1998 Congressional Hearings
Special Weapons
Nuclear, Chemical, Biological and Missile



U.S. POLICY TOWARD RUSSIA



Ambassador-at-Large

Stephen Sestanovich

Special Adviser to the Secretary of State

for the New Independent States



House International Relations Committee



July 16, 1998



1. Introduction



Mr. Chairman, I appreciate the opportunity to discuss U.S.-Russian
relations with you today. The timing of your hearing could hardly be
better. As you know, President Clinton will travel to Moscow to meet
with Boris Yeltsin in six weeks. His trip takes place at a moment of
increased uncertainty about where Russia is headed. The financial
crisis has highlighted the structural weaknesses of Russia's economy
and led to concern about the country's political stability.


These developments raise understandable questions about American
policy toward Russia. They oblige the administration and members of
Congress to take a hard look at our policy and the assumptions that
underlie it. I hope that in our discussion today we can clarify what
is at stake, what we should be trying to achieve, what stands in our
way, and what we want to do to succeed.


Let me start with a question that will occur to anyone who has read of
this week's multi-billion dollar IMF loan package for Russia. Why
should Americans care about this middle-sized, underachieving economy?
The answer is that history, geography, military technology, the
vulnerability of its smaller neighbors, and other factors give Russia
a central place in international issues of great consequence to the
United States.


There is nothing abstract about the ways in which Russia matters to
us.


-- Our success in putting a stop to transfers of sensitive missile
technology from Russia to Iran will affect the balance of power in the
Persian Gulf and the Middle East.


-- Gaining Russian ratification of START II will allow us to improve
our security and resume momentum in reducing our stockpiles of nuclear
weapons.


-- Russia's relations with its neighbors will decisively affect the
kind of Europe we end up with at the opening of the 21st century.


Russia matters in a negative sense. We wouldn't like it if things went
horribly wrong. But Russia matters to us in a positive sense, too.
Oilmen will tell you that Russia's resources will shape future world
energy supplies. Telecommunications firms will tell you they can't
create the global satellite network they want without Russian launch
capabilities. Software companies will tell you they are eager to work
with Russia's brainy computer wonks.


We have a policy that reflects the diversity and magnitude of these
interests. In relations with Russia, this administration aims to:


-- first, reduce the threat to the United States and to international
peace posed by weapons of mass destruction;


-- second, support Russia's transition to a market economy;



-- third, work with Russia's new generation of democrats as they build
a society in which human rights, including religious freedom, are
protected; and


-- fourth, ensure that Russia deals cooperatively with its neighbors
and is integrated into Euro-Atlantic and global institutions.


Mr. Chairman, we clearly won't attain any of these goals unless our
relations with Russia are a two-way street -- unless these are
Russia's goals, too. Making sure this is so is a formidable challenge.
It's not made easier by the fact that Russians are divided.


-- There are those in Russia who understand that ratifying START II
will enhance national security and serve the urgent need of military
reform. Others prefer to block Russian-American agreements of any
kind.


-- There are those who see clearly that the flow of advanced missile
technology to Iran directly threatens Russia. But others hope to
profit from it and will try to subvert any strengthening of export
controls.


-- There are many Russians committed to freedom of religion. Others
fear religious diversity.


-- There are Russians who know that economic revival and growth
requires transparency and foreign partnerships. Others prefer an
insider economy, even if it is small and weak. There are even Russians
who want the economy to fail so that they can reap political advantage
from chaos.


These differences are the stuff of pluralism. They have a deep impact
on the way policy is carried out. Add to this the fact that the
Russian system is still very much a work in progress, with the
authority of many of its institutions still being defined. The result
is a mechanism that produces policy results -- good, bad, or
indifferent -- only very slowly.


All this means that Russia is difficult. But it is hardly hopeless.
It's ironic, in fact, that the financial crunch and talk of overthrow
come so soon after the arrival of a new government in Moscow. This
government is like none we have ever seen in Russia. It is led by
young governors, former regional administrators, and business leaders
who made their mark in the country's most politically progressive
provinces. They bring no Soviet-era baggage with them to Moscow. They
have, instead, first-hand knowledge of what's needed to improve the
lives of ordinary Russians, an awareness that ordinary Russians care
more about their own government's ability to collect taxes fairly and
provide services effectively than about NATO enlargement. This
government understands that in a democracy, voters reward bottom-line
results, not empty promises.


