and we have to keep add advocating for these service members. the fight will only get harder as the population of veterans increases and you are that voice for that community, for this community, for our community. you are the men and women whom make a difference and impact the lives of those who have served. you are the ones making sure that our young people will continue to serve in our nation's military because they perceive that those who served before them have been treated well and have been appreciated by this nation, so please keep doing what you do such a phenomenal job at. keep looking out for our military and their families and our veterans because they need you. thank you. [applause] >> well, thank you, secretary,

suitte, for the remarks and on your leadership and that of your great team headed by kathy. just a fabulous job, and realm know we're here today to continue to raise the bar in support to our inter military family and particularly our wounded warriors and their family, and so we're very grateful for your leadership, very grateful for helping us kick this off with terrific remarks, and on behalf of moa and u.s. naval institute, we want to present you with the usni edition of the military advantage. >> thank you very much. thank you. [applause] okay, we're on schedule, so what we'd like to do now is before we bring up the first dynamic pam, take a 20 minute break. i'd like everybody to be back here at 20 of 10 if that's okay.

thank you, all. [inaudible conversations] >> live this afternoon on capitol hill is the cato institute hosting a discussion calling for the privatization of airport security. the organization thinks that the transportation's security administration proven to be an expensive failure, and that security should be turned over to the airlines themselves. this is live on c-span2. we expect it to get underway in just a moment. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> again, live in the ray burn house office building for a discussion on whether the transportation security administration should be prieftized. that's the position of the cato institute. they'll discuss that in the live event here on capitol hill. the think tank says tsa is a costly failure and should be turned over to the airlines. live coverage here on c-span2 should get underway here in just

a moment. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> hi, everybody. we'll get started while you get your food and get seated, but we'll get the show started. today, we're going to be talking about the transportation security administration and larger dhs issues. the handout was in the front,

but this is a recently published paper about demolishing the security. the first speaker is david rickers, a policy analyst for the cato institute focusing on justice issues. he was an infantry and special forces officer including three tours in afghanistan. he's been awarded two bronze star medals. following that is jim harper, cato's director of policy studies. he directs law and policy to the unique problems of the information age in privacy and intellectual property. he was asounding member of the department of homeland's security advisory committee and co-edited a book. he's the author of a website of

washingtonwatch.com, and with that, i'll turn it over to dave. >> well, thank you, all, for coming out. i'll note as laura mentioned, the comments i make today are mine and not those of the department of defense or army. so a brief outline. we're talking about abolishing the tsa, once again, part of the umbrella of the policy announcement i pushed abolish, and from the security, we'll talk about the aviation industry. we'll talk about not just abolishing tsa, but the federal air marshall service, a hook we have to talk about. i'll give a plug for pa, and

i'll pass it on to jim harper to talk about profiling and other identity issues. what is the proper federal role in counterterrorism? not just in aviation security, but generally. to begin with, we have to, especially in these tight fiscal realities we face today, look at drawing the proper lines where we spend federal dollars. to begin with, fundamentally, is it a public good? if it's a public good, we should spend public dollars, but if it's a private good, leave it to the private sector, and commercial passenger aviation is a private good, so in general principle, if we keep that in the hands of the private sector, we would be allocates resources more effectively. fiscal federalism is important. i talk about this in the policy analysis with regard to wasteful federal grant programs spending federal dollars to either subsidize or incentivize state

spending. we also give out a lot of many millions of dollars in wasteful grants to localities for a lot of unused decontamination equipment. you probably heard a lot of the stories, and timely, we have to scrutinize the cost effectiveness of whatever dollars we spend. of the money that we've spent since 9/11 in homeland security, a lot of it has been wasted. the recent study by john mueller and mark stuart says in order to survive a cost benefit analysis, increased homeland security expenditures since 9/11 have to detour, foil, or protect against 1,0677 time square type car bombs per year or more than four a day. there's not that many terrorists out there, and we've done a good job since 9/11 of shedding liberties and 5 lot of dollars

in the pursuit of perfect safety. perfect safety is not attainable, and so moving towards the case for privatization, we have to admit the fact what we do in aviation security is security theater. it is efforts to make us feel safer, but they might not make us safer. i include in this removing shoes, liquid quantitity restrictions, body scanners, generally security theater. as noted security expert puts it, we'd be better off returning security to a pre-9/11 regime from the passenger side and focus on airport employee screening because they have access we don't, bag screening for explosives, and relying on intelligence work to interpret plots because that pays bigger dividends on the dollar. however, there's no bureaucratic incentive to reach this conclusion and enact these policies. quite the opposite. in fact, bureaucratic incentives

dictate fighting the last war and not letting an attack repeat itself. it's dov logic; right? because of this wait times, inefficiency, inconvenience to the passengers and effectiveness are secondary concerns of protecting the bureaucracy and the people in charge of it. there's a creep away trend from the free society. i think it's striking how within a two week period the nfl screening at stadiums because one person snuck a taser into a football game went from just regular metal detector screening to enhanced pat downs in a matter of two weeks. it's an amazing knee-jerk response that we program ourselves into. i think the only way to get to a rational employment of aviation security resources is if we take government out of it because the market will simply do a better

job of allocating risk and assessing risk than the government will. have we seen some privatization? well, we have in a form, and this is the screening partnership program. as you probably know, it was created by atsa, the authorizing legislation that created the tsa. it started as a pie lot program in five airports to ascertain whether or not it was feasible to do airport security after 9/11 the way we've always done security, letting airports and airlines provide the security. after that initial five airport test was deemed a success, it expanded to 16 airports, however, that 16 airport count has been capped as the tsa has moved towards unionization and collective bargaining agreement. from this, we've seen that private security or at least contract security is no less

effective than the tsa federalized screeners, and no on the on the side is pointing towards a lack of effectiveness. in fact, in many of the studies we've found, they are more effective than the federalized screeners. there's a bit of a war of numbers here, but generally speaking, i think we can say it will not cost more than employing federalized tsa screeners if we were to have the screening partnership program screeners. there's a lot of data going back and forth, but the initial bearing point study contract screeners performed consistent or better than tsa screeners and screening costs were reduced in most cases and had the airport security directors had the ability to really use all the tools of a privatetized system, they would have been more first time. tsa countered that the screening partnership program would be as much as 17% more expensive. the gao questioned techniques,

but the tsa failed to enact the data, the number crunches reforms, so there's a war of numbers on cost. i would note that the recent house committee on transportation oversight found that privatetizing lax, the los angeles international airport alone, saves $38 million annually for taxpayers. in some plod eels, it's 68% cheaper than tsa programs. this is not privatization. it's an instance where the tsa gives permission to the airport to move towards the contract model. they select the contractor to provide the security. they dictate methods by which security is provided. that's not privatization, and if we were to actually move to a fully privatized model, this

would be on the flying public because the costs of providing security would be paid for by the the costs within the airline ticket that you would buy and not as it is now, about 25% paid by tsa fee, $2.50 added to each ticket, and the rest by the taxpayer. tax it on to the flying public and not the taxpayer, then you would see a significant reduction in costs, wiping out almost all of the federal costs for providing aviation security. there's two routes to do this. first, outright abolish the tsa and allow the insurance market to provide the, you know, the fall back if there is a terrorist attack, and let's admit airlines have a great insenttive to prevent terrorist attacks. going bankrupt is a great incentive not to allow terrorists 07b your planes.

if there's squirmishness to allow the free market to do the work and allocate risks effectively, the safety act can provide some limited little for certified security providers. if the airlines and airports were certified, there were cap and reliability, but the incentives of not letting your planes get blown up so you don't go bankrupt is a good model. a few words on unionization. first, this is a much more rigid labor model than the one we currently have, and i think that even though the initial agreement as agreed upon in the national letter at the start of the unionization process, even though it puts some of the full timely provisions off the table and says we allow collective bargaining for the part time labor provisions, that's actually a really significant piece of the puzzle because

right now tsa main tapes what's called the national deployment force. this is a pool of tsa screeners that deploy to offset seasonal demand and other labor shortages at the nonfpp, the federalized airports at a significant cost to the taxpayer. why significant? because you pick up a federal employee, flying them to some other place, paying for a hotel room, telling for dm, and displacement from family. instead of that, it's obvious and letting the market take care of it and airports with a seasonal flux use a contractor, use part time contracts to fill that need. i think that's a much more effective and better economic model for that piece of the security market for aviation security. i note that collective bargaining has not worked out well. the border control has been stung several times with the labor relations authority

dictating by terms of collective bargaining disciplinary issues within the border patrol, someone falling asleep at the post. do we have to give warning first? training issues, so transporting that into the tsa is actually going to decrease our security and increase labor costs. it's a lose-lose for the taxpayer. so i'm going to move on now to the federal air marshall service and how i think abolishing the service is important because it makes a significant emotional leap to get past the events of september 11th, 2001. i say this because it was a hijacking, and we make the emotional connection between a hijacking an airmarshall by saying if we had air marshalls on the flight, this wouldn't

have happened. going through the facts, we have counter hijacking resources in place and admitting this is an area where we are strong would undermind the inflated terrorist threat that is made about in the media quite frequently. a bit of history about the air marshall service. there's a few dozen. i think there's 33 prior to september 11, 2001, and it grew to over a thousand. the number is classified now as it should be. as representative duncan from tennessee noted, we spent $860 million for an average of four arrests a year, so that's $215 million average spent per arrest. that number is now $930 million, so the map is actually worse, but i think we have to discuss, you know, what's our metric? what's our yardstick for success with regard to the air

marshalls? is it arrests or deterrence? should we view them not suture as law enforcement officers because by the time they arrest, a lot of systems prior to the air marshall intervening has broken down, or is it to detour hijacking attempts? if the rational is to detour, you don't need a law enforcement officer, just a security guard. if we envision the air marshalls as plain clothed security guards, it makes more sense than to use federal law enforcement to do that. as i said, the, you know, there's a lot of time and distance from september 11th 2001 and terrorists have changed tactics, and the tactics employed on that day are not the tactics we see today. we don't see attempts to get into the cockpit by groups of men armed with weapons. we need people trying to get secret explosives on to the plane, and because of this change in tactics, airlines

question the ability to maintain air marshalls since they have been employees since 9/11 and they asked the service to take your officers out of first class because you are using our prime real estate, our most lucrative real estate on the plane, and the threat is not there necessitating putting officers between the bulk of the body of passengers and the cockpit. well, if the airlines made that leap, why can't we? we should note it's not a very effective in terms of cost effectiveness, getting back to making rational decisions about spending money. it's not a good deal for the taxpayers. what are the odds of an air marshall stopping a hijacking attempt? they put an air marshall in every flight. that's really expensive. we'd spend more than we spend on the whole of the tsa, about $8

billion now. we would spend $9.3 billion to reach 100% coverage. now we have 10% coverage, and one study assumed air marshall presence on 10% of flights found the cost of per life saved is $180 million. that's more than the office of management and budget recommendation of $1 million to $10 million. $180 million is an extreme amount of money to spend on per, you know, per life saved basis. however, hardened cockpit doors that were installed on all airliners are costing effective with an estimated $800,000 per life saved. that's a good expenditure of resources. to note here what's changed, there's two big changes since 9/11 and actually on 9/11 that changed the rational of

hijacking. there's the hardened doors that are cost effective and good counter measure to employ. the passengers now now they have to fight back. it's all marbles. we're not going to get flown to a tarmac and negotiate for release of political prisoners. the airlines are a cruise missile, weapons, and they want to crash them into high value terrorism targets, so three quarters of the way through on flight 93, the passengers fought back and the unorganized militia took down flight 93. sense that time, we've seen an unruly passenger incidence. we have about 200 a year. the passengers react, subdue fellow passengers who try to conduct a terrorist attack. we saw this with the shoe and underwear bomber both tackled by flight attendants and fellow passengers. do a google search on unruly

passenger subdued, you'll be astounded how frequently this happens with not just terrorists, but being intoxicated can get you hog tieded by your fellow passengers. [laughter] but if you think, if we are attached to the idea of having armed counter hijacking personnel on aircraft, the deterrence is enhanced if privatized because it's only possible because we live in a pretty open society so because their bottom line budget is a matter of public record, we can look at that and say it's pretty cost effective. now, if this was employed by the airlines and delta had a body of air marshalls they employed like private plain clothed security guards, and southwest had one and periodically show an advertisement advertising the prowess of the air marshalls in

close quarters fires markmenship, that's there. it's part of the overall operating budget and you don't know. that's deterrence. you get that from a private model and not a public one. i note in terms of having armed personnel on the aircraft, if you are attached to the idea, then the federal flight deck officer program, the means by which we arm pilots is a great deal for the taxpayer. we spend $25 million a year on the whole of crew training including the federal flight deck officer or the armed pilot program because the pilots volunteer for it and they fit the bill, travel to the training, pay for the expenses associated with being qualified for the program. that's a great deal for the taxpayer, and honestly, you know, the skill level required for an armed pilot, you know, shooting at someone breaking through the already hardened cockpit door, which is unlikely, but if it happens, you don't

really have to be, you know, as proficient as an an air marshall to get that done. i note there's a body of pilots willing to do this. 70% of them have military background. i think they can do that job in an extreme situation. now while i have a a captive audience and you're in your chair, i'll talk about the policy analysis a bit. i talk about how the department of homeland security as an umbrella organization does not make a lot of sense. on capitol hill, we always hear this proposal how we need to have one committee that oversees all dhs operations in each chamber. that is a completely unrealistic goal. there's 108 committees with oversight over dhs. why is that? because when you take 22 previously unconnected federal agencies and you stick them under one management umbrella, that requires 5 lot of

oversight. this one committee business is unrealistic. imagine if we did that, the size of that committee. what would the staff look like? you would have an unworkable management problem within the staff to supervise dhs if you were to do that, and honestly as a management theory this is called span of control. the number of suitte subordinates under one supervisor and one supervisory administrative umbrella. if that made sense, then in the free market there would be one company aggregating goods and services into one place. if this made sense in terms of government, the duties and responsibilities in the cabinet would have been lumped under one person, the secretary of government. it does not make sense, have not done those things because it's an unworkable model. abolish the tsa, i talked about that. i talk about federal --

waste in federal programs. i winded up talking about fugs centers, and these are state and local organized intelligence analysis cells that spend a lot of money duplicating the efforts of the fbi and counterterrorism and driven by following the money. in the recent book by dana priest, there's a market on tennessee and why they have three fusion centers. well, they didn't think they needed them, but there was grant money, so let's have three. the bottom line is there's a much smaller terrorist threat out there than is advertised much of the time, and spending our public dollars, our treasure, is an important task of government, and i think that abolishing both the transportation security administration and the dhs is a good step in the right direction. thank you. [applause]

>> as david said, i thank you, all, for being here. these are important issues to the country obviously and complex issues. i think we have a good team at the cato institute working on these issues, counterterrorism and security, from a lot of different angles. along with david who gives a clear-eyed assessment of things in his recent policy analysis, my colleagues and i over the last three years or so have been working on counterterrorism policy. we conducted a pair of conferences, one in early 2009 and another in 2010. we brought in experts from around the country and world on the various aspects of terrorism and talked together with them, a two day conference in 2009 and a full day in 2010. ..

well, life, is the part of that that refers to security. very important, yes. liberty and the pursuit of happiness are the other side of that if you will, letting us do what we want to do, letting us go where we want to go.

keeping taxpayer dollars as ourselves. taking the dhs's advice, which is 100% security is not our role. we have to in congress and elsewhere, counterbalance the arguments come forward from security agencies like dh s&t sa. so, i have asked myself over the years how would you do airline security? hey, smart guy, how would you do airline security? i tell you thinking i've put into it and thinking should go into it. it boils down to risk management. risk management is probably one of the most boring subjects you can find but i will bore you with it only briefly, go through the thought process that should go into homeland security. first of course, you've got to decide what you're trying to protect. choose what it is that you're doing. that is called asset characterization, literally what is it that you're trying to do, security agency will go too broad.

i'm trying to protect america. if you're protecting everything you're probably protecting nothing so choose something. men the next problem is risk characterization or risk assessment that is four-step process. you need to understand vulnerabilitis. those are weaknesses. lots of things have weakest ins. airplanes have weaknesses. airports have weaknesses everything has weaknesses that is not damning damning. you have to understand threats and standards. examine those, understand what they are. with those two in mind you compare likelihood and consequence. how likely is it that a bad thing is going to happen and how consequential will it be if it does happen? you can't boil this down to a specific science but if you have likelihood and multiply it by consequence, that is risk. the process of thinking all this through, basically flow to the top, what the most important risks are, and what the things are that you should address first. responses, also run a range. responses include acceptance, in a lot of cases we accept

risk. we do that all the time cross a street against a light. there is risk we'll be hit by a car. but we're better off on the other side of street even if we encounter minor risk after car zooming down the road at us. prevention. hardened cockpit door on airliner that's prevention. not impossible but very, very hard to access the flight deck of an airplane. interdiction is something you do to stop a bad actor, to stop the threat from coming an manifesting itself in place. what we see in airport checkpoints is a lot of interdiction, whether it is well-directed or not is a very open question. of course there is mitigation. the ability to recover, minimize damage should the bad thing occurs. all these are responses and choices that you have. when you go to choose among those the way to choose among them is do cost benefit analysis. i used to work here in the rayburn building in an office over there. title 5 was my area of expertise. regulatory law.

