[Congressional Record Volume 144, Number 119 (Thursday, September 10, 1998)]
[House]
[Pages H7574-H7581]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     STATUS OF CONDITIONS IN RUSSIA

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 7, 1997, the gentleman from Pennsylvania (Mr. Weldon) is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. WELDON of Pennsylvania. Mr. Speaker, I rise this evening to take 
some time to discuss a major crisis that this country is going to have 
to deal with. And I know the topic of discussion all across America 
tonight is the delivery of the report by Kenneth Starr involving 
potential allegations against the President of the United States. But I 
am not here to discuss that, Mr. Speaker. Actually, I am here to 
discuss another issue that is simmering and potentially could cause not 
just problems internationally, but severe problems here in America as 
well, and that is the status of conditions in Russia and actions that 
this body is going to have to take involving the Russian people and the 
Government of Russia before the end of this month, before we adjourn.
  Mr. Speaker, this past Tuesday evening I returned from what I believe 
is my sixteenth visit to Russia during the course of my lifetime of 
interest in Russia, the country and its people. This trip was one that 
was requested of me by my counterparts in the Russian State Duma, the 
equivalent to our Congress.
  They had asked me to come a week earlier to discuss ways that perhaps 
we could assist in further understanding the problem that Russia is 
experiencing now in terms of their economic instability, the political 
instability, and my own personal interest, the potential military 
instability within the boundaries of Russia. I went there with those 
three ideas in mind.
  As the chairman and founder of the Duma-Congress Initiative, which 
for 2 years has been the formal relationship between the Congress of 
our country and the State Duma and the Federation Council of Russia.
  In arriving in Moscow, Mr. Speaker, I was amazed to see the lines of 
Russian people who were gathering at banks all over the city attempting 
to go in and receive and remove their savings, in many cases their life 
savings; and the frustration of those people was that they could not 
take their own money out because in the banks in Russia today their 
accounts have been frozen.
  And at the same time their assets have been frozen all over Russia 
and they cannot remove the rubles they need, the costs of just living 
in Russia are increasing dramatically as the ruble has been devalued 
and the cost of goods and services in Russia has increased 
dramatically.

  In fact, during the 6 days I was in Moscow, when I checked my hotel 
bill on checking out, I saw that the cost of my room went up each 
evening because of the problems with the ruble. In fact, in one 
comparison, I had eaten breakfast in the hotel, which was a buffet 
breakfast, a standard fee charged to everyone who went into the hotel, 
and on one day it was 500 rubles; the next day the exact same breakfast 
was 750 rubles.
  Now, I was able to absorb the increased cost for the short period of 
time that I was there. But, Mr. Speaker, you could imagine what is 
happening all across Russia as literally thousands and millions of 
Russian people today are very much concerned about whether or not they 
are going to be able to buy the goods and the services to allow them to 
maintain their quality of life.
  And then when they add to that the impact this current economic 
crisis is having on the Russian military, it presents real problems not 
just for Russia, but for America and people around the world. Because 
the people in the military who have seen significant cutbacks in their 
funding base have particular problems because they do not have decent 
housing, many of the senior leaders of the former Soviet military feel 
betrayed because they have not been given their pensions and, 
therefore, the situation has led to a real morale problem, problems 
which jeopardize in some cases the security of Russian nuclear 
materials, nuclear arms, and conventional weapons.
  In fact, just in the past several months and years, we have seen 
increasing incidences of Russians illegally transferring technology to 
other nations. Over the past several years, we have seen very 
sophisticated guidance systems for long-range missiles being 
transferred from Russia to Iraq.
  We just this past summer saw evidence of Russian cooperation with 
Iran to build a new medium-range missile, which now threatens all of 
Israel. And we have seen continued cooperation in some cases with rogue 
states to allow technology involving chemical or biological weapons to 
leave Russia because the right price has been paid. So the problems of 
Russia economically are problems we have to face up to and problems 
that we have to deal with.
  Now, because of the current crisis and instability within the banking 
system and the instability of the ruble, there have basically been 
aggressive efforts by the central government and

[[Page H7575]]

Moscow to put some temporary holds on the slide the ruble has taken 
over the past several months. And that has not really worked. In fact, 
at this very moment, the ruble continues to be devalued in terms of the 
international community.
  The problem is that this country has basically supported over the 
past several years $22 billion in IMF funding that has gone into Russia 
that was supposed to help stabilize the ruble, that was supposed to 
stabilize the economy of Russia, that was supposed to provide jobs for 
Russian people, that was supposed to help the Russian people improve 
their quality of life.
  But as we have just learned during the past summer and even more 
tragically by the accounts of the comments of Anatoly Chubais in 
today's newspapers, Russia has largely squandered that money. $400 
million that was supposed to go to the Russian coal industry to help 
stabilize the jobs of coal miners and stabilize that industry largely 
went into a hole, ended up in Swiss bank accounts, large properties 
being bought along the Riviera, in some cases U.S. investments.
  In fact, Mr. Speaker, what we are learning more and more each day is 
that much of the significant dollars that the IMF and the World Bank 
have put into Russia have not accomplished their intended purpose. And, 
in fact, in many cases there has been outright corruption, there has 
been theft by international financial dealers, by the oligarchs who run 
the seven major banks in Russia, to the point that this help that we 
and other nations have provided has not been beneficial to the Russian 
people and there is currently a state of severe frustration.
  Now, our problem in the Congress, Mr. Speaker, is that the President 
is asking us this month to approve replenishment of IMF funds that have 
gone into Russia. That replenishment amounts to approximately $6 
billion.
  The Congress has not acted on this replenishment for almost a year 
because of the concerns of many of us, including myself, that the IMF 
money going into Russia has not been used for the right purpose, that 
in fact many of the institutions supported by the Yeltsin 
administration, and in fact supported by the Clinton administration 
because of its support for the Yeltsin administration, have ended up 
having that money being ripped off and not benefiting stability in 
Russia's economy.
  And so, with that in mind, and wanting to see Russia succeed, as 
someone who spends a great deal of time working proactively to assist 
Russia in stabilizing itself, but who is also probably Russia's 
toughest critic when it comes to proliferation and when it comes to our 
military relationship and lack of control of arms that are being 
shipped out of Russia, I decided that it was time to look at a new way 
of engaging Russia.
  So during the month of August, I sat down and laid out a series of 
eight principles, principles that this body could pass as a part of any 
IMF funding replenishment to send a new signal to the IMF, the 
International Monetary Fund, and the World Bank, as well as to the 
administration of this government that we are not going to tolerate 
business as usual, that while we want to see Russia succeed and 
stabilize for obvious reasons, we are not going to continue to support 
IMF dollars which in the end are American taxpayer dollars because we 
replenished the IMF to go down a virtual black hole, to allow those 
oligarchs in Russia and those wealthy individuals to rip off more money 
to be used for their own private purposes at the expense of stability 
in this very huge nation, which still has, by the way, over 6,000 
nuclear weapons which could very easily be pointed at America at any 
time and a whole host of additional, probably in excess of 10,000, 
tactical nuclear weapons, which also could be made available on the 
marketplace if in fact the right price would be paid.

