i fully appreciate the importance of acting in concert with our european allies to ensure that sanctions have their intended effect, but at the same time, we should not hesitate to act unilaterally to support an independent ukraine and counter malign russian interference where delay threatens these goals, our strategic objectives or national interests. in the long run, a stable and secure region will serve our national interest and enhance opportunities for the u.s. and european businesses. in my view, unless putin is confronted with strong disincentives, he will continue to ensure that the ukraunian government will not be able to stabilize the situation and that he will position himself to fill the power vacuum when the government can't fill the needs of parts the ukrainian people. what steps and measures must putin take to resolving the conflict and at what point would you call his bluff and proceed with additional sanctions?

we're pleased to have distinguished panels before the committee. we look forward to gaining a deeper insight into what's happening and the geopolitical ramifications. let me turn to senator corker for his comments. >> thanks for calling the hearing. welcome our witnesses on both panels. i think we've got an outstanding group of people here today that i know will be very informative. i know this is almost becoming a cliche, but russia seems to be a master at escalating and de-escalating at the same time acts of duplicity which keep the western world off balance. so i look forward to hearing from our witnesses today as to what phase they think we're in relative to russia. i know we have some people here that are very committed public servants that i respect, but i have to say sometimes i'm embarrassed for you as you constantly talk about sanctions

and yet candidly, we never see them put in place. so i do hope you'll enlighten us today as to where we might be in that regard. media outlets have talked about another round of sanctions that you are preparing. i hope that you'll illuminate those and hope that as the chairman mentioned, what needs to occur from russia's standpoint to either cause those to be put in place or not put in place. but again, i really feel like the sanctions, threats have been very hollow. candidly have some of the same characteristics of the red line we've talked about in syria. and i certainly hope that changes soon because, i'm getting to my final point, i worry that where we're going with russia, relative to ukraine is what a national security adviser in eastern europe said to me recently and that was he fears that our policy is taking us to a place where we're going to have a better piece with

russia. where in essence we sweep under the rug the actions that have taken place and continue to take place, actions that have taken place in crimea and continue to take place in eastern, crane. and we basically get back to business as usual which, you know, looks like that's where we may be heading. which over time, could lead to some more major consequences in eastern europe and the world. i hope that's not the policy that this administration is embarking on. i thank the witnesses for being here today and look forward to your testimony. >> thank you, senator corker. our first panel today, we welcome back assistant secretary of state for european eurasian affairs victoria nuland, mr. glaser and mr. chollet. let me remind our panelists that your full statements will be

included in the record. i'd ask you to try to summarize them in five minutes so we can enter into a dialogue. in the course of just receiving your testimony, madam secretary, i just skimmed through it. and i hope that you'll be ready to respond, if not in your statement then when we get to q&a to this one line on the third page where it says we are ready to impose more costs, including targeted sector specific sanctions very soon if russia does not decide to change course and break its tide with separatists. seems like we've heard that very soon so maybe you can quantify that. with that, we recognize you. >> thank you, chairman menendez, ranking member corker and members of this committee and thank you for the opportunity to speak with you again today on this situation in ukraine. as you said, longer statement will be submitted for the record. in previous testimony before

this committee, i have outlined four pillars of u.s. policy support for ukraine as it tackles its urgent political economic and security challenges. diplomatic efforts to try to de-escalate the crisis. imposing further costs, including targeted sectoral sanctions on russia and separatists who are fomenting violence and unrest in ukraine and four, reassurance of nato friends and allies like georgia and moldova. i'll focus on the first two efforts. assistant secretary chollet will talk about support for ukraine and secretary glaser will talk about policy. since i last appeared before you, voters from across ukraine took to the polls on may 25th and elected president poroshenko. just weeks and days earlier, many doubted that the elections would even take place. it was the determination and courage of millions of

ukrainians to choose their own future that made free, fair elections possible along with the support of the international community. but as you know, ukraine's security remains under threat as fighting continues in eastern parts of the country. and crimea remains under occupation. against this backdrop, the united states is supporting ukraine in this hour of its need. we've step upped our security assistance which secretary chollet will discuss. the more lasting antidote over the medium term is for ukraine to succeed as a democratic free market state and to beat back the corruption, dependence and external pressure that thwarted aspirations for decades. since the onset of this crisis with this congress' support, we've provided ukraine with a billion dollar loan guarantee specifically targeted to soften the impact of economic reforms on the cannot's most vulnerable. we're also providing approximately $196 million in

other assistance to ukraine this year. of this, we've already authorized $75 million in support of economic reform, anti-corruption measures, nonpartisan electoral assistance, nonlethal security assistance and humanitarian aid for ukrainians internally displaced from crimea and eastern ukraine. we're now working with president poroshenko and the prime minister and their team to direct the remaining $59 million in four key areas. first, support for economic growth and reform. second, countering corruption. third, energy diversification and efficiency and four, constitutional reform and national unity. we'll be sending up a formal congressional notification shortly. let me give you highlights. in the area of economic reform and growth, we will complement world bank and imf programs by strengthening -- working to help strengthen the ukrainian banking system, making the business climate more competitive and

attractive to investors and helping ukraine diversify its export markets. our anti-corruption support will help support the government's new three-year program and bolster its ability to deter, detect and investigate and prosecute corruption wherever it festers and support civil society, the media, business and government as they work together to rid it out. in the energy area, we will help the government to restructure the sector and to deploy new technologies to increase energy yields and efficiency and scientist ukraine in developing national plans for sustainable use of natural resources. and finally, we will help the government implement the constitutional reform and broad decentralization of power at the local and regional level that has been central to president poroshenko's peace plan and to rebuilding national unity. as we support ukraine economically, as you know, we have also worked in lockstep with the ukrainian government and our european allies and

partners to try to de-escalate the tensions with russia and with russian-backed separatists through repeated rounds of diplomacy which we've talked about here. in successive settings we've supported the ukrainian government's offers to address those concerns that are legitimate of eastern ukrainians by political means. and to offer an off ramp to separatists and to their russian backers. these efforts have culminated most recently in president poroshenko's broad reaching peace plan which he first presented in his inaugural address which offers amnesty to separatists who lay down their arms, political dialogue, broad decentralization of power, in short, virtsually all of the things the separatists and their backers in moscow have said that are needed. president poroshenko also initiated on june 27th a ten-day unilateral cease-fire to try to provide space for dialogue with separatists. but as you also know, this

cease-fire was met with ten days of violence, bloodshed and separatist land grabs as russia simultaneously allowed tanks, heavy artillery and fighters to flow across the border. on june 27th, eu leaders again called on russia to end all support for separatists, to control the border, to use its influence with separatists to return the three border check points to ukrainian authorities they had taken, to release hostages and to launch substantial negotiations on the peace plan. these are the same criteria that the u.s. is continuing to use to measure russia's willingness to deescalate tension in ukraun. as president obama has said, we'll judge russia by its actions, not by its words. the u.s. and europe have imposed repeated rounds of sanctions to increase the cost russia pays for its choices. and as you quoted, mr. chairman, we are ready to impose more costs, including targeted sector

specific sanctions very soon if russia does not decisively change course and break its support for separatists. as russia's economy teeters on the brink of recession, in part from the cost of its intervention in ukraine and the impact of our sanctions, as noted in the latest imf report released a week ago, russians need to ask themselves what their government's policy has really delivered for them or for the people of ukraine. other than economic hardship, violence, kidnapping and death. today in slovansk and other towns recently retaken by ukrainian forces from the separatists, the ucrannian government is delivering humanitarian aid and restoring services. they are also working to restore ukraine -- the ukrainian people's faith in their government's ability to provide a better future. ukraine's success or failure in its struggle for peace, reconciliation and human dignity

will impact the future of the entire region. and with it the prospect for achieving america's 20-year objective of a europe whole, free and at peace. we, therefore, continue to have profound national interests in supporting the people of ukraine in their quest for a more stable democratic future. and in this effort, we deeply appreciate congress' continued bipartisan support. we look forward to your questions. >> secretary glaser? >> thank you, chairman menendez, ranking member corker and distinguished members of this committee for inviting me to speak to you again about the administration's response to russia's occupation and purported annexation of crimea and its continued provocative actions elsewhere in eastern ukraine. in my remarks today i will discuss our continuing efforts to impose additional costs on those who seek to destabilize eastern, crane and maintain the occupation of crimea. i'll describe the impact our actions have had on those targeted and on the already faltering russian economy.

