[Congressional Record Volume 145, Number 120 (Wednesday, September 15, 1999)]
[House]
[Pages H8356-H8366]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   SECURITY ISSUES FACING OUR COUNTRY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 1999, 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 tonight to discuss 
security issues facing this country and to focus the bulk of my 
discussion on the issue that is going to be, I think, a major issue for 
the rest of this year and well into the Presidential elections next 
year, and that is a national debate on who lost Russia. What caused the 
current economic and political instability that is occurring in that 
nation that still possesses a vast supply of nuclear material, weapons, 
weapons of mass destruction, and pose a significant security threat to 
America?
  Before I talk about Russia and present some perspectives, I would 
like to first of all commend the Congress, Members on both sides of the 
aisle, for the passage today of the final conference report on the 
defense authorization bill. This bill, which passed the House with an 
overwhelming margin, is a tribute to the gentleman from South Carolina 
(Mr. Spence) and the gentleman from Missouri (Mr. Skelton), the two 
leaders on defense issues in this Congress, and to all the Members who 
worked hard on giving our military the best possible support in terms 
of resources to meet the challenges and threats of the 21st Century.
  I am concerned that the bill does not have enough in the way of 
resources to meet the level of deployments that have been entered into 
by this administration and by the President. In fact, the level of 
deployments over the past 7 years are now at 33, and that, in fact, 
compares to 10 deployments in the previous 40 years from World War II 
until 1990.
  We cannot continue to have our troops stationed around the world, 
involved in harm's way in every possible place, from the Balkans and 
Kosovo to Macedonia and Somalia and Central America and now perhaps 
East Timor, and provide less resources to pay for all these 
deployments. That has been our big problem over the past several years.
  So while this bill does not address all of our needs, it certainly is 
the best possible legislation that we can come up with given the amount 
of dollars that the administration made available and the amount that 
we in the Congress were able to plus up above the President's request. 
I would hope the President would sign this bill into law as quickly as 
possible.
  There was some last-minute controversy raised because of provisions 
dealing with changes in the management of our Department of Energy-run 
laboratories. But I can say this, Mr. Speaker, that those changes are 
needed. They are important, and they are critical.
  We could not have passed DOE reform legislation in my mind that the 
President would have signed had it been in a freestanding bill, and, 
therefore, including it as a part of our defense authorization bill was 
extremely important.
  The second issue I would discuss briefly, Mr. Speaker, is an 
announcement that is going to be made tomorrow by the administration 
regarding a change in the policy over encryption. Encryption is the 
technology that we use in the information age to protect and secure 
transmissions of data.
  Up until this point in time, we have had strict limitations on the 
type and capability of encrypted software that we allow our companies 
to sell overseas. The reason is that we do not want terrorist groups in 
rogue States to be able to get the capability to classify their 
communications so that our national security agency and intelligence 
community cannot get into the kinds of transmissions involving illegal 
activities and drug sales and arms transfers that is so important to 
our security.
  For the past several years, it has been a stalemate. Many of the 
software companies have been pushing very hard to pass legislation to 
remove all limitations on being able to sell encryption software abroad 
at any bit strength, any capability.
  Many of us in the Congress who are concerned about security issues 
and Members of the Permanent Select Committee on Intelligence on both 
sides of the aisle have raised our voices and have said we cannot just 
in one fell swoop wipe away the controls that allow us to maintain the 
kind of access to secure systems that allow America to protect our 
troops abroad as well as our homeland here.
  In fact, in each of the last two sessions of Congress, I have offered 
successfully amendments in the Subcommittee on Defense to the 
encryption bill, overwhelmingly supported by Democrats and Republicans, 
to slow down this process and to force us to look at the security 
concerns.
  We have said during our opportunities to amend this bill, both last 
year and most recently in July or August, this past summer, that we 
were looking for a compromise, that we were looking for a way that we, 
in fact, could allow our companies to maintain

[[Page H8357]]

their market share worldwide but also, at the same time, provide 
mechanisms for the national security agency and the intelligence 
community to make sure that they were being consulted when this 
technology was being sold.

  In a meeting I had with Deputy Secretary of Defense John Hamre just 1 
hour ago in my office, he told me that tomorrow the administration will 
be announcing what I think will be a successful compromise that will 
allow industry to be happy but will allow those of us who have security 
concerns to be happy that we are, in fact, not giving away capability 
to our adversaries that may come back to haunt us.
  This compromise which has yet to be worked out in terms of 
legislative language will do three things. It will allow a process to 
be kept in place to make sure that our intelligence and defense 
community have a process before an application is granted for an 
encrypted software to be sold overseas above the 64-bit strength 
capability. This gives our technical people the ability to monitor the 
kind of software encryption that we are selling so that they understand 
the implications of the sale.
  Secondarily, the companies will certify the end user of this 
encrypted algorithm software so that we know where the encryption is 
going, to make sure it is not going near the hands of a terrorist group 
or perhaps a nation that is a direct opponent of the U.S., thus could 
cause security problems for us.
  The third provision would allow the Defense Department and the 
administration and intelligence community to oppose the sale of this 
more capable encryption to a nation or to an entity that we feel would 
pose a security threat to America.
  Based on these three conditions, the administration and Dr. Hamre are 
going to announce this change tomorrow, and I am convinced that this 
change would not have occurred were it not for the efforts of members 
of the national security committee, and Permanent Select Committee on 
Intelligences who stood up and cast very difficult votes.
  The intense lobbying campaign by the private software companies who 
have significant PACs and who were having a significant influence on 
Republican and Democrat Members brought tremendous pressure to bear on 
many Members who wanted to make sure that our security was not being 
jeopardized.
  In last year's vote in the House Subcommittee on Defense and last 
year's Permanent Select Committee on Intelligence and in this year's 
votes in the House Subcommittee on Defense and Permanent Select 
Committee on Intelligences, Democrats and Republicans stood together.
  They said that we want to make sure, in spite of the tremendous 
pressure by these software companies, that we give every possible 
consideration to our security concerns. Those security concerns 
apparently are now being met. Tomorrow we will hear the outline of the 
specifics from the administration.
  I have offered my support to Dr. Hamre to work to develop bipartisan 
legislation to amend the Safe Act, the Goodlatte bill, to provide for a 
compromised solution to what has been a stalemate in this country over 
the exportation of encrypted software.
  I want to particularly thank the Members of Congress who were leaders 
in this effort and who, without their support, this compromise would 
not have occurred.
  On the Committee on Armed Services in particular, I want to thank the 
gentleman from Virginia (Mr. Sisisky). He was the cosponsor of the 
amendment that I offered this year which passed in the committee with a 
vote of 46 to 8. Overwhelming support by Republicans and Democrats. 
That bipartisan support was obtained because of the leadership of the 
gentleman from Virginia (Mr. Sisisky) on the Democrat side.
  I would also thank our distinguished ranking member the gentleman 
from Missouri (Mr. Skelton) who took a leadership role in this effort 
in the committee, supported by the gentleman from South Carolina 
(Chairman Spence).
  The other leaders on the Committee on Armed Services were the 
gentleman from New Jersey (Mr. Andrews), the gentleman from Hawaii (Mr. 
Abercrombie), and the gentleman from Nevada (Mr. Gibbons). Each of 
these Members took the tough stand. They stood up under tremendous 
pressure and intense lobbying by private industry to say that we had to 
stand up for the security concerns of the intelligence community, the 
national security agency.
  It is because of their efforts and the efforts of the leaders on the 
Permanent Select Committee on Intelligence, particularly the gentleman 
from Florida (Mr. Goss) and the gentleman from Washington (Mr. Dicks) 
that we were able to reach this compromise which, hopefully, all of us 
can rally around legislatively. I am looking forward to working 
together to achieve a balance.
  I have already discussed this in a very preliminary way with the 
gentleman from Virginia (Mr. Goodlatte) who is the chief sponsor of 
this legislation. I want to applaud him for being responsive to our 
reaching out to try to find a way to deal with the concerns of industry 
and their economic success and the concerns that we have relative to 
America's security.
  Mr. Speaker, the real topic that I wanted to address tonight is the 
beginning of what I think will be a major national debate over the next 
14 months that should occur over the issue of who lost Russia.
  Mr. Speaker, 8 years ago the people inside of the Communist-dominated 
Soviet Union were excited, were anxious, and were looking forward to 
what they saw coming: A major revolution of a Communist-dominated 
superpower, one of only two superpowers in the world at that time, that 
was repressive of their rights, that was repressive of the freedom of 
information and access to the kinds of freedoms we enjoy in America in 
free markets. The Soviet people were just chomping at the bit to throw 
off communism and become a free market democratic nation.

