and don't share our interest. i think one of the grand strategic questions of our time is, how can we preserve a system that the u.s. and europeans have together built since world war ii as more players join the table? this is not it conversation that is front and center on nato's agenda but i think it has to be moving forward. because the west, the comes together, if nato coheres and generates a plan for managing this transition i think it will withstand the test of time. at the united states in europe go their separate ways and figuring out how to preserve a rules-based system, then i hear that the next 20 or 30 years will be a very substantive period and international history. ..

>> we are chasing to get out. we collectively, the reliance as you were just saying, senator, and i think it will be a long time coming before nato engages

in the same kind of operation if engaged in in afghanistan. libya, i think the success more conclusive, but many of the conditions that were present in libya are not being replicated elsewhere, particularly in syria. a u.n. legal authority, the approval of the arab world, the degree to which libya was close to reservoirs of european power and, therefore, easy to the europeans did you even though they still relied heavily on us. in that regard i think some of the most important nato programs moving forward will not be the deployment of force, even though surely there will be some of that. they will be the broad array of programs, the partnerships, the mediterranean dialogue, the istanbul cooperation initiative, the support for the african union, the training mission in iraq which has already concluded. i think in many respects nato has wealth other regions to do

for themselves what nato has done for the atlantic community. deeper integration, understand what it means to work together, and gradually build the solidarity that preserves regional. >> to final comments. one is that i think, and we've are a discussed this this morning, thinking about the ability of nato to be a global hub, nato to serve as a institutional core of the west during this period of transition. i think it requires a european pillar that stands up to the plate. and this issue i think is more pressing today than it's ever been before. we've had debates about burden sharing since nato was born, but during the cold war that debate only went so far because the europeans were quite confident that we were there to stay, and that if something went wrong the united states would show up at the party. i think right now we are seeing a world where the europeans know

that they need to do more, where our pay for to asia, are dropdead in europe is justified and inevitable. but i think it does put a fire to the feet of the europeans about the need to do more to balance the alliance. i am skeptical that the europeans will spend more on defense. in fact, i would go so far as to say they are going to be spending less and less. and that's because for the foreseeable future they will be worried about getting out greece, how to deal with the debt, how to save the euro zone, and perhaps even the european union. that says to be we should be pressing them, not so much about spending because i think that's running into a brick wall, but i'm rationalizing how to do it. on getting more bang for the buck, i'm getting them to pool their resources. .com in my mind, is the best way to get europe to become more capable. in many respects that is much closer link between nato and the european union.

finally, i think that it would be remiss for me not to make the following point, which is not going to be on the summit in chicago, but i think should be in the back of our minds. and that is from the very beginning of the atlantic partnership, our strength abroad has dependent upon our strength at home. our economy, our political solvency. and in some ways what i'm most worried about today as i testified before the committee is not whether we get enlargement right. it's not when and how we get out of afghanistan. it is the degree to which we are now stumbling, the west collectively, in terms of our economy stuck in neutral, a european union pulling apart, experiencing a renationalization that we've not seen since world war ii, and our own political system here going through a very rough patch. so my final thought would be, it's impossible to think about, talk about, imagine it is future

without doing the hard work of getting our own houses in order. because in the end of the day, nato will only be as strong as the individual member states. we have a lot of work to do on that front. thank you very much. >> thank you. mr. brzezinski. [inaudible] >> get a little closer to the mic so we can hear better. >> is that better? >> thank you spent as a former staffer, senate staffer who served this committee and prior to that the late senator william roth, it's a real pleasure to return to these halls. it makes me recall the strong, bipartisan leadership that this committee brought to the effort to extend nato membership to the democracies of central europe. those were historic decisions. they strengthened the alliance and strengthened the

transatlantic security. the chicago summit, it's going to be important large part because of the context in which it takes place. that context includes a war in afghanistan from which both the united states and europe appear to be disengaging. economic crisis on both sides of the atlantic. diminishing or trophy defense capabilities. nato's qualified success in libya, one that nonetheless raised questions about u.s. commitment to nato and highlighted european defense shortfalls. and, of course, the recent u.s. defense guidance that features a pity to asia and initiates another reduction of american forces stationed in europe. some of us asserted this to be an implementation summit focusing on the afghan operation and reduce alliance progress under its new strategic concept. in light of our concept, in light of her context that would be insufficient. that would reinforce a sense of nato's growing irrelevance and for the process of transatlantic

decoupling. senator shaheen, you asked which should be the one central message from chicago summit. my view the chicago summit is of one overarching purpose, it should be to provide credible reaffirmation to the transatlantic bargain, one in which the united states demonstrates real commitment to europe's regional security interests and our european allies demonstrate that they stand ready with the united states to address global challenges to transatlantic security. toward that end, u.s. should pursue five priorities at the chicago summit. first and foremost, the president must critically reaffirm europe's neutrality. the drifting apart your comments has many causes. but they include a u.s. transatlantic agenda which dominant elements recently have been a vaguely defined reset of relations with russia, the new defense guidance, and a proposed missile defense architecture that still remains conditional. the decision to further reduce u.s. forces stationed in europe

occurs in the context of increasing a certain russian foreign policy. just last week russia's chief of the general staff threatened to launch a preemptive strike against proposed missile defense sites in central europe. washington should remove the condition of that still hangs over u.s. missile defense plans for europe. that condition now think that only undercuts confidence in the european conference in u.s. commitment to build those sites, it certainly incentivizes kremlin opposition. the u.s. military drawdown will also make it important to ensure that road remaining forces in europe are fully equipped and funded. and equally important, careful consideration has to be given how in the future united states and europe will sustain their military interoperability. the wave we fight for, the way united states fights wars is so complex but there is now much more difficult and challenging time consuming to make interoperability with other allied forces. it's not yet clear how

interoperability will be sustained as united states further reduce its forces in europe and continued ambiguity on this issue communicates disinterest notches in the regional security concerns of our allies, but also in the roles, potential partners and out of area operations. second, chicago summit should be used to reanimate the vision of the europe hold free and secure as a guiding priority of the alliance. the united states should be leading this effort. a europe as undivided whole and free will be a more stable and secure continent, one better able to address global concerns and partnership of the united states. imagine europe today that did not integrate poland, the baltics, romania, bulgaria into new. with the e.u. have extended their membership to all of them? would rush and all of you on the path for nor -- more normalize relations? the alliance can and should have a summit to clear its intent to issue invitations no later than

the next summit to qualified candidates. underscore the urgency result in a macedonian dispute with greece over the former's name, last remaining endemic to its a session to the alliance. it should assert that george's have to have can be to the existing middle georgia commission, and they should applaud significant progress under membership action plan. third, allies must chart its way forward in financial austerity. resource constraints are a double edged sword. they can halt multinational cooperation and generate division, and andy was a little bit of that today. as a central europeans watch as germany, france and italy so military equipment to russia in their efforts to sustain their respective national defense industries. allow me to commence senator lugar and congressional research service for the recently published study examining these sales but i hope this report will prompt the alliance to take action on this divisive issue.

