U.S. Assistance to the Former Soviet Union 1991-2001: A History of Administration and Congressional Action

U.S. Assistance to the Former Soviet Union 1991-2001: A History of Administration and Congressional Action

Order Code RL30148
CRS Report for Congress
Received through the CRS Web
U.S. Assistance to the Former Soviet Union
1991-2001: A History of Administration and
Congressional Action
Updated January 15, 2002
-name redacted-
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

U.S. Assistance to the Former Soviet Union 1991-
2001: A History of Administration and Congressional
Action
Summary
The future of the 12 successor states of the former Soviet Union is a major
concern of U.S. foreign policy and congressional attention, and the U.S. assistance
program has been a major tool for influencing the direction of that region. This report
provides a chronological history of U.S. assistance to the Soviet Union and the New
Independent States (NIS) to the end of 2001, focusing on Administration and
Congressional actions — proposals, policy pronouncements, debate, and legislation
— rather than the details of program implementation in the field.
During 1991, the thrust of the debate between Congress and the Administration
was whether and how to assist the Soviet Union as it became increasingly unstable
and then headed toward dissolution. Chiefly concerned with the effect of the region’s
instability on its nuclear weapons holdings, Congress responded with the Nunn-Lugar
legislation. In 1992, the aid debate focused on the FREEDOM Support Act
legislative proposal that laid out the basic authorities, conditions, and guidelines for
a technical assistance program.

In 1993, the Clinton Administration proposed several new priorities for the
program and a dramatic increase in the amount of funding, especially for Russia. In
all, the President requested $2.5 billion for the region. After considerable debate,
Congress approved the request. But, by 1994, a mix of concerns regarding the U.S.
budget deficit, the unpromising outcome of the December 1993 Russian parliamentary
elections, the Ames spy case, and critical questions about the implementation of the
assistance program, led to efforts, some successful, to cut funding for the region and
alter existing priorities. In 1995, the new Republican majority in the 104th Congress
cut funds to the region through a series of rescissions and lowered levels of funding
in the annual foreign aid bill. Russia was a particular target of these cuts, as well as
of conditionality and funding earmarks favoring other NIS countries. In 1996, the
tone of debate was lower pitched, and Congress adopted aid levels, earmarks, and
conditions almost identical to those of the previous year.
In 1997, responding to the Administration’s Partnership for Freedom initiative,
Congress approved a significant increase in assistance for the NIS. The initiative
promised to place greater emphasis on grassroots, people-to-people exchanges and
partnerships. In 1998, NIS account levels were raised again amid concerns regarding
the financial stability of the region in the wake of the August financial crisis in Russia.
In 1999, the approved overall FY2000 funding level was roughly the same as the year
before, but a large amount was diverted from traditional economic assistance to
nonproliferation activities under the Expanded Threat Reduction Initiative. In 2000,
criticism of Russia’s behavior and accusations that the Administration mishandled
U.S.-Russian relations contributed to multiple efforts to condition assistance to
Russia. In 2001, the need to obtain cooperation from former Soviet Union countries
in the war on terrorism and what was seen as a very forthcoming stance by Russia and
critical Central Asian countries led to a re-evaluation of aid relations with them and
other front line states.

Contents
Aid to the Soviet Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Developments Before 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The President’s Assistance Offer of December 1990 . . . . . . . . . . . . . . 3
Developments in 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Post-Coup Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Agricultural Credit Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Humanitarian Food and Technical Assistance . . . . . . . . . . . . . . . . . . . 5
Weapons Dismantlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
December 1991 Bush Administration Proposals . . . . . . . . . . . . . . . . . 6
Other Donor Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Aid to the Former Soviet Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Developments in 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The International Donors Conference . . . . . . . . . . . . . . . . . . . . . . . . . 8
Transfer of ESF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The FREEDOM Support Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FY1993 Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Tokyo Donors Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Developments in 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Clinton Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Vancouver Summit Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
April 15, 1993 Bilateral U.S. Aid Proposal and Congressional
Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Other Donor Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Developments in 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Administration FY1995 Budget Proposal . . . . . . . . . . . . . . . . . . . . . 16
Russia Aid Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
FY1995 FSU Aid Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Implementation Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Emerging Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Other Donors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Developments in 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Administration FY1996 Budget Proposal . . . . . . . . . . . . . . . . . . . . . 20
The New Congress and FY1995 Aid Rescissions . . . . . . . . . . . . . . . 20
FY1996 FSU Aid Debate in the House . . . . . . . . . . . . . . . . . . . . . . . 21
FY1996 FSU Aid Debate in the Senate . . . . . . . . . . . . . . . . . . . . . . . 22
Conference Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Major Issues in 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Developments in 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Administration FY1997 Budget Proposal . . . . . . . . . . . . . . . . . . . . . 26
FY1997 FSU Aid Debate in the House . . . . . . . . . . . . . . . . . . . . . . . 26
FY1997 FSU Aid Debate in the Senate . . . . . . . . . . . . . . . . . . . . . . . 26
Conference Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Major Issues in 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Developments in 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Administration Introduces the Partnership for Freedom (PFF)
Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Authorization Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
FY1998 FSU Aid Appropriations Debate in the House . . . . . . . . . . . 31
FY1998 FSU Aid Appropriations Debate in the Senate . . . . . . . . . . 32
Conference Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Nunn-Lugar Cooperative Threat Reduction . . . . . . . . . . . . . . . . . . . 34
Emerging Issues and Trends in 1997 . . . . . . . . . . . . . . . . . . . . . . . . 34
Developments in 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Administration FY1999 Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
FY1999 FSU Aid Debate in the House . . . . . . . . . . . . . . . . . . . . . . . 35
FY1999 FSU Aid Debate in the Senate . . . . . . . . . . . . . . . . . . . . . . . 35
FY1999 Conference Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Nunn-Lugar Cooperative Threat Reduction . . . . . . . . . . . . . . . . . . . 37
Major Trends and Issues in 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Developments in 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Administration FY2000 Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Emergency Supplemental Appropriations . . . . . . . . . . . . . . . . . . . . . 39
FY2000 FSU Aid Debate in the Senate . . . . . . . . . . . . . . . . . . . . . . . 40
FY2000 FSU Aid Debate in the House . . . . . . . . . . . . . . . . . . . . . . . 41
Conference Report on H.R. 2606 . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
H.R. 3196 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
H.R. 3422 and the Consolidated Appropriations . . . . . . . . . . . . . . . . 44
Cooperative Threat Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Major Trends and Issues in 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Russia and the Bank of New York Scandal . . . . . . . . . . . . . . . . . . . . 46
Developments in 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Clinton Administration FY2001 Request . . . . . . . . . . . . . . . . . . . . . 47
FSU Aid Debate in the Senate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
FSU Aid Debate in the House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Conference Report on FY2001 Foreign Operations Appropriations . 49
Security Assistance Act of 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Russian Leadership Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Cooperative Threat Reduction (CTR) . . . . . . . . . . . . . . . . . . . . . . . . 50
Major Issues in 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Developments in 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Bush Administration FY2002 Request . . . . . . . . . . . . . . . . . . . . . . . 52
FSU Aid Debate in the House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
FSU Aid Debate in the Senate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
FY2002 Foreign Operations Conference Report . . . . . . . . . . . . . . . . 55
Cooperative Threat Reduction (CTR) . . . . . . . . . . . . . . . . . . . . . . . . 56
Major Issues in 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
List of Tables
Table 1. U.S. Bilateral Grant and Credit Assistance
for the Soviet Union: 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 2. Russia and Other FSU Aid: $2.5 billion FY1993/1994 Package . . . . . 15
Table 3. Threat Reduction Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Table 4. U.S. Bilateral Grant Assistance to the FSU . . . . . . . . . . . . . . . . . . . . 57
Table 5. Cumulative U.S. Bilateral Commercial Financing
for the FSU (Face Value): 1992-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Table 6. NIS Account Country Allocations: FY1995-2001 . . . . . . . . . . . . . . . 58

U.S. Assistance to the Former Soviet Union
1991-2001: A History of Administration and
Congressional Action
Mikhail Gorbachev’s efforts to introduce perestroika in the late 1980s, the
collapse of the Soviet Union at the end of 1991, and the difficult economic and
political challenges faced by its successor states since then have continually raised the
issue of providing U.S. humanitarian, economic, and other aid in order to help effect
a transition to democracy and free markets in the region. This report provides a
chronological history of U.S. assistance to the Soviet Union and the 12 successor
states of the former Soviet Union (FSU) to the end of 2001. It focuses on
congressional and executive branch proposals, legislation, and debate. Because of the
immense needs in the FSU and the limits on U.S. resources, the issue of assistance has
been treated by the United States as an international concern to be dealt with both
bilaterally and multilaterally. Therefore, other donor activities are also briefly
discussed.1
Aid to the Soviet Union
During the years of Cold War, the possibility of providing what is commonly
considered foreign aid — grant or concessional assistance — rarely surfaced as an
issue among U.S. policymakers. Trade relations were a major non-military concern
as relations warmed beginning in the 1970s, and agriculture or other export credit
guarantees and provision of most favored nation status — not aid — were the carrots
held up to encourage change in the region. The events of the late 1980s that led to
the fall of the Berlin Wall and the opening up of the Eastern Bloc countries began to
change all that. Beginning in late 1990, the United States sought to influence the
struggle between reformists and hardliners within the Soviet Union by offering modest
technical and medical assistance as well as increased credit guarantees. Nevertheless,
to the extent to which the Soviet Union was still viewed with suspicion and foreign
1 Most of this report was adapted from archived CRS Issue Brief IB91050, U.S. and
International Assistance to the Former Soviet Union and deleted parts of active CRS Issue
Brief IB95077, The Former Soviet Union and U.S. Foreign Assistance. The section covering
the period to the end of 1991 is based on material originally written by (name redacted), Analyst in
International Relations. For details on implementation of the aid program, see CRS Report
95-170, The Former Soviet Union and U.S. Foreign Aid: Implementing the Assistance
Program, 1992-1994, CRS Report 96-261, Russia and U.S. Foreign Assistance: Issues in
1996, and CRS Report RL30112 (March 30, 1999), Russia’s Economic and Political
Transition: U.S. Assistance and Issues for Congress. See CRS Issue Brief IB95077 for
discussion of events after 2001.

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aid was seen as a gift, a strong reluctance to provide assistance remained on the part
of the Bush Administration as well as many Members of Congress. It was not until
the attempted coup of August 1991 and the subsequent rise of a democratic
movement led by Boris Yeltsin that U.S. congressional leaders began to talk about
large levels of assistance designed to encourage changes in economic, political, and
security policies in the still extant Soviet Union. Several Members of Congress
argued that provision of assistance was in the U.S. national interest and successfully
won approval of assistance to help the Soviet Union dismantle nuclear weapons.
Finally, just prior to the dissolution of the Soviet Union, the Bush Administration
came forward with a proposal for the first significant technical assistance program.
Developments Before 1991
Through most of the Cold War years, U.S. Administrations provided few direct
economic aid grants, concessional loans, or other benefits to their chief rival, the
Soviet Union. Indeed, normal trade was severely restricted by law. The United
States did on a few occasions provide emergency disaster assistance, as in the case of
the Chernobyl nuclear disaster and the Armenian earthquake. The United States had
also extended Commodity Credit Corporation (CCC) export subsidies in FY1964 and
FY1972-1973, and direct CCC credits in FY1973-FY1974.
With the establishment of detente in the 1970s, the United States began to shift
its attitude on the question of normalizing trade with the Soviet Union — though still
barring foreign assistance. A bilateral trade agreement was signed in 1974, providing
for mutual granting of most-favored-nation (MFN) status. The agreement provided
the Soviets access to U.S. Government-backed credits and other trade benefits.
However, Congress attached a number of conditions, leading the Soviets to reject the
accord. The Stevenson amendment to the Export-Import Bank Act and the Byrd
amendment to the 1974 Trade Act set a ceiling of $300 million on the total amount
of export loans and guarantees that could be made to the Soviet Union without direct
congressional approval. The Jackson-Vanik amendment to the Trade Act of 1974
linked MFN and U.S. credits to Soviet emigration policy.
Mikhail Gorbachev’s rise to the Soviet leadership in 1985 and his subsequent
efforts to introduce sweeping political and economic reforms brought U.S. support
for closer bilateral economic relations. In 1987, the Soviet Union gained access to
subsidies for U.S. wheat purchases under the Department of Agriculture’s Export
Enhancement Program (EEP). A new U.S.-Soviet trade agreement was signed at the
Washington summit in June 1990. President Bush determined that the Supreme
Soviet must enact a free emigration law before he would submit the trade agreement
to Congress for approval. The Soviet legislature approved such a law on May 20,
1991. On August 2, 1991, the President submitted the U.S.-Soviet trade agreement
for congressional approval. At a Senate Finance Committee hearing on September
11, 1991, Administration officials urged congressional approval. The agreement was
resubmitted on October 9, 1991, without inclusion of the newly independent Baltic
states, and a measure (H.J.Res. 346) approving extension of most-favored-nation
treatment for Soviet goods became law (P.L. 102-197) on December 9, 1991.
President Bush also pledged to work to integrate the Soviet Union into the world
economy, initially by supporting Soviet associate or observer status in the

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International Monetary Fund (IMF) and other international bodies. In July 1990, the
Administration presented Soviet Foreign Minister Shevardnadze with a paper
outlining areas of economic and agricultural reform in which the United States could
offer technical assistance, such as market development, food distribution, and storage.
The Administration also reversed its earlier opposition to Soviet membership in the
European Bank for Reconstruction and Development.
During the course of 1990, the internal struggle between proponents and
opponents of Soviet reform intensified while economic conditions deteriorated. For
the first time, the Soviet leadership directly appealed for U.S. and western food and
medical assistance. European governments moved quickly to provide assistance to
the Soviets. Germany took the lead with an $8 billion aid package that was part of
an agreement on German reunification. Other European Community countries
pledged over $1 billion.
In the United States, debate continued through much of 1990 over whether,
how, and under what conditions the United States should assist Moscow. The
Administration at first expressed wariness about large-scale aid even though it had
philosophically adopted the goal of supporting President Gorbachev. It cited the fact
that food shortages in the Soviet Union were due not to lack of production (the
Soviet Union had a record harvest in 1990) but to distribution problems and the
absence of market mechanisms. Administration spokesmen and some in Congress
also expressed concern that aid now might take pressure off the Soviet leadership
from implementing needed reforms.
The President’s Assistance Offer of December 1990. On December
12, 1990, in response to a Soviet request for urgent food and medical assistance,
President Bush announced the first major U.S. assistance package. It included
provision of up to $1 billion in Commodity Credit Corporation (CCC) credit
guarantees for Soviet purchase of agricultural goods, authorization of up to $300
million in Export-Import Bank credits for purchase of U.S. goods (the maximum
allowed under the 1974 Stevenson-Byrd amendment to the Export-Import Bank Act
without further congressional approval), an offer of technical assistance to improve
food distribution and implement other economic reforms, and a pledge of $5 million
for a public-private medical assistance program to address Soviet shortages of
medicine and medical supplies under the International Disaster Relief program.
Finally, the President announced that the United States would propose that the Soviet
Union be given “special association” with the IMF and World Bank. This association,
however, would not allow Moscow to draw on IMF loans.
To extend CCC and Eximbank credits to Moscow, the President waived the
Jackson-Vanik amendment (Subsection 402(c)(2)(A)) of the Trade Act of 1974). He
transmitted the waiver to Congress on December 29, 1990, citing the high level of
emigration permitted by the Soviet Union in 1990 and assurances from the Soviet
government that those high levels of emigration would continue. He renewed the
waiver on June 3, 1991, citing continuing Soviet reductions in barriers to emigration.

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Developments in 1991
On February 6, 1991, the Administration announced that it would send medical
aid directly to the Baltic states (Lithuania, Latvia, and Estonia) following the Soviet
military crackdown and bloodshed there in January 1991. Under this program, the
U.S. Agency for International Development (AID) paid for administrative and some
transportation costs for medicines and medical supplies donated by private American
sources. The shipments, which were designed to demonstrate U.S. concern about the
Baltic states, were part of a broader policy of increased official contacts with the
individual Soviet republics. On February 27, 1991, the first such shipment, a
planeload of medical supplies, was delivered to the Baltics and to the victims of the
Chernobyl nuclear accident in Ukraine. During 1991, donated pharmaceuticals and
medical supplies valued at $26 million were supplied to the Baltic states and republics
of the Soviet Union.
In April 1991, the Soviet Union (after exhausting the initial $1 billion in U.S.
CCC credits) requested another $1.5 billion in agricultural loan guarantees, a request
President Bush approved on June 12, 1991. The President’s decision followed Soviet
assurances that the grains would be fairly distributed among Soviet republics and the
Baltic states. This offer did not require new congressional approval.
Post-Coup Assistance. The aborted coup attempt in August 1991 renewed
the issue of increasing U.S. and other western aid. Germany, France, and Italy
especially called for higher amounts of assistance to democratic forces in the Soviet
Union. Other leaders, including President Bush, were more cautious, arguing that it
was premature to make decisions on future assistance until a rigorous and
comprehensive Soviet economic reform program was in place. On September 10,
1991, while on a fact-finding trip to the Soviet Union, Secretary of State Baker
indicated a shift in this U.S. position. He said that the Soviets did not need to have
taken the steps, but had to have made a commitment and a plan toward free market
economic reforms to receive U.S. aid.
Some congressional leaders pressed for quicker and additional U.S. action.
House Majority Leader Richard Gephardt proposed a long-term program of up to $3
billion a year in assistance in return for economic reforms. House Armed Services
Committee Chairman Les Aspin proposed using defense funds to finance higher levels
of U.S. aid. In the following months, as the Soviet Union sank deeper into disarray,
a number of actions supporting further aid were taken.
Agricultural Credit Guarantees. During the attempted coup, President
Bush put a brief hold on this program but resumed it when the coup failed. Of a $500
million second tranche originally planned for release in October, $315 million was
made available immediately. On October 1, 1991, the Administration released the
remaining $585 million ($185 million of the October tranche and $400 million
originally scheduled to be released in February 1992). It also made the guarantees
available at more favorable terms — 100% of the principal and about 5.6% of the
interest on private bank loans to finance these purchases were guaranteed.
On October 22, 1991, President Bush received a request from President
Gorbachev for $2.5 billion in U.S. agricultural credit guarantees and $1 billion in

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humanitarian aid. USDA officials who made several needs assessment trips to the
Soviet Union expressed the view that famine was unlikely in the Soviet Union, but
that severe hardships were probable because of distribution problems and lack of
cooperation among Soviet republics. U.S. Ambassador to the Soviet Union, Robert
Strauss, on November 18, urged the United States to provide food and debt relief to
the Soviets. On November 20, 1991, the Bush Administration offered a further aid
package, including $1.25 billion in agricultural guarantees. The credit guarantees
were made available in installments: $500 immediately and $750 million for early
1992.
Table 1. U.S. Bilateral Grant and Credit Assistance
for the Soviet Union: 1991
(in millions of U.S. dollars)
FY1991
GRANT ASSISTANCE
USAID Disaster Assistance
5
Economic Support Fund
5
Total Grants
10
CREDIT PROGRAMS (Face Value)
USDA CCC Export Credit Guarantees
1,912
Eximbank Guarantees
51
Total Credits (Face Value)
1,963
Source: Department of State
Humanitarian Food and Technical Assistance. The Administration’s
November 20, 1991 initiative also included $165 million in grant food aid to be
provided to particularly deficit regions, as well as technical assistance. On December
9, 1991, AID notified Congress of its intent to reprogram $5 million of appropriated
FY1992 foreign assistance funds for technical assistance.
Weapons Dismantlement. Representative Aspin and Senator Nunn included
in the conference report on the defense authorization measure (H.R. 2100) a proposal
that would allow the President to use up to $1 billion in defense funds to deliver
emergency food and medicine to the Soviet Union as well as help the Soviets with
military conversion, including assistance with dismantling nuclear, chemical, and
biological weapons. This initiative was subsequently dropped when it received no
support from the Administration.
However, on November 25, a similar proposal was incorporated into the Senate-
passed version of H.R. 3807, the Arms Export Control Act (P.L. 102-228, signed into
law December 12, 1991). By a vote of 86 to 8, the Senate authorized expenditure of
up to $500 million to help the Soviets transport, destroy, and safeguard nuclear,
chemical, and biological weapons. It also authorized (87 to 7) the transfer of $200
million of Department of Defense funds to provide emergency airlift of humanitarian

