Russia's 
contacts with the Taliban are increasing.

    Question. Do you agree that Russia seeks to ``undermine U.S. 
influence in the region'' as reported by the Department of Defense last 
month?

    Answer. Yes. Russia actively tries to discredit U.S. efforts 
towards peace and our reputation in the region utilizing a breadth of 
tools, including propagating false narratives. Russia has repeatedly 
accused the United States of supporting ISIS in Afghanistan; 
simultaneously, there are media reports that the Russian government 
clandestinely supplies arms to the Taliban.

    Question. What consequences have we imposed on Russia for their 
role in supporting insurgent groups that seek to undermine our efforts 
to jumpstart a peace process between the Afghan government and the 
Taliban?

    Answer. We continue to monitor Russian actions in Afghanistan and 
are prepared to use the tools available to respond to Russian malign 
efforts that jeopardize the peace process, as appropriate.

    Question. NBC has reported that Erik Prince has presented a plan to 
privatize the war in Afghanistan. Is this under consideration? If that 
were to happen, what opportunity would it create for Russia to exploit 
the Afghan government's relative instability?

    Answer. We are aware of the reports about Erik Prince's plan and no 
such proposal is under consideration.
                               __________

Report to Congress Pursuant to Section 243 of the Countering America's 
Adversaries Through Sanctions Act of 2017 Regarding Interagency Efforts 
in the United States to Combat Illicit Finance Relating to the Russian 
                               Federation

