[Joint House and Senate Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
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EUROPEAN ENERGY SECURITY POST-RUSSIA
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HEARING
BEFORE THE
COMMISSION ON SECURITY AND COOPERATION IN EUROPE
U.S. HELSINKI COMMISSION
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
June 7, 2022
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Printed for the use of the Commission on Security and Cooperation in
Europe
[CSCE117-17]
GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT
Available via www.csce.gov
_______
U.S. GOVERNMENT PUBLISHING OFFICE
57-724 WASHINGTON : 2024
COMMISSION ON SECURITY AND COOPERATION IN EUROPE
U.S. HELSINKI COMMISSION
SENATE
HOUSE
BENJAMIN L. CARDIN, Maryland STEVE COHEN, Tennessee Co-Chairman
JOE WILSON, South Carolina Ranking
Chairman Member
ROGER F. WICKER, Mississippi
Ranking Member ROBERT B. ADERHOLT, Alabama
RICHARD BLUMENTHAL, Connecticut EMANUEL CLEAVER II, Missouri
JOHN BOOZMAN, Arkansas BRIAN FITZPATRICK, Pennsylvania
TIM SCOTT, South Carolina RUBEN GALLEGO, Arizona
JEANNE SHAHEEN, New Hampshire RICHARD HUDSON, North Carolina
TINA SMITH, Minnesota GWEN MOORE, Wisconsin
THOM TILLIS, North Carolina MARC A. VEASEY, Texas
SHELDON WHITEHOUSE, Rhode Island
EXECUTIVE BRANCH
Department of State - to be appointed
Department of Defense - to be appointed
Department of Commerce - to be appointed
C O N T E N T S
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Page
COMMISSIONERS
Hon. Benjamin L. Cardin, Chairman, from Maryland................. 1
Hon. Steve Cohen, Co-Chairman, from Tennessee.................... 2
Hon. Joe Wilson, Ranking Member, from South Carolina............. 4
Hon. Richard Blumenthal, from Connecticut........................ 20
Hon. Ruben Gallego, from Arizona................................. 22
Hon. Marc A. Veasey, from Texas.................................. 24
WITNESSES
Oksana Markarova, Ambassador of Ukraine to the United States..... 5
Yuriy Vitrenko, CEO, Naftogaz Ukraine............................ 7
Constanze Stelzenmuller, Senior Fellow, Brookings Institution.... 8
Benjamin Schmitt, Research Associate, Harvard University and
Senior Fellow, Democratic Resilience Program, Center for
European Policy Analysis....................................... 11
EUROPEAN ENERGY SECURITY POST-RUSSIA
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COMMISSION ON SECURITY AND COOPERATION IN
EUROPE,
U.S. HELSINKI COMMISSION,
HOUSE OF REPRESENTATIVES,
Tuesday, June 7, 2022.
The hearing was held from 2:37 p.m. to 4:07 p.m., Room 562,
Dirksen Senate Office Building, Washington, DC, Senator
Benjamin L. Cardin[D-MD], Chairman, Commission for Security and
Cooperation in Europe, presiding.
Committee Members Present: Senator Benjamin L. Cardin [D-
MD], Chairman; Representative Steve Cohen [D-TN], Co-Chairman;
Senator Roger Wicker [R-MS], Ranking Member; Representative Joe
Wilson [R-SC], Ranking Member; Senator Richard Blumenthal [D-
CT]; Senator Jeanne Shaheen [D-NH]; Representative Ruben
Gallego [D-AZ]; Representative Marc Veasey [D-TX].
Witnesses: Yuriy Vitrenko, CEO, Naftogaz Ukraine; Constanze
Stelzenmller, Senior Fellow, Brookings Institution; Benjamin
Schmitt, Research Associate, Harvard University and Senior
Fellow, Democratic Resilience Program, Center for European
Policy Analysis; Oksana Markarova, Ambassador of Ukraine to the
United States.
OPENING STATEMENT OF BENJAMIN L. CARDIN, CHAIRMAN, U.S. SENATE,
FROM MARYLAND
Chairman Cardin: The Helsinki Commission will come to
order. Let me welcome our witnesses. Let me indicate this is
the latest in our series of hearings in regard to the crisis
created by Mr. Putin and Russia and their invasion of Ukraine.
Today's hearing will focus on the European energy security
post-Russia, recognizing that Russia--Mr. Putin has used energy
as a weapon. European dependence on Russian energy is a major
threat to international security. We are now faced with the
challenge of how to unwind this dependency in an expeditious
way, and that will not be easy.
Russia has long weaponized its energy resources. I authored
a report on the Senate Foreign Relations Committee a few years
back talking about Mr. Putin's asymmetric arsenal. What he has
in his toolkit to try to bring down democratic states, and we
talked about yes, his military, but we also talked about his
use of propaganda, misinformation, funding extreme groups, and
the use of energy as a weapon.
Through the use of strategic corruption that has sought to
make countries dependent on its gas to exert influence over
their policies, this is exemplified by the case of former
German Chancellor Gerhard Schroder, who has worked as a gas
lobbyist for Russian dictator Putin since the end of his time
in office.
Sadly, Russia's policy was successful. Europe is now
heavily dependent on Russian energy. Amazingly, it has
increased its dependency since 2014 after Russia's initial
invasion of Ukraine. This has greatly complicated our ability
to impose total blocking sanctions on the Russian economy while
maintaining alliance unity.
Part of our strategy in supporting Ukraine is to isolate--
is to isolate Russia and to impose sanctions so they recognize
that business is not as usual, but energy has complicated that
unity with our European partners. Although our sanctions have
been historically strong and coordinated, they are still
missing a critical energy component.
Banks involved with energy purchases also have not all been
sanctioned. As it stands, the European Union is still sending
nearly a billion euros a day to Russia. This money is used to
fuel Mr. Putin's murderous war machinery.
There is good news. The EU has implemented a coal ban and
recently implemented an oil ban, albeit with certain cut-outs.
Nonetheless, this is progress. It seems that Europe has finally
recognized the severe threat of dependency on Russian energy
and is determined to wean itself off of it. The most important
thing now is to ban Russian gas. We look forward to working
with our European allies to expedite this process.
I am proud of the role that my state of Maryland can play
in this. We have Cove Point, which is an LNG export facility
located in the state of Maryland, and we are ready to
significantly increase our LNG exports. Meanwhile, Russia's
brutal and unprovoked invasion of Ukraine rages on.
Millions of Ukrainians have been displaced, and tens of
thousands have been killed. Ukrainian cities have been leveled,
and towns and villages wiped off the map. It is almost
unthinkable that under the current circumstances, there are
those in democracies who continue to purchase Russian energy.
We need to ensure that we will never be so dependent upon a
dictator again. We also need to make sure that Ukraine has
reliable energy supplies. The valiant defenders of Ukraine face
an enormous host of economic problems on account of Russia's
destruction of their homes and infrastructure. Their energy
security is of the utmost importance.
This hearing will explore all these questions and how we
can respond. Before introducing our witnesses, let me first go
to my colleagues in the leadership of the OSCE, the Helsinki
Commission, first with Congressman Cohen, the House chairman of
the Helsinki Commission.
STATEMENT OF STEVE COHEN, U.S HOUSE, FROM TENNESSEE
Representative Cohen: Thank you, Senator. I appreciate
the--calling the hearing and your recognition.
It is been over a hundred days since this war has been
engaged in by Putin. In December, a couple of months before the
war, I had the opportunity to meet with Mr. Vitrenko, who is
with us today, and at the time, I do not think he or I had the
feeling that Russia would necessarily go through with this war.
Maybe I am wrong, but it was--started to get those inklings in
January and early February that it might take place.
When we met Mr. Vitrenko was adamant that the only way that
we should respond at that time was to cancel Nord Stream 2 and
begin preparing to sanction Nord Stream 1 should Russia invade
Ukraine. He said the best way to get after Putin--to get his
attention was to go after his sacred cows, oil, and gas. At the
time, we did not think about his daughter or the famous gymnast
missing somewhere in the universe.
Oil and gas came in close to first. As long as we are
dependent on Russian energy, we are held hostage by this crazy
despot who is trying to cement his place in history and do it
soon. As if it makes a difference after he is dead if he is
Peter the Great II or what he is, because he will be dead, as
will so many of the Russian soldiers, and Ukrainian soldiers,
and Ukrainian citizens--none of which bothers him.
We are dependent on Russian energy, and that is what he has
got, and that is what holds us in check somewhat, and that is
what gives him hope for Soviet--Russia to have a past like the
Soviet Union had, which was not so wonderful, to be honest.
The poor people, the general people, in Russia, in the
whole Soviet Union, have always lived terribly, but they have
been duped like many in America have been duped. Putin thinks
that if the war is over soon enough, we will forgive him
because we need his oil and gas.
