[Senate Hearing 117-640]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 117-640

                  KEEPING THE PRESSURE ON RUSSIA AND ITS 
                   ENABLERS: EXAMINING THE REACH OF AND 
                       NEXT STEPS FOR U.S. SANCTIONS

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION
                               __________

                           SEPTEMBER 28, 2022

                               __________

       Printed for the use of the Committee on Foreign Relations
       
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]       

                  Available via http://www.govinfo.gov

                               __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
51-702 PDF                  WASHINGTON : 2023                    
          
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                 COMMITTEE ON FOREIGN RELATIONS        

             ROBERT MENENDEZ, New Jersey, Chairman        
BENJAMIN L. CARDIN, Maryland         JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire        MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware       RON JOHNSON, Wisconsin
CHRISTOPHER MURPHY, Connecticut      MITT ROMNEY, Utah
TIM KAINE, Virginia                  ROB PORTMAN, Ohio
EDWARD J. MARKEY, Massachusetts      RAND PAUL, Kentucky
JEFF MERKLEY, Oregon                 TODD YOUNG, Indiana
CORY A. BOOKER, New Jersey           JOHN BARRASSO, Wyoming
BRIAN SCHATZ, Hawaii                 TED CRUZ, Texas
CHRIS VAN HOLLEN, Maryland           MIKE ROUNDS, South Dakota
                                     BILL HAGERTY, Tennessee
                 Damian Murphy, Staff Director        
        Christopher M. Socha, Republican Staff Director        
                    John Dutton, Chief Clerk        

                              (ii)        

  
                         C  O  N  T  E  N  T  S

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                                                                   Page

Menendez, Hon. Robert, U.S. Senator From New Jersey..............     1

Risch, Hon. James E., U.S. Senator From Idaho....................     3

O'Brien, Hon. James, Head of the Office of Sanctions 
  Coordination, U.S. Department of State, Washington, DC.........     5
    Prepared Statement...........................................     7

Rosenberg, Hon. Elizabeth, Assistant Secretary for Terrorist 
  Financing and Financial Crimes, U.S. Department of the 
  Treasury, Washington, DC.......................................    11
    Prepared Statement...........................................    12

              Additional Material Submitted for the Record

Responses of Mr. James O'Brien to Questions Submitted by Senator 
  James E. Risch.................................................    39

Responses of Ms. Elizabeth Rosenberg to Questions Submitted by 
  Senator James E. Risch.........................................    44

Responses of Mr. James O'Brien to Questions Submitted by Senator 
  Todd Young.....................................................    48

                                 (iii)

  

 
KEEPING THE PRESSURE ON RUSSIA AND ITS ENABLERS: EXAMINING THE REACH OF 
                   AND NEXT STEPS FOR U.S. SANCTIONS

                              ----------                              


                     WEDNESDAY, SEPTEMBER 28, 2022

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:00 a.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Robert 
Menendez, chairman of the committee, presiding.
    Present: Senators Menendez [presiding], Cardin, Shaheen, 
Coons, Kaine, Markey, Merkley, Van Hollen, Risch, Johnson, 
Romney, Portman, Young, and Cruz.

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

    The Chairman. This hearing of the Senate Foreign Relations 
Committee will come to order.
    As we gather today, the war in Ukraine is at an inflection 
point. In the face of Ukraine's impressive counteroffensive to 
reclaim its rightful territory, Putin is desperate, forcing 
unwilling men across Russia to join an illegal and increasingly 
unpopular war. Buying rockets from North Korea, drones from 
Iran, staging sham referendums, having people vote, but forced 
at the point of a gun. So phony that even governments friendly 
to Moscow have said they will not recognize him.
    Make no mistake. Ukraine continues to face a daily 
nightmare of shelling, of pulling neighbors and countrymen out 
of mass graves, of families torn apart, and children going to 
school in basements, of fighting for their very existence.
    Seven months into this war, Putin is not where he wanted to 
be, and that is thanks to the bravery of the Ukrainian people, 
to more than $15 billion of weapons from the United States, and 
a strong international coalition, but it is also due to the 
enormous effort to isolate Russia from international commerce 
and the international financial system, to strip Russia of 
revenues, reserves, and access to global markets.
    Ambassador O'Brien, Assistant Secretary Rosenberg, I want 
to take a moment to commend the herculean effort that the Biden 
administration has led to impose unprecedented sanctions on 
Russia in response to its invasion. Since February 24, 2022, 
the U.S. has deployed a sanctions regime that would have been 
unimaginable a year ago. Of course, that includes not just you, 
but the hundreds of dedicated personnel at State and Treasury 
who worked around the clock to prepare sanctions, even before 
the invasion began.
    Nearly 40 countries have imposed economic costs on Russia 
for this war. The democratic world has effectively decoupled 
from Russia, and massive economic and logistical achievement in 
the age of global commerce. Thanks to our relentless diplomacy, 
the U.K., the EU, Australia, Japan, and South Korea joined the 
United States in sanctioning Russian financial institutions, 
including removing seven of Russia's largest banks from the 
SWIFT payment system, a move that I championed.
    Today more than 1,000 Russians have their assets frozen 
abroad. More than 1,000 companies have ended operations or 
withdrawn from Russia, but this is not just about seizing 
glitzy yachts or forcing oligarchs to unload their Swiss 
chalets and their British soccer teams. It is about silencing 
the guns of Putin's military. It is about ending the 
destruction of homes and hospitals, farms and schools. It is 
about halting the mass killing of Ukrainians fighting for their 
homeland. It is about ensuring that the dream of an 
independent, free, thriving Ukraine remains alive.
    Just as we must keep up our support of arms and weapons, so 
too must we keep up the pressure of economic sanctions. Today I 
would like to focus on what comes next and also highlight five 
areas that I think we need to focus on in order to keep the 
pressure up.
    First, are our sanctions having the desired effect? We 
impose sanctions not to punish, but to constrain and ultimately 
change behavior. Have the sanctions changed Putin's calculus at 
all, and if not now, perhaps in the coming months. I would like 
to hear a clear assessment on how current and planned measures 
will further strain the Russian system in the coming months, 
and how that might change Kremlin behavior.
    Then energy. The recently announced price cap on Russian 
oil is a welcoming creative proposal to deprive Russia of 
revenue, but how will China and India respond? Will the 
purchase below the cap or continue to keep Russia's exports 
afloat?
    Thirdly, we need to look at the gaps in our sanctions and 
where tighter alignment would make existing sanctions more 
effective.
    Fourth, what can we do to improve enforcement? This is not 
only for Putin, but for those enabling him, evading sanctions, 
and feeding his war machine.
    Finally, I want to hear about our diplomatic efforts, which 
will be critical in the coming months. Our rigorous diplomacy 
has made the difference in ensuring that we have not just a 
united coalition, but one that is willing to act. As we head 
into winter, Putin is hoping to test our coalition. How do we 
keep Europe together as energy needs become more pressing and 
fatigue sets in? We will not only have to maintain our unity, 
but our willingness to keep meeting the multiple urgent needs 
facing Ukraine.
    This is a battle that cannot be won with weapons alone, or 
diplomacy alone, or sanctions alone. Each of these tools must 
be used to maximum effort and in coordination.
    I look forward to hearing from you today how we can 
continue to make this war as costly for Russia that we are 
seeking to achieve in the coming months and how we continue to 
keep the pressure on Putin so that we can give the Ukrainians 
the best chance to fight for their lives, their livelihood, and 
their country.
    With that, let me turn to the Ranking Member for his 
comments.

               STATEMENT OF HON. JAMES E. RISCH, 
                    U.S. SENATOR FROM IDAHO

    Senator Risch. Well, thank you very much, Mr. Chairman. You 
and I share the same objectives and goals, and today is an 
important hearing as we look at a significant aspect of the 
Russian conflict, and that being the attempt to using financial 
matters to change the conduct as you, Mr. Chairman, have 
pointed out.
    I think it is important that we do focus on what is coming 
next. We should look at where we have been, though, and I am, 
with all due respect, less enamored with what has been done, 
and I will talk about that for a little bit, but I agree that 
we need to focus together on where we go from here.
    On February 24, of course, Russia initiated its 
premeditated, brutal, and illegal invasion of Ukraine. Not 
surprisingly, the Ukrainians pushed back, as any country would, 
and the result, of course, is the war that has been going on 
now for months.
    In the months since the United States and our allies have 
imposed thousands of sanctions on Russia, its leadership, its 
companies, and properties, with the dual goals of both 
punishing Russia for its actions and crippling the Russian 
economy, to force its military out of Ukraine. Despite the 
announcement of sanctions, Russia's invasion of Ukraine 
continues, and Putin is doubling down by mobilizing hundreds of 
thousands of men and calling these sham referendums in the 
occupied regions. I think Putin obviously gets very little 
advice from anywhere. He treats the world like they are fools, 
as if somehow holding these sham referendums, whereas the 
Chairman pointed out, soldiers went with guns and forced people 
to vote in favor of the referendum, this sort of thing makes 
absolutely no difference. It will not change the reality in the 
world.
    I traveled to Ukraine and saw firsthand the devastation 
Russia's war has caused, including acts of terrorism and 
genocide against Ukrainian people, acts that have not been 
stopped by our sanctions. All of these actions are worthy of 
sanctions.
    While sanctions have had some success, including export 
controls, it requires sustained commitment and a greater 
willingness to close loopholes, aggressively target sanctions 
evasion, and periodically update sanctions guidance in order 
for these actions to have long-term impact on Russia. We should 
never return to business as usual, but sadly that seems to be 
what is happening.
    For example, in June the Administration announced sanctions 
on Rostec, which the Treasury Department referred to as the 
foundation of Russia's defense industrial base. Yet one of the 
companies under the Rostec umbrella will send dozens of 
employees to the United States in 2 weeks for a major 
international conference. Now this does not sound like a 
company that is being pressured by sanctions. You have actual 
people from the Russian military industrial complex going to 
travel here to participate in an international conference, 
which supposedly will better their industry.
    The Administration talks about imposing costs on the 
Russian defense sector, but the continued presence of Russian 
defense firms in sectors of our economy speaks for itself. This 
is just one example of glaring gaps across the sanctions 
regime. This is especially true regarding Russia's energy 
exports. Gaps have enabled Russia to weaponize energy supplies 
to Europe and generate substantial, very substantial, revenues 
to keep Russia afloat. As Assistant Secretary Rosenberg stated 
last week, ``Russia is enjoying windfall energy profits.'' 
Indeed, Russia has made over $160 billion in energy profits 
alone since this war began.
    The Administration has consistently extended the general 
license regarding nearly all energy-related transactions with 
major Russian banks, giving them relief from the sanctions. It 
is no wonder why Russian energy revenues are up and the ruble 
has stabilized. Likewise, this summer the Administration 
pressured Canada to waive its own sanctions on Russia by 
forcing it to provide turbines to Russia to repair the Nord 
Stream 1 gas pipeline. Meanwhile, sanctions on Nord Stream 2 
are still not permanent, and Russian propaganda is already 
calling for it to be completed so Russia can help Europe solve 
its energy crisis this winter. Laughable.
    The truth is the United States was the largest producer of 
oil and gas 3 years ago, at the end of the last administration 
and the start of the new administration. Most Americans do not 
realize that at that moment we were the largest producer of 
crude oil in the world, surpassing all others doing so. 
American companies with American workers, using American 
resources, had the capability to solve our domestic energy 
needs and at the same time help our European allies solve their 
energy crisis. Instead, the Administration talks about getting 
gas from other Middle Eastern countries and is still trying to 
open access to Iranian oil, which would also allow Russia to 
launder its oil through Iran to international markets, 
circumventing the Administration's purported sanctions.
    At the same time, everyone will recall, on the day he was 
sworn in as President of the United States, President Biden 
signed an order stopping the pipeline that would have brought 
800,000 barrels a day into the United States. Instead, the 
Administration advocates for oil price cap, but the countries 
participating have already agreed not to import any more 
Russian oil, so the price cap is not going to do any good 
there, and China and India are not participating. Also, it 
lacks any enforcement mechanism, as Treasury has already issued 
general licenses to exempt many of the maritime service 
providers from the sanctions that were issued.
    In the absence of enforcement, the sanctions are worthless. 
In fact, Treasury has issued so many waivers and general 
licenses that little real impact is felt by U.S. sanction 
policies. Simply disconnecting a couple of small Russian banks 
from international financial markets is not the robust 
sanctions policy that we were promised. Meanwhile, public 
reporting indicates that more than $300 billion in frozen 
Russian assets exists worldwide. We should be working to 
confiscate those funds and use Russia's own money to finance 
the reconstruction of Ukraine and provide critical humanitarian 
assistance to the Ukrainian people.
    Finally, as Russia looks to evade Western sanctions and 
begins to scrounge for the items needed to run its war machine, 
the opportunities to seize additional Russian assets, interdict 
illicit shipments, and dry up the Kremlin's revenue streams 
will grow.
    I look forward to hearing from our witnesses today. I 
really look forward to hearing how the U.S. intends to expand 
its sanctions enforcement to deny Russia these openings. We 
have got to get this right. China is watching and learning from 
our every move. If we get this wrong, we risk not only billions 
of dollars in U.S. and allied economic hardships. We will also 
risk providing Russia with the means to completely insulate 
itself from future sanctions, actions, and continue its brutal 
war in Ukraine.
    Again, I want to emphasize that I say these things. They 
are critical, but it is much more important in looking forward. 
We can do better. I really believe we can do better. To the 
witnesses I would say these matters are in your hands, and I 
look forward to hearing how we are going to do better.
    With that, thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Risch. With that we will 
start testimony. Your full statements will be included in the 
record, without objection. We would ask you to summarize them 
in about 5 minutes or so, so the members of the committee can 
have an opportunity to have a conversation with you.
    We will start with you, Ambassador O'Brien.

STATEMENT OF THE HONORABLE JAMES O'BRIEN, HEAD OF THE OFFICE OF 
 SANCTIONS COORDINATION, U.S. DEPARTMENT OF STATE, WASHINGTON, 
                               DC

    Mr. O'Brien. Thank you, Mr. Chairman and Ranking Member 
Risch, and all the members of the committee.
    Russia should and will emerge from this war defeated and 
weakened. The sanctions policy we are implementing tries to 
achieve three goals at the same time: one, deprive Russia of 
the resources for its wars; two, reduce our partners' reliance 
on Russia, and thus increasing our leverage; and three, keep 
global markets open, especially for the Global South, and that 
is critical for sustaining the war effort.
    Now I will make four points. One, the sanctions deny 
Russia's resources, and Ranking Member Risch, I frankly 
disagree with the statement that there is no impact. In fact, I 
think the impact we are having is a great roadmap toward the 
greater success we are going to have in the future.
    I just want to call attention to two elements. First, due 
to export controls and targeted financial sanctions, Russia 
cannot buy the critical elements it needs for its war, no 
matter how much cash sits in the Central Bank of Russia. We see 
real shortages in crucial categories--artificial intelligence, 
optics, certain chemicals, advanced materials, semiconductors, 
chips--you see Russian military equipment being replaced with 
commercial-grade and old technology, and that is a direct 
result of the policies that we have put in place.
    There will be more of that. As the Russians seek to evade, 
we go after their evasion networks. We provide technical help 
to the countries that need it and that are interested in 
retaining their access to our markets.
    We also have made very clear, those who provide material 
support for Russian sanctions evasion are themselves subject to 
sanction, and we see this having an enormous impact in Russia's 
ability to replace the technology.
    We know Russia will keep trying, so we watch as their tanks 
and cruise missiles cannot be replaced, and we know they will 
try to buy other equipment. When they look to use commercial 
equipment, it is often older equipment. In a way, this is race 
back in time. We have cut them off from today's technology and 
they are using older and older technology. It is like a Huey 
Lewis battle on sanctions. We will keep going after them as 
long as is necessary.
    The second piece is about the broader macroeconomic 
picture, and I am sure Assistant Secretary Rosenberg will have 
more to say about this. Russia's economy is going to shrink 
between 4-6 percent this year, 2-4 percent next year. It is 
basically heading toward a cliff. Over the next few years, it 
will have fewer and fewer resources to do the things that it 
needs to do. It will not be able to spend on people, weapons, 
procurement, research, and production.
    Half of its sovereign assets, as you mentioned, Ranking 
Member Risch, they are blocked outside Russia. About 25 percent 
of its sovereign wealth fund has been depleted this year in 
trying to subsidize activities, and they already have set forth 
10 percent federal budgets in the non-military budget for 2023. 
That is the sign of a country suffering under economic 
distress, and I think that is a direct result of the sanctions 
we have put in place.
    On this trend, our latest estimates are we think Russia's 
economy by 2030 will be 20 percent smaller than it would be if 
we did not have sanctions. That is impact.
    Now we can build from that and do more, but the critical 
piece that we cannot measure is the friction and uncertainty 
that we have introduced into Russian systems. Russia has to buy 
equipment from unfamiliar vendors, through new channels, at 
prices it cannot set, and through constantly shifting ways to 
try to bring equipment into the country. That makes every 
transaction incredibly hard. Friction and uncertainty are the 
special sauce that fatigue workers and lead to mistakes, 
exhaustion, and finally, depletion. They are just as hard to 
predict as the morale of soldiers are on the battlefield, but 
it is just as real a factor in the way that sanctions work.
    The second thing, we are delegitimizing Russia's imperial 
project. We have designated hundreds of people who are involved 
in annexation, the sham referenda election results announced, 
the quisling authorities, the atrocities being committed in 
Ukraine. That means the world cannot look away from the 
violence and criminality inherent in this war, and if they 
cannot look away, they are not going to walk away from Ukraine.
    Third point, we are fundamentally changing Russia's role in 
the global economy. Russia provides commodities. They are 
critical for allowing people around the world to survive. We 
have that happen, but Russia is not involved in high-tech, 
high-value sectors of the economy, such as research, IT, 
finance. That is a real change from the way Russia thought of 
itself a few years ago.
    Fourth, we are mitigating the effect of the war on the 
Global South, and if I may, just for a minute here, because I 
know it is important to some members of the committee, when 
Russia invaded, Ukraine's grain exports stopped. Before the 
war, 25 of the poorest countries in the world depended on 
Russia and Ukraine for more than half of their food. Russia 
temporarily suspended its exports. Ukraine could not export. 
For 2 months, tens of millions of people had no access to the 
food they normally would buy.
    Over the last few months, with help from the EU and the 
U.N., we have managed to get more than 10 million tons of 
Ukrainian grain to market. We have also made clear that Russian 
grain can flow, and it is moving at about pre-war levels. That 
is feeding hundreds of millions of people. It is allowing the 
Global South to stand with us while we stand with the brave 
people of Ukraine.
    In conclusion, I will say sanctions are just one tool in an 
all-of-government, every-tool approach. They cannot win the war 
by themselves. The courage and ingenuity of the Ukrainian 
people are going to do that, but what sanctions can do is make 
it impossible for Russia to take care of its people and pay for 
its wars at the same time. They can let Russia's soldiers know 
that today is worse than yesterday and tomorrow is going to be 
still worse, and they will make it impossible for Putin to 
carry out the imperial project that he has announced, which was 
not intended to stop just with Ukraine, but to go on. Those are 
the conditions for victory. Sanctions can create those and be 
part of the answer.
    I look forward to the questions. Thank you.
    [The prepared statement of Mr. O'Brien follows:]

