Order Code RL33407
CRS Report for Congress
Received through the CRS Web
Russia
May 8, 2006
Stuart D. Goldman
Specialist in Russian & Eurasian Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

Russia
Summary
Vladimir Putin won reelection as President in March 2004, in an exercise in
“managed democracy” in which he took 71% of the vote and faced no serious
competition. The pro-Putin Unified Russia party similarly swept the parliamentary
election in December 2003 and controls more than two-thirds of the seats in the
Duma. Putin’s twin priorities remain to revive the economy and strengthen the state.
He has brought TV and radio under tight state control and virtually eliminated
effective political opposition. Federal forces have suppressed large-scale military
resistance in Chechnya but face the prospect of prolonged guerilla warfare and
terrorist style attacks.
The economic upturn that began in 1999 is continuing. The GDP and domestic
investment are growing impressively after a long decline, inflation is contained, the
budget is balanced, and the ruble is stable. Major problems remain: 18% of the
population live below the poverty line, foreign investment is low, and crime,
corruption, capital flight, and unemployment remain high. Putin apparently seeks
simultaneously to tighten political control and accelerate economic reform.
Russian foreign policy has grown more assertive, fueled in part by frustration
over the gap between Russia’s self-image as a world power and its greatly diminished
capabilities. Russia’s drive to reassert dominance in and integration of the former
Soviet states is most successful with Belarus and Armenia but arouses opposition in
Georgia, Ukraine, Azerbaijan, and Moldova. The Commonwealth of Independent
States as an institution is failing. Washington and Moscow continue to disagree over
Russian nuclear reactor sales to Iran, among other issues. After the September 11,
2001 attacks, however, Russia adopted a more cooperative attitude on many issues.
The military is in turmoil after years of severe force reductions and budget cuts.
The armed forces now number about one million, down from 4.3 million Soviet
troops in 1986. Weapons procurement is down sharply. Readiness, training, morale,
and discipline have suffered. Putin’s government has increased defense spending
sharply but there is conflict between the military and the government and within the
military over resource allocation, restructuring, and reform.
After the Soviet Union’s collapse, the U.S. sought a cooperative relationship
with Moscow and supplied over $4 billion in grant aid to encourage democracy,
market reform, and WMD threat reduction in Russia. Early hopes for a close
partnership waned however, due to mutual disillusionment. Direct U.S. foreign aid
to Russia, under congressional pressure, fell in the past decade. Indirect U.S. aid,
however, through institutions such as the IMF, was substantial. The U.S. has imposed
economic sanctions on Russian organizations for exporting military technology and
equipment to Iran and Syria, and more restrictions on aid to Russia are in the FY2006
foreign aid bill. In the spirit of cooperation after September 11, however, the two
sides agreed on a strategic nuclear force reduction treaty and a strategic framework
for bilateral relations, signed at the Bush-Putin summit in May 2002.
This CRS report replaces CRS Issue Brief IB92089, Russia, by Stuart Goldman.

Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Post-Soviet Russia and Its Significance for the United States . . . . . . . . . . . . . . . . 1
Political Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Chechnya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Economic Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Foreign Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Defense Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Fundamental Shakeup of the Military . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Control of Nuclear Weapons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
U.S. Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
U.S.-Russian Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
U.S. Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
List of Tables
Table 1. Russian Economic Performance Since 1992 . . . . . . . . . . . . . . . . . . . . . 8

Russia
Most Recent Developments
On March 24, 2006, the U.S. Defense Department released a report citing
captured Iraqi documents to the effect that at the outset of the U.S.-led invasion of
Iraq, Russian officials passed military intelligence information on U.S. forces to
Iraqi officials. The Russian government promptly denied this allegation.
On March 29, 2006, President Putin complained to a meeting of Russian
businessmen that negotiations for Russia to join the WTO were being “artificially set
back” by a series of questions from U.S. negotiators on issues “that we thought had
been settled long ago.”
On March 31, 2006, Russian and Georgian officials signed a set of agreements
on the withdrawal of Russian forces from the Batumi and Akhalkalaki bases and
other Russian military installations in Georgia. The agreement, however, did not
address Russia’s support for secessionist movements in Georgia’s Abkhazia and
South Ossetia regions.
On April 19, 2006, Russia banned the importation of mineral water from
Georgia. This followed Russia’s March 27 ban on Georgian wines and an earlier
Russian ban on fruits and vegetables from Georgia — all allegedly for health reasons.
Georgian officials said the Russian actions were political retaliation for Georgia’s
pro-western and pro-NATO policies.
On May 4, 2006, in the sharpest criticism yet of the Putin regime by a senior
Bush Administration official, Vice President Cheney said in a speech in Lithuania
that opponents of reform in Russia are “seeking to reverse the gains of the last
decade....” He also rebuked Moscow for using oil and gas as “tools of intimidation
[and] blackmail.”
Post-Soviet Russia and
Its Significance for the United States
Russia was by far the largest of the former Soviet republics. Its population of
143 million (down from 149 million in 1991) is about half the old Soviet total. Its
6.6 million square miles comprised 76.2% of the territory of the U.S.S.R. and it is
nearly twice the size of the United States, stretching across Eurasia to the Pacific,
across 11 time zones. Russia also has the lion’s share of the natural resources,
industrial base, and military assets of the former Soviet Union.