austerity can also be leveraged to drive forward needed prioritization, innovation and collaboration. i'm glad they -- instead of long-term capability goals. but hope it will get equal if not greater emphasis to near-term multinational projects that exist existing shortfalls. such projects a as a share to jt six hubs, platforms are needed and they are urgently needed. there are also projects that are more credible than promises regarding the distant future. fourth, the summer should be used to expand and deepen partnerships of the alliance has developed around the world. sweden, australia and new zealand, korea, jordan, uae, qatar, maroc and others have made conjugations to isaf, lady mission and other alliance operations. in addition to military capability the brink diplomatic leverage as well as needed insight, intelligence, respected

or regarding their respective localities and regions. nato should expand the partnership for peace that is open to all who qualified regardless of geography. those who contribute more military should have the opportunity to be certified as nato in robin. those would be allowed to participate in a tiered fashion a different nato programs. the nato exercises, command structure, centers of excellence and civilian agencies. and, finally, of course nato in chicago needs to demonstrate unambiguous determination to sustain a stable afghanistan. i hope it would've to commit to a strategic partnership with kabul that will endure well beyond 2014. the recently signed u.s.-afghanistan agreement is an important step but even if it's flushed out robustly will be likely insufficient to secure success in afghanistan in the absence of a long-term transatlantic commitment. strong leadership is always been a prerequisite for nato's vibrancy and success. likewise, europe's ability and

willingness to contribute the military forces and political capital necessary to address regional and global concerns are equally essential. it's neither injured nor the united states interest allow the transatlantic bargain that has done so well over the last decade to drift into irrelevance. the chicago summit reaffirms that park and it will serve as an important if not inspiring benchmark of american commitment and european ambition regarding the transatlantic alliance. thank you for the opportunity to share my views. >> thank you very much. let me point out that you mentioned the report that was done, senator lugar had requested on the recent sales of military equipment. i would just like to point out we will be submitting that for the record. so thank you for raising the. >> madam chairman, senator udall, let me also say it's a great pleasure to be back at this committee. i spent a decade of my life, in the seats back to serving this to me on both sides of the aisle actually. and i was just recalled that my

first boss of your was hubert humphrey after he left the vice presidency. so i'm sort of dating myself but i wanted to make just a few very general comments about the summer, and then folks in on what i was asked to talk about, which is military and defense capabilities. and i might ask that my full statement be placed in the record and i would just ad lib. a little bit if i might. let me first say, if you look at past summits they often tend to be turning points in the direction of the alliance. look back to the rome and london summits but it was really turning the alliance from cold war in saying we have to sustain the alliance, continuous. madrid was about enlargement, really a change in the alliance innocents. prog was about military transformation of the alliance. lisbon was a new strategic concept and a new direction for the alliance, politically. so the question is what will chicago summit, will be its focus.

i think the headline will certainly be afghanistan. senator udall and the kind of the questions you were focusing on. i will be about how do you transition, how do you keep me in together out to get the formula, and what is the formula for the post-2014 period? but i think the other two elements of the summit both capabilities and partnerships are also very important. dr. kupchan talked a bit about partnerships. i think this is extremely important because the alliance basically will not fight by itself anymore. wherever it goes in the out of area operations it's going to partners and each have capable partners. i don't see this particular summit after asking for this point. i think more work needs to be done. i think there are real opportunities to make our partners interoperable. to certify that, give them better consultation

arrangements, but work can still be done on that. but let me turn my attention back to military capabilities because that's what i was asked to talk about. i want to raise for problems, and i want to argue that the summit will take the steps, each case, to begin to alleviate those problems. the first problem has been addressed already in some depth. that's the collapse of european defense spending. a little over a decade ago the united states spent about half of total nato defense spending. right now it's about 69%. the united states today spend about 4.8% of its gdp on defense. the alliance average net is about 1.6 and falling. that 2% figure we talk about, there's only a handful of european allies who spend that much. and that creates problems.

personnel costs remain about the same. for europe their funding operations out of their current budget, unlike we get out of supplemental, so what does that mean? it means they're investment accounts, procurement accounts are being hurt very badly. that's about the future. they are cutting into the future. they are cuts are not being coordinated. with nato or really with many others. these are national decisions, and that has to change. we've done an assessment at in you about the impact of this, and we've seen what you might call horizontal cuts initially, where you are cutting across the force and that tends to hollow out, tends to make a forces less ready, less sustainable. and now they are moving to vertical cuts would it take entire chunks of capability out of the force. you see this with the dutch and armories. you see with a danish in submarines. you see it with the british and their carrier capabilities. so this is a problem for the future. the summit i think we'll take

some steps in the right direction. i think we will see some kind of a commitment out of the summit to identify the core capabilities that the alliance needs, and to try to protect that core. and to also create kind of an aspirational view of where we should be going. what we call to nato force 2020. i think the summit will continue to listen capabilities commitment and the work that was done there, and continue the command structure reform. what will be new here is what secretary rasmussen called smart defense. that is really about pooling and sharing. somebody referred to as let's go by together. that's not a bad start. it will be about 20 projects or so that will be put on the table to demonstrate the smart defense will have some meat on the bones. and then they will be what's called a connected force initiative. and the danger here is that the interoperability, military and rockabilly between the united states and our european allies

is good now because we've been operating together. but post-afghanistan is very fragile so we need to start thinking now about how to continue to maintain that interoperability. there'll be an initiative at the summit to try to do that. i think more needs to be done to do with this problem. my view is that as things get worse will have a much, we'll have to have a much higher degree of role specialization within the alliance, which means allies will have to be able to trust their fellow allies. if they're going to concentrate on a certain capability, a certain role they will have to trust their allies. that trust is not there yet. so we have to build that trust to move in that direction. i think our own command needs to become a much more of an interoperability commend to you, has been sort of a lily pad where we move forward to forward areas of operation. afghanistan, iraq and past. that has to change. ucom has to be about and

rockabilly of our force but as i said we need to do much more with our partners. the second problem, that's the first, second problem is missile-defense. you know the story here, generating threat, tilting russia, trying to limit the european phase-adaptive approach and to get as much detail as they can. i think this is a success story for the summit. there is a consensus in the alliance that we need to move forward with missile defense but that's a really solid consensus and it's a good thing. we will be able to announce at the summit that will be an interim capability for missile defense. if you look at both the technical and the political achievements here over the last couple of years our great. we have, we're going to be, we have deployed a radar in turkey. we will be deploying missile interceptors in romania and poland are we will be home

porting for aegis destroyers in the road of spain. we have agreement on a command and control system for the alliance, and the dutch and others will be built up the radar capabilities. so there's a whole long list of things that the allies have done to build on this consensus. and i think that's good news. the problem and all of this of course is that we cannot get the russians to cooperate. i think they are concerned about countries, and they are concerned about where phase three and phase four of this go. office represents some threat to their defense capability? we got out of our way to assure them it will not undermine that capability. i do think it's important first to try cooperation with russians, and this is important standing in the way of another dash to a number of other things. so far the obama administration in my view has been very successful in putting forward

good ideas to the russians, but not crossing those red lines. the third problem, very quickly come has to do with nuclear deterrence, and rss to say a few words about the deterrence and defense posture review. this is really about nuclear deterrence in europe. we have hundreds of nuclear weapons, united states owns forward deployed in europe. and as we know, the germans and others have been putting pressure on the system to reduce those. the strategic concept that came out of lisbon designed a very nice formula for this. it said that the alliance will remain a nuclear alliance as long as there are nuclear weapons but we will try to create the conditions for further reductions. note unilateral action, and that the aim of all of this should be to create greater transparency

our russian systems, and to get russian systems located out of your. i think that's a good form of the what happened subsequently was there was additional pressure to try to change that, and i think that was what was behind the deterrence and defense posture review. to its credit i think the administration has been able to work with that deterrence and defense posture review. and it's not been made public yet, but believe that the conclusion of that is that the current mix is sound. and that's an important conclusion. the fourth problem is, ian mentioned this, is reassurance on article five. i was privileged to work with secretary albright, was one of her advisers in a group of experts. this was probably the single most important issue that we tackled, and out of our work and in the new made a strategic

concept is a very clear statement about the importance of article five, reinforcing that. what has happened subsequently is that both european defense cuts, but also russian intimidation has led to some opening up of that question. is reassurance really what we said it would be out of lisbon with regard to article five? i think a number of things have happened since then that should give comfort to our eastern allies. one is that we now have plans to deal, contingency plans to do with problems, threats from that part of the world. and we will be exercising those plans. a big exercise here. baltic air policing will be continued at least through 2018, and probably beyond. the nato response force which ian and i worked on many years ago will be revitalize, refocused on article v.

