U.S. GOVERNMENT PRINTING OFFICE

62–933 CC WASHINGTON : 2000

U.S. POLICY TOWARD RUSSIA, PART I: WARNINGS

AND DISSENT

HEARING

BEFORE THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

WEDNESDAY, OCTOBER 6, 1999

Serial No. 106–90

Printed for the use of the Committee on International Relations

(

(II)

COMMITTEE ON INTERNATIONAL RELATIONS

BENJAMIN A. GILMAN, New York, Chairman

WILLIAM F. GOODLING, Pennsylvania

JAMES A. LEACH, Iowa

HENRY J. HYDE, Illinois

DOUG BEREUTER, Nebraska

CHRISTOPHER H. SMITH, New Jersey

DAN BURTON, Indiana

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

PETER T. KING, New York

STEVE CHABOT, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

MATT SALMON, Arizona

AMO HOUGHTON, New York

TOM CAMPBELL, California

JOHN M. MCHUGH, New York

KEVIN BRADY, Texas

RICHARD BURR, North Carolina

PAUL E. GILLMOR, Ohio

GEORGE RADANOVICH, California

JOHN COOKSEY, Louisiana

THOMAS G. TANCREDO, Colorado

SAM GEJDENSON, Connecticut

TOM LANTOS, California

HOWARD L. BERMAN, California

GARY L. ACKERMAN, New York

ENI F.H. FALEOMAVAEGA, American

Samoa

MATTHEW G. MARTINEZ, California

DONALD M. PAYNE, New Jersey

ROBERT MENENDEZ, New Jersey

SHERROD BROWN, Ohio

CYNTHIA A. MCKINNEY, Georgia

ALCEE L. HASTINGS, Florida

PAT DANNER, Missouri

EARL F. HILLIARD, Alabama

BRAD SHERMAN, California

ROBERT WEXLER, Florida

STEVEN R. ROTHMAN, New Jersey

JIM DAVIS, Florida

EARL POMEROY, North Dakota

WILLIAM D. DELAHUNT, Massachusetts

GREGORY W. MEEKS, New York

BARBARA LEE, California

JOSEPH CROWLEY, New York

JOSEPH M. HOEFFEL, Pennsylvania

RICHARD J. GARON, Chief of Staff

KATHLEEN BERTELSEN MOAZED, Democratic Chief of Staff

MARK GAGE, Professional Staff Member

MARILYN C. OWEN, Staff Associate

(III)

C O N T E N T S

WITNESSES

Page

The Honorable David Swartz, U.S. Foreign Service, Retired, Former U.S.

Ambassador to Belarus ........................................................................................ 7

Fritz Ermarth, U.S. Central Intelligence Agency, Retired, Former Member,

National Security Council Staff .......................................................................... 10

J. Michael Waller, Ph.D., Vice President, American Foreign Policy Council,

and Editor Demokratizatsiya: The Journal of Post-Soviet Democratization .. 35

Mr. Kenneth R. Timmerman, President, Middle East Data Project, Inc., and

Contributing Editor, ‘‘Readers Digest’’ ............................................................... 37

Mr. Martin A. Cannon, Vice President, Emerging Markets, A. T. Kearney,

Inc., and Managing Director, CIS Operations, on behalf of the U.S.-Russia

Business Council .................................................................................................. 39

APPENDIX

Prepared Statements:

The Honorable Benjamin A. Gilman, a Representative in Congress from New

York and Chairman, Committee on International Relations ........................... 52

Lieutenant Jack Daly, United States Navy ........................................................... 54

Ambassador Richard L. Armitage, former Coordinator for U.S. Humanitarian

and Technical Assistance, Department of State ................................................ 60

Ambassador David H. Swartz, Retired Senior Foreign service Officer ............... 61

The Honorable Edward R. Royce, a Representative in Congress from California ..................................................................................................................... 67

The Honorable Marcy Kaptur, a Representative in Congress from Ohio ........... 68

Fritz W. Ermarth, U.S. Central Intelligence Agency, Retired ............................. 73

J. Michael Waller, Ph.D., Vice President, American Foreign Policy Council ..... 77

Kenneth R. Timmerman, President, Middle East Data Project, Inc. .................. 84

Martin A. Cannon, Vice President and Managing Director, CIS Operations,

A.T. Kearney, Inc. ................................................................................................ 92

Additional material:

Letter of The Honorable Marcy Kaptur, to the President of the United States

dated July 21, 1999 concerning U.S. farm prices and bumper crops ............... 103

Letter to The Honorable Marcy Kaptur from The Citizens Network for Foreign Affairs, Inc., dated October 5, 1999 concerning U.S. food assistance

to Russia ............................................................................................................... 105

Proposed Addition to the Conference Report for H.R. 1906 as Reported, Offered by Ms. Kaptur of Ohio ................................................................................ 107

Proposed Addition to the Conference Report for H.R. 1906 Offered by Ms.

Kaptur ................................................................................................................... 110

Article published by Novaya Gazeta: ‘‘Default Means Self Above Service,’’

as translated from Russia ................................................................................... 112

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U.S. POLICY TOWARD RUSSIA, PART I:

WARNINGS AND DISSENT

WEDNESDAY, OCTOBER 6, 1999

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERNATIONAL RELATIONS,

WASHINGTON, D.C.

The Committee met, pursuant to notice, at 10:10 a.m. In Room

2172 Rayburn House Office Building, Hon. Benjamin A. Gilman

(chairman of the Committee) Presiding.

Chairman GILMAN. The Committee will come to order.

It is clear that the path that the Administration has followed

over the past few years with regard to Russia is rapidly approaching a dead end. The pattern is clear: Top American officials have

repeatedly described Russian President Boris Yeltsin as advancing

the objectives of democracy and economic reform in Russia. Yet, for

years now, his commitment to those objectives is a bit questionable

at best. In fact, some of Mr. Yeltsin’s actions have been inconsistent with those objectives and his personal engagement in the

day-to-day governance of Russia now seems to consist largely of his

routine hirings and firings of prime ministers.

Over the past few years, top Administration officials have

pressed the International Monetary Fund to provide bigger and

bigger loans to the Russian Government. But witnesses before this

Committee, public commentators, and events in Russia itself have

shown that providing more loans only leads to the need to provide

more loans later on.

Huge amounts of money have flooded out of Russia and are being

laundered in non-Russian banks, including American banks, and

yet nothing truly meaningful has been done to halt this flood.

If they weren’t themselves stolen, IMF moneys have only replaced in part the moneys that have been stolen from Russian industry and from the Russian government. Meanwhile, the Russian

economy sinks deeper into a morass while our top officials call for

patience and point to few successes.

It is hard to ignore the dismal characteristics of life for many

Russians today: life-threatening poverty, contagious diseases, a rising mortality rate, the theft of government pensions and salaries,

renewed anti-Semitism and a possible new fascism on the horizon.

It is hard to see how Russia will gain the stability we want for it

if these circumstances continue to prevail.

In foreign policy, Russian officials tell us one thing and do the

other, whether it involves a new Russian military operation in the

region of Chechnya, Russia’s recent surprise deployment of peaceVerDate 11-SEP-98 07:59 May 02, 2000 Jkt 000000 PO 00000 Frm 00004 Fmt 6633 Sfmt 6633 62933.TXT HINTREL1 PsN: HINTREL1
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keeping troops in Kosovo, or what appears to be continued Russian

proliferation of weapons technology to Iran.

Our Committee on International Relations today will begin a

new review of our Nation’s policy toward Russia and how it has

been implemented over the last few years. Today, we will be reviewing warnings that may have been ignored or disregarded over

the past few years, warnings that have come from within executive

branch agencies as well as from outside. Today’s hearing will be

followed by a hearing tomorrow morning during which our Committee will gauge the extent of corruption within the Yeltsin government.

That hearing will be followed by a closed briefing for the Committee next week by the Director of Central Intelligence, who will

discuss the Intelligence Community’s record of analysis and reporting on corruption in Russia.

Our Committee has also extended an invitation, almost 3 weeks

ago, to Secretary of State Madeleine Albright or Deputy Secretary

Strobe Talbott to appear before the Committee on the issues of our

policy toward Russia and corruption in Russia. We expect to receive a positive response to that invitation within the next few

days.

Finally, there have been a number of troubling articles and allegations regarding the Administration’s willingness to disregard alleged Russian malfeasance. There are questions about the State

Department’s handling of an alleged assault on a U.S. Naval officer

who believes that he was blinded by a laser device while observing

a Russian cargo ship near our shores.

In 1996 American businessman Paul Tatum was murdered in

Russia, and his family members have expressed their concern that

a proper investigation of that murder may never have been carried

out due to the possible impact on our relationship with Russia.

There are stories going back to 1995 alleging that an intelligence

program was closed down after questioning the extent of Russia’s

control over its nuclear materials.

Finally, there are questioned about the removal of AID officials

who openly questioned events in Russia and the character of President Yeltsin. At this point, I ask unanimous consent to insert in

the record statements submitted by Lieutenant Jack Daly, U.S.

Navy, and Ambassador Richard Armitage, former coordinator of assistance to Russia with regard to two of these incidents.

Chairman GILMAN. Before I recognize our Ranking Member, Mr.

Gejdenson, for any opening remarks he would like to make, I would

like to briefly introduce our witnesses. Our first panel consists of

two witnesses with experience in the policymaking and analysis

that underlies our policy toward Russia.

Ambassador David Swartz is retired from our U.S. Foreign Service, having served in the region of the former Soviet Union. His last

post in that region was as our first Ambassador to Belarus. We

welcome you, Ambassador Swartz.

Mr. Fritz Ermarth is retired from our Central Intelligence Agency where he worked on intelligence analysis matters. Mr. Ermarth

has also served on our National Security Council staff.

Our second panel includes Mr. Mike Waller, Vice President of the

American Foreign Policy Council, who has written extensively on

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U.S.-Russian relations and our policy toward Russia, as has Mr.

Kenneth Timmerman, who is Contributing Editor to Reader’s Digest. They will be joined by Mr. Martin Cannon, a member of the

Board of Directors of the U.S.-Russia Business Council and the

Managing Director of CIS Operations for the firm of A.T. Kearney.

I now recognize Mr. Gejdenson, our Ranking Minority Member,

for any opening remarks that he would like to make. Mr. Gejdenson.

Mr. GEJDENSON. Thank you, Mr. Chairman.

Anybody who thought there was going to be a smooth transition

from 50 years of totalitarian rule in Russia to an open and free democracy must have never read or observed any history at all. But

we have made some progress, and while there is a tendency in the

Congress to almost nostalgically go from Port-au-Prince to Moscow,

reciting the lower crime statistics and quieter days under dictatorship, the reality is that we have had some stunning successes.

There is no question that the law governing business, the financial irregularities, and even democratic institutions are far from

perfect in Russia. But when I look at the situation, I frankly think

that the Clinton Administration took a policy that was basically

without form and gave it some form and made some progress.

If we take a look at what has happened, we have deactivated

1,500 nuclear warheads. When you compare that to the enormous

and proper response in this Congress to one missile from North

Korea where there is no evidence of a nuclear warhead at this

point, and we hope there never will be, and the destruction of 300

missiles, we have made progress. Nuclear weapons are currently

not targeted at American cities. We have denuclearized the

Ukraine, Kazakhstan and Belarus. The Russians have withdrawn

their troops from the Baltic States, they joined our peacekeeping

mission in Bosnia in 1995, and they joined our peacekeeping mission in Kosovo in 1999.

We have a lot of bumps in the road with the Russians. We have

bumps in the road with our allies, the French, British, and Israelis

at almost every corner. These are countries that have had democratic institutions for decades. We need to do a better job of managing the programs that go into Russia, without any question. We

have to demand tougher accounting, better collection of taxes, better enforcement of laws. Do we want to see less crime and less organized crime in Russia? I think we would have the same hope for

this country. Are there businessmen who are killed and women

killed on the streets of the United States? Yes. Is there more crime

in Russia now that there is no longer a totalitarian government?

Absolutely, yes.

The process of building a democracy in Russia will be a difficult

challenge. Unlike most of the Eastern Bloc, there is no precedence

for a civil, democratic and free economy in Russia. There is no history. They went from the medieval days of the czars to the Communist revolution, and they have lived under totalitarianism for 50

years.

At the end of World War II, the United States tried many of the

same things. We tried a Marshall Plan that in today’s dollars

would be $90 billion, and we tried everything we could, from hiring

Nazi scientists who had just finished trying to exterminate the

4

Free World, and we put them under our contract because we didn’t

want them to go elsewhere. I have witnessed in this Congress an

assault on Nunn-Lugar funds which are used to get rid of nuclear

weapons and fissionable material that is a danger to American national security.

It sometimes seems to me there is a nostalgia: Gee, if we only

had this dictatorship that we knew how to confront, rather than

the unsure future of dealing with a country trying to become democratic. Nobody in his right mind would nominate President Yeltsin

for head of the League of Women Voters. Frankly, I wouldn’t nominate some of the Senators and House Members we have here, when

we look at what we have done for campaign finance reform, for the

President of the League of Women Voters either. But we are going

to have legislative elections in Russia, we are going to have a free

Presidential election in Russia. Perfect?

Even some of our elections are not perfect. But let me tell you

something, there is not a Member of this Congress or I hope anybody in this country that would prefer the stable, Politburo-run

country that used to exist in Russia to the turmoil we are facing

today. We ought to focus these hearings on the financial institutions, the International Monetary Fund, and other organizations.

What happens to the money? The same problems that happen in

every poor country with bad laws. Capital flight, undermining the

economy, places a terrible burden on average citizens as wealthy

individuals are freed from inflation and the ups and downs of the

economy by taking their money out of the country.

Let’s work together to embolden our policy in dealing with Russia; let us work together to make sure it works. Let us not argue,

as some have, that we ought to stop meddling, that we ought to

somehow hope that it is all going to get better without our help.

If we had left Europe alone, it would have been in a much worse

situation. If the United States disengages from Russia, it will create a disaster, and we will face in a decade either a left-wing or

a right-wing totalitarian government again. There is no guarantee

in what we do that there will be success; but there has definitely

been proven success when you look at warheads, when you look at

missiles, when you look at denuclearized states, when you look at

the progress of free economic competition. Not perfect, but it is not

perfect anywhere, and they have a lot further to go.

Thank you for holding this hearing, Mr. Chairman.

Chairman GILMAN. Mr. Leach.

Mr. LEACH. Thank you, Mr. Chairman.

There is a lot of truth in both the opening statement and the

statement of the Ranking Member, but the big picture is that for

all of the pluses and some of the positives occurring in Russia, Russia is also going backward and is subject to forces that appear to

be beyond the control of the American people. Instead of the United

States responding with a Marshall Plan, it is clear the institutions

of the West have helped facilitate the marshalling of the wealth of

Russia for it to be recycled to the West as stolen social assets.

This country has no choice but to be very, very much alarmed

and very much supportive of the Russian people against the new

institutions of wealth-stealing that have developed. Today is a signal day in that three exceptionally minor indictments have been

5

brought in New York, but they are minor indictments with major

implications. The crimes that are suggested in our scope are rather

small, but it can begin to lead to the unwinding of our greater

crimes that are involved in the accumulation of the money that has

been laundered in contrast with the money laundering itself.

In any regard, my own view is that if things are going askew in

our relations with Russia, there is some degree of accountability

within the executive branch, lack of vigilance perhaps in all

branches of the U.S. Government. But the issue is not so much finger-pointing, but what we do to correct the situation and how we

look to the future. In that regard, I think that the bottom line of

this Congress should be concern for the Russian people, concern for

the rule of law, and to try to develop a system of accountability in

Russia that is based upon help that we can provide in insisting

that our laws are upheld and the kind of corruption we see there

is not brought to our shores.

In any regard, this hearing that the Chairman is bringing forth

is very timely and much appreciated.

Chairman GILMAN. Thank you, Mr. Leach.

Chairman GILMAN. Mr. Lantos.