i will also discuss support we and the international community have provided to ukraine for its economic recovery. president obama has issued three executive orders granting treasury authority to target those responsible for ongoing unrest in eastern ukraine. we've now issued five rounds of designations under those executive orders, responding to the actions of russia and russian-backed separatists in ukraine. designating 52 individuals and 19 entities, including four banks. we've thought to have the greatest impact an those who threat be the sovereignty and territorial integrity of ukraine. separatist leaders, members of putin's inner circle and the entities that support them and russian government officials. our actions have been complemented by designations announced by other countries including the eu, canada n australia. most recently, on june 20th, treasury designated seven individuals who attempted to establish illegal governments in eastern ukraine or assisted in arming separatist groups. the united states is working with the ukrainian authorities

to identify and disrupt financing to those and other separatists. as president obama has stated repeatedly, the united states remains prepared to impose additional sanctions should circumstances warrant. currently, we are developing a number of options in the event russia does not talk immediate steps toward de-escalation, including a broad range of sectors. of course, such preparation involves close consultation with our partners and -- to maximize the impact on the russian economy. in the past two weeks alone i've travelled to france, germany and the uk have advance preparations. as secretary lu has said if the moment comes we need to take additional steps, we will be prepared to do so. our measures and the future -- our measures and the threat of future measures have exacerbated pre-existing vulnerabilities of a russian economy weakened by years of mismanagement. imf growth projections have been downgraded twice this year and are currently close to zero. the uncertainty created has led

to challenges for russia's economic outlook, its most prominent companies and economic policymakers. president putin himself has said western sanctions imposed on russia have had real impact on domestic businesses, including limiting to access to funding for many russian companies. as recently as this week, russian deputy finance minister conceded western sanctions are having significant impact on the russian economy. he said, quote, the effect of sanctions has intensified because of the imposition of sanctions coincided with the fall in the growth rate of the russian economy. indeed, we have witnessed more than $50 billion in capital fight this year and the imf and russian central bank projected net outflows for the full year. increased risk premiums caused a spike in borrowing costs shutting many russian companies out of external debt markets. their government's actions show otherwise. the russian central bank has raised key interest rates twice

this year and spent approximately $30 billion in foreign exchange reserves since march to stabilize the ruble. despite these interventions, the russian ruble depreciated by 5% since the beginning of the year. president putin admitted last month the government of russia may need to intervene with budget funds to support russia's banks. as a result of sanctions, the russian government has -- as a result of sanctions, the russian government has openly discussed diverting government funds to support russian industry. recently president putin stated that russia needs to look into recapitalizing gas problem by the amount it would cause to build infrastructure in the far east. the russian government is focused on short-term crisis fighting and its actions are costing russia the investment needed to reverse long-term downward economic trends. in addition to our measures to isolate the russian economy, the united states government is working with the international community to support the, cranian government and returning the country to solid footing. we're working with the imf, world bank and others to see

that ukraine has the support it needs as i outline in greater detail in my written testimony. by combining our efforts to impose financial costs and those threatening peace and security in ukraine with measures to encourage ukrainian economic recovery, the united states government is working to contribute to the development af strong, unified and prosperous ukraine. we are prepared to take additional strong measures to impose severe kocosts on russia. chairman menendez, i'd be happy to answer any questions. >> thank you, secretary chollet. >> mr. chairman, ranking member corker, members of the committee, thank you for inviting me here today to discuss the angoiongoing crisis ukraine and how we are working to help ukraine address its security needs. the russian military remains very active in facilitating the movement of forces, equipment and finances across the border. additionally, russian irregular forces and russian-backed local separatists remain active inside

eastern ukraine and both are supported by russian financing. these actions are not consistent with russia's pledge to stabilize the situation and seek a negotiated outcome. it is in our interest to have a ukraine that is stable and secure. across the spectrum, ukrainian leaders made clear they want our help. and we are committed to assisting them which is a message president obama, vice president biden, secretaries kerry and hagel made clear in their meetings with their ukrainian counterparts. on security we're working to support ukraine along three lines of effort. 1st we'll continue to support ucran's urgent supply needs. president obama has approved $33 million in security assistance for ukraine since the beginning of the crisis. this is an order of magnitude beyond our assistance in previous years to ukraine and more than four times what we provided ukraine last year. this assistance has started to flow. we've delivered 2,000 sets of body armor, first aid kits,

tactical radios and 5,000 uniforms. soon night vision devices, thermal imageers, kevlar helmets and additional radios. we're actively pursuing additional sources of assistance which we will apply to ukraine's most pressing needs. second, beyond the immediate supply needs the military needs support through enhanced training and exercises. as president obama made clear after his meet with president poroshenko last month, we are discussing additional steps to help train and professionalize ukraine's military. to aid this effort, u.s./european command established a senior steering committee with ukrainian counterparts to identify areas where we cab approve our bilateral military cooperation, conduct assessments and identify requirements we can address through training and development. those meetings are under way in kiev this week. third, and perhaps most importantly, we'll work with ukraine on reforming and in some cases rebuilding its defense institutions. while i was in kiev last month meet with ukrainian national

defense ministers, the biggest obstacle to reform is the military mind-set largely oriented toward the old soviet way of doing things. he requested our assistance in reform and improving military education. to do so, u.s. defense advisers would help the ukrainians develop a feasible and sustainable reform program to get this started, a five-member initial scoping team visited kiev a few weeks ago and met with various ukrainian defense and security officials. additionally, embedded u.s. civilian advisers in the ukrainian defense ministry can help the government build a national security strategy that provides a cohesive vision for the ukrainian military, border guards, national guard and other security institutions. another area of needed reform will be in the defense industry. ukraine is endowed with an advanced defense industrial base that employs more than 40,000 people, which is in danger of collapse due to the current reliance on the russian market. given russia's aggressive ags in

crimea donetsk and elsewhere, the ukrainian government has stopped all military sales to russia. to reverse the downward trend in the ukrainian defense industry, u.s. advisers can help ukrainians develop long-term investment plans to enautomobile th enable them to shift away from reliance on russia. mr. chairman, members of this committee, the u.s. cannot achieve success in these three areas of security assistance by itself. we need others to join us. for example, nato allies who have experienced their own challenging defense reforms over the past decade such as poland and baltic states can provide abundant expertise on similar reforms in ukraine and we need other nato allies to step up and help ukraine's security forces to continue to reform and modernize and professionalize over the medium to long term. we will also continue to rely on the leadership from congress, especially in supporting the european reassurance initiate

chif president obama announced last month. if approved, this initiative of $1 billion will help the u.s. military to inn crease its defense presence in europe and cover enhanced train, readiness exercises and facility improvements in europe to reassure our allies. the initiative would also bolster material assistance to key partners such as ukraine. i look forward to working with this committee and the congress as a whole as we seek your approval on this important effort. thank you, and i look forward to your questions. >> thank you all. let me start with you, secretary nuland. a month ago president obama and the g-7 promised more economic sanctions and putin didn't stop inciting violence. in a pattern that seems increasingly familiar to all of us, putin made gestures that suggested the appearance of russian withdrawal while engaging in other actions, such as having tanks cross the border, overseeing the cut off

to gas supplies that are hostile by anyone's standard. and then reading from your own testimony, russia has made too many commitments at the diplomaticitable ovdiplomat ic table that have been rendered hollow by the weapons, cash and fighters that continue to flow across the border to fuel the fight in eastern ukraine. and that element was also echoed by secretary chollet. so i look at what the standards were, which was calling on russia to end all support for separatists to control the border, to help establish an effective osce monitoring regime, use its influence to return to three border check points to ukrainian authorities to release the hostages they hold, hold substantial negotiations on the implementation of poroshenko's peace plan and i see no advance in any of those standards. so what are we waiting for?

>> thank you, chairman. i certainly don't disagree with your assessment we've not seen progress on any of the areas i outlined or indeed that the g-7 outlined or that the eu council outlined. as i said, when president poroshenko came into office, he came in with his broad and deep peace plan. and was committed to testing it. his first aspiration was to test it in concert with separatists. he first wanted to try to negotiate a cease-fire that was bilateral when, after a couple of weeks of effort, that failed, he decided to initiate his cease-fire unilaterally. and that was a test that he asked the u.s. and europe to support to see whether separatists would meet him halfway, to see whether, in fact, russia would meet him halfway after the meeting at normandy brokered by chancellor merkel, president hollande

between president putin and president poroshenko. as you have noted, and as i noted in my testimony, that cease-fire came and went, and in the process, ukraine lost territory to separatists. it lost border control posts. and the weapons continued to flow. the europeans continue to try to bring the sides together to see if a cease-fire can be re-established. they've failed over the last week to do that because separatists have refused to meet in any location that is safe. we're continuing to consult with our european allies. the president, the secretary, all of us have been in constant day-by-day discussion with the europeans to assess, and i think our analysis in the same. we've not seen progress. so in that context, we are continuing to prepare the next round of sanctions. as we have said repeatedly, and as the president has said, these sanctions will be more effe