the united states has f-16 training programs in poland, and we will retain a base in romania. so there's just a few examples of the steps that we have taken as a nation and as an alliance to reassure our eastern allies. there's more that can be done but i think those are important first steps. so i've laid out these four problems, and my argument is that at the summit and within nato we are taking steps to deal with all those problems. that doesn't mean they go away. but steps are taken to deal with them. thank you, ma'am. >> thank you all very much. i want to start, dr. binnendijk, with your comments around missile defense. as mr. brzezinski mentioned earlier, this month we heard russia suggests that they might use preemptive force against missile installations if there's

not a cooperative agreement reached with nato. do you think this is just posturing? do you think there are, this is, represents a heightened threat on the part of russia to oppose the missile defense installations, or should we just expect more rhetoric and continue, you suggested that we've been operating operating in a way that is sufficient to continue to have some sort of relationship with russia that allows us to move forward? >> i think we're being tested by the russians. there's a long history to this, of course. during the cold war essentially the united states convinced the russians of the importance of second strike capability. and that notion was accepted by both sides, and kept the peace

essentially during the cold war. i think the russians were quite upset when the abm treaty was abrogated because it tended to challenge that notion. when the bush administration put forward the third site, which was different in composition but similar purpose, they opposed that when the obama administration decided to go with another option, the phase-adaptive approach based on the standard missile three, they first were quiet. they thought might it be a good deal and then they start looking at, start looking at phase three and four, if not maybe -- so i think they are testing us. they are uncomfortable with this. they would like to set limit. i think actually if you look at the consensus in europe, the consensus in europe really is about creating missile defenses to deal with an iranian threat,

not to deal with a russian threat but if you look at the capabilities that we are talking about, these missile interceptors are slow. they're not going to catch an icbm. we've been telling the russians that. they want legally binding assurances. i'm not sure that a legally binding assurance would be ratified. so secretary rasmussen, secretary joe rasmussen is prepared for political assurances but i don't think we need to get him. i think we need to understand where the red lines are. there is a real threat coming from the middle east. this is a serious proposal that has consensus and i don't think we should let the russians move us from the direction in which we are headed. we ought to seek to give them as many reassurances as we can within the scope of the planet that we have. >> let me just ask the other two panelists, do you all agree with that analysis? >> i agree with the analysis. i think hans is spot on.

i would add that i think russian motivations behind their opposition to those defense plans are really more geopolitical than our technical. >> there are more upset over the fact the message will have military installations in territories of poland and romany. the only thing i would add, the concern about the conditionality was the missile defense plants. to quote the president, he stated, president obama, as long as a threat from iran versus we will go forward with the missile defense system that is cost effective and proven. the iranian threat has a limited and will have a stronger basis for security than the driving force from missile defense construction in europe will be removed. that has been hanging over central europe, central european understands of how committed america is to this plan. they are not quite sure. i don't think there's high confidence in warsaw am a bucharest and elsewhere that

these will be built in 2018. in fact, foreign minister in reporting on the state of polish foreign policy instead just this last, this spring quote, we stand ready to government the poland u.s. agreement on the missile defense base even though we are aware of the fact that u.s. plans to be subject to modification. for example, if agree which -- if agreement is reached. so they're not confident at all but these plans were before. i personally think these plans are justified whether or not we make progress with iran or not. because we have basic fact, weapons of mass destruction and missile technologies are proliferating. missile defense would become part of any forces conflict of capabilities, including transatlantic communities complement of defense capabilities. >> thank you. dr. kupchan? >> i would associate myself with

dr. binnendijk is analysis. i think it is really part of a broader lack of confidence and trust that exists between nato and russia. i would agree with what ian you just said, that it's not a technical issue. it's much broader than that. i'm someone who is broadly supportive of the obama administration's reset. it is that good days and bad days, but i think the glass is more half-full and half-empty. and i believe that we should continue to press on u.s.-russia relations and nato russian relations, realizing that we have differences over georgia and that we differences missile defense, but continue to pocket those areas where we have agreement. because if we can build greater trust, if we can get the russians to see that nato means them no harm, then i actually think we will be able to reach agreement on missile defense and

perhaps on georgia. i don't want to minimize the difficulties of doing that, i think the outrage two russia is correct and we should push hard on that front. one quick comment on what dr. brzezinski said about conditionality. i don't see the obama's commitment to missile defense as conditional. i think it's conditional in the sense that it is being adapted to the nature of the threat. and that is why there was a revision to begin with, to move toward a sea-based structure that would better deal with the threat from iran. so i think that both sides of the house are moving forward on missile defense. what remains to be determined is the exact nature of that system. and that will depend upon the nature of the threat. >> but i assume you would agree with his analysis that there is still some concern, in eastern european capitals, about the

commitment, our missile defense efforts. >> i think there is still some broad discomfort in central europe about the degree to which they don't enjoy the same pride of place that he did in the alliance 10 years ago. during the first decade after the fall of the berlin wall, they were the apples i. they had sort of a door open policy in washington. they don't enjoy quite as much access in pride of place as they used to. i do not think that is because the obama administered is neglecting them or going over their heads, we are working on russia at the expense but i think it is what one could call the new normal. and nato alliance in which poland starts to enjoy the same kind of status as in italy and

spain. that requires adjustment, but it's actually very good news for poland. >> given what you said about the russian reset, do you share what we heard earlier from secretary gordon that we shouldn't read anything more ominous than two putin's not coming to the g8 summit, other than he has work-at-home? >> i find it regrettable that president putin has decided not to come. i think that it's, it's a mistake on russia's part. who knows exactly why -- he made a decision, but there's no question that his initial decision not to go to chicago, and that his decision not to show up at the g8, suggests that he's keeping a certain distance. i'm confident that over time, russia is going to orient itself

westward. and that's because i'm not sure geopolitically speaking they have a lot of other options. union with belarus and kazakhstan is not a bright future for russia. it's just in my mind a question of when russian domestic politics works itself out. it could take a very long time, but i think putin is smart enough to know that the arrow points westward, and that the markets, the institutions of the european union and nato provided better future for russia than the alternatives. >> you said in your statement that, i'm not quoting you exactly, but you suggested that as the circle widens, preserving the rule-based system, as you said, that has really been established by united states and europe and the transatlantic relationship will be difficult

if the u.s. and europe don't move forward together. is there some reason to believe that we will not be moving forward together? are you suggesting that because of the current fiscal crisis, because of some of the domestic issues that you identified, that we should worry about this as a future challenge? >> i worry about two different dimensions of that challenge. one is the bigger question of the degree to which the china, the india's, principals of the world will embrace a rules-based system. and if so, whether the our rules-based system. i think that the conversation that will be increasingly important in the years ahead. it's already started. and my second concern is that we can't manage back have on our own. the west as a going concern has

really been about partnership between the u.s. and europe, and between the u.s. and japan and other allies in the pacific. and i do worry that the european union's foreseeable future is perhaps introverted and fragmented. so it's not that they will diverge from us on what these rules are. they might not be in the game. and that i think would leave us in an exposed position, and that's what i think the united states and europe should do what they can to refurbish, and revitalize this anchor of liberal values, open markets, democratic institutions. because they are now under threat, rising powers do not share those same commitments. and that's why we need to make sure that our model is both strong and serves as an example for the rest of the world. >> you know, we have a pen and a

european european appeared subcommittee last fall -- we had a panel, and virtually all of the panelists agreed that one of the most important things we could do to support europe in addressing their fiscal crisis was to address our own at home. so i certainly thank, i would certainly support that, your analysis. let me just go to an issue that i think has been brought up several times, and that is that as we look at the summit, as a look at the future of nato, that it's the partnerships is one way for us to expand the influence and the ability to work in the global environment that we are now when. do you think about offers an opportunity -- and i guess i would ask mr. brzezinski and dr.

binnendijk if you have views on this as well -- do you think this offers the opportunity to expand the circle in a way that allows that influence to continue to happen, as you look at the partnerships that have been developed and are being looked at in the future? is this the way for nato to continue to have some influence and work with those countries with rising economies? >> absolutely. i think partnerships are the way of the future for the alliance. the fact is that probably the most urgent challenges and most surprising, unpredictable challenges are going to come from outside the north atlantic area. it will be the middle east, asia. i think it will eventually be africa. also because of all the systemic challenges these regions are facing the nato will be joined -- gone into them, because those

changes when they're particularly negative can directly affect our own security. we experienced that on september 11. the partnerships provide an opportunity not only to bring more capability to the table but to also provide an opportunity to bring to the table countries, regions, players, sometimes nongovernmental organizations that really understand the situation because they live there. they have the relationships. they have the diplomatic clout, the diplomatic legitimacy, the heavy intelligence. they can provide the nuance that countries in the north atlantic areas don't have. we're going to need more of those relationships. i think it's smart to think about nato as a community of like-minded democracies, serving as a hub that can participate with a wider set of players, the brazil, the indy, beat japan, australia, most of them already have these relationships. we need to deepen them and leverage them or. >> and you. dr. binnendijk?

