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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

 
       U.S. POLICY TOWARD RUSSIA, PART III: ADMINISTRATION VIEWS

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            October 19, 1999

                               __________

                           Serial No. 106-91

                               __________

    Printed for the use of the Committee on International Relations

                    U.S. GOVERNMENT PRINTING OFFICE
63-831 CC                   WASHINGTON : 2000

                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVE CHABOT, Ohio                   EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
    Carolina                         ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE RADANOVICH, California        JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
          Kathleen Bertelsen Moazed, Democratic Chief of Staff
              Mark Gage, Senior Professional Staff Member
                    Marilyn C. Owen, Staff Associate

                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page

The Honorable Strobe Talbott, Deputy Secretary, U.S. Department 
  of State.......................................................     8

                                APPENDIX

Prepared statements:
The Honorable Benjamin A. Gilman a Representative in Congress 
  from New York and Chairman, Committee on International 
  Relations......................................................    40
The Honorable Strobe Talbott.....................................    42

Additional Material:
Question for the Record, submitted by The Honorable Earl Pomeroy, 
  a Representative in Congress from North Dakota.................    51
Response to Question for the Record raised by Representative Earl 
  Pomeroy, answered by letter dated November 8, 1999 (with 
  attachments) from The Honorable Barbara Larkin, Assistant 
  Secretary, Legislative Affairs, U.S. Department of State.......    52
Attachments to Letter from The Honorable Barbara Larkin:.........
    (1) Letter directed to The Honorable Gennadiy Nikolayevich 
      Seleznev, Chairman of the State Duma of the Russian 
      Federation, Moscow, dated September 30, 1999, from The 
      Honorable James F. Collins, United States Ambassador, 
      Moscow, Russia.............................................    54
    (2) Letter directed to His Excellency Sergey Vadimovich 
      Stepashin, Prime Minister of the Russian Federation, 
      Moscow, dated June 29, 1999, from The Honorable James F. 
      Collins, United States Ambassador, Moscow, Russia..........    56

       U.S. POLICY TOWARD RUSSIA, PART III: ADMINISTRATION VIEWS

                              ----------                              

                       TUESDAY, OCTOBER 19, 1999

                  House of Representatives,
              Committee on International Relations,
                                           Washington, D.C.
    The Committee met, pursuant to notice, at 10 a.m. In Room 
2172, Rayburn House Office Building, Hon. Benjamin A. Gilman 
(chairman of the Committee) Presiding.
    Chairman Gilman. The Committee will come to order.
    Over the last 2 years, our Committee on International 
Relations has held a number of important hearings concerning 
developments in Russia. Looking back over the testimony we have 
taken in those hearings, particularly those of the last 2 
weeks, I believe that we have to make several conclusions of a 
serious nature, conclusions that should persuade us that a 
thorough reexamination of our current policy toward Russia is 
now warranted and long overdue.
    First, it is my belief that it is time for an accounting by 
Russian officials of their lack of any real action over the 
past few years in the face of the fantastic and growing 
corruption in their country. Given estimates that anywhere from 
$100 billion to $500 billion in Russian moneys have been 
siphoned out of the Russian government budget and the Russian 
economy, that accounting is long overdue.
    A sincere and thorough accounting might readily find that 
the highest officials in the current Russian government, 
including those in the Kremlin and in the Russian security and 
police agencies, are themselves culpable in this massive 
thievery. Still, our nation ought to press for such an 
accounting, because we need to show the Russian people by our 
actions, not just our statements, that we as a nation don't 
condone this kind of corruption.
    Second, it is time to begin an exploration here in our 
nation of where that Russian money has gone. One of our 
witnesses in a recent hearing, a retired analyst with the U.S. 
Central Intelligence Agency, has speculated that much of that 
money may have come to rest here in our own nation.
    Whether such an exploration is carried out by our House 
International Relations Committee or by our House Banking 
Committee, which has jurisdiction over international financial 
issues, a thorough examination of that flow of money should be 
considered. If such huge amounts of Russian money have been 
siphoned, stolen or laundered, with much of it perhaps having 
ended up in some of our own banks, investments and real estate, 
do we dare make a complacent assumption that those who have 
arranged that thievery will not put their financial power to 
use here in America in ways we would not approve?
    Third, it would appear that loan funds provided by the 
International Monetary Fund, particularly the almost $5 billion 
tranche provided in July 1998, may well have been diverted, 
through redemption of Russian bonds, to benefit Moscow's 
``tycoons.''
    Fourth, even if IMF loans are not being diverted in Russia, 
they are just replacing, and only in part, moneys that are 
disappearing from the Russian government budget. In light of 
these facts, while we can and should audit IMF funds and while 
we might even just transfer them from one account to another 
without ever sending them to Moscow, we should understand that 
if the Russian government is increasingly insolvent due to the 
incompetency, or worse, of its officials, we are simply 
hastening the day when Russia may default on its IMF 
obligations by continuing to provide those loans.
    Finally, if current trends continue in Russia, it is highly 
unlikely that we will see the stability in that nuclear-armed 
country that both Democrats and Republicans support here in our 
own nation. The signs of deterioration are evident in Russia, 
including impoverishment of large numbers of Russians, 
epidemics, growing anti-Semitism and possible fascist 
movements.
    Certainly, those trends alone should lead us to re-examine 
our current policy toward Russia, but the massive corruption in 
that country requires it, in my view. Let me note that, over 
the past 3 years, our Committee has held several hearings 
during which we have asked dozens of witnesses to share their 
insights on our relationship with Russia. Many of those 
witnesses have raised warning flags about our policy and 
whether it has actually been achieving what we would like to 
achieve in Russia and adequately serving our own nation's 
interests with regard to that important country.
    I think it is clear that, where the Yeltsin government in 
Moscow has had a shared interest with us to see something 
happen, such as to ensure the denuclearization of the States 
that border Russia, it has worked diligently to support such 
objectives. However, where that government has interests that 
are starkly at odds with our own nation's objectives, such as 
Russia's support for the ugly dictatorship of Alexander 
Lukashenko in Belarus, or the obvious, on-going proliferation 
of dangerous Russian weapons technology to Iran, our current 
policymakes little, if any, progress.
    Some observers now question, in fact, whether progress 
toward democratization in Russia is as substantial as we would 
like to believe and whether elections there have resulted in 
more of a facade of democracy than in a growing accountability 
of those elected to the people who have elected them.
    In my capacity as Chairman of our Committee, I have shared 
with the President and top Administration officials over the 
past few years my concerns regarding the direction of our 
policy toward Russia and what our policy has actually been 
achieving. Let me make one thing clear. No one disagrees that 
we need to engage with Russia. But many of us have for some 
time now questioned how well our current policy of engagement 
with Russia is working. Raising such questions does not make 
one an isolationist or a partisan.
    Such questions have been raised by Members of this 
Committee for some time now, in the hearings I have mentioned 
as well as in past letters written to the President and in 
opinion pieces published in our major papers. In particular, 
the fact that the House passed the ``Iran Non-Proliferation Act 
of 1999'' to establish sanctions for Russian proliferation to 
Iran by a unanimous vote of 419 Republicans and Democrats just 
one month ago, ought to clearly show that there is a bipartisan 
concern over our current policy toward Russia.
    Finally, let me note that it is unlikely that a partisan 
approach is behind the retired Foreign Service and Central 
Intelligence Agency personnel who have alleged in recent months 
that our Administration has mishandled our policy toward 
Russia.
    This morning our Committee is pleased to welcome Deputy 
Secretary of State Strobe Talbott, who represents the 
Administration's views on our policy toward Russia, and who 
will hopefully respond to such allegations by former personnel 
of our Foreign Service and the CIA. Mr. Talbott has been the 
``point man'' on the United States' policy toward Russia since 
early 1993, serving first as the State Department's Ambassador 
at Large for Russia and the other former Soviet Republics, 
serving as well on the National Security Council's Interagency 
Group on Russia, and supporting the bilateral process of the 
so-called ``Gore-Chernomyrdin'' Commission.
    After assuming his current post of Deputy Secretary of 
State, Mr. Talbott has remained heavily engaged in the conduct 
of policy toward Russia, as evidenced by the very frequent 
meetings that he has had recently with top Russian officials.
    We are pleased, Mr. Talbott, to have you join us this 
morning, and I would like now to recognize our Ranking Minority 
Member, Congressman Gejdenson, for any opening remarks he might 
care to make at this time. Mr. Gejdenson.
    Mr. Gejdenson. Thank you, Mr. Chairman; and it is great to 
have Secretary Talbott here with us. I think that anybody who 
assumed that the transition from the Soviet totalitarian 
government to a democratic and free society would be an easy 
one had no sense of history or knowledge of it.
    What we have gone through here is an unprecedented 
historical transformation. A totalitarian government with a 
centrally run economy is in the process of trying to transition 
to a democratic society, one with a free market and democratic 
institutions. I think all of us understood this would be a 
difficult and challenging road, but we have some tremendous 
successes.
    We have deactivated over 1,500 nuclear warheads, destroyed 
300 missiles, and we now have the Ukraine, Kazakhstan and 
Belarus as nonnuclear nations. I agree with you, Mr. Chairman, 
the situation in Belarus is a distressing one. Think how much 
more distressing it would be to be viewing Mr. Lukashenko today 
if he still had nuclear weapons.
    The advancement of human rights and the promotion of basic 
freedoms and press freedom, travel freedom, and even elections 
are now routine in much of what had been the Soviet Union and 
Russia. These aren't modest achievements when you think about 
one of the few countries on the European continent that had no 
history of democratic institutions or civil society.
    American bilateral aid, by and large, 98 percent of it 
spent on American goods and services, has begun to build that 
civil society using our resources to build a civil code, a 
criminal code, and trying to help develop a legislative 
process, transparency in Russian capital markets, enacting 
policies that could fight money laundering and corruption. 
These battles will go on for some time.
    When we take a look at where we are today and where we want 
to go, the answer is clear. We don't want to go back to where 
we were with Russia. We don't want the kind of confrontation 
that could cost us billions of dollars and many lives, or a 
return of the Cold War which had some very hot elements to it. 
We want to move forward in trying to include Russia in a 
civilized society, helping them combat crime and corruption, 
trying to deal with issues of nonproliferation, regional 
threats and electoral reform.
    We at the end of World War II spent $90 billion in 5-years 
on the Marshall Plan, trying to save Western democracy. The 
billions that we have spent on Russian are far less than that 
in today's dollars. Money is not the only answer here, but 
there is no country in Europe, in my opinion, that is either a 
greater challenge or more important to American security than 
our relationship with Russia. I credit Mr. Talbott and the 
