[House Report 106-668]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-668
======================================================================
RUSSIAN-AMERICAN TRUST AND COOPERATION 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. 4118]
[Including cost estimate of the Congressional Budget Office]
The Committee on International Relations, to whom was
referred the bill (H.R. 4118) to prohibit the rescheduling or
forgiveness of any outstanding bilateral debt owed to the
United States by the Government of the Russian Federation until
the President certifies to the Congress that the Government of
the Russian Federation has ceased all its operations at,
removed all personnel from, and permanently closed the
intelligence facility at Lourdes, Cuba, 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-American Trust and Cooperation
Act of 2000''.
SEC. 2. FINDINGS.
The Congress makes the following findings:
(1) The Government of the Russian Federation maintains an
agreement with the Government of Cuba which allows Russia to
operate an intelligence facility at Lourdes, Cuba.
(2) The Secretary of Defense has formally expressed concerns
to the Congress regarding the espionage complex at Lourdes,
Cuba, and its use as a base for intelligence activities
directed against the United States.
(3) The Secretary of Defense, referring to a 1998 Defense
Intelligence Agency assessment, has reported that the Russian
Federation leases the Lourdes facility for an estimated
$100,000,000 to $300,000,000 a year.
(4) It has been reported that the Lourdes facility is the
largest such complex operated by the Russian Federation and its
intelligence service outside the region of the former Soviet
Union.
(5) The Lourdes facility is reported to cover a 28 square-
mile area with over 1,500 Russian engineers, technicians, and
military personnel working at the base.
(6) Experts familiar with the Lourdes facility have
reportedly confirmed that the base has multiple groups of
tracking dishes and its own satellite system, with some groups
used to intercept telephone calls, faxes, and computer
communications, in general, and with other groups used to cover
targeted telephones and devices.
(7) News sources have reported that the predecessor regime to
the Government of the Russian Federation had obtained sensitive
information about United States military operations during
Operation Desert Storm through the Lourdes facility.
(8) Academic studies assessing the threat the Lourdes
espionage station poses to the United States cite official
United States sources affirming that the Lourdes facility is
being used to collect personal information about United States
citizens in the private and government sectors, and offers the
means to engage in cyberwarfare against the United States.
(9) It has been reported that the operational significance of
the Lourdes facility has grown dramatically since February 7,
1996, when then Russian President, Boris Yeltsin, issued an
order demanding that the Russian intelligence community
increase its gathering of United States and other Western
economic and trade secrets.
(10) It has been reported that the Government of the Russian
Federation is estimated to have spent in excess of
$3,000,000,000 in the operation and modernization of the
Lourdes facility.
(11) Former United States Government officials have been
quoted confirming reports about the Russian Federation's
expansion and upgrade of the Lourdes facility.
(12) It was reported in December 1999 that a high-ranking
Russian military delegation headed by Deputy Chief of the
General Staff Colonel-General Valentin Korabelnikov visited
Cuba to discuss the continuing Russian operation of the Lourdes
facility.
SEC. 3. PROHIBITION ON BILATERAL DEBT RESCHEDULING AND FORGIVENESS FOR
THE RUSSIAN FEDERATION.
(a) Prohibition.--Notwithstanding any other provision of law, the
President--
(1) shall not reschedule or forgive any outstanding bilateral
debt owed to the United States by the Government of the Russian
Federation, and
(2) shall instruct the United States representative to the
Paris Club of official creditors to use the voice and vote of
the United States to oppose rescheduling or forgiveness of any
outstanding bilateral debt owed by the Government of the
Russian Federation,
until the President certifies to the Congress that the Government of
the Russian Federation has ceased all its operations at, removed all
personnel from, and permanently closed the intelligence facility at
Lourdes, Cuba.
(b) Waiver.--
(1) In general.--The President may waive the application of
subsection (a)(1) with respect to rescheduling of outstanding
bilateral debt if, not less than 10 days before the waiver is
to take effect, the President determines and certifies in
writing to the Committee on International Relations of the
House of Representatives and the Committee on Foreign Relations
of the Senate that--
(A) such waiver is necessary to the national
interests of the United States; and
(B) the Government of the Russian Federation is
substantially in compliance with multilateral and
bilateral nonproliferation and arms limitation
agreements.
