[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
U.S. FOREIGN POLICY TOWARD UKRAINE
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HEARING
BEFORE THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
MARCH 6, 2014
__________
Serial No. 113-129
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Printed for the use of the Committee on Foreign Affairs
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COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida ENI F.H. FALEOMAVAEGA, American
DANA ROHRABACHER, California Samoa
STEVE CHABOT, Ohio BRAD SHERMAN, California
JOE WILSON, South Carolina GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas ALBIO SIRES, New Jersey
TED POE, Texas GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina KAREN BASS, California
ADAM KINZINGER, Illinois WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas ALAN GRAYSON, Florida
PAUL COOK, California JUAN VARGAS, California
GEORGE HOLDING, North Carolina BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas JOSEPH P. KENNEDY III,
SCOTT PERRY, Pennsylvania Massachusetts
STEVE STOCKMAN, Texas AMI BERA, California
RON DeSANTIS, Florida ALAN S. LOWENTHAL, California
TREY RADEL, Florida--resigned 1/27/ GRACE MENG, New York
14 deg. LOIS FRANKEL, Florida
DOUG COLLINS, Georgia TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina JOAQUIN CASTRO, Texas
TED S. YOHO, Florida
LUKE MESSER, Indiana
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
C O N T E N T S
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Page
WITNESSES
Mr. Eric Rubin, Deputy Assistant Secretary, Bureau of European
and Eurasian Affairs, U.S. Department of State................. 5
The Honorable Paige Alexander, Assistant Administrator, Bureau
for Europe and Eurasia, U.S. Agency for International
Development.................................................... 13
Mr. Daleep Singh, Deputy Assistant Secretary for Europe and
Eurasia, U.S. Department of the Treasury....................... 19
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Mr. Eric Rubin: Prepared statement............................... 8
The Honorable Paige Alexander: Prepared statement................ 15
Mr. Daleep Singh: Prepared statement............................. 21
APPENDIX
Hearing notice................................................... 44
Hearing minutes.................................................. 45
The Honorable Edward R. Royce, a Representative in Congress from
the State of California, and chairman, Committee on Foreign
Affairs: Material submitted for the record from the Embassy of
Ukraine........................................................ 47
The Honorable Joseph P. Kennedy III, a Representative in Congress
from the Commonwealth of Massachusetts: Prepared statement..... 51
U.S. FOREIGN POLICY TOWARD UKRAINE
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THURSDAY, MARCH 6, 2014
House of Representatives,
Committee on Foreign Affairs,
Washington, DC.
The committee met, pursuant to notice, at 9:05 a.m., in
room 2172 Rayburn House Office Building, Hon. Edward Royce
(chairman of the committee) presiding.
Chairman Royce. I am going to call the hearing to order at
this time. We will ask all the members if they can come in and
take their seats for this hearing.
Let me begin by pointing out that Ukraine is facing not one
crisis but a number of them. Its new government is confronting
an economic and financial crisis brought on by years of
mismanagement, years of corruption by previous government
officials and it is doing this while under military invasion
and economic coercion by neighboring Russia. The world has been
speaking up, sending a clear message and that message is that
Moscow's actions over the past week are out of bounds.
The new government in Kiev cannot succeed without strong
and rapid support by the international community. Working in
close cooperation with our European allies, the U.S. is
crafting an immediate assistance package. But this help must be
accompanied by fundamental economic reforms if Ukraine is to
stabilize its economy. Only Ukraine can help us help them.
I will also mention that later this month, prior to the
elections in Ukraine, I will be leading a codel to the country
because we must also help to ensure that the elections
scheduled for May will be fair, will be free and reflect the
true voice of the Ukrainian people in all regions of the
country, a country that is becoming increasingly divided, and I
think our oversight and engagement there right now is very
important. A successful election is essential to Ukraine's
ability to resolve the many issues its got on its plate and to
advance toward democracy and security, and long-term toward
prosperity.
Addressing Ukraine's energy security must be part of our
response. Russia has repeatedly used its supply of natural gas
to pressure Ukraine economically and politically, and has
announced that it will significantly increase its cost in a
deliberate effort to squeeze Ukraine.
Fortunately, we have an option to help counter this threat,
namely, reducing the current impediments to exports of American
gas to the Ukraine. The administration has it within its power
to do this by removing the current bureaucratic obstacles that
only empower Putin. They should do so rapidly.
This committee is working to provide appropriate assistance
to all Ukrainian people but also to pressure Russia to withdraw
its forces and cease its efforts to destabilize Ukraine. As
part of that effort, immediately following this hearing, we
will mark up a resolution that the ranking member and I have
introduced that condemns Russia's aggression and outlines these
steps.
I strongly encourage the administration to increase efforts
to isolate Russia diplomatically. There is much that should be
done, such as introducing a resolution at the U.N. Security
Council that condemns Russian aggression, isolating Moscow.
The rest of the international community will support such a
resolution. Moscow alone will veto it but it will increase the
pressure.
The Treasury Department should also make clear that the
U.S. is on the lookout for Russian banks that are involved in
illicit activities, such as the transfer of stolen Ukrainian
assets, and especially those banks that are primarily owned by
the government or by the oligarchs. We also in our resolution
lay out other steps that should be taken such as the limitation
on travel.
Many of us have been calling for action and last evening
the administration called me to indicate that it was going to
take steps on precisely these issues--the visa and asset bans
here--and so we will look forward to that statement from the
administration I think further elaborating on the Executive
order announced early this morning.
But we must remember that the purpose of our pressure on
Russia is not simply to punish aggression and certainly it is
not to escalate the confrontation, but instead to move Putin
toward a resolution that protects the territorial integrity of
Ukraine.
That is our ambition here, and as we look forward we have
with us today three administration witnesses to answer
questions from members regarding the current situation in
Ukraine and the administration's ongoing efforts to provide
assistance to Kiev and to pressure Russia.
The ranking member will be here shortly and while he is en
route I will also take this opportunity to introduce our
witnesses. We have limited time this morning so before I
introduce the witnesses we are honored to have with us today
Ambassador Motsyk from the Embassy of Ukraine.
Mr. Ambassador, we know that it is a very difficult time
for your country and we want to extend a very warm welcome to
you. As you can see, Ukraine has many friends on this
committee.
This morning we are pleased to be joined by representatives
from the Department of State, the U.S. Agency for International
Development, and the Department of the Treasury.
A career Foreign Service officer, Mr. Eric Rubin previously
served as Deputy Chief of Mission at the U.S. Embassy in Moscow
from 2008 until 2011 before assuming his duties as Deputy
Assistant Secretary in the Bureau of European and Eurasian
Affairs.
With over 20 years of experience working in international
development in the region, Ms. Paige Alexander is the Assistant
Administrator of the Bureau for Europe and Eurasia at the U.S.
Agency for International Development.
Mr. Daleep Singh is the Deputy Assistant Secretary for
Europe and Eurasia at the U.S. Department of the Treasury. He
advises the senior economic leadership at the Department of
Treasury and the White House on global markets.
And without objection, the witnesses' full prepared
statements are going to be made part of the record. I am going
to encourage you all to summarize and just use your time to
present your viewpoints and afterwards the members will have 5
calendar days to submit statements and questions and any
extraneous materials for the record.
Without objection, as member offices were notified last
night, in light of our time constraint Mr. Engel and I are
suggesting we limit to 3 minutes per member to help maximize
participation of all the members this morning.
And if I could now go to our ranking member, Mr. Engel,
whose family is originally from the Ukraine--Mr. Eliot Engel
from New York.
Mr. Engel. Thank you. Thank you very much, Mr. Chairman.
Deputy Assistant Rubin, Assistant Administrator Alexander,
Deputy Assistant Secretary Singh, thank you for appearing
before the committee today and for your tireless efforts over
the past several months in support of Ukraine.
And let me thank Chairman Royce for calling this hearing on
an issue which is at the forefront of all our minds right now.
Since 1991, the U.S. has strongly supported a democratic,
prosperous, sovereign Ukraine, and in keeping with this
commitment we supported a peaceful negotiated resolution of the
recent crisis there, as hundreds of thousands of Ukrainian
citizens came out in the streets of Kiev and throughout Ukraine
to express their desire for a more democratic and just state.
The recent selection of a new interim government signaled
that Ukraine was back on the path toward stability and
political and economic health. But instead of welcoming this
event, as was the case in the U.S. and Europe, President Putin
has reacted in a very different and very disturbing manner.
