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tv   Key Capitol Hill Hearings  CSPAN  July 9, 2014 12:00am-2:01am EDT

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this was the fourth nighttime oversight hearings of time -- so far this summer. it's an unusual practice for the staffers are hinting it could become the norm. the navy times writes the staffers are already planning more late hearings for the office congressional research recess. we've been asking for your comments about the hearing on facebook.com/c-span. kenneth writes as the u.s. army veteran i'm not happy at all with the recent stories about the va. finger-pointing and negative remarks are not going to fix this mess. it's about time somebody stands ustandup to the federal governmd its corruption. a comment from paula think these people for all of their courage and willingness to put themselves at risk by telling the truth. and the last one just one more
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example of the bureaucracy of the government. so many levels of management and no one does anything. president obama is requesting a nearly $4 billion of emergency funding from congress to address the influx of children coming across the u.s. border. here's more about that. >> the administration has requested $3.7 billion of emergency funding from congress for stopping some of the influx of children dealing with the situation along the southern border with mexico. laura is with "the wall street journal" and writing about the story, what is in the administration request to congress? >> a lot of the money is to house the children and families crossing the border. that is where the crisis has been. a huge influx created children traveling alone and adult traveling have come across the
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border. and in each of those cases there are sort of special needs for housing them and the administration is not able to handle right now and that is what a lot of the money would go to work. >> the white house proposal puts the president in an awkward position. the liberalization on the laws of the white house did anything out of this request that they wanted to get even before all of the crisis started? ..
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>> some say that it should be offset with other cuts and for the most part it it was open to the republican leaders as well as the other individuals like terri reid. however, there is a competition here which there is another piece of the request which is not funny for a change in law.
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and what that would do is handle weighted they have unaccompanied minors and right now the law dictates how the sponsor works and how the situation unfolds slowly create so i can take years. and that is not the way the kids from mexico or from canada are handling it. those cases are expedited. and what the white house is doing is working with them to change the law. and that is much more controversial. it. >> a couple of weeks, it has to do with the obama deportation
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policy and terms of the surge of children. so how quickly will make its way through congress. and we are talking about this and it's unclear what will happen in that house. the chairman, republican of kentucky and it is something that should the house -- the house should be addressing. so this could move quickly, however, if republicans try to attack this obama request of a version of a to change that 2008 law, then that will good complicated. and they tend to act very
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slowly, but this is a situation where i think people from all parties viewed as a true emergency. >> you can follow along. laura, thank you for the update. >> did you for having a. >> the white house has requested $3.7 million of border security. on our next "washington journal", we will talk with arizona republican congresswoman about border security challenges. we will also talk with the migration policy institute as well. and pitchforks are coming and you can join the conversation on facebook and twitter.
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>> 40 years ago, the watergate scandal led to the only resignation of an american president. american history tv revisit 1974 this weekend, here the supreme court oral argument over the recordings. >> the president may be right on how he reads this. but he may also be wrong. and if he is wrong, then the president, of course, is free to pursue his course of erroneous interpretation. >> sunday night on c-span3 on
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american history tv. the state department officials and the former hungarian ambassador to the u.s. testified at a senate hearing about european dependence on russia for their energy supplies and how it has affected the diplomatic reaction to russia's annexation of crimea. chris murphy was part of a recent delegation to talk to officials about the situation. he chairs the two-hour senate foreign relation committee some hearing. >> welcome, everyone, to this hearing. this is not a new topic for this committee, the annexation of the crimean peninsula, it has brought a new sense of the and also focused to this debate. and we are happy to have two great panels are today.
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myself and senator johnson wille givem some brief rocks and wel,t stll give you the summary ofreme their marks and then also have our second panel of experts. russia's status as a regional power is commensurate only to to th russiality to blackmail and threaten europe.ut we have imports of about 30% of its gas and 35% of its oil, contical decision-making is dictated in part by the reality of running a continent and how we are supplied by one unpredictable neighbor to another. the question is how much longer real will your approach with the reality and work in the united states to and the strategy
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proposes action to increase europe's own energy production and decrease demand, and pursue or noble energy alternatives ant it's supplier countries as well. the strategy is admirable. but in today's hearing we will ask whether there is politicall will or the funding to implement it and whether and we also want to know how non-eu countries,onu like the ukraine, fit into the u plan for energy independence. wl and we will principally examine what role the p can play.is is a this is a complicated issue. and it makes sense to examine what will the united states
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natural gas can play in weaning your above of w russian gas.th . and even when the united states will leads, there is a question as to whether we are want tocaid area and we have the increase of this as well. struck hen i and it struck me what comes to leadership when it comes to globalue leadership security ane let meni now recognize senator i'd son for t his remarks. >> i would like to thank the witnesses, first of all, for your thoughtful testimony.ugh
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and mr. chairman, i come from business backgrounds and there'p been strategic process. you have to recognize thet reality of the situation once you have done that coming out achievable goals. and once you do that to me develop a strategy shot at it because it looks like that's what you want to talk about is let's recognize what the reality of the situation is, if we're going to talk about russia, we first have to recognize what gives vladimir putin power is his oil and gas resources and europe's quite honestly growing dependence on those. so let's spend a lot of time talking about the reality of the situation, then let's start talking about what are achievable goals and what are the priorities in which we need to address those possible achievable goals? thank you for holding this hearing. look forward to the testimony.
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>> no overly excessive introductions here. we're very happy to have two administration witnesses with us. our first panel is amos hochstein and hoyt yi, denty assistant secretary of state for european and eurasian affairs. both of your written statements will be included in the record. please summarize in five minutes. we will be joined by other members of the committee. as always, a busy day here. thankful for your testimony. why don't we -- amos, why don't we start with you. we'll go to mr. hochstein and then mr. yee. >> thank you, chairman murphy and ranking member johnson and members of the subcommittee. i appreciate the opportunity to be here today to discuss european energy security during this critical time. the department of state and the administration as a whole are committed to improve europe's energy security and we're working closely with our partners in this effort. let me begin with an update on
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the energy crisis in ukraine. ukraine has been negotiating with russia and the european union to resolve the issue of price, debt, and future payment for ukraine's gas imports from russia. russia, unfortunately seized supply of gas to ukraine on july 16 showing little willingness to continue negotiations until ukraine pays off its debt. the situation is urgent. while production is sufficient to cover summer demand, without russian gas, ukraine will not be able to meet its consumption needs when the heating season returns. although the united states is not party to the trilateral gas negotiations, we are working closely with ukraine and the eu to identify solutions that will bring an end to the current crisis and make the ukrainian and eu gas supply system nor resilient in the system. eu energy commissioner, his cabinet and dg energy have done an incredible job and we are in weekly contact with him and his staff as well as with the minister of ukraine on this issue. looking forward, part of the answer for ukraine's energy
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security is its integration into the eu energy market. before it th integration can happen, it's essential ukraine reform its energy sector. if it does not, if corruption and inefficiency continue along with crippling energy subsidies for consumers, ukraine will be right back where we all started just a short while ago. we're working to develop and implement programs to increase efficiency. our bureau at the energy resources bureau at the state department is overseeing products to boost gas production from existing fields. we're also working to build the government's capacity is manage the implementation of production sharing contracts for unconventional gas production and development. to address energy efficiency, the program is designed to enhance ukraine's energy security as well as reduce and mitigate emissions resulting from the poor use of energy resources in ukrainian
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municipalities. fortunately, flows of gas through ukraine to europe have not been impacted yet. russia and ukraine have both promised not to disrupt transit and the short-term impact of this cutoff has been relatively small in europe but that is because it is not in the gas intensive heating season and because we've just gone through a relatively mild winter so stocks are unseasonably high. but it's critical that countries with storage capacity use these summer months to aggressively increase their supplies. we're working with the department of energy as they coordinate an evident to assist the most vulnerable countries to assess contingency plans in case of a shutoff. mr. chairman, the lack of immediate alarm in europe cannot lead us or the eu to become passive in addressing a long-term solution. while the media and others have focused on energy security in europe only for the last several months, as you stated in your opening statement, this committee, the congress, and the administration have been working on this for quite some time.