>> let me answer your last equation together because i do think they fit together. if you look at american grand strategy today and you look at the so-called pivot to asia or the rebalancing to asia, i think it's probably the right thing to do. that's where the long-term security challenges lie. shorter-term challenges still remain in the greater middle east. so that's the second part. and we are looking to our european allies to help us in primary that second endeavor, otherwise we're not going to have the capacity to do it. the question is are the european allies willing and able to do that? that is afghanistan to keep in your as there is a good but it's even worse i think in europe. and you got the financial problems that we discussed. so as you look at a strategy, the question i think is are the european partners, allies, willing to go along with this strategy? some have talked about not giving away from europe but

rather pivoting with europe. and that notion of pivoting with europe requires partners who are willing and able, and that's the task. so that's the first part. this related part with regard to partnerships in general, i agree with ian. i think we will have 13 or so partners meeting in chicago, and there's a real opportunity there. if you look at so-called partnerships for the alliance today, you've got the partnership for peace, which was initially a winning chamber for membership. now you have some very capable countries and some very less capable countries in the partnership. it's not really functional anymore. you've got a dialogue, the istanbul cooperation agreement. and others, but they don't make much sense anymore. i think we really need to think partnerships in general for the alliance. and doesn't mean you can't keep

those dialogues going, but to me it's about capabilities and will. and you need to find those functional partners, if you will, you can be with us. and they can be global. australia, japan, south korea, india potentially, others but how do you partner with them and how can they be useful to the alliance and to the united states? and i think where you have to start in addition to the political elements is interoperability. so that we can operate. and our standards within nato. we should be using those nato standards to apply to these other countries so that will come together in an operation we are interoperable. we should be able to certify that. these countries should do something for that which is greater consultation. so i think there's a lot can be done with this notion of partnership that will help the grand strategy that i laid out to be able to work. >> you know, i think you all have mentioned the pivot towards

asia and what the european reaction has been in some quarters, and i liked your comment, dr. binnendijk, about the idea that this is really what's happening in asia is a people's interest to europe, and there's an opportunity to pivot together. and i wonder if, if any of you have thoughts about to what extent that kind of message will come out of the summit in chicago, and whether there's an opportunity to make that point in a way that has not been made to date, anyway. >> you know, i think the europeans are beginning to understand the importance of global engagement. they are beginning to understand that the future of our partnership with them depends on their readiness to do things that are well beyond their

normal purview. but i think that's going to be a long-term process in the sense that the europeans at this point simply don't have the equities or the capabilities to be players in asia, in the same where we are. that doesn't mean they can't be helpful. that doesn't mean that they can't invest in the kind of capabilities that will get them there. but i do think, and this comes back to the session were just having about partnerships, that that conversation should not just be about what partners can do for nato to increase nato capability, it's also about what nato can do for others in the sense that as i suggested in my opening remarks, i'm not sure that nato is going to be sending out the fire trucks every few months whenever there's a problem out there. who is going to be sending out the fire trucks?

probably groupings that are local. so if i were to guess in what the most important security institutions of the coming world will be, they will be asean in southeast asia, the gulf cooperation council, the african union, the defensive union emerging in africa. and so i think nato's engagement with these groups should be partly about interoperability as hans was just saying, but also teaching them to do for themselves what nato has done for itself, which is the most successful operational integrated military/illegal institution in history. because if we're not going to do it we should invest in making sure that others will be ready to fill that gap. >> thank you. s., mr. brzezinski? >> i would hope that would be the message that comes from chicago that we will be pivoting together to the new challenges

of 21st century. that's the essence of the transatlantic bargain. i think partnerships, global partnerships are a way to do that because united states, canada and our european allies reaching out to brazil's, india's, deepening the ties to them. europe and north america pivoting together to these new regions. but i am concerned about our ability to pivot militarily together as we reduce u.s. force presence in europe. we are reducing to brigade combat teams. where pulling out pre-position shifts from the military and point out a squadron, among other elements. i think it does raise, because it hasn't been adequately addressed by the administration, of how in the long term we're going to maintain interoperability between u.s. and european forces so that they can pivot together to these new regions. to give a sense of what the administration's plans are, all occurred is that to reduce the kind of engagement that occurs

between let's say to brigade combat teams that are being illuminated, they're going to have united states commit a brigade combat team to the nrf. fantastic, cursory decision. we should've done it a long time ago. and they're going to ensure that, to brigade combat team's equivalent will be rotating to europe each year, which sounds good. when you start scratching the surface of that, those rotations are only six to eight weeks long per year. that comes nowhere close to the kind of engagement that a permanent base unit and europe can provide. it comes nowhere close to the kind of joint training that a unit based in europe can do with the italians, with the polls, with the norwegians and such. and so i think there's a real question out there was going to happen to all the great improbabilities we developed over the last decade. remember when europeans started first pulling into afghanistan

and into iraq also, we had real interoperability problems. it wasn't smooth. as the battlefield becomes more complex, more technology to many, certainly the way we fight, and rapidly is more difficult to maintain, more difficult to develop the more difficult to sustain in regard to more engagement and less engaged in. so that's the question mark i bring to the table. >> yes, dr. binnendijk. >> i would hope that the message from chicago is that we face global challenges together, that this group of nations, group of democracies needs to work together to me those global challenges. and i think that is what the message should be. and i think if you look at libya and what happened there, it does demonstrate that if an issue is in the interest of our allies to engage in, they will do it. it didn't require all european

allies to engage in that enough to engage. 90% of the ordnance dropped in libya was european ordnance. so that demonstrates that when there's an interest there can be a will. so i wouldn't write off europeans as good as some others might. now, they are in a new existential crisis today over the future of the euro, and event with developments in greece. so that will complicate it. let me just a final word about what ian just raise, which is sort of a narrower issue of brigade teams. i ask or think as ian suggested that this was a very sound decision to have these brigade combat team's, to have at least one u.s. based brigade combat team deployed battalions to europe to do joint training with the nato response force. that ought to be a model. it ought to be a model for what we do, to maintain

interoperability, military interoperability between the united states and our allies, post i sat. and we need to find many other examples, and this actually may be a place for the committee could put a constructive role. to try to urge the administration to find a place that because interoperability is very precious, and it's for a fragile. and we need to be able to sustain the effort going to stay in the alliance over time, post-isaf. >> thank you all very much. i know we promised to have folks out by about 12:30. so let me just close with one question that's a little more parochial for me. i'm planning to attend the summit in chicago, and one of the programs i'm going to be participating in is the atlantic council's young atlantis program. obviously it's aimed at trying to engage more young professional leaders, and future decision-makers in policy questions, and particularly in

the importance of nato. so do you all have thoughts about what we can do to better engage upcoming leaders on nato and on what the next generation should look like for nato and for our future leaders? u. professors ought to have some really good ideas about this. >> we are thrilled to have you at the atlantic council conference there, senator shaheen. i guess one, the doctor attending is important because you represent this institution, and that communicate a lot, a lot of commitment. with that said i would reinforce that message. they needed that america is interested in your its security interests. and and third, our second i guess, i would encourage them to think globally, and recognize that they and their countries have a lot of stake globally. and have to start looking beyond their immediate financial crises and thinking about how the interests are affected by development in asia, africa,

latin america. and then third, i've remind them just as charlie did today, that by working with the united states we are together stronger and more influential and better able to shape it and drive events beyond the north atlantic area in asia, in africa, in the middle east together, then if we do it separately. >> thank you. any other thoughts? >> i would just concur that it's not just important, but more, more and more important over time in the sense that i think on both sides of the atlantic we are going to generational change is -- changes that are, the road it would be too strong a word, but diminishing the social foundations of the partnership. in the sense that, i guess you and i can we sort of represent the last generation of people in this game who sort of still, who entered professional life in the cold war was still alive, but

