S. HRG. 115–371 RUSSIA SANCTIONS: CURRENT EFFECTIVENESS AND POTENTIAL FOR NEXT STEPS HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED FIFTEENTH CONGRESS SECOND SESSION ON EXAMINING THE IMPLEMENTATION AND EFFECTIVENESS OF THE SANCTIONS PROGRAM CURRENTLY IN PLACE AGAINST RUSSIA AUGUST 21, 2018 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: https://www.govinfo.gov/ U.S. GOVERNMENT PUBLISHING OFFICE 32–576 PDF WASHINGTON : 2019 COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS MIKE CRAPO, Idaho, Chairman RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio BOB CORKER, Tennessee JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania ROBERT MENENDEZ, New Jersey DEAN HELLER, Nevada JON TESTER, Montana TIM SCOTT, South Carolina MARK R. WARNER, Virginia BEN SASSE, Nebraska ELIZABETH WARREN, Massachusetts TOM COTTON, Arkansas HEIDI HEITKAMP, North Dakota MIKE ROUNDS, South Dakota JOE DONNELLY, Indiana DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada JERRY MORAN, Kansas DOUG JONES, Alabama GREGG RICHARD, Staff Director MARK POWDEN, Democratic Staff Director JOHN O’HARA, Chief Counsel for National Security Policy KRISTINE JOHNSON, Professional Staff Member ELISHA TUKU, Democratic Chief Counsel LAURA SWANSON, Democratic Deputy Staff Director COLIN MCGINNIS, Democratic Policy Director DAWN RATLIFF, Chief Clerk CAMERON RICKER, Deputy Clerk JAMES GUILIANO, Hearing Clerk SHELVIN SIMMONS, IT Director JIM CROWELL, Editor (II) CONTENTS TUESDAY, AUGUST 21, 2018 Page Opening statement of Chairman Crapo ................................................................. 1 Prepared statement .......................................................................................... 47 Opening statements, comments, or prepared statements of: Senator Brown .................................................................................................. 2 Prepared statement ................................................................................... 47 WITNESSES Sigal P. Mandelker, Under Secretary, Terrorism and Financial Intelligence, and Acting Deputy Secretary, Department of the Treasury ............................ 5 Prepared statement .......................................................................................... 49 Responses to written questions of: Senator Brown ........................................................................................... 77 Senator Toomey ......................................................................................... 78 Senator Cotton ........................................................................................... 78 Senator Menendez ..................................................................................... 79 Senator Tester ........................................................................................... 79 Senator Warren ......................................................................................... 80 Senator Donnelly ....................................................................................... 81 Senator Schatz ........................................................................................... 82 Christopher Krebs, Under Secretary, National Protection and Programs Di- rectorate, Department of Homeland Security .................................................... 6 Prepared statement .......................................................................................... 70 Responses to written questions of: Senator Brown ........................................................................................... 83 Senator Moran ........................................................................................... 84 Senator Tester ........................................................................................... 88 Christopher A. Ford, Assistant Secretary, Bureau of International Security and Nonproliferation, Department of State ....................................................... 8 Prepared statement .......................................................................................... 73 Responses to written questions of: Senator Brown ........................................................................................... 89 Senator Toomey ......................................................................................... 90 Senator Cotton ........................................................................................... 91 Senator Menendez ..................................................................................... 92 Senator Schatz ........................................................................................... 93 (III) RUSSIA SANCTIONS: CURRENT EFFECTIVE- NESS AND POTENTIAL FOR NEXT STEPS TUESDAY, AUGUST 21, 2018 U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. The Committee met at 10:02 a.m., in room SD–538, Dirksen Sen- ate Office Building, Hon. Mike Crapo, Chairman of the Committee, presiding. OPENING STATEMENT OF CHAIRMAN MIKE CRAPO Chairman CRAPO. This hearing will come to order. This morning the Committee will receive testimony from senior Administration officials from the Departments of Treasury, State, and Homeland Security on the implementation and effectiveness of the sanctions program currently in place against Russia. The reasons for these sanctions include Russia’s standing mili- tary incursions in Ukraine; abetting Assad’s atrocities in Syria; conducting cyberenabled information warfare activities and cyberattacks against United States critical infrastructure, including its malicious meddling in U.S. elections; and a host of other malign Russian activities. The Banking Committee plays a leading role in developing any legislation that proposes the use of sanctions and financial pres- sure, more especially those measures involving financial institu- tions, sovereign debt, and other financial instruments to address serious threats to the national security of the United States. Just about 1 year ago, on August 2nd, the President signed into law the Countering America’s Adversaries Through Sanctions Act of 2017, known as ‘‘CAATSA’’, which included in it, among other things, authorities for not only a set of strengthened sanctions against Russia but also brand-new authorities for several powerful mandatory secondary sanctions. It was this Committee that put together the foundation for those sanctions and financial measures on Russia and then worked with the Committee on Foreign Relations to expand them as a part of CAATSA. CAATSA was truly a foursquare effort. It was not only strongly bipartisan but also bicameral. It passed the House by a vote of 419–3, and 2 days later by the Senate on a vote of 98–2. It is not often that Congress acts together in such a strong man- ner, as marked by near-unanimous votes. But then Russia is a menace on so many different levels today that Congress can be (1) 2 compelled to act with a single voice to find solutions that will pro- tect America and democratic values across the world. To its credit, the Administration, in the year since CAATSA, has imposed some of the toughest sanctions on Russia in years, particu- larly with regard to those imposed in April on Russia’s oligarchs and their business associations. The bulk of sanctions imposed against Russia pertain to its un- lawful invasion and annexation of Crimea. These were strength- ened by Congress in CAATSA and, absent any other change in Putin’s behavior, will likely remain in place until he is no longer in power and Crimea is returned. In all, over the last year the Administration has sanctioned over 200 targeted Russian individuals and entities, for either its cyberattacks or Ukraine behavior, either pursuant to congressional sanctions or under its own executive authority. I hope to receive an update today from our witnesses on how the sanctions against Rus- sia are being implemented and enforced. It was a positive step when, 2 weeks ago, in response to Russia’s use of a nerve agent in Britain against one of its former spies and his daughter, the State Department showed its resolve against Moscow while it took a stand with our British allies by imposing a set of escalatory sanctions under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991. The Administration is taking some important steps against Putin, his cronies, and the industrial apparatus they control. But can Congress expect more from the Administration? And when? Congress itself is positioned to do more. There are bills in this Committee and in the Foreign Relations Committee which seek to escalate economic pain throughout Russia’s banking and energy sectors and sovereign debt markets. As we all—and that includes the Administration—consider next steps to further constrain Putin, including sanctions and other dip- lomatic initiatives, two questions come to mind: What degree of success have the existing evolutions of sanctions, which work to constrain the Russian economy and derail the activi- ties of those individuals closest to Putin, had on Putin’s behavior at home and abroad? And, second, what is the most effective way to coordinate and strengthen sanctions with our European allies and other partners? We will obviously have many more questions, but I am finished with that at this point. Senator Brown. OPENING STATEMENT OF SENATOR SHERROD BROWN