[House Report 106-667]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     106-667

======================================================================



 
         RUSSIAN ANTI-SHIP MISSILE NONPROLIFERATION ACT OF 2000
                                _______
                                

 June 12, 2000.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Gilman, from the Committee on International Relations, submitted 
                             the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 4022]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on International Relations, to whom was 
referred the bill (H.R. 4022) regarding the sale and transfer 
of Moskit anti-ship missiles by the Russian Federation, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Russian Anti-Ship Missile 
Nonproliferation Act of 2000''.

SEC. 2. PURPOSE.

  The purpose of this Act is to prohibit the forgiveness or 
rescheduling of any bilateral debt owed by the Russian Federation to 
the United States until the Russian Federation has terminated all sales 
and transfers of Moskit anti-ship missiles that endanger United States 
national security.

SEC. 3. FINDINGS.

  The Congress makes the following findings:
          (1) In February 2000, the first of two Russian-built 
        Sovremenny-class destroyers sold to the People's Republic of 
        China arrived in the Taiwan Strait, manned by a mixed Russian 
        and Chinese naval crew. Currently, the Russian and Chinese 
        Governments are discussing the sale of 2 additional Sovremenny 
        destroyers.
          (2) Within weeks after the arrival of the destroyers, the 
        Russians are scheduled to transfer the first of several of the 
        ship's most lethal weapon, the radar-guided Moskit (also known 
        as Sunburn) anti-ship missile, which can carry either 
        conventional or nuclear warheads.
          (3) The supersonic Moskit missile, which can be mounted on a 
        naval or mobile land platform, was designed specifically to 
        destroy American aircraft carriers and other warships equipped 
        with advanced Aegis radar and battle management systems. The 
        United States Navy considers the missile to be extremely 
        difficult to defend against.
          (4) The Moskit missile has an over-the-horizon range of 65 
        miles and can deliver a 200-kiloton warhead in under 2 minutes. 
        One conventional Moskit missile can sink a warship or disable 
        an aircraft carrier, causing the deaths of hundreds of American 
        military personnel.
          (5) The Russian Federation is helping the air force of the 
        People's Liberation Army to assemble Sukhoi Su-27 fighter 
        aircraft, which are capable of carrying an air-launched version 
        of the Moskit missile, which has a longer range than the sea-
        launched version. The Russian Federation is reportedly 
        discussing the sale of air-launched Moskit missiles to the 
        People's Republic of China.
          (6) Land-, sea-, or air-launched Moskit missiles raise the 
        potential for American casualties and could affect the outcome 
        in any future conflict in the Taiwan Strait or South China Sea. 
        The transfer of the missile by China to Iran or other 
        belligerent nations in the Persian Gulf region would increase 
        the potential for conflict and for American casualties. A 
        Moskit missile mounted on a mobile land platform would be 
        difficult to locate and could wreak havoc on the coastline of 
        the Straits of Hormuz.

SEC. 4. PROHIBITION OF DEBT FORGIVENESS.

  (a) Prohibition.--Notwithstanding any other provision of law, the 
President shall not reschedule or forgive any outstanding bilateral 
debt owed to the United States by the Russian Federation, until the 
President certifies to the Congress that the Russian Federation has 
terminated all transfers of Moskit anti-ship missiles that endanger 
United States national security, particularly transfers to the People's 
Republic of China.
  (b) Waiver.--The President may waive the application of subsection 
(a) if the President determines and certifies to the Committee on 
International Relations of the House of Representatives and the 
Committee on Foreign Relations of the Senate that such waiver is vital 
to the national security interest of the United States.

SEC. 5. REPORTS ON THE TRANSFER BY RUSSIA OF MOSKIT MISSILES.

  (a) In General.--Not later than 30 days after the date of the 
enactment of this Act and every 6 months thereafter, until the 
certification under section 4, the President shall submit to the 
Committee on International Relations of the House of Representatives 
and the Committee on Foreign Relations of the Senate a report 
identifying the status of any contract and the date of the transfer of 
any version of the Moskit missile, particularly transfers to the 
People's Republic of China, occurring on or after February 1, 2000.
  (b) Submission in Classified Form.--Reports submitted under 
subsection (a), or appropriate parts thereof, may be submitted in 
classified form.

                         Background and Purpose

    H.R. 4022, the ``Russian Anti-Ship Missile Nonproliferation 
Act of 2000,'' was introduced on March 16, 2000, by Mr. 
Rohrabacher, Mr. Spence, and fourteen other original sponsors. 
The bill prohibits the forgiveness or rescheduling of any 
bilateral debt owed by the Russian Federation to the United 
States until the Russian Federation has terminated all sales 
and transfers of Moskit anti-ship missiles that endanger United 
States national security. The purpose of the bill is clear: no 
further rescheduling or forgiveness of any of the Russian 
government's bilateral debt to the United States Government 
shall be provided by the United States either directly or in 
any multilateral forum, including the Paris Club of official 
creditors, until the President certifies that the Russian 
Federation has terminated all transfers of Moskit and anti-ship 
missiles that endanger United States national security, 
particularly transfers to the People's Republic of China.