big cost benefit analysis junky, not that you should live your lives the way i did. don't make the mistakes i did you should understand that cost benefit analysis is and done well it will guide government efforts at security as well as it will guide private efforts at security. cost benefit analysis is basically about tradeoffs n security area it's hard because you're trading dollars for security. you're trading privacy for the feeling of security. you're trading a lot of things that are hard to boil down to equal opposites. you're trying to sometimes, determine whether a rock is as heavy as a line is long. but that doesn't mean that we shouldn't try to solve these problems. we shouldn't figure out, what the best way forward is because, knot doing cost benefit analysis will most likely waist societal resource. we might overspend on security getting very little bang for the buck and throwing dollars out the window of an airplane if you will. there are hundreds of millions if not billions of

dollars on the line so it is important to do this kind of analysis. you're probably thinking if you're not thinking at all suggest that you should think what do i see in the transportation security administration's risk assessment and cost benefit analysis of say, the strip search machines, the advanced imaging technology that are so controversial and many of you are probably hearing from your constituents. i like to think something about the study rfk management study the tsa has not done a risk study and doesn't do risk management studies or cost benefit studies to be precise or not doing anything that it publishes. tsa leadership, department of homeland security leadership in both parties talked about risk management and talked about risk quite a lot because i think they know they should be doing it but essentially they're not doing it. gao reports regularly point out the fact that tsa programs are not based on risk management. are not based on cost

benefit analysis. they're just doing what they do. with regard to the strip search machines, which again are a sort of a hot issue and regularly get attention here on the hill, there is some good news. the electronic privacy information center filed a lawsuit a little while back against the tsa about this policy of having these machines in place and policy of extending their use. the court did not rule in their favor on immediate merits but made a very important decision as far as risk management goes i think. in order, the transportation security administration to do a notice and comment rule making that essentially means that the taa has to put its thinking on the record. it has to produce a docket. it has to take comments t has to review for the public what it is doing and how it decided to do what it does. that means essentially going you there the risk management steps that i talked about. what it means it's, the quality of its risk management which now must actually be done, can be reviewed by a court under a

standard called arbitrary and capricious. that is fairly low standard but at least it's a standard and so far the tsa has not met any standard for implementing the strip search machines or many other of its programs, among them, david talked about the air marshals program. i think the behavior detection officers are a program at tsa is worth looking at. bdoes as they're called, are supposedly trained to spot indicators among travelers who is up to something bad, whether they're looking around further tiffly, whether sweating. whether you see palpitations in their neck that reflect a heartbeat, there is no study validates this is actually a way figure out people doing bad or planning to do bad to airline security or people had a bad argument with the taxi driver. or whether they're anticipating badly the fact they have to go up to the check point and get patted down in a way far too intimate for strangers to do to one another. watch list and i.d. checks at airports, none of the risk management validation that it needs. a program called future

attribute screening technology. it business. dos but with lasers. that's right. we're talking about shining lasers and using cameras that will detect people's bio rythyms, bio activities to determine whether they plan on doing something bad. there is no science behind this. no good science anyway and it hasn't been validated by risk management nor has the liquids rule. we know there is potential liquid attack. it's real. security is real. it's a real deal, real problems. but it hasn't been shown to the public that there's a real attack that merits the liquids rule. i hear tell some times you pick up signals the liquids rule might be on the way out t might go. that would be good because it would reflect without risk management that tsa has determined the liquids rule is too much. you may remember the puffer machines that came and went. those machines would blow air on a person, collect the air, and then examine the air to see if there was any particulate in it that reflected bomb-making or

dangerous article. well, millions and millions of dollars went into the puffer machines and they found couldn't work at scale. couldn't get people through the puffer machines. they broke down regularly. millions and millions dollars wasted because one or two million dollars, if even that wasn't spent on risk management. this is stuff the tsa is not doing. and the tsa may not want to do it because it is a public institution. it's responsive to politics more than actual security. now politics often demands security. in fact politics often demands oversecurity but demands misdirected security. tsa was very good in early years looking for small sharp objects like the objects used in the 9/11 attack. after richard reid, the shoe bomber, i like to say the tsa caught something of a shoe fetish. after the underwear bomber it got closer to us still. before too long new innovations in smuggling will bring the tsa yet closer to our lives in ways

i care not describe to you today. so what are the roles what are the roles between public sector and private sector doing security? david does a good job of describing them in his paper. his thinking is sound. government provides public goods. it provides the goods that can not be provided privately economically. national defense is a public good because no one individual, no corporation, is going to go and defend the entire nation from invaders. we have an army that is public good for protecting the nation from attack. that's a public good. among the public goods in this area, that the government can and should provide are the gathering of intelligence. some domestically but certainly foreign intelligence that indicates where threats may come from. working with foreign governments to suppress terrorism, that is a role of the federal government. ist's a good one and essential one and one that had a great deal of success.

and traffic additional law enforcement, not necessarily federal level but state and local law enforcement. they are there, a lot of their work, does counterterrorism without even knowing about it. so people, people call up the police and this is how the london, liquid bombing attacks were taken care of. people called up and said there are some weird stuff going on near me. the government doesn't have to ask for weird stuff to be reported. when it asks it gets overreporting and it loses track. people, good people, know when something wrong is going on in their communities and they know to call it in. that works. we're all part of this security effort. we work with the government on traditional law enforcement. obviously support it. the private role in security is substantial. i think the way to think about it is to start with how we secure our things in our own lives. do we call the police every time we have something we need securing in no, absolutely not. we live in houses or apartments that have doors. the doors have locks. we close windows.

we have dogs. we have alarm systems. we have neighbors who we might tell about the fact that we're going away for a week or two. there are all kinds of things we do to secure our ownselves and our own things long before we call on the government to step in. i think our own experience with security is a good analogy for how security should be done for bigger risks or in bigger sets of infrastructure, like airlines and airports. airlines do have the incentives they need if left alone, if given liability for failing, airlines do have the incentives they need to secure their operations, to secure their passengers. they lose and they lose big-time if they don't do those things. they also have to, and this is important, they also have to blend security with all the other interests that passengers have, including, privacy and convenience, customer service, ease, all these things. you will get a lot better from privately-provided security from airports and

airlines if it is's done, if it's done privately. david mentioned insurance. insurance is a very, very sophisticated business. a lot of us don't know about it. a lot of it is really messy in areas like health. insurers go to great lengths when talking about large infrastructure and large companies, they go to great lengths to make sure they have a handle on the risks they're insuring. so insurers in this area will have a role in saying are you doing this, are you doing that? let's take a look, every year, every six months, every quarter to make sure your security systems are operational and functioning well. let's test it. insurers will do this and reinsurers behind them. these are all risk management systems, private risk management systems. they operate in a very diffuse environment. it is hard to crystalize and capture how these market forces work to create security. but they do. i will refer to you, i think one of the handouts was discussion called transportation security aggravation, tsa. transportation security agra

race you can find on the reason.com website with web search on that phrase where i debated boob poole from reason back and forth how this stuff is done. there is lot in this article how insurance works how the tort system works liability to make sure providers of airline, air travel are going to provide a safe experience. the most important takeaway, if there is one from today, there are many, but one of the most important is that there will never be zero risk. there will never be zero risk. governments often promise zero risk. some of your bosses may inad very antly try to promise zero risk to constituents. governments do that and fail to deliver at very high cost. the private sector will do its best to manage risks and do that while balancing privacy, comfort and convenience and i think what is probably most important at the airport, courtesy. something we don't get from the tsa. those are my remarks.

i applaud david for his paper. and his point about the department of homeland security. and the tsa. we can do much, much better and i think over time we will. thank you. [applause] >> we of course have time for question and answers if anyone has a question. >> i would be interested in knowing, how you have viewed the israeli airline situation and their, particularly their use of air marshals effectiveness for them. as compared with in the united states? >> let's talk about, i mentioned the cost and how, you know, expanding to 100% coverage would mean a lot, a lot more money than we spend currently, tenfold, to $9 billion or so. a year. everyone says the israelis do it right. let's do what israelis do.

first off, israelis the airline provides security, not the government. that is el al. second, the amount of money they spend is significantly more than we spend. on average we spend between 6 and $7 per passenger all told for security. the israelis spend 56 and $76 per passenger. so, so tack on $50 as a surcharge for every plane ticket that you buy and also accept the fact that with the questioning that you go through, that sometimes you just won't fly. you know, the screener, would decide, for whatever reason, and i think, jim does a good job of saying, you know, making the point that, you might appear nervous to someone not because you're a terrorist because you had a rough, rough time with a cab driver getting to the airport, you're going to have to accept the risk that you're going to get there, the screener is going to say, i don't like the way you look, you're not going to fly today.

whatever business trip or vacation you had planned just, cancel it. so, i think israeli model is this panacea, that gets bandied about but the aviation markets are very different. ours is much bigger. i think they have got six airports. much of their flight is international. we have 450 or so. much of our flight is internal. so the two models are very incomparable and actually don't translate well from one to the other. >> just to lend one statistic to that, in the united states we have about 700 million planements per year, someone getting on a plane plane. not each one has someone passing through security. take half of those and cost it out at $50 which would be the increase to do that kind of screening, you're looking at 17 billion 500 million per year. that's about the total cost of taking down, according to a rand study, taking down two planes per year. probably spending that is

beyond what security it provides. >> i would also say that if we're going to do that we end up spending about 100 or so billion a year doing it and we would have an army of three million tsa agents which is more than our armed forces. just perspective, what is a bigger federal role, the armed forces or tsa screeners? >> yes? >> i'm -- [inaudible] i understand that, in few weeks ago we had, person getting shot by some lunatic. and obviously in airports and airlines you're not allowed to carry gun unless you're security. do you think arming, having, allowing concealed weaponry for private passengers would get effective deterrents? >> my answer is a little clever, perhaps. that's not my problem. airlines should determine whether or not they want to allow people on planes and under what circumstances to have weapons.

it's not for us to decide. if security is aggregated and different airlines have different policies, airports have different policies that makes it harder for somebody to plan if they're trying to do something wrong. i'm with david that the, the people who fly the plane, many with military experience, think that is perfectly reasonable but let's let the systems that work for this hash this out rather than take experts or so-called experts and try to have them decide for everybody else. airlines can do that thinking themselves and in a market discussion with their customers determine what the right amount of weaponry on any plane might be. >> what is there willingness in congress to do exactly what you recommend today? what kind of transition role would you recommend? seems like some of the things we flip a switch and shut down. so how would you manage that

transition? >> ramp this down from where we are to a market model i think that first, first thing you can do remove the cap on the screening partnership program. spp, the cap on 16 airports that should go away. actually the house oversight, transportation oversight committee report talks about how basically all the wyoming airports had applications in to transition out of the tsa. there were number of airports who had applications in. they're summarily denied or drug out for a long period of time. opening that avenue i think will let, you know, will start to open the door for people to take ownership of their security and what they're willing to pay for. i think as i mentioned, the safety act allows for licensing of homeland security, well, security providers, you know, for limiting liability if there is going to be any federal standards, you could put them in there and make, add that to that piece of the

federal code. i would be wary though that we don't just transport what we currently do with the tsa as disconnected as it is from actual risk management into the federal code if you're going to do that. i would just focus on saying, you know, magnetometer and secondary screening being waunds as baseline. let the airlines go from there. i think that, you know, letting american people look at what is rational security you would find i think that not everyone would be jumping in line to go for the extra screening airline that gives you a pat-down. >> so, a little bit more details going forward. would you favor like, six-month transition out of tsa or three years or five years or? >> the time period that came to mind for me is one year. that's not based on any study. that just seems to be what makes sense. you pass a law that withdraws the tsa from that

area. airlines, airports will get this back in a year, they would move quickly to do that. they're, a lot would not change. i think that is important. we're not talking about doing less security. we're talking about doing much of the same security but doing it better. and weaving it in with a good customer service experience at the airport. there are programs that should just flat go away. i didn't mention in my remarks viper. i forget exactly what that stand for, but it's a group of close enough to jack booted thugs who go around bus depots and airports make a great show of examining people as if one day there is going to be terrorist there who says i give because you came to the bus station today. that needs to go. air marshals program i think it should go in pretty short order. behavior detection officers, no proven value to do. could go straight away. lots of stuff, so many programs within tsa and dhs that could just go away immediately but obviously the stuff that is real security you transition over,

i would guess a year. >> i would say that the cost, if you want to talk about the specifics of the cost, if you were to just take the $2.50 we pay per ticket and, and then, just not route that money through the federal government but give that to the air carrier you're flying with. the remainder of about 7.50 or so, the $10 total you spend on security per ticket, the, if you're just to let that go through the air carrier cut out mess it would come down to 7.50 or so per ticket. pay $5 more per ticket than now and have a rational level of security you need. let me say about viper. visible response team. >> response. >> that is, that is, every single search that they do, is either, it at razor's edge of unconstitutional every time they do it. let me talk about this in

terms of bus searches. there is a thing on went kind of viral on youtube where they roll out viper to a bus station in tampa, florida. may have seen this on youtube, where bring all of dhs, dhs's facets there the theory is kind of like the hercules teams new york police department has where hercules is team drive around with a bunch of swat guys with black suv drive from terror target and wall street to twin towers and jump out with assault rifles in case terrorists attack at that moment they would be there. the theory you don't have people to cover all the targets but jump around from potential target to potential target to deter and in theory get outsized deterrents for your expenditure. the problem with is, dhs is single largest employer of law enforcement officers in the federal government. so what happens is, this is important, the fourth

amendment is you're not supposed to have searches without probable cause. supreme court carved out in special sections in administrative search or dui check point or airport check point you can screen for those limited purposes when you did, what they did in tampa, you have the tsa guy checking for knives and guns and bombs, and then you have the i.c.e. guy asking about your immigration status, and then you have the other i.c.e. guy who does drugs looking for drugs. and then you have the local drug guy looking for drugs because, you know, get more sentencing at marijuana at state level than the federal. and then of you have the other i.c.e. guy who is bulk cash smuggling which is not, there is no, special needs exception or administrative search exception for bulk cash smuggling anywhere but the border. you're not longer just doing transportation security screening, right? you've just entered a place state and you have cobbled together all of these search

exceptions and it essentially a fourth amendment disam assembly line. so, you know, right now there are proposals to, to expand this program. i think that that is setting us up mentally for, you know, the surrender of a greater number of our liberties and completely unnecessary. it is a law enforcement fishing expedition at large and we should stop funding it. >> let me rif on the shows of force you see from tsa and from in new york in particular. in terms of security and counterterrorism strategy. security is not just one thing, it is actually two things. one it is the fact of being secure, that is knowing that you're going to be safe, your stuff will be safe, all these other things whatever it is you're trying to work on. the other is feeling secure. if you can act on the fact that you're secure, you're actually living a free life. so if you're in new york city, as an average person,

not someone who studies this every day like david and i do and you do, if you're after an average person in new york city, see vehicles jumping out with people with guns you live in fear. you're not living the free life you're supposed to live because your government provided you security. what the government is doing is gining up fear among the populace and not keeping them as free and not providing full measure of security this stuff is supposed to do. it is security theater, actually doesn't secure anything. makes it look like you're being made secure. it's important to understand in a little con i can conflict of interest that exists with the department of homeland security and tsa and government provision of counter terrorism in general. we can minimize, can't eliminate, we can minimize this problem by priced privatizing. government is the number one source of threat information. most everyone relies on the government, not necessarily wisely, to know what the threat level is out there. the government is also the provider of any response to that threat. so what following natural

incentives would the government do? escalate threat, escalate response, essentially a conflict of interest in having both the role of information-provider and solution-provider. so privatizing security would break that up. because of a private entity responsible for its own security is not going to overspend. it will question as it should, going to question the threat claims that are made by authorities. you get with the tension that would exist in that dynamic you get better security. you have better threat information because the tension and cost security because of that tension. we need to take advantage of that way our government takes advantage of separation of powers and federalism. think structurally about the problems. having the threat defined by government and solution provided by government is a mistake. >> yes? >> i was just wondering what you thought about getting this changed because i read that when michael chertoff

ran dhs he was the one who pushed these x-ray machines through. and now he is, i'm not sure what his position is now, still affiliated with the company that makes the machines. i've also heard that they're going to introduce a new machine that is comparable to an mri which outside of a hospital set something rather dangerous. . . it's so important

that the dc circuit has required dhs to do a full risk management analysis. [inaudible] >> that will be part of a full analysis. the risk transfer is the technical or the risk management term for it. if you've taken a security step and it causes some other problem. it's risk transferred. it could be one person in 100 million -- maybe one person in 100 million gets cancer was of the radiation that comes from the machine, i don't know. i'm not in a position to assess them. people have the right to be worried because i don't trust the process as tot mris i haven't heard anything about that. i alluded in my remarks about the fact that new smuggling techniques will lead to new techniques for discovering smuggling and those may well go inside the body. >> please join me in thanking

our speakers and thank you for coming. [applause] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> if you missed any of this program you can see it again in the c-span video library if you go to c-span.org. also, if you're on twitter, you can get the latest schedules for the three c-span tv networks by following c-span now. be sure to join us later today for more from road to the white house with texas republican governor rick perry. he'll be live from a town hall meeting in derry high temperature. it's live on our companion network c-span. and some congressional information to pass on too. the u.s. house meets next week, next monday, october 3rd.

>> c-span now on twitter. get tweets with quick program information including which events are live. and links to help you watch. easy to sign up. just go to booktv.org/booktv/c-span now. and then hit follow. the latest most instant information of what to watch on c-span, c-span2 and c-span3 now on twitter. >> privacy is the most important policy challenge of our lifetime according to a panel of internet law experts. the panelists said privacy laws should protect consumer privacy and allow businesses to access purchaser data. the discussion was part of the action media and policy summit

held yesterday at the nuewsum. >> i'm sure i don't have to tell this crowd on you truly an important this topic is especially here in washington when lawmakers are looking at a host of areas and a host of potential new regulations and i've got a great panel here who can talk quite a lot on what's going and what to expect next in the pace. reporting live ryan againer and jerry stigmyer. i think we should jump right into this instead of a long introduction of private security. a lot of us were here and saw a lengthy and informal panel about privacy and security and a lot has changed over the course of a year. we've seen a number of new security incidents and at the same time new interest on capitol hill in data security.

we've seen a lot happening in the privacy space from new bills to new efforts on the part of industry to respond to consumer concerns. so let's just go down the line here. how much has this landscape truly changed just in the past year? and where do you see things going here in washington. >> great, well, thank you. and it's great to be here. nice to see everybody. i think a lot of progress has been made by the business community really in developing tools to help give transparency and choice to consumers and explain to them all the benefits of use of personalization and information after all the information age and so the effort that i'm most closely associated with is that which is now called the digital advertising alliance. and it's an effort where a number of the leading trade associations, advertising trade associations, in the united states, the direct advertising association, interactive

advertising bureau, the forays and network advertising initiative, you get the idea, many others got together to develop principles for broad base companies working with all the lead players and back with all their 5,000 members and have rolled out what you probably see in your browsing habits today in ads in the blue icon, a little triangle with an eye on it that consumers can click on and learn about online behavioral advertising and consumer choices associated with it. and this time last year, there was not an icon on one ad and now we're estimating that we're probably approaching or even over 90% of online behavioral ads provide this transparency and choice to consumers. and describe all the value of delivering interest-based ads to consumers that fuel and provide the economic underpinning of all the great internet innovation that we're living with today. >> thanks so much.

let's keep it going. >> thanks, tony. jerry stigmeyer. if you hear anything smart you can attribute it me and our clients and anything dumb otherwise impolite attribute it to me alone. i'm here on behalf of myself and not representing any of our clients in this capacity. i think that's important because one of the things that we really have seen changed in the last year in the privacy space from my perspective is the evolution of privacy from a compliance function to being integrated directly into a business and strategic role within organizations. and we don't -- you know, the best example of that we have over our lunch discussion actually just a few minutes ago where the city of chicago appearance chief data officer who is not sitting off with the i.t. folk and other data is inherently ubiquitous and i think what we're really seeing in the last year is an evolution

of a public discussion about the relationship between what we and data -- in the business call big data and how to be responsible stewards for big data. as information becomes available in real time, in ways that that are machine readable that are accessible to all, how can we ensure that that data not only flows but is used responsibly and with the perspective of stewardship in mind? and that's actually very interesting to me here at the freedom forum today because in the realm of activism and in the political space, that's a great crucible to see sort of tensions between how do we activate voters? how do we activate consumers? how do we get people to take action but do so that is not both not deceptive or misrepresents information? and i think there's a perception that can be a real challenge.

