Valentyna Samar: Good afternoon, Mr. Fried!
Julia Kazdobina: Hello and thank you very much for agreeing to talk to us today. We would like to ask you a couple of questions about the US sanctions’ policy, both today and generally about the way the process works in the US.
Valentyna Samar. We know that the decision has been made to restore the State Department’s Office of Sanctions Coordination you used to head under the Obama Administration.
Daniel Fried: Yes, I have heard that it will be restored. It should be. The Trump administration eliminated it for no god reason and I believe the Biden people will recreate it. I hope.
Julia KazdobinaHave you been offered to head this office?
Daniel Fried: No, but I don’t need to be. I will help the administration the best I can but from the outside.
Valentyna Samar: Mr. Fried, we cannot ignore the current escalation caused by the Russian military build up at the Ukrainian borders and in the occupied Crimea. So we will start with a question about it. Don’t you think that the measures aimed at deterring the Russian aggression and even appeasement towards Putin applied by the West, including the sanctions are not working and something needs to change immediately? If so, what is it that needs to change?
Daniel Fried: Let me try to break down your question into different pieces. It’s a good question.First of all, there is the question of the West’s resistance to Putin’s aggression in 2014. We succeeded in two things. One. Well, we… Ukrainians defended their country and we helped with sanctions. So, thanks to Ukrainians’ courage Ukrainians defended their country. Thanks to Ukrainians’ defense of their country, Putin retreated from his most ambitious aggressive designs. You remember about Novorossiya? The claim he briefly made to about 40% of Ukraine? You don’t think he was serious? Because I do. I think if Ukraine had not resisted his appetite would have grown. He retreated because Ukraine resisted and the west backed up Ukraine and sanctions were the instrument of our support for Ukraine. So that was one success. The second success is that the Minsk accord – flawed, and let us say imperfect – however the Minsk accords explicitly acknowledge that the Donbass is sovereign Ukrainian territory. And the solution even in the Minsk accords – even for all their flaws – is the return of the Donbas into the Ukrainian sovereignty and restoration of Ukraine’s eastern international border with sovereign control. Now, Putin has agreed to that but he has not implemented it. So that is half a success and a failure. So I would say that sanctions accomplished something but they have not achieved their full goal.
The next question is what are we to make of Putin’s current aggression? That is his current threat, the military build-up occurring in plain sight. I think that this is a test by Putin. I do not think that he intends to actually invade, although I could be wrong. I don’t think he intends to invade because Ukraine would fight. He would have a real fight on this end. This would not be like Crimea. And a war – and that’s what it would be – a land war between Ukraine and Russia forces would mean lots of Russian casualties. And this is not a popular war in Russia. The Russian people would like to see them in a fight with Ukraine even though the Russian propaganda continues to talk about the Ukrainian fascists, some neo-Nazis and the rest of that garbage and nonsense.
Another test, however, from Putin was whether the west was asleep or whether the west would react to his latest threats. And the west, the new Biden administration in the United State reacted swiftly and strongly with coordinated calls by the national security leaders of the United States to their Russian counterparts. And the sanctions last week were mostly not about Ukraine. But they did indicate the seriousness of the purpose on the part of the Biden administration. And it was not the US alone. You remember that Merkel on April 8th called Putin and told him to back off. And French President Macron, yesterday speaking on an American news program said that Putin needed to back off his threats and that additional sanctions would be appropriate if he did not. Now that is a pretty good response from the West. Putin may have been testing us to see whether Ukraine stood alone and was isolated or whether the west stood with Ukraine. And he has his answer, Ukraine is not alone. Now, this does not mean that he will not act against Ukraine. It is possible that he won’t invade but will do something else aggressive like send Russian forces into the Donbass calling them peacekeepers. Or he could recognize independence of the puppet regimes in the Donbass. So, there are things he could do. But the Biden administration is not foolish. They are not blind, they are not dumb, they have seen this before. And I think that they are determined to resist Putin’s aggression while seeking a stable relationship with Putin. But they won’t sell Ukraine or our principles to this end.
Valentyna Samar: Mr. Fried, look, the traditional approach of the Russian propaganda is to state repeatedly that sanctions do not hurt them. Moreover, they say that the sanctions help them become more independent and grow stronger through the import replacement policy and so on. On the other hand, Russia calls for lifting the sanctions and sets up entire projects to influence policy of other governments friendly to Ukraine in order to get the sanctions lifted (e.g., Association of Crimea’s Friends). How does the US assess the effect of its Russia sanctions, first of all the sanctions with regard to Crimea. Does the US believe they are effective?
