[Senate Hearing 115-822]
[From the U.S. Government Publishing Office]
S. Hrg. 115-822
U.S. - RUSSIA RELATIONS
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HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
AUGUST 21, 2018
__________
Printed for the use of the Committee on Foreign Relations
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web:
http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
40-552 PDF WASHINGTON : 2020
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COMMITTEE ON FOREIGN RELATIONS
BOB CORKER, Tennessee, Chairman
JAMES E. RISCH, Idaho ROBERT MENENDEZ, New Jersey
MARCO RUBIO, Florida BENJAMIN L. CARDIN, Maryland
RON JOHNSON, Wisconsin JEANNE SHAHEEN, New Hampshire
JEFF FLAKE, Arizona CHRISTOPHER A. COONS, Delaware
CORY GARDNER, Colorado TOM UDALL, New Mexico
TODD YOUNG, Indiana CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming TIM KAINE, Virginia
JOHNNY ISAKSON, Georgia EDWARD J. MARKEY, Massachusetts
ROB PORTMAN, Ohio JEFF MERKLEY, Oregon
RAND PAUL, Kentucky CORY A. BOOKER, New Jersey
Todd Womack, Staff Director
Jessica Lewis, Democratic Staff Director
John Dutton, Chief Clerk
(ii)
C O N T E N T S
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Page
Corker, Hon. Bob, U.S. Senator From Tennessee.................... 1
Menendez, Hon. Robert, U.S. Senator From New Jersey.............. 2
Mitchell, Hon. A. Wess, Assistant Secretary, Bureau of European
and Eurasian Affairs, United States Department of State,
Washington, DC................................................. 4
Prepared statement........................................... 7
Billingslea, Hon. Marshall, Assistant Secretary, Terrorist
Financing, United States Department of the Treasury,
Washington, DC................................................. 9
Prepared statement........................................... 11
Additional Material for the Record
Responses of Assistant Secretary A. Wess Mitchell to Questions
Submitted by Senator Robert Menendez........................... 44
Responses of Assistant Secretary A. Wess Mitchell to Questions
Submitted by Senator Benjamin L. Cardin........................ 46
Responses of Assistant Secretary A. Wess Mitchell to Questions
Submitted by Senator Rob Portman............................... 47
Responses of Assistant Secretary A. Wess Mitchell to Questions
Submitted by Senator Cory Booker............................... 49
Report to Congress Pursuant to Section 243 of the Countering
America's Adversaries Through Sanctions Act of 2017 Regarding
Interagency Efforts in the United States To Combat Illicit
Finance Relating to the Russian Federation..................... 50
Trump Administration Actions To Push Back Against Russia......... 60
NATO Summit Deliverables......................................... 62
(iii)
U.S.-RUSSIA RELATIONS
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TUESDAY, AUGUST 21, 2018
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:02 a.m., in
room SD-419, Senate Office Building, Hon. Bob Corker, chairman
of the committee, presiding.
Present: Senators Corker [presiding], Risch, Rubio, Flake,
Gardner, Young, Isakson, Portman, Paul, Menendez, Cardin,
Shaheen, Murphy, Kaine, Markey, Merkley, and Booker.
OPENING STATEMENT OF HON. BOB CORKER,
U.S. SENATOR FROM TENNESSEE
The Chairman. The Foreign Relations Committee will come to
order. We want to thank our witnesses for being here today for
the second in a series of hearings on Russia. This committee is
attempting to get a clearer sense of the administration's
overall posture on Russia. And again, we thank you both for
being here. We have outstanding witnesses today.
We would like to understand what was agreed to when the
leaders of our two countries sat down in Helsinki, where there
were discussions regarding current or future arms control
agreements, what other promises or assurances were made.
To date, we have received no real readout, even in a
classified setting, of this meeting. We would like to
understand the administration's assessment of the threat posed
by Russia to us, to our allies, and to other countries and
institutions around the world.
Finally, we need a better understanding of how Russia
sanctions this committee wrote last year, and the Senate passed
by a vote of 98 to 2, despite strong objections from the White
House, are being implemented. Russia has annexed Crimea,
occupied parts of Georgia, interfered with elections, including
our own, violated the IMF treaty, remains in violation, used
chemical weapons to poison individuals in the United Kingdom,
and even purportedly hacked U.S. utilities.
These offenses are bad enough, but they leave us wondering
what is next. What does the administration expect that they
will next do? The past teaches us that even worse things may
lay just over the horizon if we fail to push back now, and make
clear to President Putin that our nation is united from the
very top to the bottom in standing against his destabilizing
behavior, both in policy and in public posture.
It is my hope that today you will reassure the members of
this committee that our Executive branch is doing all in its
power to convince the Russians not to continue testing our
resolve. We thank you both again for your service to our
country, for being here today before this committee, and we
look forward to your testimony.
And with that, I will turn to our distinguished Ranking
Member, my friend, Bob Menendez.
STATEMENT OF HON. ROBERT MENENDEZ,
U.S. SENATOR FROM NEW JERSEY
Senator Menendez. Thank you, Mr. Chairman, and thank you
for your opening statement. I join you in your words and your
concerns. And for convening this hearing, which I hope is part
of a series of hearings on U.S. policy towards the Russian
Federation. I hope we can get clarity into our policy and
effectively pursue oversight and legislation.
More than a month after President Trump's Helsinki meeting
with President Putin we remain in the dark about what the two
leaders discussed. We continue to hear more information,
accurate or not, from the Russian government than from our own.
It is not only embarrassing, but I believe this lack of
transparency has implications for our national security. I am
not convinced that those who need to know in our own Executive
branch have a full understanding of what happened. After more
than 3 hours with Secretary Pompeo a few weeks ago, this
committee has little more insight than we did before the
hearing.
Since the administration has failed to answer congressional
requests or provide any information, I am today formally
requesting that the department provide all classified and
unclassified cable traffic related to the Helsinki meeting,
memorandums, and policy directives.
I will not spend time today running through Russia's
ongoing transgressions. I think President Trump's cabinet,
Secretary Mattis, Director Coats, Secretary Nielson, and
others, have warned that Russia continues to undermine our
democracy. Russia uses chemical weapons to attack its opponents
abroad. It invades its neighbors and illegally annexes
territory.
Assad's murderous regime and Iranian proxy fighters inching
closer to Israel rely on the Kremlin. And today, we learn from
Microsoft that Russian hackers continue their attempts to
attack the United States Senate and venerable American think
tanks and NGOs.
I have been disappointed by the cause by some on the other
side of the aisle to ignore these threats and seek
accommodation with Moscow. Sending mixed signals to the Kremlin
and its allies only serves to undermine our pressure track and
sanctions regime. I do not currently see the value in meeting
with sanctioned members of the Russian Duma. They are
sanctioned because of their support for the illegal annexation
of Crimea, and they should remain on our sanctions list until
Crimea is returned to Ukraine.
I myself am sanctioned by the Russian government for my
authorship of the Ukraine Freedom Support Act. And I would be
happy to meet with the Duma when each of the goals of that law
are accomplished. Till then, they can stay in Moscow.
I would like to use this hearing to look forward. The
administration often points to its record while ignoring the
President's damaging rhetoric on Russia policy. With that said,
I was pleased that Secretary Pompeo committed to work with us
on new sanctions, as outlined in my bill, with Senator Graham,
and many others on this committee.
Today I would like to hear in detail specific provisions of
the Defending American Security from Kremlin Aggression Act of
2018 that you would commit to working towards. I want your
views on how these measures could impact the Kremlin's
decision-making calculus, and how the sanctions the bill
imposes would impact the intended targets.
The bill recognizes that our efforts to date have been
insufficient. It includes tough measures, which we recognize
have implications for U.S. companies and our allies. However,
do we really believe it is acceptable or in our national
interest for U.S. companies or those of our allies to be doing
business in Russia, particularly supporting the very sectors
that have aided and abet Kremlin aggression and interference?
It is utterly ridiculous that President Trump would publically
champion a U.S. Russia business council rather than condemn the
Kremlin's outright aggressions.
Second, I want to hear how you will support provisions to
deepen cooperation with Europe on Russia sanctions'
implementation. Our sanctions regime is only as effective as
our ability to convince Europe to increase their pressure.
Third, I continue to believe that our government is not
properly constituted to address the hybrid threat posed by
Russia. Our bill would establish a national fusion center to
address maligned influence and hybrid threats, and also calls
for the establishment of the sanctions coordinator office
within the Senate. I look forward to your thoughts on how we
can structure on national security institutions to maximize our
ability to address complex threats.
Fourth, I would like to hear about efforts to implement the
current CAATSA sanctions law. The administration has argued
that mandatory new provisions of CAATSA have not been invoked,
because it is easier to use established executive order
authorities. I would like to hear a clear reasoning for this,
and assurances that the clear intent of Congress is being met,
because as of now I am not convinced. Specifically, I am
interested in sections 225, 226, 227, 228, 233, and 234.
I strongly oppose a wavier provision and NDAA which allows
the administration under certain circumstances to waive
sanctions in section 231 on the defense and intelligence
sector. In response I inserted a strong reporting requirement,
demanding the State Department be more forthcoming and
transparent on how it is implementing section 231. And I remain
concerned that the conferees effectively gutted this important
provision. So I hope that State can convince me otherwise.
Finally, I want to end with a note of thanks. I do
understand that there are many within our government who are
dedicated to a more assertive approach with respect to Russia
that is clear-eyed and well-intentioned. And at the risk of
making their jobs more difficult, I would say that the
individuals before us today fall into that category.
Thank you, Mr. Chairman, for calling the hearing, and to
our witnesses for appearing.
The Chairman. Thank you. And thank you for your comments.
Our first witness is Wess Mitchell, Assistant Secretary for
the Bureau of European and Eurasian Affairs, U.S. Department of
State. Again, we thank you for being here, and appreciate what
you do for our country.
Our second witness is Mr. Marshall Billingslea, Assistant
Secretary for Terrorist Financing, U.S. Department of Treasury.
We thank you for the same.
We want to--we appreciate the fact you are sharing your
thoughts and viewpoints with us today. Mr. Billingslea, for the
committee's benefits, I understand you have returned early from
travel to be here today. We thank you for that.
We also originally had Assistant Secretary Chris Ford
scheduled for this hearing, but we were asked that he be
available to testify before the Senate Banking Committee. I
think you know we have a simultaneous hearing happening. Since
we had these two outstanding witnesses, we relented, and
allowed Chris to go over to the Banking Committee. So that
testimony will be taking place there. He likely will be before
us again in the future to talk about some other issues that he
is responsible for.
So, again, we thank you. You know the order here. If you
could summarize your comments in about 5 minutes. Any written
materials you have, without--with unanimous consent will be
entered into the record. And with that, Mr. Mitchell, if you
would begin, we would appreciate it.
STATEMENT OF THE HON. A. WESS MITCHELL, ASSISTANT SECRETARY,
BUREAU OF EUROPEAN AND EURASIAN AFFAIRS, UNITED STATES
DEPARTMENT OF STATE, WASHINGTON, DC
Mr. Mitchell. Chairman Corker, Ranking Member Menendez,
thank you for inviting me to testify today. If you will indulge
me I want to start with a piece of welcome news that is
unrelated to this morning's testimony.
Yesterday, August 20th, the U.S. Government removed to
Germany Jakiw Palij, a former Nazi camp guard at the notorious
Trawniki slave labor camp for Jews and Nazi-occupied Poland.
All this process took far longer than we wanted. The removal of
this individual can bring some comfort to Holocaust survivors
and others who suffered at the hands of those like Palij, who
did the cruel bidding of the inhuman Nazi Regime.
I will use my prepared comments today to outline in brief
form the overarching strategy of the United States towards the
Russian Federation. The foundation for this strategy is
provided by three documents, as directed and approved by the
President: The National Security Strategy, the National Defense
Strategy, and the Russian Integrated Strategy.
The starting point of the National Security Strategy is the
recognition that America has entered a period of big power
competition, and the past U.S. policies have neither
sufficiently grasped the scope of this emerging trend nor
adequately equipped our nation to succeed in it. The central
aim of the administration's foreign policy is to prepare our
nation to confront this challenge by systematically
strengthening the military, economic, and political fundaments
of American power.
Our Russia policy proceeds from the recognition that to be
effective, U.S. diplomacy must be backed by military power that
is second to none, and fully integrated with our allies and all
of our instruments of power. To that end, we have reversed
years of cuts to the defense budget, begun the process of
recapitalizing U.S. nuclear arsenal, requested close to $11
billion for the European deterrence initiative, and worked
within NATO to bring about more than $40 billion in new
European defense spending.
At the NATO summit we established two new NATO commands,
including one here in the United States, new counter hybrid
threat response teams, and major multi-year initiatives to
bolster the mobility, readiness, and capability of the
alliance.
In tandem, we have worked to degrade Vladimir Putin's
ability to conduct aggression by imposing costs on the Russian
state and the oligarchy that sustains it. Building on Secretary
Pompeo's testimony, I am submitting for the record a list of
actions this administration has taken. These include to date
217 individuals and entities sanctioned, 6 diplomatic and
consular facilities closed, and 60 spies removed from American
soil.
[The information referred to is located at the end of the
hearing.]
Our actions are having an impact. Research by the State
Department's Office of Chief Economist shows that on average
sanctioned Russian firms see their operating revenue fall by a
quarter, their total asset valuation fall by half, and they are
forced to fire a third of their employees.
Following the announcement of sanctions in April, the
Russian company Rusal lost about 50 percent of its market
value. In the 5 days following our August 8th announcement of
Chemical and Biological Weapons Act sanctions, the ruble
depreciated to its lowest level against the dollar in 2 years.
Even as we have imposed unprecedented penalties for Russian
aggression we have been clear that the door to dialog is open
should Putin choose to take credible steps towards a
constructive path. In Syria we created de-escalation channels
to avoid collisions between our forces. In Ukraine we have
maintained an effort under Ambassador Volker to provide the
means by which Russia can live up to its commitments under the
Minsk agreements.
But in all of these areas it is up to Russia, not America,
to take the next step. We have placed particular emphasis on
bolstering the lines of the states of frontline Europe. In
Ukraine and Georgia we lifted restrictions on the acquisition
of defensive weapons. In the Balkans we have played a hands-on
role in resolving the Greece-Macedonia name dispute, and
engaging with Serbia and Kosovo to propel the EU-led dialog.
From the caucuses to Central Europe we are promoting energy
diversification, fighting corruption, and competing for hearts
and minds.
Our strategy is animated by the realization that the threat
from Russia has evolved beyond being simply an external or
military one. It includes influence operations orchestrated by
the Kremlin in the very heart of the Western world. These
activities are extensively resourced and directed from the
highest levels of the Russian state.
It is important to state clearly what these campaigns are
and are not about. What they are not about is a particular
attachment to U.S. domestic political causes. They are not
about right or left, not about American political philosophy.
As the recent Facebook purges reveal, the Russian state has
promoted fringe voices on the political left and right,
including groups who advocate violence, the storming of federal
buildings, and the overthrow of the U.S. Government.
Russia foments and funds controversial causes, and then
foments and funds the causes opposed to those causes. Putin's
thesis is that the American Constitution is an experiment that
will fail if it is challenged in the right way from within.
Putin wants to break apart the American Republic, not by
influencing an election or two, but by systematically inflaming
the fault lines within our society. Accepting this fact is
absolutely essential for developing a long-term response to the
problem. The most dangerous thing in the world we could do is
politicize the challenge, which in itself would be a gift to
Putin.
What Russian efforts are about is geopolitics, the Putinist
system's permanent and self-justifying struggle for
international dominance. As stated by a handbook of the Russian
Armed Forces, the goal is to, ``Carry out mass psychological
campaigns against the population of a state in order to
destabilize society and the government, and force that state to
make decisions in the interest of its opponents.''
Doing so involves a toolkit of subversive statecraft first
employed by the Bolshevik and later the Soviet state, upgraded
for the digital age. The State Department takes this threat
very seriously. Countering it in both overt and covert form is
among the highest priorities of the Bureau of European and
Eurasian Affairs. As a co-chair of the Russian Influence Group,
I work with General Scapparotti to bring the combined resources
of EUR and EUCOM to bear against this problem.
Under EUR leadership, all 49 U.S. missions located in
Europe and Eurasia are required to develop, coordinate, and
execute tailored action plans for rebuffing Russian influence
operations in their host countries. Within the Bureau we
recruited one of the architects of the Global Engagement Center
legislation from the staff of a member of this committee. We
formed a new position, the Senior Advisor for Russian Maligned
Activities and Trends, or SARMAT, to develop cross-regional
strategies across offices.
EUR created a dedicated team to take the offensive and
publically exposing Russian maligned activities, which since
January of this year has called out the Kremlin on 112
occasions. We are now working with our ally, the U.K., to form
an international coalition for coordinating efforts in this
field, and have requested over $380 million in security and
economic assistance accounts in the President's 2019 budget.
We recognize that Congress has an important role to play in
providing the tools and resources needed to deal effectively
with the Russian problem set. As Secretary Pompeo made clear in
his recent testimony, we are committed to working with all of
you to make headway against this problem, and align our efforts
in support of the President's Russia strategy.
Mr. Chairman, thank you again for inviting me today. I look
forward to your questions.
[The prepared statement of Mr. Mitchell follows:]
Prepared Statement of Hon. A. Wess Mitchell
Chairman Corker, Ranking Member Menendez, thank you for inviting me
to testify today. I will use my prepared comments to outline in brief
form the overarching strategy of the United States towards the Russian
Federation. The foundation for this strategy is provided by three
documents, as directed and approved by the President: the National
Security Strategy, the National Defense Strategy and the Russia
Integrated Strategy.
The starting point of the National Security Strategy is the
recognition that America has entered a period of big-power competition,
and that past U.S. policies have neither sufficiently grasped the scope
of this emerging trend nor adequately equipped our nation to succeed in
it. Contrary to the hopeful assumptions of previous administrations,
Russia and China are serious competitors that are building up the
material and ideological wherewithal to contest U.S. primacy and
leadership in the 21st Century. It continues to be among the foremost
national security interests of the United States to prevent the
domination of the Eurasian landmass by hostile powers. The central aim
of the administration's foreign policy is to prepare our nation to
confront this challenge by systematically strengthening the military,
economic and political fundaments of American power.
Our Russia policy proceeds from the recognition that, to be
effective, U.S. diplomacy toward Russia must be backed by ``military
power that is second to none and fully integrated with our allies and
all of our instruments of power.'' To this end, the administration has
reversed years of cuts to the U.S. defense budget, begun the process of
recapitalizing the U.S. nuclear arsenal, requested close to $11 billion
to support the European Deterrence Initiative, and, in the past year
and a half, worked with NATO Allies to bring about the largest European
defense spending increase since the Cold War--a total of more than $40
billion to date. In addition to commitments from over half of the
Alliance to meet NATO's 2 percent defense spending requirement by 2024,
the United States achieved virtually all of our policy objectives at
the NATO Summit, including the establishment of two new NATO Commands
(including one here in the United States), the establishment of new
counter-hybrid threat response teams, and major, multi-year initiatives
to bolster the mobility, readiness, and capability of the Alliance.
In tandem, we have worked to degrade Russia's ability to conduct
aggression by imposing costs on the Russian state and the oligarchy
that sustains it. Building on Secretary Pompeo's recent testimony, I am
submitting for the record a detailed list of actions this
administration has taken. These include, to date: 217 individuals and
entities sanctioned, 6 diplomatic and consular facilities closed or
kept closed, and 60 spies removed from U.S. soil. The State Department
has played the lead role in ensuring that these efforts are closely and
effectively coordinated with European allies through synchronized
expulsions and the continued roll-over of sanctions related to Russia's
ongoing aggression against Ukraine.
Our actions are having an impact. Research by the State
Department's Office of the Chief Economist shows that on average
sanctioned Russian firms see their operating revenue fall by a quarter;
their total asset valuation fall by half; and are forced to fire a
third of their employees. We believe our sanctions, cumulatively, have
cost the Russian government tens of billions of dollars on top of the
broader impact on state-owned sectors and the chilling effect of U.S.
sanctions on the Russian economy. Following the announcement of
sanctions in April, the Russian company Rusal lost about 50 percent of
its market value. In the 5 days following our August 8 announcement of
Chemical and Biological Weapons Act sanctions, the ruble depreciated to
its lowest level against the dollar in 2 years.
Even as we have imposed unprecedented penalties for Russian
aggression, we have been clear that the door to dialogue is open,
should Putin choose to take credible steps toward a constructive path.
In Syria, we created de-escalation channels to avoid collisions between
our forces. In Ukraine, we have maintained an effort under Ambassador
Kurt Volker to provide the means by which Russia can live up to its
commitments under the Minsk Agreements. But in all of these areas, it
is up to Russia, not America, to take the next step. Our policy remains
unchanged: steady cost-imposition until Russia changes course.
As with the overall strategy, the premise of these efforts has been
that our diplomacy is most effective when backed by positions of
strength. We have placed particular emphasis on bolstering the states
of frontline Europe that are most susceptible to Russian geopolitical
pressure. In Ukraine and Georgia, we lifted the previous
administration's restrictions on the acquisition of defensive weapons
for resisting Russian territorial aggression. In the Balkans, American
diplomacy has played a lead role in resolving the Greece-Macedonia name
dispute and is engaging with Serbia and Kosovo to propel the EU-led
dialogue. In the Caucasus, Black Sea region, and Central Europe we are
working to close the vacuums that invite Russian penetration by
promoting energy diversification, fighting corruption, and competing
for hearts and minds in the lead-up to the 30th anniversary of the end
of Communism.
Our strategy is animated by the realization that the threat from
Russia has evolved beyond being simply an external or military one; it
includes unprecedentedly brazen influence operations orchestrated by
the Kremlin on the soil of our allies and even here at home in the
United States. These activities are, as FBI Director Wray recently
stated, ``wide and deep,'' being both extensively resourced and
directed from the highest levels of the Russian state. We work closely
with the Department of Homeland Security, the Department of Justice
and, and the National Security Council to ensure that all relevant
resources are being brought to bear to thwart and punish any Russian
influence campaigns in the run-up to the elections.
It's important to state clearly what these campaigns are and are
not about.
What they're not about is any particular attachment to specific
U.S. domestic political causes. They are not about right or left or
American political philosophy. The threat from Russian influence
operations existed long before our 2016 presidential election and will
continue long after this election cycle, or the next, or the next. As
the recent Facebook purges reveal, the Russian state has promoted
fringe voices on the political left, not just the right, including
groups who advocate violence, the storming of federal buildings and the
overthrow of the U.S. government. Russia foments and funds
controversial causes--and then foments and funds the causes opposed to
those causes. Putin's thesis is that the American Constitution is an
experiment that will fail if challenged in the right way from within.