and i think a recent example really sort of crystallized this for me with the discussion of onstar and the onstar system in the last week. you know, we saw that after users would stop using the onstar system, that onstar would continue to collect data unless the consumers turn that off. and there was a public outcry in the papers, immediate, you know, firestorm of controversy. i believe senator schumer sent a letter to the company. and the company then changed, right, turned off that functionality but i think something really important got lost in that debate, right? that debate in some respects and media outcry focuss on whether we should have an opt-in standard or an opt-out standard and one of the questions we didn't really ask and talk about especially in the context of democracy, how is the information going to be used? and by whom? 'cause we generally operate from

a presumption that more information better or good and we believe there's an enormous amount of innovation that can occur so the real task for us as policymakers and industry is to strike a balance between innovation and respectful stewardship and i think that's something that the debate has increased, you know, dramatically in the last year and i was thinking about this, like what does this mean for all of us as regular people and i came across this warren zevon quote which i'll self-censor. how is the world different i think we send lawyers, guns and money because i think the stuff has hit the fan? what do i mean by that? i mean, this is one of the most important public policy challenges that we'll see in our lifetimes and the decisions that we make are going to be important not just for the people in this room but for the rest of the country for a long, long time to come. >> so i'm the only nonlawyer on

the panel. so my answers will be shorter. and how it impacts kind of business and kind of how we looked at things and how we take into account the privacy potential legislation as well as just kind of our stewardship of the data that we have. what i've seen in the past year is that the industry and stu has pointed this off before anything gets out there from a legislation perspective. let's get ahead of this and show we're good stewards of the privacy information we have even though it's not identifiable to individuals. so what i've seen in the past year and what we've looked at is, how are we collecting our data? let's make sure it's clean data and it's not tied from a personal identifiable situation and the good news it never was and the other thing we looked at opt in as a method of our business versus kind of a potential opt out. so one of the things stu had mentioned, you know, opt-in versus the opt-out and we've

gone an ultra conservative it's an opt-in model. just to give you a concept of what we do. we actually deliver advertising for political advocacy as well as brand campaigns based on the values and the issue positions and the beliefs that people have. so it's interesting you are asked to do that without understanding who that person is and to that's to build a model that's unique but one we don't have any pi, and we look at it every day from the standpoint make sure what we do don't cross any lines from a pp.i. perspective but from a consumer or someone who care for a cause politician and for us it's about relevance. >> this is actually a great place to start the discussion and i want to go in the first place you said, stu some of the work the industry has done

particularly in the advertising agency and there was a report from stanford not too long ago that suggested that some of these icons and other tools that industry has put together to notify consumers of the kind of ads that are out there and what information is being collected and how to stop that collection haven't been effective at convincing consumers that those tools are there. there have to be some educational goals that they have specified that they fulfill. what's the good and the bad here? >> sure. well, let me start on the stanford study. just to say from where i sit, the study was completely inaccurate and i don't think that if you had actually taken the way that study was done and the real facts and mapped them out and put that in front of statistics 101 classes at stanford university that it would have passed that standard. so i don't think it's fair to even put the name of a stanford. it was a study of the student who worked there and the reason why i'm negative about it and

obviously vocally negative about it, is our program is designed to provide consumers with choice, notice in the form of icon and transparency for information collected across sites over time. now, that's always done by third parties 'cause it's a cross-site website over time. so any entity couldn't have relationships with all of the sites over time. what that study looked at is it looked at anywhere where a third-party was involved with a website. so most main websites, a big brand name publisher, for example, would have an independent service provider providing services to that company. but in most instances they're not collecting information across sites. they're just the service provider just for that company. and so they took that study and they said, here's the number. these are the third parties that show up on this site, yet, we don't see icons or choice in en a of those cases. well, of course, they wouldn't because what they were measuring is not what the program is designed to do.

so i view that, frankly, as just disingenuous to having an honest discussion. let me tell you the real facts. the real facts are we went from zero icons last year at this point. started creating icons in the last year and we are at the point where we are serving trillions of icons. all of you sitting in the crowd, sitting in front of your computers, go right now to any web page. you'll see advertising. you'll find the icon, all of you watching at home you'll find an icon immediately which provides transparency to consumers and choice. now, we have hundreds of thousands and i think, you know -- i think we're up to 30, 40,000 a week just through the -- about ad.info website but there's also approved providers that we use. great companies, trustee, double verify are doing great things. i shouldn't leave them off, a real leading player in this space to provide these services that are showing that tens of

thousands of consumers every week are going on to find the choice and a percentage of them -- a good percentage, i think, 20, 25% are actually exercising choice and 75% aren't which shows that there is engagement. people are understanding. and they're making choices. now, the one last point i'll make on this is, so we had a little chicken and egg problem. we had to -- you couldn't educate about an icon that wasn't anywhere to be found. but you had to get the icon out first in and of itself that's creating education but we're going to be doing major education in the coming months which more announcements about that down the road. but we'll explain to people what this symbol is and explain the dialog for consumers that care but mainly, you know, to provide the transparency that these are good companies doing the right thing and in many ways sunshine is the best disinfectant because most consumers don't want to go through any of the stuff. what they want to know the reputable companies they deal with day in and day out, the companies that are all the participants in our program,

that all of us love are doing the right things by them and by their data. and i can tell you unequivocally that they are. >> just, just to hone in on one particular thing you said. for those who have not gone through bad info and opted out of various sides of advertisements are they doing it because they prefer the ads toyed to their behavior or it's because they don't understand the advertisements they are being served or is it some mix. >> i think it's both. i think we're early in an evolution or a roll in the program. when you initially -- when the recycling symbol was put out there people didn't know what it is. you know, it's a big society we live in, you know, how many americans are we up to, 300 million, you know, globally, you know, how many billions of people. how many companies are engaged here? it takes time to kind of have -- we're having a societal discussion in the information age to make progress so i think it's all of the above but what i'm very encouraged as we've seen broad adoption and we are

seeing engagement and that engagement is increasing. so i think it's both. what will likely happen is still get to a point where there will be a lot more engagement and choices and then that will back off as beam realize what's going on and they get more comfortable with it and after ul, people aren't concerned that they're winding up with all of the free resources and content that they have on the internet. and in exchange for that, they're getting an ad that they might be interested in buying an automobile. ask any american about that -- they're very comfortable with that exchange. and our challenge is just to make it clear to them that's all we're doing here. you know, unlike what some have asserted, nobody is taking the fact that you bought a frying pan from a retail site and denying you health insurance. it's not happening. i challenge anybody to show one instance where that's happening. it's not. it sounds great in the rhetoric but that's not what's happening. what's happening are the companies in just country that are providing jobs, innovation across-the-board -- all they're doing is delivering you an ad

you might be more interested in. >> to shift a little bit, jerry, you talked a little bit about onstar. that's been one of the big topics of conversation in washington this week and it wasn't just senator schumer. there was a letter from senator kuhns and frank jenthat exchanged onstar's change of service. and you pointed out innovation. i'm curious if you think the problem was the way onstar hoped to use the data or the way onstar went about conveying its policy changes to individuals? or maybe there wasn't a problem at all. what's your general thought about what happened this week? >> so i'm going to refocus the question a little bit, i think, in two ways something that stu said and i think something that goes to the heart of your question. in essence, the public policy question we have is how do we determine what size fits many? and if we allow the people who are 6'2", 240 which happens to

be my size to dictate the size of size seat on an airplane that's a very inefficient use of size on planes. it could be inefficient if we took the 7 foot person and we did it and we said, a-ha, everybody has to have the same amount of seating space as michael jordan for every seat, that would be a very inefficient use of the space and what we're talking about in terms of sort of standard-setting is do we allow or enable those people who are by whatever margin to dictate how much seating space everyone has by rote and by rule as opposed to an organic evolution that's based on what the marketplace dictates? and i would submit not to be an apologist in any way but i work with many, many of the companies in the space, the incentives are

enormous to be responsible to do the right thing and to act in a way that will enable you to continue to work with publishers and others. so the incentives are all there. to react sort of directly, tony, to the onstar example, you know, i don't want to lose sight of my original point which is it's really not if it's opt-in or opt-out we haven't had any public discussion about why it might be a good thing for vehicles to be network devices and innovation and the things that come out of it. i have no idea what they plan to do with the data but just suppose that we could get 10% decrease in congestion in the greater dc market if all cars were connected to network devices. i'm not sure many of us would oppose that if that's the only way that that data could be used or how it would be used for. the question really becomes, who can get to the data? how might it be used or abused?

and we haven't had any of that discussion. >> sure. >> so i think that, you know, opt-in versus opt-out is something of a red herring because when you're saying opt-in versus opt-out every seat on the airplane is going to be built for someone who's 6'6" and guess what? most of us aren't. >> i'm sure we'll get in the discussion of opt-in and opt-out in a second but to tag on something you need, how do we have that conversation that you just detailed in a way that most americans understand? you know, all of us can have this conversation at length about, you know, whether opt-in or opt-out and data immunization should apply in certain instances but how do you have it in a way that conveys to the average mom and dad who owns a car with onstar that, you know, what they did may make sense in the context, maybe down the road, how does that happen? who does the onus fall in? is it the congress? is it the economy? what's your general thought about that? >> i think it's all relationship

dependent -- what i call relationship dependent context which means acting in a way that's consistent with what most people expect, right? people who get into trouble are the ones who act in a way that's inconsistent with those expectations for most. and that becomes very important, you know, a really smart mentor who said before you do anything think, are you going to be comfortable reading it on the front of the "new york times" would you be uncomfortable or embarrassed, maybe that's something you shouldn't do. and i would echo stu's comments that sunshine is the best, you know, disinfectant and when we think about education or getting to these standards, a real sort of crux and i come back to what i said in my opening comment, this relationship between innovation and regulation and the need to have an expressed recognition that when we regulate inherently we're going to limit our ability to innovate because we're going to make some choices that may prevent, you know, the next google, the next

facebook, the next, you know, company that no one even knows about. and those are very real risks when we look at where the economy is, we look at the bright spots, we look at the resume and innovation and how do we get those? and i'm not sure that that is -- we have folks in the senate dictating that this will be the standard for all of us. now, one sort of bright spot which i think tied into it is that social media and all the tools that we have really enable us to have a much richer discourse, right? >> sure. but i want to ask you a follow-up on this? >> i just want to follow in about where should that discussion be occurring? >> sure. >> it's occurring at this table. it's occurring all around the country. it's occurring in the dialog between an icon with consumers. but what's really driving the discussion, the business community is driving it. but the congress is actually driving it. and i would certainly agree with jerry that we don't want a blunt instrument of the law.

but we haven't had one yesterday. we've had proposals and i would say as much criticism as the congress gets under the current items right now, it is an issue on a bipartisan level. now, there are people who have strong views on both sides but it's really gotten over several years and increasing in the last couple of years a really public discussion, a lot of hearings, a lot of different ideas and bills put forward, and i think that's really -- and that is really a large place where the discussion should happen. it doesn't mean a law should happen but it should happen and our friends at the federal trade commission have been leading -- a couple-yearlong dialog where that's been a very public debate open for public comment, different discussion suggestions, proposals, none of them that are actually law but what should frameworks be. very thoughtful deliberative process that they're running again any given issue, there's a difference of views on things but very smart people over there working on this issue and the same is true within the administration and the department of commerce.

they've got a similar parallel, big study that they're evaluating talking to consumers, businesses and otherwise so i would argue that the level of discourse is terrific and excellent right now. and we just have make sure that we stand on top of it so we don't get the type of results -- >> and the lawyers guns and money? [laughter] >> i'll turn this conversation over to you from someone on the company side of things. you know, we started this entire segment of the conversation with onstar and you talked about being a good steward of data. when you think about what happened with onstar this week and you think about what jerry said, acting in a way that consumers would expect with your information, do you think they acted in a way that consumers would expect in that particular context or is there a different way that you would look at this? >> you know, i look at the consumer as a rational consumer on average. and i think what jerry said is true. if they understand what the value that they're going to get back from this data -- so if you're an accident we're going to know where you are and we'll be able to deploy help.

things like that, traffic, although your iphone already does that already. so, you know, there's things like that, that are valuable to the consumer. i think one of the biggest challenges is, the consumer feel they're getting value. and with the company that we have -- i did the mother test. so i went to my mom, i said this is what we're doing. there's a bunch of this privacy stuff going on. she said well, explain it to me. well, we're going to deliver advertising to you that's going to be more relevant to you but because of that, we're going to know some things about you. we're not going to know your name or how much money you make or know specifically where you are and where you physically live -- she goes i don't like that. that's bad. okay. but here's the value. the value is when you see an ad it's relevant to where you are in your life and what you might want and what you might need. it might allow you to pay less for certain products or be aware of other things. in addition to that, if you don't -- if we don't do this you may have to pay for content, the fact that you're going to -- she

lives in philadelphia and go to the local paper you could pay for content. it's advertising driven and there's not as much value in the advertising they need to make money in other ways. she said well, that doesn't make sense. so i'm getting relevant ads who don't really know who i am and i can still get the content i want? then i'm okay with that. and i would tell you my mom is not the most sophisticated internet user but she's a good representation, i think, of a typical consumer. so i do think this is one that's been driven out of legislation and i will say in the past year it's been encouraging to see companies like myself and the business community kind of step forward and say we want to take responsibility before it becomes an issue and there's good work going on there today. >> sure, before we look into some of those legislative proposals i wanted to check in with the audience to see if anybody has any questions for our panelists. i guess just stand up and say your name, hopefully they can pick it up in the camera but i can recite it if they don't.

>> i think this is a very productive discussion. [inaudible] >> what source of data are we talking about? you know, when we connect to the internet, even just doing that action we have to give a number of our ip address, our location, there are certain information about our computer that you could very easily trace back to us personally. [inaudible] >> to change your ip dynamically so when we talk about privacy innovation what information are we talking about? where would you say we draw the line? what from your perspective is okay? what is not? and how do that so other information might be aware of the information? >> go for it, jerry. >> i don't know much about tour but i know stu use tez for all of his browsing. [laughter] >> i want to make sure when i

walk outside on the street, that nobody sees me. [laughter] >> but seriously, i think it's a good question. but it sort of begs the broader question on the theme that i sort of articulated in the beginning which is innovation versus regulation, right? because each person is going to have a different perspective on the sensitivity level of their information and stu sort of made light of that but made, i think, a very crystal clear point, right? when each of us go out on the street we have a couple of things at work there. what do each of us is acceptable? what does society think is acceptable? and where are we going to set the bar and more importantly what are the tools that we're going to use to set that bar? so, for example, can someone just file a class action lawsuit because oh, my gosh, you went out on the street and you could be seen? you know, we would all probably think that sounds really

ridiculous. but i wouldn't say that is ridiculous for that individual consumer or, you know, an individual because i think different people have different points of view. but i sort of come back to, this is a baseline of trying to establish one size fits most. and then that's where you want to evolve and i think we have a lot of ways to do that. we have self-regulation. we have business communities, incentives built in. a lot of different sort of ways to get there. so i'm going to not answer your question because i don't know where the baseline should be because i don't know where it's going. >> i'll take a shot and, again, not answering and i think you're asking the right question and i think the answer questions depends because that's the classic lawyer answer but what data and in what context? and then what standards apply to it? so in the area that i was describing self-regulatory area, we're talking about anonymous analysis from cookies that just

basically keeps -- it knows what websites you visited. not you by name but the computer you're on. and it's used to deliver nonsensitive ads that are likely to be relevant to you. and you're given notice that that's happening in the form of this icon. and then choice, if that's something that you don't want to do, then you can exercise that choice and i think the -- there's a belief and this has been bourne out in the numbers to date of the -- is that there is going to be a percentage of people that it doesn't matter how anonymous how it is or how tailored or i nocuous it is. and most people don't care at that level. they're happy it's confined just to that type of data. now, if that data were then going to be used to, you know, identify you by name, identify certain products you bought and

den -- deny you as society has determined you in a statute in one context eligibility or care, treatment, insurance, otherwise then there should be a higher standard, additional limits for collection end use of those data as the default. so it's really going to depend on the type of data and the context and the use of it. >> thank you for your question. others in the back. >> you mentioned the fcc's ongoing new dialog and i think by latest count every single member of congress has now sponsored a privacy or data security bill. it's confusing to sort of get a sense where it all leaves or not leave. if you had to design a bill, what would be the three things

that you would put in it that would be essential to be effective but at the same time allow companies to -- [inaudible] >> i think that one is for brian. >> sure. three things. you know, i think first i think identifying the individual by kind of who they really are from a name perspective, in a social security number, those types of things. i think if it's allowed, i don't think -- it should be allowed but to completely opt-in in that scenario. i think that the ability to use cookies actually -- the ability to track people on a anonymous basis i think to be out because it's what the value of the advertising it and if i had to come up with a third, you know, i think that the ability for you to opt-out which actually exists

today should be a part of it. i think the majority exists. >> if you're going to draft a law, i think you have to start what are you trying to address seven what societal goal are you trying to further or achieve? and the greater privacy is to put into a statute. it means something different to every person. and so in my view, you know, while this issue has gotten a lot more scrutiny given all the developments and social media and advances in technology, volume of data, you know, these issues have actually been being considered certainly at a high focus for 30 years and maybe even 100 years. and i think you have to look at where we've been and figure out how that matches here and if something needs to be changed, what would be different? i would immediately take off the table nonsensitive marketing

that provides opt-out choice. there's no reason -- it's very clear that's in many ways the heart of the american economy. that's how -- that's how people get new customers. that's how -- you know, any of you that are out there, many entrepreneurs in the crowd know the first thing you're going to do to find a business is figure out who might be interested in your product that you can sell to. well, you're not going to have anyone have opted in to your new business. well, our country is build on new business and innovation. i would take that off the table. and on the other side of the equation, i think you have the fair credit reporting act, you know, talks about some of the eligibility criteria. i think you have to make sure that if people are going to be using data that it's tied back to you for eligibility purposes, clearly, not for advertising of health products but, you know, are you going to get credit or not? i think that the expectations that have developed in statute have to be built in there. outside of that, i think you got to look at just specific uses to see where there are things. i think that's why there's been such a challenge in figuring out

what a privacy law is because you have 70 different approaches, but they're all trying to cast this wide net over all kinds of use of data. and it's like have one law that regulates all society and everything. one last point and i'll stop talking like a lawyer here, but i was -- there was a hearing that was had in one of the committees recently. and they had a group of -- somebody was -- it was a privacy hearing. there was somebody there in the mobile environment. they had somebody there talking about internet and another person talking, i think, about health. but it was kind of a different types of data all in the name of privacy. and from where i sit, 'cause i do so much in this industry and with data, it was no different than having a hearing that had somebody from fema, federal, you know, emergency disaster and somebody from the airlines. maybe that's not even a good example. the coal industry.

three completely unrelated industries and stitch one law around it because fema is so omnipresent in our society in every different silo. you can't just try and drop one net on top of all of it. i think that's why you continue to have struggles and can actually further legislation. >> i'll go antilawyer because i see some low hanging fruit. some harmization. i don't think anyone disagrees there would be some benefit to having harmization. if that harmization came at the expense of greater security standards or other standards i don't think that's something many folks are willing to have on the table. but five or six years ago i testified in a committee hearing in virginia and i said so i'm a country lawyer from virginia. i don't cross the river unless i have to. and the state senator said, you seem to be really opposed to this bill. i said well, i apologize.