                Prepared Statement of Mr. James O'Brien

    Chairman Menendez, Ranking Member Risch, distinguished members of 
the Committee: thank you for the opportunity to speak with you today on 
the Department of State's work to impose costs on Russia and promote 
accountability for its unprovoked and unconscionable aggression against 
Ukraine.
    Like our other policy tools, our sanctions and export controls are 
intended to ensure that Russia faces a strategic defeat. We have three 
objectives for this sanctions program: 1) depriving Russia of resources 
and technology it can use to sustain its unjust war; 2) reducing our 
and our partners' reliance on Russia; and 3) maintaining global markets 
in key commodities.
    I have two key messages to share with you today:
    First, there is clear evidence that our sanctions are working to 
achieve these objectives. Our sanctions are constricting Russia's 
resources, denying Russia and prominent Russians the benefits of the 
rules-based global economy, and promoting accountability for the 
atrocities and abuse inherent in Russia's imperial project. Our success 
is increasing our own freedom of action, while it is furthering 
strategic failure for Russia.
    Second: this success is the result of working in coalition with 
allies and partners, and together our resolve is strong and unwavering. 
Our pressure will intensify unless and until Putin relents in his 
unprovoked war against Ukraine.
    Of course, sanctions are just a part of our overall policy 
response. Our robust economic and military assistance to Ukraine, the 
coalition we have built in solidarity with Ukraine, and most of all, 
the incredible courage of the Ukrainian people and their leaders, are 
the driving forces behind this effort.
    Vladimir Putin made the choice to unleash this war and inflict 
untold damage on Ukraine and the Ukrainian people, and also on global 
food and energy security.
    The crises launched or exacerbated by Putin's war are felt far 
beyond Europe, and the United States has rallied the world to respond.
    I expect that Putin will keep fighting as long as his stores of 
weapons and money hold out. But our sanctions are constraining Russia's 
ability to develop, produce, maintain, and buy weapons; to replace key 
components for his war fighting equipment, and to sustain the pace of 
his efforts. We understand that for Putin, this is not just about one 
attempted conquest. He has embarked on an imperial project, and we are 
limiting his ability to wage war, now and in the future.
    As you know, I started my job as the Coordinator for Sanctions 
Policy at the Department of State in April 2022, after my Senate 
confirmation. I am grateful for the support of this Committee. What 
struck me about the Russia sanctions program when I first came on board 
was the sheer magnitude of what the Administration had accomplished in 
so brief a time. The scope, breadth, and pace of our Russia sanctions 
program is unprecedented. Our efforts have been more innovative and 
more far-reaching than the Russian Government and many others expected.
    More than 1,000 companies, as documented by a Yale study, have 
withdrawn from Russia. Nearly 40 countries around the world have joined 
us in imposing costs on Russia for its unconscionable war on Ukraine. 
These numbers are testament to the fact that the Russian Government's 
actions not only have made normal economic relations with Russia 
unpalatable, but unwise from a national security perspective. The 
global response--from traditional partners like the UK and the European 
Union to partners that are relatively new to deploying sanctions, such 
as Australia, New Zealand, Korea, and Japan--has been a game changer on 
many levels. This broad coalition of partners expands the reach and 
impact of our sanctions, and also sends a clear message of unity in 
opposing Russia's egregious behavior. I work daily, with teams across 
the interagency, to ensure that the United States and Europe are 
aligned to the maximum extent that our different legal and political 
systems allow, and to bring new partners along in our efforts.
    Since February 2022, the United States has designated roughly 2,000 
Russian, Belarusian, and Ukrainian individuals and entities for their 
involvement in and/or support for the war, cutting them off from the 
U.S. financial system. This includes key nodes in the Russian military-
industrial supply chains, and the oligarchs and cronies who steal from 
the Russian people to line their own pockets and help Putin perpetuate 
his war. Further, the Russian Elites, Proxies, and Oligarchs (REPO) 
Task Force has blocked or frozen over $30 billion worth of sanctioned 
Russians' assets and immobilized about $300 billion worth of assets of 
the Central Bank of the Russian Federation.
    Our most recent action included the designation of more than 70 
targets, including leaders of Russia's financial institutions, high-
tech companies in the Russian defense sector, and human rights abusers 
acting in Ukrainian territory that is currently controlled by Russia. 
This action included the designation of 22 Russian-imposed proxy 
officials, including five who have overseen the seizure or theft of 
hundreds of thousands of tons of Ukrainian grain, exacerbating food 
insecurity around the globe. The United States will continue to take 
actions against those who are involved in, or support, Russia's 
defense-industrial base, its abuse of human rights, and its attempts to 
legitimize its seizure of Ukrainian territory, wherever they may be.
    We also continue to coordinate with partners to close gaps and 
share information on our priority targets. For instance, after close 
collaboration with allies, one of our previous rollouts included 
oligarchs sanctioned by the EU, UK, and/or Canada, including Dmitriy 
Pumpyanskiy, Andrey Melnichenko, and Viktor Rashnikov. Our continued 
cooperation on future actions will further the momentum of our 
sanctions programs.
                         sanctions are working
    There is clear evidence our sanctions are reducing Russia's access 
to the resources and technologies it needs to fund, maintain and field 
a modern military to conduct a modern war. These effects will only 
increase over time.
    The cracks in Russia's economy already are showing: the Russian 
Government defaulted on its foreign currency debt for the first time 
since 1918, when Lenin ruled the country; Russia's credit ratings have 
cratered, making borrowing expensive and harder to source; Russia is 
burning its budget propping up industries hurt by sanctions and 
pursuing violence against the Ukrainian people. The Russian Government 
ran a monthly budget deficit in July and August alone of over $21 
billion, and on September 16, the Kremlin announced intentions to cut 
10 percent of all non-military government spending.
    We do not have a full picture, since the Russian Government has 
refused to release much key economic data in recent months. So debates 
will continue on the macroeconomic situation in Russia. But from what 
we can see right now, it appears that the Russian Government has 
avoided a collapse of its financial system only at considerable costs, 
including strict capital controls and extraordinary measures by the 
Central Bank. Russia effectively is frozen out of major international 
debt markets, and sanctions restrict U.S. and partner investors from 
making new investments in Russia. This hamstrings the Russian 
Government's capacity to draw investments from outside Russia and 
raises government and private sector borrowing costs.
    Our efforts to disentangle Russia from global supply chains and 
deny it the benefits of integration in the global economy are having a 
significant impact. Russia's inability to get microchips and other 
imports has been devastating for many industries; for example, 
passenger car manufacturing is down between 80 and 90 percent year on 
year. The lack of access to imported inputs and finished goods--
particularly goods embedded with sophisticated technologies--has 
created bottlenecks that are impairing not only industrial production 
and transport, but importantly, the production and maintenance of 
military equipment and hardware.
    Even Russian Government statistics show a decline in industrial 
production year-to-year for July 2021 to July 2022. Overall 
manufacturing was down 1 percent. Chemical and chemical products was 
down 4.5 percent, optics and electrics down 3.2 percent. There was an 
even steeper decline in electronic equipment (down 10 percent) and 
textiles (down 15 percent).
    Our sanctions and export controls target key ``chokepoints'' for 
the supplies and technology that Russia's defense sector needs to wage 
war, whether now or in the future. As the chair of NATO's Military 
Committee reported earlier this month, our work is impeding Russia's 
ability to replace cruise missiles and more advanced weapons. Already, 
Russia has been forced to seek military equipment from Iran and the 
DPRK. News reporting shows Russia cannibalizing commercial goods to 
obtain microchips and other microelectronics for use in the defense 
sector. Russia's diminished future economic prospects will further 
hamper its ability to fund its military. Going forward Russia has two 
choices: it can spend more of its shrinking GDP on the military, or it 
can fund fewer of its military ambitions.
    Vladimir Putin has for years focused on leveraging advanced science 
and technology to strengthen Russia's defense capabilities. So the most 
recent package of sanctions that we released on September 15 included 
targeted sanctions on companies engaged the development of 
semiconductors, microelectronics, and advanced computing that support 
Russia's Ministry of Defense.
    Our sanctions also throw a spotlight on the atrocities and 
egregious abuses of human rights that are inherent in Russia's imperial 
project in Ukraine. The Department of State has imposed visa 
restrictions on nearly 5,000 individuals in response to Russia's full-
scale invasion of Ukraine, including for human rights abuses, 
violations of Ukraine's sovereignty, and suppression of dissent in 
Russia and abroad. Treasury's recent designations include a neo-Nazi 
group that fights for the Russians in Ukraine, and the Russian official 
responsible for the forced deportation of Ukrainian children to Russia. 
We also track and expose Russia's theft of Ukrainian grain, and we most 
recently designated five Russia-appointed authorities who oversee grain 
theft operations in the territories they control.
    As President Biden declared on September 23, the United States will 
never recognize Ukrainian territory as anything other than a part of 
Ukraine. Russia's referenda are a sham. Moscow is creating a false 
pretext to attempt to annex parts of Ukraine by force in flagrant 
violation of the United Nations Charter and international law. The 
United States stands with our allies and partners around the world as 
well as with every nation that respects the core tenets of the United 
Nations Charter, rejecting whatever fabricated outcomes Russia will 
announce. We are working with allies and partners to impose additional 
severe and swift economic costs on Russia.
             what we are doing to help markets run smoothly
    I have shared with you the clear evidence we already have that our 
sanctions are working; but we know that they will take time to achieve 
their full effect. That is why one of our priorities in our sanctions 
policy is to ensure that global markets continue to function smoothly; 
this is important for the overall success and sustainability of our 
sanctions.
    In spring, the Biden administration announced a historic release 
from the Strategic Petroleum Reserves. The President's historic action 
is in addition to agreements with International Energy Agency member 
countries for collective action to address the market disruption caused 
by Russia's invasion of Ukraine. My Treasury Department colleague will 
discuss the G7's commitment to implement a price cap for crude oil and 
petroleum products from Russia. The price cap advances our twin goals 
of denying Putin revenue to fund his brutal war in Ukraine, while also 
putting downward pressure on global energy prices by allowing Russian 
crude oil and petroleum products to continue flowing to the global 
market.
    We have also taken extraordinary steps--along with our EU partners 
and the UN--to ensure Ukraine is able to export its grain and cooking 
oil to a hungry world. In the aftermath of Russia's further invasion, 
Ukraine's food exports plummeted to 300,000 metric tons per month. We 
supported the EU's development of ``Solidarity Lanes,'' strengthening 
Ukraine's east-west trade routes via road, river, and rail. And in 
August, the EU Solidarity Lanes brought out 3 million metric tons of 
grain and oilseeds. Still short of the pre-war levels, but an amazing 
achievement. The Solidarity Lanes also are carrying other products like 
poultry and metals, generating billions in foreign exchange for 
Ukraine's economy.
    Putin's war of choice exacerbated what was already a grave crisis 
in global food security. According to World Food Programme, an 
additional 70 million people are at risk of acute hunger because of 
Putin's war. We didn't cause this problem, but we are doing our best to 
ensure that our response to Putin does not worsen food insecurity 
further.
    From the beginning of Russia's further invasion of Ukraine, our 
sanctions program on Russia has had exceptions for trade in medicine, 
food and fertilizer. We have worked with the U.S. Department of the 
Treasury to clarify the scope of U.S. sanctions with a food security 
fact sheet, and we have reached out to countries across the Global 
South to make it clear to commercial actors that our sanctions do not 
target Russian food and fertilizer, so the food trade can continue. We 
even opened a Food Security Help Desk at State for those countries that 
are encountering difficulties, or have questions about our sanctions, 
when buying Russian grain or fertilizer.
    Putin has tried to blame global food insecurity on Western 
sanctions, while at the same time he was blockading Ukraine's Black Sea 
ports and maintaining a quota on his own wheat exports. But it's clear 
that, when it comes to food security, it's the United States that has 
been leading the global response. The Biden administration is providing 
nearly $8.2 billion in humanitarian and $2.3 billion in development 
assistance to address food insecurity this year. We strongly support 
the Black Sea Grain Initiative spearheaded by the United Nations and 
Turkiye to bring Ukrainian grain to world markets, and the 
Administration provided $68 million to the World Food Programme to 
procure Ukrainian grain for people in Yemen, Ethiopia, and elsewhere in 
desperate need. While we will continue to tighten the noose on Russia's 
imperial ambitions, we will do so in a way that addresses the impact 
Putin's war is having on some of the world's most vulnerable 
populations.
                             looking ahead
    Looking ahead, the pressure will only intensify unless and until 
Putin relents in his unprovoked war against Ukraine. The Administration 
has been rolling out a new sanctions package on average every 6 weeks, 
and I would expect that pace to continue. In the coming months, we will 
continue our focus on chokepoints in the Russian economy and Russia's 
military supply chains. Already it is very difficult for Russia to 
obtain a range of critical inputs at prices and through channels that 
are efficient.
    We will continue to be vigilant about sanctions evasion and 
backfilling. We want to ensure that Russia can find no back door to 
obtain military equipment, to hide ill-gotten wealth, or to wield 
malign influence. Those who continue to do business with designated 
persons face increased sanctions risk. Under existing authorities, 
persons that provide material support for designated persons could be 
subject to U.S. sanctions.
    Russia is largely shut out of the global financial system, and we 
want to make sure that they cannot recreate those connections to global 
financial networks. That is why what the EU has done is so important. 
Removing banks from the SWIFT messaging service banks allows them to 
continue operating, but it means they are no longer important to the 
global financial system; they will not be hubs of activity or 
investment.
    International partnerships are key to maintaining our impact. We 
need to ensure that other countries do not provide a base from which 
Russian actors can hide assets or evade sanctions and export controls 
measures. We also work with many governments to encourage and support 
their efforts to ensure that persons in their jurisdiction do not 
provide support or services to designated individuals and entities.
    In closing, I want to reiterate that our sanctions are just a part 
of our overall policy response, one in which the United States is 
joined by countries across Europe and around the world. We remain 
united in our determination to reject Russia's aggression.
    I look forward to your questions. More importantly, I look forward 
to working with you as we promote accountability for Russia's unjust 
war and unlawful conduct. Thank you.

    The Chairman. Assistant Secretary Rosenberg.

   STATEMENT OF THE HONORABLE ELIZABETH ROSENBERG, ASSISTANT 
 SECRETARY FOR TERRORIST FINANCING AND FINANCIAL CRIMES, U.S. 
           DEPARTMENT OF THE TREASURY, WASHINGTON, DC

    Ms. Rosenberg. Thank you, Chairman Menendez, Ranking Member 
Risch, and distinguished members of this committee, for the 
opportunity to speak with you today about the Department of the 
Treasury's efforts to hold Russia accountable for its brutal 
and unjustified further invasion of Ukraine.
    The U.S. Department of the Treasury is working with 
Administration partners, including my colleagues from the State 
Department and Ambassador O'Brien, who I am joined by today, to 
implement the U.S. Government's holistic response to Putin's 
war. Since the further invasion began 6 months ago, we have 
been advancing President Biden's promise to ``squeeze Russia's 
access to finance and technology for strategic sectors of its 
economy and degrade its industrial capacity for years to 
come.''
    Earlier this month, for example, we imposed sanctions to 
further degrade Russia's military, hold perpetrators of this 
war accountable, and financially isolate Putin. To date, 
Treasury has sanctioned hundreds of Russian individuals and 
entities. This includes a majority of Russia's largest 
financial institutions, key nodes in Russia's military-
industrial supply chains, and the oligarchs and cronies who 
help perpetuate Putin's war. The United States has been joined 
by over 30 countries, collectively representing more than half 
of the global economy, and imposing the largest sanctions 
regime in modern history.
    On the other side, Russian propagandists have been 
aggressively attempting to bury any unfavorable news and push 
misinformation, saying that sanctions are not working and that 
they are the cause of food insecurity. In fact, Russia has 
crippled Ukraine's farming and export economy and dramatically 
driven up global energy and grain prices, a topic discussed by 
my colleague on the panel.
    U.S. and partner economies' responses to Russia's war have 
had, and will continue to have, a significant effect on 
Russia's ability to fund its war. Russia has been forced to 
impose draconian capital controls. The IMF expects Russia's 
economy will contract for at least the next 2 years, as was 
also mentioned, which is a sharp reversal from its forecasted 
4.7 percent growth in 2021. The Russian stock market is about 
35 percent below pre-war levels. Russia is unsustainably 
burning through its rainy-day funds, moving towards fiscal 
deficit by year's end. Simply put, Russia's economic picture is 
bleak and is deteriorating.
    Significantly, these economic constraints are translating 
into real battlefield difficulties for Russia. Struggling to 
import industrial goods and technology, Russia has been forced 
to turn to outdated equipment and approach global pariahs like 
North Korea and Iran to source material.
    Because Russia is a sizeable international economy and a 
globally important energy producer, imposing financial costs on 
Russia while mitigating the consequences of Russia's actions 
has required extraordinary planning, coordination, economic 
analysis, diplomacy, and creative policy-making. We have been 
keenly focused on Russia's large-volume oil exports and its 
windfall earnings, in this high-energy price environment. At 
this point these energy earnings represent Russia's primary 
source of hard currency.
    Given the global nature of oil markets, elevated energy 
prices affect us all, including American households that have 
seen rising prices at the pump and inflationary pressure across 
our economy. High energy prices hit the poorest the hardest, in 
our country and in your districts, and across the world, 
unfortunately.
    Our effort, alongside our international coalition, starting 
with the G7, to impose a price cap on maritime Russian oil 
exports, is the most viable option to support the security and 
affordability of the global oil supply. The policy involves 
price cap coalition countries offering services for Russia's 
maritime transport of oil, priced below the cap, and refraining 
from doing so for oil priced above the cap. The majority of 
providers of some maritime services, such as insurance, 
payments, and trade finance are located in the G7 countries and 
EU countries, so there is an overwhelming economic incentive 
for buyers to purchase under the price cap so that they can use 
these premium services. It will be cheaper and less risky to 
move Russian oil cargos with these services. We are already 
seeing this price cap policy work, with Russia forced to 
negotiate steep discounts for the oil it sells to buyers in 
Asia.
    To close, I would like to express my gratitude for the 
additional resources that Congress provided in the Ukrainian 
supplemental appropriations packages, which help us in the 
Administration surge in the policy response to Russia's war, 
and critically to support the people of Ukraine.
    I would be very happy to answer your questions and I look 
forward to working with you all in the future. Thank you.
    [The prepared statement of Ms. Rosenberg follows:]

