[Congressional Record Volume 142, Number 80 (Tuesday, June 4, 1996)]
[Extensions of Remarks]
[Page E987]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       CASH GRANTS UNDER THE COOPERATIVE THREAT REDUCTION PROGRAM

                                 ______


                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                         Tuesday, June 4, 1996

  Mr. HAMILTON. Mr. Speaker, on April 2, 1996, I wrote to Secretary 
Perry about a proposed cash grant to the Ministry of Defense of Ukraine 
under the cooperative threat reduction--Nunn-Lugar program. On May 28 I 
received a reply from Deputy Secretary of Defense John White, and I 
would like to bring the corresponding to the attention of my 
colleagues. The text of the correspondence follows:

         House of Representatives, Committee on International 
           Relations,
                                    Washington, DC, April 2, 1996.
     Hon. William J. Perry,
     Secretary of Defense, Department of Defense, Washington, DC.
       Dear Secretary Perry: I write with respect to your letter 
     of March 19, 1996 concerning a proposed obligation of $10.3 
     million of the FY95 Cooperative Threat Reduction (CTR) 
     funding as a cash grant directly to the Ministry of Defense 
     of Ukraine.
       As you know, I have been a strong advocate and supporter of 
     the CTR program from the outset. I believe that this program 
     is in the national interest of the United States, and that it 
     has made important contributions to U.S. national security 
     over the past 5 years through the destructive and 
     dismantlement of nuclear weapons systems.
       What concerns me is your proposed cash grant. I have 
     consistently opposed, as the State Department well knows, all 
     types of cash grants to NIS states as inconsistent with the 
     authorities of the FREEDOM Support Act. In November 1994, 
     Secretary Christopher wrote to me pledging that no future 
     cash grants from FREEDOM Support Act funds would go forward. 
     I have also felt that any U.S. assistance must be tied to 
     identifiable reforms.
       My views with respect to CTR funds are the same. I would 
     appreciate a detailed explanation of the reasons that you 
     seek to proceed with such a cash grant, and why you cannot 
     achieve your purposes through the U.S. articles or services. 
     I would also like a description of your oversight mechanisms 
     for the monitoring the use of funds from this proposed cash 
     transfer, how you will monitor whether funded activities are 
     accomplished, and what specific reforms this assistance is 
     tied to.
       I would respectfully request from you a commitment that 
     this proposed cash transfer is not a precedent for future CTR 
     activities. I would also seek from you a commitment on prior 
     consultation if, at any time, a cash transfer from CTR funds 
     is under future consideration.
       With best regards,
           Sincerely,
                                                  Lee H. Hamilton,
                                        Ranking Democratic Member.
                                  ____



                                  Deputy Secretary of Defense,

                                     Washington, DC, May 28, 1996.
     Hon. Lee H. Hamilton,
     U.S. House of Representatives,
     Washington, DC.
       Dear Congressman Hamilton: Secretary Perry has asked me to 
     respond to your letter of April 2, 1996 regarding DOD's 
     proposed obligation of up to $10.3 million of the FY95 
     Cooperative Threat Reduction (CTR) funding as a cash grant 
     directly to the Ukrainian Ministry of Defense. First, let me 
     clearly state that the Secretary and I share your concern 
     about providing CTR assistance in the form of grants: though 
     the authority has existed for some years to use grants, we 
     have given clear direction that grants will not be normally 
     provided. DOD is proposing an exception to this policy in 
     this case because it is required to facilitate the final 
     denuclearization of Ukraine, a paramount national security 
     goal for the United States.
       The activities the grant will support involve sensitive 
     activities to include removal of nuclear warheads and nuclear 
     support equipment and the defueling, removal from silos and 
     partial neutralization of SS-19 missiles, as well as road 
     repair and construction on sensitive areas of missile bases. 
     All of these expenditures are non-recurring costs associated 
     with the final removal of all warheads and related equipment 
     from Ukraine. Ukraine's agreement with Russia under which the 
     warheads will be returned prohibits any foreign presence when 
     these activities are underway. Therefore, the U.S. cannot use 
     normal contracting methods.
       Although cash grants cannot be audited as closely as goods 
     and services the U.S. provides to Ukraine, I want to assure 
     you that Ukraine will provide invoices, records of payments 
     made, and summary reports for most activities under the 
     Grant. We will verify that the invoices relate to effort 
     covered under the Grant and we will be working with the 
     Ukrainian banks to ensure that payments are actually made by 
     the Ministry of Defense to legitimate third parties. In 
     addition, the invoices and reports will be measured against 
     information available to us from national technical means of 
     surveillance, through which we can determine that the 
     activities for which the assistance has been provided have in 
     fact occurred. Until we have these reports and confirm 
     independently that work has taken place, the full amount of 
     assistance will not be provided to Ukraine.
       Let me stress the Secretary approved the use of grants in 
     this instance only because the activities involved are 
     critical to achieving one of our paramount security goals. 
     This exception is not intended to set a precedent for future 
     CTR activities. DOD does not now envision another exception 
     to our established policy of not providing direct financial 
     assistance to foreign governments under the CTR program. 
     However, I will make sure you are contacted in advance if 
     another exception is considered.
       Your support for the CTR program is vital and I want to add 
     my personal thanks for the help you have provided. If you 
     have any further questions, please feel free to contact me.
           Sincerely,
     ------ ------.

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