Daniel Fried: In the first place, you should not take Russian propaganda seriously. Of course, they say that sanctions have no effect. They would say that. We do not think that sanctions have an effect. First, they have an effect on the overall Russian economy. Economists estimate that there has been a hit to Russian growth over the years. Secondly, the sanctions have an impact on the individuals sanctioned. Particularly the oligarchs in Putin’s circle. We know this because these sanctions seem to anger Putin. These are the sanctions against his cronies, the people who handle some of his money. The sanctions have an effect that grows over time. That’s one thing. And the second thing is that we the Wets have a considerable room to escalate.
It is not true that our sanctions are at a maximum. They are nowhere near a maximum.
Early last week my colleague at the Atlantic Council and I published a piece outlining possibilities for additional sanctions should Putin attack Ukraine. And it’s a long list, there is a lot we could do. And it’s important to let the Putin regime know that we do have options. And they are not just sanctions There lots of things we could do but sanctions were the tool we chose starting with the Obama administration. We do have options and it’s important to make it clear to the Kremlin that we are prepared to use them.
Julia Kazdobina: Mr. Fried, could you explain the way sanctions monitoring works? So, for example a physical or a legal person has been placed on the sanctions list. What happens next? Who monitors compliance with the sanctions regime? Who assesses the effect of the sanctions and how do they do it?
Daniel Fried: These are two separate operations. The US Department of Treasury has a subunit called the Office of Foreign Asset Control (OFAC) which administers the sanctions. OFAC has a compliance division. Those people look at sanctions’ violations. And they use a variety of sources. And by the way, some of those sources sometimes are friendly or allied governments coming to us with information about possible sanctions violations. So the OFAC compliance monitoring division monitors whether a company is trying to evade sanctions. And if they are, there are penalties that are imposed. And if a person or another company is helping another company evade sanctions, that person or that company can be liable for sanctions themselves and it sometimes happens.
Secondly, you asked who estimates the effect of sanctums. This is different. They are economists. Both the IMF and the World bank. And they are private economists all of whom have done various studies. My colleague at the Atlantic Council Anders Auslund known in Ukraine is one of the best economists specializing in the post-Soviet world – Ukraine, Russia, Poland as well. The countries that were under communism. He estimates that there has been a significant hit to the Russian economy over the years because of sanctions. There could be more. We could do more. And it’s important to maintain the ability to do more as a kind of deterrent.
Julia Kazdobina: Mr. Fried, we hear a lot about the Office of Foreign Assets Control (OFAC) at the Department of Treasury but there is also the Bureau of Industry and Security at the US Department of Commerce. What do they do in the sanctions process and how is their function different from that of OFAC?
Daniel Fried: They have different responsibilities. The Department of Commerce administers export licenses. That is for certain kinds of technology an American needs a license in order to export it to another country. Back in 2014 I worked not only with the Treasury Department but also with the Commerce Department. And as you know, we imposed restrictions on export licensing to Russia. That is for military goods and goods that can be used for military purposes, and for certain kinds of hi-end energy technology. We restricted those exports. That has nothing to do with financial sanctions but it is an important economic measure. Our purpose was to make it more difficult for Russian energy companies to be able to do sophisticated hi-tech forms of oil exploration. And that also means gas exploration too in practice. And so we exposed restrictions. And these restrictions are already in place and commerce can work as a part of a united US government process. and that’s what we put together. It can’t be just treasury, it’s the State Department, the Treasury and the Commerce Department all working together.
Valentyna Samar: Our research indicates that Russia has learned to live with Crimea sanctions. Their impact is tangible, for example in the banking sector. Only 6 small banks work in Crimea and all of them have been designated. However, through correspondent accounts in other banks located in mainland their clients are able to bypass the restrictions and get out into the foreign markets. Who in the US monitors the way sanctions work and how efficient they are?
Daniel Fried: In the US government we all watch the Russian reaction to sanctions. I would not take at face value the Kremlin’s claims that sanctions have no effect. We believe that they do have an effect. We also believe that the Kremlin and the sanctioned individuals and companies will take steps to try to evade the sanctions so we have to be diligent in enforcing them. And it may be that Ukraine gains information particularly about sanctions’ violations with respect to Crimea. And I can tell you, when I was in government, I wanted to hear this from Ukraine through diplomatic channels. Ukraine has a lot of friends and so we listened to other governments who also gave us information about possible sanctions violations. Sometimes we were effective in going after them, sometimes we were less so. But if you are going to have a sanctions program monitoring and enforcing is a constant every single day effort and we have to keep this up. Now, the Trump administration did a not terribly good job because President Trump himself did not really care. He was sort of on Putin’s side as a matter of fact since Putin and him seem to share certain world views. But even under the Trump administration the State Department and the Treasury Department and many people on the National Security Council staff were still trying to do the right thing. There were good people there. So it was a mixed as a not very good picture but not as bad as it could have been. And under Biden we will see much more consistency and steadiness in the application of sanctions.
