21 September 1999Text: Treasury Secretary Summers at Hearing on Russia
(Says U.S. warned Russians on corruption) (5650) Secretary of Treasury Lawrence Summers says the United States has repeatedly encouraged Russian leaders to take steps that would make it easier to combat corruption and money laundering. At a meeting 10 days ago, President Clinton warned Russian Prime Minister Vladimir Putin that corruption and money laundering "'could eat the heart out of Russian society' unless the government acts aggressively to combat these problems," Summers told a September 21 hearing of the House Banking Committee. "That is why, for example, we have repeatedly encouraged Russia to adopt a simpler, more efficient tax code and to enforce the collection of taxes -- a process that is at present woefully inadequate and subject to rampant corruption," said Summers. He was the first speaker in two days of hearings on Russian money laundering in which 15 witnesses are scheduled to testify. Summers said it is in U.S. interests to continue to aid Russia in what is "perhaps the most complex economic transformation of our time." The current allegations of massive money laundering through U.S. banks will test Russia's "seriousness" in efforts to create the adequate legal framework and implement the enforcement mechanisms to curb these activities, Summers said. He added that that the Treasury Department has been assisting Russian authorities in developing anti-money laundering programs. The United States conditions its continued support for International Monetary Fund (IMF) and World Bank engagement with Russia on Russian compliance with crucial requirements to ensure that funds are not misused, Summers said. He noted that the IMF and the World Bank have on various occasions either suspended or otherwise constrained disbursements of aid funds for Russia because conditions were not met. The United States also requires that other countries meet anti-corruption conditions to continue to receive IMF and World Bank assistance, Summers said, noting that most recently the IMF suspended funding to Indonesia because of accusations relating to corruption at the Bank Bali. Following is the text of Summer's testimony as submitted to the committee: (Note: In the text, billion equals 1,000 million.) (begin text) September 21, 1999 Treasury Secretary Lawrence H. Summers Testimony before the House Banking Committee Chairman Leach, Ranking Member LaFalce, Members of the Committee, I welcome this opportunity to discuss our financial policies towards Russia in light of recent reports and allegations regarding corruption, capital flight, and money laundering. Given the crucial law enforcement challenges these issues pose, and given our significant national security and economic interests in Russia, it is certainly timely for this Committee to hold a hearing on these matters. Let me say at the outset, in the wake of recent allegations of money laundering through a U.S. bank, that safeguarding the integrity of the American financial system is an absolute priority for this Administration. We are committed to the full investigation of these allegations, to the prosecution of any crimes uncovered, and to strengthening our capacity to combat future abuses. We will continue to press Russia and other countries to put in place the laws and enforcement capacity to combat money laundering and other cross-border crimes. I would like to cover four topics in my remarks this morning: first, the broad context of our economic and financial engagement with Russia; second, Russian corruption, capital flight, and international money laundering; third, our financial policy towards Russia going forward; and fourth, our policies generally to combat global corruption and money laundering. I. Russia's Economic Transition and American Engagement It would be difficult to overestimate the seriousness of the problems facing Russia today in the wake of the monetary and financial collapse of August 1998 -- a collapse that was itself the consequence of long-standing Russian failures to finally establish and implement comprehensive reforms against the background of a deterioration in the international economic environment. These difficulties are of grave concern to the United States and will shape the terms of our engagement with Russia in the months ahead. But even as we recognize the enormity of Russia's problems, it is important to see them in their broader context. After the collapse of the Soviet Union in 1991, Russia faced four difficult transitions: the transition from empire to state; the transition from totalitarianism to democracy; the transition from the law of force to the force of law; and the transition from a command economy to a market economy. The American people had then, and continue to have, an enormous stake in Russia's making these transitions peacefully and successfully: -- It is a stake that derives from our national security interests, made all the more important by the large number of nuclear weapons that remain on Russian soil. -- It is a stake that derives from our interest in a strong and stable global economy and international financial system in which Russia becomes a healthy participant. -- And it is a stake that derives from our interest in protecting the integrity of our markets and our financial institutions from the scourge of corruption and money laundering -- be it in Russia or any other country. The United States has pursued these critical interests bilaterally in a number of ways: through far-reaching arms control and military cooperation with Russia; through extensive formal and informal mechanisms and contacts; through bilateral aid programs; and through direct linkages between American and Russian law enforcement agencies. Along with technical assistance, the aspect of Russia's transformation in which the Treasury Department has been, and continues to be, most heavily involved is Russia's interaction with the international financial institutions. We have supported that interaction because of our assessment of the strong U.S. interest in Russia's constructive