[Senate Hearing 114-783]
[From the U.S. Government Publishing Office]
S. Hrg. 114-783
UKRAINIAN REFORMS TWO YEARS
AFTER THE MAIDAN REVOLUTION
AND THE RUSSIAN INVASION
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MARCH 15, 2016
__________
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COMMITTEE ON FOREIGN RELATIONS
BOB CORKER, Tennessee, Chairman
JAMES E. RISCH, Idaho BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida BARBARA BOXER, California
RON JOHNSON, Wisconsin ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona JEANNE SHAHEEN, New Hampshire
CORY GARDNER, Colorado CHRISTOPHER A. COONS, Delaware
DAVID PERDUE, Georgia TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia CHRISTOPHER MURPHY, Connecticut
RAND PAUL, Kentucky TIM KAINE, Virginia
JOHN BARRASSO, Wyoming EDWARD J. MARKEY, Massachusetts
Todd Womack, Staff Director
Jessica Lewis, Democratic Staff Director
John Dutton, Chief Clerk
(ii)
C O N T E N T S
----------
Page
Corker, Hon. Bob, U.S. Senator From Tennessee.................... 1
Cardin, Hon. Benjamin L., U.S. Senator From Maryland............. 2
Nuland, Hon. Victoria, Assistant Secretary, Bureau of European
and Eurasian Affairs, U.S. Department of State, Washington, DC. 4
Prepared statement........................................... 7
Response to a Question for the Record Submitted to Assistant
Secretary of State Victoria Nuland by Senator Edward Markey 52
Ian J. Brzezinski, Senior Fellow, Brent Scowcroft Center on
International Security, Atlantic Council, Washington, DC....... 29
Prepared statement........................................... 31
Herbst, Hon. John E., former U.S. Ambassador to Ukraine,
Director, Dinu Patriciu Eurasia Center, Atlantic Council,
Washington, DC................................................. 35
Prepared statement........................................... 37
(iii)
UKRAINIAN REFORMS TWO YEARS
AFTER THE MAIDAN REVOLUTION
AND THE RUSSIAN INVASION
----------
TUESDAY, MARCH 15, 2016
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:03 a.m. in
Room SD-419, Dirksen Senate Office Building, Hon. Bob Corker,
chairman of the committee, presiding.
Present: Senators Corker [presiding], Risch, Flake, Perdue,
Gardner, Isakson, Barrasso, Cardin, Menendez, Shaheen, and
Kaine.
OPENING STATEMENT OF HON. BOB CORKER,
U.S. SENATOR FROM TENNESSEE
The Chairman. The Foreign Relations Committee will come to
order.
I want to thank our distinguished witness for being here
and our panel that is coming after this. We appreciate all of
the input on Ukraine we can get.
And to our Secretary, you have been here on a number of
occasions, and I think you know that Congress has tried to
support Ukraine in their efforts. We have passed several pieces
of legislation that have become law. All of them have been
focused, at different levels with the lack of support for
Ukraine, some of which has emanated from the administration. We
know that you have been a strong voice. Sometimes your rhetoric
has been beyond what the administration is actually doing, and
we have had conversations about that. But we know that you are
a career servant, and we appreciate the role that you certainly
play in the region and throughout Europe.
But again, our focus in the past has been to make sure that
we are doing the things that we need to be doing to support
Ukraine.
Today's hearing is a little different because there are
some things that Ukraine needs to be doing itself. And let us
face it, 20 years ago, if Ukraine tried to focus on some of the
same issues the rest of Europe had focused on then, it would be
in a very different place. And so we have a country that needs
to put tremendous reforms into place. The Minsk II agreement
has been negotiated, and although there are a lot of concerns
about Russia's adherence to this agreement, parts of it require
the country of Ukraine to be taking steps on its own.
So we are at a point again where I think Congress has been
heavily pushing the administration to be more involved in
helping Ukraine. We are now seeking a balance where Russia is
still doing those things to create a frozen conflict, if you
will, in eastern Ukraine. At the same time, there are things
that Ukraine needs to do for its own good.
As an advertisement, I do want to say that we had IMF
reform as a part of one of our bills, and we were unable to
pass a bill that dealt with IMF reform. But through the omnibus
process, our office was able to work with the Treasury
Department to put into place IMF reforms that have caused us to
live up to our obligations. And let us face it, the IMF is
playing one of the biggest roles in causing Ukraine to be able
to move ahead with reforms by the carrot and stick approach.
But again, we appreciate you being here today.
I think there are concerns about Ukraine's own ability to
fight corruption, to deal with the economic and fiscal issues
inside the country. Certainly there have been some bold but
isolated steps that have been taken. At the same time, we have
had some resignations from people who feel like that those
steps are not enough or feel like they are being marginalized.
Simultaneously Russia continues to aid some of the
corruption and, does things on the eastern border that keeps
the Ukrainian Government sort of off step and not able to fully
focus on their own internal issues.
This hearing today, hopefully, will give us a much better
sense of what type of pressure the United States should be
placing, where we should be as it relates to Ukraine today.
We thank you very much for being here, and with that, I
will turn it over to our distinguished ranking member, my
friend, Ben Cardin.
STATEMENT OF HON. BENJAMIN L. CARDIN,
U.S. SENATOR FROM MARYLAND
Senator Cardin. Well, thank you very much, Mr. Chairman,
and thank you for the way that you got our committee engaged in
what is happening in Ukraine and Russia. It has truly been, I
think, the appropriate oversight by the United States Senate.
So I thank you very much, particularly for this hearing.
Secretary Nuland, I thank you for your incredible service
to our country. It is an interesting day for you to be here
with the Chief of Missions in town. I do not know if that is
good or bad that you can escape them for a little bit. But
anyway, I know that you are very busy, and we very much
appreciate you taking time to be with us today to go over the
critical next step as it relates to Ukraine and U.S. policy in
Ukraine.
Since the Maidan demonstrations in 2013, the United States
supported the people of Ukraine and reformers in the government
as they withstood Russia's illegal annexation of Crimea and
Russia's supported violence in the eastern Ukraine. Russia
continues to wage war in the east.
The popular sentiment in the West is that the Minsk
ceasefire is holding, but I see reports of Ukrainian soldiers
being killed and the overall level of violent attacks
increasing. Tanks in the region circulate without restraint,
while observers from the OSCE are severely limited in their
movements.
I understand that the Ukrainian friends must implement
political elements of Minsk, constitutional reforms and
elections. But we also must see commensurate progress from the
Russians on the security and political fronts. The United
States and the EU should maintain and even consider
strengthening robust sanctions on Russia until it fully
implements the Minsk agreements.
Despite the persistent threat from the east, events over
the course of the last few months have demonstrated that
Ukraine's central struggle lies within. Earlier this year,
Ukraine's reformist economy minister resigned due to the
government's inability to root out entrenched corruption. The
deputy prosecutor also resigned, citing similar concerns. There
has been progress in the reform movement. There is no question
about that, but it has been too slow.
This committee has held several hearings on Ukraine since
the start of the crisis that have sought to identify the
security, economic, and technical assistance the United States
can provide to help support Ukraine's internal reforms, as well
as fight against Russia. Over the course of this time, the
United States has committed $760 million of assistance to
Ukraine, including security assistance.
Ukraine's parliamentarians responded by passing critical
pieces of reform legislation and have dramatically improved
Ukraine's microeconomic situation. The government should be
commended for reducing public expenditures by 9 percent,
cutting the budget deficit to just 2 percent of GDP from 10
percent, undertaking reforms in the energy sector to eliminate
energy subsidies, and floating an exchange rate to eliminate
Ukraine's current account deficit. Earlier this year,
parliament passed broad-based tax reform, and the government
adopted a budget for 2016 that is in line with the IMF
requirements. So while Ukraine has made progress on the
economic reforms, it has been hampered by entrenched interests
that wish to maintain the corrupt system upon which they have
built massive fortunes.
I again call on Ukraine's leaders to show courage and
resolve in pursuing progress against corrupt individuals who
wield influence in the country. I believe the United States can
play a role as well as exposing and pursuing corrupt Ukrainian
officials who use U.S. financial institutions to direct their
ill-gotten gains.
An important step was taken when General Prosecutor Shokin
resigned earlier this year, but parliament must now accept his
resignation. And this must be followed by a commitment to take
concrete steps towards judicial reform, civil service reform,
law enforcement reform, and a transparent and open
privatization process of Ukraine's 1,800 state-owned
enterprises.
The Ukrainian people have suffered under multiple corrupt
regimes and took to the streets to demand good governance,
democracy, respect for human rights, and rule of law. The
current government, while having made substantial strides on
the path to reform, is struggling with corruption. Simply put,
the government is moving far too slow on the reform process. It
is imperative that the government reenergize the reform process
or it will lose the support of the international community, and
more importantly, it will lose the support of the Ukrainian
people.
Mr. Chairman, I look forward to hearing from the Secretary
and from our distinguished guests on the second panel.
The Chairman. Well, thank you for those comments, and I
think that if I could get to the essence of many of our
concerns - and we expressed these directly to leaders who come
here from Ukraine and those that we visit there - I think we
are concerned about these sanctions in Europe being
discontinued. We want them to be continued. Obviously, we
consider Russia to be the villain in this process, but we are
worried that without Ukraine taking steps forward, Europe will
view them as the reason the Minsk II agreement is not being put
in place. I believe that will fracture Europe's ability to
continue working together to keep those sanctions in place.
So, again, thank you for being here today. Our first panel
witness is the Honorable Victoria Nuland, commonly called
Toria, who serves as the Assistant Secretary for the Bureau of
European and Eurasian Affairs, U.S. Department of State. We
thank you for your distinguished service to our country and for
being here today. And with that, if you would summarize your
comments in about 5 minutes or so, without objection, your
written testimony will become part of the record. Thank you.
STATEMENT OF HON. VICTORIA NULAND, ASSISTANT SECRETARY, BUREAU
OF EUROPEAN AND EURASIAN AFFAIRS, U.S. DEPARTMENT OF STATE,
WASHINGTON, DC
Ms. Nuland. Well, thank you very much, Chairman Corker,
Ranking Member Cardin, members of this committee. Your
bipartisan support, your visits to Ukraine, the assistance you
have provided have been absolutely essential to the American
goal of supporting Ukraine's democratic European future.
Before I begin today, let us just take a moment, if we may,
to honor the sacrifice of Ukrainian pilot and Rada Deputy
Nadiya Savchenko, who was seized in Ukraine in 2014, dragged
across the Russian border, and unjustly held and tried in
Russia. Today, her hunger strike continues as the court in
Rostov again delays an announcement of its verdict. Nadiya's
struggle is a stark reminder of the pressures Ukraine continues
to face, even as it works to build a stronger, more resilient
country for its citizens.
I want to thank this committee for its continued focus on
Nadiya Savchenko and all Ukraine's hostages and for the passage
of Senate Resolution 52. We call on Russia to release her
immediately and return her to Ukraine and to her family before
it is too late.
Like Nadiya, all across Ukraine, citizens are standing up
and sacrificing for the universal values that bind us as a
transatlantic community: for sovereignty, for territorial
integrity, for human rights and dignity, for clean and
accountable government, and for justice for all.
The United States has stood by Ukraine as Russia has sought
to stymie its democratic rebirth at every turn. Today, however,
as you both mentioned, Ukraine's European future is put at risk
as much by enemies within as by external forces. The oligarchs
and kleptocrats who controlled Ukraine for decades know that
their business model will be broken if Maidan reformers succeed
in 2016. So they are fighting back with a vengeance, using all
the levers of the old system: their control of the media,
state-owned enterprises, Rada deputies, the courts and the
political machinery, while holding old loyalties and threats
over the heads of decision-makers to block change.
Against this backdrop, Ukraine's own leaders have been
locked for months in a cycle of political infighting and
indecision about how to restore unity, trust, and effectiveness
in the reform coalition, and how to reboot the government and
its program. Every week that Ukraine drifts internally, that
reform is stalled, IMF and international support goes
undisbursed, and those inside and outside the country who
preferred the old Ukraine grow more confident.
The ability of the United States and the international
community to continue to support Ukraine depends upon the
commitment of its leaders to put their country and their people
first. So all those who call themselves reformers in Ukraine
have to work harder now to rebuild consensus behind a
leadership team and an IMF- and EU-compliant program of
aggressive measures to clean up corruption, restore justice,
and liberalize the economy. We continue to believe that 2016
can and should be the year that Ukraine breaks free from the
unholy alliance of dirty money and dirty politics, which has
ripped off Ukrainians for far too long. But without that,
Ukraine risks sliding backwards once again into corruption,
into lawlessness, into vassal statehood.
But here is the good news. Since I last testified before
this committee about 5 months ago, Ukraine has stabilized its
currency. It is rebuilding its reserves. It passed its first
winter without relying on Gazprom gas. It approved a 2016
budget that is in line with IMF requirements. It passed civil
service reform. It broke its own record for wheat exports. It
stood up an anti-corruption bureau and a special prosecutor.
And it began to decentralize power and budget authority to
local communities.
The very week in February that the current government
survived a non-confidence vote, Rada deputies also approved
five critical pieces of legislation to stay on track with IMF
conditions and EU requirements for their bid for visa-free
travel, and they passed another piece of legislation just
today.
U.S. assistance has been critical to all of these efforts.
As you said, Mr. Ranking Member, we have committed over $760
million in assistance so far, plus two $1 billion loan
guarantees. And U.S. advisors serve in almost a dozen Ukrainian
ministries and localities helping to deliver services,
eliminate fraud and abuse, improve tax collection, and
modernize Ukrainian institutions.
With U.S. help, newly vetted and trained police officers
are patrolling the streets of 18 Ukrainian cities.
In courtrooms across Ukraine, free legal aid attorneys,
funded by the U.S., have won two-thirds of all the acquittals
in the country.
Treasury and State Department advisors have helped Ukraine
shutter over 60 failed banks and protected the assets of
depositors.
And since there can be no reform in Ukraine without
security, over $266 million of our support has been in the
security sector, training 1,200 soldiers and 750 Ukrainian
national guard personnel, and supplying lifesaving gear. In
fiscal year 2016, we are continuing that training and equipment
of more of Ukraine's border guards, military, and coast guard.
But it is urgent that Ukrainian President Poroshenko, Prime
Minister Yatsenyuk, and the leaders of the Rada come together
now behind a government and a reform program that deliver what
the Maidan demanded: clean leadership, justice, an end to zero-
sum politics and backroom deals, and public institutions that
serve Ukraine's citizens rather than impoverishing them or
exploiting them.
In 2016, our U.S. assistance program, with your generous
support, is designed to support all of these priorities.
Specifically, we will support Ukraine as it takes further steps
to clean up its energy sector; to appoint and confirm a clean
and new prosecutor general who is committed to rebuilding the
integrity of the PGO and indicting and prosecuting the corrupt;
as it takes steps to improve the business climate and move
ahead with privatization of state-owned enterprises and
strengthen the banking system and strengthen judicial
independence; and to improve services and eliminate graft in
areas that affect every Ukrainian, including health care,
education, and transportation; and also to modernize the
ministry of defense.
Of course, Ukraine's greatest challenge remains the ongoing
occupation of its territory in Crimea and Donbas and its
efforts to restore sovereignty in the east through the full
implementation of the Minsk agreements. These agreements we
believe remain the best hope for peace.
The last time I came before this committee, Ukraine was in
a better place. The September 1st ceasefire had largely
silenced the guns, and some Ukrainians were even beginning to
go back to Donbas. But as you both have said, today things are
heating up again. We have seen a spike in ceasefire violations
taking the lives of 68 Ukrainian military personnel and
injuring 317. In February alone, the OSCE monitors reported
15,000 violations, the vast majority of which originated from
the separatist-controlled side of the line of contact. And
despite President Putin's commitment to the other Normandy
leaders, Russia and separatist forces continue to deny OSCE
monitors access to large swaths of the Donbas.
At the early March meeting of Normandy foreign ministers,
Ukraine supported concrete steps to pull back forces from the
line of contact, to increase OSCE monitors and equipment in key
hotspots, and to establish more OSCE bases deeper in the Donbas
and on the border. Taking these steps now and releasing
hostages would greatly improve the environment for compromising
Kyiv on election modalities and political rights for Donbas.
In the meantime, though, neither Moscow nor the self-
appointed Donbas authorities should expect the Ukrainian Rada
take up key outstanding political provisions of Minsk,
including election modalities and constitutional amendments,
before the Kremlin and its proxies meet their basic security
obligations under Minsk.
Here again, with will and effort on all sides, 2016 could
be a turning point year for Ukraine. If security can improve in
the coming weeks, if more hostages can be returned, if the
parties can finalize the negotiations on the political issues
of Minsk, we could see legitimate leaders elected in free, fair
elections in Donbas by the fall and the withdrawal of Russian
forces and equipment and the return of Ukraine's sovereignty
over its border before the end of the year. We will keep
working with Ukraine to do its part to implement Minsk and
working with our European partners to ensure that Russia stays
under sanctions until it does its part--all of it. And of
course, Crimea sanctions must remain in place so long as the
Kremlin imposes its will on that piece of Ukrainian land.
Mr. Chairman, Mr. Ranking Member, members of this
committee, we always knew that Ukraine's road to peace and
sovereignty, to clean and accountable government, and to Europe
would not be easy. Today the stakes are as high as ever. With
strong leadership in Kyiv, 2016 can and should be a turning
point year for Ukraine's sovereignty and its European future.
If and as Ukraine's leaders recommit to drive the country
forward, the United States must be there to support them. At
the same time, we must be no less rigorous than the Ukrainian
people themselves in demanding that Kyiv's leaders take their
own responsibility now and deliver a truly clean, strong, just
Ukraine while they still have the chance.
I thank this committee for its support for Ukraine and for
a Europe whole, free, and at peace.
I look forward to answering your questions.
[Ms. Nuland's prepared statement follows:]
Prepared Statement of Hon. Victoria Nuland
Thank you Chairman Corker, Ranking Member Cardin, members of this
committee for the opportunity to join you today and for the personal
investment so many of you have made in Ukraine's democratic, European
future. Ukraine still has a long way to go to meet the aspirations of
its people, but your bipartisan support, your visits to Ukraine, and
the assistance you and your fellow members have provided have been
essential to our policy.
Before I begin, let us take a moment to honor the sacrifice of
Ukrainian pilot and Rada Deputy Nadiya Savchenko, who was seized in
Ukraine in 2014, dragged across the Russian border and unjustly held
and tried in Russia. Today, her hunger strike continues as the court in
Rostov again delays announcement of its verdict. Nadiya's struggle is a
stark reminder of the severe pressures and violence Ukraine continues
to face even as it works to build a stronger, more resilient country
for its citizens. I thank this committee for its continued focus on
Nadiya Savchenko and all Ukraine's hostages, and for the passage of
Senate Resolution 52. We call on Russia to release her immediately, and
return her to Ukraine and to her family before it's too late.
Like Nadiya, all across Ukraine, citizens are standing up and
sacrificing for the universal values that bind us as a transatlantic
community: for sovereignty, territorial integrity, human rights,
dignity, clean and accountable government, and justice for all. The
United States has a profound national interest in Ukraine's success,
and with it, a more democratic, prosperous, stable Europe.
