[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]





                    RESTRICTING ROGUE-STATE REVENUE:
                     STRENGTHENING ENERGY SANCTIONS
                     ON RUSSIA, IRAN, AND VENEZUELA

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                          ILLICIT FINANCE, AND
                  INTERNATIONAL FINANCIAL INSTITUTIONS


                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________


                           DECEMBER 12, 2023

                               __________


       Printed for the use of the Committee on Financial Services


                           Serial No. 118-63







                 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]






                               ______
                                 

                 U.S. GOVERNMENT PUBLISHING OFFICE

55-207 PDF                WASHINGTON : 2024










                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas, Vice          EMANUEL CLEAVER, Missouri
    Chairman                         JIM A. HIMES, Connecticut
TOM EMMER, Minnesota                 BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia            JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee                 VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin               SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina      AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina         STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania             RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
ANDREW GARBARINO, New York           SYLVIA GARCIA, Texas
YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director











          Subcommittee on National Security, Illicit Finance, 
                and International Financial Institutions

                 BLAINE LUETKEMEYER, Missouri, Chairman

ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio, Ranking Member
ROGER WILLIAMS, Texas                VICENTE GONZALEZ, Texas
BARRY LOUDERMILK, Georgia            WILEY NICKEL, North Carolina
DAN MEUSER, Pennsylvania             BRITTANY PETTERSEN, Colorado
YOUNG KIM, California, Vice          BILL FOSTER, Illinois
    Chairwoman                       JUAN VARGAS, California
ZACH NUNN, Iowa                      JOSH GOTTHEIMER, New Jersey
MONICA DE LA CRUZ, Texas
ANDY OGLES, Tennessee








                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    December 12, 2023............................................     1
Appendix:
    December 12, 2023............................................    35

                               WITNESSES
                       Tuesday, December 12, 2023

Berg, Ryan C., Director, Americas Program, Center for Strategic & 
  International Studies (CSIS)...................................     8
Billingslea, Hon. Marshall, Senior Fellow, Hudson Institute......     4
Jungman, Claire, Chief of Staff, United Against Nuclear Iran 
  (UANI).........................................................     6
Mikulska, Anna B., Senior Fellow, Kleiman Center for Energy 
  Policy, University of Pennsylvania.............................     7
Smith, Adam M., Partner, and Co-Chair, International Trade 
  Practice Group, Gibson, Dunn & Crutcher, LLP...................    10

                                APPENDIX

Prepared statements:
    Berg, Ryan C.................................................    36
    Billingslea, Hon. Marshall...................................    45
    Jungman, Claire..............................................    49
    Mikulska, Anna B.............................................    57
    Smith, Adam M................................................    70

              Additional Material Submitted for the Record

Jungman, Claire:
    Written responses to questions for the record from 
      Representative Waters......................................    86
Mikulska, Anna B.:
    Written responses to questions for the record from 
      Representative Waters......................................    88
Smith, Adam M.:
    Written responses to questions for the record from 
      Representative Waters......................................    90










 
                    RESTRICTING ROGUE-STATE REVENUE:
                     STRENGTHENING ENERGY SANCTIONS
                     ON RUSSIA, IRAN, AND VENEZUELA

                              ----------                              


                       Tuesday, December 12, 2023

             U.S. House of Representatives,
                 Subcommittee on National Security,
                               Illicit Finance, and
              International Financial Institutions,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:03 a.m., in 
room 2128, Rayburn House Office Building, Hon. Blaine 
Luetkemeyer [chairman of the subcommittee] presiding.
    Members present: Representatives Luetkemeyer, Barr, 
Loudermilk, Meuser, Kim, Nunn, De La Cruz, Ogles; Beatty, 
Gonzalez, Nickel, Foster, Vargas, and Gottheimer.
    Ex officio present: Representative Waters.
    Chairman Luetkemeyer. The Subcommittee on National 
Security, Illicit Finance, and International Financial 
Institutions will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    Today's hearing is entitled, ``Restricting Rogue-State 
Revenue: Strengthening Energy Sanctions on Russia, Iran, and 
Venezuela.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    Thank you to our very impressive set of witnesses for being 
here today. You each possess tremendous expertise on global 
energy economics and sanctions, and we look forward to your 
insights.
    When our subcommittee last convened on October 25th, in the 
wake of the horrific terrorist attack on Israel by Hamas, we 
examined the sanctions regime against the nation that stands 
behind and funded the barbarism: Iran. Our expert witnesses 
informed us of the sources of revenue of the Iranian state, 
most of which relate to the export of hydrocarbons and related 
products, and the illicit means which are authorized by Iran to 
access those funds. Today, as promised, we will expand that 
discussion.
    As it happens, not just Iran, but two other countries in 
the new axis of evil are petrol states, or something to that 
effect: Russia and Venezuela. These three countries' dependence 
on a single category of exports should provide the United 
States and our allies with substantial leverage over their 
economies, as the global market for these commodities is large 
and liquid. Moreover, the United States is one of the largest 
producers in the world, as are several of our historically-
close allies, notably Saudi Arabia, the world's largest swing 
producer.
    Unfortunately, as other committees of this Congress have 
explored, the Biden Administration has suppressed or impeded 
North American hydrocarbon production, even as they have 
emptied out our emergency reserves for short-term political 
points. At the same time, the Biden Administration has taken a 
consistently-weak approach to enforcing the energy sanctions 
that would have the strongest economic impact on Russia, Iran, 
and Venezuela.
    Iran's ghost fleet continues to feed the Chinese industrial 
economy and its teapot refineries with little effort to stop 
the flow by the United States. Russia's oil and gas, the most 
economically-significant exports, are either excluded from 
sanctions or subjected to a fake control scheme that either set 
the price cap above the market price for euros or, when that 
was exceeded, exempted the exports. Finally, the 
Administration's efforts to allow Venezuela to export more oil 
have been foiled by the Maduro administration's incompetence 
that has gutted their technological capabilities.
    Overall, this weak approach to energy sanctions has had the 
domestic political benefit of putting a material downward 
pressure on the price of oil, but with the negative consequence 
of enriching those enemy states while hurting domestic 
producers. Furthermore, unlike the United States, China depends 
on imported energy, so the ability to import deeply-discounted 
gas and oil from all three countries has been a substantial 
benefit to our main strategic rival.
    Overall, the Administration's approach to the global 
hydrocarbon market is backwards and strategically 
counterproductive. Iran has been emboldened to throw its weight 
around the Middle East, from Yemen to Gaza, with it or its 
proxies directly attacking U.S. military sites and warships 
essentially without consequence. Continued oil revenues have 
allowed Russia's economy to weather the ostracism and wide-
ranging financial actions taken in 2022, which were widely 
predicted to be catastrophic. They were not, and Moscow has 
been able to continue its unprovoked, brutal, and unjust war 
against Ukraine.
    Finally, the Biden Administration waived energy sanctions 
against Venezuela, purportedly in a naive hope that this 
communist dictatorship would allow a free election. 
Humiliatingly, this past week, the Venezuelan dictator 
threatened to annex the oil-rich provinces of its peaceful 
neighbor, Guyana.
    It seems that in just 2 years, the Biden Administration's 
wrong-headed energy policies may have helped start or sustain 
wars on three separate continents. That is quite a record. 
Instead, the United States and our allies should return to an 
approach of strongly reinforcing energy sanctions against these 
rogue regimes to weaken our enemies.
    At the same time, we should strengthen the United States by 
unleashing hydrocarbon production in free countries with high 
environmental and human rights standards, like the United 
States, Canada, and our allies. We should be working with our 
friends to maintain low prices and high global supply, even 
while reducing the share that these rogue states provide. 
Today, we will explore what such an approach could look like by 
better understanding the energy, economics, and vulnerabilities 
of each of these countries so that we can legislate solutions 
and pressure them.
    With that, the Chair now recognizes the ranking member of 
the subcommittee, the gentlewoman from Ohio, Mrs. Beatty, for 4 
minutes for an opening statement.
    Mrs. Beatty. Good morning, and thank you, Mr. Chairman, for 
holding this hearing. And thank you to our witnesses for 
appearing here today to discuss, as we have already heard, the 
United States' energy-related sanctions against Russia, Iran, 
and Venezuela, and the various methods of evading these 
sanctions.
    Under the Biden Administration, the United States maintains 
the most-extensive set of comprehensive sanctions against Iran, 
including those related to the illicit sale of Iranian oil. 
Following Hamas' violent, unprecedented attack on Israel on 
October 7th, which we all witnessed, the Treasury Department 
has issued multiple rounds of sanctions targeting those 
involved in the illicit finance networks that fund Hamas: Iran, 
its primary state sponsor.
    Contrary to the accusations leveled by Republicans, 
Treasury Secretary Yellen recently set the record straight 
that, ``We have not in any way relaxed our sanctions on Iranian 
oil. Against Russia, the United States has long maintained a 
robust sanctions program and has only doubled down since its 
unprovoked 2022 invasion of Ukraine.''
    The Treasury Department, including the Office of Foreign 
Assets Control (OFAC) and the Financial Crimes Enforcement 
Network (FinCEN), has engaged in a historic effort to implement 
sanctions, identify oligarchs' dirty money and hamper financial 
support to the Russian war machine, map the networks of bad 
actors, and pursue sanctions evaders.
    In addition, the Biden Administration and Congress have 
worked closely to squeeze Russia's benefit from the sale of its 
oil, imposing a novel program with a price cap on seaborne oil 
exports, in collaboration with other G7 countries and 
Australia. Secretary Yellen recently confirmed that the price 
cap on Russian oil has significantly reduced Russian revenue 
over the last 10 months while promoting stable energy markets.
    Lastly, in Venezuela, the United States has long imposed 
sanctions for criminal, anti-democratic, and corrupt activity, 
and the Biden Administration has sought to leverage limited 
sanctions relief to incentivize a path towards freer and fairer 
elections. As we speak, our allies around the world are under 
attack, including Ukraine, which is set to run out of money in 
just a few weeks. Meanwhile, some of my colleagues across the 
aisle are holding aid to Israel and Ukraine hostage to push 
through their political agendas. Further underscoring the 
hypocrisy in this discussion about serious national security 
matters is the fact that the House GOP appropriations bills 
significantly cut the funding of the very agencies needed to 
implement Treasury sanctions and evasion detection.
    As we navigate various global crises and assets with the 
national security tools at our disposal, it is essential that 
we remain tough against our adversaries and leverage diplomacy 
to assure our allies that they can trust us. By employing a 
multilateral approach to the United States' national security, 
the Biden Administration has demonstrated steady leadership in 
the face of global instability. In tandem, Congressional 
Democrats have taken legislative steps to prevent sanctions 
evasion and eliminate vulnerabilities in our financial system.
    But with all that said, I look forward to continuing this 
important work, and to working together. Thank you again to our 
witnesses, and I look forward to your testimony. I yield back.
    Chairman Luetkemeyer. Thank you. The gentlelady yields 
back. With that, we recognize the ranking member of the full 
Financial Services Committee, the gentlelady from California, 
Ms. Waters, for 1 minute.
    Ms. Waters. Thank you very much, Chairman Luetkemeyer and 
Ranking Member Beatty. We are here today to discuss how we can 
strengthen energy-related sanctions on Iran, Russia, and 
Venezuela in order to prevent them from funneling funds to 
terrorism and other harmful activities, but Republicans have 
proposed to slash funding for the very agencies responsible for 
sanctions enforcement by 30 percent. We cannot expect to have 
robust sanctions enforcement without robust funding for the 
agencies in charge of enforcement. Moreover, we cannot expect 
to be tough on Russia if we walk away from Ukraine. Not only 
would that hand a major victory to Vladimir Putin, it would 
embolden China's ambitions to invade Taiwan. So, I urge my 
Republican colleagues to pass President Biden's supplemental 
package. I yield back.
    Chairman Luetkemeyer. The gentlelady yields back.
    And with that, we will turn to our witnesses: the Honorable 
Marshall Billingslea, a senior fellow at the Hudson Institute; 
Ms. Claire Yungman, the chief of staff at United Against 
Nuclear Iran; Dr. Anna Mikulska, a senior fellow at the Kleiman 
Center for Energy Policy at the University of Pennsylvania; Mr. 
Ryan Berg, the director of the Americas Program at the Center 
for Strategic & International Studies; and Mr. Adam Smith, a 
partner at Gibson, Dunn, & Crutcher.
    We thank each of you for being here today. Each of you will 
be recognized for 5 minutes to give an oral presentation of 
your testimony. And without objection, each of your written 
statements will be made a part of the record.
    We will begin with Mr. Billingslea. You are recognized for 
5 minutes for your oral statement.

