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tv   Key Capitol Hill Hearings  CSPAN  July 15, 2014 3:00am-5:01am EDT

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again, the next distinction, right, we're talking criminal versus civil so on the criminal side you have the probable cause warrant side to the third party. that would be referred to as the target. on the civil side there is no warrant authority. remember, this side over here, life, death, limb, children, women, all the scary words go over here. money and white collar things and, i don't know, other kinds of fraud goes over here. so, there are emergency exceptions for when someone is missing. there are emergency exceptions for which someone is getting hurt. that is taken care of. the law enforcement has agreed that makes sense. but if we want to find out stuff about you, like, i don't know, who's your affiliation as an
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organization when you file your tax status? just reads e-mails. i mean, if you look at some of these things that this -- having the ability to circumvent the target and subpoena the third party, a civil agency, what kind of door that opens and what kind of authority that gives the executive branch. what kind of authority that gives an independent not to raise the fcc, maybe your favorite is the epa or the consumer protection bureau, i wouldn't know. but this wouldn't apply to just one of these agencies. it would apply to all of them. not just federal ones either. this would apply to state ones
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as well. let's talk about local law enforcement that can read your e-mail now. now, with the private act that is in the house right now, the section about warrant -- warrant for content, that congressman poe was talking about. there's another bill, straight up warrant for bill for content. those are good to go. if there are changes, now, we aren't good to go. it becomes worse than what the law is now. >> actually, indicating both, there are kind of a dizzying array of bills throughout. some for content. some about geo location specifically. what bill or mix of bills do you guys see as moving the ball farthest? or just which of the ones are the best prospects right now? and which are less likely to
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move? >> so, if i could jump in on that. i think the ones with the best prospects are the ones that are straight up, warrant for content, right now. and the reason i'm saying that is it's a relatively simple concept. it's been well debated on both sides the house judiciary committee has had a couple hearings. though they haven't yet moved a bill. the senate has had hearings and has moved a bill. but once, actually, the other piece of data that i'd like most like to protect, vocation information, it's not yet right, particularly at this point in the calendar to have that come up. too many hypos will come up. so if i had my druthers, it would be that the yoder-pollis bill in the house. 220 sponsors as katie was saying, straight up warrant for content, the bill advances. it's the counterpart bill that
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went through the senate judiciary committee. just to respond to one of the questions that was asked of representative poe. the question was, you're doing e-mail, what about all of these other ways to communicate, you had asked the question? he covers those other ways to communicate because his bill goes to all content. and content is defined as substance meaning or report of communication. so it doesn't mean kind of the electronic structure, if you will, it's all content. he's covering all of it. it would be a warrant required for all of it. >> just this weird puzzle of saying a facebook message, and e-mail, sort of function exactly like an e-mail, does it matter if it's called a facebook message? >> no. >> it doesn't travel like the vertical. >> no. >> actually, since greg did bring up location, one of the things that i find particularly troubling is the growing popularity of, i guess, cell phones, but what are called tower dumps. where police don't necessarily want to go and say, we have a
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suspect, we think he did the crime. we want to confirm that he either was or his cell phone was or wasn't at the scene. but, rather, we have three robberies we think were committed by the same person, give us every phone that was near each of those three locations and we'll look at anyone at all three locations. obviously gathering information about people's locations that is not particularly sufficient for any of them. is that something that either you are aware of having been attempted with respect to location data retained by google or microsoft? >> you guys don't get that, do? >> i don't mean to give you any idea. >> just kidding. you guys are obviously most concerned about content. there are a lot of ways, like, for example, irs until very recently had in their manual, a section saying, by the way, if you're investigating and you want to read a tax dollars e-mail, you can do so with a subpoena. i think they finally agreed they shouldn't do that anymore. but for a lot of thing, well,
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what's your affiliation, are tea party patriots having too many communications with political candidates. maybe we should call the tax dollars into question. a lot of that is information that is revealed by metadata. if you're particularly concerned about how aggressive those regulatory agencies that you see at least in some quantity requiring additional protection. >> so, for me, personally, and just speaks for myself as to liberty, i personally care much more about content and location than i personally do about metadata at this point. because metadata is one of the checks that the government can subpoena to make sure you turned over all the e-mails. they can check the law and say, hey, actually, you deleted this to so-and-so. that kind of thing i think is important, especially if we're talking about protecting content which, granted, in a sense, it's all content. but we're talking about the actual -- the meat and potatoes of the e-mail, right?
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i find that to be the most important. and then i also find location information to be very difficult. and look forward to working on that a lot more. as greg was saying, right now, it's become complicated with the riley decision that just came out. you're dealing with gps location and tower location. these are two different types of locations so you need a different law. i click this button here, it goes in my cloud, if i click it here, it goes on my phone. those are the things discussed. the kinds of decisions that are coming down. and moving forward into a location space, that needs to be taken into account before talking what about we have done with location. and also what is the future going to look like. what is perspective is seven days, no big deal. but it establishes a pattern of where someone's going and what
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they're doing. talking about that, you move closer and say, well, just a one-time ping. it doesn't really tell you that much. but if we keep going down this route and we keep going, when is one time going to be too much. and we don't know that. it's a decision that is still ongoing and a lot of people are looking at this very seriously. there will be a lot more discussion about privacy and the decisions from the supreme court
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have been helpful on that. >> you know, i would be surprised actually if congress got to location information before the supremes did. and i say that because there's now a split in the circuits. the 11th circuit ruled that you need a warrant for location, stored cell location and information. and the 3rd circuit you might need it depending on circumstances. and one other circuit, i think it was the 5th that said you don't need a warrant for it. so there's a split and it's right for the supremes to weigh in when they want to. and somebody fills a case to them. part of the issue with a lot of ecpa is, representative poe was pointing out, if there's a violation of the fourth
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amendment, you have -- your remedy is that you get the evidence excluded. so what does that mean? it means that a lot of criminal defendants will claim their fourth amendment rights were violated. and you get a body of law that develops about whether those rights were violated. ecpa doesn't have an exclusionary role. the consequence of that is, you don't get the same development of the law, accept the fourth amendment claim. if you make the statute claim, hey, they violated the statute and i get to get the evidence secluded you get a lot more case coming up through the courts. we don't have that many cases
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because we're only in fourth amendment plan when it comes to the execution rule. >> it is the perverse against the law. some judges retaining those. fourth amendment law always made exclusively by guilty people trying to overturn convictions which is perhaps not the most healthy, sort of structural condition for the development of protective law that we're concerned about. particularly in the ecpa content when metadata particularly, which means data is obtained about you, what websites you're visiting, data about what people you're communicating with if you're not invaded because there's no evidence of anything happen. but you may not have an
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opportunity to bring an action against your federal constitutional rights which are incredibly gray anyway, but even if you wanted to, you would lack the opportunity. part of the issue here, there's obviously an enormous amount of data gathering from the companies here with the report leading the charge here show. but not as much public awareness of how incredibly frequent that kind of digital search was. much more frequent than traditional wiretaps. before we shift to audience questions, are there any other last remarks or can we jump to the audience? >> i would just make one last comment. i've been in washington a long
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time and i've never worked on an issue where there was so much consensus. really. i mean, how large do you see google and microsoft sitting shoulder to shoulder advocating the same position. how large do you see americans for tax reform and the aclu on the same letter? it's extraordinary, there's a website, you can read about this extraordinary coalition. it's www.digitaldue.process.org. you'll see how many people have gotten behind this ecpa reform principles. how many companies, how many academics and political groups across the spectrum, it's really
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amazing. >> and i should say, we're thinking, google and yahoo! microsoft, companies that increasingly -- i never thought it would happen, telecommunications carriers, that in the last couple of years have begun voluntarily disclosing information about the quantity of government requests for information. so, you know, it's a positive trend that i hope we see continuing. i'm glad it is something that these companies have been taking the lead on. let's let the audience judge in with questions. i'll be less tolerant than representative poe. i will enforce a three-sentence rule, somewhere around the end of your third sentence but not before, i will hope that your voice rises in such a way to suggest by that inflexion that an interroggative is being posed let's start there.
