Order Code RL33407
CRS Report for Congress
Received through the CRS Web
Russian Political, Economic, and
Security Issues and U.S. Interests
Updated October 19, 2006
Stuart D. Goldman
Specialist in Russian & Eurasian Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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Russian Political, Economic, and Security Issues
and U.S. Interests
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 and in 2006 succeeded in killing most of the top Chechen
rebel military and political leaders.
The economic upturn that began in 1999 is continuing. The GDP and domestic
investment are growing impressively after a long decline, fueled in large part by
profits from oil and gas exports. 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.
Russian foreign policy has grown more self-confident and assertive, fueled by
its perceived status as an “energy superpower.” 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. After years of
sharp U.S.-Russian disagreement over Russian support for Iran’s nuclear program,
Washington and Moscow appear to have found some common ground on the Iranian
as well as the North Korean nuclear concerns.
The military has been 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. Readiness, training, morale, and discipline have
suffered. Major weapons procurement, which virtually stopped in the 1990s, has
begun to pick up as petrodollars flow into Moscow and defense spending increases.
After the Soviet Union’s collapse, the United States sought a cooperative
relationship with Moscow and supplied over $14 billion to encourage democracy and
market reform, for humanitarian aid, and for WMD threat reduction in Russia. Direct
U.S. foreign aid to Russia under the Freedom Support Act fell in the past decade, due
in part to congressional pressure. U.S. aid in the form of WMD threat reduction
programs, and indirect U.S. aid through institutions such as the IMF, however, was
substantial. The United States has imposed economic sanctions on the Russian
government and on Russian organizations for exporting nuclear and military
technology and equipment to Iran and Syria. Restrictions on aid to Russia are in the
FY2006 foreign aid bill. This CRS report replaces CRS Issue Brief IB92089, Russia,
by Stuart Goldman. It will be updated regularly.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Post-Soviet Russia and Its Significance for the United States . . . . . . . . . . . . . . . . 2
Political Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Chechnya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Economic Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Foreign Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Defense Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Fundamental Shakeup of the Military . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Control of Nuclear Weapons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
U.S. Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
U.S.-Russian Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
U.S. Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Tables
Table 1. Russian Economic Performance Since 1992 . . . . . . . . . . . . . . . . . . . . . 9

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Russian Political, Economic, and
Security Issues and U.S. Interests
Most Recent Developments
On August 4, 2006, the U.S. State Department announced sanctions against the
Russian state arms export agency, Rosoboroneksport, and the aircraft manufacturer
Sukhoi, for alleged violations of the Iran Nonproliferation Act of 2000, thereby
barring U.S. companies from dealing with those Russian entities for two years.
Russian officials denounced the action as retaliation for their Venezuelan arms sales.
On September 15, 2006, U.S. and Russian officials resolved a long-standing
liability issue that had threatened to derail a major bilateral nuclear nonproliferation
program aimed at converting 68 tons of weapons-grade plutonium to nuclear reactor
fuel that cannot be used in weapons.
On September 18, 2006, the Russian government announced that it was
revoking environmental approval for the giant Sakhalin II liquid natural gas project,
of which Shell Oil owns 55%, with the rest split between Mitsui and Mitsubishi of
Japan. Russian officials cited environmental issues. Skeptics cite Russia’s desire to
renegotiate the 2003 profit-sharing-agreement, cutting state-owned Gazprom in for
a major share, in light of the sharp increase in the price of gas.
On October 3, 2006, the Russian state oil and gas pipeline monopoly, Transneft,
stopped pumping oil to Lithuania’s Mazeikiu refinery, the only oil refinery in the
three Baltic states. Transneft cited a major oil spill in its 42-year-old Druzhba
pipeline as the cause. Skeptics, however, claim Russia’s LUKoil company is using
the cutoff as a weapon after its bid to buy Mazeikiu was rejected by Lithuania in
favor of a Polish buyer.
On October 7, 2006, Anna Politkovskaya, a crusading Russian journalist, was
murdered in Moscow. She was the a harsh critic of the Putin regime and of Russia’s
repressive tactics and human rights abuses in Chechnya. Putin denied government
involvement in the murder, blaming enemies of his regime seeking to discredit it.
On October 9, 2006, Russia’s gas monopoly, Gazprom, announced that it would
develop the huge Shtokman gas field alone. Previously, five U.S. and European
firms had been “short-listed” by Gazprom as possible partners.

