[Congressional Record (Bound Edition), Volume 149 (2003), Part 18]
[Extensions of Remarks]
[Pages 24297-24298]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            CHANGE IN RUSSIA

                                 ______
                                 

                          HON. JAMES A. LEACH

                                of iowa

                    in the house of representatives

                        Tuesday, October 7, 2003

  Mr. LEACH. Mr. Speaker, it has been 12 years since the collapse of 
the Soviet Union and one of the most remarkable stories to emerge from 
the wreckage of that failed system has been the steadily strengthening 
partnership between the United States and Russia. Two op-eds timed for 
President Vladimir Putin's recent visit to our country each highlight 
different facets of what is one of our most important international 
relationships. Ken Adelman explores the enormous successes of the Nunn-
Lugar program, which has eliminated thousands of nuclear warheads and 
the systems that might have delivered them. Mark Medish, writing in the 
Financial Times, cites improvements in the Russian economy and the 
modernization and rise of free enterprise in Russia.
  In the aftermath of the unpredictably timed and unexpectedly rapid 
demise of communism, Soviet assets were devolved to too few in too 
conflicted a way. Instead of a free market, the Russian economy became 
characterized by oligarchic enterprises. But with each passing year the 
Russian economy has become increasingly subject to the strength of 
individual market decisions, especially consumer oriented ones. A 
middle class is growing and saving.
  Medish, in his article, optimistically emphasizes the positive. While 
it may not be the full picture, if sustained, the pace of 
entrepreneurial change in Russia bodes well for the future.
  I commend these articles to my colleagues.

                           Real Arms Control

                          (By Kenneth Adelman)

       While hanging out at Camp David this coming weekend, 
     Presidents Bush and Putin should toast an impressive--though 
     largely unknown--joint win in their war against terrorism.
       Over the past decade, their armsbuilders became arms-
     destroyers, cooperatively dismantling thousands of Russian 
     nuclear systems. These weapons of mass destruction might 
     otherwise have landed in terrorist hands.
       When the Soviet Union collapsed a dozen years ago, we 
     feared Russian hucksters would sell nuclear, chemical, and 
     biological components to terrorists. After all, Russian 
     arsenals were massive, while their state controls were 
     piddly. Incentives to sell--to get big bucks quickly; and to 
     buy--to get big bangs easily--loomed large.
       Logic proved that what the late Secretary of Defense Les 
     Aspin once dubbed ``Russia's loose nukes'' would be a 
     staggering problem. But experience shows that it hasn't been 
     one.
       Parkinson's most perceptive law tells us that the success 
     of any policy is measured by the catastrophes that do not 
     occur. By that measure--or, really, any measure--the joint 
     American-Russian effort to dismantle weapons has been a big 
     win for international security, especially against 
     international terrorists.
       With Mr. Putin standing at his side last November, Mr. Bush 
     said, ``Our highest priority is to keep terrorists from 
     acquiring weapons of mass destruction.'' He went on to 
     explain that ``our nations must spare no effort at preventing 
     all forms of proliferation.''
       Surely the leading light in this campaign has been the 
     Nunn-Lugar program. For a bargain price of some $1.3 billion 
     a year, America helps Russia disarm the meanest and most 
     massive weapons in the world. According to the original co-
     sponsor, Senator Lugar, over the past dozen years, we've 
     helped them destroy some: 800 ballistic missiles, over 800 
     launchers (followed by environmental restoration of the 
     sites), over 100 bombers, more than 350 submarine launchers, 
     20 ballistic missile carrying submarines, and, most 
     importantly, more than 5,500 nuclear warheads.
       That adds up to more than half of the old Soviet strategic 
     nuclear arsenal. During the same period, much of the U.S. 
     arsenal was eliminated as well, and newly independent former 
     Soviet republics Ukraine, Ka-
     zakhstan, and Belarus were ``denu-
     clearized.''
       In all my years of handling arms control issues--first, as 
     an American ambassador at the United Nations, and then as 
     director of the U.S. Arms Control and Disarmament Agency 
     under President Reagan--I never imagined such a success. 
     Indeed, nothing we achieved over the Geneva negotiating table 
     produced anything on that order.
       Mr. Lugar's colleague, former Senator Nunn, said earlier 
     this summer in Moscow that ``the gravest danger in the world 
     today is the threat from nuclear, biological, and chemical 
     weapons'' and that ``the likeliest use of these weapons is in 
     terrorist hands.''
       Always one to think big, Mr. Nunn proposed that 
     ``preventing the spread and use of nuclear, biological, and 
     chemical weapons should be the central organizing security 
     principle for the 21st century.''
       It's hard to top his notion, especially since the prospect 
     of the world's most vile terrorists getting their hands on 
     the world's most vile weaponry makes every civilized person 
     shutter.

