[Senate Report 106-139]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 256
106th Congress                                                   Report
                                 SENATE
 1st Session                                                    106-139

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



 
                   SERBIA DEMOCRATIZATION ACT OF 1999

                                _______
                                

                 August 5, 1999.--Ordered to be printed

                                _______


          Mr. Helms, from the Committee on Foreign Relations,
                        submitted the following

                              R E P O R T

                         [To accompany S. 720]

    The Committee on Foreign Relations, to which was referred 
the bill (S. 720), to promote the development of a government 
in the Federal Republic of Yugoslavia (Serbia and Montenegro) 
based on democratic principles and the rule of law, and that 
respects internationally recognized human rights, to assist the 
victims of Serbian oppression, to apply measures against the 
Federal Republic of Yugoslavia, and for other purposes, having 
considered the same, reports favorably thereon with an 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page

Purposes of the bill.............................................     1
Committee action.................................................     3
Section-by-section analysis......................................     4
Cost estimate....................................................    11
Evaluation of regulatory impact..................................    13

                          Purposes of the Bill


                              Introduction

    The Committee on Foreign Relations feels that the prospects 
for democratic change in Yugoslavia have improved dramatically 
since the end of the NATO air campaign against Serbia on June 
10, 1999. After eight years of conflict, war, destruction, 
economic hardship and massive human rights abuses--with 
Slobodan Milosevic at the helm--there is renewed hope that 
Serbian citizens will finally rid their country of the source 
of instability and chaos.

    Since first exploiting rising Serbian nationalism in the 
1980s to gain power and influence, Milosevic has engaged in 
undemocratic methods to maintain his firm grip on Serbian 
political life. Despite recent positive signs that Serbian 
citizens have finally tired of Milosevic, of his tactic of 
manipulating conflict into bloody warfare, and of his 
undemocratic means of governing, he has faced difficult times 
in the past and always managed to emerge on top, often stronger 
than ever. The end of the war in Kosovo, however, offers the 
United States and its allies an opportunity to affect 
positively the future direction of Serbia.

    Serbia's defeat in that war may convince those individuals 
who once viewed Milosevic as the savior of the Serbian nation 
that he is, in fact, responsible for the massive destruction 
and degradation of their country. The Serbian public cannot 
ignore the Kosovo Serbs who have fled the province for Serbia 
proper or the disenchantment of many Yugoslav army reservists 
over the manner in which they were ordered to conduct the war. 
Further, the NATO bombing damaged Serbian infrastructure and 
exacerbated the existing economic crisis. American journalists 
have reported a widespread feeling of anger and disgust within 
Serbia that is directed at Milosevic himself for what he has 
brought on.

    Evidence of this dissatisfaction can be seen in the anti-
Milosevic demonstrations occurring with increasing frequency 
and greater participation in cities throughout Serbia. A number 
of town councils controlled by opposition parties, including 
that of Novi Sad, Serbia's second largest city, have passed 
resolutions calling for Milosevic to resign. Student leaders 
have indicated that they will join the anti-Milosevic campaign 
beginning in September. Army reservists have launched protests 
in the Serbian cities of Nis, Vranje, and Krusevac, primarily 
over the issue of unpaid wages, but there is hope that their 
frustrations may be channeled into anti-Milosevic activity. On 
June 28, 1999, the leader of the Serbian Orthodox Church, 
Patriarch Pavle, called for the resignation of Milosevic for 
the good of the Serbian people, and the leader of the Church in 
Kosovo, Bishop Artemije, repeatedly has spoken out against 
Milosevic's actions in that province.

