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Russia: US Leaders Dispute Moscow's Loan Restructuring

  • Andrew Tully

Russia still owes the U.S. government nearly $5 billion in debt dating back to the World War II. Moscow owed a payment on that debt at the beginning of July, but the U.S. administration is allowing Russia to postpone the payment to ease pressure on that nation's cash flow. RFE/RL's Andrew F. Tully reports that some leaders in the U.S. Congress say Washington should not be indulging the Russian government, given the war in Chechnya and Moscow's support of Slobodan Milosevic.

Washington, 11 July 2000 (RFE/RL) - A leader of the U.S. Congress is retaliating for the decision by the administration of President Bill Clinton allowing Russia to postpone a $155 million payment on a loan that is decades old.

Senator Jesse Helms (R-North Carolina) says he will suspend Congress' consideration of all pending ambassadorial nominations until Clinton changes his mind.

Helms, chairman of the Senate Foreign Relations Committee, is joined in his opposition to restructuring Russia's debt repayment to the U.S. by Congressman Benjamin Gilman (R-New York). Gilman is chairman of the House of Representatives' International Relations Committee.

Helms and Gilman argue that such help on Moscow's loan repayment would only reward the government of Russian President Vladimir Putin for the war in Chechnya and its continued support for the government of Yugoslav President Slobodan Milosevic.

Russia still owes a total of $485 million to the United States. Some of this debt was incurred nearly 60 years ago when the Soviet Union and the U.S. were allies against Nazi Germany and Washington loaned it money for food, machinery and other material necessary to fight the war. The $155 million payment on the debt was due on July 3.

One June 30, the Clinton administration notified Congress that it was allowing a postponement of the payment.

A spokesman for Helms' committee (Mark Thiessen) says the chairman finds it "unacceptable" that the Clinton administration would give Russia financial help that could only help Moscow pursue its war against Chechen separatists.

And Helms wrote in a June 14 letter to Madeleine Albright, the U.S. secretary of state, that Russia recently made a $150 million loan to the government of Yugoslavia. The amount is nearly the same as the postponed payment.

The Clinton administration has cited two primary reasons for allowing the payment to be postponed. It notes that the Russian government is still feeling the effects of the country's financial collapse of nearly two years ago, and to make the July 3 payment would have been a hardship. And if Moscow had defaulted on the payment, Russia automatically would have lost its normal trade status with the U.S., and its exports would have been assessed higher import duties. This would have further hurt Russia's fragile economy.

Second, the administration argued that postponing the payment was part of a larger agreement between Moscow and what is known as the "Paris Club" of nations that are Russia's creditors. These countries -- including Britain, Germany and Japan -- decided last August to delay $8 billion worth of payments for the years 1999 and 2000. State Department spokesman Richard Boucher says the U.S. could not unilaterally withdraw from that agreement without causing the entire agreement to collapse.

Helms dismisses these arguments, and says they would not even be at issue if Russia were to call a unilateral cease-fire in Chechnya and end its support of Yugoslavia.

Ian Vasquez, an economist at the Cato Institute, a Washington think tank, says it is irrelevant whether the Paris Club agreement collapses. He told RFE/RL that the U.S. has been wasting money on Moscow -- whether as the capital of a totalitarian Communist state or a fledgling democracy -- for six decades. And after all this time, he says, there is nothing to show for the investment.

Vasquez dismisses the argument that the current Russian government must be given leeway in paying a debt that was in large part incurred by the Soviet Union.

"I consider that an odious debt. You have a dictatorship that indebted its own citizenry, and now it's being forced -- the citizenry is being forced to pay back those debts. That money is lost," he says.

Vasquez says it is time for the West in general and the U.S. in particular to scrap its current policy of helping Russia and replace it with one that would drastically reduce aid or eliminate it altogether.

Harley Balzer, a professor of Russian studies at Georgetown University, disagrees. He says much of the dispute between Clinton and his opponents in Congress focuses on the election-year politics. Americans will vote on a new president in November. At the same time, one-third of the Senate's 100 seats is being contested, as are all 435 seats in the House of Representatives.

Balzer told RFE/RL that forcing Russia to make its debt payments on time would have no meaningful effect on Russia's support for Milosevic or its war in Chechnya. He says: "Nothing is going to solve the Chechnya problem, right now. They haven't solved it in 200 years. Northern Ireland isn't solved, the Basques aren't solved. You know, Russia's just going to have to get used to living with the kind of things that Northern Ireland has lived with."

Balzer says he believes Clinton's policy of giving limited help to Russia seems preferable, especially since his political opponents have little to offer as an alternative.

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