characters that are arriving on the scene would alter those debates. i think it's a mistake to make drastic assumptions about how this will fundamentally force the eu to alter course on any of the issues i just mentioned or any of the other issues that it's juggling from ukraine to iran to russia or asia and a whole list of other foreign policy concerns. but i have been worried about eu foreign policy. i'm not as optimistic as some. i worry not just about the european union and europe's approach to foreign policy, i really have deep concerns right now about how america, the united states and europe are handling their common foreign policy agenda. i think what we are seeing is both sides of the atlantic find themselves in this post 9/11

world. they've been able to sketch out and have interesting conversations over the last decade about what they have learned and how they worked well together, what they didn't like about the post 9/11 world, about the global war on terror, about the bush years, but they're having trouble defining kind of the new agenda, their new foreign policy framework, the new strategy for everything that's coming at them in the world. i'm going to be issuing a report next week. we dubbed this the era of compounding complexity. it doesn't roll off the tongue, but i think this is an environment that is so incredibly complex, that i think europe and the united states are just really struggling to cope with the number of challenges that are coming at them. just to cite a few, we have not just the emerging rising powers, but we have all of the arrival

of the variety of nonstate actors, individuals, corporations that are now playing a huge role in crafting national security agendas, how we use state craft, how we use the tools of national security, and playing roles in ways that we never imagined. i think trying to find a way to fold those-ups into the foreign policy debates and give them a seat at the table has been a huge challenge for us. i also think we are coping with this defusion of power. i'm not going to stand up here and get into deet klein debate is america in decline or not, is europe in decline or not? those binary debates are not particularly useful. i think we do have to have a conversation between europe and the united states to think about our share of world power has certainly diminished as all of these other actors have arrived on the global stage. i think we're, again, trying to

wrap our heads around that. when you pair that with the proliferation of game-changing technologies with very mixed public opinion right now on both sides of the atlantic about what we should be doing in the world, how we should be leading the world, what types of tools we need in our tool kit, and then you look at this alphabet soup of international institutions that collectively, europe and the united states, have spent 60, 70 years creating and building, but they feel rusty and creeky and unable to deal with a lot of the challenges that we are facing with cyber to maritime security to drones and it goes on and on and on. i think you find that it's been particularly hard for both sides of the atlantic to come together. you see in ukraine as charlie

noted standing shoulder to shoulder, but broader strategic debates about what ukraine and russia's actions in ukraine mean for us as partners going forward. what it ultimately means for the eu/u.s. relationship, what it means for the nato alliance, what it means about our assumptions about great power politics and i think we are missing the boat a little bit, if i could tie it specifically to ukraine, on the strategy side of things. while we succeeded coping with this crisis was where we failed before the crisis where the united states in many ways felt it could easily outsource ukraine to its friends in europe and suddenly we were rubbing our eyes in disbelief saying what just happened here? we failed to have a conversation early on to say, gee, this doesn't look like it might play out so well what would happen yanukovych ran for the hills? even now in the middle as we figure out what to do with

poroshenko and how to provide support to kiev and the rest, i am not sure we are thinking strategically where to go in relation with the russians. we are thinking short term in what is our next move in the next week to two weeks? but this strategic gap troubles me and worries about together our ability as partners to deal with a lot of the global challenges coming at us. in closing, i think we have to think more creatively about in our transatlantic dialogues, folding other players into the dialogue, thinking about the tools of state craft, what do we have in our tool box today? what's missing, where do we have to make investments, and most importantly, how do we take an affirmative but affordable foreign policy agenda to our very skeptical publics right now and explain to them the importance of global engagement, how we plan to pursue it, how we

can use limited resources and apply them in a very strategic way. we've got a lot ahead of us but i worry in a long-term perspective about this relationship. >> i wonder if we are not being a little bit complacent about putin. the results of the election put enormous pressure on national governments. i would try to exercise at least a solid veto on ttip because of the electoral play in fronts. in the european parliament, it is far from clear there is a majority that will vote for this. if you're the european union and you can't do trade, what else do you do? do you not feel there is more?

i get the impression from all three of you, you are fairly relaxed about the prospects. >> personally, i'm not relaxed about ttip. i was nervous about it before the parliamentarian election. we have causes to be concerned about how this might continue to overshadow the debate. i've been worried quite some time because i think neither the folks in washington nor our counterparts in brussels mapped out a plan how we are going to get to a win on this. what i fear is that we've lost considerable time right now to those that are mounting the campaign against ttip. they are much more organized, working on outreach, pr. we turned the lights off here in washington because of the congressional piece. we want to wait to get past midterms. by doing that, i think we've given some of the anti-ttip, the permission to move forward with their agenda. >> ambassador? >> thank you.

it's a pleasure. real pleasure to be here. i remember that i walked into this building the first time when i was, i think i was a third secretary or something at the german embassy at the end of '79. i wasn't sure anybody was going to actually see me here. it's wonderful to be back. let me start by saying i'm delighted andy started us off on a positive note. it is important to note that contrary to major, to predictions by major and credible personalities, certainly most of them on this side of the atlantic, the euro zone has not collapsed over the last decade. it's still there. problems, we heard that this morning are not resolved, but we

are working our way through them. an one point, too, you know the 100,000 or so eu flags in ukraine some months ago were a powerful reminder for all those of us who have become skeptical of our ability to make of the european union what we think the european union should become, should be. and how do you explain this exuberant joy of young ukrainians looking at europe and the result of these elections a week ago?

well, why can't we have a tea party? i mean, you are suffering through this, so why can't we have some of that ourselves? i think it's normal. it was practically abnormal in my own country, for example, that there was not a single party in the bundestag that said no to this basic consensus we have had now over a number of decades. so actually, i don't want to minimize the challenges that this new configuration will create in the european parliament and in national elections and national parliaments, far from it, but i think it's actually a healthy development. it will make, it will force us, us i mean the mainstream governments, mainstream parties, to work harder on the arguments with which we need or they need to convince publics that have, as was said in the first panel,

that have come to identify the eu, not only with overregulation. i think that was a proper point made in the first debate this morning, but with this bad idea of immigration. this bad idea of immigration. how should we think about the european parliamentary elections? i would like to introduce one aspect which has not yet been highlighted enough, i think. i call this, i mean these right wing parties that are now entering the parliament, i call this, you have to give them a name. i call it the putin alliance. isn't it interesting that

president putin is getting applause, not only as everybody would expect, from the far left in germany, the post communist party. they travel to moscow as they have done all the time and say thank you for being seen in the kremlin. but lupin and others decided to look at vladimir putin as their hero because he is such a wonderful defender of nationalism. of the nation state. what we have here is an interesting challenge, by as i see it, by president putin and those who support him or who admire him in western europe to the very fundamental idea of europe. creating something new, something better after centuries

of strive and conflict. i think this is important but not because we are going to lose our ability to govern, but because there is a rather fundamental challenge here going on between putin and western europe. charlie is correct. he is a good observer of things going on in the public debate. the government has an 80% majority in the bundestag. chancellor merkel has to take note of these debates, she can rely on a very strong pro-eu, pro nato coalition in the

bundestag. i am afraid they are, americans are have not joining us but are only listening in. it's the chancellor merkel cell phone thing, the snowden revelations, it's the total loss of trust in what used to be the american trusted senior partner. i don't want to dwell too much on this the relationship between germany and the united states is different, of course, than the relationship between the uk and france and the united states. we've always had this kind of daughter/father or daughter/mother relationship between germany and the united states.