                              {time}  2030

  These 8 principles were simple, Mr. Speaker. They were designed to 
lay out a strategy that would allow this body to support the President 
and his request for additional IMF replenishment, but it would say to 
the President that we are going to provide this funding support but we 
are going to do it in a new way, a new direction. We are no longer 
going to tolerate the way that President Clinton and President Yeltsin 
have allowed dollars in Russia to flow that should have been used for 
stability in the Russian economy.
  The interesting premise, as I get into this, in August was that I 
knew all along that the leadership in the Russian Duma also opposes IMF 
funding. Now, one might say why in the world would elected leaders in 
Russia oppose more IMF funding for their nation, especially with the 
economic crisis? Well, there are two simple reasons. The first is the 
same reason that many of us have been very concerned about IMF funding 
for Russia, and that is the Russian Duma officials and the members of 
the Federation Council have sat along the sidelines and watched the 
Yeltsin government allow IMF dollars and World Bank dollars and in some 
cases U.S. dollars to go into corrupt institutions, to not be used for 
the proper purpose that those dollars were allocated, and have watched 
those monies not benefit the Russian people but, rather, a few very, 
very wealthy individuals, who have unfortunately taken money that 
should have gone for economic stability in Russia.
  The Duma deputies have said why should we support a continued effort 
for a western bailout of these failed banks and institutions that we, 
as a nation, are going to have to pay back sometime, because these are, 
in fact, loans? So the Duma has been opposed and continues to oppose 
the IMF funding just as many of our colleagues in this body oppose it.
  There is a second reason why the Duma opposes IMF funding, and that 
is because they understand that there are some very difficult and tough 
decisions and reforms that they have to make. The World Bank, in 
talking about the release of this most recent tranche of money for 
Russia, said that Russia has to impose some very tough reforms. They 
have to stabilize their tax system so it is coherent and so that it is 
consistent, one that everyone can understand, that will encourage and 
promote additional business investment.
  They have to control the growth of the central government and the 
regional governments so that inflation is kept under control. They have 
to provide mechanisms that allow for private property and for land use 
reform, so that investors can come in to Russia as a free market system 
and be able to invest their money and enjoy the benefits of free and 
open markets. These are reforms that in some cases the Duma has been 
reluctant to support.
  Now, back in July, when the first crisis occurred this year, the 
Duma, in fact, did pass some of the recommendations that were put forth 
by the Yeltsin government by then Prime Minister Kiriyenko and by the 
IMF, and those reforms were a partial solution to a problem that 
continued to grow out of control, but the Duma has been reluctant to 
support additional IMF dollars because they don't want to make the 
changes necessary in terms of reforms.
  Mr. Speaker, I can understand to some extent why the Duma is 
reluctant. They see the Yeltsin government not controlling the extent 
of where these IMF dollars are going and how they are being used, and 
so, therefore, they are reluctant to come in and make the tough 
decisions of reform that are so necessary for Russia's economy to 
stabilize.
  Yet, the Duma also wants to see investment come into Russia to 
encourage the kinds of reforms that have been taking place in the 
regions. Russia is a very large country. In fact, it has about 89 krais 
and oblasts and independent republics that are a part of the Russian 
territory. So in effect you have 89 separate, smaller governments and 
in many of those smaller governments they are making significant 
reforms. They are providing for private property. They are controlling 
their budgets. They are making the tough decisions involving tax 
policy, and yet they are not being recognized by the international 
financial community and by this government in the form of support 
financially.
  In fact, over the past year, Mr. Speaker, the gentleman from North 
Carolina (Mr. Taylor), a very successful banker, and I have traveled to 
Russia four times to work with them on what we think will be one of 
Russia's key points of success out of these current doldrums they are 
in, and that is a mortgage financing system.