Valentyna Samar: Mr. Fried, what is your opinion on Ukrainian sanctions? Have you heard about them? How efficient do you think they are?
Daniel Fried: I’ve been talking to the Ukrainian government about sanctions ever since I was in government starting in 2015. So, I know about this and by the way, the move against Medvedchuk and his media empire was a good move. Late but not too late. This is the sort of thing where Americans and Ukrainians should be sitting down and discussing it. If I were an American in the American government, I would be happy to talk to Ukrainians about how to run a sanctions policy, what kind of government agencies need to be set up, and I would also recommend to the Ukrainian government that it passed information about possible sanctions violations to the European Union, to the British and to the Americans as well as the key European governments, to the Poles, to the Germans especially because we need to know what’s going on. I would not give the Ukrainian government advice which Russian companies to go after. Ukraine knows the details far better than I ever will but I think a regular dialogue among experts is important. This is going to be going on for a while. Our governments need to be working together and the potential is there, the will is there. And when and it the sanctions coordinator office at the State Department is reestablished there will be a person responsible for the Russia sanctions and that person I suspect would want to be in close and regular contact with Ukraine.
Julia Kazdobina: Frankly, I was a little surprised when the US supported the sanctions against Medvedchuk and his channels since this move is a violation of the rule of law principle. From what I understand, sanctions are a foreign policy tool and they should not be applied to one’s own citizens. Countries should apply criminal law to their own citizens. Is this the case?
Daniel Fried: I would not… I understand the point you are making. And the rule of law is important. I think Medvedchuk’s particular role in all of this acting as a propagandist for the Kremlin given the fact that Russia has attacked Ukraine and is occupying Ukrainian territory, this decision did not bother anybody in the United States government. However, you’ve raised another issue which is important and I agree with you. Ukrainian patriots with the help of the west have defended the country since 2014. They have sacrificed much, some of them have died to give Ukraine time and space to transform itself into a modern country. A democracy that Ukraine already is. A prospering country which Ukraine has the potential to become and a country where the rule of law is supreme. And Ukraine is not there yet. President Zelenskiy was elected – as an outsider it seems to me – and this is my phrase – to break the iron wings of oligarchic corruption. That needs to happen. Not in favor of more corruption or different oligarchs but in favor of the rule of law. This is what the Ukrainian people keep insisting on, in the Orange Revolution, in the second Maidan, in the election of the President Zelenskiy. Every time Ukrainians have a choice, they vote not for extremism, not for nationalism, as the Kremlin propaganda says, but for the rule of law and democracy. And Ukraine’s prosperity and the strength of its sovereignty will come from these kinds of reforms. Putin wants Ukraine to fail at home because a successful Europeanizing Ukraine is good for Russia but very bad for Putinism as Russians will look at successful Ukraine and they will say: “ну, вот. Почему не я? Почему не мы? Мы не можем?».
Russians will know that if Ukrainians who are still Russian speaking, most of them and православный, most of them, even if it’s украинский православный, and if Ukrainians are able to do their version of the Poles and the Balts did, why do you think the Russian people would stand for more Putinism? Well, they won’t is the simple answer. At least it seems to me as a non-Russian. Putin is afraid of Ukraine’s success. Ukrainian success will make Ukraine free and secure. Success at home. And this is why Russia wants to pant Ukraine as a fascist country. Because they want to dirty and compromise the notion of modern, tolerant, democratic Ukrainian patriotism that embraces all the people of Ukraine, ethnic Ukrainians, Tatars, Jews, Poles all Ukrainians who belong to the nation. Not by blood, by conviction and loyalty. That is what makes a modern country. And Putin does not want that.
Julia Kazdobina: Mr. Fried, if I may, I would like to ask about western unity behind the Russia sanctions. We remember that back in 2004 there was very broad support for imposition of sanctions on Russia. Now it seems that it’s a lot more difficult to maintain them and even more difficult to reach an agreement on new sanctions. Also, the US sanctions against Nordstream 2 did not play the best role in maintaining the western unity. Recently there was a communication from the European Commission which used a very strong language talking about “increasing the EU’s resilience to the effects of the unlawful extra-territorial application of unilateral sanctions and other measures by third countries”. The meaning of this passage is pretty clear. So, taking this into account, what are the prospects of the western unity behind the Russia sanctions?
