Transcripts For CSPAN Deputy 20240704

The effects of sanctions against russia two years after its invasion of ukraine with u. S. Deputy treasury secretary wally adeyemo. During his remarks at the council on Foreign Relations in new york city, he also highlights chinas economy and the Treasury Departments domestic plans. This is about an hour. Is really a great pleasure to welcome an old friend and former colleague, deputy secretary of treasury, wally adeyemo, to the council. Wallys had a number of terrific jobs both in government and the private sector. Of course the most important job he had wags the g20 and g7 she werea and the assistant to the president of Economic Policy which happened to be my job. But hes gone on to bigger and Better Things from there including playing an absolutely Critical Role on a whole range of domestic and International Economic issues at the u. S. Department of treasury. Mr. Froman hes known throughout the world, highly respected. Whenever i travel, people say, do you know wally . And i say, yes, i know wally. And it has uniformy positive reaction from capitals around the world. You probably saw some of the news in the media this morning of a major announcement by President Biden and were delighted to have the deputy secretary here to talk about those issues and more. Please welcome the deputy secretary, wally adeyemo. [applause] sec. Adeyemo mike, let me thank you for having me here today and for your leadership of this institution. I know that i and your members are grateful for the fact that youve taken this on at this critical time around the world. And thank you to all of you for joining me today here and while i wish i was here under different circumstances, tomorrow we will be marking the twoyear anniversary of russias horrific war on ukraine. As the war stretches on, you know this and youve seen this, skeptics are starting to see ukraines endurance as a denial of reality rather than what it is, a show of bravery that continues to frustrate one of the Worlds Largest armies. And its important that we be clear. That russias invasion of ukraine is a strategic failure for russia. Putin expected to take the ukrainian capital within days and the entire country within weeks. Hes lost now 300,000 troops. He expected that this war would divide democracies around the world but today nato is larger and stronger than it was prior to russias invasion. And in order to pay for his brutal war, the kremlin is mortgaging russias future and theyre doing this at a time when hundreds of thousands of russians are fleeing the country because they see the lack of economic prospects and refuse to be drafted into putins war of choice. Foreign direct investments has dried up. The ruble is weak. The country is cut off from nearly every major Financial Sector and major Financial Capital in the world. And while g. D. P. Is up, its largely being driven by a 70 increase in military spending which has driven Inflation Higher and taken the place of critical investments in the russian people and their future. And its important to note that for the first time in modern russian history, russias investing more in its military than in its people, which over the medium and longterm is not sustainable for any country, especially a country like russia thats largely being cut off from much of the world. But despite russias challenges, conventional wisdom is that ukraine lax the capacity to lax the capacity to percent lacks the capacity to persevere and other coalition is weakening. This is a narrative being pushed by the kremlin. One that they are using usefully to try and demonstrate that they can outwait us. I want to be clear that this is false. The truth is that ukraine has the ability to defeat russia. The truth is that our coalition has withstood the test of time and the alliance between europe and the United States is stronger than its been. And American History shows us that we know what it takes to stop a tyrant who seeks to unleash brutality and also to rewrite borders and to rewrite the global order. In cementing russias failure requires us to use not only our diplomacy, but also our sanctions and export controls to deny the kremlin access to the goods they need to build the weapons they want. But it also requires us to provide ukraine with the Financial Support and the weapons they need to defend their country. As i mentioned earlier, russia today is more isolated from the Global Economy than at any point since the cold war. The basic reason for this is that the countries that are part of our coalition represent more than 50 of the Global Economy. The breadth and durable of our coalition send as strong message not just to the kremlin, but also to other regimes that seek to engage in unprovoked aggressions against their neighbors. A key part of our strategy is ensuring ukraineings that the military and economic support needed to defend itself ensure that there is a country and economy left to defend which ill touch on shortly. But before i turn to that i want to discuss treasurys work using sanctions to make it harder for the kremlin to wage its war of choice. Our sanctions have two goals. Ultimately sanctions are a tool of a Foreign Policy strategy from the standpoint of this strategy the president and other leaders have asked us to use sanctions to accomplish two things. One, reduce the kremlins revenues in order to make sure that its harder for them to both fund their war of choice, but also to prop up their economy. And two, disrupt russias ability to get the goods they need to build the weapons that they want. To that first point, we are going after, successfully, russias most