Administration for getting us through some very difficult 
times. I am sure there are going to be very difficult times 
ahead, but I think we are on the right course.
    We have to constantly make sure that the IMF and other 
programs are monitored, everybody agrees with that. But while 
reviews are always important, I would like to hear from the 
Chairman, or others on his side, any alternatives they have to 
the present policy, what kind of actions we can take. I think 
the Chairman is right. Nobody wants to disengage. Anybody who 
argues for disengagement doesn't recognize that there are still 
lots of very important issues for American's national security 
in this relationship that we can't abandon.
    Chairman Gilman. Thank you, Mr. Gejdenson.
    Do any other Members seek recognition?
    Mr. Royce.
    Mr. Royce. Thank you, Mr. Chairman; and I thank you also 
for holding these hearings.
    The relationship between the United States and Russia 
remains critical, and I am looking forward to hearing from 
today's witnesses about where we have been and where we are 
going. But I would like to point out that 5 years ago this very 
Committee held hearings on Russian organized crime. 
Unfortunately, we were ahead of the curve.
    At that time, I said that our aid to Russia should be 
conditioned on assurances from the Russian government and our 
government that all is being done that can be done to monitor 
and counter the growing threat of Russian crime syndicates 
before they choked off the infant democratic experiment in the 
former Soviet Union. My concern was about countering a real 
threat to the chances for a successful political and economic 
transition in the former Soviet Union and about stopping an 
international crime wave before it crested on our own shores. 
Unfortunately, that was not done, and we are all here 5 years 
and billions of dollars later, and these concerns may have 
risen to the level of a scandal, frankly.
    American taxpayers deserve better. Our important 
relationship with Russia deserves better, as does the integrity 
of the American financial system. Over the last several weeks, 
the Administration has been telling us that our relationship 
with Russia has been moving in the right direction. It has 
stood behind the Internation Monetary Fund's yet again 
commitment to reform.
    Many of these problems were quite evident 5 years ago. Some 
of us on this Committee raised these issues, but these things 
were allowed to slide.
    I hope today's hearing is about better understanding where 
we have been so that we can better understand where we are 
going, both with the international financial institutions and 
with the overall U.S.-Russia relationship. It is my hope that 
this Committee and the Congress will redouble its oversight 
efforts to help see that something positive comes out of the 
serious shortcomings in the management of our relations with 
Russia that are now so evident to all.
    I thank you again, Mr. Chairman, for holding these 
hearings.
    Chairman Gilman. Thank you, Mr. Royce.
    Mr. Lantos.
    Mr. Lantos. Thank you very much, Mr. Chairman.
    I want to welcome Secretary Talbott, and I want to take 
this opportunity to publicly commend him for his extraordinary 
contributions to U.S. foreign policy during the course of the 
last 7 years and particularly for his leadership in terms of 
U.S.-Russian relations.
    This is not a case, Mr. Chairman, of whether the glass is 
half full or half empty. As one who made his first visit to the 
Soviet Union in 1956 and has been back to the Soviet Union and 
subsequently to Russia on a very regular basis, most recently 
last month, I am as aware of all the shortcomings and 
difficulties that Russia confronts as anybody in this 
Committee, but I am equally aware of the enormous achievements 
of the last few years in which our policy played a key role. So 
to put this hearing in some kind of a perspective, allow me to 
just enumerate some of the facts about Russia in the fall of 
1999.
    Russia, after 1,000 years of autocratic and dictatorial 
regimes and 7 decades of a Communist dictatorship, is now a 
developing political democracy. There are free elections in 
Russia. We would have given our right arm for free elections 
10, 15, or 25 years ago. The Russian parliament, the Duma, will 
be elected in free elections. The new Russian president will be 
elected in free elections! Russia has a free press. Russia has 
a free press. We would have given our right arm at the time of 
Pravda and Izvestia and Moscow television controlled by the 
Communist Party for a free press. Every Russian citizen has the 
right to travel abroad. Everybody has a passport.
    As one who spent a lot of time in the 1980's fighting for 
human rights and religious freedom in Russia, I am delighted to 
remind ourselves there is religious freedom in Russia. All 
religious faiths are free to practice, to build new places of 
worship. I just visited some while I was in Russia months ago, 
and I think it is important to underscore that. There is a 
burgeoning and growing market economy.
    Now, there is corruption. That corruption is about 1,000 
years old. There is crime. Crime used to be a monopoly of the 
government. It has now become privatized. But to be surprised 
that there is crime and corruption in Russia reveals to me a 
degree of historical amnesia which is almost frightening. There 
is far less crime and far less corruption in Russia than at any 
time in Russian history. Only these activities, as I said, have 
become privatized.
    Since you, Mr. Chairman, talked about the mistakes of the 
Administration, allow me to point out that the collapse of the 
Soviet Union unfolded during the tenure of the previous 
administration, the Bush Administration, and I think it is 
important to realize, as we so ruthlessly at times criticize 
Boris Yeltsin, that we have come to know many Boris Yeltsins 
during the course of the last decade.
    Boris Yeltsin was the first democratically elected 
President of Russia in 1,000 years. We did not pick him. The 
Russian people picked him. Boris Yeltsin stood on top of the 
tank when the attempt was made to reverse the trend of history 
and make Russia again a totalitarian police state. Now we have 
plenty of reservations, I do, about Boris Yeltsin in 1999, but 
I think it is important to realize that at a certain point in 
time, just like Gorbachev, he played a critical and historic 
role in setting Russia on a new path of democracy and openness.
    Finally, Mr. Chairman, if I may make just one additional 
point. You started your opening comments about the vast amounts 
of funds that have been spirited out of Russia, and you are 
absolutely correct. There has been large capital flight out of 
Russia. This capital flight represented overwhelmingly 
resources of Russia. That doesn't make the capital flight any 
better. These are funds that should be put to the use of the 
Russian people, but these were not foreign aid funds, and these 
were not IMF funds, in large measure. As a matter of fact, the 
total amount of aid and assistance to Russia during this whole 
period of the last decade is a fraction of the capital flight 
from Russia during this same period. So it is important to keep 
our perspective.
    The bulk of the money shipped out of Russia, however 
undesirable, deplorable a phenomenon it was, it was not Western 
money. It was money and resources of the Russian people that, 
given the new oligarchy, they were able to spirit out of the 
Russia.
    The final observation, Mr. Chairman, since there is a great 
deal of confusion, some of it deliberate, about the West 
provided minimal economic aid to Russia, during the course of 
the last decade, and it is the failure to lubricate the process 
of transformation from a totalitarian police state with a 
dysfunctional economy to a democracy with a market system which 
is the core problem we face. West Germany provided much more 
aid to East Germany in one single year, in any single year of 
the last decade than the whole of the aid from the West, 
governments, international institutions or whatnot, to Russia 
during this decade. West Germany provided $100 billion of aid 
to East Germany every single year. Total Western aid, European 
countries and international institutions was less than that 
during the whole decade to Russia and the other successor 
states.
    I look forward to Secretary Talbott's presentation.
    Chairman Gilman. Thank you, Mr. Lantos.
    Mr. Rohrbacher.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman.
    Mr. Talbott, I worked in the Reagan Administration for 7 
years. I was one of Ronald Reagan's speech writers for 7 years.
    Chairman Gilman. Allow me to briefly interrupt, Mr. 
Rohrabacher. I have asked some of our Members to go over to the 
Floor to vote, and we will continue our hearing without taking 
a break.
    Please proceed, Mr. Rohrbacher.
    Mr. Rohrabacher. I seem to remember during that time period 
that you were one of a chorus of critics of President Reagan's 
policies. Many of the things that we have heard today that have 
been touted as great achievements I frankly believe, Ronald 
Reagan deserves credit for much of this, whether it is free 
press or free elections or free travel. I remember during 
Reagan's tenure people were saying that Ronald Regan was being 
very unrealistic in trying to demand that type of reform in 
Russia, and in fact, it was his tough stance that I think 
brought about this great change.
    While you were not in power then and were criticizing 
Ronald Reagan, you are somewhat influential in American policy 
toward Russia today. During this transition, for the last 6 
years at least, you have been helping direct the policies that 
have molded Russia as it is today as compared to some of the 
more bold things that I say started during the Reagan 
Administration.
    Today, I respectfully disagree with my friends on the other 
side of the aisle. The transition is not going well. As far as 
I am concerned, it appears that the legacy of Ronald Reagan 
when he left office, his legacy of hope and of progress and of 
democracy in Russia, now is being squandered. It is going down 
the drain in a swirl of corruption, where the hopes and the 
dreams of the Russian people are being dashed.
    How my colleague, whom I do respect and I think is one of 
the most knowledgeable Members of our Committee, Mr. Lantos, 
can suggest with the massive corruption that is going on in 
Russia today that the problem is we didn't give them enough 
aid, it stretches credibility. I mean, it just stretch's one 
belief in what kind of policy can we have.
    I am the Chairman of the Space and Aeronautics 
Subcommittee, and I have dealt directly with the policies of 
this Administration concerning the space station. That is just 
one little element, and just in the space station, this 
Administration has had policies that have led to corruption and 
undermined the transition that Russia should be going through. 
Mr. Chairman, just one thought on that, this Administration has 
been insisting on government-to-government relations when it 
should have instead been insisting on an opening up of their 
government to commerce and to direct contacts with the outside.
    In terms of the space Administration, Mr. Talbott, as you 
know, we pushed for direct contracting with Russian providers 
and Russian industries. This Administration insisted that we 
spend money through the government, through the Russian 
government, which is part of the money that has just 
disappeared. That is the one I know most about because that is 
the one I am personally involved with here. But you take that 
and stretch it across the wide variety of dealings that we have 
with the government in Russia--and I will have to say that, 
yes, I agree with Mr. Lantos--it should be no surprise that 
there was going to be private sector corruption during this 
transition.
    What is a surprise is this Administration's policies in 
light of the fact that this was a predictable situation. The 
Administration's policies, I believe, have led to a capital 
drain in Russia and led to the institution of corruption in the 
Russian government and, again, has squandered the legacy that 
Ronald Reagan left us so many years ago.
    I thank you very much. I am looking forward to your 
testimony.
    Chairman Gilman. Thank you, Mr. Rohrabacher.
    If there are no further comments by any of our Members, I 
will proceed with our witness.
    Mr. Talbott, as I indicated, has had a long career in 
government. He has also had a long career with ``Time'' 
Magazine, serving as its diplomatic correspondent, White House 
correspondent, State Department correspondent, and East 
European correspondent, then as the Washington Bureau Chief and 
finally as editor at large from September 1989 to March 1993.
    Joining the Clinton Administration in early 1993, Mr. 
Talbott first served as Ambassador at Large for the New 
Independent States in the former Soviet Union from April, 1993, 
to February, 1994, and then assumed his current post as Deputy 
Secretary of State.
    Chairman Gilman. Mr. Talbott, you may summarize your 
written statement which, without objection, will be inserted in 
the record in full. Please proceed.

