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Microsoft's Russian hacking revelations spur U.S. lawmakers' ire

(Bloomberg) -- Microsoft Corp.’s declaration that it found and seized bogus web domains created by Russian hackers amplified calls by U.S. lawmakers to pass legislation imposing more sanctions on Vladimir Putin’s government and allies.

“This is not something that is in the rear-view mirror,” Senator Mark Warner of Virginia, the top Democrat on the Intelligence Committee, said Tuesday at a hearing on sanctions aimed in part at deterring Russian efforts to interfere in U.S. elections.

The Senate Banking and Foreign Relations Committees held simultaneous hearings where lawmakers of both parties expressed frustration with actions by the Treasury Department and comments by President Donald Trump, who has dismissed Special Counsel Robert Mueller’s probe into Russian meddling in the 2016 campaign as a “witch hunt.”

"Our commander in chief continues to undermine" efforts to counter Russia through his comments, Foreign Relations Chairman Bob Corker of Tennessee told administration officials.

New Urgency

The previously scheduled hearings took on new urgency after Microsoft’s finding late Monday that a shadowy group with links to Russian military intelligence created domains that mimicked organizations such as the International Republican Institute and Hudson Institute so intended victims would believe they were receiving emails or visiting real sites.

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Red light illuminates the keys of a laptop computer at the Dreamhack digital festival in Moscow, Russia, on Saturday, Dec. 5, 2015. Dreamhack is the world's largest digital festival and meeting place for gamers, fans and e-sport enthusiasts. Photographer: Bloomberg/Bloomberg

The groups are conservative bastions but have been at odds at times with Russia or Trump. Russia rejected the accusation that it’s attempting to influence this year’s U.S. midterm elections.

Several senators pushed administration witnesses on whether they would embrace tough new sanctions legislation, including on the banking and energy sectors.

Democratic Senator Bob Menendez of New Jersey told Treasury’s Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker that legislation is moving.

"Congress is going to act. You might as well know that," he said. Menendez has proposed stiff sanctions along with Senator Lindsey Graham of South Carolina, including on sovereign debt and energy.

‘Global Consequences’

Mandelker said there must be an awareness of "what the global consequences would be."Treasury has previously warned about the spillover effects of sanctions on sovereign debt.

Republican Senator David Perdue of Georgia echoed that warning, saying “if we put sanctions on Russia, there’s a trading partner that gets hit by that as well.”

But Menendez and other lawmakers of both parties expressed frustration with Mandelker and Treasury.

Instead of saying what Congress can’t do, "why don’t you tell us what in fact we can do to turn up the pressure on Moscow that we are not," Menendez said.

Republican Senator John Kennedy of Louisiana, who traveled last month to Moscow with a GOP delegation, also wanted tougher options, asking how Russia’s economy can be “brought to its knees.”

"I think Putin owns assets in the U.S., and I think Treasury knows what they are. I want a discussion on the ramifications of seizing those assets," he said.

Under questioning, Mandelker said: “I am not aware of any title or deed that would have Putin’s name on it”

Administration officials defended the sanctions they have put in place, saying they have dented the ruble and badly damaged the value of companies on the sanctions list. Wess Mitchell, the assistant secretary of state for European and Eurasian Affairs, said the administration needed flexibility on any new sanctions, pushing back on several bills that would impose automatic sanctions on Moscow.

“The pain is starting to have an effect,” Mitchell said, as he suggested additional sanctions are on the way from the administration. "We’re willing to take the steps necessary to further penalize Russia’s behavior."

Despite Menendez’s prediction that congressional action is a sure thing, it’s not clear yet that lawmakers will act in time to affect the November elections.

Republican Senator Rand Paul of Kentucky, who has endorsed Trump’s argument that it’s best to seek improved relations with Russia, said carrots -- such as an agreement that Ukraine and Georgia won’t be brought into NATO -- may be a better course.

“If we wait for Russia to leave Crimea” before lifting any sanctions, Paul said, we might be waiting “until the end of time.”