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aid for the Soviet Union or its republics or localities. The conference version of the
bill included $400 million for assistance with weapons destruction and safeguarding
and $100 million for transport of humanitarian relief. The Dire Emergency
Supplemental Appropriations Act, H.J.Res. 157 (P.L. 102-229, signed into law
December 12, 1991), appropriated these funds. The weapons destruction program
became known as the Nunn-Lugar program.
December 1991 Bush Administration Proposals. Since the attempted
coup in August 1991, the Bush Administration had been perceived by many Members
of Congress as slow to respond to the new wave of events in the Soviet Union. One
possible reason was an anti-foreign policy trend among the U.S. electorate that
expressed itself in the November off-year election campaign for a Senate seat from
Pennsylvania, during which President Bush was heavily criticized for spending too
much of his time on foreign affairs to the detriment of the U.S. economy. The
Administration played little role in development and passage of the Nunn-Lugar
program.
Finally, on December 12, 1991 (four days after creation of the Commonwealth
of Independent States), Secretary of State Baker outlined actions the U.S.
Government would pursue to help safeguard or destroy Soviet weapons, establish
democratic institutions, stabilize the economy, and overcome dire food and medical
shortages. These included doubling the amount of medical assistance thus far
provided; sending surplus Desert Storm food stocks to regions in particular need;
augmenting ongoing USIA programs; and working with Congress to establish Peace
Corps programs and a $100 million technical assistance program. President Bush
named then-Deputy Secretary of State Lawrence Eagleburger Coordinator for U.S.
assistance efforts toward the FSU. To discuss the division of labor and
responsibilities for assisting the region, he proposed hosting an international donors’
conference in January 1992.
Other Donor Assistance. Up to the end of 1991, Germany provided the
largest amount of bilateral assistance to the Soviet Union, part of it connected to the
German unification process. Expenditure and planned commitments by Germany
since 1989 totaled more than $45 billion by early 1992. Part of this amount was
grants and direct subsidies relating to the transition agreement on the withdrawal of
Soviet troops (including building housing in Russia for departing Soviet soldiers) from
the territory of the former German Democratic Republic (GDR).
In 1991, Japan had pledged about $108 million in emergency loans for food and
medical supplies. On October 9, 1991, it had announced a $2.5 billion package
providing about $2 billion in export insurance and credits and approximately $500
million in loans to allow purchase of food and medicine. Throughout 1991, Japan
sided with the United States in opposing calls for increased assistance to the region.
At this time, the European Community (EC) was the major multilateral donor
to the Soviet Union. On December 15, 1990, the EC pledged nearly $1 billion in food
aid (one-third as grant, and two-thirds as credit guarantees) and about $1.4 billion in
technical assistance for 1991 and 1992. In January 1991, it put a temporary hold on
assistance to Moscow in response to the Baltic crackdown. But the EC aid program
was resumed at the end of February, apparently based on the EC’s perception that the

CRS-7
Soviets were easing military pressures in the Baltics. On October 7, 1991, the EC
announced an additional $1.5 billion in food aid credits for the Soviet Union. Part of
the new EC credits was to be earmarked to buy food from Eastern Europe, including
the Baltic states, in order to benefit their struggling economies. The EC challenged
the United States and Japan to meet its offer. In December 1991, at the Maastricht
summit, the EC decided to send about $260 million of food and medicine to Moscow
and St. Petersburg.
Aid to the Former Soviet Union
On December 21, 1991, the Soviet Union formally ceased to exist. The dozen
independent states that took its place presented a new challenge to U.S. foreign
policymakers who determined that it was in the best interest of the United States to
seek to facilitate a transition from communist political and economic systems to
democracies and free market economies. During 1992, a debate ensued regarding the
legislative framework for an assistance program for the region and the appropriate
level of appropriations to meet U.S. objectives. Soon after taking office in 1993, the
Clinton Administration determined that the needs of the region were far greater than
the previous Administration had presumed. It proposed a dramatic increase in foreign
assistance — especially for Russia — and set some new sectoral priorities for the
program. Although Congress approved these initiatives, by 1994 a number of key
leaders had become somewhat critical of aspects of the program. They expressed
concern regarding the way in which the program was being implemented, the speed
of implementation, the level of coordination, and its visible impact. Some criticized
the Administration for its perceived emphasis on Russia and on Boris Yeltsin in
particular. Support for the program, previously broadly bipartisan, appeared to be in
danger by the end of 1994.
Developments in 1992
The International Donors Conference. On January 22 and 23, 1992, the
United States convened a conference of foreign ministers of 47 potential donor
governments and representatives of seven international organizations to discuss
coordination of assistance activities for the former Soviet republics. The conference
focused on five key areas: food, medicine, energy, shelter, and technical assistance.
Working groups were established to develop a plan of action and decide on next steps
to be taken in those priority areas. A follow-up conference was scheduled to be held
in Lisbon, Portugal, in the spring of 1992, and another follow-up meeting in Japan late
in the year. Representatives of the working groups met in Minsk on February 1,
1992, with representatives of aid recipient states of the former Soviet Union.
In opening the donors conference, President Bush pledged, pending
congressional approval, $645 million in additional assistance from FY1992 and
FY1993 funds, including $500 million for humanitarian/technical assistance; $85
million in Economic Support Funds (ESF); $25 million for medical assistance; $20
million for the P.L. 480 Farmer-to-Farmer program; and $15 million in development

CRS-8
assistance. One day later, Secretary Baker announced that the United States would
shortly begin a major short-term airlift of emergency food and medical supplies.
Operation Provide Hope I (there were several more operations through the following
year), begun on February 10, 1992, consisted of 65 U.S. Air Force flights that carried
$28 million in Defense Department surplus food and surplus medical supplies to 11
republics and 24 cities.
A few other countries made aid announcements during the conference. South
Korea announced disbursement of $850 million in loans (of a $3 billion package
announced earlier), Thailand offered $450 million in loans to buy rice and other
foodstuffs, Oman offered $200 million to develop the oil industry in Azerbaijan, and
other Persian Gulf states pledged to resume aid suspended when the Soviet Union
collapsed. In preparation for the Washington aid conference, Japan had announced
$50 million in grant humanitarian aid, which it expected to be dispersed by March 31,
1992.
Transfer of ESF. H.J.Res. 456, the continuing resolution providing foreign
aid appropriations for the remainder of FY1992 (P.L. 102-266, signed into law April
1, 1992), repealed the Stevenson and Byrd amendment restrictions on provision of
export credits and provided the President with authority to provide additional FY1992
humanitarian and technical assistance to the FSU from existing Economic Support
Fund (ESF) resources. The Administration decided to allocate $150 million from
ESF, in addition to the $85 million allocated in December 1991.
The FREEDOM Support Act. On April 1, 1992, President Bush outlined a
“comprehensive package of assistance” to the FSU. It included a number of new
initiatives that would establish U.S. policy with regard to the states of the former
Soviet Union and would provide various forms of assistance to them. He also
reiterated previous aid proposals that would contribute toward his new policy
initiatives.
First, the President announced U.S. participation in a multilateral G-7 $24 billion
package of support for Russia. The U.S. contribution to that package was estimated
at roughly $4.5 billion in old and new funds — a commitment of $1.5 billion toward
a $6 billion ruble stabilization fund; $1 billion of $4.5 billion in IMF, World Bank,
and European Bank for Reconstruction and Development (EBRD) loans, counted as
part of the regular U.S. contribution to those organizations; and $2 billion of an $11
billion G-7 contribution in bilateral aid, largely composed of CCC credit guarantees,
Eximbank loan guarantees, and some humanitarian assistance.
Second, the President proposed legislation that would, in the words of Secretary
of State Baker, “unite the executive and legislative branches around a bipartisan
program that can mobilize the American people” in support of assistance for the
former Soviet Union. The Freedom for Russia and Emerging Eurasian Democracies
and Open Markets Support Act of 1992 was submitted to Congress on April 3 and
introduced as S. 2532 on April 7. In addition to providing broad authority for the
conduct of a wide range of humanitarian and technical assistance programs, the
FREEDOM Support Act proposal included authorization of a U.S. commitment to
an earlier agreed $12 billion increase in the U.S. quota to the IMF intended for all
countries, but expected to benefit the former Soviet Union; an endorsement of U.S.

CRS-9
participation in amounts up to $3 billion for the proposed currency stabilization funds;
and elimination of existing restrictive Cold War trade and aid legislation.
Finally, the President offered $1.1 billion in CCC agricultural credit guarantees
— $600 million for Russia and $500 million for the other states. The credit offer did
not require additional congressional approval. The Administration reiterated its
humanitarian and technical assistance request for FY1992 ($150 million, eventually
drawn from existing ESF resources rather than in new, supplemental funds as
originally sought) and FY1993 ($470 million) that was included in the AID FY1993
congressional budget presentation.
The Administration asked Congress to approve the FREEDOM Support Act and
any subsequent appropriations legislation prior to the visit to the United States of
President Yeltsin in mid-June. The Senate Foreign Relations Committee marked-up
the bill on May 13 with an extensive amendment of its own (S.Rept. 102-292). This
bill, S. 2532, was extensively amended before its final adoption by the full Senate on
July 2 (by a vote of 76-20). In the House of Representatives, the Foreign Affairs
Committee used a previously introduced aid authorization measure, H.R. 4547, as the
basis for its mark-up on June 10 (H.Rept. 102-569). The House approved H.R. 4547
on August 6 by a vote of 255 to 164. The Senate bill, S. 2532, was then brought up
and amended by substituting the language of H.R. 4547.
In the end, The FREEDOM Support Act, as amended by Congress, was signed
into law as P.L. 102-511 on October 24, 1992. As enacted, S. 2532 authorized
$505.8 million in FY1993 divided into several broad areas: $410 million in
humanitarian and technical assistance; $70.8 million for various educational exchange
programs; and $25 million for State Department and USIA expenses for the region.
In its most controversial provision, the bill authorized a $12 billion increase in the
U.S. quota to the IMF intended for all countries, but expected to benefit the FSU.
Although the provision would incur no new outlays (because the contribution, in
budgetary terms, represented an exchange of assets) and would not affect the budget
deficit, it did require an appropriation and was therefore perceived by some Members
and the public as a large new foreign aid expense. The Act also endorsed U.S.
participation in amounts up to $3 billion for the proposed currency stabilization funds
(this, too, required no new outlays and did not require an appropriation as the IMF
already held the necessary funds) and eliminated many existing restrictive Cold War
trade and aid legislative provisions. For greater detail on the history of the debate on
the FREEDOM Support Act, see CRS Report 93-907, The Former Soviet Union and
U.S. Foreign Assistance in 1992: The Role of Congress).
FY1993 Appropriations. Funding for these activities were contained in a
series of appropriations bills. The Foreign Operations Act for FY1993 (P.L. 102-391,
H.R. 5368) appropriated $417 million for the FSU — largely for humanitarian and
technical assistance — and $12 billion for the increase in the U.S. quota to the IMF.
The Defense Appropriations Act, 1993 (P.L. 102-396, H.R. 5504) provided $400
million more for activities authorized under the Former Soviet Union Demilitarization
Act of 1992 (Nunn-Lugar program) to assist the republics in the storage,
transportation, dismantling and destruction of nuclear weapons, and $15 million for
humanitarian aid transportation costs. The State Department Appropriations Act for
FY1993 (P.L. 102-395, H.R. 5678) appropriated $25 million for USIA and State

CRS-10
Department to set up new diplomatic posts in the FSU, appropriated $2 million to
establish a Russian Far East Technical Assistance Center at an American university,
and funded educational and cultural exchange programs.
Tokyo Donors Conference. On October 29-30, 1992, the United States
announced a $412 million aid package for the FSU at the Tokyo Conference for
Assistance to the Newly Independent States, the third and final follow-on meeting to
the January conference held in Washington, D.C. Composed of new aid, the
assistance included $250 million in grant emergency food aid, $100 million in wheat
and corn feed stocks, $38 million in DOD excess Meals-Ready-to-Eat and bulk
processed foods, and $14 million in emergency medical supplies. This initiative did
not require additional congressional approval.
The 70 donor countries and 19 international organizations that attended the
conference expressed their concern over concentrating strictly on short-term,
emergency aid. To stress medium- and long-term assistance, the World Bank was
appointed to lead donor aid coordination in the future. The Bank set up Country
Consultative Groups (CCGs) for each of the new republics to improve the overall
efficiency of longer-term donor assistance.
Developments in 1993
Although Russia survived the winter of 1992-93 despite dire predictions made
by various analysts, its economic and political status was increasingly precarious.
Russia was roughly $6 billion behind in debt payments on a total $80 to $85 billion
debt and suffered an inflation rate of 2,000% in 1992. The IMF had put the foreign
official financing requirements of Russia at $22 billion for 1993. Many observers
feared that social unrest resulting from the economic policy reforms needed to obtain
further foreign financing endangered the entire venture into a market economy.
Former President Richard Nixon, former U.S. Ambassador to Russia Robert Strauss,
and Members of Congress, among others, argued that increased U.S. aid would be
necessary to help the new republics succeed. The crux of their view was that the
economic and political stability of the region was of vital importance to U.S. interests.
Arguing in a floor speech on March 4, 1993, that the U.S. defense budget would be
$100 billion greater in the next year if the Soviet Union still existed as a military
threat, Senator Leahy, Chairman of the Senate Foreign Operations Subcommittee of
the Appropriations Committee, called for a $1 billion aid program. He suggested that
security assistance then provided to other parts of the world could be shifted to
Russia, if it was deemed of greater importance to U.S. interests. It was in this
atmosphere that the Clinton Administration took office.
Clinton Administration. In its original FY1994 foreign aid request, the new
Clinton Administration proposed $703.8 million for the FSU humanitarian/technical
assistance account, an increase of roughly $287 million from the FY1993 level of
$417 million. It also requested $400 million from the FY1994 defense budget for
nonproliferation activities.
However, increasing concerns regarding the economic and political stability of
Russia and a consequent chorus in the United States calling for an aggressive U.S.
response led the Clinton Administration to give high priority to Russia and the issue

CRS-11
of further assistance in its incipient foreign policy pronouncements. On March 5,
1993, the President pledged to take new action to help provide innovative solutions
to Russia’s problems, including financial assistance efforts. The Administration also
indicated its desire to work with the G-7 nations to formulate a package of assistance
more efficacious than the $24 billion promised in April 1992 but that the Russians and
some American analysts assert was never fully delivered (most estimates of actual
“disbursements” range from $11 billion to $18 billion).
Rather than wait for the July Tokyo conference of G-7 heads of state, the
President and other G-7 leaders agreed to have their representatives discuss the aid
issue at a meeting on March 13-14 in Hong Kong. At the President’s suggestion, a
representative from Russia was invited to participate. That meeting was concluded
with the promise that an aid package, expected to be targeted and more visible to the
average Russian citizen affected by the economic reform process, would be
forthcoming within several weeks.
Vancouver Summit Initiative. On April 4, 1993, immediately following his
Vancouver summit meeting with Russian President Yeltsin, President Clinton
announced a $1.6 billion package of U.S. assistance to Russia. All of the programs
utilized FY1993 resources, and none of the funds required new appropriations from
Congress. Of the total, $924 million — $700 million in Food for Progress Program
agricultural loans, $194 million in food grants, and $30 million in medical and
maternal/child health grants — was additional to that already designated for Russia
and the FSU. Roughly $676 million was derived from FY1993 funds and programs
previously expected to go to the FSU, if not for Russia specifically.
Although the package may not have been entirely new, aspects of it suggested
a shift from the Bush Administration approach. The terms of loans for agricultural
commodities were made more concessional, apparently responding to the view that
the previously used CCC credit guarantee program was a trade program, not foreign
assistance, and inappropriate for a country that was having difficulty repaying its
debts. Another policy change was an increase in assistance levels targeted at
privatization, from $20 million to $60 million. Many believed that the more quickly
and extensively privatization occurred, the more irreversible the new revolution would
be. The Clinton Administration also targeted funds at resettling Russian military
officers to facilitate a withdrawal from the Baltics: $6 million would be used to build
450 houses for officers returning to Russia and to provide employment training to
assist their return to civilian life. The Administration also proclaimed its intention to
make its assistance more highly visible to the average Russian citizen than the earlier
aid program. The President claimed that 75% of the assistance would be used outside
Moscow and the same proportion would be provided to non-governmental bodies.
The democracy initiatives announced at the summit were to be directly targeted at the
average person. The Administration intended to bring together a range of exchanges
and training programs to encourage person-to-person contacts between Americans
and Russians.
The appointment of presidential friend Strobe Talbott as Ambassador at Large
for the Newly Independent States was one sign of the Administration’s desire to give
the aid issue higher priority. At the summit, the President announced further moves
in this direction, including appointment of Vice President Gore to co-chair a

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commission on technological cooperation with the Russian Prime Minister;
Commerce Secretary Ron Brown to co-chair a business development committee with
the Deputy Foreign Minister; and appointment of a full-time ombudsman to facilitate
U.S. investment.
The importance of trade, often viewed as a substitute for large-scale assistance,
was given some prominence in the summit announcement. The Administration stated
its support of Russian membership in the General Agreement on Tariffs and Trade
(GATT) and access to the Generalized System of Preferences (granted September 22,
1993). It included in the aid package credit and guarantee agreements that were being
negotiated for some months — an $82 million Export-Import credit for Caterpillar
Inc. machinery to be used on a gas pipeline project; and a $150 million guarantee from
the Overseas Private Investment Corp for an oil project by DuPont’s Conoco Inc.
unit. It also promised to try to push to completion by April 14 a $2 billion
Export-Import oil and gas loan (the deal was finally signed on July 6, 1993, and the
first payment — $245 million — was approved in March 1994).
Finally, the Administration outlined $215 million in further proposed uses for the
$800 million nonproliferation fund that was appropriated in the defense budget for
FY1992 and FY1993. $130 million would go for dismantling nuclear delivery
vehicles, $75 million for warhead storage facilities, and $10 million for nuclear
materials accountability and control. There had been some criticism of the Bush
Administration for moving slowly on utilizing the fund, although disagreements
between Russia and Ukraine on nuclear disarmament were in part responsible for
delays.
At Vancouver, President Yeltsin extracted a promise from President Clinton that
the United States would review outmoded legal restrictions on trade and other
relations that treated Russia “as though we were still a communist country.” As a
result of that review, the Administration transmitted to Congress on July 27, 1993,
the FRIENDSHIP with Russia, Ukraine, and Other New Independent States Act,
approved by Congress in November and signed into law on December 17, 1993 (P.L.
103-199). Although it eliminated many vestiges of Cold War legislation, it did not
affect the two restrictions of greatest concern to Russia, the Jackson-Vanik
amendment and COCOM restrictions on technology exports. The latter, however,
were dismantled on March 31, 1994.
April 15, 1993 Bilateral U.S. Aid Proposal and Congressional
Response. According to the President, the summit package was only the first step
of a U.S. effort to assist Russia. The second step was the April 15, $28.4 billion G-7
package (not counting the $15 billion public debt rescheduling that occurred on April
2) which rested on IMF and other multilateral organization financial resources. The
third step was a $1.8 billion U.S. assistance package announced at the conclusion of
the mid-April G-7 meeting of finance and foreign ministers, and approved by
Congress on September 30, 1993 along with the FY1994 request.
Arriving at a funding mechanism for the proposal, however, required extensive
negotiations between the Administration and Congress. Meeting on May 26, the
House Foreign Operations Subcommittee approved the $1.8 billion assistance
proposal. Of that amount, $1.6 billion was included as an FY1993 supplemental