[[Page H7576]]

  In fact, Mr. Speaker, this document is the culmination of the 
meetings, extensive meetings, we have had with the leadership of the 
Russia Duma and in some cases portions of the Yeltsin government, 
talking to them about establishing a mortgage financing system similar 
to our Freddie Mac and Fannie Mae in America.
  The idea here is that the Russian people don't want hand-outs. They 
don't want to be always on the end of the receiving line. In fact, 
there are many Russians who want to be able to buy a home, buy an 
apartment or buy a flat, but to do that they have got to be able to 
borrow the money at realistic interest rates, for terms of up to 20 or 
30 years, as we do in this country.
  Now, the problem in Russia has been that the 7 oligarchs who run the 
7 largest banks in Russia who determine the bulk of economic activity 
in that nation have been ripping off the Russian people. Now, that's a 
strong word but I have no other word for it. It is ripping off the 
Russian people.
  The interest rates they have been charging over the past 4 and 5 
years have averaged between 15, 25, 50, in some cases 75, percent, and 
they have not been willing to loan money for housing for more than 2 to 
3 to 4 years. No family can afford to buy a property under those 
conditions.
  What we have proposed is a program initially controlled by the U.S., 
with Russian involvement, that would set parameters that are very 
similar to the mortgage financing mechanisms in this country.
  Mr. Speaker, in the meetings we have had with the Russian Duma and 
the regional governors who are members of the Federation Council, 
without exception, they have accepted our ideas. The problem has been 
an interesting one. The battle has not been with the Russian leaders to 
agree to this program. It has been with the Clinton administration that 
hasn't been willing to support this initiative and it has been with the 
Yeltsin administration that hasn't been willing to put forth support 
for the initiative as well.
  So here we have the two parliaments working together on some novel 
ideas to help the Russian people and yet because we have this Clinton-
Yeltsin relationship focusing on failed, corrupt Moscow-based 
institutions, the Russian people have not been able to benefit.
  So in going to Russia last week, I took 8 principles with me, 8 
principles that I told my Russian counterparts and all the factions of 
the state Duma, if you enact, following your enactment perhaps we can 
change directions in terms of the way that we relate to Russia and its 
economy.

  I am here tonight to announce, Mr. Speaker, that my key counterpart 
in the Russian Duma, Deputy Valentin Tsoy, who is a leader in the 
regional fraction, and a key ally of Duma Speaker Seleznyov came back 
with a Russian version, which I have just had translated, that, in 
fact, has Russia agreeing to 8 major principles, 8 major principles 
that they have now told me they will pass in the state Duma that we, in 
fact, can pass in this body to chart a new course in our relationship 
with Russia.
  The concept of this administration dealing with Russia over the past 
7 years has been heavily relying on Clinton to Yeltsin and that worked 
when both presidents were strong and both presidents had the commanding 
support of their populous. That doesn't exist in Russia today. In fact, 
most of the polls I have seen show that Boris Yeltsin would be lucky to 
get 20 percent of the vote if he were up for reelection. He is a very 
unpopular president.
  This President, likewise, has some problems with the Congress, not 
just because of the current situation involving Ken Starr. We can, in 
fact, Mr. Speaker, move in a new direction under the leadership of the 
two parliaments.
  Let me go through the 8 principles that the Russian state Duma, in an 
official document presented to me, have proposed as their response to 
my initiative, to reform the way international money goes into Russia. 
Number one, it will be the policy of both this Congress and the Russian 
state Duma that any additional western monies coming from the U.S., the 
World Bank or the IMF, should be used on programs such as mortgage 
credits, such as the one that we have worked on for the past year, and 
housing construction which will enable the development of a middle 
class in Russia.
  The reason why this is so important is the same reason why what FDR 
did after the great depression was so important. By establishing 
financial institutions like Freddie Mac and Fannie Mae, he gave the 
American people the chance to buy homes at low interest rates over long 
periods of time, and by creating funds that allow Russian people under 
very strict guidelines, where reforms have been made in the regions and 
nationally, reforms involving eviction, and the ability to have 
mortgages and our real estate industry, we can help Russia create that 
middle class that has been the key component of a strong America.
  Mr. Speaker, as we know, in this country, the middle class is what 
drives our economy. It is what makes America strong. Russia, largely, 
has no middle class today.
  So the first principle says that any money going into Russia should 
be aimed at those institutional programs that ultimately benefit the 
middle class, such as mortgage financing programs.
  The second principle deals with the regions, and it simply says that 
money going into Russia should not just go to central institutions in 
Moscow. Russia is a huge nation, 89 smaller subordinate governments. 
Where those governments are making reforms, international monetary 
funds should be used to encourage continued success in those reforms. 
That's not been the case under the current administration, under the 
current IMF policies.
  In fact, the second principle deals specifically with that issue and 
it says that where these real economic reforms are taking place in the 
region, tax reform, privatization, and land reform, that, in fact, all 
the international monetary organizations should be looking to support 
that reform by helping create additional programs that will encourage 
more of that activity. That principle further goes on to state that the 
criteria for evaluating the effectiveness of regional economic reform 
programs should be clearly defined. This will allow the regions to be 
sure that they will be objectively evaluated and guarantee them the 
necessary incentives for the establishment of effective economic reform 
programs.
  Now, Mr. Speaker, this comes to the Duma, that this administration 
and the Russian Yeltsin government have said doesn't want to work with 
them to help reform the Russian economy. The second principle clearly 
states a refutation of that fact.
  The third principle is a very important one, because it says, and 
remember this is being proposed to me in response to my initiatives to 
the Russians, that after a complete auditing, the international 
financial community and the U.S. Government should stop any and all 
funding to those institutions ever again. So when we do audits and 
determine that corrupt banks in Moscow have abused the IMF and the 
World Bank, they should not be entitled to any additional funding 
support from any international or U.S. organization, but that principle 
goes on to further state that not only should those institutions not 
receive financial resources in the future, but we further state in this 
particular principle, and I quote, the return of allocated funds from 
unscrupulous partners needs to be achieved through joint efforts and 
these funds that are collected need to be redirected toward specific 
programs that are, in fact, covered by these principles.
  So the Duma, in fact, wants to state with us that not only should we 
cut off funds to corrupt institutions in Russia, but we should go after 
those corrupt institutions and attempt to collect those dollars that 
have been misused and allocated in an improper manner.
  The fourth principle, Mr. Speaker, is one that we should have done in 
the past. It calls for the creation of a joint Russian American 
oversight commission, to monitor all allocated expenditures by the U.S. 
Government and by the international financial organizations so that the 
IMF and the World Bank, so that the American funds going into Russia 
which average about $600 million a year through programs like 
cooperative threat reduction or Nunn-Lugar, so that every one of those 
dollars is monitored in a formal, structured way, by a joint 
interparliamentary commission, made up of the staffs

