DOJ REPORTS SCHLUMBERGER OILFIELD HOLDINGS LTD. TO PAY ALMOST $232.7 MILLION FOR FACILITATING TRADE WITH IRAN AND SUDAN

FROM:  U.S. JUSTICE DEPARTMENT
Wednesday, March 25, 2015
Schlumberger Oilfield Holdings Ltd. Agrees to Plead Guilty and Pay Over $232.7 Million for Violating US Sanctions by Facilitating Trade with Iran and Sudan
Parent Company, Schlumberger Ltd., Also Agrees to Continue Cooperation With U.S. Authorities and To Hire an Independent Consultant to Review Its Sanctions Policies, Procedures and Internal Sanctions Audits

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Ronald C. Machen Jr. of the District of Columbia and Under Secretary Eric L. Hirschhorn of the U.S. Commerce Department’s Bureau of Industry and Security announced today that Schlumberger Oilfield Holdings Ltd. (SOHL), a wholly-owned subsidiary of Schlumberger Ltd., has agreed to enter a guilty plea and to pay a $232,708,356 penalty to the United States for conspiring to violate the International Emergency Economic Powers Act (IEEPA) by willfully facilitating illegal transactions and engaging in trade with Iran and Sudan.

The plea agreement, which is contingent upon the court’s approval, also requires SOHL to submit to a three-year period of corporate probation and agree to continue to cooperate with the government and not commit any additional felony violations of U.S. federal law.  In addition to SOHL’s commitments, under the plea agreement, SOHL’s parent company, Schlumberger Ltd., has also agreed to the following additional terms during the three-year term of probation, inter alia: (1) maintaining its cessation of all operations in Iran and Sudan, (2) reporting on the parent company’s compliance with sanctions, (3) responding to requests to disclose information and materials related to the parent company’s compliance with U.S. sanctions laws when requested by U.S. authorities, and (4) hiring an independent consultant to review the parent company’s internal sanctions policies and procedures and the parent company’s internal audits focused on sanctions compliance.  The guilty plea concludes a joint investigation commenced in 2009 and led by the Justice Department’s National Security Division, the U.S. Attorney’s Office for the District of Columbia and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) Dallas Field Office.

“Over a period of years, Schlumberger Oilfield Holdings Ltd. conducted business with Iran and Sudan from the United States and took steps to disguise those business dealings, thereby willfully violating the U.S. economic sanctions against those regimes,” said Assistant Attorney General Carlin.  “The International Emergency Economic Powers Act is an essential tool that the United States uses to address foreign threats to national security through the regulation of commerce.  Knowingly circumventing sanctions undermines their efficacy and has the potential to harm both U.S. national security and foreign policy objectives.  The guilty plea and significant financial penalty in this case underscore that skirting sanctions for financial gain is a risk corporations ought not take.”

“This is a landmark case that puts global corporations on notice that they must respect our trade laws when on American soil,” said U.S. Attorney Machen.  “Even if you don’t directly ship goods from the United States to sanctioned countries, you violate our laws when you facilitate trade with those countries from a U.S.-based office building.  For years, in a variety of ways, this foreign company facilitated trade with Iran and Sudan from Sugar Land, Texas.  Today’s announcement should send a clear message to all global companies with a U.S. presence: whether your employees are from the U.S. or abroad, when they are in the United States, they will abide by our laws or you will be held accountable.”

“Today's criminal guilty plea demonstrates the Commerce Department’s commitment to aggressively prosecute multinational corporations for violations involving embargoed destinations,” said Under Secretary Hirschhorn.  “We will continue to pursue violators wherever they are located and whatever their size.  I commend the Office of Export Enforcement and the Department of Justice for their outstanding efforts to investigate and prosecute this case.”

A criminal information was filed today in federal court in the District of Columbia charging SOHL with one count of knowingly and willfully conspiring to violate IEEPA.  SOHL waived the requirement of being charged by way of federal Indictment, agreed to the filing of the information, and has accepted responsibility for its criminal conduct and that of its employees by entering into a plea agreement with the government.  The plea agreement, which is contingent upon the court’s approval, requires that SOHL pay the U.S. government $232,708,356 and enter into a three-year period of corporate probation.  SOHL’s monetary penalty includes a $77,569,452 criminal forfeiture and an additional $155,138,904 criminal fine.  The criminal fine represents the largest criminal fine in connection with an IEEPA prosecution.      

In addition to SOHL’s agreement to continue its cooperation with U.S. authorities throughout the three-year period of probation and not to engage in any felony violation of U.S. federal law, SOHL’s parent company, Schlumberger Ltd., also has agreed to continue its cooperation with U.S. authorities during the three-year period of probation, and hire an independent consultant who will review the parent company’s internal sanctions policies, procedures and company-generated sanctions audit reports.

Summary of the Criminal Conduct

According to court documents, starting on or about early 2004 and continuing through June 2010, Drilling & Measurements (D&M), a United States-based Schlumberger business segment, provided oilfield services to Schlumberger customers in Iran and Sudan through non-U.S. subsidiaries of SOHL.  Although SOHL, as a subsidiary of Schlumberger Ltd., had policies and procedures designed to ensure that D&M did not violate U.S. sanctions, SOHL failed to train its employees adequately to ensure that all U.S. persons, including non-U.S. citizens who resided in the United States while employed at D&M, complied with Schlumberger Ltd.’s sanctions policies and compliance procedures.  As a result of D&M’s lack of adherence to U.S. sanctions combined with SOHL’s failure to train properly U.S. persons and to enforce fully its policies and procedures, D&M, through the acts of employees residing in the United States, violated U.S. sanctions against Iran and Sudan by: (1) approving and disguising the company’s capital expenditure requests from Iran and Sudan for the manufacture of new oilfield drilling tools and for the spending of money for certain company purchases; (2) making and implementing business decisions specifically concerning Iran and Sudan; and (3) providing certain technical services and expertise in order to troubleshoot mechanical failures and to sustain expensive drilling tools and related equipment in Iran and Sudan.

The Illegal Schemes

Illegal U.S. Person Approval of Capital Expenditures.  According to court documents, one of the important functions of D&M management personnel was the supervision of D&M’s capital expenditure (CAPEX) process.  The CAPEX process was a forecasting mechanism enabling oilfield locations to predict what tools and equipment they would need to meet anticipated demand for oilfield services.  Oilfield personnel worldwide made requests through an automated system for the manufacture of new tools and for permission to spend money for certain purchases in order to support oilfield operations.  Once approved by the D&M Global Asset Manager in the United States, a request for new equipment was transmitted to one of three manufacturing centers for the production of new tools and other assets.  The spending of funds for large-scale purchases was authorized once the request was approved by the D&M Global Asset Manager.  Under the CAPEX process in place during the relevant time period, approval by the D&M Global Asset Manager, a U.S. person, was required for every CAPEX request, including requests submitted by or for the benefit of D&M oilfields in Iran and Sudan.

Consequently, D&M’s CAPEX process violated sanctions with Iran and Sudan in a number of ways.  Although CAPEX approvals were ordinarily sought through an automated computer system, D&M personnel outside the United States frequently sent emails to the D&M Global Asset Manager in the United States justifying particular requests, many of which related to requests submitted by or on behalf of Iran and Sudan.  Furthermore, in these email communications, D&M personnel outside the United States referred to Iran as “Northern Gulf” and Sudan as “Southern Egypt” or “South Egypt” in email communications with D&M personnel in the United States.

In addition, D&M personnel outside the United States implemented a process designed to disguise the identities of the embargoed locations in the automated computer system in order to obtain approval from the D&M Global Asset Manager in the United States.  Orders entered into the automated computer system were identified by a series of numbers and letters.  Typically, the alpha-numeric identifier included a two or three-letter code indicating the country that placed the order.  Instead of entering the country code for Iran or Sudan, D&M personnel entered non-embargoed country codes for embargoed location orders.  Specifically, the code “BGM,” which identified a bonded-goods warehouse in Jebel Ali, United Arab Emirates, was used in place of the Iran and Sudan country codes in order to disguise the true locations.  These efforts were deliberately taken and demonstrate the company’s involvement in contriving ways intended to evade restrictions imposed by U.S. sanctions.

D&M Headquarters Involvement in Iran and Sudan.  According to court documents, separate and apart from the illegal CAPEX approval process that violated U.S. sanctions, D&M headquarters personnel made and implemented business decisions involving D&M operations in Iran and Sudan—again, all in violation of U.S. sanctions’ restrictions on the facilitation of trade with Iran and Sudan.  D&M’s illegal involvement in the day-to-day operations in Iran and Sudan, through U.S. persons working at D&M headquarters, occurred with D&M’s knowledge and understanding of the applicability of U.S. sanctions laws to the company.

Technical Services.  According to court documents, when technical problems arose in oilfield locations related to the operation of drilling tools, D&M personnel would enter relevant information about the technical issue into an automated computer system.  D&M’s automated computer system would generally route the query to a technical expert who could assist the oilfield location in addressing the technical issue.  If the technical issue was sufficiently complex, the query would ordinarily be routed to the technical experts located at the product center that manufactured the tool.  At times, queries entered by, or on behalf of, D&M personnel in Iran and Sudan were addressed by D&M personnel located in the United States.  The technical services provided to Iranian and Sudanese operations, by U.S. persons, violated the prohibitions of trade with Iran and Sudan required by U.S. sanctions.

