[House Report 106-667]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-667
======================================================================
RUSSIAN ANTI-SHIP MISSILE NONPROLIFERATION ACT OF 2000
_______
June 12, 2000.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Gilman, from the Committee on International Relations, submitted
the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 4022]
[Including cost estimate of the Congressional Budget Office]
The Committee on International Relations, to whom was
referred the bill (H.R. 4022) regarding the sale and transfer
of Moskit anti-ship missiles by the Russian Federation, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Russian Anti-Ship Missile
Nonproliferation Act of 2000''.
SEC. 2. PURPOSE.
The purpose of this Act is to prohibit the forgiveness or
rescheduling of any bilateral debt owed by the Russian Federation to
the United States until the Russian Federation has terminated all sales
and transfers of Moskit anti-ship missiles that endanger United States
national security.
SEC. 3. FINDINGS.
The Congress makes the following findings:
(1) In February 2000, the first of two Russian-built
Sovremenny-class destroyers sold to the People's Republic of
China arrived in the Taiwan Strait, manned by a mixed Russian
and Chinese naval crew. Currently, the Russian and Chinese
Governments are discussing the sale of 2 additional Sovremenny
destroyers.
(2) Within weeks after the arrival of the destroyers, the
Russians are scheduled to transfer the first of several of the
ship's most lethal weapon, the radar-guided Moskit (also known
as Sunburn) anti-ship missile, which can carry either
conventional or nuclear warheads.
(3) The supersonic Moskit missile, which can be mounted on a
naval or mobile land platform, was designed specifically to
destroy American aircraft carriers and other warships equipped
with advanced Aegis radar and battle management systems. The
United States Navy considers the missile to be extremely
difficult to defend against.
(4) The Moskit missile has an over-the-horizon range of 65
miles and can deliver a 200-kiloton warhead in under 2 minutes.
One conventional Moskit missile can sink a warship or disable
an aircraft carrier, causing the deaths of hundreds of American
military personnel.
(5) The Russian Federation is helping the air force of the
People's Liberation Army to assemble Sukhoi Su-27 fighter
aircraft, which are capable of carrying an air-launched version
of the Moskit missile, which has a longer range than the sea-
launched version. The Russian Federation is reportedly
discussing the sale of air-launched Moskit missiles to the
People's Republic of China.
(6) Land-, sea-, or air-launched Moskit missiles raise the
potential for American casualties and could affect the outcome
in any future conflict in the Taiwan Strait or South China Sea.
The transfer of the missile by China to Iran or other
belligerent nations in the Persian Gulf region would increase
the potential for conflict and for American casualties. A
Moskit missile mounted on a mobile land platform would be
difficult to locate and could wreak havoc on the coastline of
the Straits of Hormuz.
SEC. 4. PROHIBITION OF DEBT FORGIVENESS.
(a) Prohibition.--Notwithstanding any other provision of law, the
President shall not reschedule or forgive any outstanding bilateral
debt owed to the United States by the Russian Federation, until the
President certifies to the Congress that the Russian Federation has
terminated all transfers of Moskit anti-ship missiles that endanger
United States national security, particularly transfers to the People's
Republic of China.
(b) Waiver.--The President may waive the application of subsection
(a) if the President determines and certifies to the Committee on
International Relations of the House of Representatives and the
Committee on Foreign Relations of the Senate that such waiver is vital
to the national security interest of the United States.
SEC. 5. REPORTS ON THE TRANSFER BY RUSSIA OF MOSKIT MISSILES.
(a) In General.--Not later than 30 days after the date of the
enactment of this Act and every 6 months thereafter, until the
certification under section 4, the President shall submit to the
Committee on International Relations of the House of Representatives
and the Committee on Foreign Relations of the Senate a report
identifying the status of any contract and the date of the transfer of
any version of the Moskit missile, particularly transfers to the
People's Republic of China, occurring on or after February 1, 2000.
(b) Submission in Classified Form.--Reports submitted under
subsection (a), or appropriate parts thereof, may be submitted in
classified form.
Background and Purpose
H.R. 4022, the ``Russian Anti-Ship Missile Nonproliferation
Act of 2000,'' was introduced on March 16, 2000, by Mr.
Rohrabacher, Mr. Spence, and fourteen other original sponsors.
The bill prohibits the forgiveness or rescheduling of any
bilateral debt owed by the Russian Federation to the United
States until the Russian Federation has terminated all sales
and transfers of Moskit anti-ship missiles that endanger United
States national security. The purpose of the bill is clear: no
further rescheduling or forgiveness of any of the Russian
government's bilateral debt to the United States Government
shall be provided by the United States either directly or in
any multilateral forum, including the Paris Club of official
creditors, until the President certifies that the Russian
Federation has terminated all transfers of Moskit and anti-ship
missiles that endanger United States national security,
particularly transfers to the People's Republic of China.