    The war in Kosovo also highlighted the differences between 
Serbia and Montenegro, Serbia's junior partner in the so-called 
Federal Republic of Yugoslavia. (Serbia and Montenegro have 
asserted the formation of a joint independent State--the 
Federal Republic of Yugoslavia [FRY]--but the entity has not 
been formally recognized by the United States.) Montenegro's 
President Milo Djukanovic is seen as the only political leader 
in the FRY who has successfully withstood a challenge from 
Milosevic. In the face of extreme pressure, Djukanovic managed 
to maintain stability in Montenegro during the war, forestall 
Yugoslav army attacks against Montenegro, and retain his ties 
to the United States and the West. The functioning, democratic, 
multi-ethnic governing coalition in Montenegro, which is the 
beneficiary of American political and financial support, serves 
as a model to Serbs as to the benefits their country could 
enjoy in the post-Milosevic period.

    The Committee notes that the United States and Western 
Europe missed an opportunity to encourage democratic change in 
Serbia in the winter of 1996-1997, when a coalition of 
opposition parties won municipal elections in 14 of Serbia's 17 
largest cities. After Milosevic nullified the election results, 
tens of thousands of Serbian citizens took to the streets in 
massive and sustained demonstrations, demanding that the 
election results be recognized. Milosevic ultimately was forced 
to do so, but the opposition coalition disintegrated soon 
thereafter as a result of infighting and competing personal 
ambition. The United States did little to foster cooperation 
among the leaders of the opposition parties during that time, 
and Milosevic emerged even stronger.

    There are approximately 6,500 American soldiers 
participating in the NATO-led Stabilization Force in Bosnia, 
and 7,000 American soldiers participating in the NATO-led 
Kosovo Force in Kosovo. The Committee believes that the United 
States will be forced to continue to send U.S. armed forces to 
participate in peacekeeping missions in the Balkans until we 
address the underlying cause of the problem in the region--
Slobodan Milosevic. The Serbia Democratization Act provides 
substantial assistance to forces within Serbia who seek the 
removal of Milosevic and the development of a government in 
Serbia that is based on democratic principles and the rule of 
law, and that respects internationally recognized human rights.

    The Committee wishes to make clear that it has no quarrel 
with the people of Serbia, but that the problem is with its 
leadership.

                            Committee Action


    Senators Helms, Lugar, Gordon Smith, Lieberman, Lautenberg, 
Hagel, Edwards, DeWine, McCain, Hatch, Voinovich, and Coverdell 
introduced the Serbia Democratization Act (S. 720) on March 25, 
1999.

    The Committee held two hearings this year on the situation 
in the former Yugoslavia. Both Administration and private 
sector witnesses appeared at these hearings.

          April 20, 1999  The War in Kosovo  Witness: The 
        Honorable Madeleine Albright, Secretary of State

          July 29, 1999  Prospects for Democracy in Yugoslavia  
        Witnesses: The Honorable Robert S. Gelbard, Special 
        Representative of the President and the Secretary of 
        State for Implementation of the Dayton Peace Accords; 
        The Honorable James W. Pardew, Jr., Deputy Special 
        Advisor to the President and the Secretary of State for 
        Kosovo and Dayton Implementation; Ms. Sonja Biserko, 
        Chairperson, Helsinki Committee for Human Rights in 
        Serbia; Father Irinej Dobrijevic, Executive Director, 
        Office of External Affairs, United States Serbian 
        Orthodox Church; Mr. John Fox, Director, Washington 
        Office, Open Society Institute; Mr. James Hooper, 
        Executive Director, Balkan Action Council


    The Committee approved by voice vote the Serbia 
Democratization Act with an amendment in the nature of a 
substitute at a business meeting on July 28, 1999.

                      Section-by-Section Analysis


             TITLE I. SUPPORT FOR THE DEMOCRATIC OPPOSITION

    The Committee urges the Administration to support actively 
the democratic opposition in Yugoslavia to develop a legitimate 
and viable alternative to the Milosevic regime. To promote and 
strengthen institutions of democratic government and the growth 
of an independent civil society in Yugoslavia, including ethnic 
tolerance and respect for human rights, the legislation 
authorizes $100 million in U.S. assistance for fiscal years 
2000 and 2001.