effective, they will be stronger if the u.s. and europe work together. and we are working on those in the -- >> i appreciate your answer. but it begs the question, what are we waiting for? i understand all that. i understand the president poroshenko tried to give this -- i think the ukrainian government has bent over backwards to try to get to a peaceful resolution to get the russians to ultimately go along. all the russians call for is ceasefires and then take advantage of it and do nothing in return. what is this about a ukrainian fighter pilot showing up in russian jails? how does russia justify having a ukrainian armed force member acquired by separatists ending up in a russian jail? how is that an example of trying to resolve the problem? >> thank you for citing that case which is clearly a violation of international law and human rights. this is a ukrainian service member who was taken hostage on

the battle field by separatists about a month ago. and he's now turned up in a russian prison, clearly creating -- making obvious that's link between russia and separatists. senator, we are continuing the conversation with the europeans about the right moment for sanctions, as they prepare for the last meeting of european heads before the summer break, which is on july 16th. >> so if per chance on july 16th the european union heads don't come to a conclusion and move forward on sanctions, which is only about, less than a week away or so, then will we have the summer lapse and putin will know that there's no consequences? and the united states will stay on the sidelines waiting for the europeans? is that something we could actually expect? >> chairman, as i said, our goal is to act in concert with europe

but the president has always made clear that, if necessary, he'll act on -- >> let me ask you this. we see the russians creating a secession of oil deliveries and gas deliveries on ukraine. and i would love to hear what that looks like going into the fall, if it continues, which will be not too far in the distance. we have american companies helping russia learn how to drill offshore in the arctic and exploit their shale resources. now i don't think we should necessarily create a russian shale revolution and, thereby strengthen russia's energy weapon which they've shown clearly they are willing to use and threaten others in europe to do. where is the administration on that issue? >> chairman, we have made clear to u.s. business the risks of

continuing to provide high tech investment in the current climate. we have also in the context of our sanctions work internally and with the europeans focused intensively on what we might do in the next round with regard to high technology investment. you are not wrong that russia depends on outside investment in order to take its energy exports to the next level and to -- >> russia is basically an extracting country. doesn't create too much more. and that's the biggest driver of its economy. it seems to me that if the russians have shown themselves willing to use energy as a weapon, which they have, ukraine is a perfect example of it. but even the european reticence is about energy questions. at the end of the day why would the united states in its national interest and national security interests allow entities to ultimately help the russians further develop their

energy resources so that then they would have more energy to use as a weapon? is that -- is anybody thinking about that? >> we are thinking about that, charm. this is in the category of a set of measures one could take that would only be effective in terms of the goal that you seek if they were done in concert with europe. because while the u.s. has this technology, so does some key european companies as well and we'd not want to be in a position of denying our companies and have european companies back fill. >> i doubt that there is anyone in the world as advanced as the united states on the specific technologies as it relates to shale exploration. and so, you know, it seems to me that we might with, you know, one hand behund our back, maybe two with a leader who has no limitations from what i can gather, other than when he is

faced with an equivalent counterveiling force that is military, which we're not talking about in this case, or economic. so i don't get it. and i don't know how much longer there are going to be those of us willing to wait before we act independently. senator corker? >> thank you, mr. chairman. and your questions really are -- some of the kind of questions i want to pursue. secretary nuland, i know that you do a good job of staying in touch with us, and i appreciate that. and yet, seriously, i sometimes wonder whether foreign services officers feel like resigning when you are put out there to continue to sort of sound tough but know that nothing is going to happen. i'm just curious if you could, to the degree you can, knowing that you're serving in the state

department and have responsibilities, what really is happening here with the sanctions? the fact is, you know, everything we said we were going to put sanctions in place for, relative to russian actions, has occurred. every single thing. they have never responded to the threats, the hollow threats that we've put out there. what is it really that -- what's really driving our sort of feckless sanctions policy right now? is it the internal debate in the administration between the economic folks who are so wrd about the elections this fall they don't want to do anything that may blow back on us economically and the security folks who are concerned about that very bitter piece that we're basically establishing right now with russia? is that what's driving it or the fact we know europe is never going to come to the table? what is keeping us from doing some of the things that the

chairman has mentioned that i've talked to you about on the phone? what's keeping us from going ahead and putting sanctions in place when we know that russia -- russian military equipment on the ground in eastern ukraine. you all know that. you've said it publicly. they are funding separatists. what else is it that we need to see happen and know happen before we actually put sanctions in place? >> well, first of all, chauirma, it is my great honor to serve in this position at this very vital moment. >> i know it has to be very frustrating to continue to wake up in the mornings and look in the mirror and practice talking tough but know that nothing is going to happen. i just, really, i really respect your service. i just love for you to share with me why nothing is happening. >> first, ranking member corker, i think it is important to go back and look at the last few

months and take some appropriate look at what might have happened had we not had the rounds of sanctions that we have had. >> i don't want to hear that. i read the papers and i talked to you. i want to know -- tell me what the rub is within the administration that is keeping it continuing to sort of lay out red lines and make threats but not act, continuing to undermine our credibility, continuing to move towards this bitter piece i alluded to. tell me what is keeping us from taking action today. military equipment on the ground. we know they are funding separatists. we know they are playing this duplicitous game of escalation, de-escalation. why aren't we acting? >> with regard to this next round, it was the desire, first of president poroshenko, to test his peace plan. he's now done that.

we are quite clear that we have not seen the results that we are seeking from russia. so we are now talking to the europeans about when it is appropriate to move together as i -- >> when is it appropriate? >> as i said, they are last heads meeting of the summer is next week. it's on july 16th. and they very much and we very much prefer to move together. so we are looking at the evidence, and we are building the package as we move forward. >> you remember, you told me the last meeting that was the last meeting we were going to have was at the end of june. and that's when we were going to take action. and i know that everybody in this panel has to be incredibly frustrated. again, i just wish you would explain to me what it is internally so we can understand the dynamic within the white house, within the administration that is keeping us from going ahead and putting sanctions in place when we know exactly what is happening. >> i think the primary desire at

the moment is to stay tightly coordinated with europe as we move forward because the sanctions will be stronger if we move together. but, chairman, if i might for a minute just remind that there was a moment where we had 40,000 russian troops ringing the border. we threatened sanctions and those troops moved back. >> that is absolutely untrue. they stayed on the border for weeks and week and weeks afterward and they kept saying they were moving away and our nato friends kept saying they are not moving away. that is absolutely not true what you just said. >> there was a moment we had 40,000 combat units ready to move. a lot of them moved back but you're not wrong that we have a significant number returned. there was a time when we thought we wouldn't have an election in ukraine and it was the solidarity between the u.s. and europe, including the threat of sanctions that helped preserve the space for those elections. so i -- we have, when we work

together with europe, been able to provide time and space for ukraine to recover. we need to, to the extent that we can, continue to work with europe because that will make this policy as effective as possible. >> i -- i'm embarrassed for us. i just wish the administration would quit saying publicly through you and others the things that are being said when we know that we're not going to act. we don't act. secretary glaser, you talk about the damage we've done to the economy. i just had someone look. maybe we read the chart wrong and i just looked at it briefly and i apologize for not having done it an hour or so ago but

the russian stock market is up 22% since march. and whenever i talk to the people at the white house they tell me how damaging this has been to the russian economy, and i keep citing stats that point to something very, very different. am i correct that the russian stock market is up 22% since march? am i reading the chart wrong? >> the russian stock market is up. i don't know if that's the exact right number, but i'm sure that's correct. >> so just out of curiosity, i know there are a few oligarchs that probably are having some unpleasant tribal experiences and maybe having some asset frozen, but how is this affecting putin's calculation when the economy is booming because, i guess people around the world realize that, you know, that we're -- that our threats are hollow, that we're never going to do anything. germany sees itself as a bridge between us and russia. the chairman and i were at a dinner the other night where

it's clearly pointed out. they're not going to take action. so how can you say that the sanctions we've put in place already have had any effect whatsoever on russian behavior? >> well, thaunk you for the question. i don't think short-term gains in the russian stock market counterthe real long-term damage we've done and are continuing to do to the rshian economy. that's been recognized by the russian government. it's recognized by foreign investors as demonstrated by the fact that russian businesses, russian banks are having a hard time raising capital in international capital markets. it's recognized by the russian people themselves as reflected by the $50 billion in capital funding we've seen already. estimated to be $100 billion by the end of the year. that's the russian government. the russian people. and international investors who all recognize that the russian economy has been severely damaged both by russian mismanagement and by our sanctions and threat of future

sanctions. so i do think that we can point to real impact that we've had. i think it's a fair question that what point does this start to impact russian strategic calculations? and you are absolutely correct. i do think at this point, as tori has said, we've had some impact. but it's clear that their strategy remains the same. and that's why we're working so hard internally and with our friends and partners in europe and in the g-7 to make sure that when the time comes we have a very strong package of measures. i'm quite confident that at that time, we will have a strong package of measures and it will do severe damage to the russian economy. >> thank you for the time. i just want to close by saying that, again, i respect each of your service to our country. i know that each of you have to be somewhat disappointed in the actions that have not been