Well, we do not, and we need to find alternatives. Europe
is starting to look for alternatives--starting to think about
liquid natural gas, looking at more solar and more wind, and so
are we. We need to because we do not need to have oil and gas
be a weapon that makes us subservient or tries to make us
subservient to the will of a dictator and a despot.
We have imposed some of the most devastating sanctions
ever, and they have surprised even the Kremlin. On March 8, the
U.S. said it would immediately ban all Russian oil and gas
imports, a move I championed in a letter to the administration,
and I said we should call it when prices at the pump went up,
the Putin-Russia tax.
It is, and I think gas prices have gone up approximately 30
percent since the invasion--not because we canceled the small
amount of Russian oil and gas that we brought in but because we
put more gas out of the strategic oil reserve, it is gone up
all over the world. The price of gasoline is up everywhere
because of Russia, because of OPEC, and the greedy Saudis. The
American companies who have made fortunes and fortunes and
greater profits than ever and not considered the patriot at the
pump. It is been their historic profits.
It is not Biden's problem--it is Biden's problem, but it is
not his fault. I was at transatlantic dialogue over the break,
and I asked every one of the folks that were with us--there
were about seven different European parliament countries in
attendance--what was their situation with gas. They all had
gasoline prices up as we did, and I asked them somewhat
facetiously--totally facetiously, was it Biden's fault? They
laughed. Well, when they say in America it is Biden's fault, we
should all laugh, too. The same thing with inflation. What is
your rate of inflation? Nine percent, 10 percent. Biden's
fault? They laughed. We should laugh, too, when people in our
country blame Biden.
Now, we are doing what we can do to try to improve the
supply chain, and we are doing the things we can do to make
America compete, but these are worldwide problems caused by
COVID, caused by the war in Ukraine, and caused by factors that
are beyond that of President Biden or any one president.
We need to remain vigilant in our work against Russia and
its oil power over Eastern Europe and Europe in general, and
help our European allies with liquid natural gas, and support
them in these efforts. Always we can, and I think we are doing
that, and I think President Biden is doing a good job with
that.
It is difficult to make the transition, especially in
Germany where they have reduced their nuclear power
opportunities--which they had much and I wish they still used,
but that is neither here nor there. They have made their
decision. We need to use this awful situation to improve our
energy alternatives here and abroad and encourage our allies to
do the same.
I thank the witnesses for being here. I very much look
forward to what you can tell us about the situation and how
Ukraine is dealing with the loss of supplies that they have had
from Russia's missiles hitting their energy sources and their
reservoir deposits.
Thank you. I yield back.
Chairman Cardin: I now recognize the Ranking Republican
Representative Wilson for an opening statement.
STATEMENT OF JOE WILSON, U.S. HOUSE, FROM SOUTH CAROLINA
Representative Wilson: Thank you, Chairman Ben Cardin and
Chairman Steve Cohen, for calling this important hearing today.
In the face of war criminal Putin's war of mass murder in
Ukraine, the free world is working to free itself from the yoke
of Russian energy and stop funding Putin's war machine a
billion dollars a day. Forward-thinking solutions to reduce
Europe's dependence on Russian gas and oil require reflection
on how we got here today.
Today, Germany, Europe's largest economy, depends on Russia
for over half of its natural gas supply and one-third of its
oil. For decades, those skeptical of warming ties for what we
hoped would be a free and democratic Russia warned against this
level of dependence stating that--what is now Putin's
authoritarian regime could weaponize energy supply, something
we have seen come to fruition more than once.
Now, our allies face the question of how to replace Russian
energy as quickly and painlessly as possible. The European
Union has enacted a ban on Russian coal and a partial ban on
oil, but this is not enough. The global energy supply must be
future-proofed using a diverse and multiprong approach to
safeguard the global supply from control and manipulation.
Countries should examine their own domestic production policies
to ensure they're not outsourcing their entire supply needs.
Additionally, the expansion of roads via the Southern Gas
Corridor should be accelerated, as Azerbaijan indicates its
ability to ramp up production and supply to Europe. Qatar also
shows itself as a reliable and effective partner to supply
natural gas to Europe promising not to divert contracts in
solidarity with Europe.
The issue of oil will prove tougher to solve. The United
States should resume energy independence and increase domestic
production and exporting of petroleum products to our European
allies, especially as we just learned through Maryland. We
should continue working with our other global producers to
increase supply.
We are grateful to the witnesses for their time and
expertise. We look forward to discussing further how the free
world can bolster its energy supply and stop funding Putin's
war machine.
I yield back.
Chairman Cardin: Thank you, Congressman Wilson.
Let me just acknowledge our other two Commission members
who are here, Senator Shaheen and Senator Blumenthal.
We are very pleased to have the distinguished ambassador
from Ukraine, Ambassador Markarova. It is always a pleasure to
have you on our committee. We appreciate your working with us
in unity so that we can show leadership and support to the
Ukrainian people and join in an international effort to isolate
Russia. I would be glad to hear from you.
TESTIMONY OF OKSANA MARKAROVA, AMBASSADOR OF UKRAINE TO THE
UNITED STATES
Mr. Markarova: Thank you very much, Chairman. It is always
a pleasure to be here with all the distinguished members. Thank
you very much for your attention to this very important issue
today.
For more than a hundred days we have been in a full-fledged
war, which started eight years ago. The results are
devastating. The results are devastating for Ukraine with more
than 7 million people who had to flee the country, mostly women
and children; more than 8 million people who are internally
displaced; more than 10 million people who live constantly
under the shell and attack, and under the occupation sometimes.
We all know what happens to these people when they live
under occupation. Everyone saw the pictures of Bucha and other
places, and everyone saw how cities like Mariupol and Kharkiv
and Chernihiv--some like Mariupol were 95 percent destroyed,
and some have been like Kharkiv and Chernihiv, damaged forever.
Now, this ongoing aggression is not only, you know, the
full collection of war crimes that we see in Ukraine--all
imaginable or unimaginable--tortures, killings, rape, and
horrible things for which Mr. Putin and everyone involved have
to be held accountable.
It is also--he is also using--Russia is using a number of
resources as weapons. Food for a start, but energy, and this is
what is very important for all of us to discuss--that energy is
being used against Ukraine and against the European Union and
globally against everyone as a weapon that Mr. Putin is using
in order to punish everyone or coerce everyone not to fight
with him.
Also, you know, to create difficulties in so many
democratic countries, where people will suffer from increased
prices and would blame their own governments when there is only
one person to blame, it is Putin and his regime and Russia that
is waging this war.
Similarly, this is the greatest source of the invasion
force. Sixty billion euros that were paid approximately during
these three months--a little bit more than three months of
full-fledged war to the Russian budget--is a source that Russia
is using to kill people in Ukraine.
Just think about it. The 60 billion dollars, it is 500
tanks, it is another vessel like Moskva. I mean, you can count
how many weapons you can buy with this--instead of sanctions
and the military support, which the U.S. and all other military
strategic friends are providing us in order to defend our
democracy, sovereignty, and freedom.
I just would like to be very brief here, and thank you for
this very important meeting. Thank the U.S. administration and
also Congress on a very strong bipartisan basis for leading,
especially in the sanctions, especially in the energy sphere. I
really hope that, with your leadership, all of our friends and
allies throughout the globe will join this and will be able
to--as soon as possible to part Mr. Putin with all these
resources so that he will, A, stop the aggression in Ukraine.
He will get out of our country, but also that we can all return
to how to get back the security--global security. Without this,
we cannot restore the international rule of law, which Russia
violated, and it also shows a very bad example to all other
autocratic regimes, or other countries, that might think that
in the 21st century, you can still cross the border and attack
a sovereign country and resolve some of your--fulfill some of
your dreams like that.
Thank you very much for this important meeting, and I look
forward to hearing what the witnesses will be saying.
Chairman Cardin: Well, Madam Ambassador, again, thank you
very much. I can assure you we stand with the people of
Ukraine. It is bicameral, bipartisan. We will continue to be
with you. We recognize you are at the front line on preserving
democracy in Europe and throughout the world, so we recognize
the sacrifices that you are making and your people are making.
As Congressman Cohen pointed out, the pricing--prices that
we are paying on energy today as a result of Mr. Putin's
campaign squarely is on the shoulders of Mr. Putin, and it is a
small price that we are paying compared to what the Ukrainian
people are paying for Mr. Putin's aggression.
We have a very distinguished panel of witnesses today. Our
first witness is Yuriy Vitrenko, who is the CEO of Naftogaz
Ukraine, the country's largest energy state-owned company.
Over his career, Mr. Vitrenko has held several positions
throughout Naftogaz, where he has focused on reforming the
energy sector ensuring Ukraine's energy security, driving
market reforms, and promoting European integration of Ukraine's
gas sector.
Between 2020 and 2021, Mr. Vitrenko served as the acting
administrator of energy in Ukraine. Prior to his work in the
energy sector, he developed a robust leadership experience
throughout the financial sector and in consulting services.