then, dinner, not so. the students i teach at georgetown, they're going up in a world in which atlantic partnership? cold war? berlin wall? what's about? and i think that's why it's especially important to get americans and europeans to engage in these issues, to be educated on these issues. and also for europeans, i think the other thing i worry about is their own commitment to the european project. one of the issues that poland is beginning to show is that they don't have the same emotional attachment to europe than the older generation. what angela merkel has been doing with the euro, helmut kohl never would've done because that was sacred ground for them. and that's particularly why i think investing in the emerging generation is so critical. >> thank you. dr. binnendijk, you have the last word. >> take you. first i think it's great to hear going for the purpose and

there's a great job with the program. and it's a problem. i mean, i go to meetings on nato and a but it looks like to me. and this generation, and we need to fix that problem. i've taken one small step. i have my daughter now engaged in nato affairs are so that's a personal contribution. >> so if i bring my daughter that would help, right? >> i think the message want to take though there is that we are really faced with global challenges, global problems that cannot be solved by the united states or a small crew. they have to be solved globally. and day, for all of the faults of the europeans, they still are our best partners indeed with those global challenges. and it's not just military stuff he is energy, its climate, its cyber. all of these new challenges. and actually that is where the newer, the latest generation is focusing the they understand

those problems. and so i would focus on those as well. >> well, thank you all very much. this is been very enlightening. at this time i will close the hearing. [inaudible conversations] >> [inaudible conversations] >> tonight, testimony from

former news international chief executive rebekah brooks. as the panel examines the relationship between politicians and the british press. ms. brooks faced several questions about e-mails and text messages between prime minister david cameron and leaders of both the conservative and labour parties. see her test what tonight at 8 p.m. eastern on c-span. also tonight, remarks from fcc chairman mary schapiro on her agency's implementation of the dodd-frank law, and had to tighten regulations on money market funds and financial literacy. she spoke earlier today at the annual meeting of the investment company institute, and you can see her comments at 8 p.m. eastern here on c-span2. >> these men go through things, and have scars that no one can understand except each other. spent the first thing that startled us was the relationship between harry truman and herbert hoover, who are two such personally and politically different men, and who ended up

forming this alliance that neither of them would have anticipated. ended up being enormously productive. and form the foundation of what became a very deep french. the letters between them later in their lives about how important they had come to one another are really extraordinary. ..

good morning and welcome to the center for strategic international studies. i'm in the external relations department here. we will be live tweeting from this event. our twitter handle is @csis. i have the privilege today of welcoming two very distinguished publicker is vents who have served our country well. dave cohen is the undersecretary for terrorism and financial intelligence, u.s. department of the treasury, and we can think of no better person here to tell us about the role of the treasury and national security. my colleague juan zarate was basically this job in a former administration, plus, or minus, something like that, and then juan went to the white house and was deputy national security advicer. we owe both of these officials a

great debt for a service to the nation. on behalf of csis. i'd like to welcome you all today. i turn it it over to juan. >> thank you very much. thank you for all of you for coming today. in particular, david, thank you for attending today. >> i'm happy to be here. >> let me tell you openly and honestly those who followed the work that we've done here at csis. i tend to invite not only high from file government officials but also friends. i count david among one of my friends. this is a great discussion to have because i think as we read the newspapers every day, we see the importance of treasury as a core element of u.s. national security. and not just as a tool of national security, but strategically as a key port of how the u.s. government thinks about the use of financial power and situation in international security. and david now is as the

undersecretary for terrorism and financial intelligence, u.s. department of the treasury the office that is the vanguard of that strategy, vanguard of those tools, the vanguard of those global elements of influence that really put the treasury at the center of the core at the national security base. whether you talk about iran or north korea, al-qaeda, transnational organized crime, drug trafficking with, the treasury has a seat at the table but is often the center of the debate as to what we're doing about the issues. i'm happy to have david here with us to talk about the issues and the evolution of treasury role. and frankly get into some of the thorny issues the u.s. is dealing with a on a national security level. david, thank you for being here. >> thank you for having me here. >> there's a lot of continuity in the evolution of the powers and efforts, you in fact, were at the treasury department in

1999, through to the beginning of the bush administration. and then you've come back as the assistant secretary now as the under secretary. can you talk to us how you've seen the evolution of treasury and treasury role and how it now shapes national security. >> sure. thank you for that very kind introduction. kind words. it is -- i'll get to your question in a moment. but it is a great pleasure to be here. to be able to talk about the treasury department's role and the national security foreign policy efforts of the u.s. i'm mindful what i'm able to do today with the treasury department is able to do today is very much depent on the work of those who came before me including yourself. very much appreciate all of that being done. as you noted, i was at the treasury department from' 99 to 2001 in the general offices. at that time, the treasury

department was involved in the national security ill lis site finance role to some extent but to a lesser extent thea than we are today. we were at the time, the u.s. government's lead on the status eel graciouses. i'll come back to but it is the international standards setting body for antimoney laundering and counter terrorist financing efforts. we were responsible in the treasury department for regulating the domestic and money laundering realm through the financial crimes enforcement network. and of course, for implementing sanctions through the office of foreign assets control. and when i came to treasury, i came at the time when larry summer had become the secretary. he really elevated the

importance of antimoney laundering as a not a domestic issue, but as an international issue. and saw the threat of money laundering internationally as something that the treasury department should be more involved in. we pursued the issues for the two years i was at treasury. and the issue began to gain some greater attention, both within the government and internationally. i left as you noted in july of 2001, this was developing, but, you know, had really taken hold. i then came back in 2009. in the meantime, the part of the treasury now lead is completely transformed. we lost all of our law enforcement agencies, the secret service, atf, customs, what have

you. but gained something enormously important that has the sort of fed our growth as an important player in national security. that's two new offices. a policy office that is specifically dedicated to developing innovative approaches to combating illicit finance. and intelligence shop. we now at the treasury department have our own intelligence unit that is comprised of analysts whose day in day out mission is to develop financial intelligence. to help us understand the networks that are involved in a variety of illicit conduct whether it's narcotics trafficking, terrorist financing, transnational organized crime, weapons proliferations. these analysts work with with ores in the intelligence --

targeting our efforts. so adding on top of the preexisting regulatory responsibilities that we have through ofac, the policy shop with, and the intel shop, we now are able, not only to be more effective in combating illicit finance, we're able to take it internationally in a way that is, i think, quite useful in pursuing u.s. foreign policy and national security goals. we're able to talk to foreign finance ministry website foreign regulators, foreign financial institutions, foreign ministries about the importance of combating illicit finance and being able to use that as a way to address our most important foreign policy in national security goals whether, again, whether it's terrorism, weapons proliferation, transnational organized crime. the power that we are now able

to sort of extend internationally and the ability to attract complimentary actions by foreign governments and foreign institutions like the e, u has lead to, i think, have a very happy consequence, which is that when the most difficult foreign policy problems are being addressed, and the most difficult national security issues are being debated, we are going to increasingly has a tool that can help solve these problems, and help promote u.s. interests. so long answer to a short question, we now have the expertise, the tools, the authorities, and i think the credibility internationally to be able to a very effective tool

to promote u.s. national security interests. >> that's a great answer. sort of a leiman's way to feed off of it as well defeat diplomacy and military power. lies full range of financial tools which you described it very well. can we dive into the key thorny issues. this week we had a lot of attention on the al-qaeda, we had the failed plot or the disrupted plot of yemen lead by the al-qaeda. a lot of discussion about the death of bin laden given the one-year anniversary, the release of the documents. let's talk about al-qaeda's financing with treasury financing ease -- it seems that al-qaeda core is not only beleaguer it's having quite a bit of troubling financing, the network. you have the rise of the affiliates in a bulk niced

fractures where with all for the organization. kidnapping for ransom. criminal activity. a whole host of other ways the network itself is financing. you talk about some of those trends and what treasury thinking about how to combat the evolution? >> yeah. and, you know, it's, you know, sort of fallingen your first question. the evolution 77 my office i am the under cemetery. our agreement is illicit finance generally. the office's name. the office terrorism and financial intelligence for a reason, which is that when it was created in 2004, you know, the principle focus was going after terrorist financing, and so we, we have been doing that, you know, quite aggressively and quite relent leslye goes before the creation of the office since the office was created. as you know, al-qaeda today,