Mr. LANTOS. Thank you, Mr. Chairman. I want to commend you

for holding this hearing. I would like to commend my good friend

from Iowa, who is conducting important hearings on the Russian

banking system with his customary integrity and objectivity.

I would like to take a bit of an historic view of where Russia is

in 1999.

I first made my visit to the Soviet Union in the summer of 1956,

Mr. Chairman, and my last visit to Russia was last month, in September. I must say that while I certainly see probably as many

problems as difficulties in Russia, as any of us in Congress and any

of our witnesses, I also believe it is absolutely critical to put Russia

in 1999 in some kind of historic perspective.

Russia is still enjoying a free press. Russia is looking forward to

free and democratic elections for the Duma in a few months, and

to a free Presidential election next year. Every Russian has a passport. Russians are eager for American investment, for American

tourism, and the dialogue between American academic institutions

and Russian academic institutions, between our Library of Congress and their libraries, are full and fruitful and flourishing.

Since I suspect these hearings have somewhat of a partisan

angle, as your opening remarks clearly indicated, let me remind

you, Mr. Chairman, that the historic change in the Soviet Union

came in the period 1989 through 1991. The dramatic opportunity

the West had in that period took place during an earlier Administration, if I am not mistaken, the Bush Administration. So if we

are to explore seriously what has gone wrong in Russia, it is extremely important to realize who was in charge when the cataclysmic changes in the Soviet Union unfolded. It was not this Administration.

Let me also say that it was one of the tragedies of the West that

there were no great political giants in power in any of the western

countries at the time of this historic moment. There was no Adenauer, no Jean Monet, no Churchill, no Paul Anrespok, no Archita

deGustery. The great leaders at the end of the Second World War

6

in the West created a framework and we played the pivotal role in

that framework, the Marshall Plan, NATO. One would have hoped

that when the Third World War of this century ended, which we

label the Cold War, there would be equally farsighted vision and

creativity and courage on the part of western leadership to deal

with this historically incredible new opportunity.

That, clearly, did not happen. The responses were timid, halfhearted, puny, and unimpressive.

The Russians had high expectations of working with us closely.

When we had a bipartisan leadership delegation go to Moscow, as

you may recall, 2 weeks after Yeltsin and President Clinton had

their first meeting in Vancouver, British Columbia, we were greeted with tremendous enthusiasm and great expectations. Every subsequent visit was greeted with much less enthusiasm, much less

excitement, and much lower levels of expectation.

Nevertheless, the Russians have cooperated with us and are cooperating with us in Bosnia; they have been pivotal in bringing to

a close the Kosovo military engagement, and our relations with

them are far better than anyone had any right to expect in the fall

of 1999. I had a long session with the Foreign Minister of Russia,

Mr. Ivanov, less than a month ago, and there is no doubt in my

mind that the Russians are still hoping of building a constructive,

cooperative and useful relationship.

Now, I also would like to make one final point if I may, Mr.

Chairman. You were highly critical of our government’s treatment

of Boris Yeltsin. Allow me to remind you that there are many Boris

Yeltsins. The first Boris Yeltsin that we got to know was the man

who was the first democratically elected President of Russia in

1,000 years. Well, it is not unreasonable that we dealt with him.

It is not unreasonable that the Government of the United States

established as best it could relations with the first democratically

elected President of Russia. It is not unreasonable that Vice President Gore was designated as our point man with the Prime Minister of Russia, Mr. Chrnomyrdin for a period of 5 years to work

on a horrendous range of issues. You should read, Mr. Chairman,

if you haven’t yet, the agendas of the Gore-Chrnomyrdin Commission and the very constructive and positive and many-splendored

results of the Gore-Chrnomyrdin Commission.

Now, it is obvious that Yeltsin has undergone a major change

mentally, physically, and in many other ways during the course of

the last few years, but it is still important to realize that our alternatives were the lunatic fascist Zhirinovsky or the equally evil

Communist leader Girgonov, or perhaps the would-be military dictator Lebed. So I think it is important to realize that when we are

so highly critical of having dealt with Yeltsin and his government,

our alternatives were not Mother Teresa. Our alternatives were

singularly less desirable counterparts who, by the way, were not

elected President of Russia.

I look forward with great pleasure to hearing our witnesses, both

today and tomorrow, but I think it is important if we are to make

good use of these hearings that we shy away from partisan political

denunciations of this Administration, because the new Russia unfolded under the Bush and Clinton Administrations and the great

historic moment was in 1989–1991, not in 1999. Not in 1999.

7

Second, we take a balanced view of the achievements and of the

failures that our governments under the Republican and the Democratic Administrations may have committed. Thank you, Mr. Chairman.

Chairman GILMAN. Thank you, Mr. Lantos.

Does any other Member seek recognition? If not, we will get on

with the panelists.

Ambassador David Swartz entered the Foreign Service in 1967,

and during his career with the State Department, he served in our

American embassy in Moscow in the early 1970’s, in the consular

office that predated our current Embassy in Kiev, Ukraine established in the late 1970’s, and as Deputy Chief of Mission in Warsaw from 1984 to 1988. Ambassador Swartz was our first Ambassador to the newly independent state of Belarus from 1992 to 1994,

a vantage point from which he was able to closely view our policy

toward the entire former Soviet Union and its largest successor

state, Russia. Ambassador Swartz retired in 1995 and has most recently served as a Visiting Professor at Lawrence University in

Wisconsin.

Chairman GILMAN. Ambassador Swartz, you may summarize

your written statement, which, without objection, will be inserted

in full in the record. Please proceed.

STATEMENTS OF DAVID SWARTZ, U .S. FOREIGN SERVICE,

RETIRED, FORMER U.S. AMBASSADOR TO BELARUS

Mr. SWARTZ. Thank you, Mr. Chairman. I am grateful for the opportunity to be with you today and I appreciate you having invited

me to come along and appear this morning. As you pointed out, I

did provide a written statement, and I now propose to spend just

a few moments summarizing the main points of that statement, if

I might.

Certainly I believe that all of us who consider ourselves

Sovietologists or experts or specialists in the field of the Soviet

Union and the post-Soviet Eurasia were caught off guard, to be

frank, by the events beginning in the late 1980’s and culminating

with the end of the Soviet Union in December 1991. I think that

is an important point that needs to be highlighted. I think myself,

as a career Foreign Service Officer, a retired career Foreign Service

Officer, that things got underway quite effectively from a policy

point of view. From a specific concrete action point of view in the

first post-Soviet months which, in fact, was the last year of the

Bush Administration—certainly a consideration of the subject that

we are looking at today, which is basically retrospective—must look

also at the performance of the Bush Administration, as has been

correctly pointed out already.

I would submit to you that already before December 1991, Administration figures under President Bush clearly understood, as

did the President himself, and were responding to centrifugal

forces that were already well at play before the demise of the Soviet Union. I would submit that there was a strong degree of bipartisanship that reflected American foreign policy toward that region

in those days and months.

In particular, I would cite the Freedom Support Act that was, I

think if not a model of bipartisanship, certainly a strong demVerDate 11-SEP-98 07:59 May 02, 2000 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 62933.TXT HINTREL1 PsN: HINTREL1
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onstration of it in 1992, which set the framework for a concerted

effort and assistance that was intended, of course, to have significant political as well as humanitarian and economic benefits.

The Bush Administration strove, even before the Freedom Support Act was conceptualized and enacted by Congress, to embark

on a significant program of immediate humanitarian assistance.

Ambassador Armitage no doubt has or will speak about that subject, with a view toward getting the peoples of the region through

the crisis of those months and days.

A critical point I think about the Bush Administration at that

time was that it immediately established new embassies in all of

the countries of the former Soviet Union, so that by February 1992,

scant weeks after the Soviet Union ceased to exist, we had operating embassies in all of these places. I have personal experience

in that regard, of course.

I believe that the final year of the Bush Administration saw a

strong understanding of the challenges, let’s say, that the postGorbachev leadership was going to pose for American policymakers. Gorbachev was someone we had dealt with and understood

and had effective relations with, but Gorbachev was no longer

there. Yeltsin was a different kettle of fish, as has been cited already in various statements. I believe the Bush Administration understood those nuances. It managed to, I believe, successfully conceptualize a reform strategy intended to lead toward democratization and market economics in the former Soviet space, not just in

Russia itself, but elsewhere. Perhaps most crucial for American interests, the Bush Administration immediately seized upon the

issue of centralization of nuclear weapons and denuclearizing in

the circumstances surrounding the end of the Soviet Union. That

program was begun in that last year of the Bush Administration.

It did not come to full fruition until later, but it was begun during

that period, and I think it is impossible for us to ignore these facts

which are, of course, on the record.

Now, the question is, what would have happened had the Bush

Administration continued in office? I am not prepared to sit here

and assert for you—and I am not a politician anyway, but even if

I were—I would not be sitting here and asserting to you that the

Bush Administration would have had great huge successes in its

post-Soviet Russia policy in contrast to what we might say are

failings of the current Administration’s policies in that region.

Maybe that would have been the case, maybe it wouldn’t have

been. But since the question is moot, I don’t really think that we

can address it and don’t need to.

Now, turning to the first year of the Clinton Administration,

which was my last year in service in Belarus, I would say that

even allowing for a traditional settling-in period for a new Administration, things got off to a pretty confusing start. That was kind of

odd, I thought, in view of the fact that the incoming Clinton Administration claimed to have someone with enormous and deep Soviet expertise leading the policy team. From my vantage point as

a holdover Ambassador in those first months and with lengthy experience in the region, I felt that the new Administration was too

willing to take at face value punitive reformists and white head

sorts of credentials of Yeltsin himself and people around him.

9

Chairman GILMAN. I am sorry to interrupt, Mr. Ambassador. We

will continue right through the hearing. I have asked some of our

Members to go over and come back to conduct the hearing while

we are voting. So if any of the Members wish to go over and vote

and come right back, we will continue with the hearing without

interruption.

Please continue.

Mr. SWARTZ. Thank you, Mr. Chairman.

I felt that the new Administration was unnecessarily russocentric

in its approach to the region, giving rise in Moscow, in my opinion,

to the impression that the United States would not oppose and

might even support reimposition of Soviet-style hegemony, which I

felt then and feel now was contrary to American interests. I felt

that the new Administration did not make sufficient internal executive branch linkages between strategic policy and tactical policy

implementation, specifically in the technical and economic assistance areas.

I found the Administration taking some astonishingly naive actions; in particular, an event in Belarus involving President Clinton during his visit there which had, in my opinion, the exact opposite effect that was intended by holding the event.I believe that the

new Administration seemed not to understand that societal transformation is a very long, arduous proposition and to act accordingly.

The sum total of all of this, in my view, was a creation of a climate in Moscow of political and economic promiscuity, where the

impression reigned of a high U.S. tolerance level for these activities

across a broad spectrum of the unofficial and official Russian community.

On frequent occasions when I was Ambassador in Belarus, I

spoke out in written communications with high-level figures in the

State Department and the National Security Council staff in Washington on these matters and others, and typically got nowhere with

them; which is, perhaps, not unusual for Ambassadors in the field,

but it was a new experience for me. The most vociferous policy disputes that I particularly was engaged in had to do with assistance

matters: Food deliveries where they weren’t needed, no support for

private higher education where it was needed, too little transformational assistance in general, leading the local populace frequently to ask, as they still do, ‘‘Where is the beef?’’ Eventually I

decided to resign my post over these policy disputes, so it will come

as no surprise to the Committee that I express the views that I already have expressed.

With that, I would like to thank the Chairman for this opportunity.

Chairman GILMAN. Thank you, Mr. Ambassador.

Chairman GILMAN. Before I proceed, I would like to submit for

the record a statement by our distinguished Subcommittee Chairman, Mr. Royce, with regard to U.S. policy toward Russia. Without

objection, we will make it a part of the record.

Chairman GILMAN. We are pleased to have with us Congresswoman Marcy Kaptur of Ohio, a Member of the Appropriations

Committee and a Ranking Member on the Agriculture Subcommittee who wants to submit a statement. Ms. Kaptur.

10

Ms. KAPTUR. Thank you very much for allowing me to sit with

your Committee. I will submit for the record a statement that details the $1 billion shipment of food aid to Russia during this fiscal

year and raises some concerns regarding its accounting, as well as

the Administration’s disconnected approach to handling this food

aid shipment relative to other foreign policy goals. We would just

ask the Committee, and thank them very much, for including this

in the record.

I noted in the summaries that have been provided the word agriculture is not really mentioned. In this fiscal year alone, we will

provide more in food aid to Russia than we do in all of the other

foreign assistance programs. I thank you for allowing me to sit in.

Chairman GILMAN. Thank you for bringing this to our attention.

Your statement will be made part of the record, without objection.

Chairman GILMAN. We will continue with our hearing.

Now I would like to call our second panelist, Mr. Fritz Ermarth.

Mr. Ermarth retired from the Central Intelligence Agency in 1998.

During a career of more than 30 years, Mr. Ermarth served as a

Soviet Affairs Analyst at Radio Free Europe and the RAND Corporation, as well as with the CIA. Mr. Ermarth has served as Special Assistant to the Director of Central Intelligence, the National

Intelligence Officer for the Soviet Union and East Europe, and

Chairman of the National Intelligence Council. He has also served

twice on the National Security Council staff under Presidents

Carter and Reagan, and recently, Mr. Ermarth has written on the

problem of corruption in Russia and its impact on U.S. policy toward that nation in both the ‘‘New York Times’’ and the ‘‘National

Interest.’’

Mr. Ermarth, you may summarize your written statement which,

without objection, will be inserted in the record. You may proceed.

STATEMENT OF FRITZ ERMARTH, U.S. CENTRAL INTELLIGENCE AGENCY, RETIRED, FORMER MEMBER, NATIONAL

SECURITY COUNCIL STAFF

Mr. ERMARTH. Thank you, Mr. Chairman. I am deeply grateful

to you and to the Committee for this opportunity to testify on your

very important agenda. As the previous speaker, I will just offer

some brief summarizing remarks, with apologies to Representative

Leach who has heard some of them before during the hearings that

he chaired, and to the Chairman whose opening remarks indicate

he is way ahead of the power curve on much of what we are discussing.

First, it is extremely important to realize, as several speakers

have already emphasized, that the roots of the crime and corruption problem that have brought us here today in Russia go back

into the Soviet past, as do many of the problems of Russia today,

like the environmental crisis, the public health crisis, the decay of

infrastructure. It is particularly important with respect to the lack

of the rule of law. We have to understand that the plundering and

laundering, the organized crime and the authorized crime that

dominate the Russian economy today have their origins in the activities of the KGB and the Communist leadership in the late

1980’s, not under the Yeltsin regime, although they escalated

under Yeltsin.

11

The second big point is that what we call economic reform in

Russia has really not created a market economy or capitalism, that

most hoped for. Rather, it created a kind of crony capitalism without much capitalism, or I would call it phony crony capitalism

where insider privatization, in alliance with corrupt officialdom,

has produced a system dominated by a few powerful individuals or

entities who strip wealth out of the country and send it abroad

rather than investing to create wealth and prosperity at home. The

result has been impoverishment for the people and profound instability of a political and social system which we should all recognize

poses serious dangers for our most important security interests in

Russia, particularly nuclear stability and security.

Now, organized crime interacts with these phenomena with this

plundering system, both as a beneficiary and a facilitator, through

such activities as protection racketeering and money laundering.

These realities that I have tried very briefly to summarize have

been completely visible from the start, and aptly reported by a host

of Russian and western observers in the English language for that

matter. You didn’t have to read Russian to follow this saga. No

failings of American intelligence can be blamed for a failure to see

these realities. There were, however, some failings of American intelligence which, in my view, deserve some analysis and correction.

Mr. Chairman, your staff asked me to spend a few minutes on

this topic of intelligence, and I will briefly summarize my view, especially in the early to mid-1980’s.

Chairman GILMAN. I am sorry to interrupt, Mr. Ermarth. I am

going to turn the Chair over to our Vice Chairman, Mr. Bereuter,

while we go to vote. Please continue.

Mr. ERMARTH. Thank you, Mr. Chairman.

