romania? >> thank you, mr. ranking member. yes. the administration is working to identify an ambassador for romania. working as quickly as possible to identify the right candidate. we also agree with you, senator johnson, that dewayne --- butchs doing an impressive job and need an ambassador and working to get that in place as soon as possible. regarding the prosecutor and the overall effort to fight corruption in romania, american leadership has been critical. i think our good relations, working relation with the government and even when we disagree with the government of mr. ponta is such that we're able to express concerns, objections. when there are steps taken by officials, business people, business people that are clearly in violation of romanian law, in addition to international rules

and principles. so, we have that frank dialogue. we are able to do that with a very strong embassy team there. i think we need to continue to do that. it helps when members of congress visit the capitals to reinforce the message that we take corruption very seriously, not only as a matter of economics, or of moral principle, but as a matter of national security. >> and until an ambassador is appointed, has the administration considered reappointing or asking mr. butcher to stay on? >> he'll complete the tenure this summer. there's another sar shay affair and take over by the end of the summer. >> okay. i'm sure senator murphy agrees with me we don't want to see a void there in romania. it is important we don't do that. mr. hochstein, you were talking about developing shale gas in europe. do you have or does the u.s. have any estimates or europe in

terms of the oil and gas potential is if they were willing to exploit it? >> yes, senator. we work with country that is are interested. and as chairman murphy talked about, when he used the example of germany, it's a very -- it's a country by country. it's every member state in the eu has a very different perspective on different resources including shale. we had worked very closely with poland, with ukraine, with romania and we're working with other countries that are interested in pursuing that. we help identify what the shale resource is using their own resources and the u.s. geological survey to identify what the levels and what the commercialality is of those resources. >> so can you share with me or the committee what those resources? what are the estimates? can europe be more independent if it were only to, for example, do fracking? actually exploit their shale gas

reserves. >> so again, there's always a difference between what the estimates are and what it becomes in reality. if you look at poland as an example, there's published estimates that were quite high. several companies, international oil companies including large american companies went in. the results were less -- were more disappointing. some have already left as a result. some have remained so we have to see as the drilling begins and see what's happening n. crew yan we're working with them on putting some of the frameworks in place for further exploration. they are interested. they're already companiesmania . i was there just before the senate delegation was there with vice president biden talking to them about pursuing their unconventional resources as well as their offshore resources so in short i don't have the figures in front of me. it's something i can send to your office for you to see what our estimates are. some places we don't deliver

those publicly. but we are working with any country that's interested in doing it and we have a program at the state department, the unconventional gas technical expertise program that specifically putts together that framework for countries interested. >> you know, to the best of your knowledge, the company that is went in and subsequently left, did they leave because the oil and gas resources weren't there? too expensive to leave or corruption or some combination? >> it was not the issue of corruption but the resource. >> okay. can you speak to me a little bit of spot pricing versus oil indexing pricing and the affect it has on the situation in europe in terms of gas? >> europe buys its gas by pipeline from some of their suppliers. and they can buy l & g and bring in as liquefied natural gas through other ports. they have long-term contracts

and there are spot prices. the long-term contracts that they have with russia, for instance, been renegotiated a couple of years ago. some of them are coming up for renewal. the price in europe has traditionally been relatively high. it's come down over the last couple of years. part of that is because of the shale gas revolution in the united states and other market dynamics around the world. prices settled now on the $10 to $12. but it's also because there's been fuel switching in europe, as well. there's been a lot of switchover of gas to coal and with a mild winter in a region that uses gas primarily for heating, that reduces the need for gas, as well. so a variety of factors come into the pricing. i wouldn't want to suggest there's one specific cause for pricing but clearly if they can improve their infrastructure, interconnection, so it's not just about getting the infrastructure to bring the gas

into the continent but rather for it to flow across from country to country. if you can upgrade the infrastructure in romania so there's a flow across border, if you can bring in connections from croatia and hungary and the interconnections happen, you can have an integrated market for gas to flow and help with price and help with stability and security. >> and i know i'm out of time but let me follow up on this. would moving toward spot pricing be a net negative or positive for europe? >> probably a good question for my colleagues and friends to testify on the second panel. i wouldn't want to speculate on that. i think that i have learned in this job that speculating on price in oil -- >> are you seeing a trend one way or the other? in europe. movement towards spot, away from oil indexed? >> you know, i think it depends on when you ask the question. asking me last year, i would have had a different answer about what the trajectory is versus now.

the events and how we see events happening in the next few months, shaping up, you probably will see a change but i reserve those to speculate. >> thank you, mr. chairman. >> senator sheehan. >> thank you. thank you both for being here. the eu coordinated a number of policies to address particular issue that is have come up. for the eu as a whole. but it's my understanding that energy decisions are still made on a state by state basis. is that correct? and can you talk about how these bilateral energy agreements have complicated the ability to get a collective energy strategy for the region? >> senator, you're right. there is a direct commissioner for energy, commissioner integer but it's still set at the member

state level. that -- there's the second issue you raise is bilateral agreements. it is true people talk about europe's dependency on russian gas. there's a two-way street. there's a gas market. $50 billion a year gas market and they have almost very little infrastructure to support exports outside of europe. with those facts, one would normally think that this would give the equalize the leverage and that there would be a negotiation position based on the consumers in europe on that purchasing power. but because there's been a bilateral agreement for each country, that's weakened that position. and that's because countries are reluctant to allow a single central eu to negotiate price. that issue has come up in a proposal by the prime minister of poland who has suggested to have some kind of energy union where they can negotiate collectively with russia.

that's a very controversial issue in europe. there are a lot of different vies on that. i would just note that if you did make decisions centrally in europe, it would have impacts beyond the negotiations of agreement and also impact some of the things that chairman murphy talked about a moment ago and that is what do you do about nuclear? what do you do about shale gas and different views. if a decision was made centrally in europe on fuel sources and what should be allowed, approved and banned, that could lead in a different direction, as well. so, there are pluses and minuses to that idea but on the negotiation side of agreement there's no doubt that there would be a ben in it. >> well, given the recent events in ukraine and russia's response, does that not provide some added impetus to try and encourage more unified action in the eu? >> i think that, you know, you look at when's happening in ukraine and its ill pact on europe and the impact themselves

are very different in different countries. if you're receiving your gas through ukraine, you have a different perspective than those of russia through other means, through other pipelines. and the level of dependency will change your attitude. it's certainly changed -- caught our attention after the 2009 crisis when in january 1st ukraine's gas supplies of russia cut off and then january 9th the rest of europe or the rest of europe through ukraine was cut off. we have been trying to get and working with eu colleagues to act as though there's still a sense of urgency to be able to diversify. the third energy package that's been mentioned was a result of that 2009 crisis. we think that it would be a mistake not to take advantage and to seize the day and seize the moment of this crisis to move forward on implementation of a number of issues specifically on the infrastructure side but also on coming together as a region and cooperating better. >> well, that's the way we sigh

it but i guess what i'm asking is do we think the europeans see it that way and what has been their response? >> i think it's hard to say the europeans in this case because, again, there's different regions. i think there's by and large as was said there's a european conventional wisdom they need to work on energy security through diversification. what exactly diversification means changes, though, and this goes back to senator johnson talking about reality based. some countries view diversification in a different way, not just diversifying the sources away from russia but the routes of getting the gas from russia. hence the discussion on south stream and some countries see if i can get the gas from russia through a different mechanism not dependent on the relationship of ukraine and russia, maybe that's the solution. doesn't solve the problem but there's a difference of view there. >> well, one area where we know everybody could benefit is energy efficiency and my understanding the eu will be

meeting in october to unveil new energy efficiency goals and a framework to attain them and i wonder if you could talk about what -- what we think will be coming out of these talks and whether the member states will be able to accomplish the goals from those talks. >> thank you, senator. yeah. i don't want to presuppose what they'll say and announce there. they did have an aggressive efficiency rate target for 2020. 20% by 2020 and projections are they're not going to quite hit but come pretty close. i think they would like to look at extending that and look at specific measures that would address efficiency. as you said, it's the easiest way to save a dollar is through efficiency. ukraine has one of the worst records in the world on efficiency and we're very much focused on that but the eu needs to focus more internally. they have done quite a bit

already and may miss the target but we're working with them to understand better how they think they can achieve that and to see if we can be supportive in that. >> and can you talk a little bit about what the obstacles are to -- because this i think we are in agreement that efficiency is the first fuel, right? it's something that is the cheapest, fastest way to deal with the energy needs and why is this something they would not embrace, that all member states would embrace? >> i think in the idea level, they all do embrace. it's in the implementation of putting the rules and regulations in place that will allow for it to happen in a manner and enforcing the rules and regulations there and more of the challenge and i think part of this is is looking at how can you put this in compliance, put in place a framework and rule that is will actually deliver the results they want. it's spotty and some countries

they have achieved more than others. and therefore, when you look at the eu wide decision it is important to get the rules in place so that everybody can implement it efficiency. >> what can we do to help with that on the efficiency front? >> so we have a number of programs that we work with individual countries, again, we don't it through the eu as a central mechanism but through individual countries to look where we can. we have committees with the eu through the u.s. eu energy counsel to look at efficiency standards. there are some great lessons learned here from the united states that we are able to export. they have some of the ideas of their own. and looking at how we can cooperate with our experience to benefit what they're trying to achieve but there's a lot of work being done and happy to send some things to your office for the list of programs we're working on. >> i'd appreciate that and i'm sure if congress would pass energy efficiency legislation that would be a good model to share with them. would you agree?