STATEMENT OF THE HONORABLE MARSHALL BILLINGSLEA, SENIOR FELLOW, 
                        HUDSON INSTITUTE

    Mr. Billingslea. Thank you, Chairman Luetkemeyer, and 
Ranking Member Beatty. It is a pleasure to be here before your 
subcommittee to discuss this quite important set of issues.
    At the outset, I must say that autocratic regimes have, for 
years, tried to advance the narrative that, ``sanctions don't 
work,'' for obvious reasons, and now, some in Washington, D.C. 
are beginning to parrot their talking points. This is 
concerning. To say that sanctions don't or can't work would be 
incorrect, and it is an assertion that is completely at odds 
with the results we achieved during my tenure at the Department 
of the Treasury under President Trump.
    Sanctions do work when they are properly applied and 
enforced. ``Properly applied,'' in my view, means five things. 
First, as part of a broader strategy, sanctions are not a 
substitute for strategy, but a complement. Second, they are not 
symbolic: Sanctions have an effect when the target has exposure 
to the global financial system, but conversely, when the target 
is unconnected, sanctions are little more than virtue 
signaling.
    Third, they need to be applied comprehensively, without 
loopholes. Fourth, they need to be accompanied by secondary 
sanctions to deter non-U.S. third parties who otherwise might 
be inclined to continue transacting with a sanctioned entity. 
And fifth, they have to be enforced through a mix of both civil 
and criminal penalties.
    As I mentioned, under President Trump, all five of these 
criteria were met by our Iran and Venezuela efforts. I would 
parenthetically add our North Korea program as well. The effect 
on the energy-related revenue streams of the mullahs in Tehran 
and the murderous kleptocrat regime in Caracas was significant. 
Iranian crude oil production collapsed from 3.8 million barrels 
a day in 2018 when we started, down to 1.8 million by the time 
we left office, and their exports similarly crashed due to our 
efforts. They were exporting less than 400,000 barrels a day, 
and they had a huge number of cargo ships serving as floating 
storage because secondary sanctions were effectively deterring 
a number of countries, such as India and China, from buying.
    The corresponding effect on the Iranian regime's finances 
was equally dramatic. Iran's GDP shrank by 5 percent in 2018 
and another 10 percent year over year in 2019. Inflation 
spiked, going up 10 percent to approximately 35 percent during 
this time frame, and the Iranian currency hit all-time lows. As 
its economy shrank and oil and tax revenues dried up, the 
regime found that its own budget was in disarray. Its military 
spending took a huge hit, and although Qasem Soleimani, the 
head of the Quds Force at the time, fought aggressively to 
protect his terror financing, he, too, was forced to take major 
cuts.
    In fact, to make ends meet, the Quds Force resorted to its 
own oil smuggling efforts in collaboration with Hezbollah and 
Russia, and we disrupted a wide number of these schemes through 
law enforcement, intelligence, and Treasury action. The effect 
on Iran's terror network was notable. The best-funded of Iran's 
proxies by far, Hassan Nasrallah, the head of Hezbollah, was 
forced to make major cutbacks in stipends for his members, and 
he repeatedly complained about us at the Treasury. He even 
started fundraising telethons in an effort to make up the 
losses in Iranian payments.
    In Venezuela, we saw a very similar pattern. Once we 
designated the central bank and all of the other major 
financial institutions, and applied secondary sanctions to its 
oil trade, Venezuela's crude oil output dropped from 2.3 
million barrels a day to just around 400,000 by the end of the 
Trump Administration. Hyperinflation was rampant, and in 2018, 
the Venezuelan currency, the bolivar, became the least-valued 
currency in circulation based on exchange rates.
    These results speak for themselves. They prove that 
sanctions can significantly impair the revenue of hostile, 
energy-producing regimes, provided that the five principles I 
enumerated are followed, but here we are at the end of 2023, 
and Iran's oil production has bounced back to a 5-year high, to 
between 3.1 and 3.3 million barrels a day. They are exporting 4 
times as much crude and condensate today than they were when we 
left office. Hassan Nasrallah no longer needs to conduct 
telethons. The Houthis are engaged in unprecedented ballistic 
cruise and drone strikes against both Israel and shipping in 
the Red Sea. Iranian-backed militias have conducted 92 attacks 
on U.S. servicemen in Iraq and Syria since October 17th, and we 
saw what an emboldened Hamas did on October 7th.
    In Venezuela, crude oil production has nearly doubled, up 
to a record high over the summer--nearly 800,000 barrels a 
day--and the Biden Administration has now waived most of our 
energy sanctions. But what Maduro has decided to do, thanks to 
that, is to amass troops on the border of Guyana, threatening 
forcible annexation of the oil- and mineral-rich Essequibo 
region.
    I also have a fair amount to comment on with regard to the 
Russia sanctions program. Suffice to say that I feel it has 
been largely ineffective because, again, it does not include 
the five criteria that I enumerated, but I would be happy to 
address any questions on that.
    Thank you, Mr. Chairman, and Madam Ranking Member.
    [The prepared statement of Mr. Billingslea can be found on 
page 45 of the appendix.]
    Chairman Luetkemeyer. Thank you for your testimony, Mr. 
Billingsea.
    Ms. Jungman, you are now recognized for 5 minutes.

  STATEMENT OF CLAIRE JUNGMAN, CHIEF OF STAFF, UNITED AGAINST 
                      NUCLEAR IRAN (UANI)

    Ms. Jungman. Chairman Luetkemeyer, Ranking Member Beatty, 
and members of the subcommittee, I appreciate the opportunity 
to discuss the Administration's strategy for enforcing 
sanctions against Iran, focusing on the oil sector and its 
implications for national security, global oil markets, and 
international financial stability.
    Iran's oil sector is its major economic pillar, with 
exports representing the overwhelming majority of government 
revenues. Because the Islamic Revolutionary Guard Corps (IRGC), 
a U.S.-designated foreign terrorist organization, controls the 
oil industry, oil exports finance Iran's military and terrorist 
operations, with over $20 billion funneled into such activities 
since 2012.
    U.S. sanctions, when stringently enforced, have effectively 
countered Iran's nuclear ambitions and limited its funding of 
terror. The maximum pressure campaign from 2017 to 2021 
significantly reduced Iran's oil exports, demonstrating the 
potency of robust sanctions. However, due to diminished 
sanctions enforcement, Iran has accumulated north of $80 
billion in oil revenues since 2021, particularly through 
exports to China. This leniency has not only altered the global 
oil market dynamics, but also weakened the perceived 
effectiveness of sanctions.
    Iran uses a ghost fleet of more than 300 foreign-owned and 
foreign-flagged oil tankers to shift hundreds of millions of 
barrels of Iranian oil, skirting U.S. energy sanctions and 
exploiting regulatory loopholes. Most of these vessels are not 
sanctioned by the U.S., and operate clandestinely. Further, 
Panama, in particular, has facilitated Iran's oil sanctions 
evasion by flagging almost half of the ghost fleet vessels, in 
spite of over 65 letters from United Against Nuclear Iran 
providing concrete evidence that those ships are carrying 
Iranian oil. Moving forward, a comprehensive strategy is 
crucial. This includes increasing sanctions enforcement, 
focusing on Iran's ghost fleet, implementing economic and 
regulatory pressure in China, using carrots and sticks to 
encourage Panama's cooperation, and enhancing global maritime 
surveillance.
    Thank you again for this opportunity. I look forward to 
your questions.
    [The prepared statement of Ms. Jungman can be found on page 
49 of the appendix.]
    Chairman Luetkemeyer. Thank you, Ms. Jungman.
    Dr. Mikulska, you are now recognized for 5 minutes.

 STATEMENT OF ANNA B. MIKULSKA, SENIOR FELLOW, KLEIMAN CENTER 
         FOR ENERGY POLICY, UNIVERSITY OF PENNSYLVANIA

    Ms. Mikulska. As Ukrainian President Volodymyr Zelensky is 
on the Hill today to plead for military aid, we are about to 
discuss what is possibly second to that aid in pushing back 
against Putin. Economic sanctions, where properly applied and 
enforced, can be a useful tool of influence. Having lived in 
communist Poland under President Reagan's sanctions in the 
1980s, I should know.
    Sanctions generally prove most effective before they are 
applied. Once applied, the immediate effectiveness can be 
mitigated by various factors such as domestic policies, 
economic fluctuations, or geopolitical conditions. The absence 
of broad, multilateral application or enforcement can further 
undermine their effectiveness. As such, even though sanctions 
are usually applied with the hope to promptly curb an adverse 
behavior, actual realization of their objective requires a 
more-protracted timeline. For petrostates, such as Russia, 
Venezuela, or Iran, sanctions targeting their energy exports 
have traditionally been employed with the objective of 
depriving these nations of revenues, thereby constraining their 
military capabilities and eroding the popularity of their 
governments.
    Admittedly, sanctions on Russian energy flows imposed after 
the 2022 invasion of Ukraine have produced mixed results. The 
reasons are complex. First, particularly after very limited 
sanctions were imposed on Russia after the 2014 invasion of 
Ukraine, the country began to form a more self-reliant 
financial system. Domestic production and self-sufficiency were 
the key. Devaluating the ruble to enhance competitiveness and 
aid the budget was also one of the major things Russia has 
focused on as foreign currency from oil and gas have translated 
into greater value in the domestic context. Partnerships with 
China and OPEC have been also very high on Russia's agenda.
    Second, sanctions imposed after the 2022 invasion, although 
more expansive, have not been well-enforced. In particular, 
despite a cap on crude oil prices introduced by G7 countries 
over a year ago, Russia has been able to sell its crude above 
that price, thanks to widespread evasion and a shadow fleet of 
tankers it has built. At the same time, lower prices of oil 
have also made the cap inadequate.
    This does not mean, however, that there are no signs of 
sanctions working their way through the Russian economy. For 
example, devaluation of the ruble has kept Russian revenue high 
and rising, but only if expressed in rubles. Translated to 
American dollars, Russian federal revenues are falling. In 
addition, the share of Russian revenues from oil and gas 
activity is also falling, to be now around 30- to 35-percent.
    Also, the financial strategy of relying on taxation of 
energy production instead of taxation of exports is going to 
have negative implications for Russia's energy sector. While 
this approach may help finance state coffers, the heavy 
taxation will limit the ability of Russian energy companies to 
grow and invest. The lack of cutting-edge technology and the 
phenomenon of brain drain is likely to impact the efficiency, 
quality, and innovation of Russia's energy sector in the long 
term.
    As of now, however, much also of Russia's energy flows have 
not been sanctioned. This includes natural gas, particularly 
liquefied natural gas (LNG), where Russian sales have doubled 
when compared to 2021, and I am talking here about sanctions 
from our allies, in particular, the EU, where half of this LNG 
export has been going. Russia is also supplying nuclear fuel, 
and building and financing nuclear power plants all over the 
world, including in two NATO countries, Hungary and Turkey.
    As we consider existing and future options, we need to 
remember that the success of sanctions is usually not immediate 
and that imposition of tough measures is not enough unless 
robust and strict enforcement follows. The lack of enforcement 
not only diminishes the intended impact of the sanctions on 
reducing Russian capability to support their ongoing aggression 
in Ukraine, but it also poses a risk to the long-term efficacy 
of a broader system today and in the future. Thank you.
    [The prepared statement of Dr. Mikulska can be found on 
page 57 of the appendix.]
    Chairman Luetkemeyer. Thank you.
    Dr. Berg, you are now recognized for 5 minutes.