al-qaeda core, the al-qaeda that is holed up in pakistan, is in a much weaker state than it was certainly in from 2001 to 2008, 2009. in part, that has to do with actions that are taken by others. but in part, it's due to the effective use of our sanctions of authority that has lead to a substantial decrees in the financial support for al-qaeda. when we designate individuals who are supporters of al-qaeda, who are dpnl facilitators, who are raising money, moving money, for al-qaeda, that has the effect of making much for difficult for those to operate. certainly in the united states where it is a crime to do any business with these people. but one of the things that we

have been able to do is to get sphwcial financial -- international financial institutions. institutions that are not obliged to follow u.s. law to run the ofac list. to screen their transactions so -- they are certain they're not facilitating any transactions for individuals that we have does nailted for being involved terrorist financing. that has largely prevented al-qaeda from using the formal financial network to move money, to raise money, to spend money. and that has had a tremendous impact on al-qaeda core's financial situation. but they're not completely. and one of the areas where we are, you know, very much focused today is, you know, kidnapping for ransom, and the role of

al-qaeda affiliates, whether it's huim, hui psh with the arabian facility, al-shabaab in somalia, using kidnapping for ransom as a way to raise substantial amounts of money. >> we're talking millions of dollars. >> we're talking millions of dollars. we have seen huim in particular, since 2008 raising tens of millions of dollars through kidnapping for ransom. these are big hits. big dollar amounts on these individual kidnapping episodes. >> and that's much harder to affect with the class of treasury too manies. >> it's more difficult to affect with the tool of designations. although we do have the authority, and we have the authority to try to designate individuals who are involved in,

for instance, in pirate sei, pry rate sei off of the cost of somalia. to the extent we can identify individuals who are the moneymen behind the operation. we can designate them and try to disrupt their ability to get access to funds in the formal financial secretary. but our tools are broader than just designation. and in the kidnapping for ransom realm, we are embarking on an effort to try and persuade our allies to adopt the policy the u.s. has had for a long time. the u.s. government will not pay ransoms and will not give things of value to kidnappers. it is a difficult pots to implement -- policy to implement in each

specific instance. there is something being held hostage. they are saying you pay us and you can have your loved one back. it is long-standing u.s. policy. and it is policy the president is himself firmly committed to. which is that the government will not pay ransom. the effectivenesses is that we have seen that hostage takers are less likely to take americans as hostage because they recognize there is not a pot of gold at the end of this enterprise. there are others who don't sub describe -- subscribe to this policy. there are countries that pay rand is systems. there are organizations ha pay ransom. s. we are focused on trying to use

our persuasive ability along with the designation tools to get others to adopt the policy that is the same as ours, essentially. you know, so we are using diplomacy, we're using law enforcements, information sharing efforts, we use as, you know, there are good examples of our use of military appropriate to free host ages. >> with somalia. >> yeah, exactly. but the initiative that are we are undertaking to try and take the money out of kidnapping for ransom, take the incentive out of is hugely important. this is the sort of the leading edge of terrorist financing today is, you know, i sort of apologize, the superpac of

terrorist financing because instead of the individual donations being bundle upped you have big chunks of money coming in all at once. >> let's shift gears and talk about iran and financial pressure campaign has become a central component of the engagement with iran. a central hope, frankly, for the change of behavior on the iranian side. with some evidence, very good evidence that the iranian economy has been hurt badly by the pressure, which i would think started in -- carried through and strength end over time. can you talk to us about, for instance, where you see the financial pressure takes us, and i think the fundamental question being whether or not financial pressure or the time that you've helped fashion will change the behavior at the negotiating table.

especially as we look toward baghdad. >> you're exactly right. the path we've been began on in '05, '06 time frame designating iran's nuclear program working through the u.n. getting the u.n. security counsel adopting highlighting iran's failure to comply with the international obligations, and also designating people at the u.n. level, and working with foreign partners both in the private sector and in governments to have similar actions taken to isolate and put pressure on iran. the last, you know, three years we have been pursuing what has been known as the dual tract strategy. on the one hand offering the ierp begans the opportunity for meaningful, substantiative, sincere engagements. making sure increasing pressure

as long as they don't accept the offer of engagement. and we have, you know, it has the engagement tract wasn't bearing any fruit steadily and aggressively increased the pressure. additional designation using new authorities that congress has given us to apply even greater pressure on the financial sector in iran, which as cull mated most recently in the legislation that the president signed a the the very end of last year, that focuses on the export of oil, and transactions with the central bank of iran. we have seen this combined effort of our authorities and working with the international community. and i can't overstate the importance of the fact that we're able to generate when we

have our international partners working with us with the eu working with us, japan, south korea, central ya, switzerland, you name it, we have a -- and the united nationed as will. a very broad-based coalition. not doing exactly the same thing, but all pushing in the same direction of applying pressure on iran really as part of the dual-trablght strategy. and the, you know, the impact of that that we have seen particularly sort of through the fall of last year into this year, is really, you know, a very significant deter your ration in the iranian economy. the value of their currency the reelial has dropped like a rock. and that has, you know, significant impact on iran's ability to, you know, pay for the material that it needs for

the nuclear program, and more broadly just puts pressure on the leadership because the people in iran are feeling this pressure themselves. and you see that in, you know, iran's gdp, which is behind the peers as, you know, other countries that are oil exporters have been frankly doing well in the environment of increasing oil prices, iran hasn't. you can see it in the unemployment rate in iran, which is, you know, steadily increasing, and is actually quite high. you can see in the overall difficult that iran has today in interacting with the international financial community. they are increasingly isolated. the diplomatically, and financially and economically. i don't think there's any question that the impact of this

pressure has contributed to the sort of newfound apparent willingness of iran to at least come to the table. yons, i don't think anybody is naive here thinking that we have the turned a major corner. but, you know, the meeting that was held several weeks ago, the iranians came, seemed to be at least willing to engage in a conversation. the proof -- you see what happens in baghdad you see what happens going forward. in the meantime, we are going to continue to maintain the pressure because, i think as i said, there's no doubt that the pressure that has been applied has been at least in part a contributing factor to getting us to where we are today.

>> and you have at convergence of several events coming this summer. you have baghdad in the meetings coming up. you have the triggering heck schism in terms of sanctions and banks in the legislation coming june 28th and you have the oil em embargo from the europe union on july 1st. >> right. >> what do you see as treasury policy sort of given those seminal events that are coming up in the next few weeks. >> yeah you know, those are the particular the june 28th date is very important. that's the date under the ndaa, the legislation after which any country that purchases oil from iran and pays to the central bank of iran for the oil, whatever financial institution is involved in that transaction can be sanctioned under the new legislation, unless the country involved has significantly

reduced its oil intoicts from iran and secretary of states makes a determination the country is significantly reducing the oil imports. if the country does that, then the financial institutions in that country are able to pay the central bank of iran for oil for 180 days when they need to demonstrate again when they're significantly reducing. the idea to drive down the amount of oil iron iran is able to sell. for countries that don't sever the significant reduction determination, after june 28th any payment to the central bank of iran for oil exposes the financial institutions involved in that transaction to sanctions under u.s. law. we have, you know, there's still a number of countries that are importers of iranian oil that have not received reduction. surely some of them will.

maybe all of them. maybe not. we'll see how that developed. we have seen some efforts and it there was an article yesterday that i saw that reflected the efforts to develop alternative payment mechanisms to try and sort of evade the structures of the ndaa. and in this particular one,ed idea was that 20% of iran's oil will be sold by other entity in iran. not the international irannen oil company, which is the government ministry that owns all the oil. i think it's fair to say, that we are going to be very skeptical about efforts to develop alternative payment mechanisms. prefaced on the fact that under iranian law, it says all

revenues earned by any government ministry has to be paid to the central bank of iran. and the oil resources are owned by the national iranian oil company. so i think our presumption going is anyone buying oil from iran is ultimately paying the central bank for the oil, even if there is some intermediate step along the way. so we are going to be the quite skeptical of efforts to pay, you know, proport to pay someone other than the central bank of iran for iranian oil. >> that's an important point. because you're signaling a max list interpretation of the structures and you're going to be looking carefully for the attempts to abade. >> i don't know if it's max mall liz. anyone who makes a knowing transaction with the central

bank of iran for iranian oil is subject to sanctions. and, you know, we have made clear that, you know, that means direct or indirect. and that means that you know or should know that the payment is going to be the central bank of iran. we will apply the law in that fashion. >> question on iran before we shift gears again. there's been a lot of talk about what is given potentially as a negotiating table. whether or not a lessening of the sageses or pressure is on the table. can you talk about you know what that cap las looks like it potentially and what unwinding of the pressure might look like it. we went through it in 2005 with north korea. with efforts that begun -- and we engage in effort to inwind somewhat unwisely but any event. there are a historical lessons to how you do the unwinding as part of negotiations. have you thought? >> yes.

