 I am Andrea Mitchell from NBC News and from MSNBC and you know Tom Donald and Steve Hadley we are so fortunate to have two former national security advisors who've had long experience in public policy and before and since their roles in government. I of course knew Tom all the way back when I was first going to the State Department and you were working with Warren Christopher and Steve from all the years in the White House and of course with national security advisor role when Secretary Rice was Secretary of State. So thank you all so much we've had a great kick off to this from Jack Liu. First let's talk about since he raised the questions of sanctions and it is so top of mind right now with Russia and with Ukraine. Steve first to you how effective have we been in mobilizing Europe against Russia? We've seen the effects the economic effects with the ruleable how is that translated into affecting Vladimir Putin's behavior? Well you don't know I mean one of the great questions is what is makes Vladimir Putin tick and I think it's really hard to say he on these kinds of issues runs that system you know out of his hip pocket I mean it's really what is in his mind really is what matters. I think the administration was able to put together international support for a sanctions regime it has been limited it is focused on individuals and institutions that have been associated with the regime and associated with this effort asset freezes visa bans those kinds of things. And more institutional sanctions that would go after elements of the Russian economy in the event that Russia would have intervened to upset the upcoming election would move across the border with their own forces rather than with money and personnel and weapons which is what they're doing every day. So I think it's been a useful element but I think one of the problems is these sanctions are so visible and so public that they become the sort of in some sense the thing you reach for and they are a useful tool but they are only one of a series of tools and they could be more useful in some contexts and in others and I think in Ukraine one of the risks is that we focus all on the sanctions and don't look at the other things we should be doing to over time reduce Russia's leverage on Europe and to move forward with our vision of Europe whole and free I think those things over the long term are going to be more important in deterring activity by Putin so one of the risk you know sanctions in some sense are a prisoner of their own success they've been so visible they've been effective people seem to turn what is a tactic into a strategy and not realize they work more effectively when they're part of a whole series of US tools including quite frankly backed up by the use of force one of the things that got the sanctions together against Iran was that both the Bush administration the Obama administration said to countries help us with sanctions on Iran because the alternative to sanctions bringing Iran to the negotiating table is the use of force and nobody was enthusiastic for that so I think we have to not get seduced by sanctions and their visibility and their effectiveness and embed them in an overall strategy using all elements of power in order to achieve our objectives well into that point Tom Donald and you're the National Security Advisor and or the Secretary of State and you have the effective tool of sanctions they've been tried and tested but in this instance with Ukraine there is no military threat because I don't think anyone would suggest the use of force there have been various criticisms that perhaps we should have done more in terms of military backup for the NATO allies but nobody has suggested that we would go up against the Russian military in over Ukraine well I think I agree with Steve first of all it's great to be here for the 10th anniversary of the terrorism and financial intelligence group at this Treasury Department this by the way and we'll give back this I think this discussion underscores the fact that the name is currently inadequate because you do a lot more than this than your name and I think this is the example that I agree with Steve that the sanctions effort here to impose a cost on Putin and Russia that are conduct here is one element of a strategy and the other elements of the strategy do need to include a number of things that we've been doing which is to support the Ukraine government the interim government first and now the elected government politically to support the Ukrainians in terms of getting their economic footing through IMF through European support and our own support absolutely critical going forward reassuring our NATO allies especially those frontline states in NATO and taking concrete steps to indicate our support through our NATO Alliance for those countries and the present will be underscoring that in Europe this week but also imposing a cost here through the through second so it's one element of a comprehensive strategy here to address Russia's aggression and it's illegal activity in Europe in addition I do think that there are a number of long term things we need to look at to do including focusing with Europe on diversifying their energy supply and having strategies for ensuring that they're not as dependent on Russian gas as they are today and I also think it's part of also moving forward frankly with our economic negotiations and getting the t-tip agreement done with with Europe that said with respect to the sanctions I actually think they've had an effect if you look at the facts as Secretary Lew laid out in fact most of the assessments right now with respect to the growth prospects for Russia for this year next year have been dropped substantially probably into a contraction you've had capital flow Secretary Lew indicated that the estimates would be maybe a hundred billion dollars of outflow this year I think it may be higher than that we have 60 billion dollars of outflow just in the first quarter and Kudrin the former finance minister said it may be as much as a hundred and fifty billion dollars you've had lots of deterrent to investment in Russia so I think it has had an effect I think it's had an effect on some decision-making and it's going to turn from some of the worst kinds of conduct that Putin might have might have engaged in last with respect to Putin and my judgment is the same as Steve's that it's it's it's it would be inaccurate to describe this as a system making these decisions because it really is an autocratic system with President Putin making these decisions that's certainly from my observations are spending quite a bit of time part of their time with him and in the and in that system so hard to know which which which pressures get which results but my own judgment is that in fact Russia is actually more and it's not a it's not a simple calculation because there are costs as well but I think Russia is actually quite vulnerable to a targeted sanctions to a target thanks regime last thing I'll say on this is that Putin can say that I think I said that three times that you know the foreign policy that president Putin seems to be pursuing right now is a turn away from integration of Russia into with the West politically and security which is