    In particular, the Committee notes that providing support 
to the independent media is critical. During the war in Kosovo, 
the Milosevic regime passed and implemented a law strictly 
limiting freedom of the press and intimidated independent media 
from operating within the country. After the war began, the 
Broadcasting Board of Governors acted quickly to enhance Voice 
of America and Radio Free Europe broadcasts into Serbia, as 
well as to establish a ring of transmitters around the country 
so that the Serbian people would have access to accurate news 
accounts of the war. Yet, the Committee notes that VOA and RFE 
services should not preclude the United States from assisting 
the indigenous media to develop the capacity to serve more 
effectively as alternative news sources to the state-controlled 
media.

    Along with independent media, the Committee urges the 
Administration to focus its assistance on the development of 
democratic political parties, the rule of law, non-governmental 
organizations, local governance, and a free market economy.

    The Committee expects that non-governmental organizations 
with a history of working in political party development, media 
training, judicial reform and other similar activities will be 
most effective in providing the assistance authorized in the 
bill. Opportunities may exist for other non-traditional 
providers of assistance (including international organizations) 
to manage programs that further the goals of the legislation. 
The Committee expects, however, that United States assistance 
to the democratic opposition will not be funneled through the 
United Nations.

    The bill states that the President should take all 
necessary steps to ensure that no funds or other assistance is 
provided to the Government of Yugoslavia or the Government of 
Serbia, except for the purposes permitted under the 
legislation. The Committee recognizes that a situation may 
arise in which the Administration believes it consistent with 
the goals of the bill to provide assistance to a Ministry of 
the Serbian or Yugoslav Government that it thinks is working to 
bring about democratic change in Serbia. Yet, the Committee 
notes that providing such assistance may be misconstrued by the 
Serbian people as indicative of United States support of the 
current regime (particularly given the virtual monopoly of the 
state-controlled media). The Committee urges the Administration 
to provide funds or other assistance to governmental entities 
only when it is certain that those entities are actively 
supportive of the goals of the legislation and only when it is 
certain that Milosevic will be unable to benefit, either 
directly or indirectly, from doing so. The Committee believes 
that as long as the Milosevic government remains in power, it 
is unlikely that the United States will find instances in which 
providing assistance to governmental entities will further the 
purposes of the legislation.

    The Committee discourages any member of the Administration 
from meeting, negotiating, engaging in discussion, or otherwise 
interacting with Slobodan Milosevic. As an indicted war 
criminal, he should be treated as a pariah. For too long the 
United States treated Milosevic as our partner for peace in the 
region and failed to cultivate relationships with opposition 
leaders. Milosevic used his relationship with the United States 
to bolster his personal authority and represented meetings with 
U.S. officials as proof that the United States supported his 
regime. The only topics of conversation the Committee envisions 
as appropriate between United States officials and Milosevic 
concern his ceding power to democratic forces in Yugoslavia or 
surrendering himself to the International Criminal Tribunal for 
the former Yugoslavia at the Hague.

    To reward the positive developments in Montenegro, the bill 
allows the provision of assistance to that republic as long as 
the government of Montenegro is committed to democratic 
principles and the rule of law, and respects human rights. If 
undemocratic elements were to take over governing functions in 
Montenegro, the Committee would expect the Administration 
immediately to stop dispensing all U.S. assistance to that 
republic.

    As noted earlier, the Committee is pleased with the 
response of the Broadcasting Board of Governors (BBG) to 
counteract the Milosevic regime's propaganda during the war in 
Kosovo. The Committee urges the BBG to continue to further the 
open communication of ideas and information in both the Serbo-
Croatian and Albanian languages.

       TITLE II. ASSISTANCE TO THE VICTIMS OF SERBIAN OPPRESSION

    The Committee expresses its horror at the atrocities that 
took place in Kosovo beginning with the first assault by 
Serbian Interior Ministry troops in February 1998. Though it is 
likely that the exact number of innocent civilians killed 
during the course of the conflict will never be known, reports 
of mass graves, daily discoveries of bodies of the elderly, 
women, and children, as well as first hand accounts of 
atrocities from Kosovar Albanian refugees provide the impetus 
for the United States to give assistance to those who survived 
the brutal attacks and ethnic cleansing.