CRS-13
attached to the FY1994 Foreign Operations appropriations bill. Because there was
insufficient money left under the foreign assistance budget cap for FY1993,
appropriators turned to the defense budget for additional funds. With the agreement
of the Chairman of the House Defense Appropriations Subcommittee, $979 million
of the package would be drawn from supplemental FY1993 defense funds; $630
million would come from a FY1993 foreign assistance supplemental appropriation.
The remaining $200 million would be added to the FY1994 Foreign Operations
appropriations bill. The House passed the measure, H.R. 2295, by a vote of 309-111
on June 17. An effort, sponsored by conservatives and members of the Congressional
Black Caucus, to remove the $1.6 billion FY1993 supplemental increase for the FSU
was defeated by a vote of 289-140.
Following weeks of negotiations over whether to use defense funds as part of
the Russian aid package, the Senate Foreign Operations Appropriations
Subcommittee met on September 12, 1993, and approved full funding of the
President’s request. Although the subcommittee followed the same formula used by
the House, the Senate panel made two important modifications by earmarking $300
million specifically for Ukraine and shifting $300 million of the broad technical and
humanitarian aid proposal to the Export-Import Bank for loans and guarantees of
U.S. exports to the FSU. The bill further designated specific amounts of the
combined FY1993/1994 $2.5 billion package for selected programs, amounts that
were similar, but not exactly the same as those recommended by the President.
Prior to Senate consideration of H.R. 2295, a political crisis erupted in Russia
on September 21, 1993, when President Yeltsin dissolved the legislature and called
for elections. Yeltsin was challenged by parliament hard-liners who declared his
actions unconstitutional and sought to take power. Congressional supporters of
Russian assistance endorsed Yeltsin’s decisions and argued that it was even more
critical for Congress to move forward with the aid package to demonstrate continuing
U.S. support for economic and political reform in Russia. Two days later, on
September 23, the Senate approved H.R. 2295, including the full $2.5 billion
FY1993/1994 aid proposal for the FSU. During debate, however, Senators added a
number of conditions, many of which were adopted in modified form in the final bill.
While the political crisis in Moscow continued, Congress finalized action and the
President signed H.R. 2295, including the $2.5 billion FSU aid package, on
September 30. Rapid congressional consideration resulted from both Congress’
desire to signal support for President Yeltsin and perhaps more importantly, to enact
the legislation prior to the end of the fiscal year after which the FY1993 supplemental
funds ($1.6 billion) for Russia would no longer have been available. Finding the
necessary money entirely out of FY1994 appropriations would have presented
considerable obstacles, given the declining budgets for foreign aid and defense, and
the desire by many to maintain domestic spending levels. `
As shown in Table 2, Congress generally agreed with the Administration’s plan
for allocating the $2.5 billion. One of the most notable changes was the $300 million
transfer to the Export-Import Bank, action taken primarily so that Eximbank loans
and guarantees for Russia and the other FSU nations did not come at the expense of
financial backing for other countries. Lawmakers also expressed their intent that this
not be an aid package exclusively for Russia but that it provide at least one-third of

CRS-14
the total for the other states. (This was consistent with Administration estimates.)
The final bill further recommended that Ukraine receive at least $300 million and
Armenia $18 million. Although Congress approved the package, Members attached
conditions, some allowing a presidential waiver, that would affect whether Russia and
the other former republics remained eligible for American aid. Among the most
significant were:
! Russian government must be making progress in implementing
comprehensive economic reforms; Russian government must not use
aid to expropriate or seize ownership or control of assets,
investments, or ventures;
! FSU governments must not direct any action in violation of the
territorial integrity or national sovereignty of another FSU country
(national interest waiver and exemption for humanitarian and refugee
programs);No aid to enhance the military capability of any FSU
country (demilitarization, defense conversion, non-proliferation
exemption);
! Russian aid reduced by $380 million unless President certified on
April 1, 1994, that Russia had not provided assistance to Cuba
during past 18 months (national interest waiver); and no aid for
Russia unless President certified that (1) Russia and Latvia and
Estonia had set a timetable for withdrawal of Russian troops; or (2)
Russia had continued to make substantial progress toward
withdrawal.
Table 2. Russia and Other FSU Aid: $2.5 billion FY1993/1994
Package
(millions of dollars)
Enacted
Request
(P.L. 103-87)
Private Sector Development
647
894
Privatization & Restructuring
125
125
Trade and Investment
490
485*
Democratic Initiatives
295
295
Humanitarian Assistance
239
239
Energy and Environment
228
285
Officer Resettlement & Housing
190
190
Non-Russia FSU Special Funding
300**
—**
Total
2,513
2,513

CRS-15
*
Includes $300 million transfer to the Export-Import Bank.
**
Non-Russia FSU aid distributed among other sectors in enacted bill.
Other Donor Assistance. As noted above, the G-7 $24 billion aid package
announced on April 1, 1992, in the view of many, went to some significant extent
undelivered. The March 1993 parliamentary challenge to Russian President Yeltsin
precipitated a G-7 effort to demonstrate support for Russian democracy prior to the
Tokyo summit planned for July. G-7 “sherpas” met in March and finance and foreign
ministers met on April 14-15 to come up with a package of assistance that might have
an impact on the April 25 referendum on Yeltsin’s leadership. The result was a $43.4
billion assistance plan. This included $14.2 billion in currency stabilization support
efforts, utilizing the $6 billion stabilization fund approved by the G-7 in 1992, a $3
billion IMF Systemic Transformation Facility, a $4.1 billion IMF stand-by loan, and
$1.1 billion in World Bank import assistance. A further $14.2 billion was to be drawn
from World Bank, EBRD, and bilateral export credits and guarantees for import
assistance. The package included an already announced (April 2, 1993) $15 billion
Paris Club public debt rescheduling that allowed Russia to repay debts due in 1992
and 1993 over the succeeding ten years.
At the July 1993 Tokyo summit, the G-7 established a $3 billion Special
Privatization and Restructuring Program that was expected to distribute funds over
an 18-month period. It was made up of $500 million in bilateral grants, to be used
largely for technical assistance to newly privatized companies; $1 billion in bilateral
export credits, and $1 billion in World Bank and EBRD loans to be used by Russian
companies to import Western goods; and $500 million in World Bank loans to be
used by local governments to help them make up for health, education, and other
services previously supplied to employees by state-owned companies.
The Tokyo summit also adopted a U.S. proposal to set up a permanent mission
in Moscow specifically to better monitor its aid. The Support Implementation Group
is chaired by an American, and the vice-chair is a German.
The bulk of G-7 aid proposals, past and present, rested on assistance provided,
not bilaterally, but multilaterally by the IMF, the World Bank, and the European Bank
for Reconstruction and Development (EBRD). However, until mid-1993, their
participation in the assistance program was limited due to the failure of Russia to meet
macroeconomic policy reform conditions. Pending appropriate policy reforms, the
IMF, World Bank, and EBRD were expected to lend Russia as much as $4.5 billion
during calendar year 1992 (not including the $6 billion ruble stabilization fund that
was not implemented through 1993). However, only about $1.6 billion was offered.
In 1993, members of the G-7 encouraged the multilaterals to alter their standard
approach and to ease up on prior conditionality and provide assistance earlier as a
way of encouraging later reform. Following the G-7 April 15 aid package
announcement, the IMF opened a new loan window for this purpose — the Systemic
Transformation Facility (STF). Despite pressure on the IMF from the United States
and other donors, in early June 1993 the IMF held up approval of a $1.5 billion loan
to Russia, intended to be the first under the STF, pending fulfillment of specific
economic policy reform conditions. The loan was finally approved on July 1, 1993.

CRS-16
On June 17, the World Bank approved its largest project loan ever — $610 million
to assist Russia in rebuilding its oil industry.
Germany continued to be the largest bilateral donor to the FSU and, along with
the United States, German Prime Minister Helmut Kohl took a lead role in appealing
to other members of the G-7 for increases in aid to the region. However, in August
1993, the German government announced it would stop providing export credit
guarantees for Russia under its “Hermes” program until the Russian debt repayment
record improved. In 1992, Germany was forced to pay roughly $562 million to cover
defaults from former Soviet states. Its deficit in 1993 was a reported $2.6 billion.
Although Japan had been expected to be a major aid donor, its contributions had
been limited largely to the Central Asian Republics, due to its dispute with Russia
over ownership of the southern Kuril Islands. Concurrent with its hosting of the G-7
meeting on Russian aid in April, however, Japan bowed to heavy pressure from the
United States and other G-7 nations and pledged $1.8 billion in bilateral aid for
Russia, mostly in the form of credits and guarantees. Unlike previous years, it did not
push its demands for return of the Kuril Islands at the July G-7 summit held in Tokyo.
Developments in 1994
Administration FY1995 Budget Proposal. The Administration’s FY1995
budget, issued in February 1994, requested $900 million in humanitarian and
economic assistance to the FSU, a two-thirds reduction from the $2.5 billion
FY1994/FY1993 supplemental that had been appropriated in September 1993. It also
proposed $400 million in Nunn-Lugar demilitarization funds for FY1995.
Russia Aid Debate. The December 1993 parliamentary elections and
subsequent resignations of prominent economic reformers from the Yeltsin cabinet
generated a debate among U.S. policymakers regarding the efficacy of U.S. and
international assistance to Russia. Representative Lee Hamilton, then chairman of the
House Foreign Affairs Committee, suggested that he would find it difficult to support
further assistance if the Russian central bank continued to support state industries.
Noting that reformers never received promised support from the international
community, some observers, including economist Jeffrey Sachs, criticized the IMF for
not being more forthcoming with assistance promised by the G-7 in both 1992 and
1993. Of the $28 billion offered in the G-7 package of April 1993, only an estimated
$5 to $8 billion had been delivered a year later. In response, the United States put
pressure on the IMF to more expeditiously move loans to Russia.
The Ames spy case that emerged in late February produced added pressures on
the assistance program for Russia. Several Members of Congress, including Senators
DeConcini and Dole, called for a freeze on assistance. Senator McConnell indicated
that bipartisan support for the program might dwindle as a result of the incident.
These events may have strengthened support for the view that the United States
should target more of its assistance on non-Russian republics rather than rely on
Russia as the focus of reform in the region. In response, Ambassador Strobe Talbott
indicated that the Administration would pursue a 50-50 split in future resource
allocation decisions. On February 14, President Clinton pledged a significant increase

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in economic assistance to Kazakhstan due to its adherence to economic policy reforms
and moves to eliminate nuclear weapons. Assistance, reportedly, was expected to go
from $91 million in FY1993 to $311 million in FY1994. On March 4, the President
also promised to double assistance to Ukraine to roughly $700 million through
FY1995. On March 21, DOD Secretary Perry pledged an additional $100 million to
Ukraine in Nunn-Lugar demilitarization assistance.
The increasingly negative mood regarding the Russia assistance program had a
direct impact on already appropriated funds. On February 11, 1994, Congress
approved the Emergency Supplemental Appropriations for FY1994 (H.R. 3759/P.L.
103-211), providing assistance to earthquake victims in southern California and for
other purposes. To help pay for the relief, Congress rescinded previously approved
funding, including $55 million of the $2.5 billion assistance package for the FSU that
had been approved in September 1993. The Senate-passed version of the bill had
proposed a $145 million rescission from this account. However, an effort to raise this
amount to $253 million was defeated on the Senate floor. The Senate Committee
report on the bill indicated that the large amounts that had been made available to the
region in the previous year made the region’s foreign aid account a likely candidate
for sharing the costs of the supplemental.
FY1995 FSU Aid Debate. House debate on the FY1995 Foreign Operations
appropriations bill, H.R. 4426, contained a mixed message on support for assistance
to the FSU. The House Appropriations Committee had reported a bill fully funding
the President’s request of $900 million for the region. On the floor (May 25), an
amendment (Callahan) was defeated by a vote of 286-144 that would have cut the
appropriation by $348 million and excluded Russia from the remaining $552 million
except for humanitarian assistance. However, a motion by Representative Callahan
to reduce FSU funding by $24.5 million — leaving an appropriation of $875.5 million
— was later adopted. Further diminishing available funding for the region, the
Committee-reported bill allowed the NIS account to be used for Mongolia. Although
the bill contained only a line-item appropriation for the region, the Committee report
(H.Rept. 103-524) recommended a number of specific funding levels for various
programs — $20 million for law enforcement training, $14 million for the Peace
Corps, $50 million for agricultural commodities for children and women, $5 million
for postdoctoral exchanges in the social sciences and humanities, and $20 million for
family planning.
On June 16, the Senate Appropriations Committee reported its version of H.R.
4426, including $839 million for the FSU. The Committee recommendation, $61
million less than the Administration request, reflected congressional criticisms made
public by the Washington Post on June 12. The article highlighted a memorandum
written to the Administration by Representatives Gephardt and Michel that called the
Russia aid program “simply inadequate in its strategy, its intensity and its
implementation.” The Senate Committee report (S.Rept. 103-287) echoed several of
these criticisms. Unlike the House bill, the Senate Committee specifically earmarked
funds for Ukraine ($150 million), Armenia ($75 million), and Georgia ($50 million).
It also required that $15 million be used for family planning (of which $6 million was
for Russia, $3 million for Ukraine, Moldova, and Belarus, and $6 million for Central
Asia).

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During floor debate, the Senate amended the Foreign Operations appropriations
bill with new earmarks and other additional requirements. The Senate directed $15
million to be used to support and expand the hospital partnership program, $50
million for programs that match U.S. private sector resources with federal funds, $5
million to establish an enterprise fund for the Transcaucasus region, $15 million for
the International Criminal Investigative Training Assistance Program (ICITAP) to
conduct police development and training programs, and $15 million for the FBI to
help combat organized crime in the FSU. By voice vote, the Senate approved an
amendment that would end most assistance to Russia unless the President certified
that it was complying with the 1972 Biological Weapons Convention and was
disclosing the existence of its binary chemical weapons program. The Senate also
approved (89-8) an amendment that would end most aid to Russia if its troops
remained in the Baltics after August 31, 1994, or the status of those troops had not
been otherwise resolved by mutual agreement of the countries involved. The original
Senate Committee bill, like the House bill, had set a deadline of December 31, 1994.
The Senate approved H.R. 4426 on July 15 by a vote of 84-9.
The conference report on H.R. 4426 was approved by the House on August 4
(341-85) and by the Senate on August 10 (88-12). It was signed into law (P.L. 103-
306) on August 23. The conference report provided $850 million in bilateral
economic assistance to the FSU. It replaced many of the Senate earmarks with
recommendations for spending — $15 million for family planning; $150 million for
Ukraine, of which $25 million should be for land privatization and small and medium
business; $75 million for Armenia; $50 million for Georgia (the recommended
funding levels for Armenia and Georgia could include funds from any other act); and
$50 million for public/private partnership matching programs. The bill required that
up to $30 million be used for police training and exchanges for East Europe and the
FSU. It recommended that a Transcaucasus Enterprise Fund be established. It
required a report from AID on steps being taken to include individuals and
organizations with language and regional expertise in the program. The conference
report prohibited funds unless the President certified that Russia and Latvia and
Estonia had established a timetable for withdrawal of Russian forces, although it
provided for a presidential waiver (the troops were withdrawn in August 1994). The
explanatory statement recommended that at least half of appropriated funds should
be used in republics other than Russia.
Implementation Concerns. While the debate on the aid program in 1992
and 1993 focused largely on issues of funding and conditionality, during 1994 many
questions regarding the effectiveness of U.S. assistance efforts were raised. In April
1994, following a congressional delegation trip to Russia, House Majority Leader
Richard Gephardt and Minority Leader Robert Michel wrote a memo to Secretary of
State Warren Christopher suggesting that the program was poorly coordinated, not
sufficiently visible to the Russian people, not well targeted, and not addressing issues
of crime and taxation nor adequately responding to the needs of small entrepreneurs.
The Administration had already begun to address many of these questions and
during the year there were some positive signs of improvement. The State
Department’s NIS Coordinator issued individual country strategies as guidelines to
be followed by the numerous U.S. agencies involved in implementing the program.
Susan Johnson, a Coordinator’s Office liaison, took up residence in Moscow as an

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assistant to the ambassador there to further facilitate coordination in the field. By
September 1994, a Senate delegation led by Senator Leahy found much to praise in
the assistance program in its trip report. (For further and more detailed discussion on
implementation issues, see CRS Report 95-170, The Former Soviet Union and U.S.
Foreign Aid: Implementing the Assistance Program, and CRS Report 96-261, Russia
and U.S. Foreign Assistance: Current Issues.)
Emerging Trends. Two events in autumn 1994 highlighted further emerging
trends in the assistance program. A growing emphasis in the U.S. aid program on
facilitating American private sector investment and trade with the FSU was stressed
by both Russian President Yeltsin and President Clinton during the visit of the former
to the United States on September 26-28, 1994. Over $1 billion in aid and trade
agreements was approved, most of it the face value of coverage of Eximbank and
OPIC export and investment guarantees.
Further, a move away from a predominant emphasis on Russia became more
apparent during the visit to Washington of Ukraine President Kuchma on November
22. Ukraine, the second most populous and strategically important nation in the
region, had at last begun to move forward with economic reforms. As a result, the
United States began to offer more economic incentives. During this visit, the United
States promised $200 million, $72 million in the form of a cash transfer — a
precedent for the FSU. In addition, AID announced country allocations of the $850
million in FY1995 assistance to the FSU. Russia would receive $378 million or 44%
of the total, while Ukraine would get $158 million or 18.5%, up from about 8.6% of
FY1994 funds.
Following the November 1994 U.S. election, there were signs that the U.S.
assistance program to the FSU would face critical scrutiny and possible cuts in 1995.
On December 12, Senator McConnell, new Chairman of the Senate Foreign
Operations Appropriations Subcommittee, issued a foreign aid proposal for FY1996,
introduced as S. 422 in March 1995, that included a 12% cut from FY1995 levels to
$750 million in assistance to the former Soviet Union. The suggested decrease,
however, was considerably less than that proposed for the whole foreign aid program.
The McConnell proposal earmarked 43% of the aid for three countries: Ukraine,
Armenia, and Georgia, more than doubling their aid levels, and would prohibit most
aid to Russia if it contributed in any way to territorial violations of any other state.
Other Donors. Unlike previous meetings, further financial assistance to Russia
was not discussed at the July 1994 Naples summit of the G-7. Instead, Ukraine was
a topic of concern. The G-7 offered Ukraine $4 billion in international financing if it
acted to undertake genuine reforms. It also approved a $200 million plan to close the
Chernobyl nuclear plant; total costs were expected to reach $1.5 billion.
Following the December 1993 Russian elections, the United States argued
forcefully for an easing of credit terms by the IMF and other international lending
institutions while at the same time calling for continued reform. A meeting of G-7
finance ministers on February 26, 1994, stressed the need for aid and debt
restructuring to follow reform. On April 20, the IMF finally approved a new IMF
loan to Russia of $1.5 billion.