something that two administrations have been many administrations that the Clinton administration had been pursuing he's turned away from that right as this instance has a foreign policy now defined I think Steve you'd agree by negative opposition to the West and a contradistinction to the West at this point with Russia kind of taking a unique stance pullback well in terms of political cooperation that said you can't pull back economically he can stand defiantly politically but the end of the day the Russian economy can't stand defiantly in the economic realm and they really are vulnerable I think to a to this and I think it's made a difference for me in terms of his decision I think some of the decision I'm trying to make is to balance his conduct versus causing the West to put the most aggressive sectoral sanctions on it I want to follow up about Europe in the West but first let me ask you Steve is his option to make pardon the phrase a pivot to Asia can Russia counterbalance his losses in Europe by what we've seen recently in his negotiations in China he can help certainly on the energy side to have additional sources of export for his oil and gas my understanding though is that the the expectation is that the oil and gas that will go to China is largely from the Western part of Russia so he will continue to be dependent on having supply sorry in the eastern part of Russia you will continue to have need to have supply to Europe and beyond from the Western part you know Putin's interesting and I think one of the ways to think about Putin and we saw this when he went into Georgia in 2005 he's very he has a long-term strategic view he believes in Russian greatness he believes that he has a historical role to restore Russian greatness not the Soviet Empire but a Russian Empire if you will through this Eurasian Union that is contradistinction to Europe and the West and to China and Asia and I think he will go as far as he can in pursuing that agenda depending on how much he succeeds and how much resistance he gets when he went into Georgia we were concerned that today Georgia tomorrow the Crimea and the day after the Baltic States well Putin's two-thirds of the way there and if he were to try against the Baltic States particularly Latvia for example what he's doing against Ukraine and call into question the article 5 guarantee of NATO that is really an effort to split NATO and it's very interesting that he has been currying favor with the extremist parties in Europe both the right and the left that did so well in European parliamentary election those parties are all unified by one thing and one thing only they don't like the EU so in some sense if you're Putin you're playing an interesting hand you know you can take advantage of these opportunities disarray as occurred in Kiev and how far he goes depends on how well he does and how much resistance he gets but the stakes are very high the stakes really are about the kind of Europe we're going to have in the future whether it's going to be a Europe hole free and at peace with the based on our values or is it going to be a Russian-centric Europe with with a kind of regime that Putin is imposing in Russia because it's interesting and I'll stop it's interesting that his activities in Ukraine have been paralleled by even greater crackdown internally on political civil rights that hasn't gotten by the way the I think the kind of attention in the West that serves I mean the internal level of repression and activity against opponents inside Russia is at a level we haven't seen in terms of propaganda efforts that we haven't seen and against the media absolutely have we haven't seen really since the fall the since it's a crack up of the Soviet Union and this is all of a piece I think with respect to the China you know Putin was clearly trying to indicate that he has alternatives through trying to negotiate this long-term gas deal in China you know but in that in kind of an irrelevant of time frame here remember that the the I think the total trade relationship economic relation between Russia and China right now is about 80 billion dollars which is a small portion of the trade relationship with the United States particularly with Europe so it's a and I think a lot of competition and suspicion historically there's a lot of competition in Central Asia so we'll have to see how this how this ultimately develops but I do believe in the medium the medium term here there's a lot of pressure here treasury has these enormous tools with sanctions and as it's been described to me the targeted sanctions that you referred to are to try to not make any of our European allies bear the full brunt of the pressure so we know France's vulnerability on arms exports and the UK on finance and Germany obviously on energy but the attempt to try to spread the pain the leaders have been remarkably supportive given how hard it was to bring them around but as we see in the European elections and as we hear anecdotally I just was in Italy and was speaking to people in the media there leading figures in Italy from France speaking to people from Germany the populations are not really where we are regarding Putin the people were questioning me why are you so you Americans upset about Vladimir Putin now we see Orlan inviting him to Normandy what would you as national security advisor either both of you what would you advise the president of the United States to do going to Europe this week and having what will obviously be some sidebar conversations with Putin how to how do you try to hold the coalition together when they are under such pressure from their business interests and their populations well one of the problems Europe has and Tom and I were talking just before and he can pile on to this because he's just been back from Europe but Europe is in a bit of a crisis they've now had you know close to a third of the voters in the European Parliament elections up for people that are anti-EU they are above in some sense a crisis of leadership it's still the question of who speaks for Europe and they will now have a head of the EU council they will have a new foreign policy spokesman who are those people going to be and how much are European leaders willing to let them actually speak for Europe and take decisions for Europe which the individual countries will will will back up and support so there is a problem the EU project has always been an elite project it has never really been sold to the European people you've seen that in the referendums on Europe over the last four or five six years and now there is a question of is Europe going to move forward to have speaking more with a single voice in foreign policy or is it going to continue to be the voices of the many so one of the problems is that the president doesn't really have a solid partner and it has a solid partner that is internally focused and in crisis I think it's good that he's going I think it's very good that he's in Poland going to Poland and I think his speech there will be very important because he is going to have to show the vision of the future and to try to in some sense over the heads of the leaders rekindle some excitement in Europe for the vision of a Europe Poland free and at peace something that we kind