                              {time}  1715

  What happened? That revolution occurred. Gorbachev started it in a 
very heoric manner, followed by Boris Yeltsin, who, again in a very 
heroic manner, held the effort to lead the Soviet Union away from 
communism, away from a closed central economy to free markets and 
democracies.
  Unfortunately, Mr. Speaker, here we are 8 years later, those Russian 
people who for 70 years were dominated by communism are today looking 
back and they are saying to America, where is the realization of the 
dream that you promised? Where is the success of our economy? Where are 
the freedoms from the kinds of oppression and criminal activity that we 
see all over our country today? Where is the growth of our country 
economically as a major player in the world's economy? Where is the 
economic benefit?
  Instead, many of those same people are worse off today than they were 
under communism. Senior citizens, who rely on pensions, have seen 
inflation running up in the hundreds and thousands of percentage 
increases over the last 8 years, have looked at their savings dwindle 
to nothing. The people who have relied on job growth have not seen any 
significant job increase except for a very small percentage of 
Russians, many of whom were connected to Yeltsin's inner circle, 
members of the Intelligencia, or, ironically, members who were well 
connected to the communist leadership of the previous 70 years.
  In fact, Mr. Speaker, the amount of dismay in Russia today is 
unbelievable. I think it was best summed up by a member of the Russian 
Duma who I had the pleasure of doing a press conference with at the 
height of our bombing of Kosovo, which the Russians found offensive and 
because it did not initially involve them, found the running 
contradictory to our trying to improve relations.
  He said, for 72 years, the Soviet communist party spent billions of 
dollars to try to convince the Russian people that America and its 
people were evil. But the Russian people, the 95 percent who were never 
able to join the communist party, did not believe the propaganda, did 
not believe the rhetoric coming out of Moscow that America was an evil 
nation. They rejected the plea of the communists that America was their 
long-term enemy.
  He went on to say that, in a matter of a few short months and years, 
we have managed to do what the Soviet

[[Page H8358]]

 communist party could not do in 70 years. Because of our failed 
policies, because of our situation involving Kosovo, we have, in fact, 
convinced many Russians that we are an evil nation, that we are the 
enemy of Russia, that the success that we guaranteed would occur with 
free markets and democracy has not occurred, and that we are, in fact, 
part of the reason why Russia is having the economic and political 
turmoil that exists in that country today.
  Mr. Speaker, I do not think any one of us in this country can blame 
any one person for Russia's problems, but I can tell my colleagues they 
are severe.
  It hit me 2 years ago when I was asked by the Speaker of the Russian 
Duma to attend a conference in Moscow representing the U.S. to talk 
about why more western companies were not investing in the Russian 
economy. I went over and represented America and was there joined by 
parliamentarians and ministerial leaders from 13 other western nations.
  I was accompanied by representatives of the American Chamber of 
Commerce in Russia and the U.S. Russian-American Business Council, both 
groups representing the bulk of our American companies doing business 
in Russia. And I had to be given, in a very embarrassing way, the 
following statistic:
  Since the Russians threw off communism and went to a democracy and a 
free market economy in 1991, there had been only $10 billion of western 
investment into the Russian economy. During that same period of time, 
there had been $350 billion of investment in the Chinese economy.
  Now, I am not here to say that we should not invest in China. In 
fact, I have supported the normalization of our relations with China. 
But how is it that the reward for the world's only other superpower in 
transforming from a communist nation to its free democracy would have 
such little positive impact yet the reward for a nation that retains 
communist domination would be so much greater in terms of western and 
U.S. investment? Three hundred fifty billion to China, $10 billion to 
Russia, just in the 6 years from 1991 until 1997, which was when this 
conference occurred.
  The Russian people throw up their hands and they ask the question, 
what went wrong? The members of the Duma, people who I have worked with 
for the past 5 years, friends of mine, all the factions, say to me, 
Congressman Weldon, how is it that America has guaranteed and helped 
support $20 billion of U.S. guaranteed IMF and World Bank funding, and 
actually it is much higher than that, and $1 billion a year of U.S. 
Treasury funding, taxpayer dollars, into our country and yet most, if 
not all, of that money has been siphoned off by crooks, by corrupt 
business leaders, by thugs, by friends of Boris Yeltsin, by people who 
are well connected in Moscow who took hard-earned American and western 
individuals' money through their taxes paid to their governments and 
put that money in Swiss bank accounts and U.S. real estate investments 
instead of benefiting the changes that were necessary for the Russian 
people?
  Mr. Speaker, for those people, who I agree with, who say that, well, 
we cannot blame one person, we cannot blame Bill Clinton for the fiasco 
in Russia, I would agree. But I would say this, Mr. Speaker: There 
certainly is, in my opinion, a significant amount of responsibility 
that this administration must bear for where Russia is today.
  Just 3 years ago, former Russian Ambassador Pickering, who is now the 
number-three person in the State Department, was touting around the 
world in speeches that within 3 years Russia will be a stable economy, 
it will be a world-class economy, it will solve its economic problems. 
And look at where we are today.
  Last August, a major economic collapse, devaluation of the ruble, 
long lines at banks with Russian people trying to withdraw their 
savings, instability. Now we have revelation after revelation of 
Russian bankers, Boris Yeltsin's friends, friends of the establishment, 
who siphoned off hundreds of millions of dollars, western dollars 
designed to help build homes and bridges and schools and roads and to 
reform the coal industry, gone, evaporated, benefiting a few and 
leaving the Russian people in disarray and in dismay.

  It is absolutely essential, Mr. Speaker, that this body conduct a 
thorough examination of what happened and what went wrong with our 
policies toward Russia since 1991.
  Now, I am not going to be partisan and say that we should not look 
back to the Bush administration. Because we should, because that is 
when the reforms in Russia started. But, Mr. Speaker, I can say without 
any hesitation that there is no doubt in my mind that the policies of 
this administration, starting with the president and those of the chief 
Russian advisor to the President, Strobe Talbott, have had a direct 
impact on the destabilization of Russia's economy and their political 
situation.
  Why would I make such statements, Mr. Speaker? Well, let me try to 
explain them. And in explaining them, let me look at where we have 
been, the kinds of decisions we have made, and perhaps what we should 
do in the future to change our position with Russia.
  First of all, Mr. Speaker, our policy for the past 8 years has 
largely been focused around a president-to-president relationship. 
Everything focused on Bill Clinton and Boris Yeltsin. As long as those 
two men were cooperating, were trustworthy of each other, had a common 
understanding of the working relationship, that was the most important 
thing our country focused on, reinforcing Boris Yeltsin under any 
circumstance. And that was the policy of our State Department and that 
was and still is the policy of our administration.
  When Boris Yeltsin called the Duma a bunch of rogues and crooks and 
thieves, which some of them are, what did our administration say? It 
did not disagree with Boris Yeltsin and say that we should help to 
build a more stable institution of a parliament. It remained silent. 
And those people in Russia mistook that silence as though somehow we 
were embracing Boris Yeltsin's notion that the parliament in Russia did 
not matter.
  In fact, Mr. Speaker, last year I arrived in Moscow in September, the 
day that President Clinton was leaving; and one of the most respected 
members of the Russian Duma, the former Soviet ambassador to 
Washington, speaks fluent English, current chairman of the Committee on 
International Affairs, and a pro-Western leader, the Vladimir Luhkin, 
called me into his office and he said, Curt, I have some very 
disturbing news that is running through our Duma and you need to 
confront the administration to see if this happened.
  I said, What is the matter, Vladimir? He said, We have received word 
that Boris Yeltsin and your president had discussions privately as to 
what the position of the U.S. would be if Yeltsin decided to disband 
and ignore the Duma completely, in direct violation of the Russian 
constitution. Vladimir Luhkin said to me, Curt, if that discussion took 
place, that is going to cause serious problems because our Constitution 
mandates that we have a balance of power, similar to what you have in 
America, and for your president to even engage in that kind of a 
discussion would be very destabilizing.
  I went back to the administration and I raised that issue, and I was 
assured at that time that our President never had that discussion with 
Boris Yeltsin.
  We will probably never know the answer to that, but I took the 
administration at face value. But I did believe, with no doubt in my 
mind, that all of our policy considerations for 7 years, 8 years, have 
been focused around the premise that under every circumstance we must 
make sure that Boris Yeltsin is strong. And if we follow that, a 
similar attitude prevailed in the relationship between Vice President 
Gore and Victor Chernomyrdin, the Gore-Chernomyrdin Commission, much of 
which I supported, was designed to focus on their relationship.
  Where we failed, Mr. Speaker, was to reach out to the other power 
centers in Russia, to reach out to the other factions and the Duma.
  Some of the administration officials would say to me, Well, wait a 
minute. What did you want us to do? Help the communist gain more power 
in Russia? Negotiate with the communists?
  To that I say this, Mr. Speaker: How does the administration rectify 
that statement when the communists in Russia were, at least, elected in 
free and fair elections, when the administration has put so much effort 
into a

[[Page H8359]]

government in China that is entirely communist with no free and fair 
elections?
  So if their policy is that in Russia we will reinforce Yeltsin under 
any circumstance at any cost because we were fearful of the communists, 
what in the heck is our relationship with China, which is totally 
dominated by one party communist regime, with no free and fair 
elections and many concerns about human rights and access to markets?
  So I do not buy that argument. But the policies of this 
administration, constantly reinforcing the notion that under any 
circumstance we could not let anything to happen to embarrass Boris 
Yeltsin, have contributed to where we are today and the instability in 
Russia today.
  Let us look at the facts, Mr. Speaker. We have arms control 
agreements with Russia. Those arms control agreements require that when 
there is a violation, we hold those Russian entities accountable.
  Yesterday, Mr. Speaker, on the House floor, in spite of a memo from 
the administration that the President would veto the bill, every Member 
of this body, every Republican and every Democrat who voted, voted in 
favor and against the President in favor of requiring the 
administration to impose sanctions on entities transferring 
technologies to Iran.
  That is as direct a slap in the face of the policies of this 
administration as anything I have seen in the 13 years I have been 
here. It was not a partisan issue, because every Democrat joined every 
Republican.
  Now, why would we have to resort to passing this legislation forcing 
the administration to impose sanctions when violations occur? The 
reason is, Mr. Speaker, because over the past 7 years we have seen time 
and time again violations of arms control agreements by Russia and 
China, and we have ignored them.
  Mr. Speaker, I was in Moscow the December before the presidential 
election of Boris Yeltsin to his second term. The Washington Post had 
just reported a front page story that we had caught Russia transferring 
accelerometers and gyroscopes to Iraq.