The Growing Arms and Military Technology Sales Relationship Between
Russia and China
In 1991, Russia and China concluded their first big weapons
contract when China agreed to purchase a reported twenty-six
Su-27 ``Flanker'' fighter aircraft for an estimated $1 billion.
In a subsequent visit to China in December 1992, then-President
of Russia Boris Yeltsin stated that Russia was prepared to go
on to cooperate with China ``on the most sophisticated
armaments and weapons.'' Indeed, over the last few years, arms
sales to China have expanded considerably, and it has been
reported that Russia is now providing China with a broad range
of military technology and arms. In 1994, China purchased four
quiet-running, diesel-powered ``Kilo''-class submarines from
Russia. In 1996, China and Russia signed a contract to build an
estimated two hundred Su-27 aircraft in China for a reported
$2.5 billion. In 1999, China agreed to buy thirty to sixty Su-
30MK fighter aircraft from Russia for an estimated $2 billion,
and it is reported that negotiations may be underway for the
purchase of the more advanced Su-37 fighter. In 1997, China
purchased two ``956-E'' or ``Sovremenny''-class guided-missile
destroyers equipped with the advanced supersonic ``Moskit''
anti-ship missiles, and is now likely to purchase two more of
the ships. According to a Washington Post report of February
10th, 2000, Asian officials believe ``that as many as 2,000
Russian technicians are employed by Chinese research institutes
working on laser technology; the miniaturization of nuclear
weapons; cruise missiles; space-based weaponry; and nuclear
submarines. On January 19, Russian Deputy Prime Minister Ilya
Khlebanov told reporters that Beijing and Moscow ``are close
enough'' to agreement on joint use of Russia's GLONASS
satellite-based global positioning system, and accord that
would aid the Chinese military in targeting its rockets [ICBMs]
and air-to-air missiles.'' In addition to the advanced fighter
aircraft, submarine, and guided-missile destroyer purchases and
sensitive military technology agreements noted above, Russia is
reported to have sold China a range of electronics, air-to-air
and surface-to-air missiles, air defense systems (including one
hundred SA-10 air defense missiles), Ka-27 and Ka-28 anti-
submarine warfare helicopters, armored fighting vehicles and
fifty T-72 tanks.
Today, slightly more than eight years after the first major
Russian-Chinese arms deal, bilateral arms and military
technology deals with China are now believed to be worth at
least one billion dollars annually in revenues to Russian arms
exporters, and some observers believe China accounts for more
than 40% of all Russian arms exports. In testimony taken by the
Committee in March 1999, one expert witness stated that such
Russian exports to China reached over $2.1 billion in 1996,
comprising 70% of China's arms purchases in the foreign market.
Russia, in fact, has become China's largest supplier of
advanced weapons.
The Question of Possible Russian-Chinese Strategic Cooperation in
Support of a ``Multi-Polar'' World
Russia seems unconcerned over the growing Chinese military
power it is helping to create. Former Russian President Boris
Yeltsin in fact declared that Russia has a ``strategic
partnership'' with China and joined Chinese President Jiang
Zemin in opposing a ``unipolar'', i.e., US-led, world in favor
of a ``multi-polar'' world. Indeed, as a ``Washington Post
article of February 10th, 2000 stated: ``Western experts and
Asian diplomats say that * * * Moscow's security ties to
Beijing have surpassed the simple cash-for-weapons transactions
that characterized the relationship for years and are evolving
into something more complex and potentially far-reaching.''
Despite the Russian insistence on continuing arms sales to
China, the United States should view with concern those sales,
particularly sales of weapons such as the ``Moskit'' missile
that present a possibly immediate threat to American naval
forces that might be called to the defense of American
interests in the Pacific. The United States must indeed view
with concern the broader implications of the overall Russian-
Chinese arms relationship. In testimony taken by the Committee
in March 1999, Mr. Sherman Garnett, former Deputy Assistant
Secretary of Defense and Director of the Project on Russian-
Chinese Relations at the Carnegie Endowment for International
Peace stated the following: ``These [Russian] sales--and the
broader defense and technology cooperation that are linked to
them--could over time help to alter regional military balances
in areas of vital U.S. interest in East and Southeast Asia or
the Taiwan Strait. China does not need to match the military of
the U.S. and its allies to effect this alteration. It need only
develop capabilities that substantially raise the cost of U.S.
intervention in the region.''