taken. and secretary chollet, $33 million in assistance to the ukrainian military, i think that's nice. we still haven't done the things they'd really asked us to do. and i would just say to secretary glaser, the credibility, the damage you're talking about to the russian economy, we'll see. i think our country acting like such a paper tiger to the world on this and so many other fronts is doing incredible long-term damage to our nation. and i do hope at some point the administration will actually follow through on the things that it continues to tout publicly. thank you, mr. chairman. >> senator shaheen. >> thaunk you, mr. chairman. there were a number of reports over the weekend about successes of the ukrainian military and i wonder if you could talk a little bit about how substantive we think those successes were,

what we attribute those to and what response we're seeing out of russia. >> thanks, senator. you are absolutely right. there have been over the last four, five days some significant successes by the ukrainian military in the east. a major city slovansk was liberated and is in control by the ukrainians. there are other several key cities surrounded by the ukrainian military. they're watching that situation closely. there's probably not one single answer to why we've seen the tide turn at least for the moment, and i want to stress that we're not -- this isn't over yet, so although the trend line is good for now, we need to watch this very closely. it could be that the cease-fire period was -- allowed the ukrainian military to regroup, realign itself. president poroshenko has been very active in the planning and leadership of this. he was just yesterday dressed in military fatigues in the field

talking to his troops and generals. also, i think you can see that although there is a significant russian presence on the border that has been reduced, we are still seeing weapons appear on one side of the border and then mysteriously appear on the other side of the border that are clearly russian origin. but so i think it's a combination of a little bit of a lessening of support by russia but also an opportunity for the ukrainians to regroup after this very quickly cascading crisis over the previous months, the cease-fire, i think, helped. >> well, again, if i can ask you to answer on what do we think -- why do we think russia has pulled back somewhat? and what do we think their continued response will be if the ukrainian military continues to be successful? >> so on why russia has pulled back, i think the sanctions have helped. i think this was -- they did

have an effect and they certainly changed putin's calculation on how much support he would be willing to give and how deep he'd get into this. the ukrainians have also helped -- been able to improve their border security. they have said their border is sealed along the east. that has been a very porous border. when i was there a month ago and briefed by the head of the border security, i was -- it was described how in many cases it's not even demarricated, the border between ukraine and russia. that's helped. i think we have to be very mindful of what the russian response could be. and that's where we're watching this so closely. it's a very dangerous situation. the ukrainians need to be vigilant themselves in how they handle the situation in terms of civilian casualties in the surrounding of these cities. they have stressed to us that they are going to be very careful how they handle this situation. but i think we have to really expect the worst in terms of russian response. that's why we're watching it so closely. >> secretary nuland, can i ask

you to respond to that, too? do we -- assuming that the ukrainians continue to be successful in throwing the rebels out of the cities that they are holding, and actually forcing them, many of whom are russian, back into russia, what do we think putin's response will be? and are we concerned that their success means that russia will be more aggressive in coming into eastern ukraine? >> again, senator, i think it depends on how putin ultimately calculates his interests. he has other ways to create pressure and destabilization on ukraine, including the energy card and economic card. but our hope would be that as the ukrainians, as secretary chollet said, harden the border and make it more difficult to covertly support the separatists, that the choices

become more stark for russia, at least on the military side. another factor that i think is contributed to the ukrainian success is that in the towns that separatists have held, slovansk before it was liberated, human rights abuses, looting, abuse of the civilian population, have gravely turned those in the east who may have had affinity towards russia, who may have had affinity toward the separatists agenda at the beginning, firmly against them. and the ukrainian military has benefited from improved intelligence from the population that wants these guys gone. so it's a matter of the ukrainians continuing to deploy careful judicious tactics to make a success and restore good livelihood and in places that are free and make them an example in donetsk but also

continuing to raise the cost of military intervention by raising that border, by making it clear that in the international commu community, we will sanction against more military -- more transfers of heavy metal and those kinds of things. >> and are we seeing poroshenko being willing to address corruption within the country? and what kinds of concrete steps has he taken and has he committed to take? >> the government just last week published its three-year anti-corruption plan. and its six-month action plan. as you know, senators, they've already started to put a legislative base in place through part of the imf conditionality. there is more required as part of their association with the european union.

the key focuses of the six-month action plan are preventing conflict of interest for public servants, strengthening punishment for corruption, judicial reform, going after some of the most corrupt folks in the system, egovernance, creating transparency. and we are creating significant u.s. assistance to help in the anti-corruption effort as is the european union. but we'll have to judge them by how they implement. it's a very difficult pernicious problem throughout. >> is that an agenda that's helpful as they are taking back cities in eastern, crane to be able to show very specific actions, and are they willing to do that and do they have support from local officials in those communities? >> it was the number one plank on which president poroshenko ran for office.

anti-corruption, clean government, clean ukraine, europe and peace. those were his three platforms. so they've now got to approve it on all sides. in eastern ukraine, the number one concern is economic opportunity. and the fact that it's been essentially a rust belt, heavy industry economy. so as the, cra ukrainian govern takes back parts of ukraine, they are reaching out to us and the european union asking for support for microprojects and other things that will quickly jump-start the economy and over the long term, dwesification of that economy away from heavy industry and into things that will bring innovation and technology and opportunity. >> my time is up. thank you. i would suggest energy efficiency as one of the great projects they should take advantage of. >> senator slate? >> secretary nuland, i think

we're all buoyed by what we've heard in the last few weeks, particularly the military successes and how we attribute that. i think we're all that. i think we're all surprised that the ukrainian mill theitary is showing more strength than they seemed to have before. but also i think a lot of it is the fact that there were -- the elections were good, went well. the government had legitimacy. people have some hope in the east at least. with regard to further actions by the russians and their calculations, and our own sanctions, i couldn't great more that sanctions are more effective. i've always felt other areas of the world as well, when they're multilateral, not unilateral. and it's far more effective if we work hand in glove with europe. russia plays the game, maybe the

ukrainian military is successful on and off, taking another city or pushing back a little. do you -- just want your honest assessment of where europe is here. will they move forward, imposing tougher sanctions with the status quo in ukraine? >> it is my judgment based on hours and hours and hours of consultations with europeans and trips across some 20 of the 28 european union countries that if russia does not stop rearming, separatists does not stop the financial support, we will have european support for another round of sanctions. it may not be completely parallel to everything that we want to do, but this is a process moving forward. there is no one in europe who thinks what is happening in eastern ukraine is in the eu's interest or europe's interest, and everybody wants to get back

to a place where there are l civilized relationships between russia and ukraine. we have to make a cost if putin continues to go down that road. >> can you describe what efforts are being made to push back on russia's failure to pull back, i should say, further than they have. aside from sanctions, the state department undertaking. >> we've also working with europe put in place an intensetive of diplomatic and political and to some extent economic isolation. for example, as you know, the u.s. has seized all military to military cooperation with russia. we've seized all economic cooperation at the government. high technology, all that kind of thing. the europeans have largely matched that. you'll recall that we downgraded the g8 back to a g7 and had it

in brussels without the russians. none of us, with the exception of norm di and a couple of other things have been welcoming senior level russians in the capita capitals. we've been restricting the work we do together to those things clearly in our global shared interests. >> the ukrainiian military -- cn you describe that? how is that helping them prepare and grow and have the capabilities that they need. >> absolutely. it has helped them over 28 years that they've been a nato partner and operated with u.s. and nato forces in places like kosovo and iraq and afghanistan still today. and so there's no doubt that their partnership with nato has helped them in the course of the crisis, the fact they were partnered with nato has helped us diplomatic and militarily.