So let me be clear. President Putin's aggressive military
actions in Crimea flagrantly violate Ukraine's sovereignty and
territorial integrity. They violate international law and they
violate Russia's commitments to Ukraine.
They are deeply destabilizing and have serious implications
for security in Europe. All of us should be profoundly
concerned about this.
And furthermore, his justification for this aggression is
completely unsupported by the facts. There has been no
persecution of Russians or Russian speakers in Ukraine. All
credible observers agree on this point.
So I believe this is a critical moment. The U.S., our
European allies and the international community must stand up
for Ukraine's unity and territorial integrity. Russia has deep
historical and cultural ties with Ukraine and Russia and
Ukraine should enjoy good and close relations.
President Putin must respect Ukraine's sovereignty and the
right of its people to freely make their own choices and chart
their own future and Russia must also understand that there are
consequences for its aggression.
I think we should consider a range of sanctions including
visa bans, freezing assets, and banking sanctions so that
President Putin understands that this will not be business as
usual.
I call on our European allies and other members of the
international community to take similar measures. I also
support the administration's initiative to send international
observers to monitor the situation in Crimea and other parts of
Ukraine.
Russia, in turn, should welcome such a mission, return its
troops to their bases immediately and comply with its
commitments. Our other immediate priority should be to help
Ukraine's interim government deal with the formidable
challenges that it faces. Secretary Kerry was just in Kiev, and
this was the right time to go and the right way to show our
support.
Given Ukraine's dire economic situation, we and our
European allies should be ready to provide a robust assistance
pledge. I strongly support the administration's initiative to
provide loan guarantees to Ukraine and I am very pleased that
the House will pass legislation authorizing these guarantees
later today.
I also welcome the EU's announcement that it also will
provide very sufficient loans and credits and, of course, we
must also support Ukraine's efforts to reach an agreement with
the IMF and implement reforms to address structural weaknesses.
We should also provide additional assistance in areas of
urgent need, such as to help Ukraine recover looted assets,
combat corruption, conduct free and fair new elections,
increase energy security and counter politically motivated
trade actions by Russia.
With regard to this last point, I also believe we and the
EU must steadfastly support other nations facing similar
Russian pressure, such as Moldova and Georgia. As Ukraine's
leaders restore stability and order in the country, I urge them
to reach out to all groups and regions and to work together to
build a tolerant, pluralistic society.
The interim government and any Ukrainian Government must
protect the rights of all minority populations and make it
clear that it represents all Ukrainian citizens.
Let me take this opportunity to say a word about anti-
Semitism, which has been mentioned as another justification for
Russian military aggression.
I recognize that there is a concern, but as the respected
NCSJ recently stated, and I quote,
``While there has been isolated incidents in Crimea and
eastern Ukraine since the protests began in November,
there has not been a pattern of violence against the
Ukrainian Jewish population.''
And finally, let me once more thank our witnesses and the
administration for its tireless efforts over the past several
months to support democracy in Ukraine. As the people of
Ukraine confront the many challenges ahead, they should know
that the United States will stand with them.
We will support Ukraine's sovereignty and territorial
integrity and we will support Ukrainian aspirations to build a
more democratic, prosperous and just future for their country.
Thank you, Mr. Chairman.
Chairman Royce. Thank you. We are going to go to Mr. Rubin.
STATEMENT OF MR. ERIC RUBIN, DEPUTY ASSISTANT SECRETARY, BUREAU
OF EUROPEAN AND EURASIAN AFFAIRS, U.S. DEPARTMENT OF STATE
Mr. Rubin. Thank you, Chairman Royce, Ranking Member Engel,
members of this committee. I am grateful for the opportunity to
speak to you today on U.S. policy toward Ukraine.
I would also like to express appreciation for Ukrainian
Ambassador Motsyk joining us today. We very much appreciate his
presence. Let me begin by thanking this committee for its deep
engagement on this issue.
In our efforts to back the aspirations of the Ukrainian
people, we have been heartened by the robust bipartisan support
that we have received from this committee and from Congress
more broadly.
House Resolution 447, introduced by Ranking Member Engel
and passed by the House on February 10th, sent a powerful
message that the American people stand wholly and unequivocally
with the people of Ukraine in their hour of need. You have
notified us that you are marking up a new resolution today and
we welcome your leadership.
We have had close and constant contact with Congress in
every step of this grave situation. Our united efforts have
demonstrated to the people of Ukraine and to the international
community that the United States is resolute in its support of
Ukraine's desire for a democratic, peaceful and prosperous
future.
I would like to address two areas in my remarks. I will
begin by discussing the political situation in Ukraine. Second,
I will talk about regional stability, Russia's military
intervention in Ukraine and the response of the United States
and the international community to Russia's action.
I have submitted a more detailed written testimony for the
record. I underscore that the situation in the region is
extremely fluid and changing by the hour. We continue to adapt
as it evolves.
I would also like to underscore that the situation has
changed as recently as this morning and we have taken
additional actions as recently as this morning, which I am
prepared to discuss in further detail.
Let me also add a few words about my own deep personal
commitment to Ukraine and its future. I first worked to support
the Ukrainian people and their aspirations for freedom in 1989
when I was the internal politics and nationalities affairs
officer on the Soviet desk of the State Department.
I helped open relations with independent Ukraine in 1991,
and my wife and I lived and worked in Kiev from 1994 to 1996 in
the early days of Ukraine's independence.
I speak Ukrainian and I have friends throughout Ukraine.
Over the tumultuous events of the past several months, I have
watched with horror as Ukrainians were cut down by snipers in
the heart of Kiev.
But I have also been inspired by the people of Ukraine--
their determination, their courage, and their insistence on the
possibility of a better future for themselves and their
country.
I would like to start by emphasizing that the democratic
transition that has occurred in Ukraine is an expression of
will of the Ukrainian people. It is not about the United
States. It is not about Russia.
The people of Ukraine have made a decision about their
future. The Rada, the country's democratically-elected
Parliament, has taken the steps of creating a transitional
government following former President Yanukovych's abdication.
Ukraine's lawmakers in the Rada have fulfilled their
obligation to the people by preparing to tackle pressing
economic and political issues facing the country until new
Presidential elections can be held in May.
These decisions have been supported by overwhelming
majorities in the Rada including members of President
Yanukovych's party. The United States welcomed the formation of
the new government and is working with its leadership as it
ensures the protection of the rights of all Ukrainians
including all minorities.
As the international community looks for ways to help
Ukraine, we will focus on the government's efforts to build a
strong, sovereign and democratic country reflecting the will of
the people of Ukraine.
The decision of the Ukrainian people regarding their
government needs to be respected. Russia's military
intervention in Ukraine has endangered the promise of Ukraine's
democratic transition.
As Secretary Kerry said in Kiev on Tuesday,
``The contrast could not be clearer--determined
Ukrainians demonstrating strength through unity and a
Russian Government out of excuses, hiding its hand
behind falsehoods, intimidation and provocations.''
The United States fully and unambiguously condemns Russia's
military intervention in Ukrainian territory. We have
repeatedly indicated that Russia's actions in Crimea are a
violation of Ukrainian sovereignty and territorial integrity
and a breach of international law, including Russia's
obligations under the U.N. Charter and of its 1997 Treaty of
Friendship with Ukraine as well as Russia's basing agreement of
1997 with Ukraine.
Russia agreed in that treaty to respect the sovereignty of
Ukraine and not to interfere in Ukraine's internal affairs.
This is also a blatant affront to the 1994 Budapest Memorandum
and the Helsinki Final Act.
We have already taken actions consistent with the
unacceptability of Russia's military intervention. Shoulder to
shoulder with our G-7 counterparts, we have suspended
participation in the G-8 Sochi preparations.
We have suspended all talks with Russia on any future trade
or investment agreements. We have suspended military to
military contacts. We have issued a statement with the
unanimous approval of the members of the North Atlantic Council
strongly condemning the Russian military escalation in Crimea.
NATO is stepping up efforts to increase our Baltic air
policing mission and we are working on ways to strengthen our
aviation detachment cooperation with Poland.
We are considering other measures to provide reassurance to
our allies, and today the United States has marshalled a full
package of measures aimed at demonstrating the force of U.S.
resolve in the face of unprovoked military aggression,
intervention and threats.