             Prepared Statement of Ms. Elizabeth Rosenberg

    Chairman Menendez, Ranking Member Risch, and distinguished Members 
of the Foreign Relations Committee, thank you for the opportunity to 
speak with you today and provide an update on the Department of the 
Treasury's efforts to hold Russia accountable for its brutal and 
unjustified further invasion of Ukraine.
    The U.S. Department of the Treasury is a key agency working 
alongside others across the Administration to implement the U.S. 
Government's holistic response to Putin's war. Since the further 
invasion began 6 months ago, we have been advancing President Biden's 
promise to ``squeeze Russia's access to finance and technology for 
strategic sectors of its economy and degrade its industrial capacity 
for years to come.'' \1\
    Just recently, we imposed additional sanctions to further degrade 
Russia's ability to rebuild its military, hold the perpetrators of this 
war accountable, and further financially isolate Putin. To date, 
Treasury has sanctioned hundreds of Russian individuals and entities, 
cutting them off from the U.S. financial system. This includes a 
majority of Russia's largest financial institutions, key nodes in their 
military-industrial supply chains, and the oligarchs and cronies who 
steal from the Russian people to line their own pockets and help Putin 
perpetuate his war. For example, Treasury's sanctions over the last few 
months, including our latest tranche, have targeted elites tied to the 
Kremlin, firms connected to Russian steel production and the military-
industrial base, and sanctions evasion networks operating on behalf of 
designated Russian entities. They have also exposed Russian agents and 
entities involved with Russian Government efforts to promulgate 
disinformation and election interference in the U.S. and Ukraine.
    Treasury has also implemented restrictions on dealings in Russian 
sovereign debt; prohibited economic dealings with the so-called Donetsk 
People's Republic and Luhansk People's Republic regions of Ukraine; 
prohibited new investment in the Russian Federation, and imposed 
services bans covering the provision of quantum computing, accounting, 
trust and corporate formation, and management consulting services to 
any person located in the Russian federation. We have also imposed 
prohibitions on importing certain commodities from Russia into the 
United States, including oil and natural gas, and similarly imposed 
prohibitions on exporting certain items like luxury goods and dollar-
denominated banknotes.
    The United States has been joined by over 30 countries--
representing more than half of the global economy--in imposing these 
measures. The G7, the EU, and other partners like South Korea, 
Singapore, and Australia have joined us in implementing the largest 
sanctions regime in modern history. To complement these targeted 
measures, Treasury has worked alongside colleagues at the Department of 
Justice to develop unprecedented and wide-reaching international 
information exchange activities with partner countries, including 
through the Russian Elites, Proxies, and Oligarchs (REPO) Task Force. 
These efforts facilitate our ability to share intelligence, law 
enforcement data, and relevant financial records in order to expose 
shadowy economic and commercial Russian evasion networks. We are also 
working with allies and the Government of Ukraine to examine how we may 
best use Russian assets that have been frozen and forfeited to support 
the people of Ukraine.
    In addition, Treasury has mounted an aggressive campaign to close 
the global financial policy and regulatory loopholes across 
jurisdictions that Russian aiders and abettors of this war, and other 
criminals, use to perpetuate their illicit activity. At home, this 
includes three key regulatory efforts: FinCEN's work to stand up a 
beneficial ownership database pursuant to the Corporate Transparency 
Act, developing new disclosure requirements for non-financed purchases 
of real estate, and ongoing analysis related to the illicit finance 
risks presented by investment advisers and funds. FinCEN has also 
issued several Russia-related alerts, including on Russia's attempts to 
evade sanctions. Abroad, Treasury is working to strengthen global 
standards for corporate transparency through the Financial Action Task 
Force (FATF) and enhance its focus on using financial transparency 
tools to combat the scourge of corruption. This includes launching new 
efforts at the FATF to address abuse of Citizenship by Investment, or 
so-called golden passport programs, and the risks for money laundering, 
corruption, and evasion of sanctions posed by financial gatekeepers and 
Politically Exposed Persons (PEPs). Notably, FATF has also taken the 
unprecedented step of downgrading Russia's standing within FATF as a 
result of its war in Ukraine, further delegitimizing it in the eyes of 
the international financial community.
    On the other side, Russian propagandists have been hard at work. In 
the style of the former Soviet Union, Moscow is aggressively attempting 
to bury any unfavorable news and push the paradoxical narrative--and 
misinformation--that sanctions are simultaneously not working and yet 
also cause food insecurity. In fact, Russia's invasion spiked the price 
of energy earlier this year by 21 percent. Russia's months-long 
blockade of Ukraine's Black Sea ports, coupled with the purposeful 
destruction and theft of agricultural infrastructure, crippled 
Ukraine's farming and export economy, dramatically drove up global 
grain prices, and outrageously deprived food-insecure recipients of 
much needed resources. Its attacks on a major food exporter produced 
similar shocks to global food prices. To detract focus from its brutal 
tactics, Russia continues to minimize the dislocations it has caused to 
global commodity markets and its inhumane deprivation of people in 
Ukraine and across the globe.
    This lies in stark contrast with the efforts of the U.S. and others 
to aid Ukraine and developing countries around the world suffering from 
Putin's actions. Foremost among these efforts are the Congressional 
commitments to provide Ukraine with budget support and economic 
assistance to keep critical government functions going. In addition, we 
are pushing international donors to accelerate their complementary 
bilateral support. We thank Congress for already granting $8.5 billion 
for Ukraine assistance that has gone toward these efforts.
    The economic actions we have taken, both independently and jointly 
with our international partners, have had and will continue to have a 
significant effect on the Russian economy. Russia had been forced to 
impose draconian capital controls and is burning through its rainy-day 
fund, dramatically eroding its economic base and buffers in 
unsustainable ways. Russia will be in fiscal deficit by the end of this 
year. The IMF expects Russia's economy will contract for at least the 
next 2 years, a sharp reversal from its 4.7 percent growth in 2021.\2\ 
Russia's inflation rate after its invasion reached up to 21.3 percent, 
almost triple the rate from 2021, and remains in the double digits.\3\ 
The Russian stock market also reflects pessimism--its valuation remains 
depressed, sitting about 35 percent below pre-war levels.\4\ Further, 
the Central Bank Governor of Russia has started to advocate for 
``structural transformation.'' \5\ The bottom line is that Russia's 
economic picture is bleak and deteriorating.
    Significantly, these economic constraints are translating into real 
battlefield difficulties for Russia. The Russian Duma proposed wartime 
economic controls over the economy which would allow the state to 
commandeer private businesses as necessary and force employees of 
certain enterprises to work overtime.\6\ Struggling to import a host of 
industrial goods and technology, Russia has been forced to cannibalize 
its domestic industry to assemble battlefield hardware it can no longer 
buy from responsible countries. Russia has been forced to turn to 
outdated equipment and approach global pariahs like North Korea and 
Iran to source the tools to fight.
    Fundamentally, the challenge we face in using financial measures to 
hold Russia accountable while mitigating the effects of the war on 
third countries is of a different kind than we face in other sanctions 
programs. Russia is not North Korea, Iran, or Venezuela. Moreover, 
Russia is a sizeable international economy, a globally important energy 
producer, and over the last 30 years has grown closely tied--and in 
some instances inextricably intertwined--with some of our closest 
international partners and allies. Imposing financial costs on Russia 
for its brutal policies while mitigating the consequences of Russia's 
actions has required extraordinary planning, coordination, economic 
analysis and diplomacy, and creative policymaking, all alongside a 
large group of international partners.
    In line with the 2021 Treasury Sanctions Review, we are constantly 
re-evaluating and reassessing our course of action. We ask ourselves: 
Do our policies achieve our intended goals? How has the target adapted 
to our measures? What adjustments do we need to make to increase our 
effectiveness and mitigate unintended consequences? How do we sustain 
and strengthen the international coalition of countries working 
together to hold President Putin accountable for his horrific war?
    Examples of the real time adjustment Treasury has made to our 
financial policies include the multiple fact sheets we have issued just 
this year, including Preserving Agricultural Trade, Access to 
Communication, and Other Support to Those Impacted by Russia's War 
Against Ukraine in April 2022 and the Food Security Fact Sheet 
published in July 2022, which both offer expansive information about 
how sanctions are calibrated to avoid unintended impacts as well as to 
counter Russian disinformation. These public guidance documents also 
clarify, in writing, to both industry and the international community 
that agricultural and medical products are not the targets of U.S. 
sanctions. Rather, any impediments to the delivery of these vital 
commodities lie squarely with Russia and its war, theft of food 
products, and shelling of agricultural sites, in addition to Russia's 
own export restrictions on food and fertilizer.
    We have also been keenly focused on Russia's oil exports as we have 
implemented our evolving policy approach to deny Russia the money 
needed to sustain its war. At this point, these exports represent 
Russia's primary source of hard currency. Moreover, Russia is reaping 
windfall profits from oil and petroleum products due to rising energy 
costs, spurred by the geopolitical uncertainty Russia caused by 
choosing to pursue a land war in Europe. We are concerned with the way 
energy revenues fuel Russia's war efforts, but the global nature of the 
oil market requires a careful approach.
    Energy security affects us all--including American households that 
have seen rising prices at the pump and elsewhere as the downstream 
effects of rising energy costs have applied inflationary pressures 
across the economy. Elevated energy prices hit the poorest the hardest, 
in our country and across the world. Simply put, applying financial 
pressure to curb Russia's windfall energy profits requires a different, 
creative approach to make sure that Russian coffers, not regular 
citizens in our economy and the rest of the world, bear the costs we 
impose. That challenge--and the need for a carefully tailored policy 
approach--is urgent. We cannot allow Russia to continue to fund its 
atrocities, and we must do all we can to prevent the recessionary risks 
that follow extended painful, unaffordable energy prices.
    Our commitment to counter Russia's energy war profiteering centers 
on our effort--alongside an international coalition, starting with the 
G7 countries (https://www.bundesfinanzministerium.de/Content/DE/
Downloads/Internationales-Finanzmarkt/G7/2022-09-02-erklaerung-der-g7-
finanzminister.pdf?__blob=
publicationFile&v=11)--to impose a ``price cap'' on maritime Russian 
oil and product exports. Ultimately, the price cap policy is the most 
viable option to support the security and affordability of the global 
oil supply.
    The oil price cap mechanism is a tool for other importers--mainly 
developing and emerging economies suffering most as a result of Putin's 
war--to demand a lower price for Russian oil that they purchase. We are 
already seeing this take place with Russia negotiating steep discounts 
for the oil it sells to buyers in Asia. These discounts are already 
depriving Russia of revenues it would otherwise use to finance its 
reckless war.
    As a technical matter, this policy creates a framework (https://
home.treasury.gov/news/press-releases/jy0943) for companies in price-
cap-coalition countries offering services for Russia's maritime 
transport of oil: They can continue to offer these services for Russian 
oil priced below the cap, and may not for any Russian oil sold above 
that price. Given that premium service providers and the majority of 
providers of some maritime services--like insurance, payments, and 
trade finance--are located in G7 and EU countries, there is an 
overwhelming economic incentive for buyers to purchase under the price 
cap so they can engage these service providers. It will be cheaper and 
less risky to move Russian oil cargoes this way. We will continue to 
communicate closely with service providers, as we have already done in 
developing this framework, to collectively, constructively, and 
aggressively sustain participation in and the success of this policy.
    But make no mistake: This is and will remain very hard work. This 
is an entirely new way to use financial measures against a global 
bully. A price cap coalition requires unprecedented coordination with 
international partners, as well as close partnership with global 
maritime industries, and exceptional resolve in the face of hostile 
Russian bluster and threats, including the risk that Russia may seek to 
retaliate. I can tell you confidently that we at Treasury--and our 
partners across the U.S. Government--are extraordinarily diligent when 
it comes to these economic policies and the commitment to extensive and 
creative multilateral engagement. Moreover, we are laser-focused on the 
imperative to hold Russia accountable and support the people of 
Ukraine, to constantly understand the risk environment, and to advance 
a foreign and financial policy that embodies our goals and does not 
bend to the rants and coercion of a brutal bully.
    We know that Russia's war in Ukraine is not the only challenge for 
which the Treasury Department will be called upon to act. Other threats 
demand our attention as well, and the illicit finance landscape 
continues to evolve. Additionally, while the U.S. dollar, U.S. 
financial institutions and services, and our capital markets are still 
dominant in international finance and trade, our adversaries are 
actively finding ways to attack this centrality and insulate themselves 
from touchpoints with the U.S. financial system. These are long-term 
challenges that we cannot sanction ourselves out of. We must continue 
to strengthen the U.S. financial system and innovate new ways to use 
economic policies and authorities to meet both our domestic and foreign 
policy objectives. The price cap--a bold policy never previously 
attempted by the U.S. Treasury--is the vanguard for a new form of 
economic statecraft, and I am proud to be a part of the team pushing 
these boundaries in the interest of U.S. national security.
    Lastly, I'd like to echo Secretary Yellen and Deputy Secretary 
Adeyemo's sentiments and my gratitude for the additional resources 
Congress has provided in the Ukraine supplemental appropriations 
packages. Your timely actions are what allow me and the dedicated 
career staff at Treasury to surge on this urgent national security 
priority. The partnership between Congress and the Administration has 
always been very important to U.S. policy toward Russia, sanctions, and 
responding to the crisis in Ukraine. I would be happy to answer your 
questions and look forward to working with you as we move forward. 
Thank you.

----------------
Notes

    \1\ https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/
02/24/remarks-by-president-biden-on-russias-unprovoked-and-unjustified-
attack-on-ukraine/
    \2\ https://www.imf.org/en/Publications/WEO/Issues/2022/07/26/
world-economic-outlook-update-july-2022
    \3\ https://www.cbr.ru/eng/press/keypr/
    \4\ Data from time series Moscow Stock Exchange Index available 
here: https://www.moex.com/
    \5\ https://www.cbr.ru/eng/press/event/?id=14034
    \6\ As reported by Russian media: https://tass.com/economy/1476563

