House International Relations Committee Hearing: Russian Policy Toward Iraq, Iran and North Korea

February 26, 2003

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REP. HYDE: The committee will come to order. I have a feeling that the weather, which is very unseemly for Washington DC, not so much for Siberia but for Washington, has held some of our members from getting in. I hope they come.

The subject of today's hearing is of great immediacy, as the deadline for action regarding Iraq fast approaches. Given United States attempts to obtain broad international cooperation to compel Iraq to disarm and our efforts to secure a new United Nations Security Council resolution, Russia's policy toward the Persian Gulf region is a key consideration in U.S. policy, especially as Russia has the power to veto any Security Council resolution.

Seen within the larger context of President Putin's realignment of Russian foreign policy in the direction of greater cooperation with the United States and the West in the aftermath of September 11th, Moscow's policies toward Iraq and Iran constitute a troubling exception.

Russia's support of France's efforts to hinder action by the U.S. and Britain regarding Iraq is an unfortunate development, and, along with other policies such as its construction of a nuclear reactor in Iran, constitute major impediments to good relations between our two countries.

The motivations behind Russia's policies towards Iran and Iraq, as well as North Korea and other states of concern, are the subject of considerable debate. While some see geopolitical considerations (in?) opposition to U.S. influence as primary, others regard economic considerations as paramount; the latter point of Putin's statements that Russia's principal concern is economic growth and that its foreign policy must be aimed at securing the means by which this goal can be attained.

Well, we're very fortunate today in having before us all of our panelists, who are already distinguished in this subject and who I believe will be indispensable in assisting this committee and this House in achieving a better understanding of Russia's foreign policy in the Persian Gulf and elsewhere.

We are particularly fortunate and honored to have before us Mikhail Margelov, the chairman of the Committee on Foreign Affairs of the Federation Council of the Russian Federation. As you are aware, the Federation Council is the upper house of the Russian Parliament, and Chairman Margelov is in a position to give us a well-informed and candid assessment of the thinking of Russia's policymakers on these and other subjects.

It is rare that we have the opportunity to hear from so senior an individual from a foreign government, and I wish to extend my personal thanks to you, Chairman Margelov, for your gracious acceptance of our invitation to appear before our committee.

I will now turn to Mr. Lantos, the ranking member and senior Democrat, for any remarks he chooses to make.



A Representative from California, and

Ranking Member, House International Relations Committee


REP. TOM LANTOS (D-CA): Thank you very much, Mr. Chairman. And I want to add my warmest welcome to Chairman Margelov. We are delighted and honored to have you, Mr. Chairman, and we know you will come back frequently to visit with us. We look forward to seeing you in Moscow.

Mr. Chairman, I would like to ask for your indulgence in giving me more than the usual amount of time, because I just returned from Moscow last night. And obviously I would like to express some thoughts stemming from my most recent visit to Moscow and my meeting with your friends, colleagues and associates, Chairman Margelov.

REP. HYDE: Take as much time as you would like.

REP. LANTOS: I'm deeply grateful, and I won't abuse the privilege, Mr. Chairman.

Let me begin by sharing with Chairman Margelov the historical fact that I knew Moscow before you knew Moscow, because I first went to Moscow in 1956, when you were not even a gleam in your parents' eye. And I have had the great pleasure of going back on a regular basis. And, as always, the visits to Russia are extremely interesting and valuable, and they certainly were on this occasion, although this was not a cultural trip.

May I just congratulate you, Chairman Margelov, that Boris Godunov in the Bolshoi is as good as ever, and we had the great pleasure of seeing Boris Godunov in the Bolshoi, as well as a new ballet by your outstanding company. And let me report to you, Mr. Chairman, that cultural life in Russia is at an all-time high. It's a remarkable phenomenon.

I am delighted that the personal relationship between President Bush and President Putin is as good as it has become. And I want to give the president credit for recognizing that in the post-Soviet era, Russian-American friendship will be a very important cornerstone of a more civilized and peaceful and prosperous and better world for all of us.

I've had the occasion in the last few days, Mr. Chairman, to have extensive discussions with the foreign minister of Russia, Mr. Ivanov; the minister of atomic energy, Mr. Rumyantsev, and a wide range of leading political and economic figures across the political spectrum.

I am extremely optimistic about the long-range relationship between Russia and the United States. But I do see some problems in the near-future, and I would like to raise some of these in the hope that Chairman Margelov might choose to react to this.

I believe that the very complex and nebulous set of statements by our Russian friends concerning the issue that preoccupies all of us, namely Iraq at the moment, would be very different if Mr. Chirac and Mr. Schroder would not be providing very convenient cover for the Russian government to play an ambivalent game.

I am convinced that in the final analysis, Russia will not oppose the resolution that our British, Spanish friends and we introduced a couple of days ago. And I think it's even possible, and I hope it is possible, that our Russian friends will join us in an alternative vote. But I'm convinced that there will not be a Russian veto, and that is somewhat encouraging.

I also think that the very excellent cooperation we received from President Putin in the wake of September 11th, with the Russian president being the first one to telephone our president and assure us of Russian solidarity and cooperation, could be extended to our determination to remove all weapons of mass destruction from Iraq.

It is self-evident that all of us want to achieve this by peaceful means. Only an idiot would prefer war to peace. And when public opinion polls ask people whether they wish peace or war, and the answer is 95 percent peace -- sign me up on that side, Mr. Chairman, because if that is the option, we all choose peace.

The question is whether we remember Chamberlain bringing back "peace in our time" from his meeting with Hitler, because that peace was not worth the paper it was written on. So the question is, are we in favor of a meaningful peace or a propaganda peace? And certainly the American government and our British friends and a large number of other countries, from Australia to Bulgaria, have chosen to stand with us in favor of peace of a substantive and real kind.

And we are somewhat disturbed that Mr. Putin and our Russian friends are playing an ambivalent game at this time. I very much hope, when the final decisions are made, Mr. Putin and the Russian government will clearly come down on the side of a meaningful peace.

Now, I fully understand the enormous economic pressures which are operating on Russia. Russian products basically are non-competitive in the global marketplace except for armaments, nuclear technology and oil. And since both Iran and Iraq represent a market for Russia in the field of armaments and nuclear technology, it is a fact of life -- in my judgment, deeply deplorable, but perhaps understandable -- that despite repeated assurances, our Russian friends are continuing very questionable trading relations with the countries whom the president properly labeled parts of the "axis of evil."

It is incomprehensible to the rational mind that Iran would need development in the nuclear field for energy purposes. And it is self- evident to a child that Iran's determination to develop its nuclear technology is militarily oriented.

In the last few weeks, when Iran announced that it will participate by itself in the full nuclear cycle, the earlier excuses -- and I notice in your written statement, Chairman Margelov, you talk about Iran's nuclear program being at a germinal stage. It is way beyond a germinal stage. The Soviet-era support for Iran's nuclear program should have been stopped a long time ago by this government.

I had a lengthy discussion with the minister of atomic energy, Mr. Rumyantsev, on this subject. I don't think I made any more headway than other American political leaders who go to Moscow and meet him. The only benefit I got, I have a neck tie from the ministry of atomic energy, which, in your honor, I put on this morning. But that doesn't carry us very far, Mr. Chairman.

So may I just say, we feel, at least I feel, that Russian political leadership should look beyond the immediate modest commercial benefit that cooperation with Iran and Iraq offers our Russian friends, and they need to recognize that the long-term economic and political benefits to Russia of becoming true partners of the United States infinitely outweighs the short-term financial gain of dealing with Iran or Iraq.

I also understand, Mr. Chairman, that Iraq owes Russia somewhere in the neighborhood of $8 billion, $9 billion. And I think we have an opportunity of assuring our Russian friends that in the post-Saddam era, we will see to it that its debt is paid and that the Russian energy sector will have its proper place, an important place in the development of Iraqi oil resources.

Finally, let me just repeat what you and members of this committee have heard often from me. I do believe Jackson-Vanik should be terminated. I think it's a bone that sticks in the Russian throat. The goals of Jackson-Vanik have been achieved. And I, as you know, Mr. Chairman, introduced legislation at the president's request to put an end to Jackson-Vanik. I hope that during the current session of Congress we will be able to achieve that.

In conclusion, if I may, let me just again welcome our distinguished guests. I have enormous optimism with respect to the future of Russian-American relations, and I earnestly hope that the misguided policies of Chancellor Schroder and President Chirac will not have an undue influence on our Russian friends and they will recognize that Russia's long-term future is best predicated on a truly solid relationship with the United States.

Thank you, Mr. Chairman.

REP. HYDE: Without objection, every member's opening statement, if they have one, will be made a part of the record at this place in the record. And today we first welcome Mr. Mikhail Margelov, who has served as chairman of the Committee on Foreign Affairs of the Federation Council of the Russian Federation since November 2001.

This January he became vice president of the Parliamentary Assembly of the Council of Europe. Previously Chairman Margelov held senior positions in President Vladimir Putin's 2000 presidential campaign and in President Yeltsin's 1996 re-election campaign and served as deputy head of the public relations department of the office of president.

Chairman Margelov has a long-standing interest in the Middle East. And I'm told, I hope correctly, that he speaks fluent Arabic. But we will not take advantage of that skill.

But we welcome you, Mr. Chairman, very much, and please make such statement as you choose to make.



Chairman, Committee for Foreign Affairs
of the Federation Council of the Russian Federation

MR. MARGELOV: Thank you, Mr. Chairman. It's my pleasure and it's my honor to be here. I have mentioned that for the first time in our bilateral relations between the two parliaments, we have a unique opportunity to take part in the hearings here in Washington. I hope we shall continue that practice at the hearings on Russian-American relations in Moscow. We started discussing that project, if I may use that word here, last autumn with our partners in the U.S. Senate and here in the House of Representatives.

I think we need more contacts. We need more interaction. We need more interdependence. The more interdependent we are, the more firm is our partnership.

Mr. Chairman and dear colleagues, Russia, as you know, maintains relations with Iran, Iraq and North Korea. It's not a secret for our partners, for our allies, including the United States of America. Our relations with these countries do not contradict in any way our international obligations, including those within the framework of anti-terrorist coalition.

I know that in the United States of America, these countries are often defined as "axis of evil." I used to be much involved in the Soviet propaganda machine. Lately I worked for some American consulting companies, for at least five years. Therefore, I understand that directly defining the enemy facilitates many goals, particularly in the sphere of public relations.