i don't oppose the bill at all. but i thought everything you just said goes against the bill. when you pass one someone has to pay me $50,000 to say what it means for this business. >> my firm is only $40,000. [laughter] >> in the context of breach notification, we have this patchwork quilt of 50 states where you have to run this gauntlet of figuring out how you're going to do it and why you're going to do it and if the purpose of those laws is to encourage those businesses to invest in security, those 47 laws have already accomplished that purposes. the businesses making investment. from the low hanging fruit perspective if we had some harmization, there will probably be, you know, a good fix. i wouldn't say it's necessarily an easy fix. second piece, it would be for those bills not to create a private right of action, right? in other words, when i said one

size fits many and we think about class action litigation, oftentimes that class representative is the lebron james of the consumer world. right? the thing that upsets them the most, that causes them to go and be a class plaintiff is not necessarily something that each of us in this room would agree with or think that we should have that kind of litigation and when we do have it, it leads to enormous costs, significant decreases in innovation over problems that just aren't documented to exist. that they're just not clear, right? when you make lawyers entrepreneurs, you're going to create incentives that aren't necessarily going to be healthy for the rest of us. so those are just sort of two things i would say. >> well, i think to your point, i mean, the pendulum typically swings too far back so the innovation gets stifled to the point where you put an industry back or a market back not just six months but a year, two years and they try to figure out how are they going to make it work?

it's a bad thing for business. and one of the things that's slightly off-topic -- it was on-topic but it's on this point one of the things i've been amazed direct mail they know so much more on the online guys. so we get talked about as knowing so much. the reality is, we don't know nearly what plenty of other people are doing advertising. traditional advertising. >> i want to double-back to data security real fast since this is one of the issues i hoped to get into. we'll go to audience questions in a moment as well. but it's interesting. it seems like congress wants its pound of flesh so to speak on this issue of data security and so do the privacy folks and there ought to be a standard to replace that so-called patchwork but they also want to hand down security rules to say companies in this circumstance should be be doing x, y and z to prevent

the kind of rage because lawmakers seized on what happened to sony and epsilon left to their own devices don't seem to know what to do. and is there groups living with congress handing down security rules. you put a comprehensive security requirement in there we're not touching it. >> let me react to -- on two levels. real world example, six or seven years ago the federal trade commissioned been saying for years you need to have reasonable information security. and hundreds of my clients would say, okay, what does this mean? and i had the opportunity to talk to some of these really smart folks over at the agency about what that meant and they were very circumspect about their ability to provide guidance on what reasonable information security meant. why do i relate this? it comes back to a point that

stu made. when we start setting base lines, if they're looser, right, in other words if we had a federal standard that said all security must be reasonable, the devil is in the details. and what will happen quite predictably is we will overinvest in security because as a matter of practice, well, if you had a security breach, clearly, your security couldn't have been that good. you had a breach, right? now, that's sort of, you know, hindsight is 20/20 is a real concern, but what it means for business is that business will spend money on things that are not helpful to all of us as consumers and users. and i'll give you a simple illustration of that. if the pillow size on an airplane is wrong and the federal standard says it needs to be 18x18 and it needs to be goose-filled unless you have an

allergy and you got an hypoallergenic, why are we going to focus on the pillow? right? the key is we want to be able to keep the planes in the air and, unfortunately, for a lot of these issues and i think tony you sort of hit the nail on the head, you know, privacy is inherently nonpartisan. it's very hard to be against privacy. we all like it. all of us like it. and we're from industry or representing industries so we have to take that into account and i'm not sure that there is a standard that we can legislature because, frankly, i'm not confident that, you know, people agree on what a standard is. >> sure. >> i give a slightly different perspective although not meant to conflict with that. but, you know, i represent various companies and trade associations in that dialog. and there is -- there has been support for a uniformed national law for a number of years from the business community of speaking broadly. and part of what has bogged down

the bill, though, has been -- what the legislation should focus on is a consistent standard so companies comply with one standard of when they give notification across the country and it's pretty well understood what that is. most of the state laws already do that and that could be achieved and that would be good for businesses and it would be good for consumers. but the proposals have kind of keep going beyond that. it's adding all this extraneous details where businesses are saying, well, i don't need a 51st standard or one that's even more complex. we'll just live with what we have, which isn't again ultimately going to be the best thing for consumers to get the divergent notices. the other thing you hear maybe one of the state laws would have had a higher notification standard or when you have to notify. i can't do anything less the members say than protecting, you know -- i got to make sure consumers aren't losing protections. but what they don't -- what they fail in my view or articulate in

that discussion is most of the bills that are proposed mandate data security standards across -- across the -- would apply across companies throughout the country, only in one or two states do you actually have, i think, it's two, jerry, can correct me, i think it's two states have data security requirements and you would be adding data security requirements and i think some of what's reasonable needs to be flushed out more and it has worked and it is an issue but that has worked in the financial institution type of privacy. so that could all happen but they keep wanting to throw in stuff that would actually turn into privacy not security legislation. so you'd restrict use of particularly types of data, you know, which would ultimately -- where the data is used for fraud. and so it would wind up with a scenario -- the great irony to stop fraud on the internet you need more than less data so you can validate who somebody actually is. i think we could get there and

we may get there, my sense. >> the company we are with now i was at information security company we spent a lot of time around data security, data breaches and it's a pretty interesting team and they did a lot of credit card break-ins and what we really saw there's a good amount of legislation. the reality is the business community is more interested in making sure that those breaches don't occur than even the legislators are. so if you look at the credit card companies working with the banks and the retailers, they have a huge level of commitment and a structured program that the government could never figure out how to mandate because they don't understand the complexity of each business. so the businesses themselves have benefits to make sure there's no breaches in security. security is a big deal. so disclosing breaches i think there's an additional incentive for the company. they don't want that to happen. but i think it's a good place where business has done a good

job of really kind of getting ahead of that problem. that there wasn't additional legislation towards at least that specific issue. >> it's not clear to me that any of the bills proposed at this point would have actually changed what happened in some of these security standards where there was already a high level of security. some of the examples and examples where there have been breaches. >> sure. let's turn it back over to the audience. i think we have time for a few more questions. over in the back. >> i guess a more practical concern that relates -- [inaudible] >> and i see that and whether that's right in the law-making -- [inaudible] >> there's only one state in the

u.s. that has the type of -- [inaudible] >> and i think that could be the next step in changing the -- [inaudible] >> i want to make sure i heard the question correctly. if i heard you correctly -- [inaudible] >> that's why i want to make sure i heard the question correctly. we have the federal esign act and my experience in the past 13 years of practice is that, you know, virtually all transactions -- it isn't an issue or it isn't something that stops business and that businesses create ways in which they can work around. whether it's the articles of incorporation of bilaws and i'm not sure just with your question that i would agree with the assumption that esignatures are, you know, limiting or, you know,

preventing business. we still have, you know, the country lawyer from virginia, you know, do we have a contract or not? and federal law has done a pretty good job of showing that we do have contracts and, you know, i think we would all-point to all the click wraps we've done. for the most part those are enforceable. >> others in the audience, yes, in the front. >> you were talking -- brian, you were talking earlier about voluntarily giving up the data because they see value. but i wonder about instances of sort of collective action problems. so, for instance, if all cards are in network with each other, you could really make a lot of decision decisions, if one business didn't do that they could still -- [inaudible] >> my question is, in the instances like that where really the value may be -- it's more

complicated than that. are there situations where -- [inaudible] >> where we could be justified in sort of taking that sort of data out or sort of making a law that says, you know, you have to network your cards. you don't have the option? >> i don't think business would say that. i think government might say that. >> sure. >> but from a business perspective, i mean, my view is that you should have the right to opt out. you should have the right for me not to be able to collect your data for a specific reason and i think that's fair and reasonable. if the government requires a national card for everyone to carry and that has data on it that, you know, they can track, i think that's much more likely than a business person saying we want to be able to track you regardless of what you choose to do. >> tax information would be a good example. you know, the business community generally isn't mandating actually at all mandating your salaries or any of the stuff that goes into tax information

and, you know, consumers would be outraged if some of that were happening subject to opt-out but the government mandates it and consumers don't have a choice because of the benefit of the good you have to -- everyone has to pay their share. >> one thing that has, i think, is that, you know, businesses will decide whether to offer or not offer the products. so there are products that don't get offered where having a choice is a requirement. in other words, the mechanics and i think a great example where we've seen that is in the area of websites directed at children and the collection of information for children, you know, the ftc has a new proposed rule that's come out and allowed them great consideration in there so you don't have to look far if you've been working in the internet economy to realize that starting a business is going to be focused on children and online or on a mobile app is really, really really,

complicated. and it's easy to get wrong and so if you're an entrepreneur and you want to launch an app and stu says it's a great idea. i'm happy to help you. by the way, the last recorded fine was north of a million dollars and, you know, you have $25,000 maybe to start the company. it's sort of a real challenge or barrier. so, you know, i agree completely that we'll offer choice wherever we can. but there's just going to be times where you'll decide figuring it out is too hard and you'll go the other way. >> there's another question in the back earlier. [inaudible] >> i have a real world question and i don't know where to figure out where to find the answer. our firm created -- we do survey research. [inaudible] >> we created a panel of people on facebook who opted in who said they are willing to take surveys. my question is, what about the

privacy or what about the constraints of taking them off -- [inaudible] >> and emailing them, you know, they opted in giving us permission on facebook to conduct in surveys but do we have that position to match them against more of it because the response on facebook is kind of low. these people have to watch their content in order to see the surveys. you guys have any thoughts, a, where i go this out or do you know? >> yeah. exactly. so i think -- i'll use this in the context of our lunch speaker, right? our lunch speaker from chicago said, you know, our task in chicago in terms of being cheap data officer is the predicate that public information belongs to the public and we should create tools that make it available. and i think -- i'm going to assume that your question begins with the idea that should we have any kind of restriction that prevents me as a private

individual from going out and learning about people, and i think there are a lot of really strong policy reasons not to have that be the baseline for the law. but i think the crux of what you said, sort of really comes back and it goes back to what brian said and with his mom is if the people on his panel know and understand and agree, it's very hard for them to critique what you did. it's when they didn't really know and they were really embarrassed or surprised that creates the problems. so the way i think about this is, you know, we're in the risk management business. we identify risk. shift risk. we remediate risk or we accept the risk and usually it's a combination of those things and i think virtually every privacy problem is solved by -- well, if the person said it was okay and they understood what they were doing, your business as a business, you know, is probably

going to be low. >> here's the -- here's the legal answer which is, it would be determined at first by what facebook's terms of use are with you. once you get past that, it would be determined by both facebook and your privacy notice and what you've -- to get back to jerry's point rhetorically what consumers understand and what you told them you'll be doing with the data. but if all of that is permitted, there's nothing that would restrict you from doing that other than you would have to look at the industry self-regulation in this case it would be what's called the network advertising initiative that has standards of matching of data, anonymous data. >> they're not doing that. >> with online data. >> right, if you're not -- >> so there wouldn't be any limitation once you get past those things and i think you still have to get back to the real world, are the consumers going to care and be okay with this? >> sure, sure. so we are almost out of time so i wanted to ask one last question of all the panelists. you talked a lot about data

security and privacy and where regulators should and shouldn't go. let's offer a forecast. we got a couple months left. there's a lot happening in washington including this, you know, much maligned super committee that's kind of sucked a lot of air in the room. what are the chances that we see, a, some kind of data breach law or b, some kind of online privacy effort actually move somewhere in congress this year? maybe at about a sentence or two. we'll start with you, stu? >> i think on data security you got about a 50% chance that something could cross the finish line but there's a lot of work to do and the calendar is going to get closer. i think on a broader privacy bill, there's going to be a lot of hearings and discussion but it's a much more complicated debate an any of the proposals or one congress would do. i think it will wind up being informed by these reports coming out of the commerce department from the fcc this year. >> jerry? >> so i think stu sort of hit the nail on the head in terms of

the short-term progress nost indication. i think longer term i think there are a couple of factors that suggest to me at least that we will see more regulation rather than less and i think there are two that are very important. one is i think we're going to develop and evolve our consensus about what is reasonable security and what level of privacy is appropriate? in other words, as a society this discourse that sue alluded to is going to continue. and we'll get closer in figuring out as a society what is is the one size that fits most? i think the second thing that's an enormous driver here and we really haven't talked about it on this panel is that increasingly, u.s. companies have difficulty doing business abroad because of privacy and data security issues and so there are tremendous incentives lining up towards global harmization and one of my mentors one said many years ago -- he said i don't need a good law, i just need a clear

one. the challenge for us is to get both the clear law and the good one and that's going to be a tough road to hoe but i think over time we'll see more regulation as this consensus's evolves. >> and lastly brian, generally what are we going to see any chance of data security or privacy this year? >> these guys deal with this every day. i'm not going to contradict. i think -- i'd be surprised if we see either of those legislations through the end of the year. i think data security is probably more likely earlier but we don't -- i don't see it coming this year. >> sure. well, i just want to thank everyone to our three panelists. thank you everyone for joining and i believe our next session is going to be getting underway just shortly so thanks again for everyone for coming. [applause]

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>> the central asia caucuses institute hosted a panel on trade in afghanistan and central asia on thursday. the main focus, america's new silk road initiative in expanding the major trade route to include afghanistan. the under secretary of state for economics, energy, and agriculture and afghan president karzai detailed benefits that would result from an expansion. 24 -- this is about 90 minutes. >> good afternoon, ladies and gentlemen. i'm fred star, chairman of the central asia's caucuses institute. the program today is co-sponsored by the center for strategic and international studies, and i'm pleased to introduce our co-convener and friend, andrew hutchens. >> thanks, fred.

[laughter] >> there's various books and studies on today's topic, some of them free, and these are available outside after the program. on the 20th of july in india, secretary of state clinton has this to say. she said, "i want to be very clear. the united states is committed to afghanistan and to the region. we will be there. yes, we're beginning to withdraw combat troops and transfer responsibility for security to the afghan people, a process that will be completed in 2014, but drawing down our troops is not the same as leaving or disengaging,," and she continued, "historically the nations were connected to each other and the continent by a

sprawling trading network called silk road. let's work together to create a new silk road, not a single thoroughfare, but an international web and network of economic and transic connections." she then continued further and spoke about railroads, highways, pipelines, electric lines, and speeding the passage of goods across heretofore slow or closed borders. a week ago, secretary clinton met at the united nations with germman foreign minister and afghan foreign minister rosul to pursue a trade quarter through afghanistan. on the same day, the world bank hosted a meeting here in washington on the same subject.

now, the purpose of this program is to ask what is the united states new silk road strategy? where is it headed? how does it relate to other initiatives worldwide? let us start with the context, a so-called silk road initiative has been the official development strategy of the government of afghanistan for three years. we are honored to hope today's program with a statement from his ecllency who is minister of economic affairs in the government of afghanistan and senior adviser to president karzai. he's connecting with us from new delhi. sir, thank you very much for participating in today's program. you have the floor.

>> as i'm on official travel duty here so i'm addressing this from this region. first of all, i'm pleased to see you, professor starr, after a long interruption of the jfk harvard meeting a few years ago. since it's a bit late here in new delhi, let me share with you a thought to open the discussions. i recall an occasion when i saw and remember very well when late

president anwar of egypt visited israel, a sort of noise came out from the side to -- and asked the late president in saying what took you so long? that's what the minister said to the late president, and when he heard that, he responded back, "i'm just here when they tell me." it goes with the a similar note, fred, for you that you called, and here i am. it's a pleasure to be with you. good to see everybody. let me start my remarks.

your excellncy, professor starr, csci, and cssis, distinguished guests, ladies and gentlemen, i would like to extend my appreciations to the hosts, the central asia institute at the john hopkins site and international studies for currently hosting this forum on a new silk road strategy at its heart, this dialogue and many dialogues in kabul and elsewhere today such as the u.n. general assembly last week with

contributions from more than 20 foreign ministers, senior u.n. leaders, and the head of the asia durbin bank seeks to advance a vision of regional economic cooperation to achieve a stable, democratic, prosperous afghanistan for the benefits of the surrounding regions and up deed for -- indeed for the wider international community. launching the new initiative nearly one year ago at the fourth regional economic conference in afghanistan held in us istanbul, only a regional strategy and practice call efforts involving all countries near afghanistan will ensure my country's place on an enduring

path towards stability and prosperity. though when i accepted the invitation to speak, i had every intention to be with you in person today, but it is fitting that i'm able 20 use modern technologies to have a conversation with you while long distance from the indian subcontinent that's historically served as a major component of the silk road trading routes for many hundreds of years. secretary clinton has so rightly indicated so. this region is also expected to grow as increasefully important trading -- increasingly important trading partner for afghanistan especially with introductions of south asia free trade agreements and afghanistan-pakistan transit

trade agreement. it is no coi-- coincidence that secretary clinton chose a speech in india to announce the need for a new silk road region that invests in critical infrastructure and adopt new trade routes for the 21st century across the vast continent of asia. similar to europe and china, india's sheer market size today makes it a measured definition and end user for outcome for regional goods and services that may travel through afghanistan. indeed, afghanistan's strategy strategic geographic significance lies in its centrality in facilitating two great aid and transit corridors.

first, the traditional east-west corridor that linked east asia with europe, but ever more important is the second and lesser known as the south corridor connecting russia and central asia through afghanistan with pakistan, india, and other energy resources for countries of south asia. as historians show us, commerce utilizing the ancient silk road, a collection of intertwined silk routes, connected ancient chinese when dominated by the persian cultures. therefore, truly the presented versions of civilizations and the concerns of interests across the region and beyond. once again, it is this proof of cultures and interest that

people, the vision of the new seeling road initiative that we have joined to discuss today, we believe that this initiative can once again revive the sheer prosperity that the asian silk road once provided across asia. consequently, my government views regional cooperation of which the nsi or new seeling road initiative as an intreg grail part of afghanistan's development strategy and the kabul process as a final transition to increase national alignment behind national priorities towards our common goal of full ownership responsibility and sovereignty. the nsli will increase regional activity and boost economic prosperity and state through increased -- stability through increased trade and investments.