 STATEMENT OF THE HONORABLE STROBE TALBOTT, DEPUTY SECRETARY, 
                    U.S. DEPARTMENT OF STATE

    Mr. Talbott. Thank you, Mr. Chairman, very much, and I will 
do as you suggest and submit my full statement for the record 
and make some briefer comments here at the outset which I hope 
will be responsive to at least some of the points that you and 
your colleagues have made here in the opening.
    First of all, Mr. Chairman, in addition to thanking you and 
your colleagues for holding this hearing at what is obviously a 
very relevant time to be discussing these issues, I want to 
thank you for the statement that you made in your opening 
comments with regard to engagement. That is welcome news, and I 
want to engage with the Committee very much on the premise of 
what you expressed, and that is that it is not a question of 
whether we should disengage from Russia but how we can engage 
better.
    The second point I would like to make is that, obviously, 
we can indeed do better in this regard, as we can in virtually 
all aspects of national policy and foreign policy.
    The third point is you called for a reexamination of the 
premise or assumptions underlying our policy. I want to assure 
you, Mr. Chairman, as I have done in the past when I have 
appeared before this Committee, that those of us working on 
policy toward Russia and the other New Independent States of 
the former Soviet Union are constantly in the process of 
reexamination of the premises and assumptions, and an important 
part of that ongoing reexamination is a chance to exchange 
views and analysis and recommendations with key Members of 
Congress. So it is very much in that spirit that I am here 
before you today.
    I would suggest, as a general matter, as an assumption 
which I hope the Committee will help me reexamine during the 
course of this hearing, that the most fundamental standard we 
should apply to our policy at large toward Russia and also to 
every specific detail of that policy on every front is very 
simple: Does it advance the interests of the American people? 
As a result of pursuing that policy or investing those taxpayer 
dollars, are the American people going to be better off, are 
they going to be safer over the long run? That is the standard 
that we apply, and I assume that that is the one you would want 
us to apply, and we can take that general principle and apply 
it to specifics during the course of the day.
    Secretary Albright sends her greetings, by the way, Mr. 
Chairman. She is traveling in Africa on a very important 
mission--recently laid out a kind of a template for our 
relations with Russia, and she basically divided our policy 
into two categories: Those initiatives and ongoing efforts that 
are intended to increase our security by pursuing arms control, 
by reducing Cold War arsenal, by curtailing and stopping 
proliferation of weapons of mass destruction, an issue on which 
you personally have shown considerable leadership in this body, 
Mr. Chairman, and I know you are going to want to talk more 
about that during the course of the hearing, and also 
encouraging stability and integration in Europe, which is a 
topic I hope we can come back to at some point.
    The second category of initiatives that we rely on to try 
to affect the situation in Russia has to do with support for 
Russia's own internal transformation, and this I believe goes 
to a number of the points that you and your colleagues have 
made.
    Russia is very much a work in progress. Its redefinition of 
itself is a suspenseful and uncertain enterprise. It is also an 
ongoing one. There has been significant progress, as a couple 
of Members of the Committee have also pointed out, and there 
have also been very real setbacks. I think it is certainly 
worth keeping in mind what might have been, even as we 
contemplate the difficulties that we are grappling with today, 
including the ones that we are going to be talking about this 
morning.
    Perhaps the single most important positive aspect of what 
is happening in Russia is democracy and democratization, the 
fact that the Russian people are now able to express their 
hopes and their fears, their aspirations and their 
apprehensions at the ballot box, and they will be doing so very 
shortly. They will be going to the polls in December and 
electing a new Duma, and then next year they will be electing a 
new president. Meanwhile, they are at a grassroots level, 
assembling the building blocks of a civil society, and a civil 
society is one that is capable of dealing with crime and 
corruption, which, of course, has been one of the themes that 
you and your colleagues have mentioned this morning.
    Finally, in this regard, Secretary Albright has asked me to 
reiterate the case that she has made before this Committee and 
elsewhere for more resources than the Congress is currently 
willing to support in order to defend and advance American 
interests around the world, but particularly in Russia.
    If the Russians are going to succeed in the positive 
aspects of what they are trying to do, it is going to be with 
the help of the outside world. The United States must continue 
to be a leader in that effort.
    It is the conviction of the President and the 
Administration that the foreign operations appropriations bill 
that the President felt compelled to veto yesterday failed for 
many reasons, including that it contained a 30 percent cut for 
programs in Russia and the other New Independent States of the 
former Soviet Union. The funding levels proposed by the 
Congress would have forced us to make unacceptable tradeoffs 
between our core economic and democracy programs, as well as 
programs that prevent the proliferation of weapons of mass 
destruction.
    I hope we can come back to some of those specific issues, 
because it relates to the ongoing workings of our own 
democratic process as we seek to do as much as we possibly can 
to help Russia and other countries that are in transition to 
democracy around the world.
    I think that the negative or cautionary points that the 
Chairman made before you took the chair, Mr. Bereuter, in his 
opening statement and that Mr. Royce and Mr. Rohrabacher made 
are not in a way profoundly contradictory of some of the 
positive comments that Mr. Gejdenson and Mr. Lantos made. 
Rather, they are part of the interaction between Russia's 
dreadful past, which Mr. Lantos knows particularly well, and 
its aspiration for a better future.
    I cannot help but recall that in 1956, when Mr. Lantos 
first visited Russia--I am a little younger than he is and I 
was just becoming aware of what was going on in the world--and 
1956 made a big impression on me because that, of course, was 
the year that Soviet troops crushed a revolution in Hungary as 
the Hungarian people sought to gain their independence. That is 
an emblem I think of the kind of Russia that we never want to 
see again, and it is worth bearing in mind even as we grapple 
with these other problems.
    Now with regard to crime and corruption, if I could just 
say a word on that, because it has figured very prominently so 
far.
    The word accountability has come up several times. I want 
to assure you, Mr. Bereuter, and through you the Committee, 
that accountability will continue to be a watchword in the way 
that we Administer all of the programs supported by the U.S. 
Congress in Russia. Mr. Leach, who is not here today, held 
extensive hearings with Larry Summers not long ago in which 
they talked about applying the principle of accountability to 
international financial assistance.
    But in the final analysis, Russia is going to succeed or 
fail only if it can institute the principle of accountability 
in the way it does business. It isn't just a matter of how we 
assist Russia. It is a matter of how Russia governs itself, and 
that I think goes back again to the question of democracy as 
the sunlight that will ultimately serve as a disinfectant to 
get rid of this terrible scourge of crime and corruption in 
Russia. Once again, I am sure we can explore this during the 
course of the hearing.
    It is a little strange in some ways, given the 
extensiveness of the comments that were made by the Chairman 
and other Members of the outset, that perhaps the single most 
disturbing thing happening in Russia wasn't even mentioned this 
morning, and I would like to say a word about it now. That is 
the conflict that is currently under way in the North Caucasus, 
which has real potential to create instability not only in 
Russia at a time that that country can ill afford it but also 
in neighboring countries which are no longer in the same state 
as the Russian Federation.
    I want to stress this here at the outset, because I think 
that if this situation is not developed in a favorable and 
acceptable manner, it will jeopardize everything else that we 
are talking about of a positive nature in Russia today, 
including Russia's evolution as a civil society.
    The conflict is, of course, taking place on the territory 
of the Russian Federation within the boundaries of the Russian 
Federation. Chechnya, Dagestan, Ingushetia, these are all 
republics inside of Russia, and we must recognize that Russia 
has an obligation to protect its citizens not only against 
terrorism but also the kind of instability that has erupted in 
that region over the past weeks. But we also believe very 
strongly and we have conveyed to the Russians at all levels 
what I would call the parameters of U.S. Policy, and I want to 
use this hearing today to lay those out. They are basically 
five concerns.
    First, that a spread of violence in the region will be 
contrary to everyone's interests except those who rely on 
violence as a means to their political ends, including the 
political end of separatism or tearing parts of Russia out of 
the Russian Federation.
    Second, Russia's last war in Chechnya, 1994 to 1996, 
demonstrated that there cannot be a purely military solution to 
the problem there. I will say, by the way, that we have heard 
from high levels of the Russian government, including from the 
prime minister himself recently, that this is a principle that 
they accept. To turn that principle into reality, there must be 
a vigorous and conscientious effort to engage regional leaders 
in political dialogue.
    The third factor or parameter is that all parties should 
avoid indiscriminate and disproportionate use of force.
    The fourth is the one that I referred to earlier, and that 
is that Russia's significant progress toward developing a civil 
society, which means inclusive democracy and rule of law, will 
be in jeopardy if it permits a backlash against citizens 
because of their ethnicity or religion, that is to say, if 
there is a tendency in the heartland of Russia or in the 
capital of Russia to round people up and deport them because 
they have Islamic last names or are of a darker complexion than 
ethnic Russians.
    Then the fifth and last principle is that in defending its 
own territory, Russia should take special care to respect the 
independence and security concerns of neighboring states, 
especially Georgia and Azerbaijan.
    I hope it is all right, Mr. Bereuter, for me to have added 
that issue to the agenda, and I am ready to enter into a 
discussion with you and your colleagues on all the issues that 
have come up here this morning.
    Mr. Bereuter. [Presiding.] Secretary Talbott, thank you 
very much for your testimony. I regret the fact that all 
Members were not here to hear it, since you departed so 
dramatically from your written statement, which was made a part 
of the record. I particularly appreciate the five principles 
that you have just enunciated. I think they are important. We 
will try to bring them to the attention of the Members.
    Mr. Bereuter. Based upon arrival, we will now turn to the 
gentleman from North Carolina, Mr. Ballenger, under the 5-
minute rule for questions.
    Mr. Ballenger. Thank you, Mr. Chairman; and, Secretary 
Talbott, good to see you again. I miss all the fun we had in 
Central America since you are spending all your time in Russia 
nowadays.
    But I would like to ask a couple of questions, and you 
brought up Chechnya, so let me just ask, from the reports we 
get from the news media, there seems to be substantial support 
for the Chechnyans from elsewhere, Iraq, Iran or somewhere like 
that. The fundamentalist Moslem effort seems to be developing 
or have already developed in both physical and individual aid. 
It seems to be appearing. Is that true or could you give us 
some background on that?
    Mr. Talbott. The short answer is, yes, there does indeed 
seem to be a dangerous degree of what might be called 
internationalization of the conflict. There is no question that 
radical elements operating from bases out of Chechnya have had 
support from elsewhere, primarily in the arc of countries from 
the Arabian Peninsula to South Asia.
    We have had very frank and specific discussions with the 
Russian authorities about this. We are following up on any 
leads that they give us because they allege--the Russians 
allege--that some of the bad actors, if I can put it that way, 
who are behind some of the trouble in the North Caucasus are 
also people who have, we believe, carried out acts of terrorism 
against American targets and American citizens.
    I might add that this is an issue that we have discussed 
with other countries as well because, if I could make a general 
point here, it would be a good thing, it would be a hopeful 
thing if the Russian government could see the problem that it 
faces in the North Caucasus as a global threat, that is, a 
threat to civilized nations and legitimate governments all 
around the world. To deal with it as such, which means to deal 
with it in cooperation with other countries, including the 
United States, and to deal with it in a way that meets 
international norms, rather than treating this problem in the 
North Caucasus as a reason to draw back from the world and to 
do things in the old Russian way.
    I think part of what is happening in the Caucasus is that 
some evil history is coming home to roost. The people who live 
in the Caucasus have, of course, been fighting a running battle 
with Moscow from the time of the czars. The population of 
Chechnya, for example, was lock, stock and barrel deported 
under the most brutal conditions by Stalin to Kazakhstan, many 
to their deaths, and one Moscow government after another, 
czarist, Communist, post-Communist, has allowed conditions of 
terrible poverty and social backwardness to fester down there 
which, of course, makes it easier for both indigenous and 
international terrorist and extremist elements to come in and 
prey on that.
    Mr. Ballenger. If I could mention real quickly--it appears 
also that in the money that has disappeared, especially IMF 
money, at least from what we read in the newspapers, that IMF 
was very strict in the way money was managed in Mexico and 
South Korea and Indonesia and Brazil, but it doesn't seem that 
they paid much attention to what was going on with their money 
in Russia. Is that a mistake?
    Mr. Talbott. I think with respect, Congressman, that is an 
overstatement, and in fact our Treasury Department, which has, 
through Secretary Summers, addressed this issue at length in 
hearings that Mr. Leach and the Banking Committee ran about 6 
weeks ago, has addressed this in detail. But, as a general 
proposition, the willingness of the international financial 
institutions, the IMF, the World Bank to put money into Russia 