Mr. Vitrenko, we look forward to your testimony
TESTIMONY OF YURIY VITRENKO, CEO, NAFTOGAZ UKRAINE
Mr. Vitrenko: Dear Mr. Chairman and honorable members of
the Commission, thank you very much for inviting me to share my
views on this important and timely topic.
Before I turn to the subject, I would like to thank
President Joe Biden and the bipartisan support of the U.S.
Congress for America's unwavering commitment to Ukrainian
independence and its territorial integrity. Also, the Ukrainian
people are very thankful for the political, military, economic,
and humanitarian support given to us during Russia's unlawful
invasion of Ukraine in 2014 and 2021.
The European Union has developed a rather comprehensive
plan to eliminate its critical dependence on Russian gas and
oil titled, Repower EU. Although it stops short of making
Europe wholly free from the Russian Federation, from the
Ukrainian perspective it is not the biggest problem with this
plan.
The biggest problem in this plan allows Russia to continue
enjoying enormous profits from exports of oil and gas to
Europe, at least in the short run. Even though volumes of
exports are falling because of the EU actions, record high
global prices more than compensate for the volume and
decreases, and thereby, Putin's regime is now receiving more
money than it did, for example, last year.
Naftogaz of Ukraine together with the Gas Transition System
Operator of Ukraine submitted to the European Commission our
detailed proposal addressing these and other problems. Some of
our suggestions were considered, but not all.
We continue our constructive dialogue with the European
Commission and hope that it will soon consider the following
suggestions from our side: Implementing sanctions against Nord
Stream 1; fighting abuse of market dominance by Gazprom, in
particular making Gazprom unblock flows of natural gas from
Central Asia and transfer the gas and weapons to the Ukrainian-
Russian border; specific storage obligations for European
importers of Russian gas.
As a member of the International Working Group on Sanctions
on Russia headed by Andriy Yermak, head of the office of the
president of Ukraine, and Ambassador Mike McFaul, director of
the Freeman Spogli Institute for International Studies,
recently presented the energy sanctions roadmap recommendation
on sanctions on the Russian Federation.
Following the presentation of the action plan on tightening
sanctions on Russia, we continued our work and prepared a
document detailing energy sanctions helping governments and
companies around the world formulate proposals for sanctions on
Russia. The application of energy sanctions should increase the
cost of invading Ukraine for Russia and help the Ukrainian
state protect its territorial integrity, freedom, and
democratic values.
Unfortunately, so far not all of the recommendations of the
expert group have been implemented. First, to the developing
debates about the risks and benefits of different options for
the sanctions, I would suggest considering anew a slightly
modified option of a transfer cap whereby financial sanctions
that would allow transfers of payments from European uptakers
of oil and gas sold by Russian companies to Russia only within
a defined cap--a barrel of oil or a megawatt hour of natural
gas.
The difference between the full amount paid by uptakers--
presumably they will pay according to the price as specified in
their contracts--and money transferred to Russia within the
transfer cap will be frozen until Russia withdraws from Ukraine
and pays reparations. The transfer cap should be set at the
level that covers opportunity costs for Russian producers, but
this level is expected to be times lower than the contract
prices.
As a result of the transfer cap, Putin's war machine will
be starved. Russia will have a clear motivation to stop the war
and compensate for damages, while market disruptions will be
prevented. In fact, we might see market trends opposite to the
current trends, yet positive for Ukraine and for the free world
as a whole. Russia will have to supply more to global markets
while getting times less money than now because of the transfer
cap. Besides, market prices will decrease due to increased
supply.
Natural gas is an energy source for heating for about 90
percent of Ukrainian households. That is why here in the United
States, we are discussing with the U.S. government some very
practical ways to ensure financing of natural gas purchases of
U.S. LNG that can keep the lights on in Ukraine. I would be
happy to answer your questions because I am running out of
time. Thank you very much.
Chairman Cardin: Well, thank you for your testimony. Your
entire testimony will be made part of the record, and we
appreciate your summarizing in the five minutes. It gives us
more opportunity to have an exchange with the members.
Our next witness is Constanze Stelzenmuller, who is the
senior fellow at the Brookings Institute, where she is the
inaugural holder of the Fritz Stern chair on Germany and
transatlantic relations in the Center on the United States and
Europe, and previously served as the inaugural Robert Bosch
senior fellow from 2014 to 2019. She also holds prestigious
positions at the Library of Congress and the German Marshall
Fund. She has been a visiting researcher or fellow at Harvard
Law School, Grinnell College, and the Wilson Center. Her areas
of expertise include transatlantic relations, German foreign
policy, NATO, the European Union's foreign security and defense
policies, international law, and the list goes on and on and
on. I do not know if we have time for anything else other than
that. It is wonderful that you are here. We very much
appreciate your testimony.
TESTIMONY OF CONSTANZE STELZENMULLER, SENIOR FELLOW, BROOKINGS
INSTITUTION
Ms. Stelzenmuller: Thank you very much, Senator. I am sorry
I did not get a chance to edit that bio. Chairman Cardin--
Chairman Cardin: No, you deserve every one of those
praises. That is fine.
Ms. Stelzenmuller: [Laughs.] Chairman Cardin, Chairman
Cohen, and distinguished members of the Helsinki Commission, it
is an immense honor for me to be invited to testify before you
here today, together with my other distinguished panel members,
Yuriy Vitrenko and Ben Schmitt, who are friends, on this
critical issue.
I want to emphasize here that I am not and have never been
a government representative. I speak in my capacity as an
analyst of German and European politics. I am also not an
energy expert. I am here to contextualize a bit. I have noted
in my written testimony that I have signed, I think at this
point, two or three petitions, two of whom, I think, have
called for an immediate stop of oil and gas imports. I realize
that I am here to explain why Germany is not doing that, and I
will do my best to do that. I realize that is a bit of lipstick
a pig, but I will give it my best shot.
Germany is--I am sure I do not need to tell you--the case
study in the West of a middle power that made a strategic bet
on a full embrace of interdependent globalization--
interdependence and globalization in the late 20th century. It
outsourced its security to the U.S., its export-led growth to
China, and its energy needs to Russia. It is now finding itself
excruciating vulnerable in an early 21st century characterized
by great-power competition and an increasing weaponization of
interdependence by allies and adversaries alike.
The war in Ukraine, which touches on almost every single
one of our bilateral, local, regional, and global interests,
only accentuates this exposure. Guilty as charged, and the fact
that this horrific conflict is taking place in the region that
was part of the bloodlands--a term coined, as you know, by
historian Timothy Snyder, where Hitler, and to a slightly
lesser degree Stalin, murdered tens of millions of people--is
lost on no one in my country.
Where are we now on Germany's attempts to uncouple? As has
been said, oil and gas account for about 60 percent of primary
energy. Russia has long been the biggest supplier of both in my
country. On the eve of the war in Ukraine, it provided a third
of Germany's oil, half its coal, and more than half its gas.
That means we have been importing around $2 billion worth of
Russian gas, oil, and coal a month, thereby helping to finance
Vladimir Putin's war in Ukraine. I am quoting The Economist
here, but of course that is factually correct. I am not going
to fight that.
As you know, we have a new government that arrived in
Berlin in December 2021, which had a couple of energy issues of
its well before the war started. Its declared goal was to phase
out nuclear power by December 2022, and coal by 2030, and on
top of that it had an extremely ambitious climate transition
plan. Germany was also Gazprom's main foreign buyer, and
Gazprom owned most of its underground gas storage facilities in
Europe. I am going to make this very quick. We are basically
out of coal. The last ship transporting coal arrived in Rostock
Harbor last week. Russian oil is--which supplied 25 of our oil
needs, is now down to 12 percent. That is a partial embargo,
but it is, I think, a very significant one. Happy to go into
details.
Gas remains the big problem. Gas is--we are now at this
point from 55 percent of our gas needs imported from Russia, we
are down to 35 by increasing imports from Norway and the
Netherlands, as well as bringing in LNG. We have no LNG
terminals in Germany. We are now leasing floating
regasification terminals at a cost of more than three billion.
Our energy minister--our economics minister, Robert Habeck, has
said that we can only bring this down further with a massive
national effort. The goal is to bring it down to 10 percent by
2024.
There is a huge fight in Germany going on right now, about
whether it would be possible to cut off all of Russian gas
right now. There are economists who say one thing and more
economists who say the other thing, with I think persuasive
arguments on both sides. I will remind you that Secretary of
the Treasury Janet Yellen warned a couple of weeks ago about
imposing a complete ban on Russian energy imports, saying that
such a--such a move--such a sudden move, and the shock of such
a move, could harm the global economy. If you look at German
opinion polls, you will find that people are willing--at least
a third of pollees and those respondents--are willing to
contemplate a complete cut-off now. Two-thirds say it should be
done step by step. That is the political bandwidth that
decision-makers have to make that decision.