Putin wants to break apart the American Republic, not by influencing an
election or two, but by systematically inflaming the perceived fault-
lines that exist within our society. His is a strategy of chaos for
strategic effect. Accepting this fact is absolutely essential for
developing a long-term comprehensive response to the problem. The most
dangerous thing we could do is to politicize the challenge, which in
itself would be a gift to Putin.
What Russian efforts are about is geopolitics: the Putinist
system's permanent and self-justifying struggle for international
dominance. As stated by a handbook of the Russian Armed Forces, the
goal is ``to carry out mass psychological campaigns against the
population of a state in order to destabilize society and the
government; as well as forcing a state to make decisions in the
interests of their opponents.'' Doing so involves an evolved toolkit of
subversive statecraft first employed by the Bolshevik and later the
Soviet state, which has been upgraded for the digital age. While these
tools and technologies differ depending on the context, the key to
their success is that the Kremlin employs them within a common
strategic and operational framework aimed at leveraging all available
means to achieve a decisive strategic effect.
The State Department takes this threat very seriously. From my
first day on the job, I have established for our team that countering
this threat, in both its overt and covert forms, will be among the
highest priorities for the Bureau of European and Eurasian Affairs. As
a co-chair of the Russia Influence Group, I work with General
Scapparotti to bring the combined resources of EUR and EUCOM to bear
against this problem. Under EUR's leadership, all 50 U.S. missions
located in Europe and Eurasia are required to develop, coordinate and
execute tailored action plans for rebuffing Russian influence
operations in their host countries.
Within the Bureau, we recruited one of the architects of the Global
Engagement Center legislation from the staff of a member of this
committee; in addition, we formed a new position--the Senior Advisor
for Russian Malign Activities and Trends (or, SARMAT)--to develop
cross-regional strategies across offices. Early this year, EUR created
a dedicated team within the Bureau to take the offensive and publicly
expose Russian malign activities, which since January of this year has
called out the Kremlin on 112 occasions. Together with the GEC, EUR is
now working with our close ally the U.K. to form an international
coalition for coordinating efforts in this field. The State Department
requested over $380 million in security and economic assistance
accounts in the President's 2019 Budget for Europe and Eurasia that can
be allocated toward combatting Russian malign influence.
In these efforts, we recognize that Congress has an important role
to play in providing the tools and resources that will be needed to
deal effectively with the combined Russian problem set. As Secretary
Pompeo made clear in his recent testimony, we are committed to working
with all of you to make headway against this problem and align our
efforts in support of the President's Russia strategy.
Mr. Chairman, thank you again for inviting me to speak today. I
welcome your questions.
The Chairman. Thank you, Mr. Secretary.
Secretary Billingslea.
STATEMENT OF THE HON. MARSHALL BILLINGSLEA, ASSISTANT
SECRETARY, TERRORIST FINANCING, UNITED STATES DEPARTMENT OF THE
TREASURY, WASHINGTON, DC
Mr. Billingslea. Chairman Corker, Ranking Member Menendez,
and distinguished members of the committee, first of all, it is
great to be back. I got my start in Washington sitting on the
bench back there some 20-odd years ago, and it is fantastic to
appear before this committee. And thank you for the
opportunity.
At the outset I will say that those of us in the Treasury
Department share the views that you, and the ranking member,
and many in the Senate have expressed regarding the significant
and continuing national security threat posed to the United
States by the Russian Federation.
Continuing occupation of Crimea, paramilitary operations in
Ukraine, human rights abuses, malicious cyberattacks on U.S.
and ally infrastructure and companies, elicit procurement of
restricted U.S. technologies, violation of crucial arms control
treaties, support to the Assad regime's barbarism,
assassination of dissidents and defectors, including the
unconscionable use of the Novichok nerve agent in London,
United Kingdom, and ongoing efforts to interfere in our
sacrosanct election processes, and those of our allies, are
just some of the unacceptable behaviors of the Putin regime.
Countering Russian aggression is a top priority for the
Treasury Department. And consequently, the net effect of our
actions over the past year-and-a-half is an unprecedented level
of financial pressure mounted against the Kremlin, its oligarch
proxies, and key sectors of the Russian economy. To date, this
administration has applied sanctions on 223 Russia-related
entities and individuals, ranging from Yevgeny Prigozhin, and
the internet research agency social media troll farms, to FSB
and GRU cyber actors, to Russia's state-owned defense
conglomerate, Rosoboronexport, which has been supplying
billions of dollars' worth of weaponry to the Assad regime.
Additionally, Treasury has issued findings pursuant to the
Patriot Act to Section 311 against a major Latvian bank that
was laundering money for elicit activities based out of Russia.
And we have engaged globally with partner nations to apply
their anti-money laundering regimes to target financial flows
directly associated with both Russian organized crime and the
maligned behavior of the Kremlin.
Russian aggression is ongoing, but the Treasury Department
has demonstrated to Putin and his inner circle that their
behaviors will not be tolerated, and they will incur
significant costs. On April 6th, 2018, we sanctioned 7 Russian
oligarchs who are part of the innermost circle, along with 12
companies that they own or control. This included Oleg
Deripaska and Viktor Vekselberg, as well as Putin's son-in-law,
Kirill Shamalov. Unlike the previous administration, which
shied away from targeting these actors, we have gone after the
big fish.
Rusal, controlled by Deripaska, is the second largest
producer of aluminum and supplier of aluminum in the world. As
a result of sanctions, Deripaska's estimated net worth, his
personal net worth, has dropped by more than half. The share
price of the holding company that controls Rusal was cut
likewise by more than half on the London stock exchange on the
day we took our actions.
Similarly, Viktor Vekselberg's personal net worth has
dropped by an estimated 3 billion, and his company has now been
forced to divest from ventures in Switzerland and Italy. When
Treasury acted, Moscow-traded stocks experienced their biggest
plunge in years, and the ruble slid to its weakest position
since 2016, and it still has not recovered from that.
In all, our measures are taking a direct toll on the wealth
of the elites who serve as Kremlin proxies, and on the Russian
economy. Their growth is nearly stagnant. Foreign direct
investment is down. There's limited willingness to invest
further in their oil and gas sector, which is fundamental to
their economy. The cost of borrowing for the Russian government
is way up. And the central bank is increasingly forced to step
in and prop up Russian financial institutions.
Nor will we cease to ease up. We will not ease up for as
long as this maligned behavior persists. As an example, over
the past 2 weeks we have imposed additional costs on Russian
entities. Namely, we sanctioned a Russian bank, which has
facilitated millions of dollars in transactions for North
Korea, and we designated a major Russian port operator,
maritime port operator, for providing services to North Korean-
flagged vessels, and helping to evade sanctions.
This morning, about 30 minutes ago, we took further
measures. We are designating two Russia shipping--Russia-based
shipping companies, who have been conducting ship-to-ship
transfers of oil and circumvention of the U.N. Security Council
resolutions, and we are blocking six Russian-flagged vessels.
Second, as part of our ongoing effort to combat Russian
cyber activities, we are designating two more individuals and
two additional companies for their ongoing support to the
Russian FSB for cyber behavior. So I think it is clear that the
Treasury has been given a straightforward mandate to combat
Russian aggression at every turn, and I assure the committee
that we will continue to do so.
Mr. Chairman, I appreciate the opportunity to testify
before this committee, and to answer additional questions on
this matter, which I think we all agree is of the utmost
importance to our national security. With your permission, I
ask that my longer prepared remarks, together with a copy of
the CAATSA Section 243 Report on Russian elicit financial
behavior, be submitted for the record. And again, I look
forward to answering questions. Thank you, Chairman.
[The prepared statement of Mr. Billingslea follows:]
Prepared Statement of Hon. Marshall Billingslea
Chairman Corker, Ranking Member Menendez, and distinguished Members
of the Committee. It is my pleasure to be invited here today, and to
speak about a very serious and continued threat to the security of our
nation and our allies.
The Treasury Department has a clear understanding of the continued
threat posed by Russia's malign activities and works every single day,
together with other agencies and foreign partners, to counter that
threat. Russia's continuing occupation of Crimea, human rights abuses,
malicious cyber-attacks, illicit procurement of sensitive defense and
intelligence technologies, election interference and other influence
efforts, as well as their support to the Assad regime's massacre of its
own citizens, are unacceptable. Treasury has made countering Russian
aggression a top priority, and consequently, our actions to date have
resulted in an unprecedented level of financial pressure against those
working on behalf of the Kremlin and in key sectors of the Russian
economy targeted by U.S. sanctions. Treasury will continue to do its
part to impose costs in response to Russian malign activity, leveraging
all of the tools and authorities that we have. I am grateful to have
the opportunity to share with you today some of what the Department of
the Treasury is doing to support the administration's whole-of-
government Russia strategy.
First, I'd like to take a moment to put the Russia challenge into
context. Russia has spent decades developing complex and resilient
networks to raise, transfer, hide, and obscure the origin and movement
of the funds generated through illicit activity, including corruption,
sanctions evasion, and arms sales. Their highly sophisticated apparatus
relies on state and non-state agents and proxies; Russian oligarchs,
for example, use their wealth and influence to advance the Kremlin's
malign agenda at home and abroad.
Russia, however, is also unique from other countries subject to
broad U.S. sanctions in several important ways, including the
sophistication and scale of its malign activity, and we have tailored
our approach accordingly. We cannot, for example, counter Russian
aggression in the same way we approach countries like North Korea or
Iran. Russia's economy and resource base are more sizeable, and is
fully integrated into the global economy and international financial
system. North Korea and Iran, on the other hand, for decades have been
largely or almost entirely isolated from the global financial system.
Because Russia's integration presents an especially unique challenge,
we've surgically deployed Treasury tools to balance maximizing pressure
on Russia while minimizing unintentional spillovers to the United
States, our European allies, and the global economy.
For example, a number of Russia's state owned entities and
oligarch-owned businesses are intricately integrated into other
economies and global supply chains, including the economies of some of
our closest NATO allies. We designated RUSAL, the second-largest
producer and supplier of aluminum in the world, on April 6 for being
owned and controlled by EN+, which is owned or controlled by the
Russian oligarch Oleg Deripaska. As a result of our designations,
Deripaska's estimated net worth has dropped by more than 50%, and the
share price of EN+ fell from $12.20 to $5.40 on the London Stock
Exchange following its designation.
The core of our approach is to leverage every tool available to us
to impose costs upon those acting on or behalf of the Kremlin against
U.S. interests, and to increase financial pressure on Russia to advance
our national security priorities while simultaneously mitigating
unnecessary impacts on the United States, our European allies, and the
global economy.
Since January 2017, this administration has sanctioned 217 Russian-
related individuals and entities for a broad range of sanctionable
conduct, 200 of which were sanctioned by Treasury's Office of Foreign
Assets Control (OFAC). Of those, 136 were designated under Ukraine/
Russia-related sanctions authorities codified by the Countering
America's Adversaries Through Sanctions Act, or CAATSA. During this
administration, Treasury has used our sanctions authorities to counter
a wide spectrum of Russia's destabilizing activities, including malign
cyber activity, interference in U.S. elections, and support to rogue
states. In total, OFAC has also imposed blocking sanctions on 14
Russian banks and sectoral sanctions on 124 Russian financial
institutions, including any 50% or more-owned subsidiaries.
Furthermore, OFAC has imposed blocking sanctions on 20 Russian energy
firms and sectoral sanctions on another 80 Russian energy firms.
We've seen our actions have immediate effect. For example, the
RUSAL designation in April was part of a much larger sanctions package
of seven Russian oligarchs along with 12 companies they own or control,
17 senior Russian government officials, and a state-owned Russian
weapons trading company and that company's subsidiary, a Russian bank.
Among those sanctioned on April 6 were oligarchs Oleg Deripaska and
Viktor Vekselberg, as well as Putin's son in law Kirill Shamalov; and
the heads of state-owned companies such as Gazprom, Gazprombank, and
VTB Bank. One of Treasury's objectives in designating Deripaska and
Vekselberg, and indeed our objective in targeting oligarchs more
broadly, is to make it more difficult for them to wield their influence
and power to engage in malign activities.
The impact of our April 6 designation was felt within a single day.
According to public reporting, the combined net worth of Russia's 27
wealthiest people fell by an estimated $16 billion in 1 day, Moscow-
traded stocks had their biggest drop in 4 years, and the ruble fell to
its weakest position since late 2016. Viktor Vekselberg's net worth has
dropped an estimated $3 billion, and foreign governments have launched
investigations in response to his designation and subsequently frozen
Vekselberg's assets in their jurisdictions. Vekselberg's Renova Group
was forced to divest from ventures in Switzerland and Italy.
While our Russia sanctions program is among our most active,
sanctions are not and cannot be the only tool on which we rely. The
scale and sophistication of Russian malign activity is far more
advanced than that of other states currently subject to broad U.S.
sanctions. Further, the size of the Russian economy and its deep
integration into the global economy and financial system present a
unique challenge. As I've testified before, a key reason we have been
so effective in countering malign activity and illicit finance is we
implement comprehensive financial diplomacy. Accordingly, in certain
circumstances other tools will either complement or far more
effectively advance our national security interests in countering
Russian aggression. For example:
Engagement with foreign governments: Senior and working-
level Treasury officials frequently engage and consult with
foreign counterparts regarding our Russia efforts. We leverage
relationships painstakingly built over many years to consult,
pre-notify of pending actions, share information regarding
observed typologies, and urge them to match U.S. designations.
Since the passage of CAATSA, Treasury has traveled extensively
to discuss the implementation of the Russia-related provisions
of that statute with foreign and finance ministries. When
appropriate, Treasury also supports foreign partners'
designations and enforcement actions, including by providing
financial intelligence. In some cases partners need more than
one-off support, and in these cases Treasury offers technical
assistance to build partners' institutional capacity to
effectively address procedural, legislative, or other gaps.
Engagement with the private sector at home and abroad:
Treasury regularly meets with U.S. and foreign private sector
entities to explain our sanctions regulations and actions, and
share information, typologies of illicit activity, and best
practices, among other things. For example, we have held
roundtables with banks in jurisdictions at elevated levels of
risk for Russian money laundering, including Cyprus and Latvia,
to convey the risks and also to urge relevant industry
authorities to take steps to prevent the exploitation of their
respective financial sectors by bad actors. We also use private
sector engagement opportunities to communicate our intent to
aggressively enforce U.S. sanctions, and to pursue entities
that facilitate Russian malign activity.
Advance multilateral efforts: Treasury works multilaterally
to strengthen international anti-money laundering and
countering the financing of terrorism (AML/CFT) standards and
to ensure that these measures are effectively implemented
around the world. For example, Treasury officials have engaged
with international partners under the G-7+ Contact Group, a
group of likeminded countries coordinating efforts to counter
Russian malign influence. The United States also currently
holds the presidency of the Financial Action Task Force (FATF).
At FATF, Treasury works to strengthen international AML/CFT
standards and ensure that these measures are effectively
implemented around the world. For example, the FATF's efforts
to ensure that all jurisdictions apply a high level of scrutiny
to the financial activities of politically exposed persons
(PEPs) and collect information on the beneficial owners of
legal entities helps to detect attempts by Russian officials to
launder, hide, or move the proceeds of corruption. Similarly,
the FATF's work to promote the global implementation of United
Nations (U.N.) sanctions and hold underperforming countries
accountable through its ``grey list'' process helps undermine
Russian attempts to circumvent international prohibitions on
dealings with North Korea, Iran, or other U.N.-listed programs.
Indeed, the U.S. named the countering of proliferation finance
as one of the priorities of the FATF during the current U.S.
presidency, in an effort intended to harden the world's
financial systems against the type of illicit procurement and
proliferation activity in which Russian actors are regularly
involved. All FATF members are evaluated against their
effectiveness in implementing FATF standards. Russia, as a FATF
member, will be subject to rigorous assessment and peer review
of its AML/CFT regime beginning in 2019.
Deploy other authorities: As Treasury works aggressively to
deter and prevent illicit Russian financial activity abroad, we
are simultaneously protecting the U.S. financial system. For
example, on February 16, 2018, Treasury's Financial Crimes
Enforcement Network (FinCEN) issued a finding pursuant to
Section 311 of the USA PATRIOT Act that Latvia-based ABLV Bank
AS (ABLV) was a financial institution of primary money
laundering concern. In its public notice of proposed
rulemaking, FinCEN cited multiple instances of
institutionalized money laundering in which ABLV management
solicited high-risk shell company activity that enabled the
bank and its customers to launder funds. ABLV's facilitation of
shell company activity typically benefitted illicit actors
engaged in an array of illicit conduct, including transnational
organized criminal activity, corruption, and sanctions evasion,
emanating mostly from Russia and former Commonwealth of
Independent States. Pursuant to this finding, FinCEN proposed
the imposition of a prohibition on U.S. financial institutions
from opening or maintaining correspondent accounts for, or on
behalf of, ABLV.
Public affairs engagement: Finally, Treasury officials work
with the domestic and foreign media to disseminate information,
including information on designations and sanctions evasion, to
ensure information is made available to appropriate audiences.
Before concluding, I would be remiss if I did not speak to the
tremendous effort it takes on the part of Treasury's professional staff
to implement all of our programs, liaise with other country partners,
and with the private sector. Our team travels around the world to
ensure our sanctions are effectively implemented and the real-world
risks of transacting with designated individuals and entities are fully
understood. Treasury staff fields thousands of inquiries each year
regarding compliance and licensing issues--many highly complicated
questions that require substantial amounts of time and effort. On top
of this, we are mandated to prepare and submit at least 80 reports to
Congress in 2018--reports that require thousands of hours of work.
Treasury's Office of Terrorism and Financial Intelligence is a small
component compared to our interagency partners.
As you can see, Treasury has aggressively targeted the range of
Russian malign activity through our tools and authorities. In
coordination with our interagency and international partners, we will
continue to maintain pressure against the Kremlin. I would like to end
my comments here, and welcome your questions.
The Chairman. Without objection.
I am going to ask just a couple of questions, and then
reserve the rest of my time.
I think that the vast majority of this committee, in
listening to the testimony of the two of you, would say that
this was a very fact-based realistic view of what is happening,
and presented by two very sober individuals, who understand
Russia and their actions to be as they are.
I would ask the question today, is your testimony today
representative of the mainstream of the administration from top
to bottom?
Mr. Mitchell. Yes, Senator, I believe it is. It also
reflects the policy that has been directed by the President.
Mr. Billingslea. Senator, I agree with that. Chairman.
The Chairman. So we obviously are putting tough measures in
place, and I know many will advocate for more. We are seeing no
behavior change; is that correct? I mean they're still doing
the same things that they have been doing for years. Have we
seen any behavior change as a result of what it is we are
doing?
Mr. Mitchell. I would not want to characterize that. In a
classified setting I think the Intelligence community would be
better positioned. But I would say is that by the net weight of
our actions and sanctions, in particular, I think we are
forcing the Russians, and specifically Putin, to reconsider his
preferred strategy. The combined effect of our sanctions,
together, by the way, with our larger defense establishment, is
a cost and position strategy. And I think it is important to
remember that cost and position is what won the Cold War.
So I would argue that--I would argue very clearly by
increasing the costs in these sectors for the Russian economy
and state, but also forcing them to up their game in developing
military technological advances to keep pace with the United
States in both conventional and nuclear arms, I think we are
absolutely having an impact on Vladimir Putin's preferred
strategy.
The Chairman. But, and again, I am not being critical of
what it is you are doing, it just seems to me, and I know that
there are discussions, the reason I am asking these questions,
there are discussions about what we might do to prevent further
involvement in our elections, which look like there is no way
to stop involvement in our elections. We see it happening
today. We see it happening with fringe groups.
Is there something that is being discussed within the
administration that you believe may have even greater impact
than what we are doing that might possibly change their
behavior, which is the point of all of this.
Mr. Billingslea. Chairman, so we are constantly evaluating
additional--deployment of additional pressure tactics and
sanctions. And there are active discussions under way on--on
those matters. I would not want to telegraph those at this
stage, because if we do act we want it to have maximum
financial impact.
What I would offer is had we not been applying kind of
massive pressure we are applying on the regime, their behavior
would be even further off the charts. So we are at least
circumscribing their freedom to act, and the amount of
resources they have on hand to counter us, and to serve as a
spoiler, as they are attempting to do in so many cases across
the globe, whether we are talking about propping off Maduro in
Venezuela, on the one hand, what they are doing with the
Iranians and weapons trade there for Assad. So we are forcing
them to make some pretty tough resource changes.
Likewise, we do see clear indications that a number of the
Oligarchs, who thought they would just simply get bailed out by
the regime for the hit that they have taken, have, in fact, not
been made whole. And that is perhaps due to the fact that the
regime itself is struggling for the kind of resources that they
would need to do that.
The Chairman. I reserve the rest of my time. Thank you.
Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman. Thank you both
for your testimony. And Mr. Chairman, I would like to take up
the Secretary's suggestion that maybe we should have a
classified briefing on the impact of sanctions and behavioral
change. I think that would be instructive for the committee.
The Chairman. I know we had one in Banking, and a number of
us attended that. And I think they, just for what it is worth,
general speaking, I do not think it is as classified. They said
it had not been any behavior change. But maybe we should have
that for this committee, also. But go ahead.
Senator Menendez. So Mr. Secretary, I think that in
listening to your response to the Chairman's questions, I think
we could generally agree, that despite our best efforts, both
Congress's intention to the laws that it has passed, and the
administration's enforcement of elements of that, that Russia
continues to march on, both in destabilizing our democracy,
other Western democracies, continues to have a frozen conflict
in Eastern Ukraine, continues to occupy Crimea, and is engaged
actively in Syria in a way that I think undermines our national
interests. So is that a fair statement?
Mr. Mitchell. I think that is a fair statement. And I would
just add to it what Director Coats said, the assessment of the
Intelligence community, that there is a pattern of--a campaign
and pattern of pervasive influence. It is not at 2016 levels.
And the administration is responding to that with a clear-eyed
strategy.
Senator Menendez. So if we are agreed that it has not, at
least as it relates to all those things, changed its course of
conduct, do you support stronger sanctions on the Russian
energy and banking sectors?
Mr. Mitchell. I support a continuation of the
administration's current approach, which is to use the sanction
authorities that we have. And I think we have a good track
record to show for that.
Senator Menendez. If you had the ability to have stronger
sanctions on Russia's energy and banking sectors, would you
welcome it?
Mr. Mitchell. We make full review and use of all of the
authorities at our disposal, and are always assessing for new
targets.
Senator Menendez. We had the Secretary of State here, who
is your boss. And he actually said that he welcomed, as a
result of my questioning, he welcomed--we did not specify which
one, but he welcomed a new round of sanctions as it relates
towards Russia. I assume that you are in agreement with him.
Mr. Mitchell. I am. As I said, I would continue using the
authorities that we have. I believe that we have excellent
authorities. But we always use the tools that Congress gives
us.