evolution. Conditioned financial support From the start, the overarching economic objective of the international financial institutions in their operations in Russia has been to help Russia develop the policies and institutions of a functioning market economy as the route to stability and growth, an objective that the United States has supported as the major shareholder in these institutions. Economic instability in Russia raises important concerns for our national security, given Russia's pivotal and continuing role with respect to nuclear security, the battle against terrorism, the stability of Eurasia, and conflict resolution in global hot spots like the Balkans. The crucial tool of the international financial institutions to support economic reform in Russia has been conditioned finance. At every step, we have been clear-headed in endeavoring to strike a careful balance: -- Between conditionality that requires what is best economically and is also politically realistic. -- Between the desire to effect meaningful reform and the need to avoid excessive intrusion in decisions that Russia must ultimately embrace for itself -- Between the goal of creating investor confidence in Russia and attracting foreign capital and the need to avoid moral hazard problems that would result from large amounts of unconditional finance. -- Between the goal of dismantling the apparatus of communism and the need to cushion the impacts of the process of change. Our support for official financing for Russia has been grounded in the application of conditionality and in the recognition that we cannot want successful market reform in Russia more than Russia's government and its people do. America's interest lies in making reasonable, informed judgments on what we believe to be the right direction for Russia, and in conveying these views clearly to Russia's government and its people. Providing assistance in a way that puts the integrity of the international financial institutions at risk serves neither American interests, nor those of Russia or the international community. It is critical that countries respect the conditions of programs reached through negotiations with the International Monetary Fund or World Bank. The IMF and World Bank must hold Russia accountable for its performance, both in implementing agreed-upon policy actions and in ensuring that multilateral financing is used for its intended purposes. A review of the record of lending to Russia by the IMF and World Bank shows that these institutions have tailored their support to the circumstances. For example, in 1996, the IMF took the then-unprecedented step of introducing monthly monitoring of Russian policy performance in its 1996 program. In addition, the IMF withheld financing when previously agreed-upon conditions were not met. -- In 1996, monthly IMF tranches were delayed eight times, including twice before the summer elections, and two tranches were never disbursed. -- Under Russia's 1996-97 EFF program, actual disbursements were $1.6 billion, or 28 percent, less than originally planned because of shortcomings in Russian policy performance. -- After the August 1998 monetary and financial collapse, the IMF ceased lending to Russia for a year until Russia began implementing a new economic program focused on restoring financial stability. Similar failures to follow through on policy commitments have also constrained World Bank lending to Russia. Russia's record since 1992 No one, here in the United States and certainly in Russia, can be satisfied with developments in Russia during the past decade. Growth has been stagnant, corruption has been all too prevalent, and a law-based market economy has not been established. Since August 1998, Russia has struggled, albeit with more success than most expected, to avoid the perils of hyperinflation and economic collapse. There have been some positive signs; for example, industrial production in August was 16% above its level a year ago. But the fact remains that the Russian government has failed to implement some of the most basic and critical reforms, and enormous challenges remain. At the same time, the record also demonstrates that Russia today is in many ways a very different country than it was a decade ago: -- Russian nuclear weapons are no longer targeted at our cities; 1,500 nuclear warheads have been deactivated, and over 300 bombers, silos, and launchers have been destroyed. -- Russian military spending has dropped dramatically in real terms to about one tenth of its Soviet-era peak in 1988; Russian troops have been withdrawn from the Baltics and Eastern Europe; and Russians are working side-by-side with NATO in the Balkans. -- Russia is now more open; Russians can learn what happens in the markets and societies beyond their borders, have access to the ideas and products that the world has to offer, and have unprecedented personal freedoms, even if the capacity to exercise civil liberties is far from perfect. -- With 70 percent of the Russian economy's output now generated by the private sector, the communist system has been essentially dismantled and the state's tentacles of central control have been largely dislodged. -- Economic distortions created by energy prices that were once held far below world prices and the easy availability of subsidized credits have been greatly reduced. Russia's performance reflects the policies that Russia has chosen. If not all our goals for Russia have been fulfilled, it is certainly equally true that not all the fears for Russia that were common a decade ago -- or even a year ago -- have materialized. As we look at the current environment in Russia, we must be aware that Russia will shape its own destiny. What is most constructive going forward is a focus on pursuing policies toward Russia based on our national interests. II. Corruption, Capital Flight, and International Money Laundering in Russia Mr. Chairman, let me turn now to the separate, though often interlocking, issues of corruption, capital flight, and international money laundering, which have been critically important to our policy toward Russia