>> i'll follow what congress does with great interest. >> thank you. very well said. >> i just have one additional question for the panel. again, maybe directed to you, mr. hochstein. senator markey is not here for his sermon on what the export of natural gas will do to prices here in the united states, but let me ask you about what the market barriers are to u.s. natural gas reaching europe. the administration's quick to remind us that they're approving licenses here as quickly as they can and others are quick to remind us that there's only 25% of capacity being used currently at european term nols and there's another 35-plus terminals that are scheduled to be built. so with respect to the market, what's the barrier that's -- that would stop potentially licensed u.s. natural gas

exports from ending up in europe? >> senator, to be honest, i think you answered your question very well in your own question. at the end of the day, we have provided license -- granted licenses over 90 bcm of gas already. these are company that is actually have to now build the infrastructure here in the united states so that they can export it. price plays a big role in this and if you look at what the henry hub price is today, where european prices are, add what you need to add for transportation, regasification, liquefy case to henry hub, to the price and that will often dictate where this gas will end up. for profitability purposes -- reasons. i don't believe that it matters, though, where the individual molecule from the united states will end up. even if the gas goes to asian markets, the idea is that american gas will come on to the international market which will

adjust itself and free up gas that was destined for the markets where american gas came and will make those supplies available now to europe. so even if it's not a contract that's directly signed between an lng facility in lithuania or elsewhere in europe, it doesn't mean that there's no impact of u.s. shale gas or gas exports on the european market. we've already seen that effect simply by no longer importing the great volumes that we used to or the great volume we were projected to import and those already by being freed up from the u.s. market to europe and to asia had an impact on price in europe and even led to the ability of countries and companies in europe to renegotiate contracts in the last two years with gasprom for the first time so i think it's really not a matter of a direct contract between those end points but rather affect the market as a whole. and i will say that as i say to my european friends and

colleagues when i travel there and complain about natural gas exports that the best way to do that is have companies in europe noeshlt contracts with american companies or operators or distributors here in the united states. they're already gas that's contracted for india, japan and others. and that's probably a better way to do it than think about just a governmental control of it. >> and as i do think and i hope you will point out the curious position that europe continues to be in which is to ask voluntary rice rously and aggressively for u.s. shale gas and then totally unwilling to develop their own resources and happy to receive the resource of the united states and very unhappy to develop their own resources. i get it that they have the ability to make sovereign decisions about what domestic resources they will and won't exploit. it's not necessarily hypocritical position. but it's curious to say the

least. >> mr. chairman, i rarely miss the opportunity to raise that iron yi in my discussions. >> further questions for this panel? >> might be hypocritical. i just want to go to nuclear. my understanding is france generates about 75% of its power needs through nuclear power. is that largely correct? what is the activity throughout the rest of europe in terms of developing nuclear as a clean energy alternative? >> again, changes from country to country. there are a number of countries working on nuclear energy. hungary is looking to expand it current nuclear. czech republic been in a lengthy process to identify through the tender process to identify a company to build and expand nuclear power. that's hit some stumbling blocks in the czech republic. bulgaria is working on it, as well. so there are country that is are working on expanding and promoting nuclear energy.

there are others like germany that decided in the wake of the fukushima disaster to go the other direction. we -- when we're asked for our opinion in europe, we clearly say this is something for each state and country to make their own decisions. we are -- we believe that nuclear energy should be part of the mix but that's something for sovereign state to make their own decision. if they so choose to go in the nuclear decision and make it part of the mix, we are fully supportive and we believe we have companies here in the united states the best in the world and we believe that it's probably going to be a good decision for energy security for each country to have as many clean energy options as possible. >> what does europe do with its nuclear waste? >> i don't have that information in front of me. again i'm happy to get that to you, sir. >> you were mentioning the impact on price just u.s. importing less oil and gas.

can you give us some -- put some figures to that trend? >> we today are not yet a net -- we are not a net exporter yet of natural gas. we will be i believe it's by 2016 we'll be a net exporter of natural gas. we today still import some gas and on the oil side, we are far from being independent as people like to say. we still import significant amounts of oil. however, we have reduced our imports quite significantly down to the 30% range. and that has a lot of our gas we get still from the hemisphere and from our region with some quantities coming from saudi and elsewhere so we're in a much better position. i cringe sometimes when people talk about energy independence in the united states. i think that self sufficiency is something that we can strive for. independence suggests we are

immune to the market. and a disruption anywhere in the world and with everything going on gee politically today in the world would have a great impact everywhere around the world including here. if you look at the crisis in iraq and what happened in the days after when the prices spiked around the world, they spiked here in a commiserate bay a way. we are susceptible to the market and calls for direct, aboutive leadership and engagement in the world in the oil markets and engaging diplomatically with countries producing hydrocarbons. >> okay. i appreciate that answer but what i was really looking for what happened to the price in europe when we ended up importing less oil and gas. i actually want some numbers. i'm not an oil and gas expert. >> causeality is always difficult to address directly but when the extra volumes in the united states came on the market, prices at around the

same time came down from in the 14, $15 range in europe down to the $10 to $12. recently dipped lower than that in europe range for natural gas. so that -- that's where you can see the price differential. >> and current prices -- so current prices is about ten? >> in europe, in that range, yeah. >> and the u.s. it's -- >> in the u.s. today it's natural gas, $4.30 around today. >> i've heard arguments on both sides if we were to export more, that would lead toward greater exploration and build pipelines to capture some of the gas and flaring, wasting. what is your or what is your administration's viewpoint in terms of if we did increase more exports, what would actually happen to the price of gas? >> well, as far as the administration's concern, we have -- the department of energy approved a fairly large amount of natural gas for export so i think that tells you what we

think about that. >> no. it really doesn't. >> no, i think that we looked at the department of energy commission studied and did its own studies on the economic impacts of exports. and determined that it would not have the exports it's already approved would not have an economic adverse effect on the u.s. price. it could go up some but not have a terribly adverse effect. so -- >> so you basically would be disagreeing with what senator markey talks about in terms of dramatically increasing price of gas to export more? >> if we believe there's a dramatic increase in price we may be more cautious of and approved so far in the licenses and that is why every license that comes -- that is -- that is submitted for approval is looked at through that lens of what would be the impact on the united states? so so far, the quantities which are large that we have approved we have not determined to be --

would have a detrimental effect. >> in terms of the affect to have on vladimir putin's calculation, even though it wouldn't come on stream immediately, i come from the business world where i do believe the customer is king. customers ought to be more in control of the pricing levels versus supplier but we haven't developed the structure, haven't had the competitive environment to cause that. do you believe that just that signal alone would change or help to change vladimir putin's calculation in terms of his long term control over that marketplace? >> i believe that russia and others around the world already have internalized the effects of what the shale gas boom here in the united states has done and that we are -- that we no longer import the levels that we have. we will be a net exporter. i think they have understood that and factors in and had an important effect. >> mr. yee, let me ask you. i'm calling it putin's pause.

