TRANSCRIPT: Ukraine: Confronting Internal Challenges and External Threats

Commission on Security & Cooperation in Europe:
U.S. Helsinki Commission

“Ukraine: Confronting Internal Challenges and External” [hearing transcript]

Commission Members Present:
Senator Benjamin Cardin (D-MD);
Senator Sheldon Whitehouse (D-RI);
Senator John Boozman (R-AR);
Representative Michael Burgess (R-TX)
Representative Steve Cohen (D-TN)

Speaker:
Victoria Nuland,
Assistant Secretary for European and Eurasian Affairs,
U.S. Department of State

The Briefing Was Held From 10:09 a.m. To 11:30 p.m. in Room 215 Dirksen Senate
Office Building, Washington, D.C., Senator Benjamin Cardin (D-MD), Presiding

Date: Wednesday, April 9, 2014

CARDIN: Well, good morning, everyone, and welcome to this hearing of the
Helsinki Commission. I particularly want to thank Secretary Nuland for her
presence here today and for her extraordinary service to our country during an
extremely challenging time. We’ve had the opportunity to talk on several
occasions, but I particularly appreciate this opportunity within the forum of
the Helsinki Commission to be able to have this discussion about the
circumstances in Ukraine.

I also want to acknowledge Ambassador Motsyk, the ambassador from Ukraine, who
is here. We appreciate very much his presence. I also want to acknowledge
Spencer Oliver, who is the secretary general of the OSCE Parliamentary
Assembly, who is with us today also. So we have a distinguished group of
people that are in the audience, along with Congressmen Burgess and Cohen.
It’s a pleasure to welcome you all here today. I look forward to examining the
current situation in Ukraine and discussing how the United States, together
with the international community, including EU and the OSCE, can best assist
Ukraine and deter further Russian aggression.

Since last November, Ukraine has been in turmoil with a deteriorating economy,
public unrest by millions of protesters fed up with the human rights and
democracy rollback and the massive corruption characterized by the four-year
rule of Viktor Yanukovych. The largely peaceful protests culminated in a
violent crackdown resulting in the killing of more than 80 people in a span of
three days.

This in turn led to Yanukovych’s removal by a sizable majority in parliament on
February 22nd. Since then an interim government has been working at a rapid
pace to address the numerous internal challenges moving forward on badly needed
economic and political reforms and preparing for the critical May 25th
presidential elections. I might say that I know that the OSCE Parliamentary
Assembly and ODIHR will be participating in election monitoring. We will have
a delegation from the commission, which will also be in Ukraine for the May
25th elections.

As if these internal challenges weren’t enough, just a few days into the
interim government’s tenure Russia seized Crimea by force. Russia held an
illegal referendum and annexed the peninsula. Russia’s illegal actions
violated numerous international obligations, including the core principles of
the Helsinki Final Act. The land grab, cloaked in the cloth of
self-determination, brings to mind darker times in Europe’s history, undermines
the international order, and sets a dangerous precedent. We saw Russia take
similar action in Georgia and now in Crimea, in Ukraine.

If this goes unchecked, and if we do not speak with a unified voice, it just
encourages more irresponsible action by Russia and other countries around the
world that might be so inclined. Meanwhile Russia continues to threaten
Ukraine’s sovereignty and territorial integrity with formal military
intervention and attempts to undermine the legitimacy of the new government,
including through a propaganda campaign where truth is a casualty.

In the last few days, Russian agents have fomented protests in several eastern
cities in an attempt to destabilize Ukraine and make it more amenable to
Russia’s influence, yet these efforts do not appear to be finding fertile
ground. Secretary Nuland, as I’m sure you’re aware, Secretary Kerry testified
before the Senate Foreign Relations Committee yesterday and was pretty candid
about the efforts that Russia has been doing, particularly in the eastern part
of Ukraine, to try to provoke action and unrest, and this obviously needs to be
brought forward.

It is clear that Ukrainians want to live in a united Ukraine. Even among the
ethnic Russians there have been no cries of discrimination. It is clear that
the people of Ukraine long for the rule of law, transparency, democracy and
respect for human rights. They want to be afforded the dignity and respect
that all human beings desire and deserve. The May 25th elections will be vital
to understanding the aspirations of the people of Ukraine and the course they
want to chart for their future. A free and democratic electoral process is a
powerful response to Russia’s perceptions and Russia’s aggression.

Given what is at stake, it is so important for the administration, the Congress
and the international community to respond, and I believe it’s absolutely
essential that we speak with a strong, united voice and standing with the
people of Ukraine. I particularly want to note the vital work of the OSCE and
its various institutions which have been actively engaged in sending monitoring
missions and representatives to help foster security and respect for human
rights. The OSCE has just deployed a large special monitoring mission in
Ukraine. I hope that Russia will not prohibit this mission as well as other
smaller OSCE missions from entering Crimea.

I’m especially grateful that the Senate and the House, on an overwhelming
bipartisan basis, were able to send to the president, for his signature,
legislation underscoring our country’s solidarity with the Ukrainian people,
with tangible economic democracy and security assistance. The legislation also
sanctions Ukrainians and Russians responsible for undermining Ukrainian
sovereignty and massive corruption. Let me just point out that the sanctions
that were employed by the administration patterned very much the sanctions that
were made available that resulted in the Magnitksy Act, which was
Russia-specific in regards to the human rights violations in Russia.

So it is very comparable to that type of sanctions. And as we originally
suggested, and as legislation has now been authored by Senator McCain and
myself, we want to make that legislation available globally so that we don’t
have to respond to Congress every time there’s a human rights violation, and
working with the administration try to see whether we can’t get the authorizing
language that will allow the administration to be able to move more promptly if
circumstances require.

It basically underscores the three principles of the Helsinki Final Act, and
that is that if we’re going to have a stable partner, if we’re going to have a
country that is going to be able to proceed on an economic and security front,
it must respect the rule of law, good governance and human rights. We must
continue to stand with the people of Ukraine as they defend their democracy,
integrity and independence. We must, ourselves, defend the Helsinki principles
and other international principles which Russia so blatantly violated.

I also noticed that we’ve been joined by Senator Whitehouse, and acknowledge
his presence. I would yield to any of my colleagues who would like to make
brief opening comments. Congressman Burgess?

BURGESS: Oh, thank you, Mr. Chairman. I do want to thank you for holding the
hearing. I’ll keep my comments brief because we are anxious to hear from the
assistant secretary. And thank you, Madam Secretary, for being with us this
morning. And thank you, Chairman, for your willingness to travel to Ukraine
during the time that the voting occurs. I, for one, am anxious to be present
when that happens and look forward to that day for the people of a free
Ukraine.

It’s been an incredible couple of months, and some extraordinary events have
occurred in Ukraine and the Crimea. February 21st, pro-European protesters
legally marched in the streets of Kiev to demand reform from their government.
The protesters won, and Yanukovych, who was president at the time, left the
country. And we all know what happens next. Russia immediately condemned the
new Ukrainian government as illegitimate. Then, under the guise of liberating
the Russian-speaking peoples of the Crimea, Russia invaded and annexed a piece
of a sovereign nation.

