U.S. State Department Geographic Bureaus: Europe and Canada Bureau

U.S. Department of State
96/02/01 Fact Sheet: US-Russian Economic and Military Issues
Bureau of Public Affairs

U.S.-Russian Economic Relations and Military Issues

With the end of the Cold War and the reemergence of a Russian state, U.S. relations with Moscow have evolved rapidly. At meetings in Vancouver, Tokyo, Moscow, and Washington, DC, Presidents Clinton and Yeltsin laid the basis for a U.S.-Russian partnership. Progress has been made in several important fields, particularly in arms control. While disagreements persist on individual issues, the U.S. and Russia now consult on major issues of mutual and international interest.

The United States actively supports Russian efforts to develop democratic institutions and a free market economy. At successive summit meetings, Presidents Clinton and Yeltsin reaffirmed the fundamental importance of U.S.-Russian cooperation and agreed on a variety of bilateral initiatives to expand economic relations between the two countries and promote democratic and market reforms in Russia.

U.S. assistance to Russia funds a variety of programs in the following key areas: private-sector development, privatization and enterprise restructuring, trade and investment, democracy initiatives, energy, health care, housing, and environment. Humanitarian assistance represented a major portion of U.S. aid during the initial transition phase in Russia, when there was a pressing need for food, medicine, and other essential commodities. U.S. efforts now concentrate on technical assistance and, increasingly, direct support for trade and investment. U.S.-Russia trade was about $5.8 billion in 1994.

Congress has appropriated substantial resources to support U.S. assistance to Russia and the other New Independent States (NIS). In September 1993, Congress approved a special one-time assistance package of $2.45 billion aimed at helping all the NIS during the difficult period immediately following the fall of communism and the breakup of the Soviet Union. Approximately $1.6 billion of that amount was allocated for programs in Russia. In August 1994, Congress passed a $850-million legislative pack-age for assistance to the NIS in FY 1995, of which about 40% was targeted for Russia. Assistance activities in FY 1995 continued ongoing programs to strengthen democratic practices and promote the development of private enterprise and market institutions. There was a new emphasis in the 1995 program on direct support for U.S.- Russian trade and investment, which has been growing with the successful implementation of market reforms. The 1995 program also included new activities to expand cooperation on strengthening the rule of law and fighting the rise in crime.

U.S. obligations under all assistance programs total $3.65 billion, of which more than $2.6 billion has been expended. Approvals for the financing of investment and non-food exports under U.S. commercial programs in Russia exceed $2.3 billion.

Bilateral Economic Issues

Gore-Chernomyrdin Commission. Under the leadership of Vice President Gore and Prime Minister Chernomyrdin, the U.S. and Russia are working to advance bilateral cooperation through eight working committees known collectively as the Gore-Chernomyrdin Commission. The committees address issues in the fields of science and technology, business development, space, energy policy, environmental protection, health, defense diversification, and agriculture. The Commission met in Moscow in June 1995 and in Washington, DC in January 1996.

Trade and Investment. At the September 1994 summit in Washington, DC, Presidents Clinton and Yeltsin agreed to place new emphasis on expanding trade and investment. They signed a joint statement on a "Partnership for Economic Cooperation" which will serve as a framework for reducing barriers to expanded economic cooperation. President Clinton also announced that $100 million in FY 1995 assistance to the NIS would be used to provide direct support for trade and investment through the Overseas Private Investment Corporation (OPIC), the Trade and Development Agency (TDA), and the Commerce Department (see box on U.S. Support for Russian Democracy and Development).

The U.S.-Russia Business Development Committee (BDC) was established June 1992 in Lisbon and is co-chaired on the U.S. side by Commerce Secretary Ronald Brown. The BDC helps remove impediments to trade and investment. The 1992 U.S.-Russia trade agreement provides mutual most- favored-nation status and offers intellectual property rights protection. In 1992, the two countries also signed treaties on the avoidance of double taxation and on bilateral investment. The Russian parliament, however, has not ratified the bilateral investment treaty.