                              {time}  1730

  Mr. Speaker, accelerometers and gyroscopes are the guidance systems 
that guide missiles. They are the devices that make missiles more 
accurate, the kind of missiles that killed our 28 young troops in 
Desert Storm when Saddam fired that Scud missile into the barracks, the 
kind of guidance system that North Korea wants for their missiles aimed 
at America and aimed at South Korea. The Washington Post reported in a 
front page story, above the fold, we have caught the Russian entities 
illegally transferring this technology.
  I was in Ambassador Pickering's office in January of that year and I 
said, ``Mr. Ambassador, I'm sure you saw the Washington Post article. 
What was the response of the Russians when you asked them to explain 
what we found them doing?''
  And he said, ``Congressman, I haven't asked the Russians yet.''
  I said, ``Why would you not ask them? The Washington Post reported 
the story in December and they reported this transfer took place 6 
months beforehand. Why wouldn't you ask the Russians? You're our 
representative here.''
  He said, ``Mr. Congressman, that request has got to come from the 
White House.''
  So I came back to Washington and I wrote to President Clinton. I 
said, ``Mr. President, you must have read the Washington Post story. 
This would be a gross violation of an arms control agreement, the 
Missile Technology Control Regime. If this occurred, what are you 
doing? And have you asked the Russians yet to explain what we have 
found?''
  The President wrote me a three-page response in April of that year. 
``Dear Congressman Weldon,'' to paraphrase, ``if what the Post said is 
true, you're right, it would be a gross violation of that treaty, and I 
assure you we will take aggressive steps to implement the requirements 
of that treaty.''
  But the President went on to say, ``We have no evidence, we have no 
proof that it occurred.''
  Mr. Speaker, here is the proof. A Soviet accelerometer and a Soviet 
gyroscope, markings in Russian on both of them. These were clipped from 
Russian SSN-19 missiles that were on their submarines aimed at American 
cities. Evidently, as Russia decommissioned some of these nuclear 
devices and ICBMs, someone clipped off the guidance systems which only 
three countries manufacture, the U.S., Russia and China, although some 
European countries, but in terms of our relationship, the U.S., Russia 
and China, very expensive devices. Iran, Iraq, Syria, Libya, North 
Korea cannot build this quality of device. This is the proof, Mr. 
Speaker. They are real. And it was not just one time and it was not 
just one set.
  Mr. Speaker, we have in America over 100 sets of these devices. They 
are the ones we caught. And it did not happen once. It did not happen 
twice. We caught the Russians transferring these devices to Iraq three 
times. What did the administration do in spite of President Clinton's 
letter? We did nothing. When I questioned the administration, why did 
we not do anything when the President told me that we were going to 
hold Russian entities accountable? The response was very quietly, 
``Well, Congressman, we got assurances from Russia that they would 
conduct a criminal investigation and they would go after anyone they 
caught who had done this.'' That criminal investigation ended that 
year, Mr. Speaker. There were no sanctions filed. The devices were 
transferred, perhaps thousands of them, and these guidance systems then 
can be placed into missiles or redesigned or reverse engineered so 
Iran, Iraq, Syria, Libya and North Korea have better ways to aim their 
missiles with accuracy at American cities and American troops.
  Now, why would we not impose sanctions that are required, Mr. 
Speaker, especially if this administration claims that arms control 
agreements are so important? In fact, Mr. Speaker, I did a floor speech 
14 months ago, and people can get this from the Congressional Record at 
that time where I documented 37 violations of arms control agreements 
like this one by the Russians and the Chinese since 1991, since the 
President took office. In those 37 violations, we caught the Russians 
and the Chinese sending these kinds of devices to Iraq, sending other 
technology to Iran, sending chemical and biological and nuclear 
technology to Syria, Libya, Iran, Iraq, China, North Korea, Pakistan 
and India, 37 times. That was not my investigation. That research work 
was done by the Congressional Research Service, an agency that serves 
Republicans and Democrats, has no partisan nature to it, they simply do 
the work that we ask them to do. Their study documented 37 violations. 
How many times did we impose sanctions? Twice. The two times we imposed 
sanctions were when we caught China transferring M-11 missiles and ring 
magnets to Pakistan and then we waived the sanctions after 2 years.
  Now, why would we not impose the required sanctions when we caught 
the Russian entities transferring technology? It gets back to the 
policy of this administration toward Russia. Boris Yeltsin was running 
for election as the President of Russia. We did not want to embarrass 
Boris Yeltsin. Every step of the way, the President gave Boris Yeltsin 
the benefit of the doubt. ``We won't embarrass you, Mr. President, we 
won't do anything to undermine your leadership in Russia, even if 
you're allowing things to occur that we know are direct violations of 
these agreements.''
  In fact, Mr. Speaker, in a book that was written by Washington Times 
defense writer Bill Gertz called ``Betrayal'' which I encourage every 
one of our colleagues to read, in the back of that book is an 
irrefutable document. In the back of Bill Gertz' book ``Betrayal'' is 
the presidential memo cabled from Bill Clinton to Boris Yeltsin in the 
year he was running for reelection that basically said this and people 
can read it for themselves: ``Mr. President, I'll make sure that we 
don't do anything to undermine your chances for reelection. I will make 
sure that we don't do anything to embarrass you as you embark upon your 
effort to be reelected.''
  Mr. Speaker, that has been our policy for 7 years, not just during 
the election year. We have been so enamored with the relationship 
between Bill Clinton and Boris Yeltsin that even when

[[Page H8360]]

Yeltsin was not dealing with the problems that we knew were there, we 
ignored them, we pretended it did not happen, we made up excuses.
  The same policy, Mr. Speaker, applied to a Navy lieutenant in what in 
my mind is the most outrageous story I have heard in the 13 years I 
have been in Congress. A 16-year career Navy officer by the name of 
Lieutenant Jack Daly, in our naval intelligence service, was assigned 
duty up in the Seattle area working with our Canadian military friends 
to monitor Russian trawlers that we knew were spying on our nuclear 
submarine fleet. Lieutenant Daly and his Canadian counterpart would fly 
helicopter missions and take photographs of these Russian trawlers that 
we knew were spying on our ships. We knew that because we had seen 
evidence in the trawlers of sonobuoys, devices that are used to put out 
in the water to monitor the routes of submarines. And we saw these 
ships coming into port with no cargo and leaving with no cargo. We knew 
they were spy ships for the Russians.
  Mr. Speaker, Lieutenant Daly and his Canadian counterpart who were 
assigned to intelligence operations made a mistake. They did their job. 
They were flying in a helicopter, taking photographs of a Russian ship 
called the Kapitan Man. They were photographing the ship because it was 
a Russian spy ship spying on our submarines. They were taking 
photographs of the ship from their helicopter. The Russian ship saw the 
helicopter, and they activated a laser generator, aimed the laser at 
the helicopter and lasered the eyes of both of the individuals, 
Lieutenant Daly and his Canadian colleague.
  They knew immediately they had some problem. They did not know what 
it was. They landed, they went to the medical site at their base there, 
and the doctors examined them and said, ``You've had some kind of 
damage.'' They flew them down to our laser specialist in Texas at our 
military medical facility and they confirmed that he had been lasered 
by a laser that is not normally available anyplace that ordinary people 
can access. They were told that the laser came from that Russian ship.
  Now, Mr. Speaker when they came back to shore from the helicopter and 
reported to the DOD command officers that they think something had 
happened, DOD immediately wanted to go on board the ship, to board it, 
to see whether or not they had been lasered. Bill Gertz in his book, 
Mr. Speaker, for every Member of this body to know and to read and to 
document, for the first time reveals the classified cables between the 
State Department and the Department of Defense and our embassy in 
Moscow and the Russians. An American was harmed, doing his job, and yet 
we find evidence that there were discussions by the man who is 
currently our ambassador in Moscow, Jim Collins, about how we have to 
control this situation, we do not want to offend Russia, we do not want 
to embarrass Boris Yeltsin. So the military was told, ``Don't board the 
ship. Don't board the Russian trawler. Don't look for that device.''