However, I believe that politicians and especially lawmakers should not allow themselves to oversimplify their situation. Simplification can be a serious sin when long-term decisions are at stake. And it's about the taxpayers' money, too, since, in the end, it is the taxpayers who will finance our conclusions.

The top priorities of Russia's foreign policy during the last two years at least are pragmatism, economic effectiveness and addressing national issues. Thanks to this, Russia today is gaining a new position in the world. And I would like to comment on one of the points which was made by Mr. Lantos. We recognize the value of our strategic partnership with the United States of America. It's our strategic choice and it's not our just tactics.

In order to achieve the new position in the world, that we had to waive the whole system of obsolete stereotypes. And although this process is not simple and not completed yet, benefits of such an approach are doubtless. After all, refusal from mythology of confrontation between the two superpowers allowed to change drastically the Russian-American relations in the last one and a half years.

Not hidden ambitions but principles of economic effectiveness form the basis of our relations with countries which we label as countries of axis of evil. These relations do not threaten anyone's security, our firm belief.

We would like to maintain and strengthen our positions on these markets to secure a number of important exports, items which means maintaining income sources for our state treasury, still too small to meet our country's obligations.

But that is not all. We would like to make our enterprises work at full capacity, including growth in the defense industry, which often influence strongly the well-being of the whole cities in Russia. I think you in the United States also know how the military sector of economy was suffering after the end of the Cold War. That is the heritage of the economy of socialism which will (echo ?) for quite a long time.

To obtain a clear picture of how difficult the situation is, let me remind you of the U.S. military bases in the states from where many of you were elected. I think you would agree that shutting down these bases often endangers future of thousands of families involved in their maintenance. Who of you will lightheartedly agree to drive them to unemployment and poverty?

I would like to remind you of the National Security Assistant to the President Condoleezza Rice's well-known words: the threat to the national security of the United States is not in Russia's strength but in its weakness. I have no reason to argue with Dr. Rice in this regard.

We also think likewise Russia's weakness is not an option. That's why we are striving for a competitive economy, a strong and modern state. Only a strong one is able to actually protects its freedom.

I don't think I should convince the Americans of that. It means that interests of the United States and Russia at least not contradict each other. Constant and effective dialogue between our leaders, supported by consultations at all levels, allows us to predict and present the emergence of strong contradiction. That is why I would like to say again that I am pleased to address you today. That is why we hope to hold in the near future in Moscow joint hearings on bilateral relations together with our colleagues from the U.S. Senate. As for discussions, they are absolutely normal things between partners.

I would like to comment now on some statements, which were made by Mr. Lantos. First of all, I would like to say that I also saw Boris Godunov on the 21st of February and I can swear that the cultural life in Moscow is in good shape. You are lucky to have a necktie from our nuclear ministry; I don't have one, so you are in a preferable position.

REP. LANTOS: I hope it will give me some influence with the Minister of Atomic Energy.

MR. MARGELOV: I hope, too.

Unfortunately I cannot share my experience of seeing Russia in the year of 1956 because I was born in 1964. But what --

REP. LANTOS: You didn't miss much. You didn't miss much. (Laughter.)

MR. MARGELOV: Well, some people would disagree with you, particularly in Moscow.

Well, but representing the new political generation, which is coming out in the stage in Russia, I would like to make some points, which I consider to be of crucial importance. Russia does not play an ambivalent game today. We managed to improve our relations with the United States of America dramatically. We managed to come to an agreement that we can disagree but not become enemies. I think it is a great achievement in our bilateral relations.

We had the second and I think -- I might be wrong but maybe the last chance to change the character of our relations. We did not use that opportunity quite well after the August coup d'etat in Moscow in 1991. We have such an opportunity after the tragic events of 9/11. So we must work together, we must be interdependent, we must cooperate.

And I think that today Russia is in a very unique position in comparison with what we could see in foreign policy. I was accompanying President Putin on his visit to France. I was in Berlin last week. That's one of the reasons why we couldn't meet in Moscow with Mr. Lantos. I can feel these rays of anti-American feelings in Western Europe and that concerns us. We do not need anti-Americanism in Western Europe. We do not need that and we can work as a bridge between the United States of America and old Europe.

The choice for partnership with the U.S., and I would like to stress it again and again here, is our strategic choice. We have common enemies as well as we did in 1941, 1945. My grandfather was commander-in-chief of Soviet paratroopers for 25 years and he was one of the most distinguished Soviet Cold War generals, and had two American World War II medals. And even during the difficult time of the Cold War in Moscow he liked to have some vodka with American military attaches. It was strictly prohibited but he was doing that because they were brothers in arms.

And I think today, having a common enemy, having the common threat facing the same challenges we must be together.

I'm very optimistic about the discussion, which we see in the Security Council. We have two papers on the table. These texts do not contradict dramatically. Both texts have an indication that if Saddam Hussein does not cooperate with the international community there can be use of force.

I had very strong messages here on the Hill and also in the State Department that the United States of America wants to stay under the UN umbrella. I think it is of crucial importance. We have not invented any substitute for the United Nations as a docking mechanism for consultations during crises, during difficult situations. We all need it. We all need to have the United Nations modified but we need it effective.

Then I would like to say again we agree that we can disagree but not to become enemies. But our partnership needs more to be firm and solid. We need new substance for our relations. We need new agendas. We will ratify the Moscow Treaty very soon. I hope we shall do it very soon in Moscow. And I know that you are intending to do it rather soon here in Washington.

We stopped counting our warheads. Enough is enough. This chapter is closed. But what is the new substance of our relations? What is the new agenda? Do we know it? Can the intellectual community, can the two parliaments, can business communities assist our presidents in their contacts, which are really excellent, to have new substance for Russian-American relations? Are we efficient in working out the new agenda? I think we are at the very preliminary stage and that's why I think we have to institutionalize that kind of dialogue.

And I definitely should mention in particular the situation around Iraq. As an Orientalist, as a specialist in the Middle East problem, I'm very much concerned about the day after. I'm very much concerned about the fact that we did not have joint strategic planning, we did not do any early crisis prediction, we did not do much homework thinking about the day after.

If we do not preserve the territorial integrity of Iraq, the whole region can explode. If the Kurds get the wrong signal that they can get independence as a result of military conflict, that can explode Iran, it can explode Turkey, it can explode Syria. And I don't think that the international community is ready to redraw the post-British, post-French, post-colonial map of the Middle East. I don't think we are in a position where we can play such a game and be successful.

I fully agree with Mr. Lantos saying that only idiots will prefer war if there is an opportunity for peace. I seriously think that even today we have not exhausted all the opportunities to make Saddam cooperate with the international community and I think that if we look at inspectors acting in Iraq today we can compare them with policemen. Let us imagine that inspectors act as policemen. Everybody knows that if a policeman is watching the criminal, watching him carefully, very attentively, well he controls what the criminal can be doing. But even if a criminal commits a crime the policeman shoots.

So I think that the inspectors are still in a position that they can watch what is happening inside Iraq carefully and they can try to make Saddam cooperate. If not, we all have seen two texts, the Anglo- American resolution draft and the statements made by Germany, France and Russia. Both texts do not exclude the military option, so to speak.

And concluding my remarks, again and again I would like to stress Russian policy is not aimed at provoking disagreements between Europe and the United States of America. Russia's goal is stability and strength of antiterrorist coalition. Please do not forget we have common threats, we have common enemies. You know that. We know that. And let us work together.

Thank you.

REP. HYDE: Thank you very much, Chairman Margelov.

The procedure in this committee is that you get five minutes for questions of the witness in the order in which you arrived to the hearing, which is a little more democratic than just going by seniority. So we will observe that and for five minutes the gentleman from Nebraska, Mr. Bereuter.

REP. BEREUTER: Thank you very much, Mr. Chairman.

Chairman Margelov, thank you very much for your testimony. I think it is an advance when senior members of the parliamentary body in Russia have an opportunity to correctly engage in dialogue with us.

I happen to have the privilege of being the president of the NATO Parliamentary Assembly and as I took that position in November I had three priorities staked out. One of them was to increase our positive contact between the NATO Parliamentary Assembly and Russia and certainly the parliamentary body was the first emphasis within Russia. I think it complements NATO's effort to develop a strong NATO-Russia council and I would hope that we will have better success than the previous effort, and I expect that we will. I believe that the United States wants to invigorate that Russia-NATO council relationship and you are right to watch that development, as we will watch it.

I have spent time taking the delegation to Brussels at the same time that the EU Summit was underway, as coincidentally were our annual meetings, and at that time of course it was the heart of the debate before the North Atlantic Council and then ultimately a decision taking to something unusual, the Defense Planning Committee, because as you know France is not a part of the military structure of NATO when it opted out 35 years ago.

I believe that an objective observer of what's happening in Europe today would conclude that while it's not to be demonized France clearly wants to marginalize the influence of the United States within Europe and wants to reduce the influence of NATO and it accentuates the influence of the European Union. That's a legitimate objective on their part. It just happens to be probably contrary to our interests.

And as I visited the first of the seven aspirant states I'll visit, of course, this year Slovakia, the views I heard there were very commonly expressed across the band of countries that will wish to accede to the European Union and the seven have been granted accession opportunities for NATO. And they see things much differently than the French and Germans, who want to provide their vision of what Europe will be like.

I believe that it's important that the ties between Russia and the nations of central and Western Europe are strengthened. I like some of the things that are underway in Russia. We have some concerns that I hope you'll look at, and that would include what still is a very large stock of biological and chemical weapons in Russia.

And I want my colleagues to know that I think what we're doing on Nunn-Lugar is exceedingly important and we should not allow some of our colleagues on the Armed Services Committee to place unreasonable impediments in the way of President Bush as we attempt to marshal resources from throughout the area to assist the Russians on the destruction of some of those weapon stocks.

Thank you for your cooperation. I would ask you what you can tell us further about the knowledge and commitment of the Russian government to stop the transfer by Russian firms of components that will assist Iran in developing its own stock of weapons of mass destruction, including a nuclear program.

MR. MARGELOV: Thank you.

Well, as already mentioned, I did not have a privilege to meet with our nuclear minister.

REP. LANTOS: I tried to arrange it for you and I couldn't.

MR. MARGELOV: Thank you.