On the subject of U.S. Intelligence in this area, I did see some

difficulties in the early to mid-1990’s, in particular, in developing

a fully integrated big picture of what was going on in Russia’s troubled forums. First, as has been noted in some press and referred

to in an article that I published to which the Chairman alluded,

there was some political distaste in the top ranks of the current administration for reporting an analysis about corruption in the

Yeltsin regime. Second, a reduced work force, preoccupation with

current intelligence, and preoccupation with current support requirements limited the efforts of intelligence analysts to get a deep,

big-picture view of Russian reforms. There was bureaucratic

compartmentalization. People wanted to look at different aspects of

this elephant and not bring the pieces together.

Finally, economic analysis didn’t adequately appreciate the impact of crime and corruption on Russian reforms, taking the view

that while their robber barons are like our robber barons and they

will all go legitimate in the end, not recognizing that the absence

of the rule of law made it impossible or extremely difficult to impose the discipline of fair market practices that we imposed on our

robber barons, things like that.

Now, some of my former colleagues think I am unfairly critical

about our intelligence record here, because I may not have seen everything that was going on. Other colleagues, on the other hand,

who were very much in the thick of it, don’t believe I am critical

enough. But let me repeat my basic point. You did not need official

12

intelligence to see the toxic mixture of corruption, insider business,

organized crime and capital flight that undermined Russian reforms and the effectiveness of our support. They were entirely visible in the Russian press, even in English, and any attentive observer could see them.

The historic failing of American policy in this period was that it

gave support too uncritically and for too long to this phony crony

capitalism in Russia. It did so rhetorically, politically, and financially, chiefly through the IMF. The result has been the prospects

for true economic reform in Russia have been made, in many ways,

more difficult than they were initially. Worst of all, we have lost

much respect and admiration among the Russian people, as have

the very ideas of capitalism and democracy.

Now, this in no way ignores what has been achieved under such

programs as Nunn-Lugar, but as I have already said, the failures

of Russian reforms very much endanger those achievements.

The problem with the IMF has been more one of perversion, I

would say, than diversion of funds. Rather than encouraging the

stabilization and growth of the Russian economy, the IMF has

served to legitimize the extraction and the flight of wealth, of capital. But there does, in fact, seem to have been something like diversion in the summer of 1998, and I would be happy to summarize

the evidence, if the Committee is interested, in response to questions.

Why the Administration pursued the policies it did for so long in

the face of these realities is still not entirely clear because I find

its belated explanations not terribly persuasive, particularly the

reference to our security interests. While we have achieved things

during the course of the 1990’s, positive things, I believe our security relations with Russia are in worse shape today than they were

in 1992, 1993 when we enjoyed great admiration of the Russian

people.

The influx of vast sums of Russian money into our economy during this period, probably amounting to hundreds of billions of dollars, poses serious questions for law enforcement and regulation,

which is one of the reasons we are here, to witness the indictments

of yesterday. Whether that money was stolen by crime or by corrupt business, laundered or just deposited, it inevitably created

American stakeholders in the process that brought it here. Whether such stakeholding exerted an influence on U.S. policy that embedded the process is a valid question that this Congress should

address.

Finally, let me make a point that very much agrees with that of

the Ranking Minority Member. Russia is not lost but stuck in a

swamp between the Soviet past and alternative future possibilities

that range from bright and friendly to dismal and threatening. Our

task is to assay the past, reassess our policies, and get ready for

the possibility that a window of real reform in Russia will reopen

if—and I underscore if—they get through the impending elections.

I wish I and, for that matter, Russians could be as confident as the

Ranking Minority Member is that they will, in fact, hold those elections. In fact, Russia is in a profound crisis, a two-headed one involving electoral politics on the one hand and the crisis in

Chechnya on the other.

13

There are better paths available to the Russians and to our own

policy toward Russia. If this Committee can illuminate those paths,

both Russia and America will be grateful. Thank you, Mr. Chairman.

Mr. BEREUTER. [Presiding.] Ambassador Swartz, Mr. Ermarth,

thank you very much for your testimony.

Mr. BEREUTER. We will begin questioning under the Committee’s

5-minute rule.

I would begin by saying I am interested in knowing your opinions as to how we modify our current policy, which is not successful

with respect to Russia. I am not interested, frankly, in a partisan

discussion about who is responsible for what in the Bush or Clinton

Administrations as I am in understanding what we ought to do

now with the situation that is obviously not good.

If you were to be given an eight by four block of granite and you

were to know that your advice to us would have to be chiseled on

that block, what principles should underlie our policy with respect

to Russia now to give us a positive Russian-American relationship

and serve our national interests? Ambassador Swartz, do you want

to try first?

Mr. SWARTZ. I think the most important principle that would be

chiseled on that block of granite is pursuit of our national interests,

and that might sound like a cheap shot, it is not intended to be.

Really, everything that we should be doing in our diplomatic relations with anybody is pursuit of U.S. national interests.

Mr. BEREUTER. That should be on a banner in the back of the

room here: What are our national interests? That question ought

to be facing Members of this Committee every day. I understand

that is where we start.

Mr. SWARTZ. As far as Russia is concerned, I believe the period

of deep crisis that was alluded to a moment ago is certainly a characterization that I would agree with. I would suggest also that our

relations are in something of a holding pattern now because we do

have impending elections to the Duma, and we do have impending

Presidential elections. Really, the outcome of those contests will, to

a large extent, be determinant as to what our policies are going to

be with regard to Russia.

Mr. BEREUTER. Ambassador, remember that block of granite. I

am looking for those principles.

Mr. SWARTZ. Again, the principles should be following pursuit of

our national interests, should be encouraging whoever those leaders are to establish as swiftly and as comprehensively as possible

rule of law in civil society; to move us as swiftly as possible to

achieve an appropriate nexus between private capital and government in terms of how business operates, regulation, tax collection

and so on. These are the things that we should be fostering.

You can say well, we have perhaps have been fostering those, but

without wanting to be too retrospective, I think more needs to be

done.

See who wins the elections, pursue our national interests in

terms of those critical elements, and then of course in the Third

World, the broader world, do things that we need to do to encourage the Russians to stop providing nuclear technology where it is

14

being provided and to do other things that are consonant with our

own national interests, and to challenge them when they don’t.

Mr. BEREUTER. Thank you, Ambassador.

Mr. Ermarth, the Ambassador had to go first, so you had a whole

2 or 3 minutes to think about it.

Mr. ERMARTH. Yes, sir, Mr. Chairman. I would put some things,

some of the same things on that block. First, we have to start with

a thorough audit of our policy. Now, these hearings constitute such

an audit, but there are a lot of things down in the weeds—details.

For example, in Nunn-Lugar, we have achieved a lot, but a lot of

money has been spent and there needs to be a thorough investigation of where exactly it was spent and how. The IMF Program obviously needs to be gone over very thoroughly.

Second, we need to assure that in the future, we have full honesty, transparency, and accountability, on our side as well as

theirs. I mean, a great deal of the problem over the last 6 or 7

years is that we refused to be honest with any of the essential constituencies about what was obviously going on over there.

Third, we need attention to all elements of the political spectrum

that have influence in Russia, especially in the political arena. Congressman Weldon has emphasized the importance of paying attention to the Duma. I think that is a very wise consequence of the

general principle. We shouldn’t restrict our policy connectivity to

Russia to a few cozy relationships among people who speak English

and IMF-ise.

Fourth, most of the assistance ought to be targeted in a very

practical, grassroots way, and that includes things like building

civil society and rule of law.

Mr. BEREUTER. Thank you very much.

The gentleman from Connecticut, the Ranking Member, is recognized for 5 minutes.

Mr. GEJDENSON. Thank you.

It seems to me that what you outlined, both of you, although it

be a big chunk of granite and there is a lot to do here, is exactly

what all of our bilateral relationships are aimed at doing—the

Gore-Chrnomyrdin and the followup. The agendas are designed to

try to get the Russians, who have no private property, no due process, no review systems in place of any serious nature, to evolve into

a free and open society. So I think frankly we don’t have a big debate here.

The auditing—I think every Member on this Committee wants to

follow every penny that American taxpayers pay to make sure we

are getting the maximum return on it.

I guess what I am saying is, so that we can highlight this, let’s

assume I have seen one report that says that the IMF did an audit

and that they know where their money went and where it wasn’t

supposed to have gone. Some people claim it is IMF money, but I

have seen no evidence of that. Some people claim it is other Russian money in flight and illegal moneys that violate Russian laws.

I don’t think there is anybody in this town from Pennsylvania Avenue to Capitol Hill or anywhere else who wants to see our money

misused or not spent for what it is supposed to be spent. So we all

agree on that and we would like to see those audits.

15

What in the programmatic sense ought we add or take away

from what we are doing? It seems to me that I think we all basically agree we have to engage the Russians, we have to get them

to do the basic hard work of government. We have to have ethics

in government, we have to have oversight, we have to have transparency, economic transactions. We want to make sure that when

we deal with issues like nuclear proliferation, there isn’t somebody

selling nuclear material out the back door. This is even tougher in

societies in chaos.

I remember being briefed by the people who run the Ukrainian

nuclear power plants, that they hadn’t paid some of their workers

for 6 months at one point. When you are not paying your workers

for 6 months, you know what they are doing; they are stealing

something out the back door or they are not the most dedicated

workers at that point. Obviously, you have big problems. What

would you add or take away from what we are doing today? You

can do it in pencil or granite, whatever your choice is.

Mr. SWARTZ. My answer to that is that the devil is in the details,

and the details I think haven’t been paid sufficient attention.

I am a strong advocate of small concrete actions, baby steps, if

you will. Let us do this in this town, let’s do that in that town, let’s

do this project that will have this result. Not only will this achieve

greater accountability and results, I would submit, but also individual Russians who, after all, are the ones who are going to be

voting for these people that we talked about a minute ago, will be

able to see what America is doing in their town, in their factory,

in their whatever.

Mr. GEJDENSON. I think we have general agreement, even within

the Administration as well, they are moving things back into the

provinces. I think Eximbank, frankly, is a better way to go from

my position than the IMF. You have a specific project, you do

something, it is concrete, you can follow the dollars. I think we

have a real international monetary problem, and I hope the Chairman of the Banking Committee will figure out how to deal with it;

but I think you are right, specific projects.

Mr. ERMARTH. I would endorse the specific projects business, but

I would also stress we have to put our action programs, our money,

as it were, behind what we say. We have talked about law and

order, building a civic society, but we have behaved in ways, for example, supporting the IMF funding, that suggested we didn’t really

mean it.

Mr. GEJDENSON. Let me ask you this: What would you have

changed on the IMF funding?

Mr. ERMARTH. Starting most recently, I would have, in the summer of 1998 said, this GKO pyramid or casino you have going over

here is thoroughly responsible. It should have been shut down a

year ago; let’s shut it down now.

Mr. GEJDENSON. Explain that to me again.

Mr. ERMARTH. I mean, working back in time——

Mr. GEJDENSON. Right. The most recent one you have no complaint with.

Mr. ERMARTH. Which?

Mr. GEJDENSON. The refinancing tranche that stays——

Mr. ERMARTH. To avoid default.

16

Mr. GEJDENSON. To avoid default, you won’t disagree with that.

Mr. ERMARTH. Yes, I certainly do.

Mr. GEJDENSON. So you would allow them to default?

Mr. ERMARTH. I am not sure which is the best way to go right

now, politically or economically.

Mr. GEJDENSON. So you are unsure about default, and now we

go back to the previous tranche of funds.

Mr. ERMARTH. We shouldn’t have lent the money on the terms

that we did in the summer of 1998.

Mr. GEJDENSON. What would you have added for conditions?

Mr. ERMARTH. Shutting down the GKO market on some soft

landing strategy.

Mr. GEJDENSON. What would that soft landing strategy be?

Mr. ERMARTH. I am just not able to sit here and create one. But

I think we have a whole history of buying into policies on the part

of the Russian regime that were thoroughly flawed, and we could

see those flaws emerging, and we should have said so.

Mr. GEJDENSON. I think lots of people said so. I think that trying

to get the particulars to go from their system to our system is a

pretty rough road. Again, if you can’t do it today, I would appreciate any additional proposals—because my time is up—on what

we ought to do from here on in, and I agree with more specific

projects. I am a big believer in Eximbank. We have some problem

with our colleagues in the other body and sometimes in this body

as well, but thank you very much.

Chairman GILMAN. [Presiding.] The gentleman’s time has expired. Thank you.

Ambassador Swartz, what do you predict to be the future for

Russia and our relationship with them if our current policy does

not change?

Mr. SWARTZ. Mr. Chairman, in your absence I spoke about that,

a little, but let me say a bit more. I believe that first of all, we have

to understand that our ability, even as a great power that we are,

to affect events abroad is a limited ability. So we are talking about

incrementalism. That is the first thing that I would say.

Chairman GILMAN. Talking about what?

Mr. SWARTZ. Incrementalism. Yet, at the same time, I think that

we have opportunities, programs, that have not been maximally

utilized for advancing American national interests. The future,

though, of Russian-American relations, and this is what I said a

minute ago while you were gone, seems to me to be dependent at

this stage of the game on how the elections come out. I am reasonably confident that these elections are going to be held; they may

even be free and fair elections. What worries me very much is that

the ordinary man in the street is, quote-unquote, mad as hell and

not going to take it anymore, because many of them live worse now

than they did in the Soviet period. This is not good.

So I don’t mean to deflect your question, but I think we are going

to have to wait and see how the elections come out, and then vigorously pursue with whoever wins our agenda for advancing our own

interests.

Chairman GILMAN. Thank you, Mr. Ambassador.

Mr. Ermarth, as a retired intelligence analyst and also an expert

in the field of Russian affairs, do you believe that it was necessary

17

for our policymakers to have access to sensitive intelligence information on corruption in Russia and in the Yeltsin government in

order to realize the extent of the problem? Or could they have assumed from the many reports in credible, open, press publications

in both Russia and the West, that this was a serious problem?

Mr. ERMARTH. Mr. Chairman, there is no question in my mind

that the publicly available information coming out of Russia made

it very clear what the dimensions of the problem were. At the same

time, of course, policymakers should have access to the best intelligence available. Being careful not to go beyond what is appropriate to say publicly on intelligence here, I can say that what was

available through intelligence sources and methods would serve

largely to amplify and to provide rich detail to what was thoroughly presented in the public domain.

Chairman GILMAN. Mr. Ermarth, in your ‘‘National Interest’’ article earlier this year, you make reference to Russian official

Anatoly Chubais’ statement last year that with regard to a loan to

the Russian Government that went through the IMF with U.S.

support, that the Russians had ‘‘conned’’ the IMF. You then went

on to point out that our foreign policy regarding Russia involves

such large sums of money as that IMF loan and that dealings with

Russian officials and others can involve a ‘‘thicket of insider relationships’’ where there is room for ‘‘the wasteful, the dangerous and

the sinister,’’ again your quote.

Am I correct in interpreting your remarks as a warning that support for large loans to the Russian Government, and other forms

of financial support for it in recent years, may not just stem from

American policy prerogatives, but from the self-interest of some in

the United States and elsewhere? If so, can you expand on your

comments?

Mr. ERMARTH. You have interpreted my comments correctly. I

can, indeed, expand on them. But what is, in fact, going on in this

dimension is something that the hearings of this Committee and

other Committees ought to explore. I believe that the enormous

sums of money that have come out of Russia into our economy and

others in the western world have created stakeholding interests

that have exerted political influence to keep the IMF funding going

and so forth.

There have been other kinds of, you might say, insider dealings.

As Ambassador Tom Graham has pointed out in testimony before

another Committee, much of the economic policy support through

the IMF was decided in a very small group of American and Russian English-speaking officials in which context Mr. Chubais was

speaking. It was not just the Russians that conned the IMF, it was

this little group of Russians and Americans that conned the IMF

into believing that things were better and more promising than

they looked.

Finally, as another Member of this Committee, or I believe the

visiting Member pointed out, there is the very open stake of various American contractors and businesses in various kinds of Russian aid, like our farmers today. But is it really wise to support our

farmers by sending to Russia food that they may not need, the proceeds of which end up in corrupt private hands? All of these are

18

questions that have gotten into the public record and I believe need

to be examined, Mr. Chairman.