Pursuant to the President's guidance, the State Department
is putting in place visa restrictions on a number of officials
and individuals, reflecting a policy decision to deny visas to
those responsible for or complicit in threatening the
sovereignty and territorial integrity of Ukraine.
In addition, the President has signed an Executive order
that authorizes sanctions on individuals and entities
responsible for activities undermining democratic processes or
institutions in Ukraine, threatening the peace, security,
stability, sovereignty or territorial integrity of Ukraine,
contributing to the misappropriation of state assets of
Ukraine, or purporting to assert governmental authority over
any part of Ukraine without authorization from the Ukrainian
Government in Kiev.
We have made it clear to Russia and others that steps to
undermine Ukrainian democracy and territorial integrity will
result in further political and economic isolation should they
continue on this path.
Mr. Chairman, our focus remains on de-escalation of
tensions. We continue to explore the possibility of an ``off-
ramp'' that could lead to the relaxation of tensions in
Ukraine, if the Russians are willing to take it.
We support direct talks between the Ukrainian and Russian
Governments. Secretary Kerry met yesterday in Paris separately
with the foreign ministers of Ukraine and Russia as well as
with European counterparts in an effort to get such talks
going.
The OSCE and the United Nations are in the process of
deploying monitors in the country, including Crimea and eastern
Ukraine. These monitors will provide transparency about the
activity of military and para-military forces, monitors for
abuse and defuse tensions between groups.
They, along with senior delegations from our NATO allies to
the region, will offer objective on-the-ground information to
counteract Russia's flagrant propaganda campaign.
And let me be clear on this point. There are no confirmed
reports of threats to ethnic Russians. No confirmed reports of
a massive movement of ethnic Russian refugees. No threat to
Russian naval bases.
The interim Ukrainian Government is a body that represents
the will of the Ukrainian people. It is not an extremist cabal.
Russia's assertions are nothing more than a veneer used to
justify its military action.
I would also like to state before this committee that the
United States is closely monitoring reports of anti-Semitic
acts.
We take this issue very, very seriously. It is an issue I
have worked on for more than 20 years personally and I would
like to concur with the statement that you made indicating that
we have no such information indicating that there are
widespread anti-Semitic incidents.
We have been in touch with the chief rabbi, with leaders of
all the major Jewish groups in Ukraine and we believe that this
accusation is, again, being used to justify an unjustifiable
military intervention.
[The prepared statement of Mr. Rubin follows:]
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Chairman Royce. Thank you very much, Mr. Rubin.
Now, we have 5 minutes for opening statements and so,
Paige, if you could summarize I think that is for the best.
Ms. Alexander.
STATEMENT OF THE HONORABLE PAIGE ALEXANDER, ASSISTANT
ADMINISTRATOR, BUREAU FOR EUROPE AND EURASIA, U.S. AGENCY FOR
INTERNATIONAL DEVELOPMENT
Ms. Alexander. Thank you. Thank you for inviting me here
today regarding the U.S. assistance package for Ukraine.
Chairman Royce. Paige, go ahead and put the microphone
there.
Ms. Alexander. Sorry. Sorry. So recent events are momentous
for Ukraine and the response of the United States Government is
critical to the region's future.
The U.S. is working with our international partners,
especially the International Monetary Fund, to provide needed
support to Ukraine's people and the economy as they face this
current crisis.
Our approach is to support the goals and aspirations of all
people of Ukraine for peace, prosperity, freedom and human
dignity--the very things that the people have been on the
Maidan for the last 3 months explaining their concerns.
So as the chairman mentioned, for the upcoming elections
USAID and our partners are moving forward with a series of
programs in five specific areas to help ensure these elections
are free, fair, transparent and inclusive.
We will work to improve the legal framework to strengthen
election administration, support civic oversight of the
electoral process through observation missions by domestic and
international monitors, encourage civil society coalitions to
advocate for further reforms, promote a more balanced, open and
diverse information environment throughout the country and
support a robust yet a fair political competition in informing
the public through support for public opinion polls and
ensuring training for party poll watchers.
We also recognize that the more inclusive and accountable
governments will not be established with just one Presidential
election.
Over the mid- to longer-term range, we will pursue a
multifaceted approach to strengthening Ukraine's democratic
institutions and process. Years of economic mismanagement have
left Ukraine with a heavy debt burden, weak regulatory
oversight of financial institutions and an uncompetitive
business climate.
The ongoing economic instability has led to a heightened
uncertainty in the financial sector, prompting the National
Bank of Ukraine to impose capital controls as depositors become
wary of the soundness of domestic banks.
Recognizing the serious potential for failed banks, USAID
will work to help provide banking supervision to increase
public confidence.
We realize that Ukraine's inefficient and import-dependent
energy sector continues to be a significant drain on Ukraine's
financial resources and this needs to be addressed in the
medium term as well.
So U.S. technical assistance will be provided to the
Government of Ukraine as it makes important policy reforms and
combats the widespread corruption that has prevented Ukraine
from reaching its economic potential.
We need to revitalize the support for the private sector
which has staggered in recent years under an increasing and
uneven playing field and official harassment.
USAID is working with many other agencies to develop plans
to improve the financial sector transparency, reform the energy
sector and improve the operating environment for private sector
businesses.
Mr. Chairman, Mr. Engel, members of the committee, thank
you for this opportunity to testify on the issues of great
importance, not only for Ukraine but for the region and for the
United States.
This is a critical moment for an opportunity for Ukraine
and USAID is well positioned to help Ukraine meet some of its
most pressing challenges, and as my colleagues have noted, the
IMF will be crucial to those efforts.
This concludes my testimony. I am prepared for questions.
[The prepared statement of Ms. Alexander follows:]
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Chairman Royce. Thanks, Ms. Alexander.
We will go immediately to Mr. Singh.
STATEMENT OF MR. DALEEP SINGH, DEPUTY ASSISTANT SECRETARY FOR
EUROPE AND EURASIA, U.S. DEPARTMENT OF THE TREASURY
Mr. Singh. Chairman Royce, Ranking Member Engel and members
of the committee, thank you for the opportunity to testify
today.
I visited Kiev last week to meet with government officials
and express our solidarity during this difficult moment.
Secretary Lew has spoken several times with the Ukrainian
Prime Minister, who has assured us that the government is
prepared to take the necessary steps to build a secure economic
foundation, including the implementation of urgently needed
reforms to restore financial stability, unleash economic
potential and promote the economic aspirations of the Ukrainian
people.
The fragility of Ukraine's financial condition underscores
the urgency of its new government committing to an IMF-led
reform program and securing the financing it needs while
difficult adjustments are made.
The fragile economic situation in Ukraine stems from many
years of poor policy choices, lack of reform and corruption
under previous governments as well as the negative confidence
effect from Russia's recent actions in Crimea.
Ukraine's new leadership has declared publicly and
committed privately its willingness to undertake the necessary
steps to secure assistance from the IMF and others, and the
United States has made clear that as Ukraine implements reforms
we will work with our partners to support the Ukrainian people
and restore the country's economic and political stability.
As part of this international effort, the United States has
developed a package of bilateral assistance funded primarily by
a loan guarantee that is focused on meeting Ukraine's most
pressing needs. These efforts will complement what must be the
centerpiece of an international assistance effort and IMF
program.
Only the IMF has the capacity to provide the necessary
large-scale resources and the expertise to design and support a
reform agenda in Ukraine. An IMF program also sends the
strongest signal of confidence to markets, businesses and
households at a time when sentiment remains volatile.
More specifically, the IMF has the expertise to develop in
consultation with Ukrainian authorities an economic adjustment
program that eliminates unsustainable economic imbalances,
removes costly and poorly-targeted government subsidies and
improves Ukraine's business climate and competitiveness.
The central role of the IMF in this assistance effort is an
illustration of why the IMF is so vital to U.S. economic and
political interests.
The IMF is the world's first and most active responder in
an economic crisis. By providing financial support and hands-on
policy advice, the IMF helps keep our allies and partners
strong and prevents economic dissatisfaction from spiraling
into political instability. This makes the IMF's role critical
to our nation's economic well being.
When instability abroad washes up on our shores, lower U.S.
growth results in fewer jobs and our citizens' savings and
401Ks are hurt through financial markets.
For the United States to continue playing a leading role at
the IMF as it helps Ukraine, one of the most significant steps
we can take right now is to pass the 2010 IMF quota and
governance reforms.