  And the military said, ``Wait a minute. We've had a career officer 
harmed. We want to go on board the ship.'' ``Then fine,'' the State 
Department said, ``you can only board the public areas of the vessel.''
  Mr. Speaker, how stupid are we? We are going to board a Russian 
trawler that we know is a spy ship, we are going to look for a laser 
generator, and we are telling the inspectors that they cannot go into 
the nonpublic areas? Where do we think the Russians are going to put 
the laser generator, on the front deck? I mean, cut me a break. Are we 
that stupid or naive?
  No, Mr. Speaker, the point was we wanted to give Russia an out. We 
knew what happened. Again, the policy, ``Don't do anything to embarrass 
Boris Yeltsin. Ignore the reality. Pretend it did not occur.'' That is 
what we did. But the worst part about that, Mr. Speaker, is Lieutenant 
Daly's career was ruined. He had had a stellar career up until that 
point in time, he was bypassed for two promotions, his superior officer 
told him this, and I want to quote what he said to him. He said, 
``Jack, you don't know the pressure I'm under to get rid of your 
case.'' Amazing, Mr. Speaker, in America, that a 16-year career naval 
intelligence officer who is harmed by a Russian laser generator, only 
trying to get the satisfaction of his country defending him, would be 
told by his superior officer, ``Jack, you don't know the pressure I'm 
under to get rid of this case.''
  Finally, because of the pressure of Norm Dicks, a good friend on the 
Democrat side, and Members on this side, including myself who have 
raised a stink on this issue, who have told Secretary Cohen and the 
Navy that we will not tolerate this activity, just last week the 
administration announced they are now going to re-review whether or not 
Lieutenant Daly has been mistreated in his effort to secure a promotion 
to the next rank in the service, another indication of this overriding 
policy of reinforcing Yeltsin and that relationship under any 
circumstances.
  But let us get to the real problem, and that deals with the IMF 
funding. Mr. Speaker, we had a golden opportunity. The reformers took 
over and when Yeltsin first started out, he was a Godsend. He was 
standing up, reinforcing Gorbachev, standing on top of those tanks and 
defying the Communists to take him out as Russia was moving toward 
democracy and free markets. All of us, and me included, stood behind 
him and said, ``We want you to succeed.'' But we got mixed up along the 
way, Mr. Speaker. We got so enamored with Yeltsin that when he did 
stupid things, instead of saying, ``Mr. President, these people that 
you're putting in charge of these state enterprises, these 
multibillion-dollar enterprises that are going to become your banking 
system, these people that are going to run your huge state enterprises, 
are not qualified. You're picking them on the basis of friendship and 
ties as opposed to what is best for your country.'' We set in motion 
the beginning, in my opinion, of the economic turmoil that Russia is 
experiencing today.
  Mr. Speaker, all along the way, when we saw Yeltsin doing stupid 
things, when we saw the oligarchs, the seven oligarchs, most of whom 
were no more qualified to be the manager of a big bank than I am in 
Russia, we stood back and we did not engage, because we did not want to 
offend Boris Yeltsin, we did not want to offend the group of 
intelligentsia and the oligarchy that was running Russia, because we 
felt that was our solution.
  For the first few years it worked, when Yeltsin was strong and 
Clinton was strong, the policy worked and our countries were making 
some progress but we were not willing to be candid. Where are we today? 
Yeltsin's popularity is less than 5 percent, our own President has his 
own problems, but in Russia, what are the Russian people saying? 
``America, you're not our friend. You saw these things occurring and 
you did nothing.''

                              {time}  1745

  You knew what was going on. How can the Russian people respect us 
today, Mr. Speaker? They saw what was happening. How can the members of 
the elected Duma respect us? The only time we came to them was when 
after the fact and all the economic problems occurred, and the IMF was 
very weary about putting more money into Russia. We said to the Duma, 
``You've got to pass tough legislation. You've got to reform your 
finance system. You've got to collect more taxes. You've got to make 
your people pay electric bills and water bills, which they never paid 
before under communism. You've got to get tough with your people or 
we're not going to give you more money.''
  And the Duma basically thumbed their nose at the IMF, they thumbed 
their nose at Yeltsin, and they thumbed their nose at America. Why? 
Because the Duma deputy said, and I think rightfully so, ``Wait a 
minute. You now come to us in 1998 and 1999, and you ask us to pass 
tough reforms, but you did not involve us when all of this honey was 
being given out. You didn't involve us when you were sending Boris 
Yeltsin's friends the billions of dollars of IMF and World Bank money, 
when you were sending everything through central Moscow siphoned off by 
Yeltsin's crony friends instead of helping the Russian people, and now 
you want us to make the tough decisions. You want us to go to our 
constituents who see the turmoil in our country, and you want us to do 
the right thing.''

[[Page H8361]]

  Is there any wonder the Duma said, ``No way''?
  Mr. Speaker, our policies failed. We failed to help Russia establish 
a true democracy, a strong president, and Yeltsin could have been for 
the long term a strong President, ended up not being a strong 
President. And a strong parliament, one that could work in tandem, as 
we have in this country, a check and a balance.
  Instead, we put all of our eggs into Yeltsin's basket, and we ended 
up with a basket of broken eggs, and now we are being asked to pay the 
price, and it is not small chicken feed, Mr. Speaker. Twenty billion 
dollars at a minimum into Russia's economy.
  Is there any benefit to the Russian people? I would say no.
  Three hundred million dollars for the coal industry to help Russian 
coal miners; where did that money go? It ended up lining somebody's 
pocket, building some residences on the French Riviera, buying real 
estate property in America, and leaving the Russian people holding the 
bag to pay all that money back.
  And where was America? Where was America telling the Russians the 
tough things they had to hear?
  When we saw the Russians transferring technology, we did not have to 
embarrass Boris Yeltsin. We simply had to offer him our help to work 
with him to identify the people selling this technology and to tell him 
we are going to take efforts to go after those companies. We do that in 
America all the time. If a company in America is illegally selling 
products to nations that are unstable, we make no hesitation about 
punishing them. I do not care if they are in my district or not. I want 
them punished. The same thing should have applied in Russia. If we had 
entities that we knew were violating arms control agreements, we should 
have punished them, and we should have been consistent, and we should 
have been fair, and we should have showed them that our goal was not to 
embarrass Yeltsin, it was not to embarrass Russia. It was to stop 
proliferation to nations like Iran, Iraq, Syria, Libya, and North 
Korea. That is the problem.
  And when we saw the IMF money being drained away, we should have told 
President Yeltsin that we are not going to tolerate this, we are not 
going to stand for this. But what did we do? We turned our head. We 
turned our cheek.
  There is a report running in the media that Vice President Gore was 
given at least one major CIA brief that linked Chernomyrdin directly to 
corruption in Russia. The Vice President is a good friend, was a good 
friend of Chernomyrdin, wrote across that document: Bull, and you 
complete the rest, and sent it back to the CIA. He did not want to hear 
it; he did not want to hear the facts.
  We wonder why Russia is an economic and political basket case today, 
Mr. Speaker. Our policies encouraged the kind of disarray that we are 
currently seeing in Russia's economy.
  There is an alternative way, Mr. Speaker, and as we begin hearings on 
who lost Russia, as we saw the New York Times 3 weeks ago on a front-
page magazine story on who lost Russia and then followed that up with a 
Washington Post story this past weekend, and as the Congress begins to 
hold hearings on this whole issue, and by the way, Mr. Speaker, I think 
that Congress also has to bear some of the responsibility, and that 
includes my own party, and as I said before, some of these policies 
started under President Bush, so I am not saying it is all partisan, 
but I can tell you this President and his administration have 
exacerbated the problem unbelievably.
  But how do we solve it? Well, there are some solutions.
  Mr. Speaker, I am Russia's toughest critic, but I am Russia's best 
friend. I have been there 19 times. I know the Russian people; I know 
their leaders. When I saw the possibility that this Congress would not 
support more IMF funding and that Russia perhaps could have a meltdown, 
complete meltdown, with a major nuclear force still in place, more 
destabilized today than any point in time under communism because under 
communism they had discipline, they had the rule of law, they did not 
have the corruption they have today. Today they have corruption, they 
do not have the rule of law, and they have instability.
  So I was concerned that I needed to get our colleagues to support the 
President even though I disagree with the positions he was taking in 
terms of IMF funding. So I went to Moscow and arrived the day the 
President left a year ago, and I took with me, Mr. Speaker, a set of 
eight principles because I knew the Duma was opposed to IMF funding 
just as the Congress was.
  Now you might say why would the Russian Duma be against us putting 
another $4 billion in the Russian economy. Well, why? Because the Duma 
knew Yeltsin's cronies and friends, and they were going to be left to 
hold the bag to pay the bill, and they were going to be asked to pass 
the reforms and had no say in where the money was going or how it was 
being spent. That is why they opposed IMF funding.
  So I said to my Duma friends, ``Here are eight principles. Look at 
these eight principles. If you can agree with these principles, I will 
go back to Washington, to my leadership in Congress, and I'll see if 
they'll agree that you pass these principles in the Duma in the 
morning,'' since it was an 8-hour time difference, ``and we'll pass 
these eight principles in the Congress in the afternoon on the same 
day. These principles will guide all funding going into your country 
from the west, international funding, World Bank funding, funding from 
the IMF and U.S. funding, a billion dollars a year going to Russia.''
  What are the eight principles? Here they are, Mr. Speaker, in 
summary. I will put the full eight principles in the Congressional 
Record.
  Number one, Mr. Speaker, that we establish a joint U.S.-Russian 
legislative oversight commission of elected officials to monitor every 
dime of money going into Russia, not to say where it should go; that is 
up to administrations; but to monitor where it is going. Today there is 
no such capability, and much of the money is being siphoned off 
illegally, and the Russian Duma has no ability to monitor what Yeltsin 
does with the money or his people. So establish a legislative oversight 
commission, Democrats and Republicans joining with all the factions of 
the Duma and the Federation Council and monitor where the money is 
going.
  Number two, to focus our resources on programs like housing mortgages 
that benefit and create a Russian middle class. If you look at 
America's economy, our success economically is because when housing 
starts are up, our economy is strong, and our housing starts are up 
when mortgage rates are low. Russia has no mortgage system. Three years 
ago, Charles Taylor and I went to Moscow and we said to the Russian 
leaders, ``Work with us on a private mortgage program like our Freddie 
Mac and Fannie Mae, and if you agree to our tight discipline, we will 
go to the Congress and try to get some seed money.'' The Duma deputies 
agreed.
  Here is the document we produced, Mr. Speaker, 2 years ago: Housing 
For Our People, a picture of the Capitol Building and the Duma. You 
know there is no White House in either picture? There is no 
Washington White House, and there is no White House where President 
Yeltsin works. It is the two capital buildings. It is where the two 
parliaments work, the parliaments of the Duma wanting to establish a 
private, western style housing mortgage financing system.