Chairman GILMAN. One last question, Mr. Ermarth. In your article in the ‘‘National Interest’’ earlier this year, you referred to

money laundering done by the KGB at the instruction of the former

Soviet Communist Party Central Committee. According to your article and several other reports in recent years, foreign accounts and

front companies were set up by the KGB in the process.

What is your best estimate of the amount of money involved, who

do you believe now has control of such front companies and accounts, and do you believe that officials in the Kremlin have control over these accounts?

Mr. ERMARTH. The best estimate that I know as, I wrote in the

‘‘National Interest’’, was about $20 billion. There have been other

estimates of what the KGB sent out of the country between around

1985 and 1992: around $20 billion. All of that money, all of the networks, all of the companies, all of the associations that were set up

then have blended imperceptibly into the vast, plundering, laundering apparatus that we see at work today.

Who controls exactly what is very difficult to tell from a distance? I don’t believe the Kremlin lost control of these funds; in

fact, some of the wealth at the disposal of the Kremlin’s quartermaster, Mr. Boradin, derives from those funds or activities like

that. On the other hand, it didn’t retain the old kind of control. As

I said, the old money, the old organizations, the old connections

that the KGB set up, blended imperceptibly into this new toxic mix

of crime, corruption, and insider business.

Chairman GILMAN. Thank you very much, Mr. Ermarth. My time

has expired.

Mr. Lantos.

Mr. LANTOS. Thank you, Mr. Chairman.

I find the two testimonies remarkably different. As I read yours,

Mr. Swartz, it seems to me that you express almost pathological

hatred for Strobe Talbott, and that is your privilege, but that really

is not helpful in understanding our policy toward Russia. You talk

about Mr. Talbott being a self-proclaimed expert on Russia. Unless

I am mistaken, he is the translator of Khrushchev’s memoirs, he

is the author with Presidential historian Michael Beschloss of a

brilliant book called ‘‘In the Highest Places,’’ which is a discussion

of U.S.-Soviet relations during the last years; he has devoted much

of his life to understanding Russian literature, culture, history,

government, politics, and is one of the few high-ranking American

officials with a very deep understanding of Russian society.

So this is not a self-proclaimed illusion; this is the product of a

lifetime study of Russia, and it rarely happens that people high in

the policymaking apparatus have the degree of scholarly understanding that Mr. Talbott has so clearly exhibited. Now, you are

still free to hate him, but I don’t think that is helpful in our understanding of what has gone on.

I find Mr. Ermarth’s observations more analytical; and allow me

to agree with some of them. You are suggesting several things with

which I agree. You are suggesting, for instance, that in the early

period, 1992, 1993—and I was in Russia in that period several

times—there was tremendous admiration on the part of the RusVerDate 11-SEP-98 07:59 May 02, 2000 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 62933.TXT HINTREL1 PsN: HINTREL1
19

sian people for the United States, the American people. You are absolutely correct that this has been largely dissipated. The reason

is the profound, perhaps naive disappointment and disillusionment

on the part of the Russian people in expecting western aid to lubricate this historic transformation.

When I was in Russia in 1992 and in 1993 and in 1994, as probably you were, you probably recall that they had high expectations

of what the West will do for them in lubricating their transformation from a totally totalitarian police state and a dysfunctional economy into a democratic society with a functional economy.

This hasn’t happened. It hasn’t happened for many reasons, but let

me tell you what in my view is perhaps the single most important

reason, and I apologize for using statistics.

When Germany was unified, the 17 million people of East Germany every single year received $100 billion in transfusion from

West Germany. The 150 million Russian people received approximately $1 billion in transfusion. Now, I am not recommending it

should have been 100 times that or 50 times that, but I simply

think that it is wholly unrealistic to look away from the economic

realities. The West hoped that they could facilitate the transformation of Russia from a totalitarian police state with a dysfunctional economy into a vibrant democracy with a functional capitalistic economy, without any help. This was an incredibly naive,

childish, ludicrous view, and to a very large extent, we are now

paying the price of having, finally, come face to face with this new

reality.

I also think you are correct, Mr. Ermarth, in deploring, if I may

quote you, the great weakness of the rule of law in Russia. You are

totally correct. Wee were not running Russia in the last 8 or 9

years. We were not in charge of the Kremlin. It is a very naive assumption to say that we could have created a system of laws which

are transparent, respected, universally applicable, admired, which

would have created, I fully agree with you, an infinitely more likely

framework for the transition.

But, unlike the Second World War where we defeated Germany

and defeated Japan, we ran those two countries with our military

occupation forces, Lucius Clay and Douglas MacArthur, and what

we said happened. We did not defeat Russia in the Cold War, in

a military sense. This was a Russian government horrendously

flawed, horrendously incompetent, horrendously corrupt, but it was

not our government. To blame the lawlessness of the Russian system, which is so self-evident, on us is an absurdity. We were not

in charge in the Kremlin, and everybody in this room who has the

slightest understanding of who called the shots clearly knows that.

Finally, whatever leverage we did have, and we did have considerable leverage at the time of the collapse of the Soviet empire in

the Bush Administration, vanished when the Russians became

aware of the fact that they were getting nothing from the West.

They got minimal assistance, minimal assistance from the West,

not only from us but from our western allies and Japan. So our leverage, whatever it was in 1990, 1991—and it was considerable—

it vanished when the Russian people and the Russian Government

understood that they were getting very little from us.

20

As a matter of fact, one of the most dangerous consequences of

our reduced leverage was that when we quite properly attempted

to stop the flow of high-tech weaponry to countries like Iran, they

told us to go fly a kite. They told us to go fly a kite because we

had no leverage with them. Their high expectations of 1989, 1990,

1991, and 1992 went up in smoke.

So while you are perfectly correct in saying it is a largely lawless

society, it is a largely lawless society because given the realities of

Russia’s chaotic political criminal system, respect for laws, transparency of laws was not going to be forthcoming and it hasn’t been

forthcoming. That is why we are confronting a lawless society.

Thank you, Mr. Chairman.

Chairman GILMAN. Thank you, Mr. Lantos.

Mr. Rohrabacher.

Mr. ROHRABACHER. Thank you, Mr. Chairman. I thought Mr.

Lantos might want to give them some time to answer the question.

Mr. LANTOS. I will be happy to have them answer, Mr. Rohrabacher, if the Chairman is gracious enough.

Chairman GILMAN. I will be pleased to, on Mr. Lantos’ time, if

you might want to respond to Mr. Lantos’ comments.

Mr. ERMARTH. Mr. Chairman, inasmuch as Representative Lantos found my remarks so agreeable, I am very reluctant to rebut

him, but I have a couple of points of qualification.

While inadequate funding, if you will, contributed to Russian disappointment, there are other factors involved. The Russian reformers went through a series of strategic steps from decontrol of prices

to voucher privatization to loans for shares, which quite apart from

the amount of money we supported—we supported—that led to the

impoverishment of the Russian people. I am glad we didn’t put

more money behind the policies we were supporting in Russia. I

would have been happy to put more money behind better policies.

As to rule of law, of course we couldn’t create it from abroad, but

we could have been more explicitly and consistently supportive of

Russian efforts to create the rule of law as a condition for our support: for example, the Duma-passed money-laundering bill last

year, which Yeltsin vetoed ostensibly on human rights grounds because it would interfere with capital flight actually, and our protests were quite mild.

We did have leverage, it is true, at the beginning. I am sorry

that the Bush Administration wasn’t more active, but it didn’t have

a lot of time and was, in my opinion, somewhat fatigued by the previous 3 years. This didn’t mean, however, that the Clinton Administration was without leverage, as the Congressman suggested,

when it took office in 1993.

Chairman GILMAN. Thank you, Mr. Ermarth.

Ambassador, did you want to comment?

Mr. SWARTZ. Yes, Mr. Chairman. With due respect to Representative Lantos, I would like to respectfully disagree in his assertion

that I have a pathological hatred for Mr. Talbott. First of all, I

don’t hate anybody, pathologically or otherwise. Second, Mr.

Talbott and I have always been on friendly terms and I believe we

still are and will continue to be in the future.

The point, though, is—and that is what I was trying to make—

if you have someone who is the point person and identified as such

21

at a very high level of the American government for Russian policy

at the outset of a generation, then the simple rules of accountability mean that as problems arise and you go down the pike and

you are 61⁄2 years into that Administration, that perhaps that same

individual should be the one who would answer under these accountability rules that we operate under. That was the only point

I was making.

Mr. LANTOS. You didn’t use the word ‘‘point person’’; you said

‘‘self-proclaimed expert.’’ Well, if you are an expert, you are not a

self-proclaimed expert. If you have spent a lifetime studying Russia, then it is not unreasonable that people look at you as one of

the many experts.

Mr. SWARTZ. Expertise can be both proclaimed by yourself and by

other people.

Mr. LANTOS. You state that it is self-proclaimed.

Mr. SWARTZ. That doesn’t mean that other people don’t acknowledge his expertise. I am in no way denying his expertise.

Chairman GILMAN. The gentleman’s time has expired. We are

pleased to have two experts before us.

Mr. Rohrabacher.

Mr. ROHRABACHER. Mr. Chairman, thank you very much and

thank you for holding this hearing today. I think it is a long overdue account of what has been going on in Russia. Although I agree

with my colleagues on the other side of the aisle that we should

try to look for solutions, I also think that holding people accountable for the policies that they have presented to the American people as something that would work, yet haven’t worked, they should

be held accountable for presenting these policies and instituting

those policies that haven’t worked.

First, let me, before I ask my question, salute my friend, Fritz

Armitage, who has had a long and distinguished career in American intelligence and in fact, worked with me during the Reagan

White House days. I believe that he made a major contribution to

perhaps the most historic achievement in my lifetime, which was

the disintegration of Communist power in Russia, which was, after

all, this great achievement of the Reagan Administration, this legacy that I believe has been squandered.

I, unfortunately, believe that when Reagan left office and when

George Bush was entering office, it looked like the world was just

ready to remake and to create these wonderful new opportunities

for all of humankind and especially there in Russia. That legacy

has, unfortunately, as we can hear today and as is clear just from

reading the newspaper, that legacy has been squandered. Hopefully, it can be recaptured, but I don’t know.

First of all, Mr. Ermarth did answer the question about more

aid, and I do believe, just to take more trucks of money and shovel

it out of the back into Russia certainly would have resulted in the

loss of more money.

But Mr. Ermarth, could you tell us, and in fact both panelists,

before the current administration came to power and we had policies of the Reagan Administration and policies of the Bush Administration, were there changes in policy that took place when President Clinton came into power that has contributed to this; policies

that were changed from what they were before?

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Mr. ERMARTH. I think the posture of the Bush Administration in

1992 vis-a-vis aid to Russia was one of skepticism and caution and

a sense of doubt about how to proceed, which wasn’t perhaps surprising given the novelty, the extraordinary novelty of the situation

presented to them. In that situation, you may recall that President

Nixon came back to Washington from a trip to Russia in the spring

of 1992 urging a more generous, visionary, bold venture, some approach which obviously would have cost more money. The Bush Administration, for a variety of reasons one can go into in another

setting, wasn’t ready for that.

Unlike Congressman Lantos, I don’t believe the opportunity for

that kind of boldness disappeared with the end of the Bush Administration.

Now, as to changes of policy, I think there was definitely a

change in the sense that the new Clinton Administration was far

less skeptical, far more ready to basically sign up to what the team

around Boris Yeltsin was prepared to do, than the Bush Administration in its brief time with this post-Communist situation demonstrated. It just got much less skeptical with the new Administration.

Mr. ROHRABACHER. With what Mr. Ermarth just pointed out, Mr.

Chairman, we are here to find solutions as well as to fix responsibility; but as far as I can see, this Administration has a pattern

throughout the world of getting involved in supporting people who

are not necessarily committed to the same values and the same

principles that some of us would like them to be. What you just described—let me say that I don’t believe that the Russian people

were looking for aid from the United States. I think what they

were looking for when Communism collapsed was honest government and good leadership. Perhaps one of the solutions to our current dilemma and the current situation is for the United States to

commit itself to finding honest and good leaders in the Russian

people and get behind them 100 percent, rather than trying to

work more closely with people who just happen to have leverage at

the moment in dealing with them.

Mr. SWARTZ. May I offer a comment also?

Mr. ROHRABACHER. Yes, and after that, I have used my time, but

go right ahead.

Mr. SWARTZ. I certainly agree with what you have just said, but

I think it is important that we remember, at least in my view,

when the Soviet Union collapsed, the thing that ordinary Russians

wanted above all—or ordinary Soviet citizens, ex-Soviet citizens

wanted above all else—was to improve their living standards. I

think that to the extent that they were interested in rule of law,

in private market economics and so on, to the extent that the concepts of democracy and governance, that they cared about that at

all, it was because of their exigencies of daily life.

Now, democracy has changed things from the Soviet period. It

has now allowed these people to vote, to vote and express their

views, and they have done so and we will see now what they come

up with again. So I think that that is an important thing that we

have to keep in mind.

I would just like to offer a comment on leverage. It seems to me

that leverage as a potential instrument for American policy continVerDate 11-SEP-98 07:59 May 02, 2000 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 62933.TXT HINTREL1 PsN: HINTREL1
23

ued well into the mid-1990’s and, to a certain extent, exists even

today but in greatly diminished form. In fact, I would say that the

relative existence of leverage as a concept in implementing our policy toward Russia is directly proportional to the amount of concrete

results that ordinary Russians who I am talking about could see

in their daily lives.

So as that doesn’t go up, leverage goes down, but I do think leverage continued to be a significant factor well into the mid-1990’s

and to some extent, even today.

Mr. ROHRABACHER. Thank you, Mr. Chairman.

Chairman GILMAN. Thank you very much.

Mr. Berman.

Mr. BERMAN. Thank you very much, Mr. Chairman.

Ambassador Swartz, you may well not have intended it that way,

but your testimony did come off as an ad hominem attack on Deputy Secretary Talbott. Talking about dilettantes in the salons with

the literati as sort of the essence of his understanding of Russian

culture and life, it seemed a little personalized. But the problem I

have is that I hear your general assertions of the quote ‘‘Talbott

policy,’’ but I don’t see in your testimony the specifics to back it up.

I read your testimony; I don’t know what happened in Belarus that

destroyed, presumably at least, an aspiring democratic leader and

brought back a neo-Stalinist into leadership, and that you had the

right idea and Clinton screwed it up. You don’t bring it out, you

just assert it.

You talk about Clinton’s and Talbott’s russocentrism, and I see

your point. All I remember is in the late 1980’s and early 1990’s,

there was a bipartisan policy. George Bush and Democrats in Congress had a lot invested in Gorbachev, and it was on the right of

American politics that the drum beat grew and grew and grew,

that Gorbachev is a Communist, always will be a Communist, and

that the true, pure Democrat, the force for liberation, the force we

should be banking on, that is coming from the right of American

politics, was Boris Yeltsin. Boris Yeltsin, the opportunistic, drunk,

shallow intellectual Communist forever, who stood on the tank and

stopped the coup against Gorbachev—I don’t know whether you in

your historical perspective think that that was an important and

brave act that in the end helped serve the interests of peace and

stability or not; but, given your general assessment, it seemed to

me somewhat one-sided in that regard.

I understand under pressure from a Congress that wants the

farmers to be able to ship food anywhere, that perhaps the commodity provisions didn’t serve the interests. But I read Leon Aaron’s article and he says, after pointing out just where the Soviet

Union was in the last year of the Soviet empire, he writes a paragraph which says, ‘‘While it is true that millions of people, especially retirees, collective farmers, and workers and the mammoth

military-industrial complex were impoverished by galloping inflation and cuts in State spending,’’—and by the way, galloping inflation, when we went there in April 1993, Clinton in office less than

3 months, hardly enough time yet to ruin American policy toward

Russia, there was galloping inflation, and those crypto-pseudo

Democrats like Gaidar and Chubais—Gaidar was gone, and

Chubais was very much in favor of his voucher programs—these

24

were the people that I remember the previous Administration were

investing a great deal in that you now, after the fact, seem to cut

at the knees.