we were growing up and we were being chaperoned and protected as a nation and as the eu by the united states. it also affects this trust and affects the ability in germany and other european countries to come up with a positive response to the ttip challenge. it is now popular in certain circles in europe to argue, oh, this is yet another ploy by large international companies, mostly based in the united states to gain additional advantages, et cetera, et cetera, and we the simple citizen, we are going to not be as well protected regarding, you know, modified corn and chlorinated chicken and these

rather ridiculous items that have been quoted as harmful to the health of europeans, et cetera, et cetera. this is not an easy thing to overcome. let me -- i don't want to speak for too long. let me make a couple of points on russia and on european foreign policy. i, for one, believe that we should, we europeans should have spoken out more clearly when the

question was raised some months ago should we or should we not cancel the g-8 meeting? my own view is it was wrong to cancel the g-8 meeting. we should have had the g-8 meeting, but we should have told president putin there is only going to be one item on the agenda. that's crimea, and we will talk to you as long as you are prepared to listen to us about crimea. and why you did the wrong thing. what we are now seeing because we do not have a g-8 meeting, a spreading out of these bilateral meetings. i think i agree it makes me uncomfortable, too. i don't know what president olong is saying to president putin bilaterally. i believe i know what chancellor merkel is saying to putin, but i think it would be better to have him sit across the table and be given one response or more or less the same response in one meeting as a professional diplomat i always thought, and i always defended the idea that entertaining a dialogue, whether it's multilateral, bilateral, is never in and of itself a sign of

weakness. the result of the negotiation can be a sign of weakness if you're a bad negotiator and give in too much. having the discussion in and of itself cannot be a mistake. even at the height of the cold war, american presidents, including president reagan, had numerous discussions with soviet leaders, and that was not seen as a sign of weakness either. i think i have a question here. how we deal with russia. i want to highlight with one sentence. i think we in the eu, and certainly my own government in berlin we believe our priority objective ought to be to do whatever it takes to stabilize ukraine.

right? sometimes i get the impression that some people here in washington believe that the priority number one ought to be to maximize punishment for russia. when i was in ukraine, i got the impression that in some ways my ukrainian friends were told by or thought they were getting the message from washington to be even more anti-russian than they themselves felt felt necessary. so i think this is also an issue about which our government seems to have a continued discussion. how anti-russian do we want ukraine to be? ukraine will always live next to a big neighbor called russia. at some point they'll have to figure out a way to live together again, even if it's

hard given the annexation of crimea, et cetera. last point. european foreign policy. we are doing a terribly bad job. here i'm really critical about our own performance, national and eu-wise. in our own country, we have not had a single important national security document for the last eight years. i think the last one was in 2006. the world has changed significantly since then. in other words, neither our public nor our soldiers nor the members of the bundestag know exactly for what purpose we have our forces and why you should or should not use military force in

whatever circumstance, et cetera. even worse, the european union, which under the leadership of javier zolana, whom i'm glad to say has a relationship with brookings, developed a first strategy document way back in 2003. more than ten years ago. the european union has not been able to come up with a new version of this. i understand the hesitation of some of my friends who are national security advisors, et cetera, in various european capitals. their argument is let's not do it because if we do it, we will only get the smallest common denominator and the smallest common denominator will look so terribly poor and weak that it's better not to have the document than a bad document. well, i think the exact opposite. i think even if we come up with an insufficiently impressive

document, we can improve on that in the next round, but we've got to start at some point. and tell the citizens of these 28 countries representing 500 million what our objectives are. what is our strategy? are we going to conquer africa or are we going to play a role in the middle east? and how do we want to deal with russia, et cetera, et cetera. i think that's something that should happen and any support the european debate can get from this side of the atlantic will be much appreciated. final word on the conduct of european foreign policy. i've been involved in these discussions for many, many years. what i thought is probably invisible when you look at this from the united states from far away, is that from among the 28

member nations of the eu, only maybe a handful are capable of developing what i would call operational foreign policy, namely you say, okay, we've got to teach china a lesson. do we issue a declaration? that is what 20 out of 28 nations will find as the only, you know, possible action, or are we going to do something about it? is there actually a policy? can we develop a policy? maybe together with the united states or other partners. in other words, there is a difference between a handful of countries capable of having an operational foreign policy and most of these eu member countries that are small, less than 10 million people each, they have only a capacity to have what i would call a

declaratory foreign policy. they only have direct relation with neighbors. think of luxembourg. their capacity to think beyond the confines of the border is limited. i'm not criticizing luxembourg, i'm stating the obvious. don't be too critical of an eu that finds it so hard to come up with clear strategic direction and decision making. think of how hard it would be if the governors of all the states of the united states would constitute your national security council. one would say open the border

with mexico and the other one would say let's do exactly the opposite. it wouldn't be so easy. and that is why we need to work our way through this. i for one, i believe we should end up with majority voting in foreign policy. we are not quite there yet, but that's what we need. we need to be able to say 15 countries have agreed that we will now wage war and then we will go, but that's a hard thing to do. it will take many years, many months, a huge effort to get from where we are to that point. maybe i shouldn't have chosen the example of war making. peace making is better. thank you. >> do you think even in any of the larger states have anything

you could call a strategy toward china that goes beyond signing as many contracts as possible and turning a blind eye to everything else? my own view is we need to have a china strategy. because speaking as a german, so many jobs in germany now depend on strategic stability in the far east. it's not just because we need to work with the united states, et cetera, and listen to your strategic concerns. if there was a conflict in the far east, let's say between china and japan, that would endanger the free transport, et cetera, et cetera, the lights would go out first and foremost at bmw and mercedes, et cetera, et cetera, plants, which is why

we have a built-in interest. our own income well-being depends on strategic stability in the far east. that is something that has not yet sufficiently been explained to the average german voter. he would probably say let's stay out of these things. why should we worry about chinese warships in the south china seas? but it matters. that's why i believe the eu should have a policy. and i believe the eu ambassador in china needs to be able to say my instructions are to tell you that you are right or tell the japanese that you are wrong. we have not reached that point yet, unfortunately. i think there is a need to have it. >> i'm going to say something a professor from princeton with a spector of george cannon looming over me should never say. do we really need a grand strategy?

because we live in a different world than we did in a cold war. it's different for two reasons. we don't have the big overriding threats that we had then that would mobilize 20 countries, 27 countries around the same goal. we have second order, third order security threats. a coalition of the willing tends to be a couple of countries that care about something, a few more willing to go along, a bunch of countries that don't really care and a few countries that have strange domestic reason for not wanting to be involved. then the thing that happens in this situation, these things arise unpredictably. you can be critical of people not foreseeing people would erupt in the streets of ukraine and a problem could arise. you could argue it's unforeseeable. unlike the bilateral balance in the cold war, this was something that just kind of came out of nowhere.