China has indeed held missile firing ``tests'' off the
coasts of Taiwan in recent years, a sign of its growing
military assertiveness, and through its arms purchases from
Russia, China is obtaining modern air and naval weaponry that
could well help it successfully challenge the American 7th
Fleet, which is committed, in part, to the support of Taiwan.
(For example, while the ``Sovremenny'' destroyers carry
supersonic ``Moskit'' anti-ship missiles that are very
difficult to defend against, the ``Kilo'' submarines are
reportedly equipped with so-called ``wake-homing'' torpedoes
designed to detonate beneath a ship's keel, where their
approach is more difficult to detect due to the nose of the
ship's propellers.) At a strategic level, China may be
obtaining Russian technology that will allow it to improve and
expand its relatively small strategic nuclear force (now an
estimated 17 land-based and 12 sub-based long-range missiles
and an estimated 300 warheads)--ironically at the very time
that the U.S. is reducing its strategic arsenal through
agreements with Russia. The Washington Times of January 19,
2000 reported that Russian nuclear weapons experts may now be
assisting China in the extraction of Tritium for thermonuclear
warheads.
the russian government's quest for further debt rescheduling and
forgiveness of debt
Upon the dissolution of the former Soviet Union in December
1991, the Government of the newly-independent Russian
Federation, the largest successor state to the Soviet Union,
insisted that it receive various assets of the Soviet
government at home and abroad, including ownership of Soviet
embassies and facilities around the world, Soviet-created banks
abroad, and the stocks of Gold held by the Soviet regime, among
other things. The new Russian government also agreed to assume
responsibility for the payment of debts owed to both private
sector and official creditors by the Soviet Union upon its
demise. Since that time, while enjoying the benefits of such
Soviet-era assets, the Russian Government has failed to meet
its obligations to re-pay Soviet-era debts, restoring instead
to outright default and to reschedulings to avoid honoring the
bulk of those debts.
With regard to debt to other governments, the Russian
government has, in fact, been the beneficiary of debt
rescheduling by the ``Paris Club'' of official creditors
several times over the last decade, in 1993, 1994, 1995, and
1996. The rescheduling and restructuring of the Russian
Government's Paris Club debt in April 1996 was indeed the
largest-ever such debt-rescheduling arrangement in the history
of the Paris Club, cutting Russian's debt-serving obligations
in 1996 from $8.5 billion to $2 billion by giving it twenty-
five years to repay $38.7 billion in such debt to other
governments, including a six-year grace period during which it
would pay only interest, not principal. The August 1999
``interim'' rescheduling simply postponed until the second half
of 2000 those payments on about $8 billion in obligations that
were due over the course of 1998-2000. (That portion of the
Russian Government's debt to official creditors that is covered
by the Paris Club was estimated to total about $42 billion by
early 2000.)
With regard to debt owed to private lenders, over the last
eight years the Russian government has almost completely failed
to meet its obligations to the ``London Club'' of commercial
creditors for the Soviet-era debts for which it assumed
responsibility. According to information obtained by staff of
the Committee on International Relations, the Russian
Government did not honor those commercial obligations from 1992
to 1997, and honored them for only a short period following a
rescheduling that the London Club accepted in 1997. After
August 1998, the Russian government yet again defaulted on its
debts to the ``London Club.'' In February 2000, despite a
considerable rise in the price of oil, one of Russia's main
exports, that helped create a Russian trade surplus of about
$30 billion in 1998; despite increased Russian tax collections;
and despite its failure to meet its debt obligations to the
London Club for over a year, the Russian Government obtained
from the London Club a rescheduling under which approximately
$12 billion was simply written off and the remainder
(approximately $20 billion) transformed into long-term (30-
year), low-interest bonds.
the generous benefits granted the russian government through repeated
debt reschedulings and forgiveness
The Russian government has benefitted in several important
ways from the leniency shown by both officials and commercial
creditors towards the payment obligations Russia assumed when
it insisted that it be granted many of the international assets
of the former Soviet regime. Above all else, its defaults on
commercial debt and forgiveness of much of that debt and the
constant rescheduling of its official debt have alleviated the
burden of billions of dollars of annual payments it would
otherwise have had to make to its creditors. Other very
important, but less-recognized benefits have accrued to the
Russian government, however, from the leniency shown by both
the Paris Club and the London Club of creditors.
In particular, the 1996 rescheduling arranged with the
Paris Club, by avoiding a Russian Government default on its
debts to other governments, also made the Russian government
eligible for other, very lucrative forms of foreign financing,
specifically, making it possible for the Russian government to
receive a three-year loan of more than $10 billion from the
International Monetary Fund and paving the way for the Russian
government to re-enter international capital markets as a
sovereign borrower. The 1999 interim rescheduling ensured that
Russia remained eligible to access those sources of finance.