But Aaron continues to say, ‘‘For the first time in Russian history, there was a sizable middle class and an intelligentsia, outside

State employees. Before the crisis of April 1998, almost one-fifth of

Russians surveyed said that the economic situation of their own

family was improving. Between 1990 and 1997 car ownership increased by 72 percent, from 18 per 100 families to 31. Of the total

population of 150 million, 20 million Russians were estimated by

tax agencies to have traveled abroad in 1997. In a country-by-country ranking of top-spending tourists in 1996, the Russians came in

eighth.

‘‘The new Russian middle class suffered greatly in the crash of

1998 and it will take a few years for the standard of living to return to pre-crash levels. Yet there is no reason to doubt that this

will happen. It may currently be the rage in Russia to speak of

Russia’s virtual economy, but we are suddenly discovering that a

Russian market economy does exist after all, and despite its deep

distortions, responds to economic stimuli much as any market economy would. In full accordance with supply side theory, the continuing absence of price controls, a cheaper but stable national currency and drastic reduction of imports have unleashed domestic

productions,’’ and it goes on and on.

I have a lot of concerns about our policy, the investment in a

Yeltsin family, a small group of oligarchs who seem to me have

done much to bleed much of Russia dry here. I do think in that last

election, the choice at that particular point was Yeltsin versus

Zhyuganov.

I don’t quite know how we do what Mr. Rohrabacher suggests,

hold an American endorsing convention and then have our PAC

give the true candidacy of the Russian people the kind of support

that that person needs in order to win, but your effort to differentiate between Bush policies and Clinton policies, and the failure, at

least in your testimony, to specify the specifics of what was wrong,

rather than general allegations, does concern me.

Mr. SWARTZ. First of all, I would be happy to give you as many

specifics as you would like as time permits this morning. On the

food question, though, since you raised that one, that is a matter

of specific concern both with regard to Russia and the other countries. With regard to my own experience and things that I saw and

commented on and was involved with in a policy sense, namely

grain shipments to Belarus, clearly there are two issues. One was

that the Belarussians did not need the grain. The second one is by

shipping grain and distorting the market, thereby our general policy of trying to foster economic transformations in the agricultural

sector, eliminating collective farms, making them productive and so

on, would have been and in fact was undercut by those activities.

Mr. BERMAN. Did the shipments start with Clinton? I truly don’t

know.

Mr. SWARTZ. Well, could I just answer the Bush-Clinton differentiation by way of answering that question?

25

Mr. BERMAN. Tell me what happened on that fateful day in

Belarus where you said one thing and Clinton did something else

which caused the fall of democracy.

Mr. SWARTZ. Many fateful days during the Bush Administration

shipments took place, yes, of a limited number of food commodities

and of medicines, because in that immediate post-Soviet period,

there were great distortions and there was simply food unavailable

in many areas. I would draw a distinction between a crisis situation and then a more normal situation when grain is planted, seeds

are planted and grain is harvested and grain is produced and so

on. So that is that point.

On the Bush-Clinton dynamic, as I said in my testimony, who

knows what would have happened during the Bush Administration.

Maybe things would have gone down the tubes completely for all

we know. We can’t say. All we can say is that certain policies and

certain policy frameworks were put in place during the Bush Administration, which I think held us in good stead in 1992 and beyond. Frankly, I think that the Clinton team that came in kept up

with most of those policy sort of concepts. For example, the

denuclearization which the Administration takes such great pride

in saying that is the great success of Clinton diplomacy, in fact

began during the Bush Administration. But you are wrong if you

say that I am being partisan, because I criticize basically both of

them, but we only had a year of Bush to be able to assess, and we

have had 61⁄2 years of the Clinton Administration.

As far as the personal attack, or alleged personal attack on

Talbott is concerned, I can only repeat what I said before: which

is, if someone is going to be posited as the public point person, the

leader of our Russia policy, then simple rules of accountability demand that that person be the target of an assessment of how that

policy works. That is all I am trying to say on that.

Yeltsin and the tanks, sure, a great act of bravery. But the Russian persona and especially the Soviet persona is a very complicated thing, and we can’t say that X is good and Y is bad; all

I can say is that both X and Y are gray, and that certainly holds

true for Yeltsin.

Mr. BERMAN. You would say that X was good and Y was bad.

Mr. SWARTZ. No, not at all.

Chairman GILMAN. The gentleman’s time has expired.

Dr. Cooksey.

Mr. COOKSEY. Thank you, Mr. Chairman and thank you for being

here to testify today.

Ambassador Swartz, in September 1993, Russian President

Yeltsin reportedly gave President Clinton an hour’s notice that he

was going to dissolve the Russian Parliament. During the May

1995 summit with Clinton, Yeltsin stated that there were no ongoing military operations in the region of Chechnya, even as the

forces were attacking the Chechnyan villages. Through most of this

decade, while the Yeltsin government has been denying that Russia

was allowing any proliferation of dangerous weapons technology to

Iran, it appears that there has, in fact, been proliferation.

In June of this year, Russian peacekeeping troops suddenly deployed from Bosnia into Kosovo, while Yeltsin and the other Russian leaders are saying no, it is really not happening; and then

26

Yeltsin later, I think even publicly, commended the general that

did it, did the surprise move.

Finally, recently the Russian Government said that they had no

intention of mounting a military operation in Chechnya, but in fact

they did so.

My question to you, Mr. Ambassador, is why have these apparent

lies been overlooked by the Administration and by this government? Is everyone naive, or is it lack of sophistication? What is the

reason now? That is my question.

I have just been on this Committee for a short period of time. I

have to do a lot more reading than probably other Members who

have so much institutional knowledge. This is a book that I read

recently written by a U.S. Berkeley professor, ‘‘The Soviet Tragedy:

The History of Socialism in Russia, 1917 to 1991,’’ by Martin

Malia. But after reading this book—and I was in the military 30

years ago or 30 years ago plus 30 days when I got out—I was reminded that there were some really bad people running the Soviet

government over a period of many years, and they did some really

bad things, lying being the least of all of what they did. That was

just routine for them. Has anyone read this book? Is anyone aware

of the fact that they do, in fact—their leadership lie and cheat and

steal? I think there are some wonderful Russian people, but their

leadership has been bad.

My question is, why have these lies been overlooked by our government? Thank you.

Mr. SWARTZ. Well, Congressman, you appreciate that I can’t

speak for the Administration. They don’t seek my advice very much

these days, and I say that with tongue in cheek. As I say, I have

lots of friends in the Administration. But, my own view on the

question that you have posed is that Russian governance is a very

nuanced sort of a situation. There are very significant questions as

to the extent to which Yeltsin is personally involved in decisionmaking, even on matters of critical, critical mass, in many cases.

We don’t know, at least I don’t know, not being privy to the latest

intel briefings and so on.

The Russian military move into Kosovo at the very moment that

it was being denied by the civilian leaders of the Russian Government raises serious questions as to where are the power loci here,

who is in charge, who is calling the shots and so on. This is a very

nuanced situation, and my guess would be, although I again have

no particular inside information into how this Administration is reacting to these things, they are probably somewhat flummoxed as

well when things of that nature happen, and probably are just trying to figure out as well and to continue to engage as effectively

as possible in a situation where there may be different loci of

power and of decisionmaking, and it may be a moving target. That

would be my guess.

What the American response should be to these situations is another story altogether, and I again say that we are going to have

to wait and see how the elections come out and see if there is some

sort of true governance that starts to take place in today’s Russia.

As things stand right now, I think there are too many

imponderables and too many nuances for us to be able to go to

somebody, the Foreign Minister, the Prime Minister, or President

27

Yeltsin himself and say, ‘‘Why did you lie to me?’’ Because it may

well be that they didn’t. It may well be that they just didn’t know

what another arm of government was trying to do. That is kind of

how I would answer.

Mr. COOKSEY. That is a plausible explanation, I would presume.

Did you have any comment?

Mr. ERMARTH. I would underscore what Ambassador Swartz said

about the lack of coherence in a lot of Russian policymaking over

the years, particularly as time has gone on. But on our side, I do

think the Administration can be, must be, faulted for signaling to

the Russian regime, to the Yeltsin regime, not just to Yeltsin personally, but to that group of people that constituted the Kremlin.

It wasn’t just with what we said, it was kind of what we supported,

what we—when we agreed to send the money—what we criticized,

but not very strongly. By body language, basically, we were saying

we are in your corner, with a couple of big exceptions like proliferation to Iran. We are pretty well ready to back what you think is

really important to you.

Hence, the different economic reform moves that didn’t look all

that good at the beginning and mostly turned out badly from the

point of view of the public, and things like the Chechnyan war and

Yeltsin’s showdown with the Parliament in September and October

1993. Not only did the Yeltsin regime get the message, but the

Russian public got the message. They said, OK, the Americans are

supporting this about which we are increasingly alienated: economic reform that is impoverishing us, and so-called democratization that is becoming more authoritarian and unpredictably authoritarian. What is going on here? Are the Americans blind or do they

have a plan? They concluded eventually it is planned, it has been

so consistent.

Chairman GILMAN. The gentleman’s time has expired.

Mr. COOKSEY. Thank you, Mr. Chairman.

Chairman GILMAN. Mr. Hastings.

Mr. HASTINGS. Thank you very much, Mr. Chairman.

Mr. Chairman, I appreciate very much your holding this hearing,

but I must admit some serious reservations regarding everything

that I have heard here. I think the focus is wrong. Who did what

when, or what was right, or which Administration—the Bush Administration or the Clinton Administration—has done something,

ignores what our immediate responsibilities are in my view.

Gentlemen, I appreciate your testimony, but I would tell Mr.

Martin Cannon, although I don’t think I will be here when he testifies, that I was appreciative of many of his comments, but among

them was that Russia is in generational transition.

Now, listen. At the beginning of Russia’s transformation, we

knew that it would be a long-term endeavor, unprecedented in history, with successes and disappointments on the way. A transformation of this magnitude is going to take decades, even generations, to complete.

A mere 7 years out, regardless of whether it was Bush or Clinton

or any combination thereof, criticism of Russia’s transition ignores

the fact that it is still in midstream. Mr. Cannon, for example, referenced that maybe, maybe we are a third of the way. Amidst all

28

the problems, the transition continues, and Americans in my view,

at least insofar as Russia is a threat, are perhaps safer than ever.

I think it is ignorant of us to ignore that we have completed over

71,000 exchanges from the NIS since 1993, 35,000 from Russia.

People don’t know things that Members of Congress have done. I

have been to Uzbekistan myself, twice. Stayed there a week. I have

been to Kazakhstan, Turkmenistan, Kyrgyzstan, Azerbaijan, and

Georgia, and last year was in Russia for a week in St. Petersburg,

and what I witnessed was a change in progress and in recognizing

how hopeless and helpless some of us may be in order to conduct

the kinds of changes that we would like to see take place immediately.

We helped draft post-Communist legislation on the civil code and

the criminal code, as well as bills on money laundering and corruption. I have heard nothing here regarding the cooperation of the

FBI and the NVD, and they have had extremely successful undertakings in targeting criminal elements that have been pursued. We

created legal clinics, we gave grants to NGO’s and created programs that highlight the successful efforts at combating corruption.

We worked directly with local law enforcement on specific cases to

help them build the capacity to deal with widespread crime and

corruption.

We provided technical training, we have allowed for enhanced or

local TV for people. When you are a novice as I am, and perhaps

a bit naive, and you can walk the streets of St. Petersburg and you

can see a vibrant society, albeit with a gray and a black market

still operating there, then it is foolish for us to sit up here and try

to pinpoint somebody who did not have a handle on something as

slippery as this.

The questions ought to be what must we do, what should we do,

what can we do to help create a stable Russian society? Our continuing disengagement will allow for a destabilized Russia or a destabilized Europe and the costs will be insurmountable insofar as

global consequences are concerned.

There has only been $7 billion of direct aid offered by the United

States. Two-thirds of that has gone to the nuclear demilitarization

process, another $7 billion to try to help American businesses has

been offered there. I think our strategy of engagement, establishing

among other things the U.S.-Russia Binational Commission, which

has an extraordinary agenda, is not to be frowned upon.

Let me ask you all this question: Ignoring who failed and who

succeeded, what, gentlemen, the two of you, would be your top

three priorities that we should exercise as our next steps? Enough

of who was at fault about what.

Mr. SWARTZ. Thank you very much for the chance to answer that

question. Speaking for myself, my top three priorities would be

education, education, and education.

As you have correctly pointed out, Congressman, all kinds of activities have been taken that allow for the process of rule of law

in police cooperation, et cetera, et cetera, et cetera to take place.

What you said earlier about the generations, years and years needed to achieve these societal transformations is something that certainly resonates in my own analysis and my own thinking, because

29

transformations means you have to transform what is in people’s

minds, right?

The people who are out there, who are looking for their meat and

potatoes and are unhappy about the economic situation today and

remember all too well the Soviet period, with time they are going

to die away. The thing that has to be done, starting with the

youngest children and right up through higher education, is to inculcate the value systems that we hold so dear in Judeo-Christian

society into those generations of upcoming Russian and

Belarussians and Ukrainians and so on. That is what we have to

do. I think the more effort and money and concrete projects that

can be put into education is where the return is going to be paid

in terms of our own national security interests down the line.

Mr. ERMARTH. Mr. Congressman, my response to your challenge

would be three things. I am speaking to the present environment,

which is between our elections and their elections, when I don’t

think a lot of terribly important programmatic initiatives ought to

even be attempted because they don’t really have a functioning

government, and we just have to kind of face that.

I would lay down three requirements for us over the next 18

months. First, a thorough audit of our policy, not to find fault, but

to establish what worked and what didn’t work; because without

that, we might be unable to protect successes, and there have been

some.

Second, a package of policies, administrative measures, maybe

even laws in such areas as money laundering, that assure transparency of the interactions that take place.

Third, we have to make very, very clear to the Russians that everything depends, everything depends on their getting through

those elections; that there should be no notion on the part of any

part of the political spectrum that we will turn a blind eye or somehow, gulp and find acceptable some cancellation or disruption of

those elections.

Mr. HASTINGS. Thank you, Mr. Chairman.

Chairman GILMAN. The gentleman’s time has expired. Thank

you, Mr. Hastings.

Mr. Campbell.

Mr. CAMPBELL. Thank you, Mr. Chairman. You may have covered this earlier, I couldn’t be here, so if you have, I don’t wish to

impose on my colleagues, just say you have; and I can read the

record, and will. But my focus is on the IMF extension of credit in

last early summer, early summer of 1998, followed rather precipitously in my view thereafter on the default of the Russian obligations. So let me just interrupt to say, have you already discussed

this?

Mr. ERMARTH. No.

Mr. CAMPBELL. Great. Then my question is directed to both gentlemen. To the extent you know, and if you don’t, just tell me, that

is fine, but to the extent you know, I want to find out what IMF

knew. That concerns me, about the extension of credit prior to

what appeared to be—must have been, I would say—a predetermined decision to default on bonds. It looked to me as though we

were either took, I mean IMF was took—bad English, but you get

my drift—or were hopelessly incompetent. I hope you have a third

30

option, but those are the two I can think of. I would be happy to

hear the answer of either gentleman.

Mr. ERMARTH. Mr. Campbell, I have a response to that. It is still

a subject that is getting more and more light shed on it, it is still

a subject that requires continuing investigation: What happened in

the spring and summer of 1998 with respect to the IMF money?

Well, as the Chairman has pointed out in reference to something

I wrote, the architect of the reform policy in Russia, Mr. Chubais,

said we conned the IMF. I take him to mean not just we Russians,

but we Russians and our American partners who prettified the situation to the point where the IMF could rationalize another round

of lending.

Now, much turned on this bazaar that they set up called the

GKO market or the government short-term bond market. It was

kind of a casino to start with, which by presenting a market in

which there wouldn’t be any losers, everybody could make the big

profits. They began to create a pyramid which by the spring of

1998 was soaking up most of the Russian Federal budget. This was

bound to collapse, and eventually it did.