(2) Additional requirement.--If the President waives the
application of subsection (a)(1) pursuant to paragraph (1), the
President shall include in the written certification under
paragraph (1) a detailed description of the facts that support
the determination to waive the application of subsection
(a)(1).
(3) Submission in classified form.--If the President
considers it appropriate, the written certification under
paragraph (1), or appropriate parts thereof, may be submitted
in classified form.
(c) Periodic Reports.--The President shall, every 180 days after the
transmission of the written certification under subsection (b)(1),
prepare and transmit to the Committee on International Relations of the
House of Representatives and the Committee on Foreign Relations of the
Senate a report that contains a description of the extent to which the
requirements of subparagraphs (A) and (B) of subsection (b)(1) are
being met.
SEC. 4. REPORT ON THE CLOSING OF THE INTELLIGENCE FACILITY AT LOURDES,
CUBA.
Not later than 30 days after the date of the enactment of this Act,
and every 120 days thereafter until the President makes a certification
under section 3, 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 (with a
classified annex) detailing--
(1) the actions taken by the Government of the Russian
Federation to terminate its presence and activities at the
intelligence facility at Lourdes, Cuba; and
(2) the efforts by each appropriate Federal department or
agency to verify the actions described in paragraph (1).
Background and Purpose
H.R. 4118, the ``Russian-American Trust and Cooperation Act
of 2000,'' was introduced on March 29, 2000, by Ms. Ros-
Lehtinen, Messrs. Diaz-Balart, DeLay, Burton, Hyde,
Rohrabacher, Smith (of New Jersey), and five other original
sponsors. The bill prohibits the rescheduling or forgiveness of
any outstanding bilateral debt owed by the Government of the
Russian Federation until the President certifies to the
Congress that the Government of the Russian Federation has
ceased all its operations at, removed all personnel from, and
permanently closed the intelligence facility at Lourdes, Cuba.
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 Russian espionage
activities conducted against the United States from the
facility at Lourdes, Cuba are ended.
revenue earned by the castro regime for the operation of the russian
espionage facility at lourdes, cuba
The rent provided to the communist regime of Fidel Castro
in Cuba by the Russian Government is considerable, according to
open press reports and statements by the United States
government. According to the Fiscal Year 1999 annual report on
the ``FREEDOM Support Act'' program, there are ``reports of oil
shipments totaling three million metric tons authorized by the
Russian Government to Cuba as compensation for the use of the
Lourdes intelligence facility. * * *'' The former U.S. State
Department Coordinator for Assistance to the New Independent
States of the Former Soviet Union, Ambassador Thomas Simons,
told the International Relations Committee on March 3, 1995
that: ``In November 1994, following a visit to Cuba, Russian
Chief of the General Staff Kolesnikov announced that Russia
would provide Cuba with $200 million in goods for Lourdes rent
in 1995.'' The Secretary of Defense, referring to a 1998
Defense Intelligence Agency assessment, has reported that
Russia leases the Lourdes facility for up to $300 million
annually.
the costs to the russian government of renting and operating the
lourdes facility as a percentage of the russian federal budget
During a visit to Moscow in November 1999, staff of the
International Relations Committee were informed by Russian
Finance Ministry officials with whom they met that annual
Russian federal government revenues then totaled about $19
billion while federal expenditures totaled about $25 billion.
The provision of at least $200-300 million annually worth of
commodities and/or equipment to the Cuban government as rent
for the Lourdes facility would easily represent one percent of
the Russian federal budget. In fact, as this bill (H.R. 4118)
notes, it has been estimated by some observers that the Russian
government has spent in excess of $3 billion on the operation
and maintenance of the Lourdes facility.