Because I only have 14 more seconds, I want to say that
while I have made--I have a position on this, I do believe that
there are honorable reasons for German decision-makers to be
hesitant about this. Those honorable reasons are that they are
not saying we should not decouple. They are saying--they are
disputing at what speed and at what price. That is the question
before us, not whether to do it. I think it is clear to
everyone that the horrors that we have seen are not over, but
more is before us, and more will be asked of all of us. I
believe that decision-makers in Berlin know that we have no
good choices, only bad and less bad ones, and imperfect
knowledge about which those are.
I think decision-makers in Berlin, Chancellor Scholz, and
Economics Minister Habeck are faced with terribly difficult and
consequential decisions, with incalculable second and third-
order implications. I think the key reason--one of the key
reasons that is not appreciated here of why they are hesitant--
and I realize I am running over, but I do want to make this
last point--is our deep integration with our neighboring
economies, particularly Eastern Europe. Much of our
manufacturing supply chains go deep into Eastern Europe. A
recession in Germany would absolutely produce a massive, and
perhaps worse, recession in our neighboring economies. That is
something we have to consider. The economic price we pay would
also be paid by our neighbors.
I am going to stop here. I am sorry for stumbling a little
bit. This is the result of a concussion I had four weeks ago,
and I am still a little bit--a little bit woozy. I hope I made
myself clear, and I look forward to your questions.
Chairman Cardin: Oh, you have made yourself very clear and
you are raising a lot of very interesting subjects that we may
want to talk about, including Nord Stream 2. We will get--we
will get to those issues, I am sure, during our question
period.
Our final witness is Dr. Benjamin Schmitt, who is a
research associate at Harvard University and senior fellow in
the Democratic Resilience Program at the Center for European
Policy Analysis. He holds numerous degrees in mathematics,
experimental physics, and German language and culture. He
served as a U.S. Fulbright research fellow at the Max Planck
Institute for Nuclear Physics in Heidelberg, Germany. From 2015
to 2019, Dr. Schmitt served as European energy security advisor
at the United States Department of State, where he advanced
diplomatic engagement vital to the energy and national security
interests of the transatlantic community. Dr. Schmitt, glad to
hear from you.
TESTIMONY OF BENJAMIN SCHMITT, RESEARCH ASSOCIATE, HARVARD
UNIVERSITY AND SENIOR FELLOW, DEMOCRATIC RESILIENCE PROGRAM,
CENTER FOR EUROPEAN POLICY ANALYSIS
Mr. Schmitt: Chairman Cardin, Co-Chairman Cohen, and
distinguished Senate and House members of the Helsinki
Commission, thank you for the opportunity to speak on an issue
as vital to transatlantic security as supporting Europe's
energy security today. As Senator Cardin said, my name is Dr.
Benjamin L. Schmitt. I previously served as European energy
security advisor at the U.S. Department of State, and I am
currently a research fellow at the Harvard Smithsonian Center
for Astrophysics, a senior fellow at the Center for European
Policy Analysis in Washington, and a fellow of the Duke
University Center for International and Global Studies.
With heavy fighting ongoing in Ukraine and the wounds of
Bucha and Mariupol still open and bleeding, the transatlantic
community does not have the luxury of time to define an
effective path forward in countering this new phase of Russian
aggression. This is why we need an equally aggressive
multidisciplinary, anticipatory diplomacy approach to respond.
This is especially true concerning Europe's dependence on
Russian energy resources because Putin's Kremlin has weaponized
energy against Europe for years. Because hydrocarbon revenues
have played an outsized role in funding Moscow's war-making
capability. Given this reality, we need to take a lessons-
learned approach to identify energy policies that have been
successful in curbing the Kremlin's energy influence in the
lead-up to the war, and we also need to be clear-eyed about the
mistakes that were made so they are not repeated again.
Three key lessons I want to leave you with that should
guide policymakers today include, first, energy and critical
infrastructure proposals advanced by authoritarian nations,
like Russia, are not just commercial deals. The second lesson
is that energy diversification infrastructure has been
effective at countering Russian energy weaponization. Third,
sanctions have been an effective tool to slow and stop the
Kremlin's malign energy influence.
On the first lesson, given total state control in
authoritarian nations like Russia, nearly every sector of
society can be weaponized to advance geopolitical aims, from
cyberspace to supply chains and, yes, even space assets. This
includes Russia's long and sordid history of weaponizing energy
against Europe, including numerous gas cutoffs of Ukraine for
political blackmail. In 2021, the Kremlin intentionally limited
natural gas volumes exported to European storages, many of
which are owned by Kremlin-controlled Gazprom itself.
This created EU-side gas scarcity that limited the latitude
of foreign policy responses to Putin's invasion of Ukraine.
Russia also uses energy proposals, as has been said, like Nord
Stream 1 and Nord Stream 2, to advance strategic corruption and
elite capture across Europe. This includes former senior
officials leaving office only to end up working for Russian
state-owned energy firms, such as Gazprom and Rosneft. While
you likely have heard of the infamous case of former German
Chancellor Gerhard Schroder taking multiple such roles after
leaving office, over the last decade a long line of officials
have followed in his footsteps--including from France, Austria,
and elsewhere. This trend became so notorious it got a name,
Schroderization. It is dangerously undermining confidence in
democratic norms today.
On the second lesson, in recent weeks Moscow has increased
its energy pressure to deter a united European response to its
invasion of Ukraine, cutting off gas exports to Poland,
Bulgaria, Finland, Denmark, and the Netherlands. Effective
energy infrastructure policy, driven both by the European
energy union concept and effective U.S. energy diplomacy over
the years, has made these countries resilient to Russia's
cutoffs. In fact, Poland and Bulgaria were able to neutralize
this pressure by opening a myriad of energy infrastructure
diversification projects that came online this year.
In the third lesson, finally, we have got to be clear.
Congress has been consistently right with its sanctions
policies to limit Russian malign influence through energy over
the years. This is particularly true when it comes to measures
to stop the Kremlin-backed Nord Stream 2 pipeline. Nord Stream
2 was a long-running geostrategic anchor that Germany clung to,
even as Russia openly created a gas crisis last year, and
likely emboldened Putin's confidence that energy pressure could
limit Western pushback on his looming invasion. Nevertheless,
Congressional sanctions worked. The Biden administration
finally sanctioned Nord Stream 2 AG and its corporate officers
in the hours before Russia's invasion, forcing the project into
bankruptcy within days and, hopefully, ending the project for
good.
With these lessons in mind, I want to leave you with three
recommendations. First, we need to dramatically increase
transatlantic energy sanctions on the Putin regime. Our
collective goal needs to be a total oil and gas embargo of
exports from the Russian Federation. Until we get to zero,
there are things we can do. First, we can increase tariffs on
Russian energy to continue to depress the Urals crude price,
the Russian crude grade, with respect to the Brent price. We
can implement escrow accounts, so Russia cannot immediately
cash in from interim energy sales. The U.S. and the EU should
issue joint sanctions to permanently stop Russian energy export
pipelines like Nord Stream 1 while increasing sanctions on
insurers and technical service providers for Russian energy
ventures.
Two, we need a wartime level of effort to deploy energy
diversification infrastructure, to make Europe independent of
Russian energy for good. This also has to include steps to end
ownership of EU oil and gas infrastructure by Russian-
controlled Rosneft and Gazprom. Third and finally, we need to
curb Kremlin strategic corruption in Western democracies. This
needs to include Congress passing what I call the Stop Helping
America's Malign Enemies, or SHAME, act, to end the possibility
for former senior officials and set an example to the
transatlantic community that former senior officials in
government cannot leave the public trust and then serve for
authoritarian nations. This would help end the trend of
Schroderization for good.
To close, for the sake of Ukraine's struggle, we must rise
to the occasion with an effective European energy security
policy. For the sake of those millions of people now exposed to
the Kremlin's malice, failure is not an option. Thank you for
your attention, and I look forward to the discussion.
Chairman Cardin: Well, let me thank all of our witnesses. I
found this to be very, very helpful. There is no question about
the vulnerability that we have in Europe relying on autocratic
countries and regimes. Ms. Stelzenmuller, you were very candid
in your presentation about how dependent Germany is today on
Russia. Not just on oil, but a more integrated economy. One
thing we have learned is that when you are dealing with
autocratic regimes, they are not reliable. Corruption clearly
will be part of the game plan, as we saw with the use of the
former German officials by Russia. We also find that these
autocratic regimes will eventually be aimed at bringing down
democratic states. We also find they are not reliable as far as
the supply chain, whether it is energy or other commerce, and
they will weaponize that.
I understand the challenge we have--the immediate
challenge. For our national security, we need to wean ourselves
off of dependencies from autocratic regimes. It is in our
national security interest. They want to bring us down. We want
to engage. They want to bring us down. Senator Wicker is
leading a conference committee on the Republican side, the
USICA Act, known as the COMPETES Act on the House side, that is
aimed at trying to have reliable supply chain sources outside
of autocratic regimes for this very reason. Yes, it is easy for
the United States to be a leader on this, because we are not
anywhere near dependent like Europe is on Russia.