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Russia is a multinational, multi-ethnic state with over 100 nationalities and a
complex federal structure inherited from the Soviet period. Within the Russian
Federation are 21 republics (including Chechnya) and many other ethnic enclaves.
Ethnic Russians, comprising 80% of the population, are a dominant majority. The
next largest nationality groups are Tatars (3.8%), Ukrainians (3%), and Chuvash
(1.2%). Furthermore, in most of the republics and autonomous regions of the
Russian Federation that are the national homelands of ethnic minorities, the titular
nationality constitutes a minority of the population. Russians are a majority in many
of these enclaves. During Yeltsin’s presidency, many of the republics and regions
won greater autonomy. Only the Chechen Republic, however, tried to assert
complete independence. One of President Putin’s priorities has been to reverse this
trend and rebuild the strength of the central government vis-a-vis the regions.
The Russian Constitution combines elements of the U.S., French, and German
systems, but with an even stronger presidency. Among its more distinctive features
are the ease with which the president can dissolve the parliament and call for new
elections and the obstacles preventing parliament from dismissing the government
in a vote of no confidence. The Constitution provides a four-year term for the
president and no more than two consecutive terms. The president, with parliament’s
approval, appoints a premier who heads the government. The president and premier
appoint government ministers and other officials. The premier and government are
accountable to the president rather than the legislature. President Putin was reelected
to a second term in March 2004.
The bicameral legislature is called the Federal Assembly. The Duma, the lower
(and more powerful) chamber, has 450 seats. In previous elections, half the seats
were chosen from single-member constituencies and half from national party lists,
with proportional representation and a minimum 5% threshold for party
representation. In September 2004, President Putin proposed that all 450 Duma seats
be filled by party list election, with a 7% threshold for party representation. This was
signed into law in May 2005. The upper chamber, the Federation Council, has 178
seats, two from each of the 89 regions and republics of the Russian Federation.
Deputies are appointed by the regional chief executive and the regional legislature.
The next parliamentary election is to be held in December 2007.
The judiciary is the least developed of the three branches. Some of the Soviet-
era structure and personnel are still in place. Criminal code reform was completed
in 2001 and trial by jury is being introduced, although it is not yet the norm. Federal
judges, who serve lifetime terms, are appointed by the President and must be
approved by the Federation Council. The courts are widely perceived to be subject
to political manipulation and control. The Constitutional Court rules on the legality
and constitutionality of governmental acts and on disputes between branches of
government or federative entities. The Supreme Court is the highest appellate body.
Russia is not as central to U.S. interests as was the Soviet Union. With the
dissolution of the U.S.S.R. and a diminished Russia taking uncertain steps toward
democratization, market reform and cooperation with the West, much of the Soviet
military threat has disappeared. Yet developments in Russia are still important to the
United States. Russia remains a nuclear superpower. It will play a major role in
determining the national security environment in Europe, the Middle East, and Asia.

CRS-3
Russia has an important role in the future of arms control, nonproliferation of
weapons of mass destruction, and the fight against terrorism. Such issues as the war
on terrorism, the future of NATO, and the U.S. role in the world will all be affected
by developments in Russia. Also, although Russia’s economy is distressed, it is
recovering and is potentially an important trading partner. Russia is the only country
in the world with more natural resources than the United States, including vast oil
and gas reserves. It has a large, well-educated labor force and a huge scientific
establishment. Also, many of Russia’s needs — food and food processing, oil and
gas extraction technology, computers, communications, transportation, and
investment capital — are in areas in which the United States is highly competitive.
Political Developments
Former President Boris Yeltsin’s surprise resignation (December 31, 1999)
propelled Vladimir Putin (whom Yeltsin had plucked from obscurity in August 1999
to be his fifth Premier in three years) into the Kremlin as Acting President. Putin’s
meteoric rise in popularity was due to a number of factors: his tough policy toward
Chechnya; his image as a youthful, vigorous, sober, and plain-talking leader; and
massive support from state-owned TV and other mass media. In March 2000, Putin
was elected president in his own right.
Putin, who was a Soviet KGB foreign intelligence officer for 16 years and later
headed Russia’s Federal Security Service (domestic component of the former KGB),
is an intelligent, disciplined statist. His priorities appear to be strengthening the
central government, reviving the economy, and restoring Russia’s status as a great
power.
On the domestic political scene, Putin early on won major victories over
regional leaders, reclaiming authority for the central government that Yeltsin had
allowed to slip away. First, Putin created seven super-regional districts overseen by
presidential appointees. Then he pushed legislation to change the composition of the
Federation Council, the upper chamber of parliament (a body that was comprised of
the heads of the regional governments and regional legislatures), giving those leaders
exclusive control of that chamber and also parliamentary immunity from criminal
prosecution. With Putin’s changes, Federation Council Deputies are appointed by
the regional leaders and legislatures, but once appointed, they are somewhat
independent. Putin then won parliamentary approval of a bill giving the president the
right to remove popularly elected regional leaders who violate federal law. In 2005,
the Kremlin-controlled parliament gave Putin the power to appoint regional
governors.
The Putin regime has been steadily working to gain control of the broadcast
media. A key target was the media empire of Vladimir Gusinsky, which included
Russia’s only independent television network, NTV, which had been critical of Putin.
Gusinsky, one of the so-called oligarches who rose to economic and political
prominence under Yeltsin, was arrested in June 2000 on corruption charges and was
later released and allowed to leave the country. Many viewed this as an act of
political repression by the Putin regime. In April 2001, the state-controlled gas

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monopoly Gazprom took over NTV and appointed Kremlin loyalists to run it. A few
days later, Gusinsky’s flagship newspaper, Segodnya, was shut down and the
editorial staff of his respected newsweekly, Itogi, was fired. The government then
forced the prominent oligarch Boris Berezovsky to give up ownership of his
controlling share of the ORT TV network. In January 2002, TV-6, the last significant
independent Moscow TV station, was shut down, the victim, many believe, of
government pressure. The government has also moved against the independent radio
network, Echo Moskvuy and other electronic media.
A law on political parties, introduced by the government and explicitly aimed
at reducing the number of parties, gives the government the authority to register, or
deny registration to, political parties. In April 2001, Putin proposed that the Duma
be stripped of its power to debate or vote on specific components of the budget and
instead either approve or reject the government’s proposed budget as a whole. In
April 2002, the pro-Putin bloc in the Duma staged a political coup against the
Communist Party faction, depriving it of most of its committee chairmanships and
other leadership posts. Putin’s September 2004 political changes will further reduce
the number of parties in the Duma by raising the threshold for representation from
5% to 7% of the total vote and banning parliamentary blocs (coalitions of several
parties).
In the summer of 2003, the Russian government launched a campaign against
Mikhail Khodorkovski, CEO of Yukos, the world’s fourth largest oil company. After
numerous searches and seizures of Yukos records and the arrest of several senior
Yukos officials, Federal Security Service police arrested Khodorkovski on October
25. Five days later prosecutors froze Yukos stock worth some $12 billion.
Khodorkovski, the wealthiest man in Russia, became a multi-billionaire in the 1990s
in the course of the often corrupt privatization of state-owned assets under former
president Yeltsin. Khodorkovski, however, subsequently won respect in the West by
adopting open and “transparent” business practices while transforming Yukos into
a major global energy company. Khodorkovski criticized some of President Putin’s
actions, financed anti-Putin political parties, and hinted that he might enter politics
in the future.
Khodorkovski’s arrest is seen by many as politically motivated, aimed at
eliminating a political enemy and making an example of him to other Russian
oligarchs. Many observers also see this episode as the denouement of a long power
struggle between two Kremlin factions: a business-oriented group of former Yeltsin
loyalists and a rising group of Putin loyalists drawn mainly from the security services
and Putin’s home town of St. Petersburg. A few days after Khodorkovski’s arrest,
Presidential Chief of Staff Aleksandr Voloshin, reputed head of the Yeltsin-era
group, resigned, as did several of his close associates, leaving the Kremlin in the
hands of the “policemen.” Khodorkovski went on trial in June 2004 on multiple
criminal charges of tax evasion and fraud. In May 2005, Khodorkovski was found
guilty and sentenced to nine years in prison and was sent to a penal camp in Siberia.
Yukos was broken up and its principal assets sold off to satisfy tax debts
allegedly totaling $28 billion. On December 19, 2004, Yuganskneftegaz, the main
oil production subsidiary of Yukos, was sold at a state-run auction, ostensibly to
satisfy tax debts. The wining, and sole, bidder, Baikalfinansgrup, paid $9.7 billion,