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>> why does metadata get a pass. if i had an e-mail to julian it doesn't say much to the content. but if i had five e-mails addressed to five of you that is indicative or what the content of that e-mail is about. so why the pass? >> i think it's partly an historic artifact, that when courts were coming up with rules from what was going to be protected by the requirement, there's a case smith v. maryland how about the issues that dial on the phone, is that going to be protected when that information is stored with the
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telephone company. and the court said, well, it's not as revealing as the content is. it doesn't tell when the call was completed. it doesn't even say who you talked to. it just says you dialed these numbers. so maybe it should be warrant protected. what's changed is that there's so much more metadata out there about us. and it can paint a much fuller picture of what our activities are. and i think there's a growing consensus that metadata ought to be protected at a higher level than it is. one of the digit recommendations goes to metadata collected in realtime. i think we're moving in that direction, and in particular, the noncontent i think to be most likely first protected by warrant requirement is going to be location information, just because it's so reis revealing particularly when collected over a period of time. >> i would jump on that and say metadata isn't gets a pass, it's ranking, right? this is in my mind, the content in my e-mail is more revealing
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than perhaps my gps location, and that is more revealing than perhaps my communications, so this is my personal perspective. and i'm looking at what can be done and what can't be done. if i walked down the street and say metadata to the next ten people, most would think i'm babbling. >> or at a convention. >> yeah. >> that sort of thing, you've got to look at education. you've got to look at what people are ready for and where we are and what can be done. and then there's this great universe where everything is perfect. but it's politics, baby. we will leave this discussion to go to a live discussion of the senate panel looking at college athletes. among the panel is ncaa mark emmert and taylor branch.
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to subscribe at you know, universalists or angry libertarians, but that tells you i am attempting to join in effect a political discussion group. that's maybe a first more than an issue under alabama. yours following up on that, profe professor felt ben of princeton had an interesting affidavit discussing how inquantity metta data effective ly as revealing because unlike con tebt is more structured. that's and this is sort of required the level of technical understanding of really just how revealing that can be. got time for a couple of more. in the middle.
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>> the post office uses electronic sorters, could it collect the addresses and names? >> sure. yeah. cia, the intelligence agencies do that routinely. one of the first federal privacy statutes, little protecting the privacy of postal communications, i understand people would not use the federal protest, believes that the conference would be read indes krim nantly. at least with respect to i guess snail mail meta data. that is analyzed by the intelligence agencies as part of the things recently.
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>> that allows you to get the addressing information on the envelope. i think it probably hasn't been challenged as of late. it's pretty much accepted. the issue we're talking about is what's inside the envelop, not what's on the outside. on the content side, the theory being look, you're exposing the data to the company. you're asking them to use that information to convey your communication. where as they don't really need to inquire into the context of the letter itself.
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it's not a record they need to create to wrap your xhup kags. how that works on the internet, which essentially has sort of a nest of seven envelopes, one inside the other, is a kind of interesting puzzle. one of the things is essentially licking a layer into the envelope, looking into information at the backbone level. it's an interesting legal challenge there. this as a whole array of fascinating puzzles, how these apply. courts are not always sort of super attuned to the technical details that may make sort of simple analogies break down. >> if we can do one more. let's go there.
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>> this is good to hear the comments that sort of acknowledge the fundamental speechness of the content divide, but my question is about riley decision, which was preventing a surgeon telephone device. is this specifically to a device that has a cell phone radio in it or if i have my laptop, does that apply, too? >> roberts, as he says, well, look, these are basically mini computers, we can call them phones, cameras. ash tearily picked one of the hundred thousand functions, but honestly, the thipg i do with this frequently is make phone calls. it has an app for that, i didn't realize.
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but part of the decision, the essence is that the massive quantity -- >> ready to try that against a simple laptop and then somebody to bring another case. no, i don't think that's really necessary. i think there's no question that a laptop contents would be protected. if you had had comments about the case and what it means for the cloud, there was a passage for the court's decision.
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law enforcement agencies in t s this, the answer to the question of what police must do for searching an incident. get a warrant. but the other thing that he discussed, again, that the data is being scored, locally itself or in this cloud. it generally makes little difference. i think it has enormous implications for the issue we're talking about today and while i think it's unlikely that we'll see a case happening at the lower courts. i think that underscores the content's standard. if you read the decision, that it's more applicable than the communications it might be
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stored on the device. there are implications for the cloud. otherwise, that discussion that justice roberts went into, the decision won't be necessary. >> well, as one of -- would put it, i know my right, so y'all don't need a warrant for that and perhaps at some point in the in each future, that will apply equally in the cloud and physical devices. please join me in thank the panel and join us in the winter garden for drinks and snacks.
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federal reserve chair janet yellen will be before the senate banking committee to deliver the fed's report on monetary policy. we'll have live coverage at 10:00 a.m. eastern here on cpan 3 and later in the day, the senate judiciary subcommittee on crime and terrorism looks at efforts to combat cyber attacks. witnesses will include software experts as well as officials from the justice department. that's live at 2:30 p.m. eastern on cspan 3. we are at the henry a. wallace country life center, 50 miles south and west of des moines. this is the birthplace home of henry a. wallace. the wallaces of iowa consist of
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three generations. the pate ark was a t founder of wallace's former manager sein. his son, henry, was u.s. secretary of agriculture under woodrow wilson and henry c.'s son was born on this farm in 1888. he went on to become editor of wallace's former magazine. he was then asked by roosevelt to serve as secretary of agriculture. in 1941 to 1945, he was roosevelt's vice president. as u.s. secretary of agriculture, he is known for the agricultural adjustment act, which is the first time that farmers were asked not to produce. at first, people couldn't believe the things that he was proposing regarding that, but
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then as prices went up, they started to listen to him. and people still refer to him at as the genius. >> explore the history of des moines, iowa. saturday and sunday afternoon at 2:00. chris murphy recently shared a hearing on energy reliance with russia. it was addressed in a visit to eastern europe last month that included vice president biden. witnesses at this hearing include an assistant secretary of state for european and eurasianen affairs and a former hungarian abambassador. this is two hours.