lucrative source of revenue, energy. Russia federal revenues for energy in 2023 were down 40 . While their expenses for mayor military were up 70 . In large part, this cut in revenues has been driven by our sanctions and export controls which has made it harder for russia to sell oil and in addition to that the actions that weve taken with regard to the price caps has meant that russia has a simple choice. They can sell oil for under 60 or they can invest thousands upon millions of dollars and billions of dollars in building up their own ecosystem to sell oil. But that money they invest in building up that ecosystem is money they cant invest in building weapons to fight their war in ukraine. Unsurprisingly, these investments by russias taking resources and time, what were committed to doing is continuing to act to make sure that russias revenues are decreased over time so theyre in a position where they face a choice between investing in propping up their domestic economy and continuing to invest in their war of choice in ukraine. Today well impose additional price cap sanctions that will increase russias sir come invention costs. As sir come invention costs. As well reinforce our policies of reducing the kremlins revenues. In addition to reducing revenue, were making it harder for russia to purchase the weapons of war they need Going Forward. This includes sanctions on Russian Companies. Importantly, were also sanctioning companies in third countries that are providing russia with the goods that they need to build weapons that they are using in ukraine. Were making it harder for the Russian Military to build in russia and to manufacture in their own country. President biden recently signed an executive order that makes the choice clear for companies outside of russia. You have the ability to continue to do business with russias military industrialized complex and if you do, well use every tool at our disposal to come after you. Which means that fundamentally you can continue to sell to russia a small economy that is likely to get smaller or to do business with the United States and the members of our coalition that represent 50 of the Global Economy. It is a choice that company after company is finding easier because ultimately they care deeply about their largest customers, which are in the west and not russia. As russia struggles to evade our sanctions, were committed to continuing to take actions like the one that we took today. To go after that invasion. But we also know that in order to evade those sanction,s, sanctions, they have time theyre not spending on waging their war on choice in ukraine. But ultimately sanctions are only a part of our Foreign Policy strategy. At the same time those sanctions concur violence, ukraine needs to be sped up. They need access to financial resources. Our partners around the world have been steadfast in their support. The European Union took important steps by agreeing to provide 50 billion euros worth of support to ukraine. Canada, japan and the United Kingdom have each committed billions of dollars. But those of you who are in this room know, this effort cannot be successful without American Leadership and american support. The senate recently passed a supplemental that includes 33 billion in investment in American Companies and workers to build weapons for ukraine. Weapons they need to defend themselves. But in addition, the package includes 10 billion of economic assistance. Sustained economic assistance not only helps ukraine defend itself from attacks on its infrastructure and economy, it makes it clear to russia and other belligerent actors, the United States will stand with countries fighting for our shared values and as our partners stand up, its important that america stand with them. And while we are focused on making sure that in the shortterm the Financial Support from Congress Comes through, the president has also made clear that he believes its essential the kremlin pay for the damage they have done to ukraine. Early on in the invasion, President Biden and the other leaders of our coalition made the decision to immobilize russian sovereign assets held in our jurisdictions. In december, the g7 stated clearly that it is not for russia to decide if or when it will pay for the damage it has caused. With this direction, we are working actively with our g7 counterparts to find ways to use these assets to support the ukrainian people. Taking these steps will increase pressure on russia to end its illegal war of aggression. Its important that president putin and the kremlin know that if they choose to prolong this war, the ukrainian people will continue to have access to the finances they need to defend themselves and to make sure that their economy continues to function. After two years, putins blatant violation of International Law has helped to forge an unprecedented show of strength in opposition to his aggression. Together our International Coalition has responded to his barbarism with innovation, collective countermeasures like the price cap that we would not have been title of the bill accomplish alone not been able to accomplish alone. But now the kremlin continues to employ strategies aimed at destroying ukraines will to fight. But i remain hopeful because of brave ao upbgans like ukrainians like roman. In 2014, just 16 years old, he joined thousands of protesters in ukraines main square demanding democracy and an end to government corruption. Eight years later, still a young man, he enlisted, ready to defend the fragile democracy that he helped restore. On the front lines, roman prepared a will, writing like a man who already knew his