    The Chairman. Well thank you. We will start a round of 5-
minute questions. I will recognize myself.
    We have had an impact, but it is not quite what we thought. 
In March, economists estimated a contraction of the Russian 
economy by 15 percent in 2022. The International Monetary Fund 
forecasted in June a more moderate contraction of 6 percent 
this year, and the ruble has appreciated and rallied above its 
pre-war value.
    There is clearly more work to do. It looks likely that 
Russia may be behind an effort to sabotage pipelines in the 
Baltic Sea.
    I would like to ask you both, what other effective measures 
are on the table, particularly as we are trying to delicately 
balance limiting Russian oil revenues, but maintaining energy 
security for Europe? On the price cap outlook, it is a creative 
approach, but it also requires a delicate balancing act that 
requires broad buy-in. We see some voices in Europe who seem to 
be dissenting, like in Hungary. What is your current assessment 
of EU support, and what is the outlook for implementing the 
price cap as we sit here today?
    Ms. Rosenberg. Thank you, Senator. I would be happy to 
begin and then turn to my colleague. I certainly agree that we 
must be rigorous and also agree with the Ranking Member in your 
opening statement too. We must be rigorous in continuing to 
enforce our sanctions, as well as export controls, with our 
colleagues across this government. What we can be sure of is 
that Russia has used the tools it has available to try and 
shore up the losses and the economic pain that we have imposed 
with the sanctions we have brought forward.
    Nevertheless, further priorities for us when it comes to 
enforcement and a rigorous approach here include going after 
the broader networks of facilitators that support Russia's 
weapons procurement or technology procurement to create and 
supply the battlefield equipment that it uses on the front 
line. Furthermore, it is critical that we work with our allies 
in Europe and beyond to plug some of those gaps, to match our 
sanctions one to another. For example, where we have taken a 
full blocking action and a partner jurisdiction has taken a 
measure that is not yet full blocking, that is an opportunity 
for us to continue to work with them, ensuring that they have 
the appropriate information and mechanism in order to match us 
there. Those will be effective ways to continue to apply 
pressure.
    When it comes to the EU's support for the price cap, in the 
G7 Ministerial Statement, G7 members plus the EU pledged their 
commitment to implement the price cap policy. Several months 
from now, on December 5. The EU came forward and made the 
commitment to do so, and we are working with them constantly, 
daily, to bring forward the regulations--in their case it will 
be regulation and in ours it will be through administrative 
action. The U.K. will use legislation--such that we are in the 
position to implement in the coming months.
    The Chairman. You think you are going to achieve that? That 
is my question.
    Ms. Rosenberg. We have every indication, that 
notwithstanding the difficulty, and a range--indeed, it is 
true--a range of positions. Some want a tougher policy. Some 
want certain dispensation. Nevertheless, we have every good 
indication that we are moving forward together toward 
implementation of this policy.
    The Chairman. Let me ask you, many of the sanctions that I 
called for in legislation in January have been implemented. 
However, some have not. Gazprombank, one of the larger state-
owned banks, is subjected to more limited sanctions that 
predate the invasion. As we work to use sanctions as part of a 
comprehensive strategy, what, in your mind, would be the 
trigger for full blocking sanctions on Gazprombank?
    Ms. Rosenberg. Thank you, Senator, for the question. Of 
course, you have noted that we have taken sanctions, full 
blocking sanctions, on a variety of Russian banks, including 
imposing financial restrictions on all of its 10 largest banks. 
One key to the price cap policy, which as you know seeks to 
continue to have Russian oil flow, but at depressed prices, is 
the requirement for purchasers to pay for that oil at depressed 
prices, which means that there must be some controlled channels 
in order to continue to pay for that.
    Nevertheless, I will say that we have, in the last several 
months, moved from scenarios where we imposed so-called less-
than-blocking sanctions on a financial institution and then 
moved to a blocking sanction. I cannot, in this context, 
forecast what sanctions the United States or the Treasury may 
bring forward, but I take note of your point and we look for 
every opportunity, as appropriate, to impose these sanctions.
    The Chairman. Well let me drive then the last question here 
because it follows on. Large banks and funds sanctioned by the 
United States have not been targeted by the EU, including 
SberBank, VTB, RDIF. Our allies have targeted a host of Duma 
members and Belarusian defense officials that we have not 
sanctions. The U.S. has sanctioned subsidiaries of sanctioned 
entities while our counterparts in Europe and the G7 have not 
necessarily.
    What explains for these existing gaps, and how do we align 
our regimes more closely? Because we all know that the more 
comprehensive and multilateral sanctions are, the better off we 
are in its effect.
    Ms. Rosenberg. Senator, to speak to this matter, it is a 
priority that we have complementary and consistent sanctions 
across jurisdictions, and that is something we discuss with 
colleagues. You have noted some of the financial institutions 
that EU has de-SWIFTed, but not imposed full blocking measures 
on, for example. That is an opportunity for us to encourage our 
European counterparts to work with them to match ours.
    I will note, based on the disposition of assets, where they 
are, and in which jurisdiction, it may be more impactful for 
Europe to take full blocking actions than for the United 
States, if the target does not have assets in our jurisdiction. 
While we are moving towards complementarity and consistency 
across regimes, nevertheless some of the priority measures for 
our European colleagues might be ranked ahead of ours if they 
have a greater opportunity to impede and block assets, because 
their assets reside in their jurisdictions.
    The Chairman. Well I would like you to give us the list. 
Senator Risch and I often get to meet, as well as other members 
here, heads of state or foreign ministers from these countries. 
I would like to get a list of who has not met it so that when 
we meet them we can raise the question.
    Senator Risch.
    Senator Risch. Thank you, Mr. Chairman. That is an 
excellent idea, and we do talk with them, and we are pulling 
the wagon together, but it is best to have this information 
where we can encourage.
    First of all, let there be no mistake about this. We really 
appreciate what you are doing. Arguably, what you are doing is 
more important than what is happening on the battlefield. The 
kinds of things that you are doing are the ones that are going 
to bring Russia to heel. It seems like Putin does not mind at 
all throwing his young men into the meat grinder every day and 
having the thousands and thousands, tens of thousands of 
casualties that he has suffered, but the financial aspects of 
this are something that I suspect mean a whole lot more to him 
than that. What you are doing is important.
    I think part of the frustration here, and the Chairman 
mentioned it, and that is that the outset we were led to 
believe, or at least believed one way or another that we would 
be more successful in the sanctions. We all know when the 
sanctions started there was a big wave, if you would, of things 
that happened that were obvious to us. Seven hundred companies 
left the country. I mean, that is significant, obviously, for 
Russian life. The ruble, as we all know, came close to collapse 
at the beginning, and now it is back up above where it was from 
where the war started. These are the kinds of things that make 
you wonder, well, wait a second.
    We all know, and you have alluded to it, that they have 
people working full-time every day to avoid the sanctions. The 
longer the sanctions are in place, the more ways around it that 
they are going to find. One example I can give you is the price 
cap that we are talking about, obviously when it comes to 
maritime services such as insurance, these are helpful. The 
problem with that is, is I am told that every day they are 
turning to maritime services that are beyond your reach, in 
countries like China that are not subject to this or that we 
cannot get. These are things that I think you need to continue 
to focus on.
    Lastly, I think I would stay away from the argument that 
they are going to older and older technologies. That is a 
really tough argument to make to the families of the Ukrainian 
soldiers that were killed by these new Iranian drones that have 
been brought in. Now they have got an answer for that. They are 
doing okay with the Stingers in countering these newer Iranian 
drones that have been brought in, but we need the NASAMS on the 
battlefield. Now that is not your concern. Obviously, that is 
in a different lane, but that is something that we are going to 
continue to work at.
    Look, they are doing things somewhat differently. I agree 
with the observation that was made that this whole thing, what 
has happened there has totally dissipated Putin's vision, I 
think, for his imperialism. This war is won already by the 
Ukrainians. That does not mean that the carnage is not going to 
go on, but Putin's idea that he could occupy this country and 
put in a new regime, which was his objective, and then move 
from there to other countries, this is over. He will never 
occupy this country. He will go to his grave never having 
occupied this country. They will fight with broomsticks in the 
streets, if necessary, and all of us have had the opportunity 
to discuss this with the Ukrainians. They are angry. They are 
hurt. They are not going to let Putin succeed, no matter what. 
Unfortunately, that does not end the carnage. It goes on.
    We appreciate what you do. We want to urge you to double 
your efforts in this regard, because you are the ones that can 
really help bring this thing to an end.
    So briefly, I have only got a few minutes left. Your 
comments, Ambassador O'Brien?
    Mr. O'Brien. Thank you, Senator. I appreciate the comments, 
mostly on behalf of all the people who have been working on 
this since before I arrived. I met with some of the visiting 
Ukrainian soldiers, I think as you did, and you visited the 
front. They are the real heroes, and they are the ones making 
the difference. We are providing them with the weapons and 
technology. I know there will be a briefing tomorrow by some 
DoD and State reps to talk about that more.
    We do feel that the export controls and the sanctions are 
keeping Russian weapons off. We see their tactics adjust to 
conserve some of their more advanced weaponry, and that is a 
clear sign that they cannot get more.
    Now in that regard, I would appreciate--you mentioned some 
delegation of visiting Rostec executives. I would love it if 
you provided us that information.
    Senator Risch. Will do.
    Mr. O'Brien. We will work together, and I appreciate the 
offer to help us as we speak with our allies.
    A couple of points on how we coordinate and what is 
happening. To some extent the divergence is also breadth of 
coverage, and then we do have to make sure that even if we each 
hit different targets at different times we then converge. I 
think you will see some convergence relatively soon.
    In terms of what comes next, there will be more packages. 
We are working on more sanctions. Our European colleagues have 
said they will continue. President von der Leyen, in her State 
of the EU speech last week, said the sanctions are here to stay 
and they are working with us on additional packages. We will 
keep coordinating.
    Now what are the area we will look at? Everything is on the 
table. We will work in the financial sector because they have 
very skilled professionals who are working to move functions 
from the banks we have designated to others, and so we will 
follow them down the chain, try to anticipate where they are 
moving. We will look a lot in high tech, especially for energy 
exploitation, and anything that might be dual use for the 
military, as well as continuing to work on the human rights 
violators and soft power that Russia tries to deploy through 
its disinformation and other areas. We can go into some more 
detail on that, but I am very happy to have any advice or 
suggestions that you or other members of the committee have.
    A final note. You mentioned the Iranian drones, and of 
course we designated some of those involved in that 
transaction, but this goes to the strength of the coalition 
moving forward. We have more than three dozen countries, either 
formally or informally, working with us on export controls, run 
largely by Department of Commerce and by some of my colleagues 
at the State Department. We have about the same number of 
countries that are implementing strong financial sanctions. It 
is most of the global economy. Still, big outliers, as you 
pointed out, and we need to work on those.
    Russia is scrounging some help from the DPRK, Iran, maybe 
Belarus. Not a lot is showing up. I think that goes to show you 
the strength of the abhorrence that the international community 
feel toward what Russia is doing, and that is led by President 
Biden and others. I know you are really helping in pushing this 
effort, but let us never forget the strength of the group that 
we are going----
    The Chairman. Thank you. Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman, and thank you to 
both of you for being here.
    I think the frustration that you are hearing from us was 
very accurately described by both Chairman Menendez and Ranking 
Member Risch, and that is that when we were told these were 
going to be the toughest sanctions ever on a country, and they 
were going to have certain impacts, and we have not seen the 
full impact that was described to us. I think we are anxious to 
know what more we can do, what more the Administration can do 
to make these sanctions even tougher, to make it even harder 
for Russia to operate.
    One of the things you said, Secretary Rosenberg, was the 
fact that there are European colleagues who may be better 
positioned for certain banks or certain efforts because of 
where they are located. I would just point out, as I know you 
are aware, that often if the United States takes a lead that 
helps prompt our allies, our European colleagues, to follow 
that. I hope we are continuing to think about that.
    I wonder if you could--you talked about the additional ways 
that we need to apply pressure. I wonder if you could talk 
about what the plan is to do that, to the extent that you can 
publicly. Then I wanted to follow up on the energy issue, 
because as Senator Menendez mentioned in the news this morning 
was about the sabotage of the pipeline. Maybe you could start 
with this, Ambassador O'Brien. The suggestion is that it is 
Russia sabotaging the gas pipeline. Do we have any idea what 
the impact of that is going to be, and how that is being 
mitigated?
    Mr. O'Brien. Thanks, Senator. It is apparently sabotage. 
The Danes and others are going to investigate. We have to see 
the result of the investigation. They will mitigate the 
environmental damage. Neither pipeline is delivering all that 
much energy at the moment so it will not affect that, but we 
will have to evaluate the status going forward. We have 
promised support for the European efforts to look into what is 
happening.
    Senator Shaheen. What are the other ways that we are hoping 
to apply pressure, increase the impact of the sanctions, for 
both of you really, as we think about going forward?
    Ms. Rosenberg. Thank you, Senator, for the question. To go 
back to where you began your comments, this is the largest 
sanctions program that the United States has undertaken, along 
with other counterparts, in the scope and scale, the size of 
institutions, the size of the economy, the international 
coalition that has brought this forward. I appreciate the point 
you are making that what we are seeing in the drift back up of 
some of the economic indicators. That is what it looks like 
when Russia has had to burn through its fiscal buffers in order 
to create a veil of management or to seek to try and telegraph 
stability here. The draconian capital controls that they have 
put in place, they have spent over $100 billion in fiscal 
stimulus this year.
    Senator Shaheen. I appreciate that and I am sorry to 
interrupt, but my question is really more what are we doing to 
respond to that? Recognizing that Russia is taking these 
measures to try and keep their economy as stable as possible 
and to reassure their public, what are we doing to make sure 
they are not successful at that?
    Ms. Rosenberg. I think it is critical to take the long view 
here and play a long game. What they are doing is 
unsustainable, so we must match the intensity of our prior 
efforts and continue on with this. That means applying pressure 
with our own additional sanctions and working with colleagues 
in other jurisdictions to match ours.
    You made a very good point about leading by example when it 
comes to implementation of sanctions. The same is true when it 
comes to enforcement. When the United States takes enforcement 
actions, that is also a critical leadership function, not just 
on substance, but also in form, in the methodology of how to go 
about bringing enforcement actions that our partners can and 
will follow the United States in, in order to apply this 
pressure.
    Senator Shaheen. Well thank you, and I appreciate the point 
about the long game. The frustration is, as we know, that while 
we are playing the long game Ukrainians are dying. Anything we 
can do to speed up these efforts I think are important.
    Ambassador O'Brien, a final question, because I am almost 
out of time. What are we doing to get countries like India, who 
ought to be all in here in terms of being willing to join this 
effort against Russia, what are we doing to try and get them to 
work with us more closely?
    Mr. O'Brien. Thank you, Senator. We work intensively with 
all the key governments, including India. India, obviously, has 
a long-term special relationship with Russia. This is a time 
for India to reconsider where it is positioning itself 
geopolitically. It is part of an all-of-government approach 
with them.
    Indian companies understand that their access to the global 
financial system depends upon them complying with our 
sanctions, and we have made that point very clear. Deputy 
Secretary Adeyemo was just in India. We are working at a high 
level consistently with India, with other countries.
    As one example of how this constantly evolves, Turkey had 
begun accepting an alternative Russian payment system. This was 
very troubling, and I think largely through a number of 
communications, both privately and more publicly, particularly 
by the Treasury, we made clear that we were concerned about 
this. We designated some of the Russian officials involved in 
the payment system, and now the government has instructed all 
Turkish banks to back out of it. That is a way in which we are 
stopping Russia from insulating itself, and it exposes them to 
further sanctions and to more enforcement. This happens on an 
ongoing basis.
    Senator Shaheen. Thank you.
    The Chairman. Thank you. Senator Romney.
    Senator Romney. Thank you, Mr. Chairman, and I appreciate 
the work that is being done by our government, Department of 
State, in putting in place this regime of sanctions.
    I must admit that I have the same sense that I am hearing 
from both the Chairman and the Ranking Member that we have, in 
our own minds, overstated the impact of sanctions. It obviously 
depends on the country you are dealing with. There are some 
countries that if we put sanctions on them they will put 
sanctions on us, and it might be an unfair fight in a setting 
of that nature.
    I say that in part because I am looking at the statistics 
you provided. Their stock market is down 34 percent. Our stock 
market is down, what, 24 percent this year. It is not the end 
of the world for Russia if their stock market is down. The 
ruble is actually trading higher than it was before the war. 
You note that by 2030, their economy will be 20 percent 
smaller. By 2030. That is a long way out. I wonder how much 
smaller Iran's economy is as a result of the sanctions we have 
had for a long time, crippling sanctions we call them. Do you 
know what their shrinkage is of their economy? I mean, it is at 
least 30. It is probably 40-plus percent, and Iran is still 
there and selling oil and selling military equipment.
    In global markets, if we cut off access to certain 
technologies that Russia would want to purchase, they can find 
ways around it, and particularly if their friends are China and 
India, those are big countries with lots of technology. Some 
places, of course, will represent gaps.
    I think that we have to have a more clear assessment in 
Congress' mind, in our national psyche, as to just what the 
impact of sanctions can do. I know many of my friends think, 
well, the Chinese better be watching because they are going to 
see this could happen to them. Well, really? Just what would be 
the impact if they decided not to let us buy the rare earths 
and the copper and the cobalt and the lithium that they 
dominate? Who would be hurting who the most?
    I guess I look for a more precise estimate of the impacts 
sanctions will have. Not that we then do not do them. Of course 
we do, but we want to make sure that we do not overestimate in 
our own minds and plan on reaction that otherwise would not 
occur.
    Am I missing this somehow? Am I underestimating this? I 
realize we do not have a very clear view of what is happening 
in Russia. We think some things will be happening, but the 
indications so far are it was not as crippling as we thought on 
Russia, and I wonder whether that teaches us a lesson that 
should be important to us as we consider the impact of sanction 
regimes in the future.
    Assistant Secretary, you might lead, and then let me turn 
to the ambassador.
    Ms. Rosenberg. Thank you, Senator. I am happy to address 
this point. There are a couple of things you said which are 
essential for us to bear in mind. First, we must be humble, and 
we cannot rest on our laurels. We must take the long view and 
be rigorous in how we move forward. We are seeing in Russia's 
intensive use of its reserves, the $100 billion it has spent in 
fiscal stimulus to try and disguise the true pain of its 
economy. We must continue to force them to burn through the 
entirety of the buffers they have in place.
    It is that motivation which has led us to the price cap 
policy. The largest source of hard currency that Russia has now 
is from energy sales, and while we can sever Russia's access to 
the international financial system with sanctions, and we can 
impede its ability to earn money in several of its key revenue-
generating sectors, it is on energy where we must focus our 
attention in order to deny Russia that revenue. Without that 
hard currency it will not be able to continue to support its 
economy and to disguise the cratering economic conditions that 
are occurring.
    Senator Romney. I certainly concur, but the reality is if a 
country has oil, they are going to be able to get money for it. 
If we were putting sanctions on a nation that did not have raw 
materials and oil, those sanctions would be really tough. With 
Russia, we can try and do all sorts of things, but if you have 
got oil and you have got gas and you have got goal and you have 
got gold, you are going to be able to get money.
    Yes, Ambassador?
    Mr. O'Brien. I think this is really well said, Senator, and 
it is an issue we struggle with every day, so I agree with you, 
and particularly being humble about our projections of what 
will happen.
    I will get back to you with the point on Iran. I do not 
have that with me now. It is a good comparison, though 
obviously Russia's ambitions under President Putin are very 
different from Iran's. The scale does matter. I agree with the 
Ranking Member that the imperial ambition has taken a very 
serious hit at this point.
    Now sanctions are one tool, and on Russia I will just 
emphasize two pieces in addition to what Assistant Secretary 
Rosenberg just mentioned. One of them is the measure for me is 
not how much do they have, it is what can they buy. That is why 
I emphasize the export controls and the restrictions on their 
ability to finance their major purchases, because we see that 
they cannot buy the things they want to use on the battlefield, 
and this is expanding and we will keep growing.
    The second is this is impossible to quantify. As I 
mentioned, it is like the effect of soldiers' morale during a 
battle. At some point the system becomes so rickety and 
improvised that it cannot succeed. I mean, you had a great 