CRS-20
Developments in 1995
In 1995, a Republican majority in Congress acted to cut the level of funding for
the former Soviet Union and for Russia in particular. Russian aid was made subject
to more conditions, and earmarks for other NIS states at higher-than-requested levels
effectively restricted the amount of funds available for Russia programs.
Administration FY1996 Budget Proposal. On February 6, the Clinton
Administration issued its FY1996 foreign aid budget request that included $788
million to be provided for the FSU through the NIS account under the Foreign
Operations appropriations bill. An additional $92 million was requested for the region
for trade and investment activities through the OPIC, TDA, and Export-Import Bank
budgets, and $40 million for exchanges through USIA funds. The Peace Corps
budget also now included $16 million in additional funding to cover costs associated
with its program in the region. Previously, all these funds had come out of the NIS
account and were transferred from USAID to other agencies. Total proposed
economic assistance spending for the FSU, including all agencies, was, therefore,
$936 million. The Administration also requested $371 million for FY1996 under the
Nunn-Lugar cooperative threat reduction program.
The New Congress and FY1995 Aid Rescissions. At the onset of the
104th Congress, the new Republican majority proposed several initiatives to reduce
spending, some of which affected aid to the former Soviet Union. Representative
Callahan, Chairman of the House Foreign Operations Appropriations Subcommittee,
noted on January 30, 1995, that he would seek to eliminate the assistance project that
provided housing for Russian officers withdrawn from the Baltic states. On February
22, the House approved H.R. 889, a supplemental Defense Department appropriation,
that included a $110 million cut in that particular aid program. On March 2, the
Senate Appropriations Committee approved a version of H.R. 889 deleting the House
cut, an action maintained in the floor-approved version. However, the full Senate
approved an amendment to the bill that would eliminate $18 million from the overall
NIS program ($12 million of which would have to come from Russia). The
conference report on H.R. 889, approved April 6, rescinded $7.5 million from
FY1994 and FY1995 from the NIS account and reallocated $15 million from the
officer housing program to other NIS non-Russia programs. In addition, the House
bill would have cut $80 million from the Nunn-Lugar program; the Senate version
deleted this provision. The conference report rescinded $20 million for Nunn-Lugar
cooperative threat reduction activities. H.R. 889 was signed into law (P.L. 104-6) on
April 10, 1995.
On March 2, the House Appropriations Committee approved a non-emergency
supplemental rescission measure, later passed by the House as H.R. 1158, that would
cut an additional $47.7 million in FSU programs. The Committee did not specify
which programs should be affected by the cut, except that reductions should not occur
in small grassroots activities outside Moscow and Kiev. The Senate version,
approved April 6, did not specifically rescind FSU funds, but would cut $125 million
generally from the FY1994 and FY1995 Foreign Operations Appropriations that
might ultimately affect FSU programs. The conference report (H.Rept. 104-124)
rescinded $25 million of aid intended for Russia. President Clinton, however, vetoed
the measure on June 7 for reasons unrelated to the Russia provision. H.R. 1944, a

CRS-21
replacement bill that had White House support, passed the House on June 29 (276-
151) and the Senate on July 21 (90-7). Like its predecessor, it cut the FY1995 NIS
program by $25 million. The total FY1995 post-rescission appropriation for the FSU,
therefore, was $817.5 million.
FY1996 FSU Aid Debate in the House. On May 19, 1995, the House
International Relations Committee reported H.R. 1561 (Gilman), the American
Overseas Interests Act of 1995 (H.Rept. 104-128, Part I) which authorized both
foreign aid and foreign relations programs. On June 8, the House passed the bill by
a vote of 222-192. Among other provisions, the bill authorized appropriations for
foreign aid to the NIS — $643 million for FY1996 and $625 million for FY1997. It
made $11.6 million of these sums available in each fiscal year for Peace Corps
activities in the FSU. The bill also required that assistance be provided to the private
sector “to the maximum extent feasible.” As the full Senate never took up the
Foreign Relations Committee’s own foreign aid authorization bill, S. 961, the
conference report on H.R. 1561 (H.Rept. 104-478, March 8, 1996) struck out most
provisions on foreign aid, including assistance for the NIS.
H.R. 1561, as originally approved by the House, included two new conditions
on assistance that were directed at the government of Russia. The government of
Russia would be ineligible for most assistance — excluding humanitarian, democratic
reform, nuclear safety, and many private sector activities — unless the President
certified that it was “pursuing, without preconditions” a cease-fire and negotiated
settlement in Chechnya. The President would also have to certify that Russia was
providing unhindered access to Chechnya, was cooperating with the Organization for
Security and Cooperation in Europe to investigate human rights violations in
Chechnya, was cooperating in the unhindered delivery of humanitarian assistance, and
was taking steps to repatriate refugees, among other provisions. The Committee bill
also prohibited assistance — excluding humanitarian, democracy, and private sector
aid — to the government of “any” FSU state that agreed to provide nuclear reactor
components to Iran unless the President determined that the sale included safeguards
consistent with U.S. national security objectives. In report language, the Committee
emphasized the distinction between aid to governments and aid to assist reformers,
and the private and non-government sectors. This distinction would likely allow
significant amounts of U.S. assistance to continue in the event the bill’s conditions
were not met.
The bill added several prohibitions on assistance that appeared in past years in
the annual Foreign Operations appropriations bill. These prohibited assistance
(excluding humanitarian and democracy assistance) to FSU governments that directed
any action in violation of the territorial integrity of any other FSU state, prohibited
assistance for the purpose of enhancing the military capability of NIS states, and
prohibited assistance to the Russian government if it was not making progress in
economic reform or if it used assistance funds to expropriate assets or investments.
On July 11, 1995, the House approved H.R. 1868 (333-89), the FY1996 Foreign
Operations Appropriations Bill (H.Rept. 104-143). It would provide $580 million for
the NIS, a cut of $237.5 million from post-rescission FY1995 levels (-29%) and $208
million less (-26%) than the Administration request for the NIS account.

CRS-22
During House debate on H.R. 1868, several amendments were introduced
regarding the FSU provisions of the bill. An approved amendment by Representative
Miller, as amended (Wilson), cut $15 million from the original Committee-approved
level, leaving $580 million for the region. There were two efforts to cut funds for
Russia specifically. An amendment (Roemer), as amended (Obey), that limited the
amount of funds going to Russia to $195 million passed 401-2. The original
amendment would have set the limit at $150 million. Another amendment
(Menendez) reduced funds to Russia by any amount it spent on completion of a
nuclear power plant in Cuba. While an effort (Brownback) to restore $24 million in
appropriations to the NIS was defeated (340-78), an amendment (Hefley) that would
have cut funding for the region to $296.8 million was also rejected (104-320).
Finally, language in the Committee-reported bill that would allow assistance to flow
to the government of Azerbaijan — prohibited by the FREEDOM Support Act until
it made progress on ending the conflict with Armenia — was deleted (Visclosky).
On June 15, the House passed H.R. 1530, the defense authorization. It
authorized $200 million for Nunn-Lugar programs in FY1996, 46% less than the
Administration request. On December 13, conferees agreed to a $300 million level
for Nunn-Lugar. Funds could not be used for peacekeeping exercises with Russia or
for defense conversion, and some funds could not be used unless Russia was in
compliance with the Biological Weapons Convention or was making progress toward
destruction of chemical weapons. The House version of H.R. 2126, the Defense
Appropriations bill, approved $200 million for the program. On September 25, House
and Senate conferees for DOD appropriations (H.R. 2126) agreed to $300 million for
Nunn-Lugar programs in FY1996, a cut of $71 million from the President’s request.
The bill became law on November 30, 1995.
FY1996 FSU Aid Debate in the Senate. On June 23, 1995, the Senate
Foreign Relations Committee reported S.961, the foreign aid authorization (S.Rept.
104-99). While the bill itself would have folded the FSU and other accounts into one
Development Assistance Fund, the Committee report “expected” that $675 million
for FY1996 and $620 million for FY1997 would be available to the region. The bill
separately and explicitly authorized $12 million in FY1996 for a Transcaucasus
Enterprise Fund. Another provision that would have benefitted the region
permanently authorized “such sums as may be necessary” for transport of privately
donated humanitarian assistance to parts of Central Europe and the former Soviet
Union. An amendment, offered by Senator Snowe, that condemned the proposed sale
by Russia of nuclear power plants to Iran and conveyed the sense of Congress that
Russia would be ineligible for aid in the event the sale went forward, was approved
during committee mark-up. The bill also provided that no loans could be offered to
the NIS countries if they were not either keeping up with scheduled debt repayments
or if the loans were not secured by revenues from exploitation of the states’ natural
resources. The measure never went to the full Senate for a vote.
The Defense authorization bill, S. 1026, approved by the Senate on September
6, authorized $365 million for the Nunn-Lugar Cooperative Threat Reduction
Program. The Defense appropriations bill, S. 1087, approved on September 5, would
appropriate $325 million. As noted above, conferees reached agreement on a $300
million authorization level, and Congress passed a $300 million appropriation.

CRS-23
Following the August recess, the Senate, on September 21, took up the House-
passed Foreign Operations spending measure (H.R. 1868), approving $705 million for
FSU aid. Although the Senate version was $125 million higher than the House level,
the Senate expressed displeasure with Administration efforts to assist countries other
than Russia. Consequently, the Senate bill earmarked amounts for Armenia ($85
million), Georgia ($30 million), and Ukraine ($225 million), with the Armenia and
Ukraine levels significantly higher than those planned by the Administration. In
addition, the Senate included extensive earmarks for Ukraine emphasizing the
development of small and medium enterprises ($20 million) and nuclear energy safety
and self-sufficiency ($50 million). For Armenia, the bill directed $35 million for food,
$40 million for fuel, and $10 million in medical supplies. Other earmarks applying to
the region in general included $20 million for hospital partnerships, $45 million for the
Western NIS Enterprise Fund, $15 million for establishing a Transcaucasus Enterprise
Fund, and over $17 million for the FBI to set up legal attache and training programs
in the NIS and East Europe.
The Senate Foreign Operations measure also added a key restriction on Russian
aid that was strongly opposed by the Administration. The bill prohibited aid to Russia
unless Moscow terminated its planned transfer of nuclear energy technology to Iran.
The Administration raised the prospect of a veto if this condition was not removed
or softened with a presidential waiver authority.
Conference Report. House and Senate conferees reported H.R. 1868 on
October 24, 1995. While agreeing to over 175 differences between the two versions,
including those concerning the former Soviet Union, they failed to agree on
international population language. On October 31, the House approved the
conference report (351-71) but retained the controversial population language that
might either be rejected in the Senate or provide grounds for a veto by the President.
The Senate approved the conference report (90-6) on November 1, but continued to
disagree with the House on population. Both bodies voted again in disagreement on
November 15, causing further deadlock on final passage. In January 1996, the
population issue was resolved and the conference report, including NIS language, was
enacted by reference in the continuing resolution, H.R. 2880. The continuing
resolution was approved by the House on January 25; it passed the Senate and was
signed into law (P.L. 104-99) on January 26, 1996. Subsequently, H.R. 1868 was
approved by Congress and signed by the President on February 12, 1996, as P.L. 104-
107.
The conferees approved $641 million under the NIS account. They adopted
many, but not all, of the Senate earmarks. These included the $225 million level for
Ukraine, of which $50 million was designated for energy conservation and nuclear
safety, $22 million for small and medium enterprise development, and $5 million for
victims of Chernobyl. The bill further earmarked $85 million for Armenia. Georgia
was to receive $30 million, although funds could come from other appropriations.
The legislation targeted $20 million for hospital partnerships, infectious diseases, or
contaminated drinking water mitigation, $12.6 million for law enforcement assistance,
$50 million for the Western NIS and Central Asia Enterprise Funds, and another $15
million for a new Transcaucasus Enterprise Fund.

CRS-24
The $195 million limitation on funding for Russia contained in the House version
was eliminated, but extensive country and program earmarks in the conference report
were expected to effectively prevent Russia from receiving that much assistance in
FY1996. The conference report also adopted Senate language that would prohibit
assistance for Russia if it pursued arrangements with Iran to supply technical
expertise, training, technology, or equipment necessary for the development of a
nuclear reactor or related programs. However, the report allowed for a presidential
waiver on the grounds that it would be in the U.S. national security interest to
continue to provide assistance.
Finally, the legislation allowed humanitarian assistance to flow through the
Government of Azerbaijan if the President determined that assistance provided
through non-governmental organizations — the only kind permitted under the
FREEDOM Support Act due to the dispute with Armenia over Nagorno-Karabakh
— was not adequately addressing refugees.
Major Issues in 1995. As indicated by the appropriations debate described
above, some efforts were made in 1995 to cut funding to the region and to Russia
specifically. As in similar efforts in previous years, critics of the program based their
arguments chiefly on the need to cut foreign aid generally, on their preference to see
funds used for domestic purposes, and on specific grievances against Russian
behavior. The broad FSU aid program continued to find its strongest support in the
congressional leadership. In July 1995, during the debate on the Roemer amendment
to limit aid to Russia to $150 million, Members, including both House Speaker
Gingrich and Minority Leader Gephardt, argued the importance to U.S. foreign policy
and defense interests in a democratic and free market FSU. They also argued that it
was less expensive to assist a more cooperative Russia than it was to defend the
United States from threatened Soviet aggression during the Cold War. However,
these arguments had mixed success in the face of other pressures to cut aid to Russia.2
While Russia was the main focus and beneficiary of the assistance program in its
first years, it bore the brunt of NIS cuts in 1995. Funding for Russia declined from
roughly 60% of the NIS total during the first two years to roughly 40% of FY1995
funds and 21% of FY1996 funds. The decline in funding for the Russia program in
part reflected the criticism that began in late 1994 regarding Russia’s international and
domestic behavior. In 1995, Russia increasingly became the target of efforts to
impose specific conditionality in the assistance program. Early in the year, Russia’s
behavior in Chechnya was mentioned by congressional critics as a potential condition
and was one reason given for acceptance of rescissions directed specifically at Russia.
The sale of nuclear power plants to Iran was another issue that increased pressure for
conditionality in Congress. The FY1996 foreign aid appropriations prohibited aid
unless the President assured that Moscow had terminated its plans for the sale.
However, this provision did allow the President to waive this restriction if he deemed
it in the interest of U.S. national security. The Administration argued that it was
inappropriate to condition aid to Russia on a particular desired behavior in either Iran
or Chechnya inasmuch as the aid program was intended to benefit reformist elements
2 Although the Roemer amendment was defeated (348-67), a $195 million cap was approved
in the House version of the bill.

CRS-25
in Russia and ultimately facilitate a transformation that might ensure a more
cooperative relationship in the future.
Another reason for the decline in Russia funding was the congressional concern,
often expressed by Senator McConnell in 1994, that U.S. foreign policy had become
too dependent on Yeltsin and that more funds should be funneled to other countries
in the region. Consequently, what had been “recommended” funding levels in the
FY1995 foreign aid bill became “hard” earmarks in the FY1996 bill. Congress
specified amounts for Ukraine, Armenia, and Georgia, the effect of which was to
decrease available amounts for Russia.
In 1994, defenders of the Administration program had argued the greater
importance to U.S. national interest of Russia and pointed out that, on a per capita
basis, Russia had been situated near the middle of recipients while a relatively
strategically unimportant country, Armenia, had been near the top. They suggested
that there was no point in providing large amounts of funding to then-non-reformers,
such as Ukraine. In his March 28, 1995, testimony to the Senate Foreign Relations
Committee, NIS Aid Coordinator Thomas Simons pointed out that the first reformist
wave — in Russia, Kyrgyzstan, Moldova, and Kazakhstan — was where previous
funding had gone. In the latter part of 1994, there was a second wave of reformers
— in Ukraine, Armenia, Georgia, and Belarus — that were putting together IMF
reform programs. These became beneficiaries of increased U.S. assistance.
In 1995, the aid program implementation concerns expressed by Congress and
others the previous year were largely addressed. In early April 1995, Richard
Morningstar, previously senior Vice President at OPIC, took over from Ambassador
Thomas Simons as the Coordinator of the program. The latter had taken a number
of steps to improve coordination, including the formulation of individual country
strategic plans and requiring USAID to transfer funds to other agencies in a way that
would reduce its continued responsibility for those funds. After taking office,
Morningstar took a very assertive role in molding the assistance program. He
conducted a comprehensive review of the program and enlarged the scope of the
post’s responsibility to include the DOD Nunn-Lugar program.
Developments in 1996
The tone of debate on the issue of aid to the former Soviet Union was more
modulated in 1996 than in the previous year. The Administration did not request
more than it received from Congress in 1995. Congress adopted many of the same
earmarks and conditions as it had in the previous year.
Administration FY1997 Budget Proposal. In March 1996, the
Administration presented its FY1997 budget proposal, requesting $640 million for the
New Independent States (NIS) account, including $173 million for Russia (the
FY1996 level was expected to be $168 million), $173 million for Ukraine ($205.7
million in FY1996), and $55 million for Armenia ($85 million in FY1996).
FY1997 FSU Aid Debate in the House. On May 29, 1996, the House
Committee on Appropriations reported H.R. 3540, the FY1997 Foreign Operations
appropriations bill (H.Rept. 104-600). The bill provided $590 million under the NIS

CRS-26
account, 8% less than the Administration request. As in previous years, the House
version did not contain country or project earmarks. The bill maintained prior year
restrictions regarding U.S. assistance to Russia conditioned on its progress in
economic reforms and the sale of nuclear reactor technology to Iran. These and most
other conditions on aid to the region could be waived by the President on national
security grounds.
The House bill departed from previous appropriations language by allowing
NGOs and PVOs to use facilities of the Government of Azerbaijan in order to provide
humanitarian assistance. It also attempted to establish a 7 to 1 ratio of assistance for
the refugees in Azerbaijan to those in Nagorno-Karabakh. On June 11, 1996, the
House approved H.R. 3540 by a vote of 366-57. No amendment was offered
affecting the NIS assistance program.
On May 15, the House approved H.R. 3230, the FY1997 Defense Authorization
bill, which provided $302.9 million for the Nunn-Lugar program, $25 million less than
the Administration request. On June 13, the House approved H.R. 3610, the Defense
Appropriations bill, providing $302.9 million for this program.
FY1997 FSU Aid Debate in the Senate. On June 18, 1996, the Senate
Foreign Operations Subcommittee of the Committee on Appropriations approved its
version of the FY1997 Foreign Operations Appropriations bill. The full
Appropriations Committee reported the bill on June 27 (S.Rept. 104-295). The
Senate approved the bill on July 26 by a 93-7 vote.
The bill provided $640 million for the NIS account, matching the Administration
request and roughly the same as the FY1996 level of assistance. Unlike the House
bill, the Senate version contained extensive country and program earmarks. Half of
all the assistance would go to Ukraine ($225 million) and Armenia ($95 million).
Another $25 million was earmarked for Georgia (although from all funding sources),
leaving roughly $295 million for the 9 remaining republics, including Russia.
The Ukraine funds included $35 million for agriculture, $25 million to help
decommission the Chernobyl reactor, $5 million for small business development, and
$5 million for treatment of children affected by the Chernobyl incident. Another $50
million of the Ukraine funds was provided for nuclear reactor safety, including $20
million for safety panels for all reactors, and $20 million for simulators and training.
Availability of funds for Ukraine was subject to a certification that there was no
military cooperation between that country and Libya.
Funds for Russia could not be provided unless the President made a
determination that Russia had ended its agreement to sell and provide training for a
nuclear reactor in Iran. There was no waiver provision in the Senate Committee
language.
Other earmarks in the Senate bill provided $15 million for hospital partnerships,
$15 million for family planning, $2.5 million for the American-Russian Center in the
Far East, $50 million for the Western NIS and Central Asian Enterprise Funds, and
$10 million for the Trans-Caucasus Enterprise Fund. For Peace Corps operations in
the region, $12 million would be made available. Of $12 million earmarked for law

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enforcement (from the NIS and SEED accounts), $1 million would have to be used
for activities to combat violence against women in Russia.
During Senate floor debate, only two amendments affecting the FSU aid
program were adopted. One required that $25 million of the total NIS account be
used for legal reform efforts, including support for the development of commercial
law, strengthening an independent judiciary and bar, and legal education for judges
and law students. The other earmarked $5 million of the Ukraine allocation for a land
and resource management institute to identify nuclear contamination at Chernobyl.
On July 10, the Senate approved S. 1745, the Defense Authorization bill, which
authorized $327.9 million under the Nunn-Lugar Cooperative Threat Reduction
Program. On July 18, the Senate approved H.R. 3610, the Defense Appropriations
bill, providing $327.9 million for this program.
Conference Report. On September 28 and September 30, 1996, the House
and Senate respectively approved an Omnibus Consolidated Appropriations Act, H.R.
3610 (P.L. 104-208), that included the FY1997 Foreign Operations Appropriations.
It provided $625 million for the NIS account.
The FY1997 foreign operations appropriations maintained most of the Senate
bill’s country and program earmarks. The measure included $225 million for Ukraine,
$25 million of which was to be used for decommissioning the Chernobyl plant, $35
million for agricultural projects, $5 million for the small business incubator project,
$5 million for treatment of childhood illnesses resulting from Chernobyl, $5 million
for a “land and resource management institute” to identify nuclear contamination at
Chernobyl, and $15 million for legal restructuring to support creation of a market
system economy. It also required that $50 million of funds from available FY1996
and FY1997 appropriations be used for nuclear reactor safety in Ukraine, of which
$20 million should go to safety parameter display systems and $20 million to Full
Scope and Analytical/Engineering simulators.
The appropriations act also earmarked $95 million for Armenia, $10 million for
the Transcaucasus Enterprise Fund, $15 million for family planning in the NIS, and
$2.5 million for the American-Russian Center in the Far East. Conference report
language directed that $1 million be used for health and law enforcement efforts
seeking to reduce violence toward women. It also called for continued assistance for
law enforcement and training in the NIS and Central Europe at FY1996 levels. The
report further supported the transfer of $12 million from the NIS account to Peace
Corps for its activities in this region.
On July 30, conferees reported the Defense Department Authorization Act, H.R.
3230. The bill provided $364.9 million under the Nunn-Lugar Program and an
additional $57 million for Department of Energy nuclear nonproliferation activities in
the FSU. It was signed into law on September 23 as P.L. 104-201. The conference
report on H.R. 3610, the omnibus appropriations act which included the Defense
Appropriations, provided $327.9 million for Nunn-Lugar activities. The Department
of Energy Appropriations, H.R. 3816, signed into law (P.L. 104-206) on September
30, 1996, provided $48.5 million for its FSU nuclear programs.

