22 June 1999
TRANSCRIPT: STATE COORDINATOR OF NIS ASSISTANCE ON U.S. AID, JUNE 21
(William Taylor outlines criteria for aid to region) (8060) Washington - International efforts to assist Russia and other New Independent States (NIS) is the topic of the following June 21 Worldnet transcript in which William Taylor, State Department Coordinator of Assistance for the NIS, responds to the questions of reporters in the region. Taylor outlined criteria for channeling U.S. assistance to the region: a clean, transparent local government; a local government interested in encouraging investors to come in; something to invest in (people, natural or technological resources); and the ability for U.S. agencies to work in the region. Taylor said Congress allocated $850 million in assistance to NIS states for the current fiscal year, with $195 million for Russia. Taylor said "our assistance goes to those governments and those people interested in making change." He singled out Moldova, Georgia and Kyrgyzstan as countries willing to tackle change. Russia and Ukraine, "have indicated sometimes more, sometimes less willingness to make the hard decisions." Taylor sounded a cautious note on forgiveness or restructuring of Russian debt. One question, he said, is how much of that debt will be paid back, under what conditions, over what period of time. The other question is: What about the future? If a country decides not to pay back previous debt then it will be more difficult to obtain loans in the future, or the interest rate will be higher than it otherwise would be. Taylor addressed restrictions on U.S. assistance to Azerbaijan under Section 907 of the Freedom Support Act. He said the Administration is appealing to Congress to remove restrictions, "so we can provide the full range of assistance to Azerbaijan." For now, Congress has granted exceptions allowing for humanitarian assistance and democratic reform assistance but not private-sector assistance. Following is the transcript of the program: (begin transcript) WILLIAM TAYLOR, COORDINATOR OF ASSISTANCE FOR THE NEW INDEPENDENT STATES, U.S. STATE DEPARTMENT "RUSSIAN FINANCIAL ASSISTANCE" Host:Jim Bertel June 21, 1999 WORLDNET "Washington Window" United States Information Agency Television and Film Service, Washington, D.C. MR. BERTEL: Hi, I'm Jim Bertel. Welcome to "Washington Window," where we discuss today's most important issues one on one with leading newsmakers. Russia's financial crisis last August has rippled through the world economy and left Russia's economic future in a precarious position. It has defaulted on several large foreign debt payments, and has been unable to secure new loans from international lenders. But the future is looking brighter. In April the International Monetary Fund tentatively agreed to lend Russia $4.5 billion, money that is contingent on Russia adopting a package of economic reforms. And the just-released economic indicators for the first quarter show signs that Russia's economy is improving. Here in the United States, a recent hearing on Capitol Hill illustrated the varying points of view on future assistance to both Russia and the NIS. (Begin videotape.) ANNOUNCER: The political and economic turmoil in Moscow in recent months has left the United States looking at ways to improve its Russian aid programs. Many organizations offering assistance report only a fraction of the international aid given to Moscow ever reaches the Russian people. Much is lost through waste and corruption, with reports of large sum bank accounts. Armed with that information, the U.S. House Committee on International Relations recently held hearings to ensure aid provided by the United States reaches the intended recipients. Harvard University's Marshall Goldman suggested setting very specific goals: MARSHALL GOLDMAN: I think one of the ways to get at this problem is to ask the question: What do we want to accomplish with our aid? ANNOUNCER: Those testifying before the committee stress the need to go beyond Moscow and give more aid to local governments and grass-roots programs. Paula Dobriansky from the Council on Foreign Relations suggested earmarking aid to communities that have embraced democratic reform: PAULA DOBRIANSKY: High priorities should therefore be given to local projects that restore confidence in democracy by enabling ordinary Russian citizens to see some tangible effects of democratic approaches and techniques. ANNOUNCER: But the experts speaking before the committee emphasized a long-term strategy, one that would support democracy from within, by promoting student exchanges, assisting small businesses, and supporting non-governmental organizations. PAULA DOBRIANSKY: What is needed is a more realistic, restructured, long-term effort designed to contribute to those developments and to private organizations in Russia that are capable of facilitating eventual democratic transition. ANNOUNCER: But those testifying at the hearing agree that the best aid will come from private sector investment and will play a key role in reforming Russia's economic strategy. (End videotape.) MR. BERTEL: Russia's economic policy was dealt a setback last week when the Duma rejected a pivotal part of a reform bill package that is needed to secure the IMF loan. Without those funds, Moscow cannot pay off old debt due this year to the IMF, and avoid an even worse financial disaster. Well, joining me to discuss international efforts to assist Russia and other NIS nations is William Taylor, coordinator of assistance for the new independent states at the U.S. State Department. Mr. Taylor, it is a pleasure to have you with us today. Let me go back to those hearings, because you testified earlier this month that America's national interests -- it is in America's national interests to continue both long- and short-term economic aid to Russia and the other NIS nations. Why