What I would say from the Executive Branch perspective, and
for effective diplomacy, is we need discretion with those
sanctions. So sanctions without discretion, in my mind, is the
enthuses of strategy. We have to have the flexibility to use
them in a manner that reflects diplomatic realities, and I
think we have done a good job of that.
Senator Menendez. I get concerned when I have seen both
this and previous administrations use waiver authority in a way
that is far beyond discretion. It undermines the intention of
Congress. So we have a different point of view as to exactly
how much discretion you end up having.
Do you support the establishment of a sanction coordination
office at the State Department?
Mr. Mitchell. I would reserve opinion on that matter. I
think we are looking internally at how best to continue
coordinating sanctions in the days ahead. I think we have done
a good----
Senator Menendez. We have heard a lot of complaints from
European governments about the lack of senior level
coordination on sanctions. I would like to commend it to your
attention as well as the Secretary's.
Let me ask you both. Do you support the establishment of a
national fusion center to coordinate policy against maligned
actors across the whole of government?
Mr. Mitchell. I think there is something to the idea of a
mechanism for increasing coordination within government. It is
a problem that has a lot of different aspects. There is a cyber
and technical aspect. There is a diplomatic and messaging
aspect. There is an informational aspect.
My caveat would be I think it is important to go about this
in a way that does not get in the swim lane of current lines of
effort, which I would argue you are doing a good job. So I
think our team is preparing some structured feedback on the
legislation that we have--the ideas that we have seen in the
bill.
Senator Menendez. We would look forward to that. Let me ask
you this. Is it still the policy of the United States to not
recognize the illegal annexation and occupation of Crimea?
Mr. Mitchell. Indeed.
Senator Menendez. I appreciate you saying that. Because
then I see the President go ahead and veto elements of the
National Defense Authorization Bill, or the President rejected
Senate-approved language of non-recognition of the illegal
annexation and occupation of Crimea. That is worrisome for
some. I do not know why you would do that when it is the
policy, the stated policy of the administration. Also, the
Secretary of State has said that. And then you get a different
message sent by the President.
Let me ask you one last question. Under the Chemical and
Biological Weapons Act, the administration imposed sanctions on
North Korea for using chemical weapons against one of its own
citizens, killing the brother of Kim Jong-un. The
administration also designated North Korea a state-sponsored
terrorist following that attack.
Earlier this month the administration sanctioned the
Russian Federation under the CBW Act for using chemical weapons
against one of its own citizens, a former spy, Sergei Skripal,
and his daughter. You have not, however, designated the Russian
Federation to be a state sponsor of terrorism. Why not? What is
the substantive difference between these two situations?
Mr. Mitchell. Let me respond to the first part of what you
said, Senator. I think the administration has been crystal
clear on Crimea. I see no daylight here. I would refer you to
the President's comments in the interview yesterday, when he
said very clearly that every time he discusses Ukraine he talks
about Crimea. I think the Crimea declaration speaks for itself,
and we have been very strong in that regard.
On the matter of designation of state-sponsored----
Senator Menendez. Then I do not know why you reject the
provision of the NDAA. It is just a codification of a view. I
do not quite get it. It creates confusion in the world. But go
ahead, second part of my question.
Mr. Mitchell. On the second part of your question, with
regard to a state sponsor of terrorism, I think--I do not want
to get ahead of process. I think this is something that is
always important to keep in our pocket. I think we are looking
very carefully and sober mindedly at Russian behavior in all
regards. And CBW sanctions speak for themselves.
Depending on how the Russians now respond, there could be a
follow-on to that, as per the law. So I would just say we
reserve to ourselves all options with regard to Russian
behavior.
Senator Menendez. I just would say there is no
differentiation between what happened in North Korea and the
actions the administration took, which I applaud, and the
Russian Federation. And there is no reason why we should not
employ all the uses that we have, because we need to deter the
Russian Federation from undermining our elections, and
continuing to violate the international order.
Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Portman.
Senator Portman. Thank you, Mr. Chairman. And let me start
by reiterating what the Chairman and Ranking Member both said
about both of you. I am glad you are there. And I thought that
you gave us a sober, but very thoughtful and fact-based
presentation today. My questions to you are really about why,
given all the things we are doing, including sanctions, are we
not making better progress?
Let me start by saying, I appreciate that a couple of weeks
ago the Secretary was able to make clear the findings of the
investigation into the Russian involvement in the attempted
assassination of Sergei Skripal and his daughter. And I think
that is the sort of thing where, you know, we need to be frank,
and be clear-eyed, and hold Russia accountable. And I
appreciate the fact that that triggered some of the sanctions
we have talked about today, but there is so much more.
We talked about what is going on in the eastern border of
Ukraine. The question was just raised as to how we continue to
feel about Crimea. You talked about espionage, cyberattacks,
disinformation, propaganda campaigns. You talked about the
active Russian evasion of the North Korean sanctions, the
influence operations at Facebook recently, talked about, does
foment destabilization. It is not about right or left politics.
And I think you make the good point that when we break this
down on a partisan basis here in this body and in this country,
that only comes to help Russia, not us. And I hope that we in
this committee have been able to avoid that, and will continue
to.
Today, Microsoft announced it imported Russian-backed
cyberattacks as an example on the IRI, the International
Republic Institute, and also on the Hudson Institution. So this
is ongoing even as we talk here today.
I think sanctions are necessary. You talked about how firms
are sanctioned or impacted, including, you said, on average a
firm would lose one-third of its employees if it was
sanctioned. The ruble has been devalued. But it is obviously
not working the way we would like it to. I'm not saying it does
not have impact. And, again, I think it is necessary. So my
question to you really is, what would be more effective? Either
additional sanction pressures or non-sanction pressures do you
think would be most effective in countering what is going on?
And specifically, I would like you, Secretary Mitchell, to
talk a little bit about the Global Engagement Center. There was
talk about a new fusion center. I am not necessarily against
that, but we just set up this Global Engagement Center. Senator
Murphy and I spent a lot of time on legislation over the years
working on this. The idea there was to, at least with regard to
push-back on the disinformation and propaganda, be able--on an
interagency basis to be able to have better coordination and be
more effective in pushing back.
We have, frankly, much less resources than the Russians use
every day here in Washington, DC even. But could you talk a
little bit about that, or other ways we could deal with what is
obviously a continuing problem with Russia.
Mr. Mitchell. Thank you for those questions, Senator. Let
me just respond in brief to the three things you have asked.
On the first part, I am not sure I would characterize the
efforts that we have made in quite the way that you have in
terms of impact. I think the chilling effect on the Russian
economy, and certainly key sectors, has been significant and
measureable. Since 2013 foreign direct investment in Russia has
fallen by 80 percent. It is a pretty stunning number. You know,
at this point we are looking at an impact through the chilling
effect of use of 231, from CAATSA, from $8 to $10 billion in--
for closed arms deals.
I think your broader point on Putin and his view of the
United States not having a partisan ax to grind is out. I do
not think that Putin is a student of Jefferson or Adams. I
think he is a student of Haushofer. I think it is about
geopolitics. I think Microsoft revelations from yesterday show
that Facebook expulsion--show that very clearly that the groups
in question were fomenting violence from fringe left
perspective. So I think that we have to understand that we have
a competitor who sees us as strategic competition, and his
interest is in dividing us internally. It is a strategy of
chaos for strategic effect. And so I think it is incumbent on
us to not politicize and make it partisan.
In terms of GEC, we work very closely with GEC. As you
probably know, the department has put $20 million of our own
resources towards this effort in the period when we are waiting
on the additional funds. We are really looking forward to
seeing our colleagues at the Department of Defense move the
additional 40 million, so that we can see the GEC be up and
running in the way that it was intended in the areas related to
Russian disinformation.
Senator Portman. Do you feel like you have the right staff
onboard at GEC to be able to punch back?
Mr. Mitchell. I do. I think we have a very talented staff,
some very capable and knowledgeable hands. We also work very
closely with them from our bureau. In fact, when our colleagues
in Russia were P&G'd and came back, we made excellent use of
the talent base to do a temporary plus up in some of those
areas.
I mentioned the capacities that we have created at EUR,
including the SARMAT role. SARMAT is the acronym for this
person's role. It is also the acronym for a Russian missile. I
think it make the point very clearly that we take--we take the
problem seriously.
Senator Portman. Yeah. Thank you, Mr. Chairman. I just
think, in general, the measurements you are using; again, I
appreciate all the hard work you are doing are the impact on
the ruble, the impact on the economy, the impact on the direct
foreign investment. Those are interesting measurements, and
obviously they are having an impact.
The question is, what are the consequences of that as to
Russian behavior with regard to, again, their both overt and
covert espionage, disinformation, propaganda, avoiding
sanctions, and so on. And that is the question I have is, can
we see a measureable result in terms of the actual problems
that we hope to be able to address.
Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Cardin.
Senator Cardin. Thank you, Mr. Chairman. I just want to
concur with the leadership of this committee, and thank both of
you for your service, and your testimonies today have been
excellent, and I think this is what we want to hear. So I
applaud your service.
It has been 93 weeks since the presidential elections. And
our Intelligence community made a pretty quick assessment as to
Mr. Putin's involvement in our elections. Bipartisan support in
Congress took very quick action on the CAATSA statute,
recognizing the threat.
I agree with Senator Portman that this committee and this
Congress has acted in a very bipartisan manner, recognizing the
threat of Russia. So I want to make that clear.
And Mr. Mitchell, I appreciate--Secretary Mitchell, I
appreciate the fact that the policy you are enumerating, one
that I personally support, the way you articulate it,
indicating it was directed by the President, the problem is the
President has not followed it. That is the concern.
There have been times when the President has made this a
very partisan issue. We have not. He has. So I think we need to
really drill down on this just a little bit more as to how this
policy is being implemented.
You point out, in a very sobering way, that Mr. Putin wants
to break apart the American Republic. That is a pretty sobering
statement you made. Totally consistent with a report that I
authored on behalf of members of this committee in January that
said that Mr. Putin's not only trying to compromise our
democratic system here in America, but he has his eyes on
democratic nations of Europe, trying to bring them down as
well. That is pretty sobering.
But our report pointed out that to counter that you need
strong leadership. And I appreciate the fact that we have had
arguments as to the effect of sanctions. One thing is clear to
me, if you do not stand up to Mr. Putin, he will take the
situation and move even further.
So have we seen a change in behavior the way we want it?
No. If we did not pass the sanctions could there have been even
more activities by Mr. Putin? Probably yes. He will fill a
void. So I think it is important for us to be very sober about
Mr. Putin's activities and what he is trying to do.
So let me get to this one point, because this really
concerns me about the President's actions. I saw Helsinki, and
the private meetings in Helsinki, and it is filling into the
narrative of Mr. Putin and his concept of how governments
operate, and compromising our democratic system by the manner
in which that meeting took place. And after the meeting they
were celebrating in Moscow, and they were scurrying in
Washington to try to figure out how to handle some of the
statements that were made.
So first, try to assure me that--you say sanctions need
discretion. I understand that, from the point of view of the
Executive Branch of government, you need discretion, for them
to have a policy. But the problem is one person can exercise
that discretion, the President of the United States. And we saw
that the President might very well--we know that there has been
discussions about Magnitsky sanctions, and with Mr. Putin, et
cetera.
Have you been briefed as to what happened in Helsinki in
regards to discussions on sanctions?
Mr. Mitchell. I have been briefed on the appropriate
information I need to carry out my job with relation to Russia.
But the President's also been clear, as recently as in an
interview yesterday, which I would direct you to, that this
was--the question that you are asking, when he was asked in the
interview, he was very clear about this.
And beyond that, I would say----
Senator Cardin. He was very clear, not in Helsinki.
Mr. Mitchell. He was very clear with regard to raising with
Vladimir Putin the unacceptability of interference in our
elections. He has been very clear in his statements that he has
not at any point raised the possibility of lifting sanctions.
Senator Cardin. He did that when he returned to Washington.
He did not do that in Helsinki.
Mr. Mitchell. Sir, with all due respect, I am not going to
litigate the specifics of every comment that the President has
made. I would point you towards our policies that are directed
by the president of the United States.
I disagree with your overall characterization that the
President has not followed his policies. These are the
President's policies. There is no distinction between the
administration and the President with--the President directed a
Russia strategy, a strategy for countering Russian influence.
The previous administration did not.
I would point you to the 2010 National Security strategy on
Russia, and compare it to our National Security strategy as it
relates to Russia. I will point you to what President Obama
said in Moscow in 2009. He called Russia a mighty river, and
said that America wanted to ensure its rightful place among the
great powers. And I would----
Senator Cardin. Sir, I understand--sir, I understand the
policy right now, you are assuring this committee that unless
Russia changes its behavior, we will not only maintain all of
our sanctions, you are looking for ways to strengthen those
sanctions against Russia, and are prepared to work with this
committee to give you additional tools in order to make it
clear that without tangible specific results, these sanctions
will be maintained and expanded.
Mr. Mitchell. Yes. And I think that is also clear from our
actions of the past year-and-a-half.
Senator Cardin. Thank you. Thank you, Mr. Chairman.
The Chairman. I am going to make one interjection before
turning to the next person. My observation would be that some
of the undisciplined comments that the President makes creates
just as much trouble for these people as they do for us, and
the rest of our country.
Let me just give an example. The 232 Tariff issue, which I
believe is an abuse of the President's authority, were you all
involved at all in discussing the use of a national security
waiver to put tariffs in place, which in your case, Mr.
Mitchell, usually affects the portfolio that you are working
on. Were you asked, or was your, was the State Department asked
about the use of----
Mr. Mitchell. There was an extensive interagency discussion
and process on that matter. And both State Department and EUR
had a voice in the process.
The Chairman. And did you support it?
Mr. Mitchell. With regard specifically to the European
Union?
The Chairman. Yes.
Mr. Mitchell. What I supported was the President's trade
policy overall. We informed that strategy. I think as you see
from the current U.S.-EU dynamic and trade it is a strategy
that is working.
The Chairman. Well, I will take a little more of my time.
How is it working?
Mr. Mitchell. We currently have a conversation under way, a
structured dialog with the European Union, about a lowering of
EU barriers to American products and services.
The Chairman. Well, it is my understanding that the
European Union actually has to go to zero tariffs when they met
with the president on automobiles, and he did not want to do
that. He wanted to keep the 25 percent tariff in place on light
trucks. So it is us that is pushing for tariffs, if my
understanding is correct.
Mr. Mitchell. The President has repeatedly and publically,
in the company of senior European leaders, pledged to go to
zero-zero if the Europeans were willing to do this.
The Chairman. My understanding is they are willing----
Mr. Mitchell. The Europeans have not even been willing to
even engage in a process until the President used 232.
The Chairman. So you support the use of a national security
waiver to put tariffs in place on steel and aluminum?
Mr. Mitchell. I support the president's trade policies,
sir.
The Chairman. And did the department recommend the use of
the 232 waiver?
Mr. Mitchell. I am not going to get into the deliberate
process. This is one administration. There is an interagency
process for everything related to what you are asking about,
and we are on the same page.
The Chairman. Senator Paul.
Senator Paul. Thank you. You know, we have asked some
important questions, and a really important question we have to
ask is do sanctions change behavior. And so without the answer
to that I think we cannot really decide whether we want more
sanctions until we decide whether sanctions work. And that is
another way of asking the question, do sanctions work?
I think with regard to Iran, when the world had sanctions,
there obviously is evidence that it worked to bring Iran to the
negotiating table. In this case, there really is a question, do
they work, and do more sanctions, well, work even better.
I think one possibility is that they do not work. And if
they do not work, what is the result of sanctions? One result
of sanctions might be that it drives Russia more into the
sphere of China, and drives countries such as Turkey more into
the sphere of either Russia or China. And so I think there are
arguments to be made that perhaps more sanctions are not the
way to go.
Sanctions are sort of the stick, and the question is, what
is the carrot? I would say that one of the carrots might be
considering whether or not we continue to insist that Ukraine
and Georgia be in NATO. I think that if you really wanted to
influence Russia's behavior, and you were talking on a one-to-
one basis with Russia, and you were to have some sort of
agreement, I think an agreement not to have Ukraine and Georgia
in NATO might lead to less conflict in both Ukraine and
Georgia. There is the argument that much of the military
conflict and fomenting of military conflict is because they do
seriously fear, and worry, and are concerned, and are opposed
to having them in NATO.
It was George Kennan who said in 1998 that if the West
insists on pushing NATO into Eastern Europe, and into the
surrounding countries around Russia, that it will lead to the
rise of militarism, nationalism, and ultimately an aggressive
leader in Russia. And he said this in 1998. And I think, you
know, his words had great prescience in the sense that some of
the reactions, some of the things you see in the world are
reactions to actions that we take.
With that being said, if we are open to dialog, as Mr.
Mitchell said, in addition to both having the sanctions, the
stick, but we still show an openness to dialog, one of the
things that I think we could and ought to consider is whether
or not there is any element of the sanctions where we would be
willing to negotiate lessening of sanctions in exchange for
maybe a smaller change in behavior.
If we wait for Russia to leave Crimea to lift any
sanctions, we may well be waiting to the end of time. But
perhaps there are some sanctions that already we could see that
are counterproductive, and the ones that I would throw out are
sanctions that prevent the travel of legislators, and their
Duma, and their federation. And I think even in the midst of
adding more sanctions, we ought to consider whether or not it
is productive to dialog, to not have dialog.
Even if you want to complain about election meddling, you
would think that you would want to meet with the Russian
legislators to complain about election meddling. And I think if
we cut off dialog between the legislators in Russia and here,
that I do not necessarily see that that is going to change
their behavior, but it does block off the ability for us to
have dialog with Russia from their foreign relations to our
foreign relations.
And so I would just ask that the members of the committee
at least think about it as the push is towards more--is towards
more sanctions, whether or not we ought to at least think about
whether or not we want to prevent their legislators from
traveling here, and then they do the same basically to our
legislators.
There are things that despite our differences, though, that
I think we should continue to talk about, and this is, I guess,
the basis of my question. The New START Treaty was completed in
2010. It expires at the end of 2020. I guess I would ask Mr.
Mitchell, where do we stand on discussions with Russia? Do we
have ongoing discussions? Do we have negotiators? What is the
status of the New START Treaty, and our discussions with
Russia?
Mr. Mitchell. Thank you for that question, Senator. And if
I could respond briefly to the first part of what you said.
I agree with you that sanctions are a tool of strategic
statecraft. And right now the United States has 4,190 sanctions
worldwide, and 580 against the Russian Federation. What that
points us towards is the need for sanctions to always be linked
to a clear strategy. I think the role for Congress is to
continue to be very specific as you were in CAATSA about what
change in behavior is needed in order for the sanctions to be
lifted, and any forthcoming legislation.
With regard to New START, we have been very clear that
Russia's violation of the IMF Treaty has created a deficit of
trust. And that extends across the arms control ecosystem in
all of our conversations with the Russians.
We are looking very carefully and closely at the question
of the future of New START. I would just say at this point any
decision regarding a potential extension will be made at the
appropriate time, and we would determine whether extending the
treaty is in the national interest of the United States and our
allies.
Senator Paul. We do not have a formal dialog on either IMF
or New START with actual negotiators, or do we?
Mr. Mitchell. Well, what we have at present is a line of
sight to continuing the process on strategic stability talks.
But we will only know more about that once National Security
Advisor Bolton comes back from his meeting with Patrushev later
this week.
The Chairman. Before turning to Senator Shaheen, just to,
Senator Paul, I would make you aware, and appreciate your
perspective that we were in conversation with the former
ambassador here from Russia about potentially reestablishing
the parliamentary discussions. In lieu of waiving sanctions,
what we had suggested was just meeting them in a neutral place,
whether that be Israel or some other place.
And so there were discussions of that type until the
election issues began in 2016. So I did want you to know that
those conversations had taken place in the past. There were no
discussions that I remember of waiving sanctions, but certainly
meeting in neutral territory to begin a dialog. Whether that is
something we want to discuss again, we can talk about that
internally, but those have taken place in the past.
Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman. Thank you both
for being here. And like other members of this committee I
applaud the policy positions that you have outlined today. I
think the concern and confusion among Americans and the world,
actually, has come because of the contradictory statements and
actions of the President, because of his behavior in Helsinki,
because of his frequent Tweets, because of his failure to
consistently acknowledge Russia's actions to influence the 2016
elections, and their ongoing meddling in 2018.
So I appreciate the opportunity to explore the policy
positions that are under way, but I think until we see a change
in that behavior we are going to continue to see confusion and
concern. And I am not asking you to respond to that. That was a
statement, not a question.
Can you, Mr. Billingslea, tell me the status of the Skripal
sanctions that were announced on August 8th? Have they actually
been imposed?
Mr. Billingslea. Senator, the sanctions in response to the
use of the nerve agent in the United Kingdom, those have been
imposed. They were actually imposed under a State Department
authority, and I would defer to Secretary Mitchell on that. We
were in close consultation with the State Department in the
run-up to that. And as Secretary Mitchell has indicated,
depending on how Russia reacts, there is a menu of additional
follow-on options that range in potential severity, which we
are continuing close discussion on as well.
Senator Shaheen. And Secretary Mitchell, are we supporting
Foreign Minister Hunt's call for the EU to impose greater
sanctions against Russia in line with the United States has
done? And are we also working to try and encourage the EU to do
that?
Mr. Mitchell. Yes, we are, Senator, very much so. We are in
close consultation with our British counterparts at this point
on an almost daily basis, and have been both with regard to the
Skripal expulsions, and next steps on sanctions.
And I would just add, we were encouraged to see that the
Europeans, partly because of U.S. engagement, created their own
distinct chemical weapons-related sanctions authorities, which
was a new and important step.
Senator Shaheen. I agree. I think that is positive.
Mr. Billingslea. Senator, could I also offer on that, one
of the things that----
Senator Shaheen. Only if it is new. You are using my time.
Mr. Billingslea. I will revert back to you, Senator.
Senator Shaheen. Okay. Thank you. I appreciate that.
Secretary Mitchell, as we have discussed before, I had the
opportunity to visit Syria and see the stabilization efforts
that have taken place in Northeast Syria, along the Turkish
border, and how much the Syrian people have benefited from
that, from throwing ISIS out of that. And continued to be very
troubled by the fact that the administration has on hold the
stabilization funds for that part of Syria.
How does continuing to deny efforts to support
stabilization in that area fit with our Russia policy? Because
does that not give Russia, and Assad, and Iran all, and Turkey,
for that matter, all the opportunity to go into that part of
Syria, which has a chance now with continued stabilization, and
continued support to be a place where the Syrians can enjoy
some level of freedom from violence, and from Assad, and his
regime, and from all the other actors in the region. How does
that make sense in terms of a policy for Syria and Russia?
