Officials with the treasury and state department testified on sanctions against russia for its invasion of ukraine. Global partners and the sanctions. This hearing will come to order. The war in ukraine is at an inflection point. Counter offensive to reclaim its rightful territories putin is desperate. Forcing unwilling men across russia to buying rockets from north korea, a drones from iran, staging sham referendums, having people vote at the point of a gun. So phony even governments friendly to moscow have said they will not recognize it. Make no mistake, ukraine continues to face a daily nightmare of shelling, of pulling countrymen and mass graves. A fighting for existence. Putin is not where he wanted to be and that is thanks to the bravery of the ukrainian people. People, more than 15 billion in weapons from the United States and a Strong International coalition but it is also do to trying to isolate russia from the Financial System. To strip russia of revenues reserves and access to Global Markets. Ambassador obrien, rosenberg, i want to take a moment to come been commended that the Biden Administration has led to impose unprecedented sanctions on russia. Since february 24, 2022 the u. S. And posed a sanctions regime that would have been unimaginable a year ago. Of course that includes not just you but the hundreds of dedicated personnel that stayed in treasury who worked aroundtheclock to prepare sanctions even before the invasion began. Nearly 40 countries have imposed economic costs for this war. The democratic well has decoupled from russia and massive achievements in the age of global commerce. Thanks to our relentless diplomacy, the u. K. , eu, australia, japan and korea joined the United States and sanctioning russia. Including russias largest banks from the Swift Payment system. Today, more than 1000 russias had their assets frozen abroad. This is not just about seizing glitzy yachts or forcing them to unload soccer teams. It is about ending the destruction of homes and hospitals, and schools. The mass killing of ukrainians fighting for their homelands. It is about ensuring the dream of an independent, free, thriving ukraine remains alive. Just as we must keep up our support so to must we peak up the pressure of economic sanctions. I would like to highlight five areas that i think we need to focus on in order to keep the pressure up. First off, sanctions having the desire effect. We imposed sanctions not to punish but to constrain and change behavior. After sanctions changed, if not now perhaps in the coming months i would like to hear a clear assessment of how current and planned measures or further strain the russian system in the coming months and how that might change kremlin behavior. Energy, the recently announced price cap on russian oil is a welcome and creative proposal to deprive russia of revenue. How will china and india respond . Will they purchase below the cap war continue to keep russias experts afloat . We need to look at the gaps in our sanctions which would make existing sanctions more effective. Or what can we do to improve enforcement . This is not only for putin but those enabling him, invading evading sanctions. Finally i want to hear about our diplomatic efforts which will be critical in the coming months. Diplomacy has made a difference in ensuring we have a United Coalition and when that is willing to act. As we head into winter putin is helping hoping to test our coalition. How do we keep europe to gather together . We have to maintain our unity and our willingness to keep meeting the needs meeting ukraine. This cannot be one with diplomacy of on each of the tolls must be used to maximum effort and in quarter rations coordination. I want to hear how we make this is costly for russia and how we continue to keep the pressure on putin so we can get the ukrainians the best chance to fight for their lives, their livelihood, and their country. We turn to the Ranking Member for his comments. Thank you very much chairman. We shared common goals. As we look at a significant aspect and that being using financial matters to change the conduct as you, as chairman, have pointed out. I think we should focus on where we have been paired with all the respect, i am less enamored with what has been done and i am talking about that politically but i agree we need to focus together on where we go from here. On february 24 russia initiated its premeditated and illegal invasion of ukraine. Ukrainians pushed back as any country would and the result is the war that has been going on now for months. In the months since the United States imposed thousands of sections on russia leadership, properties with goals of punishing russia to force its military out of ukraine. Despite the announcement of sanctions russias invasion continues and prudent as doubling down by mobilizing hundreds of thousands of men and calling the sham referendums in the occupied regions. I think putin obviously gets very little advice from anywhere. He treats the world like fools as if somehow holding these sham referendums, shoulders with guns and force people to vote in favor of the referendum. This sort of thing makes no difference. It will not change reality. I traveled to ukraine and suffers and the devastation russias war has caused. Genocide against ukrainian people. Actions have not been stopped by our sanctions. All of these actions are worthy of sanctions. Sanctions have had some success including expert control. It requires the same commitment and a greater willingness to close loopholes and target sanctions evasion and periodically update guidance in order for these actions to have longterm impact on russia. We should never return to business as usual that sadly that seems