In October 1993, Russia received generalized system of preferences (GSP) status under which more than $440 million of Russian goods will benefit. The U.S. supports Russia's application to become a member of the World Trade Organization.

Military Issues

As noted, Russia signed the NATO Partnership for Peace initiative in June 1994; the U.S. looks forward to Russia's active participation in Partnership for Peace. The U.S. and Russia signed a memorandum of understanding on defense cooperation in September 1993 which institutionalized and expanded relations between defense ministries, including establishing a broad range of military-to-military contacts. The U.S. and Russia carried out a joint peacekeeping training exercise in Totskoye, Russia, in September 1994. Based on the January 14, 1994, agreement between Presidents Clinton and Yeltsin, the two nations stopped targeting their strategic nuclear missiles at each other as of May 30, 1994.

Agreements/Cooperation. U.S. and Russian security cooperation emphasizes strategic stability, nuclear safety, dismantling nuclear weapons, preventing proliferation of weapons of mass destruction and their delivery systems, and enhancing military-to-military contacts. At the Lisbon summit in 1992, the United States signed a protocol to the START I Treaty with Russia, Belarus, Kazakstan, and Ukraine--where the strategic nuclear weapons of the former Soviet Union were located-- making the four countries party to the treaty and committing all signatories to reductions in strategic nuclear weapons within the seven- year period provided by the treaty. The treaty entered into force December 5, 1994.

On January 3, 1993, the U.S. and Russia signed the Treaty between the United States of America and the Russian Federation on Further Reduction and Limitation of Strategic Offensive Arms (START II). This treaty reduces overall deployments of strategic nuclear weapons on each side by more than two-thirds from current levels and will eliminate the most destabilizing strategic weapons--heavy intercontinental ballistic missiles (ICBMs) and all other deployed multiple-warhead ICBMs. At the September 1994 summit, the two nations agreed to immediately begin removing nuclear warheads due to be scrapped under START II--instead of taking the nine years allowed--once START I takes effect and the START II Treaty is ratified by both countries. At their May 1995 summit, Presidents Clinton and Yeltsin agreed on a set of principles that would guide further discussion in the field of demarcation between anti- ballistic missile systems and theater missile defenses. They also agreed on steps to increase the transparency and irreversibility of nuclear arms reduction and committed not to use in nuclear weapons newly produced fissile materials or fissile materials removed from nuclear weapons being eliminated and excess to national security requirements.

Following ratification by Russia and the other NIS, the Conventional Armed Forces in Europe Treaty entered into force on November 9, 1992. This treaty establishes comprehensive limits on key categories of military equipment--tanks, artillery, armored combat vehicles, combat aircraft, and combat helicopters--and provides for the destruction of weaponry in excess of these limits.

Cooperative Threat Reduction (CTR). Often called Nunn-Lugar assistance, this type of assistance is provided to Russia (as well as Belarus, Kazakstan, and Ukraine) to aid in the dismantlement of weapons of mass destruction and prevent the proliferation of such weapons. To date, the U.S. has allocated over $600 million for assistance to Russia under this program. Thirteen implementing agreements have been signed. Key projects have included assistance in the elimination of strategic offensive arms ($162 million), design and construction of a fissile material storage facility ($90 million), provision of fissile material containers ($50 million), material control and accounting and physical protection of nuclear materials ($45 million), and development of a chemical weapons destruction plan and provision of equipment for a pilot laboratory for the safe and secure destruction of chemical weapons ($55 million). Under the CTR program, the U.S. is also assisting Russia in the development of export controls; providing emergency response equipment and training to enhance Russia's ability to respond to accidents involving nuclear weapons; providing increased military-to- military contacts; and encouraging the conversion of Russian defense firms through the formation of joint ventures to produce products, including housing, for the civilian market. As part of the CTR program, the U.S. has awarded $20 million to a joint venture project involving an American housing firm and three Russian aerospace firms to construct housing for demobilized military officers. Portions of the Russian defense firms will be converted to the production of prefabricated housing systems and related products. In a multilateral effort (the European Union and Japan are also involved), the U.S. has also provided $35 million to establish the International Science and Technology Center (ISTC), which provides alternative peaceful civilian employment opportunities to scientists and engineers of the former Soviet Union involved with weapons of mass destruction and their delivery systems.