fate. Kyiv, i died far from you. But i died for you. Just two weeks later, he was killed in action. Giving what lincoln called the last fulmer of devotion full measure of devotion. Roman understood the power of the values that bind the ukrainian people with democracies all over the world. He joined the sea of demonstrators in kyiv, driven by the same impulses that drove people to march in washington, to bring down a wall in berlin, and stand up to appar advertise in johan apartheid in johannesburg. Roman and countless others did not die in vane. As brave ukrainians fight for their future, we must continue to support them as long as russias aggression continues. Thank you for your time and i look forward to your questions and continuing this conversation. [applause] mike well, thank you for that. Its really a great honor to have you here on this momentous day for all the reasons that you said. You know, the Treasury Department is involved in everything. All the economy. Tax policy. Domestic financial regulations. I. R. S. The i. R. S. Still part of the Treasury Department . Sec. Adeyemo it is. Mike i hope its a part of that. And yet it feels like inevitably the Treasury Departments had to spend most of its time on issues like sanctions and economic security. How do you spend your time, how do you make sure the Treasury Departments having equally Important Role on fiscal issues, tax issues, other issues . Sec. Adeyemo so youre right, it ultimately we have been when we came into office, as all of you know, we were facing a global pandemic. And the place we spent our time was on implementing the American Rescue plan and 1 trillion of that money came through the Treasury Department. Everything from the advanced Child Tax Credit which dramatically reduced Child Poverty in this country in some communities by as much as 50 , to the money that went out to state and local governments, which included 13 billion on work force training. And we spent a great deal of time implementing those programs and just as we were seeing the economy start to grow and we were starting to see people return to their lives and we were seeing the impacts of those policy choices, russia invaded ukraine. And in addition to the human toll, i think we often forget now the economic damage that did, not just in ukraine, not just in europe, but around the world. You think about a country like egypt that had to go to the i. M. F. Because of the fact that the cost of wheat went up significantly. But the fact that a barrel of rent went up and you saw gas prices go up to 5 here in the United States. The actions russia took had a significant Economic Impact and we responded, of course. The president used the Strategic Petroleum reserve. Gas prices are down now. But ultimately we of the actions were taking here as both being things that were doing to reinforce our srarblgs but also values, but also to make sure that destabilizing activities like the ones russia mike but a great deal of my time is the proactive agenda tay the president has in place. I was just in atlanta last week in the state of georgia alone we had 33 projects that have been announced where the Inflation Reduction Act are putting 14 billion and making sure we modernize the i. R. S. You worked at the Treasury Department. The i. R. S. Before the Inflation Reduction Act that was running on cobalt. It was before our country had personal computing machines. So we are working on modernizing our government and making it more effective. We know that matily our ability to use tools like and our strength comes from having a and the choices we made and the dynamics within the American Economy that are created by the American People. Mike so sorry about the sanctions. Iran, north korea, cuba, now russia. How do you rate a Strong Program against russia. I am surprised when you have 500 more sanctions to impose like you did, another 500 up your sleeve . How much could we ratchet the sanctions up on russia . Mr. Aderholt those who spend time you are constraining the access for things like Foreign Direct Investment and Foreign Direct Investment in russia is now negative. And the kremlin has asked their Intelligence Services to find ways. A lot of what you are going to see us doing is russia cut out companies and take steps and we are going to find ways to identify further constrain russias access to two things, the weapons they need and the money they need to buy those weapons are going to be our focus and compare the programs we are implementing in russia, the most important thing is we have taken the Lessons Learned and applying them to the russia program. Secretary yellen asked me to conduct a review of sanctions over the last 20 years since 9 11 and one, making sure that sanctions are tied to a clear foreign and which was using these sanctions to slow russia down. And Financial Support and military support, you give them weapons and the way we measure that, are there revenues coming down and more to do because what russia is trying to do is get out of those sanctions but think. And looks like iran than it does like western europes. If you look before the invasion, russia was a well functioning economy with large numbers. Anyone who is an investor and get money out of russia than putting it in. Its successful and going to be more successful over time as well. Mike there is a debate about whether to take the frozen assets of the Russian Central Bank and redeploy them to ukraine for reconstruction or military purposes. I gather the u. S. And europe arent on the same page on this. How do you feel that issue is going to get worked out . Are you concerned and on the impact that doing