    The legislation authorizes assistance for relief, 
rehabilitation, and reconstruction in Kosovo and for refugees 
and persons displaced by the conflict. The Committee notes, 
however, that it expects our European allies to provide the 
bulk of reconstruction assistance to Kosovo, given the 
disproportionately large financial burden that the United 
States bore during the air campaign against Serbia. 
Reconstruction projects that the Committee deems appropriate 
under this section include such small-scale projects as 
winterizing housing in Kosovo. Although many Kosovar Albanian 
refugees made their way from Albania and Macedonia to other 
countries in Europe, the Committee does not intend for United 
States assistance for refugees to be provided to countries such 
as Germany, France, or Russia.

                  TITLE III. ``OUTER WALL SANCTIONS''

    For several years the Administration has maintained the 
policy of upholding the so-called ``outer wall'' of sanctions 
against Yugoslavia until that country fulfilled five 
conditions. The sanctions are: no United States support for 
economic assistance for Yugoslavia from any of the 
international financial institutions; no United States support 
for the inclusion of Yugoslavia in international organizations 
such as the United Nations and the Organization for Security 
and Cooperation in Europe; and no restoration of full U.S. 
diplomatic relations with Yugoslavia. The conditions required 
to be met prior to any relief from the outer wall are: 
agreement on a lasting settlement on Kosovo; full compliance 
with the Dayton Accords that ended the war in Bosnia; 
implementation of internal democratic reform; settlement of the 
succession issues with the other republics that emerged from 
the break-up of the Socialist Federal Republic of Yugoslavia; 
and cooperation with the International Criminal Tribunal for 
the former Yugoslavia.

    During the negotiations at Wright-Patterson Air Force Base 
in Dayton, Ohio that led to the end of the war in Bosnia, 
Milosevic made clear the importance to Serbia of sanctions 
relief. Then-Assistant Secretary of State for European and 
Canadian Affairs Richard Holbrooke described the sanctions as 
the Administration's main bargaining chip with Milosevic. As a 
result of Milosevic's signing of the Dayton Accords on behalf 
of the Bosnian Serbs, the Administration immediately lifted 
almost all of the sanctions that were aimed against Serbia at 
the time.

    The outer wall of sanctions has had an impact on the 
Serbian economy, and their effect presumably will be magnified 
as a result of the need to repair infrastructure damage caused 
by the NATO air campaign. Although the legislation allows the 
President to relax the outer wall of sanctions once he 
certifies that the Government of Yugoslavia has made 
significant progress in meeting the stated conditions, the 
Committee expects the Administration to use a rigorous standard 
to define significant progress.

    The Committee notes that such a certification will be 
virtually impossible as long as Milosevic remains in power. The 
U.S. should do nothing that could potentially prolong his 
regime, and maintaining the outer wall sanctions, particularly 
the denial of loans, grants, and other assistance from the 
international financial institutions, is critical to 
accelerating his removal from the political scene. In 
particular, the Committee expects U.S. representatives to the 
international financial institutions to work actively to 
prevent any assistance from those institutions from going to 
Serbia or Yugoslavia.

    If any of the international financial institutions proceed 
with any such assistance to Serbia or Yugoslavia over the 
objection of the United States, the Committee urges the 
Administration to withhold from payment of the U.S. share of 
any replenishment of that institution an amount equal to that 
of the loan or assistance granted.

              TITLE IV. OTHER MEASURES AGAINST YUGOSLAVIA

Blocking of Assets

    The legislation blocks all assets in the United States of, 
or in the name of, the Government of Yugoslavia or the 
Government of Serbia and forbids the exportation to Serbia of 
any U.S. goods, technology, or services.