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as early as the late 1990s we were heavily engaged in negotiations that made the bct pipeline a reality despite the skepticism of experts who said the oil would never throw to european markets. our european energy security efforts intensified after russia cut off glass supplies to ukraine and european customers in '09. we've intensely focused on energy security in europe advocating energy diversification particularly in central and eastern europe. we work hand in hand with the commission and with our other allies and energy envoys in eastern and central europe. in fact, we just returned from hungary and croatia last week. energy diversification is critical. it includes having broad fuel mix and diversifying the roots and the sources of imports. russia will and should remain essential player in the region as a producer and as an exporter, but alternative
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supplies and additional delivery roots will promote competition. without u.s. engagement, the southern gas corridor would not be on the verge of becoming a reality. we agree with our european allies on the critical need for europe to improve its energy infrastructure by constructing new pipelines, upgrading existing pipelines, upgrading interconnecters, building newl ng terminals. we applaud the recent announcement of the hundrgarian interconnector. lithuania and poland are completing their terminals. a proposed terminal on kirk island in croatia would bring in supplies from the south. with the completion of reverse flow from hungary, co-asia could become a gas import hub. hungary can provide an important link for alternative gas supplies to ukraine from
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croatia. and when we were in croatia and hungary last week, we ern couraged the two countries to work more closely. we're working with our colleagues in the eu to advance in infrastructure buildout and we support the efforts to identify and help fund the most critical projects. we also commend them for their legal reforms. the passage of the third energy package that made sure that regulatory frskt was in place to make sure that destination clauses were not crippling their own energy security were put in place and now is the time to make sure that they are implemented. as vice president biden said in budapest, the development of secure, diverse, and interconnected energy market in europe is the next big step for our european colleagues to initiate in a great project of european economic integration. thank you, mr. chairman, ranking member johnson. i welcome your questions. >> mr. ye e. >> thank you, chairman murphy, ranking member johnson for
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inviting us to testify before the subcommittee on european energy security and for the personal interest you have taken in this issue. the ukraine crisis has demonstrated security has multiple dimensions. vulnerabilities can come in many forms. the threat of military intervention, the danger of over dependence of energy from an unreliable and at times hostile neighbor or the cancer of corruption that weakens institutions and undermines security and sovereignty. russia's provocative actions in ukraine have reaffirmed the continued importance of territorial defense. in response, all nato members have reaffirmed our collective commitment to preserve security and territorial integrity in the nato area. the united states has led in this effort. we've deployed 750 troops to estonia, latvia, lithuania, poland, and romania. we've stepped up our fighter jet deployment and maintained a continued naval presence in the
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black sea. as the president announced in poland last month, we are seeking congressional approval for $1 billion of european reassurance initiative to build on our current efforts. just as the united states has strengthened its presence in the region, each of the other 27 nato allies has committed personnel and resources to nato's reassurance efforts. in the run up to the nato summit in wales, we are encouraging all members to sustain this demonstration of aligned solidarity and to reverse the worrying slide into defense budgets. the united states is working hard with central and eastern european countries and the european union to shore up energy security. we've been working to help ukraine reform its gas sector, increase energy efficiency, develop domestic sources including shale gas production and integrate more fully into european energy markets. we're also working with our european allies to increase ukraine's access to gas through reverse flows.
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at the same time the ukraine crisis has given new impetus for countries across europe to step up efforts to diversify their energy sources and supplies, boost storage, develop networks of interconnects and reverse flow capacity. as we work with our european allies, the united states is devoting greater resources to fight corruption in the region. in the wake of the situation in ukraine and russia, it is time that we treat corruption as a threat to national security and sovereignty. corrupt elites and oligarchic interests are reaching across international boundaries to support each other. they hollow out border security and military services leaving countries vulnerable and exposed to outside interference. that is why we are empowering our embassies to work with governments, civil society, and the business community across central and eastern europe and the balkans to develop tailored action plans best suited to local conditions.
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multilaterally, we are addressing corruption in the g-8, the g-20 and the oacd. we're reporting regional law enforcement and we're encouraging all of our european partners to ratify and implement the u.n.'s convention against corruption. our national interest is vested in a europe. which countries are confident their borders are respected and secure. their access to energy is reliable and ready, and their government is transparent and accountable to the people. we remain to work in a bipartisan manner to achefer these objects. >> thank you to both of you for your testimony. mr. hochstein, you talked about the things that ukraine needs to do in order to reform its energy markets. this is the most energy inefficient country in the entire region and i'll direct the question to you but happy to have mr. yee respond as well. the reforms they need to need take are dramatic and the
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effective of those reforms done too precipitously is perhaps too destabilizing in a country that doesn't need much more instability. the vector between what gas prices are today and what they would be without the subsidy is enormous. the amount of money they have to spend on reengineering this wildly inefficient soviet energy architecture is essentially almost a rip down and build back up proposition. so, how do we ask ukraine to do this without requiring them to spend money they don't have, and impose price increases on citizens who are right now looking for reasons to be confident rather than angry at their new government? >> mr. chairman, those are great questions, and it's a very difficult task to do. but it must be done because if we don't as i said in my testimony, if we don't reform it, if we just pour money into
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this and make sure there's reverse flows and gas comes in, as i said before, we are going to be back at this problem right, you know, again very shortly. this is an opportunity, it's a moment in time for ukraine to walk away from its past and part of its past was a highly corrupt, inefficient system that kept using instead of using energy as a resource for stability and security, it was the opposite. and so we can take this moment in time and as you said, not dramatically tear it all done and build it back up in a moment -- during a crisis but put in place some fences around the energy sector so that it is free of corruption. that you can always do. to start talking about the subsidy reform, not as an overnight bring it to marketplaced pricing but see how to do this effectively to begin that process. how do you look at the entire apparatus of their energy sector so that it reflects good
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management? and if we can do that, and make it open and transparent and effective an efficient, we can reduce their cost over time because efficiency rates go up. second, they won't get further into the hole by having the subsidies drag them down. third, they'll encourage new investment of international oil companies and other parts of the energy sector worldwide to actually be interested in investing in the sector. fourth, they'll be able to see growth in their production levels. their natural gas production levels can be much higher if they use new technologies and a modern way of doing it and work on the unconventional side. if we put together a regulatory framework that understands how to do the shale gas exploration in a safe, secure manner, we can bring in the foreign direct investment into that, grow it and at the end of the day have additional gas sources of their own to contribute to the new
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reverse flows and new energy diversification to do elsewhere. in addition to bringing other forms of energy so that the system is more resilient. so for that i agree it's hard to do it all at once. you have to be careful about it. i think that's what we're trying to do. >> mr. yee, talk to me about how europe thinks and talking about this issue. you know, we're encouraged by developments like the third energy package which recognizes the immense problem allowing gasprom to control the transmission. for every step faurds there's step backwards. there's some openly opposing and the way they're conducting their business, a country like germany who just this week announced that they're moving forward or passed. i can't remember. new legislation that will effectively end for the
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foreseeable future any potential of developing their own shale gas. there's often seems to be a lack of urgency in europe about this question. a lot of talk in brussels. but then not always corresponding action at the individual member state level. >> thank you for that question, mr. chairman. i would agree that there are different voices that we're hearing in europe about the specific remedies and measures that need to be taken to address problems of energy security and also ukraine's particular case of energy security. one thing, though, that i think all the members of the european union, all the countries that i deal with in europe share is a desire for energy -- an energy diversification, the desire for less dependence on single sources, less dependence on russia so while they might disagree on the means and some of the measures and the time frames, there is a general consensus on the need to do
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something to increase energy security through diversificati n diversification. one thing we do here is an interest in developing alternative pipelines, alternative routes. we may not always agree on which are the best ones but we have a discussion with europeans, an open dialogue on the need of alternative routes, alternative -- in addition to alternative sources so the countries which are most directly dependent on russia, most dependent on russian gas, for example, might be the less -- might be slightly less eager to talk about discontinuing south stream or routes that we feel may not be commercially as viable or in the long term best solutions for europe, but we are having success in discussing with europeans the need to diversify, the need to devise alternative sources. >> germans have openly been the
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most skeptical about sanctions on russia with respect to action in ukraine. they are in the process of dismantling their nuclear fleet which is a big part of energy independence and diversification. they're making a commitment against internal energy resources you should their ground. their potential for rather large shale deposits they're going to leave in place. it's very hard for the eu to move without an active germany on this questions, and what is your feeling about specifically the german government's commitment to leading when it comes to some of these questions of eu energy security? >> thank you for that question. our sense is that certainly germany understands its responsibility as a leading economy and a leading -- a leader in europe and european union and the need for them to
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show leadership on the issue of energy independence. i think the difficulty of a consensus reflects the different situations of the european union members each of which has an own set of challenges. we are seeing from germany an interest in discussing with us, discussion with the commission on ways to find solutions to these problems. certainly, in its approach to russia, recently chancellor merkel in her meetings with foreign minister lavrov and with the french foreign minister have made clear expectation that there has to be a -- there has to be some progress in ukraine and russia's approach to ukraine's -- to the situation in ukraine. we also have discussions with the european commission together with german and european members on how we can factor in all the different challenges, all the
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difficulties that european union members face, whether it's an over dependence on the gas or geographical limitations on what can be done in terms of alternative routes. >> senator johnson? >> secretary yee, in your testimony you mentioned corruption. when senator murphy and i went through poland, ukraine, romania and bulgaria, that was an echo of the situation. the legacy is corruption throughout the yeern european nations. in the visit of poland, i think our sense was probably made the most progress in terms of limiting corruption and i think probably doing better economically as a result of that. i want to talk a little bit about romania because i think we were both impressed with charlie butler there or butcher and he arranged a meeting initially
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with us, our first meeting in romania with the chief prosecutor general of corruption laura kovesia. incredibly impressive and courageous woman battling corruption in romania. we don't have an ambassador for romania. the term was basically coming up. the administration at all addressing that situation? because i think the only way romania proceeds in terms of reducing corruption is to have a strong u.s. presence continue to put pressure on the romanian government to certainly protect miss kovesia and can you speak about the administration's plan for american representation to romania? >> thank you, mr. ranking member. yes. the administration is working to identify an ambassador for romania. working as quickly as possible to identify the right candidate.