Something Like this might have on countrys willingness to use dollarbased assets and reserves in dollars . We are unified on our leaders have said very important which is one, they made the decision in the invasion to mobilize russia assets. And included the countries that held those assets, currencies that people want to put assets into and not were they mobilized but not able to use the war chest to help pay for the weapons they needed Going Forward and mobilizing assets that russia is not getting back those assets until they pay for the damage they have done to ukraines economy and in december they said russia is not going to take the time and place when they recompensate the ukranians and we asked experts to think about ways in which we can make economic value of russian assets are helping to compensate the ukranians and through a set of ideas and meaningful steps we are taking and using some of the money thats generated from the investment of those assets to support ukraine over time. We will continue to explore these because the message we want to send ukranian needs the resources they need to support their economy to go forward. Ultimately russia has to pay for the damage they have done and we are making sure we are bringing forward that commitment to make sure they have the access. Mike last 10 years there is weaponization of finance and sanctions. But first russian invasion of ukraine and taking of crima and all the other programs since. And now perhaps grabbing Foreign Countries reserves. Are you concerned that the particular position of the dollar and the position we have of being the global reserve as countries decide to do trade outside of the dollar to rely on other corns is cyst which would raise the borrowing costs for us and the headwinds you were referring to earlier . One of the things we have learned dealing with sanctions since 9 11 and included the actions when russia attacked crima. Both from the standpoint of a political message to the person or the country and protects against some of the Downside Risks in terms of getting these actors the ability to being able to and we have done a successful job that across our coalition we have taken actions together in a way that has demonstrated that you cant pick and choose. Mobilizing the russian sovereign assets is only possible because we acted together. In 2014 when russia invaded crima, what they did is they moved the majority of their assets out of the United States into other countries. They didnt expect that europe, japan and members of our coalition would join us. The key for us is going to be we continue to act together in order to protect the rulesbased order that we believe in. My view of this question of whether use of sanctions is going to lead to challenges to the dollar, the thing that is going to matter is the strength of our economy ultimately. And Inflation Reduction Act where you have seen based on the three historic pieces of the infrastructure law act and building 600 bill. And con is verts that into actual dollars. And when i travel for work and i sit down with companies or c. E. O. S, i talk to them about the economy, they are looking to make investments in the United States. As long as we are able to continue to do that, i feel good about the fact that americas Financial System is going to remain dominant in the world and make sure we take sanctions as a tool to be used in a way that is targeted and Multi Lateral and they are effective and ultimately that is what we want to make sure happens. Mike having key allies with us and in the case of ukraine that the war is in europe and the europeans have been a lot of coherence between the United States. If china was to invade taiwan tomorrow would you expect europe to be there with sanctions . I will not deal with hypotheticals. The thing that has unified us and we talk about u. S. And europe being part of this coalition that has held russia accountable and includes japan and a number of Asian Countries are taking action. This is about a violation of the order that matters to all of us and seen as a message to countries around the world, countries that represent 50 of the economy are willing to act to hold another major country accountable and we want to make sure that aggressors around the world United States is going to stand up for our values and allies and partners to do that and that goes beyond the u. S. And europe. And countries that arent close to russia and ukraine but see the impact that russias decision has had on the Global Economy and on the rules that we helped create after world war ii to ensure we dont have those global impacts. Mike i dont think this is unfair characterization, treasury has been on the devilish and engagement and cooperation and others are more combative. You worked in both agencies. Mike how worried are you first about the chinese economy and their capacity to work through their current challenges . And where do you see u. S. China relations where are we going to engage . Over the course of the last year, we have seen us engage with the chinese both on a number of issues where we see mutual benefits from Climate Change to understanding what they are doing in terms of their Economic Policy and what they are doing because it matters to us and the world. There are clear places we can engage. There are going to be places where we disagree and we want to make sure we are able to explain that to each other where we each stand and there are going to be lots of areas that we can compete with china on a level Playing Field and the chinese economy and its clear that it faces a number of challenges, a lot of them from their property sector