The general benefits to the Russian economy provided by the
London Club's forgiveness and restructuring of the Russian
government's debts this year will also be considerable.
Negotiation of the deal set the stage for upgrades in
assessments of the creditworthiness of the Russian government
and of Russian enterprises, which in turn increases the chances
of more commercial lending to that government and those
entities as well as the possibility of greater foreign direct
investment in Russia.
questions about the need to provide further leniency with regard to
russia's debt obligations
Despite the many reschedulings of Russia's debts and the
recent, outright forgiveness of at least one-third of its debt
to commercial creditors of the London Club, there is a high
probability that the Russian government will choose to continue
to default on its debts. Former Russian Finance Minister
Aleksandr Shokhim in fact stated after the conclusion of the
2000 debt forgiveness and rescheduling agreement with the
London Club that the agreement would likely merely delay
Russia's default on that particular component of its debt for
only a few years.
Indeed, the need to restructure Russia's debt to either the
London Club or Paris Club at this time is questionable. As the
New York Times reported in a story of February 13th, 2000
concerning the London Club restructuring: ``The fact that
Russia's debt--much of it stemming from the Soviet era--needs
to be restructured at all is something of a puzzle * * *
Russia, according to key economic indicators, should have the
money to meet its debt payments. * * * The government should *
* * be reaping high taxes from the profits of Russian oil
companies. In fact, the state has a huge trade surplus * * *
Charles Blitzer, chief international economist for the
brokerage Donaldson, Lufkin & Jenrette, said: ``This isn't so
much a question of ability to pay as willingness to pay,'' The
Economist stated the following in its August 7th, 1999 edition:
``As with the Paris Club negotiations, cynics suspect that
nobody is particularly bothered about the underlying
sustainability of any agreement. Given that Russia shows no
willingness to live within its means, it is reasonable to
suspect that the main priority is to clear the way for another
borrowing splurge after the elections.''
The lenient treatment of the Russian government with regard
to its debts and its continued borrowing from international
financial institutions must be viewed with some concern, given
the record of Russian willingness to benefit from the assets it
inherited from the former Soviet regime and from loans it has
borrowed abroad while clearly showing, at the same time, an
unwillingness to live up to the debt obligations it took on
from the former Soviet regime or to carry out its dealings with
international financial institutions in a proper and
transparent manner. With regard to the latter point, the
Economist, in its August 7th, 1999 edition, made the following
comment: ``Already they [the Russian government] have secured a
highly irregular $4.5 billion loan-renewal from the IMF despite
having been caught out lying to the Fund about their
reserves.''
In the on-going negotiations with the Paris Club, the
Russian government is reportedly seeking the outright
forgiveness of debt similar to that it gained from the London
Club after refusing to pay its debts to the latter
organization. Should a similar proportion of debt be written
off by the Paris Club (at least one-third of the approximately
$42 billion in debt reportedly covered by the negotiations),
the Russian government will likely gain the forgiveness of
approximately $12 billion in such debt in 2000. As a member of
the Paris Club, the United States would undoubtedly participate
in any such agreement, contributing an as-yet-undertermined
amount of outright debt forgiveness to the Russian government.
RUSSIAN GOVERNMENT DEBT TO THE GOVERNMENT OF THE UNITED STATES
According to the Congressional Research Service, as of
December 1999, the Russian Government's bilateral debt to the
Government of the United States consisted of about $1.4 billion
in direct loans and credits and about $4.1 billion in other
loans and loan guarantees. The components of this debt were
reported to be: $602 million in Lend-Lease debt from the period
of the Second World War; $783 million in outstanding direct
credits under the U.S. Department of Agriculture's ``P.L. 480''
program administered by the Commodity Credit Corporation; a
further $1.9 billion in outstanding loan guarantees under the
``P.L. 480'' program; and outstanding loans and loan guarantees
through the U.S. Export-Import Bank of approximately $2.2
billion. Staff of the Congressional Research Service also
reported that approximately $2.7 billion of the total bilateral
debt owed to the United States by the Russian Federation is a
component of the Paris Club debt being renegotiated during 2000
by the Paris Club and Russia.
As a member of various international financial institutions
such as the International Monetary Fund (IMF), the
International Bank for Reconstruction and Development (the
``World Bank''), and the European Bank for Reconstruction and
Development (EBRD), the United States also stands behind the
Russian Government's repayment of a large portion of the loans
extended to Russia by those institutions. Loans disbursed to
the Russian Government over the last eight years have
approached a total of about $20 billion through the IMF alone,
according to information provided to the Committee on
International Relations.