  Our goal was in this second principle to say that programs that 
encourage a middle class are what we should be providing funds for.
  Number three, that we should agree that western resources should be 
made available to reform-minded regional governments. Russia is a large 
Nation, over 60 States and oblasts, and many of the regions are doing 
good things. They are privatizing their property, they are collecting 
more taxes, they are having people pay for their utilities. But because 
all the money went through Yeltsin in Moscow, those regions were not 
being recognized and rewarded. The money was being siphoned off to 
Yeltsin's cronies, and the regions who are reforming were standing 
there saying, ``We're doing the things you told us, America; when are 
you going to help us?'' And the help never came, and our policy was let 
us focus on regions where they are doing good things and help them 
continue to do good things.
  All around Russia, out in Siberia, Vladivostok, St. Petersburg, 
Nizhni-

[[Page H8362]]

novgorod, Samara, all around the country, the fourth principal: Deny 
Moscow-based institutions any additional funds where we know they have 
abused IMF World Bank and U.S. dollars. If we know a bank is corrupt, 
hard and fast rule, they get no more money. And in fact let us go after 
those perpetrators and try to collect the money they abused.
  Number five, reform International Monetary Fund. This was a 
recommendation that I got after talking to George Soros in his office 
in New York to convene a blue ribbon task force that the IMF would then 
listen to that would tell it how to be responsive and make reforms to 
be more accountable to emerging economies like Russia.
  Number six, and boy is this significant to put the horse in front of 
the cart. Reforms would precede and not follow. Resources. No reforms, 
no money. You make the reforms you have asked for, and then we will 
provide the resources you need, but no money until you do the reforms.
  Number seven, have a 90-day plan to establish a relationship between 
CEOs of American companies and Russian enterprises, a one-on-one 
relationship so they can learn how we develop profits in America to 
make their companies more profitable in Russia, to learn how to 
motivate workers, how to manage their costs.
  And the last item: To bring 15,000 young Russian students to America, 
undergraduate and graduate, have them attend our business, economic and 
finance schools all across the country, pay their way over, and get our 
schools to give them an education with the understanding they must go 
back to Russia to live. They cannot stay in America, in effect creating 
a new generation, the next generation of Russia's free market leaders.
  Mr. Speaker, the Duma agreed to all eight principles, all eight 
principles. They said, ``We'll do the reforms if you tell us that 
you're going to let us march to where the money's gone. If you let us 
have a say, if the regions are recognized, we'll do it,'' and they 
passed it.
  It came back to Washington, and I went to Speaker Gingrich. Speaker 
Gingrich said, ``Well, Curt, I don't know whether we want to do this, 
that is the administration's prerogative. Let me talk to the White 
House.''
  The White House said, ``We don't need those guidelines. We don't need 
those principles.
  The eight principles in their entirety are as follows:

 Joint Statement of Principles Governing Western and IFI Assistance to 
                                 Russia

              (Draft Prepared by Congressman Curt Weldon)

     (1) Focus Western resources on programs--like housing--that 
         will develop a Russian middle class
       Funds flowing from Western governments and International 
     Financial Institutions (IFI) should be directed to segments 
     of the Russian economy where they will help develop a broad 
     Russia middle class, who will in turn have an economic stake 
     in democratic institutions and greater economic reform. One 
     such sector is housing, where there is an overwhelming need 
     for greater investment and the Russian people face tremendous 
     shortages. A major impediment to a robust housing market is 
     that all but the most wealthy Russians lack a mechanism to 
     finance the purchase of a home. Development of a mortgage 
     finance system, with longer term loans (20 to 30 years) and 
     reasonable interest rates, would greatly strengthen the 
     Russian economy, increasing employment, tax revenues, and 
     economic and political stability.
     (2) Make Western resources available to reform minded 
         regional governments
       Some significant portion of the funds from Western 
     governments and IFIs should flow from the Russian central 
     government to the Oblasts and Krais, which are the source of 
     most of the economic reforms occurring in Russia. Tax reform, 
     privatization, land reform are all areas where the regions 
     have accomplished far more than the central government in 
     Moscow. In determining the flow of these resources to the 
     regions, priority should be given to those regions that have 
     and are implementing the strongest reform programs. The 
     criteria for evaluating the effectiveness of regional 
     economic reform programs should be clearly identified, which 
     will assure all regions that they are being treated equitably 
     and provide the necessary incentives for regions to implement 
     viable economic reform agendas.
     (3) Deny corrupt Moscow-based financial institutions access 
         to Western resources
       Greater steps must be taken to ensure accountability for 
     previous and future resources provided by Western governments 
     and IFIs. The simple notion that any bank, government agency, 
     regional government, or NGO that cannot account for 
     previously supplied funding should be ineligible for future 
     funds must be strictly enforced. This will have the practical 
     effect of preventing the large, corrupt Moscow based banks 
     from accessing future IFI resources.
     (4) Establish a joint Russian--U.S. legislative oversight 
         commission to monitor Western resources
       Opposition to further assistance from IFIs run strong in 
     both the U.S. Congress and the Russian Duma. One way to 
     counter this tendency and promote a stronger Duma is to 
     create a joint Russian-U.S. Legislative Oversight Commission, 
     composed of Members of Congress and Duma Deputies and staffed 
     by experts in both legislatures, to monitor the use of 
     Western government and IFI funding to ensure that the 
     designated end recipient, not only receives the resources but 
     uses them for the intended purposes.
     (5) Reform the International Monetary Fund (IMF)
       Both the Congress and Duma should urge the International 
     Monetary Fund to establish an International Blue Ribbon 
     Commission composed of the most prominent financial experts 
     to make recommendations for reforming the IMF to achieve 
     greater transparency and more effective programs with less 
     financial risk. If the IMF is unwilling to create such a 
     commission, then the Congress and Duma should consider 
     creating its own commission of experts and then press the IMF 
     to implement the recommendations.
     (6) Put the horse in front of the cart: make reforms 
         precede--not follow--resources
       In all too many cases, resources from IFIs come first and 
     promised reforms come much later, if at all. It is time to 
     make reform precede--not follow--important economic reforms 
     at the national and regional levels. The Yeltsin 
     administration, the Duma, and the financial oligarches have 
     every incentive to promise reform prior to receiving 
     financial assistance, but they have very little incentive to 
     make good on the promises of reform, which in the short term 
     are often difficult for the government to implement and 
     painful for the Russian citizens to endure.
     (7) Jointly develop a 90 Day Action Plan to reform de facto 
         bankrupt industrial giants
       Working the Congress and the Duma, the Administrations 
     should empanel a group of international financial experts and 
     give them 90 days to develop a comprehensive program to 
     reform, privatize, or shutter the industrial behemoths that 
     are essentially bankrupt and uncompetitive in a market 
     economy but are kept limping along by subsidies because of 
     local political imperatives and the fact that in many areas 
     they represent the only source of employment. Many formerly 
     state owned enterprises (for example--food processing plants, 
     breweries, and confectionary enterprises) have made 
     successful transitions which make products without government 
     subsidies that compete with imported items--clear evidence 
     that Russian enterprises can be competitive.
     (8) Western government and IFI resources should go to 
         civilian agencies and programs--not to prop up the 
         Russian military industrial complex
       Nothing could do more to endanger U.S.-Russian cooperation, 
     especially in the eyes of the Republican Congress, than using 
     funding from Western governments and IFIs to prop up the 
     ailing military and military-industrial complex. Both the 
     Administrations and the legislatures need to make sure that 
     proper controls are put in place to prevent such an 
     eventuality.
                                  ____


                               State Duma

       Commission of the State Duma for Monitoring of the 
     Preparation and Realization of the Joint Program of the State 
     Duma of the Federal Assembly of the Russian Federation and 
     the Congress of the United States of America on Housing 
     Construction in Russia ``A Home for Our Family.''