of stopped doing in 2008 when the expansion of NATO stopped the expansion the EU stopped and we kind of left countries like Ukraine in the middle between the West on one side and Russia and the other that's a bad place to be and I hope the message he will send is it's time for us to get back into our vision of what a Europe should be and not by default leave space for Putin to pursue his I couldn't agree more the I think it's important well what's happened of course isn't a recent parliamentary elections you've had a strong indication that seems to give you seconds of the European population believe that you're not delivering for them and there really is a a lot of effort that's going to have to take place here in order to bring leadership more in line with the expectations of the people and actually and actually deliver I think the president's role will be to underscore the stakes and here and to underscore the importance of solidarity in NATO and the US Europe relationship to underscore the obligations that we have to our partners here and by the way I know there's some debate about the wisdom of NATO expansion and there's been some commentary that somehow that the United States pursuit of NATO expansion through the Clinton administration into the into the Bush administration was somehow responsible for the direction Russia had gone in here. Well I don't think you can really you can really make an argument that in fact the direction in which Vladimir Putin's taking Russia internally as much to do with NATO expansion and number two through those years the United States repeatedly reached out to try to work on integration efforts with Russia and number three I think as we sit here today and you look at the conduct of of of Russia since 2000 in 2008 and again now in 2014 we should be very happy that we engaged in NATO expansion. If you sit in the Baltic state or you sit in Poland today you are very happy that you're a member of NATO and it makes a huge difference with respect to what Putin can consider what Russia can consider that it might do and what is off the table. So I do think this has been a very important strategic initiative and it needs to be I think it needs to be underscored and embraced during the course of the president's trip. And it's been pursued by three administrations because there has been enlargement of NATO under Clinton, Bush and Obama administrations. This has been a bipartisan policy and it's served our country well and it's served Europe well. And the argument that somehow this is this is forced forced Russia and the to take the direction it has domestically or in terms of foreign policy I don't think doesn't hold water. If you're at Treasury and you are negotiating and working with the Allies on sanctions how much is your leverage undercut by the Snowden leaks and the post Snowden era and its effect if not personally on Angela Merkel she can get over it but on the political sentiment in Europe against the United States. Well it's difficult and I want to make a plug here for my colleague Juan Zerate who has written a wonderful book that tells the story and it's a great tale about how Treasury got into this business and really developed these new tools. Certainly and one of the things that's very important and Tom will talk about this is the importance of Treasury as a source of intelligence and information about what the bad guys are doing and how they're moving their money around in addition to a way of trying to disrupt that. But it has been the Snowden leaks the discussions of the involvement of US social media in helping the government on areas of dealing with terrorism proliferation have given us sort of two crises. One is the crisis with government leaders how come we didn't know and concerns about spying on leaders and the like. My guess is that piece of us we will repair over time through dialogue and conversations. There are some reforms going about how we do some of these things in terms of bulk storage of data and the like that I think will help with the leaders. The problem I think is in some sense the European public's and there's a breach of trust there and I think there has to be a broader conversation about this balance between what we need to do to defend our people against terrorism proliferation and how to do that in a way that safeguards civil liberties and I don't think we really have that conversation. I think Europe today does not feel under threat from terrorism does not feel the way we do the risk of proliferation and the risk of nuclear weapons in the hands of terrorists. So I think we need to have a more adult debate. It's a trade off and it's a balance and I think if we can have that debate in Europe the way we are having it in this country now we can come up with an understanding of what governments can do and about and what they need to do and what are the constraints on which governments operate. The key I think this will be two things let's have the debate and let's have it in an adult way not in a stick figure way and secondly in any event there's got to be a lot more transparency which again comes to the debate. People have to understand and know what is being done and not done in their name and be comfortable with it over time. So we have a lot of work to do in terms of the debate and discussion with our publics here at home and with the publics in Europe. You know I the Snowden revelations have been exceedingly damaging obviously and it's been damaging on a number of dimensions including in terms of state to state relations. I agree with Steve I think that over time because of relationships are mutually beneficial and they are deep and they've been exceedingly productive over time. I think that those will be repaired and are on the road to being repaired frankly. There are other there's other aspects of this in terms of damage that we can discuss not directly relevant here which is to which is to the commercial damage to American companies and the trust in our companies with respect to our internet and cloud and hardware products around the world which is something that is going to be a something we're going to have to work on I think I think very hard and is a real threat to the to balkanization of the internet. So there are there are those kinds of those damages that damage I think is for real and will need to be addressed but I agree with Steve. I think with respect to the intelligence relationships that we have they are mutually beneficial and I think we can work those we can I think we'll work those through in a productive way. Steve Hadley one of the arguments for negotiating with Iran that was made privately to many of us was that the sanction regime was teetering it was very very effective as Secretary Lew was suggesting but that Europe was not going to stick with it forever that we had to negotiate with Iran. I don't know where you come down on that in terms of the secret negotiation. You know there's always a problem when you use sanctions and diplomatic pressure and other things to put pressure on a regime. It's pressure for what purpose and the purpose in this case was trying to get the Iranians either to unilaterally give up their program or come into a negotiation and negotiate constraints that would