SOHL and Schlumberger’s Remediation Efforts

In 2009, in consultation with the U.S. Department of State, Schlumberger agreed to no longer pursue new oilfield contracts in Iran.  In 2011, Schlumberger voluntarily decided to cease providing oilfield services in Iran and the Republic of the Sudan (North Sudan).  As of June 30, 2013, Schlumberger ceased providing oilfield services in Iran, and presently, Schlumberger has ceased providing oilfield services in North Sudan as well.

In announcing the plea, Assistant Attorney General Carlin and U.S. Attorney Machen commended the work of Special Agent Troy Shaffer from BIS’s Dallas Field Office.  They also acknowledged the work of those who handled the case from the National Security Division and the U.S. Attorney’s Office, including former Trial Attorney Ryan Fayhee and former Assistant U.S. Attorneys John Borchert and Ann H. Petalas.

The case is being prosecuted by Trial Attorney Casey Arrowood of the National Security Division, Assistant U.S. Attorney Maia L. Miller of the National Security Section and Assistant U.S. Attorney Zia Faruqui of the Asset Forfeiture and Money Laundering Section.

CFTC ORDERS MAN AND CO. TO PAY $2.5 MILLION IN SANCTIONS

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 
December 16, 2014

Federal Court Orders Missouri Resident Daniel K. Steele and His Missouri Company, Champion Management International, LLC, to Pay over $2.5 Million in Monetary Sanctions

Order Also Requires Relief Defendant Judy D. Steele to Disgorge Ill-Gotten Gains

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced that the Honorable Ronnie L. White of the U.S. District Court for the Eastern District of Missouri entered a Consent Order for permanent injunction against Defendants Daniel K. Steele and Champion Management International, LLC, (Champion Management), a Missouri limited liability company. The Court’s Order requires Defendants jointly to pay $1,544,722.81 in restitution to defrauded investors, imposes a $1 million civil monetary penalty, and requires Relief Defendant Judy D. Steele to disgorge ill-gotten gains totaling $187,083.58. The Order also imposes a permanent trading and registration ban on the Defendants and prohibits them from further violations of the anti-fraud provisions of the Commodity Exchange Act (CEA), as charged.

The Court’s Order stems from a CFTC Complaint filed on September 25, 2013 and an amended Complaint filed on July 16, 2014, charging that from approximately February 28, 2011 through September 25, 2013, Steele individually and acting as an agent of Champion Management solicited at least $1.97 million from at least 24 pool participants to participate in three foreign currency (forex) pools (see CFTC Press Release and Complaint 6712-13, September 26, 2013, and CFTC Press Release and Amended Complaint 6962-14, July 18, 2014).

Specifically, the Court’s Order finds that Steele knowingly made material misrepresentations to actual and prospective pool participants concerning Defendants’ forex trading and trading results, such as:  “I’ve been doing this long enough to know what I can consistently deliver above expenses, in all market conditions…the return is fixed and is currently 5% per month on your invested amount compounded… .”

The Court’s Order also finds, among other things, that Steele concealed trading losses, misappropriated approximately $1 million of pool participants’ funds, issued false account statements to pool participants, and failed to disclose that the counterparty to the retail forex transactions that were offered or entered into with the respective pools was not registered with the CFTC as a Retail Foreign Exchange Dealer, all in violation of Sections 4o and 4b of the CEA.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC appreciates the assistance of the Missouri Secretary of State, Securities Division, the U.S. Postal Inspection Service, and the Swiss Financial Market Supervisory Authority.

CFTC Division of Enforcement staff members responsible for this case are Eugene Smith, Melanie Devoe, George Malas, Kyong J. Koh, Peter M. Haas, and Paul G. Hayeck.

* * * * * *

CFTC’s Foreign Currency (Forex) Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which states that the CFTC has witnessed a sharp rise in Forex trading scams in recent years and helps customers identify this potential fraud.

Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.

WHITE HOUSE FACT SHEET ON ASSISTANCE TO NIGERIAN GOVERNMENT TO FIGHT BOKO HARAM

FROM:  THE WHITE HOUSE 

October 14, 2014

FACT SHEET: U.S. Efforts to Assist the Nigerian Government in its Fight against Boko Haram

In April 2014, the world was horrified to learn that the Nigerian terrorist group Boko Haram had abducted approximately 270 girls from their school in Chibok, Nigeria. In the six months since, some girls have been reunited with their families, but most remain in captivity, and Boko Haram has continued to terrorize the region. This year alone, the group has abducted hundreds of men, women, girls and boys and killed 3,000 people in Nigeria.  President Obama has directed that the U.S. government do everything it can to help the Nigerian government find and free the abducted girls and, more broadly, to combat Boko Haram in partnership with Nigeria, its neighbors, and other allies. This support takes many forms but the goal is singular: to dismantle this murderous group.

Advisory Support to the Nigerian Government

The United States is assisting the Nigerian government to undertake more concerted, effective, and responsible actions to ensure the safe return of those kidnapped by Boko Haram, including through on-the-ground technical assistance and expanded intelligence sharing.

Multi-Disciplinary Team

In May, the United States dispatched a multi-disciplinary team to Abuja to advise the Nigerians on how to secure the safe return of those kidnapped, encourage a comprehensive approach to address insecurity, and establish a capacity to respond more effectively in the future.  These officials provide guidance to the Nigerian government on conducting a comprehensive response to Boko Haram that protects civilian populations and respects human rights.

The team includes civilian and humanitarian experts, U.S. military personnel, law enforcement advisors and investigators as well experts in hostage negotiations, strategic communications, civilian security, and intelligence.  The team continues to facilitate and coordinate information sharing and the provision of assistance for survivors and their families.

Expanded Intelligence Sharing

The U.S. government also has provided the Nigerian government with Intelligence, Surveillance, and Reconnaissance (ISR) to aid Nigeria’s efforts to locate the missing girls.

Sanctions Against Boko Haram

In recent years, we have helped isolate Boko Haram’s leaders by leveraging our own authority to designate them as terrorists and by encouraging the United Nations to do so as well.

In June 2012, the State Department designated Boko Haram’s top commanders as Specially Designated Global Terrorists under section 1(b) of Executive Order 13224.  In June 2013, the State Department added Abubakar Shekau, Boko Haram’s official leader, to our Rewards for Justice Program and offered up to $7 million for information leading to his capture.

In November 2013, the State Department designated Boko Haram and Ansaru, a splinter faction, as Foreign Terrorist Organizations under Section 219 of the Immigration and Nationality Act, as amended, and as Specially Designated Global Terrorists under section 1(b) of Executive Order 13224.  This designation empowers U.S. law enforcement and the Treasury Department to pursue these violent extremist organizations.

The United States worked closely with Nigeria to pursue terrorist designations at the UN Security Council for Boko Haram, which were approved and took effect on May 22, 2014.  These designations prohibit arms sales, freeze assets, restrict movement, and encourage regional cooperation.
Continued Engagement to Counter Boko Haram

The United States is committed to supporting efforts by Nigeria and its neighbors to combat the threat of Boko Haram more effectively and in a manner that respects human rights through a variety of assistance programs designed to advance regional cooperation, bolster rule of law, and strengthen security institutions.

President Obama announced Nigeria’s participation in the Security Governance Initiative (SGI) during the U.S.-Africa Leaders Summit in August. SGI is a new Presidential initiative in which the United States and Nigeria will work to improve security sector institution capacity to protect civilians and confront challenges and threats, with integrity and accountability.  To support a longer term focus, SGI involves multi-year funding commitments of increased U.S. support and requires sustained, high-level leadership and commitment by partner countries to pursue policies in support of the agreed upon goals.

Nigeria is a partner in the Trans-Sahara Counterterrorism Partnership, a U.S. government effort to enhance regional security sector capacity to counter violent extremism, improve country and regional border and customs systems, strengthen financial controls, and build law enforcement and security sector capacity.
The State and Defense Departments are launching a $40 million Global Security Contingency Fund for Cameroon, Chad, Niger, and Nigeria to counter Boko Haram.  The program will provide technical expertise, training, and equipment to the four countries to develop institutional and tactical capabilities to enhance their respective efforts to counter Boko Haram, and to lay the groundwork for increased cross-border cooperation to counter Boko Haram.

We work closely with other international partners, including the United Kingdom, France, and Canada, to enable information-sharing, alignment, and coordination on international strategies and programs to counter such threats in the region.

Support to Populations Affected by Boko Haram

Boko Haram is inflicting untold hardship on the people of Nigeria, with repercussions for men, women, girls, and boys throughout northeast Nigeria.  The United States provides assistance to affected populations, including support to health, water, and sanitation services; the delivery of emergency relief supplies; and protection services, including psycho-social support for survivors of Boko Haram violence.  The United States further invests in helping Nigeria to build security and increase opportunity in northeast Nigeria, including through education programs for girls and boys; maternal and child health services; and programs to strengthen democracy and governance and counter violent extremism by engaging leaders across society, including women.