around the nato ukraine council. so there's a lot of support that they get, and there's practical help that they get. and nato, in addition to u.s. bilateral efforts, nato is also seeking ways to continue to help ukraine perform and further professi professionalize the military. >> the ukraine satisfied with our efforts to bolster the military there? >> in my talks a month ago with the then-ukrainian defense minister, we talked a lot about the support they were looking for. some is spoth that's been delivered since my visit. particularly on the body armor that they were very focused on. there's other items we pledged to pay for. things like night vision and border security is something they're very, very focused on. they have a very long lists of asks, as you've probably seen. and part of the point of the discussions that i've had, that secretary hagel has had, that

the european command team is having today in kiev to talk to them in detail about further needs that they have. >> thank you, mr. chairman. thank you very much, mr. chairman. this isn't the cold war. the world doesn't revolve around who is in the united states and russia anymore. there are paradigms that matter more than that. it has similarities in the sense that this is a long-term engagement, in which we are creating a contrast with russia for the country's that lie along the fault line between east and west, and what matters most really is the work that we do over years and decades to rebuild the economic and military capacity of those countries so they really do have a choice. and i joined with senator corker in in lacking envy for the

position that you're in but for different reasons. i think we want to be careful not to be too responsive in the short run. so as to pollute the efforts that we need to make in coordination with the europeans to win the long-term gain. the russians used to be the best at playing the long game. it's how they excelled napolean from russian territory. today they're about short-term return. we now have the advantage of seeing the long gain here. i want to, though, secretary nuland challenge your optimism about where europe is heading. i agree with senator flake that we have to do this to the extend possible, but they seem to be moving backward in some ways. the french are arming the russians. there's about half a dozen eu countries now that are

considering building the south stream pipeline, even though it contravenes the third energy package directives out of the eu. i just think that further complicates your work. it is more reason why i am not envious of the position you're in, because i think that you're working with a continent in which they fundamentally disagree as to what kind of threat russia presents them. we thel them they have to be serious and they turn around and have a different view. am i wrong to think in some ways europe is moving in the wrong direction, rather than holding a new position pending developments? >> senators, as you know because you've travel tods a very large number of the countries under my responsibility, there are a lot of different views and lots of

different situations within europe in terms of their historic structural dependency on russia. ft what we're trying to do in the conversation is make the point that you've made, that everything is connected to everything. that what we offer is a democratic-free market model. you made a good impact in bulgaria. i would also give a shoutout to the eu, which has furthered support until it can evaluate the larger dependency impact of that project. and we're working intensively with the european union on the larger issue and with the nation states of energy diversification, giving them other options, interconnectors, lng, other sources of energy to reduce their dependence major

line of effort of what we are involved with. so i think it's continuing to talk about our larger dependency of countries that use trade as a weapons and countries that use energy as a weapon and more of a vibrant market set of principles within europe. >> so my default is to do this in concert with the europeans. when we were in bulgaria, we did see the effect of unilateral u.s. sanctions. we sanctioned russian individual who was potentially going to be connected to the construction of the south stream pipeline into bulgaria. not exactly sure why bulgaria decided to halt construction, but there's a lot of speculation that part of it was that they were worried about the consequences of doing business with an individual that was sanctioned unilaterally by the united states. so maybe the question to you, mr. glaser, as you think about

the impact of unilateral situations, there's certainly evidence if the europeans are not willing to move with us, that there is some impact when the united states acts alone. >> absolutely, mr. senator. and as assistant secretary mrs. nuland said, president obama has repeatedly emphasized we will be prepared to act alone if we need to act alone. we play a pivotal roll in the international system. and that gives us power and leverage and as we have pointed out there many of the sanction programs across a wide range of issues. we repeatedly show we can have different consequences as i tried to outline in my testimony. all that being said, it's obviously the case that we will be more effective politically and as a practical matter as we

move forward with the european union. if we move forward with the g7. so i think the time spent trying to put all that together is time well spent. >> we have a lot of other lines in the fire. some matter more to international instances than ukraine does. we had a great hearing yesterday, secretary nuland on european energy security and thank you for sending your deputy to join us. last question for you. there was some dispute among the second panel as to who benefits and who is hurt by a continued dispute over gas supply from russia into ukraine through to europe. some think that that will ultimately hurt ukraine, because they will be seen as having to make a choice between their own citizens and europe. others thought maybe it would move europe more quickly to energy independence if they

continue to see the downside of reliance on transit through ukraine. what's your guess on who stands to lose the most from a prolonged dispute over gas transit through yew skran. >> i would say in the short run, both russia and ukraine lose because they don't have other options to deal with each other. ukraine makes valuable revenue by being a transit country. over time ukraine has to focus more effort. that's part of the the assistance we're providing on diversifying. including a transit hub. doesn't just have to be a transit hub for russia. it can also be a transit to other countries from europe. but obviously the best outcome will be would the european unions help? and the european commissioner is trying to, as you know, midwife negotiations between russia and ukraine. if they can come to an agreement

on a fair, european market price in stable conditions for the next year, year and a half. and demonstrate to the world that they are both reliable in this regard. and russia has not been willing, as yet, to guarantee a yearlong price to ukraine. >> senator rubio. >> thank you, mr. chairman. thank you all for being here. i know you have a difficult job. i want to focus on a bill, secretary nuland, that's been filed in the senate that senator corker has taken a lead on. the the russian prevention act of to 2014. i was still hopeful to get the administration's support. first i'm going to describe how i view the situation. i would love to have your input on it. it seems putin is playing a very difficult game. his ultimate goal is to get ukraine and kiev into an agreement over ukraine's foreign policy. so they have a two-pronged plan to do this.

on one hand they provide support from separatists. i've seen open source reporting of evidence that they're making significant transfers. heavy weapons in eastern ukraine such as tanks and armored craft vehicles and the there's signs they intend to do more of that. at the same time, they're keeping alive the threat of military intervention. they've already created the rhetorical ground work for that sort of intervention for humanitarian reasons they've made. there's now indications that they're beginning to redeploy military units athrong the eastern ukrainian border for the first time since the may withdraw forces. my sense is that given the recent offensive gains made by kiev, the threat of military intervention will rise again. the flip side is they play this very careful game of this public role they now have of calling for a cease fire. so they can appear like the mediators in kiev.

up until now they've played the game very well. for example, when putin asked that are the force of -- the use of force authorization be lifted, immediately thereafter, the administer decided not to impose additional sanctions. i think this is a part of a broader strategy they have of dividing into western unity on the idea of new sanctions. but i also think, and this is my guess here, but i would be curious to your input on it. that there's probably serious divisions in moscow about the way. on one hand you have hard liners of which putin may be one of them. and you probably have the separatists themselves feeling as much as moscow has done, it should be more. you probably have elitists in government that worry about the sanctions. one is asia is going to overtake europe as russia's leading export market. especially after the latest deal. they're going to really struggle

to meet their demands and commitments that they've made. the sanctions have made it harder to access foreign financing. one way they plan to meet their commitments to china is in the eastern siberia fields they intend to use. but this is harder to develop because they have high levels of deposits of helium. it's challenges tair already facing off the coast -- i think the -- sochlin islands where they're ten years off base of doing that. and china knows this. i bet you in the deal they've done with china, the bank of china has probably reserved the right to revoke lines of credit. can't access credit or can't access the technology because of broader western sanctions. so if we know this is the game they're playing and we know this is the balance they're going through in deciding what to do next, why wouldn't we put in place now through legislation

very specific consequences for what will happen if in fact, they move forward. instead of leaving it an open question of what may happen via the u.s. if russia moves if forward with military convention or continues to arm the separatists, why not put specifically in writing what that will be. including specifically as i outlined, the access to advance u.s. oil gas technologies so that as they're having this debate in moscow, they don't have to guess or have conjecture about what it will mean, but they will know for a fact what it mr. mean if they continue. it will also have an impact on china and other countries trying to cut deals or figure out how to access more russian energy. why not put that in place in writing now so it's clear what the consequences will be for them to continue on the course that they're on. >> senator, thank you for that. let me say we have been absolutely clear in our diplomatic situation and quite

specific with president putin about the kinds of additional sanctions is that we are considering. including in the high technology area. as i said before you came in, we are also working intensively with europe on these kinds of measures, because it is not just american companies that have this technology that russia needs. so do european companies. if we do it together with europe. it's very much on the deck et. it's very much with the european union, as the kind of thing that we are looking at moving forward. and so your answer has two aspects to it. it may undermine the western unity we seek in terms of other countries in the region that also have similar technologies they can provide? >> yeah, if -- on the one hand, if we deny u.s. companies the

opportunity on the invest, but european companies continue to invest, then we not only have an ineffective sanction -- >> i understand that's what happens that would be ineffective. but is the concern that we act alone? that we just put in in legislation alone without working with them? that it would somehow make them less likely the to join us? >> i think as an administration, we are open to working with you on a bipartisan piece of legislation in this regard, but we need to make sure that if we go in this direction that it will be effective. >> what do you mean, disadvantage u.s. companies? >> as i said -- >> that sounds like we're saying, well, we don't want to sell you technology, but if other people are selling you technology, then we might as well make some money on it too? >> no, my point is that if we

were to move forward with some kind of work together, we would want to make sure that whatever we had in the bill, we could implement together with europe and/or we would not put ourselves in the position of hurting the american economy without hurting the russian economy. >> i guess i would close by saying my view on it, and i hope i can convince others on this as well, if we specifically put out in legislation, of course, it would have to be bipartisan to pass in the senate. this is what would happen if we can continue to do this. it's no longer secretary kerry saying you should disarm separatists as well. i think that sort of american leadership will in fact bring us closer to the kind of unity we seek from our ally ls. i truly hope this is the direction that we'll head. >> thank you, mr. chairman. and thank you to the witnesses. one of the events in 2013 that