Mr. Chairman, despite the slow, often tortuous process of getting
policy results out of the Russian system, we continue to work as hard
as we can to get results that advance American interests. The stakes
are too high for us to accept second-best, and our record shows that
we don't. Ours is the same approach the administration followed when
it worked for the withdrawal of Russian troops from the Baltic states,
when it concluded a trilateral U.S.-Russia-Ukraine agreement to remove
nuclear weapons from Ukraine, when it completed the NATO-Russia
Founding Act, when it stood firm for freedom of conscience in Russia,
when it supported the Russian reformers in their successful battle
against raging inflation, or frankly when it stood with them against a
communist resurgence.


It was said of every single one of these efforts that it could not
succeed. They could not have succeeded without persistence, patience
and a clear recognition of America's long-term interests. We chose to
do what we did because the alternative was unacceptable. A different
approach would only have lessened the chances of getting what we
wanted.


Mr. Chairman, there is no doubt that the bipartisan consensus that
supported American policy toward Russia after 1991 is today under
severe stress. Congressional votes on sanctions legislation and tough
questioning of IMF support for Moscow make that perfectly clear. Some
in the Congress ask whether our goals are really attainable. The
administration's answer to that question is an emphatic "yes," and I
believe nothing argues more strongly for our policy than the results
we are seeking this week in two crucial areas -- the Russian financial
crisis and the flow of military technology to Iran.


2. The Russian Financial Crisis



Three days ago, the IMF and Russia announced agreement on a
wide-ranging set of economic reforms. The Russian government will
undertake the most significant steps in years to put its finances in
order and to open up the economy. The IMF-Russia agreement mandates
rigorous conditions. Russia's budget deficit should drop from six
percent of GDP in 1998 to under three percent in 1999. Tax reform
should be carried out. Russia must redouble efforts to build a
welcoming investment climate with effective corporate governance, a
workable land code, and production-sharing agreements for energy
investors.


On the basis of Russia's commitments, the IMF is prepared to make
available to Russia this year $12.5 billion in Fund resources as part
of a broader package for 1998-1999 worth $22.6 billion.


The United States played a leadership role in putting this financing
package together. We did so because helping Russia complete the
transition from a centrally planned to a market economy is essential
to its prosperity, democratic future, and long-term role as a
constructive player in world affairs.


The United States has offered strong support for this package, for the
resources made available, and for the terms attached to them. Our view
is that the consequences of not acting would have been, and remain,
very grave. A ruble devaluation would raise food prices for tens of
millions of Russians. Inflation -- the control of which has been the
government's main achievement -- would again plague Russia.
Devaluation would engulf the banking system, freeze economic reforms,
and risk a spillover of market instability to Ukraine, the Baltic
states, and even East-Central Europe. There would be political
consequences on the same scale. And all this would happen without
resolving the structural problems of the Russian economy.


What brought Russia to this crisis? A combination of international and
homegrown factors. Internationally, Russia has been greatly affected
by the "Asian flu" and falling oil prices, which have cut Russian
export earnings by 15 percent in the past year. At home is Russia's
failure to create a viable fiscal system. The government became
increasingly dependent on international capital to support itself, at
higher and higher -- ultimately unsustainable -- interest rates.


The IMF package gives Russia a chance to climb out of this crisis, but
only if it takes the steps necessary to turn this short-term breather
into a long-term turnaround. If we are to help, Russia must act. As I
said earlier, our relations must be two-way street.


Mr. Chairman, we strongly support the IMF package, but we aren't
surprised that it is being scrutinized so closely. It should be. Funds
on this scale must be used in a manner that advances clear and
definite interests. We believe this package meets that test.


Next week, Vice President Gore will meet for the first time with
Russian Prime Minister Kiriyenko, the new Russian co-chair of the
"U.S.-Russia Binational Commission on Economic and Technological
Cooperation." The Russian government's actions to implement its
commitments to the IMF and establish the foundation for sustainable
growth will be high on the Vice President's agenda in Moscow. This is
something the President will take up in several weeks, as well.


3. Security/Non-proliferation



Mr. Chairman, in the post-Cold War era we seek a relationship with
Russia in which we can enhance U.S. security by reducing our strategic
arsenals and lowering the threat of proliferation. We have no higher
foreign policy priority.


