[Congressional Record Volume 145, Number 109 (Thursday, July 29, 1999)]
[Senate]
[Pages S9737-S9738]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              BUSINESS AS USUAL IN THE RUSSIAN FEDERATION

  Mr. CAMPBELL. Mr. President, I take this opportunity today in my 
capacity as Co-Chairman of the Commission on Security and Cooperation 
in Europe, known as the Helsinki Commission, to draw the attention of 
my Senate colleagues to the growing problem of official and unofficial 
corruption abroad and the direct impact on U.S. business.
  Last week I chaired a Commission hearing that focused on the issues 
of bribery and corruption in the OSCE region, an area stretching from 
Vancouver to Vladivostok. The Commission heard that, in economic terms, 
rampant corruption and organized crime in this vast region has cost 
U.S. businesses billions of dollars in lost contracts with direct 
implications for our economy here at home.
  Ironically, Mr. President, in some of the biggest recipients of U.S. 
foreign assistance--countries like Russia and Ukraine--the climate is 
either not conducive or outright hostile to American business. This 
week a delegation of Russian officials led by Prime Minister Sergei 
Stepashin are meeting with the Vice President and other administration 
officials to seek support of the transfer of billions of dollars in 
loans and other assistance, money which ultimately comes from the 
pockets of U.S. taxpayers.
  I recently returned from the annual session of the OSCE Parliamentary 
Assembly in St. Petersburg, Russia, where I had an opportunity to sit 
down with U.S. business representatives to learn from their first-hand 
experiences and gain a deeper insight into the obstacles they face. 
During the 105th Congress, I introduced legislation--the International 
Anti-Corruption Act--to link U.S. foreign aid to how conducive 
recipient countries are to business investment. I intend to reintroduce 
that legislation shortly, taking into account testimony presented 
during last week's Commission hearing.
  The time has come to stop doing business as usual with the Russians 
and others who gladly line up to receive our assistance then turn 
around and fleece U.S. businesses seeking to assist with the 
establishment of legitimate operations in these countries. An article 
in the Washington Post this week illustrates the type of rampant and 
blatant corruption faced by many in the U.S. business community, 
including companies based in my home state of Colorado.
  Mr. President, I ask unanimous consent that the full text of this 
article be printed in the Record.
  There being on objection, the material was ordered to be printed in 
the Record, as follows:

              Investors Fear ``Scary Guy'' in Russia Talks

                           (By Steven Mufson)

       Russian Prime Minister Sergei Stepashin arrived in Seattle 
     on Sunday to court American investment in his country's 
     ailing economy, but his entourage included a regional 
     governor who has been accused of using strong-arm tactics to 
     wrest assets from foreign investors.
       The controversial member of Stepashin's delegation is 
     Yevgeny Nazdratenko, governor of Primonsky province in 
     Russia's Far East, who is embroiled in several disputes with 
     foreign business leaders.
       ``Basically the governor is a pretty scary guy,'' said 
     Andrew Fox, who sits on the boards of more than 20 companies 
     in the region and is the honorary British consul in 
     Valdivostok. Fox said that Nazdratenko summoned him on June 3 
     and threatened to send him ``on an excursion to visit a very 
     small room'' where Fox would be kept until he agreed to give 
     the governor control of a crucial stake in a shipping company 
     and leave the company's existing management intact. Fox left 
     that week and is now in Scotland.
       David Gens, finance director of Seattle-based Far East 
     Maritime Agency, said the Russian partner of one of the 
     company's affiliates was ordered to contribute 10 percent of 
     revenue for the rest of the year to Nazdratenko's reelection 
     campaign.
       In yet another dispute, an American investor has alleged 
     that Nazdratenko packed the board of a company, diluted the 
     ownership interest of foreign investors and diverted funds to 
     coffers for his December reelection campaign.
       Senior administration officials said Nazdratenko would not 
     be included in meetings with President Clinton, Vice 
     President Gore or other top U.S. officials today in 
     Washington. But several business leaders said the mere 
     presence of the Vladivostok politician, who accompanied 
     Stepashin in Seattle for a tour of a Boeing plant and a 
     dinner hosted by Washington Gov. Gary Locke (D), was sending 
     a bad signal to investors.
       Russia has defaulted on its debts, it has a lot of economic 
     problems, it should be extra