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we also agree with you, senator johnson, that dewayne --- butchs doing an impressive job and need an ambassador and working to get that in place as soon as possible. regarding the prosecutor and the overall effort to fight corruption in romania, american leadership has been critical. i think our good relations, working relation with the government and even when we disagree with the government of mr. ponta is such that we're able to express concerns, objections. when there are steps taken by officials, business people, business people that are clearly in violation of romanian law, in addition to international rules and principles. so, we have that frank dialogue. we are able to do that with a very strong embassy team there. i think we need to continue to do that. it helps when members of congress visit the capitals to reinforce the message that we
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take corruption very seriously, not only as a matter of economics, or of moral principle, but as a matter of national security. >> and until an ambassador is appointed, has the administration considered reappointing or asking mr. butcher to stay on? >> he'll complete the tenure this summer. there's another sar shay affair and take over by the end of the summer. >> okay. i'm sure senator murphy agrees with me we don't want to see a void there in romania. it is important we don't do that. mr. hochstein, you were talking about developing shale gas in europe. do you have or does the u.s. have any estimates or europe in terms of the oil and gas potential is if they were willing to exploit it? >> yes, senator. we work with country that is are interested. and as chairman murphy talked about, when he used the example of germany, it's a very -- it's
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a country by country. it's every member state in the eu has a very different perspective on different resources including shale. we had worked very closely with poland, with ukraine, with romania and we're working with other countries that are interested in pursuing that. we help identify what the shale resource is using their own resources and the u.s. geological survey to identify what the levels and what the commercialality is of those resources. >> so can you share with me or the committee what those resources? what are the estimates? can europe be more independent if it were only to, for example, do fracking? actually exploit their shale gas reserves. >> so again, there's always a difference between what the estimates are and what it becomes in reality. if you look at poland as an example, there's published estimates that were quite high. several companies, international
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oil companies including large american companies went in. the results were less -- were more disappointing. some have already left as a result. some have remained so we have to see as the drilling begins and see what's happening n. crew yan we're working with them on putting some of the frameworks in place for further exploration. they are interested. they're already companiesmania . i was there just before the senate delegation was there with vice president biden talking to them about pursuing their unconventional resources as well as their offshore resources so in short i don't have the figures in front of me. it's something i can send to your office for you to see what our estimates are. some places we don't deliver those publicly. but we are working with any country that's interested in doing it and we have a program at the state department, the unconventional gas technical expertise program that specifically putts together that framework for countries
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interested. >> you know, to the best of your knowledge, the company that is went in and subsequently left, did they leave because the oil and gas resources weren't there? too expensive to leave or corruption or some combination? >> it was not the issue of corruption but the resource. >> okay. can you speak to me a little bit of spot pricing versus oil indexing pricing and the affect it has on the situation in europe in terms of gas? >> europe buys its gas by pipeline from some of their suppliers. and they can buy l & g and bring in as liquefied natural gas through other ports. they have long-term contracts and there are spot prices. the long-term contracts that they have with russia, for instance, been renegotiated a couple of years ago. some of them are coming up for renewal. the price in europe has
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traditionally been relatively high. it's come down over the last couple of years. part of that is because of the shale gas revolution in the united states and other market dynamics around the world. prices settled now on the $10 to $12. but it's also because there's been fuel switching in europe, as well. there's been a lot of switchover of gas to coal and with a mild winter in a region that uses gas primarily for heating, that reduces the need for gas, as well. so a variety of factors come into the pricing. i wouldn't want to suggest there's one specific cause for pricing but clearly if they can improve their infrastructure, interconnection, so it's not just about getting the infrastructure to bring the gas into the continent but rather for it to flow across from country to country. if you can upgrade the infrastructure in romania so there's a flow across border, if you can bring in connections from croatia and hungary and the
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interconnections happen, you can have an integrated market for gas to flow and help with price and help with stability and security. >> and i know i'm out of time but let me follow up on this. would moving toward spot pricing be a net negative or positive for europe? >> probably a good question for my colleagues and friends to testify on the second panel. i wouldn't want to speculate on that. i think that i have learned in this job that speculating on price in oil -- >> are you seeing a trend one way or the other? in europe. movement towards spot, away from oil indexed? >> you know, i think it depends on when you ask the question. asking me last year, i would have had a different answer about what the trajectory is versus now. the events and how we see events happening in the next few months, shaping up, you probably will see a change but i reserve those to speculate. >> thank you, mr. chairman. >> senator sheehan. >> thank you. thank you both for being here.
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the eu coordinated a number of policies to address particular issue that is have come up. for the eu as a whole. but it's my understanding that energy decisions are still made on a state by state basis. is that correct? and can you talk about how these bilateral energy agreements have complicated the ability to get a collective energy strategy for the region? >> senator, you're right. there is a direct commissioner for energy, commissioner integer but it's still set at the member state level. that -- there's the second issue you raise is bilateral agreements. it is true people talk about europe's dependency on russian gas. there's a two-way street.