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CRS-2
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 10 time zones. Russia also has the lion’s share of the natural resources,
industrial base, and military assets of the former Soviet Union.
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. President Putin has reversed this trend and rebuilt 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 next presidential election is due to be held in
March 2008. Putin is ineligible to run for a third term.
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

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CRS-3
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 some 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. 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 is the world’s second largest producer
and exporter of oil (after Saudi Arabia) and the world’s largest producer and exporter
of natural gas. 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

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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
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. In July 2006, U.S. news media
reported that the Russian government had forced Russian radio stations to stop
broadcasting programs prepared by the U.S.-funded Voice of America (VOA) and
Radio Liberty (RL). Threats to revoke the stations’ broadcasting licenses reportedly
forced all but 4 or 5 of the more than 30 radio stations that had been doing so to stop
broadcasting VOA and RL programs.
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

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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,
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

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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
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

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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. At about the same time, 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, despite international criticism. After a grinding siege, Russian forces
took the Chechen capital, Grozny, 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 over 15,000 troops in
Chechnya (1999-2006), 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 attacks against Russian forces and pro-Moscow Chechens in

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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, 330 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 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 Sadulaev President and vowed to
continue their struggle for independence.
In succeeding months, Russian forces eliminated many Chechen rebel field
commanders. On June 17, 2006, Chechen rebel president Sadulaev was killed in a
fire fight by Russian federal forces. Three weeks later, Basaev, the most prominent
and notorious Chechen rebel field commander, was killed in an explosion.
Moscow’s success in eliminating so many Chechen rebel leaders and inflicting losses
on rebel bands leads some to speculate that the back of the resistance has been
broken. Nevertheless, sporadic attacks against Russian forces and pro-Moscow
officials continue in Chechnya and neighboring regions.
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

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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,
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.
Putin initially 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.
In Putin’s second term, massive oil and gas profits and related 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.
Putin seems to be turning away from market reform toward greater government

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control of key segments of the economy, with top government officials being put into
leadership positions in many of Russia’s largest economic enterprises.
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 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 9/11, 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. 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. 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

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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 “single economic space” (SES) 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 seemed to have
killed the SES agreement, but Yushchenko’s political reverses in 2005-2006 and the
appointment of a pro-Russian Prime Minister in Kyiv in August 2006 puts this matter
in play again.
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,” and a year later, they signed a Union Charter.
Lukashenko minimized his and his country’s political subordination to Moscow.
Yeltsin avoided onerous economic commitments to Belarus. 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.
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
Abkhazian and South Ossetian separatism in Georgia and 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
2002, the Bush Administration sent a small contingent of U.S. military personnel to

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CRS-12
Georgia to help train and equip Georgian security forces to combat Chechen, Arab,
Afghani, Al Qaeda, and other terrorists who had infiltrated into Georgia. Tension
between Moscow and Tbilisi sharpened further after Georgia’s “Rose Revolution”
catapulted U.S.-educated Mikhiel Saakashvili into the presidency in November 2003.
Saakashvili is an outspoken critic of Moscow and seeks to bring Georgia into NATO.
Nevertheless, 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 is to be completed in 2007.1 But in September 2006, Georgian authorities
arrested four Russian army officers on charges of espionage. Although the Georgian
government soon released the officers, Moscow imposed a broad economic embargo
against Georgia and expelled hundreds of Georgians from Russia.
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
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 2005.2
1 See CRS Report RL33453, Armenia, Azerbaijan, and Georgia: Political Developments
and Implications for U.S. Interests, by Jim Nichol.
2 For more on Russian policy in these regions, see CRS Report RL33458, Central Asia:
Regional Developments and Implications for U.S. Interests by Jim Nichol, and CRS Report
RL33453, Armenia, Azerbaijan, and Georgia: Political Developments and Implications for
U.S. Interests, also by Jim Nichol.

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CRS-13
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 Kyiv’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 publically 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 (52% vs. 44%). Many observers in Russia,
Ukraine, and the West, saw this outcome as a powerful blow to perceived Russian
hopes of reasserting dominance over Ukraine. Yushchenko declared integrating
Ukraine economically and politically into Europe as his top priority.
Under Yushchenko, Ukraine opted out of the SES agreement promoted by
Moscow. Ukraine, however, is economically dependent on Russia, especially for
energy, although Kyiv 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 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 won only 13% of the vote, finishing third among five
major parties. After four months of political deadlock in Kyiv, Yushchenko
appointed his 2004 arch-enemy, Yanukovych, Prime Minister in August 2006.
Yanukovych, however, signed an agreement pledging to continue Yushchenko’s
policy of integration with the West, and Yushchenko was able to have pro-western
members of his own party head the Ministries of Foreign Affairs and Defense. It