At a time when the Russian government consistently fails to
pay pensions to its retired workers or wages to its current
employees, when it is receiving hundreds of millions of dollars
in revenue from the proceeds of sales within Russia of donated
American food aid, when it is receiving hundreds of millions of
dollars from the United States to pay the costs of reducing its
nuclear arsenal in line with its commitments under the START-I
Treaty, and when it is demanding further debt rescheduling or
forgiveness from the United States and the support of the
United States for further low-cost loans from international
financial institutions, it is a matter of great concern that
the Russian government expends such large amounts of funds and
resources to maintain an aggressive campaign of espionage
against the United States from its facility in Cuba.
the nature of russian espionage carried out against the united states
by the russian government and the role of the lourdes facility in such
espionage
The Sunday Times newspaper of London, England stated in a
report of January 26th, 1997 that ``the Lourdes base, the
largest spy facility outside Russia, is staffed by about 1,500
Russian intelligence experts. Using satellites and high-speed
computers, they can pick up millions of microwave transmissions
every day and communicate with Russian spies operating on the
American continent.'' Mr. Stanislav Lunev, a former colonel in
the Russian GRU (military intelligence) has said the following:
``The strategic significance of the Lourdes facility has grown
dramatically since the secret order from Russian Federation
President [Boris Yeltsin] of 7 February 1996 demanding that the
Russian intelligence community step up the theft of American
and other Western economic and trade secrets. It currently
represents a very formidable and ominous threat to U.S.
national security as well as the American economy and
infrastructure.'' The private Center for Security Policy of
Washington, D.C. reported that: ``It is all but certain that at
least some of the phone, fax and e-mail transmissions involving
targeted individuals, companies and organizations that relay
politically sensitive or potentially compromising information
could wind up in the hands of people prepared to exploit it.
Indeed, as the director of the Defense Intelligence Agency told
the Senate Intelligence Committee in August 1996, Lourdes is
being used to collect ``personal information about U.S.
citizens in the private and government sectors.''
In a May 1998 letter to Congress accompanying a report on
Cuba, U.S. Secretary of Defense William Cohen stated that he
was ``concerned about the use of Cuba as a base for
intelligence activities directed at the United States.''
According to a report in the Russian newspaper ``Izvestiya'' of
November 5th, 1998, the Russian intelligence facility at
Lourdes, Cuba ``provides between sixty and seventy per cent of
all [Russian] intelligence data about the United States.''
``Jane's Intelligence Review'' wrote in September 1998 that the
Lourdes facility is ``* * * perhaps the greatest single
overseas GRU [Russian military intelligence] asset. * * *'' The
Center for Security Policy, a private research organization,
stated in a report of April 10th, 1998 that: ``The Kremlin's
use of intelligence garnered by its Lourdes listening post is
not limited to penetrating secret U.S. military operations. Its
targets also include the interception of sensitive diplomatic,
commercial and economic traffic, e.g., Federal Reserve
deliberations, planned U.S. mergers and acquisitions,
competitive bidding processes, etc. and even private U.S.
telecommunications.'' In an appearance before a joint hearing
of the Senate Intelligence and Judiciary Committees inFebruary
1996, FBI Director Louis Freeh stated that the expertise of Russian
intelligence agencies ``presents a very formidable, very ominous threat
to this country, to the infrastructure, to our economy.''
These statements, reports and allegations must be viewed
with great concern. In August 1999, the U.S. FBI and State
Department discovered a very sophisticated Russian listening
device planted in the heart of the U.S. State Department and
operated at a remote distance by a Russian spy in the United
States under diplomatic cover. In 1998-99, news reports stated
that Russian spying against the United States by means of
placement of spies within the United States had increased
substantially in recent years. The Daily Telegraph of London,
England reported that ``Moscow is massively increasing
espionage activity in America. * * *'' In fact, the
``Washington Times'' of July 26th, 1999 reported that U.S.
Ambassador to Russia James Collins had been instructed to warn
top Russian officials to reduce the large number of Russian
intelligence officers operating in the United States. It would
appear that the Lourdes facility plays an important role in
supporting such espionage aimed against the United States and
against American citizens.
the russian governments'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, resorting 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 four
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 Russia's debt-servicing 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 rescheduling ensured that Russia
remained eligible to access those sources 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 Shokhin in fact stated after the conclusion of the
2000 debt forgiveness and rescheduling agreement with the
London Club that that agreement would likely merely
delayRussia'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 its 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 act, 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'' magazine stated the following in this 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 dealing with
international financial institutions in a proper and
transparent manner. With regard to the latter point, the
``Economist'' magazine, 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 later 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-undetermined 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/(IF), 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. 4118 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 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 amount 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. 4118 was introduced by Representative Ros-Lehtinen on
March 29, 2000 and referred by the Speaker to the Committee on
International Relations.