has always been conditioned on transparency, accountability, 
sound practices, as well as macroeconomics stabilization 
policies on the part of the Russian government.
    Now was it perfect? No, of course it was not. There was no 
recipe book on the shelf on how to assist a country in this 
situation because we never had anything quite like this.
    Going back to well before this most recent round of 
revelations and speculation developed, the International 
Monetary Fund and the Treasury were tightening up safeguards, 
and for the last year no new IMF money has been going into 
Russia at all except in this most recent program which is 
basically to help the Russians restructure their own debt. In 
other words, it is money that is going in a circular account 
within the IMF and is not available for any kind of misuse or 
malfeasance.
    In fact, back in 1996 there were several cases where 
disbursements were delayed because the Russians weren't meeting 
their end of the standard. What we have been trying to do over 
the past year is to tighten those standards up and to get 
through to the Russians that if they ever want to see any more 
IMF money they have got to clean up their own act.
    Mr. Bereuter. Thank you. The time of the gentleman has 
expired.
    The distinguished Ranking Member, Mr. Gejdenson of 
Connecticut.
    Mr. Gejdenson. Thank you, Mr. Chairman.
    Let me ask you two or three questions. First, it may take a 
little time in hindsight to see what you would have done 
differently if you had it to do over again, and second, while I 
think Mr. Lantos' assessment is correct, we have gone from a 
state where the government had the monopoly on crime in Russia 
to the public taking it over to some degree. We don't want to 
forget the history as we try to convince the Russians to deal 
with their criminal problems and money laundering and other 
criminal activities. The problem in Russia, historically at 
least, has not been a too-weak police force. How do we make 
sure they don't go back and use, whether it is the Chechnyan 
situation or the economic crisis, an excuse for reinstating 
police-state kinds of actions.
    Last, if you could go over the IMF situation, the last loan 
it seems to me was basically as if we had refinanced the loan 
without really refinancing it. We found a new mechanism where 
we set up a fund and then we used that fund to pay down some of 
the debts. So it is almost like a restructuring.
    But don't we have the basic problem, anyplace the IMF goes, 
that what it is really doing is replacing capital flight and 
what we hope is that this stabilizes the situation and then 
reduces the need for further infusions? That worked in Mexico 
very successfully, where we made a profit I guess on the 
infusion of American and IMF funds.
    Do we need to take a whole new look at the IMF, whether it 
is in Indonesia, Russia, or anyplace else, on instituting a 
more sophisticated mechanism, a more complex mechanism than we 
have today? Because I think you are starting to lose public 
support for simply infusing cash in the hope that you will 
stabilize the situation.
    Mr. Talbott. Mr. Gejdenson, I am going to accept your 
invitation to make what might be called not-so-much New Year's 
resolutions as engage in a little retrospective self-criticism, 
because I think it is in the spirit that Chairman Gilman 
established at the outset. I want to do so, though, in the 
following context, and I invite the Committee to join me in 
this.
    The really key question, I think, is whether the 
fundamental objectives that we have been trying to serve, 
whether the mechanisms we put in place to serve those 
objectives, have been borne out by the experience of the last 7 
years or whether they should be overhauled and fundamentally 
changed. I would strongly suggest--and we could come back in 
terms of specifics to discuss the point further--that actually 
the assumptions and the mechanisms stand up pretty well.
    That does not mean with the wisdom of 20/20 hindsight we 
can't see some things that we should have done better. I, for 
example--and I am going to limit myself to one thought that I 
have some personal responsibility for and let others speak for 
others--I think we should have been more public and emphatic in 
pushing a money laundering bill with the Russians. Now, we did 
push it, but we tended to do it in a way that was quiet, on the 
pretty sound theory that you are more likely to be able to 
influence a government if you are not lecturing them in public 
but working with them in private. But I think, in retrospect, 
we should have pushed the money laundering bill more in public.
    I am interested to see a press report that a colleague just 
handed me that Prime Minister Putin told Attorney General Reno 
today that his Administration will put the money laundering 
bill back in front of the Duma and try to get one in place, 
better late than never. We might have been able to ameliorate 
some of that problem if we had pushed it harder and earlier.
    I think that with regard to our technical assistance to 
Russia, exchange programs, working with grassroots 
organizations, helping them develop civil society institutions, 
helping them manage the transition both to democracy and to a 
market economy, we should have done more. We should have put 
more money in early in this Administration, never mind the 
previous Administration. I wish we had asked for more and 
gained support for more at that time.
    With regard to the Caucasus, I think we should have been 
more explicit on the cautionary points and the dangers that we 
saw during the previous Chechen war than in fact we were. 
Frankly, it is one reason we want to make absolutely sure and 
take advantage of every opportunity to get it right this time.
    I guess the general point I would make--I see the red light 
is on, but if I could just have one more crack at the last of 
your questions--the key thing here for keeping money in Russia 
is that the Russians themselves can develop an investment 
climate or environment that will attract both Russian capital 
and foreign capital. An awful lot of the capital flight that 
has come out of Russia has been fleeing, as it were, lousy and 
capricious tax laws and inadequate property protections and 
things like that.
    Again, I think the kind of macro answer to the problem is 
democracy, and for the Russians over time to elect people to 
the Duma who will put in place both laws and enforcement 
mechanisms for those laws that will address those needs.
    Chairman Gilman. [Presiding.] Thank you, Mr. Gejdenson.
    Mr. Talbott, earlier I stated my belief that we need to 
reexamine our policy approach toward Russia as we seek to 
continue to engage Russia. Can we expect the Administration now 
to reexamine its past approach and take on a new approach in 
light of the vast amount of capital leaving Russia, the 
corruption, and the problems, internal problems in Russia? Are 
we going to be taking a new approach with regard to our policy 
toward Russia?
    Mr. Talbott. I may have touched on this, Mr. Chairman, 
while you were out voting, but I said that I welcome the chance 
to look at specific ways in which we can do a better job, and I 
certainly acknowledge that there are ways that we, working with 
Congress and, by the way, with our international partners, can 
do a better job. I am echoing here something that I heard, I 
think, from one of your colleagues in an opening comment.
    We are always listening carefully to those who offer 
constructive criticism, notably including those in the U.S. 
Congress, and one of the things we are listening for is what is 
an alternative, what is a better way to do this. That doesn't 
mean our default position is to reject a better way if we hear 
it proposed; quite the contrary, and maybe in the course of our 
remaining discussion this morning, you can suggest some ways 
which we can do better.
    On the issue that seems to concern you particularly, Mr. 
Chairman, the Treasury Department over the past year has been 
taking very real and I think concrete measures to ensure that 
there is a higher standard of assurance that money provided by 
the international financial institutions does what it is 
intended to do and goes where it is intended to go.
    With respect to bilateral assistance programs, because very 
little of it is in cash, because very little of it goes into 
Russian wallets or bank accounts or even into the treasury 
there, we have a higher degree of assurance that there won't be 
malfeasance. In fact, there have been relatively few, if any, 
serious allegations of that money going awry.
    Chairman Gilman. Mr. Secretary, some of the analysts and 
experts that we have had appear before our Committee stress 
that instead of more lending to Russia by international funding 
institutions, we ought to consider directing more funding to 
the people of Russia for projects that directly benefit those 
people. They suggest, for example, housing in some very 
critical areas and, where there are shortages investment to 
promote employment. What are your thoughts about that kind of 
assistance instead of going through the International Monetary 
Fund and international banking institutions?
    Mr. Talbott. I think it should be in addition to, rather 
than instead of, and whatever the IMF and the international 
financial institutions do in the future will depend on Russia 
being able to meet these more stringent safeguards and 
conditions that I made a moment ago.
    We ought to keep in mind that while there obviously has 
been a lot of problems with the international financial 
institution assistance, the work that the IMF did in Russia, 
going back to 1992 at the time of the Bush Administration, was 
actually quite important in a positive way as well. It helped 
the Russians over the initial phase of their transition. It 
helped keep perhaps the most dangerous beast of all, 
economically speaking, hyperinflation, at bay, and it basically 
bought them some time to dismantle the old Soviet command 
economy.
    That said, Mr. Chairman, I take the point to which you are 
referring. We have in the past looked at ways of helping with 
the housing market. There was some specific work done in 1993 
and 1994 in housing for Russian officers who were being 
withdrawn from the Baltic States. Having all Russian forces out 
of the Baltic States on schedule was an extraordinarily 
important development. We also have a whole series of 
investment funds operating with the cooperation of the U.S. 
Government to support small- and medium-sized businesses in 
Russia.
    But these are only going to succeed if Russia can put in 
place the laws and the regulatory mechanisms that will not only 
attract that money but will keep that money in Russia, rather 
than having it take advantage of the freedom that now exists to 
send it elsewhere.
    Chairman Gilman. I hope you will be encouraging that.
    Mr. Secretary, notwithstanding the Administration's 
diplomatic efforts and the imposition of sanctions by the 
Administration on 10 Russian entities, entities in Russia have 
continued to transfer dangerous weapon technology to Iran 
without any significant interruption. Many analysts believe 
that the volume and the pattern of the continued transfers to 
Iran from Russia could not exist without the acquiescence, if 
not the encouragement, of at least some elements in the Russian 
government. Do you feel that we have been successful in our 
efforts to curtail the flow of sensitive missile and related 
technology from Russia to Iran, and what steps are we taking in 
that regard?
    Mr. Talbott. We have made some progress, but nowhere near 
enough. There has been certainly movement on the Russian side, 
both to put in place laws and executive orders and also 
enforcement mechanisms, including watchdog facilities or 
Committees in suspect or vulnerable entities and companies.
    The key point and the area where there needs to be the most 
progress, and it needs to come soon, is in implementation of 
those laws. It is not good enough, in other words, for them 
simply to say we recognize that it is contrary to Russia's 
interest as well as the United States, not to mention Israel, 
for Iran to acquire ballistic missile technology, and 
therefore, we are not going to permit it. We have to actually 
see, as it were, with our own eyes that this kind of activity 
is being curtailed.
    I think that we have worked quite well with the Congress in 
general on this issue and with you personally, Mr. Chairman, 
and your Committee. We have some reservations about the 
particular bill that you have sponsored. We are concerned that 
it could be counterproductive in some ways, but we are prepared 
to use the coming days and weeks to see if we can narrow our 
differences on this. It is useful to us, by the way, when we 
talk to the Russians to point to the very high level of concern 
in the U.S. Congress.
    Chairman Gilman. We appreciate your continued efforts in 
that direction.
    Mr. Lantos.
    Mr. Lantos. Thank you, Mr. Chairman.
    There are so many unspoken, underlying assumptions in this 
dialogue that I would like to take a moment to deal with them 
head on.
    Unlike Germany and Japan at the end of the Second World 
War, two countries we defeated and where we installed our own 
government, when the Third World War ended, which we called the 
Cold War, and the Soviet empire collapsed, we did not install 
an American government in Moscow. There was no General Douglas 
MacArthur sitting in the Kremlin as there was a General Douglas 
MacArthur running Japan.
    I think it is important to separate in our own minds the 
flaws and failures and mistakes and stupid and corrupt policies 
of Russian governments in the last 10 years, as if those would 
have been our mistakes. We did not defeat Russia in battle. We 
did not have an American proconsul sitting in Moscow calling 
the shots. These were Russians. They made their own mistakes. 
They engaged in their own corruption. They engaged in their own 
criminality.
    I think it is important to clear up our own mind on this 
issue, to understand that. We did not run Russia. We had a very 
marginal influence on Russia, and a very marginal influence 
because our financial involvement was minimal.
    You mentioned, Mr. Chairman, the desirability of helping 
them with housing assistance. If my memory serves me right, the 
Agency for International Development has provide $200 million 
for housing aid in Russia. This is about a dollar and a quarter 
per Russian for the last decade, and it is about 80 cents per 
American. So we were not a major factor in Russian housing, and 
you only need to visit Moscow to realize how little has been 
done in the field of housing.
    I would like to ask you, Mr. Secretary, to deal with the 
basic instrumentality that we as a country used in attempting 
to improve efficiency, productivity, and cooperation with 
Russia, namely, the GoreeChernomyrdin Commission. I followed 
very closely the work of the GoreeChernomyrdin Commission. I 
was enormously impressed by the series of achievements of that 
commission across a tremendous spectrum of issues ranging from 
space cooperation to--you name it. The agenda was endless. 
Since you played a pivotal role as a top Russian expert in the 
work of the Gore-Chernomyrdin Commission, I would like to ask 
you to indicate what, in your view, have been the achievements 
of that commission, even though the name will now have to be 
changed.