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>> this is not a new topic, but to russia's activity in eastern ukraine has brought a new sents of urgency and focus to this debate. we're happy to have two great panels here today. i and senator johnson will give brief opening remarks. we'll introduce our panel that you give summary of your remark, ask questions and then see our second panel of experts. russia's status as a regional power is frankly commensurate only to their ability to blackmail and threaten europe with russian gas and oil as the weapon of choice. there are reports of about 30% of its gas and 35% of its oil from russia. political decision make iing fr europe is dictated in part fwi realities of running a continent on a power supplied by on
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one. transatlantic relationship to help europe break free of russian energy. the european strategy reflects concerns that overdependence on russia may expose governments and businesses to coercion threats and higher prices. the strategy proposes action over the medium to long-term to increase europe's own energy production and increase efficiency, decrease demand. renewable alternatives and diversify the supplier countries and routes. the strategy is admirable. but in today's hearing, we will ask whether there's political will and the funding to implement. and will ask whether some strategies in europe actually increase rather than increase dependence on russian gas. we'll also want to know how noneu countries lying at the critical fault like between europe and russia, like ukraine, fit into europe's plans for energy independence.
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and principally examine what role the united states can play in the energy future of europe. questions of market dynamics, national sovereignty cloud the role sometimes that the united states can play in europe's energy future. it makes sense to examine the role united states natural gas can play in weaning europe off russian gas. so long as the price in europe is lower than the prices can get in asia, u.s. natural gas will simply flow with the market. and even when the united states is willing to lead, there's a question of whether our leadership is wanted. senator johnson, senator mccain and i stood with the prime minister as he announced a work stoppage on a gas pipeline opposed by the eu that would increase european dependency on russian gas. it was a breakthrough, but one that was immediately criticized by some to due to u.s. involvement. it struck me that showing leadership on an issue like
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global energy security, america stands to be criticized. if we don't lead and criticized if we do. i look forward to hearing from our panelists today on all of these questions. and with that, let me recognize senator johnson for his opening remarks. >> thank you, mr. chairman. i'd like to thank the witnesses for -- first of all, your thoughtful testimony. received it ahead of time. and you mentioned twice, the word reality, realities. i come from business background. done a lot of strategic planning in my process and that's always the first step. you have to recognize the reality of the situation. once you've done that, set achievable goals. and once you've set the achievable goals, you develop the strategy. what i'm hoping to hear the testimony today and we have a pretty good shot at it because it looks like that's what you want to talk about. 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
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europe's quite honestly growing dependence on those. 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 the priorities in which we need to address those possible achievable goals. mr. chairman, thank you for holding this hearing, look forward to the testimony. >> no overly excessive introductions here, we're very happy to have two administration witnesses with us. our first panel, deputy assistant secretary of state for energy diplomacy and the deputy assistant secretary of state for european and eurasian affairs. both of your written statements will be included in the record in their entirety. we ask that you please summarize in about five minutes so we can proceed to questions. we're going to be joined, i think, by other members of the committee as we move forward. as always, a busy day here, thankful for your testimony. why don't we -- why don't we start with you?
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go to mr. hochstein. >> thank you, mr. chairman 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 improving and working with our partners. let me begin with an update on the energy crisis in ukraine. working 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 showing little willingness to continue negotiations until ukraine pays off the debt. the situation is urgent. while ukrainian 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
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crisis and make the ukrainian and eu gas supply system more resilient in the future. 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 minister prodon of ukraine on this issue. part of the answer is its integration into the eu energy market. however, before this integration can happen successfully, it is essential that ukraine reform the energy sector. if it does not, if corruption and inefficiency continue along with crippling energy subsidies for consumers, you crane will be right back where we all started a short while ago. we're working to develop and implement programs to increase the production and efficiency. our energy resources bureau at the state department is overseeing products to boost gas production. from existing fields, strentsening transparency and management of operations at ukraine state owned oil company, oil and gas company.
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we're also working to build the government's capacity to manage the implementation of production sharing contracts for unconventional gas exploration and development. to address energy efficiency, usaid's programs is designed to enhance the program resulting from the poor use of energy resources in ukrainian 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's not in the gas-intensive heating season, and because we've just gone through a relatively mild winter, so stocks are unseasonably high. it's critical that countries use these summer months to aggressively increase their supplies. we're working with the department of energy as they coordinate an effort to assist the most vulnerable central and southeastern european countries to assess contingency plans in case of a shut off.
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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 and security in europe for the last several months. as you stated in the opening statement, this committee, the congress and the administration have been working on this for quite some time. as early as the late 1990s, we were heavily engaged in the negotiations and made the btc pipeline a reality despite the skepticism of experts who said the oil would never flow to european markets. it probably could not have happened without u.s. leadership. our efforts intensified after russia cut off gas supplies to ukraine and european customers in '09. since then, 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, as he and i just
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returned from hungary and croatia last week. energy diversification in europe is critical. this concept includes having broad fuel mix and diversifying the roots as well as the sources of the imports. i'm not suggesting that countries should eliminate russian imports. russia will and should remain a central player in the region as a producer and as an exporter. but alternative supplies in addition to delivery roots will promote competition and increase security. we are working with our friends and allies with actions as well as words. and 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, interconnectors to allow bidirectional flow, building new lng terminals. we applaud the recent announcement of the hungarian sector.
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a proposed terminal in croatia would bring in supplies from the south. and with the completion of reverse flow from hungary, croatia could become a gas import hub for the states. hungary can provide an important link for ukraine from croatia. and when we were there last week, we encouraged the two countries to work out their differences and work more closely to address their mutual potential. we're working closely with our colleagues in the eu to advance this infrastructure buildout and we support these 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 infrastructure 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
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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. >> thank you, chairman murphy, ranking member johnson for inviting us to testify before the subcommittee on european energy security and for the personal interest you have taken in this issue. the ewe p crane crisis has demonstrated that security has multiple dimensions. vulnerabilities can come in many forms. the threat of military intervention, energy from unreliable and at times hostile neighbor or the cancer of corruption that we weakens institutions and undermines security and sovereignty. russia's provocative actions in ukraine have reaffirmed the continued importance of nato's solid commitment to territorial defense enshrined in article five of the nato treaty. all members have reaffirmed our
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collective commitment to preserve security and integrity in the nato area. the united states has led in this effort. we have deployed 750 troops toeto romania. we've stepped up the fight in the baltic region and maintained a continued naval presence in the 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 the effort. in the run-up to the nato summit in wales, we are encouraging all members to sustain this demonstration of alliance solidarity and to reverse the slide in 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
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ukraine reform the 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 from countries like slovakia. at the same time, the ukraine crisis has given new impetus for countries to step up efforts to diverse their energy sources and supplies, boost storage, develop networks of interconnectors and reverse flow capacity. as we work with our european allies to shore up a secure, reliable and competitive supply of energy, 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 oligarch interests are supporting each other to manipulatie decisions.
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they hollow out military services leaving countries vulnerable and exposed to outside interference. that is why we're empowering our embassies to work with governments, civil society and the business community across central and eastern europe and the balkans to develop tailored plans best suited to conditions. we are supporting regional law enforcement and anti-corruption training centers in prague and budapest and encouraging all of our european partners to ratify and implement the u.n.'s convention against corruption. our national interest is invested in a europe in a country that's confident their borders are secure. their government is transparent and accountable to the people. we remain committed toward achieving these objectives. thank you. >> thank you to both of you for your testimony. mr. hochstein.