i have actually been appreciate the fact that he's not sent, you know, overtly more support and looks like ukraine is having some success at stabilizing the region, certainly getting, you know, stabilizing some of those cities. do you have any explanation for that? do you know what he's thinking? >> i think it would be very risky to try to get inside vladimir putin's brain and to explain what he's thinking. >> let me just ask. does that surprise the state department? >> that he's paused? >> yeah. >> i think i would say that it's not a complete surprise that in light of some resolve on the part of the international community in standing up to what russia and russian proxies are doing in you yan, in addition to some bold military action, security action by ukrainian government and security forces, it should not be a great

surprise. if we're talking about the recent days. since march, i think there's been a cumulative effect with measures led by the united states and nato showing that we are absolutely committed first and foremost to the article v commitments in putting forces, additional forces on the -- in the front line states, new ukraine, in applying limited sanctions against russians and ukrainians who are undermining ukrainian sovereignty. i think it is reasonable and it's actually -- it's predictable that there would be some pause on president -- >> what's this administration's specifically done to help ukraine militarily as they're trying to grapple with their security situation? >> well, we have as you know, senator, a large package of assistance that we have provided to ukraine both in terms of

assistance to the government and the immediate needs for shelter, vehicles, emergency equipment. we have provided nonlethal assistance to the military. >> what does that mean? specifically, what types of equipment have we provided? >> we are talking about cars, vehicles, basic equipment, nonlettal equipment that the military needs to perform. it is what we feel comfortable providing and what the ukrainian forces requested from us. i'm not saying it is all that's going to be necessary. we're not in any way predicting this is the end. this pause is somehow the beginning of the end. i think we have to be prepared for a longer effort and continued resolve on the part of not only the united states but its allies. but we have provided assistance, a large amount of assistance both in terms of the

humanitarian assistance to the people of ukraine and also assistance in terms of efforts by nato and its u.s. and its nato allies in putting troops on the ground, putting additional planes in the area, in the front line states, as well as naval presence on the black sea and the baltic sea to show that we are determined. >> okay. thank you. thanks, mr. chairman. >> thank you both for your testimony. just one last word on our representation there. let me just join with senator johnson. we need an ambassador to romania. that is country that has great reason to feel imperilled by russian aggression and i appreciate some of the work that's being done to make sure there's a charge on the ground but we need an ambassador. it's also incumbent upon the united states congress to move on ambassadors that have been named. you mentioned the czech republic, for instance, is a country that's paused their

plans for new nuclear technology. that's transformational for the czech republic. but also potentially for the united states should westinghouse win that bid. it's really hard for us to represent our nation's interests if we don't have an ambassador on the ground. we have a chance to confirm a really good one this week, next week if the senate acts on that. so when it comes to making sure that we are fully staffed in embassies, the responsibility is both the administration's to move i would argue faster than it has in bringing ambassadors to us and for us to move faster than we have once you bring them to us. thank you both for your testimony and we'll sit the second panel now.

all right. welcome to our second panel. snofr johnson's going to return in a few minutes. let me introduce you briefly, allow you to make brief statements and then we'll get to questions. that was a great first panel. dozens more questions we could have asked and try to direct them to you. ambassador andras simonyi managing director of the center for transatlantic raelgtss at the school of advanced studies at johns hopkins, was the hungarian ambassador and an advocate for strong transatlantic relations. next to him is mr. edward lucas, a senior fellow and contributing editor at the center for european policy analysis. he's also a senior editor at the economist responsible for energy commodities and natural resources, one of the foremost

experts on russia having covered that region as a journalist for 25 years and wrote a number of good books on vladimir putin, russia and other topics. next to him is miss brenda shaffer who's on sebat call from the university of haifa in israel, a visiting researcher at georgetown university for asian studies and author of numerous boomings into -- books. last but not least, pleased to have edward chow, a senior fellow in the energy and national security program. he has decades of senior level experience working in energy -- working the energy industry and advised the u.s. government, corporations and financial institutions on energy. and investment matters. he is widely respected by both

sides of the aisle. we're pleased to welcome him back to this committee. thank you all for being here. mr. ambassador, why don't we start with you? try to limit your summarized comments under five minutes and then just run down the line. >> oh. okay. well, i want to thank you for inviting me to this very important discussion and i'm really honored to be part of the discussion. senator murphy, senator johnson, for much too long there's been a disconnect between europe and the united states when it comes to energy. most europeans tend to think of the u.s. as a country out to destroy the planet. and commonly held view in america is that europeans are just a bunch of tree huggers and both are extreme, both are wrong and that is in all of our interest to overcome the divide sooner the better. the u.s. shale revolution which has changed the global energy landscape is an unexpected turn

of the last decade, it is a reality and it is not going away. europe should have embraced it a long time ago. europe was put in energy security first. as the integrity of its democratic way of life hinges on it. last thing, and viable solutions cannot be built on ideology. it's for too long taken the energy supplies for granted and banked on breakthrough of renewables and storage technologies that have not happened. captains of industry in europe like the -- x mart were among the first to signal to european leaders the challenges europe faces with an unrealistic and ideological approach to shale technologies. european positions are changing. europe is considerably weakened without a common energy policy. a good sign is the voice of prague that tiss in the european parliament and commission are getting considerably stronger but i have to agree with senator

murphy. there is this movement is way, way too slow. and i would agree with the comment made that germany is key and i, too, have a lot of questions about germany, how -- which direction germany's going. the recent crisis in the ukraine is a huge wake-up call. russia is using europe's dependence of supplies to influence politics. coerce countries into transatlantic interests. since 2009, europe has somewhat reduced the overall dependence on russia but for the most vulnerable countries the percentage climbs to 80% to 90%. energy has become a top security challenge for them. europe is divided on how to deal with russia. russia is actively influencing the european energy debate by influencing organizations and leading public figures and by sophisticated divide and rule

strategy. there is no consensus on the threats and challenges that russian policies in which energy is perhaps the most important tool posed for european democracies. the majority of europeans hope the u.s. continues to see the issue of energy security of the allies on top of its strategic priorities. the u.s. is expected to share its gas wealth with europe. it needs to dispel worries that its energy independence will result in turns of away from europe and on regions whose security energy supplies depend. lng from the u.s. to europe would be a message, strengthen the transatlantic relationship and besides making economic sense would create jobs both sides of the atlantic. the transatlantic cooperation on energy should result in a more courageous energy mix in europe that should include all sources including shale and nuclear. europe needs to support the building of interconnectors and port facilities to make sure

u.s. lng is an important factor n. this, the u.s. private sector should be actively engaged. we need to use all opportunities to shape transatlantic energy agenda intrucluding the tpp pros and the fourth coming nato summit should deal with the issue and by reinventing u.s. european dialogue and cooperation on energy. sometimes we feel that's a bit too slow. the united states and europe must also lead the international efforts on the future of the arctic, sometimes neglects issue. finally, the united states and europe need to get serious on alternatives. practical projects that reinforce cooperation can help u.s. and eu approaches to climate change. i hope congress will find a way to allow the government to issue lng export licenses in a sufficient number for u.s. lng

to make a difference under an allied energy security act ian while not have an immediate impact it will not solve europe's problems on the energy security it will be a very, very important political message. it would send the political message it would send is incall clabl especially to vladimir putin. by the way, i hope senator johnson in the course of the debate you will ask me what i think is ahead of vladimir putin when he's stopped short of invading the whole of the ukraine but maybe at another time. what really is at stake here in conclusion i would say is the cohesion and resilience of democratic and free societies. this is really an enormous task. and i do feel the united states must lead. thank you. >> thank you. mr. lucas. >> good afternoon. and thank you for inviting me.