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Major Issues in 1996. Concern for the future of the U.S. assistance program
for Russia was raised by the January 1996 actions of President Yeltsin, who replaced
a number of his key economic reformers in a bid to remake his image prior to the
presidential election scheduled for June 16, 1996. Since Yeltsin had previously
removed reformers only to continue reformist policies, Administration officials took
a wait-and-see attitude. This approach was perhaps later justified by Yeltsin’s
post-election appointment of one of the country’s leading reformists, Anatoly
Chubais, as chief of staff.
Western leaders had to balance their concerns regarding the future of reform
with the possible alternative of a communist victory in the election. In January, U.S.
and other Western officials warned that Russia could lose a loan being negotiated with
the IMF if it failed to maintain its reform program. In February, possibly bowing to
U.S. and other Western country interest in bolstering the position of Yeltsin prior to
the election, the IMF agreed to lend $10.2 billion to Russia over three years.
However, in a move signalling continued caution, the IMF required that the loan be
provided in monthly tranches that would follow monitoring reports to insure Russia
kept to its promised reform track. On July 22, the IMF indicated that it would delay
the disbursement of a $330 million tranche because of Russia’s failure to meet reform
conditions for the loan. The specific problem appeared to be the Yeltsin
government’s low cash receipts, stemming from the failure to enforce tax laws. The
IMF went ahead with the loan on August 21. However, on October 24, the IMF
again suspended loan disbursements. The October payment was made in
mid-December 1996.
In 1996, Congress continued the pattern of conditioning aid to Russia. One new
effort appeared in the Cuban Liberty and Democratic Solidarity (Libertad) Act of
1996 (H.R.927), signed into law on March 12, 1996 (P.L. 104-114). The new law
requires a reduction of assistance to any country by the amount of aid it provided in
support of intelligence facilities in Cuba or in support of the Cuban nuclear facility at
Juaragua. However, the restriction does not apply to most, if not all, categories of
assistance then being provided to Russia, including democratization, the development
of a free market economy, the grassroots private sector, and secondary school
exchanges.
In appropriations bills, a number of conditions on aid from the previous year
were adopted at the Committee-level. These included the FY1996 language
prohibiting aid unless the President assures that Moscow has terminated its plans for
the sale of nuclear power plants to Iran. As in the previous year, it allowed the
President to waive this restriction if he deemed it in the interest of U.S. national
security. The President waived the FY1997 restriction on November 8, 1996, in
Presidential Determination 97-01.
No efforts to cut aid were introduced during floor debate on bills affecting U.S.
aid to Russia and other successor states of the Soviet Union. However, some
recommended that aid to Russia be curtailed in future years. The Senate Foreign
Operations Subcommittee suggested in its report that aid be phased out after FY1997,
noting that, after that year, it intended to provide “modest support” only for “health
and humanitarian needs, democracy and rule of law programs, nuclear safety, and
security initiatives.” In effect, Russia already received a significant cut in aid by the

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FY1997 appropriations bill. Although the Administration sought $173 million for
Russia, due to the extensive earmarking of other countries in that bill, Russia would
end up with about $95 million, the lowest amount made available for Russia programs
since the aid program began.
The decrease in aid to Russia reflected, in part, the continuing concern
expressed by Senator McConnell since 1994 and again at a hearing on May 15, 1996,
that U.S. foreign policy had become too dependent on Yeltsin and that more funds
should be funneled to other countries in the region. Georgia, Armenia, and Ukraine
were promoted as candidates for increased assistance and had been the beneficiaries
of congressional earmarks. In response, the Administration continued to argue the
strategic importance of Russia to U.S. foreign policy, while also noting that the other
countries would get aid to the extent that they adopted economic policy reforms.
Despite its delay or rejection of privatization and other reforms, Ukraine
remained the largest recipient of NIS aid in FY1997. Congress earmarked $225
million for Ukraine, a 30% increase over the Administration’s request for that
country. Congress earmarked $95 million for Armenia, although, by the end of 1996,
serious questions were being raised regarding Armenia’s commitment to democratic
reform. A $25 million earmark for Georgia (from all sources) contained in the Senate
version of the FY1997 bill was deleted from the conference report. Although
conference managers noted that Georgia lagged behind it neighbors in political and
economic reforms — a view that might have been disputed by experts — they
recommended that funding be maintained at the FY1996 level to help insure that
reforms were made. The conference report also recommended that no funds be
provided to Belarus due to its movement away from political and economic reform.
Criticisms regarding implementation of the aid program were fewer in 1996 than
in previous years. But disparate views were expressed regarding the extent to which
certain sectors should be supported with U.S. assistance. During 1996, as
parliamentary and presidential elections approached in Russia, a number of critics
complained about the relatively small amounts going to democratic initiatives in that
country (only 5% narrowly defined, 18% more broadly defined). The conference
report to the FY1997 foreign operations appropriations specifically criticized USAID
and the NIS Coordinator for not including health and environmental health as
priorities. And, in its discussion of aid to Ukraine, it urged that programs to screen
and treat childhood mental and physical illnesses related to Chernobyl “supersede any
non-conforming ‘strategic objectives’ of USAID.”
Developments in 1997
On February 6, 1997, the Administration proposed its FY1998 foreign aid
budget. The request included $900 million for the NIS account, a 44% increase over
the FY1997 appropriations level of $625 million. As described by the Administration,
$372 million of the request would fund the predominantly technical assistance-type
activities that have characterized the NIS account and $528 million would be used to
fund a new Partnership for Freedom initiative.

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Administration Introduces the Partnership for Freedom (PFF)
Initiative. The Partnership for Freedom initiative, as proposed, had several
significant features. Responding to the concern of many analysts that the United
States must remain engaged in the region, the PFF would extend NIS programs into
the foreseeable future. As the old “technical assistance” programs were winding
down (by the year 2001), PFF activities would continue.
The PFF would reverse the decline in funding for the NIS region that occurred
since FY1995. In doing so, the PFF proposal also responded to concerns regarding
the imminent demise of the program for Russia and the relatively low levels of
assistance that had gone to Central Asia and parts of the Caucasus. Under the new
request, assistance to Russia would increase by 153% in FY1998 (to $242 million),
assistance to Kyrgyzstan would nearly double, and Tajikistan’s would nearly triple.
Assistance to the other Central Asian countries as well as to Georgia and Azerbaijan
would also rise substantially.
Finally, as noted above, the PFF was intended to emphasize a different mix of
program activities than was the case up to 1997. The initiative would emphasize, to
a greater extent than previously, exchanges and cooperative partnership activities at
the grassroots level, trade and investment, and assistance to entities outside of the
central government.
Authorization Debate. On May 9, 1997, the House International Relations
Committee reported H.R. 1486, The Foreign Policy Reform Act (H.Rept. 105-94).
The bill would have authorized $839.9 for the former Soviet Union in FY1998 —
about 7% less than the Administration’s FY1998 request, but 34% higher than the
FY1997 appropriation level — and $789.9 million in FY1999. Another provision of
the bill conditioned any assistance to Russia over $95 million on Russia’s termination
of all official cooperation with and transfers of nuclear-related technology to Iran and
Cuba. It did not provide presidential waiver authority. The bill also eliminated all
funds for Russia if it transferred an SS-N-22 missile system to China. Waiver
authority was provided for this provision.
H.R. 1486 did not reach the House floor due to the leadership’s belief that there
was inadequate support for foreign aid provisions. Instead, a new bill, H.R. 1757 was
introduced, incorporating provisions relating to State Department, USIA, ACDA,
international organizations, and other general foreign policy issues. It was approved
on June 11. Another bill, H.R. 1759, containing foreign aid provisions, was
introduced, but was never debated.
During debate on H.R. 1757, several foreign aid-related amendments were
adopted, including two on the NIS program. One (Rohrabacher, approved 225-190)
would prohibit economic aid to Russia in FY1998 and FY1999 if Moscow transferred
an SS-N- 22 missile system to China. No presidential waiver was included in this
language. The second (Fox, 415-12) expressed the sense of Congress, commending
Ukraine for certain foreign policy positions, including relinquishing nuclear weapons
and not participating in construction of nuclear reactors in Iran, and its adoption of
democratic reforms. It recommended that Ukraine move to insure compensation for
U.S. investors who had been subjected to fraud and corruption. Finally, it

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recommended that the President provide Ukraine with the same level of funds it
received in FY1997 — $225 million.
The Senate foreign relations authorization, S. 903, passed the Senate as H.R.
1757 (90-5) on June 17. It contained no NIS foreign aid provisions comparable to
those in the House bill.
The conference report (H.Rept. 105-432), filed on March 10, 1998, removed the
House NIS provisions from the final bill. It was vetoed by the President on October
21, 1998.
FY1998 FSU Aid Appropriations Debate in the House. On September
4, the House approved by a vote of 375-49 its version of the FY1998 foreign
operations appropriations bill, H.R. 2159 (H.Rept. 105-176). It provided $625
million for the NIS account, the same as the year before, 30% below the President’s
$900 million request, and $175 million less than the proposed Senate level.
As in previous years, the House Committee bill contained no country earmarks.
However, the bill placed significant conditions on assistance to Russia and Ukraine.
Russia would be prevented from receiving assistance unless the President determined
that it had terminated arrangements to provide Iran with technical expertise, training,
technology, or equipment necessary to develop a nuclear reactor, related nuclear
research facilities, or ballistic missile capability. Half of the funds allocated to Russia
could be made available if the President determined that it was vital to the national
interest of the United States. Half of the funds allocated to Ukraine would be
withheld until the Secretary of State certified that the Ukraine government was
enforcing a recent anti-corruption decree, had substantially completed privatization
of state owned agricultural storage, distribution, equipment, and supply monopolies,
and had fully resolved most of the commercial disputes involving complaints by U.S.
investors and established a permanent legal mechanism for dispute resolution.
The bill restated the section 907 restriction on aid to Azerbaijan unless it took
steps to end a blockade and other use of force against Armenia and
Nagorno-Karabakh. However, it would allow democracy assistance to be provided
in addition to the NGO humanitarian assistance which had been allowed in previous
appropriations. Unlike the Senate version of the bill, it continued to apply 907 aid
restrictions to OPIC, TDA, and Eximbank activities.
FY1998 FSU Aid Appropriations Debate in the Senate. On June 24,
the Senate Appropriations Committee reported S. 955, the foreign operations
appropriations bill for FY1998 (S.Rept. 105-35). It provided $800 million for the
NIS account, 11% less than the Administration request, but a 28% increase over
FY1997. As in previous years, the Senate bill contained numerous country and sector
earmarks. It provided $225 million for Ukraine, of which $8 million was for law
enforcement, $25 million for nuclear reactor safety, and $5 million for political party
development. In response to concerns regarding corruption, slow economic reform,
and the mistreatment of U.S. investors, the bill sought to withhold half of the Ukraine
allocation until the President determined that Ukraine had taken steps to enforce an
anti-corruption decree, privatize state-owned agricultural storage, distribution,

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equipment and supply monopolies, to resolve cases involving U.S. business
complaints, and to establish a permanent mechanism to deal with commercial disputes.
S. 955 also earmarked $100 million for Georgia, of which $10 million was for
energy development and privatization, $15 million for border security
telecommunications infrastructure, $7 million for judicial reform and law enforcement,
$5 million for border and customs control, $3 million for political party development,
$5 million for Supsa urban and commercial development, and up to $7 million for
business and education exchanges. The bill provided $95 million for Armenia. It also
provided $10 million for a Trans-Caucasus Enterprise Fund.
The Senate bill also conditioned assistance to Russia on a presidential
determination that it had terminated implementation of arrangements to provide Iran
with technical expertise, training, technology, or equipment to develop a nuclear
reactor or related research facilities. The bill repeated section 907 (of the Freedom
Support Act) language prohibiting aid to the government of Azerbaijan, excluding aid
to support electoral activities and political reform, and OPIC, TDA, and
Export-Import Bank activities.
On July 17, 1997, the Senate approved S. 955 by a vote of 91-8. On the floor,
several amendments regarding aid to the NIS were added. One (Smith, Oregon)
would prohibit assistance to the government of Russia unless the President certified
that Russia had not enacted a law that would discriminate against minority religions.
This amendment was offered in response to the passage of legislation in the Russian
legislature that Western observers believed would restrict religious freedom in Russia.
The Senate also approved an amendment (Kyl) that added to the above mentioned
restriction on aid to Russia if it transferred nuclear technology to Iran. The
amendment would include “ballistic missiles” in its list of items that should not be
provided to Iran. Another amendment adopted by the Senate (Kyl) earmarked $25
million of funds available to Ukraine for the legal restructuring necessary to support
a free market economy.
Conference Report. On November 12 and 13, the House (333-76) and
Senate (voice vote) respectively approved the conference report on H.R. 2159
(H.Rept. 105-401). It provided $770 million for the NIS account, 14% less than the
Administration FY1998 request, but 23% higher than the FY1997 approved level.
Included in the amount was an earmark of $225 million for Ukraine and $250 million
for the southern Caucasus region. Of the latter, 37% ($92.5 million) was earmarked
for Georgia and 35% ($87.5 million) for Armenia. The remaining $70 million of the
southern Caucasus funds were to be used for reconstruction efforts related to the
conflicts in the region — conferees recommended providing $12.5 million for victims
of Nagorno-Karabakh and $5 million for victims of the Abkhazia conflicts.
The country earmarks left funding for Russia and Central Asia, both prime
targets of the Administration’s Partnership for Freedom Initiative, significantly short
of requested levels. However, some previous year constraints on the NIS account
were eliminated, providing the NIS Coordinator with greater flexibility than in the
past. The bill increased appropriations for the Export-Import Bank, with the intention
expressed by conferees that the Bank would participate significantly in the Initiative.
This action conserved NIS account funds that might have been transferred to support

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export activities in the region. In addition, the Peace Corps was appropriated full
funding in FY1998 with no proviso that funds for NIS activities be transferred from
the NIS account The conferees also allowed the use of up to $43.7 million of the
southern Caucasus funds to be used in other areas of the FSU if the Secretary of State
reported that they could not be used effectively otherwise, and specifically if an
interim settlement to regional conflicts was not achieved by May 30, 1998.
There were two key restrictions on aid to Russia, both aimed at the government
of Russia and presumably not affecting aid to the grassroots private sector. One
withheld half of aid allocated to the government until the President certified that it had
terminated sales of nuclear reactor technology and missiles to Iran. Presidential
waiver authority on the grounds of U.S. national security and that the Russian
government was taking steps to curtail such transfers was provided. Second, no aid
would be available for the government of the Russian Federation if it implemented its
law restricting religious minorities. No waiver was provided for this provision which
took effect roughly 6 months after enactment of the bill.
Aid to Ukraine was conditioned on its undertaking of significant economic
reforms “additional to those which were undertaken in the previous fiscal year”. Half
of aid to Ukraine, excluding election and nuclear reactor-related aid, was withheld
until the President certified Ukraine was making progress toward resolving complaints
of U.S. businessmen. The conference report called for $25 million of Ukraine funds
to be provided for the Department of Energy project on nuclear reactor safety.
Assistance to Azerbaijan, mostly prohibited under section 907, was allowed for
democracy, Trade and Development Agency, and U.S. Foreign Commercial Service
activities.
Nunn-Lugar Cooperative Threat Reduction. The Administration’s
FY1998 Department of Defense budget included a request of $382.2 million for the
Nunn-Lugar Cooperative Threat Reduction Program. The proposed amount was
17% higher than the FY1997 appropriation. On June 25, the House passed H.R.
1119, the defense authorization and on July 29, it approved H.R. 2266, the
appropriations bill. Both provided $284.7 million for Nunn-Lugar programs. The
Senate version of the defense authorization, S.936, providing $382.2 million, was
approved on July 11. The Senate appropriated $382.2 million for Nunn-Lugar
programs on July 15 in S. 1005. The conference reports on both authorization
(H.Rept. 105-340) and appropriation bills (P.L. 105-56) adopted the Senate and
Administration request levels of $382.2 million.
Emerging Issues and Trends in 1997. Perhaps the most significant
development for the aid program in 1997 was the turnaround in the three year decline
in aid to the NIS. With the Partnership for Freedom initiative, the Administration
articulated a longer-term strategy for the region, reversing the position held up to then
that the aid program would achieve it goals by the year 2002. Despite indications in
1996 that Senate appropriators were prepared to see the Russia program continue its
sharp decline, Congress partly accepted the Administration’s strong defense of the
NIS program in approving an FY1998 budget 23% higher than the previous year,
thereby allowing a 40% increase in Russia aid.

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Another striking departure from earlier trends was the growing criticism of aid
to Ukraine. In fiscal years 1995 and 1996, Ukraine received a $225 million earmark,
making it the largest NIS recipient in those years. Despite the support of a strong
U.S. ethnic lobby, Ukraine’s failure to adopt economic and political reform led some
in Congress to question the level of funding provided to Ukraine. The Ukraine
earmark came under fire by members of the House Foreign Operations Subcommittee
at a hearing held on April 9, 1997. Members were particularly incensed by
information in an article published the same day in The New York Times describing the
failure of reform and the ill effects of corruption on U.S. business investment.
Subsequently, on April 29, the House Appropriations Committee reported out a
provision in the Emergency Supplemental Appropriations, H.R. 1469, that granted
the President the authority to waive the FY1997 Ukraine earmark if that country was
not taking steps to adopt reforms and eliminate corruption. This provision, except as
it related to the sub-earmark on nuclear safety, was adopted in the conference report
on H.R. 1469, later vetoed by the President for unrelated reasons. In the FY1998
appropriations, however, half of the $225 million earmarked for Ukraine was withheld
until issues affecting U.S. investors were resolved.
In 1997, an erosion in the prohibition on aid to Azerbaijan became evident as
many in Congress and the Administration did not want the United States to appear to
be biased in favor of Armenia while playing a role in the Minsk Group that oversees
the peace talks, and, perhaps more importantly, because U.S. economic interests in
Azerbaijan had grown with the exploitation of oil resources by U.S. firms. The
FY1998 foreign operations bill allowed both the U.S. Foreign Commercial Service
and the Trade and Development Agency to function in Azerbaijan.
Developments in 1998
Administration FY1999 Request. On February 3, 1998, the Administration
proposed its FY1999 budget, including $925 million for the NIS account, a 20%
increase over the FY1998 level. Under the proposal, countries that benefitted least
from the FY1998 increase in resources — Russia, the Central Asian states, Moldova,
and Belarus — would receive substantial increases, while the other countries would
face a small decline. Addressing a congressional committee on March 26,
Ambassador Morningstar noted that the Partnership for Freedom initiative had not
been fully funded in FY1998, and asserted that aid to Russia was “ridiculously low”.
At the same hearing, acting USAID Assistant Administrator Donald Pressley called
for the repeal of section 907 which prohibits aid to Azerbaijan.
FY1999 FSU Aid Debate in the House. On July 15, the House Foreign
Operations Subcommittee of the Committee on Appropriations approved a draft
FY1999 appropriations bill — approved by the full Committee on September 10 and
reported as H.R. 4569 (H.Rept. 105-719) — which provided $590 million for the NIS
account, 36% below the Administration request and 23% less than the FY1998 level.
Of the total NIS account, $194.7 million was earmarked for the Southern Caucasus
region, including $77.9 million to support the peace effort between Armenia and
Azerbaijan. The bill also limited the amount of assistance to any one country to one
fourth of the total — $147.5 million. Although the Committee bill did not earmark

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specific amounts for NIS countries, in report language it “directed” specific
percentages of the Southern Caucasus funds be provided to certain countries — 25%
($48.7 million) for Armenia and 25% ($48.7 million) for Georgia. The bill repeated
the previous year’s language with regard to the sale by Russia of nuclear technology
to Iran, withholding half of the assistance for the Government of Russia unless it
terminated such sales, but allowing for a presidential waiver.
The full Appropriations Committee adopted a Livingstone amendment that
repealed section 907 of the FREEDOM Support Act, the section that had prohibited
most U.S. assistance to Azerbaijan due to its conflict with Armenia. On September
17, the House approved H.R. 4569 by a vote of 255-161. The final bill was amended
(Porter) to strike the repeal of section 907 adopted by the Appropriations Committee.
FY1999 FSU Aid Debate in the Senate. On July 21, the Senate
Appropriations Committee reported, S. 2334, its version of the FY1999 Foreign
Operations appropriations. The bill provided $740 million for the NIS, 20% below
the Administration request of $925 million and 4% less than the FY1998 level of $770
million. Of total NIS account funds, the bill earmarked $210 million for Ukraine, $90
million for Armenia, and $95 million for Georgia.
The Senate bill contained numerous restrictions and earmarks. The bill withheld
50% of the amount earmarked for Ukraine, exclusive of funds for nuclear safety
(earmarked at $25 million), Democracy Fund activities ($700,000), and law
enforcement reforms ($8 million), until the Secretary of State reported that Ukraine
had undertaken significant economic reform in FY1998. If funds were permanently
withheld, they would be returned to the Treasury, rather than redistributed to other
NIS countries. Of funds for Georgia, $35 million was earmarked for economic
reforms, including small business development and banking institutions, $8 million for
judicial reform and law enforcement, and $20 million for border and customs control
training. Of funds for Armenia, $10 million was earmarked for the American
University of Armenia, and $4 million for nuclear safety.
As was the case in the Senate version of the FY1998 bill, the FREEDOM
Support Act section 907 restriction on aid to Azerbaijan was loosened to allow
activities of the Overseas Private Investment Corporation (OPIC), the Trade and
Development Agency, the Export-Import Bank, the Foreign Commercial Service, and
activities supporting democracy and humanitarian assistance. At that time, OPIC and
Export-Import Bank activities were prohibited.
The Senate bill would greatly toughen the FY1998 legislative language that
restricted allocation of FY1998 assistance to Russia if it continued with its nuclear
and missile sale cooperation with Iran. Unlike the FY1998 restriction which withheld
half of the aid intended for the Government of Russia (as opposed to the private
sector), the Senate bill would prohibit all FY1999 aid to Russia for all programs, not
just Government, if the cooperation continued. Unlike FY1998, no national security
waiver was allowed for this condition.
With few changes, the Committee proposals for the NIS were approved by the
full Senate on September 2, 1998, in a 90-3 vote. The only relevant changes were the
addition of an amendment that prohibited the Export-Import Bank from providing its