CRS-5
about half of its market value, according to western industry specialists. It was
subsequently revealed that the previously unheard-of Baikalfinansgrup is a group of
Kremlin insiders headed by Igor Sechin, Deputy Head of the Presidential
Administration and a close associate of President Putin. On December 22,
Baikalfinansgrup was purchased by Rosneft, a wholly state-owned Russian oil
company. Sechin has been Chairman of Rosneft’s Board of Directors since July
2004. The de-facto nationalization of Yuganskneftegaz was denounced by Andrei
Illarionov, then a senior Putin economic advisor, as “the scam of the year.”
In parliamentary elections on December 7, 2003, the big winners were the
Unified Russia Party, identified with President Putin, and the newly created pro-
Kremlin populist/nationalist party, Motherland. When the new Duma convened on
December 29, Unified Russia had 300 of the 450 seats. With its two-thirds majority
and the added support of the Motherland Party and Vladimir Zhirinovsky’s right-
wing Liberal Democratic Party, the Kremlin’s control of the Duma is absolute,
sufficient to pass any legislation and to amend the Constitution. The big losers were
the Communist Party, which lost half its seats, and the two liberal, pro-western
parties, Yabloko and Union of Rightists, which failed to reach the 5% threshold and
were virtually eliminated from the Duma. The Communist Party now holds 52 seats;
Motherland and the Zhirinovsky’s LDP hold 36 seats each. These are the only four
parties with meaningful representation in the Duma.
The pro-Kremlin sweep in the Duma election foretold the results of the
presidential election three months later. Demonstrating what some of Putin’s own
advisors call “managed democracy,” the Kremlin team used levers of power and
influence to affect the electoral process, including determining the opposition
candidates. So-called “administrative resources” (financial, bureaucratic, and
judicial) were mobilized at the federal, regional, and local level in support of Putin’s
campaign. The state-controlled national broadcast media lionized Putin and
generally ignored and/or denigrated his opponents. On March 14, 2004, Putin, as
expected, won reelection to a second term with a reported 71% of the vote, and no
serious opposition. Communist Party leader Zyuganov declined to run, as did
Zhirinovsky, both of whom designated surrogates to put up a show of contesting the
election. In the event, the Kremlin’s biggest campaign challenge turned out to be
maintaining the appearance of a politically meaningful contest. Most objective
observers, Russian and international, concluded that in this the Putin team failed.
Putin declined to participate in several televised debates with the other five
presidential candidates, nor did he present a campaign platform. Two weeks before
the election, however, he surprised observers by announcing a major government
shake up. Mikhail Kasyanov, who had served as Putin’s Premier for four years but
also had ties with the Yeltsin “family,” was replaced by Mikhail Fradkov, a little-
known bureaucrat who was Moscow’s representative to the EU and before that
briefly headed the Federal Tax Police.
On September 13, 2004, in the aftermath of the bloody Beslan school hostage
crisis (see below), President Putin proposed a number of changes to the political
system that would further concentrate power in his hands, necessitated, he said, by
Russia’s intensified war against international terrorism. He proposed, inter alia, that
regional governors no longer be popularly elected, but instead that regional

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legislatures confirm the president’s appointees as governors and that all Duma
Deputies be elected on the basis of national party lists, based on the proportion of
votes each party gets nationwide. The first proposal would make regional governors
wholly dependent on, and subservient to, the president, undermining much of what
remains of Russia’s nominally federal system. The second proposal would eliminate
independent deputies and further strengthen the pro-presidential parties that already
control an absolute majority in the Duma. Putin and his supporters argue that these
measures will help reduce corruption in the regions and “unify” the country, the
better to fight against terrorism. Critics see the proposals as further, major
encroachments on the fragile democratic reforms of the 1980s and 1990s that have
already suffered serious setbacks under Putin. They warn of Putin’s growing
authoritarianism. President Bush, Secretary of State Powell, and many members of
Congress voiced concern that Putin’s September 13 proposals threatened Russian
democracy.
In January 2005, the Russian government monetized many previously in-kind
social benefits for retirees, military personnel, and state employees. The cash
payments, however, only partly compensated for the lost benefits. At the same time,
another government “reform” substantially raised housing and public utility costs.
This led to massive, prolonged anti-government demonstrations bringing hundreds
of thousands of protesters into the streets in what many have called the most serious
challenge to Putin’s five-year rule. These widespread protests, following the
September 2004 Beslan school hostage disaster and Putin’s public humiliation in the
Ukrainian presidential election in December, brought Putin’s public approval rating
down to 41% in March 2005, from the high 70s a year earlier.
On November 14, 2005, President Putin announced major high-level changes
in the government, naming two of his closest lieutenants to new
deputy-prime-ministerial positions: Presidential-Administration head Dmitrii
Medvedev and Defense Minister Sergei Ivanov. Ivanov will also retain his post as
defense minister. These two men now are seen by many as the front runners to
succeed Putin in 2008.
In December 2005, the Russian parliament passed a controversial Kremlin-
proposed law regulating non-government organizations (NGOs), which Kremlin
critics charge gives the government leverage to shut down NGOs that it views as
politically troublesome. The U.S. and many European governments expressed
concern about the NGO law.
Chechnya
In 1999, Islamic radicals based in Russia’s break-away republic of Chechnya
launched armed incursions into neighboring Dagestan, vowing to drive the Russians
out and create an Islamic state. A series of bombing attacks against apartment
buildings in Moscow and other Russian cities killed some 300 people. The new
government of then-Premier Putin blamed Chechen terrorists and responded with a
large-scale military campaign. Russian security forces may have seen this as an
opportunity to reverse their humiliating 1996 defeat in Chechnya. With Moscow
keeping its (reported) military casualties low and Russian media reporting little about
Chechen civilian casualties, the conflict enjoyed strong Russian public support,