it's an honor and a privilege as a european to be invited here to talk. i got some written testimony which i should just summarize briefly. i would like to thank chairman murphy and ranking member johnson for the opportunity. european security really matters to the united states. europe's your largest trading partner and force plult plier, the apply and under attack, under attack from vladimir putin's russia. in ways that we haven't completely understood because we tend to compartmentalize and this is an energy problem, military problem, diplomatic problem. you have business, state craft, intelligence, organized crime, energy, military force, all overlapping and interlocking. as you referred to in your opening remarks, russia's a revisionist power and understood that they're trying to tear up the european security order. that's what it did with the invasion of crimea. it's perhaps less understood i think rurp yeah's also trying to

tear up the european energy order. it regards the eu's ability to be the rule setter in european energy as an existential threat because vladimir putin's home and abroad depends on the abuse of energy markets particularly through the way he manipulates gas exports and the european union's been doing a pretty good job to stop that as we have heard with the third energy package, the growth of interconnectors and storage and things like that and putin doesn't like that. as you saw on your visit to bulgaria, he's keen to push ahead with a head 46 on challenge to the european energy order and he's imagined to get six eu countries now lined up in support of south stream and that's pretty bad so the revisionism affects more than the conventional military thing. rush why's got the means to be revisionist. i think we're still mentally in

the 1990s where russia is a poor country and people say it is declining but it can do a lot of damage. and it's not just the military build-up which we have seen and the willingness to use force which gives it an edge over european countries who basically don't want to. but it's been able to use the energy weapon over a period of years to constrain europe's decision making ability. european country that is worry about russian, their supplies of russian natural gas don't want to offend russia. they feel vulnerable and used the money off of energy and other things to foster very powerful lobbies, commercial, financial, economic lobbies of people with a direct business interest in having good political relations with russia. we see this in germany, the netherlands, particularly i'm sorry to say in my own country of city where london is a

biggest laundry machine and there's a pushback to do things to offend the russian government. i should also mention information warfare and something that we have neglected. i'm happy to go into that in the q & a and sophistication and intensity we didn't see in the cold war. using techniques of social media, youtube and other things against us and we don't really have an answer and of course willing to use force. i think we values to be agree that russia is winning. regardless whether there's a pause in ukraine or not. the fact is they got away with it. they got away with crimea aen they're getting away with it on the pshback of energy and particularly good example of that is the eu is put on hold what would have been potentially a devastating response to russia which is the complaint against gasprom. if anyone told mr. putin in 2005, 2006, 2007, 2008 that eu officials with search warrants would be kicking down doors and

going to gasprom affiliates across europe building up a compelling picture of market abuse that could lead to hundreds of millions of dollars in fines for gasprom, enormously changing the business model and possibly class action lawsuits and goes on inside putin and not pretty and that's what happened. the eu got to the stage with a loaded weapon pointed at the crekremlin then and flinched pulling the trigger. we need to deal with the military dimension and the baltics, prepositioning, all that sort of stuff. we need to send the message that -- that crime doesn't pay. do the sanctions on the much wider thing and much wider scale. i think we -- american lng is a vital part of the picture and glad you touched on that even before molecule of lng arrived, thank to lit wanian lng

terminal, they were able to drive a harder bargain with gasprom and a much lower gas price and one has to see lng and lng infrastructure as national security times and from that point of view vital for europe and the american export licenses already granted there, very important psychological component in that even before any molecules flowed. finally, i would just touch on energy market reform. russia abuses the energy market, the sething of benchmarks, the trading companies abuse the market. a lot of stuff is very difficult to write about publicly because of english liable rules and i refer in the written testimony to the role in the economist liable defense sued by someone now on the u.s. sanctions list. this really deserves the full attention of the american criminal justice system. you have all sorts of evidence about money laundering, market abuse and insider trading that goes on. you have the ability to clean

this up. and the more open, the more transparent, the more liquid world energy markets the better everybody is and the safer europe is. i'll stop there. >> ms. shaffer? >> chairman murphy, ranking member johnson, thank you for convening this hearing this afternoon. very important topic. the 21st century is era of natural gas. 19th century -- >> is your microphone on? if it is not, just pull it towards you. there you go. >> the 21st century is the era of natural gas. in the 19th century, coal was the dominant fuel. 20th cent oil and now resources discovered in vast new locations. natural gas has many benefits. and most any other energy sources. natural gas is the fuel that's most come partible with the use of a base load and power generation. however, security of supply and natural gas is more challenging than any other fuel source. as natural gas is physical

qualities make it complicated and difficult to ship. there's meticulous policies and government involvement of security of supply of natural gas. a number of measures to improve european natural gas energy security. first, policy should focus on improving the security of supply in the vulnerable markets. observers may speak of a single european energy market but this is an illusion. states on europe's periphery have a higher energy prices and challenges than in the west and center of europe. the european council's endorsed security strategy recognizes the uneven nature of the situation in europe. natural gas sectors must be properly organized for supply regardless of the origin of the gas supplies or the political situation. supply disruptions most frequently result of technical glitches, natural disasters or extreme weather and a biggest security challenge of supplies in recent years in europe is winter 2012 due to extreme

weather. next, the united states and europe should make sure that kiev gets the natural gas sector in order. the unpaid gas bills to gasprom are legitimate russian concern. ukrai ukraine's the major point of tranmission. political elites across the political spectrum have engaged in siphoning of gas, disregard for payments and subsidies of runaway consumption. this behavior endangered security of supply to europe. additional natural gas supplies can also improve the security of supply in europe. most promising new source of gas into europe is southern gas corridor. beginning in 2012 this project to bring natural gas into southern europe. this project is the first in decades to bring new volumes into europe and not just rerouting existing volumes and reaches the specific gas markets of southern europe that relied on the single source and are the most vulnerable. the southern gas corridor can facilitate increased of volumes

of gas of different sources such as iraq, such as eastern immediate trainian and any new sources in the region. spurs can be built to additional markets in europe. the project will bring thousands of new jobs in the construction phase to southern europe such as greece and italy. as ber shan sold the gas to europe instead of local markets and probably more profitable and russia and iran noticed the choice. this project needs continued eu and american support to make sure that russia doesn't undermine it along the route. russia may attempt to reignite the conflict or destabilize georgia to thwart the development. continued u.s. interest is important for removing the potential means to destabilize the region and another potential new source of natural gas into europe from israel and sigh press. eastern immediate trainian is too modest for a source of

mainland europe unless they're found. but this can be very useful for the region itself. and the ability of these resources to serve as peace pipelines i believe are overstated. energy trade reflects existing relations, it doesn't create them. in fact, dispute over energy resources or commercial conditions can kprexasperate existing conflicts. although the gas volumes can eradicate conflict in the middle east over water as a source for desalination and essentially remove any water shortages in the region. it is increasing water supplies to israel, jordan and palestinian territories, at least removing part of this conflict. the new resources can improve reliability and affordable electricity in the middle east which is important as a basis for future prosperity and peace. in recent months there's been speculation that if a deal on iran are's nuclear program was

reached with the west, tehran could be a supplier of gas to europe. this idea is far-fetched. while iran holds the second largest reserves of natural gas in the world, today iran is surprisingly a net importer of natural gas fed by the huge domestic subsidies and inefficiency at home. russia would surely block it. over many issues despite allies their strategic competition. throughout europe moscow has policies don't as a dominant energy supplier. and block efforts if europe and rival supply projects. moscow's sponsors and funds bogus movements to oppose shale gas production and new gas projects. professional government analysis should disrupt sophisticated organize zags that moscow useses

to remove the tax status nonprofit status for organizations that receive funding from moscow. in addition they should look at russian companies that make untransparent alliances with russian are companies and bar this behavior. another mechanism moscow can explain is gas hub trade in europe are. this should be countered. last, washington and brus sell s should clarify to nato and e.u. members in the organizations it entails obligations to protect energy security. bulgaria's reluctance to improve its own security supply are worrying. until this year, brussels increasingly pulled out of the business of ensuring energy security and delegated the job to the market. the market pace alone will not be enough to encounter a

relentless russia. national and e.u. institutions must take an active role and the united states should support it. thank you. >> thank you. mr. chow? >> chairman murphy, ranking member johnson. i'm honored to testify on european energy security and the impact on the crisis in you cane. when it comes to energy security for europe we focus on natural gas supply. it's interesting to ponder why when europe is more dependent on oil imports than gas imports. there's been major global oil supply interruptions in the past year, but not in gas. yet the level of anxiety is higher with gas than the oil. why? the root causes are in part related to incomplete market integration in europe when it comes to gas and electricity. the gas markets has been dom mated by long-term contracts at fixed volumes with prices

indexed to oil. supplies have restricted competition and the free flow of gas with destination clauses in control over pipelines. the business practices were supported by major foreign suppliers and by incumbent european gas companies that control distribution networks in their home countries and pass on the higher cost of gas to consumers. european harkts in gas and electricity distribution infrastructure are not well connected for a supposed common market. what can the united states do to help our european allies and trading partners? the first point is that we have already done a lot through the shale gas boom. these supplies became available for western europe. despite initial denial of the lasting nature of the shale gas