to be what is happening. For example in june the administration announced sanctions which the Treasury Department referred to as the foundation of russias Defense Industrial inks. One of the companies under the resting umbrella sent dozens of employees to the United States in two weeks for a Major International conference. This doesnt sell my company that is being pressured by sanctions. There were actual people from the Russian MilitaryIndustrial Complex that traveled here to participate in an International Conference which supposedly will better industry. The administration talks about the Russian Defense sector but the presence of Russian Defense firms in sectors of our economy speaks for itself. This is just one example of gaps across the sanctions regime. Gaps have enabled russia to weaponize against europe. As assistant secretary rosenberg stated last week russia has enjoyed Windfall Energy profits. Russia has made over 160 billion in profits alone since the war began. The administration extended the Energy Related transactions with major rigid russian banks. It is no wonder why Russian Energy revenues are up in the ruble has stabilized. The administration pressured canada to provide repair to nord stream one gas pipeline. Meanwhile sanctions against nord stream 2 are not limited. So russia can help europe solve the Energy Crisis this wednesday or winter. Laughable. The United States was the largest producer of oil and gas three years ago at the last of the last administration and the start of the new administration. Most americans dont realize we were the largest producer of crude oil in the world surpassing all others in doing so. American companies with American Workers using American Resources had the capability to solve our Domestic Energy needs and at the same time paypal help our european allies. Instead the administration talks about getting gas from other middle Eastern Countries and is still trying to open access to iranian oil which would allow russia to shut the oil around international markets. At the same time, everyone will recall on the day, the date he was sworn in as president of the United States, President Biden signed an order stopping the pipeline that would have brought 800,000 800,000 arrows a day into the United States. The countries participating have already agreed not to import anymore russian oil so the price cap isnt going to do any good there. China and india arent participating. Also lack of aid enforcement mechanism. Exempts many of the Maritime Service providers from the sanctions. So many waivers and general licenses of real impact by u. S. Sanction policy simply disconnecting a small number of russian banks from the Financial Market is not what we were promised. Public reporting indicates more than 300 billion in frozen russian assets worldwide, we should be working to confiscate and use russias money to provide critical humanitarian assistance to the ukrainian people. As russia looks to avoid sanctions the opportunity to seize additional russian assets i look forward to hearing from our witnesses today, really look forward to hearing how the u. S. Intends to expand sanctions, enforcement to deny russia these when he spared china is watching and learning from our every move. We will also risk providing russia with the means to inflate itself from future sanctions, actions, and continue the war in ukraine. Again, i want to emphasize that i say these things they are critical but are much more important in looking forward we can do better. I really believe we can do better and it to the witnesses i would say these matters are in your hands and i look forward to hearing how we are going to do better. Thank you, senator. We will start the testimony your full statements will be included in the record without objection. We ask you to summarize to about five minutes or so so the members of the committee can ask you questions. Thank you, mr. Chairman and Ranking Member and all the members of the committee. Russia should and will emerge from this war defeated and weakened. The sanctions policy we are implementing tries to do, achieve three goals at the same time. One, deprive russia of resources. Two, reduce partners reliance on russia and increasing our leverage and, three, keep Global Markets open. That is critical for sustaining the war effort. Now, i make four points. One the sanctions deny russias resources. I disagree that with the statement that there is no impact. The impact we are having is a great roadmap to the greater success we are going to have in the future. I just want to call attention to two elements. First, due to export controls and targeted financial sanctions russia cannot buy the critical elements it needs for its war no matter how much cash the central bank of russia has. We see shortages in crucial categories, artificial intelligence, advanced materials, semi conductors. You see old technology. That is a direct result of the policies that we have put in place. There will be more of that as the russians seek aid we go after the networks. Provide help to countries that need it. We also made it very clear those who provide Material Support for russian sanction of asian are themselves subject to sanctions. We see this having an enormous impact in russias ability to replace the technology. We know russia will keep trying so we watch as the tanks and cruise missiles cant be replaced and we know they will try to buy other equipment when they look to use commercial equipment it is often older equipment so this is a ways back in time. We cut them off from todays technology and they are using older and older technology. We will keep going after them as long as is necessary. The second piece is about the broader acro economic