reassure that it's not a route to a bomb. Do you have any doubt let me just as should we stipulate that there was no way that they were going to come to the table without the sanctions that the sanctions work to that. I think the sanctions were one of a series of tools in terms of diplomatic isolation in terms of things directed at the program which we can't talk about I think it was it's been a very successful coordinated policy of pressure. I think it did bring them to the table. I think having come to the table we have an obligation to test and see if we can get a negotiated a solution that gives assurance that this is not going to be a path to a nuclear weapon. The tricky part is going to be you know if the sanctions succeed the challenge will be how do you gradually unwind them in such a way that we still have options in the event the Iranians cheat. If someone said to me he's been following this if Iran does not now have a covert nuclear facility going in Iran some place it will be the first time in 20 years that it hasn't. So there is a cheating issue and one of the challenges of the agreement is not just what's the agreement but what are the things that surround the agreement in terms of snapback sanctions and pre authorized actions that will give Iran an incentive not to cheat. So I think you know there are there issues of sanctions if the agreements if they succeed in reaching agreement there are harder issues of sanctions if there isn't an agreement and the question there will depend how did the negotiations break down if you know if the Iranians walk out in the Huff and say we don't trust the Americans we're now going to go get a nuclear weapon then it'll be pretty easy to get sanctions back on the table and maybe even some other things like military action but if it is a muddier outcome and the Iranians basically go public and say we've made a reasonable option offered to the Americans the Americans didn't accept it and we can't accept it because it does not meet our thresholds that's going to be the question can we then get the world at that point to agree that we need more sanctions to make Iran more reasonable or do you have a Vladimir Putin decides to put himself once against center stage and announced that he thinks the Iranians have given far enough in the problem for the breakdowns of talks is all in the Americans head and at that point the the international consensus that has made sanctions so effective breaks down that's a problem yeah is there a third option also is there a third outcome where both sides say we've made a lot of progress there's a lot of technical challenges remaining we're going to extend beyond July and then your BB Netanyahu and you say this is a very dangerous window because this is when Iran might start well the interim closing that the interim agreement provides for that expressly the interim agreement on which we're not the base on which we're now negotiating provides for a six month rollover if the both the parties agree to do that by mutual consent number one number two the basis on which we're doing these negotiations they the interim agreement is a sound based on which to do a negotiation essentially you you have frozen the key aspects of the program you know with respect to the medium risk for uranium at 20 percent you've actually rolled it back but are you as confident well how would you respond to Steve's suggestion that Iran has never not had a covert hidden well we couldn't detect well but this is this is this is part of the ultimate deal right you'd make right with respect to with respect to the the size of whatever whatever whatever program is there the distance that they would be from being able to achieve a nuclear weapon if they decided to break out and quite critically the importance and the intrusiveness of the inspection regime that you might have and the ability to kind of as Steve was saying to to to go back to sanctions in the event that you see you see cheating on that side so the the detail this will matter I disagree by the way with it with the premise of your question that somehow that the sanctions regime was breaking down that's the reason that the United States and Iran got to negotiate I don't think that's true I think what happened is that as Steve indicated if you do an assessment of each time that the Iranian government has made a strategic reversal a strategic decision to go in a different direction it has only been under extreme pressure and we can go through each of those instances since 1979 we determined after the United States determined after a bonafide effort to do outreach to the Iranian government in 2009 and to offer negotiation at the highest level with the Iranian government and we got nowhere they were either unable or unwilling to respond with respect to that our understanding with our allies and friends and partners around the world including the Russians and the Chinese was that if in fact after this bonafide offer of negotiation the Iranians were not able to do this or unwilling to do this and that's what happened that we would join in a pressure campaign and as Steve indicated it was a multi-dimensional a simultaneous multi-element pressure campaign that was put on the Iranians ultimately that resulted in the election of Rouhani who then came to the table essentially he ran on the prospect on the proposition that he would undertake to relieve the economic pressure on Iranian society the only way to do that was to engage in a negotiation on the nuclear file with the west I didn't see really any any breakdown in the sanctions regime I saw on the other hand on the other on the other hand here Rouhani being elected on the promise of getting some economic relief for Iran and knowing the only way to do that was to come to the table with the United States and the rest of the international international community that by the way leads me to another point here which is that I think all the all the leverages on the is with the west right here right now because the sanctions the bulk of the sanctions remain in place I don't think the Iranians have gotten any sort of real kind of maximus boost here out of the interim agreement and the United States and the west should come to those negotiations with that attitude Andrea that in fact that sanctions recent remain that Rouhani will not be able to make good on his promise to the Iranian people and that we have quite a bit of leverage here in these negotiations will that leverage persist Steve we saw the French and the Germans and other with this interest lined up in Davos trying to meet with Rouhani and then sending delegations to Tehran how how long can we maintain the coalition it's a problem you know we've seen this movie before and there are differences and we can talk about those but you know we've been to the table with Iranians before and we've had a nuclear agreement with them before this was in the 2003 2004 timeframe where it was pretty clear that the Iranians thought as Muammar Gaddafi thought that after Afghanistan and Iraq the United States was willing to use military force against Iran over its nuclear program and they suspended the program the covert aspects of the program they engaged in negotiations with the EU3 and we reached the