is this important? MR. TAYLOR: Thank you, it's great to be here. And this is a very good question, and it's an easy one to answer. U.S. assistance to Russia, to Ukraine, to the Caucasus countries to Central Asian countries, Moldova, is clearly in the United States' interests. And it is in the interests of the United States because we have a strong need, a strong desire, a strong interest in stability in that part of the world. We look to stability to be driven by and the result of economic benefits to people in that part of the world, so an increase in prosperity, an increase in living standards for people in the former Soviet countries is very important to us, because that will also lead to a more democratic part of the world. And we really believe that democracies and market economies will be more stable, will be less likely to have difficulties in that part of the world. For all of these reasons we strongly believe, and our Congress agrees, that assistance to the former Soviet states, Russia and the other, is clearly in our national interests. MR. BERTEL: The committee's chairman, Benjamin Gilman, offered some negative points, including the fact that the billions of dollars in Russian capital that have been funneled into Moscow are now sitting in foreign bank accounts. Is Congress behind continuing the economic aid to Russia and the other nations of the NIS? MR. TAYLOR: Congress makes a distinction, as do we, between the assistance that goes from the international financial institutions -- the IMF, the World Bank -- on the one hand, and the bilateral assistance that the United States provides and other nations provide on the other. There is concern that cash, that loans to Russia and other NIS will only stay in those countries if there is an economic environment that is conducive to investment, that if economic changes, economic reform of the institutions in Russia are such that people are interested, willing, eager to invest in Russia. If that environment is there, then it makes sense to provide these large loans, large amounts of cash, to the Russians from the IMF and the World Bank. On the other hand, as you have indicated earlier, the experts that testified in front of that committee indicated that what the United States should be doing in its bilateral assistance is focusing on long-term change. And we in our programs, budget programs that the United States has with all of these countries in NIS, do not provide cash or loans, we provide technical assistance. We provide advice. We provide smart people. We provide exchanges. We try to get Russians, Ukrainians, Armenians and Uzbeks and Kazakhs, Moldovans to the United States. We provide exchange funds so that we can get to know and establish links with all of these countries. So there is a distinction to be made, and the Congress understands this distinction between the international multilateral banking system, or the World Bank and the IMF on the one hand, and the bilateral assistance that funds exchanges and training, non-governmental organizations, economic reform, democratic reform on the other. Congress does support that. The Congress is concerned about the stability of the funds that go in from the international financial institutions. MR. BERTEL: Well, that makes the point a bit clearer. Thank you so much. Well, we are pleased to once again be joined by television stations all across Russia and in the NIS nations. Let's continue our discussion with my colleague Boris Asiv (ph) at TV Enten in Tomsk. Welcome to "Washington Window." Q: Good evening. Hopefully you can hear me. Good afternoon, Jim, good afternoon, Mr. Taylor. To be honest with you, I am not really happy with today's topic, because for me personally as a Russian it is not fully clear because why do you have to provide assistance to all of the countries of the former Soviet Union, if Russia has assumed all the debt obligations for the former Soviet Union? But given today's topic, still I have a question for you. My question is as follows: This assistance is somewhat different from those types of assistance which the Russian government is clamoring for and trying to get from the IMF. Was it actually consisting of cash or some technology and assistance in organizing real manufacturing facilities? Thank you very much. MR. TAYLOR: Thank you for that question. This is a very important distinction. The assistance on debt restructuring, the assistance on macroeconomic indicators from the World Bank and the IMF is different, is very different, from the kind of assistance that we try to provide. And in response to your question, what we try to provide, and particularly in regions of Russia and regions of other NIS, focuses on long-term change. So a large part of our assistance has to do with, as I have indicated, bringing Russians and Ukrainians and others to the United States so that we can learn from them and they can learn from us. These Russians, oftentimes students, will spend months living with families in the United States, and they will go to school together and they will go to factories together and the professionals will have connections, so that when these Russians and others go back to their countries they maintain these connections, whether they be academic or friendship or business connections. That's one of the main things we do. Another thing we do is we provide people who know something about a market economy in the United States for example to work with local governments to try to make changes -- small changes that will increase the attractiveness of that region, whether it's Tomsk or whether it be Samara or whether it be Sakhalin or Novgorod -- regions of Russia that will make it more attractive for people in the West, indeed the people across Russia, to invest their money in those enterprises that are in Tomsk or in these other parts of these countries. We