The U.S. Agency for International Development (USAID) provides trauma counselling to survivors and their families, including those directly affected by the Chibok abduction, through a $4.5 million, five-year (2010-15) program.  USAID also recently completed its third training for psycho-social support teams based in Borno--the locus of Boko Haram's violence. The role of these social workers, health care providers, and other community members is to sensitize communities to prevent stigma against abductees when they return, and to provide psycho-social first aid to girls and their families.

USAID is starting two new programs that will address critical educational needs for both girls and boys in northern Nigeria. A $20-30 million crisis response program will provide basic education to internally displaced persons and others affected by the violence in the northeast.  In addition, a flagship five-year, $120 million program will strengthen education systems so that they can provide greater access and improve reading among primary school children.

In support of the contributions women make to peace and prosperity, USAID is promoting women in leadership and peacemaking through a series of conferences and workshops.  Training exercises in Kano and Sokoto states promoted tolerance across ethnic and religious lines through engagement with influential religious, traditional, and women leaders.  Women participants came out with a plan to use “naming ceremonies” (common across most Nigerian cultures) to carry out campaigns against hate speech and electoral violence.  Interfaith media dialogues discussed how women and other stakeholders can prevent electoral violence in the run up to the February 2015 elections and how women can contribute to Nigeria’s political and economic progress.

USAID is launching the Nigeria Regional Transition Initiative to improve stability and strengthen democratic institutions in northeast Nigeria.  The initiative will focus on building the resistance of communities vulnerable to the effects of violent extremist organizations, weak governance, and insecurity through increased positive engagement between government and communities; increased access to credible information; and support to reduce youth vulnerability to violent extremist influences.

The State Department supports efforts to facilitate dialogue between local women activists and security-sector personnel and to highlight the role of female law-enforcement officers.  State also supports a Hausa-language multi-media platform which includes a free-to-air satellite TV channel designed to serve northern Nigeria.  The channel highlights the rich cultural diversity of northern Nigeria while offering programming with themes that reject political violence and violent extremism. It also includes programming intended to meet the needs of mothers with young children.  One show highlights as role models women who have overcome obstacles and now own their own businesses or have obtained higher education.  The objective is to show that any girl can grow up to be a strong contributor to her society.

U.S. STATE DEPARTMENT TARGETS IRANIAN WMD PROLIFERATORS WITH SANCTIONS

FROM:  U.S. STATE DEPARTMENT 

Additional Sanctions Imposed by the Department of State Targeting Iranian Proliferators

Media Note

Office of the Spokesperson

Washington, DC

August 29, 2014

The Administration imposed sanctions today on a series of companies and individuals under various Iran-related authorities targeting those engaged in proscribed activities. These actions underscore U.S. resolve to enforce sanctions as the P5+1 and Iran work toward a comprehensive solution to address the international community’s concerns over Iran’s nuclear program. As part of the Joint Plan of Action (JPOA), which was extended in July, the P5+1 committed to providing Iran with limited, temporary, and targeted sanctions relief in return for important steps Iran took to constrain its nuclear program. The Department of State today imposed sanctions on a series of entities providing support to illicit Iranian nuclear activities. The Department of the Treasury announced additional actions under its authorities as well. Today’s actions target sanctionable activity beyond the scope of the relief offered to Iran as part of the JPOA.

Actions Targeting Weapons of Mass Destruction (WMD) Proliferators and Their Supporters

As part of these combined actions, the Department of State imposed sanctions on four companies pursuant to Executive Order (E.O.) 13382 for engaging in or attempting to engage in activities that have materially contributed to, or posed a risk of materially contributing to, the proliferation of WMD or their means of delivery. The Department of State’s designations comprise Iran-based entities engaged in efforts to support the development of nuclear weapons, or elements of Iran’s program that could be used to produce nuclear weapons.

Organization of Defensive Innovation and Research:

The Organization of Defensive Innovation and Research (SPND) is a Tehran-based entity that is primarily responsible for research in the field of nuclear weapons development. SPND was established in February 2011 by the UN-sanctioned individual Mohsen Fakhrizadeh, who for many years has managed activities useful in the development of a nuclear explosive device. Fakhrizadeh led such efforts in the late 1990s or early 2000s, under the auspices of the “AMAD Plan, the MODAFL subsidiary Section for Advanced Development Applications and Technologies (SADAT) and Malek Ashtar University of Technology (MUT). In February 2011, Fakhrizadeh left MUT to establish SPND. Fakhrizadeh was designated in UNSCR 1747 (2007) and by the United States in July 2008 for his involvement in Iran’s proscribed WMD activities. SPND took over some of the activities related to Iran’s undeclared nuclear program that had previously been carried out by Iran’s Physics Research Center, the AMAD Plan, MUT, and SADAT.

Nuclear Science and Technology Research Institute:

Iran’s Nuclear Science and Technology Research Institute (NSTRI) implements projects in the nuclear field, specifically at Iran’s 40-megawatt heavy water research reactor at Arak (the IR-40) - a reactor that, as presently designed, would provide Iran the capability to produce plutonium from the reactor’s spent fuelthe could be used in nuclear weapons. NSTRI has engaged with Modern Industries Technique Company (MITEC), an Iranian entity is responsible for design and construction of the IR-40, to produce lead glass for the hot cell facilities at the IR-40. This project would allow Iran, when reprocessing spent fuel, to contain radiation using high-density concrete walls to enclose the primary containment area, known as a “hot cell.” Hot cells with thick radiation shielding and leaden glass for direct viewing are adequate for research-scale plutonium extraction. NSTRI is a subordinate to the Atomic Energy Organization of Iran (AEOI), which is the primary Iranian organization responsible for nuclear technology research and development activities and was designated by the UNSC in resolution 1737 (2006) and by the United States in the annex to E.O. 13382. Further, MITEC was designated by the UNSC in resolution 1929 (2010) for its involvement in the design and construction of the IR-40, and by the United States pursuant to E.O. 13382 in November 2011 for providing services to the AEOI.

Jahan Tech Rooyan Pars and Mandegar Baspar Kimiya Company:

Jahan Tech Rooyan Pars (Jahan Tech) and Mandegar Baspar Kimiya Company (Mandegar Baspar) are Iran-based entities involved in the procurement of proliferation-sensitive material, specifically carbon fiber, for proscribed elements of Iran’s nuclear program. Since early 2010 and as recently as 2013, Jahan Tech and Mandegar Baspar have attempted to procure high-strength carbon fiber from Asia-based suppliers, some of which is controlled for export pursuant to the Nuclear Suppliers Group (NSG) Guidelines and is proscribed for export to Iran by UNSCR 1737. Among other uses, high-strength carbon fiber is suitable for the production of advanced centrifuge rotors, as well as for forming components that increase the range and payload capability of ballistic missiles. The Panel of Experts established pursuant to UNSCR 1929 (2010) noted in its May 2014 report that Iran has been attempting to procure high-grade carbon fiber for use in manufacturing of some of its centrifuge rotors. The Washington Post in 2013 documented Jahan Tech’s efforts to acquire 100,000 highly specialized magnets used in centrifuge machines – a quantity that could outfit 50,000 new centrifuges. Iranian private sector firms should heed the risks incurred by conducting business with those who support Iran’s proscribed nuclear activities and choose to focus their activities on legitimate international commerce. The United States will continue to investigate additional companies making material contributions to the Iranian government’s proliferation of weapons of mass destruction or their means of delivery

Actions Targeting Persons Engaging with the Energy or Petrochemical Sectors of Iran

Also today, the Department of State imposed sanctions pursuant to the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) on Goldentex FZE, a UAE-based company involved in providing support to Iran’s shipping sector.

IFCA mandates, among other things, the imposition of sanctions on individuals and companies determined to have knowingly transferred to or from Iran significant goods or services used in connection with the energy or shipping sector of Iran, including the National Iranian Oil Company or the National Iranian Tanker Company (NITC).

In addition, the Department of State took action to impose sanctions on Italy-based Dettin SpA pursuant to the Iran Sanctions Act of 1996 (ISA), as amended by the Iran Threat Reduction and Syria Human Rights Act of 2012 (TRA). According to information available to the United States, Dettin SpA knowingly providing Iran’s petrochemical industry with goods and support whose value exceeded $250,000. Although the JPOA authorizes Iran to export petrochemicals, providing goods, services, and support for the maintenance or expansion of Iran’s domestic production of petrochemicals is not within the scope of sanctions relief under the JPOA and, therefore, remains sanctionable.

These sanctions send a clear message that the United States will act resolutely against attempts to circumvent U.S. sanctions. Individuals and companies providing support to illicit Iranian nuclear activities program or engaged in assisting Iran’s efforts to evade U.S. sanctions will face serious consequences.