Why is this so important? First, the United States is the
only major economy that has not passed the 2010 quota reforms
and our inability to act has led other countries to worry that
the United States is retreating from its position of leadership
at the IMF at a time when its role is so pivotal to the future
of Ukraine.
Second, the quota reforms would support the IMF's capacity
to lend additional resources to Ukraine if it needs bridge
financing to a larger package. We should be in favor of
providing as much financial flexibility and resources as
possible to the IMF in support of Ukraine's financial
stability.
There exists broad support in the American business
community for these IMF reforms. The U.S. Chamber of Commerce,
Financial Services Roundtable, Securities Industry and
Financial Markets Association, Financial Service Forum and
Business Roundtable all agree that these changes are necessary
and in the best interest of American businesses and the global
economy.
Part of the reason why the business community supports
these reforms is that it is a safe and smart investment for the
United States. The legislation will not add one new dollar to
overall commitment to the IMF.
The IMF has a rock solid balance sheet with liquid reserves
and gold holdings that exceed all of its credit outstanding.
The IMF has never defaulted on any U.S. Reserve claims on the
IMF since its inception 70 years ago.
If we fail to pass the 2010 quota reforms, our voice may
diminish and we will miss an opportunity to bolster the fund's
resources and economies may turn away from the IMF toward
regionalism, bilateral arrangements or new institutions, which
means that the United States will lose the leverage and
influence it has built up over decades at a time when our
leadership on the global stage is so critical.
Chairman Royce, Ranking Member Engel, members of the
committee, Ukraine has asked for our support during this
difficult time and the United States, along with its partners,
should be ready to answer the call.
Thank you.
[The prepared statement of Mr. Singh follows:]
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Chairman Royce. Thank you, Daleep.
In the interests of allowing our newer members of this
committee to ask any questions and get information that they
need, I am going to forego my time and pass to Mr. Engel of New
York.
Mr. Engel. Thank you, Mr. Chairman, and I am going to only
ask one question to give more people an opportunity to ask
questions. I think I am going to ask it to you, Mr. Rubin.
Russia has exerted intense pressure, especially
economically, on Ukraine in the past and my fear is that
Ukraine can expect more pressure in the months ahead.
So how can we and our European allies help Ukraine and
other countries such as Moldova and Georgia, which are
attempting to build democratic states, resist this pressure?
One of the things that worried me about leading to this
crisis is that Putin, in trying to lure these countries into
his customs union, offers them all kinds of goodies, bonuses,
gas, money, and the European Union says well, we would like you
to affiliate with us in an Eastern partnership but there are 12
hoops you first have to jump through, and then if you jump
through them and land on your feet we will consider you.
I really think that the playing field has not been leveled
and we create obstacles to having these countries join with us
to look westward rather than eastward. They all complain to me
when they come in to my office, and what can we do to change
this?
Mr. Rubin. Thank you. I would like to first talk about the
economic aspects of your question and I think I can point to
some recent action both on the part of the European Union and
the United States to address the very concerns you are talking
about, Congressman.
I think most importantly I would like to talk about the
emergency assistance that we have announced, that the European
Union has announced, which is tied in with the key reforms that
the Ukrainian Government needs to make to get its economy back
on its feet.
The European Union announced a major package this week and
Secretary Kerry in Kiev announced that we are starting to put
together a package that will include a $1 billion loan
guarantee that we have already been consulting with members on
the Hill about, including this committee.
And I think it is very important to recognize the perilous
financial situation that Ukraine finds itself in under Russian
pressure but also under very serious previous mismanagement and
bad economic policy.
The new government has taken a very encouraging and
promising set of steps and we believe that the new government
is very serious about moving quickly to get Ukraine back on its
feet.
It needs support. We are committed to providing that
support starting with not just the loan guarantee that we are
talking about but increased technical assistance and other
forms of aid, and then, most importantly, working together with
our allies and partners so that it is the international
community that is supporting Ukraine with the United States as
the leading part of that effort.
Moldova and Georgia are very vulnerable as well, there is
no question, and we have been working very, very closely with
their governments.
We had the Prime Minister of Georgia here 2 weeks ago at
the White House, meeting with President Obama, Vice President
Biden, the Prime Minister of Moldova last Monday also meeting
with the President, the Vice President, the Secretary of State.
We are working to do everything we can to help them
financially but also to provide the critical public and
political support for the democratic choices of their people,
and we will be doing that in the months ahead.
But I think it is very important that basically underlying
the point that this is a critical moment to give them that
support now when you have governments that are making the right
choices.
We recognize that. We will be doing that.
Chairman Royce. Eric, you are a little too close to that
mike. Just move it back a little bit.
Ileana Ros-Lehtinen of Florida.
Ms. Ros-Lehtinen. Thank you so much, Mr. Chairman, for
calling this hearing and for your excellent bill. The Magnitsky
list--that is what I wanted to ask about.
Denying and revoking visas of Russian regime members who
are connected to belligerent actions in Ukraine and freezing
and prohibiting any of their U.S. property transactions are
moves in the right direction.
But now we must name and shame these persons, add them and
other Putin officials responsible for human rights abuses not
just in Ukraine but in Russia as well to the Magnitsky list,
which imposes similar sanctions.
Adding these names to the Magnitsky list would make these
sanctions permanent rather than an Executive order that the
President can rescind.
I have already submitted many names to the Obama
administration to add to that list since we passed the
Magnitsky Act and there are many names here--names, position,
examples and evidence of gross human rights violations.
I will send a new letter to the administration asking for
more names of human rights violators to be added to the
Magnitsky list and I hope that my colleagues will join me in
that letter.
And the President must take similar actions in Venezuela
where Maduro continues his suppression of the people who seek
freedom and democracy. In the Executive order of the President
he talks about actions or policies that undermine democratic
process or institutions in Ukraine.
Well, Maduro and his officials are also responsible for
actions and policies that undermine democratic processes or
institutions in Venezuela, and now is the time to act. Sixteen
of my colleagues sent a letter to the President asking for
those similar powers under the International Emergency Economic
Powers Act.
So, Mr. Rubin, my question to you is, is the administration
considering adding more names of Russian officials guilty of
human rights violations to the Magnitsky list?
Is it simply a historical document for academics to ponder?
Are we just going to stay with those few names that we have put
on the list and have not added many since then?
Mr. Rubin. Thank you, Congresswoman Ros-Lehtinen.
We are actively considering adding new names. The answer to
your question is, absolutely, we take the legislation very
seriously, and I do not have any new information for you this
morning but that is something that is under active
consideration.
Ms. Ros-Lehtinen. Thank you, sir.
Chairman Royce. Thank you.
Gregory Meeks from New York.
Mr. Meeks. Thank you, Mr. Chairman.
Let me just see if I can do a real quick question. First,
Mr. Singh, I know that the Treasury Department is working
closely with the Department of State and the White House on a
loan guarantee package for the Ukraine, and you talked about it
briefly in your opening statement.
But I was wondering if you can discuss in more detail how
we in Congress can support and improve the capacity of the IMF
to provide a guaranteed loan package.
Mr. Singh. Thank you for your question, Congressman.
So the IMF, in any assistance package for Ukraine that is
going to be credible, needs to play a central role and the best
thing we can do right now is to maintain our leading voice at
the institution, the IMF, that is going to be at the heart of
the assistance effort.
If we don't meet our basic commitments to fund the IMF and
pass the quota reforms our voice may diminish. Now, there is a
second reason.
Passing the quota reform provides the IMF with more
financing flexibility, particularly in the case where Ukraine
could need a bridge--a short-term assistance package--as a
means to get to a larger agreement with the IMF.
Now, the IMF is on the ground, are looking at the data. We
don't know yet whether that flexibility will be needed. But it
is a good idea to have it.
Mr. Meeks. Thank you.
Ms. Alexander, as you prepare for the long-term engagement
in development in the Ukraine, are you confident that the
interim Ukrainian Government is a stable partner for USAID?
Ms. Alexander. Thank you, Congressman Meeks.
The benefit of the people that we have worked with in
Ukraine is that one of the development assets that Ukraine has
is also its vibrant multifaceted civil society.
So we not only work with the Ukrainian Government, we work
directly with civil society. But we have been very impressed
with what we have seen in the Ukrainian Government thus far. We
have been impressed with their restraint and we consider them
good partners.
