- The Washington Times - Friday, November 3, 2000

International aid to Russia in the mid-1990s was tailored to help favored politicians such as then-President Boris Yeltsin, with the Clinton administration greatly underestimating the difficulty of reforming Russia's economy, according to a new General Accounting Office study.

The GAO report, released by House Banking and Financial Services Committee Chairman James A. Leach, concluded there was no coordinated strategy directing some $66 billion in Western aid to Russia in the 1990s, with some areas of the Russian economy, such as banking, still in need of a major overhaul.

"Recent U.S. and Western efforts to promote free-market economics in the former Soviet Union have been at best ineffective and at worst counterproductive," Mr. Leach said in releasing the report Wednesday.

In a speech on the House floor, Mr. Leach said the GAO findings were "especially troubling" in light of reports that Vice President Al Gore and the Clinton administration had made secret deals with then-Prime Minister Viktor Chernomyrdin in 1995 not to impose U.S. nonproliferation sanctions in exchange for a halt to Russian weapons sales to Iran.

The Washington Times has reported that the deal also included a pledge by the vice president not to disclose it to Congress.

The "apparent purpose" of the Gore-Chernomyrdin deal "was to facilitate a Russian aid policy that resulted in the squandering of American tax dollars for the benefit of a kleptocratic elite, rather than the Russian people," Mr. Leach said.

"It is now self-evident that U.S. policy failed, and the Gore-Chernomyrdin Commission is a symbol of that failure," he added.

Among the findings of the GAO report:

• Political considerations had played a crucial role in many aid programs and International Monetary Fund loans to Russia. In 1994 and again in 1996, the IMF approved major loans to the Russian government primarily to show political support for Mr. Yeltsin not to promote structural economic reforms.

• The United States and other Western leaders did not object strongly enough to the "loan-for-shares" privatization program that created windfalls for a few insiders as Russia privatized some of its biggest state-owned assets in the mid-1990s.

• While the Russian banking system was targeted early on as a primary engine for reform, progress in strengthening Russian banks has been "limited."

• Despite widespread concerns about corruption in Russia, "explicit anti-corruption efforts have represented a relatively small share of international assistance to Russia."

Despite the policy failures, the GAO report noted a recent upturn in the Russian economy and the adoption of a long-term plan by the Russian State Duma to address its structural problems.

"Donors can take some credit for helping develop this capacity," the report said.

But GAO analysts concluded: "The challenge of Russia's transition was enormous and greater than generally appreciated by the West. In hindsight, expectations within Russia and among the donors of achieving quick results were unrealistic."

Congressional Republicans continue to press the administration for secret documents related to Mr. Gore's dealings with Mr. Chernomyrdin.

Three House Republican leaders International Relations Committee Chairman Benjamin A. Gilman of New York, Armed Service Committee Chairman Floyd D. Spence of South Carolina and Permanent Select Committee on Intelligence Chairman Porter J. Goss of Florida threatened to seek a subpoena if the Clinton administration refused to turn over three letters and a number of State Department cables relating to Russian weapons sales to Iran.

"In view of the serious questions that have been raised, we believe that the only acceptable course for the administration is full disclosure," the three said in a letter to President Clinton.

The Senate Foreign Relations Committee yesterday fell one vote short of issuing its own subpoena for the disputed documents.

The committee voted 9-8, with one abstention, to demand that the administration turn over the documents, but committee rules require 10 votes for the subpoena to be approved.

Committee Chairman Jesse Helms, North Carolina Republican, said yesterday that he plans another vote on the subpoena on Nov. 14, when Congress returns from its recess to begin a lame-duck session.

The Clinton administration has stated there was nothing improper in Mr. Gore's dealings with Russia over weapons sales to Iran.

The administration has offered to let congressional leaders have limited access to critical documents and letters in the controversy but has refused to release them more broadly to Congress, citing security concerns.

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