Identifier Information

Name: The Organization of Defensive Innovation and Research
AKA: SPND
Address: Negarestan 3, off of Pasdaran Street, Tehran, Iran

Name: The Nuclear Science and Technology Research Institute
AKA: NSTRI
AKA: Research Institute of Nuclear Science and Technology
AKA: Nuclear Science and Technology Research Institute
AKA: Nuclear Science and Technology Research Center
Address: P.O. Box 11365-3486, Tehran, Iran
Address: P.O. Box 14399-51113, Tehran, Iran
Address: North Karegar Ave., P.O. Box 14399/51113, Tehran, Iran
Address: Moazzen Blvd. Rajaee Shahr, Karaj, Iran, P.O. Box 31485-498
Address: End of Karegare Shomali Street, P.O. Box 11365-3486, Tehran, Iran

Name: Jahan Tech Rooyan Pars
AKA: Jahan Tech Rooyan Pars Company
AKA: Jahan Tech
Address: B18, Takhte-e-Jamshid Building, Science and Technology Park, Shiraz, Iran

Name: Mandegar Baspar Kimiya Company
AKA: Mandegar Baspar Fajr Asia
AKA: Bardiya Tejarat Javid
Address: No. 510, 5th Floor, Saddi Trading Building, South SAA DI Street, Tehran, Iran

Name: Goldentex FZE
Address: M05 Bin Thani BLD, Sheikh Khalifah Bin Zayed Road, Burdubai, Dubai, United Arab Emirates

Name: Dettin SpA
Address: Via Campania, 9 – 36015 Schio (4543N 11221E) Italy

SECRETARY OF STATE KERRY TAKES QUESTIONS FROM PRESS IN LONDON

FROM:  U.S. STATE DEPARTMENT 

Press Availability in London

Press Availability

Foreign Commonwealth Office

London, United Kingdom

May 15, 2014

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SECRETARY KERRY: Good afternoon, everybody. First of all, let me just thank Foreign Secretary William Hague for his terrific hosting today, convening all of us together to be able to talk about a number of challenging issues that we’re facing together, and I think after today, with an even better sense of direction.

We gathered here, I think it’s safe to say, frankly more united than we have been in some time. And we, all of us, unanimously, remain committed to changing the dynamics on the ground in Syria.

Since we last met, the opposition has itself taken some significant steps forward to expand their leadership, to expand their reach into Syria, to become more effective. And we know, as you know, we just hosted President Jarba and his delegation in Washington for a number of days and a series of meetings, including meetings with the State Department, the White House, and the President.

The truth is we all know that the grave humanitarian crisis is growing more dire by the day, notwithstanding the best efforts of people to date. And the bloodshed and the suffering of the Syrian people have not stopped. So today in one unified voice we made it clear that we remain committed, even more so, to taking steps that could in fact make a difference. Most importantly we start in one unified voice with rejecting any notion whatsoever that the elections that the Assad regime has called somehow have any legitimacy whatsoever. There is no way for this illegitimate effort, for this impossible set of circumstances for an election to somehow give legitimacy where there is none. Together we are unified in saying that Assad’s staged elections are a farce, they’re an insult; they are a fraud on democracy, on the Syrian people, and on the world.

And the fact is that the cynical political theater that he is engaged in will not change one thing the day after it happens. His status in the world, his position with respect to future leadership in Syria, and in fact, the potential of any resolution will be exactly where they were the day before the election – although perhaps even slightly worse because of the fraud of this effort. It just – I mean, ask yourself: How do you have a legitimate election when half the people in your country are displaced and not able to vote? How do you have a legitimate election when another several million people are in refugee camps unable to vote? How do you have it when hundreds of thousands of people, literally – almost a million perhaps – are scattered in various countries in the region, seeking safety from Assad? It is just impossible to believe that under those circumstances, where people are hunkered down in their homes, intimidated and afraid to be able to come out, afraid of being forced to do one vote or another – you just have no climate, no framework within which you can talk about legitimacy.

We also agreed today that we have to redouble our efforts, all of us, in support of the moderate opposition in order to bring about a peaceful resolution that the people of Syria want. And that requires the full support of the international community, and that was really the focus of our discussions today. I’m sure your question would be: So what’s different today? Well, look at the length of the communique. It’s short and it’s purposefully short. It purposefully points to the election and then to the renewed efforts, and the most important sentence, I think, is the last sentence in which it points out that our teams are going to come together in very short order now to lay out a specific set of steps that we can and will take together in order to have a greater impact here.

There isn’t anybody who didn’t come together today with the realization that there have been hurdles over the course of the last year, from the time when Foreign Minister Lavrov and I announced the possibility of a Geneva conference in Moscow last year – about a month earlier than now. Things changed on the ground. Hezbollah entered the fight. IRGC – Iranian forces entered the fight on the ground. And more terrorists were attracted to the fight against Assad, regrettably, thereby creating a framework where some of the opposition was fighting the terrorists, not Assad.

So that is a very clear and simple reality of what has taken place over the course of the year. That has changed. And now I think there’s a greater level of coordination, a greater level of unity, a greater level of understanding of purpose, and over the next days as those teams meet, there will be a serious definition of steps that can be taken in order to have a greater impact. The United States is committed to doing our part. Each country today sat there and sort of discussed what they felt they could do to grow the effort. And that is what is different.
Just last week, we announced that the Syrian Opposition Coalition representative offices are now foreign missions. And we’re also working to provide new nonlethal assistance and to speed up the delivery of assistance to the Free Syrian Army. The Treasury Department has imposed new sanctions and restrictions against members of the regime, and we will continue to strengthen our ties with the Syrian opposition, as I think you’ve seen firsthand in the visit to Washington this past week.

On behalf of the United States, I want to extend our deep concern for the two British journalists who were shot and who were beaten while trying to share with the world the real story of what is happening in Syria. And this is not the first time that courageous reporters have been part of the heartbreaking story of Syria. Far too many journalists and innocent civilians have been hurt, killed, or held hostage in Syria. And just two days ago in Washington, we met with one of the families – with many of the families, actually – of those being held in Syria. And we’re keeping up a very focused effort to try to secure their release. We reiterate our respect and our admiration for the reporters who put their lives and their liberties on the line to tell the stories to the world that otherwise people would never learn.

Let me also say a quick word about two other issues that we touched on this week, here, today, in the early part of our meeting this morning: that is Ukraine and Libya. We had a very good discussion this morning with the British, French, German, Italian foreign ministers, our counterparts – on Ukraine. We welcome the successful National Dialogue roundtable in Kyiv that took place yesterday and the very good conversation there on decentralization, constitutional reform, and the protection of minority rights. And we hope that the separatists, we hope the Russians, we hope that others who are disgruntled by what has taken place will take note of a legitimate effort to try to reach out, bring people to the table, and find political compromise.

We are absolutely committed to the notion that there must be a protection of these minority rights, and we support the government in Kyiv’s efforts to reach out with serious, concrete plans for increased autonomy and decentralization. I would note that the level of decentralization and autonomy that Prime Minister Yatsenyuk has articulated far exceeds any level of autonomy or decentralization that exists anywhere in Russia. And I think it’s important for everybody to note that.

We believe that the process of the roundtables coupled with the election provides the people with Ukraine with an opportunity to be able to heal the divide. And that will now be encouraged through a second meeting of a roundtable that will take place in eastern Ukraine in a few days.
This morning, we also underscored the vital importance of a free and fair presidential election across Ukraine on May 25^th, including, importantly, the eastern provinces. And we’re also working with the Ukrainians and the OSCE to protect the rights of all Ukrainian citizens and to make their voices heard through the ballot box in a legitimate election.

We call on the separatists and Russians to respect this election process, to help to make it happen, even; to encourage Ukrainians to be able to define their future. That’s the best way to de-escalate this situation.

We believe that this effort to legitimize an election and move to have a broad-based election according to the constitutional process of Ukraine is in stark contrast to the agenda of the pro-Russian separatists and their supporters, who are literally sowing mayhem in communities like Slovyansk. Far from defending the rights of the people in the east, they are seeking to speak for everybody through the barrel of a gun and through their own narrow sense of what they want for an outcome.

We agreed this morning that if Russia or its proxies disrupt the election, the United States and those countries represented here today in the European Union will impose sectoral economic sanctions as a result. Our message is really quite simple: Let Ukraine vote. Let the Ukrainian people choose their future and let them do so in a fair, open, free, accessible election.
Finally on Libya, the United States and our quintet of partners reiterated today our shared commitment to the stability and security for the Libyan people and for the region. We agreed that we need to do more, and we understood that there is this challenging moment in Libya. We need to try to accelerate the effort to bring about stability and security and the governance that is necessary to provide the time and the space for Libyan authorities to be able to confront the threat from extremism and the challenges that their country faces of just providing governance to their people.

In that light and in support of the Libyan Government, we are working collectively through a number of different envoys. The Arab League has an envoy, the – Great Britain has an envoy, we have an envoy – we will work in concert, and we task them, literally, to be working as one entity – not as individuals out there in opposite directions. And we’re going to do all we can to help the Libyans in these next days to try to be able to gain control over their revenues and begin to forge the kind of coalition that can actually begin to build the offices of governance that are necessary. This is a small country – six and a half million people – smaller than the state that I represented in the Senate – privileged to represent for almost 29 years. I know something about what you can provide when you want to. Libya is a country rich in resources, rich in people with talent and capacity. And we hope that in the days ahead we’re going to be able to tap into that and find a way to help the Libyan people to move forward to have the kind of stability and peaceful governance that they aspire to.

So with that I thank you, and I’d be happy to take a couple questions quickly.

MS. PSAKI: The first question will be from Karen DeYoung of The Washington Post.

QUESTION: Thank you, Mr. Secretary. On Syria, I think you correctly put your finger on what the question is, which is: What’s different after today? In terms of U.S. policy, could you tell us whether the United States is prepared to do what Britain has done, which is to change the way its aid is sent into Syria and start sending it through NGOs or other means instead of through the United Nations?