Paris agreement which suspended enrichment pending a negotiation of the ultimate resolution of the issue and then quite frankly we got bogged down in Iraq they had an election Ahmadinejad is president he campaigns on the on the platform that those people entered into the deal with EU3 were traitors and ought to go to prison and he rolls the whole thing back so there's getting a deal and then there's keeping a deal and I think the administration I hope has in some sense three task force going one is the task force that's trying to get the deal with Iran one is the task force thinking about what are the things outside the agreement will actually keep the Iranians compliant with it and then third is a task force thinking about how to reassure the rest the country is in the region our friends and allies that if there is an agreement with Iran we are not now sort of packing our trunk thinking our job is done and leaving the region free to an Iran which will have even more money to back the kinds of things it's doing to support terror to support Assad in Syria to disrupt Iraq to disrupt Afghanistan this is a real challenge and you know getting the agreement is only the first step of a very challenging road I agree with that but with respect to companies and others being anxious to do business with Iran the details matter here and the nature of the sanctions that are in place right now would continue to force companies to choose between doing business in Iran and doing business in the United States and we've seen the force that you know one of the really I think important aspects of the sanctions approach that's been put together by the U.S. Treasury Department has been to take advantage of the centrality of the United States financial system and to work with with governments obviously but also with private entities who have to make these kinds of choices and that's what the sanctions do the sanctions both put together by the administration and implementing congressional legislation really do force a company to decide a bank to decide between doing business with Iran doing business in the United States it is exceedingly powerful and I am not in the government today but I think I would have a pretty good guess that the Treasury Department would tell you that while these are in place they intend to enforce them as we look at the arc of Treasury's role in making foreign policy sort of taking the 30,000 foot of view Steve when you first became First Deputy National Security Advisor then National Security Advisor was Treasury always at the table in as big a role how did it evolve under Juan and Stu and now David into becoming but what is it now in terms of the relative positioning my view was that Treasury should be at the table because what we did in foreign policy had implications on things Treasury did and because it was a clear head of someone who is actually not engaged in the day to day it was not the Treasury was there because they had an arsenal to contribute to solving the problem and that's really the terrific story that Juan tells and others have told that it was a real case of people in the government being free to innovate and it starts 11 days after 9-11 with Executive Order 1-3-2-2-4 which is an effort to target terrorist financing and those countries those companies and banks that were laundering terrorist funds it's then expanded having been fairly successful in using it as a tool in the war on terror someone comes in and says why don't we use it for proliferation and the first test is actually not Iran it's North Korea in 2005 and Banco del Asia where we actually got some hands around Kim Jong-il's personal funds let me just tell you I was in Pyongyang in 2006 and when they told me Expos Facto that I had to pay something like $75,000 in cash for the satellite time we had used or they wouldn't let me leave the country and I discovered there was no way to make a transaction because of exactly what you had done we had to go to another diplomatic resource and we cut North Korea out of the finances to a bridge loan or whatever you'd call it and ultimately it led them to come in 2007 to negotiate a follow-on agreement which in the end of the day was never implemented so then the question was works in North Korea let's try it on Iran and one thing I think that needs to be said is there are several arrows in this financial sanctions quiver one is the direct one which is freezing people's assets and listing institutions that are laundering funds for terrorist proliferators but the other one that Stuart Levy and Hank Paulson use so effectively is the indirect or reputational risk you go around Stuart went around and Hank to maybe three dozen, four dozen banks and financial institutions in Europe and said you know you don't really want to be dealing with these Iranian banks and you don't want to really be dealing with the IRGC because they're actually funding terrorist activity and proliferation activity it's going to become public and your people and your depositors aren't going to like it so they're a wonderful tool because they both have direct indirect and reputational effects and this was a whole this was a new frontier and it made treasury a real player and as I said earlier my risk my concern now is it's become so good and they become so effective people think it's a silver bullet rather than just one element of a comprehensive strategy I agree with that the a couple of things on the office first of all it really is a truly non-partisan set of tools that have been used a bipartisan set of tools and I think that's been that's been indicated and one of the first personnel calls that I made during the transition in 2008 was to track down Stuart Levy at an event with his kids and to talk to him and to stay and to beg him to stay into the Obama administration and luckily he did and it did I think at the Steve's point it resulted in continuity and building on the tools and the insights that have been developed that have been developed in the in the Bush administration that we we built on and enhanced I think going going forward so it really is it really is a bipartisan bipartisan effort Treasury is at the table and has been at the table addressing some of our most important security issues national security issues whether it be the terrorist threat or it be the North Korea challenge or the non-proliferation challenge in Iran I think that this point the Steve pointed to which is a really important point which again goes to the goes to the point about the strength of being at the center of the world financial system here in terms of our ability to do these to do these things and in many ways even our unilateral steps become multilateral steps because as Steve was pointing out if you sit down with the bank and you say all right do you have assets and transactions in the United States they're subject to the treasury treasury designations but you also have to think and we're designating this bank in Iran for example because of bad conduct and we can underscore to you and show you the bad conduct banks around the world private sector banks around the world are not going to take that risk to dealing with those dealing with those entities after they've been designated with cause and you