and it's a relative otherwise, a relatively peaceful world. war is lower than it's been in centuries. trade is more open than it's been in centuries even in the face of the greatest depression, since the great depression, and there are more democracies, et cetera, et cetera. so in that circumstance, it's very difficult and in some ways counterproductive to get people to argue about principle in foreign policy. >> you know, that is ridiculous. right now putin is waging civil war in ukraine. he wants to return to the cold war. why don't we oblige him? >> but that's -- the issue is not whether or not we should do something about putin. the issue is whether or not three years ago we should have had a global strategy designed to deal with all cases of that

kind. >> what do you plan to do now with putin? >> i think ambassador ischinger answered that question. >> we now started the question session. we have to finish to get lunch. the gentleman over there. >> there may be a way out of this european crisis on the ukraine and the crimea. mine name is henry hedker. you take one look at the word "crimea" and crime is in it. they've taken this territory by force. the mexican session is something that the united states was faced with. they took all that territory by force and then paid for it

later. so why not tell them to pay for the crimea area, any area they seize? it's a nuclear power. trying to prevent them from doing something is very difficult. sanctions is a way of doing things, but i don't think it's terribly effective. why not tell them to pay for all this territory while things are still available internationally to try to solve a crisis. any comment? >> what i'm not doing the first round is taking the questions over there. >> thanks. i'm from the transatlantic academy, at least until next week. i wanted to take up ambassador ischinger's point about the european elections being a healthy development what worries me from what i heard this morning, is we can have these elections and carry on as usual. i don't think we can because that is not how democracy works. if we do that then it will make a mockery of democracy. actually, this is the first time

because the elections have created a swell populistic in the eu, this is the first time to engage at the public level on issues that have suddenly caught the interest at a level that's never been done before. so i suppose my question to the panel is, how do you think we can engage in a constructive dialogue with the public on those issues that are raised? because the issues that are raised at the public level are concerns about democracy, accountability, et cetera, in the eu. well the answer to those questions are precisely what the pop you list -- populistic mentality doesn't want. is there a way of actually taking this as a moment and engaging in a dialogue where you start using the dreaded f-word

in the european debate? >> not in britain. >> we've got a couple of questions on ukraine and one on the elections. >> quickly on the elections. i believe the eu is plenty democratic. people in europe could put a stop to any policy they want by making it count in their national election. so say you didn't like the euro or the way the euro functions and you were italian, spanish or greek, and i pick those three countries because those are three countries that thought seriously about pulling out or threatening seriously to germany that they would pull out in

order to increase their bargaining leverage, and were pushed back down by pressure. you could easily force a change in the system. the reason that change has not been pushed is because there is not a democratic majority in any of those countries to push that change at the current time. so democracy could be part of the solution, but the problem is there isn't a democratic majority to change the status quo. it's perverse, but it's true. >> on ukraine, i think that the idea of telling putin he should pay for it would be to understate the gravity of what's happened in that no, the loss of crimea is not a first order security threat to us or to germany or to poland or to the uk, but it is the most significant geopolitical move that we have seen in europe since the fall of the berlin wall. and what it says about putin's intentions, potential intentions in the future is what i think we need to worry about. it's why i'm fully supportive of efforts to beef up nato, to send more forces to the baltics and

to poland, and not just do it in a symbolic way. because we don't know. in my own mind, i'm much less willing to cut putin slack now after ukraine than i was before. and moving forward, i think american policy and policy with western europe has to be predicated upon the kind of worst-case, don't give him the benefit of the doubt. but i agree with you. the european union has prospered since 1949. single market, single currency. by effectivefully flying under

the radar screen. people didn't win or lose votes because they were pro or ante. it wasn't a huge issue in national politics. it is. you go for a walk in a major e.u. country and people are talking about it. it's been politicized. and therefore i think the main stream parties have to engage. dominate a political narrative. those people in power are running scared. what is that going to do the gdp or demographic picture? instead of having those debates they're ducking.

and unless you get more political courage, unless you get the miracles and the world to fight back the default political position, in my view, is the continued erosion of the legitimacy of the e.u. in the eyings of the e.u. e llek trait. yes, restoring the health of the economy will work. it will but it's not enough. by the argument before the euro crisis the things that the e.u. did were things that -- representative democrat issues and fiscal policy taxation are being dealt with at the european level. do you think it might be a new

way of the decisions keep saying well national elections if you need them? voters care enough about so it has a significant effect on elections. the domestic elections can have a impact on the policy and the odd thing in europe is that the despite the fact that policy is not working well and despite the fact that you would think that some people in some countries want to reform it, you don't have a democratic majority even in the countries most effective. you can understand why the germge german e lek trait doesn't want

to change the status quo. you don't have a majority in spain, majority in italy, or a majority in greece to change the status quo. that's the fact. if you want to change the status quo particularly in the area that's why you have to change it. if for no other reason, it's in all advance d you can easily hae a situation that is democratic that creates so much conflict that it can survive. we've heard it in the united

states. >> just to come back to andy's point about strategy. i think we do it -- you're right. we have to be clear eyed about our ability to predict crises. secretary gates the only thing the intelligence community succeeded in doing is consistently failing to predict what the next big event would be coming down the pipe. so, i mean, let's not assume that by sketching out some master grand strategy we could have either foreseen what happened in ukraine. the process of going through the drafting of the national security strategy or paper coming out of berlin. i think is useful particularly in the climate we find ourselves where so much is coming at us. it's useful to set priorities to think about how we manage risk. to how we deal with strategic intention in the era. how do you remain focussed having been in the white house

and see how you go six hours in the situation room from yemen to iraq to egypt. one crisis is after the next. how difficult it is to have some sort of that at least overarching general frame. i mean, it's not a perfect process. i think there is utility in putting yourself through this. all of that said with ukraine no perfect national security strategy or any process perhaps would have predicted or helped us cope with what came at us. my point on that is the transatlantic partners had checked out in many ways and weren't having the kinds of dialogue and change they exneeded to cope with potential scenarios. the ukrainians, the united states let's get through the election and ensure it takes place. that it's free and fair to the degree we can claim it to be. and then from there figure out

what comes next. we're now past the election. i think we are having a hard time figuring out and having broader strategic dialogue about what is the long-term game plan with the russians. where would we be willing to engage them? we're seeing it play out at the g 7. with the have the by lateral meetings surfacing. to me it shows we have lost our way, again, in terms of charting a common purpose and force vis-a-vis russia. we've been focussed on the me knewsha. tony is going to be here shortly. hopefully he'll be able to sketch out for us exactly what the strategy is moving forward. >> two quick points. first on you know what should be -- what could be lessons learned from this e.u. election

process with these right-winged parties coming up. well, i have one simple prescription to offer. we need better leadership in the e.u. take these two candidates who are currently battling for, you know, the next phase of running the e.u. commission. neither one of them, i'm sorry to say, meets the criteria of being a kind of -- you know, somebody that will actually be listened to by the entire e.u. e lek rate. i think the trip would be to find somebody who could really, you know, be not a nationalist leader like putin for the right wing people, but an e.u. leader who symbolizes the fundamental values of the european union. and who can speak with

authority. i think that's what we need in order to hopefully get rid of this development. second point on putin and russia. i agree it's not only about crimea, that's as bad as it is. this is a challenge to the international border, certainly to the european order as created by the final act, et. cetera, et. cetera, et. cetera. president putin has turned out to be unpredictable. that's bad in international relations if you are dealing with somebody where you actually have a hard time figuring out what he could do next. what should be our strategy?

in receipt to spect, i don't claim i knew it on may 1st or 2nd. what chancellor merkel met in the white house with president obama. they came out and said we shall measure president putin's behavior in terms of how he deals with the elections in ukraine. i think in retrospect we let putin get off the hook a bit easily. he didn't have a hard time behaving in a way that now more or less forces us to say okay he actually shook hands with poroshenko a few hours ago in france. i think what now should happen, that's based on my own experience in ukraine over the last several weeks. what should now happen is we should tell mr. putin we will measure your behavior by your ability and your willingness to

make sure that not a single truck with armed men and ammunition, et. cetera, et. cetera will come across the russian border. the russians say we can't possibly control this border. it's a long border and in the soviet union, there were no fences between the constituents, parts of the soviet union. therefore don't ask of things we can't do. well, i believe a country like the russian federation if they want to do it i think they can make at least some controls and arrest some of the truck drivers and arrest some of these separatists if they're not paid by the gremlin. they ought to be arrested and, you know, that would probably limit the flow of supply, et. cetera across the border.