career making businesses more efficient and transparent, and 
Russia is now a system that is built upon improvisations, lies, 
and guesses, and that just cannot go on for long. It is 
impossible to put one number against that, but it is how a 
sanctions program really has an effect.
    The China point we can discuss more. Thank you.
    The Chairman. Senator Van Hollen.
    Senator Van Hollen. Thank you, Mr. Chairman. Thank both of 
you for being here. I want to applaud the Administration's 
effort with respect to supporting Ukraine and punishing Russia. 
Congress, of course, has been an important partner, key partner 
in that effort. I think we have about $15 billion as part of 
the continuing resolution in support of Ukraine.
    As you mentioned, Assistant Secretary Rosenberg, in 
response to Senator Romney, the big sort of hole in our 
sanctions is the record revenue and record profits Russia has 
obtained from the sale of energy, oil and gas. I share the 
concerns that Chairman Menendez raised at the beginning of the 
hearing regarding holes in proposed sanctions regimes coming up 
with respect to the price cap. I would like to drill down a 
little bit more on it, because it is a creative idea, and I 
want to applaud the Administration for this price cap idea with 
the G7.
    A couple of questions as to how you envision that being 
enacted. I assume that there will be penalties on entities from 
participating countries if they do not comply. Right? I mean, 
is that not right? I mean, if you are an entity in one of the 
participating countries and you knowingly do not comply with 
the price cap there will be penalties, right?
    Ms. Rosenberg. Yes, Senator. That is correct.
    Senator Van Hollen. All right. There will be sanctions on 
those countries. Do you envision those sanctions being applied 
by each participating country?
    Ms. Rosenberg. Yes, they can. Here I think you are talking 
about enforcement actions?
    Senator Van Hollen. I am talking about enforcement actions.
    Ms. Rosenberg. Yes. They could also be applied by other 
jurisdictions where there is nevertheless a jurisdictional 
link. For example, a service provider in an EU country, but 
that is using dollars. There are two different jurisdictions 
there, so there is an opportunity for multiple jurisdictions.
    Senator Van Hollen. Right. In that case, in that example 
you are talking about the participating G7 country and the 
United States, when we are talking about dollar-denominated 
transactions, right?
    Ms. Rosenberg. Yes, Senator.
    Senator Van Hollen. Okay, but we have no plan to enforce 
the price cap on any countries that do not participate in the 
price cap. Is that not right?
    Ms. Rosenberg. To play out an example here, in order to 
answer this question. If, for example, we have a Southeast 
Asian country that is purchasing oil not under the price cap 
and using entirely non-G7 services, there is not a 
jurisdictional link. I would note that we believe that the 
powerful economic incentive for them to use services in these 
jurisdictions and also the risk involved in not using these 
services will direct, in addition to which Russia does not have 
sufficient services in order to completely backfill all of the 
barrels that would flow through G7----
    Senator Van Hollen. No, I understand. Again, that is 
applying the penalty on the servicers that are participating 
under the G7 framework. It is not a sanction against entities 
that are not part of that servicing network. I agree----
    Ms. Rosenberg. Senator, if I may.
    Senator Van Hollen. --if I could because my time is short. 
This is why Senator Toomey and I introduced the secondary 
sanctions regime because it is our view that if you are talking 
about a country like China and you are talking about a period 
of time--and we have to be in this for the long haul. I know 
you agree with that--that there is just a real opportunity if 
there are no penalties applied to China, for example, for 
buying under the price cap, that the whole thing could unravel.
    I guess if all of this works as you expect, what is the 
downside of creating penalties, not just for servicers and 
entities in the G7 sort of framework, but beyond that?
    Ms. Rosenberg. Senator, we do currently have authorities to 
sanction entities that compel G7 service providers to violate 
sanctions. That is to say, there is an opportunity to go after 
entities outside of the G7 countries if they are violating 
these measures and in some way have a jurisdictional hook to 
ours.
    Senator Van Hollen. I understand. As I understand, what you 
are saying is if they use coercive measures, essentially, to 
say to one of the servicers, if you do not participate with us 
in evading the price cap, we can go after you.
    Again, it does leave a network, admittedly not a huge 
network right now, outside the G7 countries, that would be free 
to purchase Russian oil above the price cap. I just think 
especially over time, because markets can adjust quickly, oil 
traders can adjust quickly, over time that just leaves, I 
think, a big hole in what is I think a really good idea and 
concept.
    Look, we are working with you and your team, and happy to 
continue conversations as we introduce the final bill.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. Senator Young.
    Senator Young. Thank you, Chairman. I thank our witnesses 
for being here today.
    The title of the hearing is ``Keeping the Pressures on 
Russia and its Enablers,'' and with that in mind I am thinking 
perhaps it is time that the President considers more of an 
asymmetric approach to isolate Putin from his allies. For 
example, the Burmese military junta has positioned itself as 
Putin's arguably most uncritical post-invasion partner in Asia. 
I see Moscow has readily backed the junta in return, both 
diplomatically and by arms sales, totaling over $1.7 billion 
over the last 20 years.
    Mr. O'Brien, has the Administration considered imposing 
targeted sanctions or reinforcement of arms embargos against 
the Burmese military?
    Mr. O'Brien. Yes.
    Senator Young. Oh, okay. Very good. What has been the 
result of that reflection and consideration?
    Mr. O'Brien. We are looking at the pillars of--we have 
sanctioned 70 individuals, 27 institutions. We are working with 
our regional partners to target the junta and sort of push 
toward free and fair elections.
    Senator Young. To leverage the ASEAN relationships, in 
particular?
    Mr. O'Brien. Yes. Trying to, as with the Russia sanctions 
directly, we need to make sure our partners have some options. 
That increases their leverage. We are looking at the pillars of 
support of the regime.
    We have sanctioned Rostec, as the Ranking Member noted, and 
that is a major partner in Burma. We will look to see what more 
we need to do there as well.
    Senator Young. Very good. Among the menu of options you 
visited, have you looked at some of the traditional sanctions 
or trade measures like revoking access to EU trade preference? 
That might be among the menu of options. What do you think 
about that one?
    Mr. O'Brien. Well, that is not ours.
    Senator Young. You are no doubt developing these policies 
in concert with our allies, right?
    Mr. O'Brien. Yes. I think maybe it would make sense for us 
to have a conversation in another forum. I do not want to 
foreshadow particular actions we may take. I think we are very 
focused on the continued threat the junta poses to its own 
citizens and its relationship with Russia, and we are 
developing ways that our sanctions can be part of an effective 
policy. I am happy to come up and talk more over the next weeks 
if you would like.
    Senator Young. That would be great, and I will look forward 
to doing that. I represent a sizeable Burmese-American 
population so that is in part my interest in this topic.
    Part of the engagement is owed to Beijing's engagement, 
particularly in 2006, when Beijing became an active 
intermediary with Russia. You will recall the junta secured 
Moscow's backing, allowing for a historical double-veto on the 
Security Council, scrutinizing the junta's activities. This all 
comes despite the regime's historic reluctance and suspicion in 
dealing with China.
    In your opinion, what is Beijing's endgame in supporting 
this diplomatic relationship?
    Mr. O'Brien. I think that economic relationships run deep. 
There is a long-time security relationship around the border, 
and so they have got a natural inclination to working together. 
We are looking at the ways in which our policies might be able 
to adjust that, but that may be a topic for a discussion.
    Senator Young. Yes, sir. One of the other things, I will 
get on record that I will look forward to exploring with you or 
your team is how some other bigger regional players, like China 
or India, might respond to targeted sanctions against the 
Burmese.
    With that I will yield back, Mr. Chairman.
    The Chairman. Okay. In the absence of any member presently 
being here, I have some additional questions, and we will see 
if anybody else joins us.
    Ambassador O'Brien, first of all, outside of Europe only a 
handful of countries have been willing to impose sanctions. How 
are we working to broaden the coalition of sanction partners 
working to hold Russia accountable? Beyond the price cap, what 
are we doing to prevent countries like China and India from 
taking advantage of their chance to trade and help Russia make 
up for its losses?
    Mr. O'Brien. Thank you, Mr. Chairman. The first step is to 
ensure that the sanctions are complied with by anyone who 
touches our system, and I think this was the heart of the 
exchange between the Assistant Secretary and Senator Van 
Hollen.
    We see the private sectors around the globe being very 
interested in continuing their access. The private sectors in 
China, India, and elsewhere are very well-attuned and aware of 
what they can and cannot do. Even companies with substantial 
state ownership are aware and attuned to what we expect of 
them.
    The coalition, in fact, the sort of coalition and those 
running alongside it, in fact, is pretty robust. Where there 
are specific problems, we raise them with those governments. We 
take appropriate actions, sometimes in law enforcement channels 
or other channels, and sometimes through sanctions activity.
    More generally, broadening the coalition means----
    The Chairman. Excuse me. China and India are both actively 
engaged in making a variety of purchases from Russia.
    Mr. O'Brien. Yes.
    The Chairman. I have not seen any actions against either 
one of them.
    Mr. O'Brien. Well, the actions that we have seen are ones 
that are allowed under the sanctions, which I realize may be 
your point, but it is not that we are negligent in enforcing 
the sanctions. It is that much of the trade is in the kinds of 
commodities that are important.
    This goes also to keeping the coalition strong, because 
there are many lower- and middle-income countries around the 
world that need the global markets to function, and that 
includes allowing Russian and Ukrainian products to reach them. 
Trade, say, to Turkey, Turkey re-exports 70 percent of any 
wheat and grain it gets from Russia and Ukraine to Africa. 
Although that number looks like a lot of trade, it actually is 
a part of keeping the global coalition in a place where we are 
able to sustain the support for Ukraine.
    The Chairman. Well, China is certainly not a lower- or 
middle-income country, right?
    Mr. O'Brien. I think it technically--well, I think China's 
role in this is very interesting, because I think the Chinese 
have made clear, including publicly, that the war strikes them 
as, say, not going well. We have all seen the exchange in the 
last week or 2 weeks ago, and I think we will continue to work 
with the Chinese to ensure that they understand where our 
sanctions operate and that that has an effect on the way that 
they engage with Russia.
    The Chairman. Yes. I just am a big supporter of U.S.-India 
relationship, but India is now part of the Quad. If you are 
going to be part of the Quad, you have got to act as part of 
it. It is not only vis-a-vis China, but beyond that.
    Kazakhstan is considered by many to be Russia's closest 
ally, only second to Belarus, yet recent reports regarding the 
Kazakh Government's decision to crack down on loopholes 
allowing Russia and Belorussian trackers to transport EU cargo 
across Russia to Kazakhstan suggests that this relationship 
maybe fissuring.
    What steps are we taking to seize upon any opportunities to 
put further pressure on Russia as a result of divisions 
possibly deepening between them and their Central Asian 
partners?
    Mr. O'Brien. Yes, it is a great point. The Central Asian 
countries have economies that are largely entwined with Russia. 
Kazakhstan's access to European markets was largely by way of 
Russia, both its oil pipeline and its agricultural exports. 
Many of the countries have substantial remittances coming from 
emigres who work in Russia and send the money home.
    We are working with them to provide them with options, 
whether that is physical alternative routes and other ways to 
develop investment and cash. Over the last week, Secretary 
Blinken met with five foreign ministers of the Central Asian 
countries. We have provided them with guidance on how to 
implement our sanctions. We followed up with specific concerns, 
and we will be having further conversations with them on 
precisely what they can do. I think we will see all of those 
countries that will be happy to have alternatives to the 
relationship that they had had with Moscow before, so we will 
continue to work in that vein.
    The Chairman. Senator Cardin.
    Senator Cardin. Thank you very much. Let me thank both of 
you for your work, and I agree with the Chairman and Ranking 
Member. We have made a lot of progress, but where we have gaps, 
where we have the inconsistencies between our European allies 
and ourselves and our global partners, we should be looking at 
ways that we can strengthen the sanctions.
    The purpose of the sanctions that you point out is to win 
this war, and you have pointed out a lot of ways in which it 
helps--taking resources away from Russia that could be used for 
its military, to deal with the inability to deal with its 
supply chain through the material and equipment that cannot get 
into Russia.
    I want to raise an additional point here, and that is 
winning this war is holding Russia accountable in addition to 
protecting Ukraine's sovereignty for the destruction it has 
caused and to hold those responsible for the atrocities 
criminally responsible for their activities. One of the points 
about individual sanctions, one of the points about putting a 
spotlight on the people that are committing these atrocities is 
that there will come a point that those around Mr. Putin, and 
those in the military recognize that their future may be at the 
Hague, and they may wish to try to cleanse themselves from the 
atrocities being committed.
    One of the ways that we make that point very clear is 
through individual sanctions. I do appreciate that the United 
States has been strong on the individual sanction front, but as 
you pointed out, we can do more. The atrocities are continuing, 
so our spotlight on those committing these atrocities need to 
keep up with, unfortunately, the activities that are occurring 
through Mr. Putin's direction.
    I just really would like to get your assessment as to how 
we are working with those that recognize that accountability 
must be part of the ultimate victory here, and the way that we 
use our individual sanctions gives a roadmap to those that will 
be ultimately responsible for this part of accountability.
    Mr. Ambassador, do you want to start? Or either one.
    Mr. O'Brien. Thank you, Senator. You have been a champion 
on these issues for all my time working in public service and I 
appreciate the support. I completely agree with you. I think 
that it is necessary to highlight the criminality and the 
violence that is intrinsic to this imperial campaign. One of 
the, say, buckets in which our sanctions work is to highlight 
the atrocities that are being committed, anything that goes to 
indicating the illegitimacy of the project.
    We have sanctioned scores, if not hundreds of individuals. 
As we learn we will sanction more. As we learn more about the 
institutions that are part of this we will continue to 
designate those. Any Russian-backed institution established in 
the occupied areas is a target for designation and very likely 
to be so, and that is part of a policy for the other work that 
others are doing, and I know you know it well. Ambassador Van 
Schaack and others are working to support investigations, the 
documentation of the atrocities, and making clear that, as you 
say, for many of these people their future may well be in the 
Hague.
    Senator Cardin. Secretary Rosenberg, a lot of times there 
is the pressure on the economic sanction front, and the 
individual sanction front may not have the same degree of 
visibility or attention. Assure me that is not the case in your 
work.
    Ms. Rosenberg. Thank you, Senator, for the opportunity to 
do so. There are two points that I want to make that complement 
what my colleague, Ambassador O'Brien, has just said. 
Individual sanctions on ultra-high-net-worth individuals in 
particular, are particularly critical in this sanctions regime. 
They do a number of things. So first, it sends a powerful 
message, as you have indicated, and it also will lock up the 
assets and holdings of these individuals who benefit from their 
position with proximity to President Putin or who otherwise 
support and facilitate his activities and decision-making.
    The so-called REPO Task Force, the Russian Elites, Proxies, 
and Oligarchs Task Force, which is the Treasury Department and 
Justice Department here in the United States and their 
counterparts in the G7 countries, have worked together to 
enforce these ultra-high-net-worth, or oligarch sanctions, 
individual sanctions, across our jurisdictions, and have locked 
up, frozen over $30 billion related to these individuals. That 
is material for our purposes here.
    Furthermore, you have noted the criminality associated with 
some of these individuals. To the extent that is established, 
then we have the opportunity not just to freeze these assets, 
but then forfeit them, including for purposes of restitution 
for the Ukrainian people, which is a unique opportunity of 
great significance for this program, given the Ukrainian people 
that we all seek to support and address in this broader 
sanctions program.
    Senator Cardin. That is an area that I am sure we are going 
to put more attention to as we get later to the restitution 
issues in Ukraine itself.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. I have one final question for you, 
Ambassador O'Brien, since we have you here. We are obviously 
devoting extensive resources to Russia sanctions, as we should. 
I wonder whether this comes at the expense of our ability to 
respond effectively in other regions. For example, despite 
horrific conflict in Ethiopia, where fighting has killed an 
estimated half a million people in Tigray alone, the 
Administration has not sanctioned any Ethiopians for gross 
violations of human rights. Eritreans, but no Ethiopians. 
Clearly, there are Ethiopians that have been part of gross 
violations of human rights.
    Likewise, the Administration has not sanctioned any senior 
security force officials in Sudan for the killing of more than 
100 pro-democracy protesters since the October 2021 coup, or 
Sudanese known to be working with the Wagner Group to export 
Sudanese gold to Russia.
    What needs to happen to ensure a proactive approach in 
these areas?
    Mr. O'Brien. Thank you, Mr. Chairman, and your attention to 
these areas I very much appreciate. I do not want to foreshadow 
what we are doing. I would love to maybe come and we could have 
a discussion with some of my colleagues from the policy side.
    Part of the mandate that this committee shaped for my 
office is to ensure that sanctions are properly used as part of 
an effective policy. I have spoken with Ambassador Hammer, and 
we are very focused also on the issues, and that is around the 
Horn and Ethiopia/Eritrea. We are also very focused on the 
issues across the Sahel, from Sudan across to West Africa. I 
think in that regard it would be great to have a conversation 
about where we see things moving.
    The influence of Russia is something that--well, how to put 
this. We are well aware of the Wagner operations, and Mr. 
Prigozhin advertising himself across the region, and that makes 
it a very high-priority target. In addition, I think Sudan and 
the gold trade and other elements are very important to us, so 
maybe we can come and have a conversation in another venue for 
that.
    The Chairman. Well, I would be happy to have a conversation 
in another venue. Let me just say, I think one of our 
challenges in our sanctions policy, more broadly defined, is if 
you are committing human rights violations, as clearly it is 
happening in Tigray and Ethiopia, if you are committing human 
rights violations in Sudan, and for that fact, in other places 
of the world, and we do not sanction them when we have full 
knowledge of it, then what is the global message? What is the 
global message to other nefarious and authoritarian actors in 
the world about, well, they pick and choose when they want to 
do it.
    I understand broader policy constructs and sanctions within 
that context, but I also think there is a gnawing question, for 
those of us who are big advocates for human rights and 
democracy, about the lack of our sanction policy when it is so 
clear and obvious that there are parties here that clearly have 
blood on their hands. It is not that we do not know who they 
are--we do--and we do not pursue them.
    I think that is a problematic set of circumstances as we 
deal in a broader policy construct, but certainly as it relates 
to these countries. Because I have a feeling that as it relates 
particularly to Ethiopia, some of your colleagues have an 
aspiration, but it is not an aspiration that is being realized. 
In the interim, half a million people have been killed. How 
long do you wait before the aspiration is realized until you 
use one of your tools of peaceful diplomacy? We only have a 
handful of them.
    At the end of the day I welcome, and I will have my staff 
reach out to you, and you bring in whoever you want, and in any 
setting you want. I want to have a serious conversation about 
why we do not see action in some of these things. Someone is 
going to have to make the case to me that, in fact, it is 
better for our ultimate goals, and to save the lives of people, 
that we not pursue any sanctions than that we do. I am looking 
forward to that.
    Mr. O'Brien. I appreciate the attention and I agree with 
you. Thank you, Mr. Chairman.
    The Chairman. I am told Senator Kaine is on his way, but I 
do not know how much longer we can keep this open, waiting for 
colleagues.
    Well, I was not going to belabor the point, but instead of 
just sitting--you work with your colleagues, Ambassador, 
obviously, in the promotion of these sanctions. They are 
bilateral relationships that are challenging. What about Orban 
in Hungary? He seems to be one of the roadblocks as we deal to 
cohesion over EU sanctions.
    Mr. O'Brien. We have made clear our support for the 
position of 26 of the 27. Obviously, Hungary has its own 
difficulties right now with the European institutions. We 
strongly support the emphasis on the rule of law in Hungary. We 
are very concerned about the prospect of Russian influence 
operating through Hungary, and are calling attention to that in 
all the channels that we can find.
    Senator, just as a minor point, one piece that the EU did, 
a decision made in July, was to align all of the sanctions 
programs so that they all roll over at once. This makes it very 
difficult for one country to stand up and block everything, as 
opposed to before when they could kind of pick one small item 
and try to stand up. I think that is part of the strategy of 
focusing attention where it needs to be and making it easier 
for us then to bring whatever tools we have to bear.
    The Chairman. You do not think he will be an impediment to 
the necessary unity of the EU to enforce its sanctions?
    Mr. O'Brien. I am not going to predict. I think that the 
gravity in this situation runs toward maintaining the coalition 
and keeping everything moving well.
    The Chairman. Senator Kaine, I have been filibustering here 
for you, although I have gotten very precious information in 
doing so. You are recognized.
    Senator Kaine. Great. Thank you, Mr. Chair and Ranking 
Member Risch, and thanks to the witnesses. I am not going to 
ask you to repeat questions that I am sure my colleagues have 
asked. One of the things I am interested in, and I know 
questions have been asked about European solidarity and how 
that is going to hang together as we get into winter with 
energy challenges.
    If you could talk about the potential role of the current 