was a precipitator of the massive street protests was yanukovych's unwillingness to sign the agreements, both the political and economical agreements. we haven't yet gotten into this in march. the political association was signed and in june the commission association was signed between the new ukrainian government and the eu. which suggests eu cooperation and the effect of this election in continuing the path towards the eu. what is the significance of the signing of the agreements? both for ukraine, and what has the reaction been in russia to those signatures after they were balked out at the end of 2013? >> overwhelming support, needless to say. in ukraine it was a major tenant that poroshenko ran on that made him a popular and overwhelming

candidate. europe has offered ukraine through these agreements not only the poshl for travel for all of its citizen, but also virtually tariff free entry for the its products to the european market and the other way. so it's a real economic and political people to people boost. it will require a good amount of hard work to prepare implementation. the russians expressed some concern that because they have tariff free trade with ukraine now, that there would be unintended impacts on their economic situation. they pushed very hard for consultations and the european union and ukraine have now agreed to those. and i think tomorrow at the level of trade administered there will be trials on how to implement the agreement in a way

that has least disruption and potentially may benefit russia as well, so it may begin to see this in some terms. right about, shortly thereafter, nato met and announced no new nations would be coming into nato any time soon. and in particular, what has the reaction been in the ukraine to this? was that sort of understood among all parties,s that this is a time that we move towards integration, however put nato aside for now. is that generally understood by the ukrainians, or do they object to that decision? >> senator p both in this his election campaign and since senator poroshenko made clear for his administration the question of closer integration between ukraine and nato is not on the table. so hasn't been a demand of the

ukrainian side, and the alliance respects that, as you know, this has to be a matter of choice for all nations. >> i want to associate myself with the comments paid by the chairman and senator rubio. the virtues of energy and technology sanctions and i look forward to continuing those discussions. but it is important for us to weigh sanctions and particularly if we have to do sanctions unilaterally. if we consider doing them ahead of europe, that does have effects on the companies. i hypothesized what a potential economic effect of sanctions could be on u.s. credit card companies, especially the big two that govern about 90% of current credit card transactions in russia, and after just hypothesizing it, i got a call the next day from one of the american companies saying actually as a result of the sanctions that have been done

thus far, the russian government is now pursuing the creation of its own credit card infrastructure and putting laws in place that will really punish and hurt the business of the two major american base credit card companies. i was wondering, secretary glaisglais glaser, if you could talk about that a little bit. unilateral sanctions from our side do pose some risks if they're not done carefully. >> well, that's absolutely correct, mr. senator. i would say that some of the retaliatory or counter measures that russia takes to protect itself from sanctions really are just examples of russia imposing sanctions on itself. it's examples of russia pulling itself out of the international financial system, isolating itself from the international community, which is the exact opposite of what russia needs to be doing in order to address the fundsmental economic difficulties. that said, we are aware that the actions we take could have

impact on american business, on american companies and it's something we take quite seriously. i think american businesses and american companies unction what ast at stake with respect to russia. and they understand what we're trying to accomplish in terms of the future of ukraine and the future of europe, so they understand these are important matters. and i think as always we're prepared to move forward as we need to. but again, it should go without saying, but it bears repeating. it's always going to be more effective. politically and practically if we can move forward multilaterally. which is time well spent in order to achieve that. >> let me make sure, do i have my facts right on this? is i was hypothesizing last time. i understand the u.s. financial sanctions have led russia to do legal reforms to make it near

impossible for master cards. the effect has been for russia to move forward to make it harder for visa and mastercard in that country. am i right about that? >> one of the things russia has done as a result of the overall situation, certainly to include u.s. sanctions, u.s. unilateral sanctions that we've imposed has been to move forward on ideas that have been circulating within russia for quite some time. in terms of a variety of measures that would require credit card companies or other financial entities to locate within russia. and yes, that would create serious problems for companies like visa and mastercard. >> i was watching the interaction between senator corker and secretary nuland on this, and the senator was having a very appropriate question. why is it hard to do these things. i don't think the answer is that hard. i think unilateral sanctions

without the eu could have some affect on russia. it has has very significant effects on us. we at least have toe grapple with that cost/benefit equation moving forward. the best sanctions are when we're together with the eu. that doesn't mean we shouldn't do unilateral sanctions. the ones we've done already have not only affected the european economy, but they've already had a significant effect on some fairly important american businesses. and we just have to balance that out. thank you, mr. chair. >> thank you, mr. chairman. thank you for holding this very important hearing. two weeks ago, i along with some of my colleagues on this committee sent a letter to the president urging him to make energy security the centerpiece of our engagement with the new leadership in the ukraine. this is urgent, and i am concerned that there are two

threats that may be more powerful than russian troops when it comes to the challenges facing the new ukrainian government and they are both related to energy first. that's half of ukraine's supply. when winter arrives and natural gas demands spike, this could be become a crises. second, ukraine has begun eliminating energy subsidies. energy subsidies provided by the government are massive, amounting to 8% of the country's entire gdp. the $17 billion loan package approve ed by the imf to stabile the economy has requirements. as a result, retail, natural gas

rates in ukraine will rise by 56% this year. another 40% next year. that's the new source of instability. they do make energy markets opaque, efficient and susceptible to corruption. but they're also extremely popular. they keep energy affordable for many households. now we're talking about a brand new government, coming in and ushering in a doubling of energy prices. this is, of course, music to putin's ears. he wants nothing more than a ukrainian population distrustful of their government and looking for alternatives. ukraine needs an apollo project like effort to become more energy efficient and increase production within their borders.

and like the apollo project, failure is not an option in this area either. there is a narrow window of time to help this new government consolidate support and give ukrainians incredible bull work against russia. so ambassador, are you concerned about the reaction from middle and low-income people in ukraine when their energy bills skyrocket 56% right after the new government takes control. >> sthaung, thank you for your commitment to this issue. it's a priority of the government that we have going with the ukrainians. as you know, these price hikes in energy were part of the requirement for ukraine to get healthy, which is why when we came to the congress to ask you for the billion dollars loan guarantee, we earmark in

coordination with the government the vast majority of it to help insulate the most vulnerable in the ukrainian population from these adjustments. we've already made a huge do down payment there. when you get our reference in our testimony for the remaining assistance, you'll see a large chunk for the whole complex of issues from energy efficiency to restructuring the sector to diversification. you yourself said accurately that ukraine wastes a third of the energy out the windows, with but we're also working aggressively with european allies and partners on reverse flow. we've had success reversing the flow from bulgaria to hungary.

35 ukrainoian mayors sent a letter urgently requesting assistance for their buildings and district heating systems. inefficient soviet boilers. uninsulated steam pipes. with these mayors begging for help. are you finding an appetite within the new ukraine to move rapidly? and to have assistance with the the project. because ultimately you need some kind of goals. perhaps you could give us a sense of what you believe is a reasonable goal for the ukrai ukrainians to reach in terms of energy efficiency over the next two years, over the next five years, et cetera.

senator, they are making this a priority. as you know, they have to change the tax base. they have to change the incentive structure for ukrainian industry in particular to reform. interestingly in the conversations we've had in the government about the challenges of revitalizing ukraine's east and recovering, if they can bring peace and security back. one of their focuses is on energy efficiency and recapturing revenue that is lost in these rust belt industries. to be able to use funding from the western states enterprise fund for micro projects in the east. some of them targeted specifically at retooling old factories. so i ask you to support that.

>> that's an excellent request. but i would like to see enhanced increased attention to this area. obviously with a 56% increase in natural gas prices coming up this winter and with 35 mayors writing above their old soviet style buildings and boilers, there's a big appetite right now to make a quick change. a quick change. and i just think that we have to front burner this issue to help them to move very, very quickly. again, that is what will keep putin sleepless at night. if they do believe that they're responding to the mayors who realize the bills, which are going to be run up. i urge you to have a program and to set real goals. i think there has to be real goals set here. same thing is true for natural gas. if we're going to help them with new technologies, and we should, we should have a telescope time

frame we create for them. and we should set those goals, set benchmarks, and then lets meet them. that's the real threat to ukraine from russia. and once we do that country will feel better to cope with the threat that is almost primarily energy related. perhaps by the next time we have a hearing on the subject, mr. chairman, if we could have concrete goals being set for this winter and the messages being sent to the ukrainian people, that will counter the propaganda that will come in from putin as for the suffering he will say is unnecessarily being inflicted by his government. we need a message that's very concrete and not vague. i thank you, mr. chairman. >> thank you, senator. i appreciate your ideas. we'll take them and try to move them forward in the committee. let me say, i appreciate the thoughtful remarks of senator

murphy and senator mccain. as we close this panel, because i want to go to our distinguished panel before the 12:00 vote that's coming up next, you know, i understand that there are no simple or great choices in the matters. but time is on putin's side. and i say that because he certainly believes he can wait out the united states and the european union and maintain enough instability in the ukraine to damage its economy, to frustrate the public. and to undermine the political cohesion. in short, putin doesn't have to win today. he only needs to generate a frozen conflict in eastern ukraine that he can exploit when the world has moved on. and that has been a standard operating procedure for years, and russia has used it in