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remains to be seen how these recent Ukrainian political developments affect the
country’s relations with Russia, the EU, and the United States.
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 virtually came to a halt in the 1990s and is only
slowly reviving. Readiness and morale remain 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 difficult,
controversial, and costly undertaking. The Chechen conflict 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 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 world oil and gas prices, has enabled Putin to begin
to reverse the budgetary starvation of the military during the 1990s. Defense
spending has increased substantially in each of the past few years. The government’s
2006 budget increases 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.
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

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a major power. 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
external 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.3
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.4 Since 2003, however, tensions have
reemerged on a number of issues that again strain relations. Although cooperation
continues in some areas, and Presidents Bush and Putin strive to maintain at least the
appearance of cordial personal relations (the G-8 summit in St. Petersburg, July 15-
3 See CRS Report RL32202, Nuclear Weapons in Russia: Safety, Security, and Control
Issues, by Amy F. Woolf.
4 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, by Stuart D. Goldman, last updated August 20, 2002.

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17, 2006, was their 17th 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 is nearly completed.
Revelations of previously covert Iranian nuclear developments 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 intrusive international safeguard inspections and other guarantees that it
will not produce nuclear weapons.
Moscow has 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 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.) won 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, 2003, 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.
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

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CRS-17
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 determination to press
ahead vigorously with missile defense, although the atmospherics, at least, improved
after the Bush-Putin summit in Slovenia on June 16, 2001. In December 2001, the
Bush Administration gave Moscow official notification of its intention to renounce
the ABM Treaty within six months. 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. In June 2002, the
commander of Russia’s Strategic Rocket Forces announced that in response to the
U.S. withdrawal from the ABM Treaty, Russia would 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. In November 2004, Putin announced that Russia was developing a new
strategic nuclear missile superior to any in the world. The SS-27 reportedly
combines a hypersonic boost phase and a maneuverable warhead, characteristics
designed to defeat (U.S.) ballistic missile defenses.
Moscow and Washington are cooperating on some issues of nuclear weapons
reduction and security. Since 1992, the United States has spent over $7 billion in
Cooperative Threat Reduction (CTR or “Nunn-Lugar”) funds and related programs
to help Russia dismantle nuclear weapons and ensure the security of its nuclear
weapons, weapons grade nuclear material, other weapons of mass destruction, and
related technological know-how. 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

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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 CTR programs, but President Bush granted Russia a waiver.
In September 2006, the United States and Russia resolved a long-standing
dispute over liability issues that had threatened to disrupt an important bilateral
nuclear nonproliferation program. The Elimination of Weapons-Grade Plutonium
Production Program — designed to convert 68 tons of excess weapons-grade
plutonium (enough for 16,000 nuclear weapons) into mixed oxide fuel for use in
nuclear reactors, a form that cannot be used for weapons by terrorists or others — is
now on track to continue.
Despite continued tension between Washington and Moscow over Iran and the
sharp disagreement over Iraq in early 2003, both governments seek to preserve
mutually advantageous elements of 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. Reports
that a U.S.-Russian agreement on WTO would be completed in time for the G-8
summit in St. Petersburg, Russia in July 2006, however, proved unfounded. U.S. and
Russian trade officials reportedly are trying to conclude a deal before the end of
2006.
U.S. Assistance
From FY1992 through FY2006, the U.S. government obligated $14.9 billion in
assistance to Russia, including $3.7 billion in Freedom Support Act (FSA) aid for
democratization, market reform, and social and humanitarian aid. Most of the rest
went for CTR (Nunn-Lugar) and other security-related programs. But Russia’s share
of the (shrinking) NIS foreign aid (FSA) 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 FSA programs in FY2003, $93.4
million in FY2004, $85 million in FY2005, and $48 million in FY2006 (which was
raised by Congress to $80 million). The Administration’s request for FSA aid to
Russia in FY2007 is $58 million.5
Both the FSA and the 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. Presidents Clinton and Bush have made such determinations
each year.
5 See CRS Report RL32866, U.S. Assistance to Russia and the Former Soviet Union, by
Curt Tarnoff.

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Since FY1996, direct assistance to the government of Russia has hinged on its
continuing sale of nuclear reactor technology to Iran. As a result, in most years as
much as 60% of planned U.S. assistance to the federal Russian government has been
cut. 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. Possibly as a result of Russian cooperation with the United States in its
war on terrorism, the war crime provision was dropped.

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