We have stood by Ukraine for more than two years as Russia has
sought to stymie its democratic rebirth at every turn--with political
pressure, economic pressure, and with unprecedented military aggression
and violation of international law. Any set of leaders would be
challenged to lead their country in this environment. Today, however,
Ukraine's European future is put at risk as much by enemies within as
by external forces. The oligarchs and kleptocrats who controlled
Ukraine for decades know their business model will be broken if Maidan
reformers succeed in 2016. They are fighting back with a vengeance,
using all the levers of the old system: their control of the media,
state owned enterprises, Rada deputies, the courts and the political
machinery, while holding old loyalties and threats over the heads of
decision-makers to block change.
Against this backdrop, Ukraine's leaders have been locked for
months in a cycle of political infighting and indecision about how to
restore unity, trust and effectiveness in the reform coalition, and
reboot the government and its program. Every week that Ukraine drifts,
reform is stalled, IMF and international support goes undisbursed, and
those inside and outside the country who preferred the old Ukraine grow
more confident. More than 3 months ago, Vice President Biden spoke
before Ukraine's Rada, its President and its Prime Minister and called
on all of Ukraine's leaders to set aside their parochial interests,
reminding them: ``Each of you has an obligation to seize the
opportunity of the sacrifices made in the Maidan, the sacrifices of the
Heavenly Hundred. Each of you has an obligation to answer the call of
history and finally build a united, democratic Ukrainian nation that
can stand the test of time.''
The ability of the United States and the international community to
continue to support Ukraine depends upon the commitment of its leaders
to put their people and country first. All those who call themselves
reformers must rebuild consensus behind a leadership team and an IMF-
and EU-compliant program of aggressive measures to clean up corruption,
restore justice, and liberalize the economy. With more unity and
leadership, 2016 can and should be the year Ukraine breaks free from
the unholy alliance of dirty money and dirty politics which has ripped
off the Ukrainian people for too long. Without it, Ukraine will slide
backwards once again into corruption, lawlessness, and vassal
statehood.
It is precisely because Ukrainians have worked so hard, and come so
far already, that their leaders must stay united and stay the course
now. And it is because the reforms already taken are cutting into ill-
gotten fortunes and cutting off avenues for corruption that the forces
of revanche are fighting back. Here's the good news: since I last
testified before this committee five months ago, Ukraine has largely
stabilized its currency and is rebuilding its reserves; seen some
modest growth in the economy; passed its first winter without relying
on gas from Gazprom; approved a 2016 budget in line with IMF
requirements; passed civil service reform to create competition and
transparency; recruited a new corporate board for Naftogaz; broke its
own record for greatest wheat exports; stood up an independent Anti-
Corruption Bureau and Special Prosecutor; and, begun to decentralize
power and budget authority to local communities to improve services and
policing for citizens.
The very week in February that the current government survived a
no-confidence vote, Rada deputies also approved five critical pieces of
reform legislation to stay on track with IMF conditions and advance
Ukraine's bid for visa-free travel with the EU, including laws on:
Privatization of state owned enterprises;
Improvements in corporate governance of state owned enterprises;
Asset seizure and recovery;
The appointment process for anti-corruption prosecutors; and,
Mandatory asset disclosure for public officials, which the
President just sent back to the Rada with several fixes.
U.S. assistance has been critical to these efforts. Since the start
of the crisis, the United States has committed over $760 million in
assistance to Ukraine, in addition to two $1 billion loan guarantees.
U.S. advisors serve in almost a dozen Ukrainian ministries and
localities and help deliver services, eliminate fraud and abuse,
improve tax collection, and modernize Ukraine's institutions.
With U.S. help, newly-vetted and trained police officers are
patrolling the streets of 18 cities;
In court rooms across Ukraine, Free Legal Aid attorneys, funded by
the U.S., have regained their credibility and won 2/3 of all
acquittals in Ukraine in 2015.
Treasury and State Department advisors embedded in Ukraine's
National Bank and related institutions helped Ukraine shutter
over 60 failed banks out of 180 and protect assets.
The U.S. and our EU partners are supporting privatization, freeing
up about $5 billion in Ukraine's coffers and pushing the
largest state-owned enterprise, Naftogaz, to form an
independent supervisory board that operates without
interference.
And, since there can be no reform in Ukraine without security, over
$266 million of our support has been in the security sector,
training nearly 1200 soldiers and 750 Ukrainian National Guard
personnel and providing: 130 HMMWVs, 150 thermal goggles and
585 night vision devices, over 300 secure radios, 5 Explosive
Ordnance Disposal robots, 20 counter-mortar radars, and over
100 up-armored civilian SUVs. In FY16, we plan to train and
equip more of Ukraine's border guards, military, and coast
guard to help Ukraine secure its border, defend against and
deter future attacks, and respond to illicit smuggling.
But first, Ukraine, President Poroshenko, Prime Minister Yatsenyuk,
and the Rada must come together behind a government and reform program
that delivers what the Maidan demanded: clean leadership; justice; an
end to zero-sum politics and backroom deals; and public institutions
that serve Ukraine's citizens rather than impoverishing or exploiting
them.
What Ukraine Must Do
The 2016 U.S. assistance program is designed to support all these
priorities. Specifically, we will support Ukraine as it takes steps to:
1. Clean up its energy sector by passing legislation to establish an
Independent Energy Regulator, reduce unsustainable energy
subsidies, and accelerate de-monopolization of the gas market,
efficiency of procurement and revenue management, and the
unbundling of services;
2. Appoint and confirm a new, clean Prosecutor General, who is
committed to rebuilding the integrity of the PGO, and
investigate, indict and successfully prosecute corruption and
asset recovery cases--including locking up dirty personnel in
the PGO itself;
3. Improve the business climate by streamlining the bureaucracy,
moving ahead with the privatization of the largest state-owned
enterprises in a manner that meets international standards, and
further recapitalizing and strengthening the banking system;
4. Strengthen judicial independence, including the certification,
dismissal, and recruitment of judges;
5. Improve services and eliminate graft in key service areas that
affect every Ukrainian: healthcare, education, and
transportation; and
6. Modernize the Ministry of Defense, squeeze out corruption in
logistics and supply chains, and move toward western standards
of command and control and parliamentary oversight.
Minsk Agreements
Of course, Ukraine's greatest challenge remains the ongoing
occupation of its territory in Crimea and Donbas, and its efforts to
restore sovereignty in the East through full implementation of the
September 2014 and February 2015 Minsk agreements. These agreements
remain the best hope for peace, and we continue to work in close
coordination with the ``Normandy Powers''--Ukraine, Russia, Germany,
and France--to see them fully implemented.
The last time I came before this committee, Ukraine was in a better
place. The September 1 ceasefire had largely silenced the guns, and
some Ukrainians were even returning home to Donbas. But today, things
are heating up again. In recent weeks, we have seen a spike in
ceasefire violations, taking the lives of 68 Ukrainian military
personnel and injuring 317. In February alone, OSCE monitors reported
15,000 violations, the vast majority of which originated on the
separatist-controlled side of the line of contact. And, there were more
recorded ceasefire violations in the first week of March than at any
time since August 2015. And despite President Putin's commitments to
the Normandy powers last October, combined Russian-separatist forces
continue to deny OSCE monitors access to large portions of Donbas and
to harass and intimidate those who do have access.
At the last meeting of Normandy Foreign Ministers in early March,
Ukraine supported concrete steps to pull back forces on the line of
contact, increase OSCE monitors and equipment in key hotspots, and
establish more OSCE bases deeper into Donbas and on the border. Taking
these steps now and releasing hostages will greatly improve the
environment for compromise in Kyiv on election modalities and political
rights for Donbas. In the meantime, neither Moscow nor the self-
appointed Donbas authorities should expect the Ukrainian Rada to take
up key outstanding political provisions of the Minsk agreement,
including election modalities and constitutional amendments, before the
Kremlin and its proxies meet their basic security obligations under
Minsk. Although the U.S. is not a party to the Normandy process, we
maintain a very active pace of diplomatic engagement at all levels with
Kyiv, Moscow, Paris and Berlin to facilitate implementation of both the
security and political aspects of Minsk, and to help the parties
brainstorm solutions.
Here again, with will and effort on all sides, 2016 can be a
turning point for Ukraine. If security can improve in coming weeks, if
hostages are returned, if the parties can finalize negotiations on
election modalities and other political issues, we could see legitimate
leaders elected in Donbas by fall, the withdrawal of Russian forces and
equipment, and the return of Ukraine's sovereignty over its border
before the end of the year. We will keep working with Ukraine to do its
part to implement Minsk, and working with our European partners to
ensure Russia stays under sanctions until it does its part--all of it.
And of course, Crimea sanctions must remain in place so long as the
Kremlin imposes its will on that piece of Ukrainian land.
Mr. Chairman, Mr. Ranking Member, members of this committee, we
knew Ukraine's road to peace, sovereignty, clean, accountable
government and Europe would be difficult and rocky.
Today, the stakes are as high as ever. With strong, unified
leadership in Kyiv, 2016 can and should be a turning-point year for
Ukraine's sovereignty and European future. If and as Ukraine's leaders
recommit to drive the country forward, the United States must be there
to support them, in our own national interest. At the same time, we
must be no less rigorous than the Ukrainian people themselves in
demanding Kyiv's leaders take their responsibility now to deliver a
truly clean, strong, just Ukraine while they still have the chance. I
thank this committee for its bipartisan support and commitment to the
sovereignty and territorial integrity of Ukraine and to a Europe whole,
free and at peace. I look forward to your questions.
The Chairman. Thank you very much for that testimony and
for your efforts on our behalf.
I am going to focus on one issue and then save the rest of
my time for interjections along the way.
On the issue of the sanctions we, along with the European
Union, have put in place against Russia, there is no question--
is there--that Putin is sewing some degree of discord there and
that keeping those in place beyond June is something that is
very important to see this through. Is that correct?
Ms. Nuland. Absolutely.
The Chairman. My observation is that the announcements
yesterday in Syria by Putin, relative to their withdrawal is
intended to somehow influence that. Is that correct?
Ms. Nuland. We continue to look at the Syria theater and
the Ukraine theater as two separate places. We will judge the
Ukraine action based on what is done in Ukraine. And as you
know, the sanctions are linked to Ukraine. So from our
perspective, what is done in Syria should not impact choices
with regard to Ukraine.
The Chairman. Do you agree that Putin is trying to be
perceived as someone who is working well with the international
community and that some of his actions are intended to, over
time, break the resolve of the European Union in regard to the
sanctions?
Ms. Nuland. I think there is no question that he is
lobbying hard inside Europe to come out from under sanctions.
The Chairman. So if you could give us guidance as we meet
and talk with Ukrainian officials because I think everyone on
this committee certainly understands what happened on the
Maidan. We understand what took place in Ukraine and herald
that, but at the same time, there are concerns about the
progress. That is what this hearing is about.
If you were to look at the Minsk II agreement, what are the
pieces of the agreement that are in Ukraine's hands that
southern Europe or other components of Europe might look at and
say, well, Ukraine is not fully doing the things that it needs
to do and therefore, maybe we ought to consider lightening up
Ukraine? What are the things that worry you the most?
Ms. Nuland. I think what is worrying me the most are the
comments that we hear from some parts of Europe that as, week
after week, Ukraine's leaders are unable to come together
behind a refreshed government, that the country is drifting,
that there is not the will to drive forward with Ukraine and
therefore, there probably will not be the will to implement
Minsk. We do not agree with that, but it causing doubt in
Europe about whether continued support for Ukraine is
warranted.
The Chairman. We've had many interactions with Ukraine. We
obviously have passed legislation. I know that the
administration is working to support efforts, and the IMF is
doing the same. Is the formation and stabilization of the
Ukrainian government itself, in essence, the most important
thing that we can push for? Is that correct?
Ms. Nuland. Absolutely, but not just coming together in
terms of reloading the government, but reloading the government
and the leadership coalition in the Rada behind an aggressive
program of IMF-compliant reform. There is, as I said, a lot
still to do. So it is not just about the people. It is about
the program.
The Chairman. Thank you.
I will reserve my time.
Senator Cardin?
Senator Cardin. Well, again, thank you very much for your
testimony.
I want to follow up on what Senator Corker is referring to
because it seems to me if Europe does not extend the sanctions
and if Minsk is not implemented and if Europe is not willing to
extend the sanctions in June, it has a profound impact on
Europe, let alone Ukraine. Here we are seeing Russia's
influence in Europe for its national sentiments growing. We
have seen that in some of the recent elections in some of the
European countries. So I am deeply concerned that our
strategies during the next couple months need to be focused on
European unity and focused on the culprit in Ukraine, which is
Russia. They are the ones who caused the current violent
activities that are taking place in that country.
So I want to focus on how we can be more effective in
getting Ukraine to implement the critical reforms that they
have not been able to do. I agree with you. The economic
reforms, the budget, the monetary--they have been on schedule
doing a lot of the important changes. And this winter, without
the reliance on the energy issue, that is a huge change in
behavior in the country at incredible cost politically. It is
not an easy thing to implement these changes.
But the oligarchs still control the political process. And
when a country is coming towards reform, you always have the
problems within the civil service that you need to root out the
corruption there by adequate budgets and paying civil servants
adequate salaries. But in Ukraine, the problem stems from the
top, and that is the relationship between the business
interests and the political system to preserve a corrupt system
which the elitists benefit from and want to continue to benefit
from.
How does the United States be more effective in rooting out
that type of corruption and supporting leaders in that country
that take the brave stands and the right stand that the people
of Ukraine want? How specifically can 2016--you say it could be
a great year. What can the United States do to make 2016 that
type of a year?
Ms. Nuland. Well, the first thing that we do is what we
have done throughout this, which is to peg our assistance to
those things that the IMF and the EU need to see for reform. So
in particular, we have pegged our next $1 billion loan
guarantee, first and foremost, to having a rebooting of the
reform coalition so that we know who we are working with, but
secondarily, to ensuring that the prosecutor general's office
gets cleaned up, as I said. The current prosecutor general, as
you mentioned, has resigned. We need to see a clean model
citizen who is really going to take justice forward in Ukraine
appointed there and confirmed. We need to see the next stage in
de-oligarching the economy, if that is a word, and by that, it
is some of the things that I mentioned, including privatization
of these state-owned enterprises that are used to siphon off
money. It is cleaning up the tax service, the customs service,
all of these places where money is siphoned off. It is creating
transparency in media holdings and these kinds of things. It is
shoring up the banking system further so that it cannot be used
to rip people off. It is strengthening private agriculture so
that agriculture cannot persist as an oligarchic haven and more
unbundling in the energy sector. And all of our assistance
programs are designed to support those concrete steps, as
Ukraine takes them, but if they do not take them, then we will
not be able to disburse in those areas.
Senator Cardin. Let me ask you specifically about judicial
reform. The judiciary historically in Ukraine has not only been
a facilitator of corruption, it has been a source of
corruption.
Ms. Nuland. Right.
Senator Cardin. So what do we do to specifically hold
Ukraine accountable on judicial reform?
Ms. Nuland. Well, as I said, the first thing is to see that
the prosecutor general's office gets cleaned up. We had
advisors in that office, which have helped us to better
understand what needs to happen. It will start with new
leadership. It will start with a review of all the justices.
We are also supporting the constitutional amendments to the
judicial aspects of Ukraine's leadership. It has passed the
Rada in the first reading and needs to pass in a second
reading. That will help create more accountability for
justices, more transparency in terms of their own ownership, et
cetera. And we are doing a lot of judicial retraining and would
like to do more.
Senator Cardin. As I also understand, in Ukraine there is a
history of loyalty of judges to particular political interests
rather than to an independence. Are the reforms aimed at giving
judges the independence they need to make independent choices
rather than just following the will of the political elite?
Ms. Nuland. Well, as you know, Senator Cardin, because you
have been a champion of this across Europe, it is a long
process but absolutely, and it starts with transparency in
their own financial holdings. It also goes to stress-testing
the qualifications of all justices. It goes to breaking the
link between politics and their appointments, all of those
kinds of things that we have had to support in other parts of
Europe. And we are really just at the beginning in Ukraine.
Senator Cardin. Thank you.
Thank you, Mr. Chairman.
The Chairman. Senator Perdue?
Senator Perdue. Well, it is good to see you again. Thank
you for being here. And your testimony is always very direct
and enlightening.
I also appreciate your recent trip to the European defense
conference in Munich, and some of your off-the-record comments
were very helpful.
But I want to talk about two things that I did not hear
talked about there, and I know you have a heart for both of
these. But I would like to get just an update for the
committee. One is Crimea and the other is Georgia.
You know, it is hard to believe it has been 2 years since
Russia went in and illegally annexed, in my opinion, Crimea and
have basically cut them off from their Ukrainian news and also
Internet providers and so forth. Russia submitted their control
of Sevastopol, their warm water port there, in connection with
what they are doing in Tartus and Latakia in Syria, as well as
Kaliningrad in Murmansk. It is easy to see what Russia is doing
and why Crimea is so important to them militarily.
My question is very simple. Can you give us an update about
where we are with Crimea? Is there an active conversation about
returning Crimea to Ukraine, and what other pressures can we
put on Russia to actually entertain a conversation about
returning Crimea to Ukraine?
Ms. Nuland. Well, thank you, Senator. We obviously share
your concerns not only about what is happening inside Crimea
and human rights for citizens and particularly minority
populations, but also the militarization of Crimea which has an
impact.
So the primary lever that we have are the continuing U.S.
and European Union sanctions that preclude any investment by
any of us in Crimea and put under sanctions any entities that
would try to trade. So, again, the theory of the case here is
that if you bite off a piece of another country's territory,
that it dries up in your mouth.
Senator Perdue. Is it the position of the administration,
though, that Crimea and the occupied portions of eastern
Ukraine are all one and the same in the conversation with
regard to the sanctions in Russia?
Ms. Nuland. Well, we are pursuing them in parallel but
separately. The Minsk accords govern how the Donbas conflict
could be settled and sovereignty could be returned to Ukraine.
We have made clear that we will never recognize Crimea's
occupation and incorporation into Russia and that sanctions
will stay in place until that is resolved.
Senator Perdue. Good. Thank you. That clears that up.
Let us talk about Russia just a minute--or Georgia just a
minute. You know, it is, I guess, technically a frozen
conflict, as some people term it, and Russia has a history of
creating these frozen conflicts. It is hard also to believe it
has been 8 years since Russia invaded Georgia. And now today, 8
years on, one-fifth of Georgia's territory and about a third of
the population resides in Russian controlled territory within
Georgia.
Our own State of Georgia has a National Guard relationship
and a partnership with the country there. And I know there are
some forward-moving activities this spring in Georgia. And I
spoke recently with our own adjutant general about their
efforts there.
Can you give us an update? You know, Georgia's defense
minister, Tina Khidasheli--and she is talking about ongoing
concern. This is the former chief I guess--the recent
occupation of the territory and what efforts we can make there
to bring that back into an active conversation. I understand
these are part of the sanctions, but can you give us an update
on that frozen conflict?
Ms. Nuland. Well, thank you, Senator, and thanks for what
Georgia does for Georgia. It is a great partnership, and the
people of Georgia very much appreciate it.
I think you know that in the early days of the U.S. and the
NATO partnership with Georgia, our security assistance was
primarily directed towards helping Georgia to deploy with us to
Afghanistan and other places, make them interoperable, able to
go a distance, et cetera.
We have in the recent period both in U.S. assistance to
Georgia and in NATO assistance to Georgia, as we head towards
our NATO summit in Warsaw, reoriented that assistance on the
security side at Georgia's request to help strengthen
resilience, self-defense, address their concerns about not only
the continuing Abkhaz issues, but the fact that there may be
efforts to move the lines, et cetera. So we are very much
focused on the self-defense aspects of that relationship.