August 6, 2018

    Section 243 of the Countering America's Adversaries Through 
Sanctions Act of 2017 (CAATSA) requires the Secretary of the Treasury 
to submit to the appropriate congressional committees not later than 
one year after CAATSA's enactment, and at the end of each 1-year period 
thereafter until 2021, a report describing interagency efforts in the 
United States to combat illicit finance relating to the Russian 
Federation. Pursuant to Section 243(e), the report shall be submitted 
in unclassified form, but may contain a classified annex. This document 
serves as the first unclassified report submitted by the Secretary 
under CAATSA Section 243; additional information is provided in the 
classified annex.
    In line with the 2017 National Security Strategy of the United 
States, which highlights Russia's global subversion and aggression, the 
administration actively employs the full range of its financial, 
intelligence, law enforcement, and diplomatic tools to expose, disrupt, 
and impose costs on those responsible for Russia's malign activities. 
Russian conduct includes, but is not limited to: attempts to subvert 
Western democracies through election interference; the continued 
occupation of Crimea; ongoing efforts to destabilize Ukraine; the 
illicit procurement of sensitive defense and intelligence technologies; 
malicious cyber-attacks; links to transnational organized crime (TOC); 
support to the murderous Assad regime in Syria; gross human rights 
violations and corruption; and the facilitation of sanctions evasion 
schemes by rogue states such as Iran and North Korea. In carrying out 
these malign activities, Russia relies on a highly sophisticated 
apparatus consisting of state and non-state agents and proxies, decades 
of experience carrying out influence operations around the globe, and 
the strategic direction of Russian president Vladimir Putin.
    Russia's integration into the global economy and international 
financial system presents an especially unique challenge compared to 
other states subject to U.S. sanctions such as Iran, North Korea, and 
Syria. For example, a substantial portion of Russian sovereign bonds 
are held by external investors, including U.S. pension funds, asset 
managers, and banks, while Russian financial institutions have 
extensive global market linkages through debt, equities, and 
derivatives.
    As this report details, this administration's efforts against this 
threat are among its top priorities, resulting in an unprecedented 
level of financial pressure against those working on behalf of the 
Kremlin and in key sectors of the Russian economy targeted by U.S. 
sanctions.
    Treasury's Russia sanctions program is among our most active. Since 
2017, this administration has sanctioned 215 Russian-related 
individuals and entities, 199 of which were under Treasury authorities, 
including 136 under Ukraine/Russia-related sanctions codified by 
CAATSA. These actions have blocked hundreds of millions of dollars in 
Russian assets in the United States and caused extensive consequences 
to the financial interests of affected individuals and entities.
    The impact of these measures is further seen in the efforts by 
companies around the world to separate themselves from persons we have 
designated, and the efforts of designated persons to seek new (often 
costlier) methods to move and hide funds.
    The administration understands that any effort to embark on a more 
positive trajectory with Russia depends on Russia's willingness to 
cease viewing the world through a zero-sum lens. Russia must also 
realize that the United States and its allies will not waver in our 
determination to prevent it from undermining our democracies, 
economies, institutions, and the values on which these pillars of 
global stability--ensured by U.S. leadership--will continue to stand. 
As part of this administration's efforts to disrupt and deter Russia 
from continued acts of subversion and destabilization, and to impose 
costs for its ongoing aggression, the administration has made focused 
financial pressure, strategically applied, a core element of our 
approach. Working together with our interagency colleagues and 
international partners, Treasury will continue to counter the corrupt 
and illicit financial networks of the Russian Federation in the United 
States and abroad, in addition to using other levers of significant 
economic pressure.
 section 243(b)(1)--efforts to identify, investigate, map, and disrupt 
illicit financial flows linked to the russian federation if such flows 
 affect the united states financial system or those of major allies of 
                           the united states
Efforts to Identify, Investigate, and Map Illicit Financial Flows
    Russia has spent decades developing complex and resilient networks 
to raise, transfer, hide, and obscure the origin and movement of the 
funds generated through illicit activity, including corruption, 
sanctions evasion and illicit arms sales, and used for its malign 
activity. The National Intelligence Council (NIC) leads and coordinates 
efforts across the intelligence community (IC) to produce analysis and 
support policymakers regarding Russian illicit financial activity, as 
well as to inform efforts to identify and disrupt these illicit 
financial networks. As part of these efforts, IC components have 
continued to identify and map a myriad of networks that support and 
fund the full range of malign Russian activity, including by 
identifying new and emerging typologies and methodologies relating to 
Russia's illicit financial activity.
    Of particular note in this regard is the classified annex to the 
report required under Section 241 of CAATSA. Led by the Office of the 
Director of National Intelligence (ODNI), Treasury's Office of 
Intelligence and Analysis (OIA) and other IC elements conducted 
research on political figures and oligarchs, and assessed their 
closeness to the regime, corrupt activities, and involvement in 
destabilizing activities and repression. This substantial assessment 
was the result of a wide-ranging effort developed over the course of 
several months and reflected over 2,500 hours of work.
    In addition to these examples of IC efforts, Section 243(b)(6) 
below describes parallel efforts performed by other agencies in the 
service of providing leads to law enforcement.
Efforts to Disrupt Illicit Financial Flows Linked to the Russian 
        Federation
    The efforts to identify, investigate, and map the illicit financial 
flows linked to the Russian Federation directly inform the 
administration's ongoing disruption actions. Drawing upon this 
information, Treasury has led the U.S. campaign to impose economic and 
financial costs on those actors most responsible for enabling Russia to 
conduct its globe-spanning malign operations.
    As noted above, the administration's efforts to target malign 
Russian actors are among its most active illicit finance undertakings, 
resulting in sanctions against 215 Russian-related individuals and 
entities under this administration. Of these, Treasury's financial 
sanctions have been particularly powerful, imposing significant costs 
on targeted Russian actors and meaningfully impacting their ability to 
raise, move, and obscure the origin of illicit funds.
    However, the impact of these sanctions and other financial measures 
is far greater than the amount of funds frozen. This is demonstrated by 
the efforts of companies around the world to distance themselves from 
sanctioned persons, and the efforts of designated actors to adopt new, 
often more difficult ways of moving and hiding their funds. From such 
reactions, it is clear that our measures have succeeded in imposing 
significant costs on those undermining U.S. interests and those of our 
partners and allies, in addition to disrupting such conduct. The 
following paragraphs illustrate numerous discrete examples of 
disruption efforts targeting the wide variety of Russian malign 
activities.
Designations of Oligarchs and Senior Government Officials
    On April 6, 2018, Treasury sanctioned 38 individuals and entities, 
comprised of seven Russian oligarchs, 12 companies they own or control, 
17 senior Russian government officials, and Russia's primary state-
owned arms trading concern along with its bank subsidiary. Many of 
these individuals were appointed to their posts by Putin and hold 
prominent positions in the government and Russian business community. 
These designations delivered on Secretary of the Treasury's commitment, 
immediately following submission of the CAATSA Section 241 report, to 
impose sanctions on oligarchs and officials identified in the report.
    Among those sanctioned on April 6 are oligarchs Oleg Deripaska and 
Viktor Vekselberg; the heads of state-owned companies such as 
Gazprombank, VTB Bank, and Gazprom; as well as the head of the Russian 
Security Council and the Russian Minister of Interior.
    Among the 12 companies sanctioned are Renova Group, an 
international group of asset management companies and investment funds 
owned by Vekselberg; RUSAL, the second-largest producer of aluminum in 
the world; EN+, a holding company for Deripaska's metals and energy 
assets; Gaz Group, Russia's leading producer of commercial vehicles; 
and EuroSibEnergo, one of Russia's largest independent power companies.