phenomenon, gas prom was forced to adjust downward all major supply contracts under more flexible pricing turns. as a result european imports increased last year. western european import facilities are working at low utilization rates. even if u.s. ong exports were available today they would not be imported by europe but east asia with gas prices about double european prices. when the united states begins to export in a few years the benefits to europe lies not in the quantities but in future price formulation in global gas markets. international gas priceses may no longer rise and fall with oil prices. with prices in different regions converging as a result of u.s. exports. the competitive advantage to

shale gas revolution provided the u.s. economy with lower gas and electricity prices coupled with reduced greenhouse gas migs caused european s to re-examine energy policies with renewed effort for further market liberalization, enforcement of competition rules and rethink on the use of domestic energy resources. in the meantime, the crisis in ukraine caused by russian action a presents a clear and present danger for european energy security. the risks are borne by eastern european countries since they rely on russia for almost all gas imports. much of which is through ukraine. ukraine's weak, corrupt energy sector createses vulnerabilities for itself and neighbors. the previous ukrainian government left the current government with mounting gas debt to russia. this debt and the failure to agree to new gas prices led to

the cut-off of supply to ukraine on june 16. ukraine depends on russia normally for 60% of the gas demand and is the major transit corridor fors gas through europe. in either case there are ready substitutes. if the gas into tra teenagecally located storage facilities doesn't begin soon, ukraine will rub are out of gas before the start of winter. if nothing changes the government would be left this winter with a choice of either letting its own population freeze or taking gas from russia destined for european markets for its own use. if russia's intent is to further destabilize ukraine and prove to europe that ukraine is an unreliable transit partner it is in russia's interest to prolong negotiations. to date, european mediations has not led to real results. the european gas market is surprisingly complacent about

the situation. spot gas prices dropped significantly, although gas storage capacity has risen. extra storage isn't as high as it could be. the risk of miscalculation is high. meanwhile russia is pushing the south stream gas pipeline to bypass ukraine all together as an alternative supply route to europe. as someone more comfortable with negotiations i question economic negotiations brokered by political leaders. the e.u. mediated russian are negotiations has become serious when negotiators stop talking to the press. long-term sustainable economic transactions cannot be based mainly on political conditions which tend to change as we discovered with the russian ukrainian gas deals of january 2006, january 2009, april 2010, and last november. raising matters to the highest

political level as europe has done only invites russia to make political demands like restrictions in urine ukraine and stopping further western sanctions resulting from russian aggression against ukraine. the only real solution to the crisis in ukraine is to strengthen ukraine. president po areroshenko observ the blunders made by previous ukrainian governments on energy policy. business as usual is no longer an option. concrete policy action is required. we have seen precious little so far. what needs to be done for the energy sector reform in ukraine is well known especially in natural gas. what's been missing are the professional financial capacity to execute reforms in a systemic way.

true reformerers deserve and require assistance to be success canful. it is an open inare vi tags from adwregs and a source of instability in the heart of europe. neither ukraine nor the west will have another chance better than the opportunity created by the current crisis for energy reform. the situation cries out for american leadership working closely with europe and the donor community by injecting needed resourceses with strict conditional ti on assistance. the policy must be performed by sound analysis, not wishful thinking, followed by hard work. thank you. >> thank you very much. thank you all p for your testimony. mr. chow, i wanted just to ask you a question about the effect of a are prolonged crisis in ukraine. you posit it would accrue to russia's efforts because it would under mine faith in ukraine on behalf of the e.u.

in my mind there are three possible outcomes. i'm sure to them. one is that it will under mine european faith in ukraine and compromise enthusiasm for marrying together ukraine and the e.u. or nato. second, it could increase enthusiasm for alternate routes of gas to europe, south stream as the primary example. but it could also be a tremendous wake-up call, the straw that break it is camel's back in terms of prompting europe to do things truly necessary to become much more energy independent of russia. why is my third alternative not just as plausible as the first two? >> thank you for that important

question. i hope you're right. you're sitting in russia's news. you got a wake-up call in january 2006 when gas was cut off to ukraine are. it got another wake-up call in january 2009 when instead of a three-day cut-off, europe suffered a three-week gas cut-off. it's done precious little except for the steps i have mentioned. its response to the invasion of crimea as well as russia's adventurism in southeastern ukraine has been relatively weak. i think -- i guess it's a parlor game mow to get into vladimir putin's head. from his standpoint, the way he sees it, and he may be miscalculating, the time is on

his side, not on europe or ukraine's side. >> let me ask a question of the other three panelists. a simple question. it isn't simple. does a prolong crisis harm ukraine more or russia more. with respect to future dynamics over e.u. membership or future continued reliance european energy. i'll go to you, mr. lucas. >> europe frequently gets wake-up calls and then goes back to sleep again. i think the question here is the time frame. i slightly disagree with mr. chow. i think the previous criseses have stimulated quite a lot of activity in europe. we now have pretty are much complete north-south gas grid. we have better storage. we have had the third energy passage which reduced russia are's monopoly power. if they cut off the gas now we

probably got threes months before it would start tonight. that's quite nice. this is stuff you were talking about to make it different. we're talking years. if we start now in five years' time webb we could have a resilient energy, if not independent, a europe with lots of energy capacity, lotses of storage. new interconnectors and all these. it's the vulnerability. they could threaten stuff which scareses politicians like here. we have a are fragile recovery and politicians are desperate to have stuff. an energy interruption worries what it does. that's a powerful weapon. they have to threaten the stuff. we start thinking of ways to try

to make this conflict go away rather than win it. >> i think the last moves of russia, they set up a perfect strategy. they set up ukraine against europe. the gas flows to europe. if the only way for ukraine to get gas is to disrupt the supply is to europe and not taken to storage for future commitment. as winter approaches it's pinning kiev to europe. if we look at previous european response was north street meaning building a pipeline from russia to germany that circumvents transit states. you might see the answer being south stream or might be the southern corridor. there is another alternative. while the third energy package is great in terms of principles and in a perfect world where lawyers ran all the gas trade, it's very nice. in the reality of russia behavior as we pointed out,

whether it's manipulation at gas hubs, price are. gas promised the biggest trader in european gas hubs. of course they can flood the market, deny the market. really affect these prices. what we need in europe is a paradigm change. they base the third energy passage on the american model. you have the market has done a great job at increase creasing energy security. the u.s. has thousands of gas buyers, hundreds of gas producers where the largest has only 3% of the market. three of them are external to europe. each has about a third of the market. it's a different game. europe needs a paradigm shift that gas is not a commodity. it is a utility. we called gas a utility, not something that you just trade. when you think of it as a public good which needs more public involve:

>> may i add that i do think what's really at stake is a competition of two systems. our liberal societies and an idea that he's going to use the time before we get our act together to liberate the ways of running a society. the size you encountered in bulgaria is exactly this. he is targeting the weakest link within europe and within the nato alliance. one of the big problems is not directly related to energy but that the perception of the russian threat is very, very different in western europe and northern your, southern europe. let me say europe. in eastern europe, i'm really worried that russia with the

multiple tools in the tool box, putin using energy, other tools to influence the eastern european and central european countries that he feels was once part of the fear of influence. it's not fair that they are now on the other side. >> senator johnson? >> you asked for a softball. so what is puts in thinking? >> i think what putin is thinking right now is that, first of all, he says my goal was to destabilize the ukraine enough so that it's definite that the ukraine will not be part of the western institutions, the european unions or nato. this is his first goal. he's achieved that. he's going to resort to all kind of means to stoke trouble when

the moment comes and it looks like things are too smooth. i think for now he's totally satisfied with running, owning, quote/unquote, crimea. i have no doubt that, of course, at any moment he can turn the switch on and we'll be back to a lot of trouble. the fact that we don't see him visibly present in the eastern ukrainian conflict at this moment doesn't mean he's not fully in control of the insurgencies. >> mr. lucas? >> yeah. i think he thinks we're weak and he's winning. >> i agree. >> i was always in support of strong sanctions. hopefully targeted ones that were painful to putin, not us. when we were talking about

sanctions, they are a double-edged sword. i wanted to stop talking. i thought it was a delaying action. they had no effect. when we were in poland, i don't want to identify the individual telling us this. we have had this since confirm ed. certainly being from the outside in, hearing how effective the sanctions were against north koreans, just top leaders. denying them access to the banking accounts and travel to macao and that type of thing was the most effective sanction. why don't we target in a far more robust fashion the hundred to 110 individualses in russia that rely on the west for banking and wealth dispersion, that type of thing. mr. lucas, i will go to you. >> i couldn't agree more, senator.