    Mr. Talbott. It is now, of course, the Gore-Putin, and 
before that was the Gore-Stepashin and before that Gore-
Primakov and long ago was the Gore-Chernomyrdin Commission. 
But, by the way, the Vice President has been in touch with 
Prime Minister Putin to indicate a willingness to continue the 
work of the binational commission, as we call it.
    A general point, Mr. Lantos, and then a couple of specific 
ones. The original idea that I think has been more than 
vindicated is that it is a useful thing to have upper working 
levels, I would call it, of various agencies and departments of 
the U.S. Government working on real world problems with 
comparable levels in the Russian government. We have learned a 
lot and it has given us insights into both the problems and the 
possibilities on the Russian side. I would like to think that 
they have learned a lot seeing how a country that has been a 
new independent state for 220 years is able to work with these 
issues.
    In the specific area, the Vice President spent an awful lot 
of time, particularly during the early days of the commission, 
working on security issues, and that meant particularly the 
denuclearization of the former Soviet Union. The commission 
gave him a way of helping make sure that Ukraine and Belarus 
and Kazakhstan would not be nuclear weapon states. Also, the 
commission has been a forum for cooperative threat reduction, 
which is a program we hope to continue and indeed enhance if we 
can persuade you and your colleagues to fund the enhanced 
threat reduction program under the bill that was just vetoed.
    This would, among other things, take American money and 
invest it in the safety of the American people the following 
way: by helping scientists in Russia, particularly nuclear 
weapons scientists, missile technology specialists and that 
kind of thing, make the conversion to a civilian economy and to 
peaceful enterprises rather than being quite so vulnerable to 
ads in the Baghdad Daily help-wanted section, if I can put it 
that way.
    Then there is the whole issue of export controls. The 
question on which Chairman Gilman has been so concerned, which 
is to say the leak of Russian technology to rogue states, 
particularly Iran, is an issue that the Vice President pursued 
vigorously with Mr. Chernomyrdin and his successors and made 
some very real progress there.
    We also used the commission to establish a mutual legal 
assistance agreement with Russia which helps in the area of 
rule of law, establishing a basic framework for bilateral law 
enforcement cooperation which has actually come in quite handy. 
We have had some real law enforcement issues to talk to them 
about in recent weeks because of the revelations with regard to 
the diversion of money.
    Then, finally, there is the issue of space. The 
GoreeChernomyrdin Commission established Russian participation 
in the international space station and has allowed us to forge 
a commercial space launch agreement that enables joint 
ventures, and that, in turn, produces real revenues for the 
United states.
    So I think it is a classic example of win-win for both 
sides, and I hope it persists not only through this 
Administration and this particular Vice President and Russian 
prime minister, but on into the next Administration.
    Mr. Lantos. Thank you very much.
    Chairman Gilman. The gentleman's time has expired. Thank 
you.
    Mr. Rohrabacher.
    Mr. Rohrabacher. Mr. Talbott, I certainly agree with you 
that those of us who are critical of the Administration's 
policy should also have positive alternatives and should not 
just say you did this wrong or did that wrong, and I take that 
criticism of the Congress to be constructive criticism of us. A 
lot of times we don't do that.
    However, let me note that among those of us who believe 
that you have failed in establishing the policies that would 
lead to a more stable, prosperous Russia, there are many people 
who have been involved with offering alternatives to the 
Administration's policies and the Administration has chosen to 
go another direction. One example, which I would use because I 
am very involved with this particular area, as I mentioned in 
my opening statement, is the goal that you just established 
which is to see that there was a transition for Russian 
scientists to move outside of their military work, and that it 
is something that would be nonthreatening to the United states 
and perhaps something involved with private sector space or 
other engineering projects.
    That is a goal, not a policy, let me add. What you have 
outlined there is not a policy. It is a goal, and certainly the 
Republicans agree with that, and I have been a champion of that 
for many years, through my involvement in the Space and 
Aeronautics Subcommittee. Chairman Sensenbrenner pleaded with 
this Administration over and over again to have a policy toward 
Russia in terms of the space station that would ensure that 
Russia was able to be a contractor, of which it was capable, 
but not be a partner, and that the money that we would then 
make available for Russia would be sent to Russian companies, 
Energiya, et cetera, for fulfilling certain obligations.
    Instead, this Administration insisted on government-to-
government relations, insisted on making Russia a partner, of 
which it was incapable. Then the money that we shipped to 
Russia, instead of going to a company and going to those 
scientists that you are talking about, went into the Russian 
space agency, which in turn was sucked into a black hole and 
disappeared--hundreds of millions of dollars, if not billions 
of dollars.
    Mr. Sensenbrenner and I have been deeply involved in trying 
to have a positive program toward the goals you suggested but 
through a different policy, a different method of achieving it. 
Let me just say, this Administration's policies have failed 
miserably in this regard, and it is unfortunate.
    Mr. Curt Weldon, whom we all know and who takes a very 
special interest in Russia, has suggested instead of having 
money guaranteed or coming from the United States into Russia 
via the IMF or just direct grants, that we should set up a 
mortgage fund, for example, which Curt was advocating, which 
could have been used to provide money for homeownership 
throughout Russia. Instead, the Administration opposed Mr. 
Weldon's idea and, instead, of course, went forward with grant 
programs and direct government-to-government programs rather 
than trying to get the money to the Russian people themselves. 
Again, a considerable sum of that money has simply disappeared.
    I would be pleased to have you comment on my observations 
that your goals are certainly laudable but your policies to 
achieve those goals have been miserable failures. I wish you 
success in the future, but I think we need a change of those 
policies.
    One last thought, and that concerns Chechnya. This 
Committee has heard me over and over and over again complaining 
about this Administration's policy toward Afghanistan, and over 
and over again I have said that Afghanistan would destabilize 
all of central Asia and Pakistan. Is it not now true that the 
miserable failure of this Administration in Afghanistan is what 
has brought about this Chechnyan war? Because isn't Chechnya 
being financed by drug money from Afghanistan? Isn't that what 
is going on right now? Again, laudable goals, a lot of good 
rhetoric from the Administration, but a miserable failure in 
shepherding through this transition to democracy in Russia.
    Any comment on any or all of what I have said? I have said 
this with a spirit of trying to offer constructive 
alternatives.
    Mr. Talbott. I can see that, Mr. Rohrabacher, and the red 
light is on, so I will simply thank you for your good wishes, 
certainly.
    I also say, in an equally serious vein, that part of the 
problem we are dealing with here--and, by the way, I have had a 
chance to work with Congressman Weldon on a number of 
occasions, more as it happened in the Balkans, but I am aware 
of his interest in housing.
    The institutions that you are talking about that he would 
like to see us work through, alternatively, don't really exist 
in Russia. So it is a question of how you get them up and 
running. Indeed, as a goal of policy, I think it would be a 
very good thing if we could work with the Russians to help them 
develop what we consider to be a modern and effective mortgage 
market. It isn't there now, but, particularly with more support 
for some of our bilateral assistance, I think that is certainly 
an area where we could do more in the future.
    I think that regarding your comments on the connection 
between Afghanistan and Chechnya, I look at it quite 
differently. Afghanistan is very much a problem in its own 
right. It is a problem with deep historical roots, as you 
understand; and its own complex role in the collapse of the 
Soviet Union and the Cold War has produced some aftereffects 
that our predecessors didn't anticipate and we are having 
trouble dealing with, no question about that. However, I think 
you are overdrawing the connection between Afghanistan and 
Chechnya.
    I would actually make a point that is a little more, what 
shall I say, sharp with regard to the Russian Federation on 
Chechnya. In some ways it is not so much Afghanistan that has 
come back to haunt them in Chechnya. It is more the policy that 
the Russian Federation pursued in 1993, of stirring up trouble 
in the South Caucasus and particularly in Georgia. There were 
Chechen fighters who went down and helped the Auka separatists 
in Georgia in 1993 who gained some skills and some enthusiasm 
and backing that they brought back into Chechnya. That is the 
point that we often make to the Russians while talking through 
this problem with them.
    Chairman Gilman. The gentleman's time has expired.
    Mr. Berman.
    Mr. Berman. Thank you, Mr. Chairman.
    Yesterday, the President vetoed the foreign operations 
bill. The Republicans printed up talking points and ran to the 
House Floor to claim that this was an effort by the President 
to raid the Social Security Fund in order to fund foreign aid, 
thinking that the American people are stupid.
    They read this as if it was an edict coming from some party 
Committee at the top, with talking points in the greatest form 
of democratic centralism. This very program is less than one 
percent of government expenditures in the context of 
appropriation bills, which in several areas far exceed what the 
President requested. That this now became the basis for making 
a plausible or serious contention that the Social Security Fund 
was raided.
    Today we have heard a lot of talk about the importance of 
our anti-proliferation efforts, of dealing with loose nukes, of 
dealing with Russian scientists, engaging them seriously. I 
wasn't quite clear on Mr. Rohrabacher's point regarding the 
space station, but what I do know is that the Administration 
requested $1.032 billion for aid to the Newly Independent 
States, obviously Russia and all the other ones in the former 
Soviet Union.
    This year's level of funding was $801 million. The 
Administration asked for an addition of $307 million for an 
expanded threat reduction initiative. The Republican majority 
in both Houses cold cocked them and simply threw out this 
requested program and cut the foreign assistance level to all 
of the Newly Independent States by $65 million. I am wondering 
to what extent the expanded threat reduction initiative had in 
it items that would have funded programs to protect our nuclear 
security, to stop proliferation, to strengthen export 
monitoring and suspect plans, to provide the kinds of programs 
that would deal with the goals that apparently people on both 
sides laud in terms of the Administration's interest with 
respect to Russia.
    Mr. Talbott. Lots, is the short answer, and let me 
elaborate just a little bit. I think that the expanded threat 
reduction initiative is about as vivid an example as we are 
ever going to see of how American taxpayer dollars spent in the 
right way at the right time cannot only save immense amounts of 
money down the road--a stitch in time--but can also enhance the 
safety of the American people.
    Russia is going to get back on its feet. We are in an 
interim period here, and I don't know how long it is going to 
last, when the problems that we cope with coming from that vast 
country tend to be associated with the weakness of that state, 
rather than the strength of that state. It is probably going to 
be a strong state again; and when that day comes, we will, I 
would hope, be in a position to look back and congratulate 
ourselves, or our successors and progeny will, for having done 
the right thing at the right time, and this is a perfect 
example.
    This is a 5-year program, as you know, totaling $4.5 
billion, with lots of different agencies involved and lots of 
objectives including the ones that you have mentioned. It will 
help tighten up export controls so that Russian technology in 
these times of both indiscipline and a certain amount of 
desperation are less likely to go out of Russia and end up in 
places like Iran and other rogue states. It will prevent or at 
least curtail the proliferation of weapons expertise by helping 
to keep gainfully and peacefully employed 8,000 to 10,000 
additional scientists. It will redirect biological weapons' 
expertise to civilian science projects.
    There is actually one other point, which is a bit of a 
detail, Mr. Berman, but it is very much on my mind. This has to 
do with conventional forces in Europe, a treaty that is under 
negotiation right now.
    We are trying to use our good offices to induce an 
agreement between Russia and Moldavia and Russia and Georgia to 
get Russian military equipment and personnel out of those 
countries in accord with the wishes of the host governments. 
There is money in the expanded threat reduction initiative that 
would help bring about that goal as which will not only help 
put in place another treaty that is very much in the interest 
of the United States, but will help undergird the independence 
of two small deserving Republics that used to be Republics of 
the U.S.S.R.
    Mr. Berman. Mr. Chairman, my time has expired. At some 
point in the hearing I think it would be interesting--I know 
Mr. Delahunt may be pursuing part of this--but in the context 
of the Senate rejection of the test ban treaty, I would be 
curious about Secretary Talbott's reaction to how that will 
play.
    Mr. Rohrabacher. [Presiding.] Perhaps with unanimous 
consent we might grant you one extra minute to ask that 
question. With unanimous consent, so ordered.
    Mr. Berman. Thank you.
    How will that play into the Administration's efforts to get 
the flexibility in the ABM treaty to deal with the kind of 
national missile defense to deal with the rogue states that our 
policy is so focused on?
    Mr. Talbott. I am sometimes accused of being an optimist, 
so let me begin on an optimistic note. I would answer your 
question this way. If the Administration can be more successful 
in persuading the Senate that the CTBT is indeed in the vital 
interests of the United States, that will certainly help in 
numerous ways. I would hope that the word bipartisan, which I 
have heard used several times here this morning, would end up 
being part of the vocabulary of a happy ending on the CTBT.
    That issue is, of course, still very much open. The 
President has made clear that we are not going to do anything 