the sheer creation will create jobs and reenforce reintegration and former competence that faced an enormous set back last week with the assassination of the late president. though not comprehensive solution for one opponents of the afghan state, afghanistan views employment generation as the wider goals of the new silk road initiative as operating hand-in-hand with my country's efforts to help create the condition for political dialogue and successful transition. working closely together, afghanistan and international communities have made tremendous progress together over the past

decade. for example, a lot has been reached in revenues, border management, and other political and legal regulatory reforms to facilitate international trade and investments with the afghanistan. together, we have also invested in afghanistan's most important resources, it's people by vastly increased access to education, improving health care for our loved ones. beginning with the start of the conference on 5th december, 2001, which i had the privilege to participate in, we had also established far more institutions of democratic governance that promote and guarantee the right of all of our citizens, women and men, young and old. numerous challenges, however, lie in the path of fully

implementing this initiative which will enable our citizens throughout the region to leverage a multitude of potential benefits and opportunity. obstacles to regional economic cooperation such as transit restrictions, military requirements, and poor roads and bridges significantly impede motor commerce, and, for example, afghanistan late today the market access to transport our foods by bode to regional and international markets or to transport or copper and iron ore by rail to customers. naturally, potential investors hesitate to make the plunge and they channel capital into other emerging frontier economies. i call myself, afghanistan, a future for tier and a new

emerging market. we don't have to be prisoners. we need to a plan. one that unifies our efforts within afghanistan with our neighbors and broader international partners. we believe that the new initiative with an agreed set of priorities in projects and emphasis on removing the barriers to efficient trade and transsit can become thatup unifying strategy. specifically, the silk road initiative pursues this undertaking by building the necessary transportation and energy infrastructure and establishing afghanistan as an efficient trade and transit hub connecting china with europe and southwest asia and russia and the central asian republics with

pakistan and india. besides large scale infrastructure projects, such as new roads and power projects, the nsri of the new silk road initiative emphasizes the importance of capacity building, trade reforms, communications, and harmization across border procedures such as customs. having an efficient and harmonized frame work will bring predictability and consistency creating a conducive environment for attracting foreign investments into our region. this is an effort in which u.s. technical expertise is particularly valued and beneficial over the past decade, and given the relatively low costs involved, we expect and hope that the united states will

continue to provide leadership in this area among the major donors. serving as chief economic component of afghanistan's economic transition, the vision of the new silk road initiative is driven by both common aspirations and sheer challenges . for instance, the silk road is based on the belief that commerce based on a win-win proposition can raise the hold of the people across the region. through increased regional connectivity, our common initiative with our partners in asia and beyond aims to transform our region by better leveraging the current high level of technical, political, and financial resources being made available by the international community and

attracting private sector investments. opportunities and challenges to regional trade and transit. some wonder at the time of declining aid and military drawndown, how support of such a large undertaking can be achieved, but it is my considered view that by tracking private capital through public-private partnerships, ppp, we can avoid placing additional burdens on donor nations and positions to a new economic development and prosperity. by choosing this path, we'll also transform the nature of the economy from one dependent on a foreign aid and consumption to one's propelled forward by foreign investments, domestic production, and exports, but

more specifically, this 1 the aid to trade policy. moreover, for a strategy to be successful and widely accepted, it must extend job opportunities for ordinary afghans and generate special economic growth in the reasonable time frame. job creation is the highest priority for us. we could not be able to stabilize afghanistan without a vigorous job creation strategy. given that afghanistan's mineral worth is estimated between u.s. dollars $it 2* trillion and $3 trillion as well, we believe minimal development and regional connectivity can maximize the use of local labor and generate export led growth in afghanistan and our neighbors. natural resources, transit fees from the transfer of natural gas

and hydropower and goods and services by road, hopefully rail and air, also maintain the potential for generating hundreds of millions of annual dollars for the afghan government. practical measures for action now are the words for that. at present while trade accounts for only 15 president of the total -- 15% of the total trade, the road, power, and rail connectivity provided by the new road silk can boost trade significantly. the new silk road initiative will build on the initial, successful regional organizations like the south asian regional corporation and as well as other bilateral agreements. here i want to highlight specific examples of progress

already made this this regard. first, following more than three years of gorgeses, the pakistan-afghanistan transit was signed on july 18, 2010. with an extensive and convening role performed by the united states in support of the afghan and pakistan government, they are expected to serve as a model for further bilateral and wider trade and transit agreements. this new silk road initiative can help to expedite after effectively implementation for the wider region. second, the government of afghanistan is strengthening border management cooperations with the neighboring countries to ensure a united approach to address cross cutting issues such as traveling, custom clearances, other organizations,

environmental protection, and encouraging regular and deeper dialogue on bonus security and management with the regional labors. breaking down barriers to trade and transit by reducing excessive bureaucratic procedures and illegal ransacking activities could represent a hallmark of the new silk road initiative sweels effective way to market progress in the near term. third, we have also taken significant steps forward in pakistan, afghanistan, indian, with the national gas pipeline projects in recent months, and i witnessed it myself when i was there with our president. we have have what many outsider observes viewed as inconceivable in recent years. establishing a national rhetoric which i am now committed to come

up with the concept note for creating a national institution on the railway which i have to report back to the cabinet at some point. the head of the lines has been built. we are also in the process of contracting our iron ore mine, one the biggest deposits in the world. some of our distinguished today may wonder why and how private capital coib attract -- could be attracted by afghanistan. some wonder if we are make k a realistic assessment. indeed, in pakistan and afghanistan, we have a highly under developed transportation structure. we need to further strengthen frame work and reduce unnecessary bureaucratic practices at the border. we have business practices, particularly at border

crossings. we have continued in security and instability in afghanistan. yet we have no. choice but to forge ahead for simple reason. all the challenges outlined above do not simply improve unless afghanistan does not have a comprehensive regional trade-based economic strategy. for my country, the region and the world to be more secure, we must implement the vision of the new silk road initiative. the way forward in introducing a new strategy for cooperation. specifically, we need to take full advantage of the upcoming conferences in istanbul to advance the decision of the new silk road strategy for regional economic cooperation. the strategy should build on the dialogue and commitments made in

regional forums over the past decade such as stark, iyho and as well as the kabul process. at the same time, it should be rooted in the current unique historical context facing afghanistan and its neighbors. in short, afghanistan finds itself at a historical cross road today. either it continues to depend on foreign aid as a principle driver of economic development as well as foreign forces to safeguard its security, or it quickly shifts to a new model of development rooted in the private sector as the main generator of jobs and wealth and the afghan gnarl security forces as chief guarantor of the national and perm -- personal security.

in afghanistan, a landlocked country, to succeed in this operation, it has to break down barriers to trade and transit, invest in the transportation and energy infrastructure to facilitate the growth of a transnational foreign corridors, and it must attract foreign investments from near and far on scales previously unforseen in afghanistan. as i always believe, it's the future frontier and one of the future emerging markets. a new silk road straitly will advance this overreaching vision by presenting key principles, objectives, and programming priorities for consideration in is tan bull and adoption. the key principles could encompass an greed principle such as reca, and others.

the strategy objectives could be on last week's new silk road foreign minister meeting in new york, and programming and project priorities could highlight new initiatives like national railways, energy pipelines from central asia to south asia, and discussion of the transit agreements to afghanistan's northern neighbors, and with consultations of other development of this strategy should be broad based in both afghanistan and the international community and link closely to ongoing consultations about afghanistan's national priority program, special attention should be given to afghanistan's immediate regional partners including pakistan, iran, central asia states, and india. they active participation and sharedded vision of the

revitalized silk road can determine the pace and depth of economic intreg gracious result -- integration resulting in a range of economic benefits across central and south asia. in closing, i'm thankful for the united states and the wider international communities' many sacrifices and continued commitment to afghanistan transformation into a peaceful, democratic, and financially self-sufficient member of the community of nations. our partnerships formed the bedrock for future efforts to both engage afghanistan's neighbors more effectively as well as unleashing the full potential of our shared partners in the business community. we look forward to our continued collaboration for peace, prosperity, and justice for all of our citizens as well as for the citizens of the countries of central and south asia and

beyond. i thank you, sir. >> thank you very much, sham. speaking from delhi. thank you very much, sir. [applause] against this background, let us ask again what is the united states' new silk road strategy, and where is it headed? now after -- we're now going to hear from robert under secretary of state for economic, energy, and agricultural affairs. as a long term senior member of the nfc and then as vice chairman of goldman sachs, he's uniquely qualified to address these questions both from the public and private perspective.

>> thank you very much, fred. it's a great pleasure to be here today and i'm particularly honored to be on a panel with sham to talk about our new silk road strategy. i'm also delighted that this forum is co-hosted by the central asia institute as well as the strategic of international studies, and i want to thank you, fred, in particular, and andy, for organizing this terrific event, and for all of you who have the interest in this for attending. i'm sure all of you are aware fred is one of our country's leading experts on central asia, and along with andy, he's championed for some time, not just recently, but for a number of years, the idea of establishing afghanistan as a regional trade and transit hub. critically, this idea has also been voiced for many years by

many afghanis, most notably, for instance, president karzai who said afghanistan should asire pob what he called an asian round about. the importance of improving connections between south and central asia and indeed between south and central asia and other parts of the world from china to western europe and parts of southeast asia where they center around about in places like afghanistan and pakistan is made all the more urgent as we and our allies begin the transition process in afghanistan which will ultimately result in the complete hand over of security responsibilities to the afghanis themselves. the process announced last nonet in lisbon is well underway.

mew any palties have been transferred to afghan leadership. 25% of the afghani people live in these areas, but i want to be clear about one thing. just because we are drawing down our military forces does not mean we are abandoning afghanistan or the region itself. as president obama said in june, our efforts are aimed at building a partnership with the afghan people that endures. this transition must be sustainable, and the political and the security effort must be complemented by progress of increasing economic opportunities for afghanistan and the broader region. as the minister has put it, a creation of jobs and economic opportunity are critical element of the future of afghanistan if it is to be a stable and productive place.

that's why when secretary clinton announced an effort to bring a political end to the decades' long conflict, she included as a key component of the provision to integrate afghanistan into the regional economy and hopefully over a longer period of time, into the whole continental economy which is an even broader vision. the bay -- the basis of the new road if the economic is firmly embedded in the life of the region, it will attract new investment, benefit from resource potential, and provide increasing economic opportunity for its people and increase hope for its people as well, all critical for its future stability and vie brans

as a participating democracy. we believe this is important to afghanistan and can be important for pakistan to further develop its economy and provide jobs for its people as well. this can provide a boost for all of afghans' neighbors as far as to the east and the west. that's why secretary clinton co-chaired a meeting with 30 of the counterparts including all of afghanistans' neighbors in the new silk road vision one week ago in new york during the u.n. sessions. the purpose of the meeting was to gather regional and international support behind the notion as she put it, "lasting stability and security go hand-in-hand with economic opportunity." of course, as many of you well know, this vision for the region

is deeply rooted in history. that's why it's called the new silk road. for millenia, a spawning trading network kris crossed asia connecting east to west and north to south. it was a robust network on land and on sea. if you look at the history of the silk road, it's not just one road, but a network of spider webbed roads and a spider web of networks and transportation that involved land transport and sea transport adds well. goods and ideas traversed the region. silk, teas, and porcelain came from the east. ivory, textiles, and spices came from the south, and presumptuous metals and -- precious metals and carpets came from the west. religions were spread along the silk road includes islam.

the one market grew as way points in the continue thenal trading routes. over the years, the trading routes that once prospers, however, went morbid as faster routes came into use and regional divisions and rivalries made many land routes unpredictable, and, in fact, very dangerous. as a result, afghanistan and much of central asia were increasingly cut off from the rest of the world. though it is located right in the middle of a rapidly growing continent, afghanistan became in many ways an economic dead end from any direction. it was deepened further by the soviet invasion and insurgency that emerged after the soviet invasion. this isolation was also a key factor in the taliban's rise

which further isolated afghanistan from the region and from other parts of the world. in the future without jobs or the opportunity to choose a different, more productive path, the afghan people were and would be left to the mercy of extremists, and that was the problem that they faced before the current government took over and before afghanistan and its friends have begun to come together to create a new vision, a new set of opportunities, and new prospects for job creation throughout afghanistan, and this is a very major departure from the difficulties afghanistan has faced in the past and the isolation, this presents a new vision of growth and opportunity for afghanistan which is not based on isolationism, not based on extremism, but becaused on

connections, interconnections from the rest of the region, with the rest of the world, and lots of new productive opportunities for the afghan people. afghanistan is today beginning to emerge from this isolation and has planned to continue to do so, and the minister has very eloquently outlined many of those plans and many of those ideas. though the infrastructure gap today remains large, the answer is not only about building new roads and raillines, as important as they are, the region as a whole must focus on setting the broad context for sustainable growth because all the countries in the region have an economic as well as security incentive to do just that, and the international community must continue to find ways to support and encourage that growth, and secretary clinton said in last july, the new silk road vision

means upgrading the facilities at bodder crossings as india and pakistan are now doing at a crossing that i had the opportunity to visit several months ago. there's many ways of doing this throughout the region. that's one particularly important example, but there's many others. it means also as the minister eluded to, removing the bureaucratic barriers and other impediments to the free flow of goods and people. it means casting aside the outdated trade policies that are still major problems in the region and adopting new rules for the 21st century. i want to underline again the entire region stands to benefit from this expanded economic connectivity, and not only the entire region, but many countries to the east, many countries to the west because afghanistan is really at the middle of the whole continent, and therefore more communication, more

transportation, more connections can have a much wider benefit for afghanistan and for other countries in the region and for other countries across the continent just as the silk road did several thousand years ago. that's why we're supportive of the initiative. for instance, just today, and this is a very important new development, the indian and the pakistani commerce ministers for the first time in 35 years concluded meetings in new delhi to enhance a path of trade relations between these two countries. they were joined by hundreds of indian and pakistani business leaders who participated in this conference as well. last year, afghanistan and pakistan took the brave step of agreeing to an updated transit trade agreement. the agreement that they reached will enable the international

best practices as border crossings to take place and will harmonize customs arrangements. also, they'll reduce smuggling and increase government revenues from legitimate trade. both countries have discussed the potential for expanding the agreement to cover all of central asia. eventually, i hope that the entire region from astana to mumbai enjoys transit trade and cooperation. other initiatives seek to match energy from central asia to afghanistan with significant needs. the pipeline would bring on shore natural gas across afghanistan to markets in pakistan and in india. other efforts would facilitate the transmission of electricity from central asia to afghanistan, pakistan, and india. construction of new projects

would create thousands of jobs across the entire panorama of central asia and unlock private enterprised suppressed by the lack of reliable electricity. critically, the new seeling road vision -- silk role vision enhances the role of women. women hold up half the sky, and in today's world, you cannot build a modern economy when you exclude half of your human capital. that's just one reason among many that we push and emphasize women's empowerment in this region and indeed around the world. we also view it as important to include not just the immediate region, but also the wider asian and international communities, and this is reflective of the fact that central asia has always been a part of the larger asian economy. for instance, throughout the region, there's increasinglingages of energy,

roads, trade, and communication with china which is also playing an historic role in this region. indeed, just recently, china conducted and held and hosted a major meeting called the china eurasia expo. at that expo, it invited countries including russia, all the stanes, turkey -- stans, turkey, india, pakistan, and afghanistan in the conference. china has long be a major player in the region, and if we're going to continue to develop this idea working with china, which is moving west as part of its go west strategy, china also needs to be and will be a major player. we'll also need to include at the other end of asia turkey which played a historic role in the region and wants to be

supportive of developments in this region now. indeed, turkey has a very impressive private sector, and their business association called the tobb, emphasized to me on a recent visit that they want to be more involved in all of these new silk road initiatives in central asia as well as in other parts of the world, so this is not just in the immediate region itself. it needs to engage a wide range of other countries including china and turkey and others that i will mention in a moment. of course, all of these efforts can want become a -- cannot become a reality overnight, but as the businessmen and women of the region finds common cause across borders, economic connections can reenforce political efforts to promote regional state. as prime minister sigh put it beautifully, i dream of a day when retaining our respective identities, one can have

breakfast in one city, lunch in lahore, and dinner in kabul. that's how my grandfather lived, and that's how i want my grandchildren to live. you can have a greater degree of communication and transportation between hungjo but thinking in terms of a broader and more extensive vision over the course of many years 1 another way of looking at the silk road and broader terms in terms of connecting western europe with east asia. to get to the appointment that we're trying to get to in terms of this greater connectivity, the afghanis, themselves, have to acknowledge they have a lot of work to do in clarifying their own future. some progress has been made in implementing the afghan national development strategy, but progress has been slowed by

policy, regulatory, and legal difficulties. the private sector has not been sufficiently engaged in the process. indeed in all of our focus on the security transition, it is important to recognize the need for afghanistan to undertake another transition from an aid dependent economy to one based on sustainable private sector led growth, so while there is a clear need for international support now, our shared vision of afghanistan's economic future is based on the fact that afghanistan, like its regional neighbors, has a lot to offer across a wide variety of sectors, and that private enterprise can and must play a major role in any improvements in the economy and it must also be consulted very actively in improving the regulatory environment in the country. agriculture, for instance, accounts for almost 80% of

employment in afghanistan, but the sector remains largely driven by sub farming. significant opportunity exists here for private sector led growth and private sector investment. modern systems have already been established in many places. cold storage networks can be built to support agricultural exports, and that is beginning, and customs processing barriers can be reduced by implementing a regional transit trade frame work, and that's just begun as i mentioned between pakistan, india, and afghanistan. there is progress, but there needs to be a lot more using these kinds of models that i have described. light manufacturing, especially productings like wool, textiles, and afghanistan's famed carpets conserve as a second source of growth. local production can be

modernized including at the small and medium size enterprise level by managing the regulatory burden of these firms and working with the afghan financial sector to make reliable financing available. infrastructure, even if it is not e elaborate can play an important role in expanding trade and commerce and allowing new product producers of goods and services including small and medium sized enterprises, for instance, small shops and local distribution networks and local companies that sell goods and services and move goods around the country can be better integrated into the economy, and they can be, in many cases, the big job producers that result from a greater degree of infrastructure. it doesn't all need to be modern highways to the extent you use existing highways for greater communication and more transportation, a lot of smaller

industries and smaller businesses can spring up. indeed, in our own country, with the construction of roads, canals, and rails played a similar role in the american economy. starting immediately, afghanistan has to take the steps required to develop not only these infrastructure industries, but it also has enormous potential in the extractive industries which in turn is helpful in supporting the communications and the transportation networks that i have been describing. as you are all very much aware, the u.s. national geological survey says afghanistan sits on top of nearly $1 trillion wort of mineral wealth. some of these deposits are already under development, and many more will be soon. the copper, iron ore mine could

be in production as soon as 2006, and according to world bank projections, they could create 90,000 jobs and up to 500 million in annual revenues for the government when they are fully developed. the afghans have a lot of hard work to do to fully benefit from this potential, and i applaud their focus on transparency and need to establish systems to protect afghanistan from what has come to be known as the resource curse. however, it is very important as well that corruption be reduced through new initiatives that increase transparency and predictability in business operations. situations like the one that o rose at kabul -- arose at kabul bank cannot be allowed to occur. land rights and investment protections must be put in place. as we pursue this course, all of the plans being laid in and around afghanistan must sit within a realistic assessment of

the availability of government resources. with governments all around the world facing enormous economic challenges, at least in most countries, among the oecd countries, we have to focus on ways 20 make this work with limited government support so for the new silk road vision to realize its potential, it is critical that the afghan government and its neighbors take ownership of this effort. to get there, the region must ultimately be responsible for facilitating the web of connections it will create with a new silk road. it is particularly important with this resource scarce context that the private sector play a leading role as i mentioned moments ago, and the region must be highly proactive in reaching out to the private sector and addressing those barriers that could scare off investors. many industries can be involved. opportunities for profit

potential are plentiful. export credit authorities in the industrialized countries and development financial institutions like the world bank and asia development bank and others can also be very helpful. of course, government resources will still need to be involved and will need to play some kind of role as well. that must start with a solid commitment to the transition plan agreed by afghanistan and our nato allies last november at lisbon where by afghanistan will assume lead responsibility for its own security by the end of 2014. the international conference on afghanistan in germany this december will not be a doe mars -- donors conference, but we hope the international community is ready to make a political commitment to reinvest the portions of the declining security presence, the transition dividend back into

afghanistan on top of existing commitments. for our part, the united states is negotiating a strategic partnership frame work to signal our long term commitment to the afghan people through 2014 and beyond. nato has already made an enduring partnership with afghanistan that commits it to supporting afghan security institutions after 2014. other countries and organizations are considering similar gestures of enduring commitment to afghanistan. in closing, i just want to reiterate what is at stake. for america, for afghanistan, for the region and indeed for the entire global community, we must not forget that this effort is about bringing lasting peace to a country that has spent much of the past three decades at war . for countries like america that lost many brave men and women and spent billions and billions

of dollars in afghanistan over the past decade, it is important to know that continued investments are putting afghanistan on the path to sustainable, self-sufficiency. we cannot forget that as history has providely shown us. simply abandoning afghanistan could porally have terrible consequences for this country, for the region, and indeed for the broader global security, but i also want to remind this audience, and, of course, i know this audience hardly needs reminding of all the potential that also exists in this region. over the last seven decades, many countries in many regions of the world have been able to build dynamic growth and opportunity for their peoples, not just china and india that are obvious, but also south korea, malaysia, brazil, turkey, and so many more countries emerged from poverty and

president from periods of economic weaknesses. these and other countries have been lifted from poverty, and this country can follow in their footsteps. they have enormous talent. the reintegration of afghanistan into this global economy can be a tremendous benefit not to just afghanis, themselves, but also the neighboring peoples throughout the region and to the global community. it means millions and millions of men and women working in the great areas of progress that can be produced by bringing the afghanis and others more actively in the global economy in terms of medical achievement, breakthroughs, and other economic activities. it means increased hope and security for generations to come. that's the vision we have been sacrifice r for, and that's the vision to which our commitment

endures. i want to thank you for your attention, and i just want to say particularly to the minister that there's enormous support in this country for the kind of vision that you have outlined, the kind of very hard work that you and your people and government are doing, and we see implementing this vision as good for afghanistan, good for the region, good for the entire continue -- continent, and certainly a powerful benefit for the world. the potential is in afghanistan, and now it's up to all of us to implement this new plan to help the afghani people to realize their potential and in so doing, afghanistan will benefit, and so will we all. thank you very much. [applause] .. [applause] >> finally, for 10 years, the asian development bank in central asia regional economic

cooperation program has been pursuing the development of continents expanding east-west transport routes. here to speak of this very important work is mr. juan miranda, director general of the central and west asian departments at adp and with a lot of experience in both private banking and his native spain and elsewhere in europe and a seasoned professional in the world of international finance. and development, he has the right one to speak on this topic. juan miranda. [applause] >> good afternoon everyone. thank you for inviting me and inviting us, and thank you minister speaking from delhi in our offices and secretary

hormats. i enjoyed both presentation very much. they were well-structured. they were good. so what i will do is not read the presentation which i had but to show slides that i produce and to share with you a few observations and then maybe have time to change notes with the audience here. i thank you very much again for the invitation. now one of the messages i want to convey to you, the first one is to convince you, and i'm sure that you are, but i will try anyway just in case because i don't want to run any risk. the regional cooperation matters and it matters a lot in this part of the world. ..