  The Growing Arms and Military Technology Sales Relationship Between 
                            Russia and China

    In 1991, Russia and China concluded their first big weapons 
contract when China agreed to purchase a reported twenty-six 
Su-27 ``Flanker'' fighter aircraft for an estimated $1 billion. 
In a subsequent visit to China in December 1992, then-President 
of Russia Boris Yeltsin stated that Russia was prepared to go 
on to cooperate with China ``on the most sophisticated 
armaments and weapons.'' Indeed, over the last few years, arms 
sales to China have expanded considerably, and it has been 
reported that Russia is now providing China with a broad range 
of military technology and arms. In 1994, China purchased four 
quiet-running, diesel-powered ``Kilo''-class submarines from 
Russia. In 1996, China and Russia signed a contract to build an 
estimated two hundred Su-27 aircraft in China for a reported 
$2.5 billion. In 1999, China agreed to buy thirty to sixty Su-
30MK fighter aircraft from Russia for an estimated $2 billion, 
and it is reported that negotiations may be underway for the 
purchase of the more advanced Su-37 fighter. In 1997, China 
purchased two ``956-E'' or ``Sovremenny''-class guided-missile 
destroyers equipped with the advanced supersonic ``Moskit'' 
anti-ship missiles, and is now likely to purchase two more of 
the ships. According to a Washington Post report of February 
10th, 2000, Asian officials believe ``that as many as 2,000 
Russian technicians are employed by Chinese research institutes 
working on laser technology; the miniaturization of nuclear 
weapons; cruise missiles; space-based weaponry; and nuclear 
submarines. On January 19, Russian Deputy Prime Minister Ilya 
Khlebanov told reporters that Beijing and Moscow ``are close 
enough'' to agreement on joint use of Russia's GLONASS 
satellite-based global positioning system, and accord that 
would aid the Chinese military in targeting its rockets [ICBMs] 
and air-to-air missiles.'' In addition to the advanced fighter 
aircraft, submarine, and guided-missile destroyer purchases and 
sensitive military technology agreements noted above, Russia is 
reported to have sold China a range of electronics, air-to-air 
and surface-to-air missiles, air defense systems (including one 
hundred SA-10 air defense missiles), Ka-27 and Ka-28 anti-
submarine warfare helicopters, armored fighting vehicles and 
fifty T-72 tanks.
    Today, slightly more than eight years after the first major 
Russian-Chinese arms deal, bilateral arms and military 
technology deals with China are now believed to be worth at 
least one billion dollars annually in revenues to Russian arms 
exporters, and some observers believe China accounts for more 
than 40% of all Russian arms exports. In testimony taken by the 
Committee in March 1999, one expert witness stated that such 
Russian exports to China reached over $2.1 billion in 1996, 
comprising 70% of China's arms purchases in the foreign market. 
Russia, in fact, has become China's largest supplier of 
advanced weapons.

   The Question of Possible Russian-Chinese Strategic Cooperation in 
                   Support of a ``Multi-Polar'' World

    Russia seems unconcerned over the growing Chinese military 
power it is helping to create. Former Russian President Boris 
Yeltsin in fact declared that Russia has a ``strategic 
partnership'' with China and joined Chinese President Jiang 
Zemin in opposing a ``unipolar'', i.e., US-led, world in favor 
of a ``multi-polar'' world. Indeed, as a ``Washington Post 
article of February 10th, 2000 stated: ``Western experts and 
Asian diplomats say that * * * Moscow's security ties to 
Beijing have surpassed the simple cash-for-weapons transactions 
that characterized the relationship for years and are evolving 
into something more complex and potentially far-reaching.''
    Despite the Russian insistence on continuing arms sales to 
China, the United States should view with concern those sales, 
particularly sales of weapons such as the ``Moskit'' missile 
that present a possibly immediate threat to American naval 
forces that might be called to the defense of American 
interests in the Pacific. The United States must indeed view 
with concern the broader implications of the overall Russian-
Chinese arms relationship. In testimony taken by the Committee 
in March 1999, Mr. Sherman Garnett, former Deputy Assistant 
Secretary of Defense and Director of the Project on Russian-
Chinese Relations at the Carnegie Endowment for International 
Peace stated the following: ``These [Russian] sales--and the 
broader defense and technology cooperation that are linked to 
them--could over time help to alter regional military balances 
in areas of vital U.S. interest in East and Southeast Asia or 
the Taiwan Strait. China does not need to match the military of 
the U.S. and its allies to effect this alteration. It need only 
develop capabilities that substantially raise the cost of U.S. 
intervention in the region.''
    China has indeed held missile firing ``tests'' off the 
coasts of Taiwan in recent years, a sign of its growing 
military assertiveness, and through its arms purchases from 
Russia, China is obtaining modern air and naval weaponry that 
could well help it successfully challenge the American 7th 
Fleet, which is committed, in part, to the support of Taiwan. 
(For example, while the ``Sovremenny'' destroyers carry 
supersonic ``Moskit'' anti-ship missiles that are very 
difficult to defend against, the ``Kilo'' submarines are 
reportedly equipped with so-called ``wake-homing'' torpedoes 
designed to detonate beneath a ship's keel, where their 
approach is more difficult to detect due to the nose of the 
ship's propellers.) At a strategic level, China may be 
obtaining Russian technology that will allow it to improve and 
expand its relatively small strategic nuclear force (now an 
estimated 17 land-based and 12 sub-based long-range missiles 
and an estimated 300 warheads)--ironically at the very time 
that the U.S. is reducing its strategic arsenal through 
agreements with Russia. The Washington Times of January 19, 
2000 reported that Russian nuclear weapons experts may now be 
assisting China in the extraction of Tritium for thermonuclear 
warheads.