but goes beyond. They have the demographics challenge and economic sentiment. And i think from a macro standpoint our economy is quite strong at the moment. I am not concerned about the headwinds from china having a large impact on the u. S. Economy. If you are in the region, you are more concerned. The thing im concerned from china, excess capacity coming from china and hitting the Global Economy. Usgr, we have seen in steel and aluminum. But now it is electric vehicles and chinese production outstrips chinese demand and that overcapacity is going to go somewhere. We have taken steps in terms of the i. R. A. And using some of our trade tools here to make sure we are in a position that companies are in a level Playing Field but this is a challenge for the Global Economy and they need to compete on a level Playing Field not just with the United States but countries around the world. We are talking with our partners and allies to make sure that chinas excess capacity doesnt wash on our wars to hurt our ability to compete on a level Playing Field. Mike tradeoffs and some of the tradeoffs involved in policy. National Economic Policy for decades, it was based on efficiency, most sufficient outcomes. Efficiency is one and so is redundancy, resilience and all of these come at a higher cost, higher cost for goods. How do you explain policies to the American People, how do you explain the tradeoff between becoming less dependent on china but at the cost of raising the price of things they may see at the store or may need in their business . The truth for most americans today, they still remember the pandemic. And in the pandemic, one of the challenges we faced was the inapt to get supply. And Many Companies learned that efficiency without resilience could impact your ability to service your customers. While your right that government policy is leading to these challenges, businesses while they may continue to invest in china, they are looking to invest in other companies and bring production closer to their customers. You are seeing that a huge gain to countries like mexico which is close to the United States and america and places like vietnam and india. But the message is around this idea we dont want to be dependent on one supplier for any good. Not only for geo strategic reasons but we want to make sure that the Global Economy is more resilient and get the message that the American People understand because we know that in order for the u. S. Economy to do well, we have to have access to the things we need that are essential, like chips and solar panels to build the Global Economy of the future and what the president has done we have made investments in these areas to unlock the ability to produce those things in the United States not just in the United States. We are creating incentives to draw in our friends and allies to be part of that ecosystem to have resilience in the Global Economy and not dependent on one country or one company to produce the things we need. Mike rapid fire answer, scale of 110. 10 is a sure thing, one is no chance. What is the likelihood that Congress Passes ukraine, taiwan israel support bill . I think they will. Mike i didnt hear a number. My view is when you look at the house of representatives a majority of house of representatives are supportive of the ukraine bill its the House Speaker letting those members vote and i continue to have confidence they will do this because being in a position where the young man i mentioned and people in ukraine dont have the weapons they need to and we know putin will not stop. My view is that congress is going to act and critical that the speaker gives congress the ability. Mike second one, 110, whats the chance that the government closes . My view we have seen this a number of times. I dont expect the government to close. They will find a way to fund the government but why do we continue to do this to ourselves . It makes no sense to do this. Its not good for anyone. Fundamentally, the United States has the ability to pay its bills and keep government open and this comes down to the speaker making the decision to continue with a deal that he cut. And the people who are in this room and members of the organization, they run businesses and organizations. When you make a deal, the most important thing is you keep that deal and dont continue to renegotiate it. We will not see the government shut down but it requires the speaker and others in congress to keep the deal they have cut and thats what i expect to happen. Mike open it up for questions. First on the room and then online. You mentioned egypt, death stress resulting from geo politics. Your team was talking about the need to Work Together to deal with the risks before they blow up. Is that cooperation or requiring china to take responsibility . It has to be an area of cooperation and not just u. S. And china. But many in the past. Paris club. Given the world that china holds, they had to play a role as well. At the end, it is fundamentally in chinas interest to address this and make sure we are in a position that countries are able to work these things out to allow them to enter the Global Economy. Not just between the u. S. And china even though that is part of the things we are talking about but Multi Laterally as well. Rebecca patterson, thank you for your comments and service. And tradeoffs and Multi Laterallism and alliances and one of the challenges tore the u. S. And west making the russian sanctions and some of our alliances are op tore nice particular. But i think about china and i know you are not doing hypotheticals but that could be more challenging. How are you