Daniel Fried: I think western unity is in better shape than many people think. Macron on the US televisions yesterday defended sanctions and said there could be more coming. That was a pretty strong statement by Macron and I was delighted o hear it. Now, you raised Nordstream 2, and this is a tough one. Look, Nordstream – 2 is a bad idea. The Ukrainians and Poles, and the European Parliament, and the people on the European Commission and the German Green Party are basically right, it’s a bad idea. That’s one. Number two, sanctions to kill Nordsteam – 2 are a very expensive tactic. I don’t like Nordstream – 2, never have but sanctums to kill it are a very expensive tactic. The question is, why is Nordsteream – 2 bad? Nordsream – 2 is bad because it allows Russia to sell gas directly to Germany bypassing Ukraine and bypassing Poland. It breaks the integrity of the EU gas market and intends to isolate Ukraine. That’s why it’s bad. But let’s remember Ukraine is in a much better shape in terms of energy security than it was 15 years ago. Why? Because the gas that it gets from Russia is piped to the west without going to the Ukrainian economy. Ukraine does not need that gas. It only needs the transit fees of 2-3 billion dollars a year. And that’s a lot of money. It is far less dependent that Ukraine was 15 years ago. Ukraine uses gas, even Russian gas that first goes to western Europe and then turns around and goes back east to Ukraine. That means that it’s a lot harder for Putin to cut off Ukraine. Ukraine is in a far better shape; this is a success of Ukrainian energy policy. It is possible to mitigate and minimize the strategic risks of Nordsteam 2. We are not there yet but it is possible to do so. This is a long discussion. But of course, Ukraine is right that nordsteam – 2 is bad. And if Nordstream – 2 dies, that’s great. I’d like to see it dead. And the Germans may kill it after their elections. Sanctions are expensive. It gets us into a fight with Germany. Germany made a policy mistake. Nordstream – 2 is a policy mistake. But Germany is not the problem. Putin is the problem. A policy mistake is not the same as being the bad guy. Putin is the bad guy. As an American I know all about governments making policy mistakes. So we need to distinguish between a government that is our friend but has made a mistake and Putin.
Valentyna Samar: You have definitely heard about the Crimea Platform. What do you think of the idea to hold a summit of heads of state in Kyiv and generally to form a international format to consolidate efforts aimed at deoccupation and reintegration of Crimea and Sevastopol. Do you think this attempt to form an anti-Putin coalition will succeed?
Daniel Fried: I would not call it an anti-Putin coalition. I would put this a positive way. A coalition for freedom, a coalition for democracy, a coalition for Europe. Remember that Ukraine wants to position itself as a country that seeks out a closest possible relationship to Europe. Europe is your future. And the more Ukraine does to Europeanize itself at home, the better off you will be. And Ukraine can succeed. It’s not there yet but it could get there. By there I mean a country which is successfully transforming itself. I think the Ukrainian people want it. I think that part of the Ukrainian politics is blocking this. But I believe that over time the sustained tendency of the Ukrainian people will make itself known especially if the west keeps backing Ukraine’s transformation
Valentyna Samar: Sanctions are a part of non-recognition policy of the attempted illicit annexation of Crimea that was proclaimed by the United States in 2014 and formalized in Mike Pompeo’s Crimean Declaration. We know that the Crimean sanctions will stay in place until Crimea is freed from the occupation. The EU position is the same. This is what the acts imposing Crmean sanction say. However, as far as we know some of our important European partners are not very happy to put it mildly and some are categorically opposed to any mention of sanctions in the charter of the Crimea Platform. Isn’t this refusal going to make the non-recognition policy toothless? Can non-recognition policy exist without sanctions?
Daniel Fried: I think that the Pompeo Declaration is one of the best things that the Trump administration did in support of Ukraine. I will tell you a secret that idea came from Ambassador Kurt Volker who had in mind the Welles declaration of non-recognition of the Soviet occupation of the Baltic states back in 1940. It was deliberately designed that way. And Volker wanted to emphasize that no matter how long it takes we Americans will maintain the principled position. And of course for years Europeans laughed at us and said you Americans are so foolish and idealistic. The Baltics are gone. They are under permanent Soviet occupation. But in the end what happened? Right? We know. Never say never. You never know what will happen in the future. I think that maintaining a strong position on Crimea is the right thing to do, I think that Europeans support it. And I think it has to be combined with the outreach to the people in Crimea, Tatars, Ukrainians and others who are suffering.
Valentyna Samar: Thank you, Mr. Fried, not only for this interview, but also for your efforts to stop the aggressive Putin’s Russia. And we very much hope that Ukraine, together with its partners, the United States being the most important of them will still be able to stop Putin’s invasion. We all understand that this is not just about Crimea, not only about Donbass. and not only about Ukraine in general. This is a matter of global security.
Daniel Fried: I agree. You are right. This is not just about Ukraine. Ultimately our respective freedom is bound up together. Europeans know this. You have solidarity from Poland, Lithuania and from many in Germany, more than you may think, from the British, from the Americans, from Democrats and Republicans in the United States. And good luck!