   the russian government's quest for further debt rescheduling and 
                          forgiveness of debt

    Upon the dissolution of the former Soviet Union in December 
1991, the Government of the newly-independent Russian 
Federation, the largest successor state to the Soviet Union, 
insisted that it receive various assets of the Soviet 
government at home and abroad, including ownership of Soviet 
embassies and facilities around the world, Soviet-created banks 
abroad, and the stocks of Gold held by the Soviet regime, among 
other things. The new Russian government also agreed to assume 
responsibility for the payment of debts owed to both private 
sector and official creditors by the Soviet Union upon its 
demise. Since that time, while enjoying the benefits of such 
Soviet-era assets, the Russian Government has failed to meet 
its obligations to re-pay Soviet-era debts, restoring instead 
to outright default and to reschedulings to avoid honoring the 
bulk of those debts.
    With regard to debt to other governments, the Russian 
government has, in fact, been the beneficiary of debt 
rescheduling by the ``Paris Club'' of official creditors 
several times over the last decade, in 1993, 1994, 1995, and 
1996. The rescheduling and restructuring of the Russian 
Government's Paris Club debt in April 1996 was indeed the 
largest-ever such debt-rescheduling arrangement in the history 
of the Paris Club, cutting Russian's debt-serving obligations 
in 1996 from $8.5 billion to $2 billion by giving it twenty-
five years to repay $38.7 billion in such debt to other 
governments, including a six-year grace period during which it 
would pay only interest, not principal. The August 1999 
``interim'' rescheduling simply postponed until the second half 
of 2000 those payments on about $8 billion in obligations that 
were due over the course of 1998-2000. (That portion of the 
Russian Government's debt to official creditors that is covered 
by the Paris Club was estimated to total about $42 billion by 
early 2000.)
    With regard to debt owed to private lenders, over the last 
eight years the Russian government has almost completely failed 
to meet its obligations to the ``London Club'' of commercial 
creditors for the Soviet-era debts for which it assumed 
responsibility. According to information obtained by staff of 
the Committee on International Relations, the Russian 
Government did not honor those commercial obligations from 1992 
to 1997, and honored them for only a short period following a 
rescheduling that the London Club accepted in 1997. After 
August 1998, the Russian government yet again defaulted on its 
debts to the ``London Club.'' In February 2000, despite a 
considerable rise in the price of oil, one of Russia's main 
exports, that helped create a Russian trade surplus of about 
$30 billion in 1998; despite increased Russian tax collections; 
and despite its failure to meet its debt obligations to the 
London Club for over a year, the Russian Government obtained 
from the London Club a rescheduling under which approximately 
$12 billion was simply written off and the remainder 
(approximately $20 billion) transformed into long-term (30-
year), low-interest bonds.

 the generous benefits granted the russian government through repeated 
                   debt reschedulings and forgiveness

    The Russian government has benefitted in several important 
ways from the leniency shown by both officials and commercial 
creditors towards the payment obligations Russia assumed when 
it insisted that it be granted many of the international assets 
of the former Soviet regime. Above all else, its defaults on 
commercial debt and forgiveness of much of that debt and the 
constant rescheduling of its official debt have alleviated the 
burden of billions of dollars of annual payments it would 
otherwise have had to make to its creditors. Other very 
important, but less-recognized benefits have accrued to the 
Russian government, however, from the leniency shown by both 
the Paris Club and the London Club of creditors.
    In particular, the 1996 rescheduling arranged with the 
Paris Club, by avoiding a Russian Government default on its 
debts to other governments, also made the Russian government 
eligible for other, very lucrative forms of foreign financing, 
specifically, making it possible for the Russian government to 
receive a three-year loan of more than $10 billion from the 
International Monetary Fund and paving the way for the Russian 
government to re-enter international capital markets as a 
sovereign borrower. The 1999 interim rescheduling ensured that 
Russia remained eligible to access those sources of finance. 
The general benefits to the Russian economy provided by the 
London Club's forgiveness and restructuring of the Russian 
government's debts this year will also be considerable. 
Negotiation of the deal set the stage for upgrades in 
assessments of the creditworthiness of the Russian government 
and of Russian enterprises, which in turn increases the chances 
of more commercial lending to that government and those 
entities as well as the possibility of greater foreign direct 
investment in Russia.