What the IMF—and into the teeth of this reality, the IMF lent— and I believe the total sum for that tranche was about $4 billion,

ostensibly for the purpose of supporting the currency in the budget.

What it basically did was support a process in which Russian and

probably some western speculators in the GKO market could convert their ruble-denominated GKO’s into dollars and scoot the

money out of the country.

Now, if that wasn’t diversion, I don’t know what the word means.

Something like that seemed to be very likely to happen and was

obvious to a lot of people who were wringing their hands at the

time.

This has been speculated about even in August and September

1998 in Russia and some western articles, but since that time, Mr.

Skuratov, the Russian General Prosecutor, a commission of the

Upper House of the Russian Parliament, and now a journalist who

wrote an article that I brought to the attention of the Committee

just before these hearings, have laid it all out: Yes, we were

conned, and your suggestion of the different choices pretty much

brackets the possibilities.

Mr. CAMPBELL. Thanks, I guess.

Mr. Swartz.

Mr. SWARTZ. I have nothing to add to what he said.

Mr. CAMPBELL. Thank you, Mr. Chairman. I yield back.

Chairman GILMAN. Thank you, Mr. Campbell.

Mr. Sherman.

Mr. SHERMAN. Thank you, Mr. Chairman.

I think that one concern I have about American policy is that it

gives inadequate consideration to the pride of the Russian people.

Here is a country that a few years ago was one of two superpowers,

and now we are telling them what to do about almost everything.

It seems that this situation is not really analogous to the postWorld War II period where Germany and Japan were occupied and

remade, but maybe has some analogous aspects to the period after

World War I where Germany ceased to be a superpower not because it completely lost on the battlefield, but because after a long

31

conflict, its system imploded and it raised the white flag in the first

World War of our century. Perhaps the Cold War was the Third

World War of our century.

It seems as if there is nothing that goes on in Russia about

which we Americans do not have an official and public position.

Now, some of this is understandable. We insist on promoting democracy around the world, and I think the Russian people and

other peoples respect that, but there is no area about which countries get more sensitive than their own territorial integrity.

I wonder whether we are rubbing Russia’s nose in it when we decide to have an opinion on what they should do in Chechnya. Here

you have a part of the Russian Federation which then not only establishes its quasi-independence, but then wages a war of aggression on other Russian areas and appears to be somewhat responsible for terrorism in the Russian capital.

I wonder if you gentlemen could simply comment on whether we

are perhaps planting the seeds for a backlash against America, and

a wave of potential nationalism supported by nuclear weapons, if

not an adequate economy, when we start scolding the Russians for

their policy in Chechnya. Not that it is necessarily good policy, but

simply one that perhaps we shouldn’t have an opinion on.

Mr. ERMARTH. Mr. Chairman, we have agreed that I will go first

on this one.

The point you make is an extremely important one, and what it

leads one to is to recognize that whatever we say about Russia’s

development as one country and one government to another, we

have to be very careful about the style in which we speak. It is

easy for us to come across to other countries as not just a superpower but a Nazi, and this is resented.

At the same time, we have to recognize our obligation to decide.

I mean, the Russians want and need a variety of help from the outside world. Some of it is just money, and some of it is a welcome

mat into the western economic community. We can’t avoid deciding

for our own policy when it is and how it is that we have met the

conditions. This is an unavoidable task that we decide what our

policy is. What will be the conditions under which we send American taxpayer dollars into that country? We are going to have to

make those decisions.

I think an extremely important point to keep in mind when doing

so is that we should ask the Russians more broadly than this favored little team, this dream team or whatever it happens to be,

empowering the Kremlin, ask across the political spectrum in the

Duma, look at public opinion. Had we consulted alternative views

about what the Yeltsin regime was doing on the question of territorial integrity, for example, when the Chechnyan war, the first

Chechnyan war started, we would have been much more careful

about seeming to endorse this very unsuccessful war against a

province of Russia, because most Russian were opposed to it.

We have to listen better to different sources before making up

our mind what they think works and what they think they want.

Chairman GILMAN. The gentleman’s time has expired.

Congresswoman Kaptur.

Ms. KAPTUR. Mr. Chairman, I thank you again very much for allowing me to sit in and listen to this important hearing and to subVerDate 11-SEP-98 07:59 May 02, 2000 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 62933.TXT HINTREL1 PsN: HINTREL1
32

mit for the record testimony that I offered concurrently this morning at the House Agriculture Committee. I thank my colleagues

just for giving me a couple of minutes here on the agenda.

I have one of the duties in the Congress of trying to integrate the

work of our Agriculture Committee—.

Chairman GILMAN. Ms. Kaptur, your statement will be made

part of the record, without objection.

Ms. KAPTUR. Thank you, Mr. Chairman. I have a summary and

a complete statement and some relevant documents to submit for

the record on the subject of our agriculture policy relative to Russia.

I appreciated Ambassador Swartz’s comments here this morning

where he references some of his own thoughts regarding the implications of current U.S. food aid to Russia and past food aid to Russia. Mr. Ermarth made some rather probing statements in his testimony of how things aren’t working.

The reason I came over here today is to try to indicate that one

thing I have learned in Congress. We cannot succeed alone in the

Agriculture Appropriations Committee in getting focus on food commodity shipments to Russia, which this year alone will dwarf in

value any other foreign assistance program we have. The latest

shipment totals over $800 million, and its largely monetized proceeds go to the Russian Pension Fund. There is now an application

for an additional amount that the Government of Russia has asked

us for.

The reason I am here this morning is to try to stress to my colleagues, and to anyone who is listening, that the United States has

to have a more coherent policy that begins in the State Department, involves the National Security Council, and links to our

Commodity Credit Corporation. Because what is happening is that

the value of these food commodities—which is enormous and growing—when it gets inside that economy, ought to go at least to help

with the privatization and reform efforts that we know we need to

make in transitioning the collective farms. Were it not for the

intervention of our Committee trying to get auditors over there and

accountants and field managers and, really, the cooperation of Ambassador Collins to a level that I did not expect and am most grateful, the dollars in my opinion would not get where they need to be.

This is not happening fully. The majority of food aid dollars that

have gone there now have gone into the Russian Pension Fund.

One of the questions, and my testimony documents this for the

record, I really think is that we need some type of separate monitoring mechanism for who audits the Russian Pension Fund. Even

though we can trace commodities going from the Port of Vladivostok to certain oblasts, when those commodities are monetized

and dollars flow to the Russian Pension Fund, the U.S. Department

of Agriculture and the Commodity Credit Corporation do not audit

those funds.

So I have a legitimate question as to what happened to hundreds

of millions of dollars this year, and we are on the verge of another

such sale in 2000. I think the general sales operations of the Commodity Credit Corporation have to be tied to the work of this Committee and the deliberations that occur inside the Executive

branch.

33

I hope I haven’t made too long a statement there, but I wanted

to ask both gentlemen questions, if I might. I have been totally

frustrated by the lack of focus, I suppose, because agriculture

seems warm and fuzzy, and nobody worries about it. But the whole

system over there, as I understand it looking at history, was premised on the production of the collectives and the distribution of

their proceeds to social welfare concerns within the State. When

the Soviet system collapsed, there was very little attention given

to the transformation of the collective structure in the agricultural

countryside and, in fact, no credit system exists today. The teeny

credit system we were trying to develop through ACDI/VOCA collapsed last August; it was only $20 million. Only $1 million has

been restored through this recent food sale to Russia, which means

largely we haven’t done anything.

We have through this food aid largely supported the parastatal

entities that still control the production. Since 70 to 80 percent of

the diet of the ordinary citizen of Russia now is bread and potatoes,

and the caloric intake is going down there, the entire structure remains so wed to agriculture. I am perplexed as an American and

as a Member of Congress as to why we as a country can’t get a

coherent agricultural reform policy built into these food shipments,

as well as the other policies that we try to implement toward Russia.

Could you comment on why that might be? I have been very frustrated with the State Department. I can not get them to even spell

agriculture.

Mr. ERMARTH. Why the lack of coherence that the Congresswoman observes exists? There are just so many stakeholders in

this game; I am afraid that is what accounts for it. But this food

aid program, certainly to Russia, which I know a little something

about, requires the most thorough, penetrating and skeptical investigation. It has had two negative results that have been widely reported in the Russian press and in some American reporting as

well.

First, it undermined the competitiveness of Russian agriculture

itself at a time when, from a public health and dietary point of

view, it wasn’t all that necessary. Now, maybe there is a tradeoff

that has to be made there that I don’t know that much about. But

it hurt Russian farmers at a time when the objectives, economic,

overall, and privatization of agriculture that we have for Russia

want us to move in another direction. The other thing I am sorry

to say is that money didn’t go into the pension fund. That money

was stolen. That is what the Russian press is saying.

Ms. KAPTUR. How do we get—how do we use the tools of this government to get proper accounting of that money?

Mr. SWARTZ. If I could offer an additional comment, let us say

for the sake of argument that the money was not stolen, which I

agree that it was—or in part, at least, because that is nature of the

culture over there. But in addition to that, your real question is,

how do we establish structures that will allow us to assure ourselves that the accountability factor again, that I have talked about

several times today, is maintained in this particular area of endeavor. The answer is that you obviously have got to achieve a

level of bilateral agreement with the Russians that will allow more

34

intrusiveness than they currently would like to give into the area

of accounting, bank accounts and this sort of thing.

It could be done by an organization like VOCA. You mentioned

VOCA. VOCA is one of the best things going out there I think. It

is right there in the forefront of the privatization effort in Russian

agriculture and the other Newly Independent States. They have a

lot of credibility with Russian farmers, with Russian farm cooperatives and with Russian agricultural officials. So use of VOCA might

be one way to do it.

But certainly in the final analysis—and this is a bigger, broader

question admittedly—again we have to come back to what is the

American national interest in all of this. If it is pushing grain, then

I submit to you we ought to push it somewhere where it is more

greatly needed than it is in Russia and where, under current arrangements, the proceeds are going—are very dubious, and cloudy

and murky as to where they are being sqirreled away and who is

getting them.

Chairman GILMAN. I want to thank the gentlelady for her very

cogent observations, and I think she has given our Committee some

food for thought. We will attempt to pursue her suggestion to a

greater extent than we have in the past.

Ms. KAPTUR. Thank you, Mr. Chairman, very much.

Chairman GILMAN. Thank you for taking the time to appear Ms.

Kaptur. Just one last question and then we will conclude with this

panel.

Mr. Ermath, in your testimony you said that the total amount

of capital flight out of Russia since the late 1980’s might be between $200 and $500 billion, with a capital ‘‘B.’’ Is that an accurate

estimate? If so, where is this money now?

Mr. ERMARTH. It can’t be an accurate one because it is at best

a guesstimate. I got it from John Void who wrote a ‘‘Who Lost Russia’’ article for the ‘‘New York Times’’ a couple of months ago. I

think 200 billion is a conservative estimate for the whole period

from 1985, roughly, when the CPSU and the KGB escalated their

capital flight operations basically. It is probably a good deal higher

than that.

On the basis of what I know and what other estimates out there

might be, or have been lately, I think $200 to $300 billion is in the

right ballpark. Where is that money now? Well, it has probably

made its way out through a variety of channels, most of it not

through laundering at all, but just export.

Chairman GILMAN. Mr. Ermarth, could we have been able able

to track much of that through the international banking system?

Mr. ERMARTH. I think it is technically possible to track it, but I

don’t think it is technically possible to reconstruct where all that

money went. One has to make some reasoned judgments. It didn’t

stay in Cyprus, it didn’t stay in Switzerland. It went to productive

places.

What is the most productive, safest, accessible economy in the

world in this period?

Chairman GILMAN. The U.S.

Mr. ERMARTH. That is where it went.

Chairman GILMAN. Thank you very much.

35

I want to thank our panelists for your very cogent observations

and for being able to spend the time with us.

We will now proceed with the second panel. Our thanks go to

both of our witnesses on our first panel.

Mr. ERMARTH. Thank you, Mr. Chairman.

Chairman GILMAN. We will now proceed to Panel Number two.

Mr. Mike Waller is Vice President of the American Foreign Policy Institute, a nonprofit educational foundation where he publishes, as well, ‘‘the Russian Reform Monitor’’ bulletin. He holds a

doctorate from Boston University in international security affairs

and serves as editor of the journal ‘‘Demokratizatsiya: The Journal

of Post-Soviet Democratization’’.

He has also written on the problems of Russia’s transition in the

‘‘Wall Street Journal’’ and other leading periodicals.

Mr. Kenneth Timmerman is a contributing editor for ‘‘Readers

Digest’’ and has written regularly for the ‘‘Wall Street Journal’’. He

has written investigative reports on the arms trade, on terrorism,

and on technology transfer for media organizations such as ‘‘Time’’

magazine and the ‘‘New York Times’’, spending much of his career

in Europe and the Middle East. Mr. Timmerman also worked on

the staff of our Committee in 1993. Welcome back, Mr.

Timmerman.

Mr. TIMMERMAN. Thank you, Mr. Chairman.

Chairman GILMAN. Finally, Mr. Martin Cannon serves as a

Member of the board of directors of the U.S.-Russia Business Council here in Washington. He also serves as managing director of CIS

operations for the firm of A.T. Kearney.

Chairman GILMAN. Gentlemen, you may summarize your statements which, without objection, will be inserted in the record.

Please proceed, Mr. Waller.

STATEMENT OF J. MICHAEL WALLER, Ph.D., VICE PRESIDENT,

AMERICAN FOREIGN POLICY COUNCIL, AND EXECUTIVE DIRECTOR, DEMOKRATIZATSIYA-JOURNAL OF POST-SOVIET

DEMOCRATIZATION

Mr. WALLER. Thank you, Mr. Chairman for inviting me here and

for holding this hearing.

Chairman GILMAN. Mr. Waller I might interrupt, I am being

called to another meeting at the moment. I am going to ask Mr.

Campbell if he could be kind enough to chair the hearing at this

time.

Mr. Campbell, if you will please take over, and if you would

please proceed, Mr. Waller.

Mr. WALLER. In a nutshell, the U.S. policy toward Russia, regardless of its good intent, has been tailor made for exploitation by

the gangster bureaucrats, oligarchs, ascendent militarists and the

secret police officials like the Prime Minister ruling Russia today.

One of the problems has been that the Administration as part of

its policy has discouraged early warning of this. A pattern, reporting on the deteriorating condition of Russia shows a calculated policy to prevent decisionmakers in the Executive branch, in Congress

and in the public from learning the truth and taking early corrective action. This was something I had a hunch about, but never

dared say because I had no proof of it as an outsider until some

36

retired diplomats and CIA officials came forward confirming this is

what they saw.

From the U.S. Embassy in Moscow we had two senior officials,

Mr. Ermarth and others, who have repeated in recent weeks that

they were instructed, or other Members of the embassy or Treasury

Department officials were instructed, not to write cables, not to

send cables already written, and not to report to Washington even

within State Department channels certain things concerning crime

and corruption within the Russian Government and the failures of

certain economic reform policies.

I have got a very blunt assessment here in my written testimony,

but point number five was the policy to ‘‘ignore or suppress opinions and facts indicating that the policy might be failing,’’ to blind

decisionmakers, to blind appropriators and authorizers, to have the

CIA and the State Department censor itself; and among AID contractors, of which I was a consultant for a very brief time, to instill

a climate of fear among them that if you see a problem, don’t talk

about it or you will get your livelihood cutoff.

This isn’t a partisan issue; it has been raised by Members of both

parties of this Committee. It was raised 5 years ago by Senator Bill

Bradley and others.

It is not an America versus Russia issue. Some of my best

sources have been Russian officials, journalists, former officials,

lawmakers, some of whom were corruption fighters, who are now

dead because of their anticorruption fighting activity. One is Dmitri

Khodolov, a Moscow journalist, and Galina Starovoitova, a member

of the state Duma, who were both assassinated.