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loans or guaranties to NIS enterprises that were majority owned or managed by state
entities, and an amendment that proclaimed the sense of Congress that the IMF should
not provide funding to the Russian Government if its economic policies were
significantly affected by the Communist party or under conditions less stringent than
those imposed on Asian democracies.
FY1999 Conference Report. On October 20, the House approved H.R.
4328, the Omnibus Consolidated Emergency Appropriations for FY1999, containing
the foreign operations bill, by a 333-95 vote. The Senate approved the measure on
October 21, by a vote of 65-29. The President signed the bill into law on October 21
(P.L. 105-277). The Omnibus Appropriations bill provided $847 million for the NIS,
$78 million less than the Administration request, $107 million more than the Senate
earmark, and $257 more than the House earmark. Under the NIS account of the
foreign operations section of the bill, $801 million was appropriated, and an additional
$46 million was appropriated as an emergency supplemental.
The bill limited assistance appropriated to any one country under the NIS
account section to no more than 30% (i.e. $240.3 million). It earmarked $228 million
for the Southern Caucasus region, including $39.9 million for reconstruction activities
related to the Abkhazia and Nagorno-Karabakh conflicts, $84.36 million for Georgia,
and $79.9 million for Armenia. Of the amount allocated for Armenia, $9.58 million
was expected to go to a one time interest-bearing endowment for the American
University in Armenia. If by May 30, 1999, funds for reconstruction noted above
could not be used, they could be used for other purposes in the Southern Caucasus
region. The bill also earmarked $195 million for Ukraine, including $25 million for
nuclear reactor safety. Half of the funds, excluding the reactor and law enforcement
activities, were subject to withholding until the Secretary of State reported in
February that Ukraine has undertaken significant economic reforms in FY1999.
As was the case in FY1998, 50% of funds allocated for the Government of
Russia were to be withheld unless the President could certify that it had terminated
sale of nuclear or ballistic missile technology to Iran. A national security waiver was
possible if the President could certify that Russia was taking meaningful steps to limit
contracts and curtail the transfer of technology. In FY1998, the President did not
waive this provision. Unlike FY1998, the legislation’s statement of conferees noted
that, by “Government of Russia”, they did not intend to affect U.S.-Russia
partnerships between hospitals, universities, and environmental institutions.
The bill extended the number of U.S. aid programs excluded in previous years
from the prohibitions of section 907 of the FREEDOM Support Act, which applied
to aid to the Government of Azerbaijan, if it did not take steps to end the blockade
and other force against Armenia and Nagorno-Karabakh. U.S. assistance could now
go to the Government of Azerbaijan to support democracy, non-proliferation, TDA,
and Foreign Commercial Service activities, as well as OPIC insurance, Export-Import
Bank financing, and humanitarian assistance.
Nunn-Lugar Cooperative Threat Reduction. The Clinton Administration
requested $442.4 million for the Nunn-Lugar program for FY1999. On October 17,
1998, the President signed P.L. 105-261, the FY1999 Defense Authorization (H.R.
3616). It provided $440.4 million for the Nunn-Lugar program. The Defense

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Appropriations for FY1999, approved on October 17 (P.L. 105-262), also provided
$440.4 million for CTR programs.
Major Trends and Issues in 1998. During 1998, the Administration
responded to several prominent congressionally imposed conditions on assistance to
NIS countries. On April 29, the Secretary of State made the determination that
Ukraine had made “significant progress” toward resolving complaints by U.S.
investors in order to unblock nearly half of the $225 million earmark for that country.
At the same time, the Secretary continued to withhold $25 million of the total Ukraine
allotment that would have gone to the Government of Ukraine, pending significant
progress in adoption of economic reforms that would make the assistance more
effective. These funds would be diverted to the private sector if reforms were not
made in the following several months. The funds were eventually released.
On May 26, President Clinton determined that the Government of Russia had not
taken actions that would discriminate against minority and foreign religious groups
and had not implemented the new Russian Law on Religion to that effect (Presidential
Determination 98-23). Such a determination was required under the FY1998 foreign
operations appropriations in order for assistance to continue to the Government of
Russia. However, the determination also noted that the issue required “continued and
close monitoring.”
The Administration was unable to determine that Russia had terminated its
agreement to sell nuclear reactor technology to Iran, and, therefore, half of all
assistance intended for the Government of Russia was diverted to other programs or
countries. Under a State Department interpretation, the roughly $24 million cut
affected regional and local governments, as well as the federal government of Russia.
Under the FY1999 appropriations bill, for the second straight year, Congress
increased assistance to the NIS, although not to the level originally requested by the
Administration. The higher level permitted an increased allocation of funds for Russia
and Central Asia programs for FY1999.
The State Department and USAID were faced in mid-year with possible new
demands created by the August 1998 financial crisis in Russia. On October 2, 1998,
Secretary of State Albright said that the United States was reexamining the program
and “retargeting money where it can be used effectively to support economic and
democratic reform.” The most significant early change in the economic aid program
was a $10 million increase in assistance to independent media which had suffered
financially due to the loss of advertising revenue.
In October 1998, the Yeltsin government formally asked the United States for
food assistance to help it deal with the impact of the financial crisis that threatened to
create a situation of severe hunger in parts of the country during the winter. On
November 6, the U.S. Department of Agriculture announced an $885 million food
assistance package, consisting of 1.5 million metric tons of donated U.S. wheat (under
section 416(b)), 1.5 million metric tons of various foodstuffs provided through a low
interest loan (P.L. 480, Title I), and 100,000 metric tons of humanitarian food aid
provided to volunteer relief agencies for direct distribution to vulnerable groups

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(Food for Progress). Included in the total estimated amount of the package was $260
million in transport costs.
U.S. economic interests in 1998 played a role in determining aid policy in two
NIS countries. Congress earmarked only $195 million in FY1999 aid to Ukraine, a
departure from the $225 million earmark it had received each year since FY1996.
The decrease could be read as continuing concern regarding the slow progress of
Ukrainian economic policy reform as well as concern regarding treatment of U.S.
investors. The growing importance of U.S. economic interests in Azerbaijan is likely
responsible for the further expansion of the types of U.S. assistance that may be
provided that country, despite the formal continuation of the section 907 prohibition
on aid.
Developments in 1999
Administration FY2000 Request. On February 1, the Administration
presented its FY2000 budget request to Congress. It requested $1.032 billion in
FY2000 funding for the NIS account, a 22% increase over the FY1999 level of $847
million. Of this amount, $241 million was expected to go for a new Expanded Threat
Reduction (ETR) Initiative that would address proliferation issues arising out of the
economic crisis facing Russia and other NIS countries. The ETR initiative was part
of a larger $1.0 billion Administration FY2000 proposal for increasing amounts
dedicated to proliferation issues in the NIS, the remaining funds coming from the
Department of Defense ($485.5 million) and the Department of Energy ($264.7
million). Over five years, most of the $1.8 billion added by the initiative to amounts
previously planned for non-proliferation activities would go to DOE and DOD. But
in the first year, three-fourths of the higher funding level requested would be in State
Department programs, mostly funded under the NIS account.
Table 3. Threat Reduction Funding
(in $ millions)
FY1992-1999
FY1999
FY2000
FY2000-2004
Agency
Approp.
Approp.
Req.
Req.
DOD
2,701.0
450.4
485.5
2,463.9
Energy
950.0
238.9
264.7
1,323.7
State
80.0
53.1
250.5
738.5
Total
3,731.0
742.4
1,000.7
4,526.1
Source: Department of State
State Department-managed programs — $53 million in FY1999 — included
several efforts to forestall the proliferation of weapons expertise held by nuclear,
chemical, and biological weapons scientists, who were likely to sell their knowledge
to rogue nations unless offered alternative employment and income opportunities. In
addition, the United States worked to strengthen NIS export controls and provide

CRS-39
training and equipment to the border guards of Georgia and other NIS countries to
prevent transfer of weapons of mass destruction. The ETR initiative proposed to fund
a new effort to remove the Russian armed forces and equipment from bases outside
Russia and to dispose of ammunition dumps vulnerable to theft.
The FY2000 request did not mark a major increase in support for the traditional
efforts to build democracy and free market economies in the NIS that have
characterized the FREEDOM Support Act program. After subtracting the
nonproliferation request, traditional activities were funded at roughly $791 million.
Early in 1999, responding to conditions placed on NIS aid in the FY1999 foreign
operations appropriations, Secretary of State Albright issued several determinations.
On February 18, the Secretary certified to Congress that Ukraine had made sufficient
progress in its economic reforms to enable release of the half of its economic aid that
had been withheld under the legislation. On April 15, she certified that the Russian
Federation had implemented no law that would discriminate against minority religions,
thereby allowing all NIS account aid to Russia to continue. On the same day, she also
determined that significant progress had been made in reaching an agreement with the
government of the Russian Federation to exclude U.S. assistance from customs
duties, thereby allowing aid directed at the central government of Russia to continue.
Emergency Supplemental Appropriations. On March 23, 1999, the
Senate approved S. 544, the emergency supplemental appropriations bill. Among the
offsets to pay for the appropriations was a rescission of $10 million from Russia
program appropriations made for FY1995, FY1998, and FY1999. In addition, the
Senate bill called for a 5% across-the-board cut in the FY1999 omnibus
appropriation’s non-defense emergency activities — $46 million of which had been
appropriated to the NIS account (i.e., a $2.3 million cut). On March 17, the House
Appropriations Committee reported H.R. 1141, its version of the supplemental, that
would have rescinded $25 million of any unobligated funds appropriated for the NIS
account. Bill conferees, however, dropped the House and Senate offsets that would
have rescinded previous NIS and Russia program appropriations.
On May 21, the President signed H.R. 1141, the FY1999 Supplemental
Appropriations, into law (P.L. 106-31). Although chiefly providing funds for Central
America hurricane damages and Kosovo, the legislation also directed that up to $10
million from FY1999 appropriations for Senate operations be used for a Russian
Leadership Program, to be implemented by the Librarian of Congress. It would bring
emerging Russian political leaders to the United States for short visits to give them
firsthand exposure to the U.S. free market economic system and democratic
institutions.
FY2000 FSU Aid Debate in the Senate. On June 17, the Senate
Appropriations Committee reported its version of the FY2000 foreign operations bill.
S. 1234 (S.Rept. 106-81) would fund the NIS account at $780 million, 24% less than
the Administration request and 8% less than the FY1999 level (including
supplemental). On June 30, the full Senate approved S. 1234 by a vote of 97-2,
leaving the NIS account mark intact but amending the Committee bill on a number of
important policy points.

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Two floor amendments on the Expanded Threat Reduction Initiative were
adopted that appeared to challenge the Committee position on the issue. At the
proposed level of funding, the Committee had, in effect, rejected the Administration’s
new Expanded Threat Reduction Initiative. In report language, the Committee noted
concerns raised by recent audits — presumably referring to a GAO study on the
DOE-funded and managed Initiatives for Proliferation Prevention (IPP) program —
that had criticized that program’s implementation and questioned the program’s
contribution to nonproliferation objectives because none of its projects was a
commercial success. The Committee suggested that it would be “ill advised” to
support a large funding increase for programs that may not have a “restraining effect”
on proliferation. Fifty-seven percent of the foreign operations bill funds proposed for
ETR projects were expected to be used for nuclear and chemical scientist alternative
employment projects similar to the IPP program in their objective, but each was to be
implemented differently and none was to be managed by DOE. The remaining funds
were intended for export control, border security, and ammunition disposal activities,
not addressed in the GAO report.
Both Expanded Threat Reduction Initiative amendments (Biden and Schumer)
stated the sense of the Senate that Initiative programs were vital to U.S. national
security interests. Both also supported the restoration of funding at or near the $250
million Administration request level when the bill reached conference. The Senate
action appeared to presume that additional funding above the allocations provided by
the budget resolution to the international affairs account would be available by the
time a House-Senate conference on the foreign operations bill was held.
As in previous years, the Senate bill contained several country earmarks — $210
million for Ukraine (up from $195 million appropriated in FY1999), $95 million for
Georgia ($84.4 million in FY1999), and $90 million for Armenia ($79.9 million in
FY1999). There were few sub-earmarks in the bill — of Ukraine funds, $25 million
had to be spent on nuclear reactor safety, $5 million for technology business incubator
programs, and, added on the floor, $3.5 million for destruction of stockpiles of anti-
personnel landmines. Of Georgia’s allocation, $8 million was for judicial reform and
law enforcement training. A floor amendment made $15 million of Armenia’s funds
available for earthquake rehabilitation and reconstruction. Other floor amendments
to the bill provided $2 million of NIS funds for NGOs teaching graduates skills for the
job market, and $200,000 for the REAP International School Linkage Program
between North Dakota and the Russia Far East. The Senate also endorsed the
activities of the Citizen’s Democracy Corps, which provided business volunteers to
the NIS. In report language, the Committee recommended assistance efforts to
improve orphanage facilities, support independent media, develop health-related
exchanges and partnerships, and target the Russian Far East, among others.
The Committee bill, as it had in 1998, would have prohibited all aid to Russia —
government and non-government — unless the President determined that the
government of Russia had terminated the transfer of technical expertise, training, and
equipment to help Iran develop a nuclear reactor. A McConnell/Leahy floor
amendment, however, made the prohibition only affect half of the aid allocated to the
central government of Russia — relieving a concern raised in the FY1998 and
FY1999 conditions that cut aid to local and regional governments in that country. A
new condition in the legislation would prohibit aid to the government of Russia until

CRS-41
the Secretary of State certified that Russia had not developed a separate zone of
operational control in Kosovo and that Russian armed forces in Kosovo were fully
integrated under NATO unified command and control arrangements. The bill also
withheld half of all aid to Ukraine, excepting nuclear safety, law enforcement, and
business incubator programs, until the Secretary of State certified that Ukraine had
undertaken significant economic reforms additional to those achieved in FY1999. A
floor amendment added Ukraine efforts to end corruption by its government officials
as a further criterion.
As in the FY1999 bill, the legislation restated the prohibition on aid to
Azerbaijan contained in Section 907 of the FREEDOM Support Act and permitted
a number of exceptions, including democracy, OPIC, TDA, Export-Import Bank, and
humanitarian assistance. During floor debate, Senator Brownback offered an
amendment, the Silk Road Strategy Act, that would authorize U.S. assistance
programs in the South Caucasus and Central Asia and amend Section 907 to allow the
President to waive the provision on the grounds of national interest. Considerable
debate took place on the waiver issue, which was resolved by its removal under a
McConnell, Abraham, and Sarbanes amendment, adopted by a 53 to 45 vote.
FY2000 FSU Aid Debate in the House. On July 14, the House Foreign
Operations subcommittee marked up its version of the FY2000 appropriations, and
the full Appropriations Committee reported the bill on July 23. H.R. 2606 was
approved by the House on August 3 by a vote of 385 to 35. It provided $725 million
for the bill’s renamed Independent States of the Former Soviet Union account, 30%
less than the Administration request and 14% less than the FY1999 level (including
supplemental). Like the Senate bill, the House version did not fully support the
Administration’s Expanded Threat Reduction initiative.
Only one amendment affecting the “Independent States” account was offered
during House floor debate. The Traficant amendment, adopted without opposition,
limited assistance provided to the Government of the Russian Federation under the
account to $172 million. While it otherwise avoided the dollar earmarks that
characterized the Senate bill, H.R. 2606 did require that allocations for Georgia and
Armenia reflect the proportion provided in the FY1999 allocation (excluding,
however, the amount in the total directed at nonproliferation activities), and that
17.5% of funds for the Southern Caucasus region be used for confidence-building
measures that might lead to a peaceful resolution of local conflicts.
Like the bill that emerged from the Senate floor, the House version withheld half
of the allocation for the central government of Russia unless the President determined
that Russia had terminated its sale of nuclear reactor technology to Iran. However,
the bill specifically excepted efforts to combat infectious diseases and child survival
activities as well as nonproliferation programs from this condition, and report
language noted the Committee intention that regional or municipal governments,
hospital partnerships, and judicial training not be limited. The House bill also largely
repeated Senate language excepting democracy, nonproliferation, TDA, Foreign
Commercial Service, OPIC, Export-Import Bank, and humanitarian activities,
specifically including those under the child survival account (this latter inclusion was
new language, not in the Senate version), from the prohibition on aid to the
Azerbaijan government contained in section 907 of the FREEDOM Support Act.

CRS-42
In report language, the Committee noted that it had dropped the requirement
that half of Ukraine’s assistance be withheld pending certification that it was taking
steps to resolve U.S. business concerns and adopt policy reforms, remarking that
certifications were made in 1999 despite the lack of action by Ukraine to resolve cases
of primary concern to the Committee. The report also noted the Committee’s failure
to include specific amounts for the Administration’s ETR initiative, stating that,
although it found merit in many of the proposed activities, it was not convinced that
the expansion of several projects was feasible or justified. The report, among other
priorities, recommended support for partnerships between U.S. non-governmental
organizations and Ukraine, partnerships between the private sector and Russian
nuclear institutes, efforts to develop an independent media, iodine deficiency
elimination efforts, the Russian orphans program, and the use of up to 5% of the child
survival account for programs in the independent states.
In a separate action, on August 2, the House approved H.R. 1152, the Silk Road
Strategy Act of 1999. The Senate had earlier approved similar language as an
amendment to its FY2000 foreign operations bill. Although somewhat duplicative of
the FREEDOM Support Act, the Silk Road Act authorized assistance and laid out
congressional priorities with specific regard to the countries of Central Asia and the
Caucasus. Both House and Senate versions omitted section 907 language with
respect to Azerbaijan.
Conference Report on H.R. 2606. On September 27, the House-Senate
conference issued its report on H.R. 2606 (H.Rept. 106-339), providing $735 million
for the now-renamed Independent States of the Former Soviet Union account, 29%
less than the Administration FY2000 request, and 13% less than the FY1999 level.
The conferees also agreed to recommend a $180 million level for Ukraine, and to
earmark 12.92% of the total account ($95 million) for Georgia, and 12.2.% ($90
million) for Armenia. For the first time, the conferees earmarked $6 million of the
account for Mongolia. No country could receive more than 25% of the total account.
The recommended account funding level and country earmarks would likely
reduce aid for Russia programs from FY1999 levels, and would prevent aid from
increasing to the levels proposed by the Administration to permit full implementation
of the Expanded Threat Reduction Program. Of those funds that would be allocated
to Russia, the conference report directed that $20 million must be spent on the Far
East and $10 million should be used to carry out the Russian Leadership Program,
which was originally funded from the Senate operations budget when it was
established in the May 1999 supplemental. The program, administered by the Library
of Congress, brought promising Russian leaders to the United States to expose them
to American democracy.
As in FY1999, the FY2000 bill withheld half of aid to the government of Russia
until the President determined that the government of Russia had terminated any
arrangements to provide Iran with technical and other assistance to develop a nuclear
reactor or ballistic missile capability. Unlike previous years, however, the provision
only affected the government of the Russian Federation, not aid to local and regional
governments. Further, it exempted nonproliferation and child survival activities, and
efforts to combat infectious diseases. The report contained a new condition, requiring
that no aid to the central government of Russia be provided until the Secretary of

CRS-43
State certified that Russian armed forces had not established a separate sector in
Kosovo and were operating under NATO command. As in previous years, aid was
also prohibited to the government of the Russian Federation if it implemented a law
discriminating against religious minorities.
The conference report required that, of funds allocated to the Caucasus, 15%
should be used for measures to further a peaceful resolution of the regional conflicts
there. Section 907 restrictions on aid to Azerbaijan were lifted for democracy,
humanitarian, nonproliferation, TDA, Foreign Commercial Service, OPIC, and
Export-Import Bank assistance. The bill also contained the Silk Road Strategy Act
that, adding a new chapter to the Foreign Assistance Act of 1961, which has governed
foreign aid programs since that date, authorized assistance and laid out congressional
priorities with specific regard to the countries of Central Asia and the Caucasus.
The conferees’ statement included a number of recommendations. For example,
the conferees directed that $15 million of funds for Armenia be used to support
recovery in areas affected by the 1988 earthquake, and that $25 million of funds for
Georgia be used for border security and law enforcement training. They
recommended that $25 million of funds for Ukraine be used for nuclear safety, and
up to $10 million be used for regional initiatives. They also directed that $3 million
be provided to Carelift International for transport of U.S. surplus medical equipment.
On October 6, Congress approved the conference report — the House by a vote
of 214 to 211, the Senate by a vote of 51-49. The President vetoed H.R. 2606 on
October 18, in part because of insufficient funding for the former Soviet Union.
H.R. 3196. On November 5, following the President’s veto of H.R. 2606, the
FY2000 foreign operations appropriations, the House approved H.R. 3196, a new
version that provided $839 million for the former Soviet Union, $104 million more
than H.R. 2606. Although providing 19% fewer funds than the Administration
FY2000 request (but only 1% less than the FY1999 level), H.R. 3196 fully funded the
foreign operations portion of the President’s Expanded Threat Reduction Initiative
at $241 million. Funds from previous foreign operations appropriations could be used
to meet this earmark.
The former Soviet Union provisions of H.R. 3196 were identical to those of the
conference report version of H.R. 2606, with several additions. As noted, $104
million was added to the total funding for the region in a supplemental Title VI, and
an earmark of $241 million to come from the bill and previous foreign operations
appropriations was made for the Expanded Threat Reduction program. Finally, a
$14.7 million earmark was added for maternal and neo-natal health activities in the
FSU, at least $8.8 million of which should be spent in Russia.
H.R. 3422 and the Consolidated Appropriations. Following the House
passage of H.R. 3196, further negotiations between Congress and the White House
led to a few additional changes and introduction on November 17 of a third foreign
operations appropriation bill, H.R. 3422. That bill was enacted into law by reference
as part of H.R. 3194, the Consolidated Appropriations Act for FY2000 (P.L. 106-
113, signed into law on November 29) that was approved by the House on November
18 (296-135) and by the Senate on November 19 (74-24).