Mr. Mitchell. Thank you for the question. No. I appreciate
the question. And I would say nothing would be better from a
Russian perspective than to see U.S. aid flowing in Syria in
many different regards. Prior to a clear commitment to a
political process at Geneva. This is part of the stock Russian
approach to next steps on Syria, to see the United States
essential bankroll various forms of stabilization
reconstruction before we see the Russians do their part in
committing to a political process.
Senator Shaheen. Well, I am not talking about all of Syria.
I am talking about that----
Mr. Mitchell. I understand the question. But you asked how
it was related to the whole----
Senator Shaheen.--northeast area that we have actually
committed to.
Mr. Mitchell.--Russia strategy.
Senator Shaheen. How does allowing other foreign influence
to go into that area and undermine everything we have done to
stabilize the region post-ISIS to work with the Syrian
democratic forces? How does that benefit a policy that says we
would like to get people to the table? If anything, I think it
would encourage the Russians to go to the table, because they
see what we have been able to do working with the Syrian people
there.
Mr. Mitchell. Senator, what I would say is we take very
seriously taxpayer resources as they relate to the Syria
problem in its entirety. We are cognizant of how that fits with
the larger Russia strategy. And it is not clear to me that the
actions that we are having are widening or creating a vacuum
for other players.
Senator Shaheen. Have you been there?
Mr. Mitchell. No, ma'am.
Senator Shaheen. I would encourage you to go. I think it
would be very illuminating in terms of the difference that we
have been able to make with our military on the ground there,
with other coalition forces. And to give up the playing field
there, and to allow other influences to go back in, I think it
is not in our interest or the Syrian people's interests.
Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Young.
Senator Young. Secretary Mitchell, welcome. I would like to
return to what you have indicated in your written statement is
Putin's thesis, ``That the American Constitution is an
experiment that will fail if challenged in the right way from
within. Putin wants to break apart the American Republic,'' you
say, ``not by influencing an election or two, but by
systematically inflaming the perceived fault-lines that exist
within our society.''
This is, indeed, a very serious point. Can you elaborate on
that point?
Mr. Mitchell. Well, I think what we see in Russian
strategic behavior, as it relates to influence operations, is
more or less consistent with standard Russian operating
procedure and influence operations all the way back to the
1930s. The Bolsheviks, and later the Soviet State--I mean,
look, even within the United States, before the social media
age, Russians have been at this since at least the 1960s or
'70s. This is not particularly in that regard. What is new is
the tools and the scale. So the digitization of this, digital
means, and social media, and the fact that this is being
directed from a very high level, with a lot of State resources
behind it.
I think what we have seen in Russian approach to the United
States in influence operations is very much not a partisan
effort. I think it is a very cynical effort to pit preexisting
political camps against one another. I would just refer you to
some of the groups that Facebook made the decision to shut
down. Look at what they were promoting. Look at what they stood
for. These particular groups were on the far left.
We are aware very much from media of those on the far
right. These were from the far left. They were putting money
and organizational efforts behind groups that stood for really
heinous and hideous causes inside the American polity.
We have seen since January of last year, after the
President was elected, the Russians have put money behind
groups that have fomented anti-Trump protests, including the
one at Madison Square Garden that drew thousands of people
immediately after the election.
So the point is that from our competitor's standpoint, the
goal is to divide us internally. There is not any reflective
political philosophy as it relates to American politics. It is
an effort to divide us.
Senator Young. We have heard from members various documents
produced from the Intelligence community in the past as well
that the difference here is not in the attempt to influence the
United States, but is, indeed, in the tools. It is the breadth
and extent to which the influence operations have been tried.
It may also have something to do with the interaction between
those tools and a particular moment in political history as
well.
Secretary Billingslea, I welcome you as well to this
committee. Great to have you. You write in your prepared
written statement that Russia's continuing occupation of
Crimea, human rights abuses, malicious cyberattacks, elicit
procurement of sensitive defense in intel technologies,
election interference, and other influence efforts, as well as
their support to the Assad's regime, massacre of its own
citizens are all unacceptable.
You know, my colleagues have already asked in a couple of
different ways whether or not the sanctions are working. I
think there has been an acknowledgement that the purpose of the
sanctions is not just to influence the Russian economy. It is
to deal with these other objectives, these continuing problems
we have.
Have we seen improvement with respect to any of these?
Crimea, human rights, cyberattacks, procurement of sensitive
technology, so on, and so forth. Election interference on
account of our implementation of sanctions.
Mr. Billingslea. Senator that is a great question. There is
a difference between working and having an effect. Our
sanctions are working to the extent that they are integrated
into a larger strategy that the administration is executing to
deal with these Russian malign behaviors. But our sanctions are
also having a clear and measureable effect.
I will give you some examples. Rosoboronexport, which is
their huge defense conglomerate that was selling fighter jets
dropping the barrel bombs of chlorine on the populations in
Syria, they are having a hard time getting paid for a number of
their deals. So we are impairing--we are impairing the
effectiveness, and we are constraining the Putin----
Senator Young. Yeah.
Mr. Billingslea.--regime, and their--and their freedom of
maneuver. But, again, the extent to which it is all working
depends on the synchronization of a lot of other measures----
Senator Young. Yeah. I understand there ought to be a
broader strategy. So can you name some of the other tools that
are being implemented, utilized, to effect change in these many
continuing areas of challenge? And perhaps you can tell us what
additional steps we might take vis-a-vis the Russians to
implement that change.
Mr. Billingslea. Chairman, if I might, and I will kind of
sneak in what I wanted to say to Senator Shaheen as well here,
which is in the capacity, is this committee, the work that you
do, it is incredibly important that we message very clearly to
a number of European allies, particularly Eastern European
allies, that it is crucial that they shore up their anti-money
laundering regimes, and that they clamp down and tighten down
on how they regulate money coming out of Russia.
There is an enormous amount of money that is still being
filtrated from Russia by both organized crime and cronies
surrounding Putin. And so to the extent that you have
parliamentary relations with Latvia, or you engage with Cyprus
and Malta, or other offshore jurisdictions, I think reinforcing
that message would be incredibly helpful.
We really need to clamp down globally on these money flows
that are associated with the movement of large amounts of money
out of Russia.
Senator Young. Thank you.
The Chairman. Thank you. Senator Murphy.
Senator Murphy. Thank you very much, Mr. Chairman.
Mr. Chairman, I thought that our hearing with Secretary
Pompeo was extraordinary, and I frankly wish that it had gotten
more attention. I thought it was extraordinary in a number of
respects. But chiefly, in the argument that the secretary was
making to us, that we should ignore what the President says and
pay attention only to what the State Department does. And we
are hearing a strain of that today.
But the argument is extraordinary because it essentially
admits that there are two different American foreign policies
today. There is one articulated by the President in his
statements that he makes standing next to President Putin, or
on his Twitter feed.
Just yesterday, to Reuters, the President once again said
that it might not have been the Russians that interfered in the
U.S. election. And then there is the, I would argue, much more
mainstream foreign policy that is being administered in part by
the two incredibly capable patriotic representatives of the
American government standing here today.
And so I wanted to pose a question, I guess, to you,
Secretary Mitchell. In the context of how this plays out on the
issue of propaganda, building off of the question that Senator
Portman asked you, I thank you for the work that you have done
to stand up the GEC while you are waiting for the transfer
authority. You have gone and worked with Secretary Pompeo to
find some money to get that up and running. And I agree that it
is going to make a difference.
But there was a really interesting poll from--about a week
ago in this country that showed that 43 percent of Republican
voters believe that the President should have the authority to
close news outlets engaged in bad behavior, which is reflective
of this obsession, especially over the past few weeks, that the
President has with what he calls the enemy of the people, which
is a really, really terrible term, given the fact that is
rooted in a Stalin era murderous campaign against journalists
and anyone that opposed the Russian government at that point.
And so I feel like you are doing some great stuff on the
GEC. You are doing some innovative work to push back on Russian
propaganda. But then the President is handing the Russian
government a gift by his regular attacks on the free press,
which seems to endorse the same kind of work that Putin is
doing in his own country, and around the periphery.
So I guess the question is, you know, is not Putin's
assault on the free and independent press inside Russia and in
the Russia periphery emboldened by President Trump's
regurgitation of the Stalin-era attacks on American media?
Mr. Mitchell. Thank you for your questions, Senator. Let me
respond to the two things that I have heard you say.
The first, I just want to push back on this idea that there
is a strategy that is separate from the views of the President.
This is the President's administration. This is his foreign
policy. National Security strategy, national defense strategy,
the directives that we have for policy are coming from the
President. The strategy overall I would characterize on Russia
in one sentence. Continue raising the costs until Russian
aggression ceases, while keeping the door open to dialog.
I think if you look at the last 18 months, that is exactly
what we have done. I look at the President's efforts at dialog
within the context of an administration that is increasing
defense spending by $700 billion, recapitalizing a nuclear
arsenal, and has had 217, 222 sanctions today on Russian
individuals and entities, in contrast to the previous
administration that sought dialog, but did so while gutting our
military, talking about global zero in nuclear weapons.
So I think the context matters. I think the strategy
documents send a very clear signal about what we are trying to
accomplish vis-a-vis Russia, and I think it is the right
approach.
Senator Murphy. Yeah. But the President said yesterday that
it might not have been Russia that interfered in the 2016
elections. That is not the policy of the U.S. State Department,
right? But that is what the President said yesterday.
Mr. Mitchell. I have a list in front of me with dates that
I would be happy to submit for the record of the instances on
which the President of the United States has been very clear in
attributing to Russia interference in our elections, and
pushing back on that interference.
Senator Murphy. Got it. Yesterday. But tell me how it plays
out in the context of propaganda, and specifically talk about
whether you have any fears about what the President's rhetoric
on the American free press being an enemy of the people has on
your work? Because, again, I think you are trying to do the
right thing here and trying to work with us. But if you think
it is no problem, tell me that it is no problem.
Mr. Mitchell. Well, look, Senator, I mean, in point of
fact, I would like to be clear that what the President has said
is not that the free press quote is the enemy of the people. He
said the fake news is the enemy of the people.
Senator Murphy. Clearly, The New Yorker, The New York
Times, Washington Post, CNN, MSNBC have not all been----
Mr. Mitchell. A healthy fourth estate is a fundamental
bulwark of a representational republic. I think today's media,
we would all agree, is unprecedently polemical. And the
political debate in this country has gone beyond the pale of
what we have seen on the part of the media in a very long time.
That is part of a healthy democracy.
If what you are asking me to do is comment on politics, I
am going to stick to my job, which is policy.
Senator Murphy. Thank you, Mr.--I was not--I do not want to
lead you down this road, because I frankly know what you
believe. I know that you do not believe that the press is the
enemy of the people, and I just want to make sure that this
committee understands that we have a tough job trying to give
you the resources while your work is being compromised by the
statements of the President.
So, again, I think we are all very appreciative of the work
that you are doing. I just think it is important in these
hearings to acknowledge the separation between the President's
rhetoric and the policy of the State Department.
Mr. Mitchell. Again, I just want to say we--the foreign
policy of the United States, we are executing the policy
directives of the President full-stop.
Senator Murphy. Got it.
The Chairman. If I could, we do appreciate the work both of
you do, and you know that. I think that, you know, what we see
happening is--well, George Kennan said in his telegram, the
long telegram, back in 1946, I mean this is what Russia has
been carrying out for years. And to foment disunity in our
country, but also disunity with other Western powers, I mean
this has been a long term--we had some glimmers of hope at
points in time. It has been a long time since we had those
glimmers of hope. But it has basically been the same policy.
And I think sometimes the President's comments create--help
create additional disunity with the West. And I think that is
what people are referring to here. And we know that makes your
job difficult.
But we have these policies that are put in place. We are
unified behind those policies. You are unified. But our
commander-in-chief continues to undermine those with either
undisciplined comments, or purposeful comments. And that is
what the committee is referring to.
Senator Isakson.
Senator Isakson. Thank you very much, Mr. Chairman. And I
would love to follow-on with Senator Murphy's comments from the
press, but they have talked to me more about the cost of
newsprint than they have talked to me about the--with the
President. So we will leave it at that. They are winning--
hopefully, they win one of those arguments soon.
Secretary Mitchell, let me ask you a question. In your
prepared statement, I will read the following quote. And it is
in quotation marks. ``Military power that is second to none,
fully integrated with our allies, and all of our instruments of
power,'' referring to the strength of America's foreign policy,
lies in ``Military power that is second to none, fully
integrated with our allies, and all of our instruments of
power,'' is that correct?
Mr. Mitchell. Yes, sir.
Senator Isakson. And I agree with that. And do you feel
like at this point in time in history we are at that point
where we are fully integrated, and we are fully funded, working
towards NDAA. I realize it is not all funded yet, but we are on
the right--you think we are on the right track?
Mr. Mitchell. I think we are on the right track. I think we
disagree with our allies on a lot of areas of policy, but on a
daily basis we see a lot more commonality between the United
States and European allies than we see differences.
Senator Isakson. And it seems to me that there is no policy
that is going to work anyway unless America's strength
militarily is not strong, and is the ultimate fallback
position.
Mr. Mitchell. Yes, sir.
Senator Isakson. You do not want it to be your opening
hand, but you want it to be the ace in your hole.
Mr. Mitchell. Well, I think it provides the basis and
context for everything else you do in your strategy. And again,
you can see this by contrasting this administration with the
previous administration.
If you have an attempted dialog with Russia in the form of
reset while you have sequestration under way, you are operating
from a position of weakness. And while you are trying to go to
nuclear zero, you are operating from a position of weakness.
If you have an attempted dialog with the Russian Federation
in the context of a strong national defense establishment,
where you have got tremendous $700 billion increase under way,
and you are recapitalizing your nuclear arsenal, I think you
are operating from a position of strength.
Senator Isakson. You are sending the right signals, no
doubt about it, in my opinion.
Talking about nuclear weapons, on the New START Treaty, I
was in the Senate in I guess 2010, Mr. Chairman, when we did
the New START Treaty. It is coming up in 2021, I think that
treaty expires, is that correct? 2020?
I think you were asked a minute ago by Senator Paul if
you--if the administration had taken a position yet on moving
forward on renegotiations for the 2020 reauthorization of the
New START Treaty. Have you?
Mr. Mitchell. We have not.
Senator Isakson. Okay. Have the Russians engaged any
conversation about it?
Mr. Mitchell. They have raised it on more than one
occasion. The Russians canceled the previous attempt at
strategic stability talks, which we saw as a broader indicator
of where we are at on arms control. As you probably know, it is
publically known, they have some questions about various
aspects of American compliance with New START that we see as
being nefarious.
Short answer to your question is at this point there is not
an administration position on what we are going to do on New
START. We will make that decision at the appropriate time,
consistent with U.S. national interests.
Senator Isakson. In the New START Treaty we negotiated a
unique identifier on warheads, which we never had before. How
has that worked since its implementation?
Mr. Mitchell. I would want to provide a fuller response in
a classified setting.
Senator Isakson. I would like to have that, if we could.
Because in the end, that is going to get the foundation--if we
ever go far enough with North Korea that we are in effect
removing wet nuclear weapons, we are going to need to have some
systems like that to make sure we can check and verify, and
trust and verify. And I think that was a good program that we
established in the New START Treaty.
Lastly, I have seen the horrible pictures on TV almost
every night in the last week about the gas and chemical weapons
used in Syria. And I know the Russians have pretty much gotten
their--I think they have gotten their least established on--is
that correct? They were meddling in Syria for a lot of reasons,
but one of them was access to a port, if I'm not mistaken, is
that correct?
Mr. Mitchell. I am sorry. Can you repeat the question, sir?
Senator Isakson. I understand that Russians have negotiated
some access with Syria to a port that they sought very badly,
to get out of the conflict with Syria, is that correct?
Mr. Mitchell. I'm sorry. I still do not fully understand
the question.
Senator Isakson. Okay. Then I will----
Mr. Mitchell. In Syria?
Senator Isakson. Yes.
Mr. Mitchell. Yes. That is correct.
Senator Isakson. Did I say something wrong?
Mr. Mitchell. No. I just misunderstood.
Senator Isakson. Okay. Good.
What do you think is the future prospects in the Syrian
situation for Russia continuing engagement, and further
engagement by Iran and Syria? It appears that is going from a
situation they have got to a reasonable case of hope, to an
unreasonable position--being fulfilled. What do you see?
Mr. Mitchell. We see two things. On one hand you do see
some modest constructive steps on the part of the Russians. I
would call in particular attention to engagement with Israel,
looking into some of our Israel security concerns, as they
relate to Syria.
On the other hand, you see Putin aiding and abetting a
murderous regime, not supporting the Geneva--the legitimate
process of Geneva, and creating a parallel process in Astana.
So on balance, the Russians are not being a constructive actor
in Syria.
Senator Isakson. Thank you very much. Thank you both for
your service.
The Chairman. Senator Booker.
Male Speaker: Not here.
The Chairman. Senator Merkley.
Senator Risch. They are arguing over there as to who is up.
Senator Merkley. Thank you, Mr. Chairman, and thank you
both for your--your testimony.
In February, the State Department put out a statement that
New START enhances the safety and security of the U.S. While
you have not reached a decision on whether it is going to be
extended, is that a statement that you--you feel comfortable
continuing to assert?
Mr. Mitchell. Yes, sir.
Senator Merkley. Thank you. We have various reports
circulating of the conversations that took place in the
President's one-on-one meeting with President Putin. Has there
now been for the assistance of the departmental interagency
process a sense of a clear memo of what was discussed and what
should flow from those discussions?
Mr. Mitchell. Both Secretary Pompeo and Assistant--or, I'm
sorry--National Security Advisor Bolton have been clear that
they received extensive debriefing by the President. That has
trickled through in the form of policy directives.
There has been extensive interagency process in the period
since Helsinki, and communication with all of our posts.
Senator Merkley. Can you share a couple of those policy
directives that have flown from that one-on-one meeting?
Mr. Mitchell. So the policy directives after Helsinki are a
continuation of previous policy. With regard to Ukraine, the
centrality of Russian compliance with the Minsk agreements, as
the gateway to any forward movement----
Senator Merkley. You are saying those were specifically
things discussed by the President at that meeting.
Mr. Mitchell. Sure. The only agreement in Helsinki was an
agreement for the two National Security Councils to meet.
Senator Merkley. That was not the question. But you can go
on in confusing the situation between the one-on-one meeting
and the broader meeting. But it is not helpful when that is not
what we are asking.
Now let us turn to Myanmar. This Saturday is the one-year
anniversary of the launch of the massive ethnic cleansing that
took place. And right now we understand there is a State
Department report that is being held and possibly is going to
be released. Is it going to be released? I am not sure which
one of you would like to respond to that.
Mr. Mitchell. I would be happy to get you more information
on this, sir. It does not fall under my area of responsibility,
but I follow the issue broadly, and would be happy to follow-up
with you.
Senator Merkley. Yes, please.
Mr. Billingslea. Senator, at Treasury we are tracking this
very closely, and we have just last week sanctioned a number--
two, actually two of the army units involved, and a number of
the--the officials who have been involved.
Senator Merkley. Four, specifically, and two army units,
but not the heads of them, which both Canada and Europe have
sanctions. So we still have not reached the same point that
Canada and Europe reached far earlier. Is it your sense that
this State Department report will be released on the
anniversary?
Mr. Billingslea. It is a State Department question,
Senator.
Senator Merkley. Let me just share with you that bipartisan
members of this committee weighed in with a letter to the State
Department, saying specifically, ``Seize the opportunity with
this 1-year anniversary. Seize this opportunity to release the
report. Seize this opportunity to provide more aggressive
sanctions. Seize this opportunity to reinforce our support for
Bangladesh, which is struggling with the--during the middle of
a monsoon with housing, refugee camp for 700,000 additional
Rohingya. Seize this opportunity for the President to speak
specifically to this issue,'' because outside of a confidential
setting, he has not done so. And this is really a place in the
world when there is massive genocide, ethnic cleansing. If
America is to be respected in the world, our president needs to
speak to the issue.
So I will just ask each of you, do you support the idea
that the United States show some leadership in response to this
ethnic cleansing?
Mr. Mitchell. Yes.
Senator Merkley. Thank you.
Mr. Billingslea. Absolutely.
Senator Merkley. Thank you. The challenge we face on the
election hacking continues to be substantial, but also there is
a lot of discussion about how Russia is continuing to aggravate
social divisions in this--in this country to basically set
Americans against Americans on a host of social issues.
Do you feel like we are doing all we can to--to take on
this effort by Russia to tear big holes in the social fabric of
our nation?
Mr. Mitchell. I do. We have a whole of government approach,
and a strong interagency process, but I will add, as you have
heard from Secretary Pompeo, we welcome additional tools from
Congress, and use them with all appropriate authorities.
Mr. Billingslea. On top of that, Senator, as--as we
continue to refine the evidence on the entities and individuals
who are engaged in this kind of unacceptable behavior, we are
going to go after them.
Senator Merkley. Okay. Thank you very much.
The Chairman. Senator Risch.
Senator Risch. Thank you very much. Gentlemen, thank you
for your service. This has been very productive, I think, as
you have gone through these things.
First of all, I hope the American people will take note of
the effect, the direct effect that our sanctions have had so
far. I think that was a really good explanation of this effect,
which really is not reported very widely in the national media,
and I expect it probably will not be this time. But the more
exposure that we can give them is really important.
I think that obviously the sanctions have two purposes. One
is a direct effect to inflict pain, but the real objective is
to change conduct. And, you know, you also did a good job, I
think, of listing the conduct that we are attempting to change.
And that is really a stunning list of some awful things that
the Russians are doing, and continue to do. And I think that
one of the--one of the points that has been made here, I think,
is the frustration that everyone has, that the--that the
sanctions are not causing immediate change in conduct.
But I think our experience over the years has been that
sanctions are not like a kinetic--are not like kinetic action.
They do not spur immediate change in conduct, but really take
time. I think the best example of that right now is the
sanctions have been placed on Iran. And they have been in place
for a long, long time. And, again, one of the underreported
stories is the effect that the sanctions are having internally
on the financial affairs in Iran. It is stunning when you find
out what the details of that are. But, again, for whatever
reason, it is not being reported. And I think the same thing is
going to take place here.
And the question that I have for you is, you know, when you
do do these sanctions, and it does inflict pain on a populous,
it takes time for the--for that pain to trickle up, if you
would, and the populous start to pressure the people that are
actually in charge. Obviously, when you are in a country that
is--that is influenced more by a religious fervor, a radical
religious fervor, like it is in Iran, that is different than in
Russia, where the dollar--where money is really important.
What are your--I would like to hear each of your opinions
on time that this is going to take, because we--over the years,
I know we have sat in this room and talked about the patience
that it takes as we were attempting to influence Iran. I would
like to hear your thoughts on the time that this is going to
take before it does actually start to pressure the people at
the top, where there will be some change in behavior.
Mr. Billingslea, could we start with you, please?