    The bill also requires the Secretary of the Treasury to 
take all actions necessary to carry out the blocking of Serbian 
and Yugoslav assets and to fulfill his responsibilities to 
enforce the Executive Orders issued in response to the Kosovo 
conflict (13088 of June 9, 1998 and 13121 of May 1, 1999). The 
Committee notes that these Executive Orders should continue to 
be fully enforced until the Milosevic regime is replaced by a 
democratic government.

Suspension of Entry

    The Committee notes that the visa ban imposed by the 
European Union against several hundred high ranking Serbian 
government officials, business cronies of the regime, and 
Milosevic family members has been highly effective at 
highlighting to these persons that their participation in or 
association with the Milosevic government has personal 
consequences. The Committee encourages the President to use the 
authority granted to him by section 212 (f) of the Immigration 
and Nationality Act to deny entry into the United States not 
just to the senior leadership of the Serbian and Yugoslav 
government, as the legislation requires, but also to a much 
broader category of individuals affiliated with, or supportive 
of, the Milosevic regime.

    Though the senior leadership of the Montenegrin government 
is exempted from this provision, if the Milosevic government 
were to act against that republic and install its loyalists in 
positions of political power, the Committee would recommend 
that the President determine that the entry of those 
individuals to the United States would be detrimental to the 
interests of the U.S. and, under the authority of section 212 
(f) of the Immigration and Nationality Act, deny them entry as 
well.

Prohibition of Strategic Exports

    The legislation forbids the Serbian or Yugoslav military, 
police, prison system, or national security agencies from 
gaining access to United States computers, computer software or 
similar goods or technology. Those institutions have proven to 
be repressive and anti-democratic and should not have access to 
any technology that would benefit them in any way.

Prohibition on Loans and Investment

    The legislation prohibits any loans, credit guarantees, 
insurance, financing, or other similar assistance to be 
extended by the United States Government to the Government of 
Yugoslavia or the Government of Serbia. The Committee expects 
the Administration to withhold all U.S. financial support from 
Serbia with the exception of the assistance authorized under 
this legislation and humanitarian aid.

    The bill also prohibits any United States national from 
making or approving any loan or other extension of credit to 
the Government of Yugoslavia or the Government of Serbia, or to 
any entity owned or controlled by either government.

    The Committee recognizes Serbia's need for foreign 
investment given the backward state of its economy and the 
destruction caused by the NATO bombing. The ban on U.S. 
Government and private loans and investment is not designed to 
punish the Serbian people, but to highlight the fact that the 
removal of Milosevic from power will have a substantial, 
positive impact on the Serbian economy as a whole, as well as 
on the lives of individual Serbs.

Prohibition on Military-to-Military Cooperation

    The legislation prevents the United States from providing 
any assistance, including defense articles or services, to the 
armed forces of the Government of Yugoslavia or the Government 
of Serbia. For the purposes of the legislation, the Committee 
intends the prohibition also to apply to the Interior Ministry 
police forces. The Committee also expects any cooperation 
between the U.S. armed forces and the Yugoslav or Serbian armed 
forces to be strictly limited to that delineated in the 
Military-Technical Agreement that ended the war in Kosovo, i.e. 
verification of Serbian and Yugoslav compliance with the 
provisions in the agreement.

Multilateral Sanctions

    The Committee recognizes that the effect of the measures 
imposed against Yugoslavia will be greater if other countries 
take similar actions. The Committee recommends that the 
President seek to coordinate a comprehensive strategy with 
other countries to further the purposes of the legislation and 
that he encourage other countries to impose similar measures 
against Yugoslavia. Their decision whether or not to do so, 
however, should not affect the Administration's commitment to 
maintain or enforce the sanctions currently in place or those 
imposed by the legislation.