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despite international criticism. After a grinding siege, Russian forces took the
Chechen capital in February 2000 and in the following months took the major rebel
strongholds in the mountains to the south. Russian forces have killed tens of
thousands of civilians and driven hundreds of thousands of Chechen refugees from
their homes.
In March 2003, Russian authorities conducted a referendum in Chechnya on a
new Chechen constitution that gives the region limited autonomy within the Russian
Federation. Moscow claims it was approved by a wide margin. In October 2003, the
Moscow-appointed head of the Chechen Administration, Akhmad Kadyrov, was
elected President of the republic. Russian hopes that these steps would increase
political stability and reduce bloodshed were disappointed, as guerilla fighting in
Chechnya and suicide bomb attacks in the region and throughout Russia continued.
On May 9, 2004, Kadyrov was assassinated by a bomb blast in Grozny, further
destabilizing Chechnya. On August 29, Alu Alkhanov, Moscow’s preferred
candidate, was elected President of Chechnya, replacing Kadyrov.
Many foreign governments and the U.N. and Organization for Security and
Cooperation in Europe (OSCE), while acknowledging Russia’s right to combat
separatist and terrorist threats on its territory, criticized Moscow’s use of
“disproportionate” and “indiscriminate” military force and the human cost to
innocent civilians and urge Moscow to pursue a political solution. Although
Moscow has suppressed large-scale Chechen military resistance, it faces the prospect
of prolonged guerilla warfare. Russia reportedly has lost some 12-15,000 troops in
Chechnya (1999-2004), comparable to total Soviet losses in Afghanistan (1979-
1989). Russian authorities deny there is a “humanitarian catastrophe” in the North
Caucasus and strongly reject foreign “interference” in Chechnya. The bloodshed
continues on both sides. Russian forces regularly conduct sweeps and “cleansing
operations” that reportedly result in civilian deaths, injuries, and abductions.
Chechen fighters stage large and small attacks against Russian forces and pro-
Moscow Chechens in Chechnya and neighboring regions and terrorist attacks against
civilian targets throughout Russia.
On September 1, 2004, a group of heavily armed fighters stormed a school in
the town of Beslan, taking some 1,150 children, teachers, and parents hostage and
demanding the withdrawal of Russian forces from Chechnya. Two days later, in a
chaotic and violent battle, over 350 hostages and nearly all the pro-Chechen fighters
were killed by explosives set by the hostage-takers and by gunfire from all sides.
Radical Chechen field commander Shamil Basaev later reportedly claimed
responsibility for the Beslan school assault. However, Aslan Maskhadov, the
nominal political leader of Chechnya’s separatist movement, denounced the school
attack and suicide bombings against civilian targets as unjustifiable acts of terrorism.
Maskhadov, who was elected President of Chechnya in 1997, was seen by some as
a relatively moderate leader and virtually the only possible interlocutor if Moscow
sought a political resolution to the conflict. Putin’s government labeled Maskhadov,
like all Chechen rebels, as a terrorist and refused to negotiate with him. On March
8, 2005, Russian authorities announced that they had killed Maskhadov in a shoot-out
in Chechnya, apparently extinguishing what little hope remained for a political
settlement. Chechen rebel “field commanders” named Abdul-Khalim Saidulaev
President and vowed to continue their struggle for independence.

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Economic Developments
After the collapse of the Soviet Union, Russia experienced widespread
economic dislocation and a drop of close to 50% in GDP. Conditions worse than the
Great Depression of the 1930s in the United States impoverished much of the
population, some 15% of which is still living below the government’s official (very
low) poverty level. Russia is also plagued by environmental degradation and
ecological catastrophes of staggering proportions; the near-collapse of the health
system; sharp declines in life expectancy and the birth rate; and widespread organized
crime and corruption. The population has fallen by over 5 million in the past decade,
despite net in-migration of 5 million from other former Soviet republics.
In 1999, the economy began to recover, due partly to the sharp increase in the
price of imports and increased price competitiveness of Russian exports caused by
the 74% ruble devaluation in 1998. The surge in the world price of oil and gas also
buoyed the Russian economy. The economic upturn accelerated in 2000, led by a
7.6% increase in GDP, 20% inflation, and a budget surplus. Economic performance
has remained relatively strong since then. Economists disagree as to whether this is
a turning point marking fundamental economic recovery, or a cyclical improvement
that will not be sustainable without further, politically painful, systemic reform. The
following table highlights Russian economic performance since the dissolution of the
Soviet Union in December 1991.
Table 1. Russian Economic Performance Since 1992
Annual percentage change
1992
1993
1994
1995 1996 1997
1998
1999 2000 2001 2002
2003
2004 2005
GDP Growth -14.5 -8.7 -12.6 -4.1 -4.9 0.8
-5.0
3.2
9
5.5
4
7.3
7.1
6.4
Rates
Inflation
2,525
847
223
131
48
11
84
36
20.2
15
12
13.6
11.7
12.9
Rates
Sources: PlanEcon, Inc., Center for Strategic and International Studies, and CIA World Factbook.
Economic Reform
In January 1992, Yeltsin launched a sweeping economic reform program
developed by Acting Premier Yegor Gaidar. The Yeltsin-Gaidar program wrought
fundamental changes in the economy. Although the reforms suffered many setbacks
and disappointments, most observers believe they carried Russia beyond the point of
no return as far as restoring the old Soviet economic system is concerned. The
Russian government removed controls on the vast majority of producer and consumer
prices in 1992. Many prices have reached world market levels. The government also
launched a major program of privatization of state property. By 1994, more than
70% of industry, representing 50% of the workforce and over 62% of production, had
been privatized, although workers and managers owned 75% of these enterprises,