picture. I am sure secretary rosenberg will have more to say about this. Russias economy set sink 24 this year. Over the next few years it will have fewer and fewer resources to have the things it needs. It wont be able to spend money on people, weapons, procurement. We estimate half of the sovereign assets as you mentioned, about 25 of the Sovereign Wealth Fund has been depleted this year. As i mentioned it is already at 10 federal budget cuts in the nonmilitary budget for 2023. That is the sign of a country suffering under economic distress. That is a direct result of the sanctions in place. The latest estimates are we think russias economy by 2030 will be 20 smaller than it would be if we didnt have sanctions. We can build from that and do more. But the critical piece that we cant measure is the friction and uncertainty that we infused into the russian system. Russia has to buy equipment from unfamiliar vendors through new channels at prices it cant set and through constantly shifting ways to try to bring equipment into the country. That makes every transaction incredibly hard. Friction and uncertainty are the special sauce that fatigued workers face. They are just as hard to predict as the morale of soldiers on the battlefield but it is just as real a factor in the way sanctions worked. We have designated hundreds of people who are involved in annexation, the shame of the election results. That means the world cant look away from the violent criminality inherent in this war and if they cant look away they are not going to walk away from ukraine. Her point, we are changing russias role in the economy. Russia provides commodity. They are critical for allowing people around the world to survive. So we had that happen russia is not involved in hightech, highvalue sectors of the economy such as research, i. T. , and finance. That is a real change from the way russia thought of itself a few years ago. Fourth, we are mitigating the effect of the war. If i may just say this here because i know its important to some members of the committee when russia invaded ukraine, ukraines grain exports stopped aired before the war 25 of the poorest countries in the world depended on ukraine and russia for their food. For two months, tens of millions of people had no access to the food they normally would buy. Over the last few months, with help from the eu and the u. N. We managed to get more than 10 million tons of ukrainian grain to market. We have also made clear that russian green can flow and it is moving at about prewar levels. That feeds hundreds of millions of people. In conclusion i will say sanctions are just one tool in all of government. Every tool, they cant win the war by themselves. The courage and ingenuity of the ukrainian people is going to do that what sanctions can do is make it impossible for russia to take care of its people and pay for the war at the same time. They can let russian soldiers know that today is worse than yesterday and tomorrow is going to be even worse. Making it possible for putin to carry out the imperial project that he has announced which was not intended to stop with ukraine but to go on. Those are the conditions that sanctions can create. I look forward to the questions. Assistant secretary rosenberg . Thank you, chairman, Ranking Member and distinguished members of the committee. The u. S. Department of the treasury is working with the Administration Partners and investor obrien who i am joined with today. To u. S. The government to elicit response to putin were since the invasion begin six month ago we had been advancing President Bidens from is to squeeze russias access to finances and technology. And they industrial capacity for years to come. Earlier this month, we imposed sanctions to further degrade the military, hold perpetrators of the war accountable and financially isolate putin. Today hundreds of russian individuals are sanctioned including majority of the Financial Institutions and supply chains. And oligarchs who helped perpetuate this war. United states has been joined by over 30 countries representing our than half of the Global Economy and imposing the largest sanctions regime in modern history. On the other site, russian propaganda has been enough to bury unfavorable news sink sanctions are not working and to cause food insecurity. In fact, russia has crippled farming and expert economy and driven up Global Energy and grain prices. U. S. And partner economies have had and will continue to have a significant effect on russias ability to fund its war. Russia has been forced to impose capital controls, it will contract for the next two years which was also mentioned. The russian stock market is about 35 below prewar level. Russia is burning through its Rainy Day Fund moving towards a deficit by years end. Something for, russias economic picture is bleak and is deteriorating. Significantly, the economic constraints are translating into battlefield difficulties for precious struggling to import industrial goods and technology. Russia has been forced to turn to outdated equipment. Because russia is a pfizer for economy viable economy imposing sanctions requires external replanning coordination, economic analysis, diplomacy, and policymaking. We have been focused on the x oil export and the windfall earnings which is noted. This represents the energy earnings. The primary source of currency. It is the nature of oil market it affects us all including american households which have seen rising prices at the pump and inflationary pressures. High Energy Prices hit the poorest the hardest. Our effort alongside our International Coalition starting with the g7 to impose a price cap to support security and affordability of the global o