SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOC
49–337 CC
1998
REVIEW OF U.S. ASSISTANCE PROGRAMS TO RUSSIA, UKRAINE AND THE NEW INDEPENDENT STATES
HEARING
BEFORE THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
MARCH 26, 1998
Printed for the use of the Committee on International Relations
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM GOODLING, Pennsylvania
JAMES A. LEACH, Iowa
HENRY J. HYDE, Illinois
Page 2 PREV PAGE TOP OF DOC
DOUG BEREUTER, Nebraska
CHRISTOPHER SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
PETER T. KING, New York
JAY KIM, California
STEVEN J. CHABOT, Ohio
MARSHALL ''MARK'' SANFORD, South Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California
JON FOX, Pennsylvania
JOHN McHUGH, New York
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
KEVIN BRADY, Texas
LEE HAMILTON, Indiana
SAM GEJDENSON, Connecticut
TOM LANTOS, California
HOWARD BERMAN, California
Page 3 PREV PAGE TOP OF DOC
GARY ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
PAT DANNER, Missouri
EARL HILLIARD, Alabama
BRAD SHERMAN, California
ROBERT WEXLER, Florida
STEVE ROTHMAN, New Jersey
BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida
RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
MARK GAGE, Professional Staff Member
KIMBERLY ROBERTS, Staff Associate
C O N T E N T S
WITNESSES
Page 4 PREV PAGE TOP OF DOC
Ambassador Richard Morningstar, Special Advisor to the President and the Secretary of State on Assistance to the New Independent States and Coordinator of U.S. Assistance to the New Independent States, Department of State
The Honorable Don Pressley, Acting Assistant Administrator for Europe and the New Independent States, U.S. Agency for International Development
APPENDIX
Prepared statements:
The Honorable Dana Rohrabacher, a Representative in Congress from California, plus attachment
Ambassador Richard Morningstar
The Honorable Don Pressley
Additional material submitted for the record:
Answers by Ambassador Morningstar to questions submitted by Representatives Gilman, Hamilton, Sherman, Bereuter, and Rohrabacher
Charts of FY 1998 Funds Budgeted for Major Assistance Programs: Russia
Answers by Mr. Pressley to questions submitted by Representatives Gilman and Hamilton
REVIEW OF U.S. ASSISTANCE PROGRAMS TO RUSSIA, UKRAINE AND THE NEW INDEPENDENT STATES
THURSDAY, MARCH 26, 1998
House of Representatives,
Committee on International Relations,
Washington, DC.
The Committee met, pursuant to notice, at 10:10 a.m., in room 2172, Rayburn House Office Building, Hon. Benjamin A. Gilman (chairman of the Committee) presiding.
Chairman GILMAN. [presiding] Good morning. This hearing of the House International Relations Committee is called to order. Members, please take their seats and close the doors.
Page 5 PREV PAGE TOP OF DOC
As our Members and our witnesses know, our assistance programs for the states of the former Soviet Union are among the most important that our State Department and our Agency for International Development manage around the world. In the region of the former Soviet Union we face a tremendously weakened nuclear power in the form of Russia that is still seeking to find its way after the sudden breakdown of the former Soviet Union, a state in which it was the preeminent nation. We face a number of other New Independent States that are struggling with economic depression, with political disarray, with corruption, capital flight, ethnic conflict, environmental deterioration, and major health problems.
We in the rest of the world expect all of these nations to build thriving economies and strong democracies despite the fact that none of them has had the benefit of a market-based economy or any type of democratic government for more than just a few short, sporadic periods over the course of the last few centuries. Still, this is the outcome we need to have in the region of the former Soviet Union if that region is to be stabilized, and if our assistance programs are to prove that they can serve our own national interests around the world, not just provide humanitarian and developmental aid.
For reasons of time, we have limited our witnesses today to two key managers of our aid programs in the New Independent States. I want to welcome, first, Ambassador Richard Morningstar, the State Department's coordinator of our assistance programs for the New Independent States. Welcome back, Mr. Ambassador.
I also want to welcome our Acting Assistant Administrator for Europe and the New Independent States at the Agency for International Development, Mr. Don Pressley. The last time I listened to one of your presentations, Mr. Pressley, was the one you delivered to the board of the U.S. Russian Investment Fund. I recall it was one of the livelier presentations that I have recently listened to.
We thank you both, gentlemen, for making time to respond to the Committee's invitation this morning. We do appreciate how busy your schedules are. Before I ask our Ranking Member or any of our other Members in attendance this morning for any opening statements that they might like to make, let me take a moment to make a particular point that I would like Ambassador Morningstar to address at some point in your presentation.
Page 6 PREV PAGE TOP OF DOC
Mr. Ambassador, you have often argued to this Committee, both to the Members and to our staff, that it would not serve our own interests to cut assistance to Russia, despite many things that Russia does with regard to Iran, to Iraq, to Cuba, and so on. These things go against what our nation is trying to support or achieve around the world as a responsible member of the international community. You have argued that point, based on the grounds that most of our assistance to Russia goes for things that we support, such as reforms at the grassroots level, reforms meant to fight corruption, assistance to ensure the safety of nuclear reactors, and so on. Now, however, we understand that the Administration is considering cutting assistance to Russia's neighbor, Ukraine, due to issues involving mistreatment of American investors.
Putting aside the fact that an American investor, Mr. Paul Tatum, was shot and killed on the streets of Moscow in Russia, in what appeared to be a business dispute, and putting aside the fact that that crime remains unsolved, let me ask the following, which I hope you would comment on. Doesn't most of our assistance to Ukraine go to support things that we want to see happen in the Ukraine as much as we want to see them happen in Russia? That is, things like reforms at the grassroots of Ukrainian society, reforms to fight corruption, et cetera?
I raise that point not because I oppose our efforts to help our American investors in Ukraine. As you know, I have supported the Administration's efforts on that issue wherever I could, but without undermining the growing pro-Western attitude of Ukraine. As you know, that pro-Western approach has persuaded Ukraine to give up its nuclear weapons, to sign a bilateral charter with NATO, to refrain from inappropriate commerce with countries like Libya, and, most recently, to promise our Secretary of State Madeleine Albright that it would refrain from selling turbines to Iran for its Russian-sponsored nuclear reactor project.
That's a pretty strong set of accomplishments in U.S.-Ukrainian relations at a time when Ukraine is reeling from economic depression and has little of the resources that its bigger neighbor, Russia, can bring to bear to help itself, such as their own oil and gas.
Page 7 PREV PAGE TOP OF DOC
Mr. Ambassador, we would welcome your thoughts on how cutting aid to Ukraine is going to be of assistance to us. You or other representatives of the Administration have also argued, I believe, that cutting assistance to Russia would not change the Russian Government's position on those foreign policy issues which now concern us greatly. So I am going to ask you: are you stating that cutting aid to Ukraine will change Ukrainian Government positions and policies but cutting aid to Russia would not? I have taken some time to go into this since I believe it is an important matter for us to consider. I understand the Administration is approaching a decision in the very near future.
I would now ask any of our Members if they would like to comment. Mr. Campbell, any comment?
Mr. CAMPBELL. Mr. Chairman, I have very little to say because I am anxious to hear from our witnesses. Except that I appreciate your holding this hearing. I very much appreciate what Ambassador Morningstar and Mr. Pressley have been doing for our country's interests in this most important region of the world.
Chairman GILMAN. Thank you, Mr. Campbell. Mr. Berman. Mr. Martinez.
So we'll now proceed with Ambassador Morningstar. You may recite your full statement or put a summary in the record. We'll take your full statement and put it in the record, whichever you may deem appropriate.
STATEMENT OF AMBASSADOR RICHARD MORNINGSTAR, SPECIAL ADVISOR TO THE PRESIDENT AND THE SECRETARY OF STATE ON ASSISTANCE TO THE NEW INDEPENDENT STATES AND COORDINATOR OF U.S. ASSISTANCE TO THE NEW INDEPENDENT STATES, U.S. DEPARTMENT OF STATE
Ambassador MORNINGSTAR. Thank you, Mr. Chairman. I would like to put my full written statement into the record.