will have this ripple effect and it really has been this has been one of the great insights I think that through two administrations we've had with respect to the effective sanctions it is way beyond as the Secretary of Treasury said this is way beyond kind of trade limitations and trade embargoes quite targeted and exceedingly exceedingly effective had we lost any leverage as many in Europe and elsewhere blamed us and our banking system being undercapitalized and our mortgage the spreading of the mortgage crisis to Europe did we lose any leverage as China has risen relative to our strength you know I'm not a I'm not a financial type Ruben Jeffery there are other people here you can ask for that my sense is look we took a hit but we have recovered it is true that I think one of the things that is the consequence of 2000 the financial and economic challenge of 2008 is that almost for the first time it was developing nations rather than the developed nations that actually led us in some sense out of that financial and economic struggle but a lot of reforms have been put in place in the financial system in the United States and globally and I don't think anybody thinks that there is any substitute in the short run for the dollar as the reserve currency China has a lot of things its needs to do to make its currency truly convertible and you know Europe has its own challenges and questions you know not two years ago we were thinking about whether there was a crisis of the Euro and whether the Euro was going to survive so at this point the United States financial system is still the beacon of stability in the international community and I think that's my sense is going to be that way for a good one I agree with that but we did take it number one we obviously took a hit reputationally in terms of authority power and prestige in the world after the financial crisis number one number two though the policy response in the United States both at the end of the Bush administration and through the Obama administration I think has actually been quite a success and indeed if you look at our banking system as compared to the banking system for example in Europe and elsewhere in the world you see a much stronger system here right and that's reflected in the fact with respect to capital flows and where money goes has gone in the world has come into the United States obviously with respect to the specific things we're talking about here Andrea I haven't seen any diminution with respect to our ability to leverage the financial system work to the financial system in a cooperative way multilaterally to affect to affect our sanctions regime at all and indeed we've had since the financial crisis most of our success frankly with respect to working in the financial in the financial system but the point that Steve made I want to get back to is very important because treasury can do things and they can do things quickly and they're identifiable and they're concrete it's very important that they be part of overall strategies and that we remember that not every case is Iran for example you know the Iranian case where we have been exceedingly effective as I argued to you earlier with respect to bringing the Iranese to the table is a unique set of circumstances it is horrible conduct it is clear violations of international law it's a policy goal in terms of preventing around from acquiring nuclear weapon and which this broad agreement around the world including by the way by the Russians and the Chinese they were particularly vulnerable with respect to oil and the banking sector so it was a unique but even with all that it also took tremendous resources tremendous resources both to work the governments multilaterally and also the work as we were referring to here work with private entities around the world so it's important that each of these challenges be taken on in their own context and you not assume that we can do an Iran campaign in every case because that's not going to be that's not going to be the case additionally in the Iranian case we also had the important collateral circumstance that we did this we were able to do this at a time when the Saudis were willing to increase their oil production and where the United States had had its energy future going in a completely different direction right with respect to us now being on track to become the largest producer of oil in the world and indeed the increased production of oil by the United States during this critical period in conjunction with the increased production by the Saudis is one of the reasons that the costs were actually bearable here in terms of our cutting off and reducing by more than half the export of oil from Kurdal from Iran absent those production we would have had we would have had real cost issues with respect to the impact of the sanctions that we were putting on in other words negative impact on Americans and on the West of from our sanctions and we were able really to manage that because of our energy to change our energy futures in Saudi actions let me drill down on China for a moment in terms of their increasing leverage and the cyber war and their they have no reluctance to use these tools and we are I would argue more vulnerable in that the Snowden leaks occurred only days before the summit in Sunnylands when we're told that the president was planning to make that a big part of his first meeting with President Xi so how how has China evolved in terms of its economic and cyber tools against what we can leverage? Well the and again I'm I'm dealing with what's in the newspapers but we have to you know this is a case where we have to make some distinctions here and we have to have a conversation it is one thing to use cyber tools to get information to counter terrorism to counter proliferation to deal with threats against the country it is another thing to use cyber tools to steal private corporate information for competitive economic advantage we clearly do the first we are not alone there are a lot of other countries that are doing the same some of whom are very outraged by the disclosures of Snowden and probably know more about what we do than what their own home countries are doing but that is something countries do what China is doing in this what some people call the greatest theft of intellectual property in history is really something we don't do and most other countries not all other countries do not do but China is doing in spades and one of the things we have to do is to get the Chinese to understand in their heart of hearts though they will not admit it publicly that there is a difference but secondly the Chinese will not stop this activity in my view unless there is a penalty now this effort of indicting five PLA people is an effort to try to impose a penalty it has a lot of problems because one of the problems is it one of the unfortunate things about US-China relations is when we hit a political hiccup one of the first things either one country or the other does is cut off military to military ties and in fact having military to military interaction is a very important thing and unfortunately resting the five PLA threatens that I think we need and Keith Alexander is here and you can ask him about this I think we need