really do believe, as indicated earlier in the segment at the beginning, that it is private investment in enterprises that are really going to make it -- private investment in enterprises that are going to provide goods and services to people to make their lives better. That's the kind of assistance that is -- and it's not really assistance -- that's the kind of cooperation, joint ventures, that is really going to make the difference over the long term on the economic side. So we try to provide suggestions as to how to make the investment climate more attractive in these parts of Russia. And we hope that that assistance will make these regions more attractive, and that other regions around the country, around Russia, will notice what's going on. In Novgorod, for example, which has been a leader in these kinds of changes, in attracting foreign investment into enterprises in Novgorod. We are doing the same kind of thing in Samara, and we are hoping that the success of Novgorod and Samara will be noticed by the governments and the private sectors in other parts of the country, and that investment will be attracted into those parts of the country, which again leads to what I talked about earlier being in our national interests to have economic reform lead to economic growth, which means better jobs, more income for Russians. So that's the kind of assistance that we look forward to providing. MR. BERTEL: Let's move on to Baku now for our next question. Space TV, welcome to "Washington Window." Q: Mr. Taylor, the government of the United States every year is providing multi-billion assistance to various -- dozens of countries of the world, including the countries of the former Soviet Union. The amendment to the freedom act has tripped Azerbaijan of any U.S. assistance. We think this amendment should be unfair and contradicts the interests of both countries. What do you think about this? MR. TAYLOR: I agree with that. I would make the following observation. That section of our law which we disagree with, we in the executive branch disagree with that law, and are trying to remove that section of the law. That section keeps us from providing assistance to the government of Azerbaijan, except in certain areas. So it does not keep us from providing any assistance to Azerbaijan; indeed, we do provide millions of dollars of economic assistance and humanitarian assistance to the people of Azerbaijan, and have for the past six, seven years, in increasing amounts over the past couple of years. The reason we can provide increasing amounts of assistance to the people of Azerbaijan over the past couple of years is that we have been able to get from Congress, our Congress, exceptions to this restriction. And the best, the largest exception has been humanitarian assistance. So we have no constraints on us now in providing assistance to refugees, of which there are 800,000 to a million, as you well know, in Azerbaijan. So we have provided assistance, humanitarian assistance to the refugees in a way that is not constrained, is not restricted by that section, Section 907 of the Freedom Support Act. I would also say that we agree that that section 907 has not served the function that its sponsors thought when it was past, and we are again trying to get that section either removed or waived in this year's legislation. We tried last year, as you know; we are trying again this year. We hope to remove it so that we can provide the full range of assistance to Azerbaijan, including the government of Azerbaijan, that would complement our efforts to work with the government of Azerbaijan and the people of Azerbaijan in economic growth and in democratic change. MR. BERTEL: Let's continue our discussion by moving to TV Va Bank in Orel, where Yevgeny Schwartz is standing by. Welcome to the program. Q: Good evening. Well, good morning rather in the United States. I have the following question for Mr. Taylor. Can you please tell me in your opinion what areas of the economy, what industries are more efficient in terms of investments, so that your American taxpayer money would not just get wasted? MR. TAYLOR: Thank you. We try to provide assistance that would allow domestic and foreign private investment to be used the best in Orel, in Novgorod, in Samara. We try to provide advice to both local governments and to local enterprises that would allow those regions and enterprises to attract investments from domestic Russian sources, from Western private sources. What we don't try to do is pick sectors of the economy in Orel or in other parts of Russia that we think are the best. American bureaucrats, American government is not very well structured, is not very well informed as to what the best sectors of the Russian economy are in which to attract investment. We think that the private sector will determine -- will be able to decide where the best investments are. The way this works is banks or venture capitalists or private firms that want to invest in Russia, in Orel or in other parts of Russia or in other parts of NIS, will come take a look at those enterprises and will determine which of those enterprises in which sectors are most likely to provide goods and services that people in Orel and other parts of NIS want to buy. And once those companies determine which of these enterprises, which sectors of the economy are more likely to grow and more likely to provide the goods and services that Russians and others want to buy, then they will attract investment. They will invest their money into these enterprises. So we try to improve the environment, the investment climate in each of these sectors so that private sector people -- bankers and enterprise managers and investors around the world -- can come in, see that there is a good climate for their investment and make the investment that will improve both the factories and the production