  questions about the need to provide further leniency with regard to 
                       russia's debt obligations

    Despite the many reschedulings of Russia's debts and the 
recent, outright forgiveness of at least one-third of its debt 
to commercial creditors of the London Club, there is a high 
probability that the Russian government will choose to continue 
to default on its debts. Former Russian Finance Minister 
Aleksandr Shokhim in fact stated after the conclusion of the 
2000 debt forgiveness and rescheduling agreement with the 
London Club that the agreement would likely merely delay 
Russia's default on that particular component of its debt for 
only a few years.
    Indeed, the need to restructure Russia's debt to either the 
London Club or Paris Club at this time is questionable. As the 
New York Times reported in a story of February 13th, 2000 
concerning the London Club restructuring: ``The fact that 
Russia's debt--much of it stemming from the Soviet era--needs 
to be restructured at all is something of a puzzle * * * 
Russia, according to key economic indicators, should have the 
money to meet its debt payments. * * * The government should * 
* * be reaping high taxes from the profits of Russian oil 
companies. In fact, the state has a huge trade surplus * * * 
Charles Blitzer, chief international economist for the 
brokerage Donaldson, Lufkin & Jenrette, said: ``This isn't so 
much a question of ability to pay as willingness to pay,'' The 
Economist stated the following in its August 7th, 1999 edition: 
``As with the Paris Club negotiations, cynics suspect that 
nobody is particularly bothered about the underlying 
sustainability of any agreement. Given that Russia shows no 
willingness to live within its means, it is reasonable to 
suspect that the main priority is to clear the way for another 
borrowing splurge after the elections.''
    The lenient treatment of the Russian government with regard 
to its debts and its continued borrowing from international 
financial institutions must be viewed with some concern, given 
the record of Russian willingness to benefit from the assets it 
inherited from the former Soviet regime and from loans it has 
borrowed abroad while clearly showing, at the same time, an 
unwillingness to live up to the debt obligations it took on 
from the former Soviet regime or to carry out its dealings with 
international financial institutions in a proper and 
transparent manner. With regard to the latter point, the 
Economist, in its August 7th, 1999 edition, made the following 
comment: ``Already they [the Russian government] have secured a 
highly irregular $4.5 billion loan-renewal from the IMF despite 
having been caught out lying to the Fund about their 
reserves.''
    In the on-going negotiations with the Paris Club, the 
Russian government is reportedly seeking the outright 
forgiveness of debt similar to that it gained from the London 
Club after refusing to pay its debts to the latter 
organization. Should a similar proportion of debt be written 
off by the Paris Club (at least one-third of the approximately 
$42 billion in debt reportedly covered by the negotiations), 
the Russian government will likely gain the forgiveness of 
approximately $12 billion in such debt in 2000. As a member of 
the Paris Club, the United States would undoubtedly participate 
in any such agreement, contributing an as-yet-undertermined 
amount of outright debt forgiveness to the Russian government.

     RUSSIAN GOVERNMENT DEBT TO THE GOVERNMENT OF THE UNITED STATES

    According to the Congressional Research Service, as of 
December 1999, the Russian Government's bilateral debt to the 
Government of the United States consisted of about $1.4 billion 
in direct loans and credits and about $4.1 billion in other 
loans and loan guarantees. The components of this debt were 
reported to be: $602 million in Lend-Lease debt from the period 
of the Second World War; $783 million in outstanding direct 
credits under the U.S. Department of Agriculture's ``P.L. 480'' 
program administered by the Commodity Credit Corporation; a 
further $1.9 billion in outstanding loan guarantees under the 
``P.L. 480'' program; and outstanding loans and loan guarantees 
through the U.S. Export-Import Bank of approximately $2.2 
billion. Staff of the Congressional Research Service also 
reported that approximately $2.7 billion of the total bilateral 
debt owed to the United States by the Russian Federation is a 
component of the Paris Club debt being renegotiated during 2000 
by the Paris Club and Russia.
    As a member of various international financial institutions 
such as the International Monetary Fund (IMF), the 
International Bank for Reconstruction and Development (the 
``World Bank''), and the European Bank for Reconstruction and 
Development (EBRD), the United States also stands behind the 
Russian Government's repayment of a large portion of the loans 
extended to Russia by those institutions. Loans disbursed to 
the Russian Government over the last eight years have 
approached a total of about $20 billion through the IMF alone, 
according to information provided to the Committee on 
International Relations.
    While H.R. 4022 does not speak to the issue of debt owed 
such international financial institutions, the United States 
Government's leniency in previous Paris Club reschedulings with 
regard to Russian Government bilateral debt owed to it and the 
United States' support for extensive loans to the Russian 
Government by those international financial institutions have 
supplemented the American government's policy of providing 
extensive aid and financial support to the Russian government 
since the end of the Soviet Union. Such direct aid and 
financial support to the Russian Government has been provided 
through various programs, including the ``FREEDOM Support Act'' 
assistance program for economic and political reforms, the 
``Nunn-Lugar'' Cooperative Threat Reduction program to assist 
Russia to meet its START-I arms reductions obligations, 
donations, of large amounts of food commodities, purchases of 
recycled Uranium, NASA contracts with the Russian Space Agency 
in support of the International Space Station project, and a 
quota for Russian launches of U.S.-made satellites.