[[Page H7577]]

of the Congress and the Russian Duma, the Federation Council and the 
U.S. Senate; not that we stop those funds because we can't stop IMF 
dollars, we are only one nation involved in the IMF, but so that we can 
tell our constituents that we are sure that every dime of money going 
into Russia in the end is going to the right purpose.

                              {time}  2045

  It is going to help the intended problem for which that money was 
intended. Right now there is no such oversight responsibility, there is 
no capability for the Congress and the Duma and the Federation Council 
and the Senate to monitor the ultimate use of these dollars. And that 
is why the corruption in Russia has allowed hundreds of millions of 
dollars to disappear and end up in U.S. real estate investments or in 
other places that benefit those oligarchs and other wealthy individuals 
who have raped the Russian people and then raped the international 
financial institutions supporting it.
  The fifth reform deals with the IMF, the fifth principle. This 
principle acknowledges that the IMF is not working right now, Mr. 
Speaker; something many of us in this body have talked about. But 
instead of abolishing the IMF, what we say in this joint statement of 
principles is that the IMF should, within one year, have completed an 
external study of the way the IMF operates.
  An international blue ribbon task force should be convened, made up 
of some of the world's top financial scholars, so they look at the IMF 
and the way it operates, issues involving transparency and the way it 
sends money into countries and comes back and makes specific 
recommendations for reforming the IMF, and those recommendations then 
should be acted on by the IMF board.
  The sixth principle, Mr. Speaker, is a very important one and one 
that we have heard over and over again in this body, and it is one that 
we have heard Boris Yeltsin complain about in Russia that the Duma 
would never enact, and that says that any case of investment in Russia 
must first of all be preceded by the passing of reform legislation; 
that both the Federal Government and the Regents must continue to enact 
reforms involving the kinds of issues raised by President Clinton when 
he was in Moscow last week and by Members of this body, so that we know 
that the dollars that are going into Russia are preceded by the reforms 
that are necessary to stabilize that country's economy and those 
reforms that are necessary to make sure that we have an accurate 
accounting for every dollar going into both the national and the 
regional governments.
  The seventh principle says that within 180 days the Congress and the 
Duma will work together to bring in American business interests and 
leaders and international financial experts who will work with the 
industrial leaders in Russia who are having difficult problems. 
Companies in Russia that are bankrupt or that are uncompetitive will be 
looked at in a one-on-one relationship with specific recommendations 
being made to those entities about how they need to reform, so they 
then can qualify for some of the kinds of programs that are available 
from the international financial community.
  The final point, Mr. Speaker, or the final principle, is one that 
deals with the long-term success of the Russian economy and the free 
market system. We have to understand, America has been working with a 
free market system for over 200 years. While we are doing things fairly 
well, we still have not solved all of our problems. Russia has only 
been working at this for seven years. They have a long way to go. After 
having been controlled by a very autocratic, authoritarian central 
government, they are now being faced with trying to understand how free 
markets work, and that is not easy.
  So our eighth principle is a simple one, and that is a principle that 
says that the state Duma in Russia and the U.S. Congress believe that a 
program needs to be established that would, within three years, bring 
15,000 young Russian students to American business schools.
  If every business school in this country took one Russian student as 
an undergraduate or graduate student and trained them in financial 
services, in economic activity, in planning and budgeting, in the 
business ways that we conduct our businesses, we would create a next 
generation of young people who would be forced under this program to go 
back to Russia and live, not stay in the U.S., and help develop a 
totally free market system.
  Mr. Speaker, these principles are in writing. They have been sent to 
me by my friend and counterpart in the Russian Duma, Deputy Tsoy, and I 
now challenge this institution and our leaders to rise to the task and 
challenge Russia to work with us to really reform the Russian economic 
system. And I propose that we pass these reforms on the same day, what 
a historic day that would be, for the first time, to have the Russian 
parliament and the U.S. Congress pass very tough reform principles that 
would say to both administrations, you have had it all wrong. You have 
had six and seven years to help that country get its act together, and 
you failed miserably. Hundreds of millions and billions of dollars have 
gone down black holes and disappeared. And while we want to see Russia 
stabilize itself, you are now going to abide by our principles. You are 
now going to allow us to play a responsible role in determining the end 
result of those dollars that are intended to help Russia stabilize 
itself, to help the Russian economy grow, to help create more jobs, to 
help improve the quality of life for the Russian people. I think we 
have a historic opportunity.
  I would be happy to yield to my friend and distinguished colleague, 
the gentleman from Florida, (Mr. Weldon), no relative, by the way.
  Mr. WELDON of Florida. I thank the gentleman for yielding. I want to 
commend the gentleman for the work he has done on behalf of U.S.-
Russian relations. I know that many of our colleagues are not fully 
aware that the gentleman speaks Russian and that he has gone over 
there, and in particular his interest in applying fundamental market 
principles and economic principles to the Russian system.
  I would agree with the gentleman wholeheartedly that the Clinton 
administration's policies in this arena have been a failure, and that 
the administration's pursuit of economic reforms has been very, very 
misdirected and very, very poorly handled.
  I was particularly interested in this issue because of the 
relationship between what goes on in Russia and the success of a 
program that is very important to the people in my district, and that 
is the International Space Station program. I know the gentleman sits 
on the Committee on Science with me and the gentleman has been a 
supporter of the Space Station program as well.
  We are really at a very, very critical stage in this program. The 
U.S. elements are being completed and are ready to be launched. The 
Japanese elements are nearing completion. Our colleagues in Europe, the 
French and Italians and Germans, have spent billions of dollars on 
their element. And the Clinton Administration, as part of its overall 
policy towards Russia, put the Russians in what is referred to as the 
critical pathway, where the whole success of the program is dependent 
on the Russians delivering to space their elements.
  Their performance to date on this program has been sorrowful indeed. 
It has actually been pathetic. They have repeatedly delayed their 
performance. They have not had the tax revenues to fund their elements 
for the Space Station, and it is driving the program into the red, it 
is causing the program to run behind, and these economic problems that 
the Russians are facing are seriously hampering the government's 
ability to collect taxes and to be able to afford to be a key player in 
this program.