 STATEMENT OF RYAN C. BERG, DIRECTOR, AMERICAS PROGRAM, CENTER 
          FOR STRATEGIC & INTERNATIONAL STUDIES (CSIS)

    Mr. Berg. Chairman Luetkemeyer, Ranking Member Beatty, and 
distinguished members of the subcommittee, thank you for the 
opportunity to testify this morning on this very important 
topic.
    Under the Biden Administration, the United States has 
embarked on a perilous dance with the dictator in Caracas. 
Absent a policy reboot, I worry that the next step in this 
caper with Nicolas Maduro could be strategic insolvency against 
an adversarial regime in our shared neighborhood. Whereas the 
previous administration built a significant sanctions 
architecture on the Maduro regime to stymie its myriad human 
rights abuses and unfathomable corruption, the Biden 
Administration has presided over a significant softening of 
Venezuela's sanctions. This is a major test of the 
Administration's ability to reach what has been a bipartisan 
goal: freer and fairer presidential elections in Venezuela on a 
much longer road to full re-democratization.
    After a skinny set of accords recently signed in Barbados, 
the Biden Administration gambled by lifting oil, gas, minerals, 
and secondary bond trading sanctions on the regime. The 
sanctions relief originally provided for 6 months, and subject 
to renewal in April 2024, could be worth as much as $10 billion 
in revenue for Maduro, representing about one-tenth of 
Venezuela's current GDP. Seven weeks in, there is nary a 
commitment in the agreements that the regime has not managed to 
contravene. The litany of violations is worth considering when 
weighing the merits of the regime's recent sanctions relief.
    The regime censored, harassed, and intimidated journalists 
covering the opposition's recent primary. It cut the internet 
during the transmission of poll results for the opposition's 
recent primary. On the day of the primary, multiple polling 
stations reported shots fired, intimidation by regime thugs, 
and ballot boxes stolen. After opposition leader, Maria Corina 
Machado, emerged victorious, the regime's attorney general 
launched an investigation into the primary process, labeling 
it, ``a mega fraud.''
    Through its control of its supreme court, the Maduro regime 
suspended the results of the opposition's primary, declaring 
them null and void. As part of the investigation, the Maduro 
regime has demanded that some of the primary organizers appear 
before local prosecutors. Also, as part of its investigation, 
the regime has demanded information on those who participated 
in a bid to compromise the identities of nearly 2.5 million 
people, potentially exposing them to retribution.
    As the ink was drying on the Barbados accords, the regime 
abducted and now holds another American political prisoner, 
Savoi Wright. No unjustly-detained Americans have been released 
since the Barbados accord. Following the referendum on December 
3rd, the Maduro regime has ramped up bellicose rhetoric and now 
threatens to annex more than two-thirds of the territory 
administered by neighboring Guyana.
    In my remaining time, I want to move to some policy 
recommendations for Venezuela. First and foremost, I think we 
need to decouple Venezuela policy from U.S. energy security. 
There is a siren song that is emerging from Caracas which has 
been going on for years, and the U.S. Government must not fall 
into the trap and dispense with the fallacy that the Maduro 
regime can be a guarantor of U.S. energy security. The goal of 
U.S. policy should be to be energy-dominant and to untether 
these considerations to ensure a clear-eyed policy toward an 
adversary.
    A sanctions-free Venezuela has a marginal potential 
production increase, and it has only managed to increase its 
production in recent weeks by about 200,000 barrels of oil per 
day, which is negligible on the world stage. Further, the 
environmental crimes and the unfolding environmental 
catastrophe in Venezuela is of grave concern and makes us 
complicit in PDVSA'S abysmal environmental record.
    Second, treat the U.S. Government's word as sacred. After 
the signing of the Barbados accords, the Biden Administration 
threatened sanctions snapback, but without a willingness to 
pull the trigger, the regime is calling our bluff. To quote a 
recent Washington Post op-ed, ``If the Secretary of State vows 
to take specific action by a specific date and then does not, 
the world will notice and assume the United States is not 
serious. Mr. Maduro undoubtedly will draw the same conclusion, 
that he can pocket the gains of sanctioned relief while not 
paying the price demanded by Mr. Blinken, and no one will do 
anything about it.''
    Third, reboot sanctions policy on Venezuela and consider 
their Barbados accords the erstwhile Barbados accords. The U.S. 
Government would be wise to reboot its sanctions policy with a 
focus on building leverage toward lifting bans on opposition 
candidates. U.S. strategy toward Venezuela must be guided by 
two clear goals: first, as I said, the bipartisan goal of a 
freer and fairer election as the starting point for a long 
process of re-democratization; and second, and more 
immediately, the goal of enabling Maria Corina Machado to 
present herself as a candidate in the 2024 presidential 
election. The Biden Administration thus far has struggled to 
leverage sanctions to see these two goals converge in 
Venezuela.
    And finally, recommit to sanctions enforcement. Even before 
the Biden Administration's sanctions relief, the architecture 
on Maduro had stopped biting. Sanctions are only as good as 
their enforcement. Now, detractors normally point out the game 
of Whac-A-Mole that ensues, but a strong architecture is 
contingent upon creative and vigilant enforcement. We knew all 
of the routes, the transshipment points, and when they were 
loading in Venezuela, and China was the top recipient of that 
sanctioned oil.
    With that, I yield back, and I look forward to your 
questions. Thank you very much.
    [The prepared statement of Dr. Berg can be found on page 36 
of the appendix.]
    Chairman Luetkemeyer. Thank you, Dr. Berg.
    And Mr. Smith, you are now recognized for 5 minutes.