Page 8 PREV PAGE TOP OF DOC
Chairman GILMAN. Without objection.
Ambassador MORNINGSTAR. I would also just like to say that I'm very pleased to have this opportunity to discuss with you and Members of the Committee various aspects of the assistance program and the President's request in Fiscal Year 1999 for $925 million for these programs.
Let me just address the points that you made during your statement right up front. You know, we don't differ on anything. I agree with virtually 100 percent of what you said as far as characterizing the arguments that we have made with respect to assistance to Russia, about the importance of grassroots programs and the like. It's really an interesting problem that we face with respect to Ukraine. I would love to be able to totally fence off all of the kinds of programs that you talking about. The problem we have is the congressional language. The language that was made part of the Appropriations Act for 1998 states that unless the Secretary of State certifies by April 30 of this year that significant progress has been made with respect to the resolution of complaints of the U.S. investors, we must reduce assistance to Ukraine by a half, with some exceptions relating to nuclear reactor safety and some election programs.
The Secretary of State has no choice but to obey the law and obey the law as written in the language of the statute. There have been investment dispute issues that have taken place in Ukraine. We are addressing those issues very diligently. We are working constantly with the Ukrainians with respect to the Ukrainian Government and those issues. I would guess that I have spent half of my time literally in the last year dealing with these kinds of issues with the Government of Ukraine. We hope very much that there will be enough resolution of these issues that in fact she will be able to make the certification. But she does have to obey the law. She will have to make that ultimate determination.
But as far as what you are saying, I agree with everything you said. We should be able to segment those kinds of programs. Right now we don't have that option. Having made that response, I will go ahead with the rest of my statement or do you want to pursue this further right now?
Page 9 PREV PAGE TOP OF DOC
Chairman GILMAN. Please continue.
Ambassador MORNINGSTAR. Mr. Chairman, the reason that Congress has supported assistance to the NIS since the breakup of the Soviet Union in 1991, is straightforward. The transition of these new states to stable market democracies will dramatically enhance our national security. If we stay engaged with the new nations in this part of the world, we can play a role in influencing their transition to market-based democracies that will reduce instability and deter aggression. Our Partnership for Freedom initiative is the cooperative mechanism by which the United States can stay engaged in the NIS over the coming years.
During the budget discussions that we had last year, including this hearing, Congress expressed its approval of the new thrust in our assistance program embodied in the Partnership for Freedom. The new approach, however, was not fully funded in the Fiscal Year 1998 appropriation, and we're seeking that funding in the 1999 request.
Two principal factors drive the Partnership for Freedom. First because economic and democratic reform in these countries is a generational process, we need to maintain our presence and influence in these countries. Governments will come and go, as we have seen this week, but by building strong ties between Americans and the citizens of the NIS, we can lay the groundwork for the cooperative relations between our countries for years to come. Hence, the Partnership for Freedom emphasizes exchanges, partnerships, and other cooperative activities that support the continuing development of civil societies and provide lasting benefits to both sides.
Second, the economic and political stability of these countries required job creating economic growth. Most of the NIS economies are growing slowly, some not at all. We must take specific actions to help these countries attain economic growth. Lack of growth will ultimately lead to destabilization which could raise new threats to our national security. The Partnership for Freedom, with its emphasis on removing barriers to trade and investment, promoting the growth of small and medium businesses, particularly in the regions away from the capitals, and providing training to entrepreneurs, supports a bottoms-up approach to economic reform, which is a logical sequel to our earlier support for the basic institutions of a market economy.
Page 10 PREV PAGE TOP OF DOC
The Partnership for Freedom is helping to develop constituencies at the local level and put a human face on cooperation with the United States. The grassroots nature of the Partnership for Freedom initiative has another advantage. As you pointed out, Mr. Chairman, we periodically have policy differences with these governments. In Russia, we are watching closely government policies on religious freedom and proliferation. In Ukraine, we do have difficulties with treatment of U.S. investors and resistance to reform. With respect to Ukraine, I might emphasize that we are all trying to achieve the same thing, which is an improved investment climate and economic growth in that country.
In Belarus we are faced with a President that is acting like a dictator. In Uzbekistan we are seeing resistance to currency convertibility. In much of Central Asia more generally we have foot dragging on democratic reform. The Partnership for Freedom activities serve U.S. interests independent of the issues of the moment with national governments. They are designed to create change from the bottom up. These activities, because they focus on people, not central governments, become even more important when we have policy differences with their governments, which I think is basically the same thing that you were saying, Mr. Chairman.
Finally, it is important to consider how difficult this transition has been for the people of the NIS. Many people in the NIS, although some are better off, many are now worse off economically than they were during the Soviet Union. Social issues have become more acute. To believe in Western-oriented reforms, people in the NIS must have hope that their situation can and will improve. To build good ties with the United States, people in the NIS must see that we truly support democratically based economic growth in the NIS. This is why the Partnership for Freedom places an emphasis on programs that have an impact on the lives of individual citizens, and why we will put further emphasis in such areas as health and environment.
Let me give you some examples of the kinds of activities that we have undertaken, guided by the Partnership for Freedom philosophy. First in the area of democratic and humanitarian initiatives. In the academic area, for example, we instituted a program of teaching excellence awards. Three hundred teachers in Russia and in Ukraine were recognized for teaching excellence. Each of their schools received $2,000 in books and equipment. The 45 finalists came to the United States for specialized training last summer. Likewise, 20 of America's best teachers went to communities where Russian and Ukrainian finalists reside. Think about it. Three hundred different communities were touched by this program. Our academic exchanges are again increasing at all levels. Several of our ambassadors have named the Bradley Program as the most effective program in the countries. They point out that these young people return from a year of living with American families as real revolutionaries for reform. With adequate funding, we will further expand this and other valuable academic exchanges.
Page 11 PREV PAGE TOP OF DOC
In the partnership area, hospital partnerships are excellent examples of mutually beneficial activities. I have seen them in Uzbekistan and in Ukraine. Training, for example, in neo-natal resuscitation techniques in Ukraine has resulted in a 30-percent decrease in infant deaths in the places affected. That's a program that saves lives. People do know about it. It really does obviously have an impact.
Since 1992, working with the Department of Defense, we have delivered 12 equipment and medical packages valued at over $170 million to hospitals in the NIS through excess DOD supplies and contributions. Its success can be attributed in great part to the personal involvement and execution of this program by U.S. military medical teams and its close link to the hospital partnership program. I have seen the benefits of these deliveries. I have seen the impact that it has on the feelings of the people in these countries and on the governments of these countries. Again, additional funding in Fiscal Year 1999 will allow us to increase the levels of this type of very beneficial assistance.
Some of the best examples of local level grassroots impact are in the economic area. Because we believe in building support and reform from the ground up, we are emphasizing loans and credit for small business. Small business credit programs administered by Enterprise Funds, the EBRD, the Eurasia Foundation and other NGO's are also among the top priorities in our Fiscal Year 1999 request. Last year, 10,400 Russian small businesses, and it's true in other countries as well, received loans under small and micro credit programs funded directly or leveraged by technical assistance that we have provided.
We are also providing credit to very small enterprises. For example, in Kyrgystan, and I visited some of the programs in Kyrgystan and some of the beneficiaries just a couple of months ago with the First Lady. A young Kyrgyz woman secured a modest loan that enabled her to open a noodle shop at a local market. Today she is an entrepreneur who has freed herself from poverty and is contributing to the development of the nascent private sector in rural Kyrgystan. Again, if adequate resources are available, we will be able to replicate this story many times over in the lesser developed NIS.
Page 12 PREV PAGE TOP OF DOC
With respect to consumer credit, the U.S.-Russia Investment Fund has implemented a new automobile lending program that is making hundreds of thousands of dollars in loans to Russia's consumers for the purchase of modestly priced vehicles. We'll also be getting very shortly a mortgage program through the U.S.-Russia Investment Fund. Again, funding for these kinds of activities will be an important component of our 1999 request.