or potential role of the OSCE. We often talk about NATO, and 
that is a flash point with Russia, but OSCE is the broader 
organization, as you know, that includes many European nations 
that are not members of NATO, including Russia. It struck me 
that during the last administration, I started to notice maybe 
a little bit more activity in the OSCE. Share with me. Is there 
value that that institution is bringing, or can bring, to this 
very, very difficult problem?
    Mr. O'Brien. Thank you, Senator. The OSCE, of course, is 
the institution that was formed around the values of the West, 
and in this conflict it has allowed us to clarify what it takes 
to be a member of the rule-abiding group.
    The OSCE has a set of institutions and standards that are 
very important as we move forward. I know the Secretary is 
attending an OSCE ministerial and democratic elections in the 
next week. That will be a key place to highlight some of the 
important steps governments can take to reinforce the rule of 
law for having free and fair elections and taking steps against 
corruption. That is very important, particularly through 
Central Asia. I was just meeting yesterday with a visiting 
minister, and this was one of the focal areas of the meeting. 
You see, the OSCE is a place in which we refine the standards 
and help one another meet them. That is one particular role.
    Its peace and security role is something maybe we can come 
back and brief you on more. Obviously, with Russia there it 
becomes a little more difficult, but the role in the rule of 
law and democratic standards is a vitally important one.
    Senator Kaine. Secretary Rosenberg, I want to ask you, and 
I imagine you have been asked this, but if I could, what grade 
would you give to our allies in terms of rigorously complying 
with sanctions, or how much leakage is there around the 
sanctions? I know it varies country to country, but if you 
could kind of give me a more general answer first, and then if 
there are things that we can do to improve the bite of the 
sanctions and reduce leakage, or end-running around the 
sanctions, what should we do?
    Ms. Rosenberg. Thank you, Senator, for the question. We 
work extremely closely with our colleagues in Europe and 
elsewhere to bring forward sanctions, sharing information in 
order to construct the packages, the technical work of 
implementing them, and sharing information for enforcement 
actions that we can take in our jurisdiction or they can take 
in theirs.
    The sanctions that we have brought forward with respect to 
Russia are unprecedented in their scope and scale, in the 
number of international partners involved, in addition to those 
European partners with which we work closely. Also partners in 
East Asia. This is the first time that Singapore, for example, 
has brought forward this kind of sanctions program on an 
individual country, outside of a U.N. framework. The same is 
true for a number of East Asian partners. The information 
exchange that we have all had, including with these Asian 
allies, has been truly unprecedented.
    Furthermore, the technical implementation is fresh in this 
experience. The information-sharing, downgrading of information 
in order to construct these packages and to enforce them, and 
also the mechanisms for things like licensing, guidance--this 
is brand new territory for many of our allies, and they have 
worked at lightning speed to implement it. It is truly a feat, 
and it sets us up for other shared challenges that we may 
encounter in the future.
    Senator Kaine. Thank you for that. I will just conclude and 
say that my colleagues know I do not mind criticizing 
administrations that are Democratic or Republican if things are 
going wrong. Not that everything with respect to U.S. response 
in Ukraine has gone right or perfectly, but the Administration 
confronted a very, very difficult challenge, which is European 
nations, including Ukraine, did not think there would be an 
invasion, and we believed there would be. With the same facts 
we had very different predictions about what would happen.
    I think what the Administration did, given that challenge, 
was really adroit in pre-negotiating a set of consequences that 
would snap into place if our prediction turned out to be right 
and our allies were wrong. We wanted them to be right and us to 
be wrong, but if we were right and they were wrong, the way the 
Administration put consequences in place in advance, I just 
give that very, very high marks and I appreciate your role in 
that.
    With that, Mr. Chair, I yield back.
    The Chairman. Thank you. Senator Kaine, my filibustering 
for you has allowed two of our other colleagues to make it here 
on time, before the end of the hearing. Senator Portman is 
next.
    Senator Portman. Thank you, Mr. Chairman. As you know I 
said earlier, and I am sorry I had to step out for a markup, 
but I really appreciate you holding this hearing, you and 
Senator Risch, and your vigilance in ensuring that we can put 
the squeeze on Russia, because that is all that is going to get 
them to the table.
    I will say earlier there was discussion by Mr. O'Brien 
about the fact that we need to demonstrate, you said the 
violence and criminality going on in Ukraine. The atrocities 
are clear. I was in Bucha a month ago and saw where the mass 
graves are. Izyum, we learned about last week, which is this 
part of northeast Ukraine that has now been liberated. Torture, 
rape, executions of civilians, forgetting the bombings of the 
hospitals and the churches and the apartment buildings, 
forgetting the fact that they are taking orphaned kids out of 
Ukraine and putting them in Russian families, when they could 
keep them in Ukraine in extended families. These are actually 
definitions of genocide.
    We need to understand, this is going on as we talk, and 
what are we doing about it? Well, we are helping the Ukrainians 
militarily, and I think that has been extremely helpful to the 
successes we have seen on the battlefield. I think that is all 
that gets Vladimir Putin to the table is feeling some pressure 
on the battlefield. Second, he has got to feel pressure at 
home, and I do not think they are feeling the squeeze.
    I appreciate all you are doing. I agree with what Senator 
Kaine said, but team, we have to realize that this is not 
working yet. You look at these numbers. You said that the 
Russian economy is bleak and deteriorating. That is how I would 
describe the Ukrainian economy. The Ukrainian economy is down, 
by best estimates, 40-50 percent--40 to 50 percent their GDP, 
this year. How about the Russian economy? How far is it down 
this year? Well, based on the IMF numbers that we have, the 
best numbers we have, it is down 8.5 percent in 2022. Our 
economy is down this year a couple of points. Eight point five 
percent versus 45 percent or 40 to 50 percent--the economic 
comparison is, to me, pretty concerning.
    I am not sure they are feeling the squeeze in terms of the 
sanction side. They are starting to feel the battlefield 
successes by the Ukrainians, and I think that will help get 
them to the table. We have got to tighten up the squeeze on 
Russia, if we all agree that what they are doing are 
atrocities. I agree with that, and so does the free world.
    Energy. Windfall earnings this year. In Russia, the revenue 
that Russia is getting from energy is up 30 percent this year. 
If I am wrong, correct me. Is that accurate, that the revenue 
is up 30 percent this year? That revenue is funding the war 
machine.
    My questions are many, but Ms. Rosenberg I am going to 
start with you. I would like to reiterate the importance of 
Europe and their dependence on Russian energy. We have talked 
about that before. I have given speeches on this on the floor, 
that Europe needs to do more in terms of the energy side.
    LNG imports are up. That is good. They are twice as high as 
they were last September right now, and I am all for the LNG 
exports from us and from the Middle East to go to help, and 
from other countries. The share of Russian natural gas has gone 
down. That is good.
    What I want to know is the Treasury Department has renewed 
the General License 8C, which has allowed certain Russian 
energy transactions to continue without sanctions. Is the 
Treasury Department prepared to sanction entities once that 
waiver expires in December--I think it is on December 5--or 
does the Department intend to extend that license again?
    Ms. Rosenberg. Senator, thank you for the question. I could 
not agree more that we need to be laser-focused on Russia's 
windfall earnings from energy and deny Russia some of that 
earning in order to fund its brutal war. That has led to this 
price cap policy amongst the G7, which would seek to keep 
Russian oil flowing at a lower price in order to deny Russia 
that revenue.
    One thing to note. You mentioned General License 8C. This, 
as you know, is the method by which purchasers of Russian oil 
can continue to pay for that oil. The price cap policy, in 
keeping that oil on the market, though at lower prices, 
requires that those purchasers be able to purchase it. That is 
part of the conceived policy here, which would keep the oil on 
the market but, as we have noted, diminish the revenue.
    That is part and parcel of this broader policy. It is 
different from prior sanctions, which have focused on denying 
volume rather than revenue. Here, given the critical 
interconnectivity of Russia's economy with so many others for 
commodities, energy in particular, this is part of the policy.
    Senator Portman. I am at the end of my questioning time. 
Let me be sure I understand what you are saying. You are saying 
that General License 8C may well be extended in early December 
because instead you believe that the price cap is more 
important. That should be used instead of the energy sanctions 
under the 8C license. Is that what you are saying?
    Ms. Rosenberg. Senator, I am not in the position to 
forecast exactly what will happen with this or other general 
licenses. Nevertheless, I would emphasize here that in order 
for the price cap policy to successfully deprive Russia of 
revenue by pushing down the price there must be a means to pay 
for it.
    Senator Portman. Let me ask you about the price cap. Have 
you set a price yet for the price cap? Yes or no.
    Ms. Rosenberg. The process has begun to set the price.
    Senator Portman. Have you set a price yet?
    Ms. Rosenberg. The process is----
    Senator Portman. Yes or no.
    Ms. Rosenberg. --has currently begun in order to set that 
price.
    Senator Portman. Have you set a price yet? Yes or no.
    Ms. Rosenberg. The process has begun, Senator.
    Senator Portman. Have you set a price cap yet? Yes or no.
    Ms. Rosenberg. We are in the process, Senator, of doing so.
    Senator Portman. You will not say no. Why will you not say 
no? You have not set a price yet.
    Ms. Rosenberg. Senator, I appreciate your question, but we 
have begun this process with the G7 partners in the price cap 
coalition.
    Senator Portman. Okay. The answer is no. You have 
acknowledged that. Correct?
    Ms. Rosenberg. Senator, I appreciate your question. We have 
begun this process and fully intend to do so.
    Senator Portman. Maybe you can follow up on that. My time 
is----
    The Chairman. The answer is no----
    Senator Portman. Thank you.
    The Chairman. --because they have not established it yet. 
They are in the process of establishing it.
    Senator Portman. Yes, so just say so.
    The Chairman. If you asked right now what is the price cap, 
there is no price cap to give you, but they are in the process 
of establishing it. That is what I take away from the answer.
    Senator Portman. I think General License 8C is more 
effective. I understand what you are trying to do with the 
price cap. I think going against market forces is very 
difficult to do. I think there are some practicality issues 
there. My hope is that we will not extend that General License 
8C and that we will continue to do what we can to try to truly 
squeeze Russia on the economic side. That has to be through 
energy.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. Senator Cruz.
    Senator Cruz. Thank you, Mr. Chairman.
    Ms. Rosenberg, for decades Iran has used Russia to evade 
sanctions. Recently we have seen that situation reversed, with 
Russia using Iran as a hub to evade our sanctions in response 
to Putin's further aggression against Ukraine.
    I am specifically concerned about Iran supplying Russia 
with weapons. The Iranian regime has been supplying Putin with 
drones that threaten to stall the enormous progress that our 
Ukrainian allies have been making retaking their territory.
    Now the Biden administration has sanctioned some of the 
Iranian drone manufacturers and the transportation companies, 
and that was certainly a good start, but it has not worked. 
Iran continues to supply these and other weapons.
    Now I believe one of the reasons it has not worked is 
because you have stopped short of targeting the Iranian banks, 
including the Iranian Central Bank, that enable these sales 
with the same powerful authorities you have used elsewhere. Why 
has the Biden administration not imposed additional sanctions 
on Iranian banks involved in the supply of weapons to Russia?
    Ms. Rosenberg. Senator, thank you for your question. It is 
particularly horrifying and egregious when Russia is able to 
use entities and individuals to supply its military equipment, 
its materiel, in violation of sanctions. In the instance you 
were talking about from earlier this month, where we designated 
Iranian entities supplying drones to Russia, that is an example 
of Russia's evasion. They were supplying a designated entity. 
We are looking for every opportunity to go after nodes in a 
network of procurement that Russian designated individuals are 
using to seek material and technology to field its battlefield 
equipment.
    Senator Cruz. Ms. Rosenberg, I am a little dismayed. Every 
word you said was non-responsive to my question. My question 
was, why has the Biden administration not imposed additional 
sanctions on Iranian banks involved in the supply of weapons to 
Russia? Let me try it again.
    Ms. Rosenberg. Senator, we are looking for good 
opportunities and the relevant intelligence and information to 
substantiate packages to go after evasion networks, including 
with respect to Iran. I take your point and appreciate this 
one. I would be happy to continue talking with you and your 
staff as we put together the packages to do so. This is a 
priority for us, looking for Iranian and North Korean entities 
supplying Russian materiel.
    Senator Cruz. Okay. Let us take that answer at face value. 
Do you commit to this committee to maintaining powerful 
secondary sanctions on Iranian banks, and especially the 
Iranian Central Bank, for their role in supplying weapons to 
Russia, even if there is another nuclear deal?
    Ms. Rosenberg. Thank you for the question. I can commit to 
this committee to powerfully imposing and enforcing sanctions 
on any evasionary network, Iranian or otherwise, that supplies 
Russia with military equipment to fund this brutal war.
    Senator Cruz. How about what funds it, like the Iranian 
Central Bank?
    Ms. Rosenberg. Funding, facilitation, of financial or 
material means, those are all priorities across the 
Administration.
    Senator Cruz. You have not done it yet?
    Ms. Rosenberg. We have gone after a variety of evasionary 
networks.
    Senator Cruz. Not the banks?
    Ms. Rosenberg. We have named financial nodes in different 
instances, and furthermore, companies acting as financial 
cutouts. Russians, unfortunately, are best in class at evading 
and creating----
    Senator Cruz. At the end of the day it is not complicated. 
We know the banks are doing this, so it is not best-in-class 
evasion. They are doing it openly and brazenly. The question 
is, does the Biden administration have the political 
willingness to sanction them, or is the Iran deal that is such 
a holy grail for this White House that they are willing to look 
a blind eye while the Iranian banks fund weapons that are being 
used by Putin to kill Ukrainians right now in the midst of the 
invasion?
    Ms. Rosenberg. Senator, I think we share the political 
commitment and intensity of focus with many of the members of 
this committee and of Congress to go after evasionary 
individuals and networks and entities, wherever they may be 
located, that are funding Russia.
    Senator Cruz. Let us change the topic for a second and let 
us go to another aspect that contributed to the war in Ukraine, 
which is Nord Stream 2, and actually Nord Stream 1. As you 
know, I authored legislation sanctioning Nord Stream 2. It 
stopped the construction of Nord Stream 2 until President Biden 
waived those sanctions, which allowed Putin to complete the 
pipeline and caused the invasion of Ukraine.
    Right now it appears both of those pipelines have been 
bombed or destroyed or sabotaged in some way. That sabotage was 
carried out either by the United States, by Russia, or by some 
third party. I assume you are not going to tell this 
Administration, if it was the Biden administration, that blew 
up those pipelines.
    Ms. Rosenberg. I would be happy to defer to my colleagues 
from the State Department. Those authorities for Nord Stream 2 
rest with the State Department.
    Mr. O'Brien. Senator, we have said it is apparent sabotage. 
There are investigations happening in Europe. We will see what 
the investigations turn up.
    Senator Cruz. Does that mean you are not going to tell us 
if it was the Biden administration?
    Mr. O'Brien. Senator, I think even the question poses a 
premise that is impossible to answer in an effective way.
    Senator Cruz. You can answer yes or no.
    Let me just ask this because my time has expired. Let me 
ask a final question of Ms. Rosenberg.
    I think the pipelines being out of commission is good for 
the United States and good for Europe. Would you agree it would 
have been much better to stop those pipelines using our 
sanction authority, which had been successful, rather than what 
we have now, which is an environmental disaster due to the 
sabotage? Would you agree that sanctions would have been a much 
more effective way to do this?
    Ms. Rosenberg. Senator, to the point of European energy 
security and denying Russia economic advantage and opportunity, 
and the opportunity to engage in manipulating Europe on the end 
of the pipeline, I think there are a variety of different ways, 
and I appreciate the collaboration we have had with this 
committee and with Congress, in general, in addressing those 
key priorities. I think more broadly on the sanctions versus 
our diplomacy, our energy supply relationships, it is the 
combination of all of them that can best advance our purposes.
    Senator Cruz. Thank you. It is amazing you are not willing 
to answer that question.
    The Chairman. Senator Coons.
    Senator Coons. Thank you, Mr. Chairman. I would like to 
thank our two witnesses today for your engagement in 
implementing the Biden administration's global leadership in 
pulling together our allies, not just in western Europe, but 
around the world, and imposing real costs on Putin and Putin's 
Russia for their brutal invasion of Ukraine.
    Forgive me. I was at another hearing. The Judiciary 
Committee is currently conducting a hearing on how to hold 
accountable those Russians who are committing war crimes, 
atrocities against Ukrainians, so I may have missed the 
exchange on this particular point.
    Are there additional economic sanctions that you are urging 
that we support or authorize or that the Administration is 
considering that would impose significant and effective 
additional costs on Russia, and if so, what are they?
    Ms. Rosenberg. Thank you, Senator, for the question. There 
are two main themes that I would like to address in answering 
your question. The first is a continuation of many of the 
sanctions on targeting financial institutions and military 
entities or military industrial supply chains. That is critical 
in order to deny Russia revenue to fund its brutal war, not 
only the U.S. imposition and enforcement of those measures, but 
also the parallel implementation and enforcement by our 
colleagues and counterparts in Europe and other jurisdictions 
that have parallel measures. We have an opportunity for them to 
match us in certain of our measures, and vice versa.
    Senator Coons. Great. Should we be considering revoking 
Russia's membership in institutions like the IMF or the World 
Bank? That would be a significant and a bold step. I would be 
interested in hearing your opinions on whether further removing 
them from some of these multilateral international financial 
institutions would have some positive impact.
    Ms. Rosenberg and then Mr. O'Brien, if you may.
    Ms. Rosenberg. Thank you for the question, Senator. This 
question is relevant not just for financial institutions, but 
other multilateral bodies in which Russia has membership. The 
principle that, if I may, the Administration has sought to 
consider when evaluating each of these is that Russia should be 
denied opportunity for decision-making and leadership in forums 
where that is unacceptable for it to continue to play a 
leadership role. The bylaws of different organizations and 
institutions create different pathways here, whether excluding 
Russia entirely or depriving it of leadership and decision-
making. It is different from institution to institution or 
multilateral body, but we are committed to the principle that 
Russia should not be in the position to inform significant 
decision-making or hold a veto over policy that other members 
would seek to advance.
    Senator Coons. Let me ask you one more question briefly and 
then I will turn to Mr. O'Brien for both. Is Treasury looking 
seriously at using Russian asset seizures as a way to fund 
reconstruction efforts in Ukraine?
    Ms. Rosenberg. Thank you for that question. This is a major 
priority for this Administration. I know many here on the Hill 
are also focused on this, and I expect that some of our 
Department of Justice colleagues may have had the chance to 
share with you some of their preliminary thinking on this 
matter.
    The Administration did send suggested legislation up to the 
Hill earlier this year. It was not included in the 
supplementary legislative package, but this is an area we would 
like to focus on further with all of you. The concept of 
restitution here is key for many of us. The mode and mechanism 
requires some detailed work, including with our allies.
    Senator Coons. Mr. O'Brien, if you might. I would be 
interested in your views on the consequences for our 
relationships for us to both impose additional secondary 
sanctions or enforce secondary sanctions against nations that 
we otherwise have good relationships with for their ongoing 
business dealings with Russia. Just hypothetically, Turkey, the 
UAE, India. What would the consequences be of our trying to 
actually carry out the things Ms. Rosenberg is talking about, 
driving the Russians out of positions of leadership and 
responsibility in multilateral financial institutions, actually 
enforcing secondary sanctions, seizing assets and using them 
for reconstruction?
    Mr. O'Brien. Well, I think the point, Senator, is we have 
many tools to get countries into compliance with sanctions. 
Many of the countries actually want to be part of the rule-
abiding club, or at least have access to our economies, and 
that gives us enormous leverage through the prospect of 
financial sanctions, designations, export controls, et cetera. 
In each of those situations that I would say, in a number of 
other countries that have different relationships with Russia, 
we find ourselves in active conversations about how they can 
retool their economies to not be completely dependent on 
Russia, how they can develop the mechanisms needed to enforce 
the sanctions and comply with them. Then, throughout that 
process, while we are working with governments, the private 
sectors are well aware of what will make them vulnerable to 
sanctions.
    Then I will close with this point. As we mentioned in a 
particular conversation earlier, sometimes if we designate the 
Russian counterparty, then that causes the institutions in some 
of those countries to say they can no longer continue working 
in an area. We do not necessarily have to employ these tools 
against the friendly countries, but we are able to achieve the 
same result in other ways.
    Senator Coons. Thank you. I would like to thank you both 
for your testimony and for your work, and to recognize the 
Administration's success so far in pulling together a very wide 
range of very disparate partners, but also urge you to sharpen 
and focus this work because of the urgency of imposing greater 
costs on Putin's Russia for their aggression in Ukraine.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    The record for this hearing will remain open until the 
close of business tomorrow, and with the thanks of the 
committee this hearing is adjourned.
    [Whereupon, at 11:53 a.m., the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record