                            Committee Action

    H.R. 4022 was introduced on March 16, 2000, and referred by 
the Speaker to the Committee on International Relations.
    The Committee has held a series of hearing on Russian 
foreign policy and related matters. At these hearing the issues 
raised by this bill were considered at length. The Committee 
held a hearing on March 25, 1999 on ``Russian Foreign Policy: 
Proliferation to Rogue Regimes,'' and received testimony from 
five R. James Woolsey, Anthony Cordesman, Henry Sokolski, 
Sherman Garnett, and John McMahon. On May 12, 1999, the 
Committee held a hearing on ``Russia's Foreign Policy 
Objectives: What are They'', and took testimony from Steven 
Sestanovich, Ambassador at Large for the New Independent 
States, Brent Scocroft, former National Security Advisor, and 
Michael McFaul.

                           Markup of the Bill

    On April 13, 2000, the International Relations Committee 
marked up the bill, pursuant to notice, in open session. The 
Committee considered an amendment offered by Mr. Gejdenson 
which would strike the world ``permanently'' (regarding the 
President certifying to Congress that the Russian Federation 
has permanently terminated all transfers of Moskit anti-ship 
missiles . . .), and would provide the President with a 
national security waiver. Mr. Bereuter asked unanimous consent 
to amend the Gejdenson amendment by changing the word 
``important'' to ``vital''. There was no objection. The 
Gejdenson amendment, as amended, was agreed to by a recorded 
vote of 20 ayes to 16 nays. Chairman Gilman asked unanimous 
consent that the Committee be deemed to have before it an 
amendment in the nature of a substitute consisting of the bill 
as amended to that point. The unanimous consent request was 
agreed to.
    Subsequently, a quorum being present, the Committee agreed 
by voice vote to a motion offered by Mr. Bereuter to favorably 
report the bill, as amended, to the House of Representatives.

                             Rollcall Votes

    Clause (3)(b) of rule XIII of the Rules of the House of 
Representatives requires that the results of each record vote 
on an amendment or motion to report, together with the names of 
those voting for or against, be printed in the committee 
report.

Description of amendment, motion, order, or other proposition (votes 
        during markup of H.R. 4022--April 13, 2000)

    Vote No. 1--Gejdenson amendment, as amended.
    Voting yes: Bereuter, Salmon, Gejdenson, Ackerman, 
Faleomavaega, Payne, Brown, Hastings, Danner, Hilliard, 
Sherman, Wexler, Rothman, Davis, Pomeroy, Delahunt, Meeks, Lee, 
Crowley, and Hoeffel.
    Voting no: Gilman, Goodling, Smith, Burton, Gallegly, 
Ballenger, Rohrabacher, Royce, King, Chabot, Sanford, Campbell, 
Brady, Radanovich, Tancredo, and Menendez.
    Total: Ayes--20, Noes--16.

                             Other Matters


                      committee oversight findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                commmittee on government reform findings

    Clause 3(c)(4) of rule XIII of the Rules of the House of 
Representatives requires each committee report to contain a 
summary of the oversight findings and recommendations made by 
the Government Reform Committee pursuant to clause (4)(c)(2) of 
rule X of those Rules. The Committee on International Relations 
has received no such findings or recommendations from the 
Committee on Government Reform.

                      advisory committee statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                applicabililty to the legislative branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                   constitutional authority statement

    In compliance with clause 3(d)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee cites the 
following specific powers granted to the Congress in the 
Constitution as authority for enactment of H.R. 4022 as 
reported by the Committee: Article I, section 8, clause 1 
(relating to providing for the common defense and general 
welfare of the United States); Article I, section 8, clause 3, 
(relating to the regulation of commerce with foreign nations); 
and Article I, section 8, clause 18 (relating to making all 
laws necessary and proper for carrying into execution powers 
vested by the Constitution in the Government of the United 
States or in any Department or Officer thereof).