CRS-44
After subtracting an across-the-board 0.38% rescission mandated by the
Consolidated Appropriations Act, H.R. 3422 provided $835.8 million (originally $839
million) for the former Soviet Union, 19% less than the Administration FY2000
request, but only 1% less than the FY1999 level. The bill earmarked 12.9 % of the
account for Georgia ($107.8 million), and 12.2% for Armenia ($102 million). Unlike
previous years, it only recommended that $180 million “should” be made available for
Ukraine, a soft earmark instead of a hard one. The bill capped assistance to any one
country at 25% of the total account ($209 million), with the exception of
nonproliferation activities.
H.R. 3422 also required that $20 million be for programs in the Russian Far East
and that $14.7 million be made available for maternal and neo-natal health activities,
of which 60% should be made available in Russia. The bill provided $10 million for
the Russian Leadership Program, which was originally funded from the Senate
operations budget when it was established in the May 1999 supplemental.
Although the bill left funding allocations for the Expanded Threat Reduction
Program up to the Administration, the recommended account funding level and
country earmarks effectively prevented aid from increasing to the levels proposed by
the Administration to permit full implementation of the Expanded Threat Reduction
Program. The Administration eventually allocated $175 million of the appropriation
to the Program, $66 million less than the Administration request.
As in FY1999, the FY2000 bill withheld half of aid to the government of Russia
until the President determined that the government of Russia had terminated any
arrangements to provide Iran with technical and other assistance to develop a nuclear
reactor or ballistic missile capability. Unlike previous years, however, the provision
only affected the government of the Russian Federation, not aid to local and regional
governments. Further, it exempted nonproliferation and child survival activities, and
efforts to combat infectious diseases. The bill contained a new condition, requiring
that no aid to the central government of Russia be provided until the Secretary of
State certified that Russian armed forces had not established a separate sector in
Kosovo and were operating under NATO command. As in previous years, aid was
also prohibited to the government of the Russian Federation if it implemented a law
discriminating against religious minorities.
H.R. 3422 also recommended that, of funds allocated to the Caucasus, 15%
should be used for measures to further a peaceful resolution of the regional conflicts
there. Section 907 restrictions on aid to Azerbaijan were lifted for democracy,
humanitarian, nonproliferation, TDA, Foreign Commercial Service, OPIC, and
Export-Import Bank assistance. The bill also contained the Silk Road Strategy Act
that, adding a new chapter to the Foreign Assistance Act of 1961, authorized
assistance and laid out congressional priorities with specific regard to the countries
of Central Asia and the Caucasus.
Cooperative Threat Reduction. For FY2000 CTR programs, the
Administration requested $475.5 million. Congress authorized that amount in the
National Defense Authorization Act for FY2000 (S. 1059, P.L. 106-65) and
appropriated $460.5 million in the Department of Defense appropriations (H.R. 2561,
P.L. 106-79).

CRS-45
Major Trends and Issues in 1999. In 1999, only two issues – the
Expanded Threat Reduction Initiative (discussed above) and a spate of anti-Russia
rhetoric that threatened to affect the aid program (discussed below) – received
significant public and press attention. Several trends, however, were notable.
For the second year in a row, the final NIS account appropriation was higher
than the amount provided by both Senate and House bills, resulting from last minute
negotiations between Congress and the Administration on the overall foreign
operations legislation. Further, an increasing amount of the account went to
nonproliferation activities, rather than to meeting traditional economic and political
reform objectives. Consequently, more money was funneled away from USAID to
other agencies than was the case previously. As much as 54 percent of the FY2000
funds were expected to go to other agencies, compared to roughly a quarter in the
first six years of the program.
In 1999, Congress appeared to continue a tougher line toward aid to Ukraine
over the issue of its failure to adopt economic reforms. While it dropped a two year
provision that had required a determination on the degree to which Ukraine was
adopting economic reforms, for the first time since it began earmarking funds for
Ukraine in FY1996, Congress made the earmark a soft one, recommending, instead
of requiring, that $180 million be provided. Congress also showed signs of paying
more attention to Central Asia, somewhat neglected in the aid program, by passing
the Silk Road Strategy Act. However, after country and program earmarks, the
region was expected to receive less in FY2000 than it had the year before.
Russia and the Bank of New York Scandal. In 1999, Russia became the
subject of a debate that threatened to affect the U.S. assistance program and, tied to
the U.S. presidential campaign, seemed likely to be revived in 2000. In August,
newspaper reports of an investigation into the possible transfer of as much as $10
billion in Russian money through the Bank of New York inspired a number of political
commentators to link the occurrence of widespread corruption and capital flight in
Russia (neither new nor startling revelations) with mishandled assistance funds and
an indictment of the Administration’s foreign policy toward Russia and especially the
role of Vice President Gore who was identified with U.S.-Russia policy by virtue of
his co-chairmanship of the Joint Commission on Economic and Technological
Cooperation. The Joint Commission acted as a conduit for discussion of key aspects
of U.S.-Russia relations, including trade, investment, space, and the environment, and
often made recommendations on use of assistance to facilitate these matters.
Some of the news reports implied that international aid funds may have been
directed through the Bank of New York. If any donor funds were diverted, it was not
likely to include U.S. bilateral economic assistance. The U.S. aid program had not
been delivered in the form of a large monetary grant. Most aid had been in the form
of U.S. technical expertise and equipment to the public and private sectors, credit
assistance to small business, and project grants to NGOs. While serious abuse
questions were raised with regard to the U.S. food aid program in 1993, the
Department of Agriculture insisted that its current aid program was closely
monitored.

CRS-46
Although balance of payments loans provided by the International Monetary
Fund were liquid and provided on a large scale, there was no evidence that any IMF
funds were among those involved in the Bank of New York investigation. The
possibility of a diversion, however, prompted Representative Jim Leach to suggest
that IMF loans be suspended until steps were taken to insure money was not diverted.
The Administration pointed out that IMF loans approved in 1999 did not leave the
IMF — they covered repayments of previous loans — an approach initiated largely
because of concerns regarding possible misuse.
The Bank of New York issue was used by some political commentators to
suggest that the Administration and Gore mishandled U.S.-Russia policy, partly by
continuing to provide aid to Russia despite its descent into corruption, and by using
aid to support the privatization process that some believe allowed the so-called
oligarchs in Russia to achieve the vast wealth many in Russia associate with
corruption. Other commentators variously pointed out that corruption long predated
the current system and that U.S. support for privatization was an effort to rapidly
ensure that communism could not return. Besides its support for privatization, U.S.
assistance, they noted, had helped strengthen an incipient democratic system and free
market economy through support for new businesses, a free press, a stock exchange,
and local government, and continued to encourage the Russian federal government
to develop a rule of law, including private land ownership and effective tax policy,
despite the strong opposition of a communist dominated parliament.
Some observers believed that critics of U.S. policy overestimated the power of
U.S. assistance to guarantee the realization of U.S. foreign policy objectives. While
it was argued that both the Bush and Clinton Administrations might have exercised
more influence to prevent corrupt practices and insure the adoption of economic
reforms using the leverage of IMF and other international financial institution
resources, others argued the bilateral aid program, often due to congressional
constraints, was too small to have a decisive influence over events in Russia. In any
event, some noted, not only was Russia not yet “lost,” it was never ours to “lose.”
Developments in 2000
Clinton Administration FY2001 Request. On February 7, 2000, the
Clinton Administration proposed its budget for FY2001, including $830 million for
the “Assistance for the Independent States of the former Soviet Union” account, less
than 1% below the FY2000 appropriation. Of the total, $87 million was expected to
go for Expanded Threat Reduction activities. An additional $45 million in ETR-
related science center funding, previously provided in the FSU account, was requested
under the nonproliferation account.
FSU Aid Debate in the Senate. On May 9, 2000, the Senate Appropriations
Committee reported S. 2522, the FY2001 Foreign Operations Appropriations
(S.Rept. 106-291). On June 22, the full Senate approved the measure by a vote of
95-4, and set it aside, pending completion of the House companion bill. On July 18,
the Senate substituted the text of S. 2522 into H.R. 4811 and passed H.R. 4811. The
Senate bill provided $775 million for the FSU, $55 million (7%) less than the
Administration request.

CRS-47
As had been the case for many years, the Senate bill contained numerous country
and project earmarks. It provided at least $175 million for Ukraine, of which $25
million was for nuclear reactor safety, $1 million for the University of Southern
Alabama to study environmental causes of birth defects in Ukraine, and $5 million for
the Ukrainian Land and Resources Management Center. It provided $94 million for
Georgia, of which $25 million was for the Border Security Guard, and $5 million was
for development and training of municipal officials in water resource management,
transportation, and agri-business. The bill also provided $89 million for Armenia and
required that at least $6 million of $12 million earmarked for Mongolia must come
from the FSU account. In all, mandatory earmarks for these four countries totaled
$364 million, 47% of the account, leaving little more than half for Russia and eight
other FSU countries.
The bill did not earmark a total for Russia, but it did require that $20 million be
spent for programs in the Russia Far East, $400,000 be used for the Cochran
Fellowship Program that provides agricultural exchanges, $250,000 be used to
support the Moscow School of Political Studies, and $10 million for non-
governmental organization humanitarian relief programs in Chechnya and Ingushetia.
S. 2522 placed several conditions on aid to Russia. As in the FY2000 bill, it
withheld half of funds planned for programs assisting the central government of
Russia until the President determined that the transfer to Iran of nuclear reactor or
ballistic missile expertise and equipment had been terminated. Nonproliferation and
infectious disease aid were exempted from this restriction. The bill also repeated
language that prohibited aid to the central government of Russia if it implemented a
law discriminating against religious minorities. S. 2522 contained a few new
conditions. One prohibited aid to the central government of Russia until the Secretary
of State determined that Russia was cooperating with international investigations of
war crime allegations in Chechnya and that Russia was providing full access to NGOs
providing humanitarian aid to refugees in Chechnya. Another condition, added during
floor debate by Senator Jesse Helms (R-NC), would, if Russia were found to be
providing economic assistance to Serbia, reduce assistance to Russia by the amount
of assistance it provided to Serbia, require that the United States oppose any loans
from the international financial institutions, and suspend Export-Import and OPIC
loans or guarantees. The President could waive this condition on national interest
grounds. An amendment by Senator Bob Smith (R-NH) expressed the sense of the
Senate that the United States should oppose international financial institution loans
to Russia if it delivered additional SS-N-22 missiles to China.
S. 2522 repeated FY2000 language exempting democracy, humanitarian,
nonproliferation, Foreign Commercial Service, Trade and Development Agency
(TDA), Overseas Private Investment Corporation, and Export-Import Bank assistance
from the Section 907 (of the FREEDOM Support Act) prohibition on aid to
Azerbaijan.
FSU Aid Debate in the House. H.R. 4811, the FY2001 Foreign Operations
Appropriations bill, was marked up by the House Foreign Operations subcommittee
on June 20 and ordered reported by the full Appropriations Committee on June 27
(H.Rept. 106-720). The House approved H.R. 4811 on July 13 (239-185). It

CRS-48
provided $740 million for the FSU, $90 million (11%) less than the Clinton
Administration request.
Armenia and Georgia each received an earmark of 12.5% of the total account
– $92.5 million each – and no more than 25% of the account ($185 million) could go
to any one country. Of total funds allocated for the southern Caucasus, 15% had to
be used for efforts to further the peaceful resolution of regional conflicts. Of the total
FSU account, $45 million had to be used for child survival, environmental health, and
infectious disease programs.
Conditions on aid to Russia included the withholding of half of funds allocated
for the central government of Russia pending certification of the termination of the
sale of nuclear reactor-related technology to Iran (infectious disease, child survival,
and nonproliferation assistance were exempted). No funds could go to the central
government of Russia until it was certified that Russia was in compliance in the
Chechnya region with article V of the Treaty on Conventional Armed Forces in
Europe which mandates a specific ceiling on certain forces.
H.R. 4811 continued the exemption of the section 907 restriction on aid to
Azerbaijan for humanitarian, democracy, TDA, Eximbank, OPIC, and U.S. foreign
commercial service activities.
Committee report language supported provision of $1 million to the Birth
Defects Monitoring Program in Ukraine, recommended $3 million for the Primary
Health Care Initiative of the World Council of Hellenes, recommended $500,000 for
the Volgograd State Medical Academy and University of Arkansas for Medical
Sciences partnership, supported the use of $78 million for the Expanded Threat
Reduction Initiative, and encouraged provision of not less than $50 million in FY2001
and FY2002 for the U.S. Russia Investment Fund.
Conference Report on FY2001 Foreign Operations Appropriations.
On October 24, House and Senate conferees submitted the conference report on H.R.
4811 (H.Rept. 106-997). On October 25, the House approved the report by a vote
of 307-101 and the Senate by a vote of 65-27. It was signed into law on November
6 (P.L. 106-429). The conference report provided $810 million for the FSU, only 3%
less than the FY2000 level and 2% less than the Administration request.
The bill earmarked $170 million for Ukraine, of which $25 million was for
nuclear safety initiatives, and $5 million for the Ukrainian Land and Resources
Management Center. Georgia received $92 million under the legislation, including $25
million designated for border guard security and other export control initiatives.
Another $90 million was earmarked for Armenia. In their explanatory report, the
conferees directed that $5 million of Georgian funds be used for training of water,
transportation, and other sector management at the municipal and regional level.
They also directed that $15 million of Armenia’s funds be used for the Particle
Accelerator project should it be selected as the host site. Conferees expected $1
million to be used to increase the analytical capacity of Ukraine in health areas, and
that $3.3 million be used for industrial sector study tours and community
telecommunications activities.

CRS-49
There was no country earmark for Russia, but aid to the Russian Far East was
earmarked at $20 million. At least $10 million had to be drawn from the FSU and
refugee assistance accounts together for NGO humanitarian relief in Chechnya.
Conditionality for Russia changed slightly from the previous year. Major conditions
were the requirement of presidential certification that Russia had terminated sales of
nuclear reactor and other nuclear-related or missile technology to Iran, that it was
cooperating with international efforts to investigate war crimes in Chechnya, that it
was providing access to NGOs providing humanitarian relief to refugees in Chechnya,
and that it was in compliance with article V of the Treaty on Conventional Armed
Forces in Europe regarding its forces in the Chechnya region. In H.R. 4811, 60% of
the funds allocated for the central government of Russia would be withheld if these
certifications could not be made – in previous years half was withheld. Also, unlike
recent years, this penalty applied to all the conditions listed here, whereas in the past
it applied only to the Iran language. In addition, the legislation prohibited all funding
to the government of Russia after 6 months if it was found to have discriminated
against minority religious faiths. The conferees on H.R. 4811 noted in their report
language that the restrictions on aid to the government of Russia did not include
infectious disease activities, and partnerships with U.S. hospitals, universities, judicial
training institutions, and environmental organizations. The conferees also directed
that $3 million be used for University of Alaska activities in Chukotka.
The conferees also praised three Russia programs. They recommended that
funding be increased for the Replication of Lessons Learned program, which helps
indigenous volunteer organizations improve their management capacity. Conferees
directed that $250,000 be provided to the Moscow School of Political Studies, which
teaches democracy and free market economy, and $400,000 to the Cochran
Fellowship program, which brings farmers to the United States.
H.R. 4811 contained the exemptions to section 907 restrictions on aid to the
government of Azerbaijan that were included in the FY2000 appropriations –
democracy, humanitarian, TDA, foreign commercial service, OPIC, and the Export-
Import Bank. The bill permitted 15% of the funds allocated to the Caucasus region
to be used for confidence building measures to resolve regional conflicts such as the
one in Nagorno-Karabagh. Added to the latter language in the 2001 bill was the
phrase “notwithstanding any other provision of law” – probably referring to section
907. In their explanatory report, the conferees directed that $900,000 be made
available for confidence-building measures such as the International Peace Forum to
be held in spring, 2001.
H.R. 4811 also earmarked $1.5 million for health and other needs of victims of
trafficking in persons, and $45 million for child survival, environmental health,
infectious diseases and related activities. In their explanatory report, the conferees
directed that equal amounts for these health-related purposes should come from the
Child Survival Fund.
Security Assistance Act of 2000. On September 22, the 106th Congress
sent the Security Assistance Act of 2000 (H.R. 4919) to the White House for
signature (P.L.106-280, October 6, 2000). Among other things, the legislation
authorized nonproliferation activities, including science and technology centers and
border control assistance provided to the former Soviet Union. While these were

CRS-50
authorized originally under the FREEDOM Support Act, the authority was never
integrated into the Foreign Assistance Act of 1961, the broad legislation that governs
most foreign assistance. The legislation also provided the basis for separately funding
nonproliferation activities managed by the State Department (as opposed to
cooperative threat reduction managed by the Department of Defense) rather than
under the Independent States of the Former Soviet Union account in the annual
appropriations bill.
Russian Leadership Program. Created by Congress in 1999, the Russian
Leadership Program had brought in two years more than 3,600 Russians to the United
States for week-to-ten-day community visits and exposure to U.S. institutions.
Administered by the Library of Congress, the program was funded in its first year
through the legislative branch appropriations bill and in its second year from the FSU
account. For FY2001, Congress provided $10 million ($9.978 million after the
rescission) through legislative branch appropriations (H.R. 4577, P.L. 106-554), and
established a Center for Russian Leadership to administer the program in the future.

Cooperative Threat Reduction (CTR). For FY2001 CTR programs, the
Clinton Administration requested $458.4 million. On July 27, the House and Senate
approved the conference report on H.R. 4576 (P.L. 106-259), the Department of
Defense appropriations for FY2001, providing $443.4 million.
Major Issues in 2000. The debate on U.S.-Russia policy that had begun in
1999 intensified in 2000 as the presidential election drew nearer. Charges that the
Clinton Administration mishandled U.S.-Russia policy, including its use of the
assistance program, resurfaced in the September 2000 report Russia’s Road to
Corruption: How the Clinton Administration Exported Government Instead of Free
Enterprise and Failed the Russian People, issued by the partisan House of
Representatives Speaker’s Advisory Group on Russia. Although focusing more
broadly on the range of U.S.-Russia relations during the Clinton Administration, the
report suggested that the aid program, especially aid from the IMF, abetted the failure
of Russian reform.
One ramification of this debate during a presidential election year was that efforts
to condition aid to Russia that were a fixture of annual legislative deliberations
multiplied considerably, reportedly in part because of Vice-President (and presidential
candidate) Gore’s close association with the formulation of U.S.-Russia policy.
The perennial condition in the foreign aid bill that sought to punish the Russian
central government for its ongoing sale of a nuclear power plant to Iran was
strengthened by boosting the amount withheld from 50 percent in the previous year’s
legislation to 60 percent in the FY2001 foreign aid appropriations. Further, a number
of conditions regarding Russian actions in Chechnya were introduced in the FY2001
bill that would also cut funding by 60 percent. These would withhold funds if Russia
did not cooperate with international investigations of war crime allegations in
Chechnya, did not provide access to NGOs doing humanitarian work in Chechnya, or
was not in compliance with the Treaty on Conventional Armed Forces in Europe
regarding forces deployed in the zone around Chechnya.