Senator Perdue. Sorry. Do we oppose the Russian effort to
put that rail line down to Armenia through occupied Georgia?
Ms. Nuland. The Georgians are trying to work with the
Russians now on a more appropriate rail link that can be of
positive benefit to everybody and not exploit the situation.
One thing I would say, though, is that we have encouraged
the government in Tbilisi to continue to reach out particularly
to the people of Abkhazia and to help them to benefit from the
new arrangements that they have with Europe and ensure that
they increasingly see benefits from those kinds of
arrangements, which stand the chance to make Abkhazia far more
prosperous than anything Russia has to offer.
Senator Perdue. Well, in meeting with the Defense Minister
from Georgia, Khidasheli--she is the current, not the former,
but the current Defense Minister--she is very concerned about
that rail line, as I am sure you guys are aware.
Ms. Nuland. Yes.
Senator Perdue. One last question with the time remaining.
Let us go back to Russia. Last year, the administration had
Ambassador Paula Dobriansky, former Under Secretary of State
for Democracy and Global Affairs, actually propose to this
committee that the West impose an embargo on spare parts for
Russian oil refineries.
I know this is getting in the weeds a bit, but as we look
at having these sanctions have more bite in Russia and to
actually get them to moderate their activity, Russia is heavily
dependent on western spare parts for their refining industry.
Is this something that we are thinking about? Is this a
possibility for things like pumps, compressors, catalytic
agents, and so forth within their refining industry?
Ms. Nuland. Senator, as you know, we have maintained an
active list of the kinds of future sanctions we might need if
Russia were to go further in Ukraine, et cetera. I will talk
to, if I may, in a separate setting about those kinds of
things.
Senator Perdue. Okay. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Shaheen?
Senator Shaheen. Good morning. Thank you for all of your
work on a daily basis and for being here this morning,
Secretary Nuland.
I wanted to pick up on Senator Corker's question about the
impact of Russia's actions in Syria and how that affects
Ukraine. I was in Ukraine with several other Senators back in
October, and it was shortly after Russia made its move into
Syria. And the Ukrainians that we talked to were convinced that
that was a diversion and that once they decided to leave Syria,
they were going to be refocused back on Ukraine and heat up the
conflict in Ukraine again.
So do we not have to assume that whatever Russia is doing
is going to have some impact on what happens in Ukraine?
Ms. Nuland. Well, I would argue, Senator, as I said in my
opening, that in recent weeks and months, we have seen a good
level of low-level violence perpetuated primarily by Russia and
the separatists they support on the line of conflict. So it
never really calmed down in Ukraine. I think the world's
attention has been more focused on what Russia has been up to
in Syria. So I think the question becomes whether there will be
more bandwidth now to pay attention as well to what is
happening in Ukraine.
Senator Shaheen. You talked about a number of things that
need to happen in Ukraine, the kinds of things that you
mentioned, judicial reform, reducing the influence of the
oligarchs in the economy, agriculture reform, the whole list of
things. Those are things that take time. And as I am watching
what is happening in Ukraine, people want to see something
happen now.
So as you assess where things are, what is the most
important change that you think would have an impact on the
public so that they would feel like there is positive momentum
there to address their concerns?
Ms. Nuland. Improvement across the board in the justice
system so that individual people feel like justice is served,
locking up some big, corrupt fish, including some folks from
the Yanukovych era. Improving services. You know, people are
still ripped off when they go to the hospital, when they try to
get education, et cetera, things that impact human beings. That
is why the police reform has been so impactful because
everybody sees it on the street.
But also cleaning up graft in the tax system, in the
customs service because everybody trying to do business gets
ripped off at every stage.
And then really beginning, as could happen in 2016 and
2017, to first create transparent boards for all of these
state-owned enterprises and then to privatize them.
Senator Shaheen. So are we concerned by the IMF's decision
to delay their planned disbursement of debt assistance to
Ukraine, that that will have a negative impact on some of these
initiatives?
Ms. Nuland. I think the IMF, like the U.S. Government, does
not have a choice right now so long as we are not sure who our
partner will be on the other side of the table.
Senator Shaheen. And how aware do you think President
Poroshenko is of these realities? And let me just preface that
with when we were there in October and we met with him, he was
all about we have got to address corruption. But when we said
to him, you know, that starts with you, he did not seem to have
any--he did not acknowledge any awareness that that was
important to setting a model for the public.
Ms. Nuland. I would commend to you the speech that Vice
President Biden gave on the floor of the Rada in the middle of
December. He could have been clearer or more public about what
our support depends on. I also joined his meeting with
President Poroshenko in Davos where the same points were made,
and he has made the same points in repeated phone calls over
the last couple of weeks with both President Poroshenko and
Prime Minister Yatsenyuk, as has Secretary Kerry in his meeting
with President Poroshenko at Munich.
Senator Shaheen. Again, I also want to explore some of the
issues that have been raised relative to Russia's continued
narrative that Ukraine is the problem with resolving Minsk II,
it is not Russia, and what more we can do to support Ukraine,
assuming they can take the steps that we are interested in, but
to try and change that narrative in Europe. And let me just ask
as part of that, obviously, the challenges that Europe is
facing with the migrant crisis and certainly the impact that
that has had in Germany on Chancellor Merkel--how does that
affect her focus on what is happening in Ukraine and resolving
Minsk II?
Ms. Nuland. Well, just to start with the last part first,
we have been very gratified by the Chancellor's incredible
resolve with regard to Ukraine and her willingness to call it
out honestly in terms of who is at fault and to support real
negotiations on how to implement Minsk.
As I said in my opening, the number one thing here is to
stop the violence on the line, get OSCE access all the way to
the border like they are supposed to have. We have been
encouraging the Ukrainians to listen to some of the ideas that
the OSCE has had because the forces are too close in certain
hotspots to pull them back, get more OSCE in there, so that it
is more obvious when the firing starts, where it initiates
from, make it harder for separatists with Russian support to
mask the initiation of violence. That is one thing.
Second, to continue to support the negotiations that France
and Germany are doing on election modalities under Ukrainian
law and compliant with OSCE standards that include things like
elections security, that include free access to media, et
cetera because without those things and without a clear obvious
evidence to the Rada that these are going to be Ukrainian
elections, not some fake elections, they will not be ready to
support the underlying legislation. So we are working on all of
those things.
Senator Shaheen. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you. I want to thank Senator Shaheen
for her line of questioning and go back to the comment you made
about how we look at Syria as one issue and Ukraine as another.
While in Munich--and I know Senator Perdue and several
other people were there--General Breedlove reiterated the point
that he has made to me on multiple occasions, and that is that
the problem with U.S. policy right now, is that Russia looks at
what is happening. They look at the entire blanket. We tend to
look at little patches and deal with them as if they are
independent and not connected to the other. And that is why
Putin, with the small amount of resources that he has, a
country--let us face it, whose economy is in shambles--has been
able to have the impact that they are having right now on
Europe. And I would just say that Europe is probably at the
lowest level of self-confidence seen in modern times. And Putin
has a huge effect on that.
So, again, I appreciate your comments about Syria and
Ukraine being different. Russia does not view it that way
because they are looking at the entire portfolio in a way that
has been very successful, and they have undermined our
interests in the region by doing so. So I would just ask that
instead of looking at them separately, we look at them as a
continuum. With our NATO policy and everything else we are
doing in Europe, we have to look at the entire blanket and not
look at these as isolated issues, as General Breedlove says so
forthrightly.
With that, Senator Barrasso.
Ms. Nuland. Senator, may I just quickly say that I did not
mean to imply that we do not look at the totality of Russian
actions and intentions. Of course, we do and how the things
interact. My point was simply because they are withdrawing or
have said they are withdrawing troops in Syria, it should not
mean that we let them off the hook in terms of sanctions vis-a-
vis their activity in Ukraine. That was my point.
The Chairman. I understand that is us. I am just saying
that when he has used refugees as a weapon of war, when he has
done the things that he has done with energy and other assets
that gives him leverage over Europe, all of these things are
playing a role and weakening Europe's resolve relative to these
sanctions. With us doing $50 billion a year in trade with
Russia and Europe doing $450 billion to $500 billion a year in
trade with Russia, obviously the U.S. helping them keep that
resolve in place is very, very important. And again, I think
Putin is looking at the entire blanket as he looks at these
issues and hoping that somehow in June he is going to be able
to break down Europe's resolve in combination with the other
things that he is doing in the region.
With that, Senator Barrasso.
Senator Barrasso. Thank you, Mr. Chairman.
Great to see you again, Madam Secretary.
I agree with Senator Corker. Putin has been very obvious.
His objective is to restore the former Soviet Union and show
his strength. Everything else, as Senator Corker just pointed
out, are just tactics to do that. And it is very aggressive and
opportunistic, and no matter where he is playing that game,
that is, I think, based on his objective and everything else is
a tactic. And we ought to take a look at the overall objective.
With regard to Vice President Biden's statements in
December with regard to Crimea, he made the speech, and he said
let me be crystal clear. He said the United States does not,
will not, never will recognize Russia's attempt to annex the
Crimea.
So what additional sanctions should we put in place? What
actions is the administration taking right now to press for the
return of Crimea?
Ms. Nuland. Well, Senator, just to say that our sanction
regime vis-a-vis Crimea with the European Union is pretty much
complete. We do not allow any investment, any trade by any of
our people. We do not allow tourist travel or any of that in
Crimea. So it really is an investment-free zone for all of us,
and we will continue to maintain that strong regime.
We also try to speak out as we learn about what is
happening inside and particularly human rights abuses against
minority populations, expropriation of libraries, those kinds
of things.
Senator Barrasso. It does not seem to be having the
intended effect. So we are just looking to see what
additionally can be done.
Ms. Nuland. I think we will continue to look at what else
we can do.
Senator Barrasso. With regard to energy security, I wanted
to visit about we have seen Russia. They continue to
demonstrate over and over again willingness to use energy
resources as a weapon. And Putin has used Russia's natural gas
to extort, to threaten, to coerce our allies, as well as our
partners. The international community saw Putin use natural gas
as a political weapon against Ukraine in 2006, 2009.
Talk a little bit about support the United States could
have in assisting Ukraine to advance its energy independence,
to support energy diversification, and reforming in the energy
sector because it continues to be a problem in my trips there
visiting with folks on the ground. And the ability of Russia to
control and command has a huge impact.
Ms. Nuland. Well, first just to say that Ukraine has made
really terrific progress on the energy front. As I said in my
opening, this was the first winter that they did not have to
depend on Gazprom gas which, for those of us who follow
Ukraine, is pretty miraculous.
There is obviously much more work to be done. Just to go
through some of the things they have already done, they have
taken the first steps towards unbundling the state-owned
company, separating it into two entities. By linking our
assistance to their willingness to take energy steps, we have
now encouraged the establishment of an independent board of
Naftogaz. They have begun to increase gas tariffs to market
levels if they need to. They are improving the corporate
governance of Naftogaz.
Next, they have to fully unbundled the market. They have to
liberalize it. They have to privatize more of it. They have to
establish an independent regulator, which is one of our main
reform requests at this next stage. They need a separate
electricity market law. They have to do more to harmonize with
EU regulations.
So we have assistance in the 2016 budget to help them do
all of those things. But again, it is going to depend on having
a strong government committed to those things that is unified
behind them.
Senator Barrasso. You know, when I was there, they were
asking about us exporting some of our----
Ms. Nuland. LNG?
Senator Barrasso.--LNG. We have certainly an abundance in
this country, and we should be using this as the master
resource that it is. Do you agree that natural gas exports from
the United States can serve as an important diplomatic tool for
us to strengthen our national security and assist our allies
and helping them alleviate some of the manipulation and the
threats from Russia?
Ms. Nuland. I absolutely do. And now that we have reverse
flow gas back into Ukraine, it is very important. We have folks
all over Europe hoping some of that gas that is now available
will make it, whether it is to Lithuania or Poland or other
parts.
Senator Barrasso. Well, they built that regasifier with the
independents that has been not built but brought into the
waters to be able to--they are just waiting for us to be able
to export.
Ms. Nuland. And I think you know that we have for the last
2 years worked really aggressively. I have as have Secretary
Kerry and Secretary Moniz and Amos Hochstein, our special
advisor, on all kinds of projects to help diversify European
energy markets and make them more open to other forms of gas
than Russian gas.
Senator Barrasso. Bring us up to date, if you could. I was
just thinking in the middle of December, Ambassador to the
United Nations Samantha Power said Russia continues to violate
ceasefires daily. And in October, General Breedlove told
reporters that what we have not seen is Russia removing any of
its forces from the Ukraine. And he said you have not heard me
report at this podium before command and control air defense,
artillery spotting support, artillery support, personnel
supplies, all still supplied to Donbas by Russia.
Are these assessments still true today as they were in
October and they were in December? And is Russia continuing to
send its mercenaries, its troops, its tanks into Ukraine?
Ms. Nuland. Absolutely. We still have hundreds and hundreds
of pieces of Russian heavy equipment in Ukraine. We still have
thousands of Russian forces and support in Ukraine.
Senator Barrasso. So Russia is currently in violation of
its political agreements since ceasefire commitments to
Ukraine.
Ms. Nuland. So those forces and that equipment will have to
be withdrawn before Minsk is fully implemented, yes.
Senator Barrasso. So are there additional things we should
be doing to, again--I asked the question regarding Crimea. I
ask the same question with regard to Ukraine. Are there
additional things we should be doing? You said we have done
everything we can with Crimea to stop--you know, with the
sanctions, but it does not seem to have the impact that we
would like. Anything additionally we should we doing with
Ukraine?
Ms. Nuland. On the security side, I think the training that
we have now been doing for more than a year with Ukrainian
forces has helped to give them confidence, has helped to give
them better understanding of how to defend their territory, how
to handle the line of contact to the best of their ability. I
think what we need to do now, as I said in answer to Senator
Shaheen, is help to get forces separated enough so that we can
get more OSCE in there and we can truly demonstrate who is
starting it when these flares happen. But we also have to push
for more OSCE all the way up to the border because there are
large parts of Donbas where we have no eyes and ears still.
Senator Barrasso. And then in terms of prepare to provide
lethal aid?
Ms. Nuland. So, as you know, no decision has been made on
that, but we are continuing to train and we will have a big
training budget for 2016 as well.
Senator Barrasso. Thank you, Mr. Chairman.
The Chairman. It is my understanding--thank you for those
questions. It is sad to me that we have not made a decision
yet. It has been several years now.
But it is my understanding our training also is not really
helping them in any offensive way. It is all about defensive
issues. Is that correct?
Ms. Nuland. Well, again, we have not provided lethal
assistance, but we have----
The Chairman. But they have some lethal capabilities
themselves.
Ms. Nuland. They do.
The Chairman. It is my understanding that one of the big
complaints in the region is they have assets, but we are not
really helping them relative to any kind of offensive training
that might need to take place, again being concerned that
Russia might view us as being proactive more so than they would
like to see.
But with that, Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman.
Madam Secretary, thank you for your service.
You know, I want to explore a bit of a different set of
questions here. And they are premised on the fact that I have
strongly supported and have said in my visits to Ukraine, as
well as those who have visited from Ukraine to the United
States, that there is a need to continue vigorously on the path
to reform and not only to pass laws but to implement them. And
I totally believe in that.
However, I also understand the realities. If I was sitting
in the equivalent of our Congress, their Rada, and seeing what
the Russians are still doing and talking about doing all of
these things, including the decentralization legislation, I do
not know how far in that process, without reciprocity, that I
am going to be able to succeed at the end of the day.
So I look at the eve of the second anniversary of Russia's
invasion of Crimea, which is March 16th, and I believe that
Russia maintains control by one means or another over the
autonomous regions, which it seeks to fortify in one way or
another. Ceasefire violations are on the rise. I look at your
own written testimony, and you talk about OSCE monitors
reporting 15,000 violations in February alone, the vast
majority of which have originated on the separatist-controlled
side of the line of contact is your testimony. And I wonder,
while we are focused, and rightfully so, in getting the
Ukrainians to do what is necessary to reform, that the other
side of the equation is lacking.
And so the administration and you have often here talked
about four pillars: support financial, technical, nonlethal
security assistance, support other frontline states from
Russian aggression, raising economic costs for Russian
behavior, and leaving the door open for diplomatic de-
escalation, should Russia commit to its commitments.
And so in that regard, on the third pillar, raising
economic costs for Russia's behavior, it still seems to me that
our efforts are not creating the conditions where Minsk can be
successful. And we have heard from many Ukrainian officials who
have circulated through the Senate about their challenges with
this. And I think one of the reasons we saw a vote of no
confidence take place, although it was ultimately beaten back,
but thinly, that we have a great challenge there.
How can we expect Ukrainians, with all the obstacles they
face, not the least of which is occupation by hostile and
violent foreign forces, to muscle the political capacity and
capability to meet their Minsk obligation when Russia still
controls parts of Ukraine and holds military superiority and is
not meeting, from my perspective, their elements of Minsk?
And secondly, as a corollary to that, I am concerned to
read in Jeffrey Goldberg's recent ``Atlantic'' article entitled
``The Obama Doctrine,'' where the President said, quote, the
fact is that Ukraine, which is a non-NATO country, is going to
be vulnerable to military domination by Russia no matter what
we do.
Now, I am not sure how well that was received in Kyiv, and
I certainly hope that we have not resigned ourselves to that
that is going to be the reality at the end of the day. When we
train but we train in a way that does not provide lethal
assistance for the ability to self-defense, because nobody
believes that Ukrainians are going to go invade Russia--right--
so but for self-defense, to give night vision goggles to be
able to see the enemy but not be able to do anything to stop
them, well, that is pretty challenging.
So I am really concerned that on that one pillar, between
the President's comments and our actions, that we are
undermining the rest of the pillars at the end of the day. So
speak to me about that.
Ms. Nuland. Well, first, on Ukraine's ability to meet its
obligations, as I tried to set out clearly in the testimony,
before the Ukrainian Rada can be asked to pass the next stage
of political agreements for Donbas, whether it is election
modalities, whether it is the last reading on the constitution,
we have got to see Russia and the separatists meet their
obligations in terms of security. So we clearly see a sequence
here for Minsk.
It is in that context that we are, as I said, trying to
encourage the Ukrainians to work with the OSCE to put forward
these ideas of pull-back so that we can continue to help them
demonstrate where the security problems lie. But you know, for
months and months and months now, the Russians have been saying
that they will ensure that their proxies give full access to
the territory to the OSCE, and that still has not happened.
So this has to happen in the sequence that it was agreed at
Minsk, and that is what we expect of the Ukrainians.
At the same time, we are working with them to ensure that
as they negotiate the terms of what an election might look
like, that it also truly meets the Minsk obligations that it be
under Ukrainian law, that it be OSCE-compliant, and that we not
be having some kind of fake election out there.
With regard to the security assistance that we are
providing, our assessment is that the training that we are
offering first to the national guard, now to the regular army
and to the special forces have manifestly improved their self-
defense capability, their unity of command, et cetera.
Senator Menendez. Let me stop you because I have less than
a minute left.
You have not satisfied me about what we are doing to get
Russia to move on its obligations. And I know I hear that you
say we expect that the sequencing will happen in the manner in
which Minsk envisions, but the reality is I hear a lot about
the Ukrainians and what we expect the Ukrainians to do.
Ms. Nuland. Right.