Mr. Billingslea. Thank you, Senator. You know, you raise
exactly the--the key point, which is that sanctions are
designed to induce a change in behavior. And very seldom, I
think, do we see that sanctions have an instantaneous effect in
that respect. But the cumulative effect over time can, in fact,
be a noteworthy change in behavior. And that is what we are
seeking to accomplish in all of the different sanctions regimes
that we are implementing, whether we are talking about
executive orders related to Venezuela, or we are talking about
the North Korea campaign, or the Iranian campaign, or in the
case of Russia.
The challenge we face, though, with Russia is that we are
dealing with a markedly different scale here, in terms of the
size of the economy. This is the world's thirteenth largest
economy. It is a trillion-dollar economy. There are the
foremost oil producer. They are the second largest oil
exporter. They hold Europe, in effect, hostage to energy supply
in so many respects. They also are deeply into the supply
chains relating to copper, even titanium, with us. So it is a
different--it is a different calculus and a different
calibration than we would be dealing with the hermit kingdom of
North Korea, or the Iranians.
So, again, I just recommend that the way we, I will say,
attack the Russia challenge has to--has to take this into
account.
Senator Risch. Yeah. Mr. Mitchell?
Mr. Mitchell. I would concur with that. And I appreciate
you raising that point. We always differentiate between the
Russian people and the Russian State and oligarchy. I think the
Russian people have suffered enormously. We look for every way
possible in our bureau to engage the Russian people. That is
often difficult. I recently attended the commemoration of the
Boris Nemtsov Street in front of the Russian Embassy. I think
it is incredibly important to keep up that engagement.
I think your broader question is apt. There is a certain
calculus, I think, on Putin's part that he and those around him
can weather, to some extent, sanctions, because of the
insularity of the regime. This is a fairly insulated regime and
oligarchy.
We have gone more deeply into the territory of going after
those individuals than previous administration. We have gone
after Putin's son-in-law, Vekselberg, Deripaska. I mean my own
view of this is when you see Putin's popularity ratings falling
by 15, 20 percent since he was elected, that does not mean
change comes immediately. But I think it does underscore that
the pain is starting to have an effect.
I think this administration has been clear that we are
prepared to take additional steps. There is an escalatory
ladder to sanctions. We are aware of what additional steps
would be needed to make an even bigger point. And I think if
you look at our actions over the last year-and-a-half they have
been escalatory and progressive, and we are willing to take the
steps necessary to further penalize Russian behavior.
Senator Risch. Thanks. Thank you both for what you are
doing.
The Chairman. Thank you. Senator Markey.
Senator Markey. Thank you, Mr. Chairman. Russian
spokesperson this morning said they have been advised that
there is no evidence of collusion between Russia and the United
States in the election. So they are clearly in denial, and that
continues to be their--their posture. And we are hearing that
their behavior continues, and, in fact, may be intensifying 10
weeks before an election in the United States of America.
So if that is the case, how--how much more authority do you
need to ratchet up the sanctions against Russia. It is 10 weeks
to go. Time is of the essence. Do you intend on doing that,
given the evidence that you have right now? We do not have time
for a long deliberative process here. We have to make sure,
especially in the final 4 weeks of the election, that the
sanctions are in place.
Mr. Mitchell. The first part of what you said, I will just
say I think the public statements from the Russian government
are deliberately obfuscatory. We can voke the Russian charge'
immediately after the Facebook expulsions. And I think the
general Russian official posture is one to deliberately mislead
and say we have no idea what you are talking about.
I would say in response to your question----
Senator Markey. It just says to me--it just says to me they
are not responding. They are not listening. Only the infliction
of additional sanction pain is going to get them to change
their behavior. We need an intervention in the underlying
pathology here.
Mr. Mitchell. I would not read into the public statements--
--
Senator Markey. Obfuscation in the defense--obfuscation in
the defense of interjection of a foreign power into our
elections is an obvious strategy. So what do we do now?
Mr. Mitchell. So I would not--I understand your point, and
I agree. I would not confuse the statements that are being made
by the Russian Foreign Ministry publically with the question of
whether we are having an impact. To answer your question, I
would say we have the authority that we need, and we are using
that authority.
Senator Markey. Yeah. So I am asking you, is the impact
working right now, or are they just continuing and escalating,
in your opinion?
Mr. Mitchell. Well, I would reference what Director Coats
said, and what Director Ray said, that this is broad and deep.
It is ongoing. We are not at the levels that we saw in the
lead-up to the 2016 election. It is a very serious threat. It
is an ongoing threat. We have an interagency process and set of
structures to confront it.
Senator Markey. Well, I think that it is time to have the
interagency meeting that--ten weeks out, that makes the
decision as to whether or not we increase those sanctions.
With regard to the discussion between Mr. Putin and Mr.
Trump, and the New START Treaty. Can you tell us what--what
happened in that discussion between the two of them?
Mr. Mitchell. These were not deeply substantive
discussions. The only agreement that came out of Helsinki was
for the two National Security Councils to meet again, which
they are doing this week.
Senator Markey. So you are saying there was no extensive
discussion about New START between the two of them?
Mr. Mitchell. I think both the President and the Secretary
have been clear on that publically.
Senator Markey. OK. Now with regard to the IMF Treaty, was
there a discussion between Putin and Trump on that issue?
Mr. Mitchell. I am not sure what has been said publically
about that by the President, and I want to respect executive
prerogative, and not get into the private details of a
conversation between these two leaders.
Senator Markey. Have you been briefed on any conversation
that took place between Trump and Putin on the IMF Treaty?
Mr. Mitchell. I have received the information I need to do
my job as it relates to Russia.
Senator Markey. Does that mean that you have been briefed
on the IMF Treaty, if--did the President say to Putin that
Russia is in violation of a treaty that deals with nuclear
weapons threat to the United States? Did he say those words
to----
Mr. Mitchell. I am not aware of any part of the
conversations that was devoted to the subject of IMF.
Senator Markey. You are not?
Mr. Mitchell. No.
Senator Markey. OK. Do you believe that the IMF Treaty is
in our national security interest?
Mr. Mitchell. I do. I also believe that Russian compliance
with the IMF Treaty is in our interest.
Senator Markey. Well, by definition. And do you feel the
same way about the START--the New START Treaty?
Mr. Mitchell. I do. And similar caveat.
Senator Markey. And, again, obvious. And that it should be
extended. I was pleased to see this morning sanctions against
Russia for aiding North Korea. That was a positive step, but I
still worry about enforcing existing sanctions, for example, on
North Korean slave labor. Recent reports indicate Russia is
still using North Korea labor regularly.
Mr. Billingslea, are you considering additional sanctions
against Russia because of their use of that North Korean labor?
Mr. Billingslea. Senator, thanks for the question. We
continue to press, together with the Department of State,
Russia to abide by the U.N. Security Council Resolutions, which
call for a wind-up of the labor licenses, and the return of
those workers out of Russia. We are concerned about the slow
roll that we are observing in connection with that. We also are
very, very--extremely concerned about other evasion behaviors
that are in practice.
Senator Markey. Are you considering new sanctions?
Mr. Billingslea. On Russia. We are.
Senator Markey. Because of this North Korean labor issue?
Mr. Billingslea. Senator, I would have to get back to you
on that.
Senator Markey. Okay.
Mr. Billingslea. I will get back to you on that.
Senator Markey. Well, I think that is----
Mr. Billingslea. I do not want to telegraph punches
publically, but we are actively looking at evasion scenarios
across the board.
Senator Markey. Okay. Very good. Thank you. Thank you, Mr.
Chairman.
The Chairman. Thank you. Just to give you a chance, Mr.
Mitchell, to--Secretary Mitchell to clean up.
When you said the elections, the interference right now is
not as it was in 2016, what you are saying is the interference
that we are seeing is less intense. Is that correct?
Mr. Mitchell. Yes. That is correct. And I was referencing
Director Coats' comments.
The Chairman. Yeah. Thank you. Senator Gardner.
Senator Gardner. Thank you, Mr. Chairman. Thanks to both of
you for being here today. I want to commend the State
Department for following up on Senator Markey's comments,
sanctioning Russian ships for their continued trade violations
of sanctions when it comes to North Korea. But I also would
point out additional articles of The Wall Street Journal and
others that talk about the depths of continued acceptance into
Russia of North Korean laborers.
It does not seem to be lessening. In fact, it seems to be
increasing. And I would hope that you would take a look,
Secretary Billingslea, at the C4ADS report. I am sure you are
very familiar with it. It identifies names of businesses that
are asking for Korean translators, hiring Korean translators to
deal with a number of foreign workers they have coming in from
North Korea.
We know that as much as 80 percent of the salary that the
North Korea worker is supposed to receive is being siphoned off
and going to prop up the Kim Jong-un regime for a grand total
of over $2 billion. That goes into directly the nefarious
activities that he continues to pursue, including reports today
from the U.N. watchdog, IAEA, that there is no indication that
North Korea is slowing down or stopping its nuclear program.
And so if we are going to have and say that we have a
doctrine of maximum pressure, then perhaps it is time that we
start saying publically that we are going to sanction these
companies in Russia, in China, and around the globe that
continue to violate sanctions when it comes to North Korea.
And I think if we are going to be trying to get Russia and
China to follow through on their commitments to U.N. sanctions,
then perhaps we can take a look at the names of these companies
and start sanctioning them. I mean here is one right here. I am
not going to be able to pronounce it, but there is Zenco,
Genco, Sakorenma. I mean these are all companies that continue
to take North Korean laborers, and it would be nice to see the
Treasury starting to sanction them.
On August 2nd, as you know, CAATSA was signed last year by
the President. Section 324 of CAATSA requires determination
with the 90 days whether North Korea should be designated as a
state sponsor of terrorism. That determination was made on
November 20th. President Trump announced North Korea designated
a state sponsor of terrorism, stating, ``North Korea has
repeatedly supported acts of international terrorism, including
assassinations on foreign soil.''
February 2nd, 2018, ``The United States determined under
the Chemical and Biological Weapons Control and Warfare
Elimination Act of 1991 that the government of North Korea used
the chemical warfare agent VX to assassinate Kim Jong Nam, Kim
Jong-un's half-brother, in the Kuala Lumpur airport. The
Treasury Department subsequently imposed sanctions against
North Korea for that attack.
On March 4th, 2018, the Russian government attempted to
assassinate two Russian nationals in Salisbury, United Kingdom.
On August 8th, 2018, the State Department determined that the
Russian Federation has used chemical or biological weapons in
violation of international law, or has used lethal chemical or
biological weapons against its own nationals in the Salisbury
attack. The Treasury Department subsequently imposed sanctions
against Russia for that attack.
On April 24th I introduced, along with Senator Menendez, I
know he has talked about this today as well, the language
identical to the CAATSA provisions regarding North Korea,
requiring the State Department to make a determination whether
Russia should be designated as a state sponsor of terror.
Language was also included in the Defending America
Security from Kremlin Aggression Act, DASKA, introduced by
Senator Graham on August--myself and others, August 2nd.
I wrote an op-ed not too long ago that the moral case for
such a designation is sound, designation of Russia as a state
sponsor of terror. Russia has invaded its neighbors Georgia and
Ukraine. It supports the murderous regime of Bashar al-Assad
and our enemies in Afghanistan. And it is engaged in active
information warfare against Western democracies, including
meddling in the 2016 United States election. And as we have
talked about here, continuing to attempt to influence the
elections going forward.
To both of you, do you believe that the Russian Federation
has repeatedly supported acts of international terrorism,
including assassinations on foreign soil?
Mr. Billingslea, yes or no?
Mr. Billingslea. Senator, they have definitely engaged in
outrageous behavior. The Salisbury attack is unacceptable.
Senator Gardner. They have engaged in attempted
assassinations on foreign soil.
Mr. Billingslea. More than once.
Senator Gardner. Mr. Mitchell? Secretary Mitchell?
Mr. Mitchell. I agree with the premise of your question. I
do not want to get ahead of our deliberative processes on what
we do about that. But there is no contesting the fact of
Russian behavior in these categories.
Senator Gardner. Do you agree that the Salisbury attack is
not the only instance where Russia has attempted assassinations
on foreign soil? Secretary Mitchell?
Mr. Mitchell. I would not be prepared to answer that
definitively in this setting.
Senator Gardner. Secretary Billingslea?
Mr. Billingslea. I think we would need to go into closed
session, but I would be comfortable saying it is--they engaged
in this behavior more than once.
Senator Gardner. Do you agree that Russia is an otherwise
maligned actor whose actions undermine U.S. national security,
global peace, and stability? Secretary Billingslea?
Mr. Billingslea. Senator, I do.
Senator Gardner. Secretary Mitchell?
Mr. Mitchell. Assuredly.
Senator Gardner. Do you agree the Kremlin has violated
international law, Ukraine, Syria, and elsewhere around the
globe?
Mr. Mitchell. Yes.
Senator Gardner. Secretary--both of you, yes. Would you
support a process that would allow the State Department 90 days
to determine whether or not Russia should be designated as a
State sponsor of terror? Secretary Mitchell?
Mr. Mitchell. I would need more information, and would want
to consult with our team, and know the Secretary's views. I
understand the direction that you are going with this, and I
think the appropriate way to go about it would be when our team
in the next week or so comes over and gives a structured
response to some of the legislation that is being considered.
Senator Gardner. Secretary Billingslea?
Mr. Billingslea. Senator, that is a State Department call
on designation, right? However, it is important to know that if
we have any evidence that a Russian actor is supporting a
terrorist, we will go after them regardless of state sponsor
level designations.
Senator Gardner. Secretary Billingslea, just quickly, what
additional sanctions would Russia face if such a designation
were to be made?
Mr. Billingslea. If State Department were to determine
that----
Senator Gardner. Yeah.
Mr. Billingslea.--they are a state sponsor? I would say
there would not be an immediate waive of actions. We would have
to work with the Department of State to then identify which
prongs within the Russian government would be viewed as the
enablers of those behaviors. Much the way we have done that in
other cases.
Senator Gardner. Thanks, Mr. Chairman.
The Chairman. Thank you. Senator Rubio.
Senator Rubio. Thank you both for being here.
My question is going to be about deterrence, but I want to
lay the framework that I think is already embedded in your
testimony. One of the things I think--we are struggling with
two things as we debate it broadly, and even here on the
committee, and beyond.
The first is that I do not think we fully accept that we
are back to sort of a historically normal era of great power
competition. For 25, 27 years, we have been in a unipolar
world, and we had difficulties with certain countries. Now we
have a near peer competitor in China for the first time in a
quarter century, and we have, at least in the military realm, a
near peer competitor in certain spheres, geopolitically as
well, in Russia.
And in that realm, the second thing I think we struggle
with is the notion that informational warfare is not warfare.
It is warfare by different means. It has always been a part of
warfare. The difference now is that propaganda and efforts to
divide, demoralize, confuse the enemy, you can do it
electronically now.
And so what is happening now is not a part of an effort to
help republicans, democrats, independents, vegetarians,
whoever, whatever party you wanted to take, it is an effort to
help divide us against each other, and weaken us internally,
and from within. It is a tactic.
And in terms of our policies, you see some of the
simplistic way people approach this. There is one group that
almost argues we should not be talking at all to them, right?
Which I think is, despite my deep antagonism towards Vladimir
Putin, what he represents, and the things he has done, I do not
want to see a shooting war, because it would be catastrophic
for the world.
And so at a minimum, that should keep you engaging and
talking, and working, where possible, within the context of
understanding you are in a competition, more of his making,
than ours, but nonetheless, one that he believes in, a zero sum
one, in which he can only get stronger if we get weaker.
And the flip side of it is if we just talked, if we just--
we are nicer to each other, we would be able to get along
better, which is also false, because at the end, it goes back
to what I just said, he uses the zero-sum competition, and the
only way he can be stronger and restore Russia to greatness, at
least his vision of it, is by us to be weaker.
And so in that competition, everything we are debating here
is about the tactics they are using, right? They cannot compete
with us economically. They cannot necessarily compete with us
militarily, in terms of projecting power all over the world.
But what they do very intelligently is a low investment in
military intervention in exchange for influence in the Middle
East. So he is now becoming a power broker in Syria, in Libya,
in different parts of the world, because he has enough
airplanes and enough troops on the ground to make a difference
there. He is even trying to finagle his way somehow into the
North Korea talks. He wants to be a player in that.
You see in Europe, there was an article yesterday about a
growing number of European countries, after new elections, far
left and right parties who have come to power, that are
potentially moving those countries closer to--I think he went
to the wedding--is it the Austrian prime minister, or
president? Foreign minister. And then, of course, the
asymmetrical means that we are discussing, which are part of
it. To them it is a very low-cost way of getting, in our heads,
and in our society, and dividing us against each other.
So in the context of all of that, if we can finally accept
the fact that we are in a great power competition with China.
And in some ways a similar competition with Russia. They are as
big as China. They do not pose the same economic challenge as
China, but nonetheless, enough that we have to address it.
If we can just wrap our brains around the fact that we are
in a competition, and that the one thing we want to do in that
competition is what we did in the Cold War, and that is avoid a
third world war. Then we begin to design what we do. We punish
what they have done, but we also try to deter what they have
done. It was a key component of the Cold War, is a fact that
both parties understood the price was so high for a nuclear
exchange that neither party pursued it, despite a couple of
close calls.
It is why I, along with Senator Van Hollen have put out
this idea of laying out ahead of time specifically what the
penalties would be, what is the price if Putin does this again.
And it has to be a high enough price so that he does not do it
again. And the notion of it is if you know ahead of time how
much it is going to cost you if you do it, you might be less
likely to do it. I cannot guarantee he will not, but I can
guarantee that if he does not think the price is high enough,
he will.
In that realm, do you have any views, either one of you,
about the role that deterrence can play in terms of changing
the cost benefit analysis that Vladimir Putin undertakes before
he conducts what he did in 2016, again in 2018, or beyond?
Mr. Mitchell. I agree with the premise of your question and
characterizing this as a big power competition. I think
deterrence is absolutely critical. And so when the
administration has gone after Deripaska, and Vekselberg, and
Putin's son-in-law, I think that sends a very clear message.
When we tightened the sectorial sanctions, I think that sends a
strong message.
I think we could do more collectively to look at cyber
deterrence. I think there is a growing awareness that we have
not done enough in that regard. But I think the tools that can
be brought to our disposal to increase the message of
deterrence, we are supportive of that.
There is a lot in the Deter Act that is very positive. It
moves in the right direction. There is some aspects of it that
we are not comfortable with. I mean the vesting new mandates,
almost entirely in a single intelligence official, the DNI,
rather than a Senate-confirmed cabinet official, is
problematic.
As I said earlier, we take the view that National Security
waivers are very important for diplomacy. Our team is preparing
some structured responses to legislation we will be providing
in coming days, and look forward to engaging with you more
closely on it. But I agree overall with what you said,
deterrence is critical.
Senator Rubio. And I know I am over time, I just want to
comment that as far as the Deter Act is concerned, I recognize,
at least speaking for myself, I think Senator Van Hollen does
as well, that if we want to pass it and turn it into law there
are changes we will need to make, because we need the
administration to sign it, and we want to do it. Our goal is to
pass a bill that deters, not to necessarily have the original
product become the law, per se, but it needs to be strong
enough.
The Chairman. Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman. I have a few
other questions.
Secretary Billingslea, let me ask you. Expectations, I
think, among the Senate whereas that you would continue to
impose sanctions on oligarchs, but clearly you have decided to
diminish pressure. You have not designated any oligarchs since
April 6th. You have delisted Estonian banks. Now there are
reports that you may delist Rusal.
What kind of signal does that send to the Kremlin? We are
told to judge the administration by its actions, and not by the
President's words. But these actions seem to be more aligned
with an accommodating and disturbing rhetoric that the
President has versus a tougher approach.
Mr. Billingslea. Senator, I am unaware of any intention to
``delist'' Rusal. If anything we are pushing forward to see
Deripaska completely removed from any ownership or control of
both Rusal and EN+ as a way forward.
We are far from easing up. We continue to accelerate. If we
just look at the cyber-sanctions, we have sanctioned three
times----
Senator Menendez. Let me interrupt you for a moment.
Mr. Billingslea. Yes.
Senator Menendez. I want to focus specifically on
oligarchs.
Mr. Billingslea. On oligarchs.
Senator Menendez. And in that respect, unless I am wrong,
there has been no designation since April 6th, and you have
delisted Estonian banks. I am glad to hear you are not
delisting Rusal. At least not intending to. But, you know, you
do not become an oligarch in Russia unless Putin makes you one,
right? So at the end of the day, this is his satellite universe
of people who support him, and maybe even part of his monies at
the end of the day. So I hope you will create a greater focus
on that, because that is, I think, critical towards our goals
here.
Let me also ask you, while I am directing questions to you.
The Obama administration imposed sanctions on the FSB and GUR
following the 2016 election. How many of those officers'
accounts have been frozen, do you know?
Mr. Billingslea. On the GRU officers, I--I do not have that
information.
Senator Menendez. Could you get it--and FSB officers as
well.
Mr. Billingslea. Yes, sir.
Senator Menendez. And how much money did those individuals
lose as a result of any sanctions, if there are any, as it
relates to them.
Mr. Billingslea. I will have to take that for the record,
sir.
Senator Menendez. Okay. Now Secretary Mitchell, let me--you
know I have a high regard for you, but it gets a little
diminished when you do things that I think are political in
nature.
You mentioned the mighty river comment as it relates to the
previous administration. Well, that was 2009. That was before
Crimea. That was before the invasion. That was before the Obama
administration leveraged sanctions against Russia for its
invasion of Crimea. That was before the president ultimately
went ahead, and that is why Russia is not part of the G7 today.
It is also when we--when it became aware that Russia was
interfering with our elections, that it did pursue sanctions
against the GRU and the FSB. That is why it made a commitment,
reaffirming NATO's commitment to extend membership to Georgia.
And I could go through a long list.
So I am not sure that that type of comparison that you
attempted to make is in our collective interest at the end of
the day. But I do want to ask you, the President, at the
Helsinki press conference, announced the establishment of a
high-level working group to include business and economic
leaders from Russia and the United States.
I thought it was our policy to put economic pressure on the
Kremlin to stop attacking our elections, its illegal occupation
of Ukraine, its war crimes in Syria. Why are we promoting
business ties with a regime that we are actually trying to
severely sanction?
Mr. Mitchell. Let me respond to the things that you have
said, Senator.
Senator Menendez. Well, I only have one question.
Mr. Mitchell. Okay. I will respond to the second thing you
said.
Senator Menendez. And I have limited time. So you can
respond to my question.
Mr. Mitchell. Look, I think Helsinki, what, what came out
of Helsinki, other than an agreement for the two National
Security Councils to meet, was to explore the concept of two
things. A business council of some kind, details to be
determined. And an academic exchange, a track two Dartmouth-
type thing, like we did during the Cold War. We are assessing
right now what, if anything, would be the composition or way
forward on either of these.