[laughter] i guess what i will say that is, you know, my colleagues at the state department are responsible for the negotiations and for the takes that will occur in baghdad and perhaps there after. i know, we are pursuing this entire endeavour in the con instruct of the dual-tract strategy. on the one hand, pressure on the other. as we have said all along, the purpose of pressure is pressure itself. we're not applying sanctions for the sake of applying sanctions. we're applying sanctions to try and induce a behaviorial change. that's the purpose of all of sanctions programs is to try and change behavior. and so as we approach the specifics of the negotiations with iran, you know, and of course in the context of the pf

the five members of the security counsel plus germany are part of the negotiations with us. we are pursuing that in the context of this dual-tract strategy. where, you know, pressure is there to try and induce a behavioral change. that has been the objective from the offset. it remains the objective. >> shifting gears a little bit to the air arab revolution. whatever we call it. treasury played a central role in the midst of that turmoil as weal. the freezing of libyan assets well over $30 billion significant success for treasury. but now centrally in the context of our strategy with respect to the coven gi in syria, people are looking to and talking about the financial pressures, frankly, really the only tool we're applying to try to effect the change.

can you talk to us about what the next steps are with respect to the financial pressure and whether or not you think it's going to work. >> yeah. and i'm also 0 going qifl with the premises of your question. i don't think that in syria, the only too they're we're applying today is financial pressure. but it is an important tool. it is a tool that we have been, you know, relying upon quite substantially since the uprising, you know, about a year ago more than a year ago in syria. we have adopted three new sanctions programs in that period. the sanctions program specifically focused on human rights abuses in syria, which i should add has lead to a number of designations of syrian officials as well as iranian officials who have been supporting the abuse of human -- syria.

the sanctions program focused on syrian government officials. last august the sanction's program focused on the entire government of syria as a whole including the central bank of syria. this effort has been undertaken, again, in conjunction with an effort that the eu has undertaken too apply financial pressure and sanctions on syria, that turkey has undertaken to apply sanctions on syria, and that, i think, importantly that the arab league has undertaken really the first time in the arab league history there was a decision to adopt sanctions. now what we have been doing in addition to applying sanctions under our own authorities. and we have designated close to 50 individuals and entities under the new authorities that have been created over the past

year. we've been working very closely with the eu, turkey, and importantly, the arab league to improve and enhance the effectivenesses of this of the other sanctions efforts. there was a meeting ever a working group on sanctions that brought together those, you know, 50 countries attended to talk about how to more effectively implement economic sanctions on syria. there's going to be another meeting in several weeks here in washington to followup on where the purpose is to enhance, and increase the financial pressure on syria. and, you know, it is having an impact. the economic inindicators in syria are much like what you see in iranian president gdp in

2009, i think, was growing at 6 6%. i think the last year declined by 23 percent and expected to contract 6% this year. you know, their currency has devalued i think 25% on the official rate, and anywhere from 50 to 75% in on the unofficial market. their their budget deficit is widing substantially. because the source of revenue for the syrian government are largely oil exports and tourism has almost completely dried up. they're not earning, basically not earning any money from their oil or from their tourist industry. that is, you know, obviously on the revenue side, they're not earning. on the extendture side, they're spending money to try and inflation down by sub dieding

food and fuel and they're spending a lot of money, frankly, pursuing the violence against their own people. and the combined effectivenesses is that the economic situation in syria today is quite perilous. the objective of that is to encourage the business class in syria to recognize their future prosperity, the preservation of their wealth, their children's future, economic stability depends on a solid leave in power. and peeling away that business community support from the regime is one of the, you know, the important objectives that we're pursues through the sanctions. >> an interesting corollary to this as well. is the --

a year ago using treasury section 311 of the patriot act authorities to december a bank as a primary money laundering concerns. work that a treasury did along with the dea to uncover a drug-money laundering scheme hundred of millions dollars worth. you recently got a lot of attention on treasury's focus on the lebanese banks -- nothing new or surprising, of course, can you talk to us about next steps you're talking about in terms of the lebanese banks system? >> i can tell you, we're continuing to focus on in lebanon. and that is, i would put it into two buckets. one is continued focus on the use of the lebanese financial system for the sorts of money laundering and finance activities that with the focus

of the lebanese canadian bank action. that was an action taken against the bank that was centrally involved an enormous international drug moneying laundering scheme. running money through the united states and, you know, involving used cars being sold and african a very complex scheme, and, you know, it was affecting the u.s. financial system. it was sending wires into the u.s. that were the proceeds of -- and we will and we've been very clear with the lebanese authorities about this,ly do what we need to do to protect the u.s. financial system from that sort of illicit activity. that's one bucket. we're continuing to work with the lebanese both on the lebanese canadian bank issue. specifically and more broadly

working with them to have them be more effective in policing their own financial sector. the other bucket is syria and iran. and we have been as clear as we possibly could be with the lebanese that that is a. that if we see either the asad regime or the cronies using the lebanese financial system as a way to escape the sanctions, weaken the sanctions, we will act. like wise, as iran is under increasing financial pressure, and has lost access to financial centers around the world, you know, we are concerned that the iranians will look to bay root, which is in the international financial that has been for some

time as their jumping off point back into the international financial system. and so again, we have been very clear with the lebanese, that's something that we are tentative to and will respond to if we have the predication. >> 2012 hours if we were given the chance. i'm going to ask one more question and open it up to the audience. david, how do you think about and deal with the rise of the chinese economy, the chinese banking system we see in the newspaper today. the federal areserve announcing -- significant announcement, i think. how do you dale with the chinese in part when they are not as cooperative as we'd like them to be on some of the issues whether@it's north korea or iran or syria. how do you attend with the economy is rising, the banking sector is powerful.

in some they with are becoming a force in the financial battle space in? >> obviously the relationship with china has many important dimensions to, including work with the chinese on a variety of foreign policy, national security issues that we have. , you know, we have on our plate. at one level, we deal with the chinese, the exact same way we deal with everybody else on the issues. which is that we explain what our laws are. explain how it is that, you know, or laws operate so that the governments instruct it's financial community, and the financial community itself understand where the lines are where they can can get crosswise with with us. whether it's china or any other

financial that is looking to be the player on the world stage, and you know the fed yesterday gave permission to the big chinese bank icbc to financial a bank here in the united states. the dpnl sector itself has a very keen interest in ensuring integrity of its own operations, and that's true for the financial sector broadly and it's true for each individual bank within the financial sector. and so part ever what we do is, you know, in addition to dealing with governments and talking to governments and trying to deal with governments, is to communicate directly to the football sector about -- financial sector about combating illicit finance. importance of combating financial into the ground sei. the integrity. and the importance of maintaining reputation. that is what, you know, assists

them as they want to be players on the international financial stage. so, you know, we approach the chinese and they said in the same fashion as we said approached other countries on the psh -- and, you know, we will continue to do that. >> you raise a great point. one of the keys to the success is the recognition that reputation is the coin of the realm when talking about the international financial system. those who want to appearly get mate. i think that's enough questions for me. i have about twenty others i could ask you. what i ask you to do is wait for my a microphone, identify yourself, please, and then pose a question. and we've got several hands up. let's start with the front. mr. secretary. when we liberated kabul, we

discovered in a safe house that was al-qaeda safe house, apparently, the evidence that the u.s. coauthorization the year before it cost them about $10,000, and that being mobilized a dr -- killed 18 u.s., the ship was out of action for two years. in that context the system is of course very pocialt. important. and the treasuried to me that was a single biggest problem. i was wondering if you could tell us what headway you've head. >> great question. the system, which for those who don't know, assume most people here do. is a way to move money not involving the formal financial sector, but through the communications between