The Russian activity must not be unchallenged. Just yesterday armed protesters
swarmed a city 300 miles to the north of Crimea. Ukraine and U.S. officials
alleged that the protesters were in fact organized by Russia. The protesters
themselves then called upon President Putin to send in troops for their aid.
In fact, this cannot stand. Doing its part, the United States Congress has
acted. We passed a billion-dollar loan guarantee to the Ukraine. And further,
Congress has passed separate legislation that requires President Obama to ban
visas and seize assets from the people responsible for undermining the peace
and stability of the Ukraine.

There is today, over in another committee of which I’m a member on the House
side, a provision to allow the expedited handling of export licenses for
liquefied natural gas. These are licenses that inexplicably have been held up
for some time, and it is clear that natural gas exports to a country like
Ukraine could be a significant weapon in the – in the fight against Russian
aggression.

Four years ago, Secretary of State Clinton said we must hit the reset button on
our relationship with President Putin. That sent a confused message to the
rest of the world. It implied that the United States, which has always stood
firm for freedom and democracy, is willing to work diplomatically with
President Putin. And, in fact, we all know he is not to be trusted. He is
still fighting the Cold War, even if we are not. And he’s denying basic
freedoms to the people of Russia.

I thank the chairman and I look forward to hearing the comments by the witness
as to the current situation in the Ukraine and what we can do to further deter
Russian hostility and aggression. I yield back.

CARDIN: Thank you.

Congressman Cohen.

COHEN: Thank you, Mr. Chairman.

I’m looking forward to your testimony. This, I think, is a most, most, most
critical issue to the world and to America. And I’d hope in your testimony –
and I haven’t had a chance to read it – that you will comment on some of the
criticisms that some have launched about our $100 billion aid, about some of
that aid possibly going to benefit debts that are owed to Russia and how that –
if there’s any reality to it or anything can be done about that aid to see that
it does help the economy directly rather than simply by paying off debts owed
to maybe the Russian energy company, or if that’s inevitable; comments about –
that have been made that the individuals who have taken power in the Ukraine
are, quote, unquote, “neo-Nazis” and fascists, et cetera – if there’s any
extremist elements that we know about or if this is simply propaganda on folks
that don’t want us to get involved.

And I’m curious about what’s going on in the Caucasus. If I was a terrorist in
the Caucasus right now in Dagestan or Chechnya, I’d be doing something because
I would think that Russia’s attention is turned toward Ukraine. And is there
any indications we have of any action taking place there, where it seems like
an ideal opportunity to disrupt the Russian efforts?

I yield back the balance of my time. I look forward to your testimony.

CARDIN: Senator Whitehouse.

WHITEHOUSE: Thank you very much, Chairman, for holding this. And I thank our
witness for being here, and I appreciate the energetic nature of her diplomacy
in this area. I think it’s been helpful to our country.

I don’t want to ask the questions now – we can take it up later – but I wanted
to flag two issues that I think bear on the situation in the Ukraine. The
first is that when we were there recently we heard considerable concern from
our Ukrainian interlocutors about the threat of corruption in Ukraine and about
the extent to which confidence in any new government could be eroded if it
weren’t clear to the people of the Ukraine that a serious effort at undoing the
corruption – primary supporting the oligarchs but more generally – I think
infesting much of the – of the previous Ukrainian government is not dealt with.

I’m not familiar with what the Department of Justice is doing by way of
providing support, mentorship, guidance, resources and so forth to the
prosecutors and to the judiciary in the Ukraine. There is skepticism, I think,
that prosecutors will have the freedom to do what they should be doing, that
investigators will be free to pursue this, that judges will be able to render
legitimate decisions – that we have been active in other countries, helping
them to, for want of a better word, reboot the justice system insofar as it
pertains to corruption. And I’d love to know what the role is and how DOJ is
participating in our combined government efforts to try to support a new
government in the Ukraine in that regard.

The second is following on Congressman Burgess’ observation that much of the
power of Russia in this area has to do with its status as a petro state and has
to do with the political threat that the denial of fuel or the aggressive and
strategic pricing of fuel provides the Russians. There has been considerable
discussion about the role of American natural gas exports to help with that
problem. I would submit that there probably is also ground to be gained in
that regard by helping support a Ukrainian transition to a stronger renewable
footprint, and that it could well be seen that every patriotic Ukrainian should
have a solar panel or, if they have enough land the grid for it, a wind
turbine. And yet I’m unaware of any connection between our Department of
Energy and the Ukraine. And I don’t know whether there’s any effort being made
to facilitate the renewable side in addition to considering natural gas
exports. So I think those are two important concerns. If we can’t get after
the corruption, if we can’t reduce the Russian political weight associated with
its petro-state status, a lot of these other goals that we want to achieve will
be made more difficult.

So I’ll pursue that during the Q-and-A period, but I do salute our witness for
the energetic effort she has brought to this and appreciate her service.

CARDIN: Secretary Nuland, thank you for being here. Secretary Nuland assumed
her position as the – as assistant secretary of state for European and Eurasia
Affairs on September 18th, 2013. As assistant secretary, she is responsible
for the diplomatic relations with 50 countries in Europe and Eurasia, as well
as NATO, the European Union and the Organization for Security and Cooperation
in Europe – quite a portfolio that you have.

Secretary Nuland is a career diplomat. She was the 18th U.S. permanent
representative to the – to NATO from 2005 to 2008. As NATO ambassador, she
focused heavily on strengthening the allied support for the ISAF mission in
Afghanistan and on NATO-Russia issues. So she is an expert. She plays a
central role in forging and implementing U.S. policy regarding Ukraine, Russia
and the region during these extraordinary, challenging times.

And I just want to note, on a personal basis, her extraordinary leadership is
well-known. As we talk to more of our colleagues around the region, they
respect greatly the strength that Secretary Nuland has brought to this
position. It’s a pleasure to have you here. And as you see, our colleagues
have a lot of questions. You may proceed as you wish. Your full statement
will be incorporated in our record. And we look forward to your testimony.

NULAND: Thank you very much, Mr. Chairman. Thank you, members of this
commission. I’ll proceed with the prepared statement, and then we can go to
many of these very rich questions that you all have raised in the opening
statements. Again, it is my honor to be invited to testify before you today on
the situation in Ukraine. It’s a particular honor to do so before the U.S.
Helsinki Commission, an organization that I have long personally valued and had
lots of exchanged with over the years.

Let me also express my gratitude and our – the administration’s gratitude for
the leadership that Congress has shown with the overwhelming passage of H.R.
4151 and S. 2183 in support of Ukraine and the Ukrainian people. That unity
sent a strong, bipartisan signal that the United States stands united for
Ukraine at this critical moment in its history.

For almost 40 years, the United States and this commission have worked with our
trans-Atlantic allies and partners to uphold the principles of the Helsinki
Final Act. Russia’s actions in Ukraine are an affront to those fundamental
principles. Its occupation of Crimea, rubber-stamped by an illegitimate
referendum conducted at the barrel of a gun, have tarnished its credibility and
diminished its international standing in the eyes of Ukrainians and in the eyes
of the world.

Reports of human rights abuses in Crimea since the Russian occupation have also
shocked the conscience. Russia has also attempted to intimidate Ukrainians by
amassing more than 40,000 troops and quick-strike aircraft along its borders,
and with trade blockades and gas price hikes, as mentioned by some of you.
This week’s violent occupation of government buildings in Kharkiv, in Donetsk
and in Lugansk deepen our concern.

