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Former USSR: Crime, Corruption Top U.S. Aid Concerns

Washington, 8 May 1997 (RFE/RL) - Crime and corruption in Russia, Ukraine and other newly independent states top the list of concerns U.S. legislators have about approving increased economic assistance to those countries next year.

Senator Gordon Smith (R-Oregon) said Wednesday that he has doubts about launching any large-scale assistance programs in the region, particularly Russia, until he gets assurances that "this assistance will not inadvertently fuel the corruption that is so rampant in Russia today."

Smith was presiding over a hearing of a U.S. Senate Foreign Relations subcommittee inquiring into 1998 funding for aid to Central and East Europe, as well as the former Soviet republics.

The U.S. State Department is requesting congressional approval for $492 million for Central and Eastern Europe, and $900 million for the former Soviet Union in the fiscal year 1998, beginning this October.

That's nearly a third more for the newly independent states than current levels and a reversal of a three-year decline.

Most of the 1998 money -- $525 million -- is to be spent on a new program called Partnership for Freedom (PFF).

It will be aimed mostly at promoting small businesses, developing partnerships with western firms and accelerating tax and legal reforms to improve the investment climate.

Senator Joseph Biden (D-Delaware) who recently traveled in the area, asked government officials testifying at the hearing how they can be sure the new money will reach its proper target.

He said he was in Russia and other countries in the region recently and was amazed at the scale and magnitude of criminal enterprise. "There is widespread and deeply-rooted corruption in most of these countries, particularly Russia and Ukraine," he said.

Biden said that in Russia the problem goes beyond various Mafia groups. He said many former communist officials remain in positions of power and management and that for them often "free enterprise means you can steal it."

Reinforcing his point, Biden said "small and medium-size businesses are the problem...they have been stolen by former government officials, there is nothing (of U.S. aid) that is trickling down."

Biden said this is what he was told in Moscow repeatedly by a wide range of politicians and that they all urged the United States to stop sending financial assistance to Russia.

Richard Morningstar, presidential adviser and the State Department's chief coordinator of U.S. assistance to the newly independent states, said the new program will be aimed primarily at new businesses and that they will have to go through a thorough screening process to determine legality and ownership.

He said another part of the program will be directed at improving forces of law and order. "We want to increase the money that goes to help law enforcement two and a half times," Morningstar said.

He said the United States wants to help the newly independent states give their citizens a more tangible stake in reform and that means, among other things, increasing investment to create jobs.

Morningstar said "this will require country leaders to take on more aggressive legal and policy reforms to improve the environment for business....and increased cooperation from us to help fight the crime and corruption."

He said the PFF program would be launched first in regions and countries that have made the best progress in democratic and market reforms.

Morningstar said Russia is in the forefront, followed by Moldova, Kyrgyzstan, Ukraine and Georgia.

He said the United States views Ukraine's problems as setbacks that can be overcome. And he said they will be discussed thoroughly with President Leonid Kuchma who is expected in Washington next week.

Morningstar said the United States is considering cutting back some aid programs if Ukraine continues to mistreat American companies and fails to tackle problems of crime, corruption and stalled economic reforms.

A senior official from the U.S. Agency for International Development, Thomas Dine, told the subcommittee that the talks with Kuchma will be very frank, adding "it will be a hardhitting session."

Dine described the situation in Ukraine as "excruciating," listing political stalemate, economic decline and lack of reform as key woes.

He said the World Bank is seriously considering suspending three major loans and delaying several new ones to Ukraine.

Nevertheless, the United States is proposing to hold aid levels steady for Ukraine giving it $225 million worth of assistance, the same as it gets now.

That would rank Ukraine ($225 million) second only to Russia in the amount of U.S. annual economic aid in fiscal 1998. But legislators may decide to change the funding for individual countries.

Last year, the Congress rejected the Administration's proposals, slashing aid to Russia to boost Ukraine to top position on the list of U.S. aid recipients. and nearly doubling what the Administration had wanted for Armenia.

The effort of legislators to redress what they said was an imbalance in Russia's favor ranked Russia a distant second, equal with Armenia in aid in the current fiscal year.

The proposed 1998 levels would increase aid to Russia nearly two and a half times to $241 million.

Aid for Armenia is to decline from the current $95 million to $80 million.

A State Department official, who spoke with RFE/RL on condition of anonymity, said the congressional earmark was disproportionate to Armenia's size and needs and that the $80 million proposed for 1998 is a more balanced amount.

Belarus would be the only other country to receive less aid than the year before, declining from the current $5.1 million to $4.9 million in a clear signal of U.S. dissatisfaction with the dictatorial policies of president Alyaksandr Lukashenka.

All nine remaining republics are to get substantial increases under the 1998 aid budget proposal with Kazakhstan ($52 million), Georgia ($41.9 million), Kyrgyzstan ($36.5 million) and Moldova ($32.8 million), as well as Uzbekistan ($32.5 million), and even Tajikistan ($15.4 million) and Turkmenistan ($6 million) benefitting.

U.S. aid for Azerbaijan is to nearly double to $31.5 million in spite of legislation that bans U.S. assistance to the government in Baku while Azerbaijan continues an economic blockade against Armenia.

The proposed funds would go mostly to promote trade and investment in the private sector and help refugees, as well as give other humanitarian assistance allowed under the legislation.

The U.S. State Department has long urged Congress to lift the ban. Morningstar said at the hearing that "we could do a lot more in Azerbaijan to promote democracy and...privatization if it were not prohibited."

The State Department official said legislators are becoming more receptive to this view and are now considering legislation to lift restrictions on U.S. aid to the government of Azerbaijan.

He said the budget proposal will be discussed and debated in several congressional committees over the next few months and that he does not expect a vote before September.