Senator Menendez. Well, it just seems counterintuitive that
we are trying to affect the Russian economy, and then we are
trying to create business ties.
Let me ask you this. Increasingly, Russia provides a vital
source for oil and aviation fuel to North Korea. And there have
been reports that at a time when China has slowed its exports,
Russia has stepped up to fill the breach. So whether it is part
of a broader strategy to increase Russian influence in Asia, or
merely an effect to make mischief and complicate our efforts to
deal with and constrain Pyongyang, it is clear that Moscow
intends to play a role in North Korea, and not one that is
helpful.
What are your thoughts in this regard in how we best deal
with that?
Mr. Mitchell. I agree with that characterization. Russia is
not being helpful in many regards with North Korea. Look, I
mean on one hand they are part of the United Nations Security
Council consensus that is critical for maximum pressure. On the
other hand, they appear to be working against many of the
measures that they themselves have supported in the National
Security Council.
What I would say is on an ongoing basis we are looking very
carefully, whether it is Russian behavior on DPRK, Syria,
across the board, we are looking on an ongoing basis at all of
these things, and the authorities at our disposal for
responding to it.
Senator Menendez. And finally, Mr. Billingslea,
congratulations. I just got notification that you have been
nominated to be the undersecretary for Civilian Security
Democracy and Human Rights. I look forward to our conversation
as it relates to that potential new role.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Menendez. Thank you both
for your testimony today. We hold lots and lots of hearings
here. Very seldom do we get as clear and direct answers as we
have got from you. And you are both great representatives for
the United States of America, and this committee sincerely
appreciates your service on behalf of the American people.
Thank you for that.
That concludes this hearing, and the record will stay open
for questions for the record until 5:00 p.m. tomorrow evening.
With that, the committee is adjourned.
[Whereupon, at 11:56 a.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Responses of Assistant Secretary A. Wess Mitchell to Questions
Submitted by Senator Robert Menendez
Question. Do you commit to working within State and the interagency
for full implementation and enforcement of CAATSA? Do you support the
use of existing CAATSA sanctions mandates that have not yet been
utilized?
Answer. Yes. We are committed to the comprehensive implementation
of CAATSA. Together with the Department of the Treasury, the State
Department is using the Russia sanctions authorities under CAATSA to
impose costs on Russia for the totality of its malign behavior. Since
January 2017, the administration has sanctioned 229 Russia-related
individuals and entities for their involvement in Russian malign
activities; 136 of these designations were done under sanctions
authorities codified by CAATSA. In addition, the threat of sanctions
has prompted other states to abandon billions of dollars in planned or
announced arms deals with Russia, imposing additional financial costs
on the Russian government.
Question What is your view of the best way to further increase
sanctions pressure on Russia? Do you support new sanctions authorities?
Answer. We have robust sanctions authorities at our disposal. We
are using these authorities in close coordination with our allies and
partners to impose costs on Russia for the entirety of its malign
behavior.
Sanctions are a powerful foreign policy tool, and are most
impactful when used in coordination with allies and partners to
maximize their effectiveness. Transatlantic unity is the cornerstone of
our sanctions against Russia; providing the State Department with
flexibility in implementation allows us to engage with allies, maintain
unity, and maximize sanctions pressure on Russia. It is important that
the U.S. government have tools available to quickly mitigate unintended
consequences of sanctions to maintain stability in global markets as
well as key relationships with our Allies and partners.
Question. How else is the administration pressuring Russia and what
more is needed in this regard?
Answer. The United States utilizes a whole-of-government approach
that combines diplomatic, foreign assistance, intelligence, and law
enforcement lines of effort to deter and defend against Russian malign
activities. We will continue to communicate to the Russian government
when its behavior is unacceptable, work with our interagency partners
to impose costs in response, and build international coalitions to
actively deter malign Russian activities. Examples of current efforts
include expulsions of Russian intelligence operatives from the United
States, sanctioning 229 individuals and entities in Russia since
January 2017, increasing funding for initiatives designed to bolster
our European Allies, working with NATO Allies to increase spending and
strengthen NATO deterrence posture, investing in projects like the
Global Engagement Center (GEC) in an effort to counter Russian
disinformation, and many more. For more exhaustive information, please
refer to the previously provided document, Trump Administration Actions
to Push Back Against Russia.
Question. How would you assess U.S. coordination with European
allies in countering malign influence? How can we improve?
Answer. The U.S. government is working closely with Allies and
partners to deter and defend against Russian malign activities. As part
of those efforts, the Department is targeting U.S. foreign assistance
to increase the resilience of U.S. partners to resist and counter
Russian pressure; working with Allies and partners to share information
and exchange best practices, including through multilateral Centers of
Excellence; providing concrete support to partner countries in response
to specific threats; and enhancing partner capacity to mitigate cyber
vulnerabilities and respond to threats through technical assistance and
bilateral and multilateral diplomatic engagement.
Sanctions and other cost-imposition measures against Russia are
most effective when they are coordinated with our European allies. We
continue to work hard to encourage our European allies to join us in
sanctioning Russian individuals and entities responsible for Russian
malign activities so that we can blunt Moscow's influence in a more
united fashion.
Question. Do you consider Hungary to be a healthy democracy? Do you
believe there are threats to independent media in the country, as State
Department reporting describes, and do you think such threats undermine
democracy in the country?
Answer. Hungary is a NATO Ally and OSCE participating member state
that shares longstanding interests, both bilaterally and regionally,
with the United States. As the President and Vice President have made
clear, strong partnerships require that Allies meet all their
commitments to uphold the values enshrined in the Washington Treaty.
The State Department has engaged the Hungarian government on a range of
issues, including the importance of a free and independent media as a
fundamental pillar of democracy. I will continue to identify
opportunities to support independent media and NGOs as well as to
combat corruption, Russian pressure, disinformation, and malign
influence in Hungary.
Question. Have you authorized grant awards to support independent
media in other Central or Eastern European countries? Does the role of
independent media in those countries differ from its role in Hungary,
and if so, how?
Answer. As the National Security Strategy emphasizes, we believe an
informed and engaged citizenry is a fundamental requirement for
societies to be free, resilient and prosperous. Freedom of expression,
including freedom of the media, and strong, diverse and unhindered
civil society are key components of democratic governance and underpin
the strength of our alliances. The Department regularly engages with
governments on these issues to stress the importance we attach to
compliance with international obligations and commitments to promote
and protect fundamental freedoms. The Department also has a range of
programs, including grants, which support independent media in Central
and Eastern Europe, both to build the capacity of independent media to
provide objective reporting as well as to support local and regional
efforts to counter disinformation. I will continue to identify
opportunities to support and promote independent media and civil
society throughout the region, as well as tailored efforts to combat
corruption, Russian pressure, disinformation, and malign influence.
Question. Do you support U.S. foreign assistance being directed to
democratically orientated Hungarian civil society activists,
journalists, and independent media who are pushing back against anti-
democratic trending in Hungary?
Answer. As the National Security Strategy emphasizes, we believe an
informed and engaged citizenry is a fundamental requirement to a free
and resilient nation. Civil society actors have an important role to
play in the democratic process, including by promoting public awareness
and public discourse. The U.S. is working to strengthen pro-America
voices in Hungary. I will continue to identify opportunities to support
independent media, combat corruption, and counter the pressure,
disinformation, and malign influence of Russia and China in Hungary.
__________
Responses of Assistant Secretary A. Wess Mitchell to Questions
Submitted by Senator Benjamin L. Cardin
Question. Special Envoy Volker is well known to this Committee and
does solid work. How exactly would you describe his mandate at this
point?
Answer. Special Representative Volker's goal remains the same:
restoring Ukraine's territorial integrity and ensuring the safety and
security of all Ukrainians, regardless of language, religion, or
ethnicity. Secretary Pompeo and APNSA Bolton have directed Special
Representative Volker to work with France, Germany, and Ukraine to
develop a proposal for an international security force that could
facilitate the implementation of the Minsk agreements once Russia
chooses peace and agrees to withdraw its forces. Special Representative
Volker is also coordinating with the Secretary and APNSA on talks with
Russian Presidential Advisor Surkov, but the Russian side has not yet
demonstrated a willingness to engage seriously
Question. Overall, what is the U.S. strategy on Ukraine at this
time?
Answer. Ukraine faces the external challenge of 4 years of Russian
aggression and the internal challenges of an economy that has been
hobbled by high-levels of corruption and centralized under the control
of a handful of politically powerful oligarchs. The United States
intends to continue bolstering Ukraine's resilience to Russian
aggression by supporting the Ukrainian defense sector, pushing for
continued Transatlantic sanctions unity, pursuing negotiations to end
the conflict in the Donbas, and making high-profile symbolic
demonstrations of our long-term commitment to Ukraine. We will continue
to support the IMF's reform program and add to our focus a broader
effort to reduce the influence of oligarchs in key economic sectors.
Question. President Putin has reportedly said that he proposed to
President Trump that a referendum be held in rebel parts of Ukraine.
Can you confirm this? Do you know if President Trump and other national
security leaders are considering this proposal?
Answer. The administration will not support a referendum in eastern
Ukraine. The State Department and NSC have publicly rejected this
proposal. Russia and its forces need to stop the fighting, withdraw
from eastern Ukraine, and implement the Minsk agreements. Russia signed
on to the Minsk agreements, which are the basis for resolving the
conflict in the Donbas, and these agreements do not include any option
for a referendum. Furthermore, any so-called referendum in a part of
Ukraine that is not under government control would have no legitimacy.
Question. Does it remain U.S. policy that the whole of Ukraine's
territorial sovereignty, including Crimea, should be restored?
Answer. U.S. support for Ukraine's territorial integrity is
steadfast. Secretary Pompeo laid out an unequivocal statement of U.S.
policy in his July 25, 2018 Crimea Declaration: that we do not, and
will not, recognize the Kremlin's purported annexation of Crimea. We
reject Russia's attempted annexation. The Declaration and subsequent
show of support from partners are clear signals of the permanence of
the international community's commitment to Ukraine's territorial
integrity. We are also focused, in coordination with France and
Germany, on pushing for implementation the Minsk Agreements, but have
been frustrated at every turn by Russian intransigence.
Question. Are you aware of any conversations at the White House or
within the administration regarding recognizing Crimea as Russian
territory, as some quid pro quo for one of President Trump's goals?
Answer. The United States remains committed to Ukraine's
territorial integrity. We reject Russia's attempted annexation of
Crimea and pledge to maintain this policy until Ukraine's territorial
integrity is restored--a position Secretary Pompeo made clear in his
July 25, 2018 Crimea Declaration. Respective U.S. sanctions on Russia
for its aggression in Ukraine will remain in place until Russia fully
implements the Minsk agreements and returns control of the Crimean
peninsula to Ukraine.
Question. You and I have discussed previously the report I
commissioned 7 months ago of the Foreign Relations Committee Democrats
regarding Putin's assault on democratic values, the rule of law, and
universal values in his own country and throughout Europe over the last
nearly 20 years. Are you aware what if any recommendations have been
taken, or even strongly considered, by the administration?
Answer. The U.S. government's efforts to deter and defend against
Russian malign activity both at home and abroad are coordinated with
our Allies and across the interagency at every level to ensure a
comprehensive approach. This whole-of-government approach combines
diplomatic, foreign assistance, intelligence, and law enforcement lines
of effort to:
Expose Russian malign behavior and combat misleading
narratives in the press.
Target our foreign assistance to increase the resilience of
our partners to resist and counter Russian pressure. We support
programs to improve good governance; expand civic engagement
and independent media; enhance cyber security; increase defense
capabilities; strengthen rule of law and anti-corruption
measures; and promote European integration, trade
diversification, and energy security.
Promote positive, truthful narratives about the United
States and its Allies to reinforce the importance of Western
institutions and values to partner governments and populations
that are most vulnerable to Russian influence.
Develop and fund programs that help foreign audiences
recognize false narratives and stave off attempts at influence.
Work with Allies and partners to share information and
exchange best practices, including through multilateral Centers
of Excellence.
Provide concrete support to partner countries in response to
specific threats.
Enhance partner capacity to mitigate cyber vulnerabilities
and respond to threats through technical assistance and
bilateral and multilateral diplomatic engagement.
Question. Do you consider the report to be a valuable tool in the
U.S. government's discourse and deliberations on how to push back
against the growing Kremlin threat?
Answer. I share the same concerns about Russia as those raised in
the report. Russia has shown through its aggressive actions that it
rejects the post-Cold War order. Russia's efforts have extended beyond
traditional military campaigns to encompass a suite of ``hybrid'' tools
used to gain influence. Safeguarding the United States and our Allies
and partners from Russian malign influence campaigns is a core
component of the administration's Russia strategy, our diplomatic
engagement, and our foreign assistance. I agree that Russia's efforts
to undermine democratic processes and the sovereignty of its neighbors
are unacceptable and require a whole-of-government response. We are
working across the U.S. government, as well as closely with Allies and
partners, to deter and defend against these activities both at home and
abroad.
__________
Responses of Assistant Secretary A. Wess Mitchell to Questions
Submitted by Senator Rob Portman
Question. Given Patriarch Filaret's recent announcement regarding
possible terms for an autocephaly agreement for the Ukrainian Orthodox
Church, as well as the Kremlin's proclivity for using the Russian
Orthodox Church as a means of spreading Russian influence, what is the
State Department doing to support Ukraine's religious independence from
Moscow?
Answer. The United States is a staunch supporter of religious
freedom, and engages with a broad array of religious communities as
part of our outreach to civil society. We support the freedom for
leaders and members of religious groups to govern their religion
according to their beliefs and practice their faiths freely. We believe
any decision on autocephaly is an internal church matter. We respect
internal church procedures and the ability of Ukraine's Orthodox
religious leaders and believers to pursue autocephaly according to
their beliefs.
enhanced u.s. military presence in europe
I think that we should explore new ways to bolster our military
deterrent in Europe. This might include re-establishing a permanent
corps-level headquarters in Europe that could provide our soldiers with
a true warfighting command, one that can utilize many more assets than
our current division-level headquarters.
Question. Do you support enhancing the U.S. military footprint in
Europe? Do you think that this would help deter potential Russian
aggression?
Answer. The National Defense Strategy calls for increased and
sustained military investment due, in part, to the magnitude of the
threat Russia poses to U.S. security and prosperity today, and the
potential for that threat to increase in the future. U.S. forces play a
critical role in deterring Russian aggression, including efforts to
exercise malign influence over our Allies and partners. NATO's enhanced
Forward Presence has provided deterrence and significant opportunities
for exercises and training to strengthen interoperability and
capabilities. U.S. capabilities in the European theater deter
aggression by strengthening NATO's posture at a time when our Allies
are also expanding their defense-capacity.
Question. If so, are you currently engaged in any conversations
about this, and what is the status of those conversations?
Answer. The United States constantly assesses its force posture to
address emerging challenges and ensure we have a combat-credible
posture in Europe. We will continue to engage Congress as well as
Allies and partners to address the challenges that arise in this
competitive strategic environment.
Question. How can Congress be helpful on this issue?
Answer. Congress has played a vital role in shoring up European
security, particularly under the European Deterrence Initiative. These
funds have enhanced our deterrent and defense posture, but there is
more the United States can do to build Allied and partner capacity and
ensure we have the right capabilities in the right locations. We would
welcome Congress's help in increasing the State Department's FMF budget
to ensure the United States can work with our NATO Allies, especially
our Baltic Allies, in procuring U.S. equipment that meets core NATO
capability shortfalls, such as air defense.
Question. What is the status of your talks with the Europeans, and
what is your assessment of Europe's willingness to establish these
CFIUS-like mechanisms?
Answer. Over the past year, State and Treasury have had robust
engagement with the EU and with numerous EU member states on CFIUS
reform in the United States, the updating of national legislative
authorities and policies to conduct more robust investment screening,
and the EU's proposal to introduce a framework for coordinating
investment review. We have sent interagency teams to European capitals,
including Brussels, The Hague, London, Paris, and Stockholm, for
outreach on investment screening to countries that have an investment
screening mechanism in place and want to strengthen it or are just
beginning to implement a national screening mechanism. We have also
welcomed groups of Europeans to the United States for intensive multi-
week discussions under our flagship International Visitors Leadership
Program, and are preparing for another group in September.
Overall, we have seen an increased awareness across Europe of the
need to protect sensitive technology, intellectual property, data, and
critical infrastructure from strategically-motivated foreign investment
that could undermine security and threaten national and EU-wide
interests. We will continue to engage and share best practices from the
U.S. perspective as the EU and its member states continue to develop a
more robust response to these pressing challenges.
Question. Do we assess that the Russians will ever return to
compliance with the [Intermediate-range Nuclear Forces (INF)] treaty?
Answer. The INF Treaty is under threat today. The Russian
Federation has developed, tested, and deployed a ground-launched cruise
missile system that can fly to ranges prohibited by the INF Treaty. In
2014, the United States declared the Russian Federation in violation of
its obligations under the INF Treaty. Despite repeated U.S. efforts to
engage the Russian Federation on this issue, Russian officials have so
far refused to discuss the violation in any meaningful way, take
substantive steps to return to compliance, or provide a credible answer
to the information provided by the United States regarding this
missile.
The United States does and will continue to abide by its INF Treaty
obligations. We call on the Russian Federation to take concrete steps
to return to compliance, preserve the INF Treaty, and restore
confidence in the role of arms control to manage strategic stability
between our two countries.
Question. What is the goal of our diplomatic efforts regarding the
Russian violation?
Answer. Our goal is for the Russian Federation to return to
compliance with the INF Treaty and to deny them a military advantage.
There are two diplomatic tracks underway to achieve this goal. The
first track is direct diplomatic engagement with the Russian Federation
through all viable channels, including the INF Treaty's Special
Verification Commission (SVC) established to ``resolve questions
relating to compliance with the obligations assumed.'' Over the last 5
years, we have provided detailed information to the Russian Federation
outlining U.S. concerns and engaged up to the highest levels of
government.
The second track is diplomatic engagement with our key allies and
partners to increase the pressure on the Russian Federation. We have
shared available information with our allies and partners regarding the
SSC-8 ground-launched cruise missile system, which the United States
assesses to be designated by the Russian Federation as the 9M729. At
the July 2018 NATO Summit, allies affirmed that ``in the absence of any
credible answer from Russia on this new missile, the most plausible
assessment would be that Russia is in violation of the Treaty.''
While the United States will continue to pursue a diplomatic
solution, we are also pursuing economic and military measures intended
to induce the Russian Federation to return to compliance. This includes
a review of military concepts and options, including research and
development for conventional, ground-launched, intermediate-range
missile systems, which would enable the United States to defend
ourselves and our allies, should the Russian Federation's failure to
return to compliance result in the dissolution of the Treaty. This step
will not violate our INF Treaty obligations. We are also prepared to
cease such research and development activities if the Russian
Federation returns to full and verifiable compliance with its INF
Treaty obligations. Should the Russia Federation's actions result in
the collapse of the Treaty, these efforts will prepare the United
States to defend itself and its allies.
Question. Can you speak further to the larger international context
regarding other countries that are not party to the INF Treaty and
their interest in developing weapons within the scope of the INF
Treaty?
Answer. The United States has long expressed concern about the
proliferation of ballistic and cruise missile technology, including for
weapons within the scope of the INF treaty. The United States uses all
available means, including military capabilities, nonproliferation
activities, and arms control to reduce and mitigate the threat to
itself, deployed forces, and allies and partners.
Question. How should that influence our actions regarding the long-
term strategy with INF and the Russians?
Answer. The United States regularly reviews its international
agreements and the international security environment to ensure
continued U.S. participation in these agreements further the security
of the United States. The INF Treaty gives each Party the right to
withdraw if it decides that extraordinary events related to the subject
matter of the Treaty have jeopardized its supreme interests.
__________
Responses of Assistant Secretary A. Wess Mitchell to Questions
Submitted by Senator Cory Booker
Question. How does Russia ``enable'' the Taliban? Do you see
Russian support to the Taliban trending upward?
Answer. We are aware of reports that the Russians continue to
provide weapons and other support to the Taliban. We believe Russia's
contacts with the Taliban are increasing.
Question. Do you agree that Russia seeks to ``undermine U.S.
influence in the region'' as reported by the Department of Defense last
month?
Answer. Yes. Russia actively tries to discredit U.S. efforts
towards peace and our reputation in the region utilizing a breadth of
tools, including propagating false narratives. Russia has repeatedly
accused the United States of supporting ISIS in Afghanistan;
simultaneously, there are media reports that the Russian government
clandestinely supplies arms to the Taliban.
Question. What consequences have we imposed on Russia for their
role in supporting insurgent groups that seek to undermine our efforts
to jumpstart a peace process between the Afghan government and the
Taliban?
Answer. We continue to monitor Russian actions in Afghanistan and
are prepared to use the tools available to respond to Russian malign
efforts that jeopardize the peace process, as appropriate.
Question. NBC has reported that Erik Prince has presented a plan to
privatize the war in Afghanistan. Is this under consideration? If that
were to happen, what opportunity would it create for Russia to exploit
the Afghan government's relative instability?
Answer. We are aware of the reports about Erik Prince's plan and no
such proposal is under consideration.
__________
Report to Congress Pursuant to Section 243 of the Countering America's
Adversaries Through Sanctions Act of 2017 Regarding Interagency Efforts
in the United States to Combat Illicit Finance Relating to the Russian
Federation
August 6, 2018
Section 243 of the Countering America's Adversaries Through
Sanctions Act of 2017 (CAATSA) requires the Secretary of the Treasury
to submit to the appropriate congressional committees not later than
one year after CAATSA's enactment, and at the end of each 1-year period
thereafter until 2021, a report describing interagency efforts in the
United States to combat illicit finance relating to the Russian
Federation. Pursuant to Section 243(e), the report shall be submitted
in unclassified form, but may contain a classified annex. This document
serves as the first unclassified report submitted by the Secretary
under CAATSA Section 243; additional information is provided in the
classified annex.
In line with the 2017 National Security Strategy of the United
States, which highlights Russia's global subversion and aggression, the
administration actively employs the full range of its financial,
intelligence, law enforcement, and diplomatic tools to expose, disrupt,
and impose costs on those responsible for Russia's malign activities.
Russian conduct includes, but is not limited to: attempts to subvert
Western democracies through election interference; the continued
occupation of Crimea; ongoing efforts to destabilize Ukraine; the
illicit procurement of sensitive defense and intelligence technologies;
malicious cyber-attacks; links to transnational organized crime (TOC);
support to the murderous Assad regime in Syria; gross human rights
violations and corruption; and the facilitation of sanctions evasion
schemes by rogue states such as Iran and North Korea. In carrying out
these malign activities, Russia relies on a highly sophisticated
apparatus consisting of state and non-state agents and proxies, decades
of experience carrying out influence operations around the globe, and
the strategic direction of Russian president Vladimir Putin.