for many years. Our longstanding concern about these problems has only been further underlined by the recent investigations. Corruption Corruption is a problem of great concern for the United States, whether in Russia or elsewhere in the world. Those who disobey Russian laws are unlikely to demonstrate any more deference to the laws of the United States or any other country. This gives us a deep interest in doing as much as we feasibly can to encourage the development of a fully functioning rule of law in Russia. To be sure, Russia inherited profound corruption problems from the Soviet era. In the 1980s and early 1990s, for example, the Soviet system allowed the elite to profit from its access to cheap commodities and credits and to foreign markets. As Anders Aslund has pointed out, in 1990 the state-controlled price of a ton of crude oil was the same as the free-market price of a pack of Marlboros in Moscow. This distortion created opportunities for quick fortunes to be made by those able to purchase oil domestically and resell it overseas. Aslund has estimated that at least 79 percent of GDP was lost in this type of distortion in 1992. These flaws in the economic system that Russia inherited from the Soviet Union explain why a crucial piece of our efforts to combat corruption in Russia has been to push for the elimination of subsidies and price controls. An equally important concern has been Russia's failure to establish the rule of law and the inability of Russians to rely on a fair enforcement of laws and contracts. In policies toward public and private enterprises, in the collection of taxes, and in the formulation and implementation of banking regulation, there have been far too many instances of corruption in which private interests, rather than the public interest, have been protected. A particularly problematic result of Russia's failure to establish the rule of law and a credible law enforcement system has been the growth of organized crime during the past decade. Russian organized crime has emerged as a powerful corrupting force -- a force that challenges Russia's political and economic development. It has also become a global threat, one that poses a challenge to the integrity of our financial system. Clearly our efforts to combat the activities of Russian organized crime here in the United States would be bolstered by substantial progress in the establishment of the rule of law in Russia. The first phase of Russia's privatization process was directed principally at dismantling the mechanisms of the failed centrally planned economy. Although it is reasonable to debate the specifics of that program, there is broad agreement that it accomplished its objective. Much more serious questions about a lack of transparency and competition surround a later phase of privatization, the Russian government's so-called "loans-for-shares" program. We shared those concerns. As early as April 1995, several months before the deals ultimately took place, the U.S. Executive Director at the IMF detailed our strong misgivings regarding such transactions and emphasized the need for transparency and competition in the privatization process. The international financial institutions also expressed profound concerns. The Clinton Administration has consistently urged the Russian government to combat corruption through structural and institutional reforms and the rule of law. President Clinton made clear our concerns in strong public statements in Moscow in 1995, as well as subsequently. As the President said to Russian Prime Minister Putin in a meeting 10 days ago, corruption and money laundering "could eat the heart out of Russian society" unless the government acts aggressively to combat these problems. That is why, for example, we have repeatedly encouraged Russia to adopt a simpler, more efficient tax code and to enforce the collection of taxes -- a process that is at present woefully inadequate and subject to rampant corruption. In addition, we have regularly supported placing specific conditions, aimed at reducing corruption and strengthening Russia's economic and legal system, on loans to Russia by international financial institutions. These conditions have included: -- Tax systems designed to reduce bribery and tax evasion by politically well-connected energy companies and other large firms. -- The elimination of tax offsets -- for example, trading tax payments for payments for goods and services -- which act as a major contributor to corruption, lack of budgetary discipline, and tax evasion. -- The creation of a Russian treasury and budgetary control system to cut expenditure leakages for corrupt purposes. -- The decontrolling of prices to eliminate corrupt, bribe-ridden distribution systems and reduce enormously costly insider arbitrage opportunities, in which traders buy commodities at low controlled prices and sell them abroad at higher market prices. -- The reduction of subsidies, which have destroyed budget discipline and created additional insider arbitrage opportunities. -- Trade liberalization to introduce more foreign competition and, thereby, reduce monopoly power and opportunities for corruption. -- Reductions in government wage and pension arrears. -- Better bankruptcy laws and improved enforcement to reduce asset stripping and induce the honoring of contracts. -- The strengthening of minority shareholder rights to avert deals that benefit insiders at the expense of the rest. Capital flight If corruption is often indicative of a vote of "no confidence" in a state's capacity to establish and enforce the rule of law, capital flight is a vote of "no confidence" in a country's economic policies. Much of the enormous flight of capital out of Russia reflects Russians' lack of confidence in the ruble, in the banking system, in the economic consequences of political uncertainty, and in the capacity and willingness of the government and the parliament to work together to implement the structural reforms necessary to build a strong economy. The most obvious manifestation of this lack of confidence is the $35-40 billion in U.S. currency