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there's a gas market. $50 billion a year gas market and they have almost very little infrastructure to support exports outside of europe. with those facts, one would normally think that this would give the equalize the leverage and that there would be a negotiation position based on the consumers in europe on that purchasing power. but because there's been a bilateral agreement for each country, that's weakened that position. and that's because countries are reluctant to allow a single central eu to negotiate price. that issue has come up in a proposal by the prime minister of poland who has suggested to have some kind of energy union where they can negotiate collectively with russia. that's a very controversial issue in europe. there are a lot of different vies on that. i would just note that if you did make decisions centrally in europe, it would have impacts beyond the negotiations of agreement and also impact some of the things that chairman
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murphy talked about a moment ago and that is what do you do about nuclear? what do you do about shale gas and different views. if a decision was made centrally in europe on fuel sources and what should be allowed, approved and banned, that could lead in a different direction, as well. so, there are pluses and minuses to that idea but on the negotiation side of agreement there's no doubt that there would be a ben in it. >> well, given the recent events in ukraine and russia's response, does that not provide some added impetus to try and encourage more unified action in the eu? >> i think that, you know, you look at when's happening in ukraine and its ill pact on europe and the impact themselves are very different in different countries. if you're receiving your gas through ukraine, you have a different perspective than those of russia through other means, through other pipelines. and the level of dependency will change your attitude. it's certainly changed -- caught
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our attention after the 2009 crisis when in january 1st ukraine's gas supplies of russia cut off and then january 9th the rest of europe or the rest of europe through ukraine was cut off. we have been trying to get and working with eu colleagues to act as though there's still a sense of urgency to be able to diversify. the third energy package that's been mentioned was a result of that 2009 crisis. we think that it would be a mistake not to take advantage and to seize the day and seize the moment of this crisis to move forward on implementation of a number of issues specifically on the infrastructure side but also on coming together as a region and cooperating better. >> well, that's the way we sigh it but i guess what i'm asking is do we think the europeans see it that way and what has been their response? >> i think it's hard to say the europeans in this case because, again, there's different regions. i think there's by and large as
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was said there's a european conventional wisdom they need to work on energy security through diversification. what exactly diversification means changes, though, and this goes back to senator johnson talking about reality based. some countries view diversification in a different way, not just diversifying the sources away from russia but the routes of getting the gas from russia. hence the discussion on south stream and some countries see if i can get the gas from russia through a different mechanism not dependent on the relationship of ukraine and russia, maybe that's the solution. doesn't solve the problem but there's a difference of view there. >> well, one area where we know everybody could benefit is energy efficiency and my understanding the eu will be meeting in october to unveil new energy efficiency goals and a framework to attain them and i wonder if you could talk about what -- what we think will be coming out of these talks and whether the member states will
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be able to accomplish the goals from those talks. >> thank you, senator. yeah. i don't want to presuppose what they'll say and announce there. they did have an aggressive efficiency rate target for 2020. 20% by 2020 and projections are they're not going to quite hit but come pretty close. i think they would like to look at extending that and look at specific measures that would address efficiency. as you said, it's the easiest way to save a dollar is through efficiency. ukraine has one of the worst records in the world on efficiency and we're very much focused on that but the eu needs to focus more internally. they have done quite a bit already and may miss the target but we're working with them to understand better how they think they can achieve that and to see if we can be supportive in that. >> and can you talk a little bit about what the obstacles are to -- because this i think we
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are in agreement that efficiency is the first fuel, right? it's something that is the cheapest, fastest way to deal with the energy needs and why is this something they would not embrace, that all member states would embrace? >> i think in the idea level, they all do embrace. it's in the implementation of putting the rules and regulations in place that will allow for it to happen in a manner and enforcing the rules and regulations there and more of the challenge and i think part of this is is looking at how can you put this in compliance, put in place a framework and rule that is will actually deliver the results they want. it's spotty and some countries they have achieved more than others. and therefore, when you look at the eu wide decision it is important to get the rules in place so that everybody can implement it efficiency. >> what can we do to help with that on the efficiency front? >> so we have a number of
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programs that we work with individual countries, again, we don't it through the eu as a central mechanism but through individual countries to look where we can. we have committees with the eu through the u.s. eu energy counsel to look at efficiency standards. there are some great lessons learned here from the united states that we are able to export. they have some of the ideas of their own. and looking at how we can cooperate with our experience to benefit what they're trying to achieve but there's a lot of work being done and happy to send some things to your office for the list of programs we're working on. >> i'd appreciate that and i'm sure if congress would pass energy efficiency legislation that would be a good model to share with them. would you agree? >> i'll follow what congress does with great interest. >> thank you. very well said. >> i just have one additional question for the panel. again, maybe directed to you, mr. hochstein.
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senator markey is not here for his sermon on what the export of natural gas will do to prices here in the united states, but let me ask you about what the market barriers are to u.s. natural gas reaching europe. the administration's quick to remind us that they're approving licenses here as quickly as they can and others are quick to remind us that there's only 25% of capacity being used currently at european term nols and there's another 35-plus terminals that are scheduled to be built. so with respect to the market, what's the barrier that's -- that would stop potentially licensed u.s. natural gas exports from ending up in europe? >> senator, to be honest, i think you answered your question very well in your own question. at the end of the day, we have provided license -- granted licenses over 90 bcm of gas
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already. these are company that is actually have to now build the infrastructure here in the united states so that they can export it. price plays a big role in this and if you look at what the henry hub price is today, where european prices are, add what you need to add for transportation, regasification, liquefy case to henry hub, to the price and that will often dictate where this gas will end up. for profitability purposes -- reasons. i don't believe that it matters, though, where the individual molecule from the united states will end up. even if the gas goes to asian markets, the idea is that american gas will come on to the international market which will adjust itself and free up gas that was destined for the markets where american gas came and will make those supplies available now to europe. so even if it's not a contract that's directly signed between an lng facility in lithuania or
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elsewhere in europe, it doesn't mean that there's no impact of u.s. shale gas or gas exports on the european market. we've already seen that effect simply by no longer importing the great volumes that we used to or the great volume we were projected to import and those already by being freed up from the u.s. market to europe and to asia had an impact on price in europe and even led to the ability of countries and companies in europe to renegotiate contracts in the last two years with gasprom for the first time so i think it's really not a matter of a direct contract between those end points but rather affect the market as a whole. and i will say that as i say to my european friends and colleagues when i travel there and complain about natural gas exports that the best way to do that is have companies in europe noeshlt contracts with american companies or operators or distributors here in the united states.
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they're already gas that's contracted for india, japan and others. and that's probably a better way to do it than think about just a governmental control of it. >> and as i do think and i hope you will point out the curious position that europe continues to be in which is to ask voluntary rice rously and aggressively for u.s. shale gas and then totally unwilling to develop their own resources and happy to receive the resource of the united states and very unhappy to develop their own resources. i get it that they have the ability to make sovereign decisions about what domestic resources they will and won't exploit. it's not necessarily hypocritical position. but it's curious to say the least. >> mr. chairman, i rarely miss the opportunity to raise that iron yi in my discussions. >> further questions for this panel? >> might be hypocritical. i just want to go to nuclear. my understanding is france
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generates about 75% of its power needs through nuclear power. is that largely correct? what is the activity throughout the rest of europe in terms of developing nuclear as a clean energy alternative? >> again, changes from country to country. there are a number of countries working on nuclear energy. hungary is looking to expand it current nuclear. czech republic been in a lengthy process to identify through the tender process to identify a company to build and expand nuclear power. that's hit some stumbling blocks in the czech republic. bulgaria is working on it, as well. so there are country that is are working on expanding and promoting nuclear energy. there are others like germany that decided in the wake of the fukushima disaster to go the other direction. we -- when we're asked for our opinion in europe, we clearly say this is something for each
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state and country to make their own decisions. we are -- we believe that nuclear energy should be part of the mix but that's something for sovereign state to make their own decision. if they so choose to go in the nuclear decision and make it part of the mix, we are fully supportive and we believe we have companies here in the united states the best in the world and we believe that it's probably going to be a good decision for energy security for each country to have as many clean energy options as possible. >> what does europe do with its nuclear waste? >> i don't have that information in front of me. again i'm happy to get that to you, sir. >> you were mentioning the impact on price just u.s. importing less oil and gas. can you give us some -- put some figures to that trend? >> we today are not yet a net -- we are not a net exporter yet of natural gas. we will be i believe it's by
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2016 we'll be a net exporter of natural gas. we today still import some gas and on the oil side, we are far from being independent as people like to say. we still import significant amounts of oil. however, we have reduced our imports quite significantly down to the 30% range. and that has a lot of our gas we get still from the hemisphere and from our region with some quantities coming from saudi and elsewhere so we're in a much better position. i cringe sometimes when people talk about energy independence in the united states. i think that self sufficiency is something that we can strive for. independence suggests we are immune to the market. and a disruption anywhere in the world and with everything going on gee politically today in the world would have a great impact everywhere around the world including here. if you look at the crisis in iraq and what happened in the days after when the prices
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spiked around the world, they spiked here in a commiserate bay a way. we are susceptible to the market and calls for direct, aboutive leadership and engagement in the world in the oil markets and engaging diplomatically with countries producing hydrocarbons. >> okay. i appreciate that answer but what i was really looking for what happened to the price in europe when we ended up importing less oil and gas. i actually want some numbers. i'm not an oil and gas expert. >> causeality is always difficult to address directly but when the extra volumes in the united states came on the market, prices at around the same time came down from in the 14, $15 range in europe down to the $10 to $12. recently dipped lower than that in europe range for natural gas. so that -- that's where you can see the price differential.