     To the Deputies of the State Duma.
     Federal Assembly.
     Russian Federation.
     From SD RF Deputy V.E. Tsoy.
     From Member of the House of Representatives of the U.S. 
         Congress Curt Weldon.

       Dear Colleagues: The complicated socio-economic and 
     political situation in which the population of Russia finds 
     itself, allows us to address you with the following 
     suggestions:
       1. Concentrate Western resources on programs such as 
     mortgage credit and housing construction, which will enable 
     the development of a middle class in Russia.
       Funds flowing from the U.S.A. and international financial 
     institutions should be directed at those segments of the 
     Russian economy which will enable broad development of a 
     Russian middle class, which, in its turn, will have an 
     economic interest in the existence of democratic institutions 
     and the realization of more carefully thought out economic 
     reforms in Russia. One such sector is housing, where larger 
     investment is needed and where the population is confronted 
     with an absence of additional sources of financing. The main 
     obstacle in the path to a healthy housing market is that, for 
     all but the most well-to-do Russians, there is no mechanism 
     for financing the purchase of a home. Creation of a mortgage 
     finance system with longer term loans (20-30 years) and 
     reasonable interest rates would considerably

[[Page H8363]]

     strengthen the Russian economy--increasing employment, the 
     growth of tax receipts for the budget, and economic and 
     political stabilization.
       2. Secure access to U.S. financial resources and the 
     resources of international financial institutions for 
     subdivisions of the Russian Federation that are disposed to 
     carrying out reforms and which have a high ratio of 
     investment attractiveness that meets the demands of the 
     leading international financial credit institutions, or has 
     the potential to meet them in the near future.
       A significant part of the financial resources coming from 
     the U.S.A. and international financial institutions should be 
     directed to those Russian oblasts and krais in which real 
     economic reforms are already occurring. Tax reform, 
     privatizations, and land reform are all areas where the 
     regions have accomplished far more than the central 
     government in Moscow. In determining the distribution of 
     these funds to the regions, priority should be given to those 
     in which there are more serious programs of reform. 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.
       3. After auditing, stop the financing of those projects in 
     which serious financial infractions were committed during 
     their realization.
       More decisive measures should be taken to ensure 
     accountability for previously allocated funds provided by the 
     U.S.A. and international financial institutions. Strict 
     fulfillment of financing, agreements by banks, government 
     organizations, regional governments, or non-governmental 
     organizations that have not been able to account for 
     previously provided financial funds should be required. In 
     the future such establishments, should not receive financial 
     resources. The return of allocated funds from unscrupulous 
     matters needs to be achieved through joint efforts and these 
     funds directed toward the realization of specific programs 
     approved by the State Duma of the Russian Federation and the 
     Federation Council. This will have the practical effect of 
     preventing future access to Western governments' and 
     international financial institutions' funds by large and 
     unreliable banks and other organizations.
       4. Create a joint Russian-American oversight commission to 
     monitor expenditures allocated by the U.S.A. and by the 
     international financial structures of Russia make up of 8 
     members of the U.S. Congress and 8 deputies of the State Duma 
     of the RF, with 2 co-chairs.
       The negative feelings to further aid from the international 
     financial institutions are intensifying in both the U.S. 
     Congress and the State Duma of the RF. One way to counter the 
     tendency and strengthen the authority of the State Duma and 
     the U.S. Congress is to create a joint Russian-American 
     legislative commission on oversight for verification of funds 
     flowing from the U.S.A. and international financial 
     institutions. Ensuring the funds are used as intended by the 
     end consumer is under the control of the aforementioned 
     commission.
       5. Reform of the International Monetary Fund.
       The U.S. Congress and the State Duma of the RF should 
     request that the International Monetary Fund create an 
     International Expert Commission, composed of the most 
     prominent financial experts, to draw up recommendations for 
     reforming the IMF. These should be directed toward achieving 
     more transparency in its structures and increasing the 
     effectiveness of programs while decreasing financial risk. If 
     the IMF does not want to create such a commission, then 
     the U.S. Congress and the State Duma of the Russian 
     Federation should think about creating a bilateral 
     commission of experts for subsequent work with the IMF on 
     its realization.
       6. The financing of different reform programs in the 
     Russian economy will be conducted only after the passing of a 
     Federal law on a foreign borrowing program taking into 
     account the position of the regions where these programs will 
     be realized.
       In the majority of cases, the funds from international 
     financial institutions flow long before the promised reforms 
     are advanced, if they are advanced at all. It's time to make 
     it so that reforms precede and not follow the financing of 
     important economic reforms at the federal and regional 
     levels. The administration of RF President B.N. Yeltsin and 
     the RF Government issued guarantees while not controlling the 
     fulfillment of these obligations that have heavy consequences 
     for the population of Russia.
       7. In the course of 180 days a bilateral working group of 
     members of the U.S. Congress and the State Duma of the 
     Russian Federation will prepare a plan according to an expert 
     evaluation of further operations on the issue of the bankrupt 
     industrial enterprises of the Russian Federation.
       The U.S. Congress, the State Duma, and the administrations 
     of both countries should create a working group of 
     international financial experts and give them 180 days to 
     work out a comprehensive program to reform, privatize or 
     shutter industrial enterprises which, in practice, are 
     bankrupt and uncompetitive in market economy conditions. They 
     continue to remain afloat due to subsidies connected with 
     local political imperatives and the fact that, in many 
     regions, they are the only sources of employment. Many former 
     state enterprises (light processing industries, food, etc.) 
     have made successful transitions and produce goods that 
     compete with imported products without government subsidies. 
     This is clear evidence that Russian enterprises can be 
     competitive. That notwithstanding, the expert commission 
     should prohibit financing of military-industrial complex 
     enterprises from investment funds which have been attracted 
     to accomplish social programs for the Russian population.
       8. Development of an initiative for the organization of 
     commercial and financial education.
       In accordance with intergovernment agreements, 15,000 
     Russian students and graduate students should be enrolled in 
     American colleges and universities in a regular course of 
     study. All Russian students who take part in this program 
     will return to Russian upon completion of their educational 
     program. The goal of such a program is to ensure a qualified 
     corps of specialists in Russia.
       Respected colleagues, we ask you, after becoming acquainted 
     with our suggestions, to express your opinions.
           Sincerely,
     V. Tsoy,
       Chair of the Commission, Deputy of the State Duma, Russian 
     Federation.
     C. Weldon,
       Member of the House of Representatives, U.S. Congress.

                 [DISCUSSION DRAFT ON RUSSIAN HOUSING]

       To propose principles governing the provision of 
     International Monetary fund assistance to Russia.

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Russian Economic Restoration 
     and Justice Act of 1999''.

     SEC. 2. PRINCIPLES GOVERNING INTERNATIONAL MONETARY FUND 
                   ASSISTANCE TO RUSSIA.

       The Bretton Woods Agreements Act (22 U.S.C. 286-286mm) is 
     amended by adding at the end the following:

     ``SEC. 61. PRINCIPLES GOVERNING INTERNATIONAL MONETARY FUND 
                   ASSISTANCE TO RUSSIA.

       ``(a) Conditions and Limitations of Assistance.--The 
     Secretary of the Treasury shall instruct the United States 
     Executive Director at the Fund to use the voice and vote of 
     the United States to urge the Fund--
       ``(1) to not provide any assistance to the government of 
     the Russian Federation or of any political subdivision of the 
     Russian Federation or to any other entity in the Russian 
     Federation, until there is in effect a Russian federal law 
     that implements the economic reforms described in subsection 
     (b); and
       ``(2) to provide assistance to the Russian Federation or a 
     political subdivision of the Russian Federation only to aid 
     the implementation of such reforms.
       ``(b) Economic Reforms.--The economic reforms described in 
     this subsection are the following:
       ``(1) Land reform, including private ownership of land.
       ``(2) Further privatization of state-owned industrial 
     enterprises.
       ``(3) Tax reform, including increased collection of tax 
     obligations.
       ``(4) Development of effective commercial law, including 
     the ability of individuals to seek enforcement of contracts 
     by an effective judicial system.
       ``(5) Establishment of residential mortgage financing 
     system for middle class individuals residing in the Russian 
     Federation.
       ``(6) The development of criteria for evaluating the 
     effectiveness of regional economic reform programs in the 
     Russian Federation, and the use of such criteria to assure 
     that Western resources are provided to the political 
     subdivisions of the Russian Federation on an equitable basis, 
     taking into account the necessity to provide incentives for 
     political subdivisions to implement viable economic reforms 
     and to reward those that have made progress in implementing 
     such reforms.
       ``(7) The development of steps to make the recipients of 
     Western resources in the Russian Federation accountable for 
     the use of such resources.''

     SEC. 3. RUSSIAN-AMERICAN FINANCIAL OVERSIGHT COMMISSION.