Exemptions

    Given Kosovo's de facto status as an international 
protectorate, the legislation exempts the province from being 
subject to the restrictions against Yugoslavia that are imposed 
by the bill. Similarly, the restrictions do not apply to 
Montenegro as long as the Government of Montenegro is committed 
to democratic principles and the rule of law, and respects 
human rights. If undemocratic elements were to take over 
governing functions in Montenegro, the Committee would expect 
the Administration to apply the legislation's restrictions 
equally to that republic. The Committee considers the 
restrictions to be sections 301 and 302 in Title III and 
sections 401 through 405 in Title IV.

Waiver; Termination of Measures Against Yugoslavia

    The legislation allows the President to waive the measures 
against Yugoslavia for successive one-year periods if he 
determines that it is important to the United States national 
interest or that significant progress has been made in 
Yugoslavia in establishing a government based on democratic 
principles and the rule of law, and that respects 
internationally recognized human rights. The Committee notes 
that progress in establishing such a government should be 
interpreted rigorously, and it expects the Administration to 
exercise its right to use this waiver only when it is clear and 
demonstrable that the use of the waiver will assist the 
establishment of a democratic government in Yugoslavia. 
Further, the Committee expects that if the Administration 
chooses to invoke the waiver option, it do so with regard to 
specific measures in the legislation, not to all the measures 
in the bill in one broad waiver. The Committee also expects a 
detailed justification for exercising the waiver, including how 
using the waiver for each particular section will contribute to 
the goals of the legislation.

    Invoking the waiver without the 15-day advance 
congressional notification specified in the bill should be done 
only in exceptional, emergency situations. The Committee 
anticipates that such a situation will arise rarely, if ever.

    The Committee notes that the termination of the 
restrictions imposed by the legislation should only occur in a 
post-Milosevic environment in which the Governments of 
Yugoslavia and Serbia are committed fully and irreversibly to 
democracy and the rule of law, and respect for human rights.

Statutory Construction

    The Committee does not intend for the people of Yugoslavia 
to be denied access to humanitarian assistance, including food 
and medicine, as a result of the measures against Yugoslavia in 
the legislation. The Committee does not consider humanitarian 
assistance to include assistance for any reconstruction in 
Serbia, however basic. The Committee emphasizes that in no case 
should the United States allow the export of any agricultural 
commodity or medicine that could contribute to the development 
of a chemical or biological weapon.

                   TITLE V. MISCELLANEOUS PROVISIONS

The International Criminal Tribunal for the former Yugoslavia

    The Committee is distressed at the lack of cooperation 
given by Yugoslavia to the International Criminal Tribunal for 
the former Yugoslavia (ICTY). Yugoslav officials have 
consistently rejected the jurisdiction of the Tribunal over 
events in Kosovo, and prior to the end of the war, actively 
impeded the Tribunal from investigating alleged war crimes 
committed there.

    In light of the Tribunal's May 24, 1999, indictment of 
Milosevic for crimes against humanity, the Committee urges the 
United States to support fully the investigation of Milosevic 
and to provide all appropriate information to the Office of the 
Prosecutor of the ICTY that the U.S. intelligence community 
collects or has collected to support that investigation. The 
Committee considers all information that directly or indirectly 
relates to the investigation to be appropriate and urges the 
Administration to transfer as much information as possible, 
taking into account the need adequately to protect intelligence 
sources and methods.

    The legislation requires the Administration to submit a 
report to Congress, in classified form if necessary, once every 
180 days that describes the information that was provided to 
the Office of the Prosecutor of the ICTY during that time 
period. The Committee is interested in a detailed list of the 
information that was provided to the ICTY, but emphasizes that 
it does not intend the report to compromise in any way 
intelligence sources and methods.

Ethnic Hungarians in Vojvodina

    Given Milosevic's pattern of fomenting ethnic conflict to 
maintain his personal power, the Committee is greatly concerned 
about the well-being of the ethnic Hungarian population in the 
northern Serbian province of Vojvodina. This population has 
been subject to restrictions of freedom similar to those 
endured by the ethnic Albanians in Kosovo, and more recently 
has suffered harassment, intimidation, and direct threats from 
the government. Milosevic's vulnerability at this time may lead 
him to embark on an armed attack against the Vojvodina 
Hungarians to divert attention from protests against his 
government and to further consolidate his power.