              Responses of Mr. James O'Brien to Questions 
                  Submitted by Senator James E. Risch

    Question. One goal for creating this office and elevating this 
position to the rank of ambassador was to create a centralized point of 
contact for foreign governments to ensure effective communication with 
allies and partners on sanctions, implementation, and technical 
cooperation. In the months since your confirmation, how would you say 
that communication is going? Do you feel you are able to effectively 
engage with other nations and appropriate staff on sanctions issues? Do 
you feel other nations are aware that they can and should be 
coordinating through the Department's Office of Sanctions Coordination 
for any questions, concerns, or updates?

    Answer. In a few short months, I have established productive and 
direct relationships with my G7, UK, and EU counterparts on an array of 
sanctions and sanctions-adjacent issues, such as the Black Sea Grain 
Initiative and the EU's Solidarity Lanes program. These relationships 
have built upon the existing sanctions architecture and expertise at 
the State Department and are proving invaluable for coordinating 
successive tranches of Russia sanctions, information-sharing, and other 
key priorities, such as facilitating the movement of Ukrainian grain. I 
also have developed highly productive relationships with UN 
counterparts, banks, insurance companies, and the like. I look forward 
to deepening and expanding those relationships to encompass other 
regional sanctions priorities.

    Question. In your opinion, have your office's communications with 
other nations been successful so far? Do you feel other nations see you 
as a legitimate point of contact on sanctions matters? Or will it take 
additional time for other nations to recognize the Office of Sanctions 
Coordination as a primary source for coordinating sanctions 
information?

    Answer. In a few short months, the Office of Sanctions Coordination 
(S/SC) has increasingly expanded its reach--and outreach--to other 
nations, including our UK, EU, and Indo-pacific partners, as well as 
Central Asian and Africa countries. Senior officials from these partner 
countries regularly seek our guidance and advice on sanctions policy 
issues involving Russia, anti-corruption, critical minerals, and other 
country-based and thematic programs, such as Global Magnitsky. There is 
more work to be done in certain regions to socialize our overarching 
coordination role, but we endeavor to approach this with a whole-of-
government approach that leverages contacts and expertise within the 
State Department and the Department of the Treasury.

    Question. Where does the United States need to improve 
communications with foreign countries on sanctions? Particularly on 
Russia sanctions?

    Answer. We have long had robust cooperation and communication with 
the UK, Canada, and EU on sanctions, including on Russia sanctions 
since 2014. We also have increased coordination with other key 
partners, such as Australia, New Zealand, Japan, and Korea. This is 
important to ensure that our communications with foreign countries on 
sanctions are tied to our foreign policy objectives and are grounded in 
a broader strategy. Looking ahead, we intend to enhance our 
communication and outreach to countries that traditionally have close 
ties with Russia, such as Turkey and others in Central Asia and the 
Caucasus region. By engaging both partner governments and the private 
sector, we can increase sanctions compliance and implementation, 
prevent illicit flows of money to and from Russia, and counteract 
sanctions evasion. More broadly, it is important that we continue to 
clarify the scope of our sanctions and counter the narrative that our 
sanctions are responsible for food insecurity or high energy prices, 
which we intend to do in concert with our G7 partners.

    Question. In particular, how would you say your communications with 
the European Union are going? How often to you communicate with DG 
FISMA?

    Answer. We have a strong, productive relationship with our EU 
partners--including at DG FISMA--and are continuously working to 
maintain alignment and bolster transatlantic sanctions unity. We also 
engage with key Member States, which are critical for continued unity 
and sanctions implementation. I personally have travelled to Brussels 
on numerous occasions since my confirmation to engage on Russia 
sanctions and related issues, such as the EU Solidarity Lanes and Oil 
Price Cap.

    Question. It is my understanding that earlier this year, when 
Russia sanctions were rolled out, DG FISMA had fewer than 20 staff 
responsible for all sanctions alignment, inquiries, and enforcement for 
all 27 EU member states. Do you feel DG FISMA is appropriately 
resourced to coordinate sanctions enforcement for the EU?

    Answer. The European Union's economic response has been robust and 
closely coordinated with the U.S. and our other partners. This reflects 
a response that draws on resources across the European institutions. We 
work across EU institutions and directorates, with DG FISMA, DG TRADE, 
and the European External Action Service, on different responses to 
Russia's actions; they along with others, work under the coordination 
of the Commission Presidency. We also work with the Council of member 
states and individual member states on the enforcement and 
implementation of sanctions. Several member states have created 
sanctions coordination and implementation offices, and the Commission 
has announced plans to create a sanctions coordinator's office that 
will augment its resources further. I defer to the Commission on 
questions related to its staffing and requirements.

    Question. How are your communications with Indo-Pacific nations 
participating in the Russia sanctions regime? What are the major 
challenges in engaging with Indo-Pacific nations on Russia sanctions?

    Answer. The Department has regular exchanges with our Five Eyes 
partners and with the Indo-Pacific nations that have supported Russia 
sanctions. During UNGA, I met with several of our Indo-Pacific 
partners--Japan, New Zealand, and South Korea--to discuss cooperation 
on Russia sanctions and related issues. Our Indo-Pacific partners are 
steadfast in their support and are looking for ways to improve their 
relatively new sanctions regimes and increase capacity.

    Question. In demarches sent by your office to other embassies, are 
you listed as the point of contact for embassies? If not, why not?

    Answer. Our office works with regional and functional bureaus 
throughout the Department to shape and send appropriate demarches on 
sanctions issues, ensuring they are tightly linked to our overarching 
policy objectives. As a coordinating office, the regional and/or 
functional bureaus send the demarches and collect any responses for 
consideration and incorporation into our overall policy efforts. This 
is a joint effort by all stakeholders in the Department of State, to 
include input from the Department of the Treasury, and it reflects a 
whole-of-government effort to ensure the right policy and technical 
experts are involved in our outreach to foreign partners.

    Question. How would you say the Office of Sanctions Coordination's 
interactions and communications with the Department of Treasury are 
going?

    Answer. Our office has developed productive relationships with our 
Treasury colleagues at all levels. We regularly speak and meet to 
coordinate on our targeting priorities, discuss our foreign policy 
objectives, deconflict, and simplify processes to improve the 
efficiency and efficacy of sanctions as a tool of foreign policy.

    Question. When it comes to identifying sanctions targets, how do 
you communicate with the Department of Treasury on who pursues 
targeting investigations?

    Answer. Conversations happen every day at every level to identify 
targets, discuss timelines, prepare supporting documentation, 
coordinate, and conduct outreach to industry and affected parties, and 
assess both the effectiveness of sanctions and any mitigation required. 
We also coordinate closely with other agencies, particularly the 
Department of Commerce, both through regular coordination meetings 
chaired by the National Security Council and as needed.

    Question. Intelligence-sharing is key to successful targeting 
efforts as well as effective enforcement of sanctions both in the 
United States and abroad. How would you say your interactions with the 
intelligence community (IC) are going? Does the IC respond to your 
requests in a timely manner? How often do you ask the Treasury 
Department to share classified intelligence? When you do, are those 
requests responded to in a timely manner?

    Answer. The intelligence community has been an invaluable partner 
in developing targets and identifying evasion across sanctions regimes. 
In the case of Russia, it also has helped us determine the efficacy of 
our sanctions and export controls and enabled us to refine and focus 
future actions. Treasury and State share classified information on a 
regular basis.

    Question. Understanding you are still setting up the organizational 
structure of the office, do you feel you are appropriately resourced 
for the staff you have and the staff you want to hire?

    Answer. The Department is committed to adequately resourcing the 
important work of the Office of Sanctions Coordination. The FY 2024 
President's Budget Request will be the first budget request for this 
office. Details regarding resource needs are currently under 
development. Once the FY 2024 Request is finalized in the coming 
months, I would welcome the chance to discuss how it supports the 
Office of Sanctions Coordination and ensures State Department-funded 
targeters and analysts have the resources needed to support the 
Secretary of State's sanctions authorities on Russia, Iran, and other 
programs.

    Question. The direct hiring authority (DHA) provided to you by 
Congress is set to expire soon. Would it help you and your office to 
have that authority extended?

    Answer. The direct hiring authority that Congress granted in the 
legislation establishing the office has enabled us to staff-up more 
swiftly and to acquire specific skills in critical areas. To date, we 
have utilized both the Department's regular hiring authority and the 
authorizing statute's special hiring authorities to extend offers to 
five sanctions and policy experts, but we need additional positions to 
succeed. It would be helpful to have the authority extended.

    Question. Sanctions on Russia's Energy Sector: During the hearing, 
in her exchange with Sen. Portman, Asst. Sec. Rosenberg stated that the 
reason the United States continues to extend general licenses (GL) 
8(a)-(c) is that the license is necessary to enable transactions that 
comply with the oil price cap. However, these licenses were first 
issued in February and have been extended twice since then. Thus, they 
predate the Administration's oil price cap proposal.
    Does this answer mean that the Administration intends to again 
extend this license when it expires in December?

    Answer. The Administration is discussing options to extend GL8C 
before its expiration in December. No determination has been made 
considering the length of the extension, should one be granted.

    Question. Is it the Administration's position that the oil price 
cap is the justification for the continued existence of the license?

    Answer. A decision to extend the license beyond its December 
expiration would reflect our commitment to see that energy markets 
continue to operate in a stable manner, including under the price cap 
regime that will come into effect.

    Question. Given that these licenses predate the oil price cap 
proposal by more than 7 months, what was the Administration's rationale 
for not imposing energy-related sanctions on Russia prior to the oil 
price cap proposal?

    Answer. The United States and our partners have multiple sanctions 
that have restricted the revenue Russia receives from its energy 
exports; reduce our reliance on Russian energy; and allow global 
markets to function smoothly. The U.S., UK, and now EU have banned the 
import of Russian oil, liquified natural gas, and coal; we could move 
earlier because of our strong domestic energy industry and 
infrastructure, and our EU partners have reduced their reliance on 
Russian gas and oil by substantial amounts. At the peak of the oil 
market this summer, Russian crude sold for substantial discounts to 
global oil prices. At the same time, energy markets are global, and we 
understand the importance of seeing those markets function smoothly, 
which GL8C facilitates.

    Question. Oil Price Cap Proposal: Has there been any progress on 
setting a price for the oil price cap?

    Answer. Yes. The price cap was announced.

    Question. What is the Administration's strategy as it relates to 
India with regard to the price cap?

    Answer. We continue to consult closely with India about the price 
cap and encourage India to negotiate prices consistent with, and if 
possible, below, the price cap. We also will continue to require any 
U.S. persons to comply with the requirements of the price cap to the 
extent that they are providing services related to the maritime 
transport of Russian oil, and we anticipate that our partners will 
maintain similar requirements. This means that the price cap can still 
achieve its objectives even if some buyers choose not to join because 
they will benefit economically from paying lower prices for Russian 
oil, and the Russian Government will earn below market prices for the 
energy products it sells.

    Question. What is the Administration's strategy as it relates to 
China with regard to the price cap?

    Answer. We continue to consult closely with China about the price 
cap and encourage China to negotiate prices consistent with, and if 
possible, below, the price cap. We also will continue to require any 
U.S. persons to comply with the requirements of the price cap to the 
extent that they are providing services related to the maritime 
transport of Russian oil, and we anticipate that our partners will 
maintain similar requirements. This means that the price cap can still 
achieve its objectives even if some buyers choose not to join because 
they will benefit economically from paying lower prices for Russian 
oil, and the Russian Government will earn below market prices for the 
energy products it sells.

    Question. What is the Administration's strategy as it relates to 
the United Arab Emirates (UAE) with regard to the price cap?

    Answer. We continue to consult closely with UAE about the price cap 
and encourage UAE to negotiate prices consistent with, and if possible, 
below, the price cap. We also will continue to require any U.S. persons 
to comply with the requirements of the price cap to the extent that 
they are providing services related to the maritime transport of 
Russian oil, and we anticipate that our partners will maintain similar 
requirements. This means that the price cap can still achieve its 
objectives even if some buyers choose not to join because they will 
benefit economically from paying lower prices for Russian oil, and the 
Russian Government will earn below market prices for the energy 
products it sells.

    Question. What is the Administration's strategy as it relates to 
Turkey with regard to the price cap?

    Answer. We continue to consult closely with Turkey about the price 
cap and encourage Turkey to negotiate prices consistent with, and if 
possible, below, the price cap. We also will continue to require any 
U.S. persons to comply with the requirements of the price cap to the 
extent that they are providing services related to the maritime 
transport of Russian oil, and we anticipate that our partners will 
maintain similar requirements. This means that the price cap can still 
achieve its objectives even if some buyers choose not to join because 
they will benefit economically from paying lower prices for Russian 
oil, and the Russian Government will earn below market prices for the 
energy products it sells.

    Question. What is the Administration's strategy as it relates to 
Germany with regard to the price cap?

    Answer. Germany is an important partner in the price cap as an EU 
leader, and we are working closely with Germany on its implementation.

    Question. In a recent Treasury briefing to congressional staff 
about the oil price cap proposal, Treasury briefers stated that 
enforcement will be handled by each participating country. Can you 
please confirm whether this is the case?

    Answer. The price cap works through service providers, which now 
have requirements to confirm that Russian oil being transported by sea 
is in compliance with the cap. (The requirements are tied to the role 
the service providers play in the transaction.) Because most service 
providers operate subject to EU, UK, and/or U.S. law the key services 
will be provided only upon the cap being respected. Enforcement, for 
example, against those who provide false documentation or obscure the 
origin or price of oil, will fall to the countries with jurisdiction. 
The EU may also implement additional enforcement measures, which are 
still under discussion by EU Member states.

    Question. The Organization of the Petroleum Exporting Countries 
(OPEC) recently announced a cut in global production of oil. Russia is 
a member [with observer status] of OPEC. How does this announcement 
impact the feasibility of the oil price cap proposal?

    Answer. With the price cap, we are creating clear incentives for 
key actors in global oil markets--Russia, oil importing countries, and 
market participants--to maintain the flow of Russian oil while reducing 
the Kremlin's revenues. These goals remain the same regardless of 
OPEC's actions.

    Question. Putin recently announced that he will put an embargo on 
any country that adheres to the oil price cap. In your view, is he 
serious about this threat?

    Answer. Russia has clear economic and strategic reasons to continue 
to sell oil to its customers. Russia may, as President Putin said, 
refuse to sell oil to countries that join the price cap coalition, 
although it remains unclear whether Russia has made the same threat to 
those who negotiate prices consistent with the price cap even though 
they have not formally joined the coalition.

    Question. Senators Toomey and Van Hollen recently introduced 
legislation that would impose secondary sanctions on countries and 
entities that do not abide by the oil price cap. Do you support this 
legislation?

    Answer. I sincerely appreciate the Senators' efforts to help us 
impose economic costs on Russia for its war on Ukraine and am happy to 
engage further with them on this. As explained above, there already are 
incentives for countries and service providers to operate consistently 
with the price cap, including enforcement mechanisms.

    Question. During the hearing, I raised concerns about foreign 
persons who are employees of a subsidiary of a designated Russian 
defense company potentially being granted visas to attend an upcoming 
conference in the United States. My staff shared additional information 
regarding those conference attendees. What action have you taken to 
look into this issue since receiving that information?

    Answer. The conference attendees' list provided to the Department 
may have contained information about U.S. citizens or Legal Permanent 
Residents. The Department generally may not collect or use information 
about U.S. citizens or Legal Permanent Residents associations with 
business or trade groups.

    Question. Why has the Biden administration not sanctioned VSMPO-
Avisma given its extensive ties to other sanctioned Russian defense 
entities and role as a supplier of critical materials to the Russian 
defense-industrial complex?

    Answer. The United States has led a coalition of allies and 
partners in imposing sanctions and export controls that have undermined 
Russia's ability to carry out its unprovoked war of aggression against 
Ukraine. We continue to evaluate entities for addition to those already 
sanctioned. While we cannot preview sanctions, all options are on the 
table.

    Question. Does the Administration believe it currently has the 
domestic authority to seize and confiscate Russian sovereign assets?

    Answer. There are complex legal and policy issues surrounding the 
potential seizure and confiscation of Russian sovereign assets, and 
there is no legal mechanism that allows us to turn over funds to 
Ukraine or to set them aside for Ukraine's use. We will continue to 
work with the interagency to examine all domestic and international 
legal authorities and options.

    Question. Does the Administration support legislation that would 
provide authority to seize and confiscate Russian sovereign assets?

    Answer. Russia's brutal invasion of Ukraine has caused untold 
damage, including billions of dollars in damage to the country's 
infrastructure, residential buildings, businesses, schools, and 
cultural facilities. The Administration has sought to enhance the U.S. 
Government's authority to hold the Russian Government and Russian 
oligarchs accountable, including a streamlined process for the seizure 
of oligarch assets, an expansion of the assets subject to seizure, and 
a mechanism to allow the proceeds to flow to Ukraine. We are working 
with the international community to coordinate actions involving 
Russia's blocked assets and are committed to keeping these assets 
blocked, as long as Russia continues its brutal war in Ukraine.

    Question. JCPOA: Moscow seeks to continue several civil nuclear 
projects in Iran that were previously allowed under the Joint 
Comprehensive Plan of Action, or JCPOA. In addition to a $500M debt the 
Iranian regime owes to Russia for previous work, Russia previously held 
a $10 billion contract to maintain and build additional reactors at the 
Bushehr nuclear power plant. In addition, Russian state-owned 
enterprise, Rosatom, has been historically involved in both enriched 
uranium and heavy water exchanges to ensure Iran's stockpiles are under 
JCPOA-prescribed limits. Jake Sullivan and State Department Spokesman, 
Ned Price confirmed Russia's role in JCPOA implementation in public 
comments. How does the Department and the Biden administration intend 
to ensure that Russian financial windfall from a potential JCPOA re-
entry does not violate both Ukraine and Crimea sanctions and that funds 
will not be used to support Putin's continued aggression against 
Ukraine?