 STATEMENT OF ADAM SMITH, PARTNER, AND CO-CHAIR, INTERNATIONAL 
       TRADE PRACTICE GROUP, GIBSON, DUNN & CRUTCHER, LLP

    Mr. Smith. Chairman Luetkemeyer, Ranking Member Beatty, and 
members of the subcommittee, it is a pleasure to be here this 
morning.
    There is no question that Moscow, Tehran, and Caracas 
continue to engage in activities that undermine national 
security. There is also no question that the regime's continued 
monetization of their energy resources is enabling them to do 
so. However, as I detail in my written testimony, the Biden 
Administration can point to significant accomplishments in 
limiting the ability of these regimes to profit from their 
energy resources and to continue their destabilization in the 
manner they would prefer.
    However, given the reality of the continued behavior, more 
can and should be done. As I will describe, in some cases, I 
argue that no new energy sanctions are needed. Rather, enhanced 
enforcement of current measures and strengthened multilateral 
coordination may be the most effective way ahead.
    Before providing some suggestions on next steps for each of 
these regimes, I want to lay out four broader interests, much 
as Mr. Billingslea did, that I think we need to keep in mind as 
we consider our sanctions approaches.
    First, while recognizing the significant threats stemming 
from Caracas, Moscow, and Tehran, we need to also recognize the 
enduring threats that emanate from outside these states, in 
particular, China. This doesn't mean that sanctions on these 
regions cannot include Chinese entities. They can and they 
should. However, it does mean that we don't further our 
interests if we pursue sanction strategies that result in any 
currently fence-sitting states to rush into the arms of 
Beijing.
    Second, we must be conscious that any efforts to eliminate 
supply from these jurisdictions could result in supply and 
price shocks here at home and amongst our allies.
    Third, we have learned that multilateral sanctions measures 
are far more coercively effective than unilateral measures, 
especially when you are dealing with large economies like 
Russia. Indeed, true unilateral measures could have the 
counterproductive effect of diminishing the overall 
effectiveness of our tools.
    And fourth, we need to remain aware of both the purposes 
and true targets of our sanctions. Sanctions are a tool of 
behavior change and deterrence. They must have an offramp, and 
our sanctions are targeted at governments and not citizens, so 
any sanctions enhancements must aim to help, or at least not 
hurt citizens, even as pressure on governments may increase.
    Turning now to each particular program, in Russia, 
domestically, we need to focus on continuing our enforcement of 
the oil price cap sanctions, and export control violations, and 
we need to support and fully fund the independent and 
integrated work of the Treasury Department, the Justice 
Department, the Commerce Department, and other agencies. 
Internationally, we need to build on the broad multilateral 
coordination that the Biden Administration has put together, 
including the G7's enforcement coordination mechanism. The EU 
continues to pressure Moscow, and the direction of travel here 
is clear. The EU is currently considering a tool that would 
allow its member states to unilaterally move against Russian 
energy, which is unprecedented. And we need to encourage the EU 
to enforce and to find other sources for third-party country 
imports of oil, many of which come from Russian crude.
    With respect to destinations of Russian oil, we need a 
balance. With respect to India, the leading purchaser of 
Russian crude, we must balance our desire to grow our bilateral 
relationship while discouraging Delhi's reliance on Russian 
oil. One potential option would be to borrow a page from Iran 
sanctions and consider a Significant Reduction Exception (SRE) 
program. That would threaten, but hold off on sanctions against 
parties involved in importation of Russian oil, and as long as 
India would be reducing its Russian oil imports, that might be 
an effective strategy.
    With respect to China, a continued focus on enforcement 
against critical intermediaries may be effective, and it would 
be especially powerful if global partners were able to join us. 
For Iran, the lowest-hanging fruit stems from the fact that 
United States sanctions are principally unilateral. If we were 
to get the EU, the U.K., and other partners on board, the force 
multiplier would be significant.
    Second, we need to calibrate our measures in Iran to target 
the government and not civilians. Fungibility is a real 
dilemma. If we allow Iran to have money in one sphere, they 
will be able to use an equal amount to engage in nefarious 
acts. However, the problem of fungibility as it relates to U.S. 
interests only principally emerges once fungible monies are 
spent by Iran to acquire troubling items or export goods or 
funds to its proxies.
    As such, we need to pursue two things simultaneously: 
first, we need to promote real humanitarian trade, which may 
require formal assurances of the private sector; and second, we 
need to enhance surveillance over and actions concerning moves 
of funds and goods across the Iranian border, both out to 
troubling actors--Hamas, the Houthis, et cetera--and coming 
into Iran to support their nuclear program, missile 
development, et cetera.
    On Venezuela, I argue that Maduro is the weakest of the 
three leaders in question. Recently, sanctions have proven that 
we actually do have leverage. Even though there clearly have 
been slides from Maduro's promises, that leverage needs to sort 
of be engaged again. Maduro has proven amenable to some sort of 
quid pro quo of sanctions relief for some moves for 
democratization.
    In conclusion, we must remember that our policy with 
respect to these states is not to increase sanctions for 
sanctions sake. Sanctions are a means to our goal, which is, of 
course, to eliminate the ability of these states to exercise 
harm to our national security. And sanctions are only one tool 
in our policy arsenal, and, alone, they will be unlikely to 
achieve our objectives. However, when paired with broader 
efforts--military, intel, law enforcement, diplomatic 
development, et cetera--and bringing on board our multilateral 
partners to do the same, sanctions can be a force multiplier 
and prove determinative.
    With that, thank you again, and I look forward to your 
questions.
    [The prepared statement of Mr. Smith can be found on page 
70 of the appendix.]
    Chairman Luetkemeyer. Thank you, Mr. Smith.
    We will now turn to our Member questions, and the Chair 
recognizes himself for 5 minutes.
    On November 30th, the oil cartel, OPEC, agreed to cut their 
oil production by around a million barrels a day to try and 
keep prices elevated. Saudi Arabia also agreed to extend the 
million-barrel-a-day cut that it announced in June. Each of you 
talked a minute ago about the amount of oil that is coming out 
of each one of these three countries we are talking about 
today. Each one of you talked about how sanctions need to be 
enforced more, that we are not doing enough, and Mr. Smith 
mentioned a minute ago that we seem to be unilaterally having 
these sanctions with not much other help from other countries.
    So, Mr. Billingslea, would you like to comment on the 
effect of those lax sanctions with regards to the effect it has 
on global energy markets, and do you see a strategy behind 
that?
    Mr. Billingslea. No, I don't see a coherent strategy. In 
the case of Iran, it has been lax enforcement. In the case of 
Venezuela, they have actually waived the sanctions, as Dr. Berg 
indicated. But when you consider the OPEC cut, or, rather, the 
continuation by the Saudis of their cut of a million barrels a 
day in Saudi production, well, that is more than made up for by 
the surges in production coming out of Iran and Venezuela 
together, to say nothing of Russia. So were we to simply clamp 
down on Venezuela and Iran to any great extent, there would be 
actually no reason for the Saudis to engage in a production cut 
to achieve the price effect that they are trying to have.
    Chairman Luetkemeyer. We see a lot of things in the news 
about China talking to each one of these three countries a lot, 
especially with regards to oil, and as I recall, I think they 
signed an agreement this spring with Russia and with Iran, or 
some of the Middle Eastern countries anyway, to provide them 
with more oil to shore up one of their two big weaknesses. Do 
you all see these three countries working with China in 
cohesion? Is there something that they are working on together, 
or is China working independently with one of these three 
countries?
    Mr. Billingslea. No. I think there are triangular 
activities that are occurring. Obviously, we all follow the 
Iranian-Russian relationship and their provision of drones to 
the Russians to attack Ukrainian civilians with, as well as 
their military. Russia is increasingly becoming dependent on 
China economically. If you look at the balance of trade shifts, 
China is increasingly dominant with regard to the Russian 
economy and its imports, but China has its own motivations in 
the Middle East, in particular. As Xi Jinping grows 
increasingly threatening towards Taiwan, China is looking for 
every which mechanism to displace the United States and our 
influence in the region, which is why it really was a 
diplomatic fiasco to see them step in--them/they, the Chinese--
to broker rapprochement between the Saudis and the Iranians 
because, of course, in the end, what Iran wants is unfettered 
and free-flowing access to Saudi oil in the event of a crisis.
    Chairman Luetkemeyer. I sit on the China Task Force, so I 
am kind of all things China anymore.
    Ms. Jungman, you talked a little bit about the ghost fleet 
and enabling China to get access to a lot of this oil through 
Panamanian tankers. Would you like to elaborate on that a 
little bit and explain how we can find a way to curtail that 
activity, or is there a way to do that? Is Panama not working 
with us? Are they no longer a friend? I think China either owns 
or operate the Panama Canal now, if I am not mistaken. They 
have a lot of interest in that, so can you give us how all that 
fits together?
    Ms. Jungman. Yes, absolutely. We have seen Iranian oil 
exports to China increase over the last few years, with 400 
million barrels so far this year, 313 million barrels in 2022, 
and 291 million in 2021. So every year, the number of barrels 
of Iranian oil to China is going up, and a big part of that is 
through the use of the ghost fleet. When United Against Nuclear 
Iran first started publishing our list of vessels involved in 
this type of activity, it was around 70 vessels, and that list 
has grown to 364 as of our most recent update.
    Chairman Luetkemeyer. 364 Panamanian vessels?
    Ms. Jungman. 364 vessels in the ghost fleet.
    Chairman Luetkemeyer. Oh, in the ghost fleet. Okay.
    Ms. Jungman. Although 48 percent of those are flagged by 
Panama.
    Chairman Luetkemeyer. Oh, my gosh.
    Ms. Jungman. So yes, almost half of the entire ghost fleet, 
and that is just looking at vessels transporting Iranian oil. 
If you added in vessels transporting Russian or Venezuelan, 
that number could be much higher.
    Chairman Luetkemeyer. How do you think we can curtail that?
    Ms. Jungman. I think there needs to be pressure on Panama. 
I think that United Against Nuclear Iran, for example, has 
written over 65 different letters to the Panama Maritime 
Authority, and provided them with bills of lading, satellite 
imagery, and so on, showing these vessels transporting this 
type of oil, and they have taken little to no action. I think 
there needs to be a significant amount of pressure.
    Chairman Luetkemeyer. Stronger action taken, okay. Thank 
you very much. My time has expired.
    With that, we go to the ranking member of the subcommittee, 
the gentlelady from Ohio, Mrs. Beatty, for 5 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman, and, again, thank you 
to the witnesses. Mr. Smith, some of our colleagues across the 
aisle propose that we abandon the Biden Administration and the 
G7's price caps policy to go it alone with a unilateral 
American ban on Russia oil exports, threatening and enforcing 
with secondary sanctions for purchases of Russian oil. Can you 
discuss the benefits of the current price cap policy and 
explain the impact of abandoning it, both with respect to 
Russia's oil revenue, which we kind of touched on with the 
chairman's question, and fuel prices here at home?
    Mr. Smith. Thank you, Ranking Member Beatty. I am a big 
believer not just in the price cap itself, but in the price cap 
as a part of a broader suite of measures. If you look at the 
price cap on its own, one could argue that because exports of 
Russian oil are up, that, therefore, demonstrates a weakness in 
the price cap, and that is true to a point. However, when you 
recognize that India is the largest importer, and they are 
paying the Russians in rupees, which they can't use--Sergey 
Lavrov has made that very clear, that they are collecting a lot 
of rupees at their bank accounts in Delhi and Mumbai, and they 
can't use them. So, it is not clear to me that this price cap 
is actually having as big a help to Russia as one might 
imagine.
    Additionally, looking at it just on its own, I think is a 
mistake. It is the broad specter of broader sanctions, and 
again, the problem with removing the price cap and going it 
alone from a unilateral perspective is just that. It is one 
thing with respect to Iran to go it alone, and we did, and we 
did it fairly successfully leading up to the nuclear deal. But 
Iran is a minnow compared to Russia, and the reliance upon our 
core allies in Europe, and also in East Asia, on Russia is 
significantly greater than it was on Iran, which means that the 
likelihood of splintering that multilateral portion of the 
really important engagement, I think is very high if we are not 
careful.
    If we were to remove that, my guess is that is what would 
happen. There would be significant pressure that the U.S. would 
have to put on parties that are unable to go there from the 
perspective of the Europeans and the East Asians. The other 
problem, of course, is India. I don't think it makes much sense 
on a long-term basis, principally because of China, to sort of 
alienate Delhi in this way, and I think there is a way we can 
actually have both things be true.
    Mrs. Beatty. Okay. Thank you. Let me kind of switch to 
this, Mr. Smith. There has been, as we have heard, extensive 
discussions about banning humanitarian exceptions to 
comprehensive sanctions, especially with respect to the Iran 
programs. This is a recent shift after decades of strong 
bipartisan support for allowing transactions of things like 
food and agriculture, commodities, medicine, et cetera, et 
cetera, to go to the people of sanctioned nations. Why are 
humanitarian exceptions important, and how does Treasury 