  It is just absolutely truly amazing. Here we are today in 1998, where 
what was formerly one of the world's leaders in space now looks like 
they are going to be out of the picture completely if they do not 
financially turn their problems around. And I agree with the gentleman 
wholeheartedly that the administration's policies on dealing with the 
Russian economic problems have been very poor indeed, very bad, and 
that there really is no thriving domestic policy.
  I was wondering if the gentleman would just yield for a question, and 
that is what are the fundamental tax

[[Page H7578]]

policies in the Soviet union or Russia now? As I understand it, they 
are suffering from the same problems in Russia that this country was 
facing in the late 1970's, before Ronald Reagan got elected, and that 
is the tax rates are very high. Indeed, it is actually much worse in 
their case, because the tax rates are so high that, whereas in the 
United States high tax rates in the late seventies played a role in 
dampening economic growth, in the case of Russia not only has it done 
that, but as well it has driven billions of dollars of the economy into 
the black market, and by some estimates more than 50 percent of the 
economic activity in Russia actually is occurring in the black market.
  In your course of going over there, were tax rates discussed? What 
are the tax rates? Are they punishingly high? Is it playing a role? 
Would indeed the Russian government collect more money in taxes, as the 
United States government did when it lowered taxes in the early 1980's 
under Ronald Reagan, stimulating economic growth and, therefore, though 
the rate was down, the amount of money that came into the Treasury was 
much greater because the economy grew dramatically, and so it was a 
win-win situation, the government had more money.
  Could that be applied? Could those principles be applied in Russia? 
Would the Russian government be well-served to try to lower rates 
substantially and get more of the economy out of the black market and 
into the taxable market?
  Mr. WELDON of Pennsylvania. I understand the gentleman's question. 
Let me first all applaud him for his work on the Space Station and 
space research. He had been the leading advocate in the Congress on 
that issue, and I applaud your performance on the committee. It is 
second to none on that issue. I applaud you personally.
  In terms of Russia and its tax policy, the problem has been they have 
not had a fair, coherent tax policy at all up until this year. They 
just in fact passed a new tax code this year which they are in the 
process of attempting to implement.
  In Russia in the past, they have had a myriad of taxes. In fact, in 
some cases American businesses who are attempting to do joint ventures 
in Russia may have to pay as many as 15 or 20 different taxes to all 
kinds of different levels of government with no coordination. In some 
cases an American company would get involved in a joint venture, only 
to have the tax structure change while they are in the process of 
completing that venture, thereby causing companies to not want to 
invest in Russia.
  In fact, we did a comparison between western investment in China and 
Russia over the past six years, and the difference is unbelievable: 
$350 billion of western investment in China, and during the same period 
of time, about $10 billion of western investment in Russia. A lot of 
that was due to an inconsistent, unfair tax code. That now is being 
changed and the tax code is now being implemented.
  The problem Russia has is not necessarily the rate itself, it is the 
collection of taxes. Everyone in Russia does not pay taxes. There is 
not a uniform way of collecting taxes, and the wealthier few in Russia 
who have largely benefitted from the outside dollars coming in from 
international monetary organizations, in some cases have paid no taxes 
at all.
  Gasprom, arguably the most successful corporation in Russia, which 
was a private state entity that has now been allowed to operate as a 
free market institution, was just recently hit by former Prime Minister 
Kiriyenko because they owe $2 billion in back taxes. Here you had one 
of the most successful companies in all of Russia, the leading energy 
company in Russia. They were not paying their taxes. So the Russian 
government has not done a good job in collecting taxes, especially from 
those people and companies who have the ability to pay taxes.
  In the end, I think your point is well taken, and that is that lower 
taxes will eventually allow the economy to grow, but at this point in 
time it is a more fundamental notion. It is an established tax system 
that is fair, that is equally applied to everyone, that has tax rates 
that the wealthiest will pay similar to what the poorer people will 
pay.
  Mr. WELDON of Florida. If the gentleman will yield for another 
question, as I understand it, another critical problem in Russia is the 
problem of corruption. I have been a student of this for years, and I 
have long been of the opinion that one of the things that has caused 
Latin America, Central and South America to lag behind the West in 
economic growth for decades is this very problem. In particular, it 
creates a problem for somebody who wants to go into business, whether 
it be a foreign investor or even a domestic entity. Not only do they 
have to deal with all these myriad levels of government and their 
various taxes, but, in addition to that, layered on top of that, is the 
unpredictable nature of demands for bribery and payoffs in order to be 
allowed to do business.
  In the course of going over there, does that issue come up in 
discussions? I personally think that is a major impediment in many 
countries towards economic growth. For a business to succeed, they need 
stability. You were alluding to that in the tax code. They need to know 
what their taxes are going to be.
  A key element of that stability is honest government. They cannot 
have government officials shaking them down and members of organized 
crime syndicates shaking them down in an unpredictable nature, because 
it obviously can have dramatic implications in terms of a business's 
profitability, their ability to reinvest profits into their business, 
to be able to grow their business, thus creating new jobs and 
prosperity.