Far from a spontaneous set of events, as Secretary Kerry said yesterday before
the Senate Foreign Relations Committee, these incidents bear all the hallmarks
of an orchestrated campaign of incitement, separatism and sabotage of the
Ukrainian state, aided and abetted by the Russian security services. Today,
Ukraine is a front-line state for the struggle for freedom and all the
principles that this commission holds dear. The United States stands with
Ukraine in its effort to forge its own path forward to a more free, peaceful
and unified future.

Our approach includes four pillars with which you’re very familiar. First, our
bilateral and multilateral support for Ukraine and its democratic future,
second the costs we’re imposing on Russia for its aggressive actions, third our
efforts to de-escalate the crisis diplomatically if at all possible and,
fourth, our unwavering commitment to the security of our NATO allies. I’ll
address each of these briefly. My longer statement includes more detail.

First, we support the Ukrainian people and the transitional government in the
courageous steps they are taking to restore economic health, democratic choice
and internal stability and security to the country. The Rada has passed
landmark anti-corruption measures, deficit reduction measures and taken
difficult steps to reform the energy sector. These reforms are going to
require painful sacrifice from the Ukrainian people, but they will also open
the way to an IMF package of up to $18 billion in support.

And as you know, the United States stands ready to help as the country
addresses its immense challenges. Again, we thank you for your support of the
$1 billion loan guarantee, which we will provide in conjunction with IMF and EU
assistance. This loan guarantee will primarily go to help cushion the impact
of reforms for the poorest in the Ukrainian system and the most vulnerable in
their society.

We also have approximately $92 million in FY ’13 State and USAID funding and 86
million (dollars) in FY ’14 State and USAID funding for other kinds of
assistance. This is primarily going to be directed in the areas of
strengthening anti-corruption and enforcement efforts, along the lines of – to
address some of the concerns that Senator Whitehouse raised: revising public
procurement legislation, again, in an anti-corruption direction; introducing
agricultural and energy sector reforms that are badly needed, also going to
rooting out corruption; improving transparency; and helping the Ukrainian
people prepare for free, fair elections on May 25th.

And thank you for those of you who’ve already traveled to Ukraine and to those
of you who will travel for the elections – very, very important to have senior
ranking Americans from both the executive and the legislative branch in Ukraine
throughout this period.

We are also working with the international community to push back against
Russian propaganda, Russian lies and efforts to destabilize Ukraine’s regions.
As you mentioned, Mr. Chairman, the OSCE has already fielded a special
monitoring mission. There are 70 monitors now in place in some 10 locations
around Ukraine, including most of the at-risk cities that we’ve seen over the
weekend.

And we expect this mission can grow to up to 500 over the coming weeks. The
OSCE’s Office for Democratic Institutions and Humanitarian Rights will also
play an essential role. They’ll send some thousand observers for the
presidential elections – one of the highest per-capita fieldings of an ODIHR
mission in recent trans-Atlantic history.

Second, as I said, Russia is already paying a high price for its actions, and
that cost will go up if its pressure on Ukraine does not abate. Across the
board, Russia has found itself isolated, disinvited and diminished in its
interactions with all of us. The president has signed two executive orders
authorizing sanctions against those responsible and finding that the actions
and policies of the Russian government undermine democratic processes and
institutions, threaten the peace and stability and security and sovereignty and
territorial integrity of Ukraine, or in the misappropriation of Ukrainian
assets.

These sanctions have been carefully coordinated with the EU and with our global
partners. And today we are considering further measures in response to
Russia’s continued pressure on Ukraine. These costs will only grow if Russia
does not change course. At the same time, the president has insisted on
leaving the door open for diplomacy. And we wanted to try to de-escalate this
crisis peacefully, if at all possible. As you know, Secretary Kerry has met
three times with Russian Foreign Minister Lavrov in recent weeks, with the full
support of the Ukrainian government, at a time when Russia was refusing to meet
directly with Ukraine.

Earlier this week, the Russians agreed that they would finally sit down over
the next 10 days with Ukraine and the EU and the – and the U.S. to discuss
de-escalation, demobilization, support for the elections and constitutional
reform. I have to say that we don’t have high expectations for these talks,
but we do believe it is very important to keep that diplomatic door open. And
we’ll see what they bring.

Even as we try to de-escalate, with Russian troops ringing Ukraine for weeks
now on high alert, we cannot be complacent about the security of our NATO
allies who live closest to Russia. Our message to Putin and to Russia is
clear: NATO territory is inviolable. And we, and our NATO allies, are
providing visible reassurance on land, on sea and in the air to our Central and
Eastern European members, who now also live on the front lines of this conflict.

More broadly, the events in Ukraine are a wake-up call for all of us.
Everything we have stood for, for over 40 years, as a community of free nations
is at risk if we allow aggressive acts to go unchecked and unpunished. As a
community, North Americans and Europeans, must continue to stand with the
people of Ukraine as they say no, or nie in Ukrainian, to the tactics and
brutality of the 19th century on display now and yes, or tak in Ukrainian, to a
21st century future that respects their sovereignty, their choice and their
human dignity.

Thank you for allowing me to be with you today.

CARDIN: Once again, thank you for your testimony. There is a scheduled vote
on the floor of the Senate at 11:00. So I’m going to try to keep the first –
we’ll probably do, if necessary, more than one round, but if we could try to
keep the rounds to five minutes, it –

WHITEHOUSE: Mr. Chairman, if I may, I have to leave very shortly with a
meeting with my EPW chairman –

CARDIN: I’ll yield my time.

WHITEHOUSE: But what I prefer to do, actually, is to have my questions be
questions for the record. There’s no particular urgency –

CARDIN: I’d be glad to yield my time to you if you’d like to start.

WHITEHOUSE: DOJ, DOE.

NULAND: So first of all, Senator, I should, obviously, let those agencies
speak for themselves. But I will, since we work very closely, say to you that
the Department of Justice has had a field team in Ukraine for at least three
weeks now. They are working on all the issues of interest to you. They are –
they have been assisting the Ukrainians, and particularly the Rata, with some
of the efforts that they’ve been making to reboot the justice system, as you
say, by cleaning out some of the corrupt members of the judiciary, by working
on legislation that would provide more transparency and more accountability in
the justice sector.

As you probably know as part of the IMF conditionality, and I cited it quickly
in my testimony, the Rata is working on a whole series of transparency and
anti-corruption legislation in things like government procurement in the
different sectors – grain, energy, et cetera – to provide openness and reduce
graft in contracting. And DOJ’s been advising on that. But equally
importantly they’ve had a team that’s been working on helping the Ukrainians
exploit this treasury trove of Yanukovych-era documents that have come forward
so that they can make judicial cases against corrupt officials, both in
Ukrainian courts and in international courts.

And we’re also advising the Ukrainians through the Department of Justice and
our – (inaudible) – out there on some of the cases that they plan to take to
international bodies – like the ICC, like the ICJ, and in the – and in the WTO
– against some of the Russian pressures, the stealing of their – of the assets
of the Ukrainian Navy, et cetera. So watch this space.

On the energy side, Carlos Pascual, the State Department’s senior coordinator
for energy, has been in Ukraine recently. The secretary had a meeting with the
EU, Cathy Ashton and the Energy Commissioner Oettinger, last week to try to
support the Ukrainians in defending themselves should there be a gas cut off,
primarily by working on reverse flows of gas from Slovakia, from Hungary, from
Poland, accelerating U.S. and EU support for the adjustments that need to be
made there. Those efforts continue. We are encouraging Secretary Moniz and
Dan Poneman, his deputy, to go out and work in Ukraine.