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most of which have not still been restructured to compete in market conditions.
Critics charged that enterprises were sold far below their true value to “insiders” with
political connections.
The Putin government favors marketization and land reform. Putin declared
reviving the economy his top priority. His liberal economic reform team formulated
policies that won G-7 (now G-8, with Russia as a full member) and IMF approval in
his first term. Some notable initiatives include a flat 13% personal income tax and
lower corporate taxes that helped boost government revenue and passage of historic
land privatization laws. In May 2004, Russia reached agreement with the EU on
Russian accession to the WTO. EU leaders reportedly made numerous economic
concessions to Moscow. Russia agreed to sign the Kyoto Protocol and roughly
double the price of natural gas domestically by 2010. Meanwhile, massive oil profits
and related government revenues have made it easier for the government to put off
politically difficult decisions on structural economic reform. Reform was further
undermined by the Kremlin’s de facto privatization of oil giant Yukos, which has
darkened the investment climate.
Foreign Policy
In the early 1990s, Yeltsin’s Russia gave the West more than would have
seemed possible. Moscow cut off military aid to the Communist regime in
Afghanistan; ordered its combat troops out of Cuba; committed Russia to a reform
program and won IMF membership; signed the START II Treaty that would have
eliminated all MIRVed ICBMs (the core of the Soviet Strategic Rocket Forces); and
radically reduced Russian force levels in many other categories. The national
security policies of Yeltsin and Foreign Minister Andrei Kozyrev came to be strongly
criticized at home, not only by hardline communists and ultra nationalists but also by
many centrists and prominent democrats, who came to agree that the Yeltsin/Kozyrev
foreign policy lacked a sense of national interest and was too accommodating to the
West — at Russia’s expense.
In 1995, Yeltsin replaced Kozyrev as Foreign Minister with Yevgeny Primakov,
who was decidedly less pro-Western. Primakov opposed NATO enlargement,
promoted integrating former Soviet republics under Russian leadership, and favored
cooperation with China, India, and other states opposed to U.S. “global hegemony.”
When Primakov became Premier in September 1998, he chose Igor Ivanov to
succeed him as Foreign Minister. Ivanov kept that position until March 2004, when
he was replaced by career diplomat Sergei Lavrov, formerly Russia’s U.N.
Ambassador.
During Putin’s first year as president he continued Primakov’s policies, but by
2001, even before September 11, he appears to have made a strategic decision to
reorient Russian national security policy toward cooperation with the West and the
United States. Putin saw Russia’s economic revitalization proceeding from its
integration into the global economic system dominated by the advanced industrial
democracies — something that could not be accomplished in an atmosphere of
political/military confrontation or antagonism with the United States. After the

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September 11 attacks, the Bush Administration welcomed Russia’s cooperation
against Al Qaeda and the Taliban regime in Afghanistan, which paved the way for
broader bilateral cooperation.
Moscow remained unhappy about NATO enlargement in Central and Eastern
Europe, but reconciled itself to that, including former Soviet Baltic republics. In May
2002, NATO and Russian leaders meeting in Rome signed the “NATO at 20”
agreement, in which Russia and NATO members participate as equals on certain
issues. This replaces the NATO-Russia Permanent Joint Council, a consultative
body that operated on the principle of “19 plus 1,” i.e., NATO plus (and often versus)
Russia, which all sides found unsatisfactory. Russia reacted relatively calmly to
NATO’s admission of seven new members (May 2004), including the former Soviet
Republics of Estonia, Latvia, and Lithuania.
After the collapse of the Soviet Union, a consensus emerged in Moscow on
reestablishing Russian dominance in this region as a very high priority. There has
been little progress toward overall CIS integration. Russia and other CIS states
impose tariffs on each others’ goods in order to protect domestic suppliers and raise
revenue, in contravention of an economic integration treaty. Recent CIS summit
meetings have ended in failure, with many of the presidents sharply criticizing lack
of progress on common concerns and Russian attempts at domination. The CIS as
an institution appears to be foundering, and in March 2005, Putin called it a
“mechanism for a civilized divorce.”
On the other hand, in October 2000, the presidents of Russia, Belarus, Armenia,
Kazakhstan, Kyrgyzstan, and Tajikistan upgraded their 1992 Collective Security
Treaty, giving it more operational substance and de jure Russian military dominance.
In February 2003, the presidents of Russia, Ukraine, Belarus, and Kazakhstan agreed
in principle to create a “joint economic space” among the four countries. They
signed a treaty to that effect in September 2003 but failed to agree on fundamental
principles and terms of implementation. The December 2004 election of western-
oriented Viktor Yushchenko as President of Ukraine has in effect killed the “joint
economic space” agreement.
Russia and Belarus have taken steps toward integration. Belarusian President
Aleksandr Lukashenko may have hoped for a leading role in a unified state during
Yeltsin’s decline. Lukashenko unconstitutionally removed the parliamentary
opposition in 1996 and strongly opposes market reform in Belarus, making economic
integration difficult and potentially very costly for Russia. In April 1997, Yeltsin and
Lukashenko signed documents calling for a “union” between states that were to
remain “independent and sovereign.” On May 23, 1997, they signed a Union
Charter. Lukashenko minimized his and his country’s political subordination to
Moscow. Yeltsin avoided onerous economic commitments to Belarus. In December
1998, Yeltsin and Lukashenko signed an agreement to “unify” the two countries.
After protracted negotiations, the two presidents signed a treaty on December 8,
1999, committing Russia and Belarus to form a confederal state. Moscow and Minsk
continue to differ over the scope and terms of union, and Putin repeatedly has sharply
criticized Lukashenko’s schemes for a union in which the two entities would have
equal power. The prospects for union seem to be growing more distant.

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Russian forces remain in Moldova against the wishes of the Moldovan
government (and the signature of a troop withdrawal treaty in 1994), in effect
bolstering a neo-Communist, pro-Russian separatist regime in the Transnistria region
of eastern Moldova. Russian-Moldova relations warmed, however, after the election
of a communist pro-Russian government in Moldova in 2001, but even that
government became frustrated with Moscow’s manipulation of the Transnistrian
separatists. The United states and the EU call upon Russia to withdraw from
Moldova. Russian leaders have sought to condition the withdrawal of their troops
on the resolution of Transnistria’s status, which is still manipulated by Moscow.
Russian forces intervened in Georgia’s multi-faceted civil strife, finally backing
the Shevardnadze government in November 1993 — but only after it agreed to join
the CIS and allow Russia military bases in Georgia. Russia tacitly supports Abkhaz
and South Ossetian separatism in Georgia and had long delayed implementation of
a 1999 OSCE-brokered agreement to withdraw from military bases in Georgia. In
2002, tension arose over Russian claims that Chechen rebels were staging cross-
border operations from Georgia’s Pankisi Gorge, near the border with Chechnya. In
March 2002, the Bush Administration announced that a small contingent of U.S.
military personnel would be deployed in Georgia to help train and equip Georgian
security forces to combat Chechen, Arab, Afghani, al-Qaeda, and other terrorists who
had infiltrated into Georgia. In July 2005, Russia concluded an agreement with
Georgia to withdraw its forces from military bases it had occupied in Georgia since
the Soviet era. The withdrawal began July 30 and is supposed to be completed in
2007. (See CRS Issue Brief IB95024, Armenia, Azerbaijan, and Georgia: Political
Developments and Implications for U.S. Interests,
updated regularly.)
Moscow has used the Armenian-Azerbaijani conflict over Nagorno-Karabakh
to pressure both sides and win Armenia as an ally. Citing instability and the
threatened spread of Islamic extremism on its southern flank as a threat to its
security, Moscow intervened in Tajikistan’s civil war in 1992-93 against Tajik rebels
based across the border in Afghanistan.
A major focus of Russian policy in Central Asia and the Caucasus has been to
gain more control of natural resources, especially oil and gas, in these areas. Russia
seeks a stake for its firms in key oil and gas projects in the region and puts pressure
on its neighbors to use pipelines running through Russia. This became a contentious
issue as U.S. and other western oil firms entered the Caspian and Central Asian
markets and sought alternative pipeline routes. Russia’s policy of trying to exclude
U.S. influence from the region as much as possible, however, was dramatically
reversed by President Putin after the September 11 attacks. Russian cooperation with
the deployment of U.S. military forces in Uzbekistan, Kyrgyzstan, and Tajikistan
would have seemed unthinkable before September 11. More recently, however,
Russian officials have voiced suspicions about U.S. motives for prolonged military
presence in Central Asia.
On July 5, 2005, the Shanghai Cooperation Organization (comprising China,
Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan), approved a Moscow-
backed initiative calling for establishing deadlines for the withdrawal of U.S. and
coalition military bases from the Central Asian states. On July 29, the Uzbek
government directed the United States to terminate its operations at the