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>> and current prices -- so current prices is about ten? >> in europe, in that range, yeah. >> and the u.s. it's -- >> in the u.s. today it's natural gas, $4.30 around today. >> i've heard arguments on both sides if we were to export more, that would lead toward greater exploration and build pipelines to capture some of the gas and flaring, wasting. what is your or what is your administration's viewpoint in terms of if we did increase more exports, what would actually happen to the price of gas? >> well, as far as the administration's concern, we have -- the department of energy approved a fairly large amount of natural gas for export so i think that tells you what we think about that. >> no. it really doesn't. >> no, i think that we looked at the department of energy commission studied and did its own studies on the economic impacts of exports. and determined that it would not have the exports it's already
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approved would not have an economic adverse effect on the u.s. price. it could go up some but not have a terribly adverse effect. so -- >> so you basically would be disagreeing with what senator markey talks about in terms of dramatically increasing price of gas to export more? >> if we believe there's a dramatic increase in price we may be more cautious of and approved so far in the licenses and that is why every license that comes -- that is -- that is submitted for approval is looked at through that lens of what would be the impact on the united states? so so far, the quantities which are large that we have approved we have not determined to be -- would have a detrimental effect. >> in terms of the affect to have on vladimir putin's calculation, even though it wouldn't come on stream immediately, i come from the business world where i do believe the customer is king. customers ought to be more in
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control of the pricing levels versus supplier but we haven't developed the structure, haven't had the competitive environment to cause that. do you believe that just that signal alone would change or help to change vladimir putin's calculation in terms of his long term control over that marketplace? >> i believe that russia and others around the world already have internalized the effects of what the shale gas boom here in the united states has done and that we are -- that we no longer import the levels that we have. we will be a net exporter. i think they have understood that and factors in and had an important effect. >> mr. yee, let me ask you. i'm calling it putin's pause. i have actually been appreciate the fact that he's not sent, you know, overtly more support and looks like ukraine is having some success at stabilizing the region, certainly getting, you
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know, stabilizing some of those cities. do you have any explanation for that? do you know what he's thinking? >> i think it would be very risky to try to get inside vladimir putin's brain and to explain what he's thinking. >> let me just ask. sta depart? ..yeah. ..i would say that it's not a complete surprise that in light of some resolve on the part of the international community in standing up to what russia and russian proxies are doing in you yan, in addition to some bold military action, security action by ukrainian government and security forces, it should not be a great surprise. if we're talking about the recent days. since march, i think there's been a cumulative effect with measures led by the united states and nato showing that we
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are absolutely committed first and foremost to the article v commitments in putting forces, additional forces on the -- in the front line states, new ukraine, in applying limited sanctions against russians and ukrainians who are undermining ukrainian sovereignty. i think it is reasonable and it's actually -- it's predictable that there would be some pause on president -- >> what's this administration's specifically done to help ukraine militarily as they're trying to grapple with their security situation? >> well, we have as you know, senator, a large package of assistance that we have provided to ukraine both in terms of assistance to the government and the immediate needs for shelter, vehicles, emergency equipment. we have provided nonlethal assistance to the military. >> what does that mean? specifically, what types of
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equipment have we provided? >> we are talking about cars, vehicles, basic equipment, nonlettal equipment that the military needs to perform. it is what we feel comfortable providing and what the ukrainian forces requested from us. i'm not saying it is all that's going to be necessary. we're not in any way predicting this is the end. this pause is somehow the beginning of the end. i think we have to be prepared for a longer effort and continued resolve on the part of not only the united states but its allies. but we have provided assistance, a large amount of assistance both in terms of the humanitarian assistance to the people of ukraine and also assistance in terms of efforts by nato and its u.s. and its nato allies in putting troops on the ground, putting additional
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planes in the are as well as a naval presence in the sea to show that we are determined. >> thinks mr. chairman. >> thank you all for your testimony. one last word on the representation. let me join with senator john thune. we need an ambassador of romania this is a country that has great reason to feel imperiled by the russian aggression, and i appreciate some of the work that is being done to make sure that we need an ambassador. it's incumbent to those that have caused their plan to buildd a new nuclear technology that is transformational for the czech republic but also potentially for the united states should they win that big it is hard if we don't have an ambassador on the ground we have the chance to confirm that were a good one. this week, next week if the
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senate acts on that. when it comes to making sure that we are fully staffed the responsibilities both the administration to move faster than it has in bringing the ambassadors to us and for us to move faster than we have once you bring them to us. thank you both for your testimony. we will set up the second panel now. [inaudible conversations]
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[inaudible conversations] [inaudible conversations] welcome to the second panel senator johnson is going to return in a few minutes. let me introduce you briefly and allow you to make a brief
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statement and then get to questions. that was a great first panel and dozens more questions we could have asked to direct them to you. the ambassador is a managing director of the transatlantic relations at the school of advanced international studies at johns hopkins and he previously was the hungarian ambassador to the united states and nato and continues to be for the strong transatlantic relations. next to him as mr. edward lucass the senior fellow contributing editor at the center for european policy analysis and also the senior economist for the commodities and natural resources. he's one of the foremost experts on russia and having covered that region as a journalist for 25 years also a number of very good books as well as other topics. next to him is brenda schafer who is on sabbatical right now for the university of israel
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currently visiting researcher center for eurasian and east european studies the professor is the author of numerous books and an expert in the field of energy security policy in europe and turned mediterranean energy issues. last but not least, we are very pleased to have with us the senior fellow in the energy national security program at the center for strategic international studies he has decades of senior level experience working in the energy industry and has advised the u.s. government corporations international financial institutions on energy and investment matters and he is widely respected by both sides of the aisle and we are pleased to welcome him back to the committee. thank you all for being here mr. ambassador why don't we start with you to try to leave your summarized comments to five minutes and then we will just run down the line.
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i want to thank you for inviting me to this very important discussion and i'm honored to be part of the discussion. for much too long there is any disconnect between europe and the united states when it comes to energy. most tend to think of the country to destroy the planet and a commonly held view in america that europeans are just a bunch of tree huggers. both are extreme and wrong and it's been all of our interests to overcome the divide the sooner the better. the revolution that has changed the landscape with an unexpected turn in the last decade it is a reality and it isn't going away. europe should have embraced a long time ago. europe to the energy security first as the integrity of its critically of life hinges on it and the last thing, the solutions cannot be built on ideology. it's for too long taken its
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energy supplies for granted and baked on the breakthrough in tho renewables industries technologies which has not happened. the captains of industry in europe or in france were among the first to signal the european leaders the challenge they face with an unrealistic and ideological approach to the shale technology. the european positions are changing. europe is considerably weakened without the common energy policy. a good sign is the voice of pragmatists in the parliament pt and the commission are getting considerably stronger. but i have to agree with senator murphy there is -- this movement is way too slow and i would agree that germany is the key and i have a lot of questions about which direction germany is going.
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the recent crisis in ukraine as a wake-up call. russia is using the dependence on suppliers and coerce the countries and taking positions against transatlantic interests. since 2009 europe has reduced its overall dependence on russia but for the most vulnerable countries the person pitch climbs from 80 to 90% and energy has become a top security challenge for them. europe is divided on how to deal with russia. russia is actively influencing the energy debate. by implementing the organizations and leading public figures and sophisticated strategy there is no consensus on the threats and challenges that russian policies in which energy is perhaps the most important tool. the majority of your opinions of the u.s. will continue to see the issue of energy security of its allies on top of its
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strategic parity. they are expected to dispel worries if energy independence while result and turned away from european regions on whose security the supplies depend. lng from the u.s. to europe has a strategic message with the transatlantic relationship and besides making economic sense it would create jobs and both sides of the atlantic. the transatlantic cooperation john result in a more courageous energy mix in europe that should include all sources including shale and nuclear. europe needs to support the building of interconnect i inted important facilities to make sure that the u.s. becomes an important factor and the u.s. private sector should be actively engaged. we need to use all opportunities to save the energy agenda including through the transatlantic trade investment partnership process and the forthcoming nato summit would
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deal with the issue and by inventing the euro 82 u.s. european dialogue cooperation of energy sometimes we feel that is a bit too slow. we must lead the international effort on the future of the arctic sometimes on a neglected issue. finally the united states and europe need to get serious on the common research on alternatives. the projects that enforce the transatlantic cooperation also hope to be ideology with the u.s. approach to the climate change. i hope the congress will find a way to upload the government to issue the expert licenses and a sufficient number for the u.s. lng to make a difference under an allied energy security act in the wild this will not have an immediate impact it will not solve the problems on the energy security and it will be a very important political method. it would send a political
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message it would send is intelligible and especially the method sent to vladimir putin. by the way i hope in the course of the debate you will ask me what is and ahead of blood america to ten when he stops short of invading the whole of ukraine that we might discuss better at another time. what is at stake here in conclusion i would say is the cohesion and resilience of the democratic society i feel the united states must lead. it is an honor and a privilege to be here to talk. i've got some written testimony which i summarized briefly. i would like to think the ranking member johnson for the opportunity. european security really matters in the united states. it's the lawyer just trading
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partner and a force multiplier. it's the most important ally and europe is under attack from vladimir putin's russia in ways we haven't completely understood because we tend to compartmentalize things. this is a diplomatic problem. all of these things mixed together you have business to organize crime come energy, military force all overlapping and interlocking. as you refer to it as a revisionist path and i think that we have understood russia is trying to tear up the u.s. security order and that is what they did with their invasion. it is less understood and russia is also trying to tear up the energy order. as regards the stability to be the assessor as an accidental threat because vladimir putin's part home and abroad depends on the energy markets particularly
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through the gas exports and european union has been doing a good job to stop start with the energy package and the interconnector is i's in the ste and things like that. and as you saw in your visit he is very keen to push ahead with a head-on challenge to the energy order and he has managed to get the countries now lined up and that's pretty bad so this affects more than just the conventional military thing. russia has the means to be revisionist. maybe it is a declining country but it can still do a small amount of damage. it's not just of the military buildup that we have seen in the willingness to use force which gives us an edge over the european countries that basically don't want it.