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you talked about the things that ukraine needs to do in order to reform the 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 undertake are dramatic. and the effect of those reforms done too precipitously is, perhaps, destabilizing in a country right now 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 efficient soviet architecture is essentially almost a rip down and build back up proposition. without requiring them to spend money they don't have and impose
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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, just pour money into this and make sure there are some reverse flows and gas comes in, as i said before, we're 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 use iing as security was the opposite. we can take this moment in time. and as you said, not dramatically tear it all down and build it back up during a crisis, but put in place some fences around the energy sector so it is free of corruption.
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that you can always do. to start talking about the subsidy reform, not as an overnight bring it to market-based pricing. how we can do this efficiently and effectively top begin that process. how do you look at the entire apparatus so it reflects good management. and if we can do that and make it open and transparent and effective and efficient, we'll do a number of things. one, we'll be able to actually reduce their costs over time because efficiency rates will 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.
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they can be higher if they use a modern way of doing it. if we can put together a regulatory framework that understands how to do the shell 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 reverse flows and new energy diversification we're going to do elsewhere. in addition to bringing other forms of energy so that the system is more resilient. so for that, i agree that 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. >> talk to me about how europe thinks and talks about this issue. you know, we're encouraged by developments like the third energy package which recognizes the problem of allowing to control the energy and
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transmission of it. so every step forward, there's steps backwards. members of the eu like bulgaria that are openly opposing the energy package in the way they're conducting their business. a country like germany who just this week announced they're moving forward or past. new legislation that will effectively end for the 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 in 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 with energy security and ukraine's problems with energy security. one thing that i think all
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members of the european union, all the countries i deal with in europe share is 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 in some of the measures and the time frames, there is a general consensus on the need to do something to increase energy security through diversification. so one thing that we do here is an interest in developing alternative pipelines, alternative routes. the countries which are most directly dependent on russia. most dependent on russian gas, for example, might be the less -- slightly less eager to talk about discontinuing south stream or routes that we feel
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may not be commercially as viable or in the long-term best solutions for europe. but we are having success in discussing europeans, the need to diversify. the need to devise alternative routes and sources. >> let me ask you specifically about the germans, then. germans have openly been the 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 dependence and diversification. they're making a new commitment against developing their own internal energy resources under their ground, the potential for rather large hail deposits that they are going to leave in place. it's very hard for the eu to move without an act of germany on these questions. and, what is your feeling about specifically the german government's commitment to
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leading when it comes to some of these questions of eu energy security? >> thank you for that question. our sense is that germany understands the responsibility as a leader in the economy and european union and the need to show leadership on the issue of energy security. i think their role reflects in part in the difficulty in reaching the consensus reflects the different situations of the european union members, each of which has its 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 and her meetings with lavrov and the french foreign minister to make clear the expectation that there has to be a -- there has to be some progress in ukraine and
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russia's approach to ukraine's -- to the situation in ukraine. we also have discussions with the european commission together with germans, the european members on how we can factor in all of the different challenges, all the difficulties that european union face. whether it's limited, an overdependence on the gas or geographic limitations on what could be done in terms of alternative routes. >> senator johnson? >> secretary yee, your testimony, you mentioned corruption. when senator murphy and i went through poland, ukraine, then to romania and bulgaria, certainly that was echoed as the reality of the situation. a legacy of really soviet areas, just corruption throughout those eastern european nations. when we visited poland, i think our sense was of the countries we visited, they've probably
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made the most progress in terms of limiting corruption and, i think, they're probably doing economically as a result of that. i want to talk a little bit about romania. i think we were both impressed. he arranged a meeting initially with us, our first meeting in romania with the chief prosecutor general for corruption lauren kovessiet. really battling corruption in romania. i think we were both concerned we don't have an ambassador for romania. the term was basically coming up. was the administration at all addressing that situation? 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 her who is under death threat.
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can you speak at all in terms of american representation to romania? >> thank you, mr. ranking member. yes -- the administration is working to identify the ambassador for romania working as quickly as possible to identify the right candidate. we agree with you, senator johnson, that dwayne butcher is doing an excellent job. we do agree there needs to be an ambassador, working to get that in place as soon as possible. regarding the overall effort to fight corruption in romania, american leadership has been critical. i think our good relations, working relations with the government, even when we disagree with the government of mr. ponta is such that we're able to express our concerns or objections. when there's steps taken by officials, business people, business people that are clearly
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in violation of romania law in addition to international rules and principles. so we have that frank dialogue. we're able to do that with a very strong embassy team there. i think we need to continue to do that. it certainly helps with members of congress also visit these capitals to to reinforce the message we take corruption seriously not only as a matter of economics or of moral principle, but as matter of national security. >> until the ambassador is appointed, have you considered asking mr. butcher to stay on? >> mr. butcher will complete his tenure this summer. there's another that's already arrived at post is overlapping that with mr. butcher and will take over at the end of the summer. >> we do not want to see a void there in romania. it'd be important we don't do that. mr. hochstein. you were talking a little bit about developing shale gas in europe. do you have -- or does the u.s.
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have any estimates? does europe have any estimates in terms of what their oil and gas potential really is if they were willing to exploit it? >> yes, senator. we work with countries that are interested. and as chairman murphy talked about when he used the example of germany, it's country by country. it's an every member state in the eu has a different perspective on different resources, including shale. we had worked very closely with poland, ukraine, romania and 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 be able to conduct the survey to identify what the levels and commerciality is of those resources. >> so can you share with me with the committee what those resources are? what are the estimates? can europe be more independent
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if it were only, for example, do fracking? >> again, there's always a difference between what the estimates are and what it becomes in reality. there were a lot of published estimates quite high. several companies, including large american companies went in, the results were less, more disapointing. some have already left as a result. some have remained. we have to see as the drilling begins and what's happening. we're working with them. putti inting some of those frams in place. companies already in place. romania is the same where you visit -- i was there just before the senate delegation was there with vice president biden talking to them about pursuinin their own conventional resources as well as the offshore resources. in short, i don't have the figures in front of me, something i can definitely send
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to your office for you to see what our estimates are. and in 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 puts together that framework for countries interested. >> you know, to the best of your knowledge, the countries that went in and subsequently left, did they leave because the oil and gas reserves weren't there? too expensive to develop? or did they leave because of corruption or some combination of the two? >> in that case, it was not the issue of corruption, more about the resource. >> can you speak to me about spot pricing versus oil index pricing and the effect that 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 lng, they can bring it in as liquefied natural gas through other ports.
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they have long-term contracts and then there are spot prices. the long-term contracts that they have with russia, for instance, have been renegotiated couple of years ago, some of them are coming up for renewal. the price in europe has traditionally been relatively high. it's come down over the last couple of years. part of that is because the shell gas in the united states, other market dynamics around the world, prices have settled now on somewhere in 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 from 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
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their infrastructure interconnection. not just about the infrastructure to bring it into the continent, but rather, for it to flow across from country to country. if you can upgrade in romania so there could be a flow crossboard. from croatia into hungary, slovakia into hungary, if all those can happen, you can have an integrated market where gas can flow. it'll help with price and security. >> i know i'm out of time, let me follow up on this would that be a net positive or net negative for europe? >> that's a good question. i wouldn't want to speculate on that. i think i learned speculating on price and oil -- >> are you seeing a trend one way or the other? in europe? >> i think it depends when you ask the question.