Russia's integration into the global economy and international
financial system presents an especially unique challenge compared to
other states subject to U.S. sanctions such as Iran, North Korea, and
Syria. For example, a substantial portion of Russian sovereign bonds
are held by external investors, including U.S. pension funds, asset
managers, and banks, while Russian financial institutions have
extensive global market linkages through debt, equities, and
derivatives.
As this report details, this administration's efforts against this
threat are among its top priorities, resulting in an unprecedented
level of financial pressure against those working on behalf of the
Kremlin and in key sectors of the Russian economy targeted by U.S.
sanctions.
Treasury's Russia sanctions program is among our most active. Since
2017, this administration has sanctioned 215 Russian-related
individuals and entities, 199 of which were under Treasury authorities,
including 136 under Ukraine/Russia-related sanctions codified by
CAATSA. These actions have blocked hundreds of millions of dollars in
Russian assets in the United States and caused extensive consequences
to the financial interests of affected individuals and entities.
The impact of these measures is further seen in the efforts by
companies around the world to separate themselves from persons we have
designated, and the efforts of designated persons to seek new (often
costlier) methods to move and hide funds.
The administration understands that any effort to embark on a more
positive trajectory with Russia depends on Russia's willingness to
cease viewing the world through a zero-sum lens. Russia must also
realize that the United States and its allies will not waver in our
determination to prevent it from undermining our democracies,
economies, institutions, and the values on which these pillars of
global stability--ensured by U.S. leadership--will continue to stand.
As part of this administration's efforts to disrupt and deter Russia
from continued acts of subversion and destabilization, and to impose
costs for its ongoing aggression, the administration has made focused
financial pressure, strategically applied, a core element of our
approach. Working together with our interagency colleagues and
international partners, Treasury will continue to counter the corrupt
and illicit financial networks of the Russian Federation in the United
States and abroad, in addition to using other levers of significant
economic pressure.
section 243(b)(1)--efforts to identify, investigate, map, and disrupt
illicit financial flows linked to the russian federation if such flows
affect the united states financial system or those of major allies of
the united states
Efforts to Identify, Investigate, and Map Illicit Financial Flows
Russia has spent decades developing complex and resilient networks
to raise, transfer, hide, and obscure the origin and movement of the
funds generated through illicit activity, including corruption,
sanctions evasion and illicit arms sales, and used for its malign
activity. The National Intelligence Council (NIC) leads and coordinates
efforts across the intelligence community (IC) to produce analysis and
support policymakers regarding Russian illicit financial activity, as
well as to inform efforts to identify and disrupt these illicit
financial networks. As part of these efforts, IC components have
continued to identify and map a myriad of networks that support and
fund the full range of malign Russian activity, including by
identifying new and emerging typologies and methodologies relating to
Russia's illicit financial activity.
Of particular note in this regard is the classified annex to the
report required under Section 241 of CAATSA. Led by the Office of the
Director of National Intelligence (ODNI), Treasury's Office of
Intelligence and Analysis (OIA) and other IC elements conducted
research on political figures and oligarchs, and assessed their
closeness to the regime, corrupt activities, and involvement in
destabilizing activities and repression. This substantial assessment
was the result of a wide-ranging effort developed over the course of
several months and reflected over 2,500 hours of work.
In addition to these examples of IC efforts, Section 243(b)(6)
below describes parallel efforts performed by other agencies in the
service of providing leads to law enforcement.
Efforts to Disrupt Illicit Financial Flows Linked to the Russian
Federation
The efforts to identify, investigate, and map the illicit financial
flows linked to the Russian Federation directly inform the
administration's ongoing disruption actions. Drawing upon this
information, Treasury has led the U.S. campaign to impose economic and
financial costs on those actors most responsible for enabling Russia to
conduct its globe-spanning malign operations.
As noted above, the administration's efforts to target malign
Russian actors are among its most active illicit finance undertakings,
resulting in sanctions against 215 Russian-related individuals and
entities under this administration. Of these, Treasury's financial
sanctions have been particularly powerful, imposing significant costs
on targeted Russian actors and meaningfully impacting their ability to
raise, move, and obscure the origin of illicit funds.
However, the impact of these sanctions and other financial measures
is far greater than the amount of funds frozen. This is demonstrated by
the efforts of companies around the world to distance themselves from
sanctioned persons, and the efforts of designated actors to adopt new,
often more difficult ways of moving and hiding their funds. From such
reactions, it is clear that our measures have succeeded in imposing
significant costs on those undermining U.S. interests and those of our
partners and allies, in addition to disrupting such conduct. The
following paragraphs illustrate numerous discrete examples of
disruption efforts targeting the wide variety of Russian malign
activities.
Designations of Oligarchs and Senior Government Officials
On April 6, 2018, Treasury sanctioned 38 individuals and entities,
comprised of seven Russian oligarchs, 12 companies they own or control,
17 senior Russian government officials, and Russia's primary state-
owned arms trading concern along with its bank subsidiary. Many of
these individuals were appointed to their posts by Putin and hold
prominent positions in the government and Russian business community.
These designations delivered on Secretary of the Treasury's commitment,
immediately following submission of the CAATSA Section 241 report, to
impose sanctions on oligarchs and officials identified in the report.
Among those sanctioned on April 6 are oligarchs Oleg Deripaska and
Viktor Vekselberg; the heads of state-owned companies such as
Gazprombank, VTB Bank, and Gazprom; as well as the head of the Russian
Security Council and the Russian Minister of Interior.
Among the 12 companies sanctioned are Renova Group, an
international group of asset management companies and investment funds
owned by Vekselberg; RUSAL, the second-largest producer of aluminum in
the world; EN+, a holding company for Deripaska's metals and energy
assets; Gaz Group, Russia's leading producer of commercial vehicles;
and EuroSibEnergo, one of Russia's largest independent power companies.
As a result of his designation, open sources estimate that
Deripaska's personal net worth has dropped by more than 50%.
The April 6 actions also had a major impact on another sanctioned
oligarch, Viktor Vekselberg. According to reliable press reports,
Vekselberg's net worth has dropped nearly USD 3 billion, from an
estimated USD 16.4 billion on April 5, 2018 to an estimated USD 13.5
billion as of July 26, 2018. Among the 12 companies sanctioned on April
6 was Vekselberg's Renova Group, an international group of asset
management companies and investment funds. As a result of the action,
Renova Group was forced to divest from Swiss-based industrial company
Sulzer AG, of which Renova Group was a majority shareholder. Sulzer AG
bought back five million of its own shares from Renova Group following
an emergency meeting days after Renova Group's designation. Renova
Group was also forced to divest 20 percent from Italy-based IT company
Octo Telematics, in which it had a 65 percent stake, to enable the
company's continued operation and planned IPO. Moreover, U.S.-based
investment management firm Columbus Nova, which manages Vekselberg's
assets and counts Renova Group as its biggest client, has had to
significantly limit its operations following the April 6 action.
These actions are also a part of Treasury's efforts to counter
Russian sanctions evasion by ``following the money'' and targeting
those who support designated persons in moving or concealing their
assets. In designating Kirill Shamalov on April 6, for example,
Treasury sanctioned an individual who received assets from Gennadiy
Timchenko, who was previously sanctioned by Treasury for his support to
senior Russian officials.
Cyber Designations
The April 6 actions were but the latest and most significant of a
continuing series of designations taken in response to Russia's malign
activities. By that time, in March 2018, Treasury had already exercised
its authorities under Executive Order 13694 and CAATSA to take aim at
entities and individuals involved in interfering in U.S. elections as
well as for perpetrating damaging cyber-attacks. Part of this
designation tranche targeted Russian intelligence organizations--the
Federal Security Service (FSB) and the Main Intelligence Directorate
(GRU)--both of which engage in activities that undermine U.S.
cybersecurity on behalf of the Russian government. Specifically, the
GRU interfered in the 2016 U.S. election through cyber-enabled means
while the FSB has utilized its cyber tools to maliciously target those
critical of the Russian government, Russian politicians, and U.S.
government officials.
This designation tranche also targeted Russian oligarch Yevgeniy
Viktorovich Prigozhin, who Treasury previously sanctioned for his
material support to the Russian regime. The March 2018 designation
further exposed his malign conduct, as evidenced by the fact that
Prigozhin also funded the operations of the Internet Research Agency,
which has covertly worked on behalf of the Kremlin to influence social
media networks in Russia and abroad, including the United States.
In its most recent cyber-related action, on June 11, 2018, OFAC
designated an additional five Russian entities and three Russian
individuals under Executive Order 13694 and CAATSA Section 224. The
primary targets that were designated, Digital Security (a Russia based
private cyber security firm), Kvant (a Russian state research
institution), and Divetechnoservices (a Russia based private underwater
technologies firm), provided technological support to the FSB and
served as enablers of the organization. Treasury also took action
against several entities and individuals that were owned or controlled
by or acted for or behalf of these entities. These actions were taken
in order to respond to Russia's continued involvement in conducting
malicious cyber-attacks, restricting those who enable the FSB's
destructive activities from the U.S. financial system, and to raise the
costs on those who do business with the FSB.
Digital Security, for example, developed a tool for the FSB that
would increase the agency's offensive and defensive cyber capabilities.
As part of Treasury's action, ERPScan and Embedi, both private
cybersecurity firms, were also designated for being owned or controlled
by Digital Security. Russia has also been actively tracking underwater
communication cables, which carry the majority of the world's
communication traffic. Since 2007, Divetechnoservices has procured a
variety of underwater and diving systems for Russian government
agencies, to include the FSB. Specifically, in 2011 it was awarded a
contract to procure a submersible craft for the FSB, valued at USD 1.5
million.
Designations Related to Russian Activity in Crimea/Ukraine
In January 2018, OFAC sanctioned 21 individuals and 9 entities
under its Russia/Ukraine authorities, as well as identified 12
subsidiaries that are owned 50% or more by previously sanctioned
Russian companies to provide additional information to the private
sector to assist with sanctions compliance. This action targeted major
Russian companies that have played a key role in supporting Russia's
attempts to integrate Crimea into its own economy and infrastructure.
ZAO VAD, for example, is a Russian company responsible for the
construction of a major highway in Crimea that will serve as a primary
connection between the Kerch bridge and other cities in Crimea. The
projected cost for this project is nearly USD 3 billion. OFAC also
sanctioned Power Machines, a large Russian engineering firm with
extensive operations around the world, because of Power Machines'
support to the U.S.-sanctioned company Technopromexport, one of the key
companies involved in the construction of power plants in Crimea.
Also in this January 2018 action, OFAC sanctioned three individuals
and four entities involved in the illicit trade of coal from the so-
called Donetsk and Luhansk People's Republics, including some working
with designated Yanukovych associate Sergey Kurchenko, to export coal
from the separatist republics to Russia and Europe.
Human Rights and Corruption Designations
Implementing authorities granted under the Global Magnitsky Human
Rights Accountability Act (``Global Magnitsky''), the administration
issued two Russia-related sanctions in December 2017 that highlighted
significant corruption as well as human rights abuses in Russia and
Ukraine. On December 21, 2017, the President imposed sanctions on
persons from around the world in the Annex to E.O. 13818 implementing
the Act, including Russian nationals Sergey Kusiuk and Artem Chayka.
While in charge of 290 elite Ukrainian police officers, Kusiuk was a
leader of an attack on peaceful protesters on November 30, 2013, many
of whom took part in the beating of activists. Kusiuk has also been
named as an individual who took part in the killings of activists on
Kyiv's Independence Square in February 2014. Kusiuk ordered the
destruction of documentation related to the events, fled Ukraine, and
is now in Moscow, where he was identified dispersing protesters as part
of a Russian riot police unit in June 2017.
Chayka is the son of Russia's Prosecutor General and has leveraged
his father's position to unfairly win contracts and put pressure on
business competitors. In 2014, Chayka's competitor for a highway
reconstruction project suddenly fell under prosecutorial scrutiny and
was forced to shut down, leaving Chayka in position to non-
competitively work on the highway project. Also in 2014, Chayka's
competitor contested Chayka's winning bid on a state-owned stone and
gravel company and filed a lawsuit, after which his home was raided and
he was indicted. After Chayka's competitor withdrew the lawsuit,
prosecutors dropped all charges.
In December 2017, OFAC issued its sixth tranche of sanctions under
the Sergei Magnitsky Rule of Law Accountability Act of 2012, bringing
to 49 the total number of individuals targeted by OFAC under this
authority. This round of names included Ramzan Kadyrov, the Head of the
Chechen Republic, who oversees an administration involved in
disappearances and extra-judicial killings. Following his designation
Kadyrov was removed from a major social media site, limiting his
ability to engage in propaganda--apparently to his great consternation.
Syria Sanctions Program
On April 6, 2018, OFAC also designated Rosoboronexport (ROE), a
state-owned corporation managing Russian weapons exports, and its
banking subsidiary Russian Financial Corporation Bank (RFC). ROE has
longstanding ties to the Government of Syria, with billions of dollars
in weapons sales over more than a decade.
North Korea Program
Since the beginning of the current administration, Treasury has
designated 17 targets in Russia under its North Korea authorities,
including five Russian companies (including one bank), four Russian
individuals, seven North Korean financial/trade/weapons
representatives, and one North Korean labor firm. Most recently, on
August 3, 2018, OFAC designated Russian-registered Agrosoyuz Commercial
Bank for knowingly conducting or facilitating a significant transaction
on behalf of the U.S. and U.N.-designated Moscow-based chief
representative of Foreign Trade Bank (FTB), North Korea's primary
foreign exchange bank. As of 2016, Agrosoyuz had opened new accounts
for a North Korean front company, processed over USD 8 million and held
the equivalent of over USD 3 million on behalf of the U.S. and U.N.-
designated Korea United Development Bank. On the same day, OFAC also
designated Ri Jong Won, the Moscow-based deputy representative of FTB.
These designations further exposed the extent of North Korea's
activities in Russia, including weapons-related acquisitions, placement
of financial representatives in violation of UNSCRs, oil procurements,
and overseas laborers generating revenue for the regime.
In considering the impacts of Treasury's designations, it is
important to understand that what we are able to observe is but a part
of the estimated effect of our actions. Business rejected, bank
accounts closed, investments avoided, and funds transfers denied
assuredly occur with some regularity, even if they are not made known
to us. They also provide an opportunity for future diplomatic or law
enforcement action. The impacts of these designations go well beyond
their immediately observable effects and can be built upon in the
future.
In addition Treasury frequently undertakes engagement with foreign
counterparts and the private sector--including intelligence and
information-sharing--to disrupt the activities of malign actors.
Illustrations of these efforts are described in greater depth in
Section (b)(2), (b)(3), and (b)(7) below.
section 243(b)(2)--efforts to conduct outreach to the private sector,
including information sharing efforts to strengthen compliance efforts
by entities, including financial institutions, to prevent illicit
financial flows described in paragraph (1)
Financial institutions and other businesses often stand on the
front lines against illicit financial activity. Indeed, disruptive
impacts like those described above depend in large part on the business
community's compliance with our sanctions. Accordingly, engaging and
educating the private sector to ensure that our sanctions programs are
as effective as possible is a core Treasury function. In light of
Russia's linkages to the U.S. and global economy, these efforts are a
particular priority in our comprehensive approach to targeting Russia
and Russian malign actors.
To address the incredibly high volume of inquiries from commercial
and financial entities that results from this interconnectedness,
Treasury has been extraordinarily active in engaging with key public
and private counterparts closely to ensure the private sector as well
as allies and foreign partners understand our sanctions on Russia and
are able to fully implement them, as well as that they understand the
broader illicit finance threats emanating from Russia.
As part of these efforts, OFAC communicates its actions to the
compliance community through Recent Action Notices, which are sent to a
large distribution list of over 50,000 recipients, and through Treasury
press releases describing in detail the basis for Treasury
designations. All sanctioned individuals and entities are placed on
OFAC's List of Specially Designated Nationals and Blocked Persons or
Sectoral Sanctions Identification List, which puts the regulated public
on notice and which is used to populate compliance screening tools and
inform global compliance programs. Although routine, these actions are
critical to keeping the private sector informed of OFAC's sanctions
actions.
To amplify Treasury actions, senior Treasury officials frequently
engage with senior executives, including compliance officials, at
foreign financial institutions and other businesses regarding our
Russia program and other applicable sanctions, affirm administration
policy towards Russia, and underscore our enforcement posture towards
entities that facilitate malign Russian activity. Treasury also holds
roundtables with banks in jurisdictions at elevated levels of risk for
Russian money laundering, including Cyprus and Latvia, to convey
concerns over this issue and urge the authorities to take steps to
prevent the exploitation of their respective financial sectors by bad
actors.
In addition, at least once a year OFAC organizes a public symposium
to discuss its sanctions programs. Most recently, in November 2017,
OFAC's symposium was attended by close to 1,000 people, including legal
and compliance professionals, interlocutors from foreign partners and
allies, and leaders from both U.S. and multinational businesses, some
of whom helped moderate public discussions of Treasury's CAATSA
guidance.
OFAC also routinely engages in outreach with the private sector by
sending representatives to various trade and sanctions conferences in
the United State and abroad, these representatives give speeches,
presentations, and answer sanctions compliance questions. In the last
year many of these conferences have devoted significant time to issues
raised by CAATSA and recent sanctions actions against Russia. OFAC also
engages with trade groups representing U.S. and international business
interests. The detailed feedback that OFAC receives from these contacts
is crucial to understanding the impact of Treasury's sanctions and
tailoring current and future sanctions in ways that avoid undesirable
collateral consequences.
While it has been a long-standing practice of Treasury to undertake
such outreach to the private sector, we have dedicated especially
significant resources to ensuring that the financial sector understands
the requirements created by CAATSA. Once key provisions of CAATSA
became effective, OFAC established a CAATSA landing page on its website
that clearly set out all of the public guidance that OFAC and the State
Department had issued. OFAC has also released a number of CAATSA-
related FAQs to provide specific guidance to the public regarding the
implementation of key provisions of CAATSA sections 223(a), 226, 228,
and 233. These FAQs were the result of extensive U.S. government
outreach to our allies and partners as well as private sector
companies.
Additionally, OFAC amended and reissued Directives 1, 2, and 4 of
the sectoral sanctions under E.O. 13662 as required by sections 223(b)-
(d) of CAATSA. OFAC also amended Ukraine-/Russia-related General
License No. 1A and reissued the general license as General License 1B,
which continues to authorize certain transactions involving derivative
products that would otherwise be prohibited pursuant to Directives 1,
2, or 3, and updated a number OFAC FAQs to account for the fact that
CAATSA-related prohibitions in Directives 1 and 2 were now in effect.
These actions communicated sanctions prohibitions and authorizations
directly to the public and private sector.
OFAC's Compliance division also regularly fields calls from the
private sector to explain CAATSA and provide guidance on adhering to
its requirements. Since the passage of CAATSA, OFAC has responded to
thousands of phone and email inquiries regarding CAATSA and Russia-
related sanctions questions. OFAC Licensing provides a valuable
interface for the public, where the private sector can seek a license
or receive interpretive guidance related to a particular regulatory
matter or fact pattern.
Large and impactful sanctions actions such as those taken against
major Russian oligarchs also require extensive private sector outreach
and communication. Following the April 6 designations, Treasury
officials engaged in extensive discussions with allies and partners, as
well as companies linked to the sanctioned persons, to identify ways to
mitigate the negative impact on global markets while simultaneously
imposing costs on targeted Russian actors by compelling these firms to
reduce the ownership and interest of sanctioned persons.
As the primary regulator responsible for money laundering and
illicit finance activity, FinCEN also closely engages with the private
sector, including to identify and disseminate information on emerging
typologies supporting illicit financial actors such as Russia.
With respect to proliferation finance, the FBI Counterproliferation
Center--Russia (CPC-3) has worked closely with FinCEN and a consortium
of financial institutions through the FinCEN Exchange Program to
enhance information sharing with the private sector. Specifically, CPC-
3 has shared Russian proliferation finance typologies to initiate
information sharing among banks that could lead to the uncovering of
complex Russian illicit financial networks and develop actionable leads
through Bank Secrecy Act reporting--including but not limited to
Suspicious Activity Reports. These efforts assist CPC-3's efforts to
identify illicit financial networks that aid in the procurement of
U.S.-sensitive technology and allow for timely and effective law
enforcement disruptions.
Further, in its posts and missions abroad, the State Department
conducts regular, significant outreach to the private sector, including
at conferences in the United States and abroad that focus on sanctions
policy, compliance, and enforcement. These conferences are attended by
sanctions practitioners, compliance professionals, and lawyers. State,
often in conjunction with Treasury officials, also engages in regular
meetings with private sector companies in order to explain our policies
in relation to Russia, including our intent to prevent illicit
financial flows.
section 243(b)(3)--efforts to engage and coordinate with allied
international partners on illicit finance, especially in europe, to
coordinate efforts to uncover and prosecute the networks responsible
for illicit financial flows described in paragraph (1), including
examples of that engagement and coordination
Foreign Engagement With International Partners
Engagement and coordination with allies and partners are essential
elements of the administration's efforts to counter Russian malign
influence. Both in Washington and in European capitals, Treasury and
State engage routinely at senior and staff levels to share information
about, coordinate approaches to, and forge common understandings of
this shared threat.
Since the passage of CAATSA, Treasury and the State Department have
traveled extensively through Europe--including the United Kingdom,
Germany, France, European Union, Italy, Poland, Denmark, the
Netherlands, Lithuania, Estonia, Latvia, and Finland--to discuss the
implementation of the Russia-related provisions of that statute with
foreign and finance ministries. Treasury and the State Department have
also engaged with international partners through the G-7+ Contact Group
(United States, United Kingdom, Germany, France, Italy, Canada,
Australia, European Union, Norway, and Poland), a group of likeminded
countries coordinating efforts to counter Russian malign influence and
continue exerting pressure on the Kremlin to implement the Minsk
agreements. The Department of Homeland Security has engaged European
partners through the G7 Security Ministers and U.S.-EU Justice and Home
Affairs Ministerial meetings to coordinate similar efforts to counter
Russian malign influence. Treasury and State also actively engage with
the European External Action Service (EEAS) of the European Union,
which has provided useful feedback and insight on the impact of CAATSA
and the recent April 6 action on the European economy.
These engagements also provide important opportunities for the
administration to press European partners to develop and employ the
necessary tools to effectively counter common threats such as Russia,
including domestic sanctions authorities where they do not exist, and
to enhance the ability of their financial intelligence units to
collect, analyze, and share information, including with respect to
illicit Russian financial activity. Senior Treasury officials have also
regularly emphasized the administration's strong opposition to Nord
Stream II, which if completed would generate additional funds the
Kremlin could use to finance its malign activity, while simultaneously
deny Ukraine substantial transit revenues it needs to defend itself
against Russian aggression.