monitor the use of waivers, licenses, and other exceptions?
    Mr. Smith. Humanitarian exceptions are important, I would 
argue, for moral reasons as well as political and strategic 
reasons. The importance, obviously, of not allowing people to 
die absent cancer medicines or foods, I think is sort of self-
evident--I would hope it is self-evident to everyone in this 
room. But the other issue, of course, is there is some soft 
power associated with the U.S. providing largesse or providing 
goods and services on a humanitarian basis.
    The real concern, and we saw this very much in the context 
of the $6 billion in Qatar that was potentially going to be 
released to Iran, was the question of fungibility, namely that 
if you give $6 billion worth of humanitarian aid to Iran, they 
will have $6 billion somewhere else in the budget to do bad 
activities. That is undoubtedly true. However, the fungibility 
concern actually speaks more to the importance of enforcement 
than it does to removing humanitarian trade, because the real 
problem for Iran is not that they are getting $6 billion into 
the system. Rather, it is their ability to use that $6 billion 
to buy things to send to Hamas, to send to Houthis, and that 
means we need to up our game with respect to surveillance and 
actions in the Treasury space as well as in the military intel 
space.
    Mrs. Beatty. Thank you. Let me just say, Mr. Chairman, for 
the record, and it has been mentioned by our witnesses, that we 
know President Zelensky is in Washington today obviously asking 
for our support and not stalling in Congress to provide those 
funds. And I would just like to echo the sentiments made by 
some of our witnesses that it is absolutely critical that we 
continue to provide aid to Ukraine so they can also defend 
themselves against Russia, and we have heard about that. 
Sanctions must be paired with other national security tools to 
be effective, and I believe that includes supporting Ukraine. 
Thank you, Mr. Chairman. I yield back.
    Chairman Luetkemeyer. The gentlelady yields back. The 
gentleman from Kentucky, Mr. Barr, who is also the Chair of our 
Subcommittee on Financial Institutions, is recognized for 5 
minutes.
    Mr. Barr. Thank you, Mr. Chairman. It is important that 
President Zelensky is here in Washington on Capitol Hill. He is 
obviously asking Congress for security assistance, but I 
suspect that President Zelensky is also asking some tough 
questions of the Biden Administration about the ineffectiveness 
of their sanctions strategy. If you want to win this war, if 
you want to crush Putin, then you need to abandon this failed 
price cap strategy and a strategy of a gaping loophole in 
American sanctions against Russia.
    Let's explore that for a minute, Mr. Billingslea. Let's 
talk about the Biden Administration's oil price cap strategy 
that our previous witness just defended, but it has failed. It 
is not curbing Moscow's war spending for two reasons. The cap 
is unenforceable, the ghost fleet, and other issues, and 
Russian oil and gas is trading well above the cap. Oil and gas 
revenues to Russia in October more than doubled from September 
and rose by more than a quarter from the same month last year. 
Russian oil and gas revenues for October exceeded 1.5 trillion 
rubles, or over $17 billion.
    Mr. Billingslea, it is true that the Biden Administration 
imposed sanctions on Russian banks at the outset of the further 
invasion back in 2022. The problem is there is a gaping 
loophole called General License 8, and it was reissued in 
October of this year. It permits U.S. persons to engage in any 
transaction with sanctioned Russian financial institutions if 
the transaction involves Russian energy. That is the whole ball 
of wax. You can sanction Russian banks, but if U.S. financial 
firms are allowed to process energy-related transactions, how 
is that curbing the financing that Putin actually needs to fund 
this war?
    Mr. Billingslea. Congressman, it is not. The oil price cap 
is performative art. It was implemented because the Biden 
Administration felt pressure to do something on Russian energy 
exports, so they came up with this concept of the price cap, 
which most of us said is completely unenforceable, not just 
because of the ghost fleet, but because of the evasion 
techniques that you can use. The Russians themselves have been 
buying an increasing number of antiquated Greek vessels, and 
they are simply up-charging on the shipping side as opposed to 
charging above the price cap itself, or there are trade-based 
money laundering schemes, in effect, which have separate 
contracts being let for other commodities to be routed through 
China into Russia.
    If we want to have effective sanctions on Russia, we have 
to do two things, neither of which the Administration has yet 
done sufficiently. The first is complete sanctions on the 
financial sector. The Biden Administration has sanctioned a 
large number of Russian banks, but by no means all of the 
Russian banks are under U.S. sanctions. And when you are in a 
state-controlled economy, it becomes a Ponzi scheme where they 
simply move and flow the finances through those financial 
institutions that are unsanctioned.
    Mr. Barr. Should we remove the General License?
    Mr. Billingslea. You should.
    Mr. Barr. Okay.
    Mr. Billingslea. Absolutely.
    Mr. Barr. And we have asked Treasury Secretary Yellen and 
Deputy Secretary Adeyemo to do this. They say that they are 
being tough on Russia, but they are not, because they are not 
removing the General License on all energy transactions.
    Mr. Billingslea. It is a very simple, 1-page General 
License that simply says, yes, we imposed all of these 
sanctions on these Russian banks, but it doesn't count as long 
as it is on energy trade.
    Mr. Barr. Yes.
    Mr. Billingslea. So, they are signaling to the world that 
it is fine to transact with these sanctioned Russian banks as 
long as it is under the auspices of buying Russian oil.
    Mr. Barr. So, Russian oil and gas is trading above the oil 
cap, and the Biden Administration is still allowing U.S. firms 
to process energy-related transactions that are funding this 
war.
    Mr. Billingslea. In October, Russia pulled in $11.3 billion 
in oil revenue, which is more than it did at any month during 
the year prior to its further attack on Ukraine.
    Mr. Barr. Let's talk about this India issue. Yes, India is 
a large purchaser of Russian oil. That is how Russia is 
circumventing sanctions, and they also export to China. Should 
we impose secondary sanctions on these other purchasers to 
deter this circumvention of the sanctions?
    Mr. Billingslea. It is the only way you can do it. You have 
to have secondaries.
    Mr. Barr. We can talk tough about, hey, we need more 
security assistance to Ukraine, but if we don't stop the 
financing of this war, we are never going to see victory for 
the Ukrainian people. We want to help Ukraine. Republicans in 
Congress want to help Ukraine, but we want to see the Biden 
Administration actually produce an effective sanctions policy, 
and they are not delivering right now.
    Mr. Billingslea. If I may, I know we are out of time, but I 
support the ranking member's points. We should absolutely 
support Ukraine with additional military aid, but it makes 
little sense to me that we take U.S. taxpayer dollars to buy 
equipment to give the Ukrainians to fight the Russians, and we 
are not choking off the Russian economy and its war machine. We 
need to do both.
    Mr. Barr. I totally agree, and I yield back.
    Chairman Luetkemeyer. The gentleman yields back. The 
ranking member of the Full Committee, the gentlewoman from 
California, Ms. Waters, is now recognized for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman. I think Mrs. 
Beatty was absolutely correct in the way that she was 
describing what the Administration is doing, and I think the 
way that the Administration is handling this is very effective. 
I could imagine that a ban would lead to American consumers 
paying $6, $7, or $8 per gallon at the pump, so I think we have 
to be careful about the criticism that one may have about the 
Administration because I don't think that there is any proof 
that a ban would work any better than what the Administration 
is doing.
    I want to turn to Mr. Smith. The Biden Administration has 
overseen the most comprehensive set of sanctions on both Iran 
and Russia, adding hundreds of additional entities and 
individuals to the sanctions list. The Biden Administration has 
also carried out robust enforcement actions, and yet, with the 
ongoing wars in Gaza and Ukraine, Congress is interested in 
what more we can do to further tighten our sanctions regimes 
against Russia and Iran. What are the constraints that the 
Biden Administration is facing when it comes to sanctions 
enforcement, and what could be done to alleviate these 
constraints now? Knowing exactly what the Administration is 
doing and hearing some defense of what they are doing from both 
Mrs. Beatty and myself, what do you recommend? What else could 
be done effectively?
    Mr. Smith. Thank you, Ranking Member Waters. It is a good 
question, and I think more can be done. As I said in my oral 
testimony, and my written testimony, in broad strokes, it is 
enforcement. That is where we are falling down, so we need to 
fully fund and support the integrated enforcement efforts of 
the U.S. Government and our multilateral partners. And that is 
not just on sanctions, because in some respects, it is not just 
choking the economy of Russia we need to be concerned about in 
the Russia context. It is making sure they can't use that money 
to help fund their war machine, and that is the most critical 
piece.
    It is certainly true that Russia is making more money now 
from its exports than they were, but the reality is that Putin 
is not fighting the war he wants to be fighting because of our 
restrictions, sanctions, export controls, and others. The 
stories are legion with respect to using convicts for his 
troops, having to go to commercial products to sort of find 
microchips that he can repurpose, and all of these sorts of 
things. That is not the military he wants to fight with. Is he 
back in his barracks yet? No. That doesn't mean the 
restrictions we have in place are not working and they could 
work.
    On the Iran side, again, the big issue there is similar to 
the Russia one. It is a problem if people are sending money to 
Iran. However, it is significantly more problematic if that 
money is then going to their bad activities, be it nuclear 
production, missile development or otherwise, or being sent out 
for goods, services, money to the Houthis, Hamas, et cetera.
    Again, the focus there needs to be on the enforcement, the 
surveillance, because the sanctions are in place. As Secretary 
Yellen has said, we need to have enforcement and surveillance 
regarding what is going into Iran and stopping what is going 
out of Iran, both from a goods and military perspective for 
Hamas, Hezbollah, et cetera, and financing, be it in the crypto 
space or the fiat space. Both of those things need to sort of 
be tightened up, and I think they can be.
    Ms. Waters. Thank you so very much, and I certainly agree 
with the need to have real enforcement, because I am concerned 
about Russia and Iran having a close relationship, as seen by 
several recent meetings that brought Iranian and Hamas leaders 
to Moscow. I am very concerned about these two nations 
conspiring to evade U.S. sanctions. And what you describe as 
enforcement, I think could be very effective. I thank you, and 
I yield back the balance of my time.
    Chairman Luetkemeyer. The gentlelady yields back. We now go 
to the gentleman from Pennsylvania, Mr. Meuser, for 5 minutes.
    Mr. Meuser. Thank you very much, Mr. Chairman. And thank 
you to all of our witnesses for being here. There is certainly 
a lot to discuss, and a lot to unpack, and I will try to ask 
you how to unpack some of it.
    The Biden Administration's literally head-scratching 
approach of appeasement towards Iran and Venezuela as well as 
others is a significant departure from the previous 
Administration's strategy--frankly, I think we can all easily 
agree on that--the shift from a robust maximum pressure 
campaign against Iran to facilitating almost $100 billion in 
monetary waivers in oil sales. Such decisions impact U.S. 
security, but also have profound implications for our allies, 
notably Israel. Iran continues to fill up its war chest, and 
Venezuela is escalating military activities near Guyana. It is 
why this committee is critically assessing such failures. So as 
our foreign policy prioritizes appeasement over strength, 
appeasing hostile regimes does not bring peace. It undermines 
it, so again, just some truths with which I think we can all 
agree.
    Mr. Billingslea, the Trump Administration did have a 
virtually maximum pressure campaign against Iran, which cut off 
approximately $80 billion in oil sales, leaving their cash 
coffers in the $4-billion range, where today it is near $100 
billion since the Biden Administration came in. What do you 
think of the Biden Administration's policy, and would resuming 
a maximum pressure campaign right now have the intended effect 
of minimizing Iran as the center of terrorist activities 
throughout the Middle East and the world?
    Mr. Billingslea. When we came into office, we found that 
Iran was flush with cash as a result of the Joint Comprehensive 
Plan of Action (JCPOA), and they were spreading that cash 
around quite freely to terrorist groups across the region and 
those terrorist groups were funding cells all over the world, 
including in our own hemisphere here. So as we began the 
maximum pressure campaign and reimposed sanctions on the 
Iranian regime, we actually saw that cash dry up, and we saw a 
significant reduction in the capacity of these terrorist 
organizations to conduct operations and to actually engage in 
the kinds of activities to undermine our regional allies. So, 
absolutely, I believe that we should reimpose--we don't 
actually have to reimpose anything; we simply need to start 
enforcing the sanctions that President Biden was given by our 
Administration.
    Mr. Smith. Do you think this was the main reason, main 
catalyst, main level of funding and support which has caused 
the chaos that exists in the Middle East and between Hamas and 
Hezbollah and the Houthis and God knows whom else?
    Mr. Billingslea. They all clearly feel emboldened, but make 
no mistake, Congressman, their instructions, their orders come 
from Tehran.
    Mr. Meuser. Right. So this whole thing with Iran proxy, we 
might as well just say, ``Iran,'' when we are referencing it.
    Ms. Jungman, what do you think Iran is doing with all of 
this extra cash that they are getting from selling their oil 
throughout the world, and particularly to China?
    Ms. Jungman. Thank you for your question. I agree with my 
colleagues here--we have sanctions on the books, but they need 