georgia, they used it in moldova where russian troops continue to occupy territory and back separatists, and by giving the world the appearance of responsibility and reasonability. by asking the parliament to withdraw the law offering the use of military force in the ukraine, putin successfully gave those who wished to avoid the g7 sectorial sanctions at the end of june ammunition to argue action at the time. so we've seen this movie before. and he has been successful in it. and i would just hope, as i said to chancellor merkel when we had the tount to have dinner with her, as i said to other who is have come to visit with us from our own government, if we've seen this movie before, we know how it plays out. we should be able not to have

the movie repeat itself at the same ending. and that's really my concern. i do not see us at this point in time where we're headed, changing the course of events in a way that this will point out, nobody talks about crimea in im. thank you all for your testimony. i look the forward to continuing to engage with you on this issue. call up our next panel. we have two very distinguished former national security advisers. steven hadley, the former national security adviser to president bush, and now a principal at rice, hadley and gates, and zbigniew brzezinski, at the center for strategic and national studies. the author of countless books, giving us the benefit of his insight to world history and world affairs. we're incredibly pleased to

welcoming all of these back of the committee. we look forward to your testimony. if i could have my fans in the press so that i can see our witnesses. thank you. we welcome you back to the committee. we remind you the the full statements will be included in the network. . as you can see, members will want to take advantage of your expertise and will want time for that, especially since there's a 12:00 vote. and so with that, dr. brzezinski, we'll start with you, then dr. hadley, and then we'll get to questions. just push the button there. yeah. since i know your time has been very limited, i don't think i'm

going to read to to you my statement, even though it's fairly short. i'm here to summarize the key three points i try to make in it. i acknowledge the fact that what putin tried to do three months ago in regards to crimea is not the same thing as he's trying to do to ukraine as a whole. nonetheless, at the time, it generated enormous enthusiasm in russia and in fact a session of the russian parliament at which he presided on march 18th was really like a jamboree and russia's world war, the unity of all russian speakers around the world and the role of russia as a global civilization. since then realism has gun to intrude more directly.

. that ukraine will fall quickly. that ukraine is not resigned the to being a member of the rename ld version of the soviet union, and that there is a rising world in ukraine to deal with the legacies of wasted 20 years of ukraine and independence and that major reforms are necessary, but also acts of will designed to show ukraine determination to be an independent nation. this is the context. and i think, putin has to realize by now that he has to think of alternative choices. i outlined them more fully in my fam statement, but the first is of course, some accommodation with the west. and i tried to outline what may be the principle features of such accommodation. one that doesn't meet the maximum objectives of those in the west, who would like to see ukraine, a member of the european union, but also nato. but also doesn't meet the

maximum objectives of russia, which would like to see ukraine subordinated to moscow. there's other specifics that would have to be considered. but that in a sense strikes me as a possible framework for an accommodation. putin has the option of continuing more directly to destabilize ukraine. he could attempt it on a larger scale. but if he does, i rather expect from what one knows of the attitude specifically of chancellor merkel and president of france on this subject that the acts more overt and drastic to destabilize ukraine would precipitate the kinds of sanctions that have been planned and which the united states would like to see implemented sooner rather than later. and that remains a point of convention in the alliance.

but they are there. and the initial sanctions have sent ominous signals to the russians not to take these issues lightly. the third alternative is a complete showdown militarily on the model perhaps of crimea, but overlooking the reality that all of ukraine is far more complicated than a relatively small peninsula. the object of a sudden and unexpected attack. i think it's quite clear if there were a larger russian intervention, the ukrainians would resist on a protracted basis. and especially the risk of urban warfare for taking them over, would occupy the larger cities. it's something no leader could contemplate lightly. it could become protracted, bloody, costly, and the result would be a disaster for ukraine and russia. both would be basket cases as a

result of anything of this sort. so the choices mr. putin has to make are not easy, but they're there. and it's becoming increasingly clear to him he should not confuse a brief triumph in crimea with ukraine and the longer range of russia in the global community. arizona it is now, russia's international position has deteriorated. it's certainly no longer a serious partner with the united states. there are more and more questions about russia's role in the world in europe and insofar saz china concerned, it's increasingly evident if there's any relationship that has a degree of depth to it, it's an iowa smetry call relationship. in which by far china is the senior partner.

that can insist on cases to it. and russia is a junior partner, squooe graphically, culturally and border wise, vulnerable to chinese pressure. so i think that's where i'll stop this statement. thank you, mr. chairman, for giving me this opportunity. >> thank you, dr. brzezinski. mr. hadley? >> thank you very much for the opportunity to be with you this morning. i've got a statement which i submitted that talks about what putin is up to. how far he's liable to press his current actions. what should be our objectives and strategies for dealing with it. i'll just leave that for the record. the bottom line i try to make is we have seen in the past that putin's objectivesest ka late as he succeeds, and he's not met

with resistance or counterpressure. therefore it's important to put together the relatives with the pressure. i thought what i night do with my time is try to answer some of the questions that you have raised in the first session and give them my answers for what it's worth. >> could you just take that microphone and put it closer to you. so why is the -- thank you, mr. chairman. why is the administration reluctant on sanctions? i think it is partly, one, they want to have unity with europeans because they do not want to let putin drive a wedge between the united states and europe, and i think that's right. second, i think it's ineffectiveness points. 75% of foreign direct investment many russia comes for the eu.

the united states is tenth in terms of foreign investors. if you look at trading relations, we're the 12th export partner, the fifth import partner of russia. so we don't have the economic clout. if you really want to be effective, you want to have the europeans along. that's where the investment and trading relations are. third, i think they're important because sometimes the sanctions are more effective in the anticipation than they are in the excuse. so i think that explains the reluctance. i think we've telegraphed the punch so often without delivering it, it raises the question of credibility. and therefore, mr. chairman, in pons to your point, if the europes don't act on july 16th, i think we will be forced to go

ahead. with an understanding that we will go first and she will the do her best so the europeans will follow. similarly, the legislation, senator rubio that you talked about that senator corker is sponsoring, a kind of road map of what will happen if putin persists in the activity, that can be a useful tool, but it will not only have bipartisan support in the congress, but is something we would support in the europeans so it becomes a road map for what we and the europeans will do together if russia and putin persist. that doesn't mean it has to be multilateral at the time it's adopted. what we would hope is many times we have to lead the europeans by taking a, but with an understanding hopefully at the end of the day we will end up in

the same page. i saw dr. brzezinski's article in the post, and i only have one small quibble with it, which answers one of the questions senator kaine answered. we ought to strength tennessee capacity to defend itself from other states at risk. the issue of nato enlargement is not on the table. the ukrainians have not asked. for them to join nato would be a long process years in the future. so it is not on the table. i would also not explicitly take it off the table and say the door is closed to ukraine, because i would like to not reward putin for his pressure. andty think we need to stick to the principle that countries should be free to select the alliances we choose. free of coercion, pressure, or the use of force. finally last point.

while there are evidences of policies we need to put in place. they're probably more important for sanctions in the long term. we want to do it in a way that does not close the the door on russia. does not say to ukraine if if you come west you have to sever your historical and economic ties with russia. i don't think that is smart. i think we need to leave the door open for russia that will change its policies and come back to the post cold war consensus and want to move west. and i think we should do that to keep face with those people in russia that hope for a more democratic and western oriented position for the country. thank you very much, mr. chairman. >> thank you both. it's tremendous talent to be able to do this in such a short period of time. i have read the testimony, and it's very instructive. let me, you know, my concern --

i hear the whole question of unilateral -- i always prefer multilateral sanctions when we get it. i prefer not to have sanctions if we don't need that in order to achieve our goals. this would ultimately lead us to a point where we can negotiate an agreement that is acceptable and obviously desirable as well. looking at russia's history here, with georgia, moldova and now the ukraine, at some point, and i think you may have alluded to this by saying we have to go first. at some point, if there is to be no significant arming of the ukrainian nil tear so the challenges of the russians trying to take them on are further kpexacerbated, they'll fight tooth and nail in the urban centers.

and that's a concept no russian leader could fathom doing. but this would enhance the possibility. also, if we are not to, at the end of the day, pursue in sanctions because the europeans aren't willing to, was it to stop putin from continuing on a course of destabilization, not stabilization, but destabilization, and what is is it that sends him a message that the next place that he picks is, he's free to do so because at the end of the, what is it? >> your microphone. it's on. it's on. >> okay, now it's on. let me briefly make one comment on your observation regarding the nagt of issue. i think there's a misunderstanding here.

the membership can be foresaken. the ukrainians are not asking for it. a large portion of the ukrainian people don't want to be in it. and i think in that context, it would be possible to negotiate it. tw the ukrainians not being promised or having to open for them in the future with nato. one can understand the russian concerns here. nato membership with just a large new area, deep into what traditionally has been the russian empire and create an altogether new political situation, which i cannot see the russians ever accepting, unless there is a significant accommodation of larger sense, and that's all i had in mind. on the question of the arms, my

view is we should be very open about it, and not secretive. and if the ukrainians need arms for their defense, we should be willing to provide them, although in a manner which doesn't provide for -- a capacity of the ukrainians to the offensive actions. if they are very deliberate, we can enhance their capacity, particularly to defend our cities. and make the attempt to occupy the cities tw the russian armed forces expensive. and that will have then political consequences. the public opinion internationally in russia, which i think would make any rational russian government.