    As a result of his designation, open sources estimate that 
Deripaska's personal net worth has dropped by more than 50%.
    The April 6 actions also had a major impact on another sanctioned 
oligarch, Viktor Vekselberg. According to reliable press reports, 
Vekselberg's net worth has dropped nearly USD 3 billion, from an 
estimated USD 16.4 billion on April 5, 2018 to an estimated USD 13.5 
billion as of July 26, 2018. Among the 12 companies sanctioned on April 
6 was Vekselberg's Renova Group, an international group of asset 
management companies and investment funds. As a result of the action, 
Renova Group was forced to divest from Swiss-based industrial company 
Sulzer AG, of which Renova Group was a majority shareholder. Sulzer AG 
bought back five million of its own shares from Renova Group following 
an emergency meeting days after Renova Group's designation. Renova 
Group was also forced to divest 20 percent from Italy-based IT company 
Octo Telematics, in which it had a 65 percent stake, to enable the 
company's continued operation and planned IPO. Moreover, U.S.-based 
investment management firm Columbus Nova, which manages Vekselberg's 
assets and counts Renova Group as its biggest client, has had to 
significantly limit its operations following the April 6 action.
    These actions are also a part of Treasury's efforts to counter 
Russian sanctions evasion by ``following the money'' and targeting 
those who support designated persons in moving or concealing their 
assets. In designating Kirill Shamalov on April 6, for example, 
Treasury sanctioned an individual who received assets from Gennadiy 
Timchenko, who was previously sanctioned by Treasury for his support to 
senior Russian officials.
Cyber Designations
    The April 6 actions were but the latest and most significant of a 
continuing series of designations taken in response to Russia's malign 
activities. By that time, in March 2018, Treasury had already exercised 
its authorities under Executive Order 13694 and CAATSA to take aim at 
entities and individuals involved in interfering in U.S. elections as 
well as for perpetrating damaging cyber-attacks. Part of this 
designation tranche targeted Russian intelligence organizations--the 
Federal Security Service (FSB) and the Main Intelligence Directorate 
(GRU)--both of which engage in activities that undermine U.S. 
cybersecurity on behalf of the Russian government. Specifically, the 
GRU interfered in the 2016 U.S. election through cyber-enabled means 
while the FSB has utilized its cyber tools to maliciously target those 
critical of the Russian government, Russian politicians, and U.S. 
government officials.
    This designation tranche also targeted Russian oligarch Yevgeniy 
Viktorovich Prigozhin, who Treasury previously sanctioned for his 
material support to the Russian regime. The March 2018 designation 
further exposed his malign conduct, as evidenced by the fact that 
Prigozhin also funded the operations of the Internet Research Agency, 
which has covertly worked on behalf of the Kremlin to influence social 
media networks in Russia and abroad, including the United States.
    In its most recent cyber-related action, on June 11, 2018, OFAC 
designated an additional five Russian entities and three Russian 
individuals under Executive Order 13694 and CAATSA Section 224. The 
primary targets that were designated, Digital Security (a Russia based 
private cyber security firm), Kvant (a Russian state research 
institution), and Divetechnoservices (a Russia based private underwater 
technologies firm), provided technological support to the FSB and 
served as enablers of the organization. Treasury also took action 
against several entities and individuals that were owned or controlled 
by or acted for or behalf of these entities. These actions were taken 
in order to respond to Russia's continued involvement in conducting 
malicious cyber-attacks, restricting those who enable the FSB's 
destructive activities from the U.S. financial system, and to raise the 
costs on those who do business with the FSB.
    Digital Security, for example, developed a tool for the FSB that 
would increase the agency's offensive and defensive cyber capabilities. 
As part of Treasury's action, ERPScan and Embedi, both private 
cybersecurity firms, were also designated for being owned or controlled 
by Digital Security. Russia has also been actively tracking underwater 
communication cables, which carry the majority of the world's 
communication traffic. Since 2007, Divetechnoservices has procured a 
variety of underwater and diving systems for Russian government 
agencies, to include the FSB. Specifically, in 2011 it was awarded a 
contract to procure a submersible craft for the FSB, valued at USD 1.5 
million.
Designations Related to Russian Activity in Crimea/Ukraine
    In January 2018, OFAC sanctioned 21 individuals and 9 entities 
under its Russia/Ukraine authorities, as well as identified 12 
subsidiaries that are owned 50% or more by previously sanctioned 
Russian companies to provide additional information to the private 
sector to assist with sanctions compliance. This action targeted major 
Russian companies that have played a key role in supporting Russia's 
attempts to integrate Crimea into its own economy and infrastructure. 
ZAO VAD, for example, is a Russian company responsible for the 
construction of a major highway in Crimea that will serve as a primary 
connection between the Kerch bridge and other cities in Crimea. The 
projected cost for this project is nearly USD 3 billion. OFAC also 
sanctioned Power Machines, a large Russian engineering firm with 
extensive operations around the world, because of Power Machines' 
support to the U.S.-sanctioned company Technopromexport, one of the key 
companies involved in the construction of power plants in Crimea.
    Also in this January 2018 action, OFAC sanctioned three individuals 
and four entities involved in the illicit trade of coal from the so-
called Donetsk and Luhansk People's Republics, including some working 
with designated Yanukovych associate Sergey Kurchenko, to export coal 
from the separatist republics to Russia and Europe.
Human Rights and Corruption Designations
    Implementing authorities granted under the Global Magnitsky Human 
Rights Accountability Act (``Global Magnitsky''), the administration 
issued two Russia-related sanctions in December 2017 that highlighted 
significant corruption as well as human rights abuses in Russia and 
Ukraine. On December 21, 2017, the President imposed sanctions on 
persons from around the world in the Annex to E.O. 13818 implementing 
the Act, including Russian nationals Sergey Kusiuk and Artem Chayka. 
While in charge of 290 elite Ukrainian police officers, Kusiuk was a 
leader of an attack on peaceful protesters on November 30, 2013, many 
of whom took part in the beating of activists. Kusiuk has also been 
named as an individual who took part in the killings of activists on 
Kyiv's Independence Square in February 2014. Kusiuk ordered the 
destruction of documentation related to the events, fled Ukraine, and 
is now in Moscow, where he was identified dispersing protesters as part 
of a Russian riot police unit in June 2017.
    Chayka is the son of Russia's Prosecutor General and has leveraged 
his father's position to unfairly win contracts and put pressure on 
business competitors. In 2014, Chayka's competitor for a highway 
reconstruction project suddenly fell under prosecutorial scrutiny and 
was forced to shut down, leaving Chayka in position to non-
competitively work on the highway project. Also in 2014, Chayka's 
competitor contested Chayka's winning bid on a state-owned stone and 
gravel company and filed a lawsuit, after which his home was raided and 
he was indicted. After Chayka's competitor withdrew the lawsuit, 
prosecutors dropped all charges.
    In December 2017, OFAC issued its sixth tranche of sanctions under 
the Sergei Magnitsky Rule of Law Accountability Act of 2012, bringing 
to 49 the total number of individuals targeted by OFAC under this 
authority. This round of names included Ramzan Kadyrov, the Head of the 
Chechen Republic, who oversees an administration involved in 
disappearances and extra-judicial killings. Following his designation 
Kadyrov was removed from a major social media site, limiting his 
ability to engage in propaganda--apparently to his great consternation.
Syria Sanctions Program
    On April 6, 2018, OFAC also designated Rosoboronexport (ROE), a 
state-owned corporation managing Russian weapons exports, and its 
banking subsidiary Russian Financial Corporation Bank (RFC). ROE has 
longstanding ties to the Government of Syria, with billions of dollars 
in weapons sales over more than a decade.
North Korea Program
    Since the beginning of the current administration, Treasury has 
designated 17 targets in Russia under its North Korea authorities, 
including five Russian companies (including one bank), four Russian 
individuals, seven North Korean financial/trade/weapons 
representatives, and one North Korean labor firm. Most recently, on 
August 3, 2018, OFAC designated Russian-registered Agrosoyuz Commercial 
Bank for knowingly conducting or facilitating a significant transaction 
on behalf of the U.S. and U.N.-designated Moscow-based chief 
representative of Foreign Trade Bank (FTB), North Korea's primary 