travelers. sort of a akin to western union, but somewhat more simplified system. we are focused on particularly on the use of the system domesticically and internationally. it exists all around the world in different ways. what makes it difficult, it is in some respects a little bit sort of below the they shall hold. it's not it isn't because it's important of the formal financial sector. it's not the traditional tools as banking transactions would be. just last week, there was an new executive order that the president signed on foreign sanctions evaders. specifically with respect to iran and syria. one of the areas where we are

focused in using this new tool is on the sort of exchange houses, the trading companies, the ha voilas that may be involved in moving money, moving funds in a way that is contrary to our on iran and syria. and we now have a new tool that will allow us to identify those who are involved in that activity. and exclude them from the u.s. market, and public ice who it is involved in that activity. so, you know, to get to your question, specifically, it remains something that we are very much focused on. in some respects our success in combating terrorist financing through the formal financial sector has rippled this

alternative mechanism for moving money. and, you know, this is a -- this effort is ongoing, you know, we're not -- i don't think we have the, you know, the view that we're going to, you know, ever completely solve this problem. and the next frontier. and now with the new tool in the foreign sanctions executive order is to hone in on on of these mechanisms. >> yes, ma'am? >> microphone is right there. >> thank you. cnn thanks for your address. i was wondering for you would flush out a little bit more on syria. specifically are you seeing any capital flight? are you seeing any indication that the business class is truly abandoning asad ab and can you talk about indicators of the tipping point would be.

whether that's any time soon. question, you talked about iran and lebanon in terms of their using their banking systems and trying to help syria circumvent the sanctions. whaibtd countries like russia that are an ally of ours but supporting the are sheem regime? >> so we -- there has been some capital points in syria. one of the things that makes this a difficult endeavor is on the one hand, we want to facilitate, the capital flight of individuals in syria who are not supporters of the regime and who want to leave syria and want to, you know, take their money with them. there's no reason that we would want to interfere with that. but at the same time, of course, we want to be as careful as possible that the regime, it's

cronies, its allies who may be trying to shield their assets are not able to do so. and so in working, particularly with the lebanese financial sector, which is very integrated with the syrian financial sector. they have, you know, relationships. there are a number of lebanese wangs that have operations -- banks that have operations in syria. one of the points we need have made they need to exercise extra special diligence with syria to ensure that, you know, good money is able to leave. bad money is not. so we are seeing some capital flight. you know, the desire is to improve the overall power and effectivenesses of the sanctions programs that have been adopted. i know, the arab league, the

eeu. as well as the united states to continue to generate the, you know, the choice of the business class there to withdrawal from regime and to leave syria. to leave syria with their money. your second question was about other financial sectors other than lebanon. i guess, what i would say is that, you know, our view that no financial sectors should provide a safe haven for the syrian regime across the board. and i'll leave it at that. >> doctor? >> thank you. i want to know if the major qualities. aaron has arab abuse of monies

and governmented where assets ended up in international constitutions financial and otherwise. now you are working on retrieving that money. is there any policy in place to prevent this thing from happening in the future? >> look, the hypocrisy issue is one that we have been working on for years. frankly, it goes back to my prior tenure of treasury where we were working on issue of crip to be sei -- i did the most effective way to combat that that we currently have in our tool kit is the effort to enhance the overall standards in the financial committee. so that financial institutions

know who they're dealing with. they know the sources of funds, they know where the money is coming from. so that financial institutions can take appropriate cautions to avoid becoming repositories for the stolen of various countries. that depends, of course, on the willingness of financial institutions to do that and to not be the, you know, the places where the leaders who are stealing money from their own people can butt -- put their fund. that is an issue that, frankly, a difficult diplomatic issue to deal with. to get to generate the agreement that this should not be allowed to take place. there are u.n. conventions in place that address that issue, and we are, you know, we pursue

the return of assets, as you noted, when, you know, when we are asked to do so and when we have the information available to us to try and assist on that. so it remains something football we are focused on on, you know, i am i don't know sometimes too candid in acknowledging. it's a hard problem. it's a hard problem because it dpndz on the willingness of the financial institutions and the financial institutions in which they reside to say they don't want to deal in these assets. >> that's good news as world. the world bank has a stolen initiative. there's retention to it. but you're right. it is a work in progress. yes, sir? up here in front.

sorry. >> thank you. international investor. you've probably heard of jason share month who published a study where he tried to, very quickly, do without a opening thousand corporate accounts around the world. he discovered his conclusion that the united states is one of the easiest places to open shell companies. states like delaware, wisconsin, where 2,000 shell companies existed. one house alone. we love to point a finger at the lot of rations around the world. what can we do to fighten the tanders around the world to set up the company but have funds in and out of them here? >> so no disrespect to him. i'm not familiar with his study. but your point is well taken,

and the u.s. has been in our mutual evaluation has identified as having a weakness on this in in ownership process. we are support of legislative initiatives that are moving through congress center 11 has a bill, for instance, that would require the identification of beneficial ownership during the company forming process. we're also working we issued a advanced notice of proposed rulemaking where we have sort of asked the question in the sphere of whether financial institutions ought to collect beneficial ownership and remain

during the account formation process. and again turgt process. had is an issue that, you know, that we're spending a lot of time focused on. i think we've recognized that as a weakness in our current money laundering account current regulatory structure. it impedes law enforcement investigations because, you know, they go to try and find out who is the owner of a particular company and you can't penetrate behind. so yes, it's an issue. it's an issue we're trying to address. >> i just want commend david on the work his office has done. a mutual employees of ours has spearheaded over the years. i want to commend them for the work. ma'am? right here this the third row, please. we have time for one or two

more. >> theresa. you mentioned at beginning that when dhs was formed and other changes after 9/11. you lost the law enforcement capacity. you have substantial intelligence capability, how do you coordinate with the law enforcement agencies or intelligence driven activities what for the coordination mechanism. how is that working? >> we did lose the agencies themselves, they are no longer a part treasury. one of the things that changed in the period that i was away was the coordination and collaboration among the law enforcement community on both sides, and so, you know, law knowed the lebanese canadian bank example, it was a treasury

ages. we were working closely with the dea but in developing the case, you know, on both, you know, particularly on the intention side we but also in sort of developing the legal case that we pursued. we have our, you know, our coordination with dea, fbi, secret service, it's very good. we have liaison from many agencies who are registered at the treasury department. they take a very healthy, and robust exchange of both law enforcement information and arizona the intelligence information. >> and just a fair point, treasury did keep the criminal investigationers from the irs, by the way, lead the efforts to hunt saddam hussein's assets in '03 and 2004. they were the sole remaining law enforcement. [laughter] yeah. reinforce that so i don't get in

trouble when i get back to the trouble. the irs, the criminal investigative side of irs, we work with, you know, all of the time all, you know, there's a new head of irs. he started two weeks ago or so. and, you know, one of the first things that that he did was come over to the treasury department, meet with me, my team. and we spent an hour about different ways question coordinate our activities. it's a close relationship even though are i the treasury and other law enforcement agencies or not. >> gentleman in the for a back. he's been very patient and enthusiastic. [laughter] >> my name is terri murphy. i'm associated with csi. i'm an export control and sanctions lawyer. i'd like to followup on the immediate question.

and give you, if i may, a very brief quote from a notice about your regulations that came out yesterday. and here's what it says, headline, news -- have dramatic exterritorial implications. from a law firm, not mine. it's signed bay former under secretary for commerce for export try and security. it's not an overstatement. i'd like to just mention, and then stop. the british who used to resist extra tear territorial actions now have a new law on corrupt practices. it's probably much more than ours except for this one. i wonder if you take the opportunity to opine on the brit of the sanctions intervenges the

actions. not from our government but the brits, the canadians, the imiewrpens. >> i haven't seen that notice. assume it's referring to the new foreign sanctions executive order. well, we're doing -- what we're doing, i think as a, you know, my old job was i was a lawyer. so i always sort of have to correct the record when people say it's extra territory yaial. it's not. we regulate u.s. financial institutions. regulate u.s. businesses, and define with whom they are able to do business. we don't have any jurisdiction to tell any foreign company or foreign bank what it can or cannot do. we tell our own banks. our own businesses whom they can