Senator Menendez. What I do not hear virtually anything
about is about getting the Russians to live up to their
obligations. And it just seems to me that if we saw progress on
the Russians living up to their obligations, that we would see
greater political will in the Ukrainian congress, the Rada, to
achieve the things we want them to do. But largely, I get the
sense this is a pretty unilateral pressure. Get the Ukrainians
to do--which I agree they should do some of these things, but
there is no question that doing them, with the countervailing
reality of Russia as it exists today, is an enormous challenge.
And I get a sense we have sort of like, you know, moved on. And
that is a problem. And that is a problem.
Ms. Nuland. Senator, I have to just disagree with that
premise. The President raised these issues, including the
importance of ending violations and allowing full OSCE access
with President Putin yesterday. We raise this in every single
conversation with the Russians, and of course, the number one
issue is maintaining unity of sanctions with the European
Union, which we have been able to do, and making it clear who
is at fault on the security side, which we will continue to do.
Senator Menendez. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Risch?
Senator Risch. Ms. Nuland, that article that Senator
Menendez referred to by the Atlantic Council painted a pretty
bleak picture of the situation. Are you familiar with that
article? Did you read that?
Ms. Nuland. I am.
Senator Risch. Are you in general agreement that that is an
appropriate assessment of where things stand today?
Ms. Nuland. Senator, I am not sure that it is appropriate
for me to comment on a journalist's interpretation of where the
President stands or does not stand. I think the testimony that
I gave today speaks to where the administration is on our
policy towards Ukraine.
Senator Risch. Well, let me set the journalist issue aside.
Is the article generally accurate as far as the current
situation in the Ukraine?
Ms. Nuland. I am not sure what aspect you are referring to.
But I would simply say that the President has led on the issue
of maintaining sanctions until Minsk is fully implemented, and
that is going to continue to be the administration's policy
until we see all aspects of Minsk, including return of
sovereignty.
Senator Risch. I wanted to change subjects for a minute. I
want to talk about the Open Skies Treaty. Starting February
22nd, the administration has 120 days to make a decision on
this upgrade that the Russians have asked for for infrared and
some other things that will greatly enhance their ability when
they do overflights in the United States. You are familiar with
that I assume.
Ms. Nuland. I am.
Senator Risch. Where are you in that process?
Ms. Nuland. There are still interagency discussions going
on. We can brief you in a classified setting, if you would
like.
Senator Risch. I suppose it is not surprising to you that
there is a lot of angst here in this body and in your own
administration regarding allowing that enhancement. You are
aware of that, I assume.
Ms. Nuland. I think we would have settled it if it were an
easy question.
Senator Risch. Correct.
And I can tell you that in the very near future, you are
going to be getting some input from members of this body, and
it is going to be not just one-sided. That is going to be very
bipartisan, stating real concerns about it.
Are you familiar with the testimony that General Stewart
gave in the House Armed Services Committee, the Defense
Intelligence Agency Director? Are you familiar with his
testimony?
Ms. Nuland. Forgive me, Senator. I am not.
Senator Risch. Well, he was pretty tough on it. He thought
that this is a really bad idea. Are you getting that from
anywhere else? Have you heard that from anyone else within the
administration?
Ms. Nuland. Well, again, interagency discussions are
continuing on how to manage this.
Senator Risch. I think most Americans would be surprised to
hear that there is such a treaty and that we allow actually
Russian spy planes to fly over the United States and do the
kind of intelligence gathering that they do.
To be fair, the door swings both ways. That is, we are
supposed to be able to do the same. But the Russians routinely
prohibit flights over the Russian territories in the Caucasus,
around Moscow, in Kaliningrad, and some other places. Do we
deny them any access here in the United States?
Ms. Nuland. Senator, I am going to have to take that
question. I have not looked in a while at whether we have had
denials of those flights.
[The information referred to above was not received in time
to be included in this transcript.]
Senator Risch. In your assessment as to whether or not you
are going to allow this, are there discussions going on about
the fact that they are routinely prohibiting us from doing what
they are doing here? Do you know whether that is the case?
Ms. Nuland. We do try to maintain reciprocity. In general,
that is what the treaty is about, as you said. So when we have
concerns about constraints, we look at how we can ensure that
there is a reciprocal response.
Senator Risch. Who is the lead person in your agency
handling this issue?
Ms. Nuland. It would be Under Secretary for Security
Affairs, Rose Gottemoeller.
Senator Risch. Thank you very much.
Thank you, Mr. Chair.
The Chairman. Thank you.
Senator Murphy?
Senator Murphy. Thank you very much, Mr. Chairman. Thank
you for all your work.
Madam Secretary, thanks for coming back again.
Just to try to square the circle on this question of the
Syria-Ukraine connection, because I think it is important to
underscore what you said, I think there is no doubt that there
is a connection in Russia's mind between their policy in Syria
and their policy in Ukraine. If you ask our friends on the
ground in Ukraine, they will tell that when Russia started to
move on Syria, it was like a clicker. It was switched in
eastern Ukraine for a period of time. Russia was very focused
on Syria, and that did mean a diminution of offensive activity
in eastern Ukraine.
But to underscore what you said, that does not mean that we
should start blending the boxes together. The worst mistake we
could make is to concede that Russia's policy in Syria is tied
to our sanctions regime in Ukraine. If you do blend those boxes
together, you start to let Europe off the hook.
And so I do not think there is really a distinction, at
least as I see it, between some of the feelings being
articulated by members of the committee and what you are
suggesting. We all acknowledge the connection that Russia is
trying to make. That does not mean that we allow for the
Europeans, those that are in the sanctions regime with us, to
look at it that way as well.
My question is on this continuing conversation of
conditionality of IMF and U.S. support. And let me be slightly
contrarian on this fact.
I worry that onerous conditions upon our aid and the IMF's
decision to do the same thing in some way plays into the hands
of Russia. You know, let us take, for example, the reforms that
we require and that Minsk requires to devolve power to the
contested regions. That becomes politically unpalatable the
more that Russia inflames tensions along that border. The more
people that are killed by Russian snipers, the less willing the
Ukrainians are to come together on those necessary reforms. The
more news there is about Savchenko and her captivity, which of
course is controlled by the Russians--her future is controlled
by the Russians--the less willing that Ukrainians are to come
together to make some of these reforms.
So I guess I put this question to you before, but do you
worry that by placing all these conditions upon U.S. aid, that
we essentially put the Russians in charge of whether it is
released or not because their ability to sort of play politics
inside Ukraine is maybe most determinative or at least
substantially determinative on whether the Ukrainians can
actually come together and make these reforms?
Ms. Nuland. Well, Senator, here again I think we need to
split the apples and the oranges. So on the one side, there is
implementation of Minsk, as you said, where Russia has the
ability with their proxies in Donbas to heat up the line and
make it politically harder for Ukraine to meet the political
obligations it has to Donbas, which is why we have to maintain
the integrity of the sequence of Minsk as it was negotiated,
that there has to be real quiet on the line. There has to be
real access before Ukraine can be expected to take the next
steps in the political package on Minsk.
That is a different matter than whether we have a strong,
unified governing coalition of unity between President, Prime
Minister, and the key Rada factions on the next step of reform
for Ukraine internally, the breaking of corruption, the
cleaning up of institutions, all of those things.
So frankly, the IMF program is conditioned on Ukraine
staying the course on reform, and our assistance is conditioned
on them being inside their IMF program. So I think we have to
stay rigorous because otherwise we are just funding the
continued oligarchic capture of the country, and those folks
are certainly not interested in Minsk either.
Senator Murphy. We are just playing a dangerous game of
chicken here, which is at some point their reserves run out,
and we will be faced--of course, this is the game that Russia
is playing. They are hoping to undermine unity inside Ukraine
so long as is necessary to prevent this assistance from
becoming real. And so at some point, we may just have to
reconcile our desire to keep Ukraine economically afloat and
our desire to push them at the speed that we would like on
reforms that are admittedly very difficult, if not impossible,
to make while your country is being occupied.
And my last question is on our committee's path forward
here and Congress' path forward as to how we can be most useful
in support for Ukraine. There is always a feeling of paranoia
inside Kyiv that the U.S. Congress and the U.S. Government is
going to focus its attention somewhere else. And I hope that we
have answered most of those concerns.
But what I hear is that the most important thing that we
can do is to pass a multiyear assistance commitment to Ukraine
so that they know that we are partners with them, not just on
the military side but on the economic and anti-corruption
program.
And so I know there are discussions here about what a new
Ukraine support bill could look like, but is some sort of
multiyear commitment not some signal that we are, as a
Congress, still willing to put money into this endeavor,
whether it be in IECA or some other source, an incredibly
important message to send?
Ms. Nuland. Well, we very much appreciate the plus-up of
IECA and the reestablishment of IECA that we have now. There is
some hope in the Department at large that it would be flexible
enough for all kinds of global contingencies. You know, we do
budget on a year-by-year basis, but we always welcome multiyear
commitments by the Congress to the projects that we share an
interest in, including Ukraine.
Senator Murphy. Thank you as always for your service, an
advertisement again for our great staff inside Kyiv who are
continually working 24/7. Ambassador Pyatt got to visit with
some of us this week. We are very lucky to have you and to have
your team on the ground there.
Thank you very much, Mr. Chairman.
The Chairman. Thank you, Senator Murphy.
Senator Gardner?
Senator Gardner. Thank you, Mr. Chairman.
Thank you, Secretary Nuland, for being here and your
testimony today.
In September of 2014, President Poroshenko was addressing a
joint session of Congress, and I believe he had made this
statement urging lawmakers to provide more political support,
as well as military equipment, both lethal and nonlethal, to
Ukrainian soldiers. And the quote that was so memorable from
that speech was blankets and night vision goggles are
important, he said, but one cannot win a war with blankets.
I know the conversation that we have had before this
committee, you have talked about a decision on military
equipment and lethal equipment not being made yet. Could you
talk a little bit--that decision to do that has not been made
yet. If you were to decide to allow lethal weapons--well, first
of all, do we have a time frame for that decision?
Ms. Nuland. Well, first of all, Senator, let me just say
that since the appearance by President Poroshenko before the
joint session, we really have, with all of your support, plused
up what we are doing in Ukraine and not just in terms of the
1,200 soldiers and 750 national guard. We have already trained
in the next stage going into the army and the special forces,
but also in terms of the kind of equipment that we have
provided, including HUMVEEs and UAVs and two counter-artillery
radars and mortar radars and all kinds of thermal vision
devices and secure radios and exploded ordnance, robots, and
all these kinds of things. So we are rally giving a lot more
than we were at that time.
I do not have a timetable for you on a lethal decision.
Senator Gardner. If a decision was made to allow lethal
weapons, what would that allow? What would Ukraine forces be
able to accomplish with those lethal weapons?
Ms. Nuland. Well, again, I do not want to speculate on what
we would actually go for if that decision were made, but there
are a range of things that they have asked for in the past.
Senator Gardner. Again, I am not saying you would do it,
but I mean, if some of those were allowed, what the Ukraine
forces be able to accomplish?
Ms. Nuland. I think the original proposals that they made,
at a time when the separatist forces and Russia were still
taking additional territory quite aggressively, were things
that would deal with the weapons superiority in terms of
dealing with GrADS, dealing with tanks advancing, et cetera.
They also have always wanted more on the ISR side.
Senator Gardner. And if this assistance were granted, they
would be able to push back on those territorial gains, as well
as the equipment advantage you are talking about?
Ms. Nuland. Conceivably, but as you know, we do not have
offensive combat now. We have skirmishing on the line, but the
hope both on the Ukrainian side and in the international
community is that we can settle this through implementation of
Minsk and the withdrawal of Russian forces.
Senator Gardner. And I believe you may have had this
conversation with Senator Perdue in relation to his questions.
But what has sort of our position and our inability to really
effect change in Crimea--what has that done to our allies in
the region from their perspective when it comes to U.S.
assistance or aid like Georgia and others?
Ms. Nuland. Well, I think we are, as I said earlier, trying
to change the way we approach Georgia. So our security
assistance is less about preparing them to deploy elsewhere and
now more about hardening their self-defenses, their resilience,
their ability to ensure that they do not lose further
territory. So that is very much in keeping with what they want.
I think there is concern in the region with the increased
militarization that we are seeing in Crimea, and that is
something that we are concerned about and allies and partners
are raising with Russia as well.
Senator Gardner. I guess this past January I had the
opportunity to visit NATO headquarters in Brussels, visited
directly with General Breedlove and talked about sort of the
Russian situation both in Ukraine and beyond, threats to
Estonia, the Baltics, and others. How well prepared do you
believe NATO is to counter the Russian threat if it does,
indeed, lead to aggression in the Baltics or Poland?
Ms. Nuland. Well, Senator, I think this is one thing we can
all be proud of, is the work we have done through the European
Reassurance Initiative with your terrific support. And as you
know, the administration has put forward a fourfold increase
for $3.4 billion this year for European Reassurance. We now, as
compared to just 2 years ago, have U.S. forces and other NATO
forces, land, sea, and air, in all of those countries. We have
prepositioned equipment. We have a much more aggressive
training schedule. We have worked with each of those countries
bilaterally on the continuum of security from border security,
civilian security, to military security. We now have NATO
headquarters elements in each one of those six countries. So it
is a much tougher and harder target for Russia, and we have
made clear that that deterrent will continue.
Senator Gardner. With that being said, though, do you agree
or disagree with the assessment? I believe it was a RAND study
just a few months ago that said if Russia decides to move on
Europe, that it would just take a matter of days before they
could overpower NATO. Is that an inaccurate assessment then?
Ms. Nuland. Again, I have not read the--I have read the
summary, but not the details of the RAND study that you saw.
I think a Russia that challenged NATO would ultimately come
to grief over that.
Senator Gardner. But, I mean, the assessment said it would
take 3 days. There is going to be grief over that. I agree. I
mean, it would be disastrous.
Ms. Nuland. I mean, I have seen various studies that say
that Russia would take some territory in the initial phases,
but I have every confidence that NATO would be able to restore
sovereignty.
Senator Gardner. Do our allies in the Baltics share that
confidence?
Ms. Nuland. What they want from us is continued presence,
particularly presence of American forces. So these rotational
elements that we have been able to maintain through the ERI are
extremely important where we have had 700 young Americans out
there in these countries on a regular rotational basis. So it
is on that basis that we ask you to continue to support ERI and
particularly the very big increase that we have asked for in
2017.
Senator Gardner. And what do you anticipate in terms of the
agreements to fulfill their 2 percent requirement in Europe
that will be ultimately achieved?
Ms. Nuland. It remains a problem. We are doing better at
reversing the slide. We have very few allies now, just a
handful, who are still cutting, and we are now starting to
see--I think we have 12, 13 allies who have started to grow
their defense budgets again. But this is very much a focus of
all of our bilateral/multilateral work, as we head to the
Warsaw Summit, to be able to say that we have definitively
started to grow back to 2 percent all across the alliance.
Senator Gardner. I am running out of time here, but I would
like to ask you this. If you could get back to me on this
point. With the RAND assessment, I would like to know whether
or not you agree, at this point in time, whether or not that is
an accurate assessment of NATO's capabilities in Europe.
Ms. Nuland. We will take a look at that and get back to
you.
Senator Gardner. Thank you.
The Chairman. Well, thank you, Madam Secretary. We
appreciate you being here today and your service to our
country. I think, you know, obviously, the topic today was the
reforms inside Ukraine that need to occur. And we want to see
those happen but on the other hand understand the constraints.
I think you heard from people on both sides of the aisle
that a concern exists relative to our pushback against Russia
and their ability to punch way beyond their weight. No doubt
some of this--a lot of this is right in their neighborhood and
causes them to have greater influence than they would
otherwise.
But I think again the balance here is that, yes, we need to
continue to encourage and work with Ukraine to create the
necessary reforms inside the country. But I think there is
still dissatisfaction, generally speaking, with the pushback
that has taken place relative to Russia, and we still want to
push the administration to assist Ukraine as much as possible.
I am very disappointed with the outcome in Syria and
Russia's ability to take advantage of a vacuum that we allowed
to exist. They have played an outsized role there in a way that
has put us in a very difficult situation.
So, anyway, we thank you for your service. We appreciate
your comments. We look forward to working with you.
And with that, we will call on panel two.
Ms. Nuland. Thank you very much.
The Chairman. We thank you for sitting through that and
hopefully it will be somewhat helpful with your questions in a
moment.
We want to thank our second panel for being here. Our first
witness is Mr. Ian Brzezinski, Brent Scowcroft Center on
International Security at the Atlantic Council in Washington,
D.C. Mr. Brzezinski served as Deputy Assistant Secretary of
Defense for Europe and NATO policy from 2001 to 2005. We thank
you for your continued involvements in helping us with this
topic.
The second witness is the Honorable John E. Herbst,
Director of the Dinu Patriciu Eurasia Center also at the
Atlantic Council from 2003 to 2006. He served as our Ambassador
to Ukraine. We thank you for the knowledge you are going to
share with us today.
If you could, summarize your comments in about 5 minutes,
and without objection, your written testimony will be a part of
the record. And if we could begin in the order you were
introduced, we would appreciate. Again, thank you both.
STATEMENT OF IAN BRZEZINSKI, SENIOR FELLOW, BRENT SCOWCROFT
CENTER ON INTERNATIONAL SECURITY, ATLANTIC COUNCIL, WASHINGTON,
DC
Mr. Brzezinski. Chairman Corker, Ranking Member Cardin,
members of the committee, I am honored to participate in this
hearing addressing the progress of reform in Ukraine after the
Maidan Revolution and the launch of Russia's invasion of that
country.
Those two events transformed the course of history in
Ukraine.
The Maidan Revolution was a powerful demonstration of
popular demand for democracy and good governance and also the
nation's desire to be a fully integrated member of the West.
The second event, Russia's unprovoked military invasion of
Crimea and eastern Ukraine, stands among the most dramatic
actions in President Putin's campaign to reestablish Moscow's
control over the space of the former Soviet union.
What is at stake is of critical interest to the United
States. If allowed to succeed, Putin's ambitions will lead to a
new confrontational divide in Europe between a community
defined by self-determination, democracy, and rule of law and
one burdened by authoritarianism, corruption, hegemony, and
occupation.
It is in this context that Ukraine launched its most
aggressive effort at comprehensive economic and political
reform since attaining independence. This undertaking has been
only made more challenging by the tragedies caused by Russia's
invasion: 9,000 Ukrainian deaths, countless wounded, 1.6
million internally displaced persons, and the loss of
economically valuable territory.
Ukraine's reform efforts have also been undermined by
Russia's decades-old campaign of subversion, one that includes
information warfare, energy embargoes, economic sanctions, and
terrorist and cyber attacks.
Despite these challenges, Ukraine has made progress. Its
tax collection, pension, government procurement systems have
improved. New vetted and trained police forces operate in Kyiv,
Lviv, Odesa, Kharkiv, and elsewhere. Anti-corruption laws have
been passed, and a government austerity program is being
implemented.
With that said, and as was pointed out by Assistant
Secretary Nuland, the process of reform is far from complete.
It moves too slowly and remains too easily reversible.
A strategy to assist Ukraine must integrate initiatives to:
1) impose greater costs on Russia for its aggression; 2)
enhance Ukraine's capacity for self-defense; 3) assist
Ukraine's efforts at reform; and 4) further its integration
into the Euro-Atlantic community.
Towards these ends, current targeted sanctions against
Russian individuals and firms should be escalated toward
broader and more comprehensive sectoral sanctions, including
against the Russian financial and energy sectors. Today's
sanctions may be hurting the Russian economy in the context of
low oil prices, but if their intended outcome has been to deter
Russian aggression, they have failed.
