[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
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
U.S. GOVERNMENT PRINTING OFFICE
62-933 CC WASHINGTON : 2000
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa TOM LANTOS, California
HENRY J. HYDE, Illinois HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey ENI F.H. FALEOMAVAEGA, American
DAN BURTON, Indiana Samoa
ELTON GALLEGLY, California MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California ALCEE L. HASTINGS, Florida
PETER T. KING, New York PAT DANNER, Missouri
STEVE CHABOT, Ohio EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South BRAD SHERMAN, California
Carolina ROBERT WEXLER, Florida
MATT SALMON, Arizona STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York JIM DAVIS, Florida
TOM CAMPBELL, California EARL POMEROY, North Dakota
JOHN M. McHUGH, New York WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina BARBARA LEE, California
PAUL E. GILLMOR, Ohio JOSEPH CROWLEY, New York
GEORGE RADANOVICH, California JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
Richard J. Garon, Chief of Staff
Kathleen Bertelsen Moazed, Democratic Chief of Staff
Mark Gage, Professional Staff Member
Marilyn C. Owen, Staff Associate
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
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 peacekeeping 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 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 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 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 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,
half-hearted, 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.
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 demonstration 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 post-Gorbachev 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.
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.
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.
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 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.
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 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.
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.
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 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 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 Russian 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.
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 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 6\1/2\ 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?
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 continued 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 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?
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 6\1/2\ 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 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 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 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 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 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 post-World 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 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 submit 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.
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 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.
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 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 AID-funded ``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
5\1/2\ 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 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 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 longer-range 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 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 post-Soviet 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 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.
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 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
high-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.
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 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?
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
Gore-Chernomyrdin 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 political 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.
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 Russian 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.]
=======================================================================
A P P E N D I X
October 6, 1999
=======================================================================
[GRAPHIC] [TIFF OMITTED] T2933.001
[GRAPHIC] [TIFF OMITTED] T2933.002
[GRAPHIC] [TIFF OMITTED] T2933.003
[GRAPHIC] [TIFF OMITTED] T2933.004
[GRAPHIC] [TIFF OMITTED] T2933.005
[GRAPHIC] [TIFF OMITTED] T2933.006
[GRAPHIC] [TIFF OMITTED] T2933.007
[GRAPHIC] [TIFF OMITTED] T2933.008
[GRAPHIC] [TIFF OMITTED] T2933.009
[GRAPHIC] [TIFF OMITTED] T2933.010
[GRAPHIC] [TIFF OMITTED] T2933.011
[GRAPHIC] [TIFF OMITTED] T2933.012
[GRAPHIC] [TIFF OMITTED] T2933.013
[GRAPHIC] [TIFF OMITTED] T2933.014
[GRAPHIC] [TIFF OMITTED] T2933.015
[GRAPHIC] [TIFF OMITTED] T2933.016
[GRAPHIC] [TIFF OMITTED] T2933.017
[GRAPHIC] [TIFF OMITTED] T2933.018
[GRAPHIC] [TIFF OMITTED] T2933.019
[GRAPHIC] [TIFF OMITTED] T2933.020
[GRAPHIC] [TIFF OMITTED] T2933.021
[GRAPHIC] [TIFF OMITTED] T2933.022
[GRAPHIC] [TIFF OMITTED] T2933.023
[GRAPHIC] [TIFF OMITTED] T2933.024
[GRAPHIC] [TIFF OMITTED] T2933.025
[GRAPHIC] [TIFF OMITTED] T2933.026
[GRAPHIC] [TIFF OMITTED] T2933.027
[GRAPHIC] [TIFF OMITTED] T2933.028
[GRAPHIC] [TIFF OMITTED] T2933.029
[GRAPHIC] [TIFF OMITTED] T2933.030
[GRAPHIC] [TIFF OMITTED] T2933.031
[GRAPHIC] [TIFF OMITTED] T2933.032
[GRAPHIC] [TIFF OMITTED] T2933.033
[GRAPHIC] [TIFF OMITTED] T2933.034
[GRAPHIC] [TIFF OMITTED] T2933.035
[GRAPHIC] [TIFF OMITTED] T2933.036
[GRAPHIC] [TIFF OMITTED] T2933.037
[GRAPHIC] [TIFF OMITTED] T2933.038
[GRAPHIC] [TIFF OMITTED] T2933.039
[GRAPHIC] [TIFF OMITTED] T2933.040
[GRAPHIC] [TIFF OMITTED] T2933.041
[GRAPHIC] [TIFF OMITTED] T2933.042
[GRAPHIC] [TIFF OMITTED] T2933.043
[GRAPHIC] [TIFF OMITTED] T2933.044
[GRAPHIC] [TIFF OMITTED] T2933.045
[GRAPHIC] [TIFF OMITTED] T2933.046
[GRAPHIC] [TIFF OMITTED] T2933.047
[GRAPHIC] [TIFF OMITTED] T2933.048
[GRAPHIC] [TIFF OMITTED] T2933.049
[GRAPHIC] [TIFF OMITTED] T2933.050
[GRAPHIC] [TIFF OMITTED] T2933.051
[GRAPHIC] [TIFF OMITTED] T2933.052
[GRAPHIC] [TIFF OMITTED] T2933.053
[GRAPHIC] [TIFF OMITTED] T2933.054
[GRAPHIC] [TIFF OMITTED] T2933.055
[GRAPHIC] [TIFF OMITTED] T2933.056
[GRAPHIC] [TIFF OMITTED] T2933.057
[GRAPHIC] [TIFF OMITTED] T2933.058
[GRAPHIC] [TIFF OMITTED] T2933.059
[GRAPHIC] [TIFF OMITTED] T2933.060
[GRAPHIC] [TIFF OMITTED] T2933.061
[GRAPHIC] [TIFF OMITTED] T2933.062
[GRAPHIC] [TIFF OMITTED] T2933.063