i think we are looking for magic sanctions that don't hurt us and do hurt putin. unfortunately there aren't such things. every country's got something to lose. because russia has done a good job building up dependencies. i think the visa sanctions and asset freezes are poourful weapon. we have laws against money-laundering in this country. in my country and yours, banks are supposed to know their customer before they start taking deposits. how is it possible these people on their modest official salaries and sons, daughters, wives and parents and the rest of it are coming and putting hundreds of millions of dollars through the payment system and financial system. how is it possible that it was listed on the stock exchange when it feasted on the corpse of the big withest oil company. dismembered because of a

political fight with the kremlin. $8 billion of western shareholder money goes down the tube. this company which is effectively taking property is allowed to list on one of the oldest, most reputable stock exchanges. the ruk russian distance had a great slogan which is the powers that be enforce your laws. i think we should start by enforcing our own laws. on visas, we had to start withes these people. the most terrifying thing isn't the secret police. it's an angry russian woman. if people are going home at night finding their wives, grandmothers and daughters saying we can't study in the west, shop in the west, go on vacation in the west anymore because of the visa sanctions, that hurts. >> doesn't it threaten the oligarchs when they can't spread money around the world sfl. >> absolutely.

>> >> the first thing is foreign passports. they move assets offshore and diversify. they real arelize the mess russia is in. >> mr. ambassador -- >> i just want to ask. we know there is much more grumbling in the inner circles of putin about the sanctions than meets the eye. >> why don't we do it? >> that, i don't know are. >> i think putin thinks he can count on it between u.s. and europe. >> more weakness play into their hands. >> what is the e.u. thinking by not dropg. not revealing what they found. what does the e.u. think? >> what would be a more perfect, totally directed sanction to a

certain extent when putin is invading crimea and threatening eastern ukraine. what are they thinking? >> it was too perfect. it was scene as an escalation which is wrong in this country and in europe. we need to find an exit ramp. we don't want to escalate this. we are trying to apply judicious, moderate sanctions, raise the cost of putin and give him a chance to back down launching the equivalent of a cruise missile at the kremlin. wasn't seen as part of that. it was wrong. the russians always hope there will be a political solution to this. they have said again and again, don't go down this quasi judicial role. let's agree are to stop doing stuff and maybe pay a little bit

of fine tuning there. we don't want a big public fight. i fear the argument has begun to fight. it's a pity. would have been a wonderful thing to see that. i wonder if we are going to see it. it looks to me at the moment it will be past it. >> i'll complete the next round. >> sure. >> you have said twice you think russia is winning, mr. lucas. i want to pursue that rath arer simplistic rendering of geo politics. i guess if the measurement is levels of testosterone and bravado he's winning. if it's the expected approval ratings of putin versus obama, he's winning.

when we look at other metrics it's hard to understand how he's winning. he has less friends than before. former republics are climbing over themselves to sign association agreements with the european university and are stopped by invasions and illegal tactics. his economy is in recession. he's no longer a member of the g-8. he's not an international paare riah, but has less influence. we are debating how fast they are going to move about russian energy. there is no debate about whether the next ten years will see reliance. it's what pace.

he's in worse shape, kicked out of international institutions and his reason for existence being an energy supplier in peril. >> it's like asking tony soprano if he wants friends and he says the people who need to be scared of me are scared of me. a few years ago are, couple years ago, puts in was in trouble in russia. the putin modernization program hasn't worked. russia hasn't diversified. the infrastructure is rubbish. he was becoming a bit of a figure of ridicule. that's changed now. the opposition knows the ratings are high. he's distracted russian public opinion. through these foreign

adventures, yes, you're right countries like kazakhstan, georgia and so on. he sees he's got more influence in western europe than he ever dreamed of. the atlantic alliance is weak. the success of the strategy. you only have to look at countries signing up. the enormous way of anti-americanism in germany now with the snowden stuff is a range of things that must make him think the sun is shining. >> i wanted to add to this. he's -- look, he doesn't necessarily want to be seen winning. he wants to win. meaning that while we are debating ukraine. while we are debating energy, at the same time he's doing other

things in europe. buying up banks. buying up companies. what he wants is a long-term influence within the european union within nato. in that sense, i think in a way he's winning. he's not winning in the sense that we consider winning, but he's winning in his own world he's going to gain a foothold that will be difficult to counter if we are not careful. >> that's an enormously important distinction. i don't care if he's winning according to his terms. we have to conduct our business according to our understanding of winning, losing what benefits us, what's to the detriment of u.s. security interests. let me turn the topic to another more specific issue.

that's this intersection of production and transmission. when we were in romania, there was some very positive discussion about the ability to move romanian resources into maldova save to the fact that the russians owned a controlling stake in the transmission lines inside maldova. so all of the work that was going in to moving the product to the border of maldova was potentially for naught. once you got into the country, it was still up to russia. the third energy package speaks to this in trying to separate the two. how important is the control of transmission to russian energy and what are the prospects to dislodge transmission of the control. is there anything the united states can do about that.

asking that to the panel. so, ms. schafer, you seem most eager to answer. >> okay, great. senator murphy, thank you for the question. in a sense the third energy package created opportunity for russia to get hands on the transmission systems. the producers, other shippers or distributors can't own it. these things have gone for sale. with financial crisis and a number of countries in the region, there's privatization. thises has given them leverage within europe. for instance, as the southern corridor made a decision to go through southern europe and go through on the route of greece, albania and italy, we see a small russian unknown company pop up and try to buy the transmission system in greece. they are aware this is a way that if you can't beat them with a south stream, try to buy a chunk from within.

something has to be done. the third energy package will enable this kind of behavior and not the opposite. in the case of maldo are va, russia is constantly taking payment for gas in national infrastructure. in january, armenia lost the last stake in the gas transmission infrastructure. in the end, this might be more hurting a state's independence than its gas supplies. this becomes an actor in the local economy. gives it a lot of leverage in one of the major financial forces domestically in a are country. >> mr. chow? >> i would support what dr. schafer said. the idea of piling up debt in order to have a debt equity swap later, it's a longstanding russian are business model since the collapse of the are european

union in russia. it applies in maldova as well. controlling equity is for all the gas that is owed, including gas debt that was utilized. and not paid for. this is quite a common practice by russia. the e.u. leverage on paper that could be applied is the fact that these countries including maldova and ukraine are signatories to the community treaty. as opposed to to comply over time with the energy key of the european union. that's been observed mainly in breech in the case of maldova until now. this is certainly something within the e.u.'s power to police over time.

it has chosen not to do so for reasons that my european colleagues may know more than i do. >> if we don't understand what tonight tifs of adversaries are, we'll misjudge. i don't believe putin is acting from are a standpoint of improving his economy. this is not in russia's best interest long term. i think this is all about vladimir putin. about his ego. about his power. about his control. we didn't draw up plans for military defense of the new members because we assumed russia was a friend. we all hoped that. i wish russia are was a friendly rival.

i want to ask you again. what is putin in it for? >> he wants to weaken the west to the point he doesn't think we are a threat to him. he's doing a good job of it. he worries. successful tris on his borders might give his people ideas. it is happy to make ukraine into a category. we thought they could have a large, prosperous, law abiding neighbor with the prepress and so on. this would be great for russia.

if we try to make a threat to ukraine, that's also to putin. they said we don't believe in geo politics. i said, but geo politics believes in you. >> explain why that's a threat to puts in. if he has successful democracieses that are western-leading, reduced corruption. his citizens are are seeing it in ukraine. is that the reason? >> yes. if you have tens of millions of people consuming russian media and a culture of oh debate and inquiry, they will touch russia and russians watch that. he needs to be able to tell russians that my way is the only way. nothing else works.

>> threaten his control. when i first made my trip to the region. they were all talking about how vladimir putin at that point in time was doing everything he possibly could to under line their success. their democracies. >> you have put your finger on an important point. these front line stakes have been warning us in the west about the this even before putin. >> we just refused to acknowledge it. why would anybody doha? we want with integrated economy. we want to lift up a lifestyle. >> they have been proved right are. we should ask them for advice. say what should they be doing? what's your suggestion?