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last year, i probably would've had a different answer versus now. i think the events and how we see events happening in the next few months shaping up, you'll see a change. i'll reserve that for those who are going to speculate. >> thank you, mr. chairman. >> senator? >> thank you, thank you, both for being here. the eu has coordinated a number of policies to address the issues that have come up for the eu as a whole. the energy decisions are 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.
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many parts are set at the member state level. the second issue is the bilateral agreements. it is true, people talk about europe's dependency on russian gas. it's a two-way street. there's a russian dependency on europe as a gas market. it's a $50 billion a year gas market, and they have almost -- very little infrastructure to support outside of europe. with those facts, one would normally think 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 has 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
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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 views on that. i would just note that if you did make decisions centrally in europe, it would have impact beyond the negotiations of agreements. something the senator talked about a moment ago, what do you do about nuclear and shale gas? there are different views if a decision was made centrally in europe on fuel sources and what should be allowed, approved, and what should be banned. that could lead in a different direction, as well. there are pluses and minuses to that idea, but on the negotiation side of agreement, there's no doubt there would be a benefit. >> 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?
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>> you look at what's happening in ukraine and the impacts on europe. the impacts themselves are different in different countries. if you are receiving your gas through ukraine, you are going to have one perspective very different than those who receive their gas from russia through other means. the level of dependency will change your attitude. after the 2009 crisis when in january 1st, ukraine's gas supplies from russia were cut o off. we've been trying to work with our eu colleagues to act as though there's a sense of urgency to be able to diversify. we think 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 and also coming together as a
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region. >> well, that's the way we see it. 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, different regions. i think there's by and large, a conventional wisdom. what exactly diversification means changes, though. and this goes back to senator johnson when he talked about reality based. some countries view diversification in a different way, not just diversifying their sources away from russia, but also diversifying the rooutes o getting away from russia. see if i can get my gas from russia through a different mechanism that is not dependent on the relationship between russia and ukraine. it ultimately doesn't solve the problem, but there's a different view there. >> well, one area where we know everybody could benefit is
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through energy efficiency. and it's my understanding the eu will be meeting in october to unveil new energy efficiency goals and a framework to attain them. i wonder if you talk about what we think will be coming out of these talks and whether the member states will be able to able to accomplish the goals from those. >> i don't want to presuppose what they were going to say. they did have an aggressive efficiency rate target for 2020. 20% by 2020. the projections are they're not going to quite hit but come pretty close. i think they'd like to look at extending that. the easiest way to save a dollar is by efficiency. ukraine has one of the worst records in the world on efficiency and we're focused on
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that. the eu needs to focus more internally. we're working with them to understand better how they think they can achieve that and see if we can be supportive in that. >> can you talk about what the obstacles are? i think we're in agreement, efficiency is the first fuel, right? something that's the cheapest, fastest way to deal with our energy needs. why is this not something that they would 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 an effective manner and enforcing the rules and regulations that are there that seems to be more of the challenge. i think part of this is looking, how can you bring all this into compliance? put in place a regulatory framework and rules that will actually deliver the results
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that they want. they've achieved more than others, and therefore, if you look at the eu wide, it's important to get the rules in place so everyone can implement it efficiently. >> what can we do to help with that on the efficiency front? >> so we have a number of programs that we work with individual countries. again, we don't do it through the eu as a central mechanism, but individual countries to look where we can. we have committees with the eu through the u.s. eu efficiency council. there's great lessons learned 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 bringing our experience to benefit what they're trying to achieve. there's a lot of work being done. happy to send some things over to your office to list the programs we're working on. >> and i'm sure if congress would pass energy efficiency legislation, that would serve as
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a good model to share with them. would you agree? >> i'll follow what congress does with great interest. >> thank you. >> i just have one additional question for the panel, again, maybe directed to you, mr. hochstein. he's not here to give us his perspective on what natural gas will do to prices here in the united states. but let me ask you what barriers are to those reaching europe. they're quick to remind us 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 terminals, and there's another 35 plus terminals that are scheduled to be built. so with respect to the market, what's the -- what's the barrier
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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've provided -- granted licenses for over 90 bcm of gas already. these are companies that actually have to now build the infrastructure here in the united states so 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, to the price, and that will often dictate where this gas will end up. i don't believe that it matters, though where the individual will
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end up. the idea is that american gas will come on to the international market. which will adjust itself and free up gas that's destined for the markets where gas came and will make those supplies available now to europe. even if it's not a contract that is directly signed between lng facility in lithuania and elsewhere in europe, it doesn't mean there's no impact of u.s. shale gas export 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 that 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 to the last two years with gas prices for the first time.
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and i will say that as i say to my european friends and colleagues when i travel there and they complain about natural gas exports that the best way to do that is to have companies in europe negotiate contracts with american companies or operators or distributors here in the united states already gas is contracted for india, japan and others. that's probably a better way to do it than think about the governmental control of it. >> i do think and i hope you will point out the curious position that europe continues to be in. which is to ask vociferously and aggressively for u.s. shale gas and be totally unwilling to develop their own resources. they seem very happy to receive the resource from the united states while very unhappy to develop their own resources. i get it that they have -- they have the ability to make sovereign decisions about what domestic resources they will and won't exploit.
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it's not necessarily hypocritical position, but it's curious to say the least. >> i rarely miss the opportunity to raise that irony in my discussions. >> senator johnson, any further questions for this panel? >> might be hypocritical. i just want to go to nuclear. my understanding is france generates 75% of its power needs through nuclear power, is that 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 that are working on nuclear energy, hungary is looking to expand its current nuclear. the czech republic has been in a very lengthy process to identify through the process to identify a company to build and expand nuclear power that's hit stumbling blocks in the czech republic. bulgaria is working on it, as well. so there are countries that are
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working on expanding and promoting nuclear energy. in the wake of the fukushima disaster to go the other direction. when we're asked for our opinion in europe to make their own decisions. we believe that nuclear energy should be part of the mix. if they so choose to go in a nuclear direction and make that part of their mix, we will be there fully supportive and work with -- we believe we have companies in the united states that are the best in the world, and we believe that is probably going to be a good decision for energy security for each country to have as many of clean energy options as possible. >> what does europe do with its nuclear waste? >> i don't have that information in front of me. but, again, i'm happy to get that to you, sir. >> you're mentioning the impact
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on price, just u.s. importing less oil and gas, can you put some figures to that trend? >> we, today, are not yet a net -- we've not a net exporter yet of natural gas. we will be, i believe it's by 2016. we'll be a net exporter of natural gas. we, today, still import some gas. 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 our hemisphere and 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
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something we can strive for, independence would suggest we're immune to the market. and a disruption anywhere in the world and with everything going on geopolitically in the world today and energy-producing countries 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 spiked around the world, they spiked here in a commensurate way. even though our production has increased, we're still susceptible to the market, which still calls for our direct active leadership and engagement in the world in the oil markets and engaging diplomatically with countries that are producing hydrocarbons. >> well, i appreciate that answer. but what i was really looking for was what happened to the price in europe when we end up importing less oil and gas? i want some numbers. i'm not an oil and gas expert. i want to understand what the movement was. >> causality is always difficult
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to address directly. but when the extra volumes of 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 for natural gas. that's where you can see the price differential. >> so current price is about ten? >> in europe, it's in that range. >> and the u.s. it's -- >> in the u.s. today, natural gas, $4.30 around today. >> i've heard, arguments on both sides, if we would export more, that would lead toward greater exploration. we'd build pipelines to capture some of the gas, which is wasting. what is your administration's viewpoint in terms of if we actually did increase more exports, what would happen to the price of gas? >> well, as as far as the administration's concerned, we, the department of energy has improved a fairly large amount
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of natural gas for exports. i think that tells you what we think about that. there's been some studies. >> it really doesn't. >> no, i think we looked at the department of energy studies and did its own studies on the economic impacts of exports and determined that it would not have the exports that it's already approved would not have an economic adverse effect on the u.s. price. it could go up some, but it would not have a terribly adverse effect. so -- >> so you basically be disagreeing with what senator markey talks about, in terms of dramatically increasing the price of gas if we were to export more. >> i think if we believed there would be a dramatic increase in price, we may be more cautious in having approved -- we've approved so far in the licenses. but that is why every license that comes that is -- that is submitted for approval is looked at through that lens of what would be, first of all, the impact on the united states.