One specific step that was mentioned earlier today is to
embargo the sale of spare parts to Russia's vulnerable oil
refinery industry. This step, first proposed to this committee
by former Under Secretary of State Paula Dobriansky, would
degrade an important source of revenues that help sustain
Russian military operations.
Second, NATO should significantly reinforce its presence in
Central Europe. Larger and more responsive exercises and
operations and the establishment of bases in Poland and the
Baltic States equipped with brigade and battalion-level
capacities, respectively, are in order. These are reasonable
steps in light of Russia's military buildup and the magnitude
of its aggression in the region.
Third, western assistance has been helpful to Ukraine's
armed forces, but the time is long overdue to grant Ukraine the
lethal defensive equipment it has requested. The provision of
anti-tank, anti-aircraft, and other systems would complicate,
add risk, and increase the cost of operations against Ukraine.
In light of Moscow's rhetoric and its belligerent force
posture, this requirement has not lost its urgency.
We must do more to counter Russia's significant information
campaigns. This is not just a media battle. It is also a matter
of physical presence. U.S. consulates should be established in
key cities such as Odesa and Kharkiv. This would expand
economic ties between these cities in the West and provide us
greater situational awareness of the surrounding regions.
Fifth, we should work to link Ukraine's energy sector to an
emerging north-south corridor of gas and oil pipelines in
Central Europe. This corridor linking the Baltic, Black, and
Aegean Seas promises to unify Central European energy markets
and bind them into the broader European energy market. A robust
Ukrainian link to the North-South corridor would further
diversify Ukraine's energy supplies, facilitate Ukraine's
integration into an emergent single European energy market, and
actually strengthen Europe's energy resiliency--Europe as a
whole--by enabling it to leverage Ukraine's significant gas
storage facilities.
Sixth, we should assist Ukraine to design a national
strategy to restructure its defense industry, a very
significant element of its economy, so that it can become
better aligned with western business practices and western
market structures.
Finally, assistance to Ukraine and its reform efforts
should rest upon a firm embrace of Ukraine's transatlantic
aspirations. Those aspirations are powerful drivers of reform.
Mr. Chairman, the recommendations I listed are prudent,
defensive, mutually reinforcing, and consistent with the
desires of the Ukrainian people to live in peace, freedom, and
under the rule of law and to see their nation become a fully
integrated member of the West. They, thus, also enhance the
prospects of peace in Europe.
Thank you.
[Mr. Brzezinski's prepared statement follows:]
Prepared Statement of Ian J. Brzezinski
Chairman Corker, Ranking Member Cardin, members of the committee, I
am honored to participate in this hearing addressing the progress of
reform in Ukraine following the Maidan Revolution and Russia's invasion
of that country.
Two years ago, the course of history in Ukraine was transformed by
those two events. The Maidan Revolution, also known as the Revolution
of Dignity, was a powerful demonstration of popular demand for
governance defined by democracy, transparency, and rule of law. That
demand's articulation also underscored Ukraine's desire for full
integration into the Western community of democracies.
The second event, Russia's unprovoked military invasion of Crimea
and eastern Ukraine, stands among the most dramatic actions in Russian
President Vladimir Putin's sustained campaign to reestablish Moscow's
control over the space of the former Soviet Union. A central objective
of this campaign has been to reverse Ukraine's western orientation and
re-subordinate the country to Moscow's dominion.
We should have no doubt that this aggression has profound
implications for the security interests of the transatlantic community,
including the United States.
President Putin's seizure and continued occupation of Crimea and
eastern Ukraine violates the principles of sovereignty that have
sustained peace in Europe since World War II.
Second, this invasion shattered the 1994 Budapest Memorandum in
which the United States, the United Kingdom, and Russia committed to
respect and protect the territorial integrity of Ukraine in return for
Kyiv giving up the significant nuclear arsenal it inherited from the
USSR. Moscow's aggression, thus, is a serious blow to the efforts to
curb the proliferation of nuclear weapons via international accords.
Third, President Putin has justified the invasion of Ukraine on his
assertion of a unilateral right to redraw borders to protect ethnic
Russians. This reintroduces to Europe the principle of ethnic
sovereignty, a dangerous principle that provoked wars and resulted in
countless deaths in earlier centuries. We had all hoped it had been
relegated to the past.
Fourth, Russia's incursion into Ukraine is a direct threat to the
vision of an Europe, whole, free, secure and at peace. For the second
time in a decade, Putin has invaded a country simply because it wanted
to join the West. If allowed to succeed, his ambitions will create a
new confrontational divide in Europe between a community defined by
self-determination, democracy, and rule of law and one burdened by
authoritarianism, corruption, hegemony and occupation.
It is in this context that that Ukraine launched its most
aggressive effort at comprehensive economic, political and legal reform
since attaining independence. This undertaking has been made both more
challenging and more urgent by Russia's military aggression. The
invasion of eastern Ukraine caused over 9,000 Ukrainian deaths, left
countless wounded and traumatized, and generated 1.6 million internally
displaced persons. Russia today occupies some 9% of Ukraine's
territory, including some of the latter's most important industrial and
tourist zones. These tragedies, needless to say, impose significant
burdens upon the nation's struggling economy.
In recent weeks, the military standoff in eastern Ukraine--which
despite the Minsk agreements has one been of sustained low intensity
warfare--has deteriorated. We are once again seeing an increase in
active combat featuring sniper, mortar and artillery fire and other
aggressive Russian operations along the line of contact. EUCOM
Commander General Phillip Breedlove recently testified that Russia has
moved over 1,000 pieces of military equipment into the occupied areas
over the last twelve months.
Since its occupation, Crimea has experienced a steady and
significant build-up of Russian military forces. It is being steadily
transformed into the hub of an anti-area/access denial zone extending
deep into Ukraine-proper and much of the Black Sea region. Large-scale
Russian snap ``exercises'' in its Western Military District and the
Black Sea remind Ukrainians that their country remains at risk to
deeper aggression.
Ukraine's reform efforts are not only challenged by these military
incursions, they are undermined by Russia's decades old campaign of
subversion, one that has only intensified over the last two years.
Moscow has conducted an aggressive disinformation effort intended to
disillusion Ukrainians with their own government, independence, and
their aspirations to become part of the West. This ``full spectrum''
campaign includes: energy embargoes and gas price escalations; economic
and trade sanctions; and terrorist and cyber-attacks, among other
elements.
Despite these challenges, Ukraine has made progress in reform since
the Maidan revolution. Its government has taken measures to improve tax
collection, its pension systems and the transparency and fairness of
its procurement systems. New, vetted, and trained police forces have
been introduced in major cities, including Kyiv, Lviv, Odesa, and
Kharkiv. Anti-corruption and public asset disclosure laws have been
passed, and a government austerity program is being implemented that
features a significant reduction in energy subsidies and social
benefits.
With that said, the process of reform is far from complete, is not
moving fast enough, and remains easily reversible. Significant
challenges remain, including systemic corruption, oversized state-owned
enterprises, powerful oligarchs, and a weak judicial system lacking
robust prosecutorial institutions. Political dysfunction, as evidenced
in recent weeks, reflects the endemic character of these impediments.
However, as we assess Ukraine's progress it is useful to compare
how its situation today differs from that of Poland, one of Central
Europe's post-Cold War success stories. When Poland emerged from Soviet
domination, it was warmly received by Europe and the United States. Its
aspirations to join NATO and the European Union were robustly embraced,
encouraged, and supported. Its aggressive ``big bang'' reforms were
undertaken in a geopolitical environment that was by and large benign.
It faced no real force that was capable of actively undercutting its
independence and integration into the West.
Ukraine has faced a different context. Its initial pursuit of
independence generated warnings of caution against national extremism.
After attaining independence in 1991, its expressions of interest in
NATO and the EU membership were largely dismissed. And, it was
confronted by a Russia that refused to recognize Ukraine as an enduring
reality. From day one of Ukraine's reemergence as an independent
nation, Moscow worked to undermine its government, its soveriegnty, and
its ties to the West. These efforts increased as Russia's economy and
military became more robust, particularly over the last decade and a
half, the period corresponding with President Putin's rule.
The transatlantic community, including the United States, has a
significant stake in assuring Ukraine's trajectory as a modern,
democratic and prosperous European state. A strategy to assist Ukraine
in accomplishing that objective must integrate a set of immediate and
longer term initiatives that will impose greater economic and
geopolitical costs on Russia for its aggression, enhance Ukraine's
capacity for self-defense, and assist Kyiv's efforts to reform its
political and economic institutions, and integrate the nation into the
Euro-Atlantic community. These initiatives should include:
Increased economic sanctions against Russia: Current economic
sanctions imposed on Russia have proven insufficient. For two years,
Moscow has refused to withdraw from Crimea and eastern Ukraine. In
fact, it has used that time to consolidate its control over those
regions and has sustained, if not increased, its other coercive
activities against Ukraine and other nations, including Georgia and
Moldova. Today's sanctions may be hurting the Russian economy in the
context of low oil prices, but if their intended outcome has been to
deter Russian aggression, they have failed by that measure.
Instead of debating whether or not to sustain sanctions against
Russia, the West should move to escalate those measures from targeted
sanctions aimed against specific Russian individuals and firms to
broader and more comprehensive sectoral sanctions against the Russian
financial and energy sectors.
One step in that direction that should be taken is to target
Russia's vulnerable refinery industry. While Russia is a top producer
of oil, its refining capacities are antiquated, have little spare
capacity and are dependent upon Western, particularly U.S., spare
parts. Former Under Secretary of State for Global Affairs Paula
Dobriansky proposed to this committee that the West impose an embargo
of exports to Russia of such equipment, including pumps, compressors,
and catalytic agents.\1\ Such an embargo would significantly impair a
key sector of the Russian economy from which Moscow derives revenues to
sustain its military operations, including those conducted against
Ukraine.
---------------------------------------------------------------------------
\1\ Dobriansky, Paula. Testimony before the Senate Foreign
Relations Committee: The Economic and Political Future of Ukraine.
October 8, 2015.
A more robust NATO posture in Central and Eastern Europe: Today,
NATO's response--including that of the United States--to Russia's
assertive military actions across Central and Eastern Europe remains
underwhelming. When Moscow invaded Crimea, it deployed 20-30,000 troops
and mobilized over 100,000 on its western frontier. Since then Russia
has conducted ``snap'' exercises in Europe involving 50,000 and more
personnel. Western counter-deployments to Central Europe have involved
primarily rotational deployments of company level units. Their limited
character been unnerving to our Central European allies and have
yielded no constructive change in the operational conduct of Russian
forces.
NATO should increase its military presence on its eastern
frontiers, including through the establishment of bases in Poland and
the Baltic states that feature permanently positioned brigade and
battalion level capacities, respectively.
These steps, some of which may be under consideration for approval
at NATO's upcoming summit meeting in Warsaw this July, would build a
context of greater security and confidence to Ukraine's immediate West.
They are reasonable in light of Russia's long-term military build-up in
the region and the magnitude of its aggression against Ukraine. They
would constitute a geopolitical setback for Moscow's regional
aspirations, at least those defined by President Putin
Military Assistance to Ukraine: Since the 2014 invasion of Crimea
and eastern Ukraine, the Ukrainian military has evolved into a more
effective fighting force. This has been particularly evident at the
tactical or field levels where Ukrainian units have learned at great
human cost how to innovatively and effectively counter Russian tactics
and operations.
Training and equipment provided by the United States and other
nations have clearly been helpful, used effectively by the Ukrainians,
and should be expanded. At the institutional and strategic levels,
particular emphasis should be directed to assisting the Ukrainian
defense establishment improve its personnel structures, logistics
systems, medical capacities, intelligence organizations, and command
and control systems.
The time is long overdue for the United States and others to grant
Ukraine the ``lethal defensive equipment'' it has requested. Russia's
large-scale ``snap'' exercises underscore the challenges the Ukrainian
military would face should Putin decide to drive deeper into Ukraine, a
possibility that cannot be discounted in light of Moscow's rhetoric and
belligerent military posture.
The provision to Kyiv of anti-tank, anti-aircraft and other weapons
would complicate Russian military planning by adding risk and costs to
operations against Ukraine. Moreover, the failure of Washington to
provide such equipment is not only disillusioning to Ukrainians, it
signals a lack of determination by the United States to counter this
Russian aggression--particularly when such equipment is shared with
U.S. state and non-state partners elsewhere in the world.
Reinforced Public Diplomacy/Information Warfare: A key priority
must be to counter Russia's significant information campaign aimed to
foster dissension, fractionalization, and turmoil. Russia's propaganda
and disinformation war against Ukraine (and other nations in Europe) is
being waged at levels not seen since the Cold War.
Left unaddressed, the campaign threatens political unity in
Ukraine, including that necessary to undertake essential and painful
economic reforms. There is an urgent need to expand Ukrainian, U.S.,
and international dissemination of accurate, credible information and
news in local languages via all forms of media throughout the country.
Information and public diplomacy operations are also a matter of
presence. The international community should increase its physical
presence throughout Ukraine, particularly in those regions where
Russia's subversive operations are most active and concentrated. Toward
this end, the United States should establish consulates in key cities,
including Odesa and Kharkiv. Such a presence would communicate U.S.
resolve to support Ukraine's sovereignty, would help expand this
region's economic ties to the West, and provide greater situational
awareness in these regions.
Ukraine's Economic Integration into the West: The U.S. has done
well in mobilizing international financial support needed to mitigate
the costs of Russia's military and economic aggression against Ukraine
and to assist that the latter undertake challenging and painful
economic reforms.
A fundamental objective of this assistance and these reforms should
be to facilitate Ukraine's full integration into the European economy.
Toward this end, two dimensions of Ukraine's economy warrant focused
attention: the energy and defense industrial sectors.
Ukraine has made real progress in reducing its dependency upon
Russian energy supplies, particularly gas. Last year, Kyiv began to
import natural gas through Poland, Hungary, and Slovakia via pipelines
that had been reconfigured for ``reverse flow.'' These imports
underscore the powerful potential of linking Ukraine to an emerging
Central European North-South Corridor of gas and oil pipelines that
will traverse the energy markets that lie between the Baltic, Black and
Aegean seas. This network promises to unify what are still-today
divided Central European energy markets and integrate them into the
broader European energy market.\2\
---------------------------------------------------------------------------
\2\ Completing Europe: From the North-South Corridor to Energy,
Transportation, and Telecommunications Union. The Atlantic Council and
Central Europe Energy Partners, November 2014.
---------------------------------------------------------------------------
Establishing a more robust Ukrainian link to the North-South
Corridor would further diversify Ukraine's energy supplies, facilitate
the integration of Ukraine into the emergent single European energy
market, and strengthen Europe's energy resiliency by enabling it to
leverage Ukraine's significant gas storage capacities.
A second important dimension of Ukraine's economy is its defense
industry. As recently as 2012, Ukraine was the fourth largest arms
exporter in the world with total deals valuing $1.3 billion. Originally
built to supply and sustain the Soviet military, Ukraine's defense
industry remained after independence heavily focused on the Russian
market. Today, the industry, even with the loss of the Russian market
and manufacturing facilities seized in eastern Ukraine and Crimea,
continues to be a significant element of the Ukrainian economy. With
its sophisticated rocket works and heavy equipment and aviation design
and production centers, Ukraine's defense industry ranks in the top ten
of global arms exporters.
Like the rest of the economy, Ukraine's defense industry suffers
from cronyism and corruption, aging, megalithic assets and near total
state ownership. A central objective of Western assistance should be to
help Kyiv design, promulgate and execute a comprehensive national
strategy to restructure that industry so that it becomes more oriented
toward the West and better aligned with Western business practices and
market structures.
Supporting Ukraine's Euro-Atlantic Integration: Finally, assistance
to Ukraine and it reform efforts must reflect an embrace of Ukraine's
transatlantic aspirations. Those who protested and sacrificed
themselves on the Maidan were very much motivated by their nation's
aspiration to become a fully integrated member of Europe and its key
institutions. Indeed, it is this aspiration that Moscow today is trying
to crush.
That vision serves as a powerful driver of Ukraine's reform
efforts. Both NATO and the EU should use their respective summit
meetings this Spring and Summer to underscore their support the
eventual integration of Ukraine in to their respective communities. The
Alliance, for example, should use its Warsaw Summit meeting in July to
reiterate its vision that Ukraine and Georgia ``will become members of
NATO.''
conclusion
The Maidan was a powerful demonstration of the Ukrainian peoples'
commitment to democracy and its sovereignty as a European state. That
commitment has been challenged by Russian aggression, including the
occupations of Crimea and portions of Eastern Ukraine. From this
conflict, Ukraine has emerged more unified and more determined to
become a full member of the Western community of democracies. They
deserve our full support.
The recommendations outlined above are prudent, defensive, mutually
reinforcing, and consistent with the aspirations of the Ukrainian
people to live in peace, freedom, and under the rule of law and to see
their nation become a fully integrated member of the transatlantic
community. They, thus, also enhance the prospects of peace in Europe.
The Chairman. Thank you very much.
Ambassador Herbst?
STATEMENT OF HON. JOHN E. HERBST, FORMER U.S. AMBASSADOR TO
UKRAINE, DIRECTOR, DINU PATRICIU EURASIA CENTER, ATLANTIC
COUNCIL, WASHINGTON, DC
Ambassador Herbst Chairman Corker, Ranking Member Cardin,
members of the committee, thank you for the invitation.
For more than 2 years, Ukraine has faced a double
challenge: Kremlin aggression and the crisis of reform.
In May of 2014, newly elected President Poroshenko faced
economic catastrophe and in advancing Russian led finance and
supplied offensive of the Donbas.
Ukraine's sharp economic decline bottomed out in the third
quarter of last year, which was a year of substantial reform
and economic stabilization.
Today there is a largely stabilized line of contact in the
east between Russian forces and their proxies in the occupied
territories and Ukraine's troops to the west. In short, Ukraine
has pulled back from the brink of disaster, but its
circumstances remain difficult.
For a year and a half, the Minsk process has been a key
factor in the effort to bring peace to the east. Ceasefires
have been in effect officially since September of 2014, but
both the Minsk I and Minsk II ceasefires have been violated
regularly with most violations coming from the Russian side.
The terms of the Minsk II agreement were similar to Minsk I
but worse for Ukraine. Under the Minsk II ceasefire, 375
Ukrainian soldiers have died, 1,500 have been injured. Since
the Minsk I ceasefire went into place, Russia has seized over
700 additional square kilometers of Ukrainian territory. This
has not been a real ceasefire.
Minsk II's terms are worse than Minsk I, but they are
adequate as long as the EU insists that sanctions imposed on
Moscow remain in place until Minsk II is fully implemented.
Thus far, sanctions have been the most effective tool that the
West has used to encourage Moscow to end its war in the Donbas.
They are responsible for a 1 to 1.5 percent drop in the Russian
GDP. Last year, Russia's GDP dropped 3.7 percent, wages dropped
up to 10 percent, and the IMF expects Russian GDP to fall again
this year.
It is essential that sanctions stay in place. Chancellor
Merkel has been key in this. She says that Russia's operations
in Syria will not affect sanctions policy, but Chancellor
Merkel's political standing is weaker as a result of the
immigration crisis. If she becomes substantially weaker, the EU
sanctions on Russia are in jeopardy. Her drubbing in Sunday's
provincial elections was not a good sign.