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she's able to use the energy weapon over a period of years to constrain europe's decision-making ability. they have the supplies to the gas and don't want to offend russia. they feel vulnerable. it's also used for the money that spins off on energy and other things to foster the economic lobbies of people in the direct business interest in having the political relations which is in the netherlands and in britain where the city is the largest for the russian money and it's a strong pushback in britaiimpression that we try too things that might offend the russian government. it is something we have neglected that i would be happy to go into that i that into q-a. russia has the information against the west in the sophistication and intensity that we didn't see in the cold
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war using the techniques of the social media and all sorts of things against us. and of course they are also willing to use force. they were put on hold what would have been potentially devastating response to russia just a complaint. if anyone had told him in 2005, 2006, 2008 the officials would be kicking down doors and going to affiliates all over europe seizing documents and computers and building up the compelling pictures that could lead to hundreds of mandated changes in the business model and it
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wouldn't have been pretty and that's what happened. you've got to the stage where thethis stage wherethey have tht the kremlin. we need to do all sorts of things. we need to deal with the military dimension on the border pre- positioning and all that sort of stuff. it's a vital part of the picture and i'm glad you touched on that. even before they arrived in the term that hasn't been deliberate yet they were able to drive a much harder bargain to get a bigger and much lower gas prices. so anyone has to see the infrastructure not just in the business terms and national security terms and from the plaintiff view from europe and the american export licenses
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already granted and that has been in the model explained. but finally to touc did touch oe market reform. russia accuses the marks and the trading companies. a lot of this stuff is very difficult to write about publicly because i returned my written testimony to the economists we were sued by somebody that isn't on that u.s. sanctions list. this deserves the full attention of the american criminal justice system. you have all sorts of money market abuse inside the trading in all sorts of other stuff that goes on. you have the ability to clean this up and the more open and transparent the better everybody else is into the sea for europe will be. i will stop there.
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the 21st century is the era of natural gas and the poll was the dominant -- the 21st century in a 19th century coal was the dominant and natural gas have benefits in the low environmental impact and low carbon emissions and the other energy sources. natural gas is a fuel host compatible in the renewable energy as a base load power generation. the supply of natural gas more challenging than any other fuel source as the natural gas physical property gets complicated and expensive to ship consequentially there is a greater need in the coming decades to ensure the supply to the natural gas. a number of measures can improve the natural gas security. first, policies should focus on improving the security supply and units vulnerable markets.
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the states on the perjury of a higher energy crisis and bigger challenges than those in the west and center of europe. the europeans endorsed the security strategy recognizing the nature of the situation in europe. natural gas sectors organized the supplies be a technical havl glitches from natural disasters or extreme weather and one of the biggest challenges to the natural gas supply in the recent years have been in the winter of 2012 due to the extreme weather. next the united states and europe should make sure they get their natural gas sector in order. he unpaid gas were legitimate russian concerns and they are the major.
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there is a disregard for the payment that provided the subsidies that encourage what the runaway gas consumption. this behavior in dangers the security supplies to europe. additional natural gas supplies can also improve the security supplies in europe. the most promising source of gas in europe is the southern gas corridor. beginning in 2012, this project will bring natural gas from azerbaijan. the project is the first in decades to bring new volumes into europe and not just the route to the existing volumes. the project reaches the specific market of southern europe and is relied on in a single source and has a multiple. the southern corridor can facilitate the increased volumes of gas from different sources such as iraq and eastern mediterranean and those discovered in the region. they can be built to an additional market in europe.
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as her beja made a strategic choice to sell its gas to europe and sent to local markets that would have been a more profitable and they've noticed the strategic choice. this project needs continued eu and american supertype sure they have undermined the route. to stabilize georgia and four to the development of the gladiator gas corridor. the interest resolving the conflict is important for removing the potential means for russia to destabilize the region. and other potential to the source of natural gas in your brothers from israel. a stern mediterranean is a modest source and left additional discoveries were found but this can be very useful for the region itself. and the ability of the resources to serve as peace pipelines are overstated. energy trader reflects the peaceful relations and it doesn't create them in fact the energy resources are commercial conditions can exact a political
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conflict in the path results them as we have seen so recently in europe. as a source essentially to remove the water shortages in the region. it's already increased the the r supply to israel, jordan and we are moving this conflict it would also be a reliable affordable electricity in this part of the middle east which is very important as a basis for future prosperity and hopefully for peace. in recent months there's been speculation that the program was reached and tehran could serve as a supplier of gas to europe. today iran is rather surprisingly the importer of natural gas and also fed by the subsidies and inefficiency at
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home. if they try to launch the project in europe russia with block it and many issues despite being a semblance of the allies the competition between iran and russia and the natural gas export. throughout europe from the moscow based sophisticated policies to continue the role as the dominant energy supplier in europe and walked to the indigenous production efforts in europe and supply projects area for instance the moscow sponsors and bogus movements to impose shale gas production and the new gas project. professional government analysis should identify the sophisticated organizations and companies as they utilized to project the tax status for the organizations that receive funding in moscow. in addition, they should investigate the use of the european and russian companies that make via alliances with
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russian companies in the behavior. another mechanism moscow could exploit in the trade hub in europe is encountered. washington and brussels should clarify to nato and the members that belong to these organizations that it entails also obligations to protect its energy security. they are reluctant to the policies intended to improve its own security supply are particularly worrying. up until this year they've been pulled out of the business of ensuring energy security and delegates to the job of the invisible market but the market pace alone will not be enough to encounter the relentless russia. the institutions must take a more active and strategic role and the united states should support this. thank you. >> chairman murphy, ranking member, i am honored to return to testify on the european energy security and infected the ongoing crisis in ukraine.
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when it comes to energy security for europe, we focused mainly on the natural gas supply. it is interesting to ponder why when europe is more dependent on oil imports ban is on gas imports. there has been major global oil supply interactions in the past year providing gas yet it is much higher than with oil. why? the root causes or in part are t related to incomplete market integration in europe when it comes to gas and electricity. the gas market has been dominated until recently by the long-term contracts at fixed volumes with prices index to oil. players restricted the competition and the free flow of gas with the control over pipelines. these business practices which supported not only by the major foreign suppliers such as the gas but also by incumbent european gas companies that
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control the distribution networks in their home countries and pass on the high cost of gas through the consumers. consequently the markets and the gas and electricity distribution infrastructure are not well connected for the suppose it on the market. so what can the united states do to help our european allies and trading for as? the first point to be made is that we have already done a lot indirectly through the gas plume. since the united states no longer supports the increasing volumes as it is expected, the supplies became available for the western world. despite the lasting nature of the phenomenon, they were forced to me t meet at the market by adjusting downward all of its major supply contracts under more flexible pricing terms. as a result, european imports of the gas increased by 13% last year, half of which transfer through ukraine.