So we are confident that our money will be well spent.
Mr. Meeks. And finally, Mr. Rubin, I am a firm believer in
multilateralism in a multilateral way and I think it is vitally
important for the United States to do that and to have this
unified voice toward Russia for their action in Ukraine.
How can the United States--I think this is something I just
want you to elaborate a little bit more--better engage our
allies in Europe to ensure that we have the same strategic
goals and long-term planning for continued development and
prosperity of the U.S.-European relationship? It seems there
have been some cracks recently.
Mr. Rubin. Well, thank you, Congressman.
We have actually made this a very high priority and
Secretary Kerry has spent the past 2 days in Europe, in Rome
and Paris following his visit to Kiev working precisely on
that--working with our allies and other interested governments
to try to craft a united international community approach to
supporting Ukraine to ending this conflict, to convincing
Russia to withdraw its troops and restore its recognition of
Ukraine's sovereignty and territorial integrity.
We agree that this needs to be a collective international
approach. It needs to be a diplomatic approach.
We believe that the call of the international community for
this to be settled through dialogue, for Russia and Ukraine to
immediately begin talking about this can only happen if the
international community is united in supporting this and that
is precisely what the Secretary is in Europe doing right now.
Chairman Royce. Chris Smith of New Jersey.
Mr. Smith. Thank you, Mr. Chairman.
Mr. Rubin, how do you assess the risk of escalation by
miscalculation? With so many AK-47s pointing at each other,
only one troop or one soldier has to fire and things could get
out of hand.
You mentioned the OSCE monitors. They have been stopped. As
you know, they can't get in. When I have visited OSCE monitors
in other countries including Georgia, Croatia, and elsewhere
over the years, they have such limited capabilities to mitigate
a firefight or any kind of hostility.
Secondly, I was in Tbilisi, Georgia a few days after the
Russians rolled in to Abkhazia and South Ossetia. They several
times put their tanks on a road as if they were going into
Tbilisi, only to turn around.
You will recall that. Their objective strategically was
Abkhazia and South Ossetia. What is the objective of the
Russians now?
Is it just Crimea or are other regions and cities in
Ukraine, particularly in the eastern area, in the cross hairs?
And Mr. Singh, if you could, Sergei Glazyev has said that
Russia will abandon the U.S. dollar as a reserve currency if
the U.S. initiates sanctions against Russia.
How seriously do we take that threat? Sanctions now have
been levied, as they ought to be, and the Eurasia Economic
Union had a meeting this week with Belarus, Kazakhstan, and
Putin talking about that union that comes into force in 2015.
How does that play into all of this?
Mr. Rubin. Thank you, Congressman.
The question of international observers and monitors is
absolutely critical, as you stated. We believe that the best
way to de-escalate this very dangerous conflict to ensure that
there are no accidental incidents that lead to escalation is to
have an international presence, eyes and ears on the ground,
and that is what we have been supporting.
That is what the OSCE has been supporting. That is what the
special envoy of the United Nations Secretary-General is there
for.
We believe that they need access to all areas of Ukraine.
They have access to all areas except Crimea. The Ukranian
Government has been very supportive in encouraging monitors to
come in to address any allegations of abuses, to address any
concerns about minority rights and that is the way to address
these concerns is through eyes and ears on the ground that can
provide an objective assessment of what is going on and also be
there as witnesses to what is going on.
We find the fact that the monitors have had extreme
difficulty in getting into Crimea and performing their
activities in Crimea is very worrying.
It is something that we consider unacceptable and we
believe that all the authorities involved including the local
authorities have an absolute obligation to allow that to happen
and we will be pushing to expand the monitoring.
We will be pushing to expand the scope of the monitoring
and without that we fear it will be very hard to actually know
what is going on. To answer your question as to what the
Russians' objectives are, I have to say I think we all wish we
knew the answer to that question.
We have seen that, clearly, one objective is to militarily
occupy and control the territory of the autonomous region of
Crimea. We have condemned that. We consider it unacceptable. We
believe the Russian forces must return to their barracks under
their treaty obligations in the basin treaty with Ukraine.
We certainly would condemn any further use of Russian
military force or aggression on the territory of Ukraine. We
hope that we will not see any further use and that we can
return to a diplomatic dialogue to end this very, very
unfortunate situation.
And with that, let me turn to Mr. Singh.
Chairman Royce. The reserve currency portion of it, Mr.
Singh.
Mr. Singh. Yes. Congressman, let me give you a simple
answer. Russia doesn't get to decide the world reserve
currencies or the United States level of interest rates. That
is determined by our economic outlook and our monetary policy.
We have the most deep and liquid capital markets. We have
the most attractive investment environment. This is not--we
control our own destiny in this regard, not Russia.
Chairman Royce. We go to Albio Sires from New Jersey.
Mr. Sires. Thank you, Mr. Chairman, and thank the members
that are here today.
You know, I certainly believe that we should have strong
sanctions. I don't think Putin understands anything else. But
how can we get strong sanctions when Europe over the last few
years has become more and more dependent on energy from Russia?
And, for example, Germany didn't jump right away because
obviously, we think it is something like 40 percent of the gas
from Russia.
So how can we get a consensus to come up with strong
sanctions against Russia when they are so dependent? So and the
other question that I have is Russia is threatening that if
strong sanctions start to impact their economy they are going
to go after the assets that we have in Russia--our American
assets.
What are we prepared to do if they go after those companies
and American assets in Russia?
Mr. Rubin. Thank you, Congressman.
Let me address, first, the question of coordinating
sanctions policy with our allies and partners. The European
Council of the European Union yesterday issued a very
comprehensive framework for imposing sanctions and the leaders
of the nations of the European Union are meeting today to
consider that.
We believe that our allies and partners in Europe
understand the seriousness of this. We have been working very
closely with them including Secretary Kerry's meetings
throughout the past 2 days in Paris and Rome and we agree with
you that there needs to be a coordinated international approach
to make clear to the Russian federation that there will be
serious consequences for Russia, for the Russian economy, for
Russia's standing in the world if Russia continues its current
course of action.
This is not intended as a threat. This is not intended as
any form of economic coercion on anyone's part. This is
intended to say that the international community is based on a
set of principles, a set of laws of the United Nations Charter,
the Helsinki Final Act--all of the obligations that members
have toward each other and it must be followed.
That is the basic foundation of the international system
and of the post-war settlement in Europe. So this is simply a
clear message to Russia that Russia has to return to respecting
those norms, those commitments, those laws.
We believe that there will be coordinated international
action, that it will not be just the United States imposing
sanctions and other forms in response to Russia's actions. We
believe we will see that very shortly and we will work very
hard to ensure that this is a coordinated international front.
I would add just to say that we will very strongly support
the rights of our companies, our investors and the basic
principles of international law and all the other obligations
that countries have toward foreign investors and we take that
obligation very seriously.
Mr. Sires. Mr. Singh, can you address the issue of----
Mr. Singh. Sure. Congressman, Mr. Rubin is right. We are
working very closely with our European counterparts.
But the reality is, you know, Russia is a--it is a very
large economy. It is a $2 trillion economy, eighth largest in
the world.
There are interconnections on the trade front, on the
financial front, on the market front. It is important that we
are proportionate in our response, depending on Russia's
actions.
With respect to the energy question in particular, I would
just observe there is a--there is a co-dependence. Yes, Europe
relies--you know, roughly a third of their energy imports come
from Russia but so too does depend on those earnings--on those
export earnings to Europe. And so they also need to be careful.
Mr. Sires. Thank you, Mr. Chairman.
Chairman Royce. We go to Mr. Steve Chabot of Ohio.
Mr. Chabot. Thank you, Mr. Chairman.
President Putin's recent explanations for his aggressive
actions in Crimea don't pass the laugh test. Putin suggests
that he is obligated to protect his fellow Russians in Ukraine
when, in fact, Crimea was last part of the old Soviet Union
back in 1956. I was 3 years old when it became part of Ukraine
and remained so after the fall of the Soviet Union and the
advent of an independent Ukraine in 1991.
His arguments are weak and his actions are, clearly, in
violation of international law. But, unfortunately, there is
the perception, at least, that there is a growing power vacuum
around the world and various bad actors are filling it from the
Middle East, the South China Sea, now to Ukraine.