       (a) In General.--The Speaker of the House of 
     Representatives and the President of the Senate shall seek to 
     enter into negotiations with the State Duma and the 
     Federation Council of the Russian Federation for the 
     establishment of a commission which would--
       (1) be composed of 8 Members of the United States Congress 
     and a total of 8 Deputies from the State Duma and Federation 
     Council;
       (2) monitor expenditures of the funds provided to the 
     government of the Russian Federation or a political 
     subdivision of the Russian Federation by the United States or 
     the international community, for the purpose of evaluating 
     that the funds are used for only for the purposes for which 
     provided; and
       (3) create a working group of financial experts tasked with 
     developing a comprehensive program to reform, privatize, or 
     close industrial enterprises in the Russian Federation that 
     are bankrupt and are (or would be) not competitive under 
     conditions of a market economy without significant government 
     financial support.
       (b) Membership.--On the successful conclusion of 
     negotiations under subsection (a), the Speaker of the House 
     of Representatives and the President of the Senate are 
     jointly authorized to appoint 8 Members of Congress to

[[Page H8364]]

     the commission established pursuant subsection (a).

     SEC. 4. SENSE OF THE CONGRESS ON ESTABLISHMENT OF JOINT 
                   UNITED STATES-RUSSIAN FINANCIAL EDUCATION 
                   PROGRAM.

       It is the sense of the Congress that the United States and 
     the government of the Russian Federation should conclude an 
     agreement under which students in the Russian Federation 
     would enroll in colleges and universities in the United 
     States at undergraduate and graduate levels for the purpose 
     of developing a network of financial specialists in the 
     Russian Federation, and students so enrolled would, on 
     completion of their studies in the United States, be required 
     to return to the Russian Federation and work for the federal 
     or a regional government in Russia.

     SEC. 5. IMF REFORM COMMISSION.

       The Secretary of the Treasury shall instruct the United 
     States Executive Director at the Fund to use the voice and 
     vote of the United States to urge the Fund to create a 
     commission, composed of prominent international financial 
     experts, for the purpose of drawing up recommendations for 
     reforming the Fund, with a view to achieving more 
     transparency in the structures of the Fund and increasing the 
     effectiveness of Fund programs while decreasing financial 
     risk.

     SEC. 6. RUSSIAN HOUSING LOAN PROGRAM.

       (a) Loan Program.--There is hereby established a pilot 
     housing loan program for the people of Russia, with such 
     funds as may be made available, as the means by which the 
     average Russian citizen may attain affordable home ownership.
       (b) Restrictions.--None of the funds under this section may 
     be made available--
       (1) for transfer to the Government of Russia; or
       (2) for the purposes of providing Russian military housing.
       (c) Establishment of Administering Corporation.--Funds 
     appropriated under this section shall be administered in the 
     following manner:
       (1) Such sums as may be made available for this pilot 
     Russian housing loan program shall be administered directly 
     through a nonprofit corporation (hereinafter the 
     ``Corporation''), consisting of a 12-member Board of 
     Directors, the members of which shall be:
       (A) Former President George Bush or his designee.
       (B) Former President Jimmy Carter or his designee.
       (C) Two members appointed by the Speaker of the United 
     States House of Representatives.
       (D) One member appointed by the minority leader of the 
     United States House of Representatives.
       (E) Two members appointed by the majority leader of the 
     United States Senate.
       (F) One member appointed by the minority leader of the 
     United States Senate.
       (G) Two members appointed by the Chairman of the Russian 
     State Duma.
       (H) Two members appointed by the Chairman of the Russian 
     Federation Council.
       (2) A Chairman of the Board of Directors shall be selected 
     from among the 12 board members. The chairman shall serve a 
     single 2-year term. The entire Board of Directors shall serve 
     a 2-year term and have the authority to select other officers 
     and employees to carry out the purposes of the Fund and the 
     program.
       (d) Loan Size and Type.--Since it is the intent of the 
     housing loan program to provide loans for the average middle-
     income potential Russian home buyer, loans shall range 
     between the equivalent of $10,000 to $50,000 (U.S.). This 
     amount shall be determined by the Corporation and shall 
     fluctuate in accordance upon market conditions. Loans shall 
     be for a term of 10 to 30 years and may be prepaid at any 
     time without penalty. Loan payments shall be amortized on a 
     basis of level monthly payments.
       (c) Working Groups.--The Corporation shall have the 
     authority to establish working groups comprised of Russian 
     and American experts, for the purpose of making 
     recommendations on topics essential to the success of the 
     program, including, but not limited to--
       (1) the preparation of the necessary legal and regulatory 
     changes;
       (2) the involvement of United States housing trade and 
     labor associations in providing materials, training, and 
     joint venture capital;
       (3) ensuring adequate offsite infrastructure for new 
     housing sites; and
       (4) other issues as deemed appropriate by the Corporation.
                                  ____


                                H.R. --

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. PRINCIPLES GOVERNING INTERNATIONAL MONETARY FUND 
                   ASSISTANCE TO RUSSIA.

       The Bretton Woods Agreements Act (22 U.S.C. 286-286mm) is 
     amended by adding at the end the following:

     ``SEC. 62. PRINCIPLES GOVERNING INTERNATIONAL MONETARY FUND 
                   ASSISTANCE TO RUSSIA.

       ``(a) Conditions and Limitations of Assistance.--The 
     Secretary of the Treasury shall instruct the United States 
     Executive Director at the Fund to use the voice and vote of 
     the United States to urge the Fund--
       ``(1) to not provide any assistance to the government of 
     the Russian Federation or of any political subdivision of the 
     Russian Federation, or to any other entity in the Russian 
     Federation, until there is in effect a Russian federal law 
     that implements the economic reforms described in subsection 
     (b); and
       ``(2) to provide assistance to the Russian Federation or a 
     political subdivision of the Russian Federation only to aid 
     the implementation of such reforms.
       ``(b) Economic Reforms.--The economic reforms described in 
     this subsection are the following:
       ``(1) Land reform, including private, ownership of land.
       ``(2) Further privatization of state-owned industrial 
     enterprises.
       ``(3) Tax reform, including increased collection of tax 
     obligations.
       ``(4) Development of effective commercial law, including 
     the ability of individuals to seek enforcement of contracts 
     by an effective judicial system.
       ``(5) Establishment of residential mortgage financing 
     system to develop a middle class residing in the Russian 
     Federation.
       ``(6) The development of criteria for evaluating the 
     effectiveness of regional economic reform programs in the 
     Russian Federation, and the use of such criteria to assure 
     that Western resources are provided to the political 
     subdivisions of the Russian Federation on an equitable basis, 
     taking into account the necessity to provide incentives for 
     political subdivisions to implement viable economic reforms 
     and to reward those that have made progress in implementing 
     such reforms.
       ``(7) The development of steps to make the recipients of 
     Western resources in the Russian Federation accountable for 
     the use of such resources.''.

     SEC. 2. RUSSIAN-AMERICAN FINANCIAL OVERSIGHT COMMISSION.

       (a) In General.--The Speaker of the House of 
     Representatives and the President of the Senate shall seek to 
     enter into negotiations with the State Duma of the Russian 
     Federation for the establishment of a bipartisan commission 
     which would--
       (1) be composed of 8 Members of the United States Congress 
     representing both political parties, and 8 Deputies of the 
     State Duma who are broadly representative of political 
     interests;
       (2) monitor expenditures of the funds provided to the 
     government of the Russian Federation or a political 
     subdivision of the Russian Federation by the United States or 
     the international community, for the purpose of evaluating 
     that the funds are used only for the purposes for which 
     provided; and
       (3) create a working group of financial experts tasked with 
     developing a comprehensive program to reform, privatize, or 
     close industrial enterprises in the Russian Federation that 
     are bankrupt and are (or would be) not competitive under 
     conditions of a market economy without significant government 
     financial support.
       (b) Membership.--On the successful conclusion of 
     negotiations under subsection (a), the Speaker of the House 
     of Representatives and the President of the Senate are 
     jointly authorized to appoint 8 Members of Congress to the 
     commission established pursuant subsection (a).

     SEC. 3. SENSE OF THE CONGRESS ON ESTABLISHMENT OF JOINT 
                   UNITED STATES-RUSSIAN FINANCIAL EDUCATION 
                   PROGRAM.

       It is the sense of the Congress that the United States and 
     the government of the Russian Federation should conclude an 
     agreement under which students in the Russian Federation 
     would enroll in colleges and universities in the United 
     States at undergraduate and graduate levels for the purpose 
     of developing a network of financial specialists in the 
     Russian Federation, and students so enrolled would, on 
     completion of their studies in the United States, be required 
     to return to the Russian Federation and work for the federal 
     or a regional government in Russia.