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the western facilities are currently operating at very low utilization rates. even if the u.s. lng exports were available today, they wouldn't be imported by europe by east asia with gas prices are about double the european crisis. when the united states against export the volumes of the lng in a few years, its benefits to europe lies not in the quantities that it might receive, but in the future price formulations in the global gas markets. international gas prices may no longer rise and fall with prices in different regions converging as a result of u.s. exports. the competitive advantage the revolution provided the u.s. economy with lower gas and electricity prices covered with greenhouse gas emissions has also caused europeans to re-examine their energy policies with renewed efforts for the market liberalization enforcement of competition rules
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and rethink the use of domestic energy resources. in the meantime the crisis in ukraine caused by the russian action presents a present danger for the energy security. the risks are disproportionate by central and eastern european countries since they rely on russia for almost all of their gas exports -- "-end-quotes much of which go through ukraine. ukraine's weak and corrupt sector creates severe vulnerabilities for itself and its neighbors. the previous ukrainian government left the current government with mounting debt to russia. this event and the failure to agree to the new gas prices are the cut off of the supply to ukraine on june 16. ukraine depends on russia normally for 60% of the gas demand and is the major record or the gas exports in europe. in neither case are there substitutes. if they are already deleted injections into the strategically located western
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ukrainian storage facilities it doesn't begin soon ukraine will run out of gas before it starts better. if nothing changes, the ukrainian government will be left this winter with a choice of either letting its own population three is or taking gas destined for the markets for its own views. if russia's intent is to further destabilize ukraine and to prove to europe that ukraine is an unreliable transit partner than it is in russia's interest to prolong the negotiations. the remediation hasn't led to any results. the european gas market is surprisingly complacent about the situation. smart gas prices have dropped significantly although the gas storage capacity has risen its not as high as it could be. the risk of miscalculation as high. meanwhile russia is pushing its gas pipeline which would bypass
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ukraine altogether as an alternative supplier to europe. as someone market bubble with the commercial negotiations, i instinctively questioned the economic negotiations brokered by the political leaders. i would note they mediated the gas negotiations and it has become serious when the negotiators stop talking to the press. long-term sustainable economic transactions cannot be based mainly on the political conditions that tend to change as we discovered with the russian ukrainian gas deals in the very 2006 come april, 2010 and last november. raising matters to the highest political level as europe has done only invites russia to make political demands such as accommodation of the occupation of crimea is hoping to further western economics engines resulting in the aggression against ukraine. the only real solution to the
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crisis in ukraine is the strength in ukraine. the president and the foreign minister and the energy minister all observed firsthand and up close the blunders made by previous ukrainian government on energy policy. the businesbusiness as usual isr an option. concrete policy action is required and we have seen precious little so far. what needs to be done for the energy sector reform as well known because the missing are the political will and professional and financial capacity to execute reforms in an orderly and systematic way. reform depends on the ukrainian leaders. true reform in the western assistance if they are to be successful. as long as ukraine is weak it is an open invitation from the russian opportunism and aggression and the constant source of instability in the heart of europe. neither ukraine or the west would have another chance better
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than the opportunity created by the current crisis for the energy reform created a situation cries outhesituation n leadership working closely with europe and the community. by injecting the resources with strict conditionality the policy must be informed by the sound analyst is not wishful thinking forward by hard work. thank you. >> thank you all of you for your testimony. it would undermine the faith in ukraine. in my mind there are three possible outcomes you can add to them. one is the one that you would suggest that would undermine the european faith in ukraine and compromise and enthusiasm
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alternately with nato. second, it could increase enthusiasm for the alternate routes of gas to europe. but it could also be a tremendous wake-up call the straw that breaks the camels back in terms of prompting europe to do the things truly necessary to become much more energy independent of russia. why is the third -- why is my third alternative not as plausible as the first two? >> i hope you're right, but i think you were sitting in russia's shoes europe got a wake up call in january, 2006 when gas was cut off to ukraine. it got another wake-up call in
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january, 2009 when the instant of a three-day cutoff they suffered a three week cut off. they've done little so far with the steps i've already mentioned. it's response to the invasion of crimea as well as the adventurism is that eastern ukraine has been relatively weak and is united. i guess it is a power game to get into vladimir putin's head. but from his standpoint of the way that he sees it and he may be miscalculating is the time is on his side, not europe or ukraine >> let me ask that same question of the other panelists. does the prolonged crisis harm ukraine or russia more with respect to the future dynamics over the membership or the
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future continued reliance on the european energy? you had your hand up first so i will go to you. >> europe frequently gets calls and then goes to sleep again. the question is the timeframe. the previous crisis stimulated quite a lot. we do not have the -- we have all that storage that would reduce the monopoly power. and this means that we are, we would have about three months before it would start and that is quite nice. but in terms of the sort of stuff that you were talking about to make a difference, we are talking years. if we stop right now in five years time we could have a
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resilient energy capacity and lots of storage and in her connectors handle this sort of stuff. but the gap between the three months and five years is what russia does is they can scare politicians just like here we have a fragile recovery and the politicians are desperate not to have stuff that is going to harm the growth in jobs and so on and the energy and direction, they worry about this confidence. that is a powerful weapon they just have to threaten this stuff and we already start thinking of ways to try to make this go away rather than try to win it. >> they set up a perfect strategy against europe because it is still flowing to europe and in fact the only way is to disrupt the supply to europe or
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for future commitments. so in the long run as winter approaches they are put against europe. i would say if you look at the previous response to the crisis it is in north street meaning building a pipeline directly from russia to germany that circumvents the states and so began you might see the answer being south stream or there is another alternative. while the energy package is great in terms of the principles and in a very perfect world where the lawyers run all of the gap trades, it's very nice but i think that in the reality of the russian behavior as it has been pointed out whether the manipulation in the gas price they are the biggest trader in the gas hub, so of course they can flood the market and to deny the market and really affect the prices. i think what we need in europe is a paradigm change. they base it on the american
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model which is what you have for the market today that they've done a great job increasing the security that the u.s. has been able with hundreds of gas producers were the largest producer in the united states has 3% of the market an and eure has three gas producers which three of them are external to europe to take completely differencompletely differentgame timeshift. when we grew up we called it a utility not something you just trade. when you think of it as a public good it is a more public involvement. >> may i add that i do think what is at stake is a competition of two systems comee liberal societies and the idea that putin is going to use the time before we get our act together over the liberal ways
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of running the society. and i must say that the signs that you've encountered in bulgaria is exactly this. he is targeting the weakest link within the alliance. one of the big problems is not directly related to energy but that the perception of the russian threats is very different in western europe and northern europe and what we see eastern europe. in eastern europe i think i am really worried that russia with multiple tools in the toolbox with putin using energy and all kinds of other tools to influence the eastern european countries that he feels was a once parone's part of the influd it's just not fair if they are not won on the other side.