to be enforced, and without that enforcement, Iran is able to 
accumulate revenue, as we have discussed, $80 billion, and this 
money is being used to fund its nuclear program, terrorist 
proxies, and so on. We need to reinforce these sanctions. We 
need to crack down on the ghost fleet and Panama's facilitation 
of these vessels involved.
    Mr. Meuser. On to Venezuela, Dr. Berg. Again, I am using 
the word, ``appeasement,'' often because that seems to be the 
ideology and the approach. Was the handling of Venezuela the 
right approach? They seem pretty emboldened. Your thoughts on 
the Venezuela situation?
    Mr. Berg. Thanks very much, Congressman, for that question. 
Look, sanctions are a tactic in a broader strategy, so what 
sanctions are for, in the case of Venezuela, is trying to get 
freer and fairer elections under the Maduro regime as the 
starting point for a broader re-democratization effort. The 
problem with the recent strategy, I would contend, is that we 
gave away everything up front simply to get the regime to the 
table, and now, we are devoid of leverage to be able to get 
candidate bans lifted for actual opposition candidates to be 
able to run in Venezuela. That is the fundamental problem, 
Congressman.
    Mr. Meuser. Thank you very much. I yield back, Mr. 
Chairman.
    Chairman Luetkemeyer. The gentleman yields back. Now, we go 
to the gentleman from California, Mr. Vargas, for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman. Again, I 
appreciate the opportunity to speak. I also thank you for 
bringing this very important committee hearing together, and I 
want to thank the people who are here testifying.
    Appeasement has been mentioned a few times, and I have to 
say I do think that at the moment, we are appeasing Russia. 
Obviously, we are not strongly behind Ukraine. We haven't been 
able to give them the aid now that they need. In fact, I was 
very sad to see in the last vote that we took, I think over 100 
of my colleagues on the other side voted against supporting aid 
to Ukraine. Appeasement doesn't work, and I think that is a 
real problem. We have to be much more aggressive here in 
helping Ukraine. You don't help Ukraine by throwing them to the 
dogs. That is not the way you help them. I think you have to 
have stronger sanctions. I agree with everyone who has said 
that we have to enforce the sanctions; they have to be 
stronger.
    One thing that really wasn't mentioned much is liquefied 
natural gas (LNG). We obviously see that there is less natural 
gas going into the EU from Russia through pipelines. But now, 
you have an increase in LNG, and we don't do much about that, 
of course, obviously, because of the strategy that Merkel and 
others had, but what can we do there? Again, I look at that and 
I say that is a real problem. We are doing more in the sense of 
sending more LNG ourselves, but what can we do? That is a real 
problem.
    You are talking about money. Money is fungible, and they 
are getting a lot of money from LNG. Does anyone want to take a 
crack at that?
    Dr. Berg, you seem like you are anxious to take a crack at 
that. Go ahead, sir.
    Mr. Berg. Congressman, I think this question would probably 
be better directed at my colleague, Anna, who actually 
mentioned liquid natural gas in her opening statement. Thank 
you.
    Mr. Vargas. I am happy to direct it towards her. You just 
seemed a bit anxious there.
    Ms. Mikulska. It is an interesting and very important part 
of the equation. In fact, between 2021 and today, Russian 
liquefied natural gas exports have doubled, and half of this 
goes to Europe. Europe does not sanction any flows of natural 
gas from Russia, besides a couple of countries that refuse to 
pay in rubles for those flows, and that is going to be Poland 
and Bulgaria. Otherwise, whatever gas flows to Europe from 
Russia, Europe is taking.
    For liquefied natural gas, it is actually quite interesting 
because most of it is being produced by what is called an 
independent Russian company, as if any company, especially an 
energy company in Russia, could be independent. And I think 
that is what a lot of companies and countries are hanging onto 
in justifying their imports of natural gas or transshipments, 
so allowing Russian tankers from the Arctic to basically move 
their liquefied natural gas to less-expensive vessels to send 
them farther out. This is a serious problem because what we 
basically do is we are financing or we are allowing--I am 
talking about the U.S., but our allies as well--a Russian 
company to grow and to still claim it is a regular market 
actor. I doubt it in many ways, and we have seen already Yukos, 
which was a private company but very quickly became a public 
company when Putin decided it was not in the interest of the 
Russian state, so that is----
    Mr. Vargas. Thank you, again. I appreciate it because I do 
think that this is a big issue that we haven't looked at and we 
have to. The other thing that was talked about quite a bit 
here, and I have interest in this, is the ghost fleet, and 
obviously, that is very, very problematic, with 48 percent of 
it being from Panama.
    Mr. Smith, you have been shaking your head. What can we do 
further there to discourage this or to end it? We shouldn't 
have these ghost fleets sailing around out there and creating 
these problems.
    Mr. Smith. No, I agree, and one of the reasons for this is 
not just sanctions and enforcement, but ghost fleets are often 
moribund, unsafe, and non-environmental. They are accidents 
waiting to happen, and they are often not insured. In fact, by 
definition, they are not insured by the major insurers, so that 
is a real risk. The reality, though, is that they are ghost 
fleets, and they are, broadly speaking, off the radar.
    Mr. Vargas. But how can we enforce something against them 
if they are ghosts? They are ghosts, but they are not really 
ghosts. You can see them. They are there.
    Mr. Smith. Exactly. They are not actually ghosts, so there 
is still a way for them to be attached to the non-ghost world, 
be it insurance, be it infrastructure, or otherwise. And again, 
it is focusing on the intermediaries that are not ghosts, that 
are actually in the real economy. That is going to be the way 
forward.
    Mr. Vargas. My time is up here. I apologize for 
interrupting.
    Mr. Smith. No, no.
    Mr. Vargas. Again, I appreciate you being here and everyone 
else as well. Thank you, and I yield back, Mr. Chairman. Thank 
you.
    Chairman Luetkemeyer. The gentleman yields back. I am sure 
we now know all about ghosts. The gentlelady from California, 
Mrs. Kim, is now recognized for 5 minutes.
    Mrs. Kim. Thank you, Chairman Luetkemeyer. And I want to 
thank our witnesses for being here with us today.
    As sanctions evasion tactics evolve for rogue countries, 
like Iran and Russia, many of our witnesses have described how 
U.S. enforcement efforts on sanctions require new sanctions on 
new entities. The brutal and senseless attacks on October 7th 
by Hamas are a stark reminder that we cannot relent the 
pressure of sanctions on the Ayatollah regime.
    Ms. Jungman, as noted in your testimony, it seems that the 
Biden Administration has relaxed the enforcement of sanctions 
on Iranian oil, so can you tell us which countries have the 
most to gain from a lax enforcement of sanctions on oil 
produced in rogue countries like Russia and Iran?
    Ms. Jungman. Thank you for your question. The country that 
is benefiting the most from this lax sanctions enforcement is 
China. China is able to purchase cheap oil not just from Iran, 
but also from Venezuela and Russia as well, and its economy 
benefits from that while other countries have higher oil prices 
and gas prices as a result. So, the main beneficiary here is 
China.
    Mrs. Kim. As you said, the Chinese imports of sanctioned 
Iranian oil are running at the highest level in at least a 
decade. Other reports say that about 80 percent of Iranian 
crude exports go to China. It seems these so-called Chinese 
teapots, which are small refineries, and like Iran's oil at a 
discount, are part of the problem. According to Reuters, 
Chinese teapots have been top buyers of Venezuelan oil since 
2019, and these teapot refineries are being used as a way to 
circumvent the U.S. sanctions on oil produced in Iran, 
Venezuela, and Russia.
    So, Ms. Jungman, again in your testimony, you lay out 
recommendations to disincentivize the use of Chinese teapot 
refineries. Can you tell us if the Biden Administration has 
taken any actions to reduce the flow of sanctioned oil into 
teapot refineries based in China?
    Ms. Jungman. As of today, I don't believe they have made 
any effort to reduce the oil sales into China, specifically 
targeting entities in China. We need to be sanctioning the 
Chinese banks, the companies involved in this trade, and, as 
you mentioned, the teapots which are responsible for importing 
almost all Iranian oil and restricting their access to the U.S. 
financial system.
    Mrs. Kim. Can you please elaborate on your recommendations 
to reduce the import of sanctioned oil into these teapot 
refineries?
    Ms. Jungman. As I mentioned in my testimony, Panama flags 
48 percent of these vessels. Panama should be a U.S. ally. 
Panama is a U.S. ally. Why are we not putting more pressure on 
Panama to reduce the vessels involved in this type of activity? 
Without the use of Panama-flagged vessels, Iran would have a 
much harder time selling its oil. Forty-eight percent is 
flagged by Panama, and Iranian oil is being used and shipped on 
these vessels, so if we were able to restrict tariffs on 
Panamanian goods entering the U.S. market, for example, that 
would put the pressure on Panama.
    Mrs. Kim. Thank you very much. Ms. Mikulska, can you shed 
some light on the strategic alliance between Russia and China 
in the energy sector over the last half-century, and what 
aspects of the current relationship are worrisome?
    Ms. Mikulska. The Russia and China relationship hasn't 
always been very easy, and I don't think it is easy at this 
moment. However, the countries have been closer, particularly 
because China wants to be. Russia has been pushing China to 
cooperate, in particular, for example, in natural gas sales, 
for decades. It didn't happen until 2014, when Russia was hit 
with some sanctions, and China could feel that Russia was going 
to be the junior partner in the relationship. So, that is how 
the relationship is basically going now with Russia becoming 
even more impacted with sanctions, and even more reliant on 
China, including potential new pipelines.
    Mrs. Kim. Do you see any gaps that additional U.S. 
sanctions could potentially help mitigate?
    Ms. Mikulska. I think if we enforce U.S. sanctions to a 
greater extent, even if China is able to bring more gas or more 
oil, that market is going to be smaller, and, by definition, 
there is going to be more competition among the rogue states 
for that market, which means Venezuela, Iran, and Russia will 
have to compete for the same markets, and that prevents them 
from working together. So, that is something that we could 
think of as we contemplate sanctions on each and every one of 
those countries.
    Mrs. Kim. Thank you. Mr. Chairman, I yield back.
    Chairman Luetkemeyer. The gentlelady's time has expired. 
The gentleman from North Carolina, Mr. Nickel, is recognized 
for 5 minutes.
    Mr. Nickel. Good morning, everyone. Thank you, Chairman 
Luetkemeyer, and Ranking Member Beatty, for convening this 
important hearing today. And I want to thank our distinguished 
panel of witnesses for spending your time with us here.
    Today, we are diving into a topic of great significance, 
the art of restricting rogue-state revenue with a focus on 
strengthening our energy sanctions concerning Russia, Iran, and 
Venezuela. But before we continue, I want to address the 
pressing issue facing the U.S. Congress: Our support for our 
allies in Ukraine and Israel. Ukrainian President Zelensky is 
with us in the Congress today, and the Congress needs to act. 
The inaction of the pro-Russia faction of the Republican 
conference, while I believe it's a minority of the conference, 
is set to be a truly dark stain on the United States, and this 
Congress. We need to stand with Ukraine, especially right now, 
and support for Ukraine is in our national interest.
    And to my colleagues who bring up the cost, the cost of 
containing an aggressive Russia around the globe will be a 
hundred times higher if we do nothing and gift wrap Ukraine for 
Vladimir Putin over this holiday season. So, I want to 
encourage my Republican colleagues to bring the bill to the 
House Floor, bring a clean bill to allow us to support our 
allies in Ukraine and in Israel. The battle here in support of 
democracies is one of the defining issues of this Congress, and 
we have to act.
    But I want to dive into my questions on the topic we are 
here to talk about today. Dr. Mikulska, I want to start with 
you. Iran's energy sector is the heart of its economy, the oil 
revenue, its lifeblood. How effective have our sanctions on 
Iran's energy industry been so far, and have they put a dent in 
Iran's ability to fund their various regional activities?
    Ms. Mikulska. I think this is going to be more of a 
question for Ms. Jungman, since I am focusing on Russia in 
general, if I can.
    Mr. Nickel. Ms. Jungman, would you like to address that?
    Ms. Jungman. Sure, I am happy to. Sanctions need to be 
enforced to reduce Iranian oil exports. They have not been over 
the last few years, and as a result, Iran has been able to 
accumulate over $80 billion worth of oil revenue, and that is a 
conservative figure, so, again, not as effective in the last 
few years in comparison to previous Administrations.
    Mr. Billingslea. Congressman, if I could add, today Iran is 
exporting more than 4 times the amount of crude oil than the 
day that President Biden took office, just as a reference 
check.
    Mr. Nickel. Thanks.
    Dr. Berg, next question to you. I recently went to Colombia 
as part of a Congressional Delegation (CODEL) led by 
Congressman Pfluger. We went to Brazil, Colombia, and Panama, 
but certainly, the whole visit was defined by Venezuela and the 
huge influx of immigrants fleeing that oppressive regime, many 
of them heading to the U.S. border. I got to see firsthand that 
huge volume of people coming up through the Darien Gap in 
Panama, and we're certainly no friend to that regime. We need a 
regime change, but Venezuela's energy sector has certainly seen 
better days, partly thanks to our sanctions and restrictions.
    Can you paint us a picture of the current state of affairs 
in Venezuela's energy industry, what is the collateral damage 
these sanctions have caused, and what can we do to balance our 
foreign policy objectives while addressing those humanitarian 
concerns?
    Mr. Berg. Thanks very much, Congressman, for that question. 
Currently, on the oil production side of things, Venezuela 
produces around 800,000 barrels of oil per day. Most experts 
will tell you that the ceiling, absent a massive capital 