Mr. Vitrenko, let me start with you. How do we get unity
with our European allies to strengthen the sanctions--energy
sanctions--against Russia? Clearly, you will have no difficulty
getting Congress to take the most dramatic steps we can to
strengthen the sanctions. Tell me practically, how can we get
our European allies to move in a more aggressive way on energy
sanctions?
Mr. Vitrenko: Thank you for this not very easy question,
because we should realize that there is a very strong, for
example, manufacturing lobby in Germany that likes dealing with
Putin's regime because they believe it gives them some
competitive advantage--unfair competitive advantage. For
example, U.S. businesses and other businesses all over the
world. Also, frankly, I personally think that the German
industry has other competitive advantages--their engineering
talent and their future should not be subject to Putin's will
if he allows Germany to be more competitive or less
competitive.
To be practical, I believe that when we develop a sanctions
package against Russian oil and gas, we should look at the
interests of different European countries to take them into
account. At the same time, not to allow free rides and not to
allow corruption. There is still a problem of corruption, even
inside the European capitals. As a practical solution, for
example, in this respect, I would reiterate this idea of a
transfer cap, when we allow for a very limited period of time
as a transitional arrangement some flows of Russian oil and gas
into Europe or the global market. We would limit the amount of
money that can be transferred to Putin. In such a way, we would
motivate, again, Putin to stop this war and to compensate for
the damages that his aggression, again, caused.
If it is implemented in such a way, I personally believe
that there would be more European governments on board. At
least, they would not have an excuse for their U.S. colleagues,
for example, for not implementing so necessary sanctions
against Russian oil and gas. Just to conclude, as you mentioned
yourself, gas is currently the most important issue because oil
is fungible. If it does not flow to Europe, it can flow to
other countries. It is a second question how to limit the
damage of this kind of fungibility of oil. Natural gas can flow
only to Russia because it takes decades to build new pipes, for
example, from Yamal to China.
If Europe implements sanctions against Russian gas, it
would immediately mean that Putin will get much less money. It
would be difficult for Putin to continue financing the war. It
would lose the support of his soldiers and, again, general
public support in Russia. It would make him stop the war.
Chairman Cardin: I agree on the gas. Gas is, to me, the key
here. The question is what do we do in the shoterm.rm versus
the long term? Long term, we do need to build the
infrastructure capacity to deal with LNG, to deal with the
pipelines. For the life of me, I could never understand why
Germany went forward with Nord Stream 2 from the beginning. I
just never understood that policy. It was flawed from the
beginning. We called it at the beginning for what it was, and
it really put Ukraine in a very, very difficult position, from
the point of view of weaponizing energy.
Dr. Schmitt, I mean, perhaps start this question with you.
What can we do in the short term to deal with the gas needs of
Europe if, in fact, we impose real sanctions against Russia's
gas?
Mr. Schmitt: Well, Senator, I think that we need to do a
number of things. Number one, we need to continue what the
Biden administration has been doing to do effective energy
diplomacy to identify gas volumes around the world working with
suppliers like Qatar and others that have been--that have been
mentioned. I know that Senior Energy Advisor Amos Hochstein,
who is testifying later this week, has been in charge of that
and has been doing an effective and really great job of
identifying and doing effective energy diplomacy. We need to
continue that.
We really need to make a wartime level of effort in terms
of funding, permitting, and getting built as quickly as
possible the actual energy infrastructure around Europe to
increase the throughput capacity of natural gas volumes that
are actually coming in. Meaning we need floating storage and
regasification units, basically, because these are these
floating LNG import ships that can be deployed much faster.
They can be put in places like Gdansk, Poland; like Brunsbuttel
and Wilhelmshaven, Germany.
I personally think that we need to look at locations that
already have a significant onshore infrastructure to build that
gas in. That means Lubmin, Germany, where Nord Stream 1 and 2
come online. It has a fantastic amount of infrastructure that
can be plugged in and instead, bring non-Russian LNG in, and
also send a message to Putin that we cannot return to business
as usual with projects like Nord Stream 2.
I also think, of course, we need to, you know, basically be
doing all of this as quickly as possible, because we are at the
end of the heating season, or maybe weeks after the end of the
heating season in Europe, meaning that all of the gas storages
that were not filled up last year because they were owned by
Gazprom and Gazprom manipulated and intentionally allowed the
gas volumes to be reduced, need to be filled. Germany, for
example, is taking effective early steps to expropriate or end
Gazprom's ownership of these facilities. That needs to happen
across Europe. We cannot have any Russian ownership of critical
energy infrastructure anymore--period.
That means that it will allow all these new infrastructure
that we are building to actually build up and fill up those gas
storage facilities ahead of next winter, so we are not in a gas
crisis anymore and so that we are resilient as Russian
aggression continues, you know, horrifically against Ukraine to
push back on that.
Chairman Cardin: Thank you. Congressman Cohen.
Representative Cohen: Thank you. Mr. Yuriy Vitrenko, how is
Ukraine doing? Maybe the ambassador can answer this as well,
and I am going to go to you first, with its energy needs during
this war?
Mr. Vitrenko: I would just reiterate, by the way, how
grateful we are for the support of the United States because it
would be next to impossible for us to fight against this brutal
force without such support. At the same time, for example, in
the gas sector, because we were serious about preparing for the
wars last year, we, for example, at Naftogaz--we turned
Naftogaz around to make Naftogaz a profitable and financially
healthy company. We also started to increase our local
production at the end of the year, reversing the negative
trends of the past. That allowed us to prepare so that during
the first months of the war we were able to provide enough gas
to all the customers in Ukraine, maybe with some rare
exceptions in some areas with heavy fights where the whole
infrastructure was just destroyed.
We are still providing natural gas to some newly occupied
cities. We provide natural gas supplies to besieged cities and
villages in Ukraine. We also were able to provide financial
support to our customers during these last three months, in the
region of three billion. We can continue like that for the next
couple of months, then we will need some international
assistance. So far, I would say that in the gas sector, Ukraine
is doing fine. Ukraine is showing strength and resilience. We
would need, again, help for the next heating season, because
Ukraine would need to import up to 6 billion cubic meters of
gas. At current market prices, it is about $8 billion. That is
something--that is a big challenge for Ukraine at the moment.
We are working now with the U.S. government about finding
ways--more commercial ways. Again, export financing,
guarantees, even considering such an option as using gas as a
part of a land lease that you, the Congress, approved. Thank
you again for that. It is a game-changing effort. Combined, we
believe that we will be also able to ensure that Ukraine is
resilient, Ukraine can fight this may be prolonged war against
Putin.
Representative Cohen: The Ukraine war machine is not being
affected by Russian attacks on oil?
Mr. Vitrenko: Ukraine's war machine has been affected. Our
oil, for example, facilities were destroyed. We had two
refineries. Two out of two are basically destroyed by Russian
missiles. Our oil product demos, and our oil infrastructure,
unfortunately, have been damaged significantly. In terms of our
gas infrastructure only, again, in those areas where the heavy
fight we are not able to continue supplying gas. In other
areas, we continue producing gas, storing gas, and transporting
gas. Even some brave European companies, since the beginning of
the war, brought some gas to store in our underground gas
storage facilities. From that perspective, again, Ukraine needs
help, but we are showing our resilience.
Representative Cohen: Well, so you give me assurances about
the people and next winter and all that. How about keeping the
tanks rolling and the airplanes flying, and all the convoys? Do
you have petroleum for that? If not, where are you getting it
from?
Mr. Vitrenko: Probably I cannot disclose all these state
secrets because, again, providing fuel for the military is a
very sensitive area. Currently, yes, we have been able to
provide the necessary fuels for the military, despite, as I
said, targeting attacks of the Russian army. Also, yes, our
government helps a lot with that. I am not sure that I can
reveal all the secrets in this respect.
Representative Cohen: Is Chernobyl producing energy?
Mr. Vitrenko: No. Again--
Representative Cohen: How about the other--
Mr. Vitrenko: --we have concerns about waste-management
facilities, nuclear waste-management facilities.
Representative Cohen: How about the other nuclear
facilities in Ukraine?
Mr. Vitrenko: They are all producing electricity, although
we have a specific concern for the--our biggest nuclear power
plant, currently occupied by Russians. We know that they are
trying to change--basically to disconnect from the Ukrainian
grid and connect it to the Russian grid. It is very dangerous,
by the way. Nobody can guarantee that nothing really
catastrophic does not happen. It is the biggest nuclear power
plant in Europe. We already witnessed the barbaric--I cannot
call it any other way--attitude of Russian forces with respect
to this nuclear power plant. They shot from tanks at the
administrative buildings with all the critical, again, IT
systems. It was just--nobody could imagine that nowadays we can
have something like that happening. The whole of Europe was on
the brink of catastrophe.