And also on the expanded aid that you’ve talked about to both the military and political sides of the opposition, President Jarba has publicly called for increased weapons assistance, specifically portable surface-to-air missiles to stop the Syrian Government’s air attacks against civilians, including the barrel bombs that you personally have denounced. Are you now prepared to take this step or allow your allies to take this step? And if not, why not?
And finally on Syria, Foreign Minister Fabius said in Washington this week that France has seen credible evidence of at least 14 chemical attacks by the Syrian Government since October. Secretary Hagel said in Saudi Arabia yesterday that the United States has seen no such evidence. Is this because you haven’t seen what the French have seen, or that you’ve seen it and don’t find it conclusive? Thank you.

SECRETARY KERRY: Well, let me take them one, two, three. We are open to the idea of providing aid through any means that will get to the people who need it. And while the decision has not been categorically made, I’d just repeat: We are open to anything that will get the aid to the people, and we are very frustrated with the current process. It is not getting to people. It’s going through one gate, one entryway, and it’s going through Damascus and/or controlled by the Assad regime. That’s unacceptable. We need to be able to get aid more directly and we’re going to work to do that. That’s a certainty.

We are in addition that, Karen, we are going to in the United Nations Security Council challenge the appropriate level of follow-through that is necessary to be able to fulfill what was passed in the resolution previously a few months ago in order to guarantee the delivery of aid. It is not being fulfilled. It has to be fulfilled and our patience is gone. We’re going to join with other countries in an effort to try to guarantee accountability through the UN in making that happen. We are determined that people will be able to get aid.

The people who left Homs, for instance, did so because they were literally under siege. They were being starved to death – civilians and others. And that is against the laws of war – not to mention anybody’s fundamental values and decency, but obviously not Assad’s. So we intend to press this issue in every way possible in the days ahead.

On the issue of weapons, I’m not going to discuss what specific weapons, what country may or may not be providing or not providing – as you know, we’re providing nonlethal aid. But I will say that out of today’s meeting every facet of what can be done is going to be ramped up. Every facet, and that includes political effort. It includes the aid to the opposition. It includes economic efforts, sanctions. Today we announced, as I told you, additional sanction. There will be ramped up effort to make it clear that despite the fact that Assad may think today he’s doing better and this process is somehow going to come to a close with him sitting pretty, the answer is: no. It’s not going to suddenly – we’re not going away. The opposition is not going away.

We are determined to reach a political settlement that protects all of the people of Syria, and I want to make it clear: Alawite, other minority, all can be protected here. Assad’s just protecting himself. The fact is that he, in doing so, he is making partnership with terrorist elements, attracting terrorists, engaging in terrorist activities against his own people, and I don’t think that anybody today felt deterred one iota in the notion that there might be a better route, another route, other than a political settlement, which can only be brought about when he is prepared to negotiate.

As everybody looks at Lakhdar Brahimi’s resignation and makes a judgment about it, it’s not that – I mean, he performed valiantly against great odds. But if the parties aren’t prepared to perform according to the standards that they have accepted to negotiate on, there’s nothing that a negotiator or an intermediary can do. So we remain committed to try to find that solution and I’m not going to discuss specific weapon systems or otherwise except to say that every possible avenue that is available is going to be pursued by one country or another.
One the third issue – the issue of evidence, I suspect – I haven’t talked with Secretary Hagel about what was in his mind or what he was referring to with respect to that. Chlorine is not listed on the list of prohibited items by itself freestanding under the Chemical Weapons Convention. But chlorine, when used and mixed in a way that is used as a chemical weapon in the conduct of war, is against the chemical weapons treaty. And I have seen evidence, I don’t know how verified it is – it’s not verified yet – it’s hasn’t been confirmed, but I’ve seen the raw data that suggests there may have been, as France has suggested, a number of instances in which chlorine has been used in the conduct of war. And if it has, and if it could be proven, then that would be against the agreements of the chemical weapons treaty and against the weapons convention that Syria has signed up to.

MS. PSAKI: The next question will be from Mina Al-Oraibi.

QUESTION: Thank you. Secretary Kerry, to follow up on your last point, if it is proven that chlorine was used as a chemical in war, which is prohibited, what will the Syrian Government face? What steps can be taken?

And I want to go back to the point of military aid. I know you won’t go into details of the assistance, however, what I’d like to ask you is: are you more confident now in the Free Syrian Army and after the meetings you’ve had with the Syrian opposition linked to the use of weaponry by the FSA and the SNC in general.

SECRETARY KERRY: I think the Free Syrian Army – I’m going to give you the second part first. The Free Syrian Army has clearly improved. It has clearly gained in its capacity. It has gained in its command and control. It is also now being supported in a more coordinated way than it was over the last year as one country or another may have been supporting one group or another, now that is much more concentrated.

So we think that they’re making progress. Are they a trained army in the context of nation-states that we measure things by in many places? No, not yet. But they are improving and under very difficult circumstances holding their own, in fact making gains in certain parts of the country. Now, we have – we are committed to continue to be helpful to them and give them greater capacity in many different respects. And everybody there today shared in that commitment.
With respect to the CW and what the consequences are, it has been made clear by President Obama and others that use would result in consequences. We’re not going to pin ourselves down to a precise time, date, manner of action, but there will be consequences if it were to be proven, including, I might say, things that are way beyond our control and have nothing to do with us. But the International Criminal Court and others are free to hold him accountable. And as you know, we have a resolution that will be in front of the United Nations with respect to culpability for crimes against humanity, atrocities in the course of this conflict. So one way or the other, there will be accountability.

MS. PSAKI: The next question will be from Indira Lakshmanan from Bloomberg.

QUESTION: Thank you. Mr. Secretary, you just told us that you and the four EU foreign ministers agreed today that sectoral sanctions will be imposed on Russia if Russia or its proxies disrupt the May 25^th elections. Foreign Minister Hague earlier referred specifically to Russia’s specific interference. So I want to know – Russia has denied Western reports of supplying weapons, personnel, and coordination to the separatists. Will Russia be held accountable and responsible for actions of the separatists even if they cannot be proved as a link to Russia itself, or what’s the criteria that you and the EU and are going to use?

And second part of that question: We understand that the approach for sanctions is going to be a scalpel, not a hammer. So does that mean it won’t be Iran-style bans on entire sectors of commerce, and does that mean that it’ll be a ban on future deals with an exemption for existing contracts?

SECRETARY KERRY: Well, I’m not going to get into announcing today what the precise sanctions are except to say to you we have completed our work. We know what they are. We’re ready. And last week we had State Department and Treasury personnel here in Europe working with our European allies in order to define precisely what that road ahead should be. And indeed, our hope – I’m not going to get into characterizations of scalpel or sledgehammer or whatever except to say to you that they’re effective, and if they have to go into effect they will have an impact.

Now, obviously, the purpose of it is to have a greater impact on the target than it is on the people imposing it, and so we will be thoughtful and we are being thoughtful and we’re being very, I think, deliberative in trying to make determinations about what is appropriate and what is not appropriate.

Let me emphasize our hope is not to do this. Our hope is not that we have to go to a next stage. I say to the Russians and everybody our hope is to de-escalate. We appreciate that President Putin made a statement about the elections and sort of acknowledging that they would take place and probably a good thing, I think was his language. We acknowledge that he said that the referendum should be stopped but didn’t stop the referendum.

And so what we need to make certain is that people aren’t trying to have everything both ways. William Hague a few moments ago told you that it’s in the attitude and behavior that you make this judgment about what is being done. And I’m not going to start laying out the whole series of definitions except to say to you that it is clear what proxies mean. If Russia or its proxies disrupt the elections, stand in the way of the Ukrainian people being able to exercise their vote, that is when and if there would be additional sanctions.

But our hope is that Russia will join in to encouraging the vote, that Russia will encourage pro-Russian separatists to say that they should work through the process that has now been opened up that Russia has helped insist on, that that process now be given a chance to work through the OSCE and otherwise. That’s our preference. That is what we want to have happen here. And our hope is that in the eight days, between now and the election, there can be a concerted effort to try to put the confrontation behind us and put the effort to build Ukraine in front of us and to try to do it together. That makes a lot more sense and that would be our hoped-for direction.

MS. PSAKI: Thank you, everyone.

SECRETARY KERRY: Thank you, all. Appreciate it.

PRESIDENT OBAMA, GERMAN CHANCELLOR MERKEL MAKE REMARKS AT JOINT PRESS CONFERENCE

May 02, 2014

FROM:  THE WHITE HOUSE 

Remarks by President Obama and German Chancellor Merkel in Joint Press Conference

Rose Garden

12:07 P.M. EDT

PRESIDENT OBAMA:  Well, good morning, everybody.  It is always a great pleasure to welcome my friend Chancellor Merkel to the White House.  Germany is one of our strongest allies, and Angela is one of my closest partners.  And with her indulgence, I want to start by making two brief comments.

First, as President, my top priority is doing everything that we can to create more jobs and opportunity for hardworking families -- for our economic strength is a source of strength in the world.  And this morning, we learned that our businesses created 273,000 new jobs last month.  All told, our businesses have now created 9.2 million new jobs over 50 consecutive months of job growth.