                        preemption clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any committee on a bill or joint 
resolution to include a committee statement on the extent to 
which the bill or joint resolution is intended to preempt state 
or local law. The Committee states that H.R. 4022 is not 
intended to preempt any state or local law.

new budget authority and tax expenditures, congressional budget office 
             cost estimate, and federal mandates statements

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives requires each committee report that accompanies 
a measure providing new budget authority, new spending 
authority, or new credit authority or changing revenues or tax 
expenditures to contain a cost estimate, as required by section 
308(a)(1) of the Congressional Budget Act of 1974, as amended, 
and, when practicable with respect to estimates of new budget 
authority, a comparison of the estimated funding level for the 
relevant program (or programs) to the appropriate levels under 
current law.
    Clause 3(d) of rule XIII of the Rules of the House of 
Representatives requires committees to include their own cost 
estimates in certain committee reports, which include, when 
practicable, a comparison of the total estimated funding level 
for the relevant program (or programs) with the appropriate 
levels under current law.
    Clause 3(c)(3) of rule XIII of the Rules of the House of 
Representatives requires the report of any committee on a 
measure which has been approved by the Committee to include a 
cost estimate prepared by the Director of the Congressional 
Budget Office, pursuant to section 403 of the Congressional 
Budget Act of 1974, if the cost estimate is timely submitted.
    Section 423 of the Congressional Budget Act requires the 
report of any committee on a bill or joint resolution that 
includes any Federal mandate to include specific information 
about such mandates. The Committee states that H.R. 4022 does 
not include any Federal mandate.
    The Committee adopts the cost estimate of the Congressional 
Budget Office as its own submission of any new required 
information with respect to H.R. 4022, on new budget authority, 
new spending authority, new credit authority, or an increase or 
decrease in the national debt. It also adopts the estimate of 
Federal mandates prepared by the Director of the Congressional 
Budget Office pursuant to section 423 of the Unfunded Mandates 
Reform Act. The estimate and report which has been received is 
set out below.

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 28, 2000.
Hon. Benjamin A. Gilman,
Chairman, Committee on International Relations,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4022, the Russian 
Anti-Ship Missile Nonproliferation Act of 2000.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Joseph C. 
Whitehill.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 4022--Russian Anti-Ship Missile Nonproliferation Act of 2000

    H.R. 4022 would prohibit the President from rescheduling or 
forgiving any bilateral debts of Russia until the President 
either certifies that Russia has ended all transfers of Moskit 
anti-ship missiles to other countries or waives that 
prohibition and certifies that the waiver is vital to U.S. 
national security. The bill would require the President to 
report to the Congress on the status of any missile transfers 
to China. CBO estimates the additional reporting requirement 
would cost less than $500,000, assuming the appropriation of 
the necessary funds. Although the other budgetary impacts of 
enacting the bill are highly uncertain, CBO estimates that they 
would not be significant. Because the bill could affect direct 
spending and receipts, pay-as-you-go procedures would apply.
    In August 1999, creditor countries agreed to reschedule 
payments on Soviet-era debts coming due between July 1, 1999, 
and December 31, 2000. Rescheduling those payments would 
increase the likelihood that the debt would be repaid. Under 
that 1999 agreement, the United States would create a new debt 
instrument out of the $496 million due on World War II 
lendlease loans and agricultural commodity credits extended to 
the Soviet Union before December 31, 1991. That amount plus 
interest would be repaid over the 2001-2020 period. The United 
States has not yet signed the bilateral accord with Russia that 
would implement the multilateral agreement.
    CBO assumes that the two most likely events under H.R. 4022 
are that either Russia would agree to end shipments of the 
missiles or the President would use the waiver authority. If 
either of these outcomes occur, the bill would not affect 
direct spending or receipts. If neither of those outcomes 
occur, the United States would be unable to reschedule Russia's 
debts under the bill. Not rescheduling Russia's debts would 
inrease net outlays from the forgone payments due upon signing 
of the bilateral agreement. A Russian default on its lendlease 
loans could affect governmental receipts because Russia could 
lose its normal trade relations status thus affecting tariff 
collections.
    H.R. 4022 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact is Joseph C. Whitehill. This estimate 
was approved by Peter H. Fontaine, Deputy Assistant Director 
for Budget Analysis.

                      Section-by-Section Analysis


Section 1. Short title

    The bill may be cited as the ``Russian Anti-Ship Missile 
Nonproliferation Act of 2000''.

Section 2. Purpose

    States that the purpose of H.R. 4022 is to prohibit the 
forgiveness or rescheduling of any bilateral debt owed by the 
Russian Federation to the United States until the Russian 
Federation has terminated all sales and transfers of Moskit 
anti-ship missiles that endanger United States national 
security.