that is estimated to lie outside the financial system, largely beneath Russian mattresses. During the transition period, capital flight has drained perhaps $15 billion a year from the Russian economy. Russia's current account surplus may reach 8 percent of GDP this year, yet foreign exchange reserves remain low, and the country has fallen behind on a substantial part of its external financial obligations. The simple explanation for this phenomenon is the withdrawal of capital from Russia. History teaches us that the best way to stem capital flight and encourage money to return is to create a healthy business environment, one that provides the sorts of investment opportunities that will attract capital back. That is why we have pressed, and will continue to press, Russia both through our own bilateral interactions and through the IMF and other international financial institutions -- to implement policies that support competition; tax reform; improved corporate governance; greater transparency and disclosure in the private and public sectors; stronger bank supervision; and restraints on the discretion and scope of government regulation. International money laundering Money laundering requires neither official corruption nor capital flight. However, the three often come together where the rule of law is weak and confidence in the economy is low. Money laundering is the process of converting ill-gotten gains into "usable" funds by routing it through what appear to be legitimate transactions. Money laundering is therefore predicated on a previous crime. Money laundering through cross-border transactions can become part of capital flight. Wherever it occurs, international money laundering poses a threat to the integrity of financial institutions both here and abroad. The current allegations involving money laundering through major American financial institutions have only reinforced our recognition that widespread corruption in another country can pose a significant danger to our interests. In this context, a test of Russia's seriousness in its effort to combat its money laundering problems will be its ability to establish an adequate legal framework and implement effective enforcement mechanisms. To further this effort, Treasury has been assisting Russian authorities to enact and implement effective anti-money laundering programs. For instance, Treasury has actively participated in bilateral training and technical assistance programs to help Russia build its anti-corruption and anti-money laundering infrastructure. Treasury has also participated in the work of the G-8 Lyon Group of law enforcement experts, in connection with that group's project to identify and pursue Russian and Eastern European organized crime groups. A team of Russian law enforcement officials visited Washington last week and met with officials from the Justice Department, the State Department, and many parts of the Treasury Department, including the Internal Revenue Service, the Customs Service, the Financial Crimes Enforcement Network (FinCEN) and the Secret Service, as well as other government agencies, to discuss money laundering issues. The Russian officials also met with officials from the Federal Reserve to discuss banking supervision and regulation. Such dialogue represents a step in the right direction, but it must be followed up with concrete actions. Administration officials have urged the Russian government to pass comprehensive anti-money laundering legislation. We have stated publicly that President Yeltsin should not have vetoed such legislation. In a telephone conversation earlier this month, President Clinton stressed to President Yeltsin the importance of swiftly designing and enacting a strong anti-money laundering law. President Yeltsin assured President Clinton that this was indeed his intent. In the context of ongoing IMF engagement with Russia, the United States and other major IMF shareholders will be monitoring developments in this area closely. III. Our Financial Policy Toward Russia Following the economic and financial collapse of August 1998, Russian economic policy and our own financial policy toward Russia moved to a very different phase. The International Monetary Fund ceased lending to Russia and did not provide any financial assistance for about a year. Our interaction with Russia through the international financial institutions, however, is only part of our efforts to promote stability, economic progress, and Russia's integration into the global economic and political systems. Certainly it is in our interest to remain engaged with the Russian people. The United States is continuing to help the Russian people develop democratic and legal institutions, start private businesses, and improve social services. We have supported the development of NGOs; of the 65,000 NGOs that have been created during the past decade, USAID programs have supported more than 15%. The Department of Commerce and USAID are assisting thousands of small and microbusinesses through a variety of programs, including loan programs. And through USAID-sponsored programs, we are training thousands of doctors and nurses and helping Russia improve prove drug therapy and care for diabetics, a disease that currently affects seven million people in Russia. The technical assistance we provide Russia has long emphasized building the legal and regulatory infrastructure necessary for a market economy. Treasury technical assistance has focused in particular on the essential task of constructing a fair, predictable, law-based federal tax system. As part of a broad array of efforts to strengthen the rule of law, USAID has worked to promote judicial independence and ethics, providing training for close to a thousand judges and court personnel. A new approach to financial assistance after 1998 In the difficult environment that has resulted from Russia's economic collapse in August of last year, the approach of the international financial institutions with the support of the G-7 has shifted from providing net new funds to Russia in order to promote economic reform to partially