The grit and determination of the American people are moving us forward, but we have to keep a relentless focus on job creation and creating more opportunities for working families.  There’s plenty more that Congress should be doing, from raising the minimum wage to creating good construction jobs rebuilding America.  And I want to work with them wherever I can, but I keep acting on my own whenever I must to make sure every American who works hard has the chance to get ahead.

Second point -- I also want to say on behalf of the American people that our thoughts are with the people of Afghanistan, who have experienced an awful tragedy.  We are seeing reports of a devastating landslide, on top of recent floods.  Many people are reported missing; rescue efforts are underway.  Just as the United States has stood with the people of Afghanistan through a difficult decade, we stand ready to help our Afghan partners as they respond to this disaster.  For even as our war there comes to an end this year, our commitment to Afghanistan and its people will endure. 

Now, Angela, I’m still grateful for the hospitality that you and the German people extended to me, Michelle and our daughters last year in Berlin.  It was an honor to speak at the Brandenburg Gate.  You promised me a warm welcome and delivered an unbelievable 90-degree day in Berlin. 

This morning, our work touched on the range of issues where the United States and Germany are vital partners.  We agreed to continue the close security cooperation -- including law enforcement, cyber, and intelligence -- that keeps our citizens safe.  We reaffirmed our strong commitment to completing the Transatlantic Trade and Investment Partnership -- T-TIP -- which is critical to supporting jobs and boosting exports in both the United States and in Europe.

We discussed energy security, including the importance of Europe diversifying its energy sources.  The United States has already approved licenses for natural gas exports, which will increase global supply and benefit partners like Europe.  And T-TIP would make it even easier to get licenses to export gas to Europe.

At our working lunch, we’ll review our negotiations with Iran and our shared determination to prevent Iran from acquiring a nuclear weapon.  We’ll discuss Syria, where we continue to support the moderate opposition and provide humanitarian relief to the Syrian people.  I look forward to briefing Angela on my trip to Asia, a region where both our nations can help ensure that all countries in the Asia Pacific adhere to international law and international norms.

Of course, most of our time was spent on the situation in Ukraine.  Angela, I want to thank you for being such a strong partner on this issue.  You’ve spoken out forcefully against Russia’s illegal actions in Ukraine.  And you’ve been a leader in the European Union, as well as an indispensable partner in the G7.  And your presence here today is a reminder that our nations stand united.

We are united in our determination to impose costs on Russia for its actions, including through coordinated sanctions.  We’re united in our unwavering Article 5 commitment to the security of our NATO allies, including German aircraft joining NATO patrols over the Baltics.  We’re united in our support for Ukraine, including the very important IMF program approved this week to help Ukraine stabilize and reform its economy.  And as Ukrainian forces move to restore order in eastern Ukraine, it is obvious to the world that these Russian-backed groups are not peaceful protestors.  They are heavily armed militants who are receiving significant support from Russia.  The Ukrainian government has the right and responsibility to uphold law and order within its territory, and Russia needs to use its influence over these paramilitary groups so they disarm and stop provoking violence. 

Let me say that we’re also united in our outrage over the appalling treatment of the OSCE observers who have been detained in eastern Ukraine.  Pro-Russian militants are still holding seven observers, including four Germans, as well as their Ukrainian escorts.  They’ve been paraded in front of the media and forced to make statements at the barrel of a gun.  It is disgraceful and it’s inexcusable.  Russia needs to work to secure their immediate release, and the international community is not going to be satisfied until Colonel Schneider and his fellow captives come home.

Finally, as both Angela and I have repeatedly said, we want to see a diplomatic resolution to the situation in Ukraine.  But we’ve also been clear that if the Russian leadership does not change course, it will face increasing costs as well as growing isolation -- diplomatic and economic.  Already, the ruble has fallen to near all-time lows, Russian stocks this year have dropped sharply, and Russia has slipped into recession.  Investors are fleeing, and it’s estimated that $100 billion in investment will exit Russia this year.  Russian companies are finding it harder to access the capital they need, and Russia’s credit rating has been downgraded to just above “junk” status.  In short, Russia’s actions in Ukraine are making an already weak Russian economy even weaker.

Moreover, if Russia continues on its current course, we have a range of tools at our disposal, including sanctions that would target certain sectors of the Russian economy.  And we’ve been consulting closely with our European and G7 partners, and we’re stepping up our planning.  Angela and I continued these consultations today.  The Russian leadership must know that if it continues to destabilize eastern Ukraine and disrupt this month’s presidential election, we will move quickly on additional steps, including further sanctions that will impose greater costs.  But that is a choice facing the Russian leadership. 

Our preference is a diplomatic resolution to this issue.  And the Ukrainian government has already shown itself more than willing to work through some of the issues that would ensure that the rights of all Ukrainians are respected, that you have a representative government.  They’ve shown themselves willing to discuss amendments to their constitution that devolve power to a local level.  They have gone through with their commitment to potentially provide amnesty for those who lay down arms and who are willing to abandon the buildings that they’ve occupied.  The Ukrainian government in Kyiv has followed through on the commitments that it made in Geneva.  We need Russians to do the same.   

So, Angela, I want to thank you again for being here and, as always, for your friendship and partnership.  These are challenging times.  Russia’s actions in Ukraine pose a direct challenge to the goal that brought Europe and the United States together for decades -- and that is a Europe that is whole, free and at peace.  Just as our predecessors stood united in pursuit of that vision, so will we. 

Chancellor Merkel.  

CHANCELLOR MERKEL:  (As interpreted.)  Well, thank you very much, Barack, for this gracious hospitality and this very warm welcome that you accorded to me.  And I’m very glad to be able to be back in Washington to have an opportunity to address all of these different issues with you. 

I think priority really is on the current issue of Ukraine and that looms very large on our agenda.  It showed how important the transatlantic partnership is also in today’s times.  And I think it’s a very good thing that all of those steps that we’ve taken so far, we’ve taken together.  And today, in our talk, we yet again underlined that we fully intend to go ahead as we did in the past.  What happened on Ukraine, what happened on the Crimean Peninsula?  Well, the post-war order has been put into question that rests on the acceptance of territorial integrity by all, and this is why it was so important for us to react in concord.

And what is at stake here is that people in Ukraine can act on the basis of self-determination and can determine themselves which road they wish to embark on into the future.  The 25th of May is a very crucial date in order to ensure that, and we will see to it that elections can take place.  The OSCE will play a central role in all of this.  We talked about this.  And together with the OSCE, we shall do everything we can in order to bring Russia -- that is, after all, a member of the OSCE -- to do the necessary steps so as the 25th of May bringing about some progress in stabilizing Ukraine. 
   
The 25th of May is not all that far away.  Should that not be possible to stabilize the situation, further sanctions will be unavoidable.  This is something that we don’t want.  We have made a diplomatic offer, an offer for a diplomatic solution.  So it’s very much up to the Russians which road we will embark on, but we are firmly resolved to continue to travel down that road.

Now, secondly, we addressed issues that have a bearing on the work of the intelligence services here.  Let me underline yet again for the German side -- we have always enjoyed a very close cooperation with our American partner on this front.  And anyone in political responsibility is more than aware, looking at the challenges of the modern world today, that obviously in fighting terrorism, the work of the intelligence services is not only important, it is indeed indispensable. 

I am firmly convinced that our cooperation in this area is a very helpful one, yet there are differences of opinion on what sort of balance to strike between the intensity of surveillance, of trying to protect the citizens against threats, and on the other hand, protecting individual privacy and individual freedom, and rights of personality.  And that will require further discussion between our two countries in order to overcome these differences of opinion. 

We have these discussions incidentally also on the European front.  We are talking about Safe Harbor agreement, for example, about a privacy protection agreement.  And I take back the message home that the U.S. is ready to do that, is ready to discuss this, although we may have differences of opinion on certain issues.

Thirdly, T-TIP, I think particularly in the overall context of further intensifying our trade relations, of global growth, but also in the context of diversification of our energy supply -- this is a very important issue.  It will be very important for us to bring the negotiations very quickly to a close on T-TIP.  We are firmly convinced that for the European Union, for Germany and for the United States, this offers a lot of opportunities for the future.  And it’s so important for us to bring this agreement to a successful conclusion.  There are a number of discussions, I know; a number of skeptical remarks.  People have doubts.  But these doubts, this skepticism can be overcome and it needs to be overcome.  Just look at the many partners all over the world that have bilateral trade agreements.  I mean, it’s simply necessary.  Looking at the intensity of a transatlantic partnership and the closeness of our partnership, for us to have this agreement, this transatlantic trade agreement, and we are fully at one on this one.

So we had very intensive talks and we are going to build on this over lunch.  Thank you very much, Barack, for giving me this opportunity and also thank you for your gracious hospitality.

PRESIDENT OBAMA:  I think we’re going to take two questions from the U.S. press and two questions from the German press.  We’ll start with Lesley Clark.

Q    Thank you, Mr. President.  With violence today in Ukraine, you’ve said today that Germany and the United States are united in efforts to deescalate.  But have you been able to reach any common ground with the Chancellor on sectoral sanctions, particularly the energy -- the Russian energy section -- sector?  What’s next if you’re unable to? 

And to Chancellor Merkel, reports in the U.S. press have suggested that you’ve said that you believed President Putin may not be in touch with reality.  Is that what you’ve said, is that what you believe?  And could you give us -- you talked to him earlier this week -- could you give us a little more insight into what he might be thinking?  And do you believe that he is a threat to Europe?  Thank you.