foreign exchange bank. As of 2016, Agrosoyuz had opened new accounts 
for a North Korean front company, processed over USD 8 million and held 
the equivalent of over USD 3 million on behalf of the U.S. and U.N.-
designated Korea United Development Bank. On the same day, OFAC also 
designated Ri Jong Won, the Moscow-based deputy representative of FTB. 
These designations further exposed the extent of North Korea's 
activities in Russia, including weapons-related acquisitions, placement 
of financial representatives in violation of UNSCRs, oil procurements, 
and overseas laborers generating revenue for the regime.
    In considering the impacts of Treasury's designations, it is 
important to understand that what we are able to observe is but a part 
of the estimated effect of our actions. Business rejected, bank 
accounts closed, investments avoided, and funds transfers denied 
assuredly occur with some regularity, even if they are not made known 
to us. They also provide an opportunity for future diplomatic or law 
enforcement action. The impacts of these designations go well beyond 
their immediately observable effects and can be built upon in the 
future.
    In addition Treasury frequently undertakes engagement with foreign 
counterparts and the private sector--including intelligence and 
information-sharing--to disrupt the activities of malign actors. 
Illustrations of these efforts are described in greater depth in 
Section (b)(2), (b)(3), and (b)(7) below.
 section 243(b)(2)--efforts to conduct outreach to the private sector, 
including information sharing efforts to strengthen compliance efforts 
   by entities, including financial institutions, to prevent illicit 
               financial flows described in paragraph (1)
    Financial institutions and other businesses often stand on the 
front lines against illicit financial activity. Indeed, disruptive 
impacts like those described above depend in large part on the business 
community's compliance with our sanctions. Accordingly, engaging and 
educating the private sector to ensure that our sanctions programs are 
as effective as possible is a core Treasury function. In light of 
Russia's linkages to the U.S. and global economy, these efforts are a 
particular priority in our comprehensive approach to targeting Russia 
and Russian malign actors.
    To address the incredibly high volume of inquiries from commercial 
and financial entities that results from this interconnectedness, 
Treasury has been extraordinarily active in engaging with key public 
and private counterparts closely to ensure the private sector as well 
as allies and foreign partners understand our sanctions on Russia and 
are able to fully implement them, as well as that they understand the 
broader illicit finance threats emanating from Russia.
    As part of these efforts, OFAC communicates its actions to the 
compliance community through Recent Action Notices, which are sent to a 
large distribution list of over 50,000 recipients, and through Treasury 
press releases describing in detail the basis for Treasury 
designations. All sanctioned individuals and entities are placed on 
OFAC's List of Specially Designated Nationals and Blocked Persons or 
Sectoral Sanctions Identification List, which puts the regulated public 
on notice and which is used to populate compliance screening tools and 
inform global compliance programs. Although routine, these actions are 
critical to keeping the private sector informed of OFAC's sanctions 
actions.
    To amplify Treasury actions, senior Treasury officials frequently 
engage with senior executives, including compliance officials, at 
foreign financial institutions and other businesses regarding our 
Russia program and other applicable sanctions, affirm administration 
policy towards Russia, and underscore our enforcement posture towards 
entities that facilitate malign Russian activity. Treasury also holds 
roundtables with banks in jurisdictions at elevated levels of risk for 
Russian money laundering, including Cyprus and Latvia, to convey 
concerns over this issue and urge the authorities to take steps to 
prevent the exploitation of their respective financial sectors by bad 
actors.
    In addition, at least once a year OFAC organizes a public symposium 
to discuss its sanctions programs. Most recently, in November 2017, 
OFAC's symposium was attended by close to 1,000 people, including legal 
and compliance professionals, interlocutors from foreign partners and 
allies, and leaders from both U.S. and multinational businesses, some 
of whom helped moderate public discussions of Treasury's CAATSA 
guidance.
    OFAC also routinely engages in outreach with the private sector by 
sending representatives to various trade and sanctions conferences in 
the United State and abroad, these representatives give speeches, 
presentations, and answer sanctions compliance questions. In the last 
year many of these conferences have devoted significant time to issues 
raised by CAATSA and recent sanctions actions against Russia. OFAC also 
engages with trade groups representing U.S. and international business 
interests. The detailed feedback that OFAC receives from these contacts 
is crucial to understanding the impact of Treasury's sanctions and 
tailoring current and future sanctions in ways that avoid undesirable 
collateral consequences.
    While it has been a long-standing practice of Treasury to undertake 
such outreach to the private sector, we have dedicated especially 
significant resources to ensuring that the financial sector understands 
the requirements created by CAATSA. Once key provisions of CAATSA 
became effective, OFAC established a CAATSA landing page on its website 
that clearly set out all of the public guidance that OFAC and the State 
Department had issued. OFAC has also released a number of CAATSA-
related FAQs to provide specific guidance to the public regarding the 
implementation of key provisions of CAATSA sections 223(a), 226, 228, 
and 233. These FAQs were the result of extensive U.S. government 
outreach to our allies and partners as well as private sector 
companies.
    Additionally, OFAC amended and reissued Directives 1, 2, and 4 of 
the sectoral sanctions under E.O. 13662 as required by sections 223(b)-
(d) of CAATSA. OFAC also amended Ukraine-/Russia-related General 
License No. 1A and reissued the general license as General License 1B, 
which continues to authorize certain transactions involving derivative 
products that would otherwise be prohibited pursuant to Directives 1, 
2, or 3, and updated a number OFAC FAQs to account for the fact that 
CAATSA-related prohibitions in Directives 1 and 2 were now in effect. 
These actions communicated sanctions prohibitions and authorizations 
directly to the public and private sector.
    OFAC's Compliance division also regularly fields calls from the 
private sector to explain CAATSA and provide guidance on adhering to 
its requirements. Since the passage of CAATSA, OFAC has responded to 
thousands of phone and email inquiries regarding CAATSA and Russia-
related sanctions questions. OFAC Licensing provides a valuable 
interface for the public, where the private sector can seek a license 
or receive interpretive guidance related to a particular regulatory 
matter or fact pattern.
    Large and impactful sanctions actions such as those taken against 
major Russian oligarchs also require extensive private sector outreach 
and communication. Following the April 6 designations, Treasury 
officials engaged in extensive discussions with allies and partners, as 
well as companies linked to the sanctioned persons, to identify ways to 
mitigate the negative impact on global markets while simultaneously 
imposing costs on targeted Russian actors by compelling these firms to 
reduce the ownership and interest of sanctioned persons.
    As the primary regulator responsible for money laundering and 
illicit finance activity, FinCEN also closely engages with the private 
sector, including to identify and disseminate information on emerging 
typologies supporting illicit financial actors such as Russia.
    With respect to proliferation finance, the FBI Counterproliferation 
Center--Russia (CPC-3) has worked closely with FinCEN and a consortium 
of financial institutions through the FinCEN Exchange Program to 
enhance information sharing with the private sector. Specifically, CPC-
3 has shared Russian proliferation finance typologies to initiate 
information sharing among banks that could lead to the uncovering of 
complex Russian illicit financial networks and develop actionable leads 
through Bank Secrecy Act reporting--including but not limited to 
Suspicious Activity Reports. These efforts assist CPC-3's efforts to 
identify illicit financial networks that aid in the procurement of 
U.S.-sensitive technology and allow for timely and effective law 
enforcement disruptions.
    Further, in its posts and missions abroad, the State Department 
conducts regular, significant outreach to the private sector, including 
at conferences in the United States and abroad that focus on sanctions 
policy, compliance, and enforcement. These conferences are attended by 
sanctions practitioners, compliance professionals, and lawyers. State, 
often in conjunction with Treasury officials, also engages in regular 
meetings with private sector companies in order to explain our policies 