Well, you know, my perception of the development of Russian cooperation with Iran is the following: We look at Iran as our important regional partner. Iran can play its role in the war on terrorism. Iran is the country, which you cannot neglect when you are talking about the Middle Eastern settlement. And I think that in the best interest of the current Iranian government to cooperate with the international community, because they have the Iraqi example, because I think they understand that if their country is not transparent to the international community the international community will change its style in dealing with Iran. That's my first point.

My second point: We know that during the last 12 years there were some kinds of leakage of technology and also some kind of brain drain. We know that it was, let's say, one of the results of the end of the Cold War that scientists, the engineers, the research institutes had to survive and they were cooperating with those who were offering to them such an opportunity to cooperate.

We definitely do not want Iran to have nuclear weapons because we have another dangerous example in the region. When the war on terrorism started in Afghanistan we all were concerned about the nuclear power in Pakistan and we had to watch it carefully. That's why we understand the dangers of the proliferation of nuclear weapons in the region. We are watching carefully what is happening in our cooperation in that field in Iran.

But I would like to stress here that our nuclear sector needs contracts and if the United States of America, if other Russian partners and antiterrorist coalitions can offer such contracts, that can be good for our nuclear industry, that will I think limit its cooperation with Iran. They have to survive, so try to help them.

REP. HYDE: Mr. Lantos of California.

REP. LANTOS: I was very pleased to hear your last observation, Chairman Margelov, because I opened that subject with your Minister of Atomic Energy. We do realize that your nuclear industry needs to survive and there are certainly more creative ways of achieving that survival than to close our eyes to exports to Iran, which we view as extremely -- extremely dangerous and destabilizing.

Let me share with you, if I may, what Admiral Wilson, who is director of the Defense Intelligence Agency, says. "Teheran is likely to re-export sensitive Russian technology for weapons of mass destruction it obtains to militant Muslim regimes or terrorist groups in other countries." I mean, that is our considered view. If Iran gets nuclear technology from Russia that nuclear technology will not remain in Iran. It will be shared with dangerous terrorist groups and countries that harbor terrorism. Our whole war against terrorism globally, the war in which we'll be engaged for many years to come, had as its focus to present weapons of mass destruction falling into terrorist hands. And while we are very sympathetic to the Russian nuclear industry's needs too have jobs and contracts, it is up to the West to see to it that these jobs and contracts do not involve sales to countries such as Iran.

Our view of Iran, according to the State Department, is that Iran is the most dangerous state sponsor of terrorism on the face of this planet as we meet here this morning. That is the official view of our State Department. And clearly terrorists who use an airplane as their weapon would love to use nuclear weapons as their weapon, and we are determined to stop that.

If I may come back to your observations concerning Iraq -- and I deeply appreciate the candor with which we can share views -- I find it very ironic that both our French and German and Russian friends point to so much in our progress that is being made as a result of inspectors being in Iraq. Well, let me point out -- and I know you agree with me -- that the inspectors are in Iraq today not because Mr. Putin arranged them to be there, not because Mr. Chirac arranged them to be there, not because Mr. Schroeder arranged to have them there -- but because the American military has an incredible armada on the Iraqi border, and Saddam, in an attempt, in a last-minute desperate attempt to prevent his own replacement, as opened the country up to inspectors. So I don't think it's realistic to claim credit for the work of inspectors and fail to recognize that it is American foreign policy which put them there. Point one.

Point two. With great respect we disagree with you that the inspectors are there as policemen. They are there to receive the voluntary full and immediate compliance of Iraq in turning over all weapons of mass destruction and all credible evidence that some weapons may have been destroyed already. They are not policemen, they are not detectives. They are unable -- whether there are a hundred of them, two hundred of them, or 2,000 of them -- to find in a huge country weapons of mass destruction which are hidden. That is simply unrealistic.

The final comment I'd like to make, and I'd be grateful if you'd react to that -- you emphasized the importance of the United Nations, and I fully share with you the view that we need the United Nations for a wide variety of purposes in a complex world. But I think it's extremely important not to paint a picture of the United Nations that does not exist. The one thing the United Nations does not have is moral authority. The United Nations has as chairman of the Human Rights Commission Libya. Come May the United Nations will have, as chairman of the disarmament committee -- hold on to your hats -- Iraq. So the notion that the United Nations somehow represents a superior moral authority is absurd, and we here, most of us at least, reject it.

Secondly, I think while we clearly prefer to have the imprimatur of the United Nations for various actions, that the United States government, in my judgment quite properly, stated that if it becomes necessary to move against a regime such as that of Saddam Hussein, we are prepared to do so, with a coalition of the willing, with or without United Nations support. It is our judgment that Resolution 1441 does provide U.N. approval of such action, and no additional resolution is called for. But we would be pleased to get one. I wonder if you could respond.

MR. MARGELOV: Thank you. Well, first of all, with all my respect, I would like to disagree with you of saying that inspectors are in Iraq because the American armada is near Iraq. Inspectors are in Iraq because there were extreme international efforts inside the United Nations and outside the United Nations to put the pressure on Saddam Hussein.

The American armada is important, but I also think that what was done and still is being done in the political field, in the field of diplomatic pressure, is also important. And if there was only armada but no diplomatic pressure, I don't think that without diplomatic pressure Saddam Hussein would allow inspectors in.

Then as for the United Nations, on the one hand I will not overestimate the effectiveness of the United Nations during the last years. On the other hand, I would not agree with some of my friends from the Israeli Knesset who call the U.N. the "United Nothing." Well, I think that today we have a major problem with all international institutions. All international institutions which we have, including NATO, including OSCE, including the United Nations, are inherited from the time of the Cold War. They are inherited from the post-World War II world. And the technology they are using, the way they are structured, the way they operate, are still not you know not very efficient, and they are, let's say kind of old-fashioned, if I can use that word, speaking about international politics. And definitely we have to think about the reshaping, the restructuring of the way the system of international institutions works. During NATO enlargement I was saying during the last state of NATO enlargement I was always saying that I am against that enlargement for only one reason: it produces again and again the old technology of preserving international stability. We are not creative. We are not looking for new options. We are not looking for new mechanisms. Will NATO become more strong after the 4,000 Estonian army joins it? I doubt that. And that's why I think that it's also another part of our whole work that has to be done together. We have to think of the new or maybe old but modernized international institutions which can be more efficient.

REP. HYDE: Thank you. Mr. Smith of New Jersey.

REP. SMITH: Thank you very much, Mr. Chairman. And Chairman Margelov, thank you for being here, and for your insights. I, like many other members of this House and Senate as well, welcome areas where we can cooperate. And I have been a member of the Helsinki Commission now for 23 years, and frequently meet with friends from the Duma, OSCE, parliamentary assembly members. We have been trying for years to encourage the Russians to enact a comprehensive law on trafficking. We did this in our Congress in the year 2000, a sweeping effort to stop that modern-day slavery. And I am happy to say that Elena Mussolini, who I know and I've worked with for years, has introduced a comprehensive bill, and I do hope your government will adopt it and aggressively implement it.

In like manner I chair the Veterans Committee, and I have met with many of your Duma members to talk about some of the programs that have worked very well in our own country, particularly the home loan program, which has created a modern-day middle class, and the GI college education program as something that might be considered on a pilot basis perhaps in Russia.

So my sense of our relationship is one of cooperation to the greatest extent possible going forward.

Having said that, I am very deeply concerned about a couple of items. One, and it was mentioned earlier by some of my colleagues, this cooperation with Iran. We know that Khatami visited St. Petersburg and toured a nuclear facility. And Ariel Cohen in his testimony speaks to this very troubling trend, and spoke of purchasing or buying a nuclear facility. And that in a land, Iran, where natural gas is in great abundance, where nuclear energy is highly questionable in terms of merit. You know, there are other more nefarious purposes for that fuel, and we are deeply concerned about it. You mentioned what happens the day after, what happens the day after Iran announces they have nuclear weapons and the capability to deliver them?

The second issue I'd like to raise is Belarus. As we all know, Aleksandr Lukashenko remains one of the last Ceausescus/Milosevic -- a terrible, despicable leader who tortures his own opposition, has shut down the independent media. Independent candidates who would like to run for office are routinely disqualified. And he runs a barbaric country, sadly, of some 10 million. Many of us have been concerned, however, about the pass-through of Soviet or Russian weapons from Minsk to Baghdad. And they're often under the guise of humanitarian flights. And that even broke into a Newsweek article that was published on February 13th. What can you tell us about that? Is there -- you know, there's many as we know joint Belarusan-Russian military corporations. We know that Belarus remains one of the largest importers of Russian weapons. You know, for a country of 10 million with no apparent enemies -- for what purpose? Are there arms transfers occurring? What is Russia doing to try to stop it? Because again those weapons, if there is a war, will be used -- the anti- aircraft weapons and the like -- against American and allied forces, which would be unconscionable to think there was some complicity by our friends, Russia.

MR. MARGELOV: Well, thank you. Well, first of all, on Iran and nuclear power, you raised that problem -- Mr. Lantos was also saying about the threat of nuclear terrorism. I don't think you can find any politician in Moscow who would applaud the idea of nuclear terrorists. We understand quite well that we have two major challenges today. One is international terrorism and another one is the proliferation of weapons of mass destruction. And you can probably find advocates neither in Duma nor the Federation Council, neither in the government nor in the presidential administration, who will say that the nuclear terrorism is something which is supported by anybody in Moscow. I think it's absolutely impossible. And that's why seriously we are watching and we will be watching very carefully, very precisely, the character of the cooperation of our nuclear industry with Iran and all other countries, not only Iran.

As for the situation around Belarus, I represent the Pskov region in the Council of Federation. It is in the northwest of Russia on the border of Latvia, Estonia and Belarus. My knowledge from what I know from different people from Belarus, from different representatives of Belarusan business, is that there is no transfer of military technology or weapons from Belarus to Iraq. And I think so, and I really think that if there is such a transfer Russia would do anything it could to stop such a transfer.

REP. HYDE: Mr. -- you want --

REP. SMITH: If you could bring back to your friends and colleagues in Russia whatever could be done to ensure that those humanitarian flights are not exploited to carry cargo that would be military in nature, because again access to those flights is very limited, and other means of -- this is a very, very high priority to many of us here.

MR. MARGELOV: I got the message.

REP. HYDE: The gentleman from Ohio, Mr. Brown.