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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 effect it might have on vladimir putin's calculation. even though it wouldn't come on stream immediately. i come from the business world where i really do believe the customer is king. customers ought to be more in control of what the pricing levels are versus the just that signal alone would help change the 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 this shale gas move here in the united states has done, that we are -- no longer want to be an exporter. i think it's had an important effect. >> let me ask you i'm calling it
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putin's pause. i appreciate the fact he's not sent, you know, overtly more support and looks like ukraine is having some success at destabilizing the region and stabilizing some of those cities. do you have any explanation for that? do you know what he's thinking? >> i think it'd be very risky you try to get inside vladimir putin's brain and to explain what he's thinking. does that surprise the state department? >> that he's paused? it's not a complete surprise in light of some resolve on the part of the international community in standing up to what russia and russian proxies are doing in ukraine in addition to some bold military action
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security action by ukrainian government. since march, i think there's been a cumulative effect with measures led by the united states and nato in showing that we are absolutely committed, first and foremost, to our article 5 commitments under the nato treaty in putting forces, additional forces on the -- in the front line states near ukraine. in applying limited sanctions against russians and ukrainians who are undermining ukrainian sovereignty. i think it is reasonable and it is actually -- it's predictable that there would be some pause on -- >> what has this administration specifically done to help ukraine militarily? as they're trying to grapple with the security situation. >> well, we have as you know, senator, a large package of
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assistance that we've provided to ukraine, both in terms of assistance to the government and the immediate needs for shelter, vehicles, emergency equipment. we've provided nonlethal assistance to the military. >> what does that mean? specifically what types of equipment have we provided? >> cars, vehicles, basic equipment, nonlethal equipment that the military needs in order to perform basic functions. it is nonlethal. it's a type of equipment we feel comfortable at this point providing. and it's what the ukrainian forces have requested from us. i'm not saying that it is all that is 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, continued resolve on the part of not only the united states but its allies. but we have provided assistance, a large amount of assistance
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both in terms of the humanitarian assistance to the people of ukraine and also assistance in terms of efforts by nato and u.s. and its nato allies in putting troops on the ground, putting additional planes in the area in the front line states as well as naval presence on the black sea and the baltic sea to show we are determined. >> okay. thank you, thanks, mr. chairman. >> thank you, both, for your testimony. just one last word. on our representation there. let me just join with senator johnson. we need an ambassador to romania, this is a country with great reason to feel imperilled by russian aggression. and i appreciate some of the work that's being done to make sure there's a charge on the ground. we need an ambassador. it's also incumbent upon the united states congress to move on united states ambassadors that haven't been named. you mentioned the czech republic
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is a country that's paused their plans to build new nuclear technology. that's transformational for the czech republic, but also potentially for the united states should westinghouse win that bid, it's really hard for us to represent our nation's interest if we don't have an ambassador on the ground, we have a chance to confirm a really good one. this week, next week, if the senate acts on that. when it comes to making sure we're fully staffed in embassies. to move faster than it has in bringing ambassadors to us and for us to move faster than we have once you bring them to us. thank you, both, for your testimony and we'll sit the second panel now.
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>> all right. welcome to our second panel. senator johnson's going to return in a few minutes. let me introduce you briefly, allow you to make brief statements, and then we'll get to questions as well as great first panel, dozens more questions we could've asked. try to direct them to you. ambassador andres simone for transatlantic relations at the school of advanced international studies at johns hopkins who previously was the hungarian ambassador. next to him is mr. edward lucas, senior fellow and contributing editor at the center for european policy analysis. he's also a senior editor of
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"the economist." he's one of the foremost experts on russia and central and eastern europe having covered that region as a journalist for 25 years, also wrote in a number of good books. as well as other topics. next to him is brenda schaefer who is on sabbatical right now, currently a visiting researcher at georgetown university center for eurasian, russia and european studies. eastern mediterranean energy issues. and last but not least, we are very pleased to have with us edwa edward chaio, he has decades of senior level experiencing working on energy, in the energy industry and has advised the u.s. government, multinational corporations and financial
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institutions on energy and investment matters. he's widely respected by both sides of the aisle. we're pleased to welcome him back to this committee. thank you all for being here, mr. ambassador, let's start with you, try to limit your summarized comments to under five minutes, and then we'll just run down the line. >> oh, okay. i want to thank you for inviting me to this very important discussion. and i'm really honored to be part of the discussion. senator murphy, senator johnson. for much too long, there has been a disconnect between europe and the united states when it comes to energy. most europeans tend to think of the u.s. as a country out to destroy the planet. and commonly held view in america is that europeans are just a bunch of tree huggers. and both are extreme, both are wrong. it is in all of our interests to overcome the divide. the sooner the better. the u.s. shale revolution which
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has changed the global energy landscape as an unexpected turn of the last decade. it is a reality and it is not going away. europe should have embraced it a long time ago. europe must put energy security first as the integrity of the democratic way of life hinges on it. last thing, and viable solutions cannot be built on ideology. it has for too long taken energy supplies for granted and banked on breakthrough in renewables and storage technologies which have not happened. captains of industry in europe like the ceo were among the first to signal to european leaders the challenges europe faces with an unrealistic and ideological approach to shale technologies. european positions are changing. europe is considerably weakened without the common energy policy. a good sign is the voice of pragmatists in the voices of
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pragmatists in the european parliament. the european commission are getting considerably stronger. this movement is way, way, too slow. i would agree with the common thing that german y and i too have a lot of questions about which direction germany going. russia is using europe's dependence on supplies to influence european policies coerce countries to take interests because transplantic interests. for the most vulnerable countries in central and american europe, the percentage climbs to 80 to 90%. energy has become a top security challenge for them. europe is divided on how to deal with russia. russia is actively influencing the european energy debate by
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influencing organizations and leading public figures. there is no consensus on the threats and challenges that russian policies in which energy is perhaps the most important tool pose for stability of european democracies. the majority of europeans hope the u.s. will continue to see the issue of energy security on its allies on top of its strategic priorities. the u.s. is expected to share its gas wealth with europe. from the u.s. to europe would be a strategic message and str strengthen the relationship and create jobs on both sides of the atlantic. it should result on a more courageous energy mix in europe that would include all sources
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including shale and nuclear. europe needs to support the building the interconnectors and port facilities to make sure that it becomes an important factor. in this the u.s. private sector should be actively engages. we need to use all opportunities to shape a transatlantic agenda including the transatlantic trade and investment partnership process. the forthcoming nato summit should deal with the issue. by inventing u.s./european dialogue on cooperation on energy. the united states and europe must also lead the international efforts on the future of the arctic, sometimes a neglected issue. finally the u.s. and europe need to get serious on common alternatives. they could also help to deideologyize these approaches to climate change. i hope congress will find a way
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to issue licenses in a sufficient number to make a difference under the allies energy security act. while this will not have an immediate impact, it will not solve europeans problems, it will european energy security it will be a very important message it would send is incalculable especially the message send to vladimir putin. by the way, i hope senator johnson, you will ask me what is in the head of vladimir putin when he stopped short of invading all of ukraine. perhaps we might discuss that at another time. what really is at stake here in conclusion for the cohesion of democratic societies. this is an enormous task. i do feel the united states must lead. thank you. >> thank you mr. lucas.
