Legislature(2021 - 2022)GRUENBERG 120
03/15/2022 03:00 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB396 | |
| HB291 | |
| HB218 | |
| HB316 | |
| HB309 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 396 | TELECONFERENCED | |
| += | HB 291 | TELECONFERENCED | |
| += | HB 218 | TELECONFERENCED | |
| *+ | HB 316 | TELECONFERENCED | |
| + | HB 309 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 396-DIVEST INVESTMENTS IN RUSSIAN ENTITIES
3:07:03 PM
CHAIR KREISS-TOMKINS announced that the first order of business
would be HOUSE BILL NO. 396, "An Act restricting certain
investments of state funds in certain Russian entities; and
providing for an effective date."
3:09:05 PM
CHAIR KREISS-TOMKINS invited Mr. Saravalle to share opening
remarks on private entities divesting from Russian assets and
the extent to which it had a sanctioning effect on Russia.
3:09:42 PM
EDUARDO SARAVALLE, a former researcher for the Energy, Economics
& Security program at the Center for a New American Security
(CNAS), answered yes, ever since the first escalation of U.S.
sanctions against Russia, there had been a voluntary worldwide
divestment from the Russian market, which was in turn,
destabilizing the Russian economy. He noted that voluntary
actions could be helpful to the U.S. policy; however, they could
also be counterproductive. He encouraged private entities or
state governments to align their actions with U.S. policy and
opined that HB 396 was well-thought out in that respect.
CHAIR KREISS-TOMKINS sought to confirm that divestment policy
should include a "stick and carrot" approach that included a
"renormalization" mechanism to reinvest in Russia.
MR. SARAVALLE answered yes, to ensure that the entity or state
government was being as constructive as possible in fostering
U.S. policy.
3:13:38 PM
REPRESENTATIVE TARR asked how the legislature should consider
its actions relative to unintended consequences or other
disruptions in the marketplace that wouldn't achieve that long-
term goal.
MR. SARAVALLE acknowledged that the risk of a less ethical
investor profiting from divestment policy was a concern in any
divestment campaign. Nonetheless, he pointed out that the
concern about other actors swooping in and taking advantage of a
strong principal move would likely be from jurisdictions that
weren't complying with sanctions or ones that were skeptical of
sanctions.
3:19:07 PM
REPRESENTATIVE CLAMAN asked how to approach the political
decision of instructing APFC or other state agencies to divest
from Russian assets, which were worth very little, with no place
to sell them. He questioned the practicality of that scenario.
MR. SARAVALLE acknowledged that uncertainty was harming the
value of Russian assets, as well as the intermediaries of global
security transactions, which were extremely risk averse and
limited the ability to change ownership. Finally, Russia was
imposing limitations on transactions as well. He explained that
all of those factors combined were lowering the price of Russian
assets and making them "uninvestable" and illiquid. He
acknowledged the difficulty of the situation, adding that any
divestment scenario would have to confront the mechanics of
selling low price shares and changing ownership. He pointed out
that any decision would have to wait and see how the situation
developed, as issuing a blanket divestment order would be
difficult.
REPRESENTATIVE CLAMAN asked whether there was a secondary market
for Russian stocks in other parts of the world.
MR. SARAVALLE said he was unsure. He cautioned that other
intermediaries would be even more risk averse than a Russian-
based exchange.
3:24:22 PM
REPRESENTATIVE EASTMAN asked for a contrasting analysis of
Chinas support for the Russian invasion of Georgia [in 2014]
versus China's support for the Russian incursion into Ukraine.
Additionally, he asked how likely it was that China would invest
in place of those who were divesting.
MR. SARAVALLE pointed out that it was a highly fluid situation.
He noted that the sanctions in 2014 were significantly lighter,
making it relatively easy for China to invest and circumvent the
sanctions. He stated that if China was interested in helping
Russia now, it would be a "different ballgame," as current
sanctions were much heavier.
REPRESENTATIVE EASTMAN recalled that Mr. Saravalle had mentioned
the need for a "clear ask" when stipulating divestment policy.
He asked what the clear ask was in terms of U.S. sanctions and
who the sanctions were designed to harm.
MR. SARAVALLE indicated that the U.S. ask was still developing.
Potential options included the recognition of Eastern Ukraine as
independent, as well as the de-annexation of Crimea and
reparation or support for the reconstruction of Ukraine. He
reminded the committee that sanctions were a bargaining measure,
adding that those in the administration were carefully ensuring
that the sanctions did not impose unnecessary harm.
Nonetheless, he pointed out that there were likely multiple
targets, noting the so-called "oligarch sanctions" were intended
to turn those closest to President Vladimir Putin against him.
REPRESENTATIVE EASTMAN referenced a report that suggested that
President Putin's support had increased since the conflict
began. He asked whether sanctions were working.
MR. SARAVALLE explained that the shared experience of suffering
could bring a "rally around the flag" effect. He reiterated
that sanctions were intended to alter the decision making of the
president, as opposed to causing a revolution. He noted that
they could have the potential to change the calculus of
leadership.
3:37:52 PM
REPRESENTATIVE TARR sought to confirm that the purpose of
sanctions was to put pressure on leaders to negotiate.
MR. SARAVALLE answered yes.
3:39:14 PM
CHAIR KREISS-TOMKINS asked what should be included or avoided in
terms of crafting divestment policy.
MR. SARAVALLE recommended keeping it specific, targeted, and
clear. He noted that more clarity would make the policy easier
to "technically undo." He provided an example. He addressed
the uncertainty in regard to the mechanics of divestment and
recommended clarifying "the how" as well.
CHAIR KREISS-TOMKINS sought to confirm that a trigger for
renormalization should be included, as well as narrowly
prescribed policy. Additionally, proper flexibility should be
included to account for "wonky" market mechanics. He asked if
that was accurate.
MR. SARAVALLE answered yes.
3:43:21 PM
REPRESENTATIVE KAUFMAN sought to confirm that by divesting, an
opportunity would be created for the worst actors who lacked
qualms about buying Russian shares at fire sale prices. He
asked if that was correct.
MR. SARAVALLE answered yes, that would be a potential risk.
3:44:28 PM
REPRESENTATIVE VANCE asked how many states had divested in
Russia.
MR. SARAVALLE did not know the answer.
REPRESENTATIVE VANCE expressed concern about backlash due to
Alaska's geopolitical position.
MR. SARAVALLE acknowledged that any sanctioned action may likely
lead to backlash. However, as Russia was involved in a physical
invasion, he pointed out that the country would have to
stabilize its economy before considering backlash.
REPRESENTATIVE VANCE recalled that since 2013 or 2014, Russia
had embargoed Alaska seafood, which was costing the state
millions. She expressed her concern about Russia's "long
memory" and asked whether there could be backlash that directly
impacted the Alaska seafood industry.
MR. SARAVALLE acknowledged that Russia could impose counter
sanctions that could be detrimental to the Alaskan economy. He
emphasized the need to include the lifting of sanctions in the
U.S. ask, adding that it would be a matter of diplomacy for the
U.S. government to clearly articulate.
3:50:29 PM
CHAIR KREISS-TOMKINS announced that HB 396 was held over.
3:51:17 PM
The committee took a brief at-ease.