REP. SHERROD BROWN (D-OH): Thank you, Mr. Chairman. Chairman Margelov, thank you for joining us. It's good to welcome Celeste Wallender here too, and thank you and other panel members for joining us. I find it interesting that we are assembling here to criticize Russia's economic policies towards the axis of evil. We are going to hear from panelists that Russian interests in Iraq are largely motivated by oil. We'll discuss how terrible it is for Russia to deal with such a nation with the implication that the opposition of U.S. military action in Iraq is based upon selfish economic interests. The nerve of the Russians, if they have economic petroleum interests in the Middle East. It is not as if our country's president and vice president are oilmen who have done quite well in the Middle East. It's not as if Halliburton had millions of dollars in contracts with Iraq as recently as 2000, while Vice President Cheney was at the helm. It's not as if Secretary Rumsfeld met with Saddam Hussein in 1983 to help normalize U.S.-Iraqi relations. It's not as if Secretary Rumsfeld visited Iraq at a time when Hussein was using chemical weapons, as the Washington Post said, on an almost daily basis. It's not as if our country, our own country, does not continue amicable relations with Saudi Arabia, one of our chief oil suppliers, in the homeland of 15 terrorists who attacked our country.

According to oil industry executives and U.N. records, from '97 to 2000 Halliburton held stakes in two firms that signed contracts to sell more than $73 million in oil production equipment and spares parts to Iraq, while later Vice President Cheney was chairman and CEO of that country. Mr. Cheney oversaw Halliburton's acquisition of Dresser Industries, that with Ingersoll-Rand created two subsidiaries, Dresser-Rand and Ingersoll Dresser, that sold sewage treatment pumps, spare parts for oil facilities, pipeline equipment to Baghdad through French affiliates while we had sanctions against Iraq, from of 1997 to the 2000.

I don't like what Russia is doing -- I make that clear -- and I think what people's objections on this committee are right on target. But I don't know how that's a whole lot different from what Vice President Cheney has done. The Russians have an interest in Iraqi oil. They have contracts, they have infrastructure agreements. But the U.S. has an interest in Iraqi oil as well -- probably quite similar to Halliburton's from 1997-2000. Iraq's proven oil reserves are estimated, as we know, at 110 million barrels -- enough to meet U.S. needs for decades. Much of Iraq has not been explored -- probable reserves may be 300,000 million barrels. But American oil companies are already taking tickets and lining up to rebuild an Iraqi infrastructure that will be damaged or destroyed by a military campaign, and ensuring a hand in Iraqi production for the foreseeable future.

Historically, Mr. Chairman, the United States and our allies have stood united, and proudly -- and we're all proud of that -- against tyrants like a Saddam Hussein -- and make no mistake he is that. In the past we worked with our allies, we respected the United Nations, we built on relationships developed over the course of decades. We did in fact see the U.N. as a moral force -- most of us still do. Now we are berating those allies with petty insults -- my way or the high way -- you're either with me or against me, you're on our side or you are not on our side. There's no objective rational analysis coming out of the White House. There's only adolescent finger-pointing and adolescent bullying.

The administration has not even attempted to answer important questions that must be addressed: Will attacking Iraq reduce the threat of terrorism? Our CIA thinks not. What is the administration's plan for reconstruction and humanitarian aid in Iraq? We haven't seen a plan. How much will the war and reconstruction cost? The administration won't tell us. If we were to apply the justifications for military action against Iraq to the rest of the world -- to Iran, to North Korea, to Pakistan and to other countries -- the United States would likely find itself involved in more wars in one times than all the wars it's fought previously. North Korea, as we know, two days ago launched a test missile under the Sea of Japan. It's not a coincidence that this occurred simultaneously with the inauguration of South Korea's new president, and no accident that our own secretary of State was there at the time. We know North Korea has nuclear capabilities. Meanwhile, we don't address the North Korean crisis. We sit in Washington, we question our allies for not supporting our war, accusing all too many of our own citizens of lack of patriotism, and accusing other nations of bad motives -- France, Russia, Germany and China, and dozens of other nations.

My question -- and there is a question in this, believe it or not -- my question, Mr. Chairman, is: What do the Russians think about what seem to me as our incompatible positions on Iraq and North Korea?

MR. MARGELOV: Well -- (laughs) -- good question. First of all, I think that the Iraqi crisis should not let us forget about the situation in North Korea. We should not -- I mean, the priorities to my mind should be as follows: Definitely Iraq is a burning issue, but North Korea is as burning as Iraq. I think that more efforts and more steps should be done in the field of diplomacy. The speaker of the upper house of the Russian parliament, Sergey Mironov, has recently been to Seoul, accompanied by our deputy foreign minister Mr. Lessikov (ph). They were discussing the situation in the Korean Peninsula there. When the Japanese Prime Minister Koizumi was in Moscow, I would say 50 percent of the time was dedicated to the discussion about the situation on the Korean Peninsula. I think that what is happening there is very dangerous, and the fact that North Korea has or might have nuclear weapons is a very destabilizing factor in Asia. And definitely talking about Iraq, discussing the situation around Iraq, discussing the day after in Baghdad, we should pay very serious attention to the North Korean peninsula. And my concern is that we sometimes as I feel -- I might be wrong -- when we are in a very emotional discussion on Iraq and what happens there, we pay less attention to North Korea, which is a mistake to my mind.

REP. HYDE: The gentleman from California, Mr. Royce.

REP. EDWARD ROYCE (R-CA): Thank you. Well, welcome, Chairman Margelov. It's good to see you here. I had the opportunity once to testify as a member of Congress before a committee at the Duma in Moscow, and I want to express to you our appreciation with your testimony here today.

You know, at times, given the emotional testimony on Iraq, one would think that the United States had a history of colonizing the many countries that we have liberated throughout our history. And I just wanted to make the point that we did not colonize Kuwait, nor did we colonize of course Germany, Italy or Japan.

And I would like to ask you a question first about Kim Jong Il. In August of 2002, he visited the Russian Far East, and we've read accounts of his trip in the private rail car. He met with President Putin at that time. And President Putin expressed political support for Kim Jong Il, and the hope for an expanded economic cooperation between the two countries. And I thought I'd ask you about the extent of these contacts today, and I thought I'd just make the point that all of North Korea's neighbors will lose if the North is allowed to pursue it's nuclear weapons program. And I thought I'd ask what the extent of Russia's cooperation with the United States is right now in terms of trying to address this threat from North Korea.

And the other question I'd like to ask you has to do with something off of this topic, but it's the scope of something we've been discussing. I chair the Africa Subcommittee, and we have been working hard on conflict resolution in three countries -- Sierra Leone, Ivory Coast, and Democratic Republic of Congo. And one of the many factors fueling these conflicts is the flow of illegal small arms -- and al of the weapons come from outside the country -- outside the continent. Many of these weapons originate in former Eastern Bloc countries, especially in the Ukraine. And one weapons dealer in particular, Viktor Boot, has gained international notoriety for his activities throughout that continent. And I was wondering if you have any thoughts about the problem that you could share with this committee, and how Russia is addressing this particular concern about small arms trafficking, which is fueling these conflicts on the African continent. Thank you very much.

MR. MARGELOV: Thank you. As for Russian-American cooperation in discussing the situation in the Korean Peninsula, I think it is and it will be much more efficient than it was is 1945-1949.

As for our economic relations with North Korea, well I think that our approach is the following: the more the regimes like the regime in Pyongyang are plugged into the world economy, the more they are interdependent with the entire world, the more transparent they will be. And I do not think that neither American nor Russian diplomacy can say that it knows 100 percent of what is happening inside North Korea about the peculiarities of its political life. So I think the only option to make such a state more transparent and less dangerous for the entire world is to try to plug it into the world economy. So I think that definitely the nuclear sector of North Korea is our major concern, and it's our mutual concern. So I hope that we shall extend our cooperation in monitoring the situation in the Korean Peninsula.

As for small arms trafficking, I fully agree with you that small arms trafficking feeds the regional conflicts in Africa, in Asia. You guys wanted the Soviet Union to collapse, so I cannot be responsible for Ukraine. It's not the Soviet republic anymore.

I understand quite well that there is much trafficking from former Warsaw Pact countries in small arms. We all understand that it's also one of the results of the Cold War -- it's one of the remnants of global Cold War arms race.

I think what we need -- we need to raise that issue as a serious issue, as a serious threat for international stability. And one of the possible mechanisms for such a discussion can be Russian-NATO summit and the format of the Russian-NATO Council. We have to bring substance to this institution, to this new institution. And I think that the issue of small arms trafficking can be one of the real things which can be discussed in that format.

REP. ROYCE: I appreciate it. And I wanted to assure you that my comment about Viktor Boot or about the Ukraine was not a pointed comment about the Russian position; it was a request for cooperation with respect to Viktor Boot. Thank you very much, Mr. Chairman.

REP. HYDE: The gentleman from Florida, Mr. Wexler.

REP. ROBERT WEXLER (D-FL): Thank you, Mr. Chairman. And I too want to thank you for your very forthright discussion this morning. I think it is hopefully mutually beneficial, but certainly beneficial for those of us on this committee to hear your thoughts.

I would like to follow Mr. Bereuter's comments of earlier with respect to what appears to be Mr. Chirac's aspirations of creating an enhanced EU to be somewhat of a counterweight to the United States, what appears to be Mr. Chirac's pursuit of Mr. Schroeder to be a part of that effort. I'm curious if you could share with us from two different perspectives -- one, what is Russia's role in that context? Mr. Putin of course, President Putin, met with Mr. Schroeder, Mr. Chirac, and signed a joint declaration. What is Russia's role? What will it be in that context? And, two, from a totally different perspective, if you could offer us some candid advice as to why it is that the divide between the United States and our traditional allies in Europe seems to be becoming greater? Is it inevitable? Is it more substance over style? Or is it style over substance? Is it a matter of more than anything else American arrogance, or perceived American arrogance? Or is it from your perspective a fundamental difference in world view? Now, I'd be curious if you could share with us your thoughts.

MR. MARGELOV: Thank you. Well, I think that Russia's role today, in contradiction with the role of the Soviet Union during the Cold War time, when the Soviet Union was trying to deepen the gap between Western Europe and the United States of America, when the Soviet Union was trying to play the game with the contradictions between Western Europe and the United States of America. So Russia's role is different. Russia can work as a bridge. Russia can work as a communication tool. And I think that Putin managed to reduce the level of anti-Americanist rhetoric during his visits to France.