Representative Cohen: Thank you, sir.
Ms. Constanze Stel --[laughter]--thank you.
Ms. Stelzenmuller: It happens all the time.
Representative Cohen: What about nuclear and Germany? Any
hope that it will come back? Can it come back? The political
will and the physical infrastructure?
Ms. Stelzenmuller: Sorry, is this on? Yes. I am sorry,
Chairman, that one is a straight no. I will tell you why.
Germany has been disinvesting not just from building new
nuclear power plants, but also from training the people who
manage it and who have the scientific and managerial expertise
for power plants for a very long time now. This is just
something I have picked up. I am not an expert here. I think
you can forget that. Also, for political reasons. A majority of
the German population is against using nuclear power plants.
Frankly, if you want to--if you want to resolve European
energy problems, I think it would be much more fruitful to look
at the European energy grid and the Europeanization of energy
policy. Such as, for example, creating energy connectors from
Spain, via France, to Central Europe. The French have resisted
that for a very long time. I think that is a huge mistake. The
Spanish have a lot of renewables, in the form of solar power,
but also have LNG terminals that we do not yet have.
I just want to reiterate what my friend, Dr. Schmitt here,
has been saying. The Germans are actually racing right now to
build--buy and build LNG plants, and terminals, and to
expropriate Russian-owned storage facilities. One thing to keep
in mind here, which I think a lot of people are not aware of,
we have the single-biggest storage facilities in all of Europe.
One of the key challenges, it seems to me, for the coming
winter is not just providing Germany, but providing the rest of
Europe with those facilities, with the help of reverse-flow
capabilities. Sorry, this is still the concussion. That is a
really big challenge.
Representative Cohen: Let me ask Mr. Schmitt, Schroder. Is
he a pariah now?
Ms. Schmitt: He has been a pariah for many, many years. I
will say this, he has left--in the past couple of weeks, he
resisted--he had a very, you know, high-profile New York Times
article where he says, you know, he does not do mea culpa, I
think, something like that. The bottom line is, in the past few
weeks he has been pressured because of the European Union,
Brussels, pressuring and bringing the threat of sanctions
against him, himself, to leave the board of Rosneft, the
Russian state oil company, to turn down or at least not in the
running for being on the board of Gazprom. Guess what? He is
still on the board of Nord Stream AG, which is majority-owned
by Russian state-controlled Gazprom. That is still a problem.
This is exactly why I wanted to talk, you know, in my
opening statement and make sure--I am pitching this SHAME act.
Because if small-case shame has not worked over the years--and,
I mean, there is been poisonings, there is been cyberattacks,
there is been election interference. Every malign influence and
malign activity under the sun that Russia has been able to
weaponize has been brought against Europe. Nevertheless,
Germany clung to this project. In particular, these folks have
taken these jobs, right? After leaving office, the former
Austrian Chancellor Christian Kern worked for Russian Railways.
The former Austrian Foreign Minister Karin Kneissl worked for
Rosneft. Former French Foreign Minister Francois Fillon worked
for not one, I believe, but two Russian state-owned oil and gas
trading firms. The list goes on and on. This is why this term,
Schroderization, is out there.
The problem is, this is not--you know, this is not illegal.
Imagine for a moment, you know, this--you know, we are up on
Capitol Hill. Imagine for a moment that former Presidents
George W. Bush and Barack Obama were working for China's state-
owned Huawei. It would not just be a story in the United
States, it would be the only story. The problem is this has not
been normalized in other areas of the world and other global
democracies. That is why we need the big SHAME Act, Stop
Helping America's Malign Enemies Act, to lay out a
transatlantic roadmap, basically starting with legislative
efforts here in the United States, that will end the ability of
former senior government officials to work for authoritarian
state-owned enterprises--period. It should not be that
controversial.
Representative Cohen: Thank you. I yield.
Chairman Cardin: Congressman Wilson.
Representative Wilson: Thank you very much, Mr. Chairman.
Ambassador, it is great to see you again. Thank you for
your inspiration, President Volodymyr Zelensky. Again, it is an
inspiration to the world. As I traveled through--around the
country, around the world--I was in Vilnius last week. Just to
see the whole concept of David versus Goliath, and David will
win. This is excellent.
Mr. Vitrenko, sanctions have been one of the key prongs of
Western response to Putin's war of mass murder. What further
sanctions should we impose on Russia to, indeed, cover energy?
What actions would help Ukraine most to win?
Mr. Vitrenko: Thank you for the question. Our biggest
priority at the moment is to impose sanctions on Russian gas
because it is currently the biggest source of revenue for the
bloody Putin regime. There should be a full embargo on Russian
gas, with only possible transitional exemption. It should be
subject to this mentioned transfer cap. For example, currently
the price of Russian gas in Europe, it is about $1,000 per
1,000 cubic meters. Therefore it should be allowed to transfer
only a small fraction, let us say $100, for example, to Putin,
to Russia. The rest--let us say $900 per 1,000 cubic meters--
should be frozen in an escrow-type kind of account through
financial sanctions that can be imposed by the United States
and the European Union.
Representative Wilson: With the technology such as floating
terminals, the ability to replace Russian Putin gas could be
done relatively quickly, could not it?
Mr. Vitrenko: Yes. Under this exemption, again, one can
expect that the Russian gas will still flow for this very
limited period of time while, within a year, Germany has the
potential to fully replace Russian gas with, for example, U.S.
LNG, Canadian LNG, supplies from the Middle East, any other
LNG. Also, what is very important, for example, Germany can
start importing Ukrainian electricity produced from Ukrainian
nuclear power plants.
Even if they do not want to develop their own nuclear power
plants, we have now a surplus of electricity produced by our
nuclear power plants and can replace 10 billion cubic meters of
Russian gas, should we be allowed to export our electricity to
Europe. It also gives money to the Ukrainian state, basically,
to finance our resilience. If there is a will, there is a way.
Germany should be even more serious about getting rid of this
critical dependence on Russia and Russian energy.
Representative Wilson: I appreciate your enthusiasm because
it is startling to me. It is against their self-interest not to
do this long term. Indeed, the extraordinary ally that we have
of Qatar can make additional production and then, hey, I am
happy to hear of even a state like Maryland, that there is a
capability of export.
Chairman Cardin: What do you mean, even a state like
Maryland? I do not think--[laughter].I noticed that.
Representative Wilson: Hey--but, hey, the bottom line is--I
was pleasantly surprised, Mr. Chairman, to find this out, okay?
Now, Ms. Stelzenmuller, the circumstance of Germany's
leadership responding to Putin's war. Initially, it was
pathetic. It was--but it has changed, and so what can we do to
work, again, with our deal allies of Germany?
Ms. Stelzenmuller: I really apologize for my last name.
[Laughter].
Representative Wilson: No, no, no, it is a good and
beautiful name.
Ms. Stelzenmuller: We do that to annoy our allies. Yes,
there are actually a lot of American Stelzenmullers. Some of
them have even kept the umlaut. They immigrated via Birmingham,
Alabama. Just saying.
To answer your question, I think that, if I may say so--I
would like to make two points, actually. Gerhard
Schroder is a nonentity in Germany. He is an
embarrassment. People are ashamed of him. His own party is
ashamed of him, and they are currently trying to throw him out
of the party. He is in no way relevant to the politics of my
country. I just want to make that very clear. He makes me angry
and ashamed, but he is irrelevant.
As for the German reactions, you know, we canceled Nord
Stream 2 on--or, suspended Nord Stream 2, but it is since
gone--the company has since gone into bankruptcy--on February
22nd, two days before the beginning of the war. The decisions
that Chancellor Scholz outlined on February 27, three days
after the beginning of the war, are in the process of being
implemented.
I think no ministry--I have some reservations myself on
what our defense ministry is doing, where I think things are
slowest. That also has a great deal to do with the structure of
our defense industry. I think no ministry is racing to comply
with those--the list of demands laid out by the chancellor on
that day as the economics and climate ministry headed by Robert
Habeck. I think that what we are doing there is real and, in
terms of what I have seen, is stupendous. I have never seen
anything like it in 25 years of watching German foreign and
security policy.
What can you do? I mean, it seems to me that we are really,
all three of us, agreeing that the goal has to be a complete
uncoupling, but that the conundrum is how to achieve this in a
way that does not create a higher price to us than to Putin,
and in way that does not create a higher price to Germany's
smaller and weaker neighbors than to Germany itself. I think
you will find--I think I find, when I go back to Germany, that
there is a great willingness actually to pay a price because we
understand that--A, we are outraged by what is happening in
Ukraine.
Also, we understand that this is really about Putin rolling
back the entire post-World War II security order. Rolling back
democratic transformation in Eastern Europe. Neutralizing
Western Europe, including my country, and pushing America out
of Europe. That will not stand, and we will not be a part of
that. I can promise you that, I think. then--I mean, you were--
I have not actually heard about the Ukrainian electricity
reimporting. Let us talk about that. I think that is an
interesting idea. I have heard a number of interesting ideas. I
think all of that is worth pursuing. This is pretty technical
stuff, I am afraid, and I am not--as I said, my expertise is
not in the technical realm.