to impose a penalty for cyber crime in cyberspace and to be able to have a way and there are difficult legal and policy issues here to take away the capacity of cyber criminals to conduct cyber threats and if and tell the day that we can pose in some sense asymmetric penalties for this kind of thing I think it's not going to stop I think just you know diplomatic interactions are not going to get us there there has to be some real costs and I would hope that there's a task force looking at what those costs could be because I think you know the I understand why they arrested the PLA folks I think that's not going to turn out to be the best or the most useful tool you know I charge them not arrested because we can't get to them sorry and indicted them my apologies you know Andrew I gave the the I gave the first public speech with respect to this in the spring of 2013 with respect to calling out China directly and I had spent a lot of time with the Chinese leadership and I think they were a bit surprised this came from me but as as Steve said you know we had massive and have massive state enabled cyber theft from the United States and indeed we have been engaged with the Chinese on this and I think I talk a little a little more broadly about it I do think there has to be a cost because I think the Chinese didn't perceive any cost to this up until the point that it was raised they certainly will be used to snow in revelation as you pointed out as a push back with respect to the dialogue that we have had with them but very important to get back to this dialogue and it's very important to reject the equivalence argument that the Chinese might make between espionage and and a criminal cyber activity and cyber enabled economic theft they're very different things and the conversation that takes place with the Chinese I think has to go broadly even beyond cyber Steve to saying that this is going to affect the overall quality of the relationship between the United States and China that this is going to be something's going to be raised repeatedly and directly with the leadership of China by the most the highest levels in the United States and it's going to affect the overall quality of their relationship you can't have a circumstance and since the conversation I think we have to have with the Chinese quite directly you can't have a circumstance where you have a 500 billion dollar a year economic relationship between the United States and China and where you have this scale of outright theft and that dialogue needs to take place there needs to be a cost associated with it it needs to affect the overall quality of the relationship and it needs to be kind of a very direct set of conversations about what is allowable what's on and what's off in terms of in terms of cyber activities but rejecting this equivalence argument is a very very important substance to the point What are the costs? What leverage do we have? Well, you know we have a 500 billion dollar relationship with the Chinese right an economic relationship and there are a lot of elements to the relationship going that we have with the Chinese on which there could be that I wish there could be a cost What I would be looking for and what Tom would be looking for is you know smart sanctions too or financial sanctions too What is something that will happen to the Chinese system? We don't have to talk about it it will just happen they will know it we will know it and the argument quietly is if this continues more of this stuff is going to happen we can get at you Now the question is what is that? And I would rather have it I'd rather not have to put it in the standpoint of the overall public trade relations I think just raising at high level meetings is fine but I think we've got to look for some new tools that they will see that will hurt them in this cyber realm and that they will know that if they don't change their ways more of that will happen I don't know what it is I'm not in that world anymore but that's what I hope we're looking for I have to ask you because Jack Lou started this off by talking about 9-11 and the evolution of the treasury tools in response and there is a big debate today about whether releasing 5 very high level Taliban prisoners is the right response to get back a prisoner of war Steve? I don't do this stuff anymore Look it's very hard and the right questions are being raised Did we negotiate with terrorists? We don't and for good reason problem is if you swap or pay to get your hostages back you incentivize hostage taking that's a problem there were congressional statutes requiring consultation with congress if we could consult on the operation against Osama bin Laden why couldn't we consult on this so there are a whole series of questions that need to be raised again my guess is that the dilemma the administration had was the following we've turned over a lot of prisoners in Afghanistan to Afghan authorities and regrettably they have released a lot of them over the objection of our military people who are now been released in Afghanistan who killed Americans and that's a very troubling thing to happen but that is what happened in Afghanistan and disposed of those prisoners our troop levels are coming down and I think the administration probably was in a very difficult choice of look we have an opportunity to get this guy back the president said I think regrettably that all of our combat troops will basically be out by the end of 2016 I think that's unfortunate to have that kind of arbitrary cutoff I'd much rather have it conditioned space but in any event if that's the policy the question is so if we're not going to get this guy back when and I think that was the dilemma and they basically said look we've we've lost control of all these prisoners in Afghanistan these are five guys bad guys but at least we have a chance by giving them to the cutters that we can keep them off the battlefield for a period of time and this may be the only way we can get our guy back I think that's probably the decision that came before the administration you can have arguments about whether how it was handled whether they should have notified Congress and all the rest but my guess is that's the dilemma they faced it's a hard one you know we did not we didn't do a pre-consultation with the Congress on the open Zamen Laden raid but with respect to this one there's a big difference between getting a POW back in a war zone and negotiating with terrorists it's an entirely different context here and that's what this is this is essentially a getting a prisoner of war back and through a swap it's the unique it's the unique undertaking because you know the gutteries we're mediating this and we'll take some steps to restrict the activities of these guys they are difficult decisions though with respect to incentivizing the Taliban and others who we are at war with and the in Afghanistan from taking prisoners they don't need a lot of incentive right we have had we've been in a we've been there for for over a decade and they know the value frankly of being able to of being able to take an American American soldier a captive and I don't think that this I don't think that we need any incentive to do that Frank I don't find that argument persuasive