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I would like to thank Fran Burwell and the Atlantic Council for inviting me here today, and Ambassador Wilson for moderating this session. I recently had the pleasure of inviting Ambassador Wilson to testify before the Subcommittee on Europe and Eurasia on energy security issues, so it’s interesting to see how quickly the tables have turned. I am also delighted to see that familiar faces will be responding to my remarks, it’s good to see all of you here.

I’m delighted to speak about US-Russian engagement on economics and energy, because frankly speaking, there’s not enough of it. My interest is primarily on the economic relationship, and I will give you three great reasons why Congress and the Administration should increase its focus in this area: jobs, jobs, jobs!

Russia is the fastest growth market in Europe with an expanding, consumption oriented middle class. Projections put Russia as the largest consumer products market in Europe by 2024. And yet, while Russia is currently the 11th largest economy in the world, it ranks only 37th amongst US export destinations. Increased US exports to Russia would support the creation of manufacturing, agriculture and service jobs across the United States, and further Russian integration into the international community will improve the trade and investment climate, enhance the enforcement of intellectual property laws and
strengthen moderate, reform-oriented sectors of Russian society.

Let me briefly address energy issues, since this is also a part of this session’s focus. I think most Members of Congress look to the Europeans, the main consumers of Russian energy, to address their over-dependence on Russian oil and gas. It comes as no surprise that European markets want access to the largest known natural gas reserves in the world. But their consumption of Russian resources is unevenly distributed, and some EU members are almost completely dependent on Russian oil and gas for their energy needs.

I think it is without question that Russia does use its dominant position on European energy markets as a political tool, and the EU has moved too slowly to address this. But efforts are underway both at national and EU levels.

The European Union has forced unbundling of distribution and supply functions of energy firms, which strikes at the heart of Russian monopolies and state-owned enterprises. The EU has established interconnectors in order to distribute energy more easily, which is particularly helpful for long term energy security and hedges against any potential Russian cutoffs in the future.

The EU is also working on targets to increase the use of renewable and alternative energy, and we are seeing a lot of movement on the liquefied natural gas market and shale gas exploration which could have long term effects on the EU energy security prospects. The various pipeline projects seem to be more of an open question and I would say the same about the status of nuclear projects: on one hand, Germany’s decision to out phase nuclear energy could lead to even further dependence on Russian resources, but on the other hand, new nuclear plants are being built or planned in Finland, Lithuania, Belarus and Kaliningrad, all of which could significantly change the energy calculus in the Nordic and Baltic regions.

In terms of exports, we are seeing great interest in US products in Russia. Consider for example Prime Minister Vladimir Putin’s kickoff event for his party’s Duma election campaign – he rode a Harley Davidson around on a Russian aircraft carrier. Can you get better buy-in than a Prime Minister promoting US products on prime time television?

OK, seriously, I believe that Russia’s accession to the World Trade Organization would be a big step in the direction of boosting our economic ties. Allow me to mention a couple of examples:

1. WTO accession would lead to a boost for US exports, according to AmCham Moscow and the representatives I have met with from John Deere, Boeing, Pepsi, Microsoft, and other Fortune 500 companies eager to expand their presence on the Russian market. The vast majority of increased exports would be from production in the United States, so a direct gain for American jobs.

2. Dispute resolution mechanisms in WTO would, for instance, force Russia to reopen its markets to Georgian products, which would be a big win for the Georgians and expand the rule of law paradigm in Russia in general.

3. The Russian economy is currently very sensitive to the price of oil. If the price of oil remains high, Russia’s economy will be dominated by extractive industries and little development of other sectors. WTO membership would lead to productivity gains and development in many sectors and expand economic opportunities throughout Russian society.

4. Increased economic development will benefit the growing middle class of business-oriented, reform-minded Russians that represent the catalyst for long-term social and political change.

I support these measures with my eyes wide open. I know full well that Russia has a democratic deficit and significant human rights problems. But isolating them doesn’t work. We have tried this approach and I do not think we should revisit it.