While H.R. 4022 does not speak to the issue of debt owed
such international financial institutions, the United States
Government's leniency in previous Paris Club reschedulings with
regard to Russian Government bilateral debt owed to it and the
United States' support for extensive loans to the Russian
Government by those international financial institutions have
supplemented the American government's policy of providing
extensive aid and financial support to the Russian government
since the end of the Soviet Union. Such direct aid and
financial support to the Russian Government has been provided
through various programs, including the ``FREEDOM Support Act''
assistance program for economic and political reforms, the
``Nunn-Lugar'' Cooperative Threat Reduction program to assist
Russia to meet its START-I arms reductions obligations,
donations, of large amounts of food commodities, purchases of
recycled Uranium, NASA contracts with the Russian Space Agency
in support of the International Space Station project, and a
quota for Russian launches of U.S.-made satellites.
Committee Action
H.R. 4022 was introduced on March 16, 2000, and referred by
the Speaker to the Committee on International Relations.
The Committee has held a series of hearing on Russian
foreign policy and related matters. At these hearing the issues
raised by this bill were considered at length. The Committee
held a hearing on March 25, 1999 on ``Russian Foreign Policy:
Proliferation to Rogue Regimes,'' and received testimony from
five R. James Woolsey, Anthony Cordesman, Henry Sokolski,
Sherman Garnett, and John McMahon. On May 12, 1999, the
Committee held a hearing on ``Russia's Foreign Policy
Objectives: What are They'', and took testimony from Steven
Sestanovich, Ambassador at Large for the New Independent
States, Brent Scocroft, former National Security Advisor, and
Michael McFaul.
Markup of the Bill
On April 13, 2000, the International Relations Committee
marked up the bill, pursuant to notice, in open session. The
Committee considered an amendment offered by Mr. Gejdenson
which would strike the world ``permanently'' (regarding the
President certifying to Congress that the Russian Federation
has permanently terminated all transfers of Moskit anti-ship
missiles . . .), and would provide the President with a
national security waiver. Mr. Bereuter asked unanimous consent
to amend the Gejdenson amendment by changing the word
``important'' to ``vital''. There was no objection. The
Gejdenson amendment, as amended, was agreed to by a recorded
vote of 20 ayes to 16 nays. Chairman Gilman asked unanimous
consent that the Committee be deemed to have before it an
amendment in the nature of a substitute consisting of the bill
as amended to that point. The unanimous consent request was
agreed to.
Subsequently, a quorum being present, the Committee agreed
by voice vote to a motion offered by Mr. Bereuter to favorably
report the bill, as amended, to the House of Representatives.
Rollcall Votes
Clause (3)(b) of rule XIII of the Rules of the House of
Representatives requires that the results of each record vote
on an amendment or motion to report, together with the names of
those voting for or against, be printed in the committee
report.
Description of amendment, motion, order, or other proposition (votes
during markup of H.R. 4022--April 13, 2000)
Vote No. 1--Gejdenson amendment, as amended.
Voting yes: Bereuter, Salmon, Gejdenson, Ackerman,
Faleomavaega, Payne, Brown, Hastings, Danner, Hilliard,
Sherman, Wexler, Rothman, Davis, Pomeroy, Delahunt, Meeks, Lee,
Crowley, and Hoeffel.
Voting no: Gilman, Goodling, Smith, Burton, Gallegly,
Ballenger, Rohrabacher, Royce, King, Chabot, Sanford, Campbell,
Brady, Radanovich, Tancredo, and Menendez.
Total: Ayes--20, Noes--16.
Other Matters
committee oversight findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
commmittee on government reform findings
Clause 3(c)(4) of rule XIII of the Rules of the House of
Representatives requires each committee report to contain a
summary of the oversight findings and recommendations made by
the Government Reform Committee pursuant to clause (4)(c)(2) of
rule X of those Rules. The Committee on International Relations
has received no such findings or recommendations from the
Committee on Government Reform.
advisory committee statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
applicabililty to the legislative branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
constitutional authority statement
In compliance with clause 3(d)(1) of rule XIII of the Rules
of the House of Representatives, the Committee cites the
following specific powers granted to the Congress in the
Constitution as authority for enactment of H.R. 4022 as
reported by the Committee: Article I, section 8, clause 1
(relating to providing for the common defense and general
welfare of the United States); Article I, section 8, clause 3,
(relating to the regulation of commerce with foreign nations);
and Article I, section 8, clause 18 (relating to making all
laws necessary and proper for carrying into execution powers
vested by the Constitution in the Government of the United
States or in any Department or Officer thereof).