Section 3. Findings

    This bill contains a number of findings with regard to the 
on-going sale of Russian-made ``Moskit'' anti-ship missiles to 
the People's Republic of China. It states that the first of two 
``Sovremenny'' class destroyers sold to the PRC by Russia has 
now been delivered to the PRC and that the transfer of Moskit 
(or ``Sunburn'') anti-ship missiles with which to equip those 
destroyers, is scheduled to begin soon after. It states that 
the Moskit missile is capable of carrying either a conventional 
or nuclear warhead, is considered by the United States Navy to 
be very difficult to defend against, and was designed 
specifically to destroy American aircraft carriers and other 
American warships equipped with the ``Aegis'' radar and battle 
management system. The bill also states that the Russian 
Federation is assisting the PRC to assemble Su-27 ``Sukhoi'' 
fighter aircraft capable of carrying an air-launched version of 
Moskit missile and that Russia is reportedly discussing the 
sale of such a variant of the Moskit missile with the PRC.
    The bill states that Moskit missiles in any variant, 
whether land-, sea-, or air-launched, raise the potential for 
American casualties and could affect the outcome in any future 
conflict in the Taiwan Strait or South China Sea. It also 
states that the transfer of the missile by the PRC to Iran or 
other belligerent states in the Persian Gulf region would also 
increase the potential for conflict and for American 
casualties.

Section 4. Prohibition of debt forgiveness

    The bill, notwithstanding any other provision of law, 
prohibits any rescheduling or forgiveness of any outstanding 
bilateral debt owed to the United States by the Russian 
Federation until the President can certify to the Congress that 
the Russian Federation has terminated all transfers of Moskit 
anti-ship missiles that endanger United States national 
security, particularly transfers to the People's Republic of 
China. The bill provides the President with the authority to 
waive the prohibition if he certifies that such a waiver is 
vital to the national security interest of the United States.

Section 5. Reports on the transfer by Russia of Moskit missiles

    The bill requires that, no later than thirty days after 
enactment of this Act and every six months thereafter, the 
President report on the status of any contract and the date of 
the transfer of any version of the Moskit missile, particularly 
transfers to the People's Republic of China, occurring on or 
after February 1, 2000. It allows for submission of all or part 
of that report in classified form.

                             MINORITY VIEWS

                       danger of moskit missiles

    H.R. 4022 would prohibit the rescheduling or forgiveness of 
the $3.1 Billion in former Soviet debt owed to the U.S. by the 
Russian Federation \1\ until the President certifies that 
Russia has ``permanently terminated'' all transfers of the 
Moskit anti-ship missile ``that endanger U.S. national 
security,'' especially to the People's Republic of China (PRC). 
The bill would also require that the President report to 
Congress 30 days after enactment and every 6 months thereafter 
on the status of any contract and transfer of Moskit missiles 
to the PRC.
---------------------------------------------------------------------------
    \1\ This debt is the Soviet-era, pre-1992 debt, assumed by the 
Russian Federation after the break-up of the Soviet Union. It includes 
World War II lend-lease loans and agricultural commodity credits 
extended to the Soviet Union before December 31, 1991.
---------------------------------------------------------------------------
    The Moskit anti-ship missiles, in air- or sea-launched 
variants, are capable of traveling at speeds in excess of Mach 
2 at low altitudes, greatly reducing the reaction time for the 
targeted vessel to defend itself. Russia has delivered the 
first of two new ``Sovremenny'' class destroyers contracted by 
the PRC, each of which will carry eight Moskit missiles; 
Beijing may order two more of these destroyers. These missiles 
are specifically designed to destroy American aircraft carriers 
and other warships equipped with advanced Aegis radar and 
battle management systems, and the U.S. Navy considers the 
missile to be extremely difficult to defend against. The 
Russians are also discussing the sale of the air-launched 
version of the missile to the PRC. We agree that these missiles 
may well constitute a significant threat to U.S. vessels 
operating in the Taiwan Straits and South China Sea; however, 
we question the use of Russian debt rescheduling as the right 
leverage to address this issue and we are concerned about the 
possible impact of a failure to reschedule Russian debt.