In Russia, we have pulled together these and similar programs under the rubric of a regional investment initiative. Under this program, we have so far selected three Russian regions, Novgorod, Samara and the Russian Far East, including particular Khabarovsk and Sakhalin, in which to concentrate our efforts to build economic growth by working with local governments, and more importantly, the local private sector. In this way, we hope to demonstrate to the other 86 Russian regions that politics at the local level does make a difference and that they can push forward with reform without always having to rely on or wait for the central government.
Those are just examples of some of the many activities that we do plan for 1999. I can get into more specifics in answer to your questions in areas such as law enforcement, health, the environment, and again, exchanges and partnerships.
Mr. Chairman, the activities that I have described require resources. The Fiscal Year 1998 appropriation of $770 million did not fully fund the President's request for NIS assistance, including the Partnership for Freedom. Funding for Central Asia as well as partnership activities in Russia in particular are inadequately funded, I believe, in this year's budget. The President's Fiscal Year 1999 request, $925 million, would firmly establish the new approach and lay a solid foundation for America's continued engagement in this strategically important region of the world.
I can think of nothing that would enhance our own national security and national interest more than the development of stable market democracies in this part of the world. I urge your continued support. Again, I agree with you with respect to virtually everything you have said in your opening. I think you have made a very good argument for the programs that we are advocating.
Page 13 PREV PAGE TOP OF DOC
[The prepared statement of Ambassador Morningstar appears in the appendix.]
Chairman GILMAN. Thank you, Ambassador Morningstar.
I am pleased that we now have Acting Assistant Administrator Donald Pressley with us, who brings 20 years of management experience to his current position as Acting Administrator, Bureau of Europe and the New Independent States.
Mr. Pressley.
STATEMENT OF DON PRESSLEY, ACTING ASSISTANT ADMINISTRATOR FOR EUROPE AND THE NEW INDEPENDENT STATES, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. PRESSLEY. Mr. Chairman, thank you.
Chairman GILMAN. You may put your full statement in the record. You may summarize it, whichever you prefer.
Mr. PRESSLEY. I very much appreciate the opportunity to put my statement in the record, and just make some brief summary remarks.
Chairman GILMAN. Without objection.
Mr. PRESSLEY. Mr. Chairman, Members of the Committee, imagine if you will that American assistance to the former Soviet Union is analogous to a three-act play. Act I occurred when the Soviet Union dissolved and transformations of epic proportions were just underway. Earlier in this decade, there was tremendous enthusiasm and the world watched in admiration as the people of Central and Eastern Europe and the former Soviet Union struggled to take charge of their own destiny. The FREEDOM Support Act, in effect, gave the United States a critical role to play in the former Soviet Union as a partner, an ally, in one of history's greatest political transformations. Congress charged USAID and other U.S. Government agencies to move quickly and engage in a wide spectrum of activities to offer American expertise in market-based economics and in vibrant democratic governance.
Page 14 PREV PAGE TOP OF DOC
Act I played out in an amazingly short time, and Act II of American assistance entered a more complex and intricate phase. Act II is in effect the Partnership for Freedom, first unveiled last year. The plot of Act II is to gradually alter the donor-to-beneficiary relationship so that ultimately U.S.-based institutions and newly emerging institutions in the NIS find common ground and form partnerships that will endure even beyond the life of the FREEDOM Support Act.
We are asking for an opportunity to continue American assistance under the aegis of Partnership for Freedom for several reasons. First, the stakes for the United States remain as high today as they were when the Soviet Union collapsed. Worldwide economic stability, military security, arms control, endemic environmental degradation, and access to highly prized natural resources, including oil and gas, are no less critical today than in Soviet times. But there are more countries today and more actors. Thus, more demands to interact constructively on a bilateral basis. We want these new, in some cases fragile countries to join the West in meaningful economic and political interactions, thereby avoiding the isolation and brinkmanship of the past.
Second, these new independent states are still ''at odds with themselves,'' as Fred Hiatt recently observed in the Washington Post. They are fluctuating between modernism and author-itarianism. They want to retain wealth and prestige, but are troubled by fully abandoning all too familiar Soviet-era leaders and institutions. The deprivation that accompanies reform; factory closings, unemployment, collapsed pension plans and healthcare systems, weigh heavily on these societies.
Third, the Partnership for Freedom is still unfolding. The partnership is intended to deepen and make more enduring the values and benefits of transitions to a market economy and governance by democratic institutions. This means reaching beyond central governments to localities and communities, going directly to the voters where faith in the validity of reform is still wavering.
Page 15 PREV PAGE TOP OF DOC
Congress has already recognized the wisdom in continuing assistance to the former Soviet Union. Last year Congress reversed the steady decline in funding levels since 1994, and increased the FREEDOM Support Act funding by over 20 percent. Congress acknowledged both the progress to date and the unmet needs still facing this region. We are asking for an appropriate increase in the next fiscal year as well, from our current budget of $770 million to $925 million, so that the Partnership for Freedom may continue and congressional mandates will be fulfilled.
Previously we focused on laying economic and democratic foundations, largely with central governments and largely involving macro economic fundamentals. In terms of democracy, we have tried to ensure that free and open media are prevalent, that rule of law becomes more routine, and that election mandates and constitutional standards are met.
However, such changes have little resonance with the population if prosperity and visible impact remain elusive. Thus, the partnership is intended, gradually to be sure, to offer deeper, more generational change to a broader population. The partnership will place greater emphasis where indicated on economic growth and investment and do so on a decentralized basis. It will target technical assistance more rigorously where it is needed the most. For example, tax reform in Russia, oil and gas management in the Caspian, support for a new reform-minded parliament in Georgia. It will catalyze other donors to continue assistance in privatization, macroeconomic policy and other facets of structural reform. It will focus on the grassroots level where transforming societies are just beginning to experiment with their newly discovered freedoms. And it will encourage education and exchanges to reach as many reform-minded present and future leaders as possible so that they may have experience with the benefits of a market economy and democratic governance.
With the budget increase we have requested, we would hope to meet our most pressing programmatic demands, including: expanding the Partnership for Freedom in accordance with the precepts I have just enumerated; responding constructively to Congress' interest in paying greater attention to infectious diseases and other health concerns that are growing, including tuberculosis in Central Asia, Caucasus and the Ukraine; fund reforms to promote energy restructuring, energy efficiency and other policies in response to the President's Global Climate Change Initiative; strengthen our efforts in Central Asia, where structural and democratic reforms still lag behind the rest of the region; continue to support private business development via the Enterprise Funds, the Regional Investment Initiatives, the Development Credit Authority, and other efforts to reach small and medium businesses; appropriately expand support for Russia, in particular, in order to roll out the Regional Investment Initiative concept that Ambassador Morningstar has described; and draw on the Eurasia Foundation and other kinds of foundations as warranted, to expand exposure to Western ideals and practices.
Page 16 PREV PAGE TOP OF DOC
Mr. Chairman, ultimately we want to get to Act III in this drama, our swan song, if you will. We want to reach a point where the New Independent States are self-sufficient, where American technical assistance is no longer required. We look forward to Act III where American universities, businesses, associations, cities, communities, have real partnerships with counterparts in the NIS standing apart from foreign aid programs. We strive for the day when these nations are fully integrated with the West, members of such international institutions as the World Trade Organization, and political and trade regimes are fully normalized.
Our guiding principles to reach Act III are straightforward. We will continue to support privatization, sound exchange rates, industry restructuring, macroeconomic reform, etc. But our greater goal at this juncture is to see that governments keep faith with their people during the arduous process of reform. To do this we want to ensure that impediments to investment are diminished, that reforms are accomplished beyond the capital cities, that governments are accountable and their processes are transparent and equitable, and that the benefits of a vibrant civil society are perceived close to home, in the cities, localities, and small communities. If prosperity is not more keenly felt at the grassroots level, then all reform is imperiled and early experiments with democracy will turn brittle, eventually breaking.
The United States and like-minded leaders in the former Soviet Union are planning for the day when the reform generation has a chance to mature and flourish. When the reform generation is stronger and more prevalent in NIS societies, then the curtain can indeed come down on this three-act drama of American technical assistance and rise again to the spectacle of New Independent States who are truly partners for freedom.