infusion and a concerted effort to repair a lot of the 
dilapidated infrastructure in that country, is a million 
barrels of oil per day, a far cry from the heyday of more than 
3 million barrels of oil per day at its height in 1998. So, 
Venezuela has done quite a bit even before U.S. sanctions came 
into play to destroy its own oil production capacity. I do 
think, however, that we need to sever this idea or sunder this 
idea that just lifting sanctions will all of a sudden cause us 
to see fewer Venezuelan migrants at the border.
    I do agree with you, Congressman, that we have seen a 
torrent of migration out of Venezuela, and it mostly has to do 
with the regime type. It mostly has to do with the fact that 
this is an incredibly repressive regime that sits on the docket 
of the International Criminal Court pending an allegation of 
crimes against humanity. About 8 million or so have left the 
country. That is a tremendous number. It is the largest 
outmigration in the world, absent a conflict context, right? 
And that outflow began in 2014, 2015, again, well before U.S. 
sanctions even came into play. So, I do think we need to get 
rid of this idea that somehow, by just lifting the sanctions, 
we are going to see fewer Venezuelan migrants.
    As you mentioned in your question, it is the regime type. 
It is the lack of freedoms in the country. And I do worry that 
another rigged election could be one of those trigger points in 
2024 where we will see, again, further outmigration.
    Mr. Nickel. Thanks. I have exceeded my time, so I will 
follow up in writing. I yield back.
    Chairman Luetkemeyer. The gentleman yields back. With that, 
the gentleman from Georgia, Mr. Loudermilk, is recognized for 5 
minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman, and thanks to all 
of our witnesses for being here today.
    On September 11th of this year, 22 years after a foreign 
terrorist organization carried out the deadliest attack on U.S. 
soil since Pearl Harbor, the Biden Administration granted a 
sanction waiver, allowing one of the largest state sponsors of 
terrorism to access $6 billion in oil revenue, with another $10 
billion up for consideration. A month later, Iranian-linked 
terrorists claimed the lives of more than 1,200 innocent 
Israelis. Just days after that attack in Israel, it was 
reported that the Biden Administration would ease sanctions on 
Venezuela's oil sector. A few months later, the Venezuelan 
regime seems poised to invade its sovereign neighbor, Guyana, 
to claim their oil fields. It appears a pattern is starting to 
emerge, revealing one thing which should have been obvious to 
the current Administration: Easing sanctions to appease 
dictators and terrorists does not work.
    Dr. Berg, under the terms of the new General License 
Agreement, oil and gas exports to Iran and Russia are 
prohibited. Does the Office of Foreign Assets Control (OFAC) 
track oil shipments out of Venezuela to enforce this provision?
    Mr. Berg. Thanks for the question, Congressman. It is 
questionable given the fact that even before the current 
sanctions lift on Venezuela, enforcement was incredibly lax. As 
I mentioned in my opening remarks, we knew the routes. We knew 
how much. We knew exactly when and where. They weren't even 
trying, in terms of creative evasion techniques, to get around 
our sanctions. They used to use ghost ships, as has been a 
focus of this hearing. They used to use what is called spoofing 
in their AIS transponders, which are saying that they are in 
one location, when they are really in another. They used to do 
ship-to-ship transfers at high sea. Now, they simply go into 
the Jose Port in Venezuela and sail right on out of there in 
front of everybody to see. So my contention is that enforcement 
had slipped drastically even before this recent sanction.
    Mr. Loudermilk. What enforcement authorities does OFAC 
have?
    Mr. Berg. By the terms of the new arrangement, Licenses 43 
and 44, the regime has reentered international oil and gas 
markets. But those shipments should be, according to those 
General Licenses, prohibited from going to certain 
destinations, Russia and Iran among them, and those are the 
rules on the books. OFAC should have the ability to enforce 
that.
    Mr. Loudermilk. See no evil, hear no evil. Are we are just 
turning a blind eye to it?
    Mr. Berg. Congressman, I think we are in a moment where we 
are seeing the Administration reticent to admit that merely 7 
weeks after lifting a significant chunk of sanctions for an 
initial period of 6 months, that the strategy has not worked 
and that they should reboot. As you mentioned in your question, 
Venezuela is engaging in bellicose rhetoric with its neighbor, 
Guyana, threatening to annex what amounts to more than two-
thirds of their territory. This is not the type of behavior 
that we would expect a sanctions lift to induce, so I think 
there is a reticence on behalf of the Administration there to 
admit that less than 2 months later, we are not seeing the 
behavior change we expected.
    Mr. Loudermilk. Okay. I would like to shift over to Ms. 
Jungman. As we talk about illicit oil shipments, I think it is 
important that we consider how existing sanctions on Iranian 
oil shipments would be improved by addressing Iran's so-called 
ghost armada, as we have been discussing here, meaning that the 
ships illegally facilitate the movement of Iranian oil to 
purchasers abroad. One question I have is regarding the 
insurance of these ships. How are they insured?
    Ms. Jungman. The majority of the vessels involved in this 
type of activity are not insured by the international P&I 
Clubs. They are using, in some cases, Iranian-insured 
companies, or, in other cases, they are just operating with no 
insurance, which could have dangerous consequences. But in some 
cases, there are vessels insured by the American Steamship 
Owners Club as well as others involved as members of the 
International P&I Club.
    Mr. Loudermilk. Is there some level cooperation of insurers 
to strip the insurance from these vessels?
    Ms. Jungman. Yes, absolutely. Part of what United Against 
Nuclear Iran does is we provide all of these different 
insurance companies with evidence of these vessels transporting 
Iranian oil and call on them to withdraw their coverage.
    Mr. Loudermilk. My understanding is that the Panama 
Maritime Authority flags more than 16 percent of the world's 
shipping fleet by tonnage, and 40 percent of the ships in 
Iran's so-called ghost armada. Are there any consequences for 
Panama when their maritime authority flags or reflag ships 
known to transport Iranian oil?
    Ms. Jungman. There have not been any consequences, but 
there should be.
    Mr. Loudermilk. Okay. I see my time is running out, Mr. 
Chairman, so I yield back.
    Chairman Luetkemeyer. The gentleman yields back. The 
gentleman from Texas, Mr. Gonzalez, is recognized for 5 
minutes.
    Mr. Gonzalez. Thank you, Mr. Chairman, and Madam Ranking 
Member, and thank you to the witnesses who are here today.
    My question is to Ms. Jungman. As you know, the last 
Administration withdrew the United States from the Joint 
Comprehensive Plan of Action (JCPOA), commonly known as the 
Iranian Nuclear Deal, believing that as a singular nation, our 
ability to sanction, we are more powerful than a multilateral 
plan. Now, Iran has expelled several inspectors from the 
International Atomic Energy Agency, hamstringing their ability 
to monitor Tehran's program, which is concerning since we know 
their ability to enrich uranium is growing. In your opinion, 
what is the best way to limit Iran's growing threat to the U.S. 
and its allies? Is it through a unilateral economic sanction, 
secondary sanctions, multilateral sectorial sanctions? What 
would you suggest?
    Ms. Jungman. I think in the case of Iran, the sanctions are 
on the books. They need to be enforced, and they have not been, 
and that is part of the problem. We don't see Iranian oil 
currently going to European countries, so in those cases, 
multilateral sanctions may not be effective, but the sanctions 
that the U.S. has need to be enforced to crack down on----
    Mr. Gonzalez. You think what we have is effective? It is 
just not being enforced, and that is the major----
    Ms. Jungman. Yes, and we have seen it work. We saw it work 
in the past under the maximum pressure campaign.
    Mr. Gonzalez. Thank you. My next question is to Mr. Smith. 
Mr. Smith, Iran has boasted that they are pros at circumventing 
sanctions, and China is on the record for helping Russia evade 
U.S. sanctions. Suffice it to say that we have a problem. These 
entities are funneling money into terrorist groups, like Hamas 
and Hezbollah, through shadow banking places like the United 
Arab Emirates (UAE). It seems that every time we impose a round 
of sanctions targeting the shells or individuals who aid in 
circumvention, China, Russia, or Iran find another way around. 
How do you suggest Congress put an end to this, and how can we 
ensure they make the most impact? I know we have been talking 
about enforcing what we have, which certainly is one way, but 
what other suggestions do you have?
    Mr. Smith. Thank you, Congressman. Enforcement, not to sort 
of beat the drum, is obviously a critical piece, because, 
again, the challenge is not so much the money that Iran has but 
how they are using that money. So, enforcement and surveillance 
of how they are using it and going to these shadow banking 
environments, be it in the Gulf or in places like Turkey, those 
are the places I think we need to sort of engage and make sure 
that they are all aware of what is happening in their systems.
    We had a good experience when I was at Treasury many years 
ago engaging with many of these same jurisdictions, and we got 
good uptake with respect to their own concerns, because at the 
end of the day, the shadow banks are one thing, but the 
jurisdictions in which they live want to be seen as legitimate 
and reasonable and responsible parts of the international 
financial community. So, I do think there is leverage there so 
that they can make sure that they remain as such and not be 
subjected to restrictions or even reputational harm if their 
entire systems are sort of overtaken by these shadow entities.
    Mr. Gonzalez. Yes. So, engage in some of these third 
countries.
    Mr. Smith. Indeed.
    Mr. Gonzalez. Dr. Berg, do you believe lifting sanctions as 
a reward for good behavior and the subsequent threat of 
reimposing them as a means for deterrence is an effective 
strategy?
    Mr. Berg. Congressman, thanks for the question. To 
characterize Venezuela's strategy over the last two 
Administrations, I think the goal was to get to a freer and 
fairer election. Sanctions are just a tactic in that overall 
broader strategy. How the two Administrations have gone about 
it, of course, differs dramatically, but I think that has been 
a broadly-shared bipartisan goal with deep buy here on the Hill 
as well. I would argue that the flaw in the current approach, 
Congressman, is that we gave away too much at the start. We 
gave away too much to get the regime to the table, and now we 
are devoid of any sort of leverage to be able to get them to 
lift those candidate bans that arbitrarily prevent them from 
facing any real opposition in the elections.
    We have a woman who has incredible enthusiasm--Maria Corina 
Machado won 92 percent of the vote in the opposition's primary. 
The opposition's primary drove more people to the voting booth 
than the regime's ploy this past weekend to get Venezuelans to 
vote for the annexation of Guyana, and yet she is unable to run 
for president in the 2024 elections. We have to find a way to 
use our sanctions to make her an eligible candidate. I think 
that is the key to this whole puzzle.
    Mr. Gonzalez. I can't agree more. Thank you so much, and I 
yield back.
    Chairman Luetkemeyer. The gentleman yields back. With that, 
we will go to the gentleman from Iowa, Mr. Nunn, for 5 minutes.
    Mr. Nunn. Thank you very much, Chairman Luetkemeyer, for 
scheduling this timely hearing, and to all of you who have just 
a deep level of expertise here.
    As a former counterintelligence officer, I have personally 
witnessed the shady tactics of several of the regimes we have 
been talking about today and worked to combat these nefarious 
relationships with many of the fellow adversaries we have 
highlighted. Their tactics, as we have highlighted, are not 
new, but our ability to respond to them must continue to 
evolve.
    Today, we hold this hearing to inform policy proposals and 
determine the best course of action to prevent illegal oil 
exports from our largest adversaries. Clearly, the sanctions 
and the oil price caps imposed by the Biden Administration are 
not working, with both Iran and Russia reporting more profits 
from oil sales than before these wars began.
    But let's get started. Mr. Billingslea, I have led a bill 
called the Stop Terrorism and Illicit Finance Location 
Exploitation Act (STIFLE Act), which I am proud to be leading 
with Ranking Member Beatty, and it's attached to this hearing. 
It would require the Treasury to look at the implementation of 
different forms of precise locations of tracking instead of 
relying on traditional IP addresses, which have been used since 
1974, and, as we have all highlighted, are easily spoofed and 
manipulated.
    As we have seen recently, over 98 percent of blocked 
compliance transactions from Iran had non-Iranian IP addresses, 
97 percent for those in Syria, and 85 percent of those blocked 
in Palestine. It is time for the Treasury to start implementing 
new sanctions technology and not continuing to rely on 
something that was last used during the late days of the Ford 
Administration. Given your experience as a former Treasury 
Assistant Secretary for Terrorist Financing, our largest 
foreign adversaries are using sophisticated technology to 
circumvent sanctions that we have discussed today. Would you 
agree with this?
    Mr. Billingslea. Yes. We are not keeping pace.
    Mr. Nunn. Would this STIFLE Act that myself and the ranking 
member on the Democratic side have introduced to lead financing 
institutions to more accurately choose geolocation forms that 
help prevent money laundering by these terrorist organizations 
be a step in the right direction?
    Mr. Billingslea. Your staff gave me the chance to look at 
the bill last night, so I gave it a read. I think it is 
definitely headed in the right direction. I might offer, for 
jurisdictional reasons--I understand the way it is framed. 
Ultimately, I would say, within the Office of Terrorism and 
Financial Intelligence (TFI), you might want to make this the 
obligation of the Assistant Secretary for Intelligence for the 
Office of Intelligence and Analysis (OIA) to prepare that 
assessment. But I would suggest that you may want to then have 
my former job evaluate whether or not the intelligence 
community is following through in providing the actionable 
intelligence necessary to disrupt these activities.