in relation to Russia, including our intent to prevent illicit 
financial flows.
    section 243(b)(3)--efforts to engage and coordinate with allied 
  international partners on illicit finance, especially in europe, to 
 coordinate efforts to uncover and prosecute the networks responsible 
   for illicit financial flows described in paragraph (1), including 
              examples of that engagement and coordination
Foreign Engagement With International Partners
    Engagement and coordination with allies and partners are essential 
elements of the administration's efforts to counter Russian malign 
influence. Both in Washington and in European capitals, Treasury and 
State engage routinely at senior and staff levels to share information 
about, coordinate approaches to, and forge common understandings of 
this shared threat.
    Since the passage of CAATSA, Treasury and the State Department have 
traveled extensively through Europe--including the United Kingdom, 
Germany, France, European Union, Italy, Poland, Denmark, the 
Netherlands, Lithuania, Estonia, Latvia, and Finland--to discuss the 
implementation of the Russia-related provisions of that statute with 
foreign and finance ministries. Treasury and the State Department have 
also engaged with international partners through the G-7+ Contact Group 
(United States, United Kingdom, Germany, France, Italy, Canada, 
Australia, European Union, Norway, and Poland), a group of likeminded 
countries coordinating efforts to counter Russian malign influence and 
continue exerting pressure on the Kremlin to implement the Minsk 
agreements. The Department of Homeland Security has engaged European 
partners through the G7 Security Ministers and U.S.-EU Justice and Home 
Affairs Ministerial meetings to coordinate similar efforts to counter 
Russian malign influence. Treasury and State also actively engage with 
the European External Action Service (EEAS) of the European Union, 
which has provided useful feedback and insight on the impact of CAATSA 
and the recent April 6 action on the European economy.
    These engagements also provide important opportunities for the 
administration to press European partners to develop and employ the 
necessary tools to effectively counter common threats such as Russia, 
including domestic sanctions authorities where they do not exist, and 
to enhance the ability of their financial intelligence units to 
collect, analyze, and share information, including with respect to 
illicit Russian financial activity. Senior Treasury officials have also 
regularly emphasized the administration's strong opposition to Nord 
Stream II, which if completed would generate additional funds the 
Kremlin could use to finance its malign activity, while simultaneously 
deny Ukraine substantial transit revenues it needs to defend itself 
against Russian aggression.
    The administration has prioritized engagement with jurisdictions 
with high volumes of Russian financial flows, including the United 
Kingdom, Cyprus, and Latvia, to advance U.S. objectives on Russia. As 
elaborated below, such engagement and coordination significantly 
expands the reach and impact of our unilateral efforts to disrupt 
illicit Russian financial activity, amplifies multilateral messaging 
that the U.S. and its partners will not tolerate Russian aggression, 
and helps maintain transatlantic unity against a Russia bent on 
undermining these historic ties.
United Kingdom
    The scale of the U.K. financial services market and access to the 
EU have made London and U.K. overseas territories such as the British 
Virgin Islands an attractive destination for illicit financial flows. 
The U.K. National Crime Agency has estimated that, ``many hundreds of 
billions of pounds of international criminal money is laundered through 
U.K. based banks and subsidiaries each year,'' to include Russian 
oligarch proceeds of corruption. Recognizing this, the United States 
and U.K. have regularized consultation and cooperation to coordinate 
our respective efforts to counter Russian malign influence, including 
its financial activity.
Cyprus
    Senior officials from State and Treasury have engaged Cypriot 
authorities extensively over the past year and a half to underscore 
concerns that Cyprus continues to host a large volume of suspicious 
Russian funds and investments, and have pressed Cypriot officials to 
harden its financial system against these threats. Vulnerabilities 
Cyprus presents include its permissive citizenship by investment 
program, its weak supervision of Administrative Service Providers, and 
lax company formation requirements, which are exploited by illicit 
actors to set up front companies and to use these fronts to open bank 
accounts and access the international financial system.
    Although Cyprus remains a jurisdiction of concern from the 
perspective of Russian money laundering, the administration is seeing 
some signs of progress. Following the April 6 oligarch designations, 
Oleg Deripaska and Victor Vekselberg both had bank accounts frozen. In 
May 2018 Cyprus issued a circular instructing its banks to address 
certain illicit finance risks from shell companies, in particular the 
challenges in verifying customers' background.
Latvia
    Latvia has long served as a permissive environment for illicit 
Russian financial activity due to its geography, demography, linguistic 
profile, developed banking system, and membership in the European Union 
and Eurozone. For decades, Russian malign actors and their agents have 
exploited lax controls in Latvia's financial sector to launder illicit 
funds and support Russia's destabilizing conduct.
    Under this administration Treasury has redoubled its efforts to 
work with Latvia to strengthen its financial system by improving the 
legislative and regulatory framework as well as institutional capacity. 
In February 2018, pursuant to Section 311 of the USA PATRIOT Act, 
FinCEN issued a notice of proposed rule-making against ABLV Bank, a 
Latvian bank it found had facilitated significant Russian-based illicit 
activity. FinCEN identified ABLV Bank as a foreign financial 
institution of primary money laundering concern and proposed a special 
measure that would prohibit U.S. financial institutions from opening or 
maintaining a correspondent account in the U.S. on behalf of the bank. 
(This action is discussed in greater detail in this report under 
Section 243(b)(5)).
    This bank's involvement in illicit financial activity reflects 
broader systemic deficiencies in Latvia that this administration is 
working hard to address. These deficiencies reflect a historically 
ambivalent commitment to definitively reducing the risks Latvia faces 
from its high volume of non-resident deposits, many of which emanate 
from Russia and other Commonwealth of Independent States (CIS) 
countries and are held by opaque shell companies.
    To strengthen the authorities in Latvia committed to redressing 
these vulnerabilities, senior Treasury leadership has undertaken 
regular, high level engagement. Working closely with Embassy Riga, 
senior Treasury officials have urged Latvian leadership to support and 
empower emerging voices in Latvia's financial sector to urge meaningful 
reforms, such as reducing Latvia's stock of non-resident deposits, 
bolstering the resources allocated to Latvia's Financial Intelligence 
Unit (FIU), and taking tougher enforcement action against banks that 
violate Latvian regulations against money laundering and sanctions 
evasion.
    Latvia has passed legislation banning shell companies and appointed 
a new FIU director. Latvia has also amended its Law on Sanctions to 
close legal loopholes and allow the banking regulator to issue 
regulations to prevent sanctions evasion (See additional detail in 
Section (b)(4) below).
Foreign Deployed Subject Matter Experts
    Administration departments and agencies have also forward deployed 
illicit finance subject matter experts to partner countries to increase 
international cooperation targeting Russian illicit financial flows. 
The BEOU program manages Assistant Legal Attache (ALAT) positions who 
currently operate with two organized crime task forces in Eastern 
Europe. These ALATs are fully embedded members within these task forces 
and serve as a point of contact between the foreign partner agency and 
the FBI writ large.
    In 2018, Treasury and the Department of Defense partnered to 
establish a new Treasury Liaison Officer position at U.S. European 
Command (EUCOM) in Stuttgart, Germany. This new Treasury liaison role 
will facilitate existing and establish new finance-related cooperation 
and information sharing among the Department of Defense, Treasury, and 
NATO allies.
 section 243(b)(4)--efforts to identify foreign sanctions evaders and 
   loopholes within the sanctions regimes of foreign partners of the 
                             united states
    As described in greater detail under the response to Section 
243(b)(1), the IC has constantly sought to identify and map out illicit 
financial networks supporting the Russian Federation, which includes 
identifying activity designed to evade existing sanctions programs.
    Through its leadership in the Financial Action Task Force (FATF)--
where the United States currently holds the presidency--and in FATF--