In the last few weeks, we heard from the White House about
consequences, all options on the table, and so forth. It wasn't
that long ago, my colleagues will remember, that we were
hearing about drawing a line in the sand and, frankly, I fear
that there may be a growing perception among our friends and
allies in the international community that the United States,
at least in the area of foreign policy, lacks resolve.
So I hope our witnesses this morning will be able to
alleviate some of those concerns. A couple of questions--where
are we in regards to our cooperative efforts with our European
partners? I have heard some vague comments about consequences
from European officials. How serious are they? Who are the
players in the region that are working closest with us and
where are the weak links?
It has been suggested that some of our allies in Europe
would never agree to strong sanctions on Russia because of the
fear that their sources of energy supplies would be cut off.
Well, here is an idea: Perhaps our friends in Europe would be
able to avoid that fate if they in fact produced more of their
own energy, which is present but untapped because of their own
domestic energy policies, which we encourage. Or even better,
the Obama administration could reverse its anti-production
policies. Approve the Keystone Pipeline, for example and open
up ANWR. If we encourage the development of our shale export
program, the Europeans could buy their energy from us while
increasing American manufacturing jobs. Just a thought.
I have given you a lot to think about. Any comments?
Mr. Rubin. Congressman, thank you.
Let me say that in terms of assuring that we have unity of
purpose and action with our allies and partners in Europe, this
is our highest priority. Again, this has been the main
objective of Secretary Kerry's work in the past several days in
Europe.
We believe we have seen clear statements that the leaders
of the European Union, of the European Union's member states
and of countries in Europe that are not members of the European
Union are very serious about the threat that this set of
developments poses will take action and we are working very
hard to coordinate our action with them so that we are
presenting a strong coordinated front on this.
Let me also say that we have seen action taken by countries
not in the European Union and countries in the European Union
already to impose sanctions to freeze accounts, to take other
steps, visa bans, to make clear that there will be consequences
for a violation of the international order.
Additionally, let me mention that it is our highest
priority to ensure that the solemn commitments that we have
under the North Atlantic Treaty to our allies in Europe are
upheld.
We take that obligation with the utmost seriousness. We
have worked within NATO in the past several days to ensure that
we are prepared within the alliance to support all its members.
We have taken action to expand our Baltic air policing
mission, our aviation detachment in Poland. The North Atlantic
Council issued a very strong statement on behalf of all the
allies and we will be working very closely with them in coming
days and weeks to ensure that the alliance stands strong and
united on this.
The last point that you mentioned, I would just like to say
that energy diversification has been at the heart of our policy
toward Europe for the past 25 years under every administration
and it remains at the heart of that.
Obviously, there is still a long way to go but we strongly
believe that diverse sources of energy, lack of reliance on a
single supplier, is very important for Europe's security and
future development.
Thank you.
Chairman Royce. We go now to Mr. Brian Higgins of New York.
Or did you have a point you wanted to make, Mr. Singh?
Mr. Singh. I was just going to make the point that it is
clearly important to collaborate closely on sanctions but we
should also acknowledge a very welcome announcement by Europe
yesterday in terms of their assistance to the Ukrainian people.
And what is important right now is that we all come
together as an international community and meet Ukraine's
financing needs as it makes the reforms it needs to achieve
economic stability which will pave the path to an independent
political future.
Chairman Royce. Thank you. Mr. Higgins.
Mr. Higgins. Thank you, Mr. Chairman.
Russia has violated all kinds of international laws
including the treaty they signed with Ukraine guaranteeing its
borders in return for which Ukraine gave up its nuclear
weapons.
Russia's occupation of Ukraine is a direct and clear
violation of Ukraine's sovereignty and territorial integrity.
President Putin has acted like a international street thug, and
in 1994 when Russia was included into the G-8 it was a
recognition that the post-Soviet Russia was behaving like an
honorable member of the international community and not a rogue
state.
If Russia's behavior has changed then it would seem to me
that Russia's status as a member of the G-8 should change a
little bit more aggressively than simply a suspension. Their
membership should be revoked. It should be revoked.
Number two--NATO, which is 28 countries including the
United States and Canada and 26 European countries, was
essentially established to safeguard the freedom and security
through political and military means.
It was a vehicle through which democratic principles could
be promoted. Any thoughts about the idea of permanently kicking
Russia out of the G-8 and offering membership to the--to
Ukraine in NATO?
Mr. Rubin. Thank you, Congressman.
As the White House announcement stated this morning, we
have suspended all preparations for attending the G-8 summit in
Sochi, and as we have said previously it is hard to imagine
that the President would go under current circumstances.
The larger question you ask, obviously, is something that
the President will need to consider and I think this gets to
the bigger picture question, which is Russia's role in the
world, how Russia participates as a member of the international
community under the structures and laws and obligations that
all members of the international community have toward each
other.
So I think the larger question is very clear. We, as I
mentioned, take the North Atlantic Alliance and its obligations
solemnly, seriously and we are looking actively to consider how
we can do more as an alliance to respond to this set of
developments.
But I would also add that we have said all along that the
alliance is based on a set of values and commitments and
principles what kind of societies have come together and in
this case we have stated publicly, for example, that Georgia
will be a member.
That was stated twice by the alliance and remains our
position, and we believe that all societies should have the
right, all countries based on the will of their people, to
choose their alliances, their friendships and the organizations
that they wish to join. So that is just a basic set of
principles.
But that is something that each country should be free to
decide for itself. That is the most important principle.
Chairman Royce. We go to Mr. Mike McCaul of Texas.
Mr. McCaul. Thank you, Mr. Chairman.
Mr. Rubin, I recently went to Russia and I got the sense
that Mr. Putin is sort of going back to a Cold War mentality.
This is more of a philosophical question.
Do you believe that Russia is intent on reconstituting its
empire?
Mr. Rubin. I think, as I said earlier, I don't really want
to speculate about why Russia is doing what it is doing
because, honestly, we don't know and I think what we have to
judge is simply what is Russia doing.
And what we see Russia doing is what has caused so much
concern and that is intervention on the territory of another
sovereign state through military force and other coercive
means.
Mr. McCaul. Well, which--and my time is limited--which they
have done prior. I think we learned from history they invaded
Georgia and then they continued to occupy Georgia. I think that
is very instructive as to the Ukraine experience today.
In fact, Crimea just voted to join Russia. It was announced
today and I am concerned that the same thing that happened in
Russia will now happen in--that happened in Georgia will happen
in Ukraine and I don't know if these sanctions will stop that.
That is my biggest concern. When one nation invades the
sovereignty of another we usually--definitions are important--
we usually define that as an act of war. Does this
administration believe that the Russian invasion of Ukraine is
an act of war?
Mr. Rubin. Well, Congressman, we have said very clearly
that we know what we have seen, which is military aggression,
intervention in the affairs of a sovereign country--a violation
of legal commitments, violation of international law.
That is what we see. That is what we are calling it. I am
not an international lawyer so I wouldn't want to get into the
terminology but I think it is pretty clear what we are seeing.
It is clear also that Russia continues to occupy territory
of the Republic of Georgia. That is something we have been very
clear in condemning and it is also clear that their commitments
that all countries have to each other to settle their disputes
peacefully and that is certainly not what we are seeing here.
So I----
Mr. McCaul. Well, I do think we should call it what it is.
I think you said it is very clear it is a violation of
international law. I believe it is also very clear that this is
an act of war against another nation.
When we look at the NATO, I think--I think Mr. Putin feels
very threatened by the European Union and NATO. Poland called
for an emergency meeting of NATO to discuss its concerns about
this Russian aggression. What are we doing to ensure that
Poland and our other NATO allies are protected?
Mr. Rubin. Well, one of the things we are doing is
increasing our aviation detachment deployment. We are also
working to ensure that the Baltic states have the support they
need to defend their territory and that is why we have
increased our commitments to the Baltic air policing mission
with additional planes and refueling, and we are working in
Brussels at NATO to address any other concerns that the allies
have.
As I said, we take these obligations extremely seriously
and we will do our utmost to ensure that the alliance stands
together.
Mr. McCaul. Thank you. Thank you, Mr. Chairman.
Chairman Royce. If I can make a quick announcement here
before we go Karen Bass of Los Angeles, our strategy will be to
recess. I think our witnesses know how Congress operates.
We have got amendments up on the floor to the energy bill.
There is about six of these amendments, 2-minute votes. So we
will recess until we get to the recommittal debate and that
will give us time to come back and finish some of the
questioning.