    The legislation urges the President to condemn publicly 
Belgrade's intimidation and harassment of the ethnic Hungarians 
in Vojvodina and encourages the Administration to monitor 
closely the situation in that province. In calling upon U.S. 
allies to pay substantial attention to establishing guarantees 
for the ethnic Hungarians and other minorities in Vojvodina and 
to consult with elected leaders in the province about self-
administration, the Committee notes that it expects any 
discussions about the status of Vojvodina to take into 
consideration the wishes of the whole population of the 
province. Ethnic Hungarians and other minorities in Vojvodina 
must have the ability to participate in all discussions about 
local governance. The Committee notes, in accordance with the 
Helsinki Final Act, that the Committee does not endorse the 
secession of Vojvodina from Yugoslavia. The Committee expects 
that the establishment of a functioning democratic system of 
government in Belgrade will also benefit ethnic minorities in 
Vojvodina.

Ownership and Use of Diplomatic and Consular Properties

    After the dissolution of the Socialist Federal Republic of 
Yugoslavia, representatives from Serbia-Montenegro effectively 
took over five SFRY diplomatic properties in Washington, DC and 
two SFRY diplomatic properties in New York, NY. Representatives 
of the other successor states (Bosnia and Herzegovina, Croatia, 
the Former Yugoslav Republic of Macedonia, and Slovenia) were 
denied access to such property and have received no financial 
compensation for their share of ownership. Because Serbia has 
blocked progress on the resolution of successor state issues, 
the ownership and continued use of these properties has not 
been settled. If Serbia continues to refuse to engage in good 
faith negotiations on the status of these properties, the 
Committee urges the President to take steps to return those 
properties to the possession of the other successor states in 
accordance with international law.

Transition Assistance

    The Committee notes that once the Milosevic government has 
been replaced by one that is committed to democracy and the 
rule of law, and that respects human rights, the United States 
should provide substantial assistance to help Yugoslavia make 
the transformation to a democratic country. Nearly a decade of 
warfare has placed Yugoslavia even further behind other 
countries in Central and Eastern Europe that also emerged from 
communism and centrally planned economic systems.

    The legislation authorizes transition assistance to 
Yugoslavia once the President determines that Yugoslavia is 
committed to democracy and the rule of law, and respects human 
rights. The Committee expects that such assistance will be 
provided only when the Administration is confident that the 
post-Milosevic leaders of Yugoslavia are on an irreversible 
course toward a democratic, free market system.

    The bill requires the Administration to prepare a detailed 
plan for providing and distributing the transition assistance 
and to submit the plan to the Congress within 120 days of 
enactment of the legislation. The Committee notes that the 
preparation of the plan offers the Administration the 
opportunity to devise a comprehensive strategy for how the 
United States will respond to the emergence of a democratic 
government in Yugoslavia and will facilitate prompt action when 
such an event does occur. The Committee expects the plan to 
have a specific dollar figure associated with it and to address 
sectors and projects in Serbia that the financial assistance 
will immediately benefit, including by facilitating foreign 
investment. The Committee further notes that publicizing the 
plan to the people of Yugoslavia can make clear to them the 
benefits of pressing for a democratic government and can be 
helpful in encouraging them to work toward that end. The Voice 
of America and Radio Free Europe should immediately publicize 
the plan in its South Slavic broadcasts, and the Administration 
should work to ensure that independent media outlets working in 
and around Serbia are familiar with its details.

                             Cost Estimate


    In accordance with rule XXVI, paragraph 11(a) of the 
Standing Rules of the Senate, the Committee provides the 
following estimates of the cost of this legislation prepared by 
the Congressional Budget Office:
                          Dan L. Crippen, Director,
                               Congressional Budget Office,
                                                    August 4, 1999.
Hon. Jesse Helms, Chairman,
U.S. Senate Committee on Foreign Relations,
Washington, DC 20510.