refinancing debt coming due to the IMF as part of an attempt to support economic stability in Russia. We and the international financial institutions have insisted that their support be based on adequate accounting and adequate safeguards. The IMF program approved in July 1999 was very different from all of Russia's prior IMF programs. The first disbursement under the new IMF program -- as well as any subsequent disbursements -- was predicated on the imposition of new safeguards to protect the use of that money. The funds were provided in the form of Special Drawing Rights, were paid into an account at the IMF, and can be used only to repay Russian obligations to the Fund. In addition, approval of the program required a satisfactory independent investigation of the Russian Central Bank's investment in Fimaco and of the July 1998 IMF disbursement. Our decision to support this new program for Russia -- as has been true of all of our policies toward Russia since 1993 -- involved a difficult balance: between the need for engagement and the need for conditionality; and between what was economically necessary for Russia and what was politically feasible. Going forward, it will be as important as ever that we remain hardheaded and clear-eyed, and ensure that any support that is provided for Russia is used for its intended purpose and for that purpose lose alone. Russia's new IMF program will be complemented by limited and measured support through financing from the World Bank and the European Bank for Reconstruction and Development for particular projects and targeted reform efforts. As in the past, any lending will depend on Russia's adherence to the conditions of these programs. Last summer, the World Bank restructured its three key structural adjustment loans to Russia to encourage greater progress toward reforms in the financial and coal sectors and in the country's pension and welfare systems. It also canceled parts of other loans amounting to $228 million because of poor performance, largely as a result of the financial crisis. This measured approach has also informed our support for a rescheduling of Russia's bilateral Paris Club Soviet-era debt that is limited both in scope and duration. Under the new IMF agreement, Russia is to repay about $2 billion of its obligations to the IMF, and is refinancing the remaining $4.5 billion coming due during the program period. This will have the consequence of reducing Russia's debt to the IMF as Russia meets its obligations. Accounting for all the operations of the international financial institutions, there will be a net financial flow from Russia to the international financial institutions as a group between July 1999 and December 2000. Loans conditioned by adequate accounting and adequate safeguards Our continued support for IMF or World Bank engagement with Russia is predicated on Russia's compliance with crucial conditions to ensure financial integrity and to safeguard any assistance provided in refinancing. These include: -- The completion of an investigative report on all offshore operations of the Central Bank of Russia. -- Procedures at the Central Bank of Russia (CBR) to strengthen internal controls on the management of reserves, exchange market intervention, and extension of credit to commercial banks. Each disbursement of IMF financing will be conditional on a determination that the CBR's reserve management since the prior disbursement has been appropriate. -- A regime of regular external audits of the CBR that are reviewed by the IMF. These audits should be made public. -- New procedures to strengthen safeguards on the use of the resources of the international financial institutions for bud budgetary support. These conditions and considerations will govern our support of additional disbursements to Russia from the IMF and World Bank. We have supported continued IMF engagement with Russia, based on these safeguards, not because we expected that Russia would be rapidly transformed into a market economy or that corruption would be eliminated overnight, but rather on the view that to quarantine, contain, or write off Russia as too corrupt Would ill serve our national interest. Acting on that view would limit our ability to support Russian economic and financial stability; it would inhibit our ability to promote democratization; and it would raise the risk that the United States and the West would be labeled as scapegoats for Russia's failure to address its problems. IV. Combating Global Corruption and Money Laundering Finally, as we work to promote the adoption of sound economic reforms in Russia and in other countries around the world, fighting corruption and pursuing policies to reduce crime will be essential components of those efforts. We will pursue these measures, as we have done in the past, both through our bilateral relationships and within multinational organizations. For example, building on the U.S.-led efforts to conclude the OECD Anti-Bribery Convention and the Vice President's Anti-corruption conference last February, we have been pressing, and will continue to press, for the complete ratification and implementation of the OECD Convention by all signatories. In addition, the United States is working with its G-7 partners and others to coordinate anti-corruption efforts and assistance, complete a WTO agreement on transparency in government procurement, and seek ways to institutionalize international measures to identify, block and seize illicit funds gained through criminal acts. Anti-corruption initiatives within the international financial institutions The IMF is increasingly giving explicit consideration to addressing weak governance and corruption in all its country programs. The Fund has developed a code of fiscal transparency, which calls for governments to accurately track and disclose expenditures and thereby make them more accountable for their spending decisions. It has also consistently supported open and transparent markets, price decontrol, and trade liberalization, each of which will reduce the opportunity for bribery and corruption. The IMF's approach to