i think that's what they do to show good will. i think we need to show double strategy and upgrade the sanctions if necessary. but at the same time as always in international diplomacy, we need to at least have some doors somewhere through which he could walk. that would be the reentry ticket into not necessarily the g 8 tomorrow morning but some kind of an ongoing dialogue which is why i have been among those who have thought that maybe creating some kind of an international contact group on ukraine with united states, russia, the e.u., possibly poland as particularly interesting part of might be one way of getting diplomacy kick started again on ukraine. i'll stop here. >> should we take some more

questions? lunch is now ready. it does mean we're not going take anymore questions. thank you very much, indeed, to our panel. [ applause ] on the next washington journal, republican representative doug collins of georgia will discuss his bill that would establish a bipartisan commission to consolidate or cut redoesnundan federal programs. and senator bernie sanders addressing problems in the va health care system. washington journal is live on c-span every day at 7:00 a.m. eastern. you can join the conversation on facebook and twitter. with live coverage of the

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twitter. the center for strategic and international studies hosted a day-long forrum on the treasury department's role in national security affairs. one the segments included a discussion with included a discussion between tom donilon and steve hadley. they were interviewed for an hour by andrea mitchell. thank you all so much. i am andrea mitchell from nbc news and from msnbc, and you know tom donilon and steve hadley. we're so fortunate to have two former national security advisers who have had long experience in public policy and before and since their roles in government. i, of course, knew tom all the way back when i was first going to the state department and you were working with warren christopher. and steve from all the years in the white house.

and of course, with national security adviser role when secretary rice was secretary of state. so thank you all so much. we've had a great kick-off to this from jack lew. first, let's talk about, since he raised the questions of sanctions and it is so top of mind right now with russia and with ukraine, steve, first to you, how aeffective have we been in mobilizing europe against russia? we have seen the effects, but how has that translated into affecting vladimir putin's behavior? >> well, you don't know. i mean, one of the great questions is what makes vladimir putin tick? and i think it's really hard to say. he, on these kinds of issues, runs that system out of his hip pocket. it's roly what is in his mind really matters. the administration was able to

put together international support for an international sanctions regime. it has been limited. it has focused on individuals and institutions that have been sxed with the regime and associated with this effort, asset freezes, visa bans, those kinds of things. threatened more institutional sanctions that would go after elements of the russian economy in the event that russia would have intervened to upset the coming election. would it move across the border with theirope assets. i think it's been a useful element that i think one of the problems is these sanctionserize so viz nl and so punlic that they become sort of inso sense the thing that you reach for. and they are a useful tool but they are only one of a series of tools. and they could be more useful in

some context than others. in ukraine, one of the risks is we focus all on sangszs and don't look at the things that we should bow doing over time to reduce russia's impact on europe and move forward with our vision. those things ovthe long term are going to be more important in deterring activity byputep. one of the risks, sanctions in some sense are prisoner of their own faek. they tend to term a tactic into a strategy and don't lealize rr backed up by a use of force. one of the things that got the sanctions against iran is they said help us with sanctions on iran because the alternative of sanctions is the use of force,

and nobody was enthusiastic for that. i think we have to not get seduced by sanctions and their visibility and their effectiveness and embed them in a strategy using all elements of power to achieve that. >> tom, you're the national security adviser for the secretary of state, and you have the effective tool of sanctions. they have been tried and tested. in this instance with ukraine, because i don't think anyone would suggest the use of force. there have been various criticisms perhaps that we should have done more in the term of military backup fromthal nato allies, but no one is suggesting we go against the russians against ukraine.

>> i gree with steve, it'sigate to be here with this group at the treasury department. this discussion underscored the fact the name is inadequate because you do a lot more than your name, and this is an example of it. i agree with steve that the sanctions effort here to impose a cause here, the one element is abslaxz, and remember the things we have to do, support the interim government, and now the elected government. to select the iranians ipterms of getting their interyalsh funding. reassuring our nato allies, especially the front line state in nato have taken concrete steps to assure our support

through nato in those countries and the president will impose a cost through sanctions. it's one element through a comprehensive stratstrategy to aaddress the numbers of cautions and there's a number of things we need to look at, including looking with europe at their inaermg supply and having strategies to mock shire they're not as independent on gas as they are today, and moving forward with our negotiations. that said with respect to sangszs, i actually think thavvtha they've had an effect. most of the growth for russia has been dropped substantially, probably in contraction. you had capital flow.

he indicated it might be $up with00 billion without throw. it might be higher. we had $60 billion wow the flow. the finance director is saying it could have b 150 billion. it's had an effect, it's had an effect on decision making. with respect to putin, in my judgment, it's the same as steve's, that it would be inrackerate todescribe this as a putin making this with president putin being angry. it's just with him in that time and system. to know which pressures get ruvl results bought there is a cost as well. i think russia is vulnerable to

a target of sanctions. last thing i will say isputecon say -- >> no, no, it's all good. >> that the foreign policy that president putin seems to be pursuing a turn away from russian to, with the west, security. it's something the clinton administration has been pursuing. he's turned away from it. has a foreign policy now defined, i think steve, you would agree, by negative opposition. with russia taking a new yeek staps to pull back. that said, you can't pull back difiantly. at the of the day, they can't stand possible in thie en roman

causing the west to put the sanctions on them. >> i want to follow up about europe and a west. first, let me ask you, steve, is his option to make, pardon the phrase, a pivot to asia, can russia counterbalance his losses in europe by what we have seen recently about his negotiations in china? >> he can help, certainly on the energy side, to have additional sources of export for his oil good gas. my understanding is that the oil and gat gas from china is larger from the western part of russia. he will continue -- sorry, in the eastern part. he'll continue to have supply from europe and beyond from the western part. putin is interesting. one of the ways we think about

putin and we saw this when we come into georgia. he has a long-term strategic view. he believes in russian greatness. he has a a role to restore greatness. not a soviet empire but a russian empire, which is counterdistinction to the west and china and asia. i think he will go as far as he can in pursuing that agenda, depending on how much he succeeds and how much resistance hoe gets. we were concerned today, georgia, and tomorrow the crimea. putin is two thirds of the way there. if he were to try against thebotic states, particularly lat vee a, what he's doing againstia

againstia nato, it would be interesting. he's incurring favor with the extremist parties that did so well in the european parliamentary elxz. they're unified by one thing and one thing only. they don't like the eu. in some sense, if you're putin, you're playing an interestish hand. you can take advantage of these tupts. disarray has dependedo on key e. but the steaks are very high. the stakes are about the kind of europe rr going to have at piece, free and at will of our values, or a russian centric version that is interesting, and i'll stop, it's interesting his activities in ukraine have been

paralleled by even greater crackdown internally on politic political soivlized. >> that hasn't gotten the attention in the west, the internal level of professionalism and activity of opponents inside is at a level we haven't seen, sxin terms of propaganda -- >> and against the media. >> we haven't seen since the crack of the soviet eupian. i think it's part of a piece, with respect to china. he'sing totoshow she has power with respect to this deal with china, but ipa relevant timeframe, the total trade relationship between russia and choopa right now is about 80 billion. which is a small amount, particularly with europe.

and i think a lot of competition, suspicion historically, a lot of competition in central asia. we'll have to see how this ultimately develops. i believe there's a lot of pressure that can be put on russia. here, treasuries have enormous tills with sanctions. the argtses angzsio rr returning to are gnaw to retouroyts bear. so we know their arms exports and the uk on finance and energy, but the attempt to try to spread the pain, the leaders have been remarkably supportive given how hard it was to bring them around. but as we see in the european elections and as we hear anecdotally, i was just in italy and speaking to the media there,

meeting figure in italy, from france, the populations are not really where we are recording putin. people were questioning me, why are you americans soy upset about putin? what would you as national security advisers, either, both of you, what would you advise the president of the united states to do, going to europe this week, and having what will obvious lee be some sidebar conversations with putin? how do you try to hold the coalition together when there is so much interest from their groups? >> one of the problems, and europe hasn't comp, and he could pile up on this, but europe is in a bit of a crisis.