And with that, let us turn to Karen Bass.
Ms. Bass. Thank you, Mr. Chair.
I believe my question is brief and it is for Mr. Singh. Mr.
Singh, on Page 3 of your testimony you talk about the IMF and
what is needed as an economic adjustment program that
eliminates unsustainable economic imbalances and poorly-
targeted government subsidies.
I was wondering if you could be more specific as to what
those subsidies are, what needs to be changed. And then also is
the IMF support contingent on that?
Mr. Singh. Thank you, Congresswoman.
So that is precisely how the IMF works. Its assistance is
contingent upon economic reforms being met and these reforms
are good for Ukraine and the three core forms that I
referenced, number one, there has been an unsustainable build-
up in fiscal spending over the years in Ukraine. That needs to
be addressed.
Number two, there are truly massive energy subsidies that
have been a part that have played----
Ms. Bass. Subsidies to companies or subsidies to the
population?
Mr. Singh. To the population--to tariffs that are paid for
heating and gas and so forth. And that has led to consumption
of energy that is among the highest in the region.
Ms. Bass. Would you be concerned that some of the reforms
might cause problems, dissent if subsidies are cut off? You
know what I mean?
Mr. Singh. So that is why our notion on the loan guarantee
is to try to direct the proceeds of that issuance--it is a bond
issuance that we have in mind--and direct that toward the more
vulnerable segments of the Ukrainian society so that those
reforms are easier to implement and that they don't fall on
those who can least afford to bear them.
And then the third piece, apart from moving on the energy
subsidy problem, which I mentioned has led to over consumption
and reliance on Russian gas, I should say, is on their exchange
rate.
It is overvalued. It has caused them to have a real problem
in terms of exports. It has made their economy uncompetitive.
One last thing is I should say it is very good news in
terms of the political will that we are observing on the ground
that we are already seeing some movement on these reforms. The
currency in Ukraine has weakened quite a bit and become much
more flexible.
It is becoming much more driven by market forces. That is a
condition of the IMF and the leadership of Ukraine has shown a
willingness already to move in that direction. That is a very
positive sign.
Ms. Bass. Do you think--I know that elections are
supposedly scheduled for May. Do you think there is the
leadership there with the current person that is in power just
run for election? And that is to anybody. And then thank you,
Mr. Chair.
Mr. Rubin. Congresswoman, the elections have been set for
May for the Presidential elections in Ukraine. The candidates
have not yet been formally announced nor has anyone formally
submitted their candidacies. So we are not sure.
But the current Prime Minister had indicated he would not
be a candidate and would just be running the interim
government. We will have to see what develops but we do believe
it is absolutely critical that there be a fully free, fair
election in Ukraine to choose its new President.
Chairman Royce. Okay. We are going to go to Mr. Bill
Keating of Massachusetts. Would you like to have the last
question before we recess?
Mr. Keating. Thank you, Mr. Chairman. A couple of quick
questions.
Number one, NATO Secretary-General Rasmussen has said the
alliance plans to intensify its cooperation with Ukraine. Could
you give us a more detailed description in terms of NATO's
plans and if the Ukrainian Government were to request a
membership action plan would the administration consider that,
possibly support it? That is question number one.
And the other one simply deals with IMF quota reform. Will
that improve the flexibility and to make sure that our dollars
and IMF funds are more effectively used and we don't have
squandered money--you know, that important taxpayer money from
the U.S. and money from our European allies will that provide
more ability to maximize the use of that?
So those are the two questions. Mr. Singh can take the
second. I don't know, Mr. Rubin, if you want to take the first.
Mr. Rubin. Certainly, Congressman. Thank you.
On the question of Ukraine NATO cooperation, Ukraine has
been a member of NATO's partnership for peace for two decades
and we have a very extensive positive experience working
together with Ukraine on training, on improving the readiness,
on all sorts of questions that relate to building a modern
military--civilian military control and that is something that
we certainly hope to continue.
And the Ukraine has admission to NATO. We have regular
meetings at the NATO Ukraine council in which that can be
discussed and as a matter of fact we just held a session in
light of the current events at Ukraine's request.
So we have a very strong partnership through the
Partnership for Peace, through the NATO Ukraine council and we
do want to continue to develop that with the new government
and, in the future, with the new President.
Mr. Keating. Specifically with the membership action plan,
I can't see--in the very near future I can see the need to
address this issue, frankly, because our options are limited
now and if Ukraine is interested and wants us to pursue this
will we entertain those discussions? Will we be supportive?
Mr. Rubin. Well, Congressman, we have said from the
beginning that countries need to be free to choose their
memberships, their alliances, their commitments to other
countries, that this is basic principle of sovereignty, and
therefore as a matter of basic principle NATO is an open
alliance.
I think in terms of what the people of Ukraine want, what
the Government of Ukraine wants it will be up to them to decide
and we will be very interested in having that conversation
based on what they tell us.
Mr. Keating. Okay. On IMF quota reform.
Mr. Singh. Yes. Congressman, the answer is absolutely. This
IMF quota reform would not require a single extra dollar of
U.S. financing to the IMF but it would preserve our lead role
as the world's preeminent responder, the first responder to
financial crisis.
It preserves our voice and our influence at the institution
that will be at the very center of the assistance in Ukraine.
And by the way, it also increases the IMF's flexibility to
respond to the situation on the ground in the event of the need
for a bridge financing to a larger package, which should be a
slam dunk.
Mr. Keating. Okay. Thank you.
Chairman Royce. Mr. Deutch, you have a minute, if it is all
right.
Mr. Deutch. Thank you, Mr. Chairman.
I just have--I want to focus the discussion a different
way. In addition to targeting individuals responsible for
undermining the democratic process and threatening the
territorial integrity of Ukraine, are you considering
additional robust sanctions that would have a more significant
impact on the Russian regime?
For example, will you look to impose sanctions--Mr. Singh,
this is my question to you--will you look to impose sanctions
that have been discussed previously for those providing the
funding and equipment necessary for the Syrian regime to kill
and terrorize its own people?
That, it seems to me, is a way to really strike at Russia
in a way that is significant and appropriate.
Mr. Singh. Congressman, let me just say we have not listed
specific individuals or entities today but this is a--this is
broad authority that we will use as appropriate, given the
situation on the ground.
Mr. Deutch. Is it appropriate--is it appropriate to impose
sanctions on those individuals who--in Russia who are assisting
the Assad regime in slaughtering its own people?
Mr. Singh. Well, Congressman, I can only say that this
specific tool is designed to allow us to sanction those who are
most directly involved in destabilizing Ukraine including the
military intervention in Crimea.
But it does not preclude further steps to be taken if the
situation escalates. I can't comment on your specific question
on Syria, unfortunately.
Mr. Deutch. So there is--so it does not provide the
opportunity. Would you support--do you understand the
opportunity though to impose sanctions in a significant way
that would impact the Russian regime and the decisions they
make by going after those who are responsible for aiding Assad?
That is the question you can't answer.
Mr. Singh. I will have to come back to you with a full
response.
Mr. Deutch. I appreciate it.
Chairman Royce. We stand in recess.
[Recess.]
Chairman Royce. Going to go to Mr. Cicilline of Rhode
Island.
Mr. Cicilline. Thank you, Mr. Chairman. I thank you for
convening this hearing. Thank you to our witnesses.
I think we all understand the urgency of the moment and the
necessity of joining our international--joining an
international response to the clear act of Russian aggression,
and I presume that many standard review or assessment
procedures are likely to be expedited or maybe even waived.
So I would like to just ask you to speak to the sort of
long-term obligations of the United States that we are
contemplating.
Typically, the United States requires that U.S. credits in
volatile countries are administered by an independent facility,
administered under U.S. supervision. Will that be the case
here? Who will administer Ukraine's payment of interest on the
bonds and repayment of principal?
Will the U.S. have effective oversight? How will that occur
and what do you assess the prospects for successful repayment
and what happens if that does not occur?
And, finally, in addition to the loan guarantee what other
sorts of aid is the administration considering for the Ukraine?
I assume, Mr. Singh, you would be the best to begin.
Mr. Singh. Thank you, Congressman.
The way the loan guarantee works is that the U.S.
Government guarantees the repayment of the principal and
interest on a bond that would be issued by the Ukraine
Government.