PRESIDENT OBAMA:  Obviously, every day we’re watching the events in eastern Ukraine and southern Ukraine with deep concern.  And I think that what you’ve seen over the course of the last several months in the midst of this crisis is remarkable unity between the United States and the European Union in the response. 

We have at the same time offered a diplomatic approach that could resolve this issue.  We have been unified in supporting the Ukrainian government in Kyiv -- both economically, diplomatically, and politically.  And we have said that we would apply costs and consequences to the Russians if they continued with their actions.  And that’s exactly what we’ve done.  And you saw just over the course of the last week additional sanctions applied both by the Europeans and the U.S.

The next step is going to be a broader-based sectoral sanctions regime.  And what we have said is, is that we want to continue to keep open the possibility of resolving the issue diplomatically.  But as Angela Merkel said, if, in fact, we see the disruptions and the destabilization continuing so severely that it impedes elections on May 25th, we will not have a choice but to move forward with additional, more severe sanctions.  And the consultations have been taking place over the course of the last several weeks about what exactly those would look like, and would apply to a range of sectors.  The goal is not to punish Russia; the goal is to give them an incentive to choose the better course, and that is to resolve these issues diplomatically.  And I think we are united on that front. 

Within Europe, within the EU, I'm sure there has to be extensive consultations.  You’ve got 28 countries and some are more vulnerable than others to potential Russian retaliation, and we have to take those into account.  Not every country is going to be in exactly the same place.  But what has been remarkable is the degree to which all countries agree that Russia has violated international law, violated territorial integrity and sovereignty of a country in Europe.  And I think there’s unanimity that there has to be consequences for that. 

How we structure these sectoral sanctions the experts have been working on, and we anticipate that if we have to use them, we can.  Our preference would be not to have to use them.  And I thank Chancellor Merkel’s leadership on this front.  She has been extraordinarily helpful not only in facilitating European unity, but she’s also been very important in helping to shape a possible diplomatic resolution and reaching out to the Russians to encourage them to take that door while it's still open.

Q    Do you feel confident you have German support on sectoral sanctions, particularly the energy sector?

PRESIDENT OBAMA:  You’ve got to keep in mind that when it comes to sectoral sanctions we're looking at a whole range of issues.  Energy flows from Russia to Europe -- those continued even in the midst of the Cold War, at the height of the Cold War.  So the idea that you're going to turn off the tap on all Russian oil or natural gas exports I think is unrealistic.  But there are a range of approaches that can be taken not only in the energy sector, but in the arms sector, the finance sector, in terms of lines of credit for trade -- all that have a significant impact on Russia.

I don't think it's appropriate for us to delve into the details at this stage because our hope is that we don't have to deploy them.  But what I can say is, is that our experts at the highest level, and not just bilaterally, but multilaterally through the European Commission and our diplomatic teams, have been working through all the possibilities, and we're confident that we will have a package that will further impact Russia’s growth and economy.  But again, our hope is that we shouldn’t have to use them.  We're not interested in punishing the Russian people.  We do think that Mr. Putin and his leadership circle are taking bad decisions and unnecessary decisions and he needs to be dissuaded from his current course.

CHANCELLOR MERKEL:  (As interpreted.)  It is, I think, obvious to all that there are very different assessments on what happens in Ukraine.  On the one hand, you have the United States and Europe -- we've always taken our decisions together -- and on the other hand, the Russian appreciation and appraisal of the situation.  I hope that Russia will live up better in the future to its responsibilities.  But we need to see deeds matching up their words. 

We don't have any release of the hostages of the OSCE, among them also four German hostages.  This is a very crucial step that needs to happen first.  We have not yet seen any implementation of the Geneva agreement by the Russian side.  The Ukrainian side has taken some steps in the right direction.  And the OSCE, too, is an organization to which we wish to accord a greater role so that they can prepare and pave the way for elections. 

And one word on sanctions.  I agree with the American President; they are not an end in itself, but combined with the offer that we want diplomatic solutions, it is a very necessary second component to show that we're serious -- we're serious about our principles.  And there is a broad base, a broad range of possibilities that are being prepared for in the European Union.  In Europe, we have taken a decision that should further destabilization happen, we will move to a third stage of sanctions. 

I would like to underline this is not necessarily what we want, but we are ready and prepared to go to such a step.  My main aim would be, first and foremost, to improve stabilization and to see to it that the elections can happen there.  We will work on this in the next few days, but we are also prepared to take further steps. 

What we are talking about here will be sectoral measures in the context of certain branches of industry.  The American President and I can only agree to this and said what is necessary as regards the dependency on gas, which is very strong in Europe, but we can also look ahead in the medium term what we can do in order to promote an energy union in the European Union, which we’re doing.  Looking at our dependencies in the next 10 to 15 years on Russian gas supplies, there are six countries right now in the EU that depend 100 percent on gas supplies.  We need to improve the reverse flow, as we call it.  We need to improve our grade of pipelines.  All of the countries need to share supplies.  And those are measures that we’re currently discussing in Europe.

We’re talking about short-term but also medium-term and long-term measures.  And then the free trade agreement, T-TIP, is also gaining more prominence in this respect.

Q    (As interpreted.)  Madam Chancellor, you said that time is of the essence and that it’s getting shorter, leading up to the 25th.  When would be the time when you would say a third phase -- moving to a third phase of sanctions is what you would promote?  And is a more energy-intensive initiative by the EU necessary, for example, on heads of state and government level?

And, President, can you understand the fact that also Mr. Putin needs to play a role in the solution, which is the position of the European Union, that also his arguments have to be weighed?  And after the Chancellor having made those several phone calls with Mr. Putin, do you think that the Chancellor also stands a chance to sort of work on this?

CHANCELLOR MERKEL:  Well, to answer the question, what about the next few days to come -- I think the meeting of foreign ministers of the EU on the 12th of May is going to play a very important role.  In this respect, one can sound out the possibilities there are in various directions.  We, from the German side, as we have agreed with our American friends, will do everything we can in order bring the OSCE into a situation, supported politically that is, to do what is necessary in order to bring matters forward in Ukraine. 

On the one hand, you have OSCE monitors for the elections, but also questions as regards a change of the constitution; reform towards further devolution or decentralization.  All of the different parts of the country obviously have to be at the same level as regards information on this, and the OSCE wants to do that.  We want to give them the necessary political backing.

When a certain point in time is there, it’s very difficult to predict.  I can only say that, for me, the elections on the 25th of May are crucial.  And should there be further attempts at destabilization, this will be getting more and more difficult.  But for now, I am working for elections to take place on that very date, and the heads of state and government are ready at any time should they be proved necessary to meet.

We’ve approved that over the past in other areas -- for example, the euro crisis.  And we will demonstrate this resolve yet again.  I am firmly convinced that the United States of America and the European Union need to act in concert here, and they have done so in the past and they are going to continue to do so.

PRESIDENT OBAMA:  I’ve said from the start that Russia has legitimate interests in terms of what happens next door in Ukraine.  Obviously there is a deep and complicated history between Russia and Ukraine, and so, of course, Mr. Putin’s views should be taken into account.  What can’t be taken into account is Mr. Putin’s suggestion, both through words and actions, that he has the right to violate the sovereignty of another country, to violate its territorial integrity, to dictate the economic policies or foreign policy of a sovereign country.  That’s not acceptable. 

Our view from the start has been that the Ukrainians should be able to make their own decisions.  And I’m very confident that if the Ukrainians are allowed to make their own decisions, then they will choose to have a good relationship with Russia as well as a good relationship with Europe; that they’ll want to trade with Russia and they’ll want to trade with Europe.  But what they cannot accept, understandably, is the notion that they are simply an appendage, an extension of Russia, and that the Kremlin has veto power over decisions made by a duly elected government in Kyiv. 

So if, in fact, Mr. Putin’s goal is to allow Ukrainians to make their own decisions, then he is free to offer up his opinions about what he would like the relationship to be between Ukraine and Russia.  And I suspect that there will be a whole lot of Ukrainian leaders who will take those views into consideration.  But it can’t be done at the barrel of a gun.  It can’t be done by sending masked gunmen to occupy buildings or to intimidate journalists. 

And one of the biggest concerns that we’ve seen is the Russian propaganda that has been blasted out nonstop suggesting somehow that the Ukrainian government is responsible for the problems in eastern Ukraine.  The Ukrainian government has shown remarkable restraint throughout this process.  The notion that this is some spontaneous uprising in eastern Ukraine is belied by all the evidence of well-organized, trained, armed militias with the capacity to shoot down helicopters.  Generally, local protestors don’t possess that capacity of surface-to-air missiles or whatever weapons were used to shoot down helicopters, tragically.

We’ve seen the attempts of OSCE monitors -- who were approved not just by Europe or the United States, but also by Russia -- being detained.  And somehow Russia is suggesting that Kyiv is responsible for that?  We’ve heard Mr. Putin say, well, Kyiv has to do a better job of reaching out to Eastern Europe -- or eastern Ukraine.  You’ve seen attempts by Kyiv in a very serious way to propose decentralization of power and to provide for local elections, and for them to offer amnesty to those who have already taken over these buildings.  None of that has been acknowledged by Mr. Putin or the various Russian mouthpieces that are out there. 