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Karshi-Khanabad (K2) airbase within six months. Tashkent is believed to have acted
not only in response to Russian and Chinese urging but also out of anger over sharp
U.S. criticism of the Uzbek government’s massacre of anti-government
demonstrators in Andijan in May 2005. (For more on Russian policy in these
regions, see CRS Issue Brief IB93108, Central Asia: Regional Developments and
Implications for U.S. Interests
, and CRS Issue Brief IB95024, Armenia, Azerbaijan,
and Georgia: Political Developments and Implications for U.S. Interests
.)
Of all the Soviet successor states, Ukraine is the most important for Russia.
Early on, the Crimean Peninsula was especially contentious. Many Russians view
it as historically part of Russia, and say it was illegally “given” to Ukraine by
Khrushchev in 1954. Crimea’s population is 67% Russian and 26% Ukrainian. In
April 1992, the Russian legislature declared the 1954 transfer of Crimea illegal.
Later that year Russia and Ukraine agreed that Crimea was “an integral part of
Ukraine” but would have economic autonomy and the right to enter into social,
economic, and cultural relations with other states. There was tension over Kiev’s
refusal to cede exclusive use of the Sevastopol naval base in Crimea to Russia.
Finally, in May 1997, Yeltsin and Ukrainian President Leonid Kuchma signed a
Treaty resolving the long dispute over Sevastopol and the Black Sea Fleet and
declaring that Russian-Ukrainian borders cannot be called into question. This
agreement, widely viewed as a major victory for Ukrainian diplomacy, was ratified
in April 1999. Bilateral relations remain very important for both countries.
Ukraine’s October 31, 2004, presidential election pitted the openly pro-Moscow
Prime Minister, Viktor Yanukovych, against an independence and reform-minded
candidate, Viktor Yushchenko. Putin strongly and openly backed Yanukovych and
lent much material support to his campaign. Nevertheless, Yushchenko narrowly
out-polled Moscow’s man in the first round. In the disputed run-off election on
November 21, Yanukovych initially claimed victory and was publicly congratulated
by Putin. Evidence of widespread election fraud, however, sparked massive
Ukrainian street demonstrations and strong U.S. and EU criticism, pitting Russia
against the West in a way reminiscent of the Cold War. After Ukraine’s parliament
and Supreme Court threw out the results of the November 21 election, the re-run on
December 26 was won by Yushchenko with 52% vs. 44% for Yanukovych. Many
observers in Russia, Ukraine, and the West, see this outcome as a powerful, and
possibly decisive, blow to perceived Russian hopes of reasserting dominance over
Ukraine. Yushchenko has declared integrating Ukraine economically and politically
into Europe as his top priority.
Ukraine has opted out of the four-party Single Economic Space promoted by
Moscow and including Belarus and Kazakhstan. Ukraine, however, is economically
dependent on Russia, especially for energy. But Ukraine also has some leverage in
this area, as the main pipelines carrying Russian gas and oil to Europe pass through
Ukraine. This troubled relationship leapt to prominence on January 1, 2006, when
Russia stopped pumping natural gas to Ukraine after the two sides had failed for
months to reach agreement on Russia’s proposed quadrupling of the price of gas.
This led to a sharp reduction in Russian gas supplies to Central and Western Europe,
which pass through Ukraine. In response to strong European protests, Russia
resumed pumping gas to and through Ukraine on January 3. The next day, Russia
and Ukraine announced agreement on a complicated deal that amounts to doubling

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of the price Ukraine is to pay for gas. Many analysts saw the outcome as
strengthening Russian influence in Ukraine and politically weakening Yushchenko
prior to parliamentary elections (March 26, 2006), in which Yushchenko’s party fared
poorly.
Defense Policy
Fundamental Shakeup of the Military
The Russian armed forces and defense industries have been in turmoil since
1992. Their previously privileged position in the allocation of resources has been
broken, as has their almost sacrosanct status in official ideology and propaganda.
Hundreds of thousands of troops were withdrawn from Eastern Europe, the former
Soviet Union, and the Third World. Massive budget cuts and troop reductions forced
hundreds of thousands of officers out of the ranks into a depressed economy. Present
troop strength is about 1.2 million men. (The Soviet military in 1986 numbered 4.3
million.) Weapons procurement is at historic lows. Readiness and morale are low,
and draft evasion and desertion are widespread. Yeltsin and later Putin declared
military reform a top priority, but fundamental reform of the armed forces and the
defense industries is a very difficult, controversial, and costly undertaking. The
Chechen conflict has delayed military reform.
Putin has pledged to strengthen and modernize the armed forces, and appears
determined to do so. At the same time, he appears to be quite aware of Russia’s
financial limitations. The decisions announced in August and September 2000 to
greatly reduce Russia’s strategic nuclear forces (from 6,000 to 1,500 deployed
warheads), to shift resources from strategic to conventional forces, and to shift from
a conscript to a volunteer force suggest serious intent to effect military reform.
Putin has made some changes in the military leadership that may lead to major
policy changes. Sergei Ivanov, a former KGB general very close to Putin, was named
Defense Minister. Ivanov had resigned his nominal intelligence service/military rank
and headed Putin’s Security Council as a civilian. Putin explained that the man who
had supervised the planning for military reform (Ivanov) should be the man to
implement reform as Defense Minister. In May 2004, the General Staff was taken
out of the direct chain of command and given a more advisory role, a move that
appears to strengthen civilian control.
The improvement of Russia’s economy since 1999, fueled in large part by the
cash inflow from sharply rising oil and gas prices, has enabled Putin to begin to
reverse the budgetary starvation the military endured during the 1990s. Defense
spending has increased substantially in each of the past few years. The government’s
2006 budget calls for increasing military spending by 22% over 2005. At the official
exchange rate, that puts the defense budget at $24 billion out of a total federal budget
of about $150 billion. Even factoring in purchasing power parity, Russian defense
spending lags far behind current U.S. or former Soviet levels.