facilities, as well as the quality of life for people who buy the products from those factories. So in sum we try to improve the climate -- we don't try to pick the sectors. We think that people on the ground there are better able to do that, whether they be Russians or investors coming to Orel or other parts of the former Soviet Union, to make those decisions themselves. MR. BERTEL: At this point we would like to move on to TV Volga for our next question. Please go ahead. Q: Hello, Mr. Taylor. Alexander Kashugin (ph), TV Volga News. Today as was already indicated that corruption eats up the bulk of U.S. centralized assistance provided to our countries through our federal agencies, because it seems that it's more efficient to work direct with the region. I have the following question: Is there a clear-cut program for selecting and hand-picking the regions in Russia that this assistance will be provided to? Who provides information to you about the attractiveness of this or that particular region where we you want to improve the investment climate? MR. TAYLOR: A great question. Of course as you know we have a very strong embassy in Moscow, and the policy of our embassy in Moscow is to get out of Moscow, is to go to the regions, go to Volga region, go to the Russian Far East and go to the Northwest. We have consulates in various parts of the Russian state as well. So that's the first answer to your question of how do we get information on where to focus our assistance. We have had a program over the past couple of years that will focus, that has been focusing our bilateral assistance, our technical assistance, our working with local governments, in three areas of Russia, and we are actually looking to expand that to a fourth area. And the way we'll decide where to really focus is to take a look at a couple of things, a couple of criteria that we use. The first -- and you already mentioned it -- is a clean, responsive, transparent local government -- local government that is not interested in self-advancement, is not corrupt, that is interested in the well-being of its people, of the people in that region. So a clean, transparent local government. The second is a local government that is interested in investments, a local government that is open to encouraging investors to come in. And that relates to the third criteria, which is something to invest in. We are looking -- encouraging investors to come in, take a look at the resources in that region, whether they be people resources or enterprises that have the potential to grow, or natural resources, technological resources -- in other words, people with good ideas about how to commercialize a technology. That's kind of the third criteria. And the fourth is an ability for our agencies to work in that region. And in some of the regions of course we have already had assistance programs in them, so they will provide us information. That then gets to your question about how we decide. We talk to Russians, we talk to investors who have taken a look across the Russian country to see where they are attracted, to see where there are problems that some of our assistance might be able to overcome; we talk with people who are providing assistance right now. We talk -- there are Peace Corps volunteers across Russia. There are exchange students and exchange programs that have Russians working with Americans over the past five, six years, where we had information about how inclined a certain region is for economic growth and investment, both from the rest of Russia and from outside of Russia. So the investment climate and the eagerness on the part of local governments to improve the quality of life for their citizens, in particular by encouraging Western and other investment into their regions so that this investment comes to help make the joint ventures and the enterprises grow. That's the kind of region that we will be looking for. MR. BERTEL: I am pleased to welcome to the program now Ural Inform in Perm. Welcome to "Washington Window." Q: Good afternoon, Mr. Taylor. Could you please tell me what amount was allocated for all the CIS countries and how much money was allocated for Russia this or last year? And what is the principle of distribution of allocation? Does it depend on the number of citizens, the inhabitant, the size of the territory or maybe this assistance was based on the number of countries? Thank you. MR. TAYLOR: Thank you. Good question. In the current fiscal year, fiscal year 1999 as we say, the total amount in answer to your question that the Congress allocated for assistance to the new independent states of the former Soviet Union was about $850 million. Of that $850 million, about $195 million was allocated for the Russian Federation. And in answer to your question how that decision is made, it is not made on the basis of the number of people in each of these countries, each of these 12 countries. We by the way take a look -- the assistance that's provided to the countries from that $850 million are 12, the 12 countries of the former Soviet Union. So we take a look in each of those 12 which of those 12 is most interested in economic reform and democratic reform, and how can we help in that regard. So some countries in those 12 are not particularly interested in economic reform, economic growth, democratic reform with transparent elections. You know these countries -- those countries do not get very much assistance from the United States. Our assistance goes to those governments and those peoples who are interested in making change. And where we can help them make change in ways that I talked about earlier as in our national interests, to see economic growth and democratic governments, where they are committed to that kind of change, we provide assistance. So we have provided more assistance to those countries like Moldova -- a small