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>> good afternoon. thank you for inviting me. it's an honor and privilege as a european to be invited here to talk. i got some written testimony which i should just summarize briefly. i would like to thank you the chairman murphy and ranking member johnson. europe is your largest trading partner. it's your most important ally. europe is under attack. it is under tack from vladimir putin's russia in ways that we haven't completely understood because we tend to compartmentalize things. in putin's russia you have all of these things mixed to go. business, organized time, energy, military source interlocking and overlapping. as you referred to, i think we've understood that russia is trying to tear up the european
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security order. that's what it did with its invasion of crimea. russia is also trying to tear up the european energy order. it regards the eu's ability to be the real maker of european energy as an existential threat because putin depends on the abuse of energy markets, particularly the way he manipulates mass expogas export. the growth of interconnectors and storage have been stopping that. putin doesn't like that. as you saw in your visit, he's very keen to push ahead with side stream which is an absolute head on challenge to the european energy order. he has managed to get six european countries lined up in support. this revisionism effects more
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than just the conventional military thing. russia has the means to be revisionist. i think we're still in the n 1990s where russia is a poor country and declining country. it can still do us an awful lot of damage feen it . it can still do us a lot of damage. it's been able to use the energy weapon over a period of years to constrain europe's decision making ability. european countries that worry about their supplies of russian natural gas don't want to defend russia. they feel vulnerable. it's also used the money that spins off from energy and other things to foster very powerful lobbies, commercial, financial, economic lobbies of people who got a direct business interest in having good political relations with russia, we see this in germany, netherlands,
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and britain. london is perhaps the biggest laundering machine for russian money. there's a strong political push back when we try to do things that might defend the russian government. i should also mention information warfare which we have neglected in the qa and. they protect information warfare against the u.s. with sophistication. they are using techniques of social media, youtube, all kinds of things against us. we don't have an answer and of course we also use force. we have to agree that russia is winning. regardless whether there's a pause in ukraine or not, the fact is they got away with it with crimea and they are getting away with it in the push back on energy and particularly a good example of that is the eu's put on hold what would have been potentially a devastating response to russia which is the complaint. if anyone had told mr. putin in 2005, 2006, 2007, 2008 that eu
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officials with search warrants would be kicking down doors and going to affiliates all over europe seizing documents and computers and building up a compelling picture of market abuse which would lead to hundred of millions of dollars in fines and possibly class action lawsuits. we don't know what goes on inside putin's head but it wouldn't have been pretty. that's what happened. the eu got to the stage where it had a loaded weapon pointed at the kremlclekremlin and it flin pulling the trigger. we need to send the message that crime doesn't pay. we need to do the sanctions on a much wider scale. i think american lng is a vital part of the pitch. i'm very glad that you putouche on that even before molecules
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lng arrived in lithuania, they were able to drive a much harder bargain and get a much lower gas price. i think one has to see lng's infrastructure not just in business terms but national security terms. it plays a very psychological component. finally, i would just touch on energy market reform. russia habitually abuses the energy market with the abuse of the setting of benchmarks. the trading companies abuse the market. a lot of this stuff is very difficult to write about publically because of english libel laws. in really deserves the full attention of the american criminal justice system.
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you have all sorts of evidence about insider trading and stuff that goes on. you have the ability to clean this up. >> ms. shaffer. >> chairman murphy, ranking member johnson. thank you for convening this hearing this afternoon. it is a very important topic. the 21 century is the era of natural gas. the 20th century of dominance of coal. the 19th century, coal was the dom nainant fuel. natural gas has many benefits such as low environmental impact and low carbon emissions than most of the other energy sources. it is the fuel that's most compatible with the use of renewable energy however security of supply in natural
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gas is more challenging than any other fuel source was natural gas's physical qualities make it complicated and expensive to shift. consequently there's a greater need in the coming decades for policies and government involvement to secure security of natural gas. policy should focus on improving the security of supply in europe's most vulnerable markets. observers may speak of a single european energy market but this is an illusion. states in europe's periphery have a bigger security challenge than those in the west or other parts of europe. natural gas sectors must be properly organized to guarantee security of supply regardless of the origin of the gas supplies or even the poll situation. supply disruptions most frequently result from technical glitches or extreme weather.