Mr. Chairman, Members of the Committee, thank you for your time and your attention. I look forward to your questions.
[The prepared statement of Mr. Pressley appears in the appendix.]
Chairman GILMAN. Thank you, Mr. Pressley, and thank you, Ambassador Morningstar. Let me address a few questions to you before I call on my colleagues.
Page 17 PREV PAGE TOP OF DOC
Ambassador Morningstar, when do you expect to begin the Partnership for Freedom effort in Ukraine and Kazakhstan? What sites, for example, in Ukraine and Kazakhstan, would likely be selected for the PFF in those two states?
Ambassador MORNINGSTAR. First of all, the Partnership for Freedom is a living process. We have already begun in those countries. Many of our activities today in Ukraine, many of our activities today in Kazakhstan as well as the other NIS, are Partnership for Freedom activities. To give you an example and to show you what we are trying to do, in Russia, for example, virtually all of our assistance for Fiscal Year 1998 is our Partnership for Freedom activities. Probably 97 or 98 percent. In Ukraine, certainly considerably more than half, I would guess that you can classify 75 percent of our activities under the rubric of Partnership for Freedom. So it's an ongoing process.
What we are doing in Ukraine, to use that as an example, and Mr. Pressley may want to supplement this, is that more and more of the activities are outside of the capital and are outside of technical assistance to the ministries with respect to specific reform programs. Our small business programs are increasing. We are looking at regional initiatives in places like Lviv and Kharkiv and other cities within Ukraine. So it is an ongoing process.
Chairman GILMAN. Ambassador Morningstar, we were informed that Vice President Gore and former Russian Prime Minister Chernomyrdin at the February 1997 meeting of the Gore-Chernomyrdin Commission meetings created a Regional Investment Initiative. Is that part of the Partnership for Freedom Initiative?
Ambassador MORNINGSTAR. Absolutely. I would submit that it is one of the key aspects of the Partnership for Freedom because what we have done is we have taken three regions where local officials have shown progressive tendencies and a willingness to reform and create proper investment climates. We are working with those regions to help them do that and within the regions to work with small business and to develop programs that will ultimately promote investment as well as, I might add, promote democracy. We're looking at a fourth region to begin later this year.
Page 18 PREV PAGE TOP OF DOC
Let me give you an example.
Chairman GILMAN. What region would that be?
Ambassador MORNINGSTAR. We're still in the process of selecting it. I could say where it will be most likely, but I would rather not until we make a final decision.
Let me give you an example of the type of activity that's part of the regional initiative that also really I think classically illustrates the Partnership for Freedom. In Novgorod, for example, in which the initiative I think is going very well, we have a program of partnership between the Citizens Democracy Corps (CDC) and the Small Enterprise Assistance Fund, which is sponsored by EBRD, in which CDC provides technical assistance, the Small Enterprise Assistance Fund provides equity investments. They work together to find candidates that can most likely succeed, provide the technical assistance, then provide the equity investment to create a successful investment. These are the kinds of activities that we need to push. These are the kinds of things that we are doing as part of the regional initiative.
Mr. PRESSLEY. Mr. Chairman, if I may just add.
Chairman GILMAN. Yes, Mr. Pressley.
Mr. PRESSLEY. The USAID is very active in the Regional Investment Initiative. In many ways it's a misnomer to just talk about investment because it's an entire community approach. The investment is being enhanced through working with those local governments, through those communities and through the non-governmental actors that are there to create the climate for investment so that the kinds of business arrangements that Ambassador Morningstar was describing can flourish and can have a real opportunity to grow.
Chairman GILMAN. We have received a communication from some of the leading citizens in Ukraine stating that on the eve of Ukraine's parliamentary elections, the crucial question at this juncture is who will lend Ukraine a helping hand, the West or the East. Then they also say that, although USAID cuts or lending deferrals may have some justification, the timing of such steps during Ukraine's parliamentary election campaign seems counter-productive to the stated goal of helping promote reforms in that country.
Page 19 PREV PAGE TOP OF DOC
Would you care to comment on that, Mr. Morningstar?
Ambassador MORNINGSTAR. Yes. I would repeat a lot of what I said before. We want very much to work out this issue with respect to the investment disputes with the Government of Ukraine. We are making every effort to do so. It is the language, the congressional language that forces the issue. It is the congressional language that says by April 30, that the Secretary has to make a specific determination that significant progress has been made. She has to make that determination in good faith. We all want to do the same thing, which is to create an improving and good investment climate that will allow for economic growth. I can understand the concerns that were raised in that article, but we are placed in a position right now where we don't have any choice but to make that determination one way or the other.
Chairman GILMAN. Mr. Pressley, how do State and USAID work with the projects that have been financed privately in the New Independent States by Mr. Soros?
Mr. PRESSLEY. We work closely with a number of foundations that are active in the former Soviet Union. We see this as a way to leverage resources. We have, for example, a university project in Kyrgystan, where the Soros Foundation is very active there. Our programs supplement and achieve synergy out of those programs. So I think it's a matter of taking advantage of the parallel, similar interests of other organizations and then making it happen as well as possible.
Chairman GILMAN. Do you provide matching funds to projects that are financed by Mr. Soros?
Mr. PRESSLEY. It varies project by project. We have no firm rule one way or the other. Matching funds sometimes imply some pari passu operation. It's more often we parallel fund.
Chairman GILMAN. Thank you.
I am going to ask unanimous consent that Congressman Rohrabacher be able to speak out of order due to his time constraints. Then we'll take two Minority Members in a row.
Page 20 PREV PAGE TOP OF DOC
Mr. Rohrabacher.
Mr. ROHRABACHER. Thank you very much, Mr. Chairman. I appreciate that courtesy. I have got a television appearance that I am doing on behalf of another Member, in fact, who is with the President in Africa.
Mr. Ambassador, I have a question. This is a request for information. I want you to know that this request is a very serious request and is not made just to be followed up on in 6 months. But I would like the information, and this is very important to the development of legislation that will be determined by this Congress shortly.
Would you please supply for the record a complete listing of all programs administered or funded by the U.S. Government which involve assistance to or purchase of goods and services from public or private sector entities in Russia? This would include that portion of our funding of IMF and World Bank that goes to Russian entities, cooperative sciences and technology programs, Nunn-Lugar assistance, and any other cooperative or joint activity involving U.S. tax dollars, personnel, or in-kind goods and services. Please provide the funding history and out-year projections for each of these programs, along with the current unobligated and uncosted balances for each year of the programs that they have been funded since their inception. I will give you a copy of that question.
As I say, this question is being asked in order to formulate some important legislation. You can imagine it's important by the magnitude of the question for information. With that, seeing as I have got 1 or 2 minutes here, let me just state that I am deeply concerned by intelligence reports that I am seeing that indicate that Russia and the Ukraine are involved with continued assistance of a nuclear and even conventional-type weapons to people who would be threats to the United States. Russian assistance, I keep seeing these intelligence reports, of continued Russian assistance to Iran, especially in the development of their missiles, and sales also from Russia to China of ballistic missiles and submarines and anti-aircraft destroying weapons systems, diesel submarines, et cetera.
Page 21 PREV PAGE TOP OF DOC
In addition, there are reports that Russia, Ukraine, and China are directly or indirectly involved in providing assistance to the development of Chernobyl-like nuclear power plants in Cuba. These are unacceptable. These things are totally unacceptable. I know that last year we had a vote on the House floor, in this Committee and on the House floor of an amendment that I pushed forward when they were dealing just with the sale of the Sunburn missile to Russia. It didn't get included in the end. The Administration maneuvered it out of the legislation. Perhaps that was a wrong signal to send to the Russians about our commitment.
But whatever the signal and whatever is happening, those things continue to happen. You can't put a happy face on it, I'm sorry. You are talking about a three-stage play and we're all going to this play. Well, we're being mugged on the way to the theater. The people doing the mugging are the ones who you are expecting us to sit down and enjoy the entertainment with. I am afraid if this continues, Mr. Ambassador, that there will be moves to cut off, totally remove the assistance programs that I am asking for details on. By the way, that is not the reason I am asking for those details.