Officer Housing Resettlement. The U.S. has assisted Russia with the construction of housing for demobilizing military officers. In response to appeals from the Russian and Baltic Governments, the United States announced at the 1993 Vancouver summit the Russian Officer Housing Resettlement Program to ease the burden of withdrawing Russian military forces from the Baltic nations. A pilot project for construction of 450 housing units for demobilizing officers was begun in summer 1993. At the Tokyo summit of G-7 leaders, President Clinton committed the United States to finance 5,000 housing units for demobilizing military officers. Congress appropriated $160 million in FY 1994 for this project. Of the 5,000 houses, 2,500 will be new construction and 2,500 will be provided through vouchers for existing houses. Distribution of vouchers and assignment of housing began in August 1994 and is expected to continue through 1996.

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U.S. Support for Russian Democracy and Development

The U.S. Government has been in the forefront of delivering privatization assistance to Russia since October 1992.

U.S. Agency for International Development (USAID). USAID has the principal responsibility for implementing technical assistance to Russia and the other New Independent States. In FY 1994, USAID devoted over $1.6 billion in assistance to help Russia develop democratic institutions and transform its state-controlled economy to one based on market principles. Programs are active in the areas of privatization and private sector development, agriculture, energy, housing reform, health, environmental protection, economic restructuring, independent media, elections, and the rule of law. The U.S. recently pledged $30 million to help Russia in its fight against crime and to support a new legal infrastructure.

U.S. Export-Import Bank (Eximbank). Eximbank approved about $2 billion in loans, loan guarantees, and insurance for transactions in Russia from 1991 to March 1995. Of this total, more than $1 billion was approved under its Oil and Gas Framework Agreement.

U.S. Overseas Private Investment Corporation (OPIC). OPIC provides loans, loan guarantees, and commercial and political investment insurance to American companies investing in Russia. As of FY 1994, OPIC approved more than $720 million in investment financing and over $1.4 billion in insurance for more than 40 projects. The total investment value of these projects is more than $2.2 billion. OPIC has reserved $500 million in finance and insurance assistance for Russia and other NIS defense conversion efforts.

Trade and Development Agency (TDA) and Department of Commerce. TDA has approved more than $45 million in funding for feasibility studies on 114 investment projects.

Commerce Department. American Business Centers have been opened in St. Petersburg, Nizhnevartovsk, Novosibirisk, Volgograd, Nizhny Novgorod, Yekaterinburg, Khaborovsk, Vladivostok, and Chelyabinsk to help U.S. and Russian companies do business in Russia. An additional center in Yuzhno-Sakhalinsk was planned for opening in 1995. The Commerce Department has also established a Special American Business Internship Program (SABIT) in Russia, and an NIS business information system.

Agricultural Credit. For 1995, the U.S. authorized $30 million in export credit guarantees in connection with sales of U.S. agricultural commodities under a private banking sector program in Russia as part of the Commodity Credit corporation's Export Credit Guarantee Program (GSM- 102).

U.S. Information Agency (USIA). USIA continues diverse programs in public administration, communications, business, and education in Russia. By 1995, more than 20,000 Russians had participated in U.S.- sponsored exchanges.

U.S. Department of Agriculture. A variety of technical assistance activities are coordinated by USDA under the Emerging Democracies Program. In March 1994, a U.S.-Russia Joint Commission for Agribusiness and Rural Development was established to channel funds generated by the sale of donated U.S. commodities to support private and social initiatives in rural communities throughout Russia.

Eurasia Foundation. The Foundation--a private, non-profit, grant-making organization supported by U.S. funds--has disbursed more than $24 million in small grants to U.S. and indigenous organizations promoting reform in Russia and the other NIS

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