pressing those alliances . How can we make them our friends. Mexico, our neighbor, our ally and reading more and more and seeing more data that chinese exports going through mexico to the United States. How are you pressing and who are you trying to do to make this is effective . The cap despite concerns that it never would. Whether it was helping with the price discovery when it came to russian oil. Western countries no longer purchasing western oil. Because we thought by doing that, russia would sell oil to some players and increase the revenues. The biggest issues is india who is buying oil. But with the price cap they are buying it far more cheaply than russia would like to sell it. The incentives are in line to buy russian oil as cheaply as possible. Russia doesnt want to do that and only ones not doing well and what russia is doing and you tr trying to buy in india and hard to use the Banking Sector there and indias banks resistance from our standpoint one of the most important things we can do is create incentives that make it hard for russia to be able to earn revenues or access to the goods they need but get other countries to be in alignment with us and think about Refined Products. When i meet with finance ministers they complain just as much. I had inflation due to russias invasion of ukraine. And increasing in the cost of wheat and energy. Many of those countries in africa or latin america are benefiting from the cap we put on Refined Products coming out of russia, because which are not buying it and buy cheaper products. Our goal is to get incentives aligned to reduce russias revenues and companies and officials in these countries want to work less with russia and more with us and if he can to ate the change we want. Mike question from our online audience. [indiscernible] im sorry, that was a mistake. Its not a question. [laughter] well take our question from tess davis. [indiscernible] and thank you for your work on this issue. You said russia is isolated from the Global Economy, but there remains an easy back door to the american art market which is the largest unregulated market and u. S. Government has proven in great detail how art is proving untraceable funding source. Talking tens of millions. And 160 million to hezbollah and treasury sounded this alarm and called for action. Pawn shops are subject to much more regulation than these auction houses and if we continue to ram up these sanctions, is treasury planning to implement to close these art market loopholes . It is a place where i havent spent a great deal of my time but my colleagues are focused on the art market and going after these ways in which wealthy oligarchs and others closely to the kremlin can move their assets. We have set up a re pmp o task force not only of the g7 but countries outside of the g7 that were set up to make sure to track things like art and other things that these russians are trying to move money around the world and going after those assets and freeze those assets and seize those assets and we are committed to do that and implement these type of recommendations. Wealthy russians have spent decades not only to evade our sanctions and russian taxes. They are very good at this. By setting up the task force is placed in a position we are able to share more information not only in the United States and u. K. And allies and partners to move wealth in ways like this. But thank you for the question. Mike this gentleman here in the center. In the failed russiaisrael Border Security bill that didnt happen, there was significant funding that the president supported now that the congress has shut down to that idea does treasury have any ability to fund any of the initiatives in that program . The president supports that commonsense legislation and we lack the funding to be able to do some of the things we want to do on the border to make sure. We dont have options without authorization and financing that can help significantly to address those challenges. Princeton university. You discussed the Inflation Reduction Act and supporting american citizens, jobs back am home whether through chips. We have seen reporting some aspects of the i. R. A. Have made allies nervous. To what extent do you see this as a balancing act . And assets of the i. R. A. To bring jobs to home . Thats a great question and my view is the Inflation Reduction Act is not only with goodiwhen you think about the , it is about dealing with existential threat that is Climate Change. Before the ira, the United States did not have the tool to do this. We are making the investments which will mean americas able to meet the commitments have made in paris but also the longerterm commitments we made around the world to bringing down our reductions and by making the investments in some of the sectors we believe it is going to bring down the cost to some of these technologies by as much as 25 . What was cost primitives in emerging market economies will hopefully be more affordable. In addition to the investments we are making in the United States, it is important to remember many of the provisions of the ira allow us to build an ecosystem that includes countries we have agreements with. We have entered into agreements with japan. That allows them to be part of our supply chain. We are negotiating a similar agreement with europe and the u. K. The thing we know to be true is the United States alone cannot build a Clean Energy Ecosystem that will be able to meet the needs of the United States and the rest of the world and compete with china. We need to do that with our allies and partners including in europe. We are working actively with them to