preemption clarification
Section 423 of the Congressional Budget Act of 1974
requires the report of any committee on a bill or joint
resolution to include a committee statement on the extent to
which the bill or joint resolution is intended to preempt state
or local law. The Committee states that H.R. 4022 is not
intended to preempt any state or local law.
new budget authority and tax expenditures, congressional budget office
cost estimate, and federal mandates statements
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives requires each committee report that accompanies
a measure providing new budget authority, new spending
authority, or new credit authority or changing revenues or tax
expenditures to contain a cost estimate, as required by section
308(a)(1) of the Congressional Budget Act of 1974, as amended,
and, when practicable with respect to estimates of new budget
authority, a comparison of the estimated funding level for the
relevant program (or programs) to the appropriate levels under
current law.
Clause 3(d) of rule XIII of the Rules of the House of
Representatives requires committees to include their own cost
estimates in certain committee reports, which include, when
practicable, a comparison of the total estimated funding level
for the relevant program (or programs) with the appropriate
levels under current law.
Clause 3(c)(3) of rule XIII of the Rules of the House of
Representatives requires the report of any committee on a
measure which has been approved by the Committee to include a
cost estimate prepared by the Director of the Congressional
Budget Office, pursuant to section 403 of the Congressional
Budget Act of 1974, if the cost estimate is timely submitted.
Section 423 of the Congressional Budget Act requires the
report of any committee on a bill or joint resolution that
includes any Federal mandate to include specific information
about such mandates. The Committee states that H.R. 4022 does
not include any Federal mandate.
The Committee adopts the cost estimate of the Congressional
Budget Office as its own submission of any new required
information with respect to H.R. 4022, on new budget authority,
new spending authority, new credit authority, or an increase or
decrease in the national debt. It also adopts the estimate of
Federal mandates prepared by the Director of the Congressional
Budget Office pursuant to section 423 of the Unfunded Mandates
Reform Act. The estimate and report which has been received is
set out below.
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 28, 2000.
Hon. Benjamin A. Gilman,
Chairman, Committee on International Relations,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4022, the Russian
Anti-Ship Missile Nonproliferation Act of 2000.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Joseph C.
Whitehill.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 4022--Russian Anti-Ship Missile Nonproliferation Act of 2000
H.R. 4022 would prohibit the President from rescheduling or
forgiving any bilateral debts of Russia until the President
either certifies that Russia has ended all transfers of Moskit
anti-ship missiles to other countries or waives that
prohibition and certifies that the waiver is vital to U.S.
national security. The bill would require the President to
report to the Congress on the status of any missile transfers
to China. CBO estimates the additional reporting requirement
would cost less than $500,000, assuming the appropriation of
the necessary funds. Although the other budgetary impacts of
enacting the bill are highly uncertain, CBO estimates that they
would not be significant. Because the bill could affect direct
spending and receipts, pay-as-you-go procedures would apply.
In August 1999, creditor countries agreed to reschedule
payments on Soviet-era debts coming due between July 1, 1999,
and December 31, 2000. Rescheduling those payments would
increase the likelihood that the debt would be repaid. Under
that 1999 agreement, the United States would create a new debt
instrument out of the $496 million due on World War II
lendlease loans and agricultural commodity credits extended to
the Soviet Union before December 31, 1991. That amount plus
interest would be repaid over the 2001-2020 period. The United
States has not yet signed the bilateral accord with Russia that
would implement the multilateral agreement.
CBO assumes that the two most likely events under H.R. 4022
are that either Russia would agree to end shipments of the
missiles or the President would use the waiver authority. If
either of these outcomes occur, the bill would not affect
direct spending or receipts. If neither of those outcomes
occur, the United States would be unable to reschedule Russia's
debts under the bill. Not rescheduling Russia's debts would
inrease net outlays from the forgone payments due upon signing
of the bilateral agreement. A Russian default on its lendlease
loans could affect governmental receipts because Russia could
lose its normal trade relations status thus affecting tariff
collections.
H.R. 4022 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
The CBO staff contact is Joseph C. Whitehill. This estimate
was approved by Peter H. Fontaine, Deputy Assistant Director
for Budget Analysis.
Section-by-Section Analysis
Section 1. Short title
The bill may be cited as the ``Russian Anti-Ship Missile
Nonproliferation Act of 2000''.
Section 2. Purpose
States that the purpose of H.R. 4022 is to prohibit the
forgiveness or rescheduling of any bilateral debt owed by the
Russian Federation to the United States until the Russian
Federation has terminated all sales and transfers of Moskit
anti-ship missiles that endanger United States national
security.