                              {time}  2100

  Did this issue come up? Was it discussed in the course of the 
gentleman's trips to Russia? Does the gentleman think, from what he has 
seen going over there as many times as he has, does the gentleman think 
they are taking appropriate steps in terms of dealing with the problem?
  Mr. WELDON of Pennsylvania. Mr. Speaker, corruption is a major 
problem. It comes up all the time in discussions with both elected 
officials and with our companies who are doing business in Russia and 
who want to do business there. It is a problem that has been caused by 
a country that was for decades very centrally controlled by a very well 
established Communist hierarchy. When that basically fell apart, 
unfortunately, there were some who took advantage of the situation and 
some who established criminal elements. Criminal activity does exist in 
Russia and in some cases it is a severe problem.
  Now, what has happened, on a positive note, is that our law 
enforcement community, Louie Freeh from the FBI and others, have, in 
fact, taken a very proactive role to assist Russia in learning the 
kinds of techniques that we use in America to deal with the criminal 
element, both in the corporate setting as well as in the general 
populous. In fact, in one of my trips last year, Louie Freeh had a 
significant portion of his FBI establishment in Moscow for meetings 
with the senior law enforcement officials throughout Russia. So we are 
attempting, as well as are other western nations, to assist Russia in 
getting control of criminal activity. But I would be less than candid 
if I did not tell the gentleman that it still exists and it still is an 
impediment to future investment.
  In the meeting I had with the State Duma and with the Federal Council 
members, I raised this issue; they are aware of it. They want to move 
forward. Part of the problem is until they get the economy solidified, 
people are going to go out and they are going to raise money any way 
they can to feed their families and take care of their personal needs, 
and if that means in some cases resorting to criminal activity, it is 
going to happen.
  A case in point is a meeting I had last year with General Alexander 
Lebed. I had dinner with him this past week in Moscow, but I met with 
him 4 or 5 times prior to that. As the gentleman probably knows, 
General Lebed is now the governor of Krasnoyarsk. He and his brother 
now are the governors of 2 republics which represent one-third of the 
land mass of Russia. He was a very decorated military leader in the 
Russian army.
  He told me a year ago in May, he said Curt, you have to understand 
one very important fact. He said, the most capable Russian admirals and 
generals from

[[Page H7579]]

the Soviet military have, for the most part, left the service, because 
of the lack of pay and because of the cutbacks in the size of our 
military, and he said unfortunately, because of our economic problem, 
they have not been given their back pay. In some cases they have not 
been given their pensions. In other cases they have not been given any 
housing assistance.
  So here we have senior military leaders who at one time commanded one 
of the top 2 militaries in the world when they were a superpower who 
had access to the most capable nuclear technology, which Russia has 
today, sophisticated weapons, chemical, biological, nuclear capability, 
and who now feel betrayed by their motherland. General Lebed said to 
me, what do you expect them to do. If they feel betrayed by their 
homeland, they are going to go and raise money any way they can in 
order to take care of their families. Which means in some cases, these 
foreign military leaders are the very ones selling off technology to 
raise money to take care of their own personal needs.
  That is why those who say we should not worry about Russia have to 
understand. We have no choice. We have no choice unless we want to see 
Iraq and Iran and Libya and Syria continue to get chemical weapons, 
biological weapons, missiles like we just saw Iran test on July 22nd 
that have a medium range that can hit any place in Israel that 
eventually will be able to hit portions of the U.S.; unless we want to 
see continued development of nuclear programs by rogue nations because 
Russians will sell off that technology. The alternative to not helping 
Russia stabilize is to basically say we are going to turn our back and 
let them sell off whatever they need to sell that eventually is going 
to come back to haunt us. We have no choice but to be engaged with 
Russia.
  But the point is, to be engaged with Russia does not mean we take the 
policy of this administration and basically work only with the 
President and basically not be willing to discuss the tough issues that 
confront our 2 countries, and that is a key, fundamental difference.
  But the point the gentleman raises is a significant one. Crime is a 
continuing problem, but I would say that there are aggressive efforts 
underway to try to assist Russia in getting control of that situation.
  Mr. WELDON of Florida. Mr. Speaker, I thank the gentleman for 
yielding. I again want to commend the gentleman for his efforts in this 
arena. It is an irony today to be in a situation as a Nation the United 
States is where our former Cold War adversary is essentially becoming 
an economic basket case, and I do believe that we as a body are going 
to have to wrestle with this issue, and the gentleman's comments at the 
onset of his Special Order tonight I thought were very, very well taken 
in that we are not going to be able to avoid trying to deal with this.
  The Russians still have a huge amount of nuclear capability, and 
obviously it is a large Nation with a large number of people, and to 
have the resurgence of a totalitarian form of government like they 
previously had under the Marxist-Leninist dictatorship totalitarian 
type of state would be potentially very, very bad for not only U.S. 
interests, but as well global interests, because as we all know, that 
government funded all kinds of revolutions and terrorist activities all 
over the globe for a period of 70 years.
  So there is a tremendous amount at stake for the United States to see 
to it that there is stability in Russia, and because of that, I think 
we as a Nation and we as a body, the United States Congress, the House 
and Senate, are going to have to deal with this issue.
  Obviously, from my perspective, representing the east central coast 
of Florida which includes Kennedy Space Center and home to the shuttle 
program and where we have many people working on the space station 
program, this issue is very, very critical to what is going on. Russia 
now has the ability to affect jobs in my congressional district, and 
the failure of the Russians to perform on the space station could 
seriously set back the program, which in turn can affect people's lives 
in Cape Canaveral and Merritt Island and places like Titusville, all of 
those communities that are around the space center where literally 
hundreds and thousands of space center workers work and raise their 
kids and go to school, their kids go to school.
  So I think it is very, very critical that we take leadership and to 
see the leadership role that the gentleman is taking on this issue, and 
I commend the gentleman for it and his willingness to try to make a 
difference.