As you may know, there is major U.S. energy investment in Ukraine, primarily in
the shale gas exploration field. This has the potential to make Ukraine
completely energy independent in the span of some eight to 12 years, depending
upon how it goes. We are also encouraging them in the direction of energy
conservation – that’s a really very serious issue; if you’ve ever been to – in
Ukrainian public buildings with the windows open in the middle of the winter,
you know what I’m talking about – and also on renewables. But as you know,
with renewables, it’s expensive, it’s a longer-term game, but there are lots of
young, Ukrainian high-tech companies interested in getting into that sector.

WHITEHOUSE: Thank you, chairman. Thank you, Ms. Nuland.

CARDIN: Thank you. Congressman Burgess.

BURGESS: Please go ahead, sir.

CARDIN: Thank you. Well, thank you. The – let me – first, I want to bring up
an issue that was present before Russia’s invasion in Ukraine, and that is the
legislation that was passed, known as the Magnitsky law, required the
administration to evaluate who in Russia was responsible for these gross
violations of human rights and to take action, including visa bans and
sanctions on our banking system. The list that came out before the Ukrainian
crisis erupted, before the Olympics was – by many of us – we thought
incomplete. And we have, under the laws, notified the administration that we
thought additional reviews should be made, particularly of certain individuals.
Can you just give me the status of that review?

NULAND: Chairman, thank you. As you mentioned, we put forward our annual
report in December, but did not at that time add more names. We are in receipt
of your request for more review, which sets in motion a 120 day clock, which I
believe comes forward to us end of April, middle of May. We do expect to be
able to respond within the timeframe that the legislation sets and we are
reviewing now the question of adding more names.

CARDIN: Thank you, and we’ll look forward to that response.

I’m going to talk a little bit about the OSCE and its importance. It is the
largest regional organization. It is an organization that includes both the
United States and Russia, which gives it particular importance. Now that the
G-8 is G-7, at least temporarily, the OSCE provides us one of the only regional
forums that we can have direct contact with Russia. It is difficult right now,
because Russia is in violation of so many of its responsibilities under the
OSCE. We now have missions from the OSCE in Ukraine. Can you just tell us what
we can do to help ensure that the missions are able to get the type of access
and support that they need in order for us to have independent observers and
help, we hope, to develop the type of democratic tools necessary to resist open
violence in that area?

NULAND: Well, Chairman, in all my years of working with the OSCE, and it’s
been decades, as it has for you, I have never seen a more active period at the
headquarters in Vienna than we have now, because the need is so great and
because the OSCE has so many of the tools that are required. That said, as you
know, it was quite a struggle to get agreement on the Special Monitoring
Mission. We would have liked it about a month earlier than it came forward.
But we do now have agreement to a mission that can grow to up to 500 people.
As I said, we have about 70 in the field now, including in the key cities.
We’ve had considerable reporting coming forward, including reporting that very
much validates our understanding of the situation in Kharkov and Donetsk and
Lugansk – which was that it was relatively peaceful with some relatively small,
but peaceful, pro-Russian protests on Saturday, on Sunday – until this very
surgical and orchestrated campaign of building takeovers that happened, as you
know, over the last couple of days. And then, since then, monitors coming
forward with reporting that the rest of the cities are relatively calm, that
citizens in these cities are distancing themselves from the position of these
extremists and these aggressive actors and are expressing their desire to vote
in free, fair elections on May 25th.

I think we need, now, to accelerate the pace of getting the monitors out there,
filling out this mission. Obviously, it takes money. I am scraping my budget
now to fund as many American monitors as we – as we can. We’re also talking to
the OSCE about insuring – currently their reporting is confidential within the
organization. The first reporting we’ve had has been very rich. We’re asking
them to do what they can to publicize more of it, either by sanitizing
reporting and putting it up on their website on a regular schedule, or by
giving regular press conferences, and I think hearing from you all on that
would be helpful.

Final issue on the special monitoring mission: It has a mandate not simply to
passively monitor, but also to offer good offices to facilitate de-escalation
of crisis situation. So over the last couple of days, we’ve been raising the
question in Vienna whether the monitors in Donetsk, the monitors in Lugansk can
offer a more active role and good offices in trying to get these last two
buildings that are being held cleared, particularly the one on Lugansk, where
there are hostages still at risk. So we’d like to see the mandate used to the
maximum.

We also talked about the absolutely vital role that ODIHR will play in
monitoring the elections. This is absolutely key for undercutting this
narrative that somehow the Ukrainian people will not have a broad choice. As
you know, there are more than 20 candidates in the race, representing every
single color of Ukraine. We expect the media environment for this to be as
free as it’s ever been. But it’ll be important to document that and important
to have monitors in every single part of the country.

Finally, the human rights monitors from the OSCE were some of the only people –
and the monitors for journalistic freedom – were some of the only people to get
into Crimea, both during the occupation and afterwards, and the witness that
they have borne to the increasingly tense human rights situation in Crimea has
been very, very important. But, again, we’re frustrated that more of this
information is not getting into the public domain.

CARDIN: The Yanukovych administration left Ukraine in a pretty bad situation.
The economy was in desperate situation. The political institutions were
severely damaged, and the parliament acted with some division. They are
clearly united in regards to the independence of Ukraine and the actions of
Russia, but it’s not a predictable circumstance. The May 25th elections are
critically important, and they’re only weeks away. How well-prepared will the
Ukrainians be for a open, free and fair election on May 25th?

NULAND: Well, obviously, Chairman, this is an issue that we are watching
intently. This is why we are gratified to have such a large ODIHR presence.
We also expect that we will have a large IRI and NDI contingent out there and
also from the commission.

In terms of the fundamentals of free, fair conditions, a broad slate of
candidates, open media environment, electoral roles that are up-to-date – my
understanding is that the conditions are all in relatively good shape along
those lines. I think our number one concern is the concern that you also have:
That there will be efforts to – further efforts to destabilize the security
situation, that that is part of the playbook here: to make it difficult to
have elections, or to claim that the environment is too unstable for elections.

This is why we are gratified to see the very restrained and careful efforts
that the Ukrainian security services have been making to deal with the
occupation of the buildings in these eastern cities. They’ve now, through a
combination of negotiation and very surgical police action, cleared the two
buildings in Kharkov. They’ve cleared one of the buildings in Donetsk, and
they’re working on the last two. This, again, gives confidence to the
Ukrainian people in those cities that their public institutions serve them and
serve them with professionalism and credibility.

CARDIN: Let me also point out: ODIHR works very closely with the
Parliamentary Assembly. I think we have resolved some of our earlier conflicts
so it’s – we expect a large number of parliamentarians – maybe a record number
of parliamentarians – that will be participating in the observation of the
elections.

I want to just – we now have frozen conflicts in Georgia, in Azerbaijan,
Moldova – will Ukraine outlook be one in which it’s going to be a long-term
area of disagreement before we can get this resolved, or is there any hope that
this will not become another frozen conflict?

NULAND: Well, Chairman, first and foremost, we are, as I said, focused
intently on supporting the Ukrainian people and the Ukrainian transitional
government, and we will support the elected authorities after the elections in
ensuring that the rest of Ukraine is as successful as possible in improving the
economy, the political environment, security, and stability.