CRS-51
In the spring of 2000, Members of Congress had proposed a number of other
conditions, some of which were adopted by one body or the other. One called for a
reduction in U.S. assistance to Russia by an amount equal to any loan or other
financial assistance or energy sales it provided to Serbia, and U.S. opposition to
international financial institution loans and suspension of Export-Import and OPIC
loans or guarantees to Russia in response to Russia’s hosting of the Yugoslav Defense
Minister, an indicted war criminal, and its provision of a loan to Serbia. The
condition, sponsored by Senator Jesse Helms, was adopted as an amendment to S.
2522 (section 599D), after being modified with a presidential waiver authority.
However, the provision was not included in the conference report agreement on H.R.
4811, the FY2001 foreign aid appropriations.
Another proposal expressed the sense of the Senate that the United States should
oppose international financial institution loans to Russia if it delivered additional SS-
N-22 Moskit anti-ship missiles to China. This amendment by Senator Bob Smith (R-
NH) was added to S. 2522 during floor debate. It was not included in the conference
report agreement on H.R. 4811, but, in their statement, the conferees expected the
Secretary of the Treasury to urge U.S. executive directors to oppose loans if the sale
continued. A related piece of legislation, H.R. 4022, introduced by Representative
Dan Rohrabacher (R-CA), prohibiting rescheduling or forgiveness of bilateral debt
until Russia terminated sales of the missiles, was approved by the House International
Relations Committee on April 13, 2000, with a presidential waiver authority
provision.
A further proposed condition would prohibit the rescheduling or forgiveness of
any bilateral debt owed to the United States by Russia until the President certified that
Russia had closed its intelligence facility at Lourdes, Cuba. H.R. 4118 (Rep. Ros-
Lehtinen, R-FL) was approved by the House (275-146) on July 19. The International
Relations Committee added presidential waiver authority that would permit the
rescheduling of debt, but the bill did not provide a waiver for debt forgiveness.
Further, the bill still would require U.S. opposition to rescheduling and forgiveness
at the Paris Club, possibly making the rescheduling waiver meaningless. In the
Senate, similar legislation was introduced (S. 2748, Senator Mack, R-FL) on June 16,
2000.
In addition to the above, the chairmen of the two congressional foreign policy
committees sought to block rescheduling of Russian debt. On May 26, 2000, as
required by law thirty days prior to its taking effect, the Administration submitted to
Congress a report on a bilateral agreement with Russia to reschedule its 1999 and
2000 repayments of Soviet-era debt. While Paris Club creditors had opposed total
forgiveness, they had favored rescheduling due to the burden the debt placed on
Russian efforts to reform its economy. However, Senate Foreign Relations
Committee Chairman Helms and House International Relations Committee Chairman
Gilman (R-NY) in mid-June 2000, announced they would put the agreement on
“hold” due to Russian actions in Chechnya and support for Serbia. What made this
move particularly significant was that, of the roughly $485 million of U.S. debt that
would be rescheduled, $155 million was part of Lend Lease debt, held from World
War II. A provision of the Trade Act of 1974 required that arrears in this debt be
punished by loss of MFN (most favored nation/normal trade relations) status.
Therefore, if the debt could not be rescheduled, on July 1, when payment would

CRS-52
otherwise be due, Russia would either be forced to make the payment or stand to lose
its MFN status.
On June 30, 2000, the Clinton Administration announced that it would proceed
with the rescheduling, regardless of the congressional leaders’ views. The
Administration argued that a refusal to reschedule would have no effect on Russian
policy, would make it more difficult for Russia to repay its debts, and would create
problems with the Paris Club donors. In response, a Gilman spokesman suggested
that a “legislative remedy” would be sought. Although Senator Helms threatened to
put all ambassadorial nominations on hold, in late July he lifted holds on 13
ambassadorial nominees.
Developments in 2001
Bush Administration FY2002 Request. For FY2002, the new George W.
Bush Administration requested $808 million for the former Soviet Union account,
nearly the same as was appropriated in FY2001 ($810 million appropriated; $808.2
million after rescission).
With two exceptions, the Administration’s FY2002 individual country allocation
requests were also nearly the same as allocated in FY2001. Although the requests for
Armenia – a nearly $20 million decrease to $70 million – and Azerbaijan – a roughly
$16 million increase to $50 million – might have attracted some attention in Congress,
additional amounts for reconstruction in both countries were set aside from the
regional pool of funds to be provided as part of an international donor effort once a
settlement was reached in the Nagorno-Karabakh conflict.
In its congressional presentation documents, the new Administration promised
to increase amounts allocated for grassroots level activities, such as exchanges,
NGOs, and pro-reform and local governments.
Amid rumors of substantial cuts in funding, the Bush Administration launched
a full-scale review of cooperative threat reduction and related nonproliferation
programs in Russia. Although it had used $451 million as a placeholder in the budget
request, in the end it requested $403 million. The chief cut was in funding for a
plutonium storage facility (a $57 million decrease), and the chief increase was for
chemical weapons destruction (an increase of $50 million).
FSU Aid Debate in the House. On June 27, the Foreign Operations
subcommittee of the Appropriations Committee approved its version of the FY2002
Foreign Operations appropriations. It was reported by the full committee as H.R.
2506 on July 17 (H.Rept. 107-142), and approved by the House on July 24 by a vote
of 381 to 46. No amendments were added on the floor that affected aid to the former
Soviet Union.
H.R. 2506 provided $768 million, $40 million less than the Administration
request and 5% less than the FY2001 post-rescission appropriation figure of $808.2
million. As in previous bills, funds were earmarked for three countries. Both Georgia
and Armenia were assured at least $82.5 million each. However, in a departure from
previous bills, a ceiling of $125 million was placed on aid to Ukraine. This was a

CRS-53
response to the lack of economic reform and the recent deaths of journalists and
dissidents in that country. A general limitation of 30% of the appropriation – $230.4
million – was placed on aid to any one country, not counting nonproliferation aid.
There were only three other specific funding recommendations. At least $1.5
million was directed to assist victims of trafficking in persons. Fifteen percent of funds
allocated to the Caucasus could be used for confidence-building measures related to
a possible peace in Nagorno-Karabagh and Abkhazia. At least $45 million was
recommended for child survival, environment, family planning, and infectious disease
purposes.
The bill contained several conditions and exceptions as in previous years. For
Russia, 60% of funds allocated to assist the central government had to be withheld if
the transfer of nuclear reactor technology to Iran continued or if Russia did not
provide full access to NGOs aiding refugees in Chechnya. Exempted from this
language were programs to combat infectious diseases and trafficking in persons, and
nonproliferation activities. In committee report language, hospital and university
partnerships, judicial training, regional and municipal governments, and environmental
organizations were also exempted from the Iran condition. Previous year language
prohibiting aid to Russia if it implemented laws discriminating against minority
religions was continued in the FY2002 bill.
Finally, the bill continued to exempt democracy assistance, nonproliferation
assistance, TDA, Foreign Commercial Service, OPIC, Export-Import Bank, and
humanitarian assistance from the prohibition on aid to the government of Azerbaijan
under section 907 of the FREEDOM Support Act.
In report language, the Appropriations Committee made a number of funding
and programmatic recommendations. The Committee recommended at least $1
million be used for birth defects monitoring related to Chernobyl, additional funding
for trafficking of women programs, additional funding for the primary health care
initiative of the World Council of Hellenes, expansion of the American International
Health Alliance primary health care partnership program, expansion of seed
multiplication programs to countries beyond Armenia, allocation of $15 million for
the U.S. Civilian Research and Development Foundation, $15 million for Georgia
border security activities, $2 million for research grants for American and Russian
scholars studying nonproliferation issues, provision of an additional $40 million to the
U.S.-Russia Investment Fund over FY2002 to 2003, and provision of $4 million for
the National Endowment for Democracy for NGOs.
FSU Aid Debate in the Senate. On July 26, the Senate Appropriations
Committee approved its version of H.R. 2506, the FY2002 Foreign Operations
appropriations, including the provision of $800 million for the former Soviet Union
(S.Rept. 107-58). On October 24, the Senate approved H.R. 2506 by a vote of 96
to 2. On the floor, there were several key changes made to parts of the bill affecting
the former Soviet Union.
First, the bill was amended reducing the appropriation for the former Soviet
Union to $795.5 million, a reduction of $4.5 million from the Committee bill meant
to offset increases in other accounts, especially global health. Second, language was

CRS-54
added by Senator Sam Brownback (R-KS) allowing the President to waive section
907 of the FREEDOM Support Act prohibiting aid to Azerbaijan if he determined it
was in the national interest to do so. This action was taken in part to allow
unhampered U.S.-Azerbaijani military cooperation in the war on terrorism.
A third amendment to H.R. 2506 earmarked for the first time specific military
aid funds for a former Soviet Union country. Armenia was to receive at least
$600,000 in International Military Education and Training Program funds and $4
million in military financing. Concerns regarding possible increased U.S. military aid
and cooperation with Uzbekistan led to the adoption of an amendment by Senator
Paul Wellstone (D-MN) that would require a report every six months from the
Administration on defense articles and services provided to that country, their use,
and the extent of any human rights violations by the Uzbek government during that
period. Finally, the Senate restored a provision that had appeared in legislation in
recent years but was not included in the FY2002 Committee bill prohibiting aid to the
government of Russia if it implemented a law restricting religious minorities.
As in the Committee version, the adopted Senate bill recommended that at least
$180 million be provided for Ukraine, and earmarked $90 million for Armenia and
$90 million for Georgia. Of the amount for Ukraine, it recommended $25 million for
nuclear reactor safety programs. Of the amount for Armenia, it earmarked $5 million
for education, including computer and Internet access in primary and secondary
schools. Of the amount for Georgia, it recommended $3 million for small business
development. From the whole account, it recommended at least $45 million be used
for child survival, environmental and reproductive health, and infectious diseases.
Like the House bill, it would cut assistance to the central government of Russia
by 60% if conditions relating to Iran and Chechnya were not met. In the case of
Chechnya, it required that Russia allow access to NGOs, but, unlike the House, it
continued previous year language requiring that Russia cooperate with war crimes
investigators, and be in compliance with the Conventional Armed Forces Treaty that
sets ceilings on troop levels. The bill also required that the Department of State
provide a report on progress by Ukraine in bringing to justice the murderers of
Ukrainian journalists.
Also, as in previous years, it exempted democracy, nonproliferation, TDA,
foreign commercial service, OPIC, Export-Import Bank, and humanitarian assistance
from the prohibition on aid to Azerbaijan under section 907 of the FREEDOM
Support Act.
In report language, the Appropriations Committee recommended support for a
number of programs and funding levels, including $5 million for the Title VIII
program which funds academic research on the region, $3.5 million for aid to Russian
orphans, $2 million for the primary health care initiative of the World Council of
Hellenes, and funding for Russian domestic violence programs at no less than the
FY2001 levels. Of nuclear safety funds provided for Ukraine, the Committee
recommended that $21.5 million be used for installation of simulators for training.

CRS-55
FY2002 Foreign Operations Conference Report. On December 19,
2001, House and Senate conferees submitted the conference report on H.R. 2506
(H.Rept. 107-345), and the House approved the report by a vote of 357-66. On
December 20, the Senate approved the report by voice vote. The conference report
provided $784 million for the former Soviet Union account, 3% less than the FY2001
and Administration FY2002 request levels.
As had been the case in previous years, the final bill contained hard and soft
earmarks for several countries. It recommended that Ukraine be provided not less
than $154 million, a $16 million decrease from FY2001. Of Ukraine’s total, at least
$30 million was recommended for use for nuclear reactor safety. The State
Department was required to report on progress made by the Government of Ukraine
in investigating and prosecuting the murders of Ukrainian journalists. H.R. 2506 also
provided at least $90 million for Armenia, but only recommended that $90 million be
made available for Georgia. The bill required that at least $17.5 million be used for
the Russian Far East.
The conference report further recommended that $1.5 million be used for health
and other needs of victims of trafficking in persons, and recommended that $49
million be used for child survival, environmental and reproductive health and family
planning, and for combatting HIV/AIDS, tuberculosis, and other infectious diseases.
The conference report maintained language cutting 60% of funds allocated for
the central government of Russia (excepting nonproliferation, disease, and child
programs) if it continued to implement its sale of nuclear reactor technology to Iran
and if it did not provide access for humanitarian relief NGOs to Chechnya. It
maintained language prohibiting aid to the central government of Russia if it
implemented a law discriminating against religious minorities.
H.R. 2506 also continued to exclude nonproliferation, TDA, foreign commercial
service, OPIC, Export-Import Bank, and humanitarian programs from the FREEDOM
Support Act section 907 prohibition on aid to Azerbaijan. However, in a departure
from previous years and a response to the war on terrorism, the bill provided specific
waiver authority to the President for this provision running through the end of 2002.
In what might be interpreted as an effort to compensate Armenia for this leniency
toward Azerbaijan, the bill provided Armenia with no less than $4 million under the
Foreign Military Financing account, and the conference managers directed that not
less than $300,000 be provided Armenia under the International Military Education
and Training (IMET) program.
In the statement of managers, conferees further recommended that, of the $49
million suggested for child survival, etc., $15 million be used for reproductive
health/family planning. They also endorsed the use of $5 million for education
assistance in Armenia and $3 million for small business start-up assistance in Georgia,
recommended $2 million for the Primary Health Care initiative, and urged that the
U.S.-Russia Investment Fund receive $50 million in FY2002.
Cooperative Threat Reduction (CTR). For FY2002 CTR programs, the
Bush Administration requested $403 million. On December 20, the House and Senate

CRS-56
approved the conference report on H.R. 3338, the Department of Defense
appropriations for FY2002, providing $403 million.
Major Issues in 2001. As a result of the war on terrorism that began on
September 11, 2001, U.S. foreign policy changed in numerous ways, and U.S. aid
relations with the former Soviet Union were affected by these changes. For the war
to succeed, the United States would require cooperation – intelligence, logistical, and
diplomatic support – especially from countries in the southern flank of the FSU. The
countries of the FSU were quick to offer cooperation, and U.S. officials indicated that
cooperating countries would be rewarded.
Up to September 2001, the countries of Central Asia – the so-called “stans”,
Uzbekistan, Tajikistan, Turkmenistan, and Kazakhstan – were the most neglected of
FSU aid recipients. While it was too early to tell at the end of 2001 whether there had
been a significant shift in aid relations, some countries in the region appeared to reap
benefits from close cooperation in the terrorism war. On November 9, the United
States announced that Uzbekistan would receive $40.5 million in economic and law
enforcement assistance, and additional military aid was also expected.
Some observers, including Members of Congress, expressed fear that the poor
human rights records and lack of progress in democratization that have worked to
limit U.S. assistance to some Central Asian countries in the past would, as a
consequence of the war, now be disregarded when determining aid levels and
programs. During floor debate on the FY2002 foreign operations bill, an amendment
(Wellstone) was adopted by the Senate which would have required a report every six
months on defense assistance provided to Uzbekistan and the extent of any human
rights violations. While the language was omitted from the final version of the bill,
authors of the conference report directed the Secretary of State to report on defense
assistance and its use by Uzbekistan, but did not require a special report on human
rights violations.
In the Caucasus region, the war appeared to generate sufficient impetus for
Congress and the Administration to ease long-standing legislative barriers to
assistance to Azerbaijan. The Administration asked Congress to lift the section 907
FREEDOM Support Act prohibition on aid to the government of Azerbaijan, and
Congress, in the FY2002 foreign operations appropriations bill, provided the
President with authority up to the end of 2002 to waive section 907 if he determined
it was in the national interest. On December 15, Secretary of Defense Rumsfeld told
the President of Azerbaijan that he expected that sanctions would be waived in the
near future.
U.S.-Russia relations may also have been profoundly affected by the war. Prior
to September, Congress, perhaps wishing to grant the President foreign policy
flexibility, did not move to adopt new conditions to U.S. assistance as they had in the
previous year. After September, with President Putin offering strong support for the
U.S. war, Congress eliminated two existing conditions regarding aspects of Russian
behavior in Chechnya which had long been a target of congressional ire, but which

CRS-57
Putin linked to the struggle against terrorism.3 In the first half of 2001, the
Administration undertook a review of nonproliferation assistance to Russia amid
reports that it was thinking of substantial cuts to these programs. By the end of the
year, with heightened concerns regarding terrorist access to nuclear and chemical
weapons material, the Administration was reportedly preparing to substantially
increase these programs in its next budget proposal.
Table 4. U.S. Bilateral Grant Assistance to the FSU
(millions of $ appropriations)
FY92 FY93
FY94
FY95 FY96 FY97 FY98 FY99 FY00
FY01
FY02
NIS Acct.*
230a
417
2,158b
818c
641
625
770
847
836f
808
784
DOD CTR**
188d
283
400
380e
300
328
382
440
461
443
403
* New Independent States Account under the Foreign Operations appropriations.
** Cooperative Threat Reduction (Nunn-Lugar) Program under the Department of Defense
appropriations.
Note: Prior to the dissolution of the Soviet Union, in FY1991, the United States provided $5 million
in Economic Support Funds and $5 million in USAID disaster assistance.
a. Economic Support Funds reprogrammed for FSU in early 1992.
b. Includes $1.6 billion FY1993 supplemental approved September 1993. P.L. 103-211 rescinded
$55 million of the FY1994 and FY1993 supplemental appropriations for the FSU.
c. Original appropriation was $850 million. P.L. 104-6 rescinded $7.5 million. P.L. 104- 19
rescinded $25 million.
d. Original appropriation for FY1992 and FY1993 was $400 million. Of these amounts, $212
million from FY1992 and $117 million from FY1993 were “lost” due to failure to obligate funds by
end of FY1993 and FY1994, respectively.
e. Original appropriation was $400 million. P.L. 104-6 rescinded $20 million.
f. Original appropriation was $839 million. P.L. 106-113 rescinded $.38%.
Table 5. Cumulative U.S. Bilateral Commercial Financing
for the FSU (Face Value): 1992-2000
(millions of $)
Financing Programs
Total
USDA CCC Export Credit Guarantees
3,439
Eximbank Guarantees
5,819
OPIC Financing and Funds Support
2,679
Total Credits (Face Value)
11,937
Source: Department of State.
Note: Prior to the dissolution of the Soviet Union, in FY1991, the United States provided $1.9
billion in CCC credit guarantees, and $51 million in Eximbank guarantees.
3 Putin’s October 17 decision to withdraw from the intelligence listening post at Lourdes,
Cuba, may also have positively affected congressional and Administration behavior.

CRS-58
Table 6. NIS Account Country Allocations: FY1995-2001
(in $ millions)
FY01
Country
FY95
FY96
FY97
FY98
FY99
FY00
(est)
Russia
344.2
137.0
94.8
133.2
161.2
186.6
167.8
Ukraine
182.5
225.0
225.0
225.0
203.6
174.2
169.6
Belarus
5.6
5.0
6.7
7.3
12.4
8.5
10.0
Moldova
23.6
23.0
27.6
33.1
45.4
50.4
43.7
Armenia
52.1
85.0
95.0
87.5
80.1
102.6
89.8
Azerbaijan
10.7
12.0
16.4
34.3
35.2
32.0
34.3
Georgia
37.5
22.0
26.8
97.5
84.6
108.5
91.8
Kazakhstan
47.2
33.0
35.4
40.3
50.5
44.8
44.6
Kyrgyzstan
22.7
19.0
20.8
24.3
32.0
30.1
30.4
Tajikistan
9.2
4.0
5.0
12.0
13.1
9.9
11.2
Turkmenistan
5.4
4.0
5.0
5.3
11.3
6.2
6.2
Uzbekistan
11.8
19.0
21.6
20.5
27.3
20.0
23.6
Regional
65.5
53.0
37.6
50.7
90.5
62.0
85.2
Total App.
818.0
641.0
621.6
770.8
847.0
835.8
808.2

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