I also want to emphasize that cultivating new friends doesn’t mean turning our backs on our old ones. US Congress strongly supports the territorial integrity of Georgia and stand behind our NATO allies in the Baltics and Central and Eastern Europe, but it is important to note that these countries will also benefit significantly from improved US-Russia relations. Some of these countries have started to chart new relationships with Russia and I think this is very promising.

I believe that the United States and Russia have common interests that are best served by acting as partners. Our interests intersect on curbing nuclear proliferation, ensuring a secure and stable Afghanistan, countering terrorism, radicalized groups, narcotics, human trafficking and organized crime. No single nation can harness this agenda on its own, and U.S.-Russian partnership in these areas has great potential.

In fact, the Obama Administration’s engagement with Russia has already produced tangible results, including a New START Treaty, diplomatic cooperation on Iran sanctions, the Northern Distribution Network delivering supplies to ISAF troops, and a Russian abstention in the UN Security Council vote on Libya which, under the circumstances, many have analyzed as tacit approval, and enabled the toppling of Qaddafi’s forces.

In order to get full advantage of Russia’s WTO membership, Congress would have to grant Permanent Normal Trade Relations (PNTR) to Russia by repealing the Jackson-Vanik amendment. Currently, no such legislation has been introduced, and the likelihood of anything being introduced or voted on are unclear at this time, but we could soon enough see movement during the fall session of Congress.

It is evident that some Members of Congress would wish to register political discontent with Russia by opposing PNTR. Some Members wish to keep the Jackson-Vanik amendment in place, despite the fact that it is completely anachronistic and redundant, and even some of the major Jewish organizations are now calling for its repeal.

When members of the Subcommittee on Europe visited Moscow earlier this year, they were told by leaders of the Russian opposition that Jackson-Vanik was undermining US moral credibility in Russia, and they also called for it to be repealed. So maybe rationality can prevail on this issue.

I think a couple of steps can be taken to improve the likelihood of Congress agreeing to PNTR. First of all, most Members of Congress are not familiar with Russia, and some of them are stuck in a Cold War mindset. I blame both sides in a way. Russia has not been a frequent destination for Congressional Delegations, though it should be. But Russian diplomats have not been particularly good at doing the rounds on Capitol Hill, so their perspective is not well understood amongst legislators.

I recently met with the Russian Ambassador, Mr. Kislyak. This is the first time I have met with a Russian Ambassador, and I have been on the Foreign Affairs Committee for 13 years. I was the one who requested the meeting by the way. I told him he needs to make more friends on Capitol Hill by having one on one conversations with legislators and he agreed to do that.

I’ll tell you who is good at making the rounds on the Hill: Poland, Hungary, Czech Republic, Georgia, the Baltic countries… If you think that Russia comes up during these meetings, you are right, and usually not from a positive perspective. You can’t blame them for that of course, but I believe that increased, positive engagement is the only way forward.

I am not alone with this perspective. When Members of the House Committee on Foreign Affairs visited Moscow in June, they met with the Chairman of the Committee of International Affairs of the Duma, Konstantin Kosachev. One of his main points was that the parliamentary dialogue that had been carried out under the previous Chairs of the House Committee on Foreign Affairs; Chairman Henry Hyde, Chairman Tom Lantos, and Chairman Howard Berman, had been discontinued by our current Chair, Ileana Ros-Lehtinen.

The dialogue may not have resulted in much in terms of specifics, but it is relevant to note that this dialogue was initiated under previous Republican leadership, and has continued in a bipartisan way under successive Chairmanships. It is very important to the Russians to have the opportunity to exchange views, and we no longer have a natural venue for that.

We need to be able to discuss everything from IP enforcement and missile defense to Georgia’s territorial integrity and access to Arctic resources with our Russian counterparts. So to that end, I am taking the initiative this fall to establish a bipartisan “Caucus on US-Russia Trade and Economic Relations” and I have invited my colleagues to join in.

I think caucuses can help to provide information to the legislative process and highlight underemphasized issues, so I hope that I will be able to call on the expertise in this room to participate in future caucus events, and I would be happy to visit with you again to discuss our ideas once we get this off the ground.

Thank you again for inviting me, I look forward to hearing your views.