  Speaker Gingrich, my Republican leader, said,'' I'm not going to 
bring that up, Curt, as a bill.''
  So it is not just the Democrats' fault, Mr. Speaker. The President of 
the United States did not listen, Strobe Talbott thought he knew it 
all, and our Speaker did not respond either.
  Speaker is gone now, Mr. Speaker, and I am asking this Congress to 
consider a new dialogue with Russia where we in the Congress, the 
Senate and the House, the Duma and the Federation Council come together 
and we take control of this relationship in setting out some basic 
parameters, not in dictating when and where money should be used, but 
laying out parameters like the ones that I negotiated and discussed 
with my Russian friends as the chairman of the Duma Congress initiative 
with the gentleman from Maryland (Mr. Hoyer) and passed this in both 
bodies and tell whatever President wins election next year these are 
the parameters for our relationship with Russia in the future.
  Mr. Speaker, I also developed what I call a new vision for Russia, a 
series of principles of how we can assist Russia in getting through 
these difficult times. I would also ask to insert in the Record at this 
time my new vision for Russia:

[[Page H8365]]

        establishing a new framework for u.s.-russian relations

  Working with my colleagues in the Duma, I have developed a joint 
statement of principles governing Western and IFI assistance to Russia. 
For too long, the United States has poured money into Russia without 
proper control or oversight. As a result, this money has lined the 
pockets of the wealthy, while average Russians have seen no improvement 
in their standards of living. Therefore, I am working on a bold new 
agenda so that this money will be made available to reform-minded 
regional governments. In order for financial assistance to make an 
effect on the lives of the Russian people, we must ensure that the 
system is reformed before the money is invested.


                  stablizing russia's nuclear arsenal

  An original supporter of the Nunn-Lugar Cooperative Threat Reduction 
(CTR) program, I have worked tirelessly against proposed funding 
reductions in that effort--working to defeat amendments that would cut 
CTR funds and related amendments which would withhold CTR funds pending 
official reports and action from the Russian government. I was also 
instrumental in extending Nunn-Lugar assistance beyond dismantlement 
support to assisting former Soviet states with better protection of 
their nuclear assets, as well as establishing better systems of control 
and accountability.


                   empowering the russian state duma

  In 1996, I created the Duma-Congress Study Group, an on-going 
parliamentary exchange between the U.S. Congress and the Russian Duma. 
The goal of the Study Group is to foster closer relations between our 
two legislatures so that we can help address key bilateral issues, 
across a wide range of substantive issues. The future of Russian's 
democracy is dependent on the strength of the Duma, and I hope that 
these continuing discussions on substantive issues will provide a basis 
upon which to continue building. I have also initiated a similar 
exchange program for staff members of the U.S. Congress and the Russian 
Duma in an effort to establish a personal and direct communication link 
for the staff support of our two countries' legislatures.


                    creating a russian middle class

  A successful mortgage finance system will reduce unemployment, 
increase democratization, strengthen the banking system, create wealth 
for Russian families, encourage commercial reforms, and increase the 
housing stock. With mutual support between the Russian Duma and the 
United States Congress, I believe that these goals can be achieved. I 
remain committed to the establishment of a mortgage finance system, and 
I will continue to pursue legislation in this area in the U.S. 
Congress.


                   developing russia's energy sector

  In 1992, recognizing that energy was the key to transforming the 
former Soviet republics, and that energy cooperation between the United 
States and the FSU could infuse much-needed hard currency into the 
three energy-producing republics of the former Soviet Union, I formed 
the United States-Former Soviet Union Energy Caucus. The group, 
composed of U.S. legislators, works with U.S. oil companies and Russian 
Duma and government counterparts to enable energy development projects 
in oil and gas-rich Russia. Development benefits Russians by ensuring 
economic development in their country and providing them with sorely-
needed cash, and U.S. energy companies and the American people with new 
sources to meet our continuing energy needs.


                    encouraging investment in russia

  In January of 1998, I was the U.S. representative to Speaker 
Seleznev's conference on Russian Economic Development. I have also been 
working actively in my home state of Pennsylvania to encourage U.S. 
companies to invest in Russia. My work in this arena has included the 
creation of the Pennsylvania-Russia Business Council which has, with my 
assistance, conducted five successful workshops on U.S. investment in 
Russia.


                     assuring russia's social needs

  Education is the key to the future. In order for Russia's democracy 
to succeed, a new generation of Russians must be educated in the tenets 
of freedom. I am currently advocating a program which would enroll 
15,000 Russian students in American colleges and universities. 
Following their graduation from these programs, these students would be 
required to return to Russia and become part of a qualified corps of 
future leaders and specialists.


               improving the health of the russian people

  Healthcare is rapidly becoming a global service. In Greater 
Philadelphia, the region which I represent, I am currently supporting 
an effort in which the hospitals have agreed to work cooperatively on a 
new initiative to jointly provide healthcare services for international 
patients. I am also working on a proposal to bring modular hospitals to 
Russia. These two unique efforts will provide increased access to 
quality healthcare for the Russian people.


                     developing russia's technology

  As Chairman of the House Military Research and Development 
Subcommittee, I have played a lead role in sustaining and expanding 
U.S.-Russian cooperative technology development programs. Not only have 
I worked to ensure funding for early warning sharing programs like 
RAMOS and APEX, but I established a separate line item in the missile 
defense budget specifically for cooperative work in this field. This 
year, the Clinton Administration has canceled the RAMOS program, 
suggesting that alternative cooperative projects be pursued. 
Recognizing the critical role of this program in establishing 
cooperative links on early warning sharing and in enabling pursuit of 
mutual defenses, I will lead the fight this year to preserve the RAMOS 
effort.


                    working with russia's scientists

  In an effort to sustain the work of Russian scientists and prevent 
proliferation of critical technologies, I have asked Academician 
Velikhov of the Kurchatov Institute to develop a proposal that would 
enable Russian scientists and engineers who developed missile 
technology comparable to that which was transferred to Iran for 
application in its Shabab-3 to work with the Ballistic Missile Defense 
Organization in identifying those technologies transferred to Iran and 
in helping the U.S. counter that technology. In addition, I am 
supporting other proposals that would ensure continued U.S. support for 
underemployed Russian scientists and engineers.


                helping russia combat radioactive waste

  I have been a leader in the U.S. Congress in raising awareness 
regarding the need to confront and cooperatively address the issue of 
radioactive waste dumping in the Arctic Ocean. I held hearings on this 
matter, and called Alexei Yablokov to testify on the findings of the 
Bellona Foundation, which documented volumes of evidence on Russian 
nuclear dumping which was previously unconfirmed. I have since worked 
to fund Navy research on this issue and worked through Global 
Legislators for a Balanced Environment (GLOBE) to encourage continued 
attention to and research on this problem. I have also supported U.S.-
Russia collaboration on nuclear waste identification and cleanup work, 
holding several hearings on U.S. and Russian waste problems and 
potential cooperative projects, and securing funding through the Arctic 
Military Environmental Cooperation program in 1999 for sponsorship of a 
conference in Russia to address this issue.
  And finally, Mr. Speaker, I would say that in dealing with Russia it 
is very simple, and you know I think Ronald Reagan had it right. 
Remember when Ronald Reagan called the Soviet Union ``Evil Empire"? 
Well, you know something, Mr. Speaker? The 95 percent of the Russians 
who were not members of the Communist Party heard him and agreed with 
him. They knew that their country was the Evil Empire. They knew that 
it was abusing their rights. They knew the communism was not good for 
them. They respected Ronald Reagan because he spoke the truth.
  Russians respect strength, they respect consistency, and they respect 
candor. When they see you turning your cheek, when they know that you 
know that things are going wrong, when they see you pretend things are 
not what they are, when they see you bolster up a man who is not doing 
what is in the best interest for Russia, they lose respect.

                              {time}  1800

  That is why the Russians today have no respect for us, in my opinion, 
Mr. Speaker.
  We have to earn the respect of the Russians by being strong, by being 
candid, and by being transparent and consistent. If we do that, I am 
convinced Russia can be an equal, stable partner of us.
  We have to ask the tough questions. We have to ask what Russia is 
doing building a multibillion underground complex in the Ural Mountains 
at Yamantau Mountain, the size of the Washington beltway, deep enough 
to withstand a nuclear first strike hit.
  This administration has not been able to get the answer to that 
question because they will not pursue the issue. I work with the CIA on 
a regular basis; and I can say today, the administration knows no more 
about that project today than they did 5 years ago when I first raised 
it.
  We do not have the respect of the Russians under the current 
relationship and policies. Therefore, I am convinced that this body 
needs to explore in great detail what we have done wrong, what we have 
done right and, most importantly, lay out a plan for the future, a plan 
that looks at where Russia is today; and what we can do as

[[Page H8366]]

a Nation, working with the Russian people who are our friends, to build 
a new Russia, a strong Russia, a Russia with a freely elected president 
who works closely with our President and a new Duma that works with our 
Congress, a freely elected Duma, even if it includes Communists.
  Remember what I said, Mr. Speaker. How can this administration say 
that we had to work with Yeltsin because of our fear of the Communists? 
At least the Communists in Russia were elected in free and fair 
elections, as much as we did not like it.
  I wish I could say the same about the Communists in China, which this 
administration falls all over on a regular basis. If the Communists are 
those elected by the Russian people, we have to work with them. It does 
not mean we have to embrace them. It does not mean we do not want to 
help the pro-Western forces, the formers like the Apple party, the 
Yabloko party, the Nash Dom, the People's Power party. We still work 
with them, but we work with all factions in Russia.
  My hope is, as we complete this first half of this session, the focus 
on Russia becomes a dominant focus. As we approach the presidential 
elections, this country needs to have a national debate in a 
constructive way over what happened, why did it happen, where did $20 
billion go, what did we get for that investment, and why are the 
Russian people more negative about America today than they were when 
they were dominated by a Soviet Communist system?

                          ____________________