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U.S. Department of State

Diplomacy in Action

Teleconference on Ukraine

Victoria Nuland
Assistant Secretary, Bureau of European and Eurasian Affairs
Via Teleconference
Brussels, Belgium
July 17, 2014


Moderator: Good afternoon everybody and greetings from the U.S. Department of State Media Hub in Brussels. I would like to welcome all of you who have dialed in from across Europe today. We are pleased to be joined by Assistant Secretary of State Victoria Nuland. We are going to begin today with brief remarks from Assistant Secretary Nuland and then we are going to, as you hear, open the line up to your questions. As a reminder, today’s call is on the record and we are going to try to get to as many of your questions as we can during the time that we have. And with that, I will turn it over to Assistant Secretary Nuland for some brief remarks.

Assistant Secretary Nuland: Thanks Mireille, thanks European colleagues.

We just, since I was in Brussels today, thought we would give folks an opportunity to discuss the news of the day. As you know, throughout the Ukraine crisis the United States has worked intensively with our European allies and partners on a strategy that seeks to strengthen and support the Ukrainian people in their desire to have a future that is democratic, peaceful, unified, prosperous, and European. We have also worked together with Europe to try to de-escalate the crisis in the wake of Ukraine and in the wake of Russia’s destabilizing activities in the East. We have engaged in many diplomatic efforts -- U.S.-Russian bilateral efforts; the April negotiations in Geneva, which brought together the foreign ministers of Russia, Ukraine, the U.S., and then the European High Representative; and then of course the efforts of the G7 in June when President Obama was in Europe followed by the Normandy meeting that brought together Chancellor Merkel, President Hollande, President Poroshenko, and President Putin, where President Poroshenko presented his peace plan and we sought through diplomacy to offer a chance for de-escalation, to set up a structure of contact that would enable legitimate grievances having to do with decentralization of power, economic opportunity, elections, to be addressed and to end the conflict.

As you know, those efforts, unfortunately, despite repeated efforts by European leaders, by our leadership, have not succeeded in persuading Russia to stop its support for separatists or to close the border or to end the supply of weapons and financing, and as a result, yesterday the U.S. and Europe took measures in parallel to increase the cost on Russia for the choices that it’s made. You’ve seen the decisions of the European Union heads last night. On the U.S. side, I think you’ve seen our decisions to move in the direction of sanctions in the areas of finance, energy, and defense -- the sanctioning of two Russian banks, two Russian energy companies, eight defense companies, and various additional individuals in Russia and Ukraine and entities who have contributed to the conflict.

I just want to underscore that this is nobody’s choice. This is not our preferred course of action. Our preferred course of action would have been and remains peaceful, stable relations between Ukraine and Russia, cooperation between the people and economic opportunity for all. But in the face of the aggression that Ukraine is facing and the continued escalation of weaponry and support, the U.S. and Europe do not feel that we can stand by. This is a threat not just to Ukraine but to the peace, stability of Europe as a whole.

With those opening comments, why don’t I move to your questions.

Moderator: Thank you so much, Assistant Secretary Nuland. As you heard, we will now begin the question and answer portion of the call.

Question: Thanks for taking my question.

With regard to the sanctions imposed yesterday, what practical effects do you think they might have on these companies, because the perceived wisdom is that the U.S. actions are largely symbolic because the trade relations are not so intense as the EU has with Russia. So do these arms companies, banks or energy firms, are they actually going to be impacted by these sanctions? Or is it really a symbolic act?

Assistant Secretary Nuland: We believe that they will have a profound effect on the activities of these companies. With regard to the two banks that are sanctioned, and I would call your attention to a background briefing that U.S. officials participated in yesterday. If you haven’t seen the transcript of that, we will get it to you. But it goes through in some detail, as did the Treasury’s press release, the specific sanctions that these entities will feel. But let me just go through them now.

With regard to the banks, the Treasury has imposed measures prohibiting U.S. persons from dealing in new equity or new debt of longer than 90 days maturity for the two banks that are listed. That means that they will not be able to avail themselves of U.S. financing, dollar-denominated financing over 90 days. So it has the effect of squeezing their ability to get dollar financing, so it’s quite significant.

In the energy sector, the Treasury imposed measures that prohibit dealing in the debt of longer than 90 days maturity for these energy firms. So again, it goes to their ability to recapitalize in the dollar market. These companies operate primarily in dollars, so we think that will have a profound effect.

On the defense side, these are all companies that make or sell the kinds of equipment and materiel we’re seeing show up in Eastern Ukraine, so the message we’re trying to send there is if you participate in the arming of separatists and in the destabilization of your neighbor, we’re not interested in trading with you. So we do believe there will be a profound effect.

You’ll also notice that on the Treasury list was the purported Luhansk and Donetsk People’s Republics. These are the names the separatists give to the two entities that they are trying to establish. When we sanction them it precludes them from getting any debt or servicing or banking or credit in dollars on the international market.