to undercut the CTBT. We are going to continue the moratorium 
on testing, and we are going to use every avenue that we can to 
reengage with the Senate on this.
    Mr. Berman, I might just say to you that I was in Europe 
when the Senate voted down the CTBT, and that news had a 
devastating effect on a lot of our very closest and best 
friends in Europe. I haven't come to the question about NMD, 
which may require a whole new set of lights here; but the long 
and short of it is that they are very much hoping that we will 
be able to make sure that the United States is a leader in the 
area of achieving a comprehensive test ban, just as it is in 
every other aspect of arms control.
    You and I have in other settings talked occasionally about 
South Asia, India and Pakistan. One of the principal benchmarks 
of nonproliferation that we have been pursuing with the Indians 
and the Pakistanis, and we are going to engage with the Indians 
now that their elections are behind them, is CTBT. I would say, 
to use Olympic terms, the degree of difficulty has maybe gotten 
a little harder in that argument, but I hope it is not 
impossible.
    Why don't I hold on the connection to NMD and maybe we can 
come back to it.
    Chairman Gilman. [Presiding.] Thank you, Mr. Berman.
    Mr. Royce.
    Mr. Royce. Thank you.
    Secretary Talbott, one of the observations that you have 
made is that the President has vetoed the foreign aid bill 
yesterday. I think one of the arguments is because the aid 
provided to Russia is 30 percent less than the aid that the 
Administration wanted to be provided. Indeed, overall, I guess 
we provided $3 billion less in foreign aid than the 
Administration wanted, and so they vetoed the bill.
    I thought I would explain our thinking here in Congress and 
then ask for your response on this issue. We remember the words 
of Boris Fyodorov, who was the former Russian finance minister, 
who repeatedly warned that providing more IMF loans to the 
Russian government would simply allow the government to ignore 
corrupt activities while the IMF moneys kept it afloat. As a 
matter of fact, at one point he is quoted as saying, ``I told 
Mr. Summers that if you release the loan without conditions it 
will end up in Switzerland.'' I think his exact words were, 
``It will end up in a bank in Zurich.''
    These are the concerns we have with putting more money into 
the problem, and I will tell you why. In the Banking Committee 
last month, we heard testimony from Russian Duma members. There 
were seven separate members from seven different political 
parties, and every one of them gave us, during our meetings 
with them here, the same advice that the Russian finance 
minister had given the U.S., in which they said, ``Don't do 
this by picking a government and giving the aid to the 
government. Instead, build institutions.'' It should be the 
rule of law, not of men, and they asked us why we were so 
focused on propping up Yeltsin and Chernomyrdin and supporting 
government-to-government aid rather than trying to force 
reforms.
    This was the point they made. How credible is it, they 
said, when Boris Yeltsin twice had vetoed the bill passed by 
the Duma against Russian money laundering when several hundred 
billion dollars had been laundered outside of the country, and 
here we continue to provide the aid even as the Administration 
vetoes the very bill that would stop it. These are the 
questions raised by Duma members. These are the questions 
raised by former finance ministers in Russia, and that is why 
we are not eager to provide all of these additional billions in 
aid. We have already done that.
    So I would just like to understand what it is going to take 
to get the President to sign the foreign aid bill. I mean, will 
we have to spend the $3 billion in additional aid money?
    Mr. Talbott. The short answer is, more money for advancing 
and defending the interests of the United States.
    By the way, Mr. Royce, knowing of your Chairmanship of the 
Africa Subcommittee and your knowing of where my boss is today, 
namely, in Africa, I am sure she would want for me to stress 
the importance of more support for our various Africa programs 
and initiatives; but you have asked me to address the specific 
issue of Russia.
    You have actually touched on several different points here. 
Let me say, in a way that I intend as much more than courtesy, 
I think it is a terrific thing that you are meeting with Duma 
members and interacting with them. When I appeared before the 
Senate Foreign Relations Committee several weeks ago, there was 
a delegation from the Duma there as well. I hope that 
congressional parliamentary exchanges can be more and more a 
part of our interchange with Russia.
    The long and short of it is that this 30 percent cut simply 
squeezes the life out of an awful lot of programs that we feel 
go to the very heart of what we are trying to do in Russia. It 
is a goal, if I can use Mr. Rohrabacher's word, a policy goal 
for which I hear a lot of support from this Committee. That is, 
helping the Russians make this transition that we are talking 
about, not pumping money into the Russian treasury and 
certainly not putting money into hands that are dirty or that 
will allow it to find its way out of the country.
    We are talking about nonproliferation programs. We are 
talking about democracy. We are talking about buildup of the 
NGO community there, exchanges which I continue to think are 
absolutely vital, building up a free media.
    Now, on the point that Boris Fyodorov, who I know well and 
have worked with over the years, has made, the real answer to 
your question is that Mr. Summers and the leadership of the IMF 
have made clear that they are in a new mode with regard to 
lending to Russia, and it is not a new mode that started when 
the revelations came out this summer. It goes back to August of 
last year and the Russian financial crisis. They have 
instituted much tougher safeguards to protect against a lot of 
the things that Mr. Fyodorov is warning about.
     Just to say one other thing. Mr. Berman, who has now left, 
asked about the expanded threat reduction program. If I am not 
mistaken, half of the funds in that program are for the benefit 
of non-Russian New Independent States, that is, other countries 
besides Russia and very much for the benefit of the United 
States itself.
    Chairman Gilman. Would the gentleman yield a moment?
    Mr. Royce. I will yield.
    Chairman Gilman. Thank you.
    Mr. Talbott, the President had requested an increase in aid 
to Russia to fight proliferation and raised that initiative in 
his State of the Union speech in January, but I don't believe 
there was ever any followup to our Committee or to the Congress 
with regard to that proposal. Could you comment on that?
    Mr. Talbott. I am not entirely clear what you mean there. I 
can assure you that there has been followup in that we have 
continued to work on the problem of nonproliferation at 
virtually every level. There is going to be a continuation of 
expert level talks later this week. Ambassador Galuchi remains 
engaged with Dr. Kokiyef. It figured on the agenda of the 
meeting in Auckland between President Clinton and Prime 
Minister Putin. So we have continued to pursue the 
nonproliferation agenda, but I have a feeling you have 
something more specific in mind.
    Chairman Gilman. The President proposed this in his 1999 
State of the Union message, but we didn't see any followup by 
him personally with regard to that proposal, and I was 
wondering if you might want to comment on that.
    Mr. Talbott. Let me do this. Perhaps after the hearing, I 
can get some clarification both of what you are referring to 
from the President's side and where you feel there is lack of 
followup. I can assure you there is no issue on which we more 
want to followup with you than that one, because it is almost 
literally the case that hardly a meeting goes by with our 
Russian counterparts where we don't press this agenda, and 
particularly the issue of Iran, that you are so concerned 
about.
    Chairman Gilman. Thank you.
    Mr. Royce. Reclaiming my time, Mr. Chairman, since the 
subject of Africa was brought up, I do want to make the point 
that we had a real change in Nigeria because we disengaged 
completely with respect to aid. Just another perspective--and I 
was there for the elections in the Nigeria--the IMF and the 
United States disengaged. We did not continue to reward. We 
demanded and we sought leverage and we got that leverage, and 
eventually we had free elections several months ago in Nigeria 
and a duly elected government. So there is more than one 
approach. It is because we want to make certain that there is 
leverage exerted that Republicans raise these points, and I 
wanted to share that with you.
    Mr. Talbott. Mr. Royce, you know both Russia and Nigeria, 
and you don't need to hear from me the profound differences 
between them. Russia is now entering its fourth round of 
democratic elections since it became a democracy, and I am sure 
you are not suggesting disengagement is the way to go to with 
Russia.
    Mr. Royce. What about leveraged engagement?
    Mr. Talbott. I like that. Conditional engagement, leveraged 
engagement, effective engagement, all of those I would 
certainly subscribe to.
    Chairman Gilman. Mr. Delahunt.
    Mr. Delahunt. Yes. Thank you, Mr. Chairman.
    I think what I am hearing, Mr. Secretary, is the concern 
expressed by those that have spoken before me on the other side 
of the aisle is that this is a government-to-government 
relationship in terms of assistance and loans, grants. Your 
position is that, particularly early on in the private sector 
or in the quasi-private sector, those institutions simply did 
not exist.
    Now, presumably once there was a viable private sector, 
with institutions in which the Administration could have 
confidence in terms of their integrity, that consideration in 
terms of commercial relationships and providing assistance 
might very well be considered. Is that a fair statement in 
terms of where we are along the continuum of progress within 
Russia?
    Mr. Talbott. Yes, Mr. Delahunt.
    Mr. Delahunt. In defense of the Administration, I think 
there did not exist that option, in the early years of this 
decade. Even in a mature democracy like ours, with institutions 
such as our banking system that are well regulated, corruption 
exists. In this morning's newspaper there was a front-page 
story relative to fraud in a small bank somewhere in the south 
that amounted to an excess of $500 million. We have been 
through a period in our own history, the S&L debacle, for 
example.
    So I want to be clear I don't disagree with where you have 
gone, and I would agree with the comment by Mr. Lantos that 
there was not an option available.
    It would also appear that some would suggest the reason or 
the cause of capital flight in Russia is corruption--that as 
soon as the money comes in from wherever, it is taken out and 
put in Swiss bank accounts. Is there any evidence of that or 
would you suggest that it is primarily the tax laws of the 
Russian state that create an incentive for Russian citizens to 
seek havens elsewhere on the globe to avoid paying these 
confiscatory taxes? If that be the case, is the Russian 
government and the Duma addressing that particular issue in 
terms of making fundamental changes within their own tax code?
    Mr. Talbott. Mr. Delahunt, can I first offer my condolences 
on a certain athletic event that occurred?
    Mr. Delahunt. I would prefer you remain silent, Mr. 
Secretary. Don't pick on the scab, please.
    Mr. Talbott. Speaking of scab, sitting behind is my 
executive assistant Phil Goldberg, who is from Boston and who 
barely came in this morning, but he is such a good public 
servant that he is here to serve the national interest.
    Mr. Delahunt. He is also a man of great courage to be here 
this morning.
    Mr. Talbott. I think both sets of points that you have made 
are very germane, and this actually--we have lost Mr. Royce--
but something that Mr. Royce said earlier actually resonates 
with the point that you made.
    One reason that the Russians felt, including Mr. Fyodorov, 
that they had to make a clean break with the past and do a 
hellbent-for-leather privatization, which created a lot of 
controversy back in the early part of this decade, was because 
Russia became an independent and democratic country but it was 
still a country that was dominated by the Soviet system. The 
state ran everything and the state owned everything, and they 
made the calculation, on which I think history will pass 
judgment, but on which we cannot pass final judgment, that the 
only way to deal with that was just dismantle the old system 
virtually overnight, even though they didn't have a new one to 
put in place.
    You are certainly also right that the problem of corruption 
was very much part of the legacy from the old system. I 
remember the first time I ever heard the word ``kleptocracy'' 
was in the context of the Soviet Union and not Russia. They 
have, in fact, if you look at what has happened in the NGO 
sector and the small business sector, made incredible strides. 
There are lots and lots of little businesses doing OK in Russia 
today.
    Now, bigger businesses that require investment, and this 
goes to your second point, operate under a huge burden, and it 
is the one that you identify. It is not just the tax law but it 
is also property laws which are either inchoate or chaotic or 
very capricious; and, as a result, it is not a good climate for 
investment, whether it is from Russian investors or from 
foreign investors. Now, are they doing something about it? Not 
yet and not very fast.
    The real question is, what will happen when they have a new 
Duma? They are going to the polls on the 19th of December to 
elect a new Duma. I am not about to hazard any predictions 
about what is going to happen in that election or any other 
democratic election coming up on the horizon, but I can tell 
you that there are pressures building within the Russian 
economy and within Russian society to get a grip on some of 
these core problems, crime, corruption, lousy tax system, right 
at the top.
    Chairman Gilman. Thank you, Mr. Delahunt.
    Dr. Cooksey.
    Mr. Cooksey. Thank you, Mr. Chairman.
    Mr. Talbott, starting in 1995-1996--I think it was in the 
1993 to 1994 period--a former State Department official, a Mr. 
Wayne Merry, was in charge of reporting the political 
activities from Russia back to the States and to our embassy in 
Moscow. He wrote an article that was in a publication, and he 
said during 1993 and 1994 there was an unmistakable shift in 
the Clinton Administration's priorities from, ``telling us what 
is happening to'', ``telling us that our policy is a success.''
    I understand that Mr. Wayne Merry had had some important 
Foreign Service positions and he was in a position, or his role 
or his responsibility was, to help policymakers here make 
decisions; and yet during the 1996 campaign, the message that 
was given to the public was that our foreign policy program in 
Russia was indeed a success story. Why do you think he came to 
this conclusion? Why did this former State Department official 
feel that they want to give a message that our economic policy 
there had been a success? Was it just a political statement to 
get through a campaign or was this part of policy? What was the 
policy of the Administration, the State Department?
    Mr. Talbott. A couple of points here, Dr. Cooksey.