>> what's the concept? >> i can't resist to cut in here. this has been in the making for the last 12 or more years. i eep telling people just because i'm hungarian, i still might be right about vladimir putin. i would like to echo what was said. what you are talking about is a difficult, painful, bloody process are. at the end of the day which will be best. he wants to stay in power for 20 years. we are the biggest threat for his continuous remange in power.

transparency, accountability, rule of law means he will end up. that's something he wants to prevent. >> understanding his goal -- and i totally agree with that. >> what's the best way to blunt that? what is the first thing we can do and implement quickly? >> let me say that -- i've still got the light on. let me say that it's counterintuitive. the harder we react, the stonger our reaction, the more determined we are, the more likely he is to back off. >> when we were in po lant, i don't want to name the official. they said the main reason vladimir putin didn't go into eastern ukraine is he was generally surprised at the

west's reaction. there were delegations. the west actually covered what fs the doing and basically this official credited the west reaction that surprised putin for having him hold off which bolsters your point. >> it could have been a little bit harder. >> oh, absolutely. >> senator, i just say this because that would have given us a lot more time to fix the problem. >> the reaction has been totally weak, lacked resolve, inadequate. >> first of all, i want to agree with my fellow panelist that mr. putin has different metrics for success than we hold. he's not insensitive to the down sides of what the action has caused. i see the deal he signed with the shanghai on may 21.

for example, as a reaction it won't help him in the short run. s as a reaction to the to show russia can't kwoth be isolated and his win in the foreign policy and tradesfear. he may think he's winning doesn't mean we should give up. polts -- policy is the most important thing. i will repeat what i said, that strengthening ukraine. helping it become a democratic and prosperous free market country is the best thing we could do in the short to medium term. >> we should be doing what we can to bolster it. i mean real military equipment.

>> we should equate russia's actions with his specific goals. i think any russian leadership would try to invade crimea. there was an interesting debate in the united states. is this the return of geo politics. to my ear it is idea is like saying, oh, the return of the pacific ocean or the return of the caucasus mountains. of course it's always there. the only thing that changes, we tried to ignore they will. the most dangerous weapon is the world as you would like it to be versus what it is. left the fleet outside the jurisdiction of russia. this was like leaving the pacific fleet outside. if california broke off from the

united states, leaving the pacific fleet outside the jurisdiction of the united states, it was a ticking bomb. the only problem is some panelists pointed out we didn't learn lessons about how countries react. there is something connecting the panel hs in terms of natural gas. states expand as much as they can until they hit a container. this was the opportunity and timing. invading crimea was something that would happen. this is the russian playbook. i think why there seemed to be pulling back from ukraine is we are focused on eastern ukraine, forgetting about yiem crimea. it seems like there is no intent to invade it. it seems like they will invade and then you see they are happy to stay in the region as peacekeepers. this is their play book to focus on getting them out of eastern

ukraine. >> we refuse to deny reality. rely on hope as a strategy. we have to be brutal in our assessment of the reality of the situation. i keep going back to having to recogni recognize the power and control. it makes no sense for the citizens of russia. it makes total sense to maintain his own personal power as long as he lives. >> to respond senator murphy, every day thousands of people try to enter the united states. not only to enter here i don't see thousands of people trying to break through to russia. in the end of the day, we have to stop the defeatism in our policies. >> p i thank the witnesses.

thank you, ms. schafer, for that comment as well. senator johnson and i agree on much more than people think when it comes to a lot of the topics. we do disagree on right now the score card between the east and west. i will close with this this comment. there is irony to putin's actions. we agree there is short-term calculus made here. russia made its name over the last 200 years by being anybody else at the long game. kutizov emptied moscow in order to allow napoleon to stretch the troops so far into the russian territory that eventually his forces collapsed. i think it is important for us to remember that the long game is creating real contrasts. what it means to align yourself

with free market and what it means to be beholden. this is asymmetrical warfare. they are willing to use tactics we aren't are willing to use. that means we lose a couple of skirmishes in battles along the way. they are willing to ebb gauge in bribery and corruption. ultimately it probably means we will be able to win the long gail. thank you very much for being here. our hearing is adjourned. the record will be open until friday at 5:00 if we have other questions from committee members. we hope you will turn around answers as quickly as possible.

more live coverage from capitol hill tonight when the house veterans affairs committee holds another in a series of hearings looking into the treatment of veterans at v.a. health care facilities. this one specifically examining the whistle blowers who report are on inadequate services to veterans. live coverage begins at 7:30 eastern on c-span 2. you can weigh in with thoughts on our facebook page and twitter kwusing the hashtag c-span chat. the sight selection committee today announced cleveland, ohio,

will be its recommendation to host the 2016 republican national convention. rnc chairman reince priebus saying in part a cleveland convention offered a party a great steppingstone to the white house in 2016. the selection of cleveland will be voted on by the full republican national committee when they meet in chicago in early august. the white house announced today that it will request $3.7 billion in emergency funding to deal with the influx of unaccompanied children across the border. the heads of feel and border protection will testify about the security challenges at the border. that's at 10:00 a.m. eastern live on c-span3. on thursday, homeland security secretary jeh johnson and sill vie ja burrwell will appear before lawmakers to discuss the p president's funding request.

live coverage of that hearing thursday beginning at 2:30 p.m. eastern on c-span3. 40 years ago the water gate scandal led to the only resignation of an american president. throughout this month in early august american history tv revisits 1974 and the final weeks of the nixon administration. this weekend hear the supreme court oral argument, united states v. nixon, as the water gate special prosecutor contests the president's claim of executive privilege over his oval office recordings. >> now the president may be right in how he reads the constitution. but he may also be wrong. if he is wrong, who is there to tell him so? if there is no one, then the president, of course, is free to

pursue his course of erroneous interpretations. what then becomes of our constitutional form of government? watergate, 40 years later, sunday at 8:00 eastern on american history tv on c-span3. transportation secretary anthony foxx talked about the solvency of the highway trust fund. general motors recent vehicle recalls and the commercial and consumer use of drones. he was speaking to reporters at the christian science monitor breakfast series. this is an hour. >> our guest this morning is transportation secretary anthony foxx. this is his first visit to the land of low calorie breast cancer faas. we thank him for coming. he earned a bachelor's at davidson college where he was the first african-american student body president. after law school he spent a month in new orleans playing trumpet, becoming friends with win tan marsalis.

he clerked for a federal appeals court judge and served in the u.s. department of justice and on the staff of the house judiciary committee. our guest returned to charlotte in 2001 to work in a law firm there and got elected to the charlotte city council in 2005 and re-elected in 2007. he was elected the city the's mayor in 2009, the youngest person ever to hold the job. he was con if i recalled as the 17th transportation secretary last june. so much for biography. now to the ever popular process portion of the program. let me begin with thanks to kaitlyn oaks, my partner in monitor breakfast land for the past couple of years. she's headed to graduate school. today is her last breakfast. jared gillmore just graduated from northwestern will be taking over. kaitlyn brought grace under pressure and unfailing kindness, especially to the elderly, to

the many tasks these breakfasts involve. thank you, kaitlyn. [ applause ] now to mundane process matters. we are on the record here. no blogging or tweeting. there is no embargo when the session ends. if you would like to ask a question, send me a signal and i will call on all when we have the time available. we'll offer our guest the opportunity to make opening comments. he's threatening to make news. then questions from around the table. thank you very much for coming. >> thank you very much. i want to thank the christian science monitor and all of you for being here. to kaitlyn, i hope that this is a very thunderous send-off for you and this breakfast is the best one you have put together. i would like to introduce a

colleague of mine who's with me today. sylvia garcia, our cfo within the department. you will understand shortly why i have asked her to be with me this morning. the department of transportation has been warning that the highway trust fund is running out. we have been doing this in several ways over the last several months. we began in january with a ticker on our website that gave the public an up to the minute view of how the highway trust fund is performing. at that point i have predicteded that the highway trust fund could run dry as early as august of this year. in april, we took a tour of the are country and a state tour.