[[Page 24298]]

       To make sure we keep these weapons out of the hands of 
     terrorists, there is still plenty of work to be done by 
     Russia and the U.S. as partners. In Russia, for example, 
     several thousand nuclear warheads are still housed in 
     hundreds of weapons storage sites; several hundred metric 
     tons of bomb-building materials are spread around Russia's 
     nuclear facilities network; and millions of pounds of nerve 
     agents are stored in vulnerable facilities. A single 
     artillery shell, small enough to fit inside a brief case, if 
     stolen from one of these facilities, could be powerful enough 
     to kill 100,000 people.
       Imagine that last year's scare had been true--when the U.S. 
     intelligence community thought terrorists had gotten their 
     mitts on a 10-kiloton nuclear bomb and smuggled it into New 
     York City. It turned out, thank goodness, that such a report 
     was false.
       But if something like that could be true, as indeed it 
     could be, then shouldn't we do everything possible to make it 
     un-true? And to make sure it never happens?
       Again, Mr. Nunn had the right take here: ``If a nuclear 
     weapon goes off in Moscow, Paris, Tokyo, or some other city, 
     what would we wish we had done to prevent it? We may not be 
     able to make these terrorists less evil, but we must make 
     them less powerful. We must keep them from acquiring weapons 
     of mass destruction.''
       The success of the cooperative efforts between Russia and 
     America should give Messrs. Bush and Putin some pride this 
     weekend. It calls for a Camp David toast.
                                  ____


             Russia's Economic Strength Begins in the Home

                            (By Mark Medish)

       President Vladimir Putin comes to the U.S. this week 
     bearing good news. The Russian economy continues to gain 
     speed, and investment-grade status may be around the corner.
       As he drives through New York, Mr. Putin will see something 
     striking: the logo of Russia's Lukoil has replaced the all-
     American Getty sign at local petrol stations. The symbolism 
     is powerful. Russia and the U.S. can be meaningful investment 
     partners. But the real question for the Russian economy is 
     whether it can become more than the world's newest petrol 
     pump.
       Russia's relationship with market capitalism has been 
     dramatic. Russia emerged from the ashes of the 1998 financial 
     collapse to log almost five years of steady growth in gross 
     domestic product.
       An emerging Russian middle class has begun to assert itself 
     with raw spending power. Retail turnover in 2003 may reach 
     $150bn.
       Initially, the retail trend was strongest in food sales, 
     but consumer durables are now increasing as a share of 
     household spending. Domestic manufacturing has responded to 
     this demand. Whether Russia can also grow into an export 
     platform, as China has done, is an open question. Russia's 
     skilled workforce, low labour costs, and central Eurasian 
     location suggest that such an opportunity may exist.
       The trend, if sustained, could have profoundly positive 
     implications for Russia's overall economic and political 
     development. Promoting this trend is likely to be a theme of 
     Mr. Putin's meetings, both with prospective U.S. investors 
     and, at Camp David, with President George W. Bush and his 
     team.
       The Russian consumer story has not gone entirely unnoticed 
     by foreign investors. Ikea, the mass-market Swedish furniture 
     retailer, opened several megastores in Moscow and St. 
     Petersburg in 2000. Ikea's sales have been strong enough to 
     justify plans for a further dozen stores across the country, 
     evidence of middle-class patterns spreading beyond the two 
     biggest cities. The German supermarket chain Metro is 
     following suit. Russia's wireless sector is among the hottest 
     in emerging markets.
       The rising middle class strengthens the business case for 
     big western consumer-oriented companies to take a closer look 
     at Russia. Russians want quality furniture, mobile phones, 
     televisions, appliances, and cars. If this continues, a boom 
     in commercial banking and other services should not be far 
     behind.
       Having endured decades of supply-side privation under the 
     Soviet command economy, average Russians are becoming 
     dictators of market demand. This change is fuelled by several 
     factors. Russian households are much wealthier than 
     previously supposed; they seem to have a high marginal 
     propensity to consume; and they have few debts.
       The strengths of Russia's new consumers are also tied to 
     abiding weaknesses in the economy. First, the unexpectedly 
     high disposable income reflects years of accumulated 
     ``mattress money''--the uncounted grey economy. Some analysts 
     estimate Russia's current GDP at nearly $450bn, 40 per cent 
     higher than official figures.
       Second, the high propensity to consume partly reflects the 
     lack of sound channels for savings and investment. Finally, 
     the low debt level is due largely to the absence of wide-
     scale consumer credit facilities. Changing this will take 
     time.
       Policy challenges remain, including management of the 
     windfall from high oil prices, diversifying the productive 
     economy, deepening the rule of law, and entering the World 
     Trade Organisation. These tasks can be achieved if Mr. Putin 
     and his government continue to recognise their central 
     importance and act on it.
       A surging consumer sector will both reinforce and ease the 
     process. Consumers are natural proponents of market reform 
     and a business environment that promotes predictability, 
     transparency, and wealth creation. An active middle class is 
     the most potent force for change in market economies.
       Economics is also politics. Mr. Putin's political strategy 
     may depend increasingly on satisfying middle-class 
     constituencies. This would mean responding seriously to their 
     interests, while balancing the demands of super-rich 
     oligarchs, the security apparatus, and pensioners. If he 
     succeeds, Mr. Putin's legacy will be a genuinely modern 
     Russia.

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