Section 3. Findings
This bill contains a number of findings with regard to the
on-going sale of Russian-made ``Moskit'' anti-ship missiles to
the People's Republic of China. It states that the first of two
``Sovremenny'' class destroyers sold to the PRC by Russia has
now been delivered to the PRC and that the transfer of Moskit
(or ``Sunburn'') anti-ship missiles with which to equip those
destroyers, is scheduled to begin soon after. It states that
the Moskit missile is capable of carrying either a conventional
or nuclear warhead, is considered by the United States Navy to
be very difficult to defend against, and was designed
specifically to destroy American aircraft carriers and other
American warships equipped with the ``Aegis'' radar and battle
management system. The bill also states that the Russian
Federation is assisting the PRC to assemble Su-27 ``Sukhoi''
fighter aircraft capable of carrying an air-launched version of
Moskit missile and that Russia is reportedly discussing the
sale of such a variant of the Moskit missile with the PRC.
The bill states that Moskit missiles in any variant,
whether land-, sea-, or air-launched, raise the potential for
American casualties and could affect the outcome in any future
conflict in the Taiwan Strait or South China Sea. It also
states that the transfer of the missile by the PRC to Iran or
other belligerent states in the Persian Gulf region would also
increase the potential for conflict and for American
casualties.
Section 4. Prohibition of debt forgiveness
The bill, notwithstanding any other provision of law,
prohibits any rescheduling or forgiveness of any outstanding
bilateral debt owed to the United States by the Russian
Federation until the President can certify to the Congress that
the Russian Federation has terminated all transfers of Moskit
anti-ship missiles that endanger United States national
security, particularly transfers to the People's Republic of
China. The bill provides the President with the authority to
waive the prohibition if he certifies that such a waiver is
vital to the national security interest of the United States.
Section 5. Reports on the transfer by Russia of Moskit missiles
The bill requires that, no later than thirty days after
enactment of this Act and every six months thereafter, the
President report on the status of any contract and the date of
the transfer of any version of the Moskit missile, particularly
transfers to the People's Republic of China, occurring on or
after February 1, 2000. It allows for submission of all or part
of that report in classified form.
MINORITY VIEWS
danger of moskit missiles
H.R. 4022 would prohibit the rescheduling or forgiveness of
the $3.1 Billion in former Soviet debt owed to the U.S. by the
Russian Federation \1\ until the President certifies that
Russia has ``permanently terminated'' all transfers of the
Moskit anti-ship missile ``that endanger U.S. national
security,'' especially to the People's Republic of China (PRC).
The bill would also require that the President report to
Congress 30 days after enactment and every 6 months thereafter
on the status of any contract and transfer of Moskit missiles
to the PRC.
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\1\ This debt is the Soviet-era, pre-1992 debt, assumed by the
Russian Federation after the break-up of the Soviet Union. It includes
World War II lend-lease loans and agricultural commodity credits
extended to the Soviet Union before December 31, 1991.
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The Moskit anti-ship missiles, in air- or sea-launched
variants, are capable of traveling at speeds in excess of Mach
2 at low altitudes, greatly reducing the reaction time for the
targeted vessel to defend itself. Russia has delivered the
first of two new ``Sovremenny'' class destroyers contracted by
the PRC, each of which will carry eight Moskit missiles;
Beijing may order two more of these destroyers. These missiles
are specifically designed to destroy American aircraft carriers
and other warships equipped with advanced Aegis radar and
battle management systems, and the U.S. Navy considers the
missile to be extremely difficult to defend against. The
Russians are also discussing the sale of the air-launched
version of the missile to the PRC. We agree that these missiles
may well constitute a significant threat to U.S. vessels
operating in the Taiwan Straits and South China Sea; however,
we question the use of Russian debt rescheduling as the right
leverage to address this issue and we are concerned about the
possible impact of a failure to reschedule Russian debt.
previous russian debt rescheduling
The Russian Government's Soviet-era debt that is covered by
the Paris Club of official creditors is estimated at $42
billion. The Paris Club rescheduled portions of this debt in
1993, 1994, 1995, and 1996. These reschedulings aimed to (1)
ease Russian debt burden in exchange for the Russian government
implementing a macroeconomic stabilization program and (2)
ensure that Western official creditors, including the U.S. will
get repaid. The August 1999 interim rescheduling postponed
until the second half of 2000 those payments on about $8
billion in obligations that were due over the course of 1998-
2000. The U.S. completed negotiations with Russia on
implementing the August 1999 agreement under Paris Club
guidelines \2\ on May 26, 2000. The Congressional Notification
(CN) on this agreement was presented to Congress on the same
day.\3\
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\2\ Under the Paris Club guidelines, any debt rescheduling or
forgiveness must be negotiated and agreed by all members under a
general framework; individual bilateral agreements between debtor and
creditor country follow.