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Despite its difficulties, the Russian military remains formidable in some respects
and is by far the largest in the region. Because of the deterioration of its conventional
forces, however, Russia relies increasingly on nuclear forces to maintain its status as
a major power. In November 2004, Putin announced that Russia was developing a
new strategic nuclear missile superior to any in the world, although no details were
provided as to its ostensibly unique features. There is sharp debate within the armed
forces about priorities between conventional vs. strategic forces and among
operations, readiness, and procurement. Russia is trying to increase security
cooperation with the other CIS countries. Russia has military bases on the territory
of all the CIS states except Azerbaijan and is seeking to take over or share in
responsibility for protecting the “outer borders” of the CIS. In the proposed Russia-
Belarus union, President Lukashenko pointedly emphasizes the military dimension.
On the other hand, Georgia, Ukraine, Moldova, and Azerbaijan are shifting their
security policies toward a more western, pro-NATO orientation.
Control of Nuclear Weapons
When the U.S.S.R. collapsed in 1991, over 80% of its strategic nuclear weapons
were in Russia. The remainder were deployed in Ukraine, Belarus, and Kazakhstan.
Those three states completed transfer of all nuclear weapons to Russia and ratified
the Nuclear Non-Proliferation Treaty as non-nuclear-weapon states by 1995-1996.
All Soviet tactical nuclear weapons, which had been more widely dispersed,
reportedly were moved to Russia by 1992. The command and control system for
strategic nuclear weapons is believed to be tightly and centrally controlled, with the
Russian president and defense minister responsible for authorizing their use. The
system of accounting and control of nuclear (including weapons grade) material,
however, is much more problematic, raising widespread concerns about the danger
of nuclear proliferation. There are growing concerns about threats to Russian
command and control of its strategic nuclear weapons resulting from the degradation
of its system of early warning radars and satellites. At the June 2000 Clinton-Putin
summit, the two sides agreed to set up a permanent center in Moscow to share near
real-time information on missile launches, but this has yet to be implemented. (See
CRS Report RL32202, Nuclear Weapons in Russia: Safety, Security, and Control
Issues
.)
U.S. Policy
U.S.-Russian Relations
The spirit of U.S.-Russian “strategic partnership” of the early 1990s was
replaced by increasing tension and mutual recrimination in succeeding years. In the
aftermath of the September 11, 2001 attacks, the two nations reshaped their
relationship on the basis of cooperation against terrorism and Putin’s goal of
integrating Russia economically with the West. (For the change in Russian policy
toward integration with the West and cooperation with the United States, see CRS
Report RL31543, Russia’s National Security Policy After September 11, last updated
August 20, 2002.) In the past year or two, however, tensions have reemerged on a
number of issues that again strain relations. Although cooperation continues in some

CRS-15
areas, and Presidents Bush and Putin strive to maintain at least the appearance of
cordial personal relations (their brief Moscow summit, May 8-9, 2005, was their 15th
meeting since 2001), there now appears to be more discord than harmony in U.S.-
Russian relations.
Russia’s construction of nuclear reactors in Iran and its role in missile
technology transfers to Iran are critical sources of tension with the United States.
Despite repeated representations from the White House and Congress, which argue
that Iran will use the civilian reactor program as a cover for a covert nuclear weapons
program, Russia refused to cancel the project, which was completed in 2004.
Revelations of previously covert Iranian nuclear developments have revived this
issue, and some Russian political leaders criticized the policy of nuclear cooperation
with Iran, giving rise to policy debate on this issue in Moscow. Moscow’s position
is that it intends to continue its civilian nuclear power projects in Iran, while urging
Tehran to accept more intrusive international safeguard inspections.
Moscow withheld delivery of nuclear fuel for the Bushehr reactor, pending
agreement with Teheran about return of spent fuel to Russia for reprocessing. In late
2005, Moscow proposed a compromise plan to avert a showdown between Iran and
the United States and the EU over Iran’s insistence on its right to reprocess uranium.
The Russian proposal, which has won luke-warm Bush Administration support,
would allow Iran to reprocess uranium, in facilities on Russian territory, presumably
subject to international inspection. After prolonged talks, Iran’s Foreign Ministry on
March 11, 2006 rejected the Russian proposal. The United States and an EU group
(France, Germany, and the U.K.) are trying to win Russian (and Chinese) agreement
to move the issue to the UN Security Council, which could impose sanctions on Iran,
an outcome that Moscow appears to be trying to avoid.
Since the mid-1990s, U.S. and Russian interests have clashed over Iraq. Russia
strongly opposed military action against Iraq in connection with the U.N. inspection
regime. After September 11, Moscow moved away from blanket support of Iraq.
Some Russian officials suggested that under certain circumstances, U.S. military
action against Iraq might not seriously strain U.S.-Russian relations — provided it
was not unilateral and Russia’s economic interests in Iraq were protected. As the
United States moved toward military action against Iraq, Putin tried to balance three
competing interests: protecting Russian economic interests in Iraq; restraining U.S.
“unilateralism” and global dominance; and maintaining friendly relations with the
United States. In February-March 2003, Putin aligned Russia with France and
Germany in opposition to U.S. military action and threatened to veto a U.S.-backed
UNSC resolution authorizing military force against Iraq. The U.S.-led war in Iraq
further strained U.S.-Russian relations, but the senior leadership in both countries
said that this would not be allowed to jeopardize their overall cooperation. On May
22, Russia voted with other members of the U.N. Security Council to approve a U.S.-
backed resolution giving the United States broad authority in administering post-war
Iraq.
Moscow’s main interests in Iraq came to focus on debt repayment, having the
post-Saddam regime honor pre-war multi-billion dollar contracts with Russian oil
firms, and preventing a glut of Iraqi oil from sharply depressing the price of oil. In
December 2003, Moscow initially reacted angrily to the Pentagon decision to bar