I don't think that it is in Russia's best interests to inspire anti-American feelings in Western Europe when we all are facing the common threat. The question why I think should not be addressed to Russian parliamentarians. It should be addressed to American politicians first. But from parliamentarian angle, I would like, if I may, to criticize you a little bit for not paying much attention in dealing with the European parliamentarians in the format of the Council of Europe. The Council of Europe, where the United States of America has the status of observer, can be an interesting stage to bring your thoughts to the European colleagues. You know, I was taking part in a discussion on the report on terrorism in Strasbourg in the parliamentary assembly of the Council of Europe last January. And I was surprised even a year ago with the rise of anti-American feeling among the European parliamentarians. And almost everybody was, when we were discussing the problem of international terrorism, almost everybody was just criticizing the U.S. for putting the terrorists in the Guantanamo Base in Cuba. I stood up and said, "We have at least four Russian citizens there. I prefer them to be there. I don't want them back in Moscow." I might be wrong. I might sound not very democratic or not politically correct, but that's my perception, and people in my constituency will understand that.

And I think that, if you allow me to switch a little bit to the discussion around Iraq, I think that the United States of America managed to win the PR from being inside the country, but the United States of America did not have a good PR campaign in Western Europe. It seems like maybe some European leaders think that it's high time for them to change the position which they had during the last 50 years. They might have some external reasons, but they also have some internal reasons in their perception of the situation around Iraq. There is an Islamic population in Western Europe. It's a serious internal political factor. And definitely I think that some West European politicians have to keep in mind the feelings of the Islamic voters. So I think that the situation is rather complicated, and I think that Russia can play its role in strengthening the bridge between Western Europe and the United States of America. So let us work together. Let us work hard.

REP. HYDE: The gentleman from Michigan, Mr. Smith, Mr. Nick Smith.

REP. SMITH: Mr. Chairman, thank you for being here. Thank you for your testimony. And thank you for the honor you show this committee by presenting it with such excellent English.

You point out in your testimony a lot of the potential dangers of military force in Iraq, and I agree. You mention the danger of it turning into a fundamentalist dictator. Possibly even more challenging is a fundamentalist Muslim democracy -- and I appreciate it, I think most of us do -- the challenges of the aftermath of a military conflict. But still it seems to me we have got to look at the consequences of doing nothing. And I am convinced for one that the consequences of doing nothing is going to mean that negotiating with Kim Jong Il and what we do in North Korea is going to be that much more difficult. If the consequences are nothing in Iraq, then our chances of doing something in dismantling the weapons of mass destruction in North Korea are going to be also minimized as far as having a lesser chance of succeeding in that arena.

Do you think that we would be where we are today in terms of inspectors, in terms of the allowance of U-2 flights or your flights over that area if it wasn't for the potential of military force, if it wasn't for in effect President Bush holding a gun to the head of that leadership, saying we have got to do something? And so I want to know what your ideas are of doing nothing. Do you suggest that the United States pull its troops out? Do you suggest the United States back off from the potential of military conflict? What do you -- do you think we would go back to where we were from 1992 until 2002?

MR. MARGELOV: Well, first of all, I think that the consequences of doing nothing can be really bad, but the consequences of doing anything without good preparation can be even worse. And that's why I'm stressing again and again that to my mind we were not doing our homework well. We are facing a quiz at the end of the term, and we still did not discuss much the situation in Iraq the day after. While we hope that Saddam Hussein cooperates with the international community, but I think that -- let's say I give 90 percent for the fact that the war will break out, and that's why you know I think we have to discuss today not that the war will start or not, but the fact that what do we want to see in Iraq the day after. We have to discuss what kind of a state the international community wants to see, how to preserve its transparency, how to preserve its disarmament the day after.

REP. SMITH: So specifically would you suggest the United States pull its troops back out of the area, that we change our potential threat of using military force?

MR. MARGELOV: Well, I think that --

REP. SMITH: And do you think the United States should take this role by itself?

MR. MARGELOV: Okay, if I were in a position of advising the U.S. administration of withdrawing or deploying the troops, I would be working in the White House, but not in the Federation Council in Russia. But I mean -- well, I think that it is important --

REP. SMITH: Well, my question really is: What does Russia and France and Germany -- would they suggest in their suggestion that we don't go to use military force, and that we put it off, would you really suggest that we pull back from the threat of that military force? That the United States, since we are pretty much funding the cost of that gun to Saddam Hussein's head, if you will, at the moment, which has resulted I think in some positive consequences -- do we back off, or should the United States continue to carry this financial military burden essentially by itself and with Great Britain?

MR. MARGELOV: I think -- I think we have to continue putting pressure on Saddam Hussein -- military pressure, diplomatic pressure. But I think one can shoot only after all the arguments, the peaceful arguments, are exhausted. I think we still have some time to try to convince Saddam to cooperate. But if not, look at both texts, the Anglo-American draft resolution and Russia and German statements. Both texts say if all peaceful means are exhausted there will be a military solution.

REP. SMITH: And Russia would cooperate in that military solution? If that -- I mean, it's so arbitrary in making that kind of a judgment. Let me ask you just one last question, Mr. Chairman, and that is: Would you suggest that the United States and Great Britain and Spain pull back and not introduce the resolution? And if you such that the resolution be go ahead and introduced, would you suggest to President Putin that Russia abstain or vote no or vote yes?

REP. HYDE: I know these are tough questions, Mr. Chairman.

REP. SMITH: Oh, sure.

MR. MARGELOV: I would suggest to the diplomats to work hard during the coming week or two week and make one text of the two texts. That's my only suggestion to the diplomats.

You know, I think that we have the possibility to bring two positions together. And I think we have to watch carefully the process of consultations inside the building on the East River. I don't think that the Council of Federation will be giving any advices to our president on how to instruct our foreign minister how to vote in the United Nations. According to Russian Constitution the president is a key figure in determining the foreign policy. And, if not, I don't think our partnership with the United States of America will be developed as fast as it is being developed under President Putin.

REP. HYDE: The gentleman from California --

REP. SMITH: Thank you. Your diplomacy is as excellent as your English.

REP. HYDE: The gentleman from California, Mr. Sherman.

REP. BRAD SHERMAN (D-CA): Thank you, Mr. Chairman. And thank you, Mr. Chairman for coming across the Atlantic and further to be with us. We confront terrorism, Russia confronts terrorism. What is -- how would you explain to the American people what you confront in Chechnya? And was the United States helpful or harmful with regard to, I believe it's called the Pankisi Gorge in the neighboring country of Georgia. And have steps been taken to make sure that cross-border terrorism from Georgia into Chechnya and into the rest of Russia is contained?

MR. MARGELOV: Thank you. Well, as for the situation in we Chechnya, we have started a very difficult process of consultations and negotiations between different Chechen influence groups, between different Chechen political groups. We were inspiring them to cooperate with each other. And as a result of that I hope we will have the referendum in Chechnya on the 23rd of March. We will welcome the OSCE and the Council of Europe's presence before that referendum, at the referendum. We'll look at the referendum as not the end but the starting point of the political settlement process in Chechnya. We don't want to Chechenize the war; we want to Chechenize the peace process. And you know we definitely do not need a hot-bed of war in the Caucasus there.

I think that we are facing today the situation that there is a serious evidence that there is a linkage between some Chechen terrorist groups and the international -- and the terrorists international. Let me put it this way. I know that there will be a statement from the State Department that three Chechen terrorist organizations are now on the list in the United States of America, and the list of terrorist organizations, and this process will be developing. Right after the tragic events of the theater complex in Dubrovka at the end of October last year, I wrote a letter to Secretary Powell encouraging him to include the Chechen organizations in the list of terrorist organizations. Well, it is being done now.

Well, if you remember during the terrorist attack at the theater complex at the end of October, there were not only Chechens inside that theater complex among the terrorists. There were Chechens, there were some Arabs, there were people of other nationalities. We are acting against the terrorists international there. We are not acting against the Chechen nation -- not at all. Chechnya is part of Russia, and we want it to be a part of Russia.

You know, and as for the situation of the Pankisi Gorge, we have started a process of the dialogue between Russian and Georgian parliamentarians. We have formed a working group with two delegations in the Council of Europe. (I'm interested with Zurub (ph) Givania (ph).) And there was a fact-finding mission which was sent the Pankisi Gorge by the Council of Europe.

I do not say that the mission was very successful, but it is first step. We would be proposing to have a meeting of Russian and Georgian parliamentarians in Ingushetia, which is very close to Chechnya, which is very close to Pankisi Gorge. And I had a discussion with the Ingush president Murat Zyazikov about it.

So I think we are in a very difficult process of building bridges between Russian and Georgian political elites, but we understand that we want successful federal state in Georgia on our borders. We are federation. We want to have another successful federation. If not, it will be a wrong and bad example for Russian politicians in different Russian regions.

In that case, I would say that we definitely will work with our Georgian counterparts, and we welcome all international efforts which can assist in that work.

REP. HYDE: The gentleman from South Dakota, Mr. Janklow.

REP. WILLIAM JANKLOW (R-SD): Thank you, Mr. Chairman.

Sir, I'd like to thank you for learning our language as well as you have, because we're far too cavalier in this country to believe we ought to learn other people's languages. So the best chance we have to communicate with others is to have them learn our language until we change our culture and our habits.

You are a brilliant spokesperson for your country and its interests. I had dinner one evening years ago in South Dakota with Mikhail Gorbachev because he spoke at a university. I told him that I thought America and Russia would have a permanent relationship. And he leaned over and he tapped me on the hand and he said, "Governor, countries do not have permanent relationships. They have permanent interests" was his response.

And I've always been awestruck by the thoughtfulness of that response. We understand that Iran is as close to you geographically as Canada and Mexico are to the United States. We understand that that gives you a feeling of uniqueness with respect to the type of relationship you have to have that may be far more significant than countries that are farther away, even though we all live in a world today that becomes very small, is becoming much smaller very, very quickly.

We talk about our friends in Europe and our disagreements and we hear some people suggest that maybe we ought to cancel attendance at the air show and trivial things of that kind of nature.

I think the reality of the situation is that, not unlike the people from Russia, there are an awful lot of people in the United States that feel that developing our relationship with Europe, most of us, not all of us but most of us, have a common heritage, ethnic heritage, national heritage. It's just as deep in terms of the blood that was shed to assist them throw off the yoke of tyranny and oppression over the years. And it wasn't just at Normandy Beach.