laurels for the last 10 years. we haven't been doing that. we've been actually acting, and other donors, other countries on the type of project that we need to put together to get the job done. however, talking about it today is crucial because we have crucial things coming up veryg p shortly, particularly in 2014. my third point that i will shae with you is that we have been doing many of the projects we have to do, and none of them are no of th complete.ple the job is not that, and we havo to finish it.sh otherwise, we don't have the means to an end. my fourth point, message will be to suggest how we can move now from division a division to putg this project together.

the ones that have not been done or the one that had been finished. and in that context, i will make some suggestions for all of us in here today. let me start with the first first, why regional cooperation and wide region. first of all, we know, we heard because we know it thought why with a few exceptions then we have to convert than loughner's into family nurse. why is this important? because it is in between large commercial centers, not supermarkets, but clients in the east and west and of course in the south. and unless we develop a comic judy to make things have been, there is no way that this region without the benefit, but there is no way this region will get

out of poverty, which is something we need because it's in everybody's interest. the nearest port, a lot of countries in a region is about 2000 kilometers away. how can he compete if you have anything to sell unless he has access to the places in between. an important one is getting on the way to develop at 8%, 9% growth over the past two years needs access. unless we have that access, investment, competitiveness, productivity ain't going to be there. those are some of the reasons why this makes sense. what other things make sense? the logistics of the place they are lying in and also the things they have to sell. so it's not just a conduit for east-west trade and for

north-south. it is also because we have minerals. we have commodities that we need both in the south, in east and west. we can't do without. what is the significance of all this in relation to afghanistan? very simple. the significance address he said quote, unquote, afghanistan is a place in between. you have things that you can sell and will talk about some of those than a minute, but it has sold for the rich, the markets and in particular to access the ports in pakistan to crack she and this is good to reach markets in those places, but also important to reach markets elsewhere. either way, pakistan has become the 10th member of a regional economic cooperation program, the so-called eric and this gives us a new opportunity.

an opportunity for all. so the system of the reasons for the work that we do in the work that has been proposed here today by both the secretary hormats. in other messages that we believe in without practicing in doing so for 10 years for care at. herod is a voluntary arrangement. it has no treatments. it has 10 countries and he has a very practical approach, which is to focus on projects that deliver infrastructure, deliver products both for the domestic market and for exports. and it's been going well. we invested over the past 10 years close to about maybe $16 billion in different projects. and we, the world bank and others, particularly the countries in the neighborhood have done a lot of that investment themselves with contribution to the finance.

i may talk a little bit about my second message, which is about the new silk road initiative. what we like about it and why do you think is both appropriate? we like about it the fact that it focuses homes in on the core problem and it is the sovereignty of the economy today impose 2014. and what does that mean? it means the one the troops that are out in economic activity that is related to in this town. we do have something to replace it, to create jobs, income and hope for retail. and if we tell, we don't have a situation there that provides benefits, probably has a situation that provides all the others. so the economic sovereignty is in question and the initiative focuses on the problem first and foremost, but we like it because it talks about the solution.

if a solution that has two critical components. one, infrastructure as a means to an end into common in the regional dimension. it's not quite like the effort of the statement of this defense making airplane for me ask you to a gas mask on your first before putting it on the little ones. and distinguish between what is big and small, but he means that i must be sorted out a common activity in the central asian countries, we're not going to be able to do very much for afghanistan to become a connect their coming to become a conduit for others. so we do have to start about that. original dimension not only because they want to get to points, but then get us to markets, but because those are the things that need connectivity in order to be good for you. in fact, when afghanistan was negotiating with pakistan the cross-border trade agreement,

one of the key messages and perhaps maybe not a driver for getting it done, but certainly a message that will drill down and can be very clearly to other parties that afghanistan can bring not only afghan products, but it can bring the whole central asia to pakistan and beyond. i hope that was one of the factors that continued the end, but we like the projects and regional dimension and we like that as part of the solution. we like it so much that we've been doing it for 10 years. we've invested in afghanistan alone, close to $1 billion with almost the same amount they will tell you on what's in a few minutes. so the message, it is a good initiative because it talks about a vision again, it repackages the message, to me that well, clearly. i was talking about the problem and solution in a cause for

projects. projects is something we have two kerrick. characters a platform to getting that job. most of the jobs we talk about today in the initiative, but in fact also in the program and while not competing here at the initiative simply states that they make sense for that period of time. buddy make another point. if it is the fact that minerals and hydrocarbons are a means to nine, the infrastructure will be a means to that particular means. and in this case and in this point, i like to acknowledge the excellent work of the task force business instability cooperations hear from the u.s. has been driven this country. they are trying to place while helping others place public assets of the private sector, to 19 and hydrocarbons that is absolutely fundamental for those

jobs demand in coming years years to come. it focuses on three things. 3.5 perhaps. one is transport, conductivity, and that the mail. the second one is energy, the various parts of it including trading with other countries in the region. the fourth one is trade facilitation, getting most cross-border agreements time. in the fourth one or the half his knowledge, sharing experiences not only on a regional cooperation but particularly on the role of the year and the things that go with it. once again what undersecretary hormats said, women in that particular development. otherwise we will get inclusive growth. now, let me come back to some challenges and then i'll finish with a proposal on the initiative itself. to get things done in afghanistan, we have to take into account now, but also in the future that security will

matter. it's going to be huge problem to attract investors and investment and it's not easy. it's not easy today. it won't be easy tomorrow, but at least we acknowledge that it's going to be part of putting projects together. the second point is that we need to develop the nonbinding, the non-hydrocarbon sectors as well because those come as important as they are come with billions of dollars of resource, untouched as they are come if they will not be -- we cannot make ends meet without a transition in between. i'm not probably takes us to what some manufacturing and other services. so we can forget about that. and that is not yet been finished. at least the job hasn't been done. the third point is that we need finance. we must not and cannot have unfunded mandate. and it's okay to name the projects than we do. we are also asking for us to

make sure that we have the money to back it up. now the private sector will have to raise the funds to build the big projects, mining and hydrocarbons, but we also have to raise money for facilitating infrastructure through various vendors that we have available, whether it's the asian development or special transcends unless the job is funded, it ain't going to happen. so we have to think about that it is surely a challenge. the institutional makeup in afghanistan needs to be strained and because back to provides credibility and credibility basically allows the private or another's to mention the risks are meant to operate within that sphere unless we have that fixed, we are going to have some difficulties to attracting investment and the investors. and finally another challenge, maybe not the only one, reforms are about the ambience for doing

business in these countries. we are short. we have got a number of areas in the sky to fix them. so with this work in progress, i also add that if the original dimension elsewhere, that things happen in the rest of central asia, then the possibilities, the opportunities for business in afghanistan will also be impaired. the mitac and about the initiative. i think that what he means is that continue a strong messaging, a strong outreach. it does no harm at all to put what it is and to put it to others so that we focus around the important than the essence of having economic sovereignty in this country in years to come. but we need to focus. we can't spread it too much. we have to convert into an action plan. as we do that, we have to do

prioritization. we've got to define what is first, second and third. it won't kill to do it all. remember that we have long-term projects, but we've got to pay for the short-term ones first. let me add the third point, which i alluded too early on. we need other sectors like agriculture and manufacture to be in place. and the fourth one -- the fourth point is that we need constant agency alignment among both here in the united states, but also with other donors and multilateral banks. if are not on the same page, will be talking different language. and that will do good to no one. but that message in my view is important because the job is not easy. let's not make it more difficult by not being together and turns that the priorities in the way forward is. if it problem is how to play for the long-term projects with the

private sector. and i've highlighted the job that it's been done for the support provided by the task force with the department of defense, we need to professionalize the weight the assets have placed and we need to probably find ways to underwrite or minimize some of the risk that those investments do indeed take place. i also believe we need the platform to execute projects. it is not easy to prepare investment plans for projects particularly in the railway, the public sector projects at the private sector isn't going to do. and so we've got to go to places that have been practicing, but i've been doing the job against the times. it takes time and takes money to prepare an electricity system operation. so we need following from that, dollars. we can't do the job without

financing and i've highlighted earlier on the essence of mandates. there is a need for leadership. and finally, for always bearing in mind, taking into account the original dimension matters constantly doing the job in afghanistan. so what is my proposal? my proposal is that we moved the initiative to an action plan into shortcoming medium and long-term projects. that we surrounded the enablers, things that must have been for us to have been properly and on time and that would leverage on existing programs, including kerrick. the way of clear, unequivocally clear financing plans that would bring in the reforms for doing business within the country of, that we align ourselves and we talk about it time and time

again. that is part of the outreach and that's what the initiative has given us. what a way to? and what can we offer to this endeavor. number one, we have a platform. it's a platform with experience, with a track record, with an honest reputation. we can make it available to others in particularly projects like this. however, it doesn't come cheap and you give us a freelance. we will not do any freelances at this because we had our amendment to trying to convince the donor community that putting money into afghanistan, which is one of our most important hindsight now and rightly so needs cash. the only cache we can put in this country is grants because they are not able to borrow. not yet. and to do this, we have to

galvanize the international community for the same purpose. otherwise we will not succeed. we have an afghanistan infrastructure found in the making. we haven't yet we haven't yet we haven't yet rhodin because it takes time to do so. if we look down and we look ahead toward building the green road, which is absolutely essential to compete the growth network, to build the railways, we've only done phase one of three types of faces for projects to complete the energy projects, including games that we will need millions and millions of dollars. so let me conclude. i represent in my house and therefore my house is not night, but is the house where we think the initiative is good. we think it's timely. we also think that it needs to shift into action planning a

period i believe that it is compatible with current program, including kerrick and i know and therefore i say that adb is a good partner for both the united states and other donors than i am here to say to all of us, to say to you, let's get down to work. thank you. [applause] >> thank you very much. and all three of our speakers. the floor is open for just a few minutes of questions. we are happy that you're able to stay with us. thank you so much. and mr. miranda is also here available. >> yeah, leif grossberg or, economic adviser done at centcom. we've heard about the importance of afghanistan getting on with all its neighbors. we have heard much about every. iran is a big neighbor of

afghanistan. afghanistan has economic interests and good relations with iran at the same time, the united states has problems with iran. it's certainly an understatement. how do we reconcile these competing national interests? >> who wants to address that? [laughter] who wants to own it? yes. >> i should have welcomed many other people, and the investors they react in this area. former ambassador from afghanistan here, but is there anyone from ulster and the u.s. government that can speak to this? [laughter] >> well, sir [inaudible]

>> the energy source is coming to brisbane built, pipelines are being built. what is already at the iran border and meanwhile the exemption up or down the hills began to push. >> if i could just make a quick note with regard to iran, very interesting. two quick note. first, the iranians and the pakistanis have both built ports as you know very well. kandahar and childish heart and the u.s. has been, as i observed as nonmember of the government has spent quite content of a lot of traffic coming and from central asia. further to the west down to chow bar, the virtue which was built by india from afghanistan. now, apparent as it also wishes

to go east. but the u.s. hasn't taken a stand on not as far as i'm aware. second, the road north, one of the roads north coast or tajikistan. the u.s. built the bridge over the punch river. you take the right route up through the 10 years and over tacoma past and to send john. you are taking a road that was built by china. if you take the route north, you are taking a road to bridges and tunnels of which were built by iran. there is a case of clear collaboration that i would never, ever acknowledge. server. >> guesstimate thank you. bob kalina ase investments. question, you talk about this afghanistan infrastructure fund. what do you envision to be a hurdle rate that would be appropriate for that and secondly, are there industries that do not allow control

investments and the lake they are in terms of this going forward? >> thank you. >> if i could first of all make an observation about iran and china. we are not and i hate to name iran and their and i still want my bacon can't open at the end of this meeting, but we do build the roads up in the north end of railways will go through have wrought i am not going to suffer to get into whatever port those products want to go to. we have other issues with iran. conductivity should be one of them and i have heard that it is. it is however the plant because it looks attract this, looks economically right. i'm sure it would be for the private operators to go down to

karachi and ported them. those two are competitive sports and i don't see any contradiction in that sense. that leaves the network goes around the country and it would become whatever is more convenient for the operators. if it happens to be pakistan would be, if it happens to be other ports, so be it. as far as china is concerned, remember it's not just about dragons here. it's about competition. we have had the empires before an afghanistan now is no longer a cushion. it shouldn't be. it should be a conduit. and what we do and what we should say is a not then back off petition. we had those mandates that both the u.s. and others are trying to put together. but the best guy come in and take them. and it's pretty good at the east-west trade makes sense. it totally justifies the corridors of building and investing in him another south

corridors that make hopefully just as much in places like india, southeast asia in general with trillions of dollars in trade potential would be a really good thing to happen. about the afghanistan infrastructure fund this concerned, if the private sector one and they put the money together turn a company or many, but we are doing so from primarily the public sector. the reasons for this is when we went to projects, public sector projects, we can charge money for them. i know it sounds great. you and i couldn't benefit from that, but afghanistan does. and that's because as the instability problems. so we don't have that in play. as far as the questioning and may be the answer on what is possible and not possible in the hydrocarbon sector, i'm sure that our colleagues here from the u.s., from the task force could probably give you with that. at least the way understood the

question. >> i wonder if i could turn to michael stanley from the world bank who has devoted more time than anyone in the room i suspect to the problem of mineral =tranfour and markets and minerals. can you provide a comment on this? >> a daylong topic. thank you. i did have a comment. i think one just said it so i'll just parrot what he said. these are commercial commodities going to global markets. at the end of the date they will dictate what direction the commodities will slow. within that there are technical barriers, using iron ore is an example. if the bulk commodity. some ports are not bulk commodity course. so i karachi port is not. there are others in the region that are like that. so it's a little bit difficult for us to set today and try and engineer and direct something

that at the end of the day the markets will tell us. and so i think -- i think we are all on the same page and i think we are all in alignment with the bank is reading the resource coordinator initiative which is in response to the adb's program in the silk road initiative. what we are proposing from our site is to just improve coordination and dialogue among the donors in the commercial market and to reach out now and have these conversations with the global market people. what do they need? and get more pull from the demand side and was pushed from supply-side. so maybe i'll stop i'm not in others can react in a statement. >> thank you very much. just please, sir. please stand. >> my name is mohammed. i don't know whom to ask this question about security. this existed in the time that

ground realities of today, especially a security. so what the security issue facing today is that we're talking a security issue which is not in control of anyone. >> mr. bathija, we can turn to you on that. >> at the dawn i think, right? well, thank you very much. let me take this opportunity to thank mr. miranda and to provide just that his ability to communicate with each other from this corner of the world to you. thank you. the question of security i need much to elaborate except one small sentence.

we have to start somewhere, whether it's a reasonable security or whether it's another security. the opportunity which we bring to westmont pa security and that may be one way to look at it and therefore i believe in it. other race will be staying for the next century to create a security, to expect 100%. there's no such thing. we are working on it. i think the world has seen very well that our forces will be taking in 2014 with the help of our donors, particularly the united states are getting very much ready for it and i hope by the time the silk road initiative comes into full blown, we should be in good shape. >> let me follow this up if i may, theriot, with the following question: are you suggesting that these activities should be done very on them?

for security and then development? or are you suggesting the possibility that they could become simultaneous and mutually reinforced? >> thank you. they take your second card. it has to be done hand-in-hand because i believe whatever activity is taking place as result into some sort of creating a proper security. so i take the second part of what she said in fully agree with you on that. >> can i ask ms. veranda to comment on the same thing? >> at happy to do that. but let's not make it abstract. we both close to 1000 kilometers of roads in afghanistan. and we've been doing so so far i don't have any words attached i

can tell you without any problems of any problems of significance. we built the transition land that takes electricity 24/7 to everyone in the city of kabul. four years ago we had about two hours of electricity supply in that city. today we have 24 hours. and this is about any other problem. we just built the railway line to massage every. we did so in record time. the project was supposed to take three years. we negotiated for a wide and the contractor finished it in nine months. there is no project in recent time that has been done as fast and i may say as well as this particular one. in the history of add, for other countries that we have and this is in afghanistan. so what do we do?

we work with the ministry of interior. so when we say that we transition and pass responsibility to the ministries, we actually does what we are talking about here. so we have a lot of people that we put in there. and yes we have to finance it and yes, the cast aside, but it's necessary so we do. we have been without in the future. the next railway lines were required maybe two dozen people at the brick road with just in a word to contract to an american firm, they'll probably need two or 3000 people there. we are not using private contractors. we rightly so think that is an appropriate do in this country now. forgetting the job done despite this problem. >> a railroad from pirate time

was built right they are. they are labor costs are a little less than ours. why are we contracting -- where you contract and with an american firm probably six or eight times the cost? is that a political decision or is it a principled decision? i don't understand. >> it was political -- >> or people or issue that know how to build roads in tajikistan. >> the greenberg contract with dugout and the american group of joint with the turkish one answer they put a deal in front of us. use back -- the railway operation was done with the news that company because among other things were using the north gauge system. we think it makes sense because it's both efficient and cheaper mark perspective, from the

government's perspective and because much of that trade will come from the north shifting down. so why use any other system? but even in the border between iran and herat come in the line being put together will follow that particular system because there's always certain pressure that one of the country supporting the finance of their own system. but we will end up with is probably three or four if we don't take care of it. and that's something we're not prepared to go into. so why use that? well, they were competitive. they were. they did it well. and of course, just make sure we also verified with a very good engineer outside the quality was not compromised. we have three criteria to get the job done. the budget, the time and the quality. and they performed exceptionally well on all fronts.