  Let me just close with one other question for the gentleman. The 
gentleman's assessment of the President's visit over there, the impact, 
I made some inquiries and discovered that the space station program 
really was not discussed very much. It came up at the last meeting, and 
the extent of the conversation was, well, we will leave this problem to 
the experts in that area. I was very disappointed to hear that that was 
the extent of the President's discussion with Mr. Yeltsin, considering 
that this is claimed to be a priority for the administration, claimed 
to be a program that the administration wants to see succeed, 
obviously, as a cornerstone of our manned space flight program in the 
United States, but nonetheless it gets an ``also mentioned'' at the end 
of a series of meetings and turned over to others to try to work 
through the problem, when it is obviously a critical problem and it is 
not being dealt with.
  Mr. WELDON of Pennsylvania. Mr. Speaker, the gentleman raises another 
very valid point. I arrived in Moscow the same day the President was 
leaving Moscow, and while I did support the President's visit to Russia 
because we had made the announcement and I thought it would be very 
ill-timed for him not to go, it would send a very wrong signal that 
America was abandoning Russia at a time of economic chaos, I do not 
think much at all was discussed of substance. The agreements that were 
reached were certainly not earth-shattering agreements in the arms 
control arena, they were relatively minor additions to a regime that we 
already have in place, working with the Russians. The space station 
should have been a major topic because, as my colleague has pointed 
out, it is a very emotional issue in this body about whether or not we 
are going to have the ability to continue and complete that project.
  I think part of our problem is, and this is something the Russian 
people may have to deal with, and that is the effectiveness of their 
President. They are eventually going to have to deal with that issue. I 
know that is being discussed by many Russians right now, and perhaps 
that was part of the problem with President Clinton. But I would agree 
that Russia needs to understand that our continued commitment to their 
involvement in the space station is very seriously in question right 
now. We understand the economic problems they are having, but the fact 
is that we are putting U.S. dollars on the mark, in some cases I think 
more than perhaps what we originally anticipated, and that Russia is 
going to have to live up to its part of the bargain, and that should 
have been a serious topic for discussion by the White House. Why the 
President did not make that a key issue I just do not understand. It 
was a very short trip. He was only there for 2 days.
  But I thank my colleague for joining with me in this Special Order.
  Mr. Speaker, just to sum up, I want to again reiterate that this 
document was the Russian response to my 8 principles that I took over. 
It is a solid document.
  One point that I did not mention which is worth mentioning to our 
colleagues because it is significant, in the document and contained 
within principle 7 is that we should also, through the Commission 
between the U.S. Congress and the Duma, we also should, and I quote, 
``prohibit financing of military industrial complex enterprises from 
investment funds which have been attracted to accomplish social 
programs for the Russian population.'' It is another very important 
principle that we do not use U.S. money and IMF and World Bank money to 
build more offensive weapons systems, but rather, we use the money to 
create programs that help people: Housing, mortgages, roads, hospitals, 
schools. They are the primary intended uses for international 
assistance to help the Russian economy grow and prosper.
  So while the situation in Russia, Mr. Speaker, today is gloomy, being 
portrayed as being very gloomy by the western media, I think we have an 
opportunity to chart a new direction. I

[[Page H7580]]

think this Congress and the Senate and the Duma and the Federation 
Council can be the catalysts to chart a new beginning in our 
relationship with Russia.
  But I would be remiss if I did not mention one other concern, an 
issue that I addressed on my trip to Moscow last week. In the 26 
meetings that I had in 5 days, I met with over a dozen Duma deputies 
from all of the various factions; I met with Governor Lebed; with the 
mayor of Moscow, Mayor Luzhkov on 2 occasions; met with ministers of 
the Russian government, Minister Kokoshin, defense minister of housing; 
the minister of northern regions, and was actually in the Duma on the 
day that they voted down the nomination of Chernomyrdin.
  But one other task that was somewhat troubling to me, and I have to 
mention again today, if for no other reason that this administration is 
not even talking about this issue. Our relationship with Russia again 
has been one that I feel has been too heavily dependent on the 2 
Presidents personal feelings towards each other. While that is 
important, we must build stability beyond just the offices of the 
President.
  In addition, it is my contention that in this country, the 
administration has been unwilling to confront Russia when problems 
occur that need to be addressed candidly and openly with a great deal 
of transparency. In the area of arms control, we have not been willing 
to confront Russia, and we have evidence of transfers taking place.
  Something happened in July that is very troubling to me that this 
administration should be raising with the administration in Russia. It 
involved the assassination of one of the senior leaders in the Russian 
State Duma. I spoke about this issue on the floor of the House the 
second week of July when we returned from the July 4th break. I spoke 
about it because the individual who was assassinated had been a friend 
and a colleague of mine. Lev Rokhlin was the Chairman of the Duma 
Committee on National Security, the highest elected official in the 
Russian parliament working defense issues.

