House committee hears testimony on aid to new independent states (03/16/97)

House committee hears testimony on aid to new independent states

Special to The Ukrainian Weekly

WASHINGTON - The House International Relations Committee on March 11 heard testimony on the Clinton administration's Fiscal Year 1998 request for $900 million of assistance to the new independent states (NIS). The request is an increase of 44 percent over FY 1997 levels. The proposed level of spending for Ukraine is $225.5 million (an increase of .2 percent), while spending for Russia is proposed at $241.5 million (an increase of 153.1 percent).

In his opening statement, Chairman Benjamin Gilman (R-N.Y.) said that Russia has received over $4.5 billion of U.S. assistance over the past five years.

"The United States has been generous," he said, adding that there have been many loan guarantee programs and assistance from European allies. Rep. Gilman went on to say, "we have steered $650 million in business to the Russian space program" as part of the international space station project. According to the chairman, last year the Paris Club organized the largest restructuring of debt in its 40-year history for Russia.

"Russia's foreign policy does not reflect gratitude to the West for this assistance," said Rep. Gilman. He enumerated issues of concern, including weapons sales to China, nuclear sales to Iraq, failure to ratify START II, continued production of chemical and biological weapons, and exertion of pressure on other former Soviet states for the stationing of Russian troops on their borders.

After that introduction, Ambassador Richard Morningstar, coordinator of assistance to the NIS, began his testimony by outlining the three principles that form the foundation of the administration's proposal for the Partnership for Freedom program, a follow-up program to the Freedom Support Act: (1) the development and stability of the NIS is in U.S. national security interests; (2) the transition is complex and generational; and (3) the people in the NIS are facing economic hardship.

He outlined a $160 million program of trade and investment with an emphasis on small business loans. Part of the proposal entails business training and exchange programs. Also included is $29 million for fighting corruption, an increase from the current $12 million for this effort.

Positive trends noted

Thomas Dine, deputy administrator of the U.S. Agency for International Development (USAID), highlighted the positive trends in various NIS countries. In Ukraine, Mr. Dine said, shares of 440 companies a month are being auctioned.

Ukraine is the only NIS country to create an electricity market, which includes a reorganization of fuel procurement policies, tracking of customers in arrears, and the creation of a National Electrical Regulatory Commission.

Mr. Dine reserved his most positive comments for Georgia, where "democracy is flourishing" and whose "Parliament is most progressive, practitioners of Madisonian democracy."

During questioning, Rep. Gilman inquired about corruption in Ukraine and the prospects for an anti-corruption effort. Ambassador Morningstar noted that corruption is a major issue in Ukraine and that the administration is pursuing a two-track system: support for economic reforms and deregulation to eliminate opportunities for corruption; and anti-corruption programs. He went on to comment that the "Ukrainians say the right things," but do not implement them.

The committee's ranking minority member, Lee Hamilton (D-Ind.), inquired which countries are furthest along on reforms and which countries are disappointing in their efforts. Mr. Morningstar said reforms are good in Georgia, Armenia, Kyrgyzstan, Moldova and Russia, which is furthest along in economic reforms, and disappointing in Belarus. Mr. Dine said the most reforms are in place in Estonia, the Czech Republic, Slovenia, Poland, Hungary, Latvia, Lithuania and Slovakia.

The second tier, according to Mr. Dine, is Romania, Bulgaria, Russia, Kyrgyzstan and Moldova. The problem nations are Turkmenistan, Tajikistan, Belarus and Serbia. Showing surprise, Rep. Hamilton asked where Ukraine is. "Below Russia," Mr. Dine replied.

The issue of earmarks

The issue of earmarks for Ukraine and Armenia was raised by Rep. Tom Campbell (R-Calif.), who inquired whether they were helpful or not. Mr. Dine responded that the "earmarks hurt us in our strategic objective" since we "could not do as much in our star country." (The reference to a "star country" was not clarified.)

In a more diplomatic response, Mr. Morningstar, stated that he "has no problem with $225 million for Ukraine within a $900 million budget, but not within a $625 million budget," referring to the FY 1997 earmark. Neither one commented on the earmark for Armenia, however.

While stating his opposition to "earmarking for domestic political reasons," Rep. Doug Bereuter (R-Neb.) focused his attention on the use of the Export-Import (Ex-Im) Bank for the Partnership for Freedom program. He pointed out that Ex-Im's reauthorization is already facing opposition from those who call it "corporate welfare" and that this proposal complicates the issue. He criticized the Clinton administration for not consulting with the Banking Committee before floating the idea of changing aspects of the bank's work.

Another aspect of the Ex-Im credit facility was raised by Rep. Cass Ballenger (R-N.C.), who inquired why the U.S. is advancing credits to a firm like Gazprom that does not pay the taxes it owes to the Russian government. Mr. Morningstar responded that efforts are under way to avoid such problems in Ukraine.

Stating that he understood that the Central Asian Enterprise Fund was effective, Rep. Earl Hilliard (D-Ala.) expressed concern about the Russian and Western NIS enterprise funds (the latter serving Ukraine, Belarus and Moldova). He pointed out that the Western NIS fund spent 52 percent of its resources on operating expenses rather than financing projects.

Mr. Morningstar agreed that the Central Asian fund was operating effectively, something he attributed to the experience and knowledge of the region by the president of the fund. He acknowledged that the other two funds had slow starts.

The House International Relations Committee plans to complete its hearing schedule this month and begin mark-up of the legislation on April 9. Chairman Gilman announced that plans to have a panel of public witnesses had to be postponed due to the visit of Egyptian President Hosni Mubarak to the Congress.

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