With regard to Crimea, I think we all have to be honest with ourselves that
this is going to be a medium-term effort, and here again, the more successful
Ukraine is, the more Ukraine begins to resemble Poland, rather than resembling
Russia over time, the more the people of Crimea will have to ask themselves
whether they made the right bet, either with their vote, or otherwise.

And I think that the best antidote to this kind of separatism is to bring these
countries – whether it is Ukraine, whether it is Moldova, whether it is Georgia
– closer to their successful neighbors in Europe. As you know, the EU has
offered to sign association agreements with Moldova and Georgia. They’ve
extended a lot of the benefits of the Association Agreement in the Deep and
Comprehensive Free Trade agreement to Ukraine already. In Georgia and Moldova,
this offers the opportunity, conceivably as early as June, July, for citizens
carrying Moldovan passports to travel visa-free to Europe, to set up – to have
business exchanges with the lowest-possible, or no tariffs to Europe. And
that’s going to be true not just for those living in Chi?inau – it’s going to
be true for those living in Tiraspol.

So, again, this opportunity, as a Moldovan, to integrate with Europe, and to be
freer and more prosperous through that opportunity, we think is the greatest
antidote to separatism, whether it’s there or whether it’s in Apozee (ph) – or
ultimately in Crimea. But it’s going to be a medium-term game.

CARDIN: One last follow-up question in regards to Moldova. There’s been
released reports that there is some nervousness that Russia might in fact pull
its troops into Moldova under, again, the guise of protecting the Russian
ethnic community. Can you just give us a quick update as to our concerns as to
Moldova and Russia’s actions on that border?

NULAND: Chairman, as you know, I was in Moldova a week ago Sunday, reassuring
that – Moldovan government and people of U.S. support for their sovereignty,
territorial integrity, and for their chosen path of deeper association with
Europe. There was considerable concern that in a scenario where Russia chose
to bring its troops that are now ringing the Ukrainian border into Ukraine
proper, that they would also use their bases in Transnistria to come into
Ukraine on the western side and make a connection between Transnistria and
Odessa. Obviously, that puts a premium, again, on trying to deter that kind of
decision by Russia and to continue to make the case to the people of
Transnistria that there are very, very good things coming for Moldova in the
coming weeks and months as a result of its association with Europe, which will
pay economic benefits and free-choice benefits for their people too, and that
they should resist these efforts to use them as a pawn in this game.

CARDIN: Thank you. We’ve been joined also by Senator Boozman – it’s nice to
have you here. Congressman Burgess.

BURGESS: Thanks, Mr. Chairman. Again, Madam Secretary, I want to thank you
for spending time with us this morning and sharing your considerable knowledge
and expertise in this area with the commission. I want to ask a question about
just prior to the annexation, or the takeover, of Crimea. And there was a
story that broke in the newspapers about a hospital where the hospital
administrator had been instructed that the hospital was now being managed by,
presumably, the Russians. And, I mean, that got my attention, because why
would Russia be taking over a hospital if they were not expecting multiple or
maybe a mass casualty situation? After the event occurred, then there was a
follow-up story where the hospital administrator had now been detained by the
Russians. And I’m a physician by background – there’s plenty of times I want
to see a hospital administrator detained – but can you shed any light on that
as to what happened to that hospital administrator?

NULAND: Sir, I frankly don’t – I’m not familiar with this incident. We will
look into it for you. But certainly the story that you recount is consistent
with human rights violations and intimidation and other tactics that have been
widely reported, including by OSCE human right monitors and by others and by
the Crimeans themselves since the Russian pressure began, but particularly
since the occupation – human rights abuses against Tatars, against journalists,
against Ukrainian Navy personnel who resisted. We’re talking about arrests,
we’re talking about reports of secret torture facilities, we’re talking about
appropriation of property, intimidation of families. It is significant. It is
pervasive.

Secretary Kerry, in his meetings with Foreign Minister Lavrov, has expressed
our concerns about this at every stage and, in the most recent meeting, handed
over a list of cases of concern that was coordinated with the government of
Ukraine.

BURGESS: Well, if you could follow up with us on that, I would be very, very
grateful.

NULAND: We will.

BURGESS: I was happy to hear your affirmation of the NATO commitment. Can you
tell us, as far as the Budapest memorandum was concerned, is there any like
requirement that any of the people who were involved in the crafting of that
memoranda be – provide any assistance or lack of aggression toward the Ukraine
– or toward Ukraine?

NULAND: In terms of the individuals who were negotiators of the agreement?

BURGESS: Right. We asked them to disarm. I remember Secretary Rice – well, I
guess when she was national security adviser, actually coming to Congress and
talking about if a country wanted to disarm, we know what it looks like.

NULAND: Right.

BURGESS: We know what the Ukraine – what Ukraine did.

NULAND: Yes.

BURGESS: So does that carry any weight, the fact that Ukraine was so
cooperative?

NULAND: So I was on the negotiating team in the Clinton administration that –
led by Strobe Talbott, that worked on the denuclearization of Ukraine,
Kazakhstan, Belarus at the time, and worked on this security assurance
document, the 1994 Budapest agreement. And as you say, the idea here was that
for a Ukraine that had voluntarily surrendered its nuclear weapons, it needed
political – it required political assurances from its neighbor, Russia, and
from two other large NATO powers, the U.K. and the U.S., that it would not be
subject to attack as a result.

That was a political reassurance; it was not a sovereign treaty obligation of
the level of what we have with our NATO allies, what we have with Japan, Korea.
But it was primarily designed to give Ukraine reassurance vis-à-vis Russia.
As you know, we consider that that commitment has been more than violated by
Russia. We supported the Ukrainian call for consultations under Budapest. We
endeavored to have those consultations within days of the Crimean crisis, and
the Russians declined to participate.

So it is regrettable that this political commitment proved not to be worth much
more than the paper that it was written on. I think it does speak to whether
broader international assurances should be given to other such states in the
future.

BURGESS: May I ask a follow-up question, then, as far as, for example, the
missile defense in Poland, the interceptor program in Poland, in
Czechoslovakia, that was brought back to some degree. Perhaps we should
rethink the activities surrounding that.

NULAND: Well, sir, I think you know and – that these systems were never
designed with Russia as a target. These are systems that are designed to deal
with ballistic missile and nuclear threats and WMD threats coming from the
south of Europe. So they are not constituted for that mission.

BURGESS: Correct.

NULAND: There is a question of, you know, Russian nuclear aggression is
deterred by the NATO nuclear posture, which remains in place, as you know.

BURGESS: But while these were designed for protection from a country such as
Iran, there was considerable concern on the part of Vladimir Putin that we had
participated in the missile defense of Poland, so, I don’t know, it just seems
like this may be – if we know it is something that has concerned the Russian
hierarchy before, maybe it’s worthwhile re-exploring that.

Let me just ask – or add one other thing, and this is on the question of
energy, and as Secretary – or Senator Whitehouse did bring that up. Again,
we’re marking up a bill right now in the Energy and Commerce Subcommittee on
Energy that would expedite the export licenses. It still takes a long time,
even for those companies that are – have already done their environmental
studies, that are awaiting the approval of these licenses. It’s still a year
and a half before gas can be shipped. So it does take a long time. Are you
encouraging the Department of Energy to really be active in looking at these
licenses, these export licenses?

NULAND: Again, I don’t want to get into a brother/sister agency’s business too
deeply. That obviously is their business and their relationship with you.