i have to say. >> thanks, fred. i want to address the security question. and the insight i got it this was the studies we did on the northern distribution network from the transit quarters into afghanistan and the labor they won off in my head when i learned that, you know, these transit orders are bringing in nonlethal good. until the opening of the new transit quarters from the north, everything less to the point of karachi and up through the shaman case, going virtually through enemy territory. and the loss of a was less than one half of 1%. these are not military commonplace. these are shipped by commercial carriers. nonlethal goods. they had a loss rate due to filters blowing up or whatever.

less than found in new jersey. that was quite amazing for me to realize. >> this is not a comment on the possible candidacy? >> nothing against new jersey. >> some of my best friends are from new jersey. but it was quite a stunning to realize and of course we think, how do you explain this? i mean, the major explanation is that there are people that are making money and it's facilitating the transit and trade. and that was one of the insights that let us to think about what we learned from that project for trade and transit strategy for afghanistan. >> thank you very much. they even john, i wish we had more time. we are out. how to think our three speakers, mr. bathija, it's really wonderful you could arrange to take this time and of course,

robert had to take off. of course my good friend juan miranda. this is obviously at the beginning of a very serious discussion. the questions that we have to face and face the horror, is this all coming to a quick visit to little? can it get the job? is this a realizable goal? or is it a naïve dream? these have to be face. how do you engage the private sector. juan miranda is done by bureaucratic organizations. finally, above all, how will the government of afghanistan and businesses in afghanistan

leadership in afghanistan continue their engagement were they've after all been the pioneers of this and the years to come us in the changing environment in which the country assumption. so obvious and many many other -- much more plentiful questions i'll have to be addressed, we hope, to be one of the settings in which that might occur. thank you very much for [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

>> up next former russia specialist who served in the state department and the national security council under george w. bush, talk about that country's relationship with the u.s. also discuss the complex and, interests of both countries across the former soviet union. the ambassador of cast extend joined this event. it was held following the announcement of former russian president vladimir putin will return for a third term. this is just over 90 minutes. >> welcome to the center for the nation interest. we have a distinguished panel, an important topic, and hopefully we would will be able to produce some light in addition, as i'm sure will produce some, because we are going to deal with u.s.-russian interaction, space is difficult and controversial. before i introduce the panel, however, let me conducts an institutional business and

introduce a new colleague at the center. a new editor of the national, can you stand up, please? [applause] >> he is a former chief executive officer editor publisher congressional quarterly, and distinguished author, and we are delighted to have you with us. we are also are delighted to host this panel. the panel is based on the book about u.s.-russian rivalry, edited by my colleague, paul saunders, executive director of the center. and we have two american contributors to the book. tom graham, former senior official in the bush administration on the policy, state department, and samuel

charap who is at the center 4 and progress. let me say that this is clearly very difficult issue because if you look at u.s.-russian relations, during last several years particularly since president obama came to office, there was significant progress in some areas. i'm not sure that there was enough progress to say that we have achieved a lasting breakthrough it and it is quite clear that there a number of issues, more difficult issues, serious disagreements remain. and that is particularly true regarding u.s.-russian interaction in space where we have clearly different

perspectives, many of us believe different interests. and it is also quite clear that neither russian nor the united states, with a number of countries in the region who dare to have their own interest and increasingly act on the basis for what they believe their interests ear and some things in washington are not just acted, they are also reacting. they are not just creating situations, they are managing situations. it's difficult. it is controversial, and i think it is likely to become more controversial after this weekends events in moscow. i'm talking of course about president putin deciding that he would be coming back to power. also those who watched, also

someone like myself without back in moscow during the days of communism. it was all very well orchestrated. it looked quite impressive, but during communist party, because i guess party congresses were supposed to be long, lesser several days. they would proceed with a war, they would elect their candidates. this time it was, i have to say, i have to give them credit. they were quite efficient at did not want to waste any time. prime minister putin came to the podium and said that president medvedev would be leaving the united russia party.

no vote. some applause. clearly, a lot of people in the halls were somewhat surprised because they thought it would be president putin who would leave the part to the elections and they thought perhaps he would become a can of the presidency. so there was some initial hesitation in the hall but then everybody applauded, stood up, and president medvedev went to the podium and he announced that because he will be preoccupied with -- [laughter] it would be prime minister putin who would run for presidency. even more applause, no vote, no discussion, everything was arranged. that is what i would call new

ambition russian style. unfortunately, for russia, they cannot have that sufficient in space. and, unfortunately, for them they are discovering that not only with countries like georgia, which obviously have a different foreign policy, in countries like belarus in spain, russia has difficult issues. different foreign policy perspectives. how should we deal with all of that? what does it mean? we have a very distinguished panel. you will start? >> i will start. thank you very much, dimitri. thank you also, tom and sam, for your contributions to the report, and to alex peterson who is not able to be here, but co-authored the paper with sam and also to the two russian authors. and, finally, and quite

importantly, thank you to the united states institute of peace, which supported the project, and without whose support it wouldn't have been possible. the project that led to this report was something that was conceptualized really in the wake of august 2008 war between russia and georgia. and grew out of my concern that the former soviet space was a region where there were a number of ongoing conflicts that the so-called frozen conflicts, also some others, and really that any of those conflicts at any time could become unfrozen or escalate, or turn into a

situation like what happened in georgia. and that it was important for the united states and russia to talk together about the region and about those kinds of problems, and ways to try to manage problems like that so that they, a small problem didn't become a big problem. that conflicts didn't expand beyond the region where they start to become wider. so, that was conception only how the project originally was. since the two russian authors are not here, and since i have two very capable american authors are here, what i might do is just very briefly talk about some of the russian

perspectives that came through in the course of the project, some of the key points of difference between the united states and russia, and then at the end maybe a couple of comments about prime minister putin, president medvedev, the transition that we are all expecting to see over the course of the next few months. the first thing i would say in thinking about russian perspectives on this region and these issues and the american role there, and i don't think it's probably news to anyone, is that there is really clear and lasting frustration on russia's part with the american role in the former soviet region, a

resentment of america's real almost dominance during the period of a decade of the 1990s, when russia was in some very difficult circumstances. irritation among many about the american presence, particularly and american bases in central asia, suspicion of u.s. democracy promotion, its methods, and also its goals. and a regular complaint about u.s. double standards. i apologize to those of you who are here from the state department, because i'm sure you hear about these things all the time. another i think view that came through very frequently is the

sense that russia should have special rights in this region of the former soviet union. president medvedev of course talked a little while ago about russia's privileged interests in this region, and that's a very, clearly a very widespread sentiment based both on geography and on shared history. there were a couple of things though that struck me as somewhat surprising, i guess, and conducting this project. and i thought i might share those. one that was really especially striking to me, and it's a relatively narrow issue but i think it has wider implications, is the real russian focus, and it comes through in the two papers, on the kozak memorandum.

and i think frankly very few people in washington remember what the kozak memorandum is, this of course was an effort to resolve the dispute between -- [inaudible] >> no. right, right, right. former russian official and russia but that are instrumental role in negotiating an agreement and they kind of thought there was a deal, and putin was on his way to moldova to witness the signing of this and then the united states and the europeans at the last minute kind of intervened and the moldovans decided they didn't want to do it after all. and for a lot of people in washington, and i think in the rest of the united states, yeah, it's not an issue that people have focused on really intensively, or think about.

but our two russian authors, and serving another -- a number of other people i spoke to felt this was a joke moment that had a very major impact on particularly then president putin's thinking about what the united states was trying to do in the former soviet region. and really contributed to putin, at that point, disillusioned with the united states. and i think one wider implication of this is, you know, we have a tendency in the united states when we think about ourselves as the sole superpower. not always the focus on the fact that some of the decisions that we make can really have a

disproportionate impact on others, compared to the level of priority for us. and i'm not saying that to endorse the kozak memorandum, or that particular solution to the problem. i think it's something that bears thinking about. another thing that i found a little bit surprising was the relative lack of concern among many of the people who i talked to, and certainly the two authors, about china's role in the former soviet region, which is something that a lot of people in the united states are very focused on. but there was really a sense among a number of russian participants in the dialogue meetings and also the authors that, you know, china has a very important economic role, particularly in central asia,

but has not really attempted to any kind of political role. and that's fine with us. where i think many people in the united states might expect that the economic role that china has is not necessary the end of the role that it will have, and may evolve into something else. you know, i don't want to talk too long, so in the interest of time, let me just mention very briefly three points of tension that i see, one very important american priority that i see, and then get into the putin and dmitry medvedev business. in terms of points of tension, clearly this issue of russia's

special rights collide with an american since that the united states needs to be very active in this region, supporting the sovereignty of countries in the former soviet union, and also trying to promote democracy. and i think going forward that has the potential to be one of the most challenging issues to deal with. secondly, certainly the war in georgia is not so much in the headlines, but that remains a point of tension and disagreement in the relationship along with the other frozen conflict that it will be important for both sides to work together to avoid violence in

the future. finally, the energy pipelines, clearly another area of tension that has already become in the past a serious issue. russia's assertiveness in terms of its energy diplomacy i think subsided somewhat in recent years. that coincide in many ways with medvedev's leadership but it also of course inside with some changes in energy prices. so i'm not sure that i would try to attribute that necessarily too much to one person or the other. finally, a very important american interest moving forward. ..

>> supplies and materials into afghanistan, but also outward, and russia agreed to the two-way transit at the lisbon nato russia counsel meeting, but the definition of what's permitted is still fairly narrow. it seems after the last week and everything that's been discussed in pakistan, that it would be

highly desirable to be in a position to withdraw as much as we can through the former soviet region including central asia and russia rather than having to go through pakistan. just very briefly on putin and i'm sure this will be a topic for more discussion during the question. you know, we have at this point every reason to think that putni has been broadly supportive of foreign policy approach, if we can call it a foreign approach, and if you look at the public statements that the two of them have made, i think there is relatively little difference in how they define russia's interest. at the same time, you know,

putin has a very different style. he may gave somewhat different weight to some russian interests versus others, and tipping the balance on some issues could make a difference to the united states, and timely, you know, it's very clear that after having already been president once during a period when the u.s.-russian relationship went through a lot of ups and downs, putin returning to the kremlin as president would be bringing a lot of baggage with him both in russia and the united states, and the united states i would say particularly in the congress, which becomes obviously quite important to confirming u.s. officials ratifying agreements, passing any legislation that may need to

be passed. my very last point, i guess, is that, you know, we're all assuming, of course, that he will return to the presidency, but it strikes me that this is a time period where it's dangerous to make too many assumptions, and i think what happened with kudrin, his criticism and then his subsequent firing, you know, it makes clear that there are a number of strains inside that system and inside that leadership that make it less predictable than in the past. thank you. >> quite remarkable in two respects. first came to washington totally unaware of what would happen

there later with congress and learned about the development in the u.s. capitol which i guess partly would explain his very angry response. second and i think that's what paul was talking about, things are not quite black and white. it's not like liberals or security services around putin. it is a bit more complicated with more shades of gray. i think that service is good in terms of talking in shades of gray both in the u.s. and russian relationship. >> thank you, paul, for inviting me. my co-author could not be here unfortunately to contribute to the volume and present today. we try to think to the region we call post-soviet eurasia, and

countries that are not part of e.u. or nato. we look at the region both in the u.s. and in russia namely that the kinds of russian behavior that many in the u.s. find objectionable are found with historical drivers. in other words, so the argument goes, russia meddles abroad because of security and economic imperatives mimicking the similar behavior of the soviet union before it. i think we argue that this core assumption about the cautions of russian concept in the region is flawed because it rests on logic, it is this way now because it was that way before, and more importantly because of the questionable lanking between the russian federation and the two previous states with two geographic call cores. they are similar to their maybes

in nature. one was the russian empire, and the other was found on an ideology at the front of a global movement. today, it's neither an empire or the font of an industrial revolution. it is one of the soviet union and happens to be the one where the all union elite largely still control foreign and defense policy, and that reference point with the successor states was not prerevolutionary russia or ussr's relationship with its neighbors, but we argue that the soviet era habits of seeing the other former ssr's as constituent subunits of the same state after it collapsed. relations with the countries were handled by a separate ministry and not the ministry of foreign affairs. the mfa was not made to deal with this part of the world, and

in other words, when we argue when moscow meddles in its neighborhood it's not out of imperatives, but hat. the relatives for u.s. interest in the region while not direct we argue is crucial. if we assume a clash of interests between the u.s. and russia, then the u.s. is presented with a stark choice, either a real grand bargain or a neoconservative roll back approach, but since that assumption is2$

>> such a strategy is more than a creative balancing or a great game analogy. it requires a new game positioning the u.s. as a potential full partner of all the states in the region without reference to our other our relations with russia. we have to fully reimagine the region outside the historical context of the baggage of the cold war and great game before that. what would determine u.s. policy in this region which is compromised of numerous small

states with various degrees of elements, government problems, and foreign policy sophistication. a legacy of great power with serious resource and governance problems of its own, a rising political power to the east, and up predictable international spoiler to the south, and connections to europe, south asia, and the middle east that hold the potential to bring dividends of trade and cooperation and instability and alienation. how would washington determine actions in the region? what would u.s. policy look like? how would the u.s. prioritize its relationships? we conclude that they would in a number of cases look differently than they do today in terms of which countries receive the bulk of a policymakers' time and attention. we argue that in the paper. by looking at the region, we can facilitate democratic development. currently, the debate is polarized between those who see russia as a democratic force in the region and those who argue

the u.s. should forget about its values. our values and interests are consistent. governance produces greater stability over time and better enforcement of contract rights. despite moscow's heavy handed tasks, they are largely responsible for shortcomings in democratic practices in their own countries. outside the frame, we see the country r for what nay are, warts and all, and focus with deeper engagement with all of them to further interests including that of democratic transformation. we also argue a reimagined look would allow for more effective u.s. engagement on conflicts of the region. our focus on russia distracted us from the tensions that form these conflicts. the russia factor is an important one, but not efficient when counting for the status quo.

the experiment we conducted earlier is applicable. we should not get stuck again in a paradigm that has great power over the region's domestic dynamics. in crafting a china strategy, the first step is reimagining the region itself. a strategy based on one where the state is assessed on merits, it's long lasting, and spheres of influence are rejected, and the region is emphasized. the best china and euroasia solution is avoiding repeating the mistakes of previous approaches to russia and euroasia and approach to china emerging as the pivotal power in the 21st century. thank you. >> when you talk about paying less attention to political

orientation of countries in the region, do you mean to suggest the different countries want to move west to be a part of europe constitutions is prepared to be independent from russia and should not be a major consideration for american policymakers? >> no. announcements of loyalty on their face opposed to concrete actions towards moving towards institutional integration, for example, should be -- should be less of a determining factor. >> what concrete actions? like, for instance, if somebody's prepared to send troops to afghanistan, would it be important for you? >> well, intiewtional integration -- institutional integration is based on reform and not sending troops abroad. in the case you're referring, the decision should be made based on the merit of georgia's

relationships and determination whether it's in their interest to become a member. >> thank you very much. tom? >> thank you very much, dimitri, and paul, thank you very much for inviting me to participate both in the initial volume in this discussion today. i want to make three brief points about russia, united states, and this region we're talking about today. first point is that the former soviet space doesn't exist. it doesn't exist as it unified geopolitical space despite the efforts of moscow in the early 1990s to reserve a certain geopolitical violence with the creation of the isf. this is a policy moscow itself abandoned and focuses more on the constituent part of the

region, central asia, the caucuses, the european parts of this region opposed to former soviet space. this is something also the united states needs to increasingly adapt in the way it talks about this part of the world. i think you look at the way american administration that organized themselves over the past decade beginning with the bush administration is actually recognition of this so we put south asia -- central asia with south asia in both the state department and in the nfc. i think the pentagon was way ahead of this long before the state department and the nsc came to that conclusion. we have a european region that includes ukraine, bell reduce, and all the countries of western europe, and we have a caucuses

region that needs to include north russia proper, the south caucasian states, and i argue the neighboring region like turkey, iran, and iraq. moving forward, we need to think about u.s.-russian relations not in terms of what we once called the former soviet space, but in terms of these new geopolitical configurations. the second point is that i think it's quite clear that aggressive competition between the united states and russia along russia's prief yal in ukraine, georgia, and central asia poisen the entire relationship. certainly during the bush administration, but less so now because there's efforts made by the obama administration to temper some of that competition. now, the differences in the problems do not arise from a misunderstanding from the lack of communication or the lack of

transparency. i'm not sure how far transparency goes in this respect. your money or your life is a fairly transparent statement, but it's not one that's con deuced to the building repore between the two parties involved. in part because there's a fundamental conflict of interest in that situation, and something similar arises when we talk about russia and the united states and all the regions along russia. fundamental conflict of interest. here i disagree with sam. history's important. you can reimagine, you can rethink about things, but history plays an important role in the way societies view their own interests, and it takes time to change, and so for russia, this region has been, if not a sphere of influence, certainly a sphere of privileged interest as

it was once put. the reasons for this are obvious. what we call the former soviet space, as sam noted, is also the former russian imperial space. it's this region that gave russia geopolitical heft for the last years. the russian elites, rightly or wrongly, still think is critical to their own security, and i would argue today there's even a very deep psychological aspect to this, to russia's own sense of its role in the world as a role of a great power. what do great powers do if not radiate power into neighboring regions? so russia, moscow for the past two decades has looked at any other powers' penetration into this part of the world as a challenge to russia's only sense of itself as a great power. now, for the united states, clearly, we look at this

differently. we do not recognize the sphere of influence for me power in that part of the world. we prefer what was called "geopolitical pluralism" geopolitical pluralism that agents as a guard as a threat of soviet dimensions. now, it's clear for the past 20 years up to this moment that that has been directed against russia because the only power that could conceivably rebuild that type of threat, that dependence was russia. we supported consistently the sovereignty of all the states emerged from the soviet union to lock the ree mother janes -- reemergence of the threat. it's a way of underminding and

eroding russia's control of the energy sources of euroasia, and quite frankly we advocated democracy and free markets to lead to a pro-western orientation to all the countries of this region, a pro-western orientation to give us a foothold on the ground in these countries and a place to monitor, and if necessary, counter what we saw as imdeemble actions by the russian state. what we've done were most of the past two decades, and particularly in the past decade as russia rebuilt its power, is to try to manage the conflict of interest between our countries along russia's border so that it did as little damage as possible to the overall relationship. this leads to the third point. it would be the question about