Okay. So the cost to U.S., the way that it is calculated,
is that there is an assessment of the possibility that the
Ukraine Government cannot repay the interest in principal, in
which case the U.S. Government would be responsible, and that
is how it is designed.
Now, the way we can mitigate that risk is twofold. One is
that we make the loan guarantee conditional upon the existence
of an IMF program, which has strong conditionality and
increases the probability of repayment, and, number two, we can
use the proceeds from the loan guarantee to lessen the impact
of those reforms on the most vulnerable segments of the
Ukrainian society and therefore that makes reform
implementation--the success of it more likely.
Mr. Cicilline. And in addition to the loan guarantees, what
other aid is the administration considering and what other
things can we do to support that?
Ms. Alexander. Thank you for your question, Congressman.
I think the reality is we have had a bilateral support
program with Ukraine since 1992 and we have spent a lot of
money and we have worked with the government and we have worked
with civil society very effectively.
As we look at the Fiscal Year 2015 request that we just
made, obviously, that was drawn up, as well as the 2014
request, before we knew what the actual needs were going to be.
So as my colleague was talking about what the IMF team is
looking at, USAID in particular will go in and look at the
various elements of technical assistance needed to support
that, whether it is through banking supervision, whether it is
through energy, subsidies, as we were talking about.
But most importantly and immediate, I think we have the
elections in front of us and those are something that I think
is going to provide a lot of emphasis for the Ukranian people
to recognize their true ambitions and where they want to go.
And so we want to make sure those are as free, fair and
transparent as possible.
Mr. Cicilline. Thank you very much. I yield back, Mr.
Chairman.
Chairman Royce. Thank you. Mr. Kennedy of Massachusetts.
Mr. Kennedy. Thank you, Mr. Chairman. Thank you to the
witnesses and I appreciate your testimony earlier. Sorry for
the brief break.
Mr. Singh, I wanted to build off a little bit of what one
of my colleagues said earlier. Russia has threatened to not use
the dollar as the reserve currency. They also have threatened
to not pay back some outstanding loans to the U.S. and other
European nations.
Are you, again, at all concerned about that or can you
assess the validity of that threat--what the economic outcome
of that might be?
Mr. Singh. Congressman, thank you for your question.
I don't think it would be prudent for me to speculate about
the various scenarios that could unfold. What I would say
again, though, is that Russia does not get to decide whether
the U.S. dollar is a reserve currency and that we control our
destiny in that regard.
Mr. Kennedy. And I appreciate that, sir. But with regards
to outstanding loans or can you just give me some idea as to
the volume of--loans outstanding that they have, if that is a
threat? Are we talking about single billions, tens of billions,
what kind of order of magnitude where we are at?
Mr. Singh. We have some initial data on the amount of
claims that reside in the U.S. financial system to Russia. Our
exposure is somewhat lower than that of Europe, and as it
relates to our system in particular it is well under 1 percent.
Mr. Kennedy. Thank you. And then, perhaps Mr. Rubin or for
any of you, I understand from some of the materials that were
provided this morning the IMF is currently doing an assessment
of the Ukrainian economy at this point.
There has been some issues with transparency, some issues
with the full disclosure of the true state of that economy. I
think the figures that I have seen at least somewhere between
$20 billion and $35 billion over the course of the next year or
so.
How long until that full assessment is done and do you--
with any degree of certainty are you confident that that figure
in there, again, is accurate or is there a potential for what
is needed to actually shore up the finances in Ukraine to be
quite a bit larger?
Mr. Rubin. Congressman, thank you for your question.
On the actual figures, I will defer to Mr. Singh. But let
me just say that we have been saying now for years that Ukraine
needed to address the very serious deficiencies, not just in
its economic policy making, but in the entire way its economy
was structured.
And we have said all along that the way to do that was to
engage in a serious dialogue with the International Monetary
Fund, bring in the people who know how to do these assessments
and then have a serious negotiation. The previous government
did not do that and as a result did not get the help and the
advice that it needed.
We are very encouraged by this current interim government's
readiness to engage--to engage with the fund, to welcome the
advice and to begin making the difficult reforms.
We believe that the package that includes IMF support, that
includes IMF quota reform, which we do believe is critical to
getting us to be able to have the kind of IMF support to
Ukraine and other countries that find themselves in this kind
of situation, is a critical part of that package.
And then the bilateral assistance that we are committed to
providing together with an IMF package that the European Union
has now committed to providing can get Ukraine through this
very difficult period but also launch it on a healthy path back
toward prosperity and economic stability.
And let me just ask if Mr. Singh had anything to add.
Mr. Singh. Sure. I will just say that there are a wide
range of market estimates out there in terms of Ukraine's
financing needs. I don't want to speculate without having the
facts.
That is why the IMF is there, as you suggested. They are
going to provide that transparency in terms of the financing
needs of Ukraine.
I will say that in their estimate of what Ukraine needs
much of that is going to depend on the willingness of the
Ukranian authorities to undertake the needed reforms and every
indication that we have is that they are willing to make the
hard decisions.
So I should just add that the IMF and the international
community have more than enough resources to meet Ukraine's
needs so long as it is willing to make the commitments to
reform.
Mr. Kennedy. And any idea--if I can, Mr. Chairman--just any
idea when we will see that report from the IMF? Is that weeks
away, days away?
Mr. Singh. It really depends on the speed with which the
relevant data can be handed over and analyzed. It doesn't need
to take a long time.
Mr. Kennedy. Thank you, sir. I appreciate that. Thank you
for your time.
Chairman Royce. Thank you, Mr. Kennedy. I appreciate it.
Let me ask a question just about the brutality against
reporters there--this is one of the concerns I have about the
ability to get the free flow of information out around the
Ukraine.
We had both Radio Free Europe, Radio Liberty and the Voice
of America targeted by security forces there, pro-Yanukovych
security forces. We had two Radio Free Europe reporters who
were badly beaten and then detained in January.
A prominent journalist and contributor was forced to leave
the Ukraine due to death threats in mid-January, and in VOA we
had a Ukrainian Service TV reporter who faced repeated
intimidation following his coverage of the auto Maidan
motorcade protest.
So in the run-up to the next elections in the Ukraine, it
seems to me that uncensored information, sort of a surrogate
radio to give real-time information about what's actually
happening on the ground and to discredit misinformation, is
going to be very important.
What steps are being taken to increase messaging to the
Ukrainian people and, specifically, one of my concerns is how
do you focus that, target that to eastern Ukraine and maybe
people in Crimea to make sure that they have got the real case
of what is going on?
Ms. Alexander. Thank you, Chairman.
We have been working very effectively with the public
diplomacy arm of the Embassy to do exactly that. As you saw,
the White House fact sheet yesterday came out about the top 10
myths that are being portrayed out there.
The independent media has been a really bright spot that we
have seen throughout Ukraine over the years. Just today, the
Ukrainian Crisis Media Center was stood up by Ukrainian
activists themselves and these are things that we honestly
don't have to financially support because they are doing it
themselves.
However, we are trying to give a bit of a bully pulpit and
try to amplify the messages that they are putting out. I think
you are right.
In the lead-up to the election that will be one of the most
important elements is to make sure that this information is out
there, and we have been training journalists and we have been
working effectively with a lot of burgeoning stations that
really have been trying to get the message out.
Chairman Royce. I do think, and I have talked to Croatian
journalists and others, years ago I tried to restart Radio Free
Yugoslavia. By the way, we never had that.
That was the one country we never broadcast in during the
Cold War and I have had a number of reporters there tell me
that the--you know, you saw the way the Czech Republic and
Slovakia handled this without any loss of life.
They told me if there had been a surrogate radio like we
had with RFE broadcasting into the country it would have been
possible with hate radio for each of these ethnic groups to
whip up the types of hatreds that were created.
And that is why I think at the end of the day, having this
kind of capability going in before the election while at the
same time reassuring Russian-speaking Ukrainians, you know,
that the Ukranian Government is going to respect all languages,
but I think these broadcasts have to be not just in Ukrainian
but in Russian.
I am going to follow up with you on that. But let me just
say at this moment we are going to have to adjourn in order to
get to the floor for the final vote.
Thank you very much for your testimony here today.
[Whereupon, at 11:01 a.m., the committee was adjourned.]
A P P E N D I X
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Material Submitted for the RecordNotice deg.
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Material submitted for the record by the Honorable Edward R. Royce, a
Representative in Congress from the State of California, and chairman,
Committee on Foreign Affairs
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