The Europeans have been clear that they would – that they appreciate the
licensing that has already been done, that they are hopeful that in the context
of the Transatlantic Trade and Investment Partnership negotiations, the TTIP
negotiations for a broad trade agreement between the U.S. and the EU, that this
could be included, which would put them in a preferential category for
licensing. What we are doing is very aggressively encouraging the building of
LNG terminals, the building of pipelines and interconnectors, the reverse flow
of gas, as we’ve talked about, to invigorate the energy market within Europe,
which will, of course, bring prices down and create more options for these
countries, not just outside of NATO space, but those allies who are at risk
from total monopoly from one source of energy. So we are very active. We have
been releasing, as you know, the Department of Energy has, considerable amounts
more of LNG. The president spoke about this when he was in Europe. And we
will, you know – I understand the department is in dialogue with all of you
about what makes sense going forward.

BURGESS: Sure. Well, as a Texan, we don’t ever want to see our Ukrainian
friends want for natural gas.

Thank you, Mr. Chairman. I’ll yield back.

CARDIN: I want to thank Congressman Cohen. He’s yielded to allow Senator
Boozman an opportunity to ask questions since there will be a pending vote.
During that vote, I will leave and let Congressman Cohen have the gavel and
question, and I will be back shortly. So Senator Boozman.

BOOZMAN: Well, thank you, Mr. Chairman. And thank you for yielding just for a
second. We appreciate you being here, appreciate your hard work.

I’d really like for you to comment. Right now OECD, the ambassadorship is
vacant. Can you talk a little bit about, you know, as a former NATO ambassador
and things – sometimes we don’t realize the importance that that agency has in
Europe and, you know how important it is to have somebody around the table, you
know, as you talk about Ukraine and the other issues that are facing Europe
right now and our allies. Can you talk a little bit about the importance,
perhaps, of getting that position filled?

NULAND: Well, thank you, Senator. We are, as you know, as an administration
eager to have every one of these ambassadorships filled. I’ve got some 10
still vacant in my area of responsibility. OECD is one of the few missions
resident in Europe that I am not responsible for, but obviously can speak to
the fact that it plays an absolutely vital role in providing those kinds of
essential connections, economic connections, cultural and human rights
connections, across its memberships. So having a strong leader there is
absolutely essential.

As you may know, Russia has sought a closer relationship. We had been trying
to support that and help it, but now we’ve had to make very strong decisions,
along with our European partners, that that closer integration is not in
keeping with the behavior that we’re seeing now. So these are the kinds of
political calls that we’re now having to make out there, which speak to having
strong leadership.

BOOZMAN: No, I agree totally. And I think it is important that we have
representation at the table that can, you know, speak with a strong voice.

Tell me also about the NATO Parliament and things. I know that – as an old
NATO ambassador – how important it is for the Americans to be represented there
and to be a strong voice.

NULAND: Well, thank you for that softball, Senator. I am a strong and
enthusiastic supporter of the NATO Parliamentary Assembly, having worked very
closely with them during my two tours at NATO, both as deputy and as
ambassador. It’s particularly a strong organization when the American
contingent is bipartisan, is broadly geographically representative and is
committed both at home and in Europe to a good conversation. I remember, for
example, when we were – when I was out there and we were first working on
missile defenses in Europe, and the fact that although Republicans and
Democrats had some differences as to what the appropriate system would look
like, the fact that both Republicans and Democrats thought we needed missile
defenses in Europe had a profound impact on our ability to get that done in
individual nations. And the fact that they could talk to their counterparts in
nations who were responsible for national budgeting, who were responsible for
these kinds of policy decisions was absolutely key.

And today I would say that speaks to two absolutely vital things. One is the
importance of all allies participating in the reassurance mission on land, sea
and air for our frontline allies in Eastern and Central Europe, and that this
not just be an American or big allied effort. And that requires
parliamentarians to make budget decisions sometimes that are difficult, and
more broadly to maintain strong budgets.

And then increasingly we see that if we want to be strong in defense of our
values and in defense of our security, we’ve also got to continue to grow, and
that means that everything is connected to everything in the European theater.
So the strong steps that individual parliamentarians take to support growth and
jobs in their economies, to support banking union and other kinds of
strengthening of the eurozone is directly connected to whether they can raise
defense budgets, provide reassurance; whether they can work together to
withstand what we have to do to sanction Russia. All of these things are
connected.

BOOZMAN: Right. No, I appreciate that. And again, we’ve got, you know,
really significant problems going on, but I think, you know, one of the basics
for solving those problems is the dialogue, you know, the communication.

NULAND: Yes.

BOOZMAN: I was very active on the House side, you know, in NATO and now trying
to get Senate participation, which I think is really important, in then NATO
parliament. You mentioned the bipartisanship. Probably that’s one of the most
nonpartisan things that I’ve ever been a part of, you know, in the sense that,
you know, when you get over there and, you know, you roll up the sleeves and
start working together, it really – I can’t remember a time, you know, in any
of those meetings, you know, where there was a real rift as far as important
policy.

So we appreciate your leadership, and I’ve got to go vote. Thank you.

NULAND: Well, thank you. And thanks for – thanks for coming and participating
at NATO.

BOOZMAN: Thank you.

COHEN: Thank you, Senator. And I will yield myself as much time as I shall
consume. (Laughter.) It’s good to have the gavel. (Sounds gavel.) Yeah.

Thank you for your attendance here. One thing I’d like to ask is, in the
Eastern Ukraine with the disturbances, do we have any proof – not suspicion but
proof – that Russians have been involved in the takeover of the buildings and
participating physically?
NULAND: Congressman, let me say that the evidence is overwhelming that this
was a very carefully orchestrated, well-planned, well-targeted,
well-coordinated effort to take over buildings in four cities on – within the
same 24-hour period with identical tactics. There is considerable information
out on social media, out in the public domain in Ukraine that points directly
to involvement of folks who are not resident in those cities and are not
resident, in fact, in Ukraine.

As you may have seen, the Ukrainian government has also put out publically its
recent arrests and rollups of GRU and other intelligence officers in various
Ukrainian cities, including these, over the last couple of weeks. There is –
there are also a number of absolutely wild stories, like in Kharkiv, where when
the mob first started forming it showed up to take over the opera house rather
than what its intended target turned out to be, which was the local
administration building and the local interior building, indicating that these
were not boys from Kharkiv and they were not quite as well planned and executed
as they might have been, opera house not being a very significant threat.

So I don’t think that we have any doubt that the preponderance of evidence
indicates direct Russian involvement here, but in this setting I’m not prepared
to go further.

COHEN: I understand. I can read that. It seems like a cookie cutter from
what they did in Crimea, but in Crimea was there not actual sightings of – even
though they had their masks on and you can never know who the “lone ranger”
might be, but that there were actually Russians there.

NULAND: Well, Crimea, as you know, was host to Russian bases.

COHEN: Navy.

NULAND: There were significant numbers of troops, which had, you know,
dual-use capability, as we saw during the occupation annexation. And then they
were of course reinforced with Spetsnaz and other military assets directly from
Russia at the time of the annexation.

I think the concern that we have, in addition to what’s going on currently in
the cities, as Secretary Kerry said yesterday before the SFRC, is that this is
the same playbook, and what it – and the effort here is to create the pretext
or the excuse for a larger Russian reinforcement over the borders in defense of
ethnic Russians or Russian citizens who are not getting their way by force.