and we have that we have that risk every single day in Afghanistan and we deal with that risk you'll have others playing on the panel Michelle and others who can talk about who can talk about this so I don't know that it's an incentive problem it was an opportunity as Steve said to get back home the only prisoner of war in the conflict and there were there were constraints put on the activities of the guys who were going there and it's a it's a different context it's essentially getting back a POW in a war zone context and I take Tom's correction it's interesting because I read the press coming out of the Sunday shows which said that we had consulted on the Obama the Osama bin Laden raid which was not my understanding I thought that's interesting it is a point if we did consult on that why not here I think it's important that that record be corrected publicly because that argument is being is going to be I'm willing to make I'm willing to make that correct know something about I know something about this yes indeed that they have I'm willing to I'm willing to make that I'm willing to take make that correction make that correction publicly there wasn't a distinction between consultation on the months leading up to and or and no consultation during the week or days leading up to the actual there was not there was nothing there was not there was not a consultation with with the with the Congress with respect to any of the with respect to any of the specifics around the Osama bin Laden we had we had tremendous operational operational security concerns and if in fact there had been a leak with respect to the any of the anything with respect to the Osama bin Laden Osama bin Laden raid we would have number one probably not have had not another shot for another 10 years and we would have put our troops at extreme risk I want to in the few minutes left talk about places where you don't think sanctions work we've talked about Iran and you've talked about the unique set of circumstances with Iran and to a certain extent with Russia and Ukraine that targeted sanctions you think have already affected Russia's economy and potentially business behavior what where doesn't it work Steve sir well a couple things and I'm others can correct me on the numbers but one of the issues that came surfaced in connections with sanctions against Russia on Ukraine is people you know the United States generally has to lead on these things and encourage the Europeans to come around but I think Germany is I think Russia's number two trading partner if you take the EU together it's far and away the number one trading partner for Russia we're way down that list so one of the problems in sanctions is you know they need to be multilateral many times because the folks with the money that with the economic and financial relations may not be the United States of America this is why it was so important to bring the Europeans along which actually started in the Clinton administration to begin to bring the Europeans along to see around the way we did because we were sanctioned out in many respects at least initially on Iran now the administrations to administrations move that go post further so one is the question you got to look at who's got the leverage and if you're really going to make these things work then the folks with the leverage have to be at the table and have to be willing to sanction because otherwise they're not going to be effective secondly you know it is tools can are cumulative in their effect and if you can have a military element in addition to your diplomatic and all the rest if you can have the threat of a military element it is going to make sanctions more effective this is the argument that we made on Iran we cannot make bring them to the table with sanctions we'll have to contemplate military force and nobody really likes that it is true nobody when Russia went into Georgia when Russia went went into Ukraine no one suggested the U.S. would engage Russia militarily but the fact that we have reinforced our presence in NATO countries the fact that hopefully the NATO countries will begin to pay more attention to defense and to increase their own defense spending this again is something that I think gives added leverage to a sanctions context finally there's a question of for how many things are you willing to threaten sanctions we've now been on terrorism we've been on on organized crime and drug trafficking we've been on proliferation there's now discussions sort of using it as a tool for human rights one of the things you have to really decide is because you can overuse these things what are the national interests and national values which are so important to us as a country that we're willing to use this tool and what are issues on which the advocates for this particular perspective will want to use the tool but in some sense we ought to say you know we got to save this for the things where that matter most to us and where they can be most effective so I think that's it's got to be an issue of priority in terms of values and interests and considerations of effectiveness because you know these things will become a wasting asset at some point I think I think that's all correct one is that with respect to where it hasn't worked I think overuse is an important is a very important concept to think hard about here as I said earlier not every case is going to be an Iran case and you have to think very clearly about what your objectives are and it can't just be a reflex to go to this because again it's something that the Treasury can do in a week and it's short obviously of military of military action that seems to me the two or three context and where they're difficult right is where a country is unplugged from the world economy you know like North Korea now the Bush administration successfully was able to find a steam there right and a connection that was effective but that's one of a few so if a country is willing to live like North Korea and tragedy and where their citizens are completely unplugged from the world and suffer you know that's a more difficult circumstance in terms of making now you can you can make it more difficult for North Korea and we have frankly to engage in proliferation efforts and we can make it more difficult for them to get the kinds of things that can advance their program but you have some sort of limit if you have a little more limit effect when they're unplugged from the world economy and the second is I think is Steve said where you don't have multilateral support you know for example there's not there's not an economic relationship between the United States and Iran it hasn't been since I don't know what the economic relationship was after the LG years at Gord but basically essential that we have a multilateral setting there and where you don't have an economic direct economic relationship of any consequence if you don't have multilateral support you're not going to have an effective sanctions regime I think our time with with you is as expired but I want to thank both of you for your collective wisdom and judgment and experience and for sharing with us today it's been a great privilege for you for being here so thank you so much thank you so much thank you so much