[[Page S9738]]

     careful to woo foreign investors, said a Moscow-based 
     spokesman for a group of foreign investors in a dispute with 
     Nazdratenko over a Vladivostok-based fishing company. ``To 
     bring the poster boy of corruption along to the United States 
     is just staggering.''
       Nazdratenko has repeatedly and forcefully denied 
     allegations in the Russian media of tolerating corruption and 
     organized crime. As the governor of an immense territory with 
     valuable forests and rich fishing grounds north of Japan, 
     Nazdratenko is a political powerhouse and runs his region 
     with little supervision from authorities in faraway Moscow.
       In Seattle, Stepashin told business leaders: ``There are 
     good prospects for investment in Russia, so please don't lose 
     any time.''
       But Fox, who has lived in Vladivostok for seven years and 
     represents foreigners with more than $100 million invested in 
     the area, says he would like to ask Stepashin: ``Which bits 
     of Russia are you talking about?''
       ``Everyone knows it is a risky thing to invest in Russia,'' 
     Fox added. ``But it's so outrageous what's being done'' in 
     Vladivostok. ``It's total lawlessness. Is that where Russia 
     is heading?'' Fox asked. ``If so, then there is no sense in 
     spending money there, and Russia is going to go backwards.''
       Acknowledging the complaints of many foreign investors, 
     Stepashin told members of a U.S.-Russia business council in 
     Washington last night that ``all investments have to be 
     protected not only in word, but in deed.'' He said, ``We 
     understand that investors have every reason to be weary,'' 
     but added that ``we are dead set on changing our attitude.''
       Many of those who have suffered from the fickle nature of 
     Russia's economic system are in Seattle, the first stop in 
     Stepashin's U.S. visit.
       Gens estimates that one Vladivostok fishing trawler 
     company, Zao Super, owes tens of millions of dollars to 
     Seattle-area suppliers of nets, fuel, spare parts and 
     maintenance services. Yet the Russian Committee of Fisheries 
     on July 2 transferred most of Zao Super's main assets--the 
     fishing boats--to another company whose major shareholder and 
     chairman is a close associate of Nazdratenko.
       Zao Super, which allegedly was told to divert money to 
     Nazdratenko's campaign, has $350 million in debts being 
     renegotiated by the Paris Club, a creditors' group comprised 
     of the governments of leading industrialized nations.
       Despite these and other economic problems, Stepashin is 
     widely expected to receive support in Washington for Russia's 
     quest for $4.5 billion in loans from the International 
     Monetary Fund and up to $2 billion from the World Bank. He 
     will meet with officials of those institutions on Wednesday. 
     The IMF funding is important to negotiations on rescheduling 
     Russia's crushing debts. Russia, which has $17 billion in 
     debt payments due this year, already has defaulted on many 
     obligations.
       The IMF has been reluctant to support Russia since a 
     combination of capital flight, poor tax collection, weak 
     budget controls, corruption and lumbering state enterprises 
     led to a collapse of the Russian currency, the ruble, in 
     August 1998.
       But senior U.S. and IMF officials have been equally 
     reluctant to isolate Russia by cutting off economic 
     assistance.
       ``We are going ahead with a package which I hope is 
     credible, which I hope will be implemented fully,'' Alassane 
     Quattara, deputy managing director of the IMF, told Reuters. 
     ``The first intentions and the first measures taken by the 
     new government are quite positive. . . . The board knows the 
     parameters, the difficulties and the risks.''

  Mr. CAMPBELL. Mr. President, instead of jumping on the bandwagon to 
pump billions of additional tax dollars into a black hole in Russia, 
the administration should be pressing the Russian leadership, including 
Prime Minister Stepashin, to root out the kinds of bribery and 
corruption described in this article that have an overall chilling 
effect on much needed foreign investment. Left unchecked, such 
corruption will continue to undermine Russia's fledgling democracy and 
the rule of law and further impede moves toward a genuine free market 
economy.

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