COHEN: We, as I understand it, reduced our joint relationship with Russia in
the space program. We’re still going to, as I understand it, participate in
maintaining the space station, but we eliminated some of our activities. What
activities did we eliminate, and what was the purpose of that? Does that
strike them financially in that we give them X amount of money, or was it
simply a blow to their pride?

NULAND: Well, Congressman, we, after Crimea, did a complete review of U.S.
bilateral relations with Russia. We have suspended the vast majority of our
programs that go to economic cooperation, that go to military-to-military
cooperation, and that go to a lot of the technical cooperation that we had been
doing.

We have maintained the relationship in areas of high national interest to the
United States – obviously the Iran talks, the work we’re doing on Syria
chemical weapons. Parts of the space program where that relationship is vital
to the safety and security of the program continue, but my understanding is
that most of the routine other things have been curtailed, as have other U.S.
government programs with Russia. But I would refer you to NASA for more
specifics on what they’ve curtailed.

COHEN: And in Syria, have the Russians been working with us in trying to
locate and remove the weapons?

NULAND: Well, as you know, this has been a matter of intensive diplomatic
effort, including – and Secretary Kerry’s direct diplomacy with Foreign
Minister Lavrov from the time of the negotiation of the U.N. Security Council
resolution in September that provided for the removal of these weapons. The
Russian role here has been to work with the Syrian government on their
implementation. As you know, we consider that this has been too slow. There
have been obstacles. The Russians do continue to work with us to try to speed
those things up, but in this setting I can’t speak any further about the
details of that.

COHEN: Thank you. The questions I thought about earlier – and these were
criticisms that I didn’t feel were warranted but they were still within my
constituency, and one was about the $100 billion loan guarantee. And much of
that money, if I remember correctly, my constituent complaint was that some of
that would go to Russia, probably to the energy debt that Ukraine has. Is
there – are there any stipulations that that money will not be money that
basically just goes right back to Russia?

NULAND: Well, in the context of the negotiations that Ukraine is having with
the IMF, the IMF is looking at the totality of Ukrainian budget obligations, as
you – as we talked about earlier, trying to ensure that the corruption is
squeezed out of the system, that energy prices are normalized, that – now that
the hryvnia is floating, that they are being responsible in fiscal and monetary
terms. But Ukraine does have some outstanding legitimate gas debt to Russia,
so in the context of working through all of that, the IMF is advising the
Ukrainians on what does need to be paid out of budget and what is illegitimate,
and working also with the Russians on that.

With regard to our loan guarantee, as I said, we’re currently in discussions
with the Ukrainian government now that the legislation has been passed on
exactly how it would/should/could be used in support of that larger
conversation the IMF is having. And our priority, and the Ukrainians’ priority
as I understand it, is to use our money to help implement these energy sector
reforms that have been put in place to support the IMF, to help implement the
anticorruption programming, but the bulk of the money will go to help cushion
the most vulnerable Ukrainians from the increased gas and energy and oil prices
that will be required in order to normalize the economy, so to strengthen a
social safety net program. But again, those negotiations are ongoing now.

COHEN: And then the issues that were raised by some constituents – and I think
they were – they were about possible neo-Nazis being involved in the – in the
group that took over. I can’t – I know you can’t assure me that everybody
that’s in power there is a George McGovern or a Chuck Percy, but do we have any
assurances that those concerns are not valid?

NULAND: Well, first, Congressman, it’s absolutely clear that during the period
of the building takeovers in Kiev there were some extremist elements that got
into some of these buildings. They were talked out of these buildings and
disarmed by other Maidan participants, other members of the Ukrainian political
structure, many of whom are either serving in the current transitional
government now or are members of the Rada, which supported the government.

I think what’s most important here is that the transitional government was
voted in by the vast majority of members of the parliament representing all of
the regions and all of the political colors of Ukraine. All of this very
difficult, very painful legislation that they’re putting in place with regard
to energy sector reform, anticorruption, et cetera, is also being voted through
democratically after lots of debate with broad support in the Rada. And the
Rada also called for these elections. And as I said, we have some 20
candidates representing everybody from the far, far right to the far, far left,
and lots of moderate candidates in the middle.

So the Ukrainian people will have a choice, and it is quite interesting that
public opinion polling in Ukraine now indicates that these extremist elements,
whether they are the Communists or whether they are the (private ?) sector
candidate, are polling well below 3 percent on both ends of the scale. So that
speaks well to the moderating influence of an increasingly democratic Ukrainian
system.

BURGESS: Will the gentleman yield?

COHEN: Yes.

BURGESS: Madam Secretary, I’m going to have to take off as well. I just
wanted to thank you for being so generous with your time this morning. I
appreciate your efforts and look forward to perhaps seeing you May 25th –

NULAND: Good.

BURGESS: – when the – in Kiev when the elections are ongoing. But thank you
for your efforts in this, and the country is counting on you. So thank you.

NULAND: And thank you, sir.

COHEN: One other – couple of questions. The Tartars (ph) – or the Tatars in
Crimea, there was one killed, as I understand it, and the treatment may have
not been so wonderful from the Russians. Is there concern there about the
treatment of that minority group in Crimea, and if –

NULAND: We’re very concerned about the situation for Crimean Tatars. They are
concerned themselves. I think some members of Congress may have had a chance
to see the Crimean Tatar leader when he was here over the past week.

The incident you reference was the March 3rd abduction of Crimean Tatar
activist Reshat Ametov. He was abducted in Simferopol. Two weeks later his
body was found 28 miles away in a small village. According to local media,
that body bore clear evidence of torture. In another notable case, massed
pro-Russian forces kidnapped Yuri Shevchenko from a train station in
Simferopol. He was on his way to visit friends. He seems to have been
mistaken for another activist.

As I said at the beginning, we are concerned – very concerned about the human
rights situation inside Crimea. We have made these concerns known to the
Russian government in the Kerry-Lavrov conversations and handed over
significant case information and demanded a response.

COHEN: And has Mr. Erdogan made his voice known on this issue at all?

NULAND: Yes, the Turkish government has been quite active on this subject and
they do participate with us in the small group that works on Ukraine.

COHEN: Two last questions. One is, any indices (ph) that there’s any activity
in the Caucasus?

NULAND: You’re talking about the Russian Northern Caucasus.

COHEN: Right. Right.

NULAND: Well, as you know, the Northern Caucasus as never peaceful. There was
a significant crackdown on separatist activity by Russian security forces in
the run-up to –

COHEN: The Olympics.

NULAND: – the Sochi Olympics – pretty devastating clean-out there. So they’ve
been pretty –

COHEN: I’ll withdraw that question –

NULAND: Yeah.

COHEN: – because if you knew the answer, you couldn’t tell me or you had to
kill me, and we don’t want either one of those things to happen.

NULAND: I don’t want to kill you, Congressman.

COHEN: Yeah, we don’t. I’m going to yield back, but I’ve just had this
thought, and it’s more of a – whatever, but the Russians and the Ukrainians
just had a boxing series, and it was a big deal, I think, and the Russians won
4 to 1. And maybe this would be better for the ambassador, but I just wondered
if Vitali Klitschko hasn’t offered the opportunity for Mr. Putin to have an
exhibition match with him, and I’m sure he would take him up on it, and it’d be
wonderful to watch.

MR.: (Off mic.) (Laughter.)