rr a third of the elections in the european parliament elections up for anti-eu. it's still a question of who speaks for europe. and they will now have a head of the eu counsel. they'll have a new foreign policy spokesman. who will those people be, and how much are leaders willing to let them speak for europe and attack places for country that they're back up and support. the e.u. project has always been an elite project. it has never really been sold to the people. you have seen that ovthe last foiv, five, six, years. is europe going to move forward, or is it going to continue to be the voice of many? one problem is that the

president doesn't really have a solid partner. it has a solid partner that is in crisis. it's very good he's going, that he's in polanpoland, and his sp there will be very important because he's going to have to go to vision there and in some cases rekipdal some of the excitement in poland. smmz that we started dug in 2008. stopping the expansion of the eu, and we left countries like ukraine in the middle between the west on one side and russia on the other. that's a bad place to be. and i hope the message he will send is it's time for us to get back into our vision of what a europe should be and not by default leave space for putin to make his. >> i couldn't agree more.

what happened of course is in recent elections you had a strong showing that there really is a lot of effort that's going to have to take place to bring leadership more in line and actually deliver. the president's role will be to underscore the stakes here and underscore the importance of solidarity tin nato, and the united states/nato relationship. bay, i know there's debate about the wisdom of nato expansion. there's been commentary that the nato expansion that, and that was possible frl the responsible nato has gone in. you can't make an argument in which vladimir putin has taken it internally, and number two, through those years, the united states reached out to try to work on integration efforts with

russia. and number three, as we sit here today, and you look at the conduct of russia, in 2008 and again now in 2014, we should be happy. if you sit in the baltic states or in polanpoland, you're happy you're a member. it makes a huge difference. i think this is a very important strategic initiative, and it needs to be underscored and imbrisked. >> and rr been pursued by three administrations. it's been enlarged through clinton, bush, and the obama administration. it's served our country well, and it served europe well. >> the already -- i think that's foreign policy. >> if you're at treasury and

you're negotiating and working with the allies on sanctions, how much is your leverage undercut by the snowden leaks and the post-snow dp area and it alect not personally on enj law mu angela merkel, she can get over it, but about the political sentiment of the united states? steve? >> it's difficult. i want to make a bug here for my colleague, juan zarate, who has written a wonderful book that tells the story. it's a great tale about how pressury got into this book and really developed this new tools. and ones of the things that is important and talk will talk about it is the source of treasury as intelligence and information about what the bad guys are doing and how they're moving their muddy around in addition to trying to disrupt

them. but the snowden leaks, the dicushes of u.s. social media in helping the government on areas of dealing with terrorism proliferation has given us two crisis. one is with government leaders. how come we didn't know and concerned about spying lon leaders and the like. we'll repair through dialogue and conversations. there's dialogue about how we do some of these like bulk storage of data and the like. the problem i have is in some sense the european publics. there's a beep of trust there. i think there has to poe a broader sense of balance about this balance and what we need to do to defend our people from the

proliferation of tearism and how odo that. i think europe today does not feel the risk of nuclear weapons in the hands of terrorists. it's a trade-off and it's a balance. i think if we could have that debate in europe, the way we're having it in this country now, we can come up with an understanding of what governments can do and what they need to do and what are the constraints on cht comps operate. let's have a debate and let's have it in an adult way, not a stick figure way, and there's got to be a lot more transparency. people have to understand and know what is being done and not done in their name and be comfortable with it over time. we have a law of work to do with

our puck lbs at home and here in europe. >> the snowden revelations have been exceedingly damaging. and it's been damaging on a number of fronts, including state-to-state relations. because the relationships are mouch wale beneficial and they're deep they have been exceedingly difficult. there are other aspects in terms of damage that are directly relevant, which is to the r regative communities and the communities and cloud and ware products. i would have to think hard, and there's a threat to the balkanization of the internet. there are those kinds of damages, that damage, i think, is for real and will need to be addressed, but i agree with steve. wewith respect, they are

mutually beneficial, and we can work those through in a beneficial way. >> steve, one of the arguments for negotiations with iran that was made privately to many of us was the sanction machine was very powerful, but europe was not going to steak with it forever. that we had to negotiate with iran. i don't know where you come down on that. in terms of the secret negotiations. >> you know, there's always a problem when you use sanctions and diplomatic pressure and other things to put pressure on another regime. it's pressure for what prurps. the prurps is in that case was to give the europeans to unilatically give up their powerful. >> do you have any doubt, should we stipulate there was no way

they were going to come to the table without the sanctions? that the sanctions worked to that -- >> i think the sanctions were one of a series of tools in terms of diplomatic isolation, in terms of things directed at the program which we can't talk about. it was a successful coordinated policy in which we had press. it did bring to the table. coming to the table, we have to see if there's a solution that gives assurance this is not a path to a nuclear weapon. the tricky path is if the saxzs succeed, the challenge will be how do you gradually unwind them them in such a way that we still have options that the iranians cheat. if somebody said to me -- if iran doesn't have a nuclear facility going in iran some

place, it will be the first time in 20 years it hasn't. there is a cheating issue. one of the challenges of the agreement is not just what's the agreement, but what are the things that surround the agreement in terms of snapback, sanctions, and preauthorized sajzs that will give iran an incentive not to cheat. there are sajnctions if they succeed in reaching an agreement. there are harder sanctions if they can't reach an agreement. and it's how will they break down? if the iranians walk out in a huff and say we don't trust the americans. we're not going to get a nuclear weapon, it will be easy to get sangs back on the table and maybe other things like military action, but if it is a muddier outcome and the iranians basically go public and say we have made a reasonable offer to

the americans and we can't upset it, that's the question. can we then get the world at that point to agree with need iran to be more reasonable, or does vladimir putin decide to put himself center stage and announce he thinks the iranians have given far enough and the breakdown of talks is on the americans' heads, and at that point, the international consensus that has made sanctions so effective breaks down. that's the problem. >> is there a third option, a third prospect where they say there are a lot of challenges remaining. we're going to tend before july, and you say this is a dangerous window. this is when iran might start imposing that. >> the interim agreement on

which we're negotiating provides for a six-month role-over, if both parties agree to do that. number two, the basis on which we're doing the negotiations is a sound base on which to do the negotiations. you have froesen, the key aspectess of the program. you could have rolled it back. >> how would you respond to steve's suggestion that iran has never not had a covert hidden facility that we couldn't detect? >> this is part of the ultimate deal. right, with respect to the the size of whatever program is there, the distance they would be from being able to acheem a military wep, and quite importantly, the importance and truth of the regime, and the ability to kind of, as steve was saying, to go back to sanctions in the event you see cheating on

that side. so i disagree with the premise of the question that somehow the sanctions breaking down, that's the reason the united states and iran got to negotiations. i don't think that's true. i think what happened, as steve indicated, if you do an assessment of each time the iranian government has done a strategic reversal, a strategic reversal in a different direction, it's only under extreme pressure. we can go through each instance since 1989, we determined after a dawnified roofed outrage in 2009, and offered in the highest level with the iranian government, they were unwilling or unable to respond, our understanding with our allies around the world was that in fact after the bona fide offer, the iranians were not willing to do this or unable to do this, that's what happened, we would

join in a pressure campaign. it was a multidimensional, simultaneous pressure campaign put on the iranians. it resulted in the election of rouhani who came to the table. he ran on the prop zishz that he would undertake to relieve the economic pressure on the rainian spry i didn't see any breakdown on sanctions regime. i saw on the other hand, here, rouhani being elected on the promise of getting some xrk relief for iran was to come with the united states and the international community. i think all of the leverage is with the west right here right now. because the sanctions, the bulk of the sanctions remain in place. i don't think they have gotten any boost out of theertm

grement, and they should come to the table with the fact that sanctions remain. that rouhani will not be able to make good on his promise to the iranian people, and we have quite a bit of leverage in these negotiations. >> will that leverage persist, steve? we saw them lined up in davos trying to line up with rouhani and trying to send assistance to iran. how long can we maintain the coalition? >> it's a problem. we have seen this movie bf, and there are differences, and we could talk about them. we have been there before, in the 2003-2004 timeframe where it was pretty clear that the iranians thought as moammar gadhafi thought that after afghanistan and iraq, the united states was willing to use military force against iran over the military program.