    As you may know, within the Treasury, the international 
effector is the Office of Terrorist Financing and Financial 
Crimes (TFFC.) They are ultimately the customer of the 
intelligence community who needs to furnish much better, much 
more comprehensive lead information on who these bad actors 
are.
    Mr. Nunn. Mr. Billingslea, that is excellent, and I 
appreciate that feedback. It helps us get to the point where we 
are collecting and assessing correctly on the intelligence side 
as then being able to implement effectively on the holding them 
accountable side, which leads me directly to Ms. Jungman.
    Ms. Jungman, I want to speak specifically to this oil 
situation that we have reviewed with Iran. Is it true that 
China is the leading buyer of illicit Iranian oil?
    Ms. Jungman. Yes, it is--72 percent.
    Mr. Nunn. Is it true that Iran's sales have increased 
nearly 400 percent since 2020?
    Ms. Jungman. Yes.
    Mr. Nunn. Is it also true that in the last 2 years, Iran 
has added $80 billion to its coffers from the sale of illegal 
oil that is then transferred to Hamas, Hezbollah, Houthi 
rebels, and other terrorist groups?
    Ms. Jungman. That is correct, and it is a conservative 
figure.
    Mr. Nunn. From that, I want to talk about how the clearest 
challenge that we have is not just stopping the exportation of 
this, but how this oil is being transferred out of Iran to 
these buyers. Is this being provided by an armada of literally 
ghost ships that are no longer being tracked or able to be 
intercepted?
    Ms. Jungman. Yes. They are being transported on what is 
called the ghost fleet, and the ghost fleet got that term not 
because of actual ghosts but because they are using discreet or 
different methods to try to evade the sanctions, such as ship-
to-ship transfers, manipulating their transponders, and flag 
hopping. However, our organization does this type of tracking, 
and if a small nonprofit like us can do it, we believe that 
there are other entities within the U.S. Government or outside 
of that who are able to do the tracking as well and then 
enforce those sanctions on the vessels.
    Mr. Nunn. In fact, from the oldest days of privacy, perhaps 
one of the best ways to go after this is going after these 
insurance vessels. Is that correct?
    Ms. Jungman. That would be correct.
    Mr. Nunn. Wonderful. Thank you, Mr. Chairman. I yield back.
    Chairman Luetkemeyer. The gentleman yields back. The 
gentlewoman from Texas, Ms. De la Cruz, is recognized for 5 
minutes.
    Ms. De La Cruz. Thank you, Mr. Chairman, for holding this 
hearing today, and thank you to the witnesses for being here. 
We do appreciate it.
    At our last committee hearing, a witness provided written 
testimony that, ``Hezbollah earns large sums through drug 
smuggling, cigarette smuggling, currency counterfeiting, and 
armed smuggling, much of which occurs in Latin America.'' As a 
South Texan, the idea of terrorist groups raising funds in our 
part of the world simply is just unacceptable, especially as 
our ally, Israel, battles with these groups.
    Mr. Berg, last year it was reported that Hezbollah 
illegally sent gold from Venezuela to the Middle East to 
finance militias. Can you share with my colleagues and I the 
extent of Hezbollah activities in Venezuela?
    Mr. Berg. Thanks, Congresswoman, for this excellent 
question because we have drawn a lot of nexes in this hearing 
so far between the three countries that are covered. But 
Venezuela has been less addressed, so this gives an opportunity 
to show that Venezuela is part of this pack, just as Russia and 
Iran are part of it.
    We know that throughout the years, there were schemes to 
give passports to those from Iran and from the Hezbollah group 
from Venezuelan officials to set up networks within Venezuela, 
and we also know that Hezbollah is incredibly active in what we 
call the tri-border area in South America, the border between 
Paraguay, Argentina, and Brazil. As you mentioned in your 
question, it is cigarette smuggling, it is drug smuggling, it 
is money laundering, but it is also other terrorist activities.
    We need to remember because it has been a while, but in the 
1990s, there were two attacks in Argentina, one in 1992, and 
one in 1994, one on a Jewish community building, and the other 
on the Israeli Embassy in Buenos Aires. That showed that this 
group has a real capability in South America to actually attack 
physical targets. We need to remember that Latin America and 
the Caribbean is our neighborhood. It is our shared 
neighborhood, and there is a real capability for this group to 
actually perform terrorist acts, not just engage in illicit 
financing and other activities that then send resources back to 
the Levant.
    Ms. De La Cruz. So aside from passports and giving 
passports to these terrorist groups, what are some of the other 
activities that Venezuela created in order to make these 
activities thrive in Venezuela?
    Mr. Berg. In 2016, Congresswoman, the Maduro regime 
designated an area called the Orinoco Mining Arc. It is about 
the size of Portugal in the southern part of Venezuela and the 
Amazonian region, and that is essentially a state-sponsored 
policy of illegal mining, illegal gold mining. And a lot of 
that gold, it is suspected, was ferried out in the cargo holds 
of Venezuelan state-owned airlines, like Conviasa, to places 
like Iran and the Middle East. Gold is obviously very easily 
layered and refined and smelted in a way that can make it 
difficult to track in the supply chain, and we suspect that the 
cargo holds of those planes held many billions in illicit gold.
    So, even if these two countries were sanctioned, and even 
if the enforcement was kept very tight, which was questionable 
as we have discussed today, you have these illicit workarounds 
through things like illicit gold mining which clearly link 
Venezuela and Iran.
    Ms. De La Cruz. Thank you so much for your comments, and as 
I said in the beginning of my remarks, it is simply 
unacceptable that terrorist activities, like the ones you just 
described, go unchecked in Latin America, and that is why I 
recently introduced a package that included H.R. 6589,--I would 
love for you to take a look at that--the Prevent the Financing 
of Terrorism Through the Drug Trade Act, so that Congress can 
get a better understanding of just what is going on with these 
terrorist groups, not only here, but in South America, 
including Venezuela. Thank you so much for your time. I yield 
back.
    Chairman Luetkemeyer. The gentlelady yields back. With 
that, we go to the gentleman from Tennessee, Mr. Ogles, for 5 
minutes.
    Mr. Ogles. Thank you, Mr. Chairman. And thank you all for 
being here. I really appreciate your time. And we are nearing 
the end of the hearing.
    Mr. Billingslea, and Ms. Jungman, I really want to focus on 
the impact that when you look at this triad, in particular Iran 
and Russia, the impact that it has had on U.S. national 
security, but then also in the shadows of October 7th when you 
look at the Iranian cash flows from oil, when you look, even in 
Ukraine, where we are being asked as Members of Congress to 
vote on aid packages for Ukraine. Meanwhile, sanctions aren't 
going far enough, if you are truly trying to come to some sort 
of endgame in the Ukraine-Russia conflict, of really tightening 
down on the Russian economy and/or the funding of the war 
machine.
    Just to recap, Mr. Billingslea, give me an estimated value 
of the oil that Iran exports annually in violation of U.S. 
sanctions.
    Mr. Billingslea. I believe in my testimony, I have the 
volume. You may have a better estimate of the number, but it is 
back up to the levels before we imposed sanctions on them 
during the Trump Administration, so they have gone right back 
to where they were at the end of the Obama Administration.
    Mr. Ogles. And is it fair to say that the monies that Iran 
is generating through the sale of oil is flowing its way back 
into, obviously, the Middle East and around the world, but 
specifically to fund terrorism?
    Mr. Billingslea. Absolutely.
    Mr. Ogles. Would you consider their sanctions against Iran 
and this nexus between the three countries sufficient to stop 
the flow of money and/or stop the funding of terrorism 
globally?
    Mr. Billingslea. It has clearly not been, right? There was 
yet another Houthi attack on a shipping vessel in the Red Sea 
last night. As I mentioned in my testimony, there have been 92 
attacks against U.S. servicemembers by Iranian proxy groups in 
Syria and Iraq since October 17th. By the way, with regard to 
Venezuela, the Iranians have been cultivating a relationship 
there, and with Hezbollah as well.
    The Revolutionary Guard Quds Force general who was 
responsible for arming the Houthis and training them on drones 
and ballistic missiles, before he had a heart attack, started 
traveling to Venezuela. And by the way, those drones and those 
missiles, if they are ultimately supplied to the Venezuelan 
regime, will have South Texas in range. So, this is a huge 
issue for us, and the Iranian regime is largely now 
unconstrained and unfettered from a resource standpoint. They 
have gone right back to where they were after the JCPOA was 
enacted by the Obama Administration.
    Mr. Ogles. Again, we saw that there is a silver lining in 
the attack on October 7th in that it was just one of the 
terrorist groups in that neck of the woods, so to speak, versus 
the Houthis and some of the other rogue actors in that 
neighborhood. That being said, as we move forward, whether it 
is Iran, when you look at a holistic package of what we have to 
do to make the world safe again and when you look on, again, 
that front of global terrorism, what do we do next, and how 
quickly must we act to prevent the next 9/11? I will give you a 
chance to jump in.
    Mr. Billingslea. We need to come down incredibly hard on 
the Iranian economy, and we need to support the protesters who 
are still there protesting for their rights. This is a regime 
that is the foremost sponsor of terrorism in the world, and 
they will not change their spots under any circumstances.
    Mr. Ogles. Ms. Jungman, would you like to jump in here 
rather quickly?
    Ms. Jungman. Sure. As we have all talked about, enforcement 
of sanctions is essential, but I would also like to add that 
funding support to the Homeland Security Investigations (HSI) 
Office would also be essential. The Iran Sanctions Enforcement 
Act would provide seed funding for HSI to be able to do 
physical interdictions of these vessels carrying Iranian oil, 
and that reinforces the effectiveness of sanctions.
    Mr. Ogles. Mr. Chairman, thank you for this hearing, but I 
just want to point out that there is a clear connection between 
illicit finance, the three countries that have been the topic 
of conversation today, and ultimately linking back to Israel 
and the horrific attacks, the terrorist attacks that took place 
in that peninsula, and when you look at our Southern border, 
which is wide open, when you look at the Syrians and Iranians 
that we know are now in this country.
    In this room, in one of the hearings in this room, there 
was testimony that we know that there are terror cells 
operating in the United States of America. We know that there 
are Iranian assassins operating here in the United States of 
America, and that is solely the responsibility of the Biden 
Administration, solely the responsibility of this open border 
and their lack of commitment to truly, truly shutting down 
illegal and illicit activity. Thank you, Mr. Chairman. I yield 
back.
    Chairman Luetkemeyer. The gentleman yields back. With that, 
we are out of Members asking questions. I do have a quick 
comment, and I have a question as well here.
    A headline that I was reading this morning talked about how 
there was an explosion at an Iranian oil refinery--Mr. 
Billingsea, I don't know if you are aware of that, or if any of 
you are aware of that--and that all 18 refineries were 
destroyed. What kind of effect would that have on Iran's 
ability to market their oil if one of their big refineries goes 
up in flames?
    Mr. Billingslea. It would have a substantial effect.
    Chairman Luetkemeyer. So, they don't have dozens of the 
refineries, so if they lose 1 out of 5, it is a 20-percent hit 
to their ability to export oil?
    Mr. Billingslea. Yes, sir.
    Chairman Luetkemeyer. Wow. That same article talked about 
ghost ships and some of the problems in following them, but in 
this article, it talked about some of the ships that are being 
targeted by this group, and it is amazing. The ship was flagged 
in the Bahamas. It was a Bahamas-flagged ship, that was leased 
to a Japanese company, from a British firm that was partially 
owned by an Israeli businessman. I can't follow that. How does 
anybody else follow that? If that is the kind of layers they 
use to to protect this, to have ghost ships, to be able to 
cause us to have to go digging and digging and digging to find 
stuff, it is amazing. I don't know if you want to comment?
    Mr. Billingslea. Mr. Chairman, having been also the Deputy 
Under Secretary of the Navy, I can tell you that Naval 
Intelligence follows these vessels very, very closely. In fact, 
when I was at the Treasury, I went out to the Office of Naval 
Intelligence and gave them an award for the help that they were 
providing to us. I routinely had to go to Panama and furnish 
them with details of vessels that they were flagging. Yes, they 
would de-flag them, but they weren't going to look on their 
own. They really just aren't that interested. W need to make it 
their business to care about not providing flags of convenience 
to both Iranian and Russian vessels.
    Chairman Luetkemeyer. Do they make more money when they 
flag it?
    Mr. Billingslea. Oh, yes.
    Chairman Luetkemeyer. Okay. So, there is a monetary 
incentive here as well?
    Mr. Billingslea. Yes, sir.
    Chairman Luetkemeyer. Ranking Member Beatty, would you like 
to jump in?
    Mrs. Beatty. Yes. After the chairman shared that, I just 
read the article as well about the 18 refineries, but it also 
talked about, and I don't know how to convert this, the 1.5 
million liters of oil. That just sounds like it could be 
devastating to them, and, as I think Ranking Member Waters 
talked about, how the prices could go up then for us here, and 
that all of this is interrelated. So, we have to be very 
careful because we know what happens in our economy when, 
across the United States, we start hitting $5, $6, or $7 per 
gallon.
    Chairman Luetkemeyer. Very good. Okay. I would like to 
thank our witnesses for being here today. It was a great 
hearing, and you all did a great job of articulating a lot of 
information for us. We thank you for that.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    We ask our witnessed to please respond as promptly as possible.
    With that, the hearing is adjourned.
    [Whereupon, at 11:48 a.m., the hearing was adjourned.]


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