Go right ahead.
Ambassador MORNINGSTAR. Can I just seek a point, just one point of clarification and then respond to your points. The detailed information that you are asking for, is that literally every program that we are doing in Russia or is it program relating to proliferation activities, science and technology?
Mr. ROHRABACHER. Everything that is spent in Russia.
Ambassador MORNINGSTAR. Literally everything that's been spent?
Mr. ROHRABACHER. I would expect that your office would have a grip as to what American monies are being poured into the former Soviet Union. We need to do an assessment of this. Please feel free to comment on the points that I made about helping with the nuclear reactors and the continued sale of weapons to America's enemies.
Page 22 PREV PAGE TOP OF DOC
Ambassador MORNINGSTAR. First of all, let me say a couple of things about it. First, obviously we share your concerns. Second, I can assure you that the State Department is working vigorously with respect to the issues that you talk about. I know that from the past Gore-Chernomyrdin Commissions. Under Secretary Holum is working very closely with respect to these issues. It is the highest priority of the Administration to work through these issues and it will obviously continue to do so.
With respect to Cuba, our activities are geared toward mothballing the Jaragua nuclear plant. We are watching that situation very closely. We don't have any specific information at this point which would show that they are actually continuing construction with respect to the plant.
Just the one point that I would like to stress and it's a distinction that I think is very important. There presently are restrictions in the Appropriations Act that relate to activities undertaken by the Government of Russia. I hope that however your opinions and feelings and other Members develop as to our assistance programs, that we can separate programs that relate to the Government of Russia and programs that relate to the private sector, and do the kinds of things that I was talking about with respect to the Partnership for Freedom program.
I don't think it would be particularly helpful over the long term if because we were concerned, which we are, with respect to the issues that you are talking about, that we eliminated exchanges, partnerships, working with small businesses, doing the kind of work that we are focusing on now that builds the constituencies that over the long term hopefully will make a difference. I just would please ask if we try to make that distinction as we look at these issues.
Mr. ROHRABACHER. When you compile this list for me, you might make that distinction.
Ambassador MORNINGSTAR. We will do that.
Page 23 PREV PAGE TOP OF DOC
Mr. ROHRABACHER. That's a fair request on your part.
Chairman GILMAN. The gentleman's time has expired.
Mr. ROHRABACHER. Thank you very much, Mr. Chairman. Thank you very much for letting me go out of order. I would appreciate it if my colleagues understand that.
Chairman GILMAN. At this time I ask unanimous consent that the question submitted by Mr. Bereuter, who can not be at our hearing today, be submitted into the record for an early response in writing from our witnesses. The question has to do with foreign investment in Kazakhstan.
[The information referred to appears in the appendix.]
Chairman GILMAN. We'll now recognize Mr. Martinez, followed by Mr. Hamilton due to our recognition of Mr. Rohrabacher out of order. Mr. Martinez.
Mr. MARTINEZ. Thank you, Mr. Chairman. The aid that goes to Moldova for the different things they are doing, is this a package of money and then they determine which programs they are going to implement? Or do they specifically request monies for certain programs?
Mr. PRESSLEY. If I may start, Mr. Martinez, we work very closely to set priorities. The needs of the country are discussed by our people in-country, and then we come up with a package of assistance that meets our mutual needs; our American strategic objectives in Moldova and the needs that they have articulated. We do not transfer funds to the Government of Moldova. These are American contractors and grantees who are working there to provide technical assistance or to provide the kind of support for grass root activities that we have described in that country. So our program isn't tied to the government and it isn't in a government-to-government agreement. It is done by these independent grant contractors and grantees.
Mr. MARTINEZ. The contractors then apply for the funds through——
Page 24 PREV PAGE TOP OF DOC
Mr. PRESSLEY. Through competition, through various ways in which we make the funds available to them.
Mr. MARTINEZ. Moldova is restructuring its tax system. That is a very important thing. Is that one of the higher priorities?
Mr. PRESSLEY. Indeed it is. The structural reform in Moldova is a very important component of the work that we have been doing there. We help them to privatize their state-owned enterprises as well as to create the kind of market-focused economy that will allow those enterprises to flourish as private companies. Tax is a very key, important part of that, as is a commercial code that supports these kinds of market operations.
Mr. MARTINEZ. Although it's not a part of the Republic of the former Soviet Union, I do have a question regarding the USAID program in Macedonia. A couple of weeks ago, Deputy Secretary of State Strobe Talbot visited Macedonia and signed an agreement committing the United States to provide economic aid to Macedonia. What will be the dissemination of that assistance? Is there a concrete program to encourage the growth of the private sector in Macedonia?
Mr. PRESSLEY. Very much so. The program is focused in basically two areas, economic development and democracy building. In economic development, we are looking at the development of business-related laws. We are supporting a private business resource center. We are helping commercial banks to provide lines of credit to small and medium companies. We are looking at micro lending. We are helping farmers to improve production. This is a package, again, that reinforces the different elements so that we can help them see the benefits of this kind of a market economy.
Mr. MARTINEZ. Thank you very much.
Ambassador MORNINGSTAR. Can I just briefly supplement Mr. Pressley's answer with respect to Moldova, because I think Moldova gives the classic example as to how our aid program should work. In Moldova, they have undertaken a massive land titling program in which the Government of Moldova through its President, President Lucinschi, made the decision that they want to see every farmer in Moldova own their own piece of land. He forwarded that request to us. The embassy strongly supported it. USAID and our office strongly supported it. That project is ongoing now. I actually have a framed land title certificate in my office. It is one of the programs that is working well and I think that we should point to it with pride as to how a program should work.
Page 25 PREV PAGE TOP OF DOC
Mr. MARTINEZ. Thank you.
Thank you, Mr. Chairman.
Chairman GILMAN. Thank you, Martinez.
Mr. Hamilton.
Mr. HAMILTON. Mr. Chairman, thank you for holding this hearing. I will have some questions to submit, if we may do that. I want to recognize George Ingram. As I understand it, he is the Deputy Assistant Secretary at USAID and served on the Committee staff for many years with great distinction. George, as I understand it, will now have responsibility for the NIS and we look forward to working with him. Mr. Pressley, I guess, moves onto other responsibilities. We have appreciated your work as well.
I haven't had a chance to talk to anybody expert on Russia since they changed the government over there. So what can you tell us? What is the impact? I sat down with Chernomyrdin and talked with him for 3 hours 2 weeks ago and didn't have the slightest idea that he was going to be kicked out. How does this affect U.S. relations with Russia and specifically, how does it affect the USAID effort? Chubais has been kicked out. Chernomyrdin has been kicked out. Those people have generally been associated with support for reform. How does this affect things for us?
Ambassador MORNINGSTAR. I can begin to answer. Of course we have to wait and see how things unfold over the next several weeks. We do believe and have been assured by appropriate representatives of the Russian Government, including Foreign Minister Primakov in his meetings with Secretary Albright earlier this week, that there will be continuity. That commitments that the Russian Government have made will continue. We have no reason to doubt that.
Mr. HAMILTON. Yeltsin said that he wanted a new impetus toward reform.
Page 26 PREV PAGE TOP OF DOC
Ambassador MORNINGSTAR. Right.
Mr. HAMILTON. In his statement. That's good, isn't it?
Ambassador MORNINGSTAR. Yes. I was going to get to that. Chubais, yes, Chubais will no longer be part of the government. There are strong reformers that continue within the government, very strong reformers.
Mr. HAMILTON. Do you know anything about the new acting Prime Minister?
Ambassador MORNINGSTAR. We have had experience with Kiriyenko over the last year. I have met him. I haven't dealt with him in an extensive way. Members of our Administration have dealt with him in his capacity as Minister of Fuel and Energy and have been very impressed with him. He does certainly have reform credentials. He's closely associated with——
Mr. HAMILTON. Do you think the changes in the Russian Government are a plus for reform?
Ambassador MORNINGSTAR. We'll have to see. I would like to take President Yeltsin at this point at his word, that he wants, as you said, an increased impetus toward reform. We think that there are officials within the government that can carry that through. We hope very much that that will happen.