COHEN: I yield back the –

NULAND: (Inaudible) – the ambassador says they’d be glad to see it, yeah.

COHEN: Yeah, I think I would too. I’d pay to see that fight, so to speak.
(Chuckles.)

I yield back the balance of my time.

CARDIN: Let me thank Congressman Cohen for substituting while we had a vote on
the floor of the Senate.

I want to just a few follow-up questions. I want to talk a little bit more
about energy, Senator Whitehouse’s point. And I understand the longer-term
strategies on dealing with the shale and dealing with energy efficiency, and I
couldn’t agree more. I think that’s, you know, obviously an area of great
interest.

There are conflicting incentives here. Russia makes a lot of money off of
Ukraine, and there’s pipelines through Ukraine that affect other countries, in
addition to just Russia and Ukraine. So what is our strategy in the short term
to try to provide more security to Ukraine and some of the other countries in
that region as it relates to energy sources? There has been some discussion –
and I know in the very short term this doesn’t work – in regards to liquefied
natural gas. There’s been other discussions about other sources that could be
made available to Ukraine in the region other than Russia. Do we have a
strategy to try to remove the potential leverage that Russia has over Ukraine
on energy supply?

NULAND: Well, thank you, Senator. We did talk a little bit about this while
you were out. I think your Republican colleagues asked some questions about it.

CARDIN: Oh, good.

NULAND: But – so you’ll see some of that in the record. We are working hard
with the Ukrainians and with the Europeans to provide some cushion, some
diversification in the very, very short run, even as we work on some of these
longer-term things.

The most – the most likely source of quick gas for Ukraine in the event of a
shutoff comes in reverse flows from Slovakia, from Hungary, from Poland. This
requires some upgrading of infrastructure, and it requires some investment; it
requires some political decisions. As I may have mentioned, Secretary Kerry
and High Representative Ashton and the EU’s Commissioner for Energy Oettinger
met last week to talk about this very subject and directed their teams over the
next three weeks to accelerate talks between the Slovaks and the Ukrainians in
particular, but also looking at EU funding support, U.S. funding support for
this kind of reverse flow. That’s the best thing we can do. And we’re also
working in the Moldovan context, with Romania and with the EU on interconnector
infrastructure, which would also allow reverse flow. That speaks more
generally to strengthening and revitalizing the intra-European energy market.

So the other topic of conversation at the EU last week was how they can
strengthen the interconnector system, the LNG terminal system, across the
European space, across EU space, so that there are more flows, more options,
which reduces prices, makes them more competitive when they negotiate with
Gazprom. And that’s what’s resulting already in lower gas prices within
Central and Western Europe, that they are more competitive than Ukraine has
been because they have more options. So that’s all part of – (inaudible) –

CARDIN: That’s an encouraging report. I take it we have certain plans in
place in the event that Russia imposes additional pressure on Ukraine?

NULAND: We do. The Ukrainians have been pretty strategic in ensuring that
their storage tanks are well-stocked, and as I said, some of these reverse flow
things are the best option in the short run. That said, you’ll remember that
in 2010, when the Russians, for the second time, cut off the gas completely
from Ukraine, it didn’t last long because it cost them a fortune because
Ukraine is a transit country to others and to some of their major markets in
Central Europe. So –

CARDIN: Yeah. I think that’s a double-edged sword.

NULAND: It is.

CARDIN: We understand that.

NULAND: It is.

CARDIN: But sometimes Russia’s calculations are not easy for us to logically
understand, so –

NULAND: And blessedly, it’s spring and summer now, so it buys – give us some
time.

CARDIN: That’s true. It helps us a good deal.

Can we talk a little bit about the economic progress in Ukraine, which also
deals with energy cost? One of the major areas of protest is when energy costs
go up in Ukraine. Again, it’s – the warmer seasons are coming, so that will
help. But can you just talk a little bit about how the reforms are taking
place in Ukraine and whether the popular support will be adequate so that
politically this can be accomplished?

NULAND: Well, Senator, as you know, in the context of the IMF agreement, the
Ukrainians have been asked to make a huge amount of change very, very quickly,
not only in the energy sector, but also to squeeze out corruption throughout
the public sector and in all of the different – in agriculture, in energy and
in other places, as well as in public procurement. They have passed a huge
number of new bills already, and they are working this week on further steps,
both in support of the IMF program, but in support of cleaning up Ukraine.

As you know, the Maidan was about many things, but it was very strongly about a
sense that the leadership of Ukraine was kleptocratic, was – that the – that
too much money was going into their private pockets, that not enough was going
to the Ukrainian people, that it was disappearing. I think some of these
documents that we’ve seen have certainly supported that. So there is strong
support across the country for anti-corruption measures. It is difficult to
make some of these energy reforms. They will hit households.

But this is why it is so important and such a strong signal of American support
that in a bipartisan fashion, both houses of Congress supported the $1 billion
loan guarantee, because one of the things we’re going to do with the loan
guarantee is support Ukrainian programs to cushion the poorest Ukrainians from
the impact there.

CARDIN: Oh.

NULAND: We do think the government of Ukraine has to do more outreach to the
regions, has to explain these programs, as do those members of the Rada who
have voted for them. We think this’ll be a hot topic in the election campaign,
but we are gratified that the legislative measures that have passed in the
Ukrainian parliament have had broad popular support, that – have had broad
political support across the parties, because there was an understanding across
political elites that things have to change in Ukraine, or they just become
more and more dependent.

CARDIN: I fully agree in regards to the popular desire to rid their country of
corruption. I think that is clearly a commitment that the populace understands
needs to be implemented by their government, and they strongly not only support
it, but demand it, as they did during the Orange Revolution, as they did now.
So I’ve been in Ukraine. I was there shortly after the Orange Revolution.
I’ve been back a couple times since. And you hear that frequently as one of
the battle cries of a free Ukraine, free from corruption.

But as you get to pricing of energy and a more accurate cost, that’s a hard
political sell.

NULAND: It is.

CARDIN: It has to be done.

NULAND: It is.

CARDIN: Hard political sell. I’m pleased to see that part of our assistance
will go towards mitigating the harm to lower-income families. That’s a – not
only the right political message, but it’s also the right policy message for
the growth of the Ukrainian economy.

These changes have to take place. But knowing that Russia will use propaganda
to try and take advantage wherever they can, I think we need to understand that
the explanations to the Ukrainian people will be mixed based upon what Russia
will be doing.

NULAND: Absolutely. And you know, we have consistently encouraged the
Ukrainian government to send its representatives out to the east, to have town
hall meetings, to bring regional representatives to Kiev to talk about these
things. They have started doing a lot more of that, particularly in the
context of the dicey security situation. And I think in the conversations that
we and Secretary Kerry have had with Prime Minister Yatsenyuk, he hopes to do
much more of that in the coming weeks and days.

CARDIN: Well, again, I thank you so much for your appearance here. I think
this has been extremely helpful to our commission’s work and to the work of the
Congress, and we fully intend to keep the unity between the administration and
Congress on this effort. We understand there are short-term, medium-term and
long-term objectives that we need to accomplish, and we look forward to you
keeping us informed so that we can do everything we can to support the people
of Ukraine, as I said earlier.

And again, we appreciate you being here. We appreciate the ambassador being
here. And with that, the commission’s hearing will stand adjourned. Thank you.

NULAND: Thank you, Chairman.

[Whereupon, at 11:30 a.m., the hearing ended.]