I think I can assure you that we know we need to do this. I
will tell you why, because Putin is not stopping. Because
Putin's goals are so much bigger than just destroying Ukraine.
Because we know that this is about all of us.
Representative Wilson: Thank you very much for your
insight. I yield back.
Chairman Cardin: Senator Blumenthal.
STATEMENT OF RICHARD BLUMENTHAL, U.S. SENATE, FROM CONNECTICUT
Senator Blumenthal: Thanks, Mr. Chairman. Thank you for
holding this hearing. Thanks to our witnesses.
Thank you, Madam Ambassador, for your continued courageous
leadership and for your country's fierce fight for democracy.
All of us have a stake in it as a matter of our own national
security. I would like to ask the panel, and Madam Ambassador,
if you have insights on this question. Russia has aiders and
abettors in avoiding the impact of some of the existing
sanctions. I would like to name some names and perhaps alert
colleagues as to who they are--whether it is individuals or
countries. If you could suggest why our sanctions perhaps have
been less effective than they might be because it will impact
our adopting additional sanctions. I am strongly in favor of
additional sanctions, as you know. Perhaps you could give us a
little insight on that point.
Maybe begin with you, Madam Ambassador.
Mr. Markarova: Thank you. With pleasure. It is a very
important question, and why the situation is really drastic in
Ukraine. The fact that we are able not only to fight, but also
to sustain the energy system, financial system, and everything
else, is a constant, daily struggle of so many people, and
constant, daily help from our friends and allies in Europe but
from the U.S., especially on the energy and other issues. In
some areas, it is also the help of that because it is a miracle
that we are able, while the whole infrastructure has been, you
know, bombed completely or destroyed, we are able to restore
it, and get back, and supply people.
On the sanctions, I think it is very important--and we saw
already, we had some lessons learned in how the sanctions are
implemented. We saw some countries that are helping to evade
the sanctions or are not as prudent in their--in their dealings
with Russia. That is why, you know, two points that I want to
raise which I think would enable us not only to have new
sanctions but also to make the existing ones more efficient.
First, designating Russia as the state sponsor of
terrorism. It is a decision that will not automatically make
Russia a pariah, but it will very much amplify all other
sanctions that we have on board. It will make it very difficult
and risky for other countries to help Russia because that will
make them potential targets for the secondary sanctions. While
I understand that secondary sanctions--and we are discussing
them with Congress, as you know it is a very powerful tool.
Until we can get all the transatlantic unity together on all
the secondary sanctions, we cannot move ahead with full
secondary sanctions. This designation will actually pave the
way to getting everyone on board and, you know, preventing
those that are trying to play and benefit from this situation.
Second, is the sanctioning of all Russian banks and
financial institutions. Because, again, the way we look
sometimes at Russia is that we think that it is exactly the
country like Ukraine or the United States, just with, you know,
bad management or bad leadership and high corruption. In
effect, it is a full-state capture. There is no such thing as
private Russian banks. When we sanctioned--when more than 11
banks got into the full blocking sanctions list, and when some
of them--seven, hopefully now it will be more de-SWIFT-ed--it
took them just a day to switch to other banks. There are 330
banks altogether.
The more Russian banks, preferably all but at least half of
them, that can be included in the full blocking sanctions list
will significantly impair the Russian ability to wage war and
service the economy but also will limit the--you know, the way,
how they deal with other countries. What we noticed, is that,
for example, even the Chinese banks, for example, and others
are not working with the banks which were on the full blocking
sanctions list, because every country is very responsible--and
every bank, you know, is not trying to get sanctions itself. It
is a very powerful tool. These two areas, sanctions on all
financial banks and designating Russia as a state terrorist, I
think would be a very powerful addition that would enhance the
sanctions. Thank you.
Senator Blumenthal: Thank you for that answer, and I would
be interested in others who might have similar comments. Let me
just say, that I am the principal Democratic leader on a bill,
it is bipartisan, with Senator Graham, to designate Russia as a
state sponsor of terrorism. I think your comments give more
evidence of the need to do so, and I am very, very hopeful that
the Senate will move forward on it. I have also called for
sanctions on all of the Russian banks, not just on some of
them, because, as you point out so well, in effect they are
interchangeable because it is not like in this country, where
they compete with each other. They are, in effect, all owned,
ultimately, by the Russian state. Thank you for those very
important comments.
I know I am over my time, Mr. Chairman. If you would like I
will take other comments in writing, or give them an
opportunity to--
Chairman Cardin: If you would like to respond briefly. We
are trying to stay on schedule. Yes, sir.
Mr. Vitrenko: It is difficult to escape this topic of
secondary sanctions on countries that help Russia evade, again,
the primary sanctions. I would suggest considering a mechanism
of a special duty on imports from countries that help Russia
evade sanctions. If such a duty is imposed by G-7 countries,
especially by the U.S. and by the European Union, it would be a
really good detriment for countries like, for example, India or
others, that may consider, for example, a free ride on
discounted Russian oil. That is--and there is nothing risk-free
in this world. At least that is something that is worth
considering, I would say.
Chairman Cardin: I would just comment, I agree with you on
secondary sanctions. They are so difficult to get European
unity with the United States on those issues. It is one that we
have been wrestling with well before the Ukraine invasions,
with certain Russian sanctions. Your point is very well taken
on that.
Representative Gallego.
STATEMENT OF RUBEN GALLEGO, U.S. HOUSE, FROM ARIZONA
Representative Gallego: Thank you, Mr. Chairman. Thank you,
all. Thank you, Mr. Chairman.
Mr. Vitrenko, thank you for your testimony and thank you
for taking the time to join us today. Like my colleagues here,
I am disgusted by Russia's actions and committed to helping
Ukraine win this endless war of aggression by President Putin
and his cronies. As Chairman of the House Armed Services
Committee and Intelligence, Special Operations Subcommittee, I
am especially focused on Russia's reliance on gray zone
techniques to exert influence--whether that is launching cyber
campaigns, spreading disinformation, or using energy as a
weapon. Can you describe how Naftogaz Ukraine has adapted over
the months since the invasion? Also, are there any lessons you
have learned that are helping Ukraine be more effective at
operating in the gray zone from an energy perspective?
Mr. Vitrenko: Thank you for the question. Again, although
we had been warned about the risk of the war by the U.S.
intelligence community, and by the U.S. government, of course,
it came to us as a shock, again, to experience this full-scale
invasion at the end of February. At the same time, it helped us
a lot that we were--with the help of the U.S. government and in
general investing our own resources, to prepare for this hybrid
warfare by the Russian Federation. Including, for example, to
enhance our level of cybersecurity.
During the first days of the war, we still need, for
example, to relocate our offices from Kyiv during this battle
for Kyiv. We had to relocate our servers and move them into a
cloud outside Ukraine, and over here, we got a lot of help from
the U.S. IT companies. For example, if I can call names, but,
like, from Microsoft, for example, from Amazon, from Elon Musk
providing Star Links, for example, to Ukraine, that helped us a
lot, for example, when we were relocating offices and we needed
to have a reliable IT connection within 20 minutes. Again, Star
Link was the only option for us.
The lesson that we learned is that because, again, we have
to live with this risk of an invasion--a full-scale invasion
from the Russian Federation, we need to be much more agile and
flexible in terms of how we manage our IT infrastructure--our
critical infrastructure. We also learned that, again, a friend
in need is a friend indeed. We can rely only on the, again,
like, best international companies, the U.S. IT companies. We
cannot rely on any providers of services from the Russian
Federation or from any other rogue regimes, or authoritarian
regimes. Because I cannot disclose everything, but we had some
other problems with some other suppliers from such countries.
The same, for example, with Russian propaganda. The lesson
we learned--and thanks to our, for example, special services,
that many of the so-called experts that appeared on Ukrainian
TV criticizing the government, criticizing Ukraine, criticizing
the West during the first days of the war, it was clear that
they were Russian agents. Again, our special services, with the
help of the U.S. intelligence, could trace a direct connection
to the Russian special service, to the KGB. Altogether I
believe allowed us to have these lessons on how to be more
resilient against the malign influence of Russia.
Representative Gallego: Thank you. This question is for Dr.
Stelzenmuller. I want to ask about Germany's role in this
debate going forward. As you well know, Berlin was long
reluctant to halt the Nord Stream 2 pipeline, not only despite
Russia's increasingly aggressive behavior but also despite
warnings from allies and partners including members of
Congress, like me, about the danger of dependency on Russian
gas. Now that Germany's reversed its course on the pipeline, do
you think German politicians truly recognize that it is not
possible to separate economic issues from security issues? Do
you think this debate in Europe on Russia has repercussions for
Germany's relationship with China?