With respect to our assistance program about which you asked, that again the great majority of our program is directed toward the regions and toward activities that are looking toward the long term. Those activities need to continue, whoever is in government. We do think obviously that a pro-reform government will help that along because that will allow local governments to do more in order to attract investment.
Mr. HAMILTON. I was looking at some figures on per capita NIS assistance. What you find there is rather remarkable. We are giving $25 per capita in the Fiscal Year 1998 budget to Armenia. We are giving $16.5 per capita to Georgia. We are giving $4.34 per capita to Ukraine. We are giving $.86 per capita to Russia. Now the way I see things there, Russia is the key country. What happens in the U.S.-Russian relationship is very important. It is important in terms of our foreign policy. It's important in many different ways. But our aid program is very heavily skewed away from Russia if you look at it on a per capita basis.
Page 27 PREV PAGE TOP OF DOC
It just seems to me that's not the right priority. You have got 150 million people in Russia. You have got 3 million people in Armenia. You have got 6 million people in Georgia. Russia is three times larger than Ukraine. Obviously every country is important, every person is important, but the whole aid program is skewed against Russia.
Ambassador MORNINGSTAR. I couldn't agree with you more. You know, why do we do what we're doing? We do what we are doing with respect to assistance because we want to promote ultimately our own national interest and our own national security. If destabilization were to take place, where would our greatest threat come from? The answer is obvious. The answer is obviously Russia.
We need to do whatever we can do to help the transition to a market democracy in that country. That is why we keep asking for increased funding for Russia. Again, not funding to assist the Government of Russia, direct payments to government ministries or whatever. But to create the climate within the country at the grassroots level and throughout that will create a middle class, that will create a state, allow the people——
Mr. HAMILTON. Are earmarks a big problem for you?
Ambassador MORNINGSTAR. It certainly doesn't help. I'll give you an example of how it worked with respect to this year's funding. Congress very generously increased our appropriation from $625 million to $770 million. Included in that were earmarks to Ukraine, Armenia, Georgia, and the regional Caucasus fund. I am not criticizing the amounts of money to those countries. It is a question as to what the amounts ought to be relative to the total assistance package.
Mr. HAMILTON. My impression, Mr. Ambassador, is that the earmarks are seriously distorting American foreign policy. Our foreign policy interest is Russia. Russia is the important country. What happens in Russia is going to make the difference, not what happens in Armenia, to be very blunt about it though we want to help the Armenians. Not what happens even in Ukraine. What is important is what happens in Russia. The American foreign policy interest is to put the money into assistance for reform in Russia. That's it.
Page 28 PREV PAGE TOP OF DOC
Now I go much further than you do. I think these earmarks are distorting the American national interest. That's what I think.
Ambassador MORNINGSTAR. I agree with that.
Mr. HAMILTON. And I think the earmarks are not just not helping. I think they are an enormous obstacle. That's what I think.
Ambassador MORNINGSTAR. Let me give you a numerical example. As a result of the earmarks, the budget for Russia for Fiscal Year 1998 under the FREEDOM Support Act is $135 million. We have been celebrating because that's up from $95 million in 1997. It's still a ridiculously low number. That is why in the 1999 request we are asking to double that again to do the kinds of activities.
Mr. HAMILTON. My time is expired. But let me just ask, now that Chernomyrdin is out. The Gore-Chernomyrdin channel has been the most important bilateral channel we have had here. What is going to replace that?
Ambassador MORNINGSTAR. Well, we'll see. We have been assured again by Foreign Minister Primakov at his meetings with Secretary Albright that it's the intention to continue the binational commission. Assumedly the next Prime Minister of Russia will be the interlocutor. We would expect that to be the case.
Mr. HAMILTON. Have they indicated that?
Ambassador MORNINGSTAR. As far as I know, they haven't said specifically that it would be the Prime Minister or who the Prime Minister would be. They have said that we expect the binational commission to continue. We have no reason to believe that would not be the case. So it's going to be critically important that the commission continue, that that commission be a basis for dialog between the Vice President and the country, of this country and whoever the Prime Minister is. And that we also have the institutional framework that is set up through the commission to carry on critically important activities with the Russians.
Page 29 PREV PAGE TOP OF DOC
Mr. HAMILTON. Thank you.
Chairman GILMAN. Thank you, Mr. Hamilton. I am going to ask Mr. Campbell to preside for the remainder of this hearing.
Without objection, after this hearing is concluded, the Committee will submit to our witnesses questions to be expeditiously answered in writing. Questions will be submitted by the chairman, including any questions provided by the Ranking Member on behalf of the Minority.
Mr. Campbell.
Mr. CAMPBELL. [presiding] Mr. Chairman, thank you. I yield to myself 5 minutes.
The first question I would pursue would be the same as Mr. Hamilton. I think his comments on earmarks are correct. I understand that you are sympathetic to that, both gentlemen, but Mr. Morningstar responded. Nevertheless, the overall budget would be going up if the Administration had its request. So getting rid of the earmarks is not enough, although I do think that's advisable. This is unfair and so you are within your rights to say it's unfair. But I would like to know if you have an idea of where the money might come from. That is my first inquiry. I hope to get to four.
The second would be oil and gas in the Caspian. The third would be the Religious Persecution Act that this Committee passed yesterday, to know what its consequences might be. Last, if you had any sense of which countries we are giving money to directly rather than through agencies. I would like to know which ones we have sufficient trust in in the NIS that we can deal with them government-to-government. Those are my four inquiries. I am pleased to take whoever wishes to respond to them. The first is do you have a suggestion where you would get the additional money over and above getting rid of the earmarks, which is an internal issue?
Ambassador MORNINGSTAR. I don't think I am in a position to make that recommendation or make that determination.
Page 30 PREV PAGE TOP OF DOC
Mr. CAMPBELL. Do you know what the Administration might be thinking and how about that for a question. Do you know what your bosses might be thinking of?
Ambassador MORNINGSTAR. I would have to refer that to our legislative area within the State Department to talk to you about that. That is something that has to be looked at from an overall basis and not from the specific area that I am involved in.
Mr. CAMPBELL. I put to you, as you well know, Ambassador, that I am most sympathetic to your activities and our government's activities in the area, but it's a fiscal question, and so we would have to get some sense of priorities. Other areas may have to be cut if we increase our support.
Ambassador MORNINGSTAR. I understand that.
Mr. CAMPBELL. Second was oil and gas in the Caspian. Go ahead, if you wish to consult counsel.
Ambassador MORNINGSTAR. Go ahead, I'm sorry.
Mr. CAMPBELL. I never interfere with somebody talking to their attorney. I would like to promote that.
Ambassador MORNINGSTAR. The only point to the first question is of course the President's budget has stated the priorities. I realize your question is if the President's budget for some reason in total can't be approved——
Mr. CAMPBELL. Exactly. What countries would you take from to give to, and you can't answer?
Ambassador MORNINGSTAR. It's unfortunately not a question that I can answer.
Mr. CAMPBELL. Well maybe some day when you are Secretary of State or President.
Oil and gas in the Caspian? Maybe this could go to Mr. Pressley as well as Ambassador Morningstar. Are we working in that field in the NIS, if you can tell me about that.
Page 31 PREV PAGE TOP OF DOC
Mr. PRESSLEY. Yes. Indeed we are. The countries that are the oil-rich countries or that are on the pipeline route are currently trying to set up the kinds of regimes that will enable production-sharing, enable foreign oil companies to come in and help them extract this wealth. But in order to do that, they need the kind of legal and regulatory regime that is fair to them and to the companies that are involved. That is the area where we have been of assistance to them. We have through our technical advisors helped them to set up national working groups that are looking at the package of laws and regulations that they would need to have in place in order for an American oil company to come in and strike the kind of deal that would benefit them and the oil company.