President Poroshenko and Prime Minister Yatsenyuk are the
best senior team in Ukraine's history, but they must make the
right decisions for reforms to succeed. Ukraine's vibrant civil
society, an impressive cohort of young reformers in the Rada
and in minister and deputy minister slots have been encouraging
the president and the prime minister to make those decisions.
Ongoing advice and assistance from the EU, the United
States, and especially the IMF are critical in helping
Ukraine's leadership to make the right choices.
2015 was ultimately a successful year for reform. The
budget passed in 2015 reduced public expenditures by 9 percent
of GDP and cut the budget deficit from 10 to 2 percent.
Parliament passed a host of laws that were also very reform-
minded. Ukraine's GDP dropped 11 percent, but most of that was
in the first half of the year. In the fourth quarter, there was
no decline in GDP, and the IMF projects modest growth for
Ukraine this year.
While reform was substantial in 2015, it was not enough for
many Ukrainians. Critics focused on the absence of any change
in the prosecutor general's office and the judiciary and
claimed that the president and the prime minister were not
interested in going after these major sources of corruption.
Early this year, three reform ministers resigned quietly.
Then Economic Minister Abramavicius resigned complaining that
he could not do his job because of corruption, and that
corruption went all the way to the top. Reformers in civil
society spoke up for Mr. Abramavicius, so did the U.S., the EU,
and the IMF. In response, President Poroshenko called for the
removal of Prosecutor General Viktor Shokin, and the Rada
passed reform legislation that had been blocked for months.
In February, two parties resigned from the coalition. Since
then, President Poroshenko's party has been negotiating with
other parties to ensure that it retains the majority. Those
negotiations continue. The president has to name a prime
minister who can gain a majority of votes in the Rada and who
is acceptable to the West and especially the IMF.
This whole affair, starting with the resignation of the
economic minister, has damaged Ukraine's reform credentials.
Many observers read the headlines and assume that reform in
Ukraine has not made progress, but that is not true. Progress
has been made consistently since 2014, and even during this
crisis, the Rada passed reform legislation.
Under the current lineup in the Ukrainian Government and in
the Rada, there will always be one step backwards before you
get to two steps forward for reform. This is the way that
progress will take place in Ukraine, and we need to understand
that.
The Obama administration has a mixed record regarding
Moscow's aggression and its support for Ukraine. It has been a
strong and effective advocate for imposing and maintaining
sanctions on Russia. Dan Fried and Toria Nuland should get
credit for that.
The Obama administration has also provided important
military training and some hardware to Ukraine, as Toria
outlined. And the administration also understands the way
reform will move in Ukraine. Vice President Biden has been a
great advocate for reform in Ukraine.
But the Obama administration has failed to recognize the
magnitude of this crisis. President Obama has said that the
crisis in Ukraine is a regional crisis. This is false. When a
nuclear super power changes borders in Europe by military
force, this is a global crisis requiring strong American
leadership.
Mr. Putin has not hidden his goal of changing the post-Cold
War order in Europe, which is a vital threat to American
interests. To increase the odds that Mr. Putin does not commit
aggression elsewhere in Europe, we must help Ukraine defeat
Moscow's war in the Donbas. At an absolute minimum, we should
make the war on Ukraine by Russia as painful as possible for
the Kremlin.
With these goals in mind, we should provide Ukraine with
robust military support, at least $1 billion a year for 3
years. Ukraine needs four to six more units of counter-battery
radar for long-range missiles. Ukraine needs lethal defensive
weapons to defeat Russia. If the U.S. had provided 25 Javelins
to Ukraine in January of 2015, Ukraine forces would have
defeated Moscow's Debaltseve Offensive. If we gave Ukraine 50
Javelins today, we would make it very, very painful for Russia
to continue its territorial aggression in Ukraine.
There is another reason for thwarting the Kremlin
aggression. Moscow's war against Ukraine, the seizure of Crimea
is the single greatest blow to the nuclear nonproliferation
movement ever. Ukraine gave up its nuclear weapons in return
for assurances from Russia, from Great Britain, from the United
States, and from France, and we have ignored those assurances.
Our economic assistance should also be much greater. It
should be seen as an investment in our security, a point that
former Treasury Secretary Larry Summers has made in advocating
$10 billion of western aid for Ukraine. The U.S. should
shoulder up to $5 billion of this package. It should consist of
loan guarantees, direct budget support, debt swaps, as well as
assistance to support reforms in key sectors such as banking.
Coupled with strong military assistance and the maintenance
of sanctions on Moscow, a large aid package would help Ukraine
defeat the Kremlin's aggression and transform itself into a
prosperous democracy with close links to the West.
Thank you. I am sorry for going over my time.
[Ambassador Herbst's prepared statement follows:]
Prepared Statement of Ambassador (Ret.) John E. Herbst
Chairman Corker, Ranking Member Cardin, members of the committee,
thank you for the invitation to speak this morning. It is an honor.
For over two years, Ukraine has faced a double crisis. The first
concerns the war of aggression waged by the Kremlin; the second is the
crisis of reform. The two are related because it was the determination
of the Ukrainian people, in the face of the corrupt and increasingly
authoritarian Yanukovych government, to pursue reform that ultimately
led Viktor Yanukovych to flee Ukraine in February of 2014. This, in
turn, prompted the Kremlin to annex Crimea in March of 2014 and to
launch an increasingly open hybrid war in the Donbas.
In late May of 2014, newly elected reform President, Petro
Poroshenko, faced an advancing Russian-led/financed/supplied offensive
in the east and economic catastrophe throughout the country. Ukraine's
international reserves dropped steadily through 2014 and reached a low
of $5 billion in February of 2015. Today, there is a largely stabilized
line of contact in the east between Russian forces and their proxies in
the occupied territories and Ukrainian troops to their west.
Ukraine's economic decline of nearly 10 percent in 2015 bottomed
out in the third quarter, with zero growth in the fourth quarter and
actual growth projected for 2016. And thanks to a raft of reform
legislation that passed the Rada, Ukraine's parliament, in early 2015,
the International Monetary Fund, the European Union, the United States
and other countries provided $5 billion in economic assistance to
buttress Ukraine's foreign reserves. As of today, Ukraine's reserves
are $13 billion. The IMF is expected to release the next tranche of its
$17.5 billion package in the coming months.
In short, whether looking at the war, the economic condition of the
country, or the state of reform, Ukraine has pulled back from the brink
of disaster, but its circumstances remain difficult. Still, the
understanding of Ukraine's circumstances and the West's interests in
Ukraine remain rudimentary--although much better in Congress than in
many European capitals.
the military situation and minsk
For a year and a half, the Minsk process has been a key factor in
the military situation in the east. To understand the present situation
in the Donbas, it is useful to review briefly the origins and evolution
of the war.
The problem starts, of course, with the Kremlin's decision first to
seize Crimea and then to launch a covert war in Ukraine's east in April
of 2014. The Kremlin believed that it would be able to turn much of the
east and--from Luhansk in the north to Donetsk and Kharkiv to its south
and all the way to Odesa in the southwest--into a zone of influence by
providing leadership, money, and arms for an uprising against the
reform government that took office after Mr. Yanukovych fled Kyiv. This
ambitious effort to create a ``Novorossiya'' failed as the residents of
the area were not interested in fighting against the government in
Kyiv. Indeed, polls taken in the Donbas in January of 2014 showed that
no more than 25 percent of the population favored either independence
from Ukraine or joining Russia (similar polls in Crimea at that time
showed that no more than 40-43 percent of the population there favored
those options).
While this ersatz rebellion failed in most of Ukraine's east and
south, with the help of Russian ``political tourists'' and
``volunteers,'' it enjoyed some success in the Donetsk and Luhansk
Oblasts. For six weeks, with little and ineffective Ukrainian
resistance, this rebellion marched westward taking the cities of
Kramatorsk and Slovyansk. The Kremlin's objective in conducting this
covert war was to produce political changes in Kyiv that would lead to
the installation of a government beholden to Moscow; or, if that was
too difficult, to destabilize the reform government that replaced Mr.
Yanukovych.
Shortly after taking office in late May of 2014, Mr. Poroshenko
launched a counteroffensive to halt the advance of Russian forces in
the Donbas and to retake lost territory. For two months the
counteroffensive went from victory to victory, despite the Kremlin
taking increasingly hostile measures to thwart it. These measures
included the introduction of T-64 and then T-72 tanks, the dispatch of
the ``volunteer'' Vostok battalion of Chechens, the firing of long-
range artillery by Russian forces in Russia, and the deployment of
increasingly sophisticated anti-aircraft batteries, including the BUK
missile that shot down the Malaysian airliner in mid-July of 2014.
In mid-August of 2014, with Ukrainian troops on the verge of
encircling the Moscow-supported forces in Donetsk and Luhansk, several
thousand regular Russian troops invaded and defeated the Ukrainian
troops within three weeks. The shoot-down of the Malaysian plane and
the Russian invasion prompted the European Union to join the United
States in imposing sectoral sanctions on Russia--serious measures that
the Kremlin had hoped to avoid by keeping hidden its role in Ukraine's
war.
Under OSCE auspices, Ukraine and Russia negotiated the Minsk I
ceasefire in September of 2014. The agreement called for an immediate
ceasefire, an end to offensive operations, the withdrawal of heavy
weapons 15,000 kilometers behind the line of contact, the withdrawal of
all foreign fighters and equipment from the occupied areas, the passage
of decentralization legislation in Ukraine and the holding of elections
in the occupied areas, freedom from prosecution for those involved in
the fighting in the Donbas, OSCE monitoring of the ceasefire and the
border between Russia and Ukraine, and the return of the border to
Ukrainian control.
The senior group for negotiations on the Kremlin's hybrid war in
Ukraine is the so-called Normandy format, consisting of German
Chancellor Angela Merkel, French President Francois Hollande, Russian
President Vladimir Putin, and Mr. Poroshenko. This format was
established in June of 2014, when the four leaders met in Normandy to
celebrate the 70th anniversary of the Allied invasion of Nazi-occupied
France. This setup suits France, Germany, and Russia. Ukraine would
prefer to include the United States. But Washington has never insisted
on joining the talks.
Violations of Minsk I Lead to Minsk II
The Minsk I ceasefire was violated from the very beginning. While
both sides committed violations, it was the Russian-backed side that
conquered an additional 500 square kilometers between September of 2014
and February of 2015, when the Minsk II protocol was signed. Indeed,
negotiations on Minsk II began as result of the Russian offensive to
take Debaltseve in southeast Ukraine, which began in early January of
2015.
The terms of the Minsk II agreement were similar to Minsk I, but
worse for Ukraine. Specifically, Minsk II gives the authorities in the
occupied areas the right to organize and control their own militia. Mr.
Poroshenko's motivation for signing Minsk II may have been to save the
Ukrainian army that was defending Debaltseve. It was nearly encircled
by Russian forces. German and French officials claim that they put no
pressure on Mr. Poroshenko to sign these unfavorable terms, and that
Chancellor Merkel even asked him if he wanted to accept these onerous
conditions. Ukrainian officials state that the French and the Germans
were anxious for Mr. Poroshenko to sign.
It is noteworthy that while Minsk II was signed on February 12, the
Russian side insisted that the ceasefire only go into effect February
15. Moscow wanted to use the additional three days to capture
Debaltseve. This tactic did not work. On February 15, Debaltseve was
still in the hands of Ukrainian forces. So Moscow and its proxies
violated the Minsk II ceasefire from its first hours as they continued
the offensive to take the town, which required a few more days.
After the Kremlin's minions took Debaltseve, violations of the
Minsk II ceasefire continued, averaging 70 to 80 incidents a day. The
majority of these violations were committed by the forces in the
occupied territories. In September of 2015, Moscow decided to dial down
the violence in the Donbas as it turned its military attention to
Syria. But even that did not lead to a true ceasefire. Daily firing
incidents averaged 30 to 40. Moscow was hoping that by reducing the
violence, it might persuade the EU to lift, or at least ease, the
painful sectoral sanctions that would be reviewed in December. Moscow's
hopes were not fulfilled as the sanctions were renewed for an
additional six months.
In January, Moscow chose to up the pressure in the Donbas and the
number of daily violations jumped again to over 70. The authorities in
the Luhansk and Donetsk Peoples' Republics have continued to hinder the
work of the OSCE's Special Monitoring Mission (SMM) in verifying the
removal of heavy weapons and in observing the Ukrainian/Russian border.
Since the Minsk II ceasefire went into effect, Moscow's forces have
taken hundreds of square kilometers of Ukrainian territory, and killed
over 375 and wounded over 1,500 Ukrainian soldiers.
The number of Russian troops in the Donbas is a matter of dispute.
Ukrainian intelligence has regularly reported that number as between
8,000 and 12,000. In late 2014, Western sources were putting that
number at 400-800. But in March of last year, LTG Ben Hodges,
Commanding General of U.S. Army Forces Europe, put that number at
12,000. Earlier this month, Assistant Secretary of State for European
and Eurasian Affairs, Victoria Nuland, spoke of ``thousands'' of
Russian soldiers in Ukraine.
The Kremlin has devoted much attention and energy to hiding its
aggression in the Donbas--just as it did in Crimea until Putin decided
to boast about his success in a triumphal documentary on the ``return''
of Crimea to Russia in March of 2015. At a press conference last
December, Putin also publicly acknowledged that the Russian military
was in Ukraine. ``We never said there were not people there who carried
out certain tasks including in the military sphere,'' Putin said. But,
he asserted without elaboration, this was not the same as regular
Russian troops.
In their military operations, the Kremlin was surprised first by
the unwillingness of the people in the east, including ethnic Russians,
to join the rebellion against Kyiv and then the stubbornness of
Ukraine's defense. That defense has been a source of pride to the armed
forces and people of Ukraine. Moscow now has no expectations that it
can somehow engineer a sympathetic government in Kyiv. It also
understands that it would take a large, conventional offensive
involving hundreds of tanks and/or airpower to make a major
breakthrough Ukraine's well dug in lines. That option is inexpedient
for domestic and international reasons. But Moscow is still seeking to
wear out Mr. Poroshenko's government by constant military pressure,
including small seizures of territory.
Minsk and Sanctions
The terms of Minsk II are weak and unfavorable for Ukraine, but
they are adequate as long as the EU insists that the sectoral sanctions
imposed on Moscow will remain in place until the terms of Minsk are
fully implemented, including the withdrawal of all foreign equipment
and fighters, the restoration of Kyiv's sovereignty over the entire
Donbas, and Ukraine's control of its border with Russia.
Thus far, sanctions have been the most effective tool that the West
has used to encourage Moscow to end its war in the Donbas. According to
Russian economic officials, the sanctions are responsible for a 1-1.5
percent drop in Russia's GDP. Sanctions have proved a particular
problem for Russian firms turning over debt or seeking new credit.
Russian GDP dropped 3.7 percent and Russian wages dropped 9.5-10
percent in 2015. Sanctions were an important reason for this, although
the drop in hydrocarbon prices played a larger role. The IMF expects
Russian GDP to fall another 1-1.5 percent this year, but other
observers think that GDP contraction this year may be the same as in
2015.
It is essential that the sanctions continue. To the Kremlin's
unpleasant surprise, sanctions have been renewed three times. But some
EU nations are growing restive with the sanctions regime. When Moscow
intervened in the Middle East last September, some prominent European
voices spoke of the need to remove sanctions in order to secure the
Kremlin's support for dealing with issues like Syria.
It quickly became clear, however, that Moscow's military campaign
was directed almost exclusively against the weak and moderate
opposition supported by the West, not against the Islamic State of Iraq
and the Levant (ISIL) or other extremist groups. And by the end of the
year, even that intervention had not achieved much--it only enabled
Bashar al-Assad's regime to recover .004 percent of Syrian territory.
In January, however, the Kremlin took a page from Putin's war in
Chechnya in the late 1990s. It began a massive bombing campaign against
the secular opposition and the civilian population among whom it lived
in the small cities and towns in northwest Syria. This operation has
produced large civilian casualties and prompted major movements of
people out of these locations. This has had two consequences: It has
enabled Assad's forces to take back territory leading to Aleppo, and it
has greatly exacerbated the refugee crisis in Europe.
Without a doubt, the refugee crisis is the greatest political issue
in Europe today. There is some understanding on the continent that
Kremlin policies are contributing to the crisis. For those who do not
like sanctions on Russia, this is another reason to lift them--to
somehow ``trade'' this for an end to Moscow's migration-inducing
bombing campaign. (Of course, Moscow denies it is conducting such a
campaign, so it is not clear that such a deal is possible.)
But for the German Chancellor and others who insist that the
sanctions must remain in place until Russia implements its Minsk
obligations, Moscow's Syria operation will not, in and of itself, lead
to a weakening of sanctions policy. It is true, however, that the
Chancellor's political standing is weaker as a result of her policy of
accepting migrants from Syria and other hot spots to the south. If she
becomes substantially weaker, it could threaten the sanctions policy.
The provincial elections in Germany March 13 were a clear set-back for
the Chancellor. The impact of the election on here political fortunes
and, possibly, sanctions policy will play out in the months ahead.
If this danger appears, it will come in the form of the pseudo-
sophisticated argument that neither Russia nor Ukraine are meeting
their Minsk commitments; therefore, why should only one side (Russia)
be punished with sanctions? Those who dislike sanctions are already
pointing out that Ukraine's Rada has yet to pass a local election law
for the occupied areas or constitutional reform on decentralization,
which would give autonomy to those areas. This argument overlooks the
fact that the Russian side is:
currently occupying Ukrainian territory;
responsible for the most immediate and important violation of the
Minsk agreement--the ongoing fighting in which they continue to
advance into Ukrainian territory; and
hindering the essential monitoring activities of the OSCE.
U.S. Policy and Minsk
The Obama administration has a mixed record in this crisis. On the
one hand, it has been a strong and effective advocate for imposing and
maintaining sanctions on Russia for its aggression in Ukraine. In
encouraging the EU to impose and maintain sanctions, the administration
has demonstrated leadership and skill.
At the same time, U.S. President Barack Obama has said famously,
and incorrectly, that the crisis in Ukraine is a regional crisis; when
a nuclear superpower changes borders in Europe by military force, it is
a crisis of global import.
Mr. Putin has not hidden his goal of changing the post-Cold War
order in Europe--a vital threat to American interests. As part of his
revanchist agenda, Mr. Putin has invoked his right and duty to protect
ethnic Russians and even Russian speakers wherever they live--a
principle he used to justify aggression in Georgia and then Ukraine. If
emboldened, he could use that principle to intervene in Estonia or
Latvia, where ethnic Russians total 25 percent of the population. We
have an Article 5 obligation to protect our Baltic NATO allies in the
face of Kremlin aggression. Therefore, it is in our interests that
Moscow's aggression in Ukraine fails. At an absolute minimum, we should
make it as painful as possible for the Kremlin.
With this in mind, we should be providing Ukraine with robust
military support to the tune of at least $1 billion a year. We are
providing some military training and some equipment and hardware, but
more needs to be done. Most importantly, Ukraine needs more units of
counter battery radar for long-range missiles. Last September, the
Obama administration sent two such units to Ukraine. Washington should
send an additional four to six units.
It is also long past time for the Obama administration to send
lethal defensive equipment to Ukraine. Russia has seized over 700
square kilometers of additional Ukrainian territory since the Minsk I
ceasefire. Their most effective tactic for these offensive actions is
the massing of tanks. According to military experts, if we had provided
25 Javelins to Ukraine by January of 2015, Ukrainian forces would have
defeated Moscow's Debaltseve offensive.