country, very interested, very willing to make changes, very willing to take the hard decisions towards privatization, towards economic reform, towards democratic reform, contested elections, transparent elections, but not a very big country. Similarly, another country that has been willing to make the hard changes, the hard decisions is Georgia. Another one is Kyrgyzstan. Indeed Russia and Ukraine have indicated sometimes more, sometimes less willingness to make the hard decisions. Certainly we take a look at the size of the country when we are making these decisions, but the driving force behind our decision is which of these countries, just like I mentioned earlier, which of the regions within the countries are most interested in making the hard choices and taking the hard steps to move forward on economic reform and on democratic reform, and those are the countries where we provide relatively more assistance, and where those countries are -- the countries that are not interested in making these changes we provide relatively less. In virtually all of the countries we look to bring as many young people to work with people in the United States as we can on exchanges. And, again, Americans learn a whole lot about your countries in these exchange programs, and we hope that citizens of Perm, the citizens of Ukraine, the citizens of Central Asia, will also learn about the United States in these exchange programs. But the fundamental answer to your question is those countries willing to make the hard decisions toward reform are the countries that we provide the greatest amount proportionally of assistance to. MR. BERTEL: Mr. Taylor, can you give us some specific examples of U.S. aid being put to effective use in the NIS? MR. TAYLOR: I'd be pleased to. One of our best programs across the NIS is a land titling program in Moldova -- I mentioned Moldova earlier. We can come back to that as an example of a good program. In Moldova the Moldovan government identified land privatization as an area that they were willing to go forward on -- it's a hard decision to make as people in NIS and governor and governments and broadcasters and others who live in the NIS will agree. It's a hard decision to go forward private ownership of land for all kinds of historical reasons. But the Moldovan government was willing to go forward on it. They recognized -- the Moldovan government recognized that farmers owning their own land are much more likely to make the changes and be productive on that land that they own than farmers on large collective farms. So the Moldovan government made the decision. They decided they were going to make this reform. We came in and we provided -- again proportionally -- a lot of assistance to the Moldovan government to help them undertake that major economic reform effort. So we came in and we brought our experts in -- experts who knew something about how to divide up existing farms. And working mostly with Moldovans who helped implement this we had the Moldovans go out and do surveys of the land, of the farms, of the collective farms, of the state-owned farms, and to divide those farms into small plots. And each of those small plots would be owned by a private farmers, and each of those private farmers are getting a title to that plot. So each of those private farmers has a piece of paper, an official piece of paper, a title to that land. And that piece of paper allows the farmer to go borrow money, to sell that land, to buy his neighbor's land if the neighbor wants to sell it to him, so that farmer can get a little bit bigger farm, a private farm to irrigate, and to sell the products from. So that was a decision taken by the government that we could help on. Now, each of those farms elected to get into this program. Each of those Moldovan, the large Moldovan state-owned collective farms, had their own choice to make. And one by one they took a vote and decided they wanted to get into that program, that each of these farms one by one decided, We want to go into that program, work with the Moldovan government, work with the Americans that come in, divide up this large farm into small plots, give each of the small plot owners a title that they can do with that piece of land what they want. And it has been a great success. It has been a political success for the government of Moldova. It has been an economic success for the small plot owners. And we are looking to see an increase in prosperity so that people, Moldovans, will benefit across that small country. Well, you are watching "Washington Window," where we are talking with William Taylor, coordinator of assistance to the new independent states at the U.S. State Department. We'll have more right after this. (Announcements.) MR. BERTEL: This is "Washington Window," where we are talking with William Taylor, coordinator of assistance to the NIS at the U.S. State Department. Mr. Taylor, the point was made earlier that Russia has assumed the bulk of the debt from the former Soviet Union. In the final communique from this past weekend's G-8 summit there were some indications that there might be some debt relief; in fact, some of that debt, if not all, might be forgiven at some point in the future. How likely is this scenario? MR. TAYLOR: There are two issues that took place this past weekend in Cologne, Germany. One had to do with debt relief for very poor countries around the world, the poorest countries of the world. And there was some agreement among the G-8 countries about debt relief, and that's a separate issue. I assume that's not what we are talking about here. There is a question of course in the Russian economy about two kinds of debt, both Soviet debt as well as post-Soviet debt. This issue is being carefully analyzed by people here in Washington at our Treasury Department, as well as at the International Monetary Fund, the IMF, and the