                              {time}  2115

  He was a very respected Russian, had served in the Russian military, 
had retired as a two-star general, and had been given the highest award 
Russia gives to its military personnel, the Hero of Russia award.
  In fact, to demonstrate Rokhlin's integrity, he refused to accept the 
award because at that time the defense minister in Russia was Pavel 
Grachev, and Lev felt that Pavel Grachev was not an honest individual, 
was not someone of honor that he felt was appropriate to give him that 
award, so he actually refused to accept the Hero of Russia award 
because of who would have had to give it to him.
  But Lev served his country well. He ran for the Duma as a member of 
Yeltsin's own party, Chernomyrdin's party, Naschdom, Our Home is 
Russia. He won on that ticket. And because the Naschdom party is the 
second largest faction in the Russian Duma, there are certain committee 
assignments that they are allowed to fill in terms of the 
chairmanships. One of those was the chairmanship of the Duma defense 
committee. Lev Rokhlin assumed that role as a member of Yeltsin's and 
Chernomyrdin's party.
  But in my meetings with Lev Rokhlin, he would always raise the issue 
of his concern about instability in the Russian military, soldiers not 
being paid, not being fed. He would say to me, Curt, you have to 
understand, if they are not paid, these soldiers may do things that 
cause problems down the road for your country. They may sell off 
technology. They may get involved in illegal operations.
  So he said, you have to understand, it is very important for us to 
downsize our military in a logical, constructive way. We must maintain 
the morale of our troops if we are going to continue to downgrade our 
military, downsize our military in a peaceful process.
  Lev Rokhlin was the leading and most outspoken critic of Boris 
Yeltsin for not providing the adequate funding for that military. Lev 
Rokhlin a year ago this summer called for the public resignation of 
Boris Yeltsin. In the fall, he called for the impeachment of Boris 
Yeltsin, the first elected official in Russia to call for Boris 
Yeltsin's impeachment. That sent shock waves throughout Russia, because 
here was one of Yeltsin's own party leaders calling for his 
impeachment.
  I met with Rokhlin in Moscow in November and again in February. I 
said, Lev, you are making some very provocative statements. Are you not 
fearful for your safety? He said, Curt, don't worry, they are not going 
to do anything to me. After all, I am a retired military leader. For 6 
months they attempted to remove Lev Rokhlin from the chairmanship of 
the Duma defense committee. Finally, in June, they accomplished that.
  As Lev was keeping his role as a Duma member, but no longer chairman 
of the defense committee, he was involved in investigating illegal arms 
sales to Armenia and to other nations from Russia, illegal activity. On 
July 3rd, three people entered Lev Rokhlin's home and shot him in the 
head.
  When Lev Rokhlin's daughter was called by her mother on the night 
that he was assassinated, Lev Rokhlin's wife told his daughter that 
three people came into the house and assassinated her father. The 
mother further told Lev Rokhlin's daughter, Tamara, that the mother was 
told she had to accept the blame for the murder or they would murder 
her, her daughter, their son, and all the family members.
  Tamara Rokhlin told her mother, don't worry, I will come over and I 
will comfort you, and we will find out who killed father. When she got 
to the home, Mrs. Rokhlin was not there. She was at the local police 
station. Tamara went to the police station and she saw her mother 
bruised all over her body, imprisoned. When she talked to her mother, 
her mother had changed her story. She said, Tamara, I killed your 
father. I shot him in the head with a pistol in our house.
  Tamara said, mother, you didn't. You told me that three people came 
into our house. You didn't do this. The mother said, I did it. I was 
the one who killed your father. Tamara then went back and, with a 
lawyer, assessed the home, looked at the bullet holes, and realized 
through the evidence that there is no way that her mother could have 
killed her father, especially in light of the fact that there was a 
bodyguard in the home for Lev Rokhlin on that night who claimed he 
heard no shots.
  In the ensuing days after the murder of Lev Rokhlin three bodies were 
found in the vicinity of the Rokhlin household, but before those bodies 
could be identified, they were cremated by the Moscow governmental 
authorities. When I went to Moscow this past week on Saturday I met for 
one and one-half hours with Tamara Rokhlin. I sat there and listened to 
her and her family tell the story of how her father, awarded the 
highest award in Russia for service to his country, had been murdered.
  The Russian people do not believe the statements of the Russian 
government, the central government that maintains that Lev Rokhlin was 
killed by his wife. On the day of Lev Rokhlin's funeral, 10,000 Moscow 
residents came out in the streets to attend his funeral. The newspaper 
was filled with stories of people saying there was no way that Lev 
Rokhlin was killed by his wife.
  So my final plea tonight, Mr. Speaker, is not just for these 
principles involving the IMF and world funding and U.S. funding in 
Russia, but it is a plea to this administration to live up to its 
rhetoric. When this administration talks about human rights abuses in 
China, when it talks about human rights abuses in third world nations, 
it should also talk about a human rights abuse in a democracy, where an 
elected leader in their parliament is shot down, I think because of 
statements he made about the need to impeach the leader of the Russian 
government. That is unacceptable for any democracy, and it is 
unacceptable for this country not to talk about this incident openly.
  When I went to Moscow, I talked about Lev Rokhlin's murder to 
everyone that I met. Mr. Speaker, everyone that I met unofficially, off 
the record, told me the same thing: Curt, we have no doubts. Lev 
Rokhlin was not murdered by his wife. Lev Rokhlin was murdered by 
people who did not like what Lev Rokhlin was saying.
  The message is simple, Mr. Speaker. If we are going to have a stable, 
lasting relationship with Russia, we cannot continue to follow the 
pattern of this

[[Page H7581]]

administration. Candor and transparency have to be our cornerstone. 
These principles in our relationship with Russia are the future way to 
provide stability for that once great Nation.

                          ____________________