                   previous russian debt rescheduling

    The Russian Government's Soviet-era debt that is covered by 
the Paris Club of official creditors is estimated at $42 
billion. The Paris Club rescheduled portions of this debt in 
1993, 1994, 1995, and 1996. These reschedulings aimed to (1) 
ease Russian debt burden in exchange for the Russian government 
implementing a macroeconomic stabilization program and (2) 
ensure that Western official creditors, including the U.S. will 
get repaid. The August 1999 interim rescheduling postponed 
until the second half of 2000 those payments on about $8 
billion in obligations that were due over the course of 1998-
2000. The U.S. completed negotiations with Russia on 
implementing the August 1999 agreement under Paris Club 
guidelines \2\ on May 26, 2000. The Congressional Notification 
(CN) on this agreement was presented to Congress on the same 
day.\3\
---------------------------------------------------------------------------
    \2\ Under the Paris Club guidelines, any debt rescheduling or 
forgiveness must be negotiated and agreed by all members under a 
general framework; individual bilateral agreements between debtor and 
creditor country follow.
    \3\ Current law requires a Congressional Notification on debt 
rescheduling after the bilateral negotiations have been completed and a 
bilateral agreement has been signed. On debt rescheduling, the law does 
not require consultations with Congress before entering into the Paris 
Club framework agreement. On debt forgiveness, the law states that the 
Administration must come to Congress for an appropriation to fund any 
forgiveness of Russian debt to the United States.
---------------------------------------------------------------------------
    The goal of H.R. 4022 is to utilize the U.S. leverage 
obtained by ongoing reschedulings of Russian official debt to 
obtain more responsible Russian behavior in its arms sales to 
China. In fact, the legislation explicitly prohibits the 
President from rescheduling or forgiving any Russian debt until 
he certifies that the Russians have terminated all transfers of 
Moskit anti-ship missiles, particularly transfers to the PRC.
    The Administration was and continues to be strongly opposed 
to this legislation. In the Administration's view, prohibiting 
rescheduling and forgiveness will not only cripple U.S. 
leadership in the Paris Club but also undermines a key Paris 
Club principle--equal treatment of creditors--and encourage 
other creditors to cut special deals with Russia to the 
determinent of the United States. The Administration believes 
that U.S. efforts with Paris Club members for debt relief for 
the highly indebted poor countries (HIPC) would also be 
jeopardized.

         the issue of russian debt rescheduling and forgiveness

    In 1999, following the August 1998 financial crisis, Russia 
could not meet its $17.8 billion debt service obligations.\4\ 
Collapse of the ruble made servicing the dollar denominated 
debt unsustainable. Full debt servicing would have absorbed 
over 80% of the total projected Russian federal revenue. Russia 
chose to seek rescheduling and forgiveness of the Soviet-
inherited debt, while continuing to service its post-Soviet 
debt (primarily Eurobonds and other capital market issues but 
also including debt owed to the United States, such as to the 
Export-Import Bank). The August 1999 Paris Club agreement, as 
well as the February 2000 London Club (private holders of the 
Russian Soviet-era debt) agreement, are the outcomes of this 
period.
---------------------------------------------------------------------------
    \4\ Includes official and private Soviet and post-Soviet debt. The 
Soviet-inherited debt represents two-thirds of Russia's total debt 
obligations.
---------------------------------------------------------------------------
    The Russian economic situation looks significantly 
different today. Partially fueled by higher prices for Russia's 
oil exports as well as import substitution driven growth, the 
Russian economy is on the rise. Foreign exchange reserves are 
at the highest level in nearly 2 years. However, without 
significant economic reforms and sustained growth, Russia is 
still expected to have payment difficulties on the Soviet-era 
debt. Russian government officials said publicly that they will 
attempt to seek additional debt rescheduling and forgiveness at 
the upcomng G-7 Summit in Okinawa in July. Germany, with 48% of 
the estimated $42 Billion Russian Paris Club debt, will chair 
the upcoming Paris Club meeting, and has publicly questioned 
the need for any new Russian debt forgiveness. However, further 
debt rescheduling has not been ruled out by the Paris Club.
    The bilateral U.S.-Russia debt re-scheduling agreement, 
signed on May 26, 2000, is the outcome of the August 1999 Paris 
Club framework. It normally takes approximately a year to 
negotiate and sign a bilateral agreement. There is no mechanism 
in the Paris Club to amend the original framework if the 
economic situation, as is the case of Russia today, changes. If 
the U.S. can't sign an agreement with Russia to implement the 
August 1999 agreement, the Russians will have two choices: 
either pay the U.S. the upcoming $150 million of the Lend Lease 
portion of the Soviet debt on/around July 1, 2000 or default 
and loose its annual NTR status. Since Russia greatly values 
its NTR status and has sufficient foreign exchange reserves, it 
would most likely make this payment. While it may sound very 
attractive to have the Russians pay the United States right 
away, or Paris Club partners will immediately demand the same 
treatment from the Russians. Russia may suddenly face the 
prospect of default to major Western creditors. A Russian 
default to key Western governments will undermine the fragile 
stability of the Russian economy, and decrease the chances that 
the government of President Putin would implement any type of 
economic reforms. This type of economic hardship could even 
force the Russians to export more military items to China and 
other countries of concern to the U.S. Therefore, the remedy 
chosen by this bill could have the effect of increasing the 
problem the bill is seeking to address. These were the concerns 
we had in mind when the Committee supported the Gejdenson (D-
CT) amendment which granted the President a national security 
waiver that would allow the president to waive the prohibition 
on debt rescheduling and forgiveness if the President finds 
such waiver is vital to the national security interest of the 
United States. We are gratified that the Committee recognized 
that this issue required a degree of flexibility.

                                   Sam Gejdenson.
                                   Gary L. Ackerman.
                                   Earl Pomeroy.
                                   Howard L. Berman.
                                   Alcee L. Hastings.

                                  
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