they suspended the covert aspects of the program, and we reached the paris agreement, which suspended inroachment, and then fright fringly, wegot bogged down in election. nujaud is present. he campaigns on the platform that they were traders and ought to go to prison. and he rolls the whole thing back. there's getting a deal, and then there's keeping a deal. i think the administration, i hope, has in some sense three task forces going. one is the task going trying to get the deal with iran. one is thinking about what the thinks are outside of the iranian wrrng and third is a task force thinking about how to reassure the rest of the countries in the region, our friends and allies, that if there is an agreement with iran,

we are not now sort of packing our trank thinking our job is done and leaving the region free to an iran which will have even more money to pack the things it has to support more power and disrupt afghanistan. this is a real challenge. getting the agreement is only the first step of a very challenging road. >> i agree with that. rerespect to companies and others being anxious to do business with iran, the details matter. the nature of the sanctions in place right now, we continue to force companies to choose between doing business in iran and doing business in the united states. one of the really important aspec aspectses of the actions approach has to take advantage of the centrality of the united states financial system, and to work with, with governments obviously, but also with private entities who have to make these

kinds of choices. that's what the sanctions do. the sanctions both put together by the administration and implementing congressional legislation, really do force a company to decide, a bank to decide between doing business with iran, doing it with the united states. it's xeetingly government, and i'm not in the government, but i would tell you while they're in place, they intend to enforce them. >> as we look at the ark of treasury's role in making foreign policy, taking the 30 do ,000 foot view, when you first became first deputy, national security adviser, then national security adviser, was treasury always at the table in as big a role or how did it evolve under juan and stu and now daf vid in becoming, well, what is it now in terms of relative positioning? >> my view was treasury should

be at the table because what we did in foreign policy had implications on things treasury did and because it was a clear head of someone who was actually not engaged in the day to day. it was not that treasury was there because they had an arshinal to contribute to solving theb. that's the story juan and others have told. it was a real case of people in the government being free to innovate. and it starts 11 days after 9/11 with executive order 13224, which is an effort to target terrorist financing and those companies and banks that were laundering terrorist funtsdz. it's then expanding, having bib vir virsuccessful. and the first test is not iran. it's north korea in 2005, and

bank of asia where we got some hands around kim jung il's personal funds. >> i was in pyongyang in 2006, and when they told me that i had to pay something like $75,000 in cash for the satellite time we had used or they wouldn't let me leave the country, and i discovered there was no way to make a transaction because of exactly what you had done -- >> right. >> -- we had to go to another diplomatic resource. >> we cut north korea out of the financial system. >> whatever you would call it. >> and ultimately led them to come in 2007 to negotiate and follow an agreement which at the end of the day was never implemented. if it works in north korea, let's try it in iran. one thing that needs to be said is there are several arrows in this financial sanctions quiver. one is the direction one, which is freezing people's assets and

listing institutions that are laundering funds for terrorist proliferators. but the other one that stewart levy and hank paulson used so effectively is the indirect reputational risk. you go around, stewart went around and hank, to maybe three dozen, four dozen banks and financial institutions in europe and said, you know, you don't really want to be dealing with these iranian banks and you don't want to deal with the irgc because they're actually funding terrorist activity and it's going to become public and your people and your depositors aren't going to like it. so they're a wonderful tool because they have direct, indirect, and reputational effects. and this was a whole -- this was a new frontier. it made treasury a real player. my risk, my concern now is it's become so good, and they have become so effective, people think it's a silver bullet

rather than just one element of a comprehensive strategy. >> i agree with that. a couple things on the office. first of all, it really is a truly nonpartisan set of tools that have been used, a part partisan set of tools. one of the first personnel calls i mad in the transition in 2008 was to track down stewart levy at an event with his kids, right, and to beg him to stay thd the obama administration, and lockly, he did. and i think to steve's point, it resulted in continuity and building on the tools and the insights that had been developed in the bush administration that we built on, going forth. it really is a bipartisan -- the treasury was at the table and had been at the table for addressing some of our most important national security issues, whether it be the terrorist threat or the north korea challenge or the

nonproliferation challenge in iran. this point that steve pointed to which was a point about the strength of being at the center of the world financial system in terms of being at our ability to do these things. in many ways, even our unilateral steps became multilateral steps because as steve was pointing out, if you sit down with a bank and say you have assets and transactions with the united states, they're subject to the treasury designations, but we're designating this bank in iran, for example, because of bad contact, and we can underscore and show you the bad kakz, private sector banks around the world are not going to take the risk of dealing with those entities after they have been designated with the cause, and you'll have this ripple effect. this has been one of the great insights through the two administrations we had with effect to the effective

sanchgzs. this is beyond leave trade emba embargoes and quite exactive. >> have we lost any leverage post 2008, as many in europe and elsewhere blamed us and our banking system, being undercapalized and our mortgage, the spreading of the mortgage crisis to europe. did we lose china as china has risen relative to our strength? >> i'm not a financial type. the are other people you could ask for that. my sense is that, look, we took a hit. but we have recovered. it is true that i think one of the things that is the consequence of 2000, the financial and economic challenges of 2008 is almost for the first time, it was developing nations or than develops nations that led us out

of that financial and economic struggle, but a lot of reforms have been put in place in the financial system in the united states and globally, and i don't think anybody thinks that there is any substitute in the short run for the dollar as the reserve currency. china has a ha of things it needs to do to make its currency o totally convertible, and china has its own questions. we were thinking whether there was a crisis of the euro and whether the euro was going to survive. at this point, the united states financial system is still the beacon of stability in the international community. i think that's, my sense is it's going to be that way for a good while. >> i agree with that. we did take it, number one, we took a hit reputationally in terms of authority, prestige, and power after the financial crisis. number two, though, the policy

response in the united states, both at the end of the bush administration and for the obama administration, i think has been quite a success. and in deed, if you look at our banking systems compared to banking systems in europe and around the world, you see a much stronger system. that's due to the capital flow. it's coming to the united states with respect to the specific things we're talking about here, andrea. with respect to our ability to leverage the financial system, work to theficial system to affect our sanctions rejeej at all. and since the financial crisis, most of our respect financially, but the fact steve made that i want to get back to is very important. because torrentially can do things and they can do things quickly and they're identifiable and concrete they become a part

of a strategy, and not every case is accessible. the case with bringing iranians to the table is a unique set of circumstances. it's horrible conduct. it is clear violations of international law. it's a policy goal in terms of presenting iraq with your weapon aroundser world. they were familiar vulnerable with respect to oil and the banking sector. so it was a new yeek -- but even with all that. it took tremendous resources to work the governments multilaterally and to work with private entities around the world. it's important the challenges take on their own context and not assume we can do an aron campaign in every case. that's not going to be the case.