We had early public warnings in 1994 even by the former Finance Minister, Boris Fyodorov, pleading with us; please don’t send

IMF money, it is only going to be used for corruption. There are

top officials in our country who want to take the loans and not

repay them, and it is only going to cause a lot more trouble than

it is going to solve.

Few Russians dared be outspoken and it was apparent that U.S.

policy was not to support them, not to listen to them and to continue to link ourselves to individuals who were the problem.

For U.S. AID contractors being under similar pressure, I was a

consultant for only a month because, as a token Republican-oriented guy, they needed somebody to make them look good on Capitol Hill. So after that I left. But I found that this was the AIDfunded ‘‘Rule of Law’’ project run by ARD-Checchi company.

In June 1994, they had hired an official at the insistence of

somebody within AID, a criminologist at American University. I

put the e-mail at the end of my written testimony, but I want to

quote from it because it is very important; this is from 51⁄2 years

ago. Her name is Dr. Louise Shelley. The head of this AID Program

said, ‘‘If I had known what Shelley was up to, I would have resisted’’ the AID official’s ‘‘instruction to put her on the consulting

contract. She is a bomb with a lit fuse. Her hobby horse is that the

AID privatization program has been exploited by organized crime,’’

and then proceeded with a way to figure out how to keep her quiet.

There is a pattern of official pressure to cover things up—whether it is CIA; whether it is the ‘‘barnyard epithet’’ incident regarding

an assessment of some of our Russian interlocutors; whether it is

37

NASA and journalists reporting on corruption of NASA’s space program or whether it is a cover-up of the laser incident where an

American Navy officer was wounded in Washington State; the

FBI’s retreat from organized crime reportings and so forth—it is a

pattern of these types of things to discourage and ignore this information from coming out.

I would like to have three recommendations: One is to establish

a dissent channel like the Foreign Service has to allow contractors

who see problem areas to be able to report this without fear of getting penalized. Ambassador Morningstar attempted such a system,

but it really didn’t work as well as it might have and it needs rejuvenating.

Second is, with our new public diplomacy effort at the State Department, we need a much more honest and straightforward public

diplomacy effort to communicate with the people of Russia.

Third, keep those GAO reports going. Because the congressionally mandated audits have done more than anything else to promote change.

Mr. CAMPBELL. [Presiding.] Thanks, Dr. Waller, and thanks for

staying within your time.

Mr. CAMPBELL. Mr. Timmerman.

STATEMENT OF KENNETH TIMMERMAN, INVESTIGATIVE

REPORTER, AND CONTRIBUTING EDITOR, READERS DIGEST

Mr. TIMMERMAN. Thank you, Mr. Chairman.

It is a particular pleasure for me and an honor to testify before

this Committee, where I had the opportunity to serve on the professional staff 6 years ago, doing nonproliferation and export controls.

When Mr. Lantos came to France in 1993 to invite me to join the

Committee, he reinforced my own conviction that issues of such

monumental import for our national security were indeed bipartisan in nature. For most of the past 6 years, however, partisanship

has been the rule and cooperation the exception. I hope we can

begin to redress that as we look at Russia’s role in the proliferation

of weapons of mass destruction and the stunning accumulation of

opportunities we missed to prevent that from ever occurring.

In 1992, after I had completed a study on missile, nuclear and

chemical weapons programs for the Simon Wiesenthal Center, I

was in Paris at a conference and Mr. Wiesenthal paid me the

greatest compliment I have ever received. He said, ‘‘I have spent

all my life tracking the murderers of yesterday. Mr. Timmerman

is tracking the murderers of tomorrow.’’

Now, that is why we are here, Mr. Chairman, to track down and

prevent the murderers of tomorrow, for the unchecked flow of Russian technology into Iran’s missile and nuclear weapons programs

and that of other countries could very well lead to the deaths of

many of our fellow citizens tomorrow, as well as thousands, if not

millions, of innocent people across the Middle East.

Now, I certainly concur with Mr. Lantos’ remark that there was

a lack of vision in the Bush Administration between 1989 and perhaps 1991. But being bipartisan does not mean we should refrain

from criticism where criticism is due. We cannot rewrite the Bush

Administration, but we can hope to influence the final year of the

38

Clinton Administration and especially events pertaining to Russian

behavior.

The architect of this Administration’s policy toward Russia is

Strobe Talbott. He has a vision, and I would argue his vision is all

wrong.

I have testified in various Committees on Iran’s Shahab 3 and

Kosar missile programs, which would not exist without direct assistance from the Government of Russia. The Shahab 3, in particular, which is now deployed in southwestern Iran, and is capable

of targeting Israel with nuclear, chemical or biological warheads,

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 of Mr. Talbott’s responsibility for

the Shahab 3 Missile. This is not my opinion; this is a statement

of fact. It is a statement of the record.

The initial information of Russian assistance to the Shahab Missile came from Israeli agents in 1996. The Israelis felt so confident

of their information they presented a detailed briefing to Mr.

Talbott in September or October 1996. Mr. Talbott told them not

to worry, he had the situation in Russia, quote, ‘‘under control.’’

When nothing happened for 3 or 4 months, the Israelis presented

the same information in more detail to Leon Fuerth at the White

House in late January, 1997. Mr. Fuerth briefed the Vice President, who was reportedly stunned to learn this. On February 6th,

Mr. Gore raised the issue with Victor Chernomyrdin, who protested

it was impossible that Russian firms were involved in such

projects. He demanded that Mr. Gore supply him with specific information so he could investigate back in Moscow.

The Vice President provided what the Israelis had given to his

aide, Mr. Fuerth. The Russians did nothing. Instead, some of

Israel’s best-placed assets on the ground in Russia went silent.

They lost agents on the ground. Over the ensuing months, the

Israelis met time and time again with Mr. Talbott, who rebuffed

them every step of the way. In the meantime, Russia and Iran

worked overtime to complete the Shahab Missile and roll up Russia’s intelligence network.

I have given you much more detail in the written statement, but

the crux of the matter, Mr. Chairman, is very simple. For nearly

2 years, despite having detailed intelligence on Russia’s involvement with the Iranian Missile programs, the U.S. Government

failed to press the Russians in any meaningful or effective way to

stop it.

If we had intervened with the Russians when the Israelis first

came to us in late 1996, the Shahab Missile would never have been

tested successfully 2 years later. It would probably still, even

today, be on the drawing board. Instead, not only have the Iranians

deployed that missile, they are now working on a much longerrange missile, the Kosar, which is being disguised as a satellite

launch vehicle. Both of those missiles are going to be powered by

Russian-built and Russian-designed boosters. Ultimately, Russia

has far more——

Mr. CAMPBELL. Mr. Timmerman, I am going to interrupt. The 5

minutes is up. We have a vote pending. So I think it is fair to let

39

Mr. Cannon speak for 5, at least that way he can have his opening

statement.

Mr. TIMMERMAN. Let me refer to the conclusions that I made in

my statement, which are some concrete things that I believe this

Congress and this Committee can do to rectify the situation.

Mr. CAMPBELL. Indeed. Thank you very much. We will come back

to you, no question.

Mr. CAMPBELL. Mr. Cannon.

STATEMENT OF MARTIN CANNON, MEMBER, BOARD OF DIRECTORS, U.S.-RUSSIA BUSINESS COUNCIL, AND MANAGING

DIRECTOR, CIS OPERATIONS, A.T. KEARNEY

Mr. CANNON. Thank you, Mr. Chairman. The U.S.-Russia Business Council greatly appreciates the opportunity to testify on the

issue of U.S. policy toward post-Soviet Russia, and we do so from

the perspective of the U.S. Business community that is involved in

the Russian economy. We represent over 250 enterprises from

small entrepreneurs to the Fortune 500 corporations.

We don’t think Russia is lost. What we think is lost is any lingering illusion about the immensity of the challenge of transforming Russia into a fully functioning democracy and market

economy. Your examination of U.S. policy toward Russia comes in

what we view as only the end of the beginning of a longer and

more arduous process than any of us anticipated when we got involved in Russian business.

There was, we know, no prediction of the suddenness and totality

of Soviet collapse. There was no blueprint to guide U.S. policy

through this extraordinary event. The report card on the performance of government and business is not flawless. With an impending change of presidents in both countries, we need the debate now

taking place. With our now substantial, accumulated experience in

dealing with Russia, we can make it constructive and well informed

if we so choose.

Our written testimony lays out comprehensively our largely positive view of the record of past U.S. government policy toward postSoviet Russia. It allows, as we all must, for the difficulties inherent

in dealing with such an unprecedented challenge. In these summary remarks, I want to highlight four areas with which we believe a constructive debate over past policy might yield the most future benefit.

First, I want to talk about the scale focus and effectiveness of

programs funded directly or indirectly by the U.S. government. The

majority of expenditure quite properly is focused on issues of security and on the promotion of democratic institutions in civil society.

A lesser but still significant amount has been devoted to the nuts

and bolts of building a functioning market economy. These include

tax reform, the development of securities markets, conversion of accounting standards and many other areas critical to our economic

transformation.

In only 7 years, Russian’s political community has shed a condition of almost complete ignorance about the nature of the market

economy and evolved a large measure of consensus about economic

management, resulting, in several important areas, in draft or enacted legislation. Not all the obstacles to economic transformation

40

have been overcome, but thanks in large part to U.S. and other

Western government support, they are far fewer today than in

1992.

Going forward, our accumulated experience raises some important and, I think, useful questions. Have we struck the right balance between investments and policy prescription and investments

in enabling infrastructure? Are these programs individually or collectively at a critical mass of scale and intensity significant enough

to bring about lasting change? Are we sufficiently willing and flexible to discontinue, initiate or modify programs in light of experience? Have we sequenced the efforts in ways that maximize their

impact? Do they always have a political constituency in Russia that

is capable of driving them to implementation? Should we link the

provision of new programs more tightly to successful implementation of prior ones?

Let me turn now to the impact of the IMF on the drive for economic reform. In 1992, Russia assumed voluntarily responsibility

for Soviet external debt, now standing in excess of about $100 billion. Despite the colossal latent wealth of the country that is embedded in its natural resources, the Russian government has

proved unable to meet those commitments, and its public finances

are in complete disarray. The effects traceable back in some degree

to this problem are poverty among the dependents of the state, decaying social infrastructure, decline in control over nuclear and

other military resources, further environmental degradation and diminishing public confidence in the market model.

The IMF was not designed to cope unaided with a situation of

this kind. It does not have the resources to finance the Russian

government out of it, and it is not equipped to direct their strategy

for dealing with it. The most it can do it is doing: buying time for

others to find a solution to the external debt problem.

We believe the policy debate needs to include the question of

whether the U.S. and other governments of the G–7 should take a

more direct role in tackling the problem of former Soviet debt. Put

simply, this issue alone has the potential to derail the entire reform effort.

Third: Crime, corruption and capital flight. We believe the culture of lawlessness in much of Russia’s economic life is a Soviet

legacy of abuse of power by those who had it and disrespect for authority among those who didn’t. We also believe that confiscatory

tax regimes drive otherwise honest businesses and individuals to

shelter their resources from the state through concealment at home

and abroad.

Mr. CAMPBELL. Mr. Cannon, I apologize, 5 minutes are up. We

are going to interrupt and proceed as follows. Because we have a

pending vote, we will not be able to complete the panel before a recess is necessary.

Chairman Gilman has a question he would like me to place before you, which I will. I would ask Mr. Waller to answer it and to

take, if possible, under 2 minutes. I will then yield to the Ranking

Member. After that, I will then recess. Then as soon as Dr.

Cooksey comes back, we will be able to reconvene.

If you gentlemen can stay—is it possible for each of you to stay?

Thank you. I apologize for having to stick to the time limit.

41

Mr. Waller, the question—but I would be delighted to hear the

answer from all three: How corrupt are the highest levels of the security and police agencies in Russia today? Do Russian police ever

work in support of Russian criminal groups?

Mr. WALLER. The corruption is pervasive. There has been a problem both in the Interior Ministry, the NVD and the secret police,

the old KGB, now the Federal Security Service, where they are protecting criminal rackets not just at the low level but at the higher

levels as well, and in the case of the Federal Security Service, protecting criminal elements close to the Kremlin Administration

itself.

I think what illustrates it is Prime Minister Putin himself who,

as Federal security chief, earlier this year quashed the probes of

the people around Yeltsin. He is the guy sitting on the information

and he is basically sheltering these criminals and criminal organizations.

Mr. CAMPBELL. Mr. Timmerman.

Mr. TIMMERMAN. I would refer to a statement by a former CIA

Director, James Woolsey. You can go to Lausanne, Switzerland, to

a major hotel today and see a Russian with Gucci shoes, a Rolex

watch, and a $3,000 suit. He can either be, first, a member of the

Russian Mafia; second, a member of, the foreign intelligence services; or third, a Russian cabinet minister. Today, he might be all

three of those at the same time.

Mr. CAMPBELL. Mr. Cannon.

Mr. CANNON. The answer to the first is, more than is acceptable;

and the answer to the second is, yes.

Mr. CAMPBELL. The Committee of International Relations is recessed pending return of Members adequate to reconvene. Thank

you.

I would assume we have a 15-minute vote on now, followed by

a 5-minute vote, so why don’t we assume we will come back at 10

or probably 5 minutes to 1:00; 5 minutes to 1:00.

[Recess.]

Mr. COOKSEY. [Presiding.] The Committee will now reconvene.

We have a smaller group. Now we can really get something done.

I always enjoy these meetings. I have a little game I play, trying

to decide who is here from the other government, whether, it is

China or Iran or Russia. I really would like to get them up, but

in lieu of that, we will follow standard procedure. I am not a real

politician, in case you couldn’t tell.

Mr. Timmerman, you have written in an article in the ‘‘American

Spectator’’ of April 1998 that Gordon Oehler, a career intelligence

officer who headed the CIA’s Nonproliferation Center and who had

briefed congressional Committees on Russia proliferation to Iran,

may have been forced into early retirement as a result of high-level

pressure from the Administration.

Can you back up that allegation or can you explain more, sir,

give us more detail?

Mr. TIMMERMAN. Thank you, Mr. Chairman.

Mr. Oehler provided in 1998 extensive testimony on Russian involvement in the Iranian Missile programs. He briefed Members of

Congress on Russia’s involvement in selling gyroscopes to Iraq, and

42

these were gyroscopes that had been taken off the SS–N–18 strategic missiles and shipped to Iraq through clandestine means.

The specific incident that triggered Mr. Oehler’s decision to leave

the CIA came after he testified in public session that there was no

doubt of the intelligence that China had delivered M–11 missiles

to Pakistan. Now, this was something that the State Department

had consistently refused to acknowledge on the record. Mr. Oehler

was basically told that his department would be downsized significantly days after he made that statement on the public record.

So the actual incident was involving China, but he had a record

of being frank and cooperating with Congress and did not earn

himself friends in the Administration for that.

Mr. COOKSEY. Thank you.

Mr. Campbell.

Mr. CAMPBELL. Thank you, Mr. Chairman. My question, first of

all, is to Dr. Waller.

The Shelley e-mail that you appended to your testimony, it is

possible to interpret that Professor Shelley was pursuing something that would be embarrassing to AID and inaccurate. If she

was silenced because she was critical of AID, that is one thing; if

she was silenced because she was inaccurate that is another. I am

trying to make the case that could be used to rebut. Namely, the

author of the memo, Mr. Bronheim, might say, well, we just didn’t

think she was right. We weren’t going to have that erroneous patina put upon AID.

Can you give me any more information about what happened to

Professor Shelley? What might lead you to believe that she was silenced, if you care to or can?

Mr. WALLER. Yes. In fact, maybe Mr. Henderson, who is testifying tomorrow, can explain. I haven’t consulted with him on this.

He doesn’t even know I attached this, so I might be putting him

on the spot. But she was right. She was raising concerns not to attack AID, but to say, hey, this is a problem—we have to undo this

problem before it gets worse.

Mr. CAMPBELL. But were any steps taken with regard to Professor Shelley on her contract?

Mr. WALLER. No, she wasn’t penalized because she had support

within the bureaucracy.

