PANEL I OF A HEARING OF THE SENATE FOREIGN RELATIONS COMMITTEE SUBJECT: CORRUPTION IN RUSSIA CHAIRED BY: SENATOR JESSE HELMS (R-NC) WITNESS: DEPUTY SECRETARY OF STATE STROBE TALBOTT

SEN.  HELMS:  (Raps gavel.)  The meeting will come to order.  I've been instructed by the distinguished senator from Delaware, Mr. Biden, the ranking Democrat on the committee, to proceed.  He's on his way.  He's like all the rest of us that have a busy schedule.  The subject of today's hearing, as is well known, and I'm glad to see so many people here today, the subject is corruption in Russia and recent revelations about the diversion of billions of U.S. taxpayer dollars into the pockets of corrupt Russian officials.  Now, the committee's purpose is to examine if the Clinton-Gore administration contributed to this problem and, if so, how so.  And also, whether the administration was aware of this corruption but chose to ignore it.  Now, we are pleased to have Deputy Secretary of State Strobe Talbott with us to discus the administration's position, following which we will hear from a distinguished group of former officials of the State Department, of the CIA and the FBI, as well as the noted scholar.  Now, let me stress at the outset, our purpose today is not to debate the wisdom of supporting or engaging Russia.

We are here to discuss how the administration managed, or mismanaged, the United States relationship with the Russian government, and specifically what happened to the $5.2 billion in grants and $12.8 billion in loans that were entrusted to the United States government by the American taxpayers to support our Russian policies.  Now the administration's defenders have argued that yes, the United States aid was stolen, but they say that was a small price to pay for the nuclear stability our assistance had bought.  Now, these defenders and their logic, it seems to me � I may learn differently today � these defenders lean on a weak reed, to say the least.  The aid program for deconstructing and preventing the proliferation of Russian nuclear weapons accounts for a mere 8 percent of the total U.S. assistance to Russia.  And our purpose today is to try to determine what happened to the rest of that money which was supposed to facilitate Russian reform.  And I confess deep concern that the policies pursued by the president and Mr. Gore, through the so-called Gore-Chernomyrdin Commission, may have abetted corruption in Russia.  It has been widely reported that in 1995, the CIA sent a memorandum to the vice president discussing corruption in the Russian government and warning that foreign aid funds were being diverted into the pockets of Russian officials.  And the vice president is said to have sent the memo back with a scatological epithet scrawled across it.  Emblematic of the administration's policy, he apparently did not want to know.  And just last week, the Washington Post reported that the first lady's two brothers were involved in a nut-growing venture with a crooked Georgian warlord, whose goal is to overthrow our friend and ally, President Eduard Shevardnadze.  Worse still, the Rodham brothers' partner in this venture was a man named Grigory Loutchansky, and we'll hear about him later today, a known organized-crime figure involved in the smuggling of nuclear materials.

Now, the question is inevitable: Why would the Rodhams do business with a thug like Loutchansky?  A better question, I guess, is why wouldn't they?  After all, Loutchansky was invited to attend a 1995 fundraiser you know where, and he had his picture with the president in 1993.  And I guess that's the one over there.  Loutchansky was invited to that fundraiser the same year the president went to Moscow and called for, quote, "an all-out battle to create a market based on law, and not lawlessness."  In uttering that worthy phrase, while simultaneously consorting with a corrupt figure like Loutchansky, surely it sends the wrong signal to President Yeltsin and Russian leaders of today.  Now then, how can the United States ask Russian government officials not to consort with such criminals at home, when our own president and vice president appear to have done so?  And I hope our witnesses today will address why the administration has failed to make a priority out of ending the theft of U.S. aid and for excising corruption from the highest levels of the Russian government.  The administration's defense's � alternative to looking the other way � was to abandon our policy of engagement with Russia.  And I contend that the opposite is true.  By not pressuring Russia's leaders to expunge corruption, the United States has led the Russian people to lose faith in market economies and democracy.  It is patently dishonest to suggest that the only policy choice is between forsaking engagement and giving Russian "kleptocrats" a carte blanche to pick the American taxpayers' wallets.  It is my hope that this hearing and one next week will provide new thinking about the ways the United States can help the Russian people get rid of irresponsible leaders who are stealing from Russia and from them.

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