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one of the biggest challenges has been the winter of 2012 due to extreme weather. next the united states and europe should make sure that kiev gets its gas in order. a they have engaged in disregard for payments. this behavior endangers energy security supply to europe. additional natural gas supply can also approve the supply in europe. the most promising new source is the southern gas corridor. beginning in 2012, this project will bring natural gas into southern europe. this project is the first in decades to bring new volumes into europe and not just rerouting exist volumes. this also reaches the specific gas markets of southern europe
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which have previously relied on a single source and are the most vulnerable. spurs can be built to additional markets in europe such as the balkans. they will bring new jobs in southern europe such as albania, greese, ititaly. russia and iran have noticed the strategic choice. it needs continued eu and american support to make sure russia doesn't undermine it. russia may stable to destabilize georgia. continued u.s. interest in resolving this conflict is important from moving a potential means for russia to destabilize the region. another potential source of
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natural gas is from israel and cypress. this can be very useful for the region itself. the ability of these resources to service peace pipe lines i believe are overstated. energy trade reflects existing peaceful relations, it doesn't create them. it also exacerbate existing potential conflicts and not resolve them. they can eradicate conflicts over water and essentially to remove any water shortages in the region. the increases water supplies to israel, jordan and the palestine territories. the new resources can also improve affordable electricity in the u.s. which is very important for future prosperity
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and peace. in recent months there has been speculation that tehran could also become a source of supply to europe. while they have the second largest reserves the natural gas in the world. this is surprisingly an importer of natural gas. if they tried to launch a gas export project to europe, russia would surely block it. over many years, their strategic competition between iran and russia especially in the sphere of natural gas export. throughout europe moscow employs policies to be the dominant supplier in europe. they fund bogus environmental
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actio actions. moscow utilizes this to protect its dominance in europe and remove the nonprofit status from the organization that's receive the funding from omoscow. another mechanism that moscow can exploit is manipulation of gas hub trade in europe and this should be countered. last, washington and brussels should clarify to nato and eu members that belong to these organizations that it entails organizations to protect the securi security. up until this year, brussels has increasingly pulled out of the visit of ensuring energy security but the market pace
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alone will not be enough to encounter a relentless russia. national and eu institutions must take a more active and strategic role and the ut shoni states should support this. thank you. >> thank you. mr. chow. chairman murphy ranking member johnson i'm honored to testify on energy security and the ongoing crisis in ukraine. when it comes to energy supply in europe we focus on natural gas supply. it is interesting to ponder why because europe is more dependant on oil supply. the level of anxiety is much higher with gas than oil. why? the root causes are in part related to incomplete market integration in europe when it comes to gas and electricity. the gas markets have been
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dominated by long term contracts at fixed volumes with prices indexed to oil. suppliers have restricted competition with destination clauses and control over pipe lines. these business practices were supported not only by major suppliers but also by incumbent countries that pass on the higher cost of gas to consumers. consequently european markets in gas and electricity distribution ip sfr f infrastructure not not well connected. what can we do to help our allies and trading partners. the first point is that we've already done a lot through the shell gas boom. these supplies became available
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for western europe. despite initial denial of the nature of the shell gas phenomena. it was forced to meet the market by adjusting down ward. as a result, european imports of russian gas increased by 13% last year, half of which transferred through ukraine. american european ong import facilities are currently operating at very low utilization rates. even if usong exports were available today they would not be imported by europe but east asia where spot gas prices are double that of european gases. the benefits to europe lies not in the qualities it might receive but future price formulation in markets. it may no longer rise and fall
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with oil prices. the competitive advantage to shell gas revolution provided the u.s. economy with lower gas and electricity prices coupled with reduced gas emissions has also caused europeans to he re-examine their energy policies. with renew efforts to further market utilization, enforce competition rules and rethink the use of energy resources. in the meantime the crisis in ukraine caused by russian action presents danger to european energy security. these countries rely on russia for almost all of their gas imports. much of which transferred through ukraine. ukrain's corrupt energy structure created vulnerabilities for itself and neighbors. the current government is left
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with mounting gas debt to russia. this led to the cut off of russian supply to ukraine on june 16th. ukraine depends on russia normally for 60% of its gas demand. in either case, are there ready substitutes? >> if the already delayed injection of gas into western ukrainian storage facilities does not begin soon, ukraine will run out of gas before the start of winter. the ukrainian government would be left with a winter with the choice of letting its own population freeze or taking gas from russia destined for european markets for the own use. if they want to further destabilize ukraine and provide it is an unreliable transit partner. it is in rush's interest to prolong negotiations.
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the european gas market is surprisingly complacent about the situation. spot gas prices have dropped significantly although gas storage capacity has risen, actual storage is not as high as it could be. the risk of miscalculation is high. meanwhile russia is pushing the south stream pipe line which would pass uk an all together. i instinctually question economic negotiations brokened by european leaders. it has become serious when negotiators stopped talking to the press. long term sustainable economic transactions cannot be placed mainly on political conditions which tend to change as we discovered with the russian ukrainian gas deals of january 2006, january 2009, april, 2010,
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and last november. raising matters to the highest political level as europe has done only invites russia to make political command demands such as accommodation of the occupation of crimea, stopping further economic sanctions. the only issue is to strengthen ukraine. the energy minister observed first hand and up close the blunders made by previous ukrainian governments on policy. concrete policy action is required. what knees to be done for the energy sector in ukraine is unknown especially with natural gas. what i have been missing with the capacity to execute reforms
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in a orderly and systematic way. reform depends foremost on ukrainian leaders. they require consorted warner siftance if they are to be successful. as long as ukraine is weak, it is an open invitation from russian opportunism and aggression. neither ukraine nor the west will have another chance bettered by the opportunity created by the crisis for energy reform. the situation cried out for american leadership, working closely with europe and the donor community. by injecting resources with the provision of assistance. a policy must be done with sound analysis not wishful thinking. >> thank you all for your testimony. mr. chow, i wanted to ask you a question about the effect of a prolonged crisis in ukraine. so say that it would accrue to russia's benefit because it
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would undermine faith in ukraine on behalf of the eu. i think there's sort of three in my mind -- 3 possible outcomes. i'm sure you can add to them. one is the one that you suggest that it will undermine european faith in ukraine and compromise enthusiasm for marring together ukraine and the eu or ultimately with nato. second, it could increase enthusiasm for alternate routes of gas to europe south stream as the primary example. it could also be a tremendous wake up call, the straw that breaks the kam ecamels back in of prompting europe to do the things necessary to become much more energy independent of russia. why is my third alternative not
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just as as you plausible as the first two? >> thank you, senator, for that important question. i hope you're right but i think you're 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 january of 2009 when instead of a three day gas cut off, europe suffered a three week gas cut off. it has done precious little so far accept for the steps that i have already mentioned. it's response to the invasion of crimea as well as russia's adventurism may i say in southeastern ukraine has been relatively weak and disunited. from vladimir putin's head, the way he sees it and he may be
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miscalculating, the time is on his side, not on europe or ukraine's side. >> let me ask that question of the other three panelists. a simple question that isn't simple. does a prolonged crisis harm ukraine more or russia more with respect to future dynamics over eu membership or future continued reliance on european energy. mr. lucas you had your hand up so i'll go to you and mr. shaffer. >> i think you frequently get wake up calls and then it goes back to sleep again. i think the question here is the time frame. i would slightly disagree with mr. chow that i think the previous crises have stimulated quite a lot of activity in europe. we do now have a pretty much north/south gas grid with better storage. we've had the third energy package which has reduced
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russia's monopoly power. this means we're -- if they cut the gas off right now we got three months before it would start to bite. that's quite nice but in terms of the sort of stuff you were talking about to make a real difference, we're talking years. you know? if we stopped right now in five years time we could have a really resilient if not independent but a europe that had lots of energy and storage. the gap between three years and five years is the vulnerability. what russia knows is that they can threaten stuff which scares politicians just like here. we have a fragile recovery. the politicians are desperate not to have stuff that's going to harm growth and jobs and so on. an energy interruption worries what it does to business confident. that's
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that's a powerful weapon for the russians. they just have to threaten this stuff. we already think of ways to make this conflict go away rather than trying to whip it. >> ms. shaffer. >> i think russia set up a really perfect strategy to actually set up ukraine against europe because basically the gas is still flowing to europe. the only way for ukraine is get the gas is to disrupt the supplies to europe and not take it into storage for future system. as winter approaches, it's spinning kiev against europe. if you look at previous european response to this krieps is was north stream. building a pipe line from russia to gem any to circumvents states. we might be more responsible to the southern corridor. there's another alternative. while the third energy package is great in terms of principals in a very perfect world with all
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the gas trade, it's very nice. i think in the reality of russian behavior while it's manipulation of gas hubs at price. of course they can flood the market, deny the market and really effect these prices. i think what we need in europe is a paradigm change. they based the third energy package on the american model. the market has done a great job here in increasing u.s./energy security. the u.s. has thousands of gas buyers. hundreds of gas producers. the largest gas producer only has 3% of the market. each has about a third of the market. it's a completely different game. what europe needs is a paradigm shift that gas is not a commodity. it is a utility. when we grew up, we called it a utility. not something that you just trade. when you think

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