    Answer. We have made clear that the JCPOA is not our focus now, the 
JCPOA, UNSCR 2231, and previous UN Security Council resolutions on Iran 
permitted Russia's engagement with Iran regarding the Bushehr nuclear 
power plant. It remains in the interest of the international community 
that Russia continue the support necessary for safe operation of the 
nuclear facility, that enriched uranium for use as fuel at the power 
plant continues to be produced outside Iran, and that spent fuel is 
removed from Iran. We are implementing sanctions measures against 
Russia unprecedented for an economy of its size and continue to work 
closely with our allies and partners to impose significant further 
costs on Russia for its war of aggression against Ukraine.

    Question. The Arab Gas Pipeline: Amos Hochstein, Special Envoy for 
Energy, was central to negotiations on the Arab Gas Pipeline, bringing 
Egyptian natural gas through Jordan, through Syria, and ultimately into 
Lebanon. The deal has since stalled over concerns with Caesar Syria 
Civilian Protection Act sanctions compliance. In addition to Caesar 
concerns, Russian state-owned enterprises are involved in the repair 
and maintenance of Syrian portions of the Arab Gas Pipeline. Is the 
Arab Gas Pipeline compliant with Caesar Syria Civilian Protection Act 
sanctions? Why or why not?

    Answer. As Secretary Blinken has made clear, we have not lifted or 
waived Syria-related sanctions, and these sanctions remain in place. 
Regional proposals to sell Egyptian gas and Jordanian electricity to 
Lebanon are about providing the Lebanese people with more sustainable 
energy sources, which could significantly increase the number of hours 
of power they currently receive from Lebanon's electricity utility per 
day. Neither of these proposals would involve any financial payments to 
the Assad regime. The potential involvement of the World Bank would 
promote transparency, accountability, and reform in the electricity 
sector, which is in desperate need of structural transformation. The 
Departments of the Treasury and State will review details to assess and 
address any possible sanctions concerns after receiving final financing 
details from the World Bank, in addition to the final contracts from 
the parties.

    Question. Is Russia's involvement in the repair and upkeep of the 
Syrian portion of the Arab Gas Pipeline compliant with the Caesar Act 
or existing sanctions regimes against Russia for its actions in Crimea 
and Ukraine?

    Answer. A number of Syrian and Russian entities involved in the 
Syrian economy are designated under various U.S. sanctions authorities. 
The Departments of the Treasury and State will review details to assess 
and address any possible sanctions concerns after receiving final 
financing details from the World Bank and final contracts from the 
parties.
                                 ______
                                 

           Responses of Ms. Elizabeth Rosenberg to Questions 
                  Submitted by Senator James E. Risch

    Question. Sanctions on Russia's Energy Sector: During the hearing, 
in your exchange with Sen. Portman, you stated that the reason the 
United States continues to extend general licenses (GL) 8(a)-(c) is 
that the license is necessary to enable transactions that comply with 
the oil price cap. However, these licenses were first issued in 
February and have been extended twice since then. Thus, they predate 
the Administration's oil price cap proposal.
    Does this answer mean that Treasury intends to again extend this 
license when it expires in December?

    Answer. Treasury has extended GL 8C with the issuance of GL 8D. 
This authorization is valid until May 15, 2023, though Treasury 
reserves the right to revoke a license at any time and will consider a 
range of factors in any decision to do so.

    Question. Is it the Administration's position that the oil price 
cap is the justification for the continued existence of the license?

    Answer. Russia's brutal war has not only caused widespread 
destruction in Ukraine, but has had negative spillover effects--
including through higher energy prices--on people around the world.
    As we have imposed sanctions on Russia for its unprovoked war in 
Ukraine this year, we have taken painstaking efforts to ensure we have 
done so in a way that does not take energy supply off the market--an 
outcome that would hurt low-and-middle income countries the most.
    Through the issuance of GL 8 and its subsequent amendments to its 
current version of GL 8D, we have broadly carved out Russian energy-
related payments to keep these transactions for other countries 
flowing, and Treasury's extension of GL 8C to GL 8D demonstrates our 
commitment to further bolstering our collective energy security.
    GL 8D will also play an important role in ensuring energy 
transactions can continue in support of our efforts to work with our 
partners to implement a price cap on seaborne Russian-origin oil, which 
aims to restrict the revenues the Russian Federation earns from oil, 
and to do so in a way that maintains a reliable supply of oil to the 
global market.

    Question. Given that these licenses predate the oil price cap 
proposal by more than 7 months, what was the Administration's rationale 
for not imposing energy-related sanctions on Russia prior to the oil 
price cap proposal?

    Answer. As noted during my testimony, fundamentally, the challenge 
we face in using financial measures to hold Russia accountable while 
mitigating the effects of the war on third countries is of a different 
kind from what we face in other sanctions programs. Russia is a 
sizeable international economy and a globally important energy 
producer, and over the last 30 years it has grown closely tied--and in 
some instances thoroughly intertwined--with some of our closest 
international partners and allies.
    Given that the energy sector is a key generator of revenue for the 
Russian Government, we have sought to apply pressure on Russia by 
targeting certain activities in the energy sector. Most notably, on 
March 8, 2022, the President issued Executive Order (E.O.) 14066, which 
prohibits the importation into the United States of Russian oil, 
liquefied natural gas, and coal as well as bans new investment in the 
energy sector in the Russian Federation by U.S. persons. In addition, 
Treasury imposed energy-related sanctions on Russia as far back as 
2014, when we imposed sanctions that prohibited U.S. persons from 
providing new financing to Russia's largest oil firm, Rosneft, as well 
as Novatek, limiting their access to U.S. capital markets.
    At the same time, we seek to ensure that our sanctions do not 
disrupt energy supplies for our partners and allies, especially during 
this crucial period when many partners and allies transition away from 
Russian energy. Accordingly, GL 8 and its subsequent amendments to its 
current version of GL 8D have authorized certain payments related to 
energy for these partners and allies that transit the U.S. financial 
system. GL 8D will also play an important role in ensuring energy 
transactions can continue in support of our efforts to work with our 
partners to implement a price cap on seaborne Russian-origin oil, which 
aims to restrict the revenues the Russian Federation earns from oil, 
and to do so in a way that maintains a reliable supply of oil to the 
global market.
    As also noted in my testimony, applying financial pressure to curb 
Russia's energy profits requires a different, creative approach to make 
sure that Russian coffers, not regular citizens in our economy and the 
rest of the world, bear the costs we impose. This is exactly the 
challenge that the oil price cap seeks to address.

    Question. Oil Price Cap Proposal: Has there been any progress on 
setting a price for the oil price cap?

    Answer. Yes. The price cap coalition countries has now banned a 
broad range of services--including maritime insurance and trade 
finance--related to the maritime transport of crude oil of Russian 
Federation origin (``Russian oil'') unless purchasers buy the oil at or 
below $60/barrel. On February 5, 2023, this ban on services will extend 
to the maritime transport of Russian-origin petroleum products unless 
the products are sold at or below a price cap to be announced before 
February 5, 2023.

    Question. What is the Administration's strategy as it relates to 
India with regard to the price cap?

    Answer. The Treasury Department regularly engages Indian Government 
counterparts as well as private-sector entities to highlight current 
guidance; explain the objectives and mechanics of the price cap policy, 
including specific attestation and recordkeeping requirements; and flag 
potential risks, particularly relating to India's role in energy 
markets.

    Question. What is the Administration's strategy as it relates to 
China with regard to the price cap?

    Answer. The Treasury Department has engaged China at senior levels 
to share our intent and desired effect for imposing a price cap on 
Russian oil. A price cap seeks to prevent further increases in global 
energy prices, and cut into Russia's revenue.

    Question. What is the Administration's strategy as it relates to 
the United Arab Emirates (UAE) with regard to the price cap?

    Answer. The Treasury Department is engaging with UAE Government 
counterparts and private-sector entities to highlight guidance; explain 
the objectives and mechanics of the price cap policy, including 
specific attestation and recordkeeping requirements; and flag potential 
risks particularly relating to the UAE's transshipment role in energy 
markets.

    Question. What is the Administration's strategy as it relates to 
Turkey with regard to the price cap?

    Answer. The Treasury Department is engaging Turkish Government 
counterparts and private-sector entities to highlight guidance; explain 
the objectives and mechanics of the price cap policy, including 
specific attestation and recordkeeping requirements.

    Question. What is the Administration's strategy as it relates to 
Germany with regard to the price cap?

    Answer. Germany, as the G7 president, has been a key partner in 
developing the Russian oil price cap policy. Our leaders have 
coordinated about critical milestones, such as the September 2 G7 
announcement of the price cap. Our technical experts have been in 
continuing communication with German technical experts to refine the 
implementation details.

    Question. For questions 4-8, what opportunities are there for the 
United States to work with or assist each of these respective nations 
on their energy needs so that they are not forced to turn to Russian 
oil?

    Answer. The Departments of State and Energy generally lead on 
efforts to work with other countries to meet their energy needs. 
Treasury will fully support these Departments' efforts as necessary and 
appropriate.

    Question. In a recent Treasury briefing to congressional staff 
about the oil price cap proposal, Treasury briefers stated that 
enforcement will be handled by each participating country. Can you 
please confirm whether this is the case?

    Answer. The price cap is implemented as a prohibition on certain 
services unless Russian oil is purchased at or below the cap. As the G7 
Finance Ministers' December 2 statement confirmed, the G7 countries, 
along with other allies and partners, is prohibiting the provision of 
services that enable maritime transportation of such oil unless 
purchased at or below the cap. If an entity wants to access these 
services from participating countries, it will need to demonstrate that 
it bought Russian oil at or below the cap.
    Treasury, together with other departments and agencies of the U.S. 
Government, is working with partner countries implementing the 
maritime-services policy, or otherwise coordinating with the United 
States, to enforce the price cap, including by sharing information.
    I would also note that OFAC has authorities to address actors that 
violate or evade the price cap, including actors that provide falsified 
or erroneous information to U.S. service providers. Key to the price 
cap policy is the ``safe harbor'' afforded to U.S. service providers 
that act in good faith. These actors can use a recordkeeping and 
attestation process to be afforded the safe harbor, so that they will 
not face penalties if someone causes them to inadvertently violate the 
price cap. OFAC intends to focus its enforcement responses on those 
actors who willfully violate or evade the price cap.

    Question. The Organization of the Petroleum Exporting Countries 
(OPEC) recently announced a cut in global production of oil. Russia is 
a member of OPEC. How does this announcement impact the feasibility of 
the oil price cap proposal?

    Answer. The price cap policy is intended to restrict the revenue 
the Russian Federation earns from oil, and to do so in a way that 
maintains a reliable supply of oil to the global market. By contrast, 
OPEC's announcement reduces that supply. Ultimately, Russia may make 
choices that have negative impacts on emerging markets and even its 
allies in the developing world, but Russia bears responsibility for 
those choices.

    Question. Putin recently announced that he will put an embargo on 
any country that adheres to the oil price cap. In your view, is he 
serious about this threat?

    Answer. With the price cap policy, Russia retains clear incentives 
to continue to provide oil to the global market. One major aspect of 
our sanctions against Russia is that Russia has become even more 
reliant on energy exports for government revenue. If Russia decides to 
halt the export of its oil to all markets that implement a price cap, 
Russia will suffer significant decreases in government revenue and also 
cause long-term damage to its own goal of being a reliable global 
energy exporter.

    Question. Senators Toomey and Van Hollen recently introduced 
legislation that would impose secondary sanctions on countries and 
entities that do not abide by the oil price cap. Do you support this 
legislation?

    Answer. As Deputy Secretary Adeyemo said in June, we do not think 
that secondary sanctions are necessary to implement the price cap 
policy.

    Question. If secondary sanctions were to be imposed against India, 
how would they affect our ability to work with India in the Indo-
Pacific, bilaterally and through the Quad? What opportunities will we 
lose for cooperation if we apply secondary sanctions on India?

    Answer. As Deputy Secretary Adeyemo said in June, we do not think 
that secondary sanctions are necessary to implement the price cap 
policy. We will continue to engage with India on a variety of sanctions 
matters and cooperate on shared interests.

    Question. How do we balance enforcement of sanctions against Russia 
without unnecessarily harming our allies and partners who have 
legitimate energy needs and concerns?

    Answer. Treasury will continue to effectively and appropriately use 
its tools, including enforcement actions, to hold actors around the 
world accountable for attempting to undercut our sanctions or otherwise 
support Russia's aggression in Ukraine. However, alongside enforcement, 
Treasury, with G7 partners, continues to engage with the public on its 
strategy to restrict the Kremlin's revenues while keeping Russian oil 
flowing to global markets.

    Question. Sanctions Enforcement: During the hearing, I raised 
concerns about foreign persons who are employees of a subsidiary of a 
designated Russian defense company potentially being granted visas to 
attend an upcoming conference in the United States. My staff shared 
additional information regarding those conference attendees. What 
action have you taken to look into this issue since receiving that 
information?

    Answer. Treasury appreciates the information you provided. Treasury 
routinely assess open-source, business-proprietary, and classified 
information to identify potential violations of U.S. sanctions, 
including those imposed on Russia, and welcome leads provided by 
Congress. If a potential sanctions violation is discovered, Treasury 
will pursue an appropriate enforcement action. However, the agency 
cannot comment on sanctions enforcement investigations. You may also 
consider referring this question to the Departments of State and 
Homeland Security.

    Question. Why has the Biden administration not sanctioned VSMPO-
Avisma given its extensive ties to other sanctioned Russian defense 
entities and role as a supplier of critical materials to the Russian 
defense-industrial complex?

    Answer. All options are on the table; however, we do not comment on 
sanctions investigations.

    Question. Seizure of Sovereign Russian Assets: Does the 
Administration believe it currently has the domestic authority to seize 
and confiscate Russian sovereign assets?

    Answer. The Treasury Department has supported Administration 
legislative proposals, led by the Department of Justice, to streamline 
the process to recoup proceeds from seized and forfeited private assets 
and use them to remediate the harm caused in Ukraine. You may also 
consider referring this question to the Department of Justice.

    Question. Does the Administration support legislation that would 
provide authority to seize and confiscate Russian sovereign assets?

    Answer. As stated above, the Treasury Department has supported 
Administration legislative proposals, led by the Department of Justice, 
to streamline the process to recoup proceeds from seized and forfeited 
private assets and use them to remediate the harm caused in Ukraine. 
Legislation related to seizing and forfeiting Russian sovereign assets 
would likely pose complex questions of international and domestic law, 
and would implicate sensitive policy considerations. You may also 
consider referring this question to the Department of Justice.

    Question. MIDDLE EAST/NORTH AFRICA: JCPOA Re-entry and Associated 
Nuclear Work: Moscow seeks to continue several civil nuclear projects 
in Iran that were previously allowed under the Joint Comprehensive Plan 
of Action, or JCPOA. In addition to a $500M debt the Iranian regime 
owes to Russia for previous work, Russia previously held a $10 billion 
contract to maintain and build additional reactors at the Bushehr 
nuclear power plant. In addition, Russian state-owned enterprise, 
Rosatom, has been historically involved in both enriched uranium and 
heavy water exchanges to ensure Iran's stockpiles are under JCPOA-
prescribed limits. Jake Sullivan and State Department Spokesman, Ned 
Price confirmed Russia's role in JCPOA implementation in public 
comments. How does the Department and the Biden administration intend 
to ensure that Russian financial windfall from a potential JCPOA re-
entry does not violate both Ukraine and Crimea sanctions and that funds 
will not be used to support Putin's continued aggression against 
Ukraine?

    Answer. The United States is committed to strictly enforcing our 
sanctions against both Russia and Iran and holding accountable Iran and 
those supporting Russia's war of aggression against Ukraine.

    Question. The Arab Gas Pipeline: Amos Hochstein, Special Envoy for 
Energy, was central to negotiations on the Arab Gas Pipeline, bringing 
Egyptian natural gas through Jordan, through Syria, and ultimately into 
Lebanon. The deal has since stalled over concerns with Caesar Syria 
Civilian Protection Act sanctions compliance. In addition to Caesar 
concerns, Russian state-owned enterprises are involved in the repair 
and maintenance of Syrian portions of the Arab Gas Pipeline. Is the 
Arab Gas Pipeline compliant with Caesar Syria Civilian Protection Act 
sanctions? Why or why not?

    Answer. The World Bank requested that the Government of Lebanon 
complete certain sectoral reforms before the World Bank can bring the 
project to its Board for approval. We have made clear to the parties 
involved, including the World Bank, that we need more information--
including the final financing details from the World Bank--before we 
can make a final determination about whether the activities would be 
sanctionable.

    Question. Is Russia's involvement in the repair and upkeep of the 
Syrian portion of the Arab Gas Pipeline compliant with the Caesar Act 
or existing sanctions regimes against Russia for its actions in Crimea 
and Ukraine?

    Answer. We are aware of reports that the Russian firm Stroytransgaz 
was involved in construction of the Syrian portion of the Arab Gas 
Pipeline, which was completed in February 2008. Treasury designated 
Stroytransgaz on April 28, 2014. We have made clear to the parties 
involved, including the World Bank, that we need more information--
including the final financing details from the World Bank--before 
Treasury, in collaboration with State, will be able to conduct its 
analysis to determine the implications of any potential interactions 
with relevant sanctioned entities that may be part of the proposed 
deal.
                                 ______
                                 

              Responses of Mr. James O'Brien to Questions 
                    Submitted by Senator Todd Young

    Question. Noting how you mentioned that Russia is having 
difficulties procuring key components for its military, including 
advanced weaponry and microchips, can you speak to the long-term 
impacts of Russia's export of military hardware to other countries?

    Answer. I expect that the long-term effect will likely be to 
significantly reduce Russia's export of arms and military equipment to 
other countries as Russian equipment will not be top of the line. We 
are already seeing countries accelerating the phase-out of Russian 
equipment given the general poor performance of Russian systems on the 
battlefield in its unprovoked war in Ukraine.

    Question. Would it be reasonable to conclude that these shortages 
mean a significant degradation of the quality and effectiveness of 
Russian arms presently on the market?

    Answer. I expect that the growing lack of access to modern 
components will continue to wear down Russia's ability to both wage its 
imperialistic war in Ukraine as well as to provide top-grade arms on 
the world market.
    Since 2017, largely as a result of United States sanctions and 
diplomatic engagement, Russian arms exports have decreased 
significantly. Indications are that this trend will accelerate as a 
result of component shortages caused by the coordinated work of 37 U.S. 
Allies and partners to block the export of such components to Russia.

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