World Bank. The question about forgiveness or restructuring, changing the terms of either the Soviet or the post-Soviet debt is a complicated one, but it will depend on the ability and willingness of the Russian government to work with the IMF and the World Bank to deal with this question of the debt. But the issue is a complicated one in that one needs to work forward as well as back. There is this outstanding debt that is owed now, both the government and private banks and to private entities. And the question of course is how much of that debt will be paid back, under what conditions, over what period of time. The other question that you have to keep in mind as you are thinking about that debt question is: What about the future? If a country decides not to pay back previous debt and then decides it may well want to borrow again, whether it be from the private sector, the international private sector, or whether it's to borrow from other countries, those countries or the international private sector will take a look to see whether or not its loans to this country will be paid back. If there is a high risk of not being paid back, then it will be more difficult for these bankers or these governments or these financial institutions to make the loans in the future. If they make the loans in the future, the interest rate will be higher than it otherwise would. So it's not just a matter of deciding, Well, let's forget about, or restructure or stretch out that debt in the past; the real question has to be addressed: How does this affect the ability of Russia in this case, or other countries as well, to borrow in the future? What kind of signal does this send to financial markets when those financial markets are deciding in the future how much money to lend to these countries. So it's a complicated one. We'll work forward on that one. MR. BERTEL: Well, that certainly clarifies it some. Thank you. Let's return now to TV Enten in Tomsk. Welcome back to the program. Q: Hello, good evening once again. Dear Mr. Taylor, I have the following question. You're the coordinator at the State Department for assistance for the NIS. How does your agency define whether a country that needs help is a new independent state, whether it's an old independent state rather? That's the first part. and the second part is why isn't Vietnam a newly-independent state, considering this? A second question. If on the map of Europe we have a new state appearing called "Great Albania" let's say, that the Bosnian separatists are sparring to create to integrate Albania, Macedonia and Kosovo -- let's say there is a new independent state created -- would you be helping such a state, your agency, with useful advice, consultations and so forth? Thank you. MR. TAYLOR: Thank you. The decision on which new independent states receive assistance from which part of the U.S. government comes from -- technically it comes from our law. So the U.S. Congress has given the authority -- given us the authority to provide assistance to certain new independent states, and the authority that the Congress has given us is to provide assistance to the 12 countries -- Russia, Ukraine, Moldova, Belarus, the three Caucasus states and the five Central Asian states -- those 12 are the countries that we are authorized to provide assistance to. So Vietnam, in answer to your first question, is not part of the 12 countries that we are authorized to provide assistance to. And technically neither is Albania or another new independent state in Eastern Europe. Now, there is another part of the State Department here, and indeed another law from our Congress, that allows us to provide assistance to Eastern European states. So there is assistance that is provided to Albania, Macedonia, Bosnia -- some of these new independent states. And there is assistance that is going in both this year and next year. To the other new independent states, as you mentioned Vietnam, there are ways outside of this direct assistance to the former Soviet Union that the United States does provide assistance to. So it's kind of a bureaucratic decision, but it's a legal legislative decision that our Congress has made on which of the states we are able to provide assistance to. MR. BERTEL: Let's remain in Tomsk for another question from TV Enten. Q: Hello. I was overthrown by the fact that I could join you again. I have another question, if you will not take offense because of it. You have a wonderful ring on your finger. Can you tell us more about its origins? MR. TAYLOR: Certainly, certainly. This ring is from the college that I went to. It turns out that I went to the United States Military Academy at West Point, New York, and all of the graduates from the United States military Academy at West Point wear a ring similar to this one. So that is the explanation for this ring. Thank you for your observation. MR. BERTEL: Let's move back to Baku now and Space TV. Go ahead with your next question. Q: Mr. Taylor, I would like to bring your attention to amendment 907. As it is known, the subcommittee of the Foreign Relations Committee in the U.S. Senate left the 907 amendment intact, in place, banning direct government-to-government assistance to the government of Azerbaijan, because of the blockade of Nagorno-Karabakh. And we are talking about an entity that has not been recognized by anyone -- a state entity. As it turns out, nominally the U.S. government from some of the highest podiums talks about territorial integrity and viability of existing borders. At the same time, the U.S. Congress recognizes separatists entities, the Nagorno-Karabakh republic. MR. TAYLOR: The Congress to my knowledge has not recognized a separatist organization in Azerbaijan. Indeed, the policy as you know of the United States to recognize Nagorno-Karabakh as part of Azerbaijan -- this is clear. It is not independent, it is