\3\ Current law requires a Congressional Notification on debt
rescheduling after the bilateral negotiations have been completed and a
bilateral agreement has been signed. On debt rescheduling, the law does
not require consultations with Congress before entering into the Paris
Club framework agreement. On debt forgiveness, the law states that the
Administration must come to Congress for an appropriation to fund any
forgiveness of Russian debt to the United States.
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The goal of H.R. 4022 is to utilize the U.S. leverage
obtained by ongoing reschedulings of Russian official debt to
obtain more responsible Russian behavior in its arms sales to
China. In fact, the legislation explicitly prohibits the
President from rescheduling or forgiving any Russian debt until
he certifies that the Russians have terminated all transfers of
Moskit anti-ship missiles, particularly transfers to the PRC.
The Administration was and continues to be strongly opposed
to this legislation. In the Administration's view, prohibiting
rescheduling and forgiveness will not only cripple U.S.
leadership in the Paris Club but also undermines a key Paris
Club principle--equal treatment of creditors--and encourage
other creditors to cut special deals with Russia to the
determinent of the United States. The Administration believes
that U.S. efforts with Paris Club members for debt relief for
the highly indebted poor countries (HIPC) would also be
jeopardized.
the issue of russian debt rescheduling and forgiveness
In 1999, following the August 1998 financial crisis, Russia
could not meet its $17.8 billion debt service obligations.\4\
Collapse of the ruble made servicing the dollar denominated
debt unsustainable. Full debt servicing would have absorbed
over 80% of the total projected Russian federal revenue. Russia
chose to seek rescheduling and forgiveness of the Soviet-
inherited debt, while continuing to service its post-Soviet
debt (primarily Eurobonds and other capital market issues but
also including debt owed to the United States, such as to the
Export-Import Bank). The August 1999 Paris Club agreement, as
well as the February 2000 London Club (private holders of the
Russian Soviet-era debt) agreement, are the outcomes of this
period.
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\4\ Includes official and private Soviet and post-Soviet debt. The
Soviet-inherited debt represents two-thirds of Russia's total debt
obligations.
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The Russian economic situation looks significantly
different today. Partially fueled by higher prices for Russia's
oil exports as well as import substitution driven growth, the
Russian economy is on the rise. Foreign exchange reserves are
at the highest level in nearly 2 years. However, without
significant economic reforms and sustained growth, Russia is
still expected to have payment difficulties on the Soviet-era
debt. Russian government officials said publicly that they will
attempt to seek additional debt rescheduling and forgiveness at
the upcomng G-7 Summit in Okinawa in July. Germany, with 48% of
the estimated $42 Billion Russian Paris Club debt, will chair
the upcoming Paris Club meeting, and has publicly questioned
the need for any new Russian debt forgiveness. However, further
debt rescheduling has not been ruled out by the Paris Club.
The bilateral U.S.-Russia debt re-scheduling agreement,
signed on May 26, 2000, is the outcome of the August 1999 Paris
Club framework. It normally takes approximately a year to
negotiate and sign a bilateral agreement. There is no mechanism
in the Paris Club to amend the original framework if the
economic situation, as is the case of Russia today, changes. If
the U.S. can't sign an agreement with Russia to implement the
August 1999 agreement, the Russians will have two choices:
either pay the U.S. the upcoming $150 million of the Lend Lease
portion of the Soviet debt on/around July 1, 2000 or default
and loose its annual NTR status. Since Russia greatly values
its NTR status and has sufficient foreign exchange reserves, it
would most likely make this payment. While it may sound very
attractive to have the Russians pay the United States right
away, or Paris Club partners will immediately demand the same
treatment from the Russians. Russia may suddenly face the
prospect of default to major Western creditors. A Russian
default to key Western governments will undermine the fragile
stability of the Russian economy, and decrease the chances that
the government of President Putin would implement any type of
economic reforms. This type of economic hardship could even
force the Russians to export more military items to China and
other countries of concern to the U.S. Therefore, the remedy
chosen by this bill could have the effect of increasing the
problem the bill is seeking to address. These were the concerns
we had in mind when the Committee supported the Gejdenson (D-
CT) amendment which granted the President a national security
waiver that would allow the president to waive the prohibition
on debt rescheduling and forgiveness if the President finds
such waiver is vital to the national security interest of the
United States. We are gratified that the Committee recognized
that this issue required a degree of flexibility.
Sam Gejdenson.
Gary L. Ackerman.
Earl Pomeroy.
Howard L. Berman.
Alcee L. Hastings.