    Dear Mr. Chairman: The Congressional Budget Office (CBO) 
has prepared the enclosed cost estimate for S. 720, the Serbia 
Democratization Act of 1999.

    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Joseph C. 
Whitehill, who can be reached at 226-2840.
            Sincerely,
                                    Dan L. Crippen.

Enclosure
cc: Hon. Joseph R. Biden, Jr.,
Ranking Minority Member.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

    S. 720 would impose numerous sanctions against the current 
governments of Serbia and Yugoslavia and would call upon the 
President to isolate Yugoslavia in international organizations. 
The bill would authorize the appropriation of $100 million over 
fiscal years 2000 and 2001 to promote the growth of civil 
society and democratic institutions. It would also authorize 
assistance to individuals displaced by the conflict in Kosovo 
and to a transitional government in Yugoslavia.

    CBO estimates that the budgetary impact of the bill would 
be limited to the explicit authorization of $100 million, 
because the bill would not substantially expand the 
Administration's current authority to provide other assistance 
to individuals and a transitional government. In the two years 
prior to March 1999, the Administration provided $16 million in 
grants to individuals and nongovernmental organizations in 
Yugoslavia. Since then, the Yugoslav government has prevented 
those programs from being restarted in areas under its control. 
Assuming appropriation of the authorized amount, it is unlikely 
that all of the $100 million would be spent unless there is a 
change in the Yugoslav government. CBO estimates that spending 
over the 2000-2004 period would be about $20 million under the 
current Yugoslav regime. Because other authorizations in the 
bill would overlap with provisions in current law, they would 
have little or no budgetary impact. S. 720 would not affect 
direct spending or receipts; thus pay-as-you-go procedures 
would not apply.

    S. 720 contains private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) but CBO estimates that the 
direct costs of mandates in the bill would be well below the 
statutory threshold established in UMRA ($100 million in 1996, 
adjusted annually for inflation). The bill would impose 
private-sector mandates by prohibiting certain transactions 
with any person, entity, or funds associated with the 
governments of Serbia and Yugoslavia. Specifically, S. 720 
would prohibit payments or transfers of anything of economic 
value by any person in the United States to the governments of 
Serbia and Yugoslavia. Further, the bill would prohibit any 
transaction within the United States or by a U.S. individual, 
firm, partnership or other organization relating to any vessel 
in which a majority interest is held by a Serbian person or 
entity. The bill would also prohibit funds that are blocked 
under current law from being used to pay for maintenance and 
administrative expenses for assets associated with the 
governments of Serbia and Yugoslavia. According to information 
provided by the Department of Treasury, all prohibitions in the 
bill are part of the current policy of the department. Although 
the bill allows for less Presidential discretion in applying 
prohibitions, the bill would largely codify current policy and 
thus would have little impact on the private sector.

    To the extent that state, local, or tribal governments 
engage in the proscribed transactions, such prohibitions would 
be intergovernmental mandates as defined by UMRA. CBO has found 
no evidence that these governments are involved in such 
transactions; thus, the mandate would have no significant 
effect on the budgets of state, local, or tribal governments.

    The estimate of the federal costs was prepared by Joseph C. 
Whitehill, who can be reached at 226-2840; the estimate of the 
impact on state, local, and tribal governments was prepared by 
Leo Lex, who can be reached at 225-3220; and the impact on the 
private sector was prepared by Keith Mattrick, who can be 
reached at 226-2940. This estimate was approved by Robert A. 
Sunshine, Deputy Assistant Director for Budget Analysis.

                    Evaluation of Regulatory Impact


    In accordance with rule XXVI, paragraph 11(b) of the 
Standing Rules of the Senate, the committee has concluded that 
there is no regulatory impact from this legislation.

                                  
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