Ambassador MORNINGSTAR. Your question, Mr. Campbell, also relates to the earmark issue, ironically or maybe not ironically. To Mr. Hamilton's questions, we talked about the effect of the earmarks on our assistance to Russia and how with the increase we were able to increase the amount of money for Russia from $95 million to $130 million, which certainly we believe is too low. But there is another aspect to it. The earmarks made it impossible, given what we did in Russia, to put any increased monies into the Central Asian countries of the former Soviet Union. One of the primary purposes of getting the budget increased from $770 million to $925 million would be to allow for significant new monies in Central Asia and in two areas, in the oil and gas area and helping them to develop those resources, but also democracy-related funding in those countries, because the more we do with respect to exchanges and partnerships in those countries, the more likely that we'll be able to increase democracy in those countries.
Also, I might add that it will be important to put more money into Azerbaijan for many of the same reasons. Of course the Administration does support the repeal of section 907.
Mr. CAMPBELL. I will drop the fourth question and just now ask the third. That will be my last before yielding to the gentleman from Arizona.
Page 32 PREV PAGE TOP OF DOC
The Religious Persecution Act that passed this Committee yesterday, I know the Administration's point of view and they testified to that, Mr. Eizenstat did. From your perspective, would this have affect on Russia?
Ambassador MORNINGSTAR. If you'll give me a moment, I'll give you an answer on that.
Mr. CAMPBELL. Sure. Mr. Pressley, do you have anything to say on it? If not, I'll just wait.
Ambassador MORNINGSTAR. Can I just again, a point of clarification? You are talking about an act that was passed within this Committee?
Mr. CAMPBELL. That's right.
Ambassador MORNINGSTAR. Yesterday. As opposed to the Russian law that was passed.
Mr. CAMPBELL. Oh yes. I'm sorry. No, I am speaking about what we did yesterday.
Ambassador MORNINGSTAR. The truth is that I am not familiar enough with what was passed to give you an answer on that.
Mr. CAMPBELL. All right. That's a fair answer.
Mr. Pressley, are you familiar with what we did yesterday?
Mr. PRESSLEY. Unfortunately, not either. I would just note that we have programs in Russia that are designed to help with the human rights situation there. There are non-governmental organizations that are very active in that area. That is the kind of thing that we would like to see continue.
Mr. CAMPBELL. I direct both of your gentlemen's attention to this. I voted no, at least one other colleague who is present here today also did. That was out of a concern that we might be administering our good will in a way that actually is counterproductive. If this is the case in Russia, it would help if you made that case to other Congresspersons as this goes forward. If it's not the case in Russia, then tell us too. That would be useful to know.
Page 33 PREV PAGE TOP OF DOC
The gentleman from Arizona, 5 minutes.
Mr. SALMON. Thank you, Mr. Chairman. Actually the question that you asked I was going to kind of piggy-back on that. Ambassador Morningstar, I think, made reference to a law that the Russian Duma passed not so long ago that many in our country, myself included, believe was a major step backward for Russia in recognizing, I believe, was it only three official religions in Russia, excluding other religions? Nobody knows for sure exactly what the consequences of the passage of that law will do to other existing religions in Russia today. I know my religion has missionaries proselytizing over there. In fact two of them were kidnapped. The State Department was very very helpful. I know I worked with them on securing the ultimate release of those missionaries. But I know many in the religious community are very very concerned about what the upshot of that will be.
Mr. Campbell, in regard to your question, depending on how that law is interpreted, Russia could very much be impacted in my opinion, by the Religious Persecution Act that we passed yesterday.
Mr. CAMPBELL. If the gentleman would yield.
Mr. SALMON. Yes. I do yield.
Mr. CAMPBELL. It was with that in mind I put the question. I would thus alert our Representatives most concerned about helping the Russian Government that we might very well face a termination of funding to agencies associated with administering that act. I yield back.
Mr. SALMON. The law is very rigid. I think that's probably why both he and I voted against it. We probably shouldn't get into another debate on that today. But I would encourage you, as well as the Chairman has, to look into that law to see what the impacts would be.
Along those same lines, I am concerned, and I know you are probably not going to be able to answer all my questions in the time allotted, but maybe if you could respond in writing at a later time I would appreciate it. I am concerned as to the Russian Duma's vote and Boris Yeltin's signature on the ultimate law and what that will do to freedom of religion in that region.
Page 34 PREV PAGE TOP OF DOC
I am also concerned with the comments Alexander Lebed made regarding certain religions, very discriminatory comments that he made. He said about my religion that they were scum. They were a cult. He chided a reporter for speaking like a Jew. He has made some very inflammatory anti-religious bigoted comments. I am wondering what his position right now is in the Yeltsin Administration, what we are to expect from him.
I am very concerned about comments that Boris Yeltsin personally made in the heated exchange during the Iraq controversy when he said that if America attacks Iraq, this could and probably will start World War III. I know that those statements seem to be very inflammatory. The press played them over and over and over. It doesn't sound very much like an ally speaking when he makes inflammatory comments like that. I know that they were not very supportive of our position. Since we are giving them so much money and so much assistance, I think it would be right to expect a little bit more cooperation from them when we need international support and unity. I have a big concern about that.
I also would request the same information that Mr. Rohrabacher requested of you. I don't know why he is requesting it, but I have heard some reports that rather disturb me about money being disseminated to that region that's not necessarily getting to the right places. With reports that I have heard about organized crime and many who are involved in organized crime infiltrating the government in that region, for lack of a better term, I have heard them referred to as the Russian mafia and their actual exportation to this country as well as other regions, other areas of Europe. I am very concerned about how the monies are spent and whether or not they are indeed getting to the right places. I am interested in your comments.
I probably used all my 5 minutes, but those to me are questions that have plagued me for a long time regarding this region of the world. I just want to make sure that when we send a dollar over there it's going for the right things. Thank you.
Ambassador MORNINGSTAR. Certainly I would echo what you are saying. We want to make sure the money is going to the right places. Let me just briefly respond to that.
Page 35 PREV PAGE TOP OF DOC
I have not heard of, do not know of any instances of money literally, U.S. money finding itself in the hands of people to whom it was not intended. It should be understood that virtually all of our programs are literally that program money goes to organizations that are doing the work. We do not provide money directly to the Russian Government. None, zero goes directly to the Russian Government or to sub-governments. Money goes to programs. Money does go to entrepreneurs from the standpoint of loans that are monitored and constantly monitored. Money goes to training, but not directly into the pockets of people. I can't guarantee that 100 cents out of every dollar has been spent effectively, but I don't think that that is a significant problem. I certainly hope not.
But on the other issues that you raised, the so-called religious freedom law, we're obviously very concerned about that too. That was a major concern that Vice President Gore raised with Prime Minister Chernomyrdin all through last summer and fall. President Clinton talked about it specifically on numerous occasions with President Yeltsin. We were not happy when the law was passed.
There is legislation presently in effect that requires the President to make a certification to Congress, it would be sometime in May, certifying that that law is not being implemented in a way that is discriminating against religious groups. If he can not make that certification, that would eliminate all assistance to the Government of Russia. Again when I say to the Government of Russia, that means programs that help the Government of Russia, as opposed to monies directly funneling into their hands.
There are regulations that have been finalized that have not yet been officially promulgated. We are monitoring the situation very closely to look at the Government of Russia's performance with respect to respecting religious freedom and living up to commitments that both Yeltsin and Chernomyrdin made that this law would not discriminate.
It is true we do receive, and I'm sure you receive reports from local officials that the law sometimes has been used as justification by local officials to harass minority religious organizations. We take those complaints very seriously. Our embassy works with those complaints and we'll be watching it very closely.
Page 36 PREV PAGE TOP OF DOC
Mr. CAMPBELL. Mr. Ambassador, let's pause for a moment.
Mr. Pressley, if you could limit your answer.
Mr. PRESSLEY. Very briefly.
Mr. CAMPBELL. I owe the time to Mr. Fox next.
Mr. Pressley.
Mr. PRESSLEY. I would like to harken back to Mr. Rohrabacher's comment. The story in Russia and the former Soviet Union is not some light entertaining comedy. It is a very serious drama. There is a struggle going on there. The religious freedom issue is one of the key ones. We have worked hard to be sure that our assistance is supporting those people who are on the right side of that struggle. That is the kind of assistance that we would want to continue.