not part of another state. Nagorno-Karabakh is clearly a part of Azerbaijan. You are also correct, and I am pleased that you are following so closely the working group of your government. You are exactly right, the subcommittee of the appropriations committee of the Congress in the Senate did leave standing Section 907 of the Freedom Support Act in its action, in the subcommittee's actions last week. However, it did extend the exception that I mentioned earlier on, the humanitarian exception. I didn't even mention there are several other exceptions that we have had in the law for the past two years that were also extended by this early action by the Senate, and that is in addition to humanitarian exception -- that is, allowing us to provide all manner of humanitarian assistance. There is also a democratic reform exception, so we can provide assistance even to the government, even though that is part of -- that is what the 907 restriction applies to -- we can provide assistance to the government as it makes democratic reforms. Also, we can provide assistance in the area of investments, and so the Overseas Private Investment Corporation can operate in Azerbaijan according to this law. So again the Congress has recognized, even with the existence of Section 907, that it is important for us to work with the government of Azerbaijan as well as the people of Azerbaijan in these areas that are the high priority areas we think -- humanitarian certainly, economic reform. Clearly in the private sector the private sector assistance that we provide are not constrained by Section 907. And also in election assistance. So democratic reform we think is very important across the NIS, but certainly in Azerbaijan as well. MR. BERTEL: Let's return to Space TV for a follow-up question. Q: I wanted to follow up. And just for your information I would like to say based on the American Armenian assembly information the same subcommittee of the foreign committee in the Senate adopted U.S. assistance for Armenia for the year 2000 19 million U.S. dollars all told. This amount is ten times more than the assistance allocated for 1999. I would like for you to comment to this issue. MR. TAYLOR: Again you are right that the Congress subcommittee -- it's actually the Senate Appropriations Committee has a committee on foreign operations -- and this committee is a very important one to us -- did act last week -- and they gave some guidelines to the executive branch, to us, on assistance to the new independent states, including Armenia. I mentioned earlier that this year, fiscal year 1999, the Congress approved about $850 million for this assistance that we provide. This early action of the Senate subcommittee for next year, for fiscal year 2000, they used a number of $780 million in assistance for the independent states, and of that $780 million, you are correct, they earmarked we say, the kind of designated $90 million -- nine, zero -- million for Armenia. They also designated amounts for Georgia and for Ukraine. The amount for Armenia that you asked about, if it were to go into law, which of course we don't know if it will or not, but the amount that this subcommittee designated for Armenia is an increase over what we are providing this year, which is in the range of $80 million for Armenia this year, fiscal year '99. So they -- the Senate subcommittee would recommend an increase from 80 to 90 million (dollars). The House of Representatives will next act on its version of the fiscal year 2000 budget, and it will give us different guidance I suspect on how to spend the money. They may give us a different amount, and they may also give us different priorities. So we will of course wait to see what the House of Representatives does. We know what the subcommittee in the Senate has done. After the both floors act, then they will get together in a compromise committee and come up with the guidance from the overall Congress that will come to us for the fiscal year 2000 budget. I only go through this in order to point out that the process for deciding how much money the Congress will provide to my office, to me, to allocate among countries is a complicated one, and sometimes the Congress gives us direct guidance and makes it part of the law. Sometimes they give us discretion on how to allocate these funds. In any case, the process is complicated and will stretch out over the next three or four months. We hope to have an indication from the overall Congress, from the full Congress, by September of this year, so that we can get started in the fiscal year 2000 budget which gives in October. So along about September we should know what the Congress's direction to us is, and what the total amounts of assistance that we can provide to the NIS. MR. BERTEL: Yevgeny Schwartz at TV Va Bank has our next question. Q: Thank you, Jim. Mr. Taylor, thank you for responding to my first question. I have a second question. Earlier on you talked about the IMF loans. The IMF ties its loans to Russia to carrying out certain conditions, in particular the issue of gas station taxes. In Russia there's industries requiring investment, but at the same time it can bring more revenue to the budget than this tax. I am talking about the military industrial complex. And you as a West Point graduate you are probably familiar with this. Since our military equipment -- tanks and ground defense systems -- especially after when Yugoslavia is -- (inaudible) -- but here you have discrimination vis-a-vis Russia with regard to selling the 300 (set-ups ?) to Cyprus. How can you tie those two issues -- loans from the IMF and the fact that Russia would be able to freely trade in arms? We can't get away from this -- the entire world is trading arms, including the United States. How do you do this so that as we say so that everyone will be happy, you know? MR. TAYLOR: Two separate