Markup of the Bill
On May 4, 2000, the International Relations Committee
marked up the bill, pursuant to notice, in open session. The
Committee adopted by voice vote an amendment by Mr. Gejdenson
that would add a presidential waiver provision and reporting
requirement. A unanimous consent request by the Chair that the
Committee be deemed to have before it an amendment in the
nature of a substitute, consisting of the text of the bill as
currently amended, was agreed to.
Subsequently, a quorum being present, the Committee agreed
by voice voice to a motion offered Mr. Bereuter to favorably
report the bill, as amended, to the House of Representatives.
Rollcall Votes
Clause (3)(b) of rule XII of the Rules of the House of
Representatives requires that theresults of each recorded 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. 4118--May 4, 2000)
There were no recorded votes on the bill or amendments.
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.
Committee 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.
Applicability 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. 4118 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 8 (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. 4118 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
of 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. 4118 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. 4118 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, May 8, 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. 4118, the Russian-
American Trust and Cooperation 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. 4118--Russian-American Trust and Cooperation Act of 2000
H.R. 4118 would prohibit the President from rescheduling or
forgiving any bilateral debts of Russia until the President
either certifies that Russia has closed its intelligence
facility at Lourdes, Cuba or waives that prohibition and
certifies that the waiver is necessary to the national interest
of the United States. The bill would require the President to
report to the Congress on Russia's efforts to close its
facilities at Lourdes and, if he provides the certification, on
the extent that a waiver is in the national interest and that
Russia is in substantial compliance with nonproliferation and
arms limitation agreements. CBO estimates the additional
reporting requirement would cost less than $500,000 a year,
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 lend-
lease 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 Russian
that would implement the multilateral agreement.
CBO assumes that the President would use the waiver
authority. In that case, the bill would not affect direct
spending or receipts. If not, the United States would be unable
to reschedule Russia's debts under the bill. Not rescheduling
Russia's debts would increase net outlays from the forgone
payments due upon signing of the bilateral agreement. A Russian
default on its lend-lease loans could affect governmental
receipts because Russia could lose its normal trade relations
status thus affecting tariff collections.
H.R. 4118 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-American Trust and
Cooperation Act of 2000''.
Section 2. Findings
This bill contains a number of findings--all based on
general press or open source reports and statements--with
regard to the Russian government's rent and operation of the
intelligence facility at Lourdes, Cuba. It notes that the
Russian government pays up to $300 million annually in rent for
the facility, that that government has spent an estimated $3
billion for the operation and modernization of the facility,
and that Russia is upgrading and expanding the facility. The
bill notes that some academic analysts believe the facility is
being used by the Russian government to collect personal
information about United States citizens through electronic
intercepts of targeted telephones and other electronic
communications and that, in that regard, its significance to
Russian intelligence agencies has grown since former Russian
President Boris Yeltsin issued an order to those agencies in
February 1996 to increase their gathering of economic and trade
secrets in the United States. The bill notes that the Secretary
of Defense has formally expressed concerns to the Congress
regarding the facility at Lourdes, Cuba and its use as a base
for intelligence activities directed against the United States.
Section 3. Prohibition on bilateral debt rescheduling and forgiveness
of the Russian Federation
The bill, notwithstanding any other provision of law,
prohibits any rescheduling or forgiveness of any outstanding
bilateral debt owned to the United States government by the
government of the Russian Federation until the President can
certify to the Congress that the Russian government has
permanently closed its facility at Lourdes and removed all of
its personnel and ended its operations there. It also requires
the President to instruct the United States representative to
the Paris Club of official creditors to oppose such
rescheduling or forgiveness for Russia until the President can
make that certification.
The bill provides the President with the authority to waive
the prohibition, only with regard to rescheduling of the
bilateral debt owned to the United States by the Russian
government, if he certifies that that waiver is in the national
interests of the United States and the Russian government is
substantially in compliance with multilateral and bilateral
nonproliferation and arms limitation agreements. If the
President exercises that authority, his written certification
must include a detailed description of the facts that support
his determination to issue a waiver. He may provide that
certification in classified form. The President shall also
provide to the relevant Committees of the Congress subsequent
reports, every 180 days, describing the extent to which the
national interests of the United States are being met by the
issuance of the waiver and the extent to which Russian is in
compliance with multilateral and bilateral nonproliferation and
arms limitation agreements.