its 1997 programs with Thailand, Korea, and Indonesia included provisions aimed at reducing "crony capitalism," and other forms of corruption. For example, in the case of the Reforestation Fund in Indonesia, used by former President Suharto and his colleagues for inappropriate purposes, the IMF required that the Reforestation Fund be accounted for as part of the national budget, and required a fall audit by internationally acceptable experts that is to be published upon its completion this fall. More recently, the IMF has suspended funding to Indonesia in connection with accusations of corruption relating to Bank Bali. The World Bank, with the strong support of the United States, is also paying increased attention to the problems of corruption in its member countries. The Bank has developed programs to combat corruption problems in individual countries, initiatives to enhance transparency and accountability in public finances, and approaches to strengthen public institutions and the rule of law with regard to investment and property. The Bank has also developed new methodologies and techniques for analysis of the nature and extent of corruption in specific countries. Since 1996, more than two dozen countries in East Asia, Eastern Europe, Latin America, and Africa have sought the Bank's assistance in anti-corruption work. Specific country programs include: technical assistance for procurement reform in Tajikistan and Lebanon; anti-corruption seminars in Georgia, Ghana, India and Korea; Supreme Court modernization in Venezuela; and educational workshops to improve public expenditure management in Gambia. In the IDA-12 replenishment agreement, the United States led the effort to include a strengthened linkage between new lending and borrower performance, with explicit consideration to be given to good governance and efforts to combat corruption. IDA-12 also requires the World Bank and its borrowers to undertake public expenditure reviews, procurement assessments and financial capacity assessments and to identify follow-up actions. The United States will also continue to urge the Multilateral Development Banks to give priority attention to developing uniform procurement rules and documents which can help countries combat corruption and decrease opportunities for corruption in World Bank and regional development bank projects. Going forward, these issues will be the focus of attention and the international meetings over the next ten days. We and the G-7 will be calling for authoritative reviews by the IMF and the World Bank to identify ways to strengthen safeguards on the use of IMF and World Bank funds, especially in cases where there is heightened risk of diversion or misappropriation of funds. National Money Laundering Strategy This Thursday, the Treasury Department and the Justice Department will release the Administration's first National Money Laundering Strategy report. The Strategy will set forth a broad-based domestic and international program to combat money laundering, including several dozen proposed action items aimed at bolstering international cooperation in the fight against money laundering; strengthening domestic enforcement; enhancing the regulation of banks and other financial institutions; and building stronger partnerships with state and local governments. The Strategy will contain a series of recommendations intended to combat the types of criminal activity we are discussing here today. For example, it calls for legislation to make U.S. money laundering laws applicable to a broader range of international criminals -- including corrupt foreign officials. It calls for rules to extend requirements for filing suspicious activity reports (SARs) to money service businesses, broker/dealers and casinos, as well as enhanced use and analysis of SARs by Treasury's Financial Crimes Enforcement Network and other federal law enforcement agencies. The Strategy calls for designating high-risk money laundering zones toward which to direct coordinated law enforcement efforts. And it proposes that we intensify pressure on nations that lack adequate counter-money laundering controls to adopt them. The implementation of these recommendations will take time, but with hundreds of billions of dollars laundered each year, it is clear that we must make long-term commitments while moving forward quickly. V. Concluding Remarks Mr. Chairman, during the past six and a half years we have faced very difficult choices with respect to Russia even as we have sought to intensify our efforts to combat global corruption and money laundering. There are clearly no simple answers on how best to support perhaps the most complex economic transformation of our time, and the process of change in Russia is still ongoing. In many respects, the challenge has been to find the best economic policy when confronted with difficult choices. The difficulty of those choices has hardly diminished in the wake of developments that have taken place in Russia since August 1998. As I have described, since the economic and financial collapse at that time, the financial aspect of our engagement with Russia has been pursued on very different terms and with much constrained objectives. The present program, built around the very rigorous safeguards that restrict how Russia can use any financing that the IMF makes available, implies a continued reduction in Russian debt to the IMF. It has always been clear that Russia's complex transformation from a centrally planned communist empire to a democratic market-based economy would take a great deal of time. And it has been equally clear that the United States has a great stake in the success of this process. As Russia's transformation proceeds, we will need to continually assess and adjust our strategy in light of our interests as events in Russia evolve. Discussions like the one we are having here today will be important to help guide our thinking on this crucial national issue as Russia's transition continues. Thank you. I would now welcome the Committee's questions. (end text)
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