    First, since you are citing Wayne Merry, let me just say I 
remember him well. I worked with him in two of my capacities 
and I think two of his because he was in the Department of 
Defense, if I am not mistaken, after leaving the Department of 
State. He is a fine public servant and a very fine analyst.
    I disagree with his analysis in this case and, insofar as 
you have accurately conveyed it, his opinion or his 
characterization of the instructions that Embassy Moscow 
received from Washington. Our instructions to our embassy, 
whether it was under Ambassador Pickering or Ambassador 
Collins, has always been to tell it like it is and, by the way, 
Wayne Merry always did and often very compellingly.
    I don't think that the word success is really appropriate 
yet, and probably won't be for quite some time to come. You 
proclaim something a success when you see how it has turned 
out. Russia is a long way from establishing itself either as a 
success or as a failure.
    What we try to do is monitor the trends and the 
developments, and we have had a lot of discussions here along 
those lines. Russia is a mixed bag. There are extraordinarily 
promising and favorable developments, the most important of 
which is democratization. There are also deeply disturbing and 
dangerous developments, crime and corruption being one cluster 
of those issues, and the resumption of violence in the Caucasus 
being another. Russia is a country, not for the first time in 
its history, God knows, that is undergoing a struggle between 
its best possibilities and the worst of its past and the worst 
that is still there in the present.
    Mr. Cooksey. Thank you.
    I certainly respect your credentials because you do have a 
good background on Russia, and I know you have spent a lot of 
time there, but it is also my understanding that you reported 
that part of the driving force behind the policy. Our 
responsibility--and, quite frankly, I think Congress fails in 
this responsibility--our responsibility as Members of 
Congress--our constitutional responsibility, is oversight. I 
feel that a lot of times Congress is not aggressive enough in 
carrying out its oversight responsibilities to make sure that 
the taxpayers' money is spent properly. There is the feeling I 
think across the country and certainly in my District that 
probably the taxpayers' money has not been well managed in our 
effort to help the Russian people come out of this period of a 
command economy, central economy, a period of Communist 
political model.
    Do you think this is an accurate perception? If so, do you 
think that the policies were used because there was some 
naivete on the part of the people that were making the 
decisions? What is the future?
    Mr. Talbott. They are all very fair questions, and I 
totally agree that I think this hearing bears it out that 
Congress has a critical role to play, not only in giving 
Administration witnesses a chance to explain and defend our 
policy but also in interacting with parliamentarians from 
Russia and from other countries who are trying to learn how we 
do business in this country.
    I think that we, the U.S. Government, going back over the 
two Administrations who have been involved in the post-Soviet 
transition, have done a solid job that you can represent as 
such to your constituents in protecting the integrity of our 
assistance programs for reasons that we have already talked 
about. But if you have any specific questions in that regard 
either now or to followup after the hearing, I will be glad to 
answer them.
    I can tell you that we have the highest standards of 
accountability and safeguards in the money that goes from us, 
the United States of America, to various projects in Russia.
    The more controversial and problematic area is the 
international financial institutions, and there again I think 
that the verdict of history will be positive. I think that the 
fact that the IMF was willing to step in early, going back to 
the Bush Administration but continuing into this 
Administration, to help the Russians get over the first and the 
worst and the most dangerous part of the transition, has to be 
counted against the fact that the Russians--we can't want 
reform for Russia more than Russians themselves want it--fell 
down on the job in a number of respects. I mean, the worse year 
for them was 1998, a year that, by the way, also included an 
international financial crisis; but the Russian government at 
the time, Mr. Kiriyenko's government, could not get the Duma to 
put in place the kind of laws, including tax laws, that were 
necessary in order to justify some of the risks that the IMF 
had taken. The IMF, as a result, has tightened up further its 
conditionality.
    Mr. Cooksey. Good. Thank you, Mr. Talbott.
    Thank you, Mr. Chairman.
    Chairman Gilman. The gentleman's time has expired. Thank 
you, Dr. Cooksey.
    Ms. Danner.
    Ms. Danner. Thank you, Mr. Chairman.
    I made notes of some of the statements that you have made 
as we have gone along. You made a comment that we need more 
money for Russians, that this is to the benefit of the American 
people. I am wondering if some of the American people we 
represent who are here right now, let us just say the senior 
citizens who have to decide between purchasing their drugs for 
their well-being or food, and there certainly are many of them 
in our country, students who are looking at education needs, 
where they know they don't have the facilities or the 
technological advances that exist today, married couples who 
are paying as much as $1,400 more in income tax each year 
because they are married, what we call the marriage tax 
penalty--obviously, you can see I am a cosponsor of that 
legislation or even the general infrastructure of our country.
    Following up on what John Cooksey had to say, I wonder how 
many of our people, the people that we represent, think that we 
spend our money well? They remember that we spent an awful lot 
of the American taxpayers' dollars for the Cold War when Russia 
was the enemy. Now we are spending money because they are our 
purported friend. So, friend or enemy, Russia is costing us a 
lot more money.
    So the question is, how well is it spent. The oversight 
question came up, and your last comment was that we are 
protecting the integrity of our assistance programs. As I was 
making note of that, I thought I heard you say something about 
the fact that you could provide us with some information on how 
you are doing that. I know that I would certainly appreciate 
that information, and I can assume that the other Members of 
this Committee would like to know exactly how you are indeed 
protecting the integrity of our programs. Because if we are 
going to spend this money, if my senior citizens, if my young 
people know that they have less for their needs because we are 
sending money overseas, I think the very least they can be 
expected to receive in return is evidence that this money is 
well spent.
    I, like many of my colleagues, do fear and feel that much 
of it does make its way to Swiss bank accounts, and I would 
like to note that we are putting in process and in progress 
some kind of a program to ameliorate that problem. In Russia, 
recently I understood that in, for example, Saint Petersburg, 
as many as 70 percent of the populace lives in communal 
apartments with families of eight or more, and one bathroom and 
one kitchen shared by eight families. Even the bathroom shared 
by eight families staggers my imagination. But we would like to 
know that the money goes to the people and not to the 
government, to a few people who are sending it possibly into 
Switzerland.
    So if you would provide us with that information, I think 
we would all appreciate receiving it.
    Mr. Talbott. Thank you very much, Ms. Danner.
    You have raised a specific issue and a more general issue. 
I will provide to you and to Dr. Cooksey and, if the Chairman 
wants, to the Committee as a whole a breakdown on the programs 
that we are funding and would hope to fund in the future under 
what we call the Freedom Support Act, which is the umbrella for 
those regions.
    One of the things you will see is that a great many of 
those programs involve either technical assistance where our 
people with know-how go over there and explain how to do 
things, how to run a stock market, how to set up a securities 
exchange commission, how to run an NGO or local election. So 
money doesn't change hands. Exchanges, of course, mean bringing 
them over here and sending our people over there. Again, money 
does not fall into harm's way.
    Then there is also a good deal of highly sophisticated 
equipment used to dismantle Soviet era nuclear weapons, weapons 
that used to be aimed at the United States but, again with a 
lot of controls, to make sure that nothing is diverted.
    As to what you tell your constituents more generally, I 
would hope that in discussing this issue with them that you 
would remind them during the Cold War the United States spent 
literally trillions of dollars to deter the Soviet Union, to 
contain the Soviet Union and, let us face it, to be prepared to 
make global thermonuclear war against the Soviet Union. That 
was a very expensive, as well as a very dangerous operation, 
dwarfing the amount of money we are talking about now. Waging 
the peace and waging the relationship with a Russia that is no 
longer our enemy is much less expensive but I think requires a 
little bit more in the way of resources than the Congress is 
currently willing to give us.
    Chairman Gilman. The gentlelady's time has expired.
    Mr. Tancredo.
    Mr. Tancredo. Thank you, Mr. Chairman.
    I have two questions, one dealing directly with your 
testimony today, Mr. Talbott, and one with the speech you 
actually gave in Colorado a little over a month ago, and I will 
deal with the latter first, although it may take us afield. I 
hope it doesn't do so. I hope it doesn't go to far.
    You stated that in the speech that you gave at the Aspen 
Institute, and I quote the old system of nation states, each 
sovereign in its exercise of supreme, absolute and permanent 
authority, is giving way to a new system in which nations feel 
secure enough in their identities and in their neighborhoods to 
make a virtue out of their dependence on one another.
    You went on to say, this means pooling sovereignty in 
certain areas of governance and in other areas granting greater 
autonomy to regions. You said it means simultaneously 
relinquishing some powers upward and devolving others downward.
    I wonder if you could help me here by being a little more 
specific about which powers you think, for instance, the United 
States should devolve downward or relinquish upward in order to 
achieve this new system of nation states.
    Mr. Talbott. The short answer is none. I wasn't talking 
about the United States in this speech that I gave.
    I am sorry, I am having trouble looking at you.
    Mr. Tancredo. Some people have that, probably when there is 
no one in between.
    Mr. Talbott. I should look you in the eye when I say this. 
I was talking very specifically about what is happening in 
Europe. I was talking about the institution of the European 
Union and the way in which the phenomenon of European 
integration as represented by the European Union can be used to 
avert in southeastern Europe, and particularly the Balkans, the 
kind of crisis that has occurred there.
    Mr. Tancredo. I do recognize and should perhaps have made 
that more specific in my question, that you were talking about 
Europe. But when you say the old system of nation states is 
essentially dissolving, I can hardly assume that meant only in 
Europe in your mind.
    Mr. Talbott. I can't leave it entirely to the Chairman. I 
am not sure we have time today to pursue this, but I would like 
very much to pursue this. I do not think that the United States 
is a classic Westphalian nation state. I was talking about 
nation states which means, of course, states built up around 
particular nationality groups that came about as a result of 
the treaty of Westphalia in Europe, and Europe is now moving 
beyond that.
    I think one of the United States' great strengths and one 
of the reasons to be both very proud and also very protective 
of our sovereignty and national interest is that we are more 
than a nation state. We are a state made up of many, many 
different nationalities. You have a country on the map today 
called France which is made up of mostly of French, and 
Germany, Germans, and Sweden, Swedes, and so forth and so on, 
and that tends to talk about people of a particular ethnic 
group, a particular language group, and very often a particular 
religious group.
    In the United States, we are a wonderful, rich mixture. 
There is no such thing as American nationality in the same 
sense that there is in the old European state, and I tried 
elsewhere in that speech with what is probably overlong, as 
this answer may be, to make the distinction between the United 
States and the EU in that regard.
    Mr. Tancredo. I am certainly glad to hear that at least 
that distinction exists in your mind, although it is again a 
little difficult to understand or see a world developing in a 
way that one half of a significant chunk of it would be 
operating in the manner in which you describe in devolving or 
evolving into something else, where the United States would 
only be an observer; but, nonetheless, I am glad to hear that 
this is a distinction you carry on.
    The last part of the question is dealing with your response 
to a question by Congressman Lantos when he specifically asked 
you to respond to the GoreeChernomyrdin Commission or whatever 
iteration it is in now, and you went on to tell us that you 
were quite excited by the outcomes and believed it, in fact, 
had been quite successful.
    Going back then to something that Mr. Cooksey brought up, I 
refer to Mr. Wayne Merry again who also wrote, especially after 
you characterized Mr. Wayne Merry as you did, as a very 
competent employee, a very professional individual, he wrote 
that every program or project associated with the so-called 
GoreeChernomyrdin bilateral commission's meetings always had to 
be deemed, quote, a success. He argued that the commission 
should have been disbanded long ago, making a case that it was 
part and parcel of the Administration's interest to have State 
Department tell it, in his words, that our policy is a success. 
So how should we gauge your response in light of this 
characterization by Mr. Merry and your characterization of Mr. 
Merry?
    Mr. Talbott. I think my characterization of Mr. Merry is 
both accurate and generous, and my response to him is total 
disagreement. I haven't read everything that Mr. Merry has 
written of late, but I assume you are accurately 
characterizing. I think he is just plain wrong on the facts and 
on the merits.
    For those of us working with the Vice President on the 
binational commission, we are well aware that there were some 
areas where we could have a brass-ring type success--for 
example, getting Kazakhstan to accede to the nonproliferation 
treaty which involved some work with the Russians. That 
happened. That is a success. You can chalk that up. But getting 
Russia to cooperate for reasons that have to do with its own 
self-interest in curtailing and eliminating the illicit 
transfer of dangerous technology to Iran, that is an ongoing 
effort and an uphill one, but certainly not one that we would 
