[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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \3\ Includes official and private Soviet and post-Soviet debt. The 
Soviet-inherited debt represents two-thirds of Russian's total debt 
obligations.
---------------------------------------------------------------------------
    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.

                                  
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