Mr. CAMPBELL. You also said—I am trying to quote close to accurately, I hope accurately—that members of State and AID were instructed not to write cables concerning crime and corruption, and

AID contractors were also so instructed.

Can you give a little specificity to that?

Mr. WALLER. Yes. Wayne Merry and Tom Graham, who were

both at our embassy in Moscow in the early and mid-1990’s, testified to that effect either before the Banking Committee or the Foreign Relations Committee, and also to Bob Kaiser in the ‘‘Washington Post’’ and elsewhere, so they have been pretty open from

their own personal experience, especially Wayne Merry, about all

this. In the August 15th, ‘‘Washington Post’’ in the Kaiser piece,

that is detailed pretty well.

Mr. CAMPBELL. Thank you. These are my last two questions: I

don’t remember the gentleman’s name, but the deputy mayor of St.

Petersburg was assassinated. I remember he was shot by a highVerDate 11-SEP-98 07:59 May 02, 2000 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 62933.TXT HINTREL1 PsN: HINTREL1
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velocity rifle through the roof of his car, that he had been identified

with fighting corruption. If you can refresh my memory—any of the

gentlemen—it comes to mind because of Dr. Waller’s testimony

that advocates for reform had been assassinated in Russia, and I

wonder if that instance which I am recalling probably 3 years ago

was an example of that reality.

Mr. WALLER. I don’t know about that particular instance. I knew

Galina Starovoitova when she was on our editorial board, and she

was assassinated last November. She was a human rights leader

and also——

Mr. CAMPBELL. But that particular incident.

Mr. WALLER. I don’t know this particular instance.

Mr. CAMPBELL. I apologize for not remembering the name. But

what was remarkable about it was it was a very difficult rifle shot

that killed him, doing damage to no one else. In other words, it had

all the marks of professional killing about it.

Last, Ambassador Morningstar’s tenure as our Special Ambassador for the Newly Independent States is of interest to me. Again,

my question is directed to Dr. Waller, but I invite Mr. Cannon and

Mr. Timmerman, as well, to give me an assessment. I believe you

had said that he had tried to establish a dissent channel. I notice

he has been moved, that he is no longer in that position. I wonder

if you could enlighten me as to whether any negative career action

was taken with regard to him because of his attempt to establish

a dissent channel or whatever else you could shed on the change

in personnel.

Mr. WALLER. No. He was there as a troubleshooter, first to coordinate and then recognize things that didn’t work. It wasn’t a formal dissent channel that he created, but he wanted his office to be

used as a place where contractors and others could come and speak

frankly. Now people in his office said it didn’t work well because

people had to physically go to the State Department. But he was

the first senior official that was really open to this.

Mr. CAMPBELL. Is your judgment of his tenure a favorable one?

Mr. WALLER. I can say he tried in many ways, but in other areas

I think he was not well served by some members of the staff in his

office.

Mr. CAMPBELL. Last, Mr. Timmerman. Incidentally, unless my

direction be in doubt, I happen to have high regard for his work,

but I am seeking advice. If you had good things to say, they would

be welcome; if truth forced you to say less than good things, obviously I would receive that as well.

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. As a reporter, I came to this issue first from sources in government in the

United States and sources in the Israeli military intelligence, but

I was certainly not privy to the type of classified briefings to which

Mr. Talbott was privy. I was not able to call up the Central Intelligence Agency and ask them to look into the case.

44

One of the most astonishing things that I found 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 aide, Leon Fuerth.

After February 1997, Mr. Talbott was tasked by Mr. Gore to deal

with the issue directly with the Russians. For the next 6 months

he did absolutely nothing.

He was aware. He had detailed intelligence from the Israelis on

the names of companies and the names of individuals involved in

the transfers to Iran of Russian missile technology and did nothing.

He never put it at the top of his agenda. He never pressed the Russians or used the leverage, the very real leverage that we had at

that time through Aid programs, and in particular, U.S. assistance

to the Russian space programs.

Mr. CAMPBELL. Again, just for the sake of getting the full story

out, if he were here, he might say he undertook a lot of steps, but

they were not 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 from both U.S. Government sources and from Israeli sources.

Afterward, Mr. Talbott was tasked specifically by the Vice President’s office and put in charge of dealing with the Russians on this

issue. He had exchanges with the Russians, but he never pressed

them. The reason that we know that he never pressed them is because it leaked out into the press in numerous cases of Russian

transfers going to Iran. There were customs cases; customs officials

in various countries blocked shipments. This came out in the press.

Mr. Talbott had information about those shipments before they

were stopped, and he never pressed it.

Mr. CAMPBELL. Thank you.

Mr. Chairman, thank you.

Mr. COOKSEY. Thank you, Mr. Campbell.

Dr. Waller, you have written about the bilateral commission with

the Russian Prime Minister headed by Vice President Al Gore, referred to generically as the Gore-Chernomyrdin Commission. How

influential a role did the Vice President have or did he play in U.S.

relations under this Administration due to his leadership of this

commission? That is my first question.

Second question: In a ‘‘Washington Post’’ article of August the

27th of this year an unnamed advisor of the Vice President was

quoted as saying Gore clearly chaired this commission, but it was

Administration policy, not his policy. Do you agree with this assessment of the Vice President’s role? Basically both my questions are

directed at Vice President Gore’s influence and basically his effect

on this commission and on our relationship with the the Russian

Government.

Mr. WALLER. I think he and Deputy Secretary Talbott were the

two primary players on Russia, Talbott with the big-picture approach and Gore on implementing a day-to-day relationship with

his Russian interlocutors across the board. So he had a very strong

role. He and his staff were always claiming credit for his role and

45

saying that he was so central to it, until things started hitting the

fan this summer, when they were then saying, well, it wasn’t just

him, it was other parts of the Administration. So I think he was

happy to accept credit when people were crediting him, but sort of

shying away from some of the responsibility.

Mr. COOKSEY. Another question: Mr. Wayne Merry, a former

State Department official in Moscow, has written that every program or project associated with the commission’s meetings had to

be deemed a, quote, ‘‘success.’’ He argues 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 personnel tell, in his words, that its policy is a success.

Do you agree with that assessment?

Mr. WALLER. Yes.

Mr. COOKSEY. So you have no argument with that——

Mr. WALLER. No, argument at all. That is part of the issue of my

testimony. The whole line across every agency involved was to only

report successes and to limit or even not report on policy failures.

Mr. COOKSEY. Good.

Mr. Timmerman, in your earlier article for the ‘‘American Spectator’’ you referred to a ‘‘Washington Post’’ profile of Deputy Secretary Strobe Talbott, a statement in the article to the effect that

no career diplomat should think of opposing his policy line toward

Russia. What, in your view, are the sources of Mr. Talbott’s influence over policy toward Russia, and does the Deputy Secretary

have greater influence over policy toward Russia than former Secretary of State Warren Christopher or current Secretary of State

Madeline Albright?

Mr. TIMMERMAN. I take it you are asking for my opinion, as well

as what I can base my opinion on, Mr. Chairman. Certainly, I

think Dr. Waller has testified that other diplomats in the U.S. Embassy, Russia, have been overruled by Mr. Talbott. I think that is

credible information, and certainly from my own contacts with the

diplomatic community, I think that is true.

But I do not have firsthand information of how Mr. Talbott has

played the role inside the State Department. That has not been my

focus. My focus has been on what he has been doing with the Russians vis-a-vis with Iran and vis-a-vis nonproliferation and his failure to stop the Russian transfers.

Let me just point out one other detail which is in my written testimony, but it hasn’t come out here this morning. Mr. Talbott was

instrumental in making sure that Yuri Koptev, who was the Chairman of the Russian space agency, became the principal interlocutor

for this Gore-Chernomyrdin process focusing on the Russian missile transfers to Iran. It is very curious that he would choose Mr.

Koptev, because our own intelligence agencies had singled out and

identified Mr. Koptev as the man who was probably most knowledgeable and probably in charge of those transfers to Iran.

Mr. COOKSEY. Mr. Cannon, how much influence has the U.S.-

Russia Business Council had in setting the agenda of past meetings of the so-called Gore-Chernomyrdin Commission, and how do

you believe outside organizations can influence the agenda of the

commission?

46

I will repeat that. One, how much influence has the U.S.-Russia

Business Council had in setting the agenda of past meetings of the

so-called Gore-Chernomyrdin Commission; and second, how do you

believe outside organizations can influence the agenda of the commission?

Mr. CANNON. Mr. Chairman, the U.S.-Russia Business Council

has acted as a staff and support of the business dimensions of that

agenda. It is the logical place to go to get the opinion of the U.S.

business community that has an interest in Russia. A substantial

part of the Gore-Chernomyrdin Commission’s agenda was focused

on elements of the program of reform in the business environment

in which all those companies have a stake. So I would say that our

issues were advanced. They were, therefore, known to the staff and

presumably communicated to the leadership of the commission, including the Vice President.

I think the attitude of the member companies in the U.S.-Russia

Business Council was that any exposure of our concerns and views

on the state of the Russian business economy and the priorities as

we saw them for its modernization was valuable—didn’t take a

huge amount of staff time, didn’t feel that it was a wasted effort.

Have one or two wins to point to in which I think it is legitimate

to say the Gore-Chernomyrdin Commission played a valuable role.

Production sharing agreements, I think, is probably, in the oil industry, the largest single area that we would point to.

With respect to access for other organizations, I think they are

very accessible. I think, a lot of these organizations frankly lacked,

in some areas in the business arena within their staff structure,

the necessary expertise and perspective to be able to operate in an

informed fashion.

As I say, any business that had a particular gripe in the way in

which its interests were being dealt with by agencies of the Russian government would tend to have gravitated toward the GoreChernomyrdin Commission in search of redress. Whether they were

successful I don’t know. Frankly, I wouldn’t have myself channeled

any concerns that I would have had or any comment I would have

had through the Gore-Chernomyrdin Commission as the sole method of attempting to deal with it. I might do it as a pro forma matter to see if anything happened. But I think most businesses that

have a significant investment in Russia and a significant concern

would know where to go to deal with any problems they have, directly within the government or the counterpart businesses that

they were dealing with.

Mr. COOKSEY. Good. Thank you.

I have a personal comment and then a question for the three of

you. Due to my age and my past time in the military, I still have

somewhat of a concern about the people that are running the government now, because they were all educated in Moscow and came

with the old Soviet mentality. I feel that past political model and

that past economic model have been totally discredited. But even

though I have only been to one city and spent about a week there,

in St. Petersburg—it is a beautiful city, the Russian people I met

were wonderful, nice people, obviously a lot of them are very

bright, well educated—I can’t help but feel that they are not going

to really put their country together and have a democracy as a poVerDate 11-SEP-98 07:59 May 02, 2000 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 62933.TXT HINTREL1 PsN: HINTREL1
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litical model, a market-driven economy, until this generation is off

the scene.

Do you feel that that is a correct position or is there any hope

that these people that were educated—part of the old problem,

maybe midlevel, but still part of the old problem—do you think

they can be salvaged or salvage the remnants of the Soviet Union?

Mr. WALLER. Yes. It has to be a generational approach. There

are a lot of people in their forties who made good leaders in the

early 1990’s who have been marginalized. I am thinking particularly of former Foreign Minister Kozyrev, who doesn’t have this innate hostility to the West. That generation certainly did have

power for a while. We chose not to continue supporting the ideals

that many of those people had and to side with the Chernomyrdins

and the Primakovs and the others from the old Communist Party

Central Committee.

There are more out there, but in Russia, they have always

learned to talk to survive. Back in the Soviet system, they didn’t

always speak their minds, obviously, because there were always

consequences to whatever they said.

Today, there is a similar degree of that where you have people

who in private may be much more friendly toward the United

States than they would be in public. I think you can see these votes

in the Duma, where you have a 420–to–1 vote condemning the

United States for something. Well, a good 50 of those people, at

least, are of this generation of people that we are talking about,

but they don’t dare to vote at all, or if they do, they will vote with

the opposition to the United States.

What has happened now is that our policy of just supporting the

Kremlin has marginalized people who were formerly allies in the

government. So now President Yeltsin’s main ally in the Duma, his

most reliable ally, is Vladimir Zhironovsky and his Liberal Democratic Party. Now, nobody would have dreamed of this in 1992–

1993, but that is how it has deteriorated. So it is going to take a

long time.

Mr. TIMMERMAN. There is a very disturbing trend inside Russia

today within the military, within the intelligence establishment

and in certain areas of the foreign policy establishment that are

close to former Foreign Affairs Minister Primakov—Yevgeny

Primakov—who is probably going to be a candidate for the presidency. They have a belief that they need to counterbalance Russia’s

declining military capabilities especially the conventional military

capabilities, by creating strategic challenges to the United States

and other parts of the world. You all remember how the Russian

army made that terrific midnight dash into Kosovo the same way

they had gone into Berlin in 1945.

We have also seen in this Iran and Iraq. For Yevgeny Primakov

and this particular faction within the security establishment, they

are consciously pursuing a policy of creating challenges to U.S.

power in the Persian Gulf. They would like to see Iran and Iraq

have the military power to challenge our presence in the Persian

Gulf, and that is a policy of the Russian government. I think this

is a very disturbing factor. This is certainly something that Deputy

Secretary of State Strobe Talbott should have been focusing on, but

he is not.

48

Mr. COOKSEY. Mr. Cannon, and really for all of you, one final

question from me, What will be the future of Russia if U.S. relations continue along the same track, if we don’t change the policy?

Mr. CANNON. I think there will be a widening gap between the

vision and the aspirations of the reform-minded community in Russia, which I think consists of far more than a few intellectuals with

a grasp of free market economic principles. I think it extends to a

substantial portion of the population that intuitively understands

that life has the potential to be far better in the absence of communism, even if it isn’t today. I think because of the widening of

the gap between aspirations that existed in the early 1990’s and

the belief in what is truly possible, given Russia’s realities, there

will be a deepening of cynicism on the part of the Russians about

their ability to integrate themselves into the value system and the

economic organizations and to adhere to the terms and behavior

patterns that are required of members of the OECD and other

international agencies.

I believe very strongly that the dual burdens of an unmanageable

external debt and an unaddressed problem of capital flight will

render the reform agenda largely irrelevant unless they are tackled

differently from the way they have been tackled over the last 6 or

7 years.

Mr. TIMMERMAN. Simply put, Mr. Chairman, I think we should

do what America does best; we should hold high the light of democracy and engage directly with the Russian people. This Administration has been engaging with the Russian elite and a corrupt Russian elite. Our policy should be crafted at doing things like encouraging private property. There is still not private landownership in

Russia after all these years, 10 years after the Wall has gone down.

We should be crafting policies that promote the rule of law and the

accountability of public officials. Instead, we have just rewarded a

corrupt elite.

Mr. WALLER. I think, if current trends continue, we are going to

find ourselves engaged in finding a Russia that is very nationalistic, not in the good sense, but in the very bad sense.

Scapegoating, worsening problems in the United States, blaming

the United States, suspecting us for every type of subversive intent

and then rearming not only places like China, but rearming strategic nuclear forces on their own.

The Chairman of the Duma’s international relations Committee,

Vladimir Luken, who is a voice for moderation there, came out the

other day and said we are just going to crank out more and more

of these Topol-M nuclear missiles, and we are going to put multiple

warheads on them. When you get people of that stature and that

degree of moderation saying things that only the Communists were

saying only a few years ago, you know we are headed in the wrong

direction.

Mr. COOKSEY. Thank you. We appreciate your testimony and

your participation in this hearing today. It has been very informative. Your thoughts and comments I can assure you will contribute to this Committee’s understanding of the problem. Hopefully, the Administration and maybe the House will review its policy toward Russia and, in the long run, do what is best for the RusVerDate 11-SEP-98 07:59 May 02, 2000 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 62933.TXT HINTREL1 PsN: HINTREL1
49

sian people, for the American taxpayers and for everyone that is

influenced by these two nations.

Thank you very much. The meeting is adjourned.

[Whereupon, at 1:25 p.m., the Committee was adjourned.]

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