During the past 18 months we have worked hard to stop the flow of
sensitive technology from Russia to Iran's missile program. Our
objective has been to see Russian government policies embodied in an
effective export control system that actually prevents the transfer of
illicit goods and technology into the wrong hands. Since January, the
Russian government has taken a number of steps to deal with this
problem. With the publication of new export control regulations in
May, Russia had in fact created a system that -- on paper, at least --
is much like our own and that of other Western countries. The key, of
course, is making it work.


Yesterday the Russian government announced that it has launched
special investigations of nine companies suspected of cooperating with
foreign programs to acquire weapons of mass destruction and missile
delivery systems. The investigations involve potential administrative
and criminal actions against these entities. For our part, we plan to
suspend any U.S. government assistance programs to these Russian
companies, and we will use existing legal authority to restrict trade
between them and the United States.


The administration's approach to this problem is working. Our goal has
not been simply to make a statement or to express outrage but to get
the job done. This means finding ways of getting the Russian
government to cooperate with us, to take the problem seriously and to
act.


That's why the administration has resisted the sanctions that Congress
has sought to impose. The sanctions in the "Iran Missile Proliferation
Act of 1998" will not prevent Iran and others from seeking missile
technologies, nor will they remove the temptation for cash-starved
companies and individuals to do business with Iran. This will put the
cooperation we need at risk. Only an effective and fully implemented
Russian export control regime can solve this problem. Yesterday's
announcement shows that our efforts are beginning to pay off.


Russia still has a large and potent nuclear arsenal that our two
countries agreed in 1993 should, along with our own, be reduced. We're
frankly disappointed that START II remains unratified and hope that
the Duma will take up the treaty early this fall. Once START II is
ratified, we'll be ready to begin negotiations on START III so as to
cut both arsenals still further, with a ceiling on strategic nuclear
warheads of 2000-2500. We will also seek to enhance security by
increasing transparency in nuclear warheads and fissile material.


Through the Cooperative Threat Reduction Program (CTR), the United
States has provided approximately $1.3 billion to help Russia and the
other NIS states meet their obligations under START I by helping to
destroy strategic missiles, bombers, silos and submarines, and to
provide secure storage for fissile material removed from dismantled
nuclear weapons. Other programs are helping Russia improve the
security of fissile material and provide opportunities for productive,
non-weapons related work for laboratories, scientists and engineers.


Destroying the world's stockpiles of chemical weapons is another
challenge that we're tackling with Russia, which ratified the Chemical
Weapons Convention in November. CTR will help Russia eliminate its
chemical weapons production capacity and will provide a facility which
will eventually destroy 14 percent of Russia's chemical weapon
stockpile. We are also working with Russia and the international
community to secure greater international funding for, and involvement
in, Russia's chemical weapons destruction effort.


4. Democracy and Human Rights



Successful development of a society and a government that respect
human rights is fundamental among our interests in Russia. The
collapse of communism does not guarantee that democracy will prevail.
There will be fits and starts in Russia's political transformation. In
recent months, in fact, the voices of intolerance and hatred have been
growing louder, and President Yeltsin has warned that fascism is now
raising its ugly face in Russia. We cannot alone assure the outcome of
Russia's democratic transformation. But there is no better investment
for our long-term security than to promote, particularly among the
younger generation now assuming leadership positions, the knowledge
and the values needed for Russia's full integration into the
Euro-Atlantic community.


We have since 1991 initiated programs in Russia to support free and
fair elections, the development of independent media, the promotion of
accountable and responsive municipal government institutions, and the
growth of a vibrant non-governmental sector. Congress has been
far-sighted in providing the resources to sustain these programs,
which have affected the lives of tens of thousands of Russian people.
Under these programs, we have hosted over 10,000 high school exchange
students. U.S.-sponsored programs have provided over 1500 small grants
that have nurtured environmental watch-dog groups, women's
organizations, public policy institutions, and other non-governmental
organizations. We have launched a new initiative, co-funded by the
Russian government, to provide practical training and internships in
U.S. businesses for Russian managers.


The American people consistently favor and participate in these
efforts as an expression of our deep-rooted sense of responsibility to
support those who have survived tyranny and now want to build an open
society. I hope and urge that Congress continue to support these
programs that are so important for institutionalizing the freedoms
that Russians now enjoy and ensuring the development of a civil
society.