I listened to the Belgians recently talking, although I don't remember from any of my history studies anyone from Belgium standing at the line at Bastogne, where the Battle of the Bulge was taking place. It was the Americans who were there, surrounded, with other allies, and refused to yield an inch. But the Belgians weren't there, even though it was their country. We have tens of thousands of Americans buried in France. Some of us feel very strongly about that because it's our relatives, some of them only one generation from us.

My point is, the president of Germany says one thing, but at the same time recently he's ordered 80 million doses of smallpox vaccine for his people. So I think what he's saying is, I would interpret it to mean, "We trust what's going on in the world in terms of the discussions, but in case we're wrong, we'd better get the vaccines that are necessary for our people."

You made the statement, sir, in your comment today that we can make Saddam cooperate. I thought the mandate that the world community and he had agreed upon is that he was cooperating and his responsibility was to show us what it is that he had done to dispose of his weapons of mass destruction, not having the world community make him cooperate.

In the briefing papers that were sent to us before the meeting, one of the comments in the paper says, "The Iranian president announced on February 9th of 2003 Iran had found and was mining uranium domestically, was building three uranium processing plants, and intended to retain control of the entire fuel cycle from mining and processing the uranium ore to reprocessing the spent fuel." And this was preceded by a sentence that said "following U.S. revelations in December of 2002 that Iran was clandestinely building uranium processing plants."

In your remarks, sir, you say Tehran is prepared to demonstrate maximum transparency in its nuclear activities. Iran is ready to contribute to the program enhancing the efficiency of the IAEA guarantees." Those two statements appear to be inconsistent. You only made one of them. But the two statements, taken together, appear to be inconsistent.

We hear criticism about America's activity toward North Korea. But the fact of the matter is, sir, we all understand nuclear proliferation is starting to break out of the cage -- India, Pakistan, North Korea, Iran, Iraq's efforts. I think the genie is headed out of the bottle while we all debate what are the proper procedures to follow.

My final comment on this is that America hasn't had an enemy soldier in this country since the War of 1812 -- a long time. The ocean has protected us. These oceans have protected us. They no longer do from biological and chemical and nuclear activity.

We heard a general in your country named Lebed, I believe -- I may be mispronouncing his name. He was a great warrior, a great general. He's gone now; he passed away. But that general made the statement that Russia had missing nuclear weapons, a small number of missing artillery nuclear weapons.

REP. HYDE: The gentleman's time has expired. Would the chairman care to make some comments?

MR. MARGELOV: Yeah, just two brief comments. Well, I really welcome your concern about the non-proliferation issues. I seriously think that, well, the proliferation of weapons of mass destruction is one of the two major challenges and two major threats to civilization today. The first is international terrorism. The second is the proliferation of the weapons of mass destruction.

And if you'll allow me just a brief comment on American-European relations, I've been to Aramanche (ph) last summer with my family and the museum of de-embarkation, the D-Day museum. And I've seen American military cemeteries there in Europe.

I seriously think that I would say the disputes which are here today between American and West European politicians, I would not say they should be stopped, but they should not damage -- they should not damage the structure of international security. They should not damage the anti-terrorist coalition. And I think that much of the efforts should be put not to damage the coalition today.

REP. HYDE: The gentleman from California, Mr. Rohrabacher.

REP. DANA ROHRABACHER (R-CA): Thank you very much. I apologize for being late. I'm chairman of the Space Aeronautics Subcommittee, and we had a meeting with Admiral Gehman, who's investigating the Space Shuttle Columbia's tragedy, and it was important that I participate in that.

Yes, I believe that governments have no permanent friends and have interests, but I think that people in government have friends, and I think that we have a good friend with us today and appreciate you being here.

I don't believe that the United States has treated Russia as a friend. I think the United States has come short in these last 12 years when the people of Russia have reached out to us in so many ways to try to work with us to build a better world. And I think we have fallen short.

I think some of the things that we're facing today reflect the fact that we have not reached out to President Putin and the people of Russia to maximize the benefit of that positive relationship that we could have had, and hopefully that we will have in the future.

Let me just note that I think that space cooperation is an area now, especially after this tragedy of the Space Shuttle Columbia, that will reflect the type of cooperation that we can have, just to get over a problem situation, but also to take humankind up to new levels and that we shouldn't just look at it that we're going to go to our Russian friends only at a time when we need their help or at a time of crisis.

I think that space cooperation -- and I hope that we would have full cooperation during this time, but I hope we also establish a systematic way of working together to carry on a mutual space program.

The Iranian problem that is getting in the way of that deals with Russia's continuing work with Iran on the nuclear power plant. Let me just say that I do not personally blame the Russian people who are involved in that project, who are trying to do some business and make some money.

The bottom line is that Russia is going through very hard times economically. And I understand earlier in the hearing that you mentioned that perhaps if Russia had some alternatives being offered, some contracts to build power plants elsewhere, that that would be a good incentive for Russia to give up that contract and to go someplace else and to make just as much money, if not more.

I think our government, the United States government, has been remiss in trying to make demands on Russia without offering positive alternatives. I think that, here again, if we were doing what was right, we would be working with our Russian friends to try to give a positive alternative rather than making demands.

And, first of all, I'd like your comment on that; and finally, just to say that I believe that we could have a lot closer ties with Russia dealing with Iraq now, while you yourself have indicated to us that we need to reach out and to consult with your president and your government to a great degree in approaching Iraq to make sure that Russia was included and that Russia would not be excluded in a post- Saddam government there or situation there and that Russia would not lose financially because of what we're doing.

Now, have we given you those guarantees, and have we done enough in those areas? And had we done more, do you think that there'd be a better, more cooperative relationship at this moment?

MR. MARGELOV: Thank you. It's always a pleasure to see Dana Rohrabacher, both in Washington and in Moscow. Thank you for your statement.

Well, I think that if you talk about Russian economic interests in Iraq, first of all -- and it was mentioned by Congressman Lantos -- there is a debt, let's say, between $8 billion and $9 billion U.S. dollars, Iraqi debt to Russia. It definitely should be repaid, and definitely this is the amount of money which is of crucial importance to Russian economy. We have our interests in the oil sector.

REP. ROHRABACHER: Have we given -- has the United States government done anything to address that yet, that very point that you made?

MR. MARGELOV: Well, actually, we are raising that point all the time in our consultations with our American partners. And I know that all the key players in NSC and the State Department are aware of that problem, the debt problem.

REP. ROHRABACHER: We need to make sure -- Mr. Chairman, we need to make sure -- if we expect the Russians to work with us, this is a very important point to their economy. If they're going to work with us, they've got to understand that we are taking them into consideration as well. And I hope that this point did not pass our decision-makers by and that this isn't taken lightly.

Excuse me.

MR. MARGELOV: Yes, thank you. Well, the second point is definitely Russian interests in the oil sphere in Iraq. And please do not forget that Iraq and this region as a whole is a market for Russian commodities. You can hardly sell Russian trucks in Western Europe, with all the limits which are normally being put by the European Union, but you can sell them there. And Russian industry needs that market.

So I think that our economic interests in Iraq are much wider than just oil sector. It's a huge market even for Russian FMCG (ph) goods. So I think that should be taken into consideration.

I don't know whether any written or oral guarantees to our president about the protection of Russian interests in Iraq; I have no idea. But I think that our partners should understand that we, being pragmatic and being, well, let's say, realistic in our foreign policy, we see our national economic interests as the cornerstone of our foreign policy.

Last year President Putin was addressing all the Russian ambassadors who had gathered in Moscow for a huge conference, and he said that Russian foreign ministry should work hard to protect Russian business interests abroad; it is really important to us.

Then definitely Russia should not feel that it is excluded from the process of consultations, and I think that Russia is not excluded. The United Nations might not be an ideal blocking mechanism, but it still works. And that's why I'm saying again and again, we have not exhausted all the possibilities for our consultations there. And I'm happy that our American partners understand that. I got very strong messages in the State Department about it yesterday.

So -- and then you mentioned the cooperation this year of space exploration. I would like to use that opportunity, first of all, to express my deepest condolences with the tragedy of the space shuttle. We in Russia had several catastrophes of the same kind previously, and we understand what it is.

I think that today we have a very interesting and, I think, unique opportunity to inspire our cooperation in the sphere of space exploration. We have many good examples of such cooperation, starting with 1975 Apollo-Soyuz test project, and definitely that sphere can be one of the spheres where our interests do not contradict at all; they coincide.

And I fully agree with President Gorbachev, who said that in foreign policy there is no friendship; there are interests. We are in the unique position that, on most issues, Russian-American interests do not contradict or coincide. We have to use that opportunity.

REP. SMITH: Chairman Margelov, thank you very much for your testimony, for being here for the better part of an hour and 45 minutes. And I think the exchange was very, very useful. And Chairman Hyde asked me to convey to you as well his very deep sense of gratitude. We look forward to working with you as we go forward.

MR. MARGELOV: Thank you, Mr. Chairman. And it was my real pleasure and my real honor to be here, and I hope we shall continue such a practice. And I welcome you all in Moscow for the same procedure. Please be ready and study Russian. Thank you.

REP. SMITH: Thank you very much.

I'd like to welcome our second panel, if they would make their way to the witness table. And we will first hear from Dr. Ariel Cohen, who has been a senior research fellow at the Heritage Foundation since 1992, where his work has focused on the countries of the former Soviet Union, especially Russia and Russian foreign policy.

Dr. Cohen's responsibilities also include many aspects of the war on terrorism, U.S. energy security in the Middle East. He is often called on to provide commentary on Russia and Russian foreign policy for the U.S. and Russian media and is a weekly contributor to the Voice of America. Dr. Cohen received his Ph.D. at the Fletcher School of Law and Diplomacy at Tufts University.

And we will then hear from Dr. Celeste Wallander, who directs the Russian and Eurasia program at the Center for Strategic & International Studies. Before joining CSIS, she was a senior fellow at the Council on Foreign Relations right here in Washington DC. Prior to that, she was associate professor of government at Harvard University and faculty associate at the Davis Center for Russian studies at the Center for International Affairs.

Dr. Wallander is the founder and executive director of the Program on New Approaches to Russian Security, a network of the leading researchers on politics, economics and foreign policy in Russia and Eurasia. Dr. Wallander received her BA in political science from Northwestern University summa cum laude, and her Ph.D. in political science from Yale University.

And finally we will hear from Dr. Eugene Rumer, who is a senior research fellow at the Institute for National Strategic Studies, the INSS, at the National Defense University, again, here in Washington DC. Dr. Rumer is a specialist on Russia and other states of the former Soviet Union.