in additi additionally, we were able to do this in a time when the saudis were able to increase their oil production and where the united states had its energy future go in a completely different direction with respect to us now being on track to being the largest oil producer in the world, and indeed, in this period in conjunction with the production by the soud as is the reason that the costs were bearest here in terms of cutting off and reducing by more than half the amount oftrude oil. we would have trust issues, negative impact on americans and on the west from our sanctions. we were able to manage that because of our energy, changing our energy future and saudi actions. >> let me delve into china for a moment. in terms of their increasing leverage, and the cyber war and

their -- they have no reluct nls to use these, and we are more vulnerable, i would argue, in that the snowden leaks occurred only days before the summit in sunny lands, where we're told the president was planning to make that a big part of his first big meeting with the president. so how is china evolved in terms of its economic and cyber tools against what we can leverage. >> again, i'm dealing with what's in the newspapers, but we have to, you know, this is a case where we have to make some distinctions here, and we have to have a conversation. it is one thing to use cyber tools to get information. to counterterrorism, to counter proliferation, to deal with

threats across the country. it's another thing to use cybertools to steal private corporate information for competitive economic advantage. we clearly do the first. we are not alone. there are a lot of other countries that are doing the same. some of comoo are very outraged by the disclosures of snowden and probably know more about what we do that what their own home countries are doing. but that is something countries do. what china is doing in this, what some people call the greatest threat of indulecical property in history is something we don't do and most other countries don't do, but china is doing in spades. one of the things we have to do is get the chinese to understand in their heart of hearts, though they will not admit it publicly, that there is a difference. but secondly, the chinese will not stop this activity, in my view, unless there is a penalty.

now, this effort of inviting five people is an effort to try to impose a penalty. it has a lot of problems because one of the problems is one of the unfortunate things about u.s./china relations is when we hit a political hiccup, one of the first things either one country or the other does is cult off military to military ties. having military to military interaction is an important thing, and that threatens that. i think we need and keith alexander is here. you can ask him about this. i think we need to impose a penalty cybercrime in cyberspace, and to be able to have a way, and there are difficult legal and policy issuissue s here to take away the capacity of cybercriminals to conduct cyberthreats. until the day that we can pose

in some sense assymetric penalties for this kind of thing, i think it's not going to stop. just diplomatic interactions are not going to get us there. there has to be some real costs. i would hope there's a task force looking at what those costs could be because i think, i understand why they arrested the pla folks. i think that's not going to turn out to be the best or most useful tool. >> we can't get to them. >> sorry. indicted, my apologies. >> i gave the first public speech with respect to this in the spring of 2013, with respect to calling out china directly. and i had spent a lot of time with the leadership and they were a bit surprised it came from me. it had masblg state enabled cybertheft from the united

states. and in deed, we have been engaged with the chinese on this. i talk a little more broadly about it. i think there has to be a cost. the chinese didn't perseed any costs this. they certainly used the snowden revelation, as you pointed out, as a pushback, with respect to the dialogue we had with them. but very important to get back to this dialogue, and very important to reject the equivalent argument that the chinese might back between espionage, right, and a criminal cyberactivity. and cyber enabled economic theft. they're different things. the chinese conversation has to go beyond that to say this is going to affect the overall quality of the relationship between the united states and china. that this is going to be something that's going to be repeated directly by the leadership of china by the highest levels in the united states, and it's going to affect the overall quality of the relationship. it can't have a circumstance,

this is a conversation we have to have with the chinese directly. you can't have a circumstance where you have a $500 billion a year economic relationship between the united states and china and a scale about theft, and a dialogue needs to take place. there needs to be a cost associated with it. it needs to affect the overall quality of the relationship and needs to be a direct effect of consai conversations about what is available and what is on and off with regard to cyberactivities. >> what are the costs? what leverage do we have? >> a $500 billion relationship with the chinese, and an economic relationship, and a lot of elements to the relationship that we have with the chinese in which there could be a cost. >> what i would be looking for, and what tom would be looking for is, you know, smart sangs or financial sanctions. what is something that will happen to the chinese system.

we don't have to talk about it. it will just happen. they will know it. we will know it. and the argument quietly is if this continues, more of this stuff is going to happen. we have get at you. the sawn sashz is what is it. i would like to not have to put it in the standpoint of all over trade relations. but i think we've got to look for new tools that they will see, that will hurt them in this cyberrealm. and that they will know that if they don't change their ways, more of that will happen. i don't know what it is. i'm not in that world anymore, but that's what i hope we're looking for. >> i have to ask you because jack lew started this off by talking about 9/11 and the evolution of the treasury tools. in response, and there is a big debate today about whether rrthr

releasing five high-level taliban leaders is the correct response, steve? >> i don't do this stuff anymore. look, it's very hard. and the right questions are being raised. did we negotiate with terrorists? we don't. and for good reason. problem is, if you swap or pay to get your hostages back, you incentivize hostage taking. that's a problem. there are congressional statutes requiring consultation with congress. if we could consult on the operation against osama bin laden, why couldn't be consult on this? there are a whole series of questions that need to be raised. again, my guess is that the dilemma the administration had was the following.

we've turned over a lot of prisoners in afghanistan to afghan authorities and regrettably, they have released a lot of them over the objection of our military. people who are now released in afghanistan, who killed americans. and that's a very troubling thing to happen. but that is what happened in afghanistan and dispose of the prisoners. our troop levels are coming down. i think the administration probably was in a difficult choice of, look, we have an opportunity to get this guy back. the president has said, i think regrettably, that all of our combat troops will basically be out by the end of 2016. i think that's unfortunate to have that kind of arbitrary cutoff. i would much rather have it condition spaced. but if that's the policy, the question is, if we're not going to get the guy back, when?

i think that was the dilemma. they basically said, look, we lost control of all these prisoners in afghanistan. these are five guys, bad guys, but at least we have a chance by giving them to the qatarys, we can keep them off the battlefield for a period of time. this may be the only way we can get our guy back. i think that's probably the decision that came before the administration. you can have alreadies about hout it was handled. whether they should have delayed congress and all the rest, but this is the dilemma they faced. >> we didn't do a preconsultation with them on the osama bin laden raid. but with respect to this, one, there's a big difference between getting a p.o.w. back in a war zone and negotiating with terrorists. it's an entirely different context here. and that's what this is. this is essentially getting a prisoner of war back through a swap. it's a unique undertaking

because the gutteries were mediating this and will take some steps to respect the activities of these guys. they are difficult decisions. with respect to incentivizing the taliban and others who we are at war with, and afghanistan, from taking prisoners, they don't need a lot of incentive, right? we have been there for over a decade. and they know the value, frankly, of being able to take an american soldier captive. i don't think they needed incentive. i don't find that argument persuasive. we have that risk every single day in afghanistan. we deal with that risk, and you'll have others on the panel who can talk about this, so i don't know it's an incentive problem. it was an opportunity, as steve said, to get back home. the only prisoner of war in the

conflict. and there were constraints put on the activities of the guys who were going there. it's a different context. it's essentially getting back a p.o.w. in a war zone context. >> i take tom's correction. it's interesting because i read the press coming out of the sunday shows, which said that we had consulted on the the psalm psalm raid, which was not my understanding. it's interesting. it is a point if we did consult on that, why not here? it's important that that record be corrected publicly because that argument is being used -- >> i'm willing to make that correction. i know something about this. >> yes, indeed. >> i'm willing to make that -- i'm willing to take the opportunity to make that correction, make that correction publicly. >> are you making a dish tinction on the months leading up to and no consultation during the week or days leading up to

the actual trade -- >> wthere was not a consultatio with respect to any of the specifics around osama bin laden. we had tremendous operational, operational security concerns. and if in fact there had been a leak with respect to anything, with respect to the osama bin laden raid, we would have number one, probably have not had another shot for another ten years and we would have put our troops at extreme risk. >> i want in the few minutes left to talk about places where you don't think sanctions work. we talked about iran and the unique set of circumstances with iran. and to a certain extent with russia and ukraine that targeted sanctions have already effecteda's economy and