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Russia (and other states that did not support the U.S.-led coalition in Iraq) from
bidding as prime contractors on $18 billion of U.S.-funded Iraqi reconstruction
projects. Russians said they would not write off their portion of Iraq’s debt, as
Washington was requesting. Two weeks later however, after visits from U.S.
Presidential Envoy James Baker and from a delegation of Iraq’s Governing Council,
this issue was resolved. Putin said that Russia would write off 65% of Iraq’s debt
($5.2 billion). The Iraqis said Russian firms would get multi-billion dollar oil field
development contracts.
A sharp U.S.-Russian clash of interests over missile defense, the ABM Treaty,
and strategic arms reductions flared in the first year of the Bush Administration.
These problems were substantially reduced, but not entirely resolved, at the Bush-
Putin summit in May 2002. The Bush Administration declared its disinterest in
START II and the ABM Treaty and its determination to pursue robust missile
defense. This approach was met with resistance from Moscow, but the
Administration stuck to its policies and, despite skepticism from some Members of
Congress and many European allies, gradually won Russian acquiescence on most
elements of its program.
Moscow reacted negatively to early Bush Administration assertions of its
determination to press ahead vigorously with a more robust missile defense program,
although the atmospherics, at least, improved after the Bush-Putin summit in
Slovenia on June 16, 2001. In the run up to the November 2001 Bush-Putin summit,
U.S. and Russian officials hinted that a breakthrough agreement was near that would,
inter alia, relax ABM Treaty restrictions on missile defense testing while preserving
the ABM Treaty and also sharply reduce strategic nuclear forces on both sides. The
November 13-16 summit in Washington and Texas, however, did not result in the
expected package deal. Discussions at the foreign minister level in December 2001
narrowed the differences on strategic force reductions. On December 13, the Bush
Administration gave Moscow official notification of its intention to renounce the
ABM Treaty within six months. According to Bush Administration sources, Russian
leaders were privately informed of the U.S. decision some days earlier. Russia’s
official response was cool but restrained, calling the U.S. decision a mistake, but
saying that it would not cause a major disruption in relations. Similarly, in January
2002, Moscow reacted negatively to the Bush Administration’s proposed plans to put
in storage many of the nuclear warheads it planned to withdraw from deployment,
rather than destroy them. Again, however, Russian criticism was relatively
restrained, while the two sides continued intensive negotiations.
The negotiations bore fruit in mid-May, when final agreement was announced.
Moscow won U.S. agreement to make the accord a treaty requiring legislative
approval. The terms of the treaty, however, achieve all the Administration’s key
goals: deployed strategic nuclear warheads are to be reduced to 1,700-2,200 by 2012,
with no interim timetable, no limits on the mix or types of weapons, and no
requirement for destroying rather than storing warheads. The so-called Treaty of
Moscow was signed by the two presidents on May 24, 2002. On June 13, the United
States became free of all restraints of the ABM Treaty. On the same day, Moscow
announced that it would no longer consider itself bound by the provisions of the
(unratified) START II Treaty, which has become a dead letter. On June 24, the
commander of Russia’s Strategic Rocket Forces announced that in response to the

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U.S. withdrawal from the ABM Treaty, Russia had decided to prolong the life of its
MIRVed ICBM force, which, he said, could be extended another 10-15 years. On
June 1, 2003, Presidents Bush and Putin exchanged instruments of ratification
allowing the Treaty of Moscow to enter into force. They also agreed to cooperate in
missile defense. Later that month, the two sides agreed to conduct joint missile-
defense exercises.
Moscow and Washington are cooperating on some issues of nuclear weapons
reduction and security. Since 1992, the United States has spent over $3 billion in
Cooperative Threat Reduction program (CTR or “Nunn-Lugar”) funds to help Russia
dismantle nuclear weapons and ensure the security of its nuclear weapons, weapons
grade nuclear material, and other weapons of mass destruction. During the
September 1998 summit, both countries agreed to share information when either
detects a ballistic missile launch anywhere in the world, and to reduce each country’s
stockpile of weapons-grade plutonium by fifty metric tons. In June 1999, U.S. and
Russian officials extended the CTR program for another seven years. The two sides
also agreed to each dispose of an additional 34 tons of weapons-grade plutonium,
with the U.S. to seek international funding to help finance the $1.7 billion Russian
effort. The planned U.S.-Russian joint missile early warning information center in
Moscow, however, has yet to be established. In April 2002, the Bush Administration
decided not to certify that Russia was fully cooperating with U.S. efforts to verify its
compliance with agreements to eliminate chemical and biological weapons. This
could have blocked U.S. funding for some U.S.-Russian comprehensive threat
reduction programs, but President Bush granted Russia a waiver.
Despite continued tension between Washington and Moscow over Iran and the
sharp disagreement over Iraq in early 2003, both governments seems determined to
preserve the cooperative relationship they built following the September 11 attacks.
In March 2003, Senator Lugar introduced legislation to exempt Russia from the
Jackson-Vanik amendment to the Trade Bill of 1974, action which would grant
Russia permanent normal trade relations (PNTR) status and facilitate Russian
accession to the WTO, but it received no further action. Recent reports suggest that
a U.S.-Russian agreement on WTO may be completed in time for the G-8 summit in
Russia in July 2006.
U.S. Assistance
From FY1992 through FY1997, the U.S. government obligated $4.5 billion in
grant assistance to Russia, including $2.1 billion in Freedom Support Act (FSA) aid
for democratization and market reform and $857 million for Cooperative Threat
Reduction (Nunn-Lugar assistance). But Russia’s share of the (shrinking) NIS
foreign aid account fell from about 60% in FY1993-FY1994 to 17% in FY1998 and
has been between 15%-22% since then. The Administration requested $148 million
for Russian programs in FY2003, a 6% cut from the previous year. The FY2004
Russian appropriation fell to $93.4 million and in FY2005 to $85 million.
In June 2005, the House approved the FY2006 Foreign Operations
appropriations, H.R. 3057 (H.Rept. 109-152), including the Administration’s request
to cut the Russian FSA program by 77% to $48 million. In July, the Senate approved

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its version of the bill. The Senate Appropriations Committee report (S.Rept. 109-96)
recommends $85 million for Russia, the same as in FY2005.
Both the FREEDOM Support Act and annual foreign operations appropriations
bills contain conditions that Russia is expected to meet in order to receive assistance.
A restriction on aid to Russia was approved in the FY1998 appropriations and each
year thereafter, prohibiting any aid to the government of the Russian Federation (i.e.,
central government; it does not affect local and regional governments) unless the
President certifies that Russia has not implemented a law discriminating against
religious minorities. The President has made such determinations each year.
In addition to the conditions related to Russian nuclear reactor and missile
technology transfers to Iran, discussed above, Members of Congress introduced a
number of other conditions on aid to Russia. The FY2001 foreign aid bill prohibited
60% of aid to the central government of Russia if it was not cooperating with
international investigations of war crime allegations in Chechnya or providing access
to NGOs doing humanitarian work in Chechnya. The FY2002 bill withholds 60% of
aid to the central government only if it does not provide access to NGOs. Possibly
as a result of Russian cooperation with the United States in its war on terrorism, the
war crime provision was dropped. The FY2003-FY2006 bills continued this
omission of the war crimes provision.