You’ve also seen suggestions or implications that somehow Americans are responsible for meddling inside Ukraine.  I have to say that our only interest is for Ukraine to be able to make its own decisions.  And the last thing we want is disorder and chaos in the center of Europe. 

So for the German audience who perhaps is tuning into Russian TV, I would just advise to stay focused on the facts and what’s happened on the ground.  A few weeks ago, Mr. Putin was still denying that the Russian military was even involved in Crimea.  Then, a few weeks later, he acknowledged, yeah, I guess that was our guys.  And so there just has not been the kind of honesty and credibility about the situation there, and a willingness to engage seriously in resolving these diplomatic issues. 

And our hope is, is that, in fact, Mr. Putin recognizes there’s a way for him to have good relations with Ukraine, good relations with Europe, good relations with the United States.  But it cannot be done through the kinds of intimidation and coercion that we’re seeing take place right now in eastern Europe [Ukraine].

Tangi.

Q    Thank you, Mr. President.  Earlier this week, an inmate died in Oklahoma in what critics have called an inhumane manner because of a seemingly botched execution.  Human rights groups put the United States in the devious company of China, Iran and Saudi Arabia when it comes to the prevalence of executions.  Some European countries have expressed their concerns as well.  What are your thoughts on this?  And does this raise moral questions about U.S. justice and global reputation?

And to Chancellor Merkel, after Edward Snowden’s revelations on U.S. surveillance of your own cell phone, you said that friends shouldn’t spy on friends.  Are you satisfied that the steps taken by the U.S. on NSA surveillance are now consistent with a healthy alliance?  Has the personal trust been rebuilt?  And I was wondering if you could elaborate a little bit on this no-spy agreement that apparently couldn’t be reached.  Thank you.

PRESIDENT OBAMA:  What happened in Oklahoma is deeply troubling.  The individual who was subject to the death penalty had committed heinous crimes, terrible crimes.  And I’ve said in the past that there are certain circumstances in which a crime is so terrible that the application of the death penalty may be appropriate -- mass killings, the killings of children.  But I’ve also said that in the application of the death penalty in this country, we have seen significant problems -- racial bias, uneven application of the death penalty, situations in which there were individuals on death row who later on were discovered to have been innocent because of exculpatory evidence.  And all these I think do raise significant questions about how the death penalty is being applied.  And this situation in Oklahoma I think just highlights some of the significant problems there. 

So I’ll be discussing with Eric Holder and others to get me an analysis of what steps have been taken not just in this particular instance but more broadly in this area.  I think we do have to, as a society, ask ourselves some difficult and profound questions around these issues.

If you don’t mind, I’m going to also go ahead and maybe say something about NSA just because I know it’s of great interest in the German press as well.  Germany is one of our closest allies and our closest friends, and that’s true across the spectrum of issues -- security, intelligence, economic, diplomatic.  And Angela Merkel is one of my closest friends on the world stage, and somebody whose partnership I deeply value.  And so it has pained me to see the degree to which the Snowden disclosures have created strains in the relationship.

But more broadly, I’ve also been convinced for a very long time that it is important for our legal structures and our policy structures to catch up with rapidly advancing technologies.  And as a consequence, through a series of steps, what we’ve tried to do is reform what we do and have taken these issues very seriously.  Domestically, we’ve tried to provide additional assurances to the American people that their privacy is protected.  But what I’ve also done is taken the unprecedented step of ordering our intelligence communities to take the privacy interests of non-U.S. persons into account in everything that they do -- something that has not been done before and most other countries in the world do not do.  What I’ve said is, is that the privacy interests of non-U.S. citizens are deeply relevant and have to be taken into account, and we have to have policies and procedures to protect them, not just U.S. persons.  And we are in the process of implementing a whole series of those steps. 

We have shared with the Germans the things that we are doing.  I will repeat what I’ve said before -- that ordinary Germans are not subject to continual surveillance, are not subject to a whole range of bulk data gathering.  I know that the perceptions I think among the public sometimes are that the United States has capacities similar to what you see on movies and in television.  The truth of the matter is, is that our focus is principally and primarily on how do we make sure that terrorists, those who want to proliferate weapons, transnational criminals are not able to engage in the activities that they’re engaging in.  And in that, we can only be successful if we’re partnering with friends like Germany.  We won’t succeed if we’re doing that on our own. 

So what I’ve pledged to Chancellor Merkel has been in addition to the reforms that we’ve already taken, in addition to saying that we are going to apply privacy standards to how we deal with non-U.S. persons as well as U.S. persons, in addition to the work that we’re doing to constrain the potential use of bulk data, we are committed to a U.S.-German cyber dialogue to close further the gaps that may exist in terms of how we operate, how German intelligence operates, to make sure that there is transparency and clarity about what we’re doing and what our goals and our intentions are. 

These are complicated issues and we’re not perfectly aligned yet, but we share the same values and we share the same concerns.  And this is something that is deeply important to me and I’m absolutely committed that by the time I leave this office, we’re going to have a stronger legal footing and international framework for how we are doing business in the intelligence sphere. 

I will say, though, that I don’t think that there is an inevitable contradiction between our security and safety and our privacy.  And the one thing that I’ve tried to share with Chancellor Merkel is that the United States historically has been concerned about privacy.  It’s embedded in our Constitution, and as the world’s oldest continuous constitutional democracy, I think we know a little bit about trying to protect people’s privacy. 

And we have a technology that is moving rapidly and we have a very challenging world that we have to deal with, and we’ve got to adjust our legal frameworks.  But she should not doubt, and the German people should not doubt, how seriously we take these issues.  And I believe that we’re going to be able to get them resolved to the satisfaction not just of our two countries but of people around the world. 

CHANCELLOR MERKEL:  (As interpreted.)  Under the present conditions, we have, after all, possibilities as regards differences of opinion to overcome those differences in the medium term and in the long term.  One possibility is to enter into such a cyber dialogue, which is very important because that gives us a forum to have somewhat longer discussions as to where we stand individually, what the technical possibilities but also ramifications of technological advances are.

Secondly, there are two strands of negotiations with the European Union -- on the one hand, the Safe Harbor agreement and then the data protection -- privacy protection accord.  And in the course of the negotiations, it will come out very clearly what differences of opinion there are, what different perspectives there are.  And I think it’s of prime importance for us to bring these negotiations forward, the process, but also bring it to a successful conclusion. 

And something else comes into play.  I heard this, this morning when I had a breakfast meeting with people who are very closely in contact with the parliaments.  They suggested to me that our parliaments, too, ought to have closer contacts on this.  And that’s very important not only for the governments to talk about these things, but also for the broader public.  And these could be three possibilities as to how to address this further and also understand each other’s motivations and arguments better.
 
Q    Mr. President, could you explain to us from your point of view why it’s not possible to agree on a no-spy agreement, which was, as we understood, proposed by the U.S. government last summit?  What kind of assurances could you give Chancellor Merkel with regard not only to ordinary German citizens, but to government members -- some of them sitting here -- that they are not under U.S. surveillance anymore?

(As interpreted.)  And, Chancellor, the question addressed to you -- when the French President was here a couple of weeks ago, after his talk with President Obama, he said that trust as regards to the NSA discussion has been rebuilt.  Can you say the same thing?

PRESIDENT OBAMA:  It’s not quite accurate to say that the U.S. government offered a no-spy agreement and then withdrew it.  I think that what is accurate to say is, is that we do not have a blanket no-spy agreement with any country, with any of our closest partners.  What we do have are a series of partnerships and procedures and processes that are built up between the various intelligence agencies. 

And what we are doing with the Germans -- as we’re doing with the French, as we do with the British, or the Canadians, or anybody -- is to work through what exactly the rules are governing the relationship between each country and make sure that there are no misunderstandings.  And I think that we have gone a long way in closing some of the gaps, but as Chancellor Merkel said, there are still some gaps that need to be worked through.

But I think what we can be confident about is that the basic approach that we take with Germany is similar to the approach that we take with all our allies and all our friends, and that during the course of the last several years as technology advanced, I think there was a danger in which traditional expectations tipped over because of new technologies.  And what we’ve tried to do is make sure that our policies now reflect increased capabilities and, as a consequence, increased dangers of intrusions in privacy. 

But let me put it this way:  Our interest in working effectively with the Germans and to making sure that German governments as well as the German people feel confident about what we do is as important to us as any other country.  Germany is at the top of our list in terms of friends and allies and colleagues, and so we’re not holding back from doing something with Germany that we somehow do with somebody else.

CHANCELLOR MERKEL:  (As interpreted.)  I think the whole debate has shown that the situation is such that we have a few difficulties yet to overcome.  So this is why there’s going to be this cyber dialogue between our two countries, and this is also why there needs to be and will have to be more than just business as usual.  I mean, looking at the discussion not only in the German parliament but also among members of the German government and also in the German public, we need to do that. 

But it’s very good that we have taken these first steps, and what’s still dividing us -- issues, for example, of proportionality and the like -- will be addressed.  We will work on this, and it’s going to be on the agenda for the next few weeks to come.

PRESIDENT OBAMA:  Thank you very much, everybody.

END   
12:50 P.M. EDT