>> mr. chairman, i think sanctions are an important element of a comprehensive policy, and at some point we may have to go out ahead to lead by example as a way to bring the europeans along. but i think we must focus equally on the other elements of a comprehensive strategy that over the long term are going to be more important in reduce iin putin's leverage and his ability on these actions. developing a joint transatlantic energy strategy that reduces the eu's dependence on russian oil and gas. resuming an open door to succession of the european union. the united states recommitting to the security of europe and word indeed by some of our employments in exercises.

revitalizing the nato alliance get the europeans to make more of a commitment and to refocus on the core mission of preserving and protecting the security of europe. helping the nations that are subject to russia pressure and finally helping ukraine succeed as a democratic, prosperous country able to provide security and prosperity for its people. those long-term commitments are what are really going to eliminate the opportunities for poout on the make mischeaf in the future. >> let me ask you one last question. from the end of the cold war, attempts have been made to draw russia into the community of nations as a stable, prosperous and democratic partner. but, given putin's high level of domestic support in recent polls, there's some allure among

the russians empire and power over other countries as being attractive. could we have done things differently that would have changed the course of events? or was putin's russia inevita e inevitable. and what kinds of policies would you advocate. you were referring to keeping the door open, mr. hadley, that the u.s. and international community follow to encourage russia to foresake imperial aspirations and to get back to an order that they have offend i by virtue of their invasion in crimea, and what they are doing in ukraine. or both of you, i would like to hear from both of you on this side. >> i think basically, i think we have to maintain the policy that we have adopted in the wake of the collapse of the soviet

union. which is to create opportunities for russia's close association with the west but without compromising our fundamental principles, and while entertaining the hope over time eternal change in russia will contribute to the gradual -- itself. there is indication that shows this is not only possible, but probable. there is developing a russian middle class, which increasingly thrives on essentially adopting as much as possible of the western lifestyle and of connectivity with the west. it sends its children to the west. it travels to the west. it sends its money to the west, and perhaps that is most persuasive of all. basically a pros is taking place, km is demonstrated by the scale of social opposition, the

demonstrations, the increasing number of commentators speaking up openly on this issue. and that's part of a process of. putin's current move, are, in my judgment, a ret gentlemenive aberration, kekd with his personality and his previous institutional connections and the instruments of compulsion. and perhaps a certain touch of mania on a personal level and he appeals on that basis to those elements of russian society which feel themselves vulnerable, which are very nationalistic. which are susceptible to chauvinistic appeals and we saw that manifesting itself in the wake of the seemingly very easy so-called quarterback quote/unquote, triumph in crimea but the crisis in ukraine is sending signals to the more

intelligent internationally minded part of the elite that russia is being drawn into something that could prove utterly debilitating to russia itself. this is why in the longer run, i anticipate that there will be some inclination to experiment, to check out, to investigate the possibility of some sort of an accommodation once it dawns, not only on the russian elite itself but increasing in putin himself that the policy of violence either selective or all-out, is in the long run, not the rootd road to success but the guarantee of russia as a basket case economically and politically. >> i agree very much with what he said. putin views himself as a strong leader who wants to return to russian greatness. but he has a definition of russian greatness, i would say, is 19th century, a new

neorussian empire. we have to show him that whatever his short-term tactical success is, involve a long term strategic loss. and the real future for russia as a secure and prosperous state is going to be not on 19th century principals but on 21st century principals. and those -- and we need to, therefore, deter him from his 19th century agenda and leave the door opened for those who want russia to have a 21st century role and path for a secure and prosperous state. >> thank you, senator corker. >> >> we always appreciate having distinguished national security advisers here and directr docto you say "accommodation" accommodation to russia, once the thinking of the elite

permeates the rest of society our putin, what kind of accommodation would that be? well, i would document specifically, your question about ukraine or more generally? >> specifically, relative to ukraine? >> well it seems to me that increasingly, it is a fact and no longer speculation. that ukraine as an independent state, is going to be moving towards the west. that is the predominant predisposition of the ukrainian people. i think the regime that has now emerged ukraine is generally democratic and it is determined to correct the errors of the last 20 years for, i'm sad to say, over the last 20 years, ukraine has been governed very badly and i think that it is evident of concern that the regime that's dominated were

self-serving and self-enriching and not dedicated to ukraine's well being. the use of force against ukraine by the russians was a stunning experience for the ukraineians. they have not been an thai russian historically. but over the last 20 years they have started to enjoy the fruits of independence. that's especially the case with the younger generation. and that younger generation asserted itself. that increasingly defines the ukraine today. so the russians will have to come to terms with that new reality. but otherwise, they'll embroil themselves in a prolonged adventure which as i've tried to stress, self-debilitating. so i'm on the whole, an optimist. i believe an accommodation is possible. because the costs of imposing a lateral solution, like the russians themselves, are simply disproportionately high to the benefits that could be achieved

thereby. there are learning this in the case of crimea. liberation, reunification, also a the slogans. what is the reality three months later? crisis have risen three times. prices have risen three times. tourists are not coming. they come every year on a scale of 6 million including great many from abroad. not showing up. they have difficulty even in getting there. investments in ukraine are very difficult to make the moment they involve any international deal. because the international community has not reorganized the organization of crimea which means there will be endless legal suits connected with any kind of development in the ukraine. tourism or exploration from energy or whatever. in brief, what seemed like great success three months ago is becoming increasingly a source of concern. this is where i sort of feel more confident about what is happening. i'm frustrated that we haven't adopted the sanctions that we

should. i would like to see the europeans act more decisively. yank we could to. by and large we're pointed in the right direction and it's more clear to more russians that putin is pointed in the wrong direction. >> if i could, i knn handily ha love and ru rue beyou -- and whi referred to in my opening comments was the national security adviser in eastern europe referring to the fact that if we allow russia to continue with this bad behavior, without the sanctions that most of you have alluded to, we, in essence, will accommodate a better piece, in other words, we return to business-as-usual. nothing is really done about what's happening in crimea and other places. just since both of you have to

think for the long haul and done that within differing administrations, what are the risks there from your perspective over the longer haul? and that is a bitter piece with russia where their actions have never been countered? they just kind of fester in eastern europe? >> one thing we're tripping over is the word "accommodation" which suggests giving in to russia. i'd rather talk in terms of outcomes. i think it's very important that russia be seen and not to be able to succeed with what it is doing. and as i say, that putin sees that and the russian people say that this 19th century nationalistic bing he has on them is not working for them. the outcome, i think we want, is the ukraine that if it decides to move west, join the eu and western institution is able to do so, and outcome where ukraine

is prosperous and secure. an outcome where the russian people within ukraine can enjoy the security and prosperity in which it is the russians see that it is the ukraine that is not against russia but is allowed to maintain its historical economic and lockeral ties with russia. and i think that if that happenings, the russian people at some point, will decide that, maybe, ukraine is a better model for their future than this kind of nationalistic neorussian empire that putin is talking about. that's the outcome. i think we ought to be striving for here. >> thank you both for being here. senator? >> thank you mr. chairman. thank you both for back here and your service to our country over an extended period of time both in government and outside. i appreciate your presence very

much. dr. kaczynski your presence here is very helpful and these days you're known as mika's dad. i wanted to ask you both, first in the previous panel, and i know it was kind of simplistic in the way i u described it and i don't think it's inconsistent with what you're saying but in my mind, the 5,000 foot view of what putin is trying to pull off here is to reach a point where he in in can exorbitant reaction. he wants to be juxtaposed against a image he's trying to show to create kiev as the agentlemen sor. within moscow now and the people

making this decision i would venture to guess and i don't know and i'm pretty certain that they, themselves are looking at this dynamic and there's two opposing schools of thought. one group is pushing hard for more aggressive action. another group is partly saying, these sanctions are going to hurt our pocketbook and our ability to do things. like this, we should not underestimate how important the asian market rts going to be for russia's future short term ability to export energy. and, in fact, the estimates are going to be become leading and to do that, they have to have the capacity and they have to explore and i pointed to the fact they're going to struggle in eastern siberia and some of these gas deposits have high amounts of helium and that requires extensive work and they need access not just to financing but western technology and that leads me to as we view this dynamic they're having this debate in moscow about worried about sanctions but we have this grouppu