behavior. where doesn't it work, steve? syria? >> a couple things. others can correct me on the numbers. one of the issues that surfaced in connection with sanctions against russia on ukraine is people, you know, the united states generally has to lead on these things and encourage the europeans to come around. but i think germany is, i think, russia's number two trading partner if you take the eu together, it's far and away the number one trading partner for russia. we're way down that list. one of the problems in sanctions is, you know, they need to be multilateral in many times because the folks with the money, with the economic and financial relations, may not be the united states of america. this is why it's so important to bring europeans along, which started in the clinton administration, to begin to bring the europeans along to see around the way we did, because

we were sanctioned out in many respects, at least initially on iran. the two administrations have moved the goalpost further. one is the question, you have to look at who has the leverage. if you're going to make these things work, the folks with the revolog have to be at the table and have to be willing to sanction because otherwise they're not going to be effective. secondly, you know, it is tools can -- are cumulative in their effect, and if you can have a military element in addition to your diplomatic and all the rest, if you can have the threat of a military element, it is going to make sanctions more effective. this is the argument we made on iran. we cannot bring them to the table for sanctions. we have to contemplate military force, and nobody likes that. when russia went into georgia, when russia went into ukraine,

no one suggested the u.s. would engage russia militarily, but the fact we have re-enforced our presence in nato countries, the fact that hopefully the nato countries will begin to pay more attention to defense and to increase their own defense spending, this again is something that i think gives added leverage to sanctions context. finally, there's a question of, for how many things are you willing to threaten sanctions? we have now been on terrorism. we have been on organized crime and drug trafficking. we have been on proliferation. there's now discussions sort of using it as a tool for human rights. you know, one of the things you have to really decide is because you can overuse these things. what are the national interests and national values which are so important to us as a country

that we're willing to use this cool, and what are the issues on which the advocates for this perspective will want to we've got to save this for the things that matter most to us and where they can be most effective. i think it's got to be an issue of priority in terms of values and interest and a considerations of effectiveness. because, you know, these things will become a wasting asset at some point. >> i think that's all correct. one is, with respect to where it hasn't worked, i think overuse is an important -- is very important concept to think hard about. not every case is going to be an iran case and you have to think about what your objectives are. and it can't just be a reflex to go to this because again it's something that the treasury can do in a week and it's short obviously of military action. it seems to me that two or three

contexts where it's difficult is where a country is unplugged from the world economy, you know, like north korea. the bush administration successfully was able to find a steam there, right, and a connection that was effective. but that's one of a few. so if a country is willing to live like north korea in tragedy and where their citizens are completely unplugged from the world and suffer, you know, that's a more difficult circumstance in terms of making -- you can make it more difficult for north korea and we have, frankly, to engage in proliferation efforts and we can make it more difficult for them to get the kinds of things that can advance their program. but you have some sort of limit. if you have a limited effect when they're unplugged from the world economy. and the second thing is where you don't have multilateral support. for example, not an economic

relationship between the united states and iran and hasn't been since -- i don't know -- basically since 1979 or the early '80s. it was essential that we have a multilateral setting there. if you don't have multilateral support, you're not going to have an effective sanctions regime. >> i think our time with you has expired. but i want to just thank both of you for your collective wisdom and judgment and experience and for sharing with us today. it's been a great privilege for me. >> thank you for will being here. >> thank you so much. [ applause ] [ applause ] here's more from that forum on the treasury department's role in national security affairs. it's a discussion on the private sector's role in combatting terrorism with former officials from the treasury and state department.

this is just over an hour. good afternoon. hope everyone is doing well. it's been a fantastic lineup. i want to thank the treasury department for entrusting this important event to all of us. i think it's been a very important discussion. this one i think is important, in part because what we're going to do is focus a bit more heavily on the question of the

private sector and the world of the private sector in this new era of financial tools and influence. as we've heard before, as stewart mentioned in his remarks, one of the evolutions, and frankly revolutions of this period has been the centrality of the private sector in this period, where the private sector in many ways, both banks and non-bank financial institutions of the like have served as guardians of the gate of the financial system. so with us today we've got two phenomenal experts to help us through that discussion. to my immediate left is neil woollen, former deputy secretary of the treasury, long-time public servant. numerous roles at the treasury department, including general counsel during the clinton administration, numerous roles in the intelligence community as well. to his immediate left is ruben jeffrey, csis senior advisor here.

also, former undersecretary of state for economic business and agricultural affairs. currently the ceo of rockefeller and company and rockefeller financial services. before we begin the questions and we'll open this up. we'll reward those of you who stay to the end with enough q and a time to ask these experts great questions. i just want to say thank you to everybody, the kind remarks that dennis mcdonough just made, and just for a moment taking the prerogative to say thank you to the tfi family and everybody who has worked in this community. this is a little bit like a family reunion, and seeing a lot of the same familiar and very good faces is incredibly satisfying and an honor to include not just those at treasury, but those that worked in the community of interest in the audience. with that let me start. let me start by asking our experts questions. why does this matter? why does this matter not just in the context of what we've talked about today, stopping funds to

terrorists or squeezing regimes like iran, but why do these issues of financial integrity actually matter to the safe and and soundness and integrity of the financial system at large? >> so the national security implications have been much discussed already, as you suggested, juan, but i think it's important to note and dennis just noted in his remarks that the global financial system of which the u.s. sort of stands right in the center, i think, depends importantly for its robustness and its resilience and its strength on making sure that the illicit flows are kept to a minimum, are not present. that the kinds of integrity principles, which really stand at the foundation of what tfi does are well observed, and so apart from all the national security implications, it's critically important for the

world's economy and for the world's financial system that these kinds of illicit activities, whether it's terrorists or organized crime or narcotics traffickers or what have you, have a light shown on them, and their activity be scrutinized and to whatever extent possible, eliminated. i think that, you know, we as a country spend a lot of time policing our own financial system and running around the globe talking to foreign ministries and central banks and private sector participants about the importance of having financial systems and economies that are resilient and transparent and effective, and i think that this set of issues, this set of things on which tfi has been focused for the last ten years is critically important to the proper functioning and the resilience of all of that, which, in turn -- on which in turn an awful lot of global commerce

and, you know, global well being depends. >> ruben, can you speak to this both from within the government and now in the private sector? >> juan, thank you. i like to add my thanks to david and treasury and john emery and csis. i'm up here before you as one of the few representatives. stewart, you're here, thank you, but about the private sector. a seven-year detour i wouldn't trade for anything. just to underscore what neil said, i can't understate the significance of the confidence factor in the integrity, solidity, solvency and resiliency of the global financial sector. accordingly, managements of any

responsible institutions around the world take this issue of compliance, of sanctions enforcement, of cracking down on illicit flows extremely seriously. any given institution is only as good as its reputation. if you talk to bank ceos, they will have reputation, reputation, reputation at the top of their list of things first and foremost on their minds when it comes to running their businesses, assuring the solidity of their businesses and building those businesses going forward. let alone dealing with their own employees and local communities. in terms of implementation, just anecdotally by way of preparation for this, i went to our general counsel, a little investment management firm. i better kind of dust off a file on bsa, aml, patriot act, and she handed me our 100 page

single-spaced manual, and she took me around the corner and introduced me to who just happened to be a resident, one of our occ examiners, who was the aml, bsa person. this implementation enforcement, the practical nitty gritty of everything that tsi represents, ultimately it's a shared responsibility between government and responsible private sector participants, so the private sector part of this is about commitment at the top, shared mind, but it's actually about permeating every organization and making sure that from the most micro level, that these, the desired effects, are being put in place, monitored, policed, and sanctioned when there are shortcomings. >> i just want to extend on what ruben just said and connect it to something stewart said.