Prior to joining INSS, he served as a visiting scholar at the Washington Institute for Near East Policy as a member of the secretary's policy planning staff at the Department of State and director for Russian, Ukrainian and Eurasian affairs at the National Security Council. Dr. Rumer holds degrees in economics, Russian studies and political science from Boston University, Georgetown and MIT.

Dr. Cohen, you can proceed.



Research Fellow, Russian and Eurasian Studies,
The Heritage Foundation


MR. COHEN: Thank you, Mr. Chairman. I would like to thank the staff for working with me in providing this opportunity. I also apologize. Due to a conference at the Heritage Foundation, I may depart a little bit early, before the closure of the session, and ask your forgiveness.

I would also ask the remarks to be entered into the record. You can have a copy of the remarks.

REP. SMITH: Dr. Cohen, without objection, yours and the full statements of all of our witnesses will be made a part of the record.

MR. COHEN: We have a unique window of opportunity, Mr. Chairman, to develop a relationship with Russia that President Bush characterized as a strategic relationship. Economic drivers of this relationship are extremely important for both countries; on the U.S. side, because of our need to diversity our energy dependence away from the politically unstable Middle East; and on the Russian side, in order to further integrate into the global economy and have a strong economic as well as political partner in the United States.

However, there are some worrying signs that this relationship is not going as well as we all hope. The signs of Russia's discontent, of the lack of tangible economic benefits, include Moscow's threats that it would veto a potential U.N. Security Council resolution authorizing the use of force to disarm Saddam Hussein and its de facto alliance with France and Germany in opposing U.S. policy.

Today the question is whether the U.S. will offer Russia significant political and economic incentives to bolster the strategic partnership between the two countries in the war on terrorism and against rogue regimes. Otherwise Putin's foreign policy will tilt toward the EU core, France and Germany, and Russia's oil companies, with large production contacts in Iraq. And the Soviet-era anti- American elite, which includes the top brass in the Russian nuclear ministry, the Minatom, will influence that policy to the extent that it will be detrimental to American national interests.

I would like to focus, with your permission, on Iran and Iraq. Briefly in Iraq, Russia had three major interests: Number one, the Soviet-era debt that historically, around 1985, was around $7 billion to $8 billion -- their counting there is fuzzy; maybe they should hire Arthur Andersen to sort it out -- but, adjusted for inflation, Mr. Chairman, it's probably close to $11 billion today.

Secondly, they have exploration and production contracts in Iraq that they would like to secure in full, or at least partially. And, finally, they would like to continue the economic involvement in trade with the Iraqis that historically were developed from the Soviet era.

The Russians were not very efficient in formalizing their concerns and presenting them to be grandfathered by any kind of an arrangement that will take place in Iraq, if and when Saddam is removed. However, I would also point out that the United States did not directly link Russian support in the United States or Russian participation assistance in post-war policing and administration of post-Saddam Iraq to addressing these Russian interests.

In the interest of time, I would now move on to Iran and point out that Secretary of Energy Spencer Abraham stated in Moscow on August 1st, 2002, that, quote, "Iraq is aggressively pursuing nuclear weapons as well as other weapons of mass destruction," and Secretary Abraham's further stated, "We have consistently urged Russia to cease all nuclear cooperation with Iran, including assistance to civilian nuclear power reactor in the Port of Bushehr." Furthermore, civilian commercially available satellite photography indicates that the Iran-- Iranians are building a heavy water production facility and uranium enrichment plant. Chairman of IAEA, Mohammed ElBaradei, said that he is very concerned about the usage of these facilities and when he visited Iran last weekend, he said that IAEA will provide inspections on one of these facilities but not on the other one. Iran also did not comply with the 93 plus 2 protocol on enhanced safeguards for these facilities.

On the other hand, top Iranian leadership, including Ayatollah Khomeini, said that Iran is, quote-unquote, "entitled" to have nuclear weapons, and is willing or wishing to, again quoting Khomeini, "to eradicate the state of Israel from the face of the earth." So, it was quite worrisome intentions being articulated by the top Iranian political leadership. And by cooperating with Iran in the nuclear area, Russia's credibility as the U.S. strategic partner in the war on terrorism I believe is on the line, as Presidents George W. Bush and Vladimir Putin have worked diligently so far to improve bilateral relations, and no must work even more diligently to deal with the Iranian nuclear weapons program which is a threat of both questions. Mr. Chairman, I believe that a nuclear armed Iran may trigger an international crisis in comparison to which North Korea will look like a school picnic.

Russia also participated -- or Russian entities participated in providing some missile technology to the Islamic Republic of Iran, and all Iranian leadership, elected and unelected, including President Khatami, is involved in developing this strategic relationship with Russia. Khatami was in St. Petersburg, where he purchased the nuclear reactor for Bushehr and is working on additional two nuclear reactors. All this is indeed a threat to the United States interest, and while we have the explanation, this is all done to secure employment and in order to keep the huge Russian nuclear energy entity, MINATOM, afloat, there is a geopolitical threat to the stability of the Middle East coming from a possibility of Iran armed with nuclear weapons and ballistic missiles.

Real quick on North Korea and I will end. I believe that the Russians are interested in economic development in North Korea. They often articulated the concern that they were pushed out of the nuclear reactor market by us in North Korea, when we provided in the 1990s a white (?) water reactor to North Koreans. And I think there is a potential to work together for Russia, Japan and China to resolve that.

And just in terms of concluding and policy recommendations, I can say that the Iraqi economic package needs to be addressed, including the debt. The debt can be recognized and then discounted from the Russian debt to the Paris group of creditor countries. To Russia, at least some of the oil contracts need to be examined, because there will be an examination of all the contracts that Saddam signed, and I believe some of these contracts were signed as bribery to the permanent members of the Security Council -- Russia, China and France. If you look at the list of the countries that got the largest contracts, you will see that these are all the permanent members of the Security Council that are now trying to veto our language of the resolution.

On Iran, we may be considering, or we should be considering an economic package that will bring to closure Russian nuclear cooperation with Iran, will provide full disclosure of private prior cooperation and will finalize a list of unstable or terrorist- supporting countries that the Russians should not sell nuclear, dual- use or military technology. But there are plenty of opportunity to develop mutually beneficial economic relations between American firms and Russian firms, and we can assist with that.

Thank you, sir, for giving me this opportunity.

REP. SMITH: Mr. Cohen, thank you very much for your very sobering and incisive commentary. We thank you for that. Dr. Wallander.



Director and Senior Fellow, Russia and Eurasia Program
Center for Strategic and International Studies


MS. CELESTE WALLANDER: Thank you. Mr. Chairman, I'm privileged to contribute to the work of your committee at a time when the United States faces such significant challenges to our national security and seeks to find the right policies and partners to secure our homeland and interests. In my written testimony, I analyze in detail Russia's economic structures and its incentives in the energy, heavy industrial and defense sectors for trade with Iraq and Iran, and I'd like to submit that for the record.

Today, I would like to highlight the main factors behind Russia's economic and geopolitical strategies for achievement of a new form of 21st century great power status as -- for a way to understand Russia's policies on Iraq and Iran.

On the economic side, we need to understand that Russia's current leadership seeks power, status and prosperity through economic modernization and international trade. This definition of Russia's national interest leads -- has led it to a strategic choice for cooperation with the United States, but, as been commented today already, it also means nurturing trade relations with countries that are markets for goods that Russia cannot sell on most international markets. Russia's leadership has come to the conclusion that the country has no future without significant economic growth, and that requires working with the few strengths that were inherited from the Soviet economy while building new capabilities that fit the modern global economy.

While new -- success stories in this new economy are genuine, the main factors between -- behind Russia's economic growth rates of nine percent in 2000, five percent in 2001, four percent in 2002, and probably about the same range in 2003, are Russia's energy exports and high global energy prices. Analysts estimate that for every dollar change in the price of a barrel of oil, Russian GDP rises or falls about a third of one percent. Now, these factors have made Europe and the United States important for Russia. Both are important energy markets and both are the sources of Western corporations that are likely to be major sources of foreign investment to build that new Russian economy.

But it also means that Russia has significant interests in Iran and Iraq. And what I want to emphasize today is that it's the very same packages of objectives and weaknesses that the political leadership has identified and is working that are behind trade with Iran and Iraq. Now, I find myself enormously impressed to find that the members of this committee are already so well informed about the economic side of Russia's interests in Iran and Iraq, so I won't belabor the points that have been made today.

I would like to point out one aspect of that economic relationship, though, that's not been discussed today. It's a less intuitive but vital stake in Iraq's future oil industry. Although Russian oil companies could gain from access to Iraqi oil production, they stand to be harmed by too much success. To understand this, remember that Russia's healthy looking growth in its GDP is essentially due to foreign energy sales and to high energy prices. If the price of oil falls to as low as $12 to $15 a barrel, which is not outside the range that experts expect might be the case were the war in Iraq to go well, and were oil -- Iraqi oil be open to international production, the Russian -- Russian growth in GDP disappears.

Furthermore, not only Russian economic and business interests have a stake in the price of a barrel of oil, but the government itself does. Russia will hold Duma elections in December of 2003, and presidential elections in the spring of 2004. Studies of Russian public opinion and voting behavior show that the Putin government's popularity and support come from its more stable and successful economy, from the fact that the government has managed to control inflation, to pay pensions, and to pay wages. Because the Russian economy is so dependent on global oil prices, so is the Russian government budget.

One of the main reasons the budgets have been in surplus is because oil has been at a high price on international markets. If oil falls below about $20 a barrel on the international market -- the price of oil -- the Russian government's budget surplus disappears, and Russia's ability to pay those pensions, pay those wages, and control inflation becomes at risk. So, Russia is not only an energy economy, its government has to watch global oil prices in much the way that Western politicians have to watch poll numbers.

Now, on Iraq -- on Iran, the points have already been made about the importance of sales of nuclear technology to Iran, to bolster Russia's own nuclear energy -- nuclear sector. And one can also make the same -- very similar arguments about Russia's conventional arms sales to Iran. The Russian military procures very little on the domestic market in the way of conventional military goods, and it's -- the Russian defense industries are basically being kept alive these days with foreign arms sales, including those to Iran.