Ms. Stelzenmuller: Thank you--sorry. Thank you,
Representative. That is a very complex question. [Off mic]--of
our dependency issues. Again, this is a debate I have been
watching very closely for years, and it seems to me that I am
seeing a genuine sea change in Germany. Frankly, it is not
because we have become suddenly enlightened, you know, or
because there was a generational shift, but because of Russia
and China's behavior, very simply. I explain this in my
testimony, but really the Russian-German relationship had been
going downhill for a while, really since 2017 and Putin's
speech in Munich--[off mic]--because they are--they are, by
their very nature--[off mic]--and it took a war--[off mic]--to
make us realize that--[off mic]-- viewed shared I think by
almost anybody, except perhaps--[off mic]. People know who they
are.
The larger challenge for all of us, I think, is when we
look beyond this war, Putin's war against Ukraine, and really
against the West, is: How do we deal with the China challenge?
It seems to me that it comes back to, as--[off mic]-- in this
conflict just how much we need each other. I mean, it is easy
to say that we would be toast in Europe without America's
support, without American leadership in this crisis. I would
also say to you, with great respect, that this is the first
crisis--[off mic]--crisis since 1945 where the Europeans,
because of their economic--[off mic]--and their regulatory--
[off mic]--have played a significant role in backstopping
American--[off mic]--in a sanctions context. I think what this
war has shown us is just to what degree we are interdependent
with each other as allies, how important that is, and that we
are going to need each other in a coming contest with China.
Representative Gallego: Thank you, Mr. Chairman. I yield
back.
Chairman Cardin: Representative Veasey
STATEMENT OF MARC A. VEASEY, U.S. HOUSE, FROM TEXAS
Representative Veasey: Mr. Chairman, thank you very much. I
wanted to ask the ambassador a question--Ukrainian ambassador--
about the--a question about the pipeline. What are your
thoughts on American investment and innovation in the energy
sector to help Ukraine get back on its feet after the war? Are
people looking that far ahead about energy and how it can save
the Ukrainian economy and help it get back on its feet? It is
going to, obviously, be a long push and a long haul, once there
is some sort of conclusion to this, and just did not know if
there were any thoughts on that.
Mr. Markarova: Thank you very much. Yes, we--even though,
of course, the priority now is to win this war, and to fight,
and, you know, you hear from me always weapons, sanctions, you
know, support for us. We already are thinking, and President
Zelensky already created a group inside the country that is
thinking about the post-war reconstruction and how we can do
it. We definitely can and should do it together with the United
States, especially in the energy sector.
This is where Ukraine presents a number of opportunities.
A, we have to essentially reform and rebuild so many of our
sectors, and as Mr. Vitrenko just said, you know, we have great
prospects in our electricity market where we can increase the
generation. We have great prospects in all kinds of energy-
efficient industries. Ukraine has one of the largest deposits
of lithium and other rare earth materials. Not only we can
become a very reliable democratic country supplying the U.S.
and be part of the supply chain, but we can also produce a lot.
We would be looking and seeking an increased number of U.S.
investments in pretty much all of the sectors--from LNG, gas
exploration, transit, and hydrogen. I mean, you name it, and
Mr. Vitrenko can maybe answer more on specific projects, which
already Naftogaz is discussing during this trip here in the
U.S. with potential colleagues. You know, we essentially will
have to rebuild the country from scratch in so many areas.
Energy will be one of the key aspects of that, and we can build
it not in a way how to restore the way it was before but build
something that is going to be as inspirational as our fight for
freedom now.
Representative Veasey: Thank you very much. I wanted to ask
Ms. Stelzenmuller a question on energy in Germany, in
particular. I visited Germany back in 2013 with a Republican
member of Congress, now former member, Charlie Dent out of
Pennsylvania, and we talked with members of the Bundestag and
business leaders about energy in Germany. At that time, Germany
had a very ambitious plan for renewable energy consumption. Has
what is happening right now in the Ukraine sort of made people
think about energy security?
Not only energy security but how all of these platforms
work together in the future. Whether it is wind, solar, natural
gas, oil. One of the things that I thought really surprised me
was the fact that in France recently, when I was on a CODEL
there, one of the French people told us that when they got
ready to get rid of one of their nuclear plants, that they were
concerned that the Germans were going to actually have to start
burning more coal because they would not have the capacity to
provide enough electricity otherwise for their residents there.
Has this sort of refocused everyone into thinking about
energy security, and what is going to be available in the
future? Not so much a binary choice between renewable energies
versus fossil fuels?
Ms. Stelzenmuller: Thank you, Congressman, and thank you
for visiting my country. What can I say? I mean, German energy
policy is a bit of a mess, and was before Putin ever--Putin's
troops set foot into Ukraine, right? We had just not managed to
get the trilemma right--having sustainability, social cost, and
security costs, you know, in balance, as we have now found out
to our dismay. I think that this traffic light government, with
a green economics and climate minister, is correct in
understanding that we cannot privilege security at the cost of
forgetting about the energy transition to renewables, right?
Because fossil fuel imports made us dependent, as we have now
learned.
We are going to have to do all these things together, and
my sense of what I see of what Minister Habeck is doing is
exactly that. It is a huge challenge, and as he has said, this
will require an all-society effort. I think the other thing
that we have learned in this crisis is that we cannot think in
Europe, particularly not as a major power in Europe with nine
neighbors that we share borders with, only one of whom is as
large as we are--France. We cannot think about this as a merely
national endeavor. This has to be a Europe-wide endeavor, and
there, I think, you know, it is very helpful for us to think of
this, I think, as not just a Europe-wide endeavor, but also as
a transatlantic endeavor, where we can exchange best practices,
help each other, and I think generally see that we forge a
policy that does not allow authoritarian adversaries to divide
us.
Representative Veasey: Yes. Mr. Chairman, will you indulge
me for one more question? Do you think that Germany can be a
model for the rest of the world? You talked about Europe, but
do you think that they could maybe be a model? I mean,
because--the reason why I asked that is because, you know, your
plans for, I believe it was 2030 or 2040, you know, were
definitely ones that garnered national and global-wide
attention how we, you know, shift around our energy assets and
energy resources, and how a country can survive and thrive
during that transition. Do you think that, because of
everything that is happening now, perhaps Germany can emerge as
sort of a role model for the rest of the world on how to
balance all of it?
Ms. Stelzenmuller: Sorry, forgive me, Congressman, for
laughing just now, because, I mean, I love my country but, you
know, it would take me some effort to say with a straight face
that, you know, it is a role model on everything that it is
done, particularly in this field. I will say, seriously now,
that while we got ourselves in trouble and tied ourselves in
knots in our energy transition, as you implied, had to go into
coal again, which we did not want to do because we shut down
our nuclear plants, and you know, all of this is sort of six
ways to Sunday.
I do think that we have made a huge amount of investment in
technologies that we, I think, can share--in renewables
technologies, and that I think we--and that the way that we are
trying to conceptualize this as European efforts might also be
something that we can--we can discuss with our American
friends. I do know that there is a great deal of exchange on
both the industrial and the government level between the
American--between American states and not just European member
states but subnational state units on these issues. I am sure
we should continue that.
Representative Veasey: Thank you very much, Mr. Chairman.
Thank you for the extra time.
Chairman Cardin: Surely. Let me thank all of our witnesses
once again. As I said at the beginning, this has been part of a
series of hearings that we have held in the Helsinki
Commission. The main purpose for bringing this subject to a
hearing is that we want the sanctions to really work against
Russia. The number-one priority here is to cut off the money
for the war machine in Russia. The sanctions have to be
effective, and because of the dependency on Russian energy, we
have not been able to make them as effective as they need to
be. I think today's hearing has helped us to understand that.
Obviously, that is part of an overall strategy that
includes providing the Ukrainians with the military and defense
equipment they need to defend themselves. It also involves
humanitarian assistance to deal with the displaced individuals
that are both in Ukraine, as well as the neighboring countries.
Also, it involves holding those responsible for these
atrocities wholly accountable. Then lastly, the issue that has
been most recent questioning, about moving forward. What type
of country do we need to invest in Ukraine moving forward, and
in Europe moving forward, recognizing the dependency upon
autocratic states jeopardizes the security and economics of our
democratic states?
As we look at energy, we want to make sure that our
democratic allies have the security, the economics, and the
environmentally friendly sources of energy to meet their
domestic needs and our responsibilities in the global
community. That is going to require us to have a very
enlightened discussion, and recognize where resources can be
made available, so we are not in the future as vulnerable as we
have been in regards to Mr. Putin's invasion of Ukraine.
I want to, again, thank all of our witnesses. We had full
participation by the Commission. There is a lot of interest in
this subject. I am sure we will be having additional hearings.
Once again, thank you for your participation, and with that,
the Commission will stand adjourned.
[Whereupon, at 4:07 p.m., the hearing ended.]
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