make sure we get a could a cold minerals agreement signed. We also think through how we build an ecosystem that allows us to have the resilience that is going to be important. The last thing we want is to go from a world in which our allies and partners are reliant on russia for gas to one where they are over reliant on china for batteries. We are focused on the issue as both important from a climate standpoint but also in Energy Security standpoint. Lets go to an online question. Will take our next question from chris. Please accept the unmute now prompt. Looks like we having technical difficulties. Please go back to the room. Former Treasury Department official. I wanted to return to the question of the price cap and the issue of tradeoffs. One of the reason i think it is an interesting innovation is because it grapples with the trade of between reducing russian revenue and not increasing the price of oil on global markets. I was hoping you could talk more about how you think about the tradeoff and where the level of the price cap is set. Is it set today at a level where you believe there is no impact on the global price of oil compared to the status quo or is their ability to move that down to achieve the goal of reducing russian revenue over not increasing Global Energy prices . One thing people often miss was in response to the price cap, what russia did was they passed legislation that said because of the impact the price cap was having on the money the russian state was getting from the Energy Companies, instead of charging them taxes based on the price of russian oil, they are going to be in a position when they need to to charge a tax based on the price of brent. We are trying to reduce the revenues that come to the russian state they can use to fund their war and prop up their economy. What they are saying is they are willing to increase the taxes on Energy Companies regardless of how much money they make from selling a barrel. Our role became to maintain the price cap because it was effective in maintaining the prices of Energy Companies and they will have less money to invest in. But also to increase their cost. Instead of thinking about this in one variable where we can increase or decrease the price of oil, we are thinking about what we can do to increase the cost to the Energy Companies Going Forward. In terms of how we think about the tradeoff in terms of oil, lots of people before we put in place the price cap thought it would do Energy Prices would mean a shy in. We have been able to reduce their revenue while also making sure russia is able to produce oil in the short term. From my standpoint, the most important thing we can do is focus on our mediumterm strategy of making it harder for russia to extract energy from the ground. That is the place where we are focused now rather than only on these two levers to right now, i think that strategy of focusing on the nearterm are reducing revenues while allowing oil to flow is working. The place i went to increasingly focus is what can we do to take away their ability to produce over the mediumterm . Next question. Danny russell. Ancient Society Policy institute. I would like to go back to the china question from a slightly different angle. I think it is fair to say the Chinese Government is highly selfinterested. As much as they sympathized with putin as close and supportive as they would like to be, they are not doing anything they calculate could cost him significantly. They are short of the redlines. Can we do more than just get them to not do the worst sorts of things . You talked earlier about incentives. Have you thought about incentives and tradeoffs and ways we could bring the chinese a little closer on side in terms of reducing their financial and commercial interactions with russia because of ukraine . It is a great question. The thing we have increasingly focused on with these third countries is while we are contending to have engagement with our governments, we are now talking to their companies. There incentives especially in the private sectors, especially in Large State Owned Enterprises are to make sure they dont run afoul of our sanctions or expert controls because they dont want to lose access to our markets or the dollar. There is more we are doing. The executive order the president put out, which happened on the 23rd is an important step. Lots of you may have missed it. Soon after that went out, financial at the two shins from around the world especially third countries were knocking on our door to understand what they had to do to make sure they were not exposed to the secondary sanctions. That is true for knees when we identify for them there is a risk. If you continue to do this type of business, you bear the risk of losing access to the dollar while losing access to our market. A big part of our strategy is in addition to the ongoing diplomacy which we are doing with these companies to recommend they do less with russia, we are talking to companies about the risk they face in going after them in ways helping to create more sand in the cares of russias ability to get access to these weapons. I think the other innovation is we have focused in on being on certain items in terms of machine tools. Machine tools is something i knew nothing about a year ago. In talking to the people who think about the production of weapons, she tools are critical. Once you have enough machine tools, you are able to produce almost anything you need. That is probably not in chinas interest for russia to be independent. Sending a message to countries about the specific items we are concerned about and telling them we won them to take