this region going forward, and that is is there a way that the united states and russia can move beyond what has been a history of competition during the cooperation? can we do this taking into account the new realities that are emerging in a time of tremendous flux in the global environment? start with some, i think, ax yums of this, of this new emerging geopolitical environment. first, russia and the united states are no longer strategic rivals. we no longer pose strategic threats to one another as we did during the cold war. second, this is 5 point to be stressed particularly given the rhetoric from moscow, and that is that russia is no longer the dynamic core of euroasia like it has been the last 300 years. look around russia's per riff

rei, there's a good argument that all those regions, all the states are more dynamic politically, economically, demographically, than russia is itself. we see the chinese penetrating into central asia, perhaps only commercially at the ploament, but certainly if you're willing to think out a few years, politically and in the security realm as well. we see the growth of islamic movements that penetrate into central asia in the caucuses. as we think about it itself, russia does not reliable control the north caucuses, but alone speaking of the southern caucasian states no matter where its military forces might be at the moment, and even despite the current disarray in europe and all the questions about the future of the european union, it's quite interesting that ukraine is still tilting towards europe despite what moscow has done over the past several years

to push it in the other direction. russia faces a period where what it really needs to do is to create stability along its entire borders, to give it time, to rebuild itself so that sometime in the future under the best of circumstances, it might become once again that dynamic core of euroasia. in the united states, the challenge is somewhat different, and in some ways simpler. we just need to adjust, rebuild, and construct security balances that will provide for an overall global e quill equilibrium with northeast asia, afghanistan, broader middle east, into europe, and now into the arctic region which has become a new frontier and will become a contested one because it changes

with the climate. now, i would argue that the united states is better hof, will have a better chance of creating these types of balances if there's a strong russian partner to deal with. that's obviously not as a sole player, but one of many in creating balances. by the same token, i think that russia will be better able to create the stability it needs along the borders if it recognizes the necessity of a robust american presence all along the borders. the question now is whether one can persuade washington and moscow to move into that direction. if we can, if moscow and washington accept this, then i think you can say the u.s.-russia relationship is going to move towards what the bush administration would have called the qualitative new relationship based on a common strategic purpose that has the

potential to last well into the future. if we can't persuade moscow and washington in this, and i would say the reset is basically where the relationship is. there is not going to be any qualitative improvement. what we're going to do is change more or less, better or worse on the margins. >> thank you very much, and ask question. can we persuade moscow and washington? i found your presentation very persuasive. remember back in the 1990s when there were a lot of pollution in the united states about russia about the parliament, about russian democracy. there was a very profound article in a paper by a american foreign service officer. i thought it really was courageous and profound about what was happening with the russian leadership, how instead of democracy, they were getting

several different ideas competing with each other, and some of the article also appeared in cables from the services in moscow. tom grahm also. in he was in charge of american foreign policy and some of the russians were in charge of russian foreign policy, i guess we would be on the path of saving the reset and making it more substantial and perhaps reversible, but, well, well, let me make one observation. the difficulty with this region, whatever we call it, that most of russian neighbors are not real friends of russia. with a notable expense of armenia and cars stan, most neighbors do not see the united

states to have close relations with moscow. that's not to say they want a russian-american conflict, but basically we're in the situation where the united states does not even need to create trouble in the post-soviet region. we have a lot of newly independent countries, some democratic, system not so democratic, coming to the united states and asking for support against what they perceive. few people would know more about that than the ambassador of pakistan who i'm sure will be able to speak for himself if we can persuade you. >> i'll try. [laughter] >> fortunately, for bulgaria, you're no longer -- you're no

lopinger direct lsh longer direct russian neighbor. we're delighted to have you with us and you have an important perspective, and we look forward to your participation. we have a number of experienced people in the audience. we want to enable everybody who wants to participate to do so, and then in that spirit, please try to limit yourself to one question or comment, and also when you do so, please identify yourself briefly. who would like to start? >> american foreign policy council. i would just note while having drawn attention to the importance -- until william hill from national defense university at the other table probably knows more about that than nip else on this side of the atlantic. there's a book coming out in a few weeks looking at the meme memorandum in the broader

context of russian policy, so for anyone, everything you always wanted to know about the memorandum, don't be afraid to ask. it's coming out. >> thank you for this promotion. [laughter] marvin? >> [inaudible] [laughter] >> marvin? >> tom, you mentioned -- marvin calvin, brookings. you mentioned the arise of the islamic movement, i think those were the words you used in central asia and the caucuses, and you also mentioned the importance of three years of russian history. 100 years ago or there abouts, there was a rise of the movement in soviet central asia. the communists dealt with it by crushing it, physically destroying it, but the roots of that exist today according to current reporting. what has to be regarded as serious or a possible threat to

existing governments in that region, and to what extent if it is that kind of threat that might give rise to the idea of america and russia cooperating in trying to handle that kind of a problem. >> well, i mean, i think certainly if you look at central asia and the central asian states now, that first of all, the earlier movements didn't disappear totally. they are part of the history, and that's being reenforced by 5 certain development we've seen outside of the region throughout the broader middle east and afghanistan and so forth. problems that e erupted in -- erupted in insurgencies in the early post-soviet period. some quieted down, but i think the questions are slowly reemerging, particularly as you look at the state of societies in central asia, the tremendous

poverty, the agree disperties in wealth, and also equally important, the likelihood that the two key states in central asia, both kazakhstan and uzbe uzbeckestan and the u.s. potential withdrawal over the next couple of years, and i think you do have a potentially, at a men mum, there's a volatile mix in that part of the worldment i think it's also equally clear that russia in its current state doesn't have the resources to deal with the major uprising in central asia. the central asian states themselves don't have those resources. we don't want to do it on our own. we couldn't. we don't have the domestic

backing here, but some type of cooperation between russia and the united states as well as with the state of the region have to be the way to deal with it if you're going to deal with this problem over the long term. my sense is this is what we ought to be talking about now. when we think about our own situation in afghanistan, i think a major part of that discussion should not be focusing on afghanistan and pakistan, no matter how important those are, but we really need a regional dimension to this, and that's lacking, i think, most certainly in the strategies we've pursued over the last couple of years. >> [inaudible] >> george with the center of intelligence and research analysis. i want to ask a question about history. paul, you mentioned the reaction in moscow of our reaction to the

plot in and how pivotal that seemed to be in shaping perceptions of what we were attempting to do on russia. tom, you mentioned the approach that we toshing to russia in the snows and beyond based on this concept of geopolitical plushism. there's a word here we ought to think about on the u.s. side that weaves through all of these events, and that's containment. after the soviet union fell, trfs a transition that u.s. policy went through, and taking our soviet policy of containment and adapting it to this new situation, and it was aimed at containing russian up fliewps on the per riff free, and it was

uncertain whether they would recreate an entity in this space that might be threatening to us, but i wonder if we're now at the point where we need to address much more explicitly to what degree we ought to be focused on containing russian inflyings in -- influence in these states, and can we get beyond an almost instinctive push back when there's russian involvement. from russia's point of view spoke to an almost knee-jerk reaction when russian troops are going to be on the ground, there must be something wrong and u.s. interest to push back against that. can we device something nor -- devise something more nuanced here that takes into account the perceptions and interests of russia's neighbors about russian involvement, but distinguishing between things that we can live

with and might be in u.s. interest to support and things that really are not in our interest. >> the administration during the -- [inaudible] right? why don't you start. >> no, i mean, during the entire bush administration, as i say now, we were recreating the conditions or creating conditions that make the reset necessary in the relationship, so that's a great service to the obama administration. [laughter] look, jordan was in the administration too. you were in the vice president's office, weren't you? >> [inaudible] >> exactly. >> vice president cheney. >> yeah. [laughter] but, you know, there was a knee-jerk reaction at that point. clear sensitivity to anything that would, any action that the united states would take that would legitmate russian actions

or beyond the federation itself. you clearly saw that in central asia, and it also came up with a kozak memorandum. what the russians found particularly disturbing about this is we did this at the last hour. it's not as if they saw this coming, but the moment that the plan dropped on the desk of people in washington, they looked at in particularly the mill tear aspects of it and were immediately on the phones to people in the region trying to reverse the decision to make sure that that memorandum was not coined or agreed to in any way. you know, the point that i would make looking forward is that russia simply is not the threat that it was to us 20 years ago certainly, and with 20 years of experience, we also ought to

realize 245 what we feared in the -- that what we feared in the early post-soviet period is unlikely in the next decade or not, so we need to rethink how we think about our russian presence in this part of the world. by the same token, we have our own interest, and we need to pursue our own interest in that part of the world, but it does not have to be done explicitly anti-russian way. building commercial contacts, having a political presence, all of these things are legitimate. i think the russian government see these as legitimate activities as long as they are not framed in the context of trying to push back russian influence in that part of the world, and that, i think, type of policy at least creates the frame work for a more productive relationship. now, i make one point, okay? one additional point. i think we're in a more difficult situation now than we would have been a decade ago. a decade ago we could have made

this type of or pursued this policy, and in a sense challenged russia to demonstrate that it was prepared to act in a cooperative, benevolent fashion beyond the borders. because of the country at this point, the russians turned out not to be prepared to do that. we had many ways of pushing back, reserving our position, and risked little in creating that challenge to russia. today, because of reasons i don't need to go into here, we don't have the same sort of margin for error as we did before, so i think you've got to prepare the ground in conversation with moscow much more carefully than we would have had ten years ago. >> there are just inherent limits to how far the u.s.-russian relationship can really develop in an environment when we don't trust each other, and maybe we're justified in not

trusting each other, but i think we need to think about that and to recognize that and accept the fact that if we think it's necessary to pursue some variant on the containment policy that think are really limits to what to expect from russia at the same time that we're taking that approach to them because they are going to react to that, and it's going to affect how they view us. secondly, you know, if we get past that, then, you know, yes, russia has important interests in this part of the world, and many of those interests are legitimate, but there's a question of, you know, how does russia try to assert its interests, and what are the specific tools and methods that

it uses? i don't think that, you know, russia has always made the best choices 234 that regard in terms of how it advances its own interest, and that creates reactions in those countries and also here. then timely, you know, and this is a little bit related to the previous point. you know, there's an issue of institutions in those countries, and, you know, if the country's on russia's borders had been independent for longer than 20 years and had fully developed and consolidated political systems and institutions and procedures and, you know, operated in an open and transparent way, then many of

the things russia tries to do now wouldn't really work, but because of the particular situation that many of those countries are in at this particular point, you know, it gives russia with its particular system this range of tools and options that it might not have in trying to interact with other countries. >> paul, thank you very much. he's also a former state department official in the bush administration, and very insightful and careful, all right? whenever possible. [laughter] >> future administration official wants to add something too. [laughter] >> i just wanted to comment. thank you for that question. i think there's a distinction. i don't discount the value of history. i just put more emphasis on the value of immediate history,

namely the soviet history rather than pre-soviet or otherwise, so i think the point about the memorandum, and i know everything i know about it from reading a manuscript of william hill's book, but nonetheless it's less about substance than about the multilateral processes and appeared to be hammered out in secret or almost in secret, and it was negotiated in a heavy-handed way. it was classic, you know, sort of soviet style behavior opposed to the merits of the documented self-. i think that is what in the end arrowed the reaction that it did. the third point is that i agree with tom that the basis of u.s. policy in the 90s was certainly the countering the threat of the reemergence of the threat of

soviet dimensions as you put it, but the purpose of the democracy was to bolster the states in order to prevent the threat. our point in the paper is that there was a time limit on that where you reached, and we're at the point where we say the threat has passed, and that's why we argue that the con taping russia as a motivation for policy is neither going to be effective nor is it what it receivers in u.s. interests. >> thank you. ambassador. >> elena, bulgaria. three brief comments and a question. number one, long worried that bulgaria was on the wrong side of yugoslavia, but luckily through memberships of nay to in particular and the union, the job was remedied through politics. number two, i think that soviet

union, soviet russia, russia, has been and always will measure itself up and sometimes against the united states of america. that's the way of proving importance, strategic geopolitical role and international weight. in nato, for example, russia would not happily talk to you, 20 the united states or america rather than to the nato bodies that have been established or nato as an organization. point number three, energy. i'm grateful that you mentioned it, but obviously this is not the topic for today's panel, and yet, i'd love a reaction from the panelists on how they see russia's role in energy now and in the near future. my impression is that the energy

goes with mr. putin in any job, so i would think that when he assumes his old and new responsibilities, language on energy will become more sort of distinct, clear -- what should i say? i leave it to you to describe the next stage, next phase of russia's energy policy, and sense we have here representatives of different administrations of this country, i can say that for years now, america has justly insisted on diversification incoming with my own -- including with my own country and discussions and meetings with bulgarian officials, and yet nothing much has been done on the american side to that. how do you see your american role in the energy diversification which is also not just intention, but already

a forward disci's -- decision by the european union. in other words, there should be a partnership between e.u. and u.s. on the front of energy and diversification. >> [inaudible] >> i guess that while they are two energy parts. on diversification, you know, the u.s. talks a lot about that, and i think you're correct that it is mostly remained in the realm of talk, and, you know, certainly there's a lot of other people here who are qualified to talk about that who work for or have worked for companies in that area and worked for the government in that area, but my own view would be that, you know, the united states government as an institution doesn't really get that involved

in what actually happens in the energy sector or any other sector of the economy, the way the united states system tends to operate as companies make their own decisions based on what they are interested in or not interested in as they look at the market, and the government occasionally tries to encourage particular decisions and certainly in the case of the pipeline i think really press a great deal, but i think that happened for particular reasons, and i'm really doubtful that anything like that is going to happen again any time soon. you know, somebody has to pay for these pipelines, and for this idea of diversification because you have to build

things, and the u.s. government suspect going to pay, and companies are not going to pay if it can't be done commercially, and 23 you don't have companies or the government to pay, and, of course, when the government pays, it means the taxpayers pay. you can also try to have consumers pay who happen to be the same as taxpayers, but, you know, in a lot of cases, they are not very excited about that, so i don't really see really very much happening. >> tom and then ambassador of cars stan and then -- [inaudible] >> we spent a lot of time in the clinton administration, bush administration, and i presume the obama administration talking about energy and pipeline routes and so forth.

the energy sector is one you can't separate from geopolitical and political considerations, and while it's obvious that companies in our system make the final decision whether they're going to invest or not, the way the united states government phrases the issues and talks about the strategic consideration i think has significant impact on that, and certainly companies take intoing the what the u.s. -- take into account what the u.s. government's views are. two quick responses. one on diversification. the u.s. strategic interest has always been, i would argue, in russia or in eroding russia's monopoly on the export of energy resources out of central asia to global markets. now, the big contribution the united states made to that a we did nothing and couldn't do nothing to prevent the chinese from building pipelines across

central asia and the chinese markets, and i think as energy markets developed over the next few decades that you're going to see a tremendous pressure interest in pipelines going south to feed the growing markets in south asia, india, and geopolitical issues and security issues to be worked out. i think that's happening. i always thought the mistake the u.s. government made was putting this only in terms of europe, that the only goal we had was bringing resources into the european markets. here i'll make a couple quick points. first, you can't solve the energy points without russia long term. sec, you can -- second, you can reduce the role russia plays in the energy markets, and this is happening already because the energy equation has changed dramatically over the past

decade. we have lng coupled with the potential of shell gas in the united states means lng is not coming to u.s. markets the way we thought a decade ago. it can go into european markets. there's the development potentially of markets inside europe and shell gas inside europe that will radically change not the level of dependence on russia, but will change the geopolitical equation to a certain extent. i think the russians are aware of that. what's happening in the airplane world now, north africa, also has potential to reshape this as you think about what alternative resources are. yes, putin will come back. he will like and try to use energy as one of the levers, but i think it's a much weaker lever now than it was a decade ago. >> ambassador?

>> [inaudible] [inaudible conversations] >> thank you. it's difficult for me to avoid stepping in. [laughter] >> that was my temptation. >> of course, after all, thank you, ambassador. the whole topic of this discussion is about us, so i'm not speaking on behalf of my -- i try to position myself and speak for myself, and i put myself as an observer, outside observer. there are two plays, who talk about what they doo and what they should do in my courtyard. it's interesting to listen. first, thing which emitted distraction is whether we would

at all if there were not russia there? >> making that point very strongly -- >> very diplomatic i would put it, but basically if russia -- if russia will not recall the form of soviet union, whether ukraine with the uranium resources, would that matter? would we matter at all? unfortunately, i've come to the conclusion we would not matter. that's the discussion. we have to start from there. the core of the discussion here today and in the book i read is whether there is rivalry or something which can be and should be managed in the u.s.-russian relationship in our part of the world, and the so-called privileged interests. tom said that u.s. will reject

anyone's privileged interests rights in the world, but when we speak about our part of the world and implication or your rejection of the privilege interested of russia part of the world, we talk perceptions. understand russians have their own understanding and angry about their perceived or their perception of your regional privileged interests in our part of the world, so there is a rivalry, and paul spoke about the culture sus prigs, what -- suspicion. what we observe is this culture did not diminish at all, if not went into the other direction, so we believe that these are the starting points for the discussion, and if -- i'll touch on something i rather support the thoughts sam produced, three basic thoughts i wish would lead

to a situation which in the end end -- that simple notion simply does not take the minds of academics or political practitioners, ect., ect.. this is something which makes us not very happy. what we saw until recently 1 a transactional approach by the united states. we mattered, of course, when we had to do the nuclear. clear, done. we mattered with policies that was kind of sometimes very frustrating because we explained that our policy, share policies

multiple, but when it came to expansion of another route, a traditional largest northern route, and chevron and exxon-mobile was happy about that, but we heard grumbling here. we believe what sam said and formulated about developing a new policy, i wish on the basis of three things. bring it on the merits of having the relationship, strong engagement, and looking for real considerations. we, basically -- i personally would not be mad with the concept of privileged rights or interests. you are right, tom, that history plays a great role. you cannot compete with russia

in the historic terms, in the economic market terms. russia will continue to be a large market for us. it is much bigger than you, and let's be frank when we talk about the customs union. whether europe is a market for ukraine or kazakhstan or a meaningful market for ukraine or kazakhstan, no, it's always our immediate space. it was our practical choice to expand our markets for ourselves, but you want to join here for other reasons and other merits and other privileged rights. we support rather the concept where you both and others and we have to take into account china. we have to take into account india, iran, and many other countries. i'm afraid because of time sounding very suspicious when i mention the name of iran here in this room, but we live in the world, in our part of world which has its own dynamics, and

we believe everybody ought to have privileged rights where they have their own edge. russia has history. russia has demography. russia has transition and competitive edge. you have other edges. you're declared policy in our part of the world for 20 years 1 support for our independence. secondly promotion of market reforms, and then democracy, and security; right? so you have certain edges in all of those areas, and this should be your privileged rights and interests, and russia should not see them as something endangering their privileged rights, and you should not see their competitive edges as something endangering your interests, and if this culture will start to prevail and overcoming the cultural

suspicion, i think then we'll be able to better understand where and why we have those privileges. the democracy promotion and sovereignty. the implication is that there is something endangering sovereignty all this time. promoting sovereignty, the implication is we are very bad, we do not want democracy, and this is your task to drag us down into democracy. this is absolutely wrong. you simply come with those edges naturally because you have, for example, in the market reforms, you have completely different culture of doing business and running the economy. you have different technology core and investment competitive edge. these are the things which are natural intrepts of the united states -- strengths of the united states, and we embrace that.