Also on your second point or your point about where the funds go. One of the tenets of U.S. Government, USAID assistance is that we maintain a presence in the country. We have a USAID mission there. We have inspectors and auditors and program managers who look at this program very carefully and take their responsibilities very seriously that this is U.S. taxpayer money that must go to the right places. Thank you.
Mr. CAMPBELL. The gentleman from Pennsylvania, Mr. Fox.
Mr. FOX. Thank you, Mr. Chairman. The assistance given to the Ukraine from the U.S. Government has as its main prerogative the intent of supporting reform efforts in a wide variety of issue areas. In the past 3 years, Ukraine has received an earmark of U.S. foreign assistance in the amount of $225 million. The current fiscal year, funding is subject to the certification by the Secretary of State by April 30 that Ukraine has progressed in its economic reforms and achieved substantial progress in resolving U.S. business disputes. Reform in each area is vitally important in continuing Ukraine's transition to a stable parliamentary democracy with a free market economy. Acknowledging this, former ambassador to Ukraine, William Green Miller stated recently at a roundtable discussion that the United States has the capacity to continue the levels of support it has given in the past, and in fact should look to increase those levels in order to ensure successful outcome.
Page 37 PREV PAGE TOP OF DOC
I would ask in your capacity as Ambassador at Large to the NIS for assistance programs, what recommendations have you provided Secretary Albright to justify the certification process?
Ambassador MORNINGSTAR. First of all we have not at this point made a recommendation, because as I stated earlier during the proceedings, we are working very hard and very diligently with the Ukrainian Government to address the issues of these investment disputes in the hope that she will be able to make the certification. We don't have an answer at this point, but we want to be able to do everything possible to support Ukraine.
You know there should be no misunderstanding. Ukraine is a very important country in that part of the world. We have as a very high priority the development of Ukraine as a market democracy, as an independent country, as a prosperous country. We want to do everything possible to help them. What we need to do is to work with their government to improve that investment climate so that investment can increase. They just don't have enough investment in that country. One of the principal reasons is because of the investment climate. We have to create the climate for economic growth. We're going to do everything we can to help push them along that road.
As I said earlier, the issue that we have on April 30 is a congressionally-mandated issue because of the language, and because of the language in the statute, the Secretary of State has to in good faith obey the law and make a good-faith determination. We are working as hard as we can to allow her to make that. Hopefully with a result that Ukraine will continue to be supported at the levels it has. But we can't make a guarantee of that at this point.
Mr. FOX. I would agree with your assessment of the importance of Ukraine to the United States and the United States to Ukraine. Would you agree with former Ambassador Miller's position that the United States has within its capacity the ability to increase the levels of support for Ukraine? If so, in what form?
Page 38 PREV PAGE TOP OF DOC
Ambassador MORNINGSTAR. You know, again everything is relative. With respect to a budget of $770 million, $225 million is a lot for Ukraine. In the abstract, certainly we can spend $225 million effectively in Ukraine. If the budget for the NIS was $3 billion, we could spend a lot more. So it is all relative to what the total budget is. But the main point is to use whatever we have to help them improve the investment climate and advance economic reform.
Mr. PRESSLEY. Mr. Fox, may I just note that this is why we have focused so hard on this Partnership for Freedom idea. If we can direct our program to those activities that have the greatest impact on the people so that they will be champions for change and as they make their votes, and as they make their voice heard, Ukraine will be able to move forward in the ways this certification addresses, then we will be able to use our funds well.
Mr. FOX. Thank you very much. Thank you both. Thank you, Mr. Chairman.
Mr. CAMPBELL. Thank you, Mr. Fox. The gentleman from California, Mr. Sherman.
Mr. SHERMAN. Thank you, Mr. Chairman. I have many questions. I would ask unanimous consent to be able to submit written questions for the panel and seek an expedited response. There are also a number of questions I will go through rather quickly.
Mr. CAMPBELL. Without objection, the request will be assumed as being made through the Ranking Member. Without objection.
Mr. SHERMAN. Thank you, Mr. Chairman. I first want to turn our attention to the Caucasus. Congress allocated $12.5 million for Nagorno-Karabakh for Fiscal Year 1998, and indicated that the funds should be spent forthwith. It is my understanding that only $2.3 million is in the pipeline so far. I hope that you will get back to me in writing indicating how expeditiously the rest of those funds would be expended to meet the needs of those in Nagorno-Karabakh.
Page 39 PREV PAGE TOP OF DOC
Another concern I have is that while we have distributed some $135 million to date in aid to the needy of Azerbaijan, there is some concern that some of that $12.5 million that is supposed to go to Nagorno-Karabakh would instead be diverted to Azerbaijan on the theory that Azerbaijan has been affected by the war involving Nagorno-Karabakh. I would like your assurance that the $12.5 million will not only be spent forthwith, but that it will be spent for people in Nagorno-Karabakh.
Finally, I know that the money is to be spent through NGO's, not U.S. organizations. I would like the Administration to describe the types of NGO's that can apply for USAID-funded projects in Nagorno-Karabakh, whether there are any particular restrictions on what types of organizations can apply.
I would like to shift our attention now to the unfortunate cooperation between Russia and Iran, particularly in the area of missile technology. Intelligence efforts reportedly show an unabated flow of missile technology. I wonder whether the recent change in the Russian Government is likely to be helpful or harmful to the efforts of the Russian Government, A) to be genuine in their promises, and B) to effectuate their promises to control this flow of technology.
Ambassador MORNINGSTAR. Perhaps I can address the last question. First of all, there were extensive discussions during the Gore-Chernomyrdin meeting. There have also been extensive discussions prior to that among representatives of our government and the Russian Government with respect to a whole question of transfer of missile technologies.
It was made very clear publicly after that meeting that the Prime Minister, Chernomyrdin, stated that the Russian Government was committed to stop or make sure that missile technology was not transferred to Iran. There was a commitment made a couple of months earlier in a decree that such would be the case as well.
We have been assured through the meetings between Foreign Minister Primakov and Secretary Albright, as publicly reported, that the commitments made by the Russian Government will be upheld. Obviously this is something that we have to continue to watch very closely, to work very closely with them. They have now agreed with us that we can work with them to set up more effective export controls. That should help. We realize that we have a major responsibility in watching to make sure that such technology transfers don't take place. They have made the commitments and we have to work with them to see what happens. There is certainly no indication that the change in government will change their view on it.
Page 40 PREV PAGE TOP OF DOC
Mr. SHERMAN. Does the Administration support the Iran Missile Proliferation Sanctions Act, and has that act been useful in your diplomatic dialog with the Russian Government?
Ambassador MORNINGSTAR. Fortunately that is an area that I do not have responsibility for. So my answer probably wouldn't be terribly helpful to you. I can tell you that no decision has yet been made on the sanctions issue. We can get back to you with further information from the appropriate people if you would like.
Mr. SHERMAN. I would appreciate a written response to that question.
Mr. CAMPBELL. If the gentleman will suspend. I am informed that Mr. Wilson of our State Department is available, if he wishes to speak to this subject. If you wish, we could ask him to come forward.
Ambassador MORNINGSTAR. Mr. Wilson has said that he has nothing to add at this point.
[Laughter.]
Ambassador MORNINGSTAR. But thank you, Mr. Gage [Committee staff] for informing the chairman that he is available.
Mr. CAMPBELL. There is something going on here that I am not completely sure I know. I yield back.
Mr. SHERMAN. I trust that his ability to express himself in writing will exceed his current ability to express himself orally.
Mr. CAMPBELL. Thank you, Mr. Sherman.
Without objection, a statement provided in writing by Mr. Rohrabacher will be inserted at the end of the record of this hearing. The statement merely formalizes the points made by Mr. Rohrabacher earlier.
Page 41 PREV PAGE TOP OF DOC
[The prepared statement of Mr. Rohrabacher appears in the appendix.]
Mr. CAMPBELL. This meeting of the International Relations Committee is concluded.
[Whereupon, at 11:37 a.m., the Committee was adjourned, subject to the call of the Chair.]
A P P E N D I X
Insert "The Official Committee record contains additional material here."