ever have instructed anyone to characterize as a success, not 
least because we are accountable to the U.S. Congress, and we 
have to come up here and describe to you how it is going, and 
the answer is it is ongoing and it is difficult, but we want to 
keep doing it.
    Chairman Gilman. Thank you, Mr. Tancredo.
    Mr. Davis.
    Mr. Davis. Secretary Talbott, I have agreed to yield about 
a minute of my time to Representative Pomeroy.
    So, within that timeframe, we have discussed today a number 
of issues that relate to moving Russia closer to a democratic 
society, our attempts to influence how the money is spent 
within that country, and our attempts to influence a movement 
toward the rule of law. My question for you is, based on the 
lessons we have learned here in dealing with Russia, what can 
we begin to talk about in terms of changing the way we use the 
IMF to more realistically influence how the government and 
institutions within that country move closer to the rule of law 
and putting money in places we would like to see it put in? In 
other words, are there more creative or aggressive ways that we 
can use the IMF to try to influence their internal affairs or 
should we just continue to look at some of the other 
alternatives in addition to the IMF to try to accomplish those 
goals?
    Mr. Talbott. That is the first and I hope only question 
today that I am going to candidly dodge in a sense. I think it 
is such a good question that I really should defer to my 
colleagues at the Treasury Department on that because they are 
the custodians, and very good custodians there by relationship 
with the IMF.
    Larry Summers has been part of, and if I can put it this 
way, the IMF/Russia team from the beginning of the 
Administration is deeply engaged on this. He has testified on 
it to Mr. Leach, and I wouldn't want to get out in front of him 
on this. I am sure he would accept the general proposition that 
of course we can do better, but what he would want to do is put 
a context in answering your question that takes account of the 
IMF global responsibility, its mission worldwide. I think it is 
a very good question, and I hate to make work for Larry, but I 
suggest you find some way of asking it to him.
    Mr. Davis. Thank you.
    I would like to yield the balance of my time to 
Representative Pomeroy.
    Mr. Pomeroy. I thank very much the gentleman for yielding.
    Mr. Secretary, I commend you on superbly stated testimony. 
It is very clear and very, very good.
    I hope that going forward, if there is a partisan debate 
about Russia--and I, for the life of me, don't understand why 
that is necessarily so, we have plenty of other things to fight 
about--it will concern what best advances our interest, what 
best reduces a nuclear threat, either through direct engagement 
over there or proliferation, and what best further achieves a 
restoration of stability in the march to democracy and free 
market economy over there, as opposed to the inane battle of 
who lost Russia, as if Russia is lost in any event.
    I think that your testimony would help all of us refocus 
the debate in a much more constructive path than it seems to be 
unfolding. But my question involves the building of financial 
infrastructure capable of supporting growth of free market 
enterprise at a household level, at a small business level, on 
a big business level; and I find that insurance, the ability to 
allay risk, is a critical dimension of building economic 
viability, especially in a system that doesn't have the 
meaningful risk protection available presently.
    There is a vote that has been highly contentious in the 
Duma. In fact, they passed a very restrictive, basically anti-
competitive insurance measure that would have kept out foreign 
insurers, significantly reducing insurance capacity within 
Russia. Yeltsin vetoed that bill, to considerable political 
risk. Who understands his political calculations? In any event, 
it was unpopular for him to veto that bill, and the bill I 
understand is being considered in the Duma on an override 
effort.
    I am wondering if the Administration would like to put into 
the record any comments it might have about the role of 
insurance in Russia's march toward building a vibrant, free 
economy and thoughts about this measure in particular.
    Mr. Talbott. I am sure we would. Would you mind if I did 
that in writing in followup to this meeting? Because it is such 
an important and good question that I want make sure the words, 
especially after your kind remarks, are exactly the right ones. 
I mean, insurance is another part of what might be called the 
economic infrastructure of reform that has an awful long way to 
go. I know that there are some American companies that are very 
vigorously pursuing entry into that market and that they are 
having some difficulty. I don't know the legislation you are 
speaking of, but let me look into that and get a letter back 
either to you or to the Chairman.
    Mr. Pomeroy. Mr. Secretary, I would appreciate that very 
much and would alert you that I think the measure is pending in 
the Duma. It may even be slated for voting on this week and so 
would urge that you do that quickly.
    In the event that you want to take a pass on it, that is 
fine, too, but I think a statement might be help from the 
Administration.
    Mr. Talbott. I think I hear you saying that it is a 
statement we should make fairly promptly.
    Mr. Pomeroy. Correct.
    Mr. Talbott. Make sure that Jim Collins and our colleagues 
in Moscow get it around there.
    Mr. Pomeroy. I am going to say it is an issue that is 
important, it is out there, and if you choose to make a 
statement, it ought to be done promptly. If you choose to pass, 
I understand.
    Mr. Talbott. Thank you.
    Chairman Gilman. The gentleman's time has expired.
    Since Mr. Talbott has limited time, and we have a vote on 
the House Floor, I am going to ask our Members to limit 
themselves to 1 minute, and we will try to get to everyone.
    Mr. Campbell.
    Mr. Campbell. Secretary Talbott, on October 6th, Ken 
Timmerman said the following about you. I want to read it to 
you, and I want you to respond for the record.
    Chairman Gilman. Please be brief so each Member can query.
    Mr. Campbell. ``The Shahab-3 missle in particular--is 
capable of targeting Israel with nuclear, chemical or 
biological warheads and should, in my view, have Mr. Talbott's 
name written all over it.''
    Let me briefly summarize the more detailed chronology I 
provided in the written statement for Mr. Talbott's 
responsibility for the Shahab-3 missile.
    Later in the colloquy, I speak to Mr. Timmerman:
    Mr. Timmerman, your comment about the Shahab-3 having 
Strobe Talbott's name on it is chilling. I wanted to ask you if 
it is your belief that Deputy Secretary of State Strobe Talbott 
knew of the diversion of the technology, whether he could have 
taken steps to prevent it and chose not to.
    Mr. Timmerman: Yes, on both counts, Mr. Campbell. I was 
certainly not privy to the type of classified briefings to 
which Mr. Talbott was privy. One of the most astonishing things 
that I found out was that, after Mr. Talbott was initially 
briefed by the Israelis in September or October 1996, he never 
once asked a question of our intelligence agencies until the 
Israelis came back and briefed Mr. Gore through his aid, Leon 
Fuerth.
    I then further asked Mr. Timmerman: Again, just for the 
sake of getting the full story out, if he, Mr. Talbott, were 
here, he might say he undertook a lot of steps but they were 
publicly known. You categorically state that he knew and did 
nothing. On what do you base that judgment, Mr. Timmerman?
    For the first 3 months, I am saying between late 1996 and 
February, 1997, absolutely nothing was done. This I have both 
from U.S. Government sources and from Israeli sources. 
Afterward, Mr. Talbott was tasked specifically by the Vice 
President's office--he was put in charge of dealing with the 
Russians on this issue. He had exchanges with the Russians, but 
he never pressed them.
    I end the quotations, and I ask you to make your response.
    Mr. Talbott. Nonsense, is my response.
    Chairman Gilman. The gentleman's time has expired.
    Mr. Campbell. Mr. Chairman, it is not fair to the witness. 
I ask unanimous consent to allow the Secretary to respond to 
the serious charges which I quoted.
    Mr. Talbott. The suggestion, the allegation is utter 
nonsense. You will understand, of course, Mr. Campbell, that in 
this setting neither I nor any of us can get into intelligence 
matters in a detailed reconstruction of the way in which this 
Administration, notably including the Vice President, has dealt 
with the very real issue which has been kind of a theme 
throughout the morning of the leakage of dangerous technology 
from Russia to Iran.
    I can tell you that this Administration and, insofar as I 
have been part of the policy, which is considerable, I myself 
have been quite assiduous in following up on all information 
that we have gotten and pressing the matter with the Russians. 
I think that we can review the history of this episode if you 
want in some other setting, but the bottom line is that when we 
knew there was a problem we acted on the problem, and we are 
several years down the road now. We are closer to a solution to 
that problem as a result of our unstinting work with the 
Russians to get a grip on this, but we are not as close as we 
need to be for the problem to be----
    Chairman Gilman. The gentleman's time has expired.
    Mr. Payne.
    Mr. Payne. Thank you, Mr. Chairman.
    Let me say, Mr. Talbott, it is good to see you, and 
certainly I know of your record of public service, and I don't 
know of any that has a more impeccable record, and it is a 
pleasure to see you.
    First, I also would like to add my dismay to the $2 billion 
that has been cut from the President's request for Russia, $1 
billion less than last year. But also I might add that 40 
percent of the development fund for Africa has been cut, $175 
million from essential loan programs, $157 million cut from 
global environmental programs, $87 million cut from debt relief 
for the poorest countries in the world, $50 million cut from 
African development loans, $200 million cut from economic 
development and democracy building in Africa and around the 
world, $35 million cut from the Peace Corps. It makes 
absolutely no sense when we are trying to make the world safer.
    I come from one of the poorest districts in the country, 
but I have to totally disagree with my colleague from Missouri 
when he says that Americans are outraged about the President's 
$13 billion request for the foreign aid bill, which is less 
than one percent of what we spent on foreign aid. I think it is 
disgraceful that we spent so little. The greedy are really 
taking from the needy. I think that foreign aid is a hedge on a 
world that is safe and secure.
    If you can in New York City and Manhattan get a bite from a 
mosquito that comes from three continents away--and you die--
and you are cutting money from world health, it is silly. If we 
are worried about our children and our children's children, 
about balancing the budget, we are going to have a world that 
is going to be unfit to live in if we continue the nonsense of 
this tunnel vision, this head-in-the-sand silliness that we see 
in the House.
    I guess my minute is up. So I don't have a question. Thank 
you.
    Chairman Gilman. Thank you, Mr. Payne.
    We are pleased that we have with us the gentlelady from 
Ohio, Ms. Kaptur, who is the Ranking Member on the Agriculture 
Subcommittee on Appropriations.
    Ms. Kaptur. I thank the Chairman very much and my 
colleagues for allowing me to sit in on this important hearing, 
and I will be brief.
    The first statement I just wish to make to Mr. Talbott in 
welcoming him back to the House is that I hope you will use 
your full powers within the Administration to get additional 
precinct monitors into Ukraine for the upcoming elections. 
There are 30,000 precincts, and perhaps all Americans living 
and working in the Ukraine could volunteer that day. I think 
the situation is becoming more serious.
    You don't have to respond to that.
    But the major reason I am here today is to say I hope that 
when you leave today you and the staff members that are here 
with you from State will be imbued with greater fervor to deal 
with the issue of Russian food security as fundamental to 
Russian stability. Your testimony deals primarily with military 
security, which I can understand, but I would hope, Mr. 
Talbott, that you could spearhead an effort within the 
Administration and your allies here in Congress to take a fresh 
look at how to better use the food aid and its monetized value 
to achieve reform in Russia and her surrounding former client 
states.
    We know that collective farms were fundamental to the 
structure, the architecture of the Russian system. They have 
collapsed, and their entire social welfare system was tied to 
that.
    Chairman Gilman. The gentlelady's time has expired. Thank 
you very much, Ms. Kaptur.
    Mr. Manzullo.
    Mr. Manzullo. Mr. Secretary, you referred earlier in your 
testimony to theater missile defense systems. Let me ask you to 
comment on the recent series of stories that I have seen in the 
newspaper of granting concessions to Russia to literally 
abandon or modify greatly the ABM treaty, especially in light 
of the fact that, in 1995, the Clinton Administration said that 
shoring up the ABM treaty was of high priority.
    Mr. Talbott. Mr. Chairman, I want to just agree with and 
respond affirmatively to Mr. Payne and Ms. Kaptur.
    Chairman Gilman. We have very limited time.
    Mr. Talbott. Right, and perhaps we can followup.
    Mr. Manzullo. Could you answer mine? Mine is more of a 
question. Theirs is a statement.
    Mr. Talbott. I understand that. That is exactly what I was 
saying, and if the Chairman feels we have run out of time, I 
would be glad to pursue this with you, either in person or by 
letter.
    The word concession is not in the vocabulary of the 
dialogue that we are conducting with the Russian Federation on 
the subject of national missile defense and the Antiballistic 
Missile Treaty and START III. The word cooperation, however, is 
very much part of that vocabulary.
    President Clinton has made clear repeatedly that we and 
Russia face a common problem, which is the proliferation of 
ballistic missiles to third countries, rogue states that could 
threaten both American territory and Russian territory, and we 
should therefore work cooperatively to meet that threat. That 
will require, almost certainly, amendments to or adjustments in 
the ABM treaty, but it will also require new levels of thought 
and ultimately work in the area of cooperative strategic 
defense. It is in that context that this issue arises.
    Mr. Manzullo. Thank you.
    I have to go vote. If I could send you a letter for more 
detail, I would appreciate it.
    Mr. Talbott. I would be happy to respond.
    Chairman Gilman. We want to thank our witness for appearing 
today. The Chair may submit to the State Department questions 
on behalf of the Committee's Members for expeditious answers in 
writing, and I thank you once again, Mr. Talbott, for being 
here today.
    The Committee stands adjourned.
    [Whereupon, at 12;20 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                            October 19, 1999

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