Question: I am from the newspaper Le Soir in Brussels.

My question is about the gap between the sanctions of the European Union and the American sanctions. I was wondering what do you think about that gap, about the disproportion of the U.S. sanctions and the European ones?

My next question is, are you satisfied by the European sanctions that have been pronounced yesterday? Thank you.

Assistant Secretary Nuland: We are gratified that throughout this very difficult period, at every stage where we have made a decision that we needed to increase the costs on Russia for the choices that it was making, the U.S. and Europe were able to move together.

Our systems aren’t completely parallel. Europe is 28 governments, we are one. So there are always going to be differences in the way we approach this. There are going to be differences in the legal basis, the time that it takes to put things in place, but we think that the measures that Europe took yesterday will have quite a profound impact on Russia in terms of ending EBRD financing, ending EIB financing, ending other kinds of support that the Russian government has depended on in order to trade with Europe and will have a chilling effect in general on European investment in Russia.

I would also note that the European heads yesterday gave themselves the legal and political ability to move into more sectoral areas along the lines of what we have done. You’ll note the section in the council decision sheet that speaks about more individuals and entities to be designated before the end of July. So that brings the European legal structure closer to what the U.S. had already given ourselves in terms of competencies, so Europe now has the ability to do more in banking, energy, and defense as we have done.

Question: Thank you very much indeed for this opportunity.

I just wanted to ask, some senior business people from Europe and the U.S., and not just in Russia, have suggested that through these kinds of measures the U.S. could undermine confidence in the financial system, the global financial system, and in the reliability of that system and of business relations and business contracts. I wondered if you could comment on that.

Assistant Secretary Nuland: I think we would reject that. We’ve talked for many weeks about the importance in this context of using a scalpel, not a hammer. This is a different set of circumstances than we have in some other foreign policy arena where sanctions have been applied, whether you’re talking about Sudan or whether you’re talking about Iran. The economy of Russia is deeply integrated into the global economy, into the European economy. Therefore, the measures that we have taken, the measures that Europe has taken have been calibrated to have maximum impact on the entities and the Russian economy that they are targeting and minimum impact on the larger financial system and on the equities of the U.S. and Europe.

You will note that with regard to the banking sanctions they are profound, but they are not complete with regard to closing our markets to banks or even to these banks. They go to the issue of longer term ability to get debt and equity financing.

So I think you see a new tool of U.S. and European foreign policy with a scalpel, not a hammer applied in sanctioning.

Question: Thank you for this opportunity. I’m from Hromadske TV, Ukraine.

I would like to know what if there won’t be any de-escalation? We’ve heard about today, had more information about the direct rocket launching from the Russian territory to the Ukrainian territory. Even after yesterday’s decision. So what is the [inaudible]?

Also, can you get more, what it means, we heard about the decision of the Congress. There is a project according to reach the Ukraine, Moldova and Georgia would have the status of the U.S. ally without being a NATO member. What does it mean in practice? Can you maybe explain clearly? Because there are a lot of discussions in Ukraine, but we want to have with a clear context so that nobody would misunderstand it. Thank you so much.

Assistant Secretary Nuland: With every application of sanctions, they do take some time to be felt in markets. They do take some time to be felt in terms of their impact on the geostrategic calculation of the target. So I don’t think that anybody would have expected a change of policy overnight. But nonetheless, given the increase in weaponry flowing into Ukraine, given the up-tick in support for separatists, we were very committed to making a strong statement which we think will have an impact over time. You can see quite a strong reaction both in terms of how the markets have responded, which is perhaps even more important, and in terms of the reaction in Moscow.

I am not familiar with the project that you’re talking about in the Congress. I will say that there has been very strong bipartisan support in both the House and the Senate for the sovereignty and territorial integrity, unity and aspirations of Ukraine and its people. You see that in the one billion dollar loan guarantee that the Congress approved. You see it in the very strong and generous U.S. assistance that we’re providing to Ukraine in the economy, in fighting corruption, in energy, in people to people, and now in supporting the rebuilding in eastern Ukraine and in security terms. So I expect that that will strongly continue. And it is, as I said, bipartisan across the United States. We’ve also had many members of Congress come out and show their support by visiting Ukraine and getting to know your leaders and your people.

Question: Is the American administration contemplating the increasing of United States military efforts into Ukraine in case of some escalation, further escalation of the conflict in Ukraine?

Assistant Secretary Nuland: We are providing non-lethal support to Ukrainian security services. We are also, as the President announced when he met with then President-Elect Poroshenko, doing an assessment of the Ukrainian security forces at their request so that we can begin working on a train and advisory program.

We’ve also provided significant support for border security over this period, and we will continue to evaluate Ukrainian needs going forward.

Thanks very much everybody for joining us.

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