Section 4. Report on the closing of the intelligence facility at
Lourdes, Cuba
Within thirty days of the enactment of this bill, and every
120 days thereafter until he makes a certification either that
the Russian government has closed the facility at Lourdes, Cuba
or that a waiver is in the national interests of the United
States and that Russia is subsequently in compliance with its
nonproliferation and arms limitation agreements, the President
shall submit to the relevant Committees of Congress a report
(with a classified index) detailing actions taken by the
Russian government to terminate its presence and activities at
the facility at Lourdes, Cuba and efforts by appropriate
Federal departments or agencies to verify those actions.
MINORITY VIEWS
espionage activities at the lourdes facility
H.R. 4118 would prohibit the rescheduling or forgiveness of
any outstanding bilateral debt owed by the Government of the
Russian Federation to the United States until the President
certifies to the Congress that the Government of the Russian
Federation has ceased all its operations at, removed all
personnel from, and permanently closed the intelligence
facility at Lourdes, Cuba. The bill seeks to prevent
rescheduling or forgiveness of any of the Russian government's
bilateral debt to the United States Government in any
multilateral forum, including the Paris Club of official
creditors. The legislation also contains a reporting
requirement on the status of any actions taken by the Russian
government to terminate its presence and activities at Lourdes
and verification of such efforts by each appropriate U.S.
government agency.
Lourdes is a signals intelligence facility established in a
suburb of Havana in the aftermath of the Cuban Missile Crisis
to monitor naval communications and other high frequency
military transmissions from the U.S. With the dissolution of
the U.S.S.R. the new Russian government negotiated an agreement
(at under $200 million annually) with Cuba to ensure continuing
functioning of the facility, albeit at reduced levels.
Reportedly, the facility is manned at 1,000 to 1,500 personnel.
The Lourdes facility remains under control of the Russian
military intelligence and enables Russia to monitor arms
control agreements, thus guaranteeing a certain level of
political trust between Russia and the U.S. Although some argue
that Lourdes is being used to collect personal information
about U.S. citizens and offers means for Cuba and Russia to
engage in cyberwarfare against the U.S., the extent to which
Lourdes may target U.S. individual or corporate communications
is uncertain. Reportedly, the intelligence gathered at Lourdes
is not shared with the Cuban government.
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 \1\ on May 26, 2000. The Congressional Notification
(CN) on this agreement was presented to Congress on the same
day.\2\
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\1\ 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.
\2\ 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.
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The goal of H.R. 4118 is to utilize the U.S. leverage
obtained by ongoing rescheduling of Russian official debt to
obtain Russian cooperation on closure of the Lourdes facility.
In fact, the legislation explicitly prohibits the president
from rescheduling or forgiving any Russian debt until he
certifies that the Russians have terminated all operations at
Lourdes and have closed the facility.
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 undermine a key Paris
Club principle--equal treatment of creditors--and encourage
other creditors to cut special deals with Russia to the
detriment 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.\3\
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 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.
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\3\ Includes official and private Soviet and post-Soviet debt. The
Soviet-inherited debt represents two-thirds of Russian's total debt
obligations.
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The Russian economic situation looks significantly
different today. Partially fuelled 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-ear debt. Russian government officials said publicly
that they will attempt to seek additional debt rescheduling and
forgiveness at the upcoming 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, 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 United States 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, our 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. Rather than closing the Lourdes facility,
this type of the economic hardship could force the Russians to
engage in activities that threaten the national interests of
the United States, such as export more military items to
countries of concern to the U.S. Thus, these were the concerns
we had in mind when the Committee supported the Gejdenson (D-
CT) amendment which granted the President a waiver that would
allow the president to waive the prohibition on debt
rescheduling and forgiveness if the President finds such waiver
is necessary to the national interests of the United States and
is substantially in compliance with non-proliferation and arms
limitation agreements. 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.