questions it sounds like, although there may be a relationship between the two. The one question on IMF requirements about raising revenues, the IMF generally across the world, around the world, looks at the fiscal stability of the countries that it is making loans to. The IMF has a large amount of money that it can make loans -- relatively speaking a large amount of money that it can loan to countries. It wants to make loans to those countries where economic stability can be foreseen. So it does have conditions on its loans. And you are exactly right, one of the conditions as I understood -- this is not my direct area of responsibility, but I have observed exactly what you say -- that is, one of the conditions that the IMF has placed on further loans to Russia is that revenues increase so that the budget deficit is smaller. And they had a recommendation on how to raise revenues, and it was on the taxation of gasoline stations. And the Duma did not agree. There will be further discussions, I am sure, between the IMF and the Russian government, and some decisions on how to raise the revenues will be taken. Then your question about the Russian defense industry, which as you suggest was well respected during Russia's history of the Soviet Union. Those weapons produced by the Soviet state were well respected around the world. And trade in those weapons, with some exceptions, is part of commerce, as you indicated. There are countries around the world that sell weapons to each other. Most countries around the world, however, have identified some countries that they don't sell weapons to. Generally the international community does not sell weapons to warring countries. They try not to sell in particular sophisticated weapons, as are produced in the former Soviet factories. They try not to sell sophisticated weapons to countries that are at war with each other, which would exacerbate, the international community thinks, would exacerbate that conflict or those conflicts. So they try not to sell to those countries. The international community has also identified some countries that are accused of being outside the law -- international boundaries of international behavior. And these countries sponsor international terrorism; these countries are not taking responsible actions with regard to weapons of mass destruction; these countries may be trying to build weapons of mass destruction. So most countries have identified these countries as rogue state or international outlaws if you will, and we try not to sell in particular sophisticated weapons to these countries for obvious kinds of reasons. Russia does not want to have states that are not responsible about the use of weapons against their own people or their neighbors, and certainly Russia doesn't want to have these countries armed with weapons of mass destruction. So we agree, and the Russian government agrees. We need to come into and indeed are working carefully with the Russian government to identify these countries which are outside the bounds and sponsor international terrorism, or are trying to develop nuclear weapons or other weapons of mass destruction. We are working closely with the Russian government to identify these and so that we can both avoid selling to these countries. However, the bulk of the weapons and the bulk of the countries around the world for legitimate self-defense are certainly within the realm of commerce. We try to put some guidelines on these for obvious reasons -- these are weapons after all. We try to have some generally agreed rules about who we will sell to or what kinds of weapons we will sell, but the Russian government, the American government, European governments, Asian governments have ways of coming up with these kinds of rules, and by and large these are adhered to. There are exceptions and there are violations -- sometimes with the understanding of the Russian government, sometimes without the knowledge of the Russian government. And we are working carefully and closely with the Russian government to identify these. MR. BERTEL: We have just a couple of minutes left. Let's return now to TV Volga for a short question and a quick response. TV Volga, please go ahead with a quick last question. Let's move on to Ural Inform for one last question. Go ahead please. Q: Mr. Taylor, your assistance per capita in Russia constitutes $1.30 per year. Thank you very much for this -- we can't argue with it. Is this because the government cannot allocate more or assistance to Brazil is ten or hundreds of times bigger than our assistance? Thank you very much. MR. TAYLOR: Again, we don't make decisions on how much assistance to provide to any one country based on the population; that is not the prime criteria. Furthermore, we have decided to try to focus our assistance, that $195 million that I mentioned, tried to focus that assistance on certain parts of Russia so that we don't spread it over all citizens of Russia. Because as you indicated, when you divide, when you make that calculation you don't get enough money to really make a difference. So in order to make a difference, in order to have an effect on economic reform and democratic reform, we have focused our assistance on a couple of regions, and maybe identifying another region to do this. But that is the mechanism -- that is the way we decide how to do it -- and it's on the basis of willingness to make the hard decisions toward economic growth and economic reform and democratic reform. Thank you very much. MR. BERTEL: And we'll have to make that the final word. My thanks to William Taylor at the U.S. State Department for joining us for this fascinating and informative discussion. And I'd like to thank all the broadcasters for joining us as well. In Washington, I'm Jim Bertel For "Washington Window." (end transcript)
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