steps to prevent them from getting to russia has been an effective means but often times we cannot only go to the country. We have to go directly to the companies and the private sector because of the ideas here you dont always know the Beneficial Owner of the thing you are buying. If you look at the list of companies we sanctioned today and there are more than 500, any of them are small Rushing Company many of them are small Russian Companies youve never heard of. They have been set up to deliver things to the Russian Military complex. Even if these governments are trying to work with us, we have to take steps to better empower their private sector to identify when the things that are dual use are being sent to russia to be used for the terry industrial complex. There is more we can and we are doing to try to send the message not just to china but governments around the world. We are not doing it alone. We are doing with our allies and partners in europe and the u. K. Which matters because many of these countries care deeply about the relationships with other countries. Lets try to take one from our online audience. Well take our next virtual question from michael. Appreciate this conversation. I wanted to build on the theme of Energy Security and the ira we were talking about earlier. If you look at the role of u. S. Lng and how quickly it was to supporting our allies and partners around the world, and on that with the ira, we have worked to create a Hydrogen Industry at home. It can support our partners and allies particularly in europe looking to import amounts of hydrogen to diversify away from russian gas. Im wondering working through the issues around implementation, how we balance the tradeoff in ensuring we can scale the industry while also addressing the climate Energy Security concerns holistically. Let me take one more question and you can answer both or neither. Thank you very much for a really great presentation. Back to the oil price cap, at the start of the war, most russian oil was exported on western ownerships with western insurance. That is what gave the west and the Treasury Department a huge amount of leverage over the companies that were delivering those exports for russia. Now we read a substantial if not all russian oil is exported on a shadow fleet of second rate old vessels with questionable insurance. What is the next turn . How do you maintain the leverage you had at the outset of this conflict so you can enforce the oil price cap. It is a great question and both related to energy. When i think about the ira, we are focused on the climate peace. Energy security piece is critical. I think your point is very important. We think the ability to produce Green Hydrogen and hydrogen in general as something that provides a strategic invented especially if we are able to provide this to our allies and partners. I spend a lot of my time thinking about a bunch of textiles around creating incentives but we also put money and infrastructure, money that will help drive the creation of the Hydrogen Hubs in the United States ultimately to benefit the United States and our businesses especially the hard to decarbonize businesses. Fundamentally if we are able to deal with the cost curve and to produce this in large quantities, to provide to our partners as a critical part of our puzzle. I think this comes back to the question around how much does the 60 matter . I think it matters less today than at the beginning. Russia has decided they are going to build an alternative ecosystem to get around the price cap. From our standpoint what that means for us is we want to increase the cost of building the ecosystem. In the beginning we had two things we were trying to accomplish. Reduce their revenues and make sure oil is able to get into the market so you did not see price hikes where they sold less but they made my money. Today we are focused on imposing cost on the alternative ecosystem they are building because by doing that youre going to increase their cost. Revenues minus cost equals income. What we have done is go after ships in the shadow fleet. The other thing we have done is we have sounded the alarm on the point you made about, is the insurance reliable. Some of these jurisdictions have start to ask russians in order for you to port in my dock, lets set up an escrow account. Every dollar russia spending buying a tanker putting into an account is a dollar they cannot invest in building a tank or fitting there were in ukraine fighting their war in ukraine. How it fits within the price cap regime. Youre going to see more of that. You should expect to see us take further actions that impose further cost. In order for us to be successful to use energy as a weapon and you look at what they did in europe, you have to make sure we add more renewables to our energy. That is why we are so focused at implementing the ira as quickly as possible and finding ways to deal with Green Alternatives like Green Hydrogen, online in order to make sure we are better prepared to deal with times when countries like russia take steps that can destabilize Global Energy markets. Senior economic official in the u. S. Government. We are honored to have him on this important day. Please thank me in having him here. [applause] two years ago, democracy faced its greatest threat since the civil war and today our democracy remains unbroken. [applause] thursday, march 7. President biden delivers the annual state of the Union Address during a joint session of congress to outline his priorities for the country. Watch our live coverage beginning at 8 00 p. M. 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