Style Regional Bodies (FSRBs), Treasury also works to strengthen 
international anti-money laundering/countering the financing of 
terrorism (AML/CFT) standards and ensure that these measures are 
effectively implemented around the world. For example, the FATF's 
efforts to ensure that all jurisdictions apply a high level of scrutiny 
to the financial activities of politically exposed persons (PEPs) and 
collect information on the beneficial owners of legal entities helps to 
enable the detection of detect attempts by Russian officials to 
launder, hide, or move the proceeds of corruption. Similarly, the 
FATF's work to promote the global implementation of U.N. sanctions and 
hold underperforming countries accountable through its ``grey list'' 
process helps undermine Russian attempts to circumvent international 
prohibitions on dealings with North Korea, Iran, or other U.N.-listed 
programs. Indeed, one of the priorities of the current U.S. presidency 
is proliferation finance, an effort intended to harden the world's 
financial systems against the type of illicit procurement and 
proliferation activity in which Russian actors are regularly involved.
    section 243(b)(5)--efforts to expand the number of real estate 
      geographic targeting orders or other regulatory actions, as 
  appropriate, to degrade illicit financial activity relating to the 
 russian federation in relation to the financial system of the united 
                                 states
    As the administration works aggressively to deter and prevent 
illicit Russian financial activity abroad, it is also focused intently 
on protecting the U.S. financial system. Of particular recent note, as 
referenced above, was FinCEN's February 16, 2018 finding pursuant to 
Section 311 of the USA PATRIOT Act that Latvia-based ABLV Bank AS 
(``ABLV'') was a financial institution of primary money laundering 
concern. In its public notice of proposed rulemaking, FinCEN cited 
multiple instances of institutionalized money laundering in which ABLV 
management solicited high-risk shell company activity that enabled the 
bank and its customers to launder funds. ABLV's facilitation of shell 
company activity typically benefitted illicit actors engaged in an 
array of illicit conduct, including transnational organized criminal 
activity, corruption, and sanctions evasion, emanating mostly from 
Russia and former CIS countries. Pursuant to this finding, FinCEN 
proposed the imposition of a prohibition on U.S. financial institutions 
from opening or maintaining correspondent accounts for, or on behalf 
of, ABLV.
    FinCEN has also utilized its authorities under the Bank Secrecy Act 
to issue Geographic Targeting Orders (GTO) to impose additional 
recordkeeping requirements on domestic financial institutions or other 
businesses in a specific geographic area. Specifically, FinCEN has 
issued GTOs to collect additional financial information on transactions 
in the real estate sector in several jurisdictions known for attracting 
large amounts of foreign investors, including those from Russia.
section 243(b)(6)--efforts to provide support to counter those involved 
   in illicit finance relating to the russian federation across all 
 appropriate law enforcement, intelligence, regulatory, and financial 
authorities of the federal government, including by imposing sanctions 
             with respect to or prosecuting those involved
    Treasury's Office of Intelligence and Analysis, FinCEN, CIA, and 
NSA, among other agencies, play critical roles in the administration's 
work to support law enforcement and other authorities, especially in 
the imposition of sanctions and other impactful measures against 
illicit Russian financial activity.
    FinCEN conducts research and analysis of information gathered 
pursuant to the Bank Secrecy Act relating to Russian illicit financial 
activity, both domestically and overseas. FinCEN's financial 
intelligence products are disseminated primarily within the U.S. 
government, including to policymakers, law enforcement agencies, and 
the Intelligence Community. FinCEN also exchanges information with its 
counterpart financial intelligence units in other jurisdictions, 
including on matters related to Russian illicit finance. Additional 
details are provided in Section (b)(7) below.
 section 243(b)(7)--efforts to investigate or otherwise develop major 
             cases, including a description of those cases
    The administration has moved aggressively using the range of its 
law enforcement and regulatory tools against Russian malign activity. 
Descriptions of select cases are described below.\1\
---------------------------------------------------------------------------
    \1\ As with the classified version of this report, this 
unclassified version of the report does not discuss in detail open or 
pending investigations, law enforcement investigations or activities, 
or other disruptive actions ongoing at the time of release that have 
not been publicly disclosed in charging documents.
---------------------------------------------------------------------------
    The investigation of the Department of Justice's Special Counsel 
thus far has led to the indictment of 25 individuals and three 
companies for a variety of offenses--including conspiracy to commit 
wire fraud and bank fraud and conspiracy to launder money--committed in 
furtherance of Russia's scheme. The indictments describe a variety of 
methods used by the defendants to fund their operations.
    As alleged in an indictment filed in February 2018, one element of 
the operation involved the use of two related companies to channel 
millions of dollars' worth of funds to approximately fourteen 
affiliated companies that in turn provided money to an organization 
that sought to engage in ``information warfare against the United 
States'' and to ``spread distrust towards the candidates and the 
political system in general.'' Certain of the defendants in this part 
of the operation also used stolen personal information to open accounts 
at a digital payment service provider.
    In another element of this influence operation focused on hacking 
into the United States, as described in the Special Counsel's July 2018 
indictment, 11 Russian individuals affiliated with Russia's military 
intelligence agency, the Main Intelligence Directorate of the General 
Staff (GRU), conspired to launder the equivalent of more than $95,000 
using cryptocurrencies such as bitcoin to lease servers, register 
domains, purchase at least one virtual private network account, and 
make other payments in furtherance of their hacking activity. As the 
indictment highlights, the conspirators engaged in a web of 
transactions structured to capitalize on the perceived anonymity of 
cryptocurrencies such as bitcoin in their financial transactions with 
U.S. payment processing companies, including to pay web hosting 
companies, domain registrars and other businesses. The conspirators 
also allegedly mined bitcoin, purchased bitcoin through peer-to-peer 
exchanges, moved funds through other digital currencies, used pre-paid 
cards, and worked with a third-party exchanger that enabled layered 
transactions through digital currency platforms.
    In July 2017, FinCEN assessed a $110 million dollar penalty against 
virtual currency exchange BTC-e (operated by a Russian citizen) for its 
failure to implement even basic controls to prevent the use of its 
services for illicit purposes. BTC-e's lack of effective supervision 
led to it being exploited by a customer base that included many 
criminals who desired to conceal proceeds from crimes such as 
ransomware, fraud, identity theft, public corruption, and drug 
trafficking. BTC-e permitted and failed to report millions in 
transactions from ransomware such as Cryptolocker and Locky. 
Importantly, FinCEN's BSA enforcement investigation also led to the 
assessment of a $12 million civil money penalty against one of BTC-e's 
administrators, Alexander Vinnik--the largest individual liability 
penalty FinCEN has assessed to date. At one point BTC-e served 
approximately 700,000 customers across the world and was associated 
with bitcoin wallets that had received over 9.4 million bitcoins. It 
also offered exchange in fiat currency, as well as convertible virtual 
currencies Bitcoin, Dash, Litecoin, Namecoin, Novacoin, Peercoin, and 
Ether. In conjunction with FinCEN's enforcement action, Alexander 
Vinnik and BTC-e were also indicted by the Department of Justice for 
operating an unlicensed money service business, money laundering, and 
related crimes.
    FBI is also partnering with FinCEN to detect and disrupt illicit 
financial flows linked to the Russian Federation. Drawing on primarily 
wire transfer datasets shared by FinCEN and a dataset derived from the 
Panama Papers leak revealed by the International Consortium of 
Investigative Journalists, FBI used analytic platforms to assist in 
processing nearly 4,000,000 international wire transfers centered on 
four Balkan and Cypriot banks known by FinCEN to facilitate illicit 
Russian financial flows. This effort enabled the FBI to expand its 
understanding against Russian-linked offshore financial networks, 
identified a variety of new FBI targets, and enhanced FBI understanding 
of existing investigations. Impacts under this initiative include but 
are not limited to the following:

   FBI opening of a sensitive internal joint investigation by a 
        counterintelligence and public corruption squad against a high 
        level state elected official.

   A targeting and potential intelligence reporting platform 
        using links between FBI-derived information and Russia-
        affiliated entities in FinCEN--FBI data holdings, including 
        several TOC and various criminal targets.

    FBI also has an open investigation on a multi-billion dollar 
international money laundering operation also tied to U.S. locations, 
owned and operated by an identified Eurasian billionaire with strong 
ties to Eurasian organized crime. FBI developed U.S. law enforcement, 
U.S. intelligence, and international law enforcement partners to 
enhance this investigation.
                               conclusion
    As evidenced by the comprehensive efforts illustrated above, the 
administration is aggressively targeting and disrupting the illicit 
financial networks supporting Russian malign activity. The Department 
of the Treasury, in close coordination with other departments and 
agencies, will continue to impose costs upon those acting on behalf of 
the Kremlin against U.S. interests and increase financial pressure on 
Russia to advance our national security priorities. Additional 
information on the full range of the administration's efforts can be 
found in the classified annex to this report.
                               __________

        Trump Administration Actions to Push Back Against Russia

                             latest actions
   Executive Branch determination that Russia has violated the 
        Chemical and Biological Weapons Act of 1991 for its use of the 
        nerve agent, ``Novichok,'' in the Salisbury attacks in March 
        2018; imposition of sanctions.
   Crimea Declaration of non-recognition.
   In July, the Department of Defense released an additional 
        $200 million in security cooperation funds to the Ukrainian 
        military.
confronting russian influence in the u.s. by reducing russian presence 
                             an spy numbers
   In March 2018, President Trump expelled 48 Russian officials 
        and intelligence officers from the United States and closed the 
        Seattle consulate.
   In March 2018, President Trump expelled 12 officials and 
        intelligence officers from the Russian Mission to the United 
        Nations in New York for abusing their privilege of residence.
   The 60 Russian officials expelled in March 2018 constituted 
        the largest expulsion of Russian spies from the United States 
        since the high point of the Cold War.
   In October 2017, the administration closed Russian 
        properties in New York, San Francisco, and Washington in 
        response to the Russian government-imposed personnel cap on 
        U.S. Mission Russia in July 2017.
   In September 2017, the administration banned the use of 
        Kaspersky Labs software on United States Government computers 
        due to Kaspersky's ties to Russian intelligence.
   In March 2017, the administration charged 3 Russians for the 
        2014 Yahoo hack, including 2 officers of the Russian Federal 
        Security Service (FSB).
   The Trump administration has maintained the closure of 2 
        Russian compounds and the expulsion of 35 diplomats in response 
        to Russian interference in the 2016 election.
             confronting russian aggression with sanctions
   Since January 2017, the Trump administration has sanctioned 
        217 individuals and entities in Russia.
   In June 2018, the Trump administration sanctioned 5 Russian 
        entities and 3 Russian individuals for enabling Russia's 
        military and intelligence units to increase Russia's offensive 
        cyber capabilities.
   In April 2018, the USG used CAATSA authorities to designate 
        seven Russian oligarchs and 12 companies they own or control, 
        along with 17 senior Russian government officials, a state-
        owned Russian weapons trading company and its subsidiary, a 
        Russian bank, for their involvement in Russia's global malign 
        activities.
   In March 2018, the USG sanctioned five entities and 19 
        individuals for malicious cyber activity.
   In January 2018, the USG sanctioned 42 targets (30 SDNs, 12 
        SSIs) under Ukraine-related programs.
   In January 2018, Treasury, the State Department, and the 
        Office of the National Director of Intelligence, transmitted to 
        Congress the CAATSA 241 report on Russian oligarchs and senior 
        political officials.
   Under CAATSA 231, several countries have stopped significant 
        deals involving the planned purchase of Russian military 
        materials and supplies.
   In December 2017, the USG imposed sanctions on five serious 
        human rights abusers, including Ramzan Kadyrov and one of his 
        underlings.
   In December 2017, the USG imposed sanctions on 13 serious 
        human rights abusers and corrupt actors, including two Russian 
        citizens under the Global Magnitsky sanctions program. The 
        Russians sanctioned include the son of Russia's prosecutor 
        general.
                   defending and strengthening europe
   The Trump administration has increased funding for the 
        European Deterrence Initiative by 4.8 billion in 2018.
   The administration has worked with Allies at NATO to 
        maintain a firm message to Russia that there can be no return 
        to ``business as usual'' until there is a clear, constructive 
        change in Russia's actions.
   The administration is also leading efforts at NATO to 
        address Russian hybrid warfare and to counter Russian malign 
        influence against the Alliance.
   This year alone, the United States has led or participated 
        in over 150 military exercises in Europe.
   This administration is helping Ukraine and Georgia bolster 
        their means for self-defense and deter Russian aggression 
        through defensive weapons sales.
   At the NATO Summit, the U.S. successfully fought for a 
        stronger package of defense and deterrence measures in NATO, 
        including enhancing Allied force readiness by getting Allies to 
        develop 30 air squadrons, 30 naval combatants, and 30 maneuver 
        battalions all ready to be employed in 30 days.
   The President and Senior Administration Officials have 
        clearly expressed strong U.S. opposition to Nord Stream 2.
   The United States strongly supports the Southern Gas 
        Corridor project, which would lessen Europe's dependence on 
        Russian gas.
                   restoring america's military edge
   The Trump administration released a National Security 
        Strategy that makes clear that Russia is undertaking actions 
        that threaten our security and outlines steps to stop their 
        interference.
   This administration is working to pressure Russia back into 
        compliance with the INF Treaty.
   The United States is investing billions in modernizing its 
        nuclear arsenal to deter competitors such as Russia and China 
        so that they do not gain a strategic military advantage from 
        its treaty violations.
   We have increased defense budgets to $700 billion for FY 
        2018 and $716 billion for FY 2019.
                       fighting malign activities
   The Department increased support for the Global Engagement 
        Center (GEC), requesting $53.5 million in the FY19 budget. It 
        also signed a Memorandum of Agreement with DoD to transfer an 
        additional $40 million for the Global Engagement Center (GEC) 
        to support efforts to counter disinformation and propaganda 
        from foreign governments like Russia.
   The administration publishes multiple tweets and statements 
        per week calling Russia out on its malign activities and 
        destabilizing behavior around the world.
   The State Department's European Bureau co-chairs the Russia 
        Influence Group (RIG) with European Command which streamlines 
        interagency efforts to counter all aspects of Russian influence 
        campaigns and ensures more efficient coordination.
   In April 2018, the Department convened the high-level 
        interagency Active Measures Abroad Steering Committee (AMASC), 
        chaired by the Under Secretary for Political Affairs.
   In 2018, we indicted of two alleged FSB officers for 
        cybercrimes.
   In August 2016, Russian national Roman Seleznev was 
        sentenced to 27 years in federal prison for hacking and credit 
        card fraud.
                     protecting american elections
   In May 2017, President Trump signed an Executive Order to 
        strengthen and review the cybersecurity of our Nation and its 
        critical infrastructure.
   The administration established Election Infrastructure 
        Government and Sector Coordinating Councils.
   34 States, 52 county or local governments, and 5 election 
        companies receive cyber security scans and assessments from 
        DHS, free of charge, on an ongoing basis.
   DHS plans to provide on-site risk and vulnerability 
        assessments to all States that request it. Currently 18 States 
        have requested this assessment and 16 are completed for the 
        2018 election cycle.
   A new pilot program was launched to share information 
        between State and local officials and the Election Assistance 
        Commission to allow for rapid response on Election Day.
   During the 2017 elections, the Trump administration provided 
        on-site cybersecurity support to States and will do so again 
        during the 2018 elections.
            statements by the president on russian meddling
   In January 2017, the President-Elect said at a news 
        conference, ``I think it was Russia.''
   When asked what he would say to Putin about the hacking, 
        Trump responded, ``He shouldn't have done it. I don't believe 
        he will be doing it more.''
   In a June 23, 2017 tweet, the President wrote, ``The Obama 
        administration knew far in advance of November 8th about 
        election meddling by Russia.''
   On July 6, 2017, the President said ``I think it was 
        Russia.''
   On November 12, 2017, the President said ``I believe very 
        much in our intelligence agencies.''
   On March 6, 2018, the President said ``certainly there was 
        meddling.''
   During the Helsinki press briefing, President Trump told 
        reporters, ``I addressed directly with President Putin the 
        issue of Russian interference in our elections.''
   During the July 17 White House press conference, President 
        Trump said, ``I accept our intelligence community's conclusion 
        that Russia's meddling in the 2016 election took place.''
                               __________

