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)
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