12 cities and towns, large and small across america to raise the urgency of the issue to make sure the public understands what, in fact, is at stake. if the highway trust fund runs out. more importantly, to promote a piece of legislation that the president and i have put forth called the grow america act. which would not only get the highway trust fund stabilized, but do what we think should be doneeses which is to pivot to a time of investment, a time of growth, a time of stability and prib predictability in the transportation system. as we predicted back in january, the time is almost up. this morning i spent letters to state departments of transportation and to transit agencies outlining steps when the highway trust fund approaches zero. normally states receive an

annual allotment. they forward bills to u.s. dot and we pay the bills as we get them. but during the first week of august, the highway trust fund will drop below a crucial point. we'll stop reimbursing states for each bill coming in. instead, implement a new process of cash management to help us move through this unfortunate period of time. each state is entitled to a certain percentage of the highway trust fund based on the annual formula. those same percentages will determine how much each state receives of whatever is left in the trust fund. states will be paid not just as they send in bills but every two weeks as money from the gas tax comes in. we believe this is the most equitable and prudent approach. to be clear there is no good option when we are talking about

a trust fund that's running short on supply of dollars. i can tell you, having been at the local level, that the most devastating part of this situation is that many communities would depend on the federal government for significant dollars to get projects done, and no matter how we estimate the infrastructure deficit we have as a country, it's growing by the day. the confidence level at the state and local levels as dropped. projects aren't being put on the table. projects that will reduce congestion. proare projects that will improve quality of life, projects that will enable commerce to move freely and efficiently in this country. it will be made worse unless congress acts which brings me to the good news.

congress can still act. we have proposeded an answer to the question through the grow america act. we think it is a good bill that meets it is standards and the tests that many members are have made clear to us. but we have also expressed that we are willing to listen to other ideas that emerge. but this is a crisis that can be avoided. again, i want to urge congress to act. so thank you very much for giving me a few minutes to say that. i look forward to your questions. >> i'll do one or two myself. then to tom curry. mark january son, mark rosenthal, matt wald and david shepherdson. let me follow up on the highway trust fund and move to something else. we have a visit last week from the chairman of the immigration -- well, the judiciary committee of the house bob goodlat basically saying the

chances of getting immigration legislation out of congress weren't wonderful. you're saying congress could act. do you actually expect them to act? i mean, if you were rating the odds for action, wouldn't they be minimal? >> the american public expects congress to act. if you had been on the bus tour with me in april, you would go out to the communities and see the long list of things they want to get done. and the burning desire the communities have to fix a bridge that's crumbling in nashville or to see more bridges like the ones created on the kentucky/indiana border or to see transit systems come back to life in parts of atlanta that the haven't seen it before or the investments that make jobs in alabama that a company building transit buses being sold all over the country in a small town in rural alabama

putting people to work. so i think this is a place the american public expects our transportation system to be first rate, efficient, safe, as we've seen the potholes the size of canyons and as we've singh travel times increasing around the country, congestion increasing, that the public will the hand action. >> and the cbo was saying earlier this week that you need $8.1 billion. can you say where it is now? and how long before it runs dry? or do you not let it run dry? >> the numbers are actually bigger than 8.1 billion. over the next four years we estimated the highway trust fund will run short of 63 billion. >> is it $8.1 for the rest of the year? >> for the rest of the year.

and you know, i've said this and i will keep saying it. as a country, we've got to stop playing small ball with transportation. it is so critical. you go to china and i just saw a study a couple of weeks ago, that china has poured more concrete in the last three years than we have in 100. and that's emblematic of the race to create efficient, reliable save transportation systems around the world to attract commerce and to immobilii improve mobility. we've been first rate but other countries are beginning to run faster than we are and we can't take for granted what's been given to us. we've got to take a giant leap. >> last one about general he tors. as you know, yesterday, they announced a recall of another 8.5 million cars which brings it to 29 million cars and trucks.

the number they recalled this year as the waul stre"wall stre journal" pointed out that's more than 2005 through 2013. what does it tell you about how effective the transportation has been in protecting u.s. motorists and what changes, if any, has gm's woes caused you to make the department's safety activities? >> let's keep in mind the timeframe in which this issue should have come to light was exactly the same time as the set of issues that gave rise to concerns with toyota. and we learned an awful lot as a department from the toyota example. as part of an ig report that was done and some protocols that are now put in place to help us improve going forward. we're looking at the situation to see what we can learn from it

as well. the point i'll make is several. number one, the recall activity is emblematic of the enforcement work of our transportation department. the fact that you're seeing this recall activity, i think, is part and parcel of the fact that we've issued the stiffest fines, stiffest penalty for lack of timeliness that we've ever leveed against a company. i would take the position that what's happened here is actually a result of an awareness that we're going to take action if we see vie layings happening. let me say, the second and final point is -- we use data to evaluate the safety of automobiles and the reason why we have a timeliness requirement is because sometimes auto makeers are if a better position to know than we are of problems with the vehicle. that's why there's a penalty if

there's a five-day delay in providing that information. so you know, we'll always have to be working with industry on these issues to promoment safety, but as you point out -- oh promote safety but as you point out it's far more expensive for a company to go through a situation like this and have to fix it than it would be to catch it on the front end and that's what we always endeavor to do. >> speak up a little? >> do you think the rule that's likely to emerge from this possess is the result of the disruptions of -- and significantly higher prices? >> this is a question about a rulemaking that's currently

under review. and whether our rulemaking is going to created a higher expense and disruption in the movement of crude oil. we're seeing exponential growth in the transfer of crude oil in this country. the figures are like 1,000% over so many years. that's a huge increase in the amount of this particular crude oil moving around and it requires up to step up our legal of safety as a nation. our approach to rulemaking is something that i can't talk about in specifics but what i can tell you is that what i've heard from the industry is if strong desire to have certainty and clarity over which way the federal government is going to go here. and my impression is that once a

rule is actually finalized and it's put out there, industry will adjust and we'll be able to do this much more safely and striking the balance between safety and getting crude oil moving. >> jennifer? cnn? >> hey. >> so, come august, when the bill paying starts to happening with one, can you give me a ball park estimate of how many projects potentially could be halted or stops nationwide? and two, how and when will drivers and real people start seeing effects of this? >> so that's a great question. it's difficult to know exactly which projects will be affected. the reason why is the states are basically drawing on the funds available from the sfral government. the governor and the state department of transportation are

going to have to make judgments based on mr. limited available of dollars how they'll manage that. in some states projects may be slowed down. in some states, there may be projects stopped altogether. and still, other states they may have available cash to advance dollars basically, putting iou's in place for the federal government for future withdrawal. so i think the challenge for governors is going to be -- who are you going to tell that the project is not going to happen? or that it's going to happen in a longer schedule? the other complicating factor is that there's a limited window in many states around the country for actually doing construction work. so even if a state could slow down a project financially, and in some cases it's impractical because they can't get the project advanced in this season of construction. so i think it's going to be all

over the map but the reality is that no matter how you slice and dice it it's going to be bad. your second question was -- i'm sorry? >> people -- how will people feel the impact of this? >> you know, well, let me say it this way. i think people are feeling the impacts of the cumulative inability of the country to chart a path long term already. i think you have you know, whether it's potholes. whether it longer travel times or what have you. if pipeline of projects in this country that we need, both maintenance projects and new capacity, is so great and the dollars that we're spending to do that are not -- this pale in comparison to what we need. i think this is going to created a massive gulf in that pipeline

that's going to slow down activity. it's going to chill the design and engineering of projects that need to happen at the state and local levels and there's going to be projects of people expecting next year and the year after and the year after that won't happen or happen as quickly because of what's happened so i think people will see it in traffic. i think they'll see it in the condition of our roads and the lack of our ability to fix or bridges and put the capacity in place that this country needs. it's going to be a longer term crisis if we go over this cliff. but these projects take yourself in some cases to get done and if we take more years to get them done it's just going to get worse. >> bart? >> i have an aviation question. i guess norwegian air international has applied to serve the u.s. as a low-cost carrier. they complained that their application has been pending than the average european

application. what's taking so long? >> well, it's a subject that i can't comment on. >> okay. how about if i try airport fees? the -- there's a proposal to increase the cap on as the jer pa silt charges and there are disputes about whether that should go up. the airlines do not like the idea of raising those fees. what are the prospects of raising that cap this year as the president has proposed? >> you know, i think our aviation sector is one that's undergoing rapid change. it's been consolidation activity in the industry itself among commercial carriers. we are very bullish on the work that is involved in next gen and bringing our airspace from world war ii radar tol