In October 1997, Russia enacted a potentially discriminatory law on
religion. This bad law, its restrictive application, and increasing
discrimination against minority religions and foreign missionaries
would represent major steps backward for Russia and for
Russian-American relations. We have worked persistently and patiently
with the Russian government -- with the help of a number of members of
Congress -- to convey the importance of this issue. Our working with
the Russian government on this produced results. On this basis, the
President determined in May that Russia's performance was consistent
with its international obligation to protect religious freedom, as
required by the FY-98 Foreign Operations Appropriations Act. The State
Department and our embassy and consulates in Russia will continue to
monitor this issue closely.


5. Russian Foreign Policy



Our goal since the end of the Cold War has been a democratic,
undivided Europe that includes Russia and all of the New Independent
States. Our interests dictate that we work to draw Russia into more
cooperative relationships with its immediate neighbors and with the
world as a whole. Inclusion is a sounder policy than isolation, but it
does not mean forgetting our interests or ignoring our differences.
During a recent NATO-Russia meeting, Secretary Albright expressed this
well when she said, "We are not here to pretend or to paper over
differences. We are here to work through them."


Let me start with Russia and its neighbors. Some, perhaps most, of
Russia's neighbors believe that Moscow is out to dominate them. (And
some Russians accuse us of trying to supplant them in the region.)
This administration categorically rejects the idea of a Russian sphere
of influence. The reality is that the region needs a cooperative,
constructive Russia, whose dealings with its neighbors accord with
international norms for relations among sovereign states.


Nowhere is this clearer than in the Caucasus. Our objective has been
to provide firm support for the independence and territorial integrity
of these and the other New Independent States. Our cooperation with
Russia has made positive contributions to lowering tensions and
building new, appropriate relationships among the NIS, but the picture
is not uniform.


In Georgia, for example, we have been concerned by the renewal of
fighting in Abkhazia that threatens the stability of the entire
country. Russian peacekeepers are present, but they did not prevent
this fighting. Similarly, Russian diplomats have sought to negotiate
an end to this war, but they have made no real progress. At the
request of President Shevardnadze, we have sought to strengthen a
mediation process overseen by a representative of the UN Secretary
General. We have also offered assistance to the Georgian government as
it takes over control of its borders from departing Russian Border
Guard forces


In the Caspian, Russia has raised delimitation, environmental and
economic issues that complicate our East-West pipeline strategy. At
the end of the day, Russia has a clear role to play in Caspian
development, and the Caspian Pipeline Consortium is one encouraging
sign that Russia will play an important constructive role in this
important effort. On Nagorno-Karabakh, we serve with Russia and France
as co-chairs of the OSCE Minsk Group. There are clearly problems with
these negotiations, the three co-chairs have worked together closely
and cooperatively.


Elsewhere, we have worked together on Iraq -- not easily, I might add
-- to secure access by international arms inspectors to all sites in
Iraq. In the Balkans, the United States and Russia work together as
members of the Contact Group. The fact that Russian troops serve under
an American command in SFOR in Bosnia demonstrates the fact that, by
working together on a large peacekeeping undertaking, we can achieve
results.


6. Conclusion



The common thread of our policy toward Russia is to address all four
parts of the agenda I described in a way that advances our interest in
a long-term stable relationship with a democratic Russia. President
Clinton articulated our strategic objective in May:


"The secure, free and prosperous Atlantic community we envision must
include a democratic Russia. For most of this century, fear, tyranny
and isolation kept Russia from the European mainstream. Now Russians
are building a democratic future. We have an enormous stake in their
success.... We must support this Russian revolution."


Today I have discussed the challenges, difficulties and opportunities
we encounter in dealing with a Russia that is still in the middle of
an historic transformation. Despite frustrations, the administration
and Congress have understood that our interests demand that we work to
influence these changes in ways that will enhance our security and
support the development of democratic, free-market institutions inside
of Russia.


We cannot know with utter certainty how Russia's great drama will turn
out. But to pass up the chance to influence how it unfolds would be
worse than foolish. It would be an abdication of responsibility.
Whether the issue is economic reform or non-proliferation, or still
other issues that I discuss at length in my full statement -- such as
religious liberty or building a peaceful Europe -- our policy is
producing results that serve American national interests.


Mr. Chairman, we welcome debate and discussion of our approach to
dealing with Russia, for we believe it meets what is at the end of the
day the only serious test of policy.


(End text)