                        NATO Summit Deliverables

                 1. defense spending and burden sharing

   Cash and Capabilities: The number of Allies spending 2% of 
        GDP on defense and 20% of their defense budgets on major 
        equipment has increased since January 2017.

        Allies' total defense spending increases since 2017 amount 
            to over $40 billion.

        Eight Allies are currently meeting their 2% pledge, and 18 
            in total are on track to do so by 2024.

   Contributions: Since Jan 2017, Allies (and partners) added 
        over 5,000 more troops to NATO missions (46% increase), and 
        Allies now contribute 57% of troops in NATO missions.

        For the Resolute Support Mission (RSM) in Afghanistan

   15 Allies announced additional troop offers since April.

   With the addition of the UAE and Qatar, there are now 41 RSM 
        members providing a total of 16,000 troops, a 20 % increase 
        over December 2016.

        Canada announced it will continue its role as framework 
            nation of the enhanced Forward Presence force in Latvia 
            through 2022, and that it will augment its land presence 
            there by deploying CF-18s.

                       2. deterrence and defense

   The 4 x 30s: The NATO Readiness Initiative will ensure that 
        NATO has 30 air squadrons, 30 naval combatants, and 30 maneuver 
        battalions that are ready to join the fight in 30 days.

   Mobility: Improving our ability to move forces across Europe 
        (by taking steps within NATO, within the EU, and jointly 
        between NATO and the EU)

   NATO Command Structure:

        a new Atlantic-focused Joint Force Command in Norfolk to 
            help protect sea lanes between North America and Europe.

        a new Joint Support Command in Germany for logistics, 
            reinforcement, and mobility to improve the movement of 
            troops and equipment

        a new Cyberspace Operations Center in Belgium to provide 
            situational awareness and coordination of NATO operational 
            activity within cyberspace

   Hybrid and Cyber:

        Established Counter-Hybrid Support Teams

        Doing more on cyber threats, e.g. integrate sovereign 
            cyber effects into NATO operations

                         3. fighting terrorism

   Iraq Mission: Transformed NATO's activity in Iraq into a 
        non-combat training and capacity building mission, with Canada 
        commanding the mission.

   Afghanistan:

        Extended support to the NATO Resolute Support Mission 
            (RSM) in Afghanistan and funding for the Afghan National 
            Defense and Security Forces Trust Fund through 2024.

        Since the launch of the President's South Asia strategy, 
            Allies and partners are matching U.S. troop increases, 
            adding 1,200 more troops, comprising 47% of RSM troop 
            levels. Record fill-rate of RSM staffing requirements 
            thanks to new troop pledges at Summit.

   Southern Partners:

        Launched a Defense Capacity Building (DCB) package for 
            Tunisia and continuing to implement a DCB package for 
            Jordan

        Declared Hub for the South in Naples, Italy, at Full 
            Operational Capacity

                              4. open door

   Macedonia received an invitation to begin accession talks.

                         5. nato-eu cooperation

   Strengthened NATO-EU cooperation as NATO and EU leaders 
        signed a new NATO-EU Joint Declaration.



                                  [all]