Providing defensive lethal weapons would either persuade the
Kremlin to stop seizing more Ukrainian territory or it would force
Moscow to accept more casualties and to greatly escalate to secure
territorial gains. But that would be politically risky for Mr. Putin
because his public does not want its soldiers fighting in Ukraine and
the Russian president has been hiding this fact from them. The bottom
line is that providing such weaponry to Ukraine raises the cost of
Moscow's aggression and reduces the odds of Kremlin provocations
against our Baltic allies.
To help ensure that the Minsk negotiating framework does not
disadvantage Ukraine, the Obama administration should be seeking to
join as a full partner. It is true that our diplomats keep a close
watch on Minsk, but that is not the same as being part of the process.
Assistant Secretary Nuland met Vladislav Surkov, a senior Kremlin
official responsible for policy in the Donbas, in January. But there
was no clear outcome to those talks or announced plans for follow-up
meetings.
There is one more reason for a robust American role in thwarting
Kremlin aggression in Ukraine. It is especially appropriate to broach
this reason now, with a nuclear summit looming in Washington. Moscow's
war against Ukraine and seizure of Crimea is perhaps the single-largest
blow to the nuclear nonproliferation movement ever.
In 1994, Ukraine, along with Belarus and Kazakhstan, voluntarily
gave up its nuclear weapons. In exchange, Russia, the United States,
and the United Kingdom provided assurances for Ukraine's sovereignty
and territorial integrity. Russia's aggressions violated this
memorandum, and various international treaties. Washington's
insufficiently resolute response to that aggression demonstrated, I am
sorry to say, the hollowness of our assurances. This whole episode
provides a clear and negative lesson to nations on the dangers of
denuclearization.
reform and the economy
Petro Poroshenko is a Ukrainian businessman and politician who has
been successful financially and politically under every government in
Ukraine since President Leonid Kuchma. He was a member of the Rada in
the Social Democratic Party, which supported Mr. Kuchma. He was a
founding member of the Party of the Regions--the party later headed by
Viktor Yanukovych. He then became part of President Viktor Yushchenko's
political team and had a number of responsible positions in Mr.
Yushchenko's government. And he had enough political agility to serve
in the government of Mr. Yanukovych after that.
When the political crisis began in November of 2013, with the
demonstrations against Mr. Yanukovych's rejection of the Deep and
Comprehensive Free Trade Agreement with the EU, Poroshenko busied
himself maintaining ties with the EU. He was not involved in the day-
to-day demonstrations. This was a plus for Poroshenko because the
mainstream politicians supporting the demonstrators did not burnish
their reform credentials. Their instincts were always more cautious
than the crowd's. This was particularly evident at the climax of the
crisis in mid-February of 2014, when snipers murdered scores of
demonstrators. At that point, politicians like Arseniy Yatsenyuk and
Vitali Klitschko were willing to accept the compromise suggested by the
EU that Yanukovych would stay in office until the end of 2014, when
there would be new elections. A week earlier, that deal would have been
acceptable to the protesters. After the bloodshed, it was not.
So Poroshenko's distance from the Maidan turned into an advantage,
as did his work with the EU. He became the near-consensus candidate for
the presidential elections planned for late May; and he won a stunning
victory, receiving over 50 percent of the vote on the first ballot,
which had never happened before in Ukraine's history. Moreover, he won
over 30 percent of the ballot in every oblast in Ukraine, including in
the east. He was truly a president of the entire nation, something that
Yanukovych or Yushchenko or Kuchma were not. (Yanukovych had very small
support in Ukraine's west, and Yushchenko very little in the east.)
Poroshenko ran on a reform, pro-European agenda.
Poroshenko announced, shortly after assuming office, that he would
not be able to proceed with a strong reform agenda as long as the old
Rada remained in place. Plans were accepted for parliamentary elections
in October. Those elections proved to be a stunning referendum for
reform. Six parties made it into the Rada, of which four ran as pro-
Western reformers. The Poroshenko Bloc won 132 seats; Mr. Yatsenyuk's
People's Front 82; the Self Reliance (Samopomych) Party 33; and Yulia
Tymoshenko's Fatherland Party 19--a total of 266 out of 450 seats in
the Ukrainian parliament.
While Poroshenko's party won a large plurality of seats, Mr.
Yatsenyuk's party won the plurality of votes (22.12 percent to 21.82
percent). A large number of Poroshenko's seats were won in one-man
constituencies without party voting. Mr. Yatsenyuk's strong showing
made him the clear favorite to become prime minister, even though the
president would have preferred a prime minister from his own team. With
political rival Mr. Yatsenyuk in office, tensions between the prime
minister and the president were inevitable. This proved a complicating
factor in reform. Like the President, Mr. Yatsenyuk was a very
successful politician prior to his becoming prime minister. While only
41, he was Minister of Economy and Minister of Foreign Affairs under
Mr. Yushchenko, and Speaker of the Rada.
Both the President and Prime Minister are intelligent and worldly.
They know the language of reform that the West values. They campaigned
and won office as reformers; but were successful too in the old
Ukraine, too. In short, they are classic transitional figures in the
move from the old Ukraine to the new, reform Ukraine.
The Dynamic of Reform in Ukraine
Poroshenko and Yatsenyuk represent the best president-prime
minister team in Ukraine's 25-year history. They must make the right
decisions for reform to succeed. They are encouraged to do so by
Ukrainian civil society, by the impressive cohort of young reformers
who became ministers and deputy ministers, and by the approximately 40
young reformers who became Rada deputies. These are the core drivers of
reform.
There is also a critical foreign element in the reform process. It
consists of those providing assistance and advice for reform in the EU,
the United States, other Western governments, and the IMF and other
international financial institutions. Given the pressures of the old
system on Ukraine's top leadership, it was inevitable that young
reformers in the Ukrainian government and the Rada, and the country's
outside partners would have to be active to keep reform on track. That
is how the reform process has played out over the last 15 months.
Overall Progress in 2015
After the October 2014 Rada elections and the formation of a
government in December, the reform process began in earnest. The
decision to appoint Aivaras Abromavicius as Minister of Economy,
Natalie Jaresko as Minister of Finance, Oleksiy Pavlenko as Minister of
Agriculture, Andriy Pyvovarskiy as Minister of Infrastructure, and
Alexander Kvitashvili as Minister of Health put a solid core of
reformers in key spots. Another key appointment had taken place six
months earlier--the naming of Andriy Kobolev, a known reformer, as the
head of Naftogaz, the national gas company and ground zero for major
corruption in Ukraine.
The government budget presented to the Rada in December of 2014 was
a major vehicle for change; it was also essential to demonstrate to the
IMF that Ukraine was not just pursuing reform, but taking control of
its current account and budget deficits. Without that control, the IMF
would not likely approve the $5 billion loan that Ukraine needed
instantly to service its international debt obligations. As a result of
years of financial mismanagement and the domestic crisis, Ukraine's
reserves had shrunk throughout 2014 and fell to $5 billion by February
of 2015.
Efforts to pass a reform budget ran into problems in the Rada both
from old, vested interests and from populist politicians, who saw the
political value in opposing the cuts in social expenditures and, in
some instances, the increased taxes needed to meet IMF requirements.
Mr. Yatsenyuk and his reform ministers lobbied hard for the budget and
the various reforms, but it was perhaps the IMF that provided the
essential push by simply holding off providing the financial assistance
until the budget passed. In March of 2015, the IMF transferred $5
billion to Ukraine.
The budget that finally passed in February was a large victory for
reform. It reduced public expenditures by 9 percent of GDP--almost all
of its subsidies -- and cut the budget deficit from 10 to 2 percent. An
astonishing achievement. It passed along with legislation moving toward
market pricing for natural gas. The law calls for the move to market
pricing to take place in tranches over two years; but the important
first step went into effect in April. This legislation was one reason
for the sharp drop in gas usage in 2015 of 20 percent and the much-
reduced dependence on imports of Russian gas. (Ukraine had been the
most energy inefficient consumer of natural gas in the world. The
destruction of Ukraine's industry in the east because of Moscow's war
was another reason for the drop in gas consumption.)
March of last year witnessed another a political development with
significant, positive reform implications: the firing of oligarch Ihor
Kolomoisky as governor of Dnipropetrovsk Oblast. Mr. Kolomoisky was
named governor in the spring of 2014 after Mr. Putin began the war in
the Donbas. One of Ukraine's richest men with substantial assets in
Dnipropetrovsk, Mr. Kolomoisky was seen as someone who could
effectively prevent Moscow's minions from taking over in
Dnipropetrovsk. And the expectations were met as he formed and funded
his own battalions that kept his oblast secure. Between his wealth and
(battalion-backed) political power, he was widely seen as the most
powerful oligarch in the country.
When the Rada passed legislation enabling a simple majority of
shareholders to make changes in the management of state owned
companies--another reform measure--Mr. Kolomoisky decided to test his
power. He controlled 42 percent of the shares of Ukrnafta. Under the
old rules, which required 60 percent of shareholders to make management
changes, Mr. Kolomoisky controlled the company, even though the state
owned the majority of shares. When the new legislation opened the way
to changes threatening his control, he sent armed and camouflaged young
men to seize Ukrnafta. In the political storm that followed, Mr.
Poroshenko sacked Mr. Kolomoisky as governor and affirmed the
government's new control over Ukrnafta. Ukraine's most powerful
oligarch was taken down two pegs.
Other important reform measures were introduced in 2015. The
Ministry of Economy greatly simplified procedures for opening a
business--and thereby reducing the number of hands looking for a
handout from new businesses. The government also introduced a system
for government e-procurement known as ProZorro. This transparency is a
major impediment to corruption. In 2015, the cleanup of the banking
system that had begun in the spring of 2014 continued. This cleanup had
led to the closing of 67 insolvent or non-transparent banks out of a
total of 180 banks.
Another reform gathering interest and support was the introduction
of new traffic police in Kyiv, Odesa, Lviv and other major cities. The
new police refrained from the habit of their predecessors and did not
seek bribes from motorists.
The year 2015 was a difficult, but ultimately successful one for
reform in Ukraine and for Ukraine's economy. While Ukrainian GDP
dropped 11 percent, most of that was in the first half of the year and
in the fourth quarter there was no decline in GDP. Despite the
expenditures for defense and the destruction caused by Moscow's
aggression, the IMF projects a modest 1-2 percent growth for Ukraine in
2016.
The improvement by the end of 2015 was significant enough to give
at least some politicians the thought that they could take a populist
approach to the 2016 budget and increase government expenditures and
reduce taxes. Once again, the IMF proved an invaluable ally to
Ukraine's reformers, letting Kyiv know that only a responsible budget
would lead the institution to release the next round of financial aid.
A responsible budget passed in January.
The Storms Hit, And Yet More Progress
While reform progress was substantial in 2015, it was not enough
for many in civil society and at least some reformers in the Rada and
the government. Critics focused on the absence of any real changes in
the Procurator General's Office and in the judiciary and claimed that
the president and prime minister were not interested in going after
these major sources of corruption. Both institutions were known to
facilitate corruption. They pointed to the failure of the government--
through the Procurator General-- to indict any major figures from the
Yanukovych administration for corruption. They complained, too, that
Procurator General Viktor Shokin was a compromised figure who had
served as Procurator General in the Yanukovych administration.
By late fall of 2015, the EU and the United States joined the
chorus of those seeking Mr. Shokin's removal as the start of an overall
reform of the Procurator General's Office. U.S. Vice President Joe
Biden spoke publicly about this before and during his December visit to
Kyiv; but Mr. Shokin remained in place.
Early in the new year Mr. Pavlenko, the Minister of Agriculture;
Mr. Pyvovarskiy, the Minister of Infrastructure; and Mr. Kvitashvili,
the Minister of Health, quietly resigned. This had little impact on the
reform debate. But in early February Mr. Abromavicius, the Minister of
Economy, resigned and complained that he was tired of fighting
corruption. He said that the immediate cause for his decision was an
effort by close presidential aide Ihor Kononenko to install a crony as
Deputy Minister of Economy with responsibility for the newly-cleaned up
Naftogaz. Mr. Kononenko denied the charge, but civil society and other
reformers took Mr. Abromavicius' side.
So did the West. The United States, the EU, and eight Ambassadors
of other countries expressed regret at Mr. Abromavicius' resignation.
So did IMF Managing Director Christine Lagarde. In response to the
controversy, Mr. Poroshenko called for Mr. Shokin's removal and for an
investigation into the charges against Mr. Kononenko. The efforts to
place someone as Deputy Minister of Economy to oversee Naftogaz died.
The Rada passed reform legislation that had been blocked for months.
This legislation was required by the EU for the implementation of the
Deep and Comprehensive Free Trade Agreement.
What is more, Mr. Yatsenyuk engaged with all the reform ministers
to bring them back into the government. Kvitashvili, Pavlenko and
Pyvovarskiy agreed; Abromavicius did not. Pro-reform Deputy Prosecutor-
General Vitaliy Kasko also resigned.
The Political Crisis
The crisis engendered by Mr. Abromavicius' resignation soon became
a political crisis when the Fatherland Party and then the Self Reliance
Party resigned from the ruling coalition. Both are polling well and
believe that they would profit from new elections for the Rada. Mr.
Yatsenyuk's poll numbers are in low single digits and he would like to
avoid new elections. Mr. Poroshenko's numbers are much better, but he
too does not want the distraction of new elections. Mr. Poroshenko's
party has been negotiating with some success with the Radical Party and
with independents to make sure that it has a majority. But negotiations
have not been finalized as of this writing (March13) because all
concerned want to know who will be the prime minister.
The president has to name a prime minister who can gain 226 votes
in the Rada AND who is acceptable to the West and in particular the IMF
as the head of a reform government. The IMF has been withholding the
next tranche of aid pending the outcome of this crisis. That is where
we are now.
This whole affair, starting with Mr. Abromavicius' resignation, has
been a public relations nightmare for Ukraine. Many observers,
including some in responsible positions in the West, read the headlines
and assume that reform in Ukraine has not made much progress and is
currently moribund. That is simply false. Much progress has been made
since Mr. Poroshenko assumed office and even the unseemly tale of the
past few weeks has led to the net reform gain discussed above.
Given Ukraine's stage of development, the continuing (but weaker)
influence of oligarchs, the ongoing dependency on oligarchs for
political funding, and the transitional nature of the country's top
leadership, progress towards reform is bound to be uneven, confusing,
and ugly. None of this should be surprising nor a reason to say that
nothing has changed in Ukraine. The problems of this government are
serious, but this is not a repeat of the failures of the Orange
Revolution. There is a solid core of reformers in the Rada, at the
ministerial and deputy ministerial level in the government, and a
sophisticated civil society.
U.S. Policy: Plus and Minus
Washington's approach to reform and the Ukrainian economy is also
mixed. On the plus side, the Obama administration understands well the
nuances of Ukrainian reform. It recognizes that the government in Kyiv
needs outside encouragement and, at times, tough love, to make the
right reform choice. Mr. Biden, in particular, has devoted a great deal
of time to promoting reform in Ukraine, and he has not been reluctant
to tell Mr. Poroshenko and Mr. Yatsenyuk when they have shirked the
hard choices that need to be made. This was evident in the
conversations regarding Mr. Shokin and the Office of the Procurator
General.
The United States has also provided substantial, but insufficient,
economic support for Ukraine. In FY 2015, we provided $361.8 million in
economic assistance. The budget that has been approved for FY 2017
reduces that to $294.9 million. Both are substantial sums, but not
sufficient to help in the present crisis and not consistent with our
interests.
As Gen. Joseph F. Dunford, Jr., Chairman of the Joint Chiefs of
Staff, has stated, Mr. Putin's revisionist policies make Russia the
greatest national security danger to the United States. We need to
blunt this danger, and the first place to do that is in Ukraine.
Moscow's aggression against Ukraine has greatly increased the burden on
that country's economy. We should consider economic assistance to
Ukraine as an investment in our security, a point that former Treasury
Secretary Larry Summers has made in advocating a Western aid package of
$10 billion.
The United States should shoulder up to $5 billion of this package.
It should consist of loan guarantees, direct budget support grants, and
debt swaps, as well as assistance to support reforms in key sectors,
such as banking, energy, and the judiciary. It could also be used to
encourage investment in Ukraine. Loan guarantees, which have been the
preferred method of support approved by Congress to date, should only
constitute part of the package. There is a limit to how much debt
Ukraine can take on before default. Loans could be paired with direct
budgetary support to assist with balance of payments and debt swaps,
which have a proven track record of helping sustain young democracies:
The United States granted them to Poland in the 1990s.
This aid package is quite large, but not when seen as an investment
in our security or a step to meet our obligations to Ukraine under the
Budapest Memorandum. Coupled with strong military assistance and the
maintenance of sanctions on Moscow, this aid would help Ukraine defeat
the Kremlin's aggression and transform itself into a prosperous
democracy.
The Chairman. No. Thank you very much for your testimony.
Obviously, the title of this hearing has been more about
reforms in Ukraine and concerns that Europe may utilize the
lack of some of those reforms occurring as a reason to loosen
sanctions, which we do not want to see happen.
But could you follow up, Mr. Herbst? It appears that in
your testimony--and I want to ask Mr. Brzezinski the same
thing--that right now you feel that our push towards Ukraine's
reformation process is not balanced, and that we are not doing
enough on the other side of the equation to push Russia. Is
that correct?
Ambassador Herbst Absolutely. Our military support for
Ukraine has been growing, and it is much better today than it
was a year ago, but it is still inadequate. And we still worry
far too much about, quote/unquote, annoying or provoking Russia
than about defending our interests in Ukraine because Mr. Putin
is vulnerable in Ukraine. His people do not want the Russian
army fighting in Ukraine. And there are thousands and thousands
of Russian soldiers right now.
The lethal defensive equipment we would provide would make
it much more painful for Russia to commit its next offensive
action. And while I am not expecting a major offensive, the
Russians are grabbing land every week or trying to grab land
every week. They have taken at least 700 additional square
kilometers under the Minsk ceasefires. We want to make it much
more painful for them to do that.
The Chairman. You heard Secretary Nuland speak to the fact
they have not made decisions yet relative to lethal defense
weaponry. What do you think is stalling the administration's
process? It is evident it is not going to happen. But what is
the reasoning for that?
Ambassador Herbst I think the administration and the
President do not want to provide defensive lethal equipment to
Ukraine because, quote/unquote, it will provoke Moscow. And I
think there is a fundamental geopolitical misunderstanding at
the top. If you understand that changing borders in Europe by
aggression is a major crisis, then you will take steps to deal
with that major crisis.
We have taken good steps, although not enough, to
strengthen the position of NATO, especially the Baltic States
and Poland and Romania. But the point is the Kremlin has been
emboldened, first, by our weak reaction to its aggression in
Georgia, then our weak reaction to the seizure of Crimea. If we
provide Javelins to Ukraine, if we provide, as Ian suggests,
serious anti-aircraft capacity to Ukraine, it would make it
much more painful for the Kremlin to continue its aggression in
Ukraine.
If you believe the article that Jeff Goldberg did in the
``Atlantic'' that Senator Menendez referred to, the President
believes that that will lead to war with Russia. That is simply
false. If we permit the Kremlin to succeed in Ukraine, they
will be embolden to commit provocations in the Baltics where we
have an Article 5 obligation to defend them. And that is more
likely to lead to war, giving the Russians a free hand in
Ukraine, than a policy of helping Ukraine defend itself.