The administration has prioritized engagement with jurisdictions
with high volumes of Russian financial flows, including the United
Kingdom, Cyprus, and Latvia, to advance U.S. objectives on Russia. As
elaborated below, such engagement and coordination significantly
expands the reach and impact of our unilateral efforts to disrupt
illicit Russian financial activity, amplifies multilateral messaging
that the U.S. and its partners will not tolerate Russian aggression,
and helps maintain transatlantic unity against a Russia bent on
undermining these historic ties.
United Kingdom
The scale of the U.K. financial services market and access to the
EU have made London and U.K. overseas territories such as the British
Virgin Islands an attractive destination for illicit financial flows.
The U.K. National Crime Agency has estimated that, ``many hundreds of
billions of pounds of international criminal money is laundered through
U.K. based banks and subsidiaries each year,'' to include Russian
oligarch proceeds of corruption. Recognizing this, the United States
and U.K. have regularized consultation and cooperation to coordinate
our respective efforts to counter Russian malign influence, including
its financial activity.
Cyprus
Senior officials from State and Treasury have engaged Cypriot
authorities extensively over the past year and a half to underscore
concerns that Cyprus continues to host a large volume of suspicious
Russian funds and investments, and have pressed Cypriot officials to
harden its financial system against these threats. Vulnerabilities
Cyprus presents include its permissive citizenship by investment
program, its weak supervision of Administrative Service Providers, and
lax company formation requirements, which are exploited by illicit
actors to set up front companies and to use these fronts to open bank
accounts and access the international financial system.
Although Cyprus remains a jurisdiction of concern from the
perspective of Russian money laundering, the administration is seeing
some signs of progress. Following the April 6 oligarch designations,
Oleg Deripaska and Victor Vekselberg both had bank accounts frozen. In
May 2018 Cyprus issued a circular instructing its banks to address
certain illicit finance risks from shell companies, in particular the
challenges in verifying customers' background.
Latvia
Latvia has long served as a permissive environment for illicit
Russian financial activity due to its geography, demography, linguistic
profile, developed banking system, and membership in the European Union
and Eurozone. For decades, Russian malign actors and their agents have
exploited lax controls in Latvia's financial sector to launder illicit
funds and support Russia's destabilizing conduct.
Under this administration Treasury has redoubled its efforts to
work with Latvia to strengthen its financial system by improving the
legislative and regulatory framework as well as institutional capacity.
In February 2018, pursuant to Section 311 of the USA PATRIOT Act,
FinCEN issued a notice of proposed rule-making against ABLV Bank, a
Latvian bank it found had facilitated significant Russian-based illicit
activity. FinCEN identified ABLV Bank as a foreign financial
institution of primary money laundering concern and proposed a special
measure that would prohibit U.S. financial institutions from opening or
maintaining a correspondent account in the U.S. on behalf of the bank.
(This action is discussed in greater detail in this report under
Section 243(b)(5)).
This bank's involvement in illicit financial activity reflects
broader systemic deficiencies in Latvia that this administration is
working hard to address. These deficiencies reflect a historically
ambivalent commitment to definitively reducing the risks Latvia faces
from its high volume of non-resident deposits, many of which emanate
from Russia and other Commonwealth of Independent States (CIS)
countries and are held by opaque shell companies.
To strengthen the authorities in Latvia committed to redressing
these vulnerabilities, senior Treasury leadership has undertaken
regular, high level engagement. Working closely with Embassy Riga,
senior Treasury officials have urged Latvian leadership to support and
empower emerging voices in Latvia's financial sector to urge meaningful
reforms, such as reducing Latvia's stock of non-resident deposits,
bolstering the resources allocated to Latvia's Financial Intelligence
Unit (FIU), and taking tougher enforcement action against banks that
violate Latvian regulations against money laundering and sanctions
evasion.
Latvia has passed legislation banning shell companies and appointed
a new FIU director. Latvia has also amended its Law on Sanctions to
close legal loopholes and allow the banking regulator to issue
regulations to prevent sanctions evasion (See additional detail in
Section (b)(4) below).
Foreign Deployed Subject Matter Experts
Administration departments and agencies have also forward deployed
illicit finance subject matter experts to partner countries to increase
international cooperation targeting Russian illicit financial flows.
The BEOU program manages Assistant Legal Attache (ALAT) positions who
currently operate with two organized crime task forces in Eastern
Europe. These ALATs are fully embedded members within these task forces
and serve as a point of contact between the foreign partner agency and
the FBI writ large.
In 2018, Treasury and the Department of Defense partnered to
establish a new Treasury Liaison Officer position at U.S. European
Command (EUCOM) in Stuttgart, Germany. This new Treasury liaison role
will facilitate existing and establish new finance-related cooperation
and information sharing among the Department of Defense, Treasury, and
NATO allies.
section 243(b)(4)--efforts to identify foreign sanctions evaders and
loopholes within the sanctions regimes of foreign partners of the
united states
As described in greater detail under the response to Section
243(b)(1), the IC has constantly sought to identify and map out illicit
financial networks supporting the Russian Federation, which includes
identifying activity designed to evade existing sanctions programs.
Through its leadership in the Financial Action Task Force (FATF)--
where the United States currently holds the presidency--and in FATF--
Style Regional Bodies (FSRBs), Treasury also works to strengthen
international anti-money laundering/countering the financing of
terrorism (AML/CFT) standards and ensure that these measures are
effectively implemented around the world. For example, the FATF's
efforts to ensure that all jurisdictions apply a high level of scrutiny
to the financial activities of politically exposed persons (PEPs) and
collect information on the beneficial owners of legal entities helps to
enable the detection of detect attempts by Russian officials to
launder, hide, or move the proceeds of corruption. Similarly, the
FATF's work to promote the global implementation of U.N. sanctions and
hold underperforming countries accountable through its ``grey list''
process helps undermine Russian attempts to circumvent international
prohibitions on dealings with North Korea, Iran, or other U.N.-listed
programs. Indeed, one of the priorities of the current U.S. presidency
is proliferation finance, an effort intended to harden the world's
financial systems against the type of illicit procurement and
proliferation activity in which Russian actors are regularly involved.
section 243(b)(5)--efforts to expand the number of real estate
geographic targeting orders or other regulatory actions, as
appropriate, to degrade illicit financial activity relating to the
russian federation in relation to the financial system of the united
states
As the administration works aggressively to deter and prevent
illicit Russian financial activity abroad, it is also focused intently
on protecting the U.S. financial system. Of particular recent note, as
referenced above, was FinCEN's February 16, 2018 finding pursuant to
Section 311 of the USA PATRIOT Act that Latvia-based ABLV Bank AS
(``ABLV'') was a financial institution of primary money laundering
concern. In its public notice of proposed rulemaking, FinCEN cited
multiple instances of institutionalized money laundering in which ABLV
management solicited high-risk shell company activity that enabled the
bank and its customers to launder funds. ABLV's facilitation of shell
company activity typically benefitted illicit actors engaged in an
array of illicit conduct, including transnational organized criminal
activity, corruption, and sanctions evasion, emanating mostly from
Russia and former CIS countries. Pursuant to this finding, FinCEN
proposed the imposition of a prohibition on U.S. financial institutions
from opening or maintaining correspondent accounts for, or on behalf
of, ABLV.
FinCEN has also utilized its authorities under the Bank Secrecy Act
to issue Geographic Targeting Orders (GTO) to impose additional
recordkeeping requirements on domestic financial institutions or other
businesses in a specific geographic area. Specifically, FinCEN has
issued GTOs to collect additional financial information on transactions
in the real estate sector in several jurisdictions known for attracting
large amounts of foreign investors, including those from Russia.
section 243(b)(6)--efforts to provide support to counter those involved
in illicit finance relating to the russian federation across all
appropriate law enforcement, intelligence, regulatory, and financial
authorities of the federal government, including by imposing sanctions
with respect to or prosecuting those involved
Treasury's Office of Intelligence and Analysis, FinCEN, CIA, and
NSA, among other agencies, play critical roles in the administration's
work to support law enforcement and other authorities, especially in
the imposition of sanctions and other impactful measures against
illicit Russian financial activity.
FinCEN conducts research and analysis of information gathered
pursuant to the Bank Secrecy Act relating to Russian illicit financial
activity, both domestically and overseas. FinCEN's financial
intelligence products are disseminated primarily within the U.S.
government, including to policymakers, law enforcement agencies, and
the Intelligence Community. FinCEN also exchanges information with its
counterpart financial intelligence units in other jurisdictions,
including on matters related to Russian illicit finance. Additional
details are provided in Section (b)(7) below.
section 243(b)(7)--efforts to investigate or otherwise develop major
cases, including a description of those cases
The administration has moved aggressively using the range of its
law enforcement and regulatory tools against Russian malign activity.
Descriptions of select cases are described below.\1\
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\1\ As with the classified version of this report, this
unclassified version of the report does not discuss in detail open or
pending investigations, law enforcement investigations or activities,
or other disruptive actions ongoing at the time of release that have
not been publicly disclosed in charging documents.
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The investigation of the Department of Justice's Special Counsel
thus far has led to the indictment of 25 individuals and three
companies for a variety of offenses--including conspiracy to commit
wire fraud and bank fraud and conspiracy to launder money--committed in
furtherance of Russia's scheme. The indictments describe a variety of
methods used by the defendants to fund their operations.
As alleged in an indictment filed in February 2018, one element of
the operation involved the use of two related companies to channel
millions of dollars' worth of funds to approximately fourteen
affiliated companies that in turn provided money to an organization
that sought to engage in ``information warfare against the United
States'' and to ``spread distrust towards the candidates and the
political system in general.'' Certain of the defendants in this part
of the operation also used stolen personal information to open accounts
at a digital payment service provider.
In another element of this influence operation focused on hacking
into the United States, as described in the Special Counsel's July 2018
indictment, 11 Russian individuals affiliated with Russia's military
intelligence agency, the Main Intelligence Directorate of the General
Staff (GRU), conspired to launder the equivalent of more than $95,000
using cryptocurrencies such as bitcoin to lease servers, register
domains, purchase at least one virtual private network account, and
make other payments in furtherance of their hacking activity. As the
indictment highlights, the conspirators engaged in a web of
transactions structured to capitalize on the perceived anonymity of
cryptocurrencies such as bitcoin in their financial transactions with
U.S. payment processing companies, including to pay web hosting
companies, domain registrars and other businesses. The conspirators
also allegedly mined bitcoin, purchased bitcoin through peer-to-peer
exchanges, moved funds through other digital currencies, used pre-paid
cards, and worked with a third-party exchanger that enabled layered
transactions through digital currency platforms.
In July 2017, FinCEN assessed a $110 million dollar penalty against
virtual currency exchange BTC-e (operated by a Russian citizen) for its
failure to implement even basic controls to prevent the use of its
services for illicit purposes. BTC-e's lack of effective supervision
led to it being exploited by a customer base that included many
criminals who desired to conceal proceeds from crimes such as
ransomware, fraud, identity theft, public corruption, and drug
trafficking. BTC-e permitted and failed to report millions in
transactions from ransomware such as Cryptolocker and Locky.
Importantly, FinCEN's BSA enforcement investigation also led to the
assessment of a $12 million civil money penalty against one of BTC-e's
administrators, Alexander Vinnik--the largest individual liability
penalty FinCEN has assessed to date. At one point BTC-e served
approximately 700,000 customers across the world and was associated
with bitcoin wallets that had received over 9.4 million bitcoins. It
also offered exchange in fiat currency, as well as convertible virtual
currencies Bitcoin, Dash, Litecoin, Namecoin, Novacoin, Peercoin, and
Ether. In conjunction with FinCEN's enforcement action, Alexander
Vinnik and BTC-e were also indicted by the Department of Justice for
operating an unlicensed money service business, money laundering, and
related crimes.
FBI is also partnering with FinCEN to detect and disrupt illicit
financial flows linked to the Russian Federation. Drawing on primarily
wire transfer datasets shared by FinCEN and a dataset derived from the
Panama Papers leak revealed by the International Consortium of
Investigative Journalists, FBI used analytic platforms to assist in
processing nearly 4,000,000 international wire transfers centered on
four Balkan and Cypriot banks known by FinCEN to facilitate illicit
Russian financial flows. This effort enabled the FBI to expand its
understanding against Russian-linked offshore financial networks,
identified a variety of new FBI targets, and enhanced FBI understanding
of existing investigations. Impacts under this initiative include but
are not limited to the following:
FBI opening of a sensitive internal joint investigation by a
counterintelligence and public corruption squad against a high
level state elected official.
A targeting and potential intelligence reporting platform
using links between FBI-derived information and Russia-
affiliated entities in FinCEN--FBI data holdings, including
several TOC and various criminal targets.
FBI also has an open investigation on a multi-billion dollar
international money laundering operation also tied to U.S. locations,
owned and operated by an identified Eurasian billionaire with strong
ties to Eurasian organized crime. FBI developed U.S. law enforcement,
U.S. intelligence, and international law enforcement partners to
enhance this investigation.
conclusion
As evidenced by the comprehensive efforts illustrated above, the
administration is aggressively targeting and disrupting the illicit
financial networks supporting Russian malign activity. The Department
of the Treasury, in close coordination with other departments and
agencies, will continue to impose costs upon those acting on behalf of
the Kremlin against U.S. interests and increase financial pressure on
Russia to advance our national security priorities. Additional
information on the full range of the administration's efforts can be
found in the classified annex to this report.
__________
Trump Administration Actions to Push Back Against Russia
latest actions
Executive Branch determination that Russia has violated the
Chemical and Biological Weapons Act of 1991 for its use of the
nerve agent, ``Novichok,'' in the Salisbury attacks in March
2018; imposition of sanctions.
Crimea Declaration of non-recognition.
In July, the Department of Defense released an additional
$200 million in security cooperation funds to the Ukrainian
military.
confronting russian influence in the u.s. by reducing russian presence
an spy numbers
In March 2018, President Trump expelled 48 Russian officials
and intelligence officers from the United States and closed the
Seattle consulate.
In March 2018, President Trump expelled 12 officials and
intelligence officers from the Russian Mission to the United
Nations in New York for abusing their privilege of residence.
The 60 Russian officials expelled in March 2018 constituted
the largest expulsion of Russian spies from the United States
since the high point of the Cold War.
In October 2017, the administration closed Russian
properties in New York, San Francisco, and Washington in
response to the Russian government-imposed personnel cap on
U.S. Mission Russia in July 2017.
In September 2017, the administration banned the use of
Kaspersky Labs software on United States Government computers
due to Kaspersky's ties to Russian intelligence.
In March 2017, the administration charged 3 Russians for the
2014 Yahoo hack, including 2 officers of the Russian Federal
Security Service (FSB).
The Trump administration has maintained the closure of 2
Russian compounds and the expulsion of 35 diplomats in response
to Russian interference in the 2016 election.
confronting russian aggression with sanctions
Since January 2017, the Trump administration has sanctioned
217 individuals and entities in Russia.
In June 2018, the Trump administration sanctioned 5 Russian
entities and 3 Russian individuals for enabling Russia's
military and intelligence units to increase Russia's offensive
cyber capabilities.
In April 2018, the USG used CAATSA authorities to designate
seven Russian oligarchs and 12 companies they own or control,
along with 17 senior Russian government officials, a state-
owned Russian weapons trading company and its subsidiary, a
Russian bank, for their involvement in Russia's global malign
activities.
In March 2018, the USG sanctioned five entities and 19
individuals for malicious cyber activity.
In January 2018, the USG sanctioned 42 targets (30 SDNs, 12
SSIs) under Ukraine-related programs.
In January 2018, Treasury, the State Department, and the
Office of the National Director of Intelligence, transmitted to
Congress the CAATSA 241 report on Russian oligarchs and senior
political officials.
Under CAATSA 231, several countries have stopped significant
deals involving the planned purchase of Russian military
materials and supplies.
In December 2017, the USG imposed sanctions on five serious
human rights abusers, including Ramzan Kadyrov and one of his
underlings.
In December 2017, the USG imposed sanctions on 13 serious
human rights abusers and corrupt actors, including two Russian
citizens under the Global Magnitsky sanctions program. The
Russians sanctioned include the son of Russia's prosecutor
general.
defending and strengthening europe
The Trump administration has increased funding for the
European Deterrence Initiative by 4.8 billion in 2018.
The administration has worked with Allies at NATO to
maintain a firm message to Russia that there can be no return
to ``business as usual'' until there is a clear, constructive
change in Russia's actions.
The administration is also leading efforts at NATO to
address Russian hybrid warfare and to counter Russian malign
influence against the Alliance.
This year alone, the United States has led or participated
in over 150 military exercises in Europe.
This administration is helping Ukraine and Georgia bolster
their means for self-defense and deter Russian aggression
through defensive weapons sales.
At the NATO Summit, the U.S. successfully fought for a
stronger package of defense and deterrence measures in NATO,
including enhancing Allied force readiness by getting Allies to
develop 30 air squadrons, 30 naval combatants, and 30 maneuver
battalions all ready to be employed in 30 days.
The President and Senior Administration Officials have
clearly expressed strong U.S. opposition to Nord Stream 2.
The United States strongly supports the Southern Gas
Corridor project, which would lessen Europe's dependence on
Russian gas.
restoring america's military edge
The Trump administration released a National Security
Strategy that makes clear that Russia is undertaking actions
that threaten our security and outlines steps to stop their
interference.
This administration is working to pressure Russia back into
compliance with the INF Treaty.
The United States is investing billions in modernizing its
nuclear arsenal to deter competitors such as Russia and China
so that they do not gain a strategic military advantage from
its treaty violations.
We have increased defense budgets to $700 billion for FY
2018 and $716 billion for FY 2019.
fighting malign activities
The Department increased support for the Global Engagement
Center (GEC), requesting $53.5 million in the FY19 budget. It
also signed a Memorandum of Agreement with DoD to transfer an
additional $40 million for the Global Engagement Center (GEC)
to support efforts to counter disinformation and propaganda
from foreign governments like Russia.
The administration publishes multiple tweets and statements
per week calling Russia out on its malign activities and
destabilizing behavior around the world.
The State Department's European Bureau co-chairs the Russia
Influence Group (RIG) with European Command which streamlines
interagency efforts to counter all aspects of Russian influence
campaigns and ensures more efficient coordination.
In April 2018, the Department convened the high-level
interagency Active Measures Abroad Steering Committee (AMASC),
chaired by the Under Secretary for Political Affairs.
In 2018, we indicted of two alleged FSB officers for
cybercrimes.
In August 2016, Russian national Roman Seleznev was
sentenced to 27 years in federal prison for hacking and credit
card fraud.
protecting american elections
In May 2017, President Trump signed an Executive Order to
strengthen and review the cybersecurity of our Nation and its
critical infrastructure.
The administration established Election Infrastructure
Government and Sector Coordinating Councils.
34 States, 52 county or local governments, and 5 election
companies receive cyber security scans and assessments from
DHS, free of charge, on an ongoing basis.
DHS plans to provide on-site risk and vulnerability
assessments to all States that request it. Currently 18 States
have requested this assessment and 16 are completed for the
2018 election cycle.
A new pilot program was launched to share information
between State and local officials and the Election Assistance
Commission to allow for rapid response on Election Day.
During the 2017 elections, the Trump administration provided
on-site cybersecurity support to States and will do so again
during the 2018 elections.
statements by the president on russian meddling
In January 2017, the President-Elect said at a news
conference, ``I think it was Russia.''
When asked what he would say to Putin about the hacking,
Trump responded, ``He shouldn't have done it. I don't believe
he will be doing it more.''
In a June 23, 2017 tweet, the President wrote, ``The Obama
administration knew far in advance of November 8th about
election meddling by Russia.''
On July 6, 2017, the President said ``I think it was
Russia.''
On November 12, 2017, the President said ``I believe very
much in our intelligence agencies.''
On March 6, 2018, the President said ``certainly there was
meddling.''
During the Helsinki press briefing, President Trump told
reporters, ``I addressed directly with President Putin the
issue of Russian interference in our elections.''
During the July 17 White House press conference, President
Trump said, ``I accept our intelligence community's conclusion
that Russia's meddling in the 2016 election took place.''
__________
NATO Summit Deliverables
1. defense spending and burden sharing
Cash and Capabilities: The number of Allies spending 2% of
GDP on defense and 20% of their defense budgets on major
equipment has increased since January 2017.
Allies' total defense spending increases since 2017 amount
to over $40 billion.
Eight Allies are currently meeting their 2% pledge, and 18
in total are on track to do so by 2024.
Contributions: Since Jan 2017, Allies (and partners) added
over 5,000 more troops to NATO missions (46% increase), and
Allies now contribute 57% of troops in NATO missions.
For the Resolute Support Mission (RSM) in Afghanistan
15 Allies announced additional troop offers since April.
With the addition of the UAE and Qatar, there are now 41 RSM
members providing a total of 16,000 troops, a 20 % increase
over December 2016.
Canada announced it will continue its role as framework
nation of the enhanced Forward Presence force in Latvia
through 2022, and that it will augment its land presence
there by deploying CF-18s.
2. deterrence and defense
The 4 x 30s: The NATO Readiness Initiative will ensure that
NATO has 30 air squadrons, 30 naval combatants, and 30 maneuver
battalions that are ready to join the fight in 30 days.
Mobility: Improving our ability to move forces across Europe
(by taking steps within NATO, within the EU, and jointly
between NATO and the EU)
NATO Command Structure:
a new Atlantic-focused Joint Force Command in Norfolk to
help protect sea lanes between North America and Europe.
a new Joint Support Command in Germany for logistics,
reinforcement, and mobility to improve the movement of
troops and equipment
a new Cyberspace Operations Center in Belgium to provide
situational awareness and coordination of NATO operational
activity within cyberspace
Hybrid and Cyber:
Established Counter-Hybrid Support Teams
Doing more on cyber threats, e.g. integrate sovereign
cyber effects into NATO operations
3. fighting terrorism
Iraq Mission: Transformed NATO's activity in Iraq into a
non-combat training and capacity building mission, with Canada
commanding the mission.
Afghanistan:
Extended support to the NATO Resolute Support Mission
(RSM) in Afghanistan and funding for the Afghan National
Defense and Security Forces Trust Fund through 2024.
Since the launch of the President's South Asia strategy,
Allies and partners are matching U.S. troop increases,
adding 1,200 more troops, comprising 47% of RSM troop
levels. Record fill-rate of RSM staffing requirements
thanks to new troop pledges at Summit.
Southern Partners:
Launched a Defense Capacity Building (DCB) package for
Tunisia and continuing to implement a DCB package for
Jordan
Declared Hub for the South in Naples, Italy, at Full
Operational Capacity
4. open door
Macedonia received an invitation to begin accession talks.
5. nato-eu cooperation
Strengthened NATO-EU cooperation as NATO and EU leaders
signed a new NATO-EU Joint Declaration.
[all]