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>> i will save my other question for the second round. >> you asked for a softball. what is putin thinking? >> i think what putin is thinking right now is the first of all he says michael was to destabilize ukraine enough so that it is definite that they will not be part of the western institutions, the european union or nato. this was the first call. he has achieved that and he is going to resort to all kinds of names when tha the moment comesd it looks like things are too smooth. i think for now he is totally satisfied with running to crimea and i have no doubt at any moment he could switch and we
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would be back to a lot of trouble. the fact that we don't see him present in eastern ukrainian conflict at this moment doesn't mean he isn't fully in control of the insurgencies. >> he thinks that he is winning. >> i agree. i was always in support of the strong sanctions. hopefully the targeted ones that were really painful to putin, not us. we talk about them being a double-edged sword. i want to stop talking about them because i thought it was a delay action they were not going to be implemented and they had no affect. when we were in poland and i don't want to identify the individual telling us this, that we have since confirmed
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apparently 10210 russian patrols 35% of the wealth. certainly being from the outside in hearing how effective were top leaders denying them access to their banking accounts into that kind of thing was the most effective sanction. why don't we target those 10210 individuals in russia that rely on the west for their wealth dispersion and that kind of thing. >> i can't agree with you more senator. we are looking for the kind of magic sanctions and there are not such things in every country has something to lose because russia has done a good job building up the vulnerabilities and dependencies. but in these sanctions and asset
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freezes they are a powerful weapon. we have laws against money laundering in the country and in my country and your country that things are supposed to know the customer before they start taking deposits. so how is it possible for people on their modest official salaries and their sons and daughters and wives and parents and all the rest of it are coming into putting tens of hundreds of millions of dollars in the payment system how is it possible they were allowed to list them on the stock exchange wednesday peace date remember russia i as the five biggest company dismembered the invited the assets and $80 billion of the western shareholders money goes down the tube. and this company that is effectively taking the property is allowed to list on one of the oldest stock exchanges. how is that possible? gold rush and distanc rush and a great slogan which is the powers
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that bpowersthat be in force yo. the last is iconic and i think we should start by enforcing our own law and we would be amazed at the scope. we had to stop with these people. the terrifying thing wasn't a secret police. it's the angry russian woman. and if these people going home at night for finding their wives and grandmothers and daughters saying we can't study were shot in the west anymore. because these are sanctions applying to us that would really hurt. >> doesn't it also threatened them when they can spread their money around the world? i wouldn't want to be an oligarch in russia. the first thing they do is they get passports, citizenship and the swiss citizenship. they move their assets offshore and diversified because they realize what a mess russia is in. we have a wonderful opportunity there. >> mr. ambassador, do you want
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to -- >> we know there is much more grumbling in the inner circles of putin about the sanctions then meets the eye. >> so let me ask why don't we do it? >> of that, i don't know and i think that putin thinks he can count on the divide between -- >> so we are showing more weakness play into his hands? >> i think so. >> what is the eu thinking by not dropping those charges come in not revealing to the public what they found in their investigation, what is the eu thinking? what would be more perfect, you know, totally directed sanctions to a certain extent when putin is invading crimea and threatening to eastern ukraine, could be more effective than that? what are they thinking? >> in a way it was too perfect. it was seen as an enormous escalation of the response when both the conventional wisdom which ivy league is wrong in this country and in europe as we
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need to find an exit round. we don't want to escalate this & the massive task forces in the black sea. we are trying to apply the very judicious and moderate sanctions and raise the cost and give him a chance to back down in launching this week with a length of the kind of near cruise missile straight to the kremlin that wasn't seen i think that is wrong. i think they will always hope there will be a political solution to this end they have said again and again, don't go down this prosecutorial role. we have agreed to start doing some stuff and maybe pay a little bit here and there but we don't want to be public. and i feel that that argument has begun to bite and i think it is a great pity and it would have been a wonderful thing to see this prosecution and i begin to wonder if we are ever going to see it. it was hoped it was going to be in this commission that it looks
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at the moment that it will be part of the next commission. we don't know what the makeup of the commission will be. >> thank you. i will conclude my next round. >> using twice to think russia is winning. so i want to pursue that rather simplistic rendering of the geopolitics. so if it is a level of testosterone and bravado, he is winning. if the measurement is the respective approval ratings of putin versus obama, he's winning. but when i look at other mac tricks it's hard for me to understand how he's winning. he has less friends now than he had before. former republics are climbing over themselves to sign association agreements with the european union and are only stopped by a legal tactics and
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invasions. his economy is in recession for two straight court is likely of negative growth and massive capital flight and thinks that won't do any business with them. no longer a member of the g8 he's not an international pariah but he has less influence than he used to. we are having a debate about how fast you that is going to move away from russian energy, but i don't think that there is any debate as to whether the next ten years will see more or less reliance distressed at what pa pace. so if he has less friends and his economy is in worse shape he's been kicked out of international institutions and his reason for existence being an energy supplier to europe is in peril. >> that is a bit like saying first i don't completely agree
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with you. it's a bit like saying to tony soprano doesn't it bother you you don't have any friends and he says i have lots of money and the people who need to be scared of br suing his terms he thinks this is great. a few years ago, couple of years ago he was in trouble in russia because exactly the program hasn't worked and diversified structures and he was becoming a bit of a figure of ridicule and the opposition was doing well. he's kind of distracted the russian public opinion to these. and you are absolutely right to companies like kazakhstan and georgia and so on and even belarus is kind of of wallowing but he doesn't care about that when he needs them to do something he can make them do it. he has more influence in western europe than he ever dreamed of.
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the atlantic alliance is weak and the success of the divine strategy has been pretty impressive and you won't have to look at the way the countries are signing up. the enormous sort of way that we are seeing right now there are a range of things that must make him think the sun is shining. >> she doesn't necessarily want to be seen when in. he wants to win meaning while we are debating ukraine and energy at this time he' the same time g other things, he's biting the thing what he wants is a long-term influence within the european union and within nato and so in that sense i think in a way he is winning. he's not winning in the sense
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that we consider that he is winning in the sens investmentsn world he is going to gain a foothold that will be difficult to counter if we are not very careful. >> that is an important distinction because i don't care if he thinks he's winning according to his terms we have to conduct our business according to our understanding of winning and losing and what benefits us and what is to witho determine that the security interest. let me turn the topic to another more specific issue, and that is this intersection of production and transmission. when we were in romania there was some very positive to discussion about the ability to move romanian resources into moldova save for the fact that
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russians owned a controlling stake in the transmission lines inside of moldova. so all of the work that was going to go into moving the product to the border was potentially for not because it was still up to russia. the third energy package speaks to this in trying to separate the two. but how important is the control of transmission to the russian energy hegemony and what are the process prospects to dislodge a control and is there anything that the united states can do about that? i'm asking this to the panel. using the most eager to answer. >> this is crucial. senator murphy, thank you for the question because it is crucial in a sense the third energy package created the opportunity to get its hands on the transmission systems because
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the producers or others and distributors can't own it so you think that it's gone for sale and also the financial crisis and a number of other countries in the region have the privatization transmission system so this has given them incredible leverage. so at the southern quarter we've made a decision to go through southern europe and go through on the route of greece and albania and italy and suddenly we see a sort of strong because small company propaganda by the transmission system that is increase. they are quite aware this is a way that if you can't actually, you know if you can't beat them with the stream at least try to buy a chunk from within. something has to be done because the third energy package will enable this kind of behavior and not the opposite. we see for instance exactly as you pointed out and as indicated that russia is constantly taking payment for gas in the national infrastructure. in january they lost the last
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stake in the gas transmission infrastructure became the gas power of romania and in the end, this might even be more hurting the state independence then actually the gas supplies so this becomes an actor in the local economy, and di gives it a lot of leverage on the major financial forces domestically in the country. >> your thoughts on this question? that i would support what doctor schaeffer said. the idea of piling up that in order to have a debt equity swap later is a long-standing russian business model since the collapse of the soviet union that happened inside russia, and it applies in boulde in moldovas well. the reason that it is controlling the equity is for all of the gas that moldova goes to the gas including, by the way, the gas that was back actually utilized and not paid for.
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so, this is quite a common practice by russia. the leverage that on the paper could be applied is the fact that these countries including moldova and ukraine by the way are signatories to the un energy community treaty. and they are supposed to comply over time with the energy in the european union that has been observed mainly in the breach in the case of both ukraine and moldova up until now. but this is certainly something from within the power to police overtime. it has chosen not to do so for reasons that my european colleagues may know more than i do. >> senator johnson. >> i want to go back to the issue of winning because i think it is crucial point. if we don't understand what the objective of our adversaries are
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i don't believe putin is acting rationally from the standpoint of improving his economy. i agree this is not long-term in russia's disinterest, but it's in the best interest of vladimir putin. i think this is all about vladimir putin and about his power and his control. mr. lucas in your testimony you talk about when we expanded nato we didn't even draw the contingency plan in the military defense for the new members because we assumed that russia was a friend. now, we all hoped that. i would hope at this point that russia was a friendly rifle that they are nobutthey are not a fr. they are an adversary and i hope they do not become a full-fledged enemy. so mr. lucas i want to ask you again, what do you think is vladimir putin's goal personal personally, but is he in this for? >> i think first of all, lots of money to be honest. and second, i think that he wants to weaken the west he
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doesn't think we are a threat to him so he wants to corrupt and coerce europe and he is doing it pretty good job of it. i think that he worries that successful countries on his borders might get his people ideas. we i think quite wrongly in the european union thought they would be happy if we could make ukraine into a success story. we thought that it would be nice to have a large successful while prosperous law abiding free abie press and contested elections and so on and this would be a great thing for russia. and i tried again and again to explain to the european officials that if we try to make success out of ukraine that is the next potential threat and we act very strongly. they said we don't believe in geopolitics. i said that they be leaving you. >> that explain further why that
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is an existential threat to pretend. if they have access to agile democracies could the western leading lacking production or reduce corruption and his citizens are seeing that in ukraine is that the reason for the front? corruption. his citizens are are seeing it in ukraine. is that the reason? >> yes. if you have tens of millions of people consuming russian media and a culture of oh debate and inquiry, they will touch russia and russians watch that. he needs to be able to tell russians that my way is the only way. nothing else works. >> threaten his control. when i first made my trip to the region. they were all talking aboutow

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