The Chairman. To coin a phrase one of my colleagues used,
it appears that Russia's appetite is growing by eating. In
other words, as they continue to do what they are doing, their
appetite grows for just that.
Mr. Brzezinski, do want to respond to the balance issue and
the lack of lethal defensive weaponry?
Mr. Brzezinski. Yes, sir.
If you look at our current posture and our policies towards
Russia, they have not succeeded in achieving their stated
objectives with regards to Ukraine. After 2 years, Russia still
occupys eastern Ukraine, still occupys Crimea. It has used the
last 2 years to consolidate its position in both. In eastern
Ukraine, over the last year, General Breedlove, the SACEUR
Commander, reported that Russia has moved in over 1,000
additional pieces of heavy equipment. Moscow has tightened its
command and control capacities. Coordination remains deep.
Resupply continues. They have continued to amass forces on
Ukraine's eastern frontier. In Crimea, Moscow has used the time
to transform Sevastopol and the other bases on Crimea into
basically the hub of an A2/AD zone, anti-area/area denial
access zone, that reaches deep into Ukraine and much of the
Black Sea region. So our policies have not had the desired
effect.
And on lethal assistance, while the U.S. military
assistance to Ukraine has been useful at the institutional
level, helping the Ukrainian ministry of defense and general
staff further develop their doctrines, their personnel
structures, their logistical capabilities and such, there is a
real need, an urgent need, for lethal assistance at the
tactical level.
Why? Just look at Russia's force posture. It has massed
forces on Ukraine's eastern frontier and increased its forces
in Crimea. The Russian military regularly conduct snap
exercises involving tens of thousands of forces to demonstrate
the capability to rapidly mobilize and deploy and conduct
offensive operations into a neighboring country like Ukraine.
And Ukraine right now does not really have the capacity, as
John pointed out, to really impose significant costs on an
aggressor. And through the provision of lethal assistance
including anti-tank weapons, anti-aircraft weapons, advanced
forms of artillery, better UAVs, and targeting systems, the
West would enable Ukraine to place itself in a better position
to deter such aggression. It is long overdue.
The Chairman. Both of you talk to officials inside the
country, as we do, but from your own perspective. Obviously, we
want to see reforms take place inside Ukraine. They have been
their own worst enemy. They would be in a very different place
had they moved along with reforms like much of Eastern Europe
did years ago. We understand it is a problem. I mean, it is
endemic in their society. It is a holdover from the Soviet
Union in many ways.
So they have issues that they have to deal with. We want to
push them along. We want their country to be better. We want
the things that happened on the Maidan to be realized through a
country that is certainly western-oriented and it has those
types of values.
And at the same time, we are concerned about Europe
responding to the lack of progress by shifting blame, to
Ukraine away from Russia.
On the other hand, you just listed a host of things that we
are not doing to help Ukraine with the frozen conflict.
Actually after listening to your testimony, it seems to ne not
that frozen, as Russia takes additional land.
What are the conversations that you hear within as we push
for needed reform on one hand and on the other hand, we do not
fully support their efforts to push back against Russia? What
does that generate internally in Ukraine?
Mr. Brzezinski. I think it sends a mixed message. When we
ask Ukrainian leaders to undertake aggressive, systemic,
political and economic reform, we are asking them, we are
encouraging them, to undertake changes that involve a certain
amount of risk. Change creates opportunities and
vulnerabilities, even as you are pursuing higher ends. And if
we do not complement our efforts to support and pressure reform
in Ukraine with a stronger position against Russia, I think we
are actually creating risk to the reform process.
Russia's actions are not just designed to seize territory.
They are designed also to undercut the prospects of reform. And
so we have to impose a higher penalty on Russia.
It is stunning to me that after 2 years in which Russia has
not only been occupying territory of Ukraine, but also
sustaining a campaign of information warfare, economic
embargoes, cyber attacks, even terrorism, we have not increased
the pressure on Russia. We have not escalated our sanctions
from targeted sanctions that basically hit a limited number of
individuals and entities, including entities that have very
little relationships with the West such as their arms industry,
to broader, harder hitting sectoral sanctions. We have not
really leveraged the full weight of our economic power against
Russia. That resonates in Ukraine and I think makes them less
confident to take the steps that are inherently risky, albeit
necessary.
The Chairman. Mr. Herbst? Ambassador. Excuse me.
Ambassador Herbst I would endorse Ian's points on the
impact of our reluctance to provide more military assistance
and our less, not as aggressive as it could be sanctions
policy.
But I would add one more dimension. We provide Ukraine
substantial economic assistance, but just not nearly enough. We
are asking them to make reforms that are politically dangerous,
although in their interest. And if we provided greater
assistance, it would make the risk of those reforms less.
And again, the justification for greatly increasing our
already substantial assistance is this of direct interest to
our security because, again, if the Kremlin succeeds in
Ukraine, the odds go up that they will do something nasty vis-
a-vis a NATO country. And we want to defeat them or stop them
in Ukraine.
The Chairman. Thank you, both.
Senator Cardin?
Senator Cardin. Well, thank you both for your testimony. It
is very interesting.
Both of you have a common theme here that we have to be
more aggressive in supporting Ukraine and isolating Russia's
influence. You point out, Mr. Brzezinski, that the existing
sanctions, although they have certainly had an impact and they
have not had the desired results, therefore, we should look at
more targeted sanctions in addition to the current sanctions
and be more aggressive in regards to isolating Russia.
You also point out I thought a very good suggestion about
public diplomacy by setting up consulate offices in different
parts of Ukraine to counter the public relations battle that
Russia has been waging within Ukraine. I thought that was a
good suggestion.
And, Ambassador Herbst, you have been pretty aggressive. $5
billion. That is a pretty big number of additional aid. And of
course, the military assistance, which is something our
committee has looked at in the past and have been very
sympathetic to military assistance for Ukraine.
When we look at this realistically, it looks like it is
moving in the other direction, that the budget funds are tight
and the chances of getting that type of support from the United
States is not likely. And we are confronting a June deadline in
Europe as to whether they will continue the sanctions, the
existing sanctions, let alone strengthening those sanctions. So
it looks like we are moving in the opposite direction.
So I would welcome your observations of what the impact
would be on Ukraine if Europe does not extend its sanctions in
June and the current status quo remains, that is, that Minsk II
has not been implemented.
Ambassador Herbst That would be a disaster. That would
remove the one substantial reason that the West has given to
Russia to back off its aggression. It would also greatly
dishearten the whole political class in Ukraine, whether
dealing with the war in the east or dealing with reform.
While I think that we should increase sanctions and we
should tie that to specific Russian actions, I suspect, if we
can retain sanctions--or keep them in place, that may be enough
on that front. And while it would be a disaster if they are
removed, I would say as long as Chancellor Merkel's position
remains solid, they will stay in place. But, again, we have
just seen regional elections in Germany which weakened her. How
much? We will wait and see. But this is something very
important.
There is one other element, though, that could keep
sanctions in place. The United States holds a trump card. It is
a very controversial trump card, and that is the SWIFT option.
We run the international payment system. We could suspend
Russia from SWIFT. I suspect that if Europe were to truly
weaken in its resolve to maintain sanctions, America putting
into play the notion that in that case, we might have to use
SWIFT would help strengthen the European spine.
Senator Cardin. Thank you.
Mr. Brzezinski?
Mr. Brzezinski. Sir, if Europe were to abandon the
sanctions that it currently has imposed on Russia for its
aggression against Ukraine and its occupation of part of
Ukraine, it would amount to a de facto acceptance of a new
partition of Europe. The West will have communicated to Russia
that it is willing to live with a Russia that occupying and
trying to assert hegemony over its neighbors. And that would
return us back to an era we thought had long passed.
If the West shows the will necessary to sustain those
sanctions, I am not convinced that is a satisfactory situation
because I think what we should then expect is continuation of
the status quo, with Russia using its proximity and its
geopolitical leverage, its economic leverage, its energy
leverage, its military power to further eat away at Ukraine, to
further weaken Ukraine, to destabilize Ukraine, and not just
Ukraine, but Georgia and maybe other states along its
periphery.
That is why I think we need to move to a new stage in our
engagement with Russia on this issue, which means imposing
harsher penalties for Russian aggression. I think moving to
SWIFT--I mean, that is long overdue. I think sectoral sanctions
on the energy and the financial sectors are long overdue. We
have an economic advantage, almost 15 to 1. If you tally up the
GNP of Europe and the United States, it is higher than that
against Russia. We should be leveraging that.
Senator Cardin. So I do not disagree with your assessment
of the impact if the sanctions in Europe were removed under
current circumstances and that we should be more strategic and
stronger in our messaging.
But let me get to the second part of this. The concern that
we have on the extension of sanctions in Europe is that there
will be justification given that Ukraine has not implemented
its aspects of Minsk as it relates to decentralization, but
also its dealing with good governance reforms that have yet to
be fully implemented, as we have already pointed out with
Secretary Nuland.
Russia has been systematic in marginalizing civil
societies, the classification of civil societies, its foreign
agents or undesirables cutting off the opportunity for civil
society activities within their own country. But we have seen
over the last couple decades a weakening of the transatlantic
ties between civil societies and our support. In Ukraine, it
would be helpful if we had stronger community connections
between the United States and civil societies, recognizing that
historically we are going to be judged by how aggressive we
were in the reforms in Ukraine.
I just would like to know your comments as to whether there
should not be greater efforts made to help civil societies in
Ukraine and in Europe, I might say, as well, of course, as our
connections within Russia.
Mr. Brzezinski. Let me address two points that you raised:
the one on civil society and then one on the Minsk.
I think it is important to remember that the failure of
Minsk has not been because of Ukraine. It has been a failure of
Russia to live up to the very agreements it signed.
Senator Cardin. I do not disagree with that. I just say it
could be used as justification by Europe because there has not
been full compliance by Ukraine. I agree with you that Russia
is the aggressor. Russia is the one that invaded Crimea and
took it over and invaded eastern Ukraine. I recognize that. I
am concerned about what might be happening in Europe.
Mr. Brzezinski. I think your fear is justified, and we
actually see that happening. We see Europeans placing more
pressure on Ukraine to, quote/unquote, live up to its
dimensions of Minsk and not applying equal pressure on Russia
to live up to its side of Minsk.
But to counter that dialogue requires, I think, stronger
American leadership. We need to make clear to the Europeans the
pressure needs to be directed in the sequence that Toria Nuland
articulated--should be first on Russia fulfilling its
dimensions of the Minsk agreement, withdrawal of forces,
release of prisoners and hostages, allowing the OSCE to get
full access, allowing Ukraine to control its borders. Then the
other steps will come into play.
Regarding civil society, I think that is an area that
really needs deeper exploration and perhaps direct support. If
we are going to fight corruption in Ukraine, it is a very
useful course to work with existing authorities. But the key to
fighting corruption in a democracy, an emergent democracy, I
think really is to build up civil society, its NGOs, its press
to facilitate greater transparency so that the people
themselves feel that they have a greater grip on how money is
being used, how decisions are being made, and can then leverage
that knowledge to force more effective change. So I think you
are spot-on. If more assistance can be directed to NGOs, we
should do that.
Senator Cardin. Thank you.
Ambassador Herbst My view is, not surprisingly, rather
similar to Ian's.
On Minsk, the most important thing to remember is that the
immediate commitments that Russia has undertaken have not been
fulfilled. They are shooting every day, most of it coming from
the Russian side. There has been no real pullback of Russian
military equipment. It is Russia and the separatists who do not
permit the OSCE to move around the occupied territories. There
is no way you can expect to hold an election under those
circumstances. So Ukraine's commitment logically comes second.
And this is a point which simply needs to be reiterated
forcefully and clearly to our European friends.
Regarding reform, you are absolutely right, Senator, that
civil society is critical. I believe the U.S. has done a pretty
good job in terms of promoting civil society in Ukraine, and I
think that the administration understands that to ensure that
there is reform in Ukraine, you need to have regular contact
with civil society and with reformers in the government. And I
think Vice President Biden has done a very good job on this
account.
Regarding reform and implementation of Minsk, you are
absolutely right that those in Europe who do not want sanctions
will point to the ugly headlines in Ukraine and say, look, they
are not reformers. Why should we be doing sanctions? But,
again, if you understand the stage of history that Ukraine is
in right now where you have senior levels in the government,
senior members of the society, especially the oligarchs not so
keen on fast reform, but reform is necessary, then you will see
steps backwards, steps to the side before there is progress.
And again, the crisis of the past 6 weeks has been very ugly,
but in this crisis, serious reform legislation has been passed
and there has been progress. We simply need to repeat this to
our friends in Europe so they understand it.
Senator Cardin. Thank you. I appreciate your comments.
The Chairman. Ambassador, we thank you for being here. Mr.
Brzezinski, thank you.
Look, I do want to correct one thing for the record. The
SWIFT system is a European system, not an American system. So
just for what it is worth, as we have in the past, we would
need to work with Europe on that if we are ever to utilize it.
I think the essence of today's hearing is to look to the
reforms in Ukraine that need to take place. I do want to say
the context of almost all of our hearings have been about
pushing back against Russia and the kind of things we can do to
support Ukraine. I think the hearing should not be
misunderstood. We are concerned about the issue that Senator
Cardin brought up, myself, and others, and that is that we are
concerned about Europe looking to the lack of reforms in
Ukraine as a reason to back away from some of the sanctions
that are in place against Russia. We are only speaking to what
we are seeing happen right now in Europe as they probably have
the lowest self-confidence they have had in 50 years. And there
are concerns about what is happening in the region to them, you
know, what is happening with Chancellor Merkel, what is
happening with Brexit, what is happening with refugees, what is
happening with their economic and fiscal issues, and we are
looking for ways to encourage Ukraine to continue on.
At the same time, we understand that the pressure by the
administration on Russia has not been what most of us would
have liked to have seen.
So we thank you again for adding context and adding a
bookend to the earlier testimony. We hope that you will answer
questions promptly. I know you will.
We are going to keep the record open until the close of
business Thursday.
Thank you again, both, for being here. You have been a
valuable addition to this hearing, and we look forward to
seeing you again.
With that, the committee is adjourned.
[Whereupon, at 12:03 p.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Response to a Question for the Record Submitted to Assistant
Secretary of State Victoria Nuland by Senator Edward Markey
Question. What kind of progress has there been in implementing the
following requirements in the Ukrainian Independence from Russia Energy
Act?:
1. The Secretary of State and the Secretary of Energy, in
collaboration with the Administrator of the United States
Agency for International Development and the Administrator of
the Federal Emergency Management Agency, shall work with
officials of the Government of Ukraine to develop a short-term
emergency energy assistance plan designed to help Ukraine
address the potentially severe short-term heating fuel and
electricity shortages facing Ukraine in 2014 and 2015.
2. Assistance--The Secretary of State, the Secretary of Energy, and
the Administrator of the United States Agency for International
Development are authorized to provide assistance in support of,
and to invest in short-term solutions for, enabling Ukraine to
secure the energy safety of the people of Ukraine during 2014
and 2015.
3. The Secretary of State, in collaboration with the Secretary of
Energy and the Administrator of the United States Agency for
International Development, shall work with officials of the
Government of Ukraine to develop medium- and long-term plans to
increase energy production and efficiency to increase energy
security by helping Ukraine reduce its dependence on natural
gas imported from the Russian Federation.
4. Prioritization--The Secretary of State, the Administrator of the
United States Agency for International Development, and the
Secretary of Energy should, during fiscal years 2015 through
2018, work with other donors, including multilateral agencies
and nongovernmental organizations, to prioritize, to the extent
practicable and as appropriate, the provision of assistance
from such donors to help Ukraine to improve energy efficiency,
increase energy supplies produced in Ukraine, and reduce
reliance on energy imports from the Russian Federation,
including natural gas.
5. The Overseas Private Investment Corporation shall (A) prioritize,
to the extent practicable, support for investments to help
increase energy efficiency, develop domestic oil and natural
gas reserves, improve and repair electricity infrastructure,
and develop renewable and other sources of energy in Ukraine;
and (B) implement procedures for expedited review and, as
appropriate, approval, of applications by eligible investors
(as defined in section 238 of the Foreign Assistance Act of
1961 (22 U.S.C. 2198)) for loans, loan guarantees, and
insurance for such investments.
6. The President shall, to the extent practicable and as appropriate,
direct the United States Executive Directors of the World Bank
Group and the European Bank for Reconstruction and Development
to use the voice, vote, and influence of the United States to
encourage the World Bank Group and the European Bank for
Reconstruction and Development and other international
financial institutions (A) to invest in, and increase their
efforts to promote investment in, projects to improve energy
efficiency, improve and repair electricity infrastructure,
develop domestic oil and natural gas reserves, and develop
renewable and other sources of energy in Ukraine; and (B) to
stimulate private investment in such projects.
Please provide an update on each of these requirements, and provide
additional information on reasons in cases when the requirement was not
met.
Answer. The United States, led by the Department of State in
coordination with the Department of Energy (DOE) and the U.S. Agency
for International Development (USAID) has strengthened diplomatic and
assistance efforts aimed to address short term concerns and develop
long-term solutions. These efforts are designed to improve Ukraine's
energy safety and security, establish competitive markets and fair
regulations, and bring Ukraine closer to European Union (EU)
integration. While Ukraine has made significant progress in reform and
diversification, the country's energy sector remains vulnerable to
corruption, inefficiencies, and dependence on Russia. Therefore the
United States remains committed to enhancing Ukraine's energy security.
As an example, U.S. assistance funded a Department of Energy (DOE)
program to support emergency management and contingency planning,
bringing in expertise from the Federal Emergency Management Agency
(FEMA) and national laboratories, as well as experts from Canada. The
program provided technical expertise to the Government of Ukraine (GOU)
that led to the development of a Winter Action Plan, a roadmap of steps
which needed to be taken in preparation for possible fuel shortages
during the winter of 2015-2016. DOE also provided technical expertise
to the GOU's Anti-Crisis Cell, a cabinet-level entity in charge of
managing the GOU's contingency planning efforts and supervising energy
sector reform. A USAID program also supported strategic communications
and public messaging to educate Ukrainians on energy efficiency
practices and to inform citizens of social benefits to help offset
increased energy prices due to tariff adjustments needed to meet EU
requirements. These efforts greatly increased the GOU's capacity to
handle potential emergencies.
Similarly, the Department of State's Bureau of Energy Resources
(ENR) continues to provide assistance to Naftogaz (Ukraine's national
oil and gas company) and its upstream gas production subsidiary,
UkrGazVydobuvannya (UGV), in order to increase domestic gas production
by improving field and technical operations, reforming the company's
operating practices, and improving corporate governance. These efforts
will help reduce dependence on Russian natural gas.
We are also implementing other medium- and long-term programs
through USAID, State, and DOE. These efforts are closely coordinated
with other United States government entities including the Overseas
Private Investment Corporation, international donor partners including
the European Union, World Bank, International Monetary Fund, and the
European Bank for Reconstruction and Development, and the Ukrainian
government. We are finalizing our FY 2016 budget allocations and expect
to increase our support for these activities. Programs support energy
efficiency, EU-compliant regulatory reform, diversification of
resources, corporate governance reform, privatization of state-owned
enterprises, and cybersecurity improvements.
We are very concerned about the Nord Stream II pipeline, which
would undermine European energy security, divert gas shipments from
Ukraine, and eliminate Ukraine's transit revenue. This is not a
commercial project to Moscow, but a way to enhance Russia's leverage
over Europe. We have encouraged the European Commission to scrutinize
Nord Stream II thoroughly on legal, environmental, and competition
grounds.
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