But again, I want to emphasize something that hasn't been mentioned today. The actual amount of money that Iran is going to pay and is paying Russia for development of the nuclear technology and building at Bushehr, and even building new power plants, is not that great. It isn't a part of the strategic overview of the Russian economy and its foreign policy. It's a very narrow benefit to a very narrow interest, although a big ministry, MINATOM. One of the reasons why this is allowed to continue in the Russian political elite is because the Russian nuclear industry, of course, is a civilian as well as a military industry. Keeping alive Russia's commercial nuclear industry is important for a Russia that expects to have a modern nuclear force into the 21st century. So, again, these sales are in a sense stop-gap measures, and they are in a sense responding to narrow interests, but they are important for the United States to understand as it thinks about the terms of its strategic partnership with Russia into the 21st century.

I would also add that the discovery of these new, independent sources of uranium production in Iran basically change the basis of Russia's assurances to the Western community that there will be transparency and full inspection of the fuel cycle in Iran, and this is a point on which the United States might press Russian attention.

Finally, I want to say something about geopolitics. Russia is engaged -- I would argue Russia is engaged in not a traditional geopolitics, but what we might call the geopolitics of a former superpower. Russia is playing a geopolitical strategy to manage America's overwhelming global power. But this is not the classic game of global or regional balance of power. Russia's leaders are far too pragmatic and far too much practical realists to fool themselves that any balancing coalition can be effective, or that it's worth sacrificing recently won cooperation for some kind of quixotic tilting in America power. Russia's policy is not geopolitical balance of power but rather one of constraining U.S. policy through international rules, institutions and procedures. So don't think of Don Quixote and windmills, but think of a little -- of a Liliputian enmeshing Gulliver in the law and institutions that the United States itself values and helped to establish.

Putin and his team aspire to renewed national power and status, but the path they've identified in order to realize that goal is one that conforms to U.S. power and bows to the reality of a Western defined and dominated global economy. Since the U.N. Security Council resolution passed -- since the U.N. Security Council passed Resolution 1441, Russia's diplomatic efforts have focused not on power balancing but on weaving a web of rules and procedures around U.S. military options. Russia's approach to international institutions has been instrumental and pragmatic. Russia favors the U.N. because the Security Council, with its unique rules according a veto to the key five, is an institutional vestige of the great power status Russia inherited from the Soviet Union. If Russia were playing a simple balance of power strategy, we would expect its leaders to offer countervailing alliances and security guarantees to Iran and Iraq, not to call on the United States to observe U.N. rules. In recent days, Russia's foreign minister, Igor Ivanov, has publicly called more firmly and harshly for Iraq to disarm and cooperate fully with U.N. weapons inspectors.

And I'll just note, since you may not quite have noticed it yourself, but when Chairman Margelov was asked about the two resolutions on offer, he did not come out fully in support of the resolution advanced by France, but in fact called for a compromise and a synthesis. I think this is a very good guide to where Russia policy is today.

So, the bottom line is that there is significant economic interests, and in the long run those interests drive Russia to a close cooperation with the United States. We hold the keys to Russia's ability to achieve its objective to become a successful country and a new kind of 21st century great power.

The challenge to our policy lies in trying to get Russia to think past the short and medium term in its relations with Iran and Iraq and think towards the long term. And the signs, I must say, in Russia's shifting policy on Iraq and the likelihood that it will not veto a Security Council resolution enabling use of force is that the United States is able to move its policy forward in a way that preserves that partnership.

Thank you.

REP. SMITH: Thank you very much, Dr. Wallander; appreciate your testimony.

Dr. Rumer.



Senior Fellow, Institute for National Strategic Studies
National Defense University


MR. RUMER: Thank you, Mr. Chairman. It is a privilege to be here today and be a part of this very important and fascinating exchange. I want to emphasize at the beginning that although I am a full-time employee of the federal government, the views that I'm presenting here are strictly my own and do not represent the views of National Defense University or any other agency of the United States government.

I will skip the introduction, although I have submitted a longer statement that I would like to be entered into the record.

Let me just say outright that in 2003, Russia is not a country in pursuit of a grand geopolitical design. Nothing illustrates this better than some very basic facts that shape Russian policy and policymaking. In 2001, according to the CIA World Fact book, Russia's federal budget was approximately $45 billion, roughly half that of Brazil. Imagine that in a country that spans 11 times zones on about one-tenth of what our military spends to defend our nation.

Nobody has described the position Russia found itself in at the turn of the century better than President Putin himself when he told his compatriots on January 1, 2000 that if Russia did everything right and sustained the rates of growth of about 7 to 8 percent a year, it would catch up to Portugal by 2015 -- Portugal as it was in 2000, not as it will be in 2015.

Indeed, Mr. Chairman, it will be a towering achievement of the Putin presidency and testimony to his skill as a leader if Russia reaches that goal by 2015. According to our own Central Intelligence Agency, the outlook for Russia is bleak. By 2015, it will be a smaller, sicker, older and weaker nation.

The Russian military is bogged down in Chechnya. In the words of the chief of the general staff, the Russian military is decomposing. Russia has no capability for power projection in the Persian Gulf. It has neither the vision nor the means nor the will for ambitious geopolitical designs.

President Putin's task is consolidation rather than expansion. Domestic politics is dominated by powerful, entrenched corporate and bureaucratic interests which span the political spectrum and weigh heavily on foreign and domestic policymaking. (When seeking ?) diffusion of political power and capital dominates virtually every aspect of Russian public life.

President Putin has to take all this into account as he crafts a careful diplomatic line through the current crisis. The main lobbies Mr. Putin has to contend with are well-known, as are their interests. My colleagues, Drs. Cohen and Wallander, have described energy and the weapons manufacturers as key interests behind Russian policy in Iraq.

I fully embrace the view, and their interests are quite transparent. They are getting a piece of the post-Saddam Iraq oil by getting repayment of $7 billion to $8 billion, possibly $9 billion, worth of old Iraqi debts for past weapons deliveries, as well as possibly a chance to participate in the re-equipping of the future Iraqi army.

The old Soviet-era national security establishment is another group that Putin has to contend with in the ministry of foreign affairs, in the ministry of defense, as well as in successor agencies to the old KGB. That group of interests is resentful of the unipolar world and U.S. dominance in world affairs. These are the practitioners of Russian foreign policy. They cling to the old vision and resent Putin's caving in to the United States, especially since 9/11.

Putin has to take all of these diverse interests into account. Furthermore, although he enjoys high personal popularity, he has to be careful to avoid the image of being exceedingly accommodating to the United Nations, given the residual nostalgia for the superpower days in the general public as well as the national security establishment.

And as if the domestic hurdles weren't enough, Putin has to pay close attention to the positions of France and Germany, two key power for Russia in Europe, with which Russia needs to maintain stable and positive relations.

In short, the current crisis presents a set of difficult choices for the Russian president. It will take diplomatic and political skills to adjudicate among these diverse domestic and foreign interests and sustain strong, positive relations with the United States, as Mr. Putin has made clear is his priority.

Let me say a few words about Iran. I'm largely in agreement with my colleagues on this panel. It is a very important relationship for Russia for several reasons. It has been a buyer of Russian weaponry and nuclear technology. There is a strong domestic corporate and bureaucratic constituency for trade and military-technical cooperation with Iran and Russia, which so far has been able to overrule all concerns about Iran's WMD ambitions.

Iran is a regional power, not only in the Persian Gulf but also in the Caucasus and in Central Asia, both very important key regions for Russia. Iran gives Russia a diplomatic foothold in the Gulf, where Moscow's influence is otherwise marginal. For these reasons, Russian-Iranian relations, in my view, will continue on their present course for the foreseeable future.

Thank you for giving me this chance to present my views on this important subject, and I look forward to your questions.

REP. SMITH: Thank you, Dr. Rumer, as well for your testimony and your insights.

You might have heard earlier, when I asked our distinguished friend Mr. Margelov about the issues relevant to Belarus -- and I wonder if either of you might want to comment on that kind of pass- through, if not complicity, in weaponry going from Russia to Iraq, if you have any information or knowledge of that.

And when we talk about Russia's economic and strategic interests and historical partnerships with Iraq and Iran, how do we secure more cooperation with Russia? And I think, Dr. Rumer, you made a very good point about the links to Iran and how important it is for Russia.

And I think, Dr. Wallander, I think your point about the importance of Russia being an important country -- you know, now that the superpower status has been diminished so significantly, they want to be a player. They are a player. They are a significant player. But they need to assert that authority in order to maintain that hold. And I think your comment about trying to craft a hybrid between the French, you know, in terms of U.N. resolutions, I think, was a very good observation.

You could comment on that, but also, as I said, on this Belarus concern, because you might recall -- and I was very pleased, I think we all were, when Russia did not take the bait when Milosevic was trying to craft a Belarusan-Moscow-Belgrade type of axis. I think that showed, I think, a steering away, if you will, from that kind of alliance. But still we all have deep concerns about anti-aircraft and other kinds of weaponry that could very much menace and threaten our own pilots, being a pass-through, really, through Belarus.

MS. WALLANDER: Thank you, Mr. Chairman. Belarus and Russia -- I think that it's clear that the Belarusan and Russian defense industries remain remarkably interdependent; if not quite integrated, interdependent in terms of processing and finished products, having to go back and forth between different firms in those two countries.

And so, insofar as U.S. relations with Russia are so positive, and insofar as Russia has committed to playing by the international rules of the game, I think that the case of Belarus and whether it has illicitly any equipment, and I don't have any specific information that that's true.

But I think that, looking into that -- and we should look into that, because we looked into that in the case of Ukraine, and we need to be even-handed -- our position should be that Russia is our partner, Russia is interested in preventing violations of export control regimes, Russia has assets for doing that, Belarus has been less transparent than Russia in this sector, and, given the level of integration in those industries, it's reasonable to expect Russia to take the lead in seeking transparency and to answer those questions.

And I believe you heard from -- I don't want to put words in his mouth -- but from Chairman Margelov that Russia would take that request seriously, would take this issue seriously. So that's a positive.

On Russia's strategy to remain a player in the region, I think that is clear in Russia's shift in the fall of 2002 in the terms of that being a player are clear as well. Russia did not lead opposition to the United States on moving forward on a Security Council resolution. Russia did not take a role in ruling out the use of force. Russia followed France. Russia does not want to win the ire of the United States in being the country opposing the United States.

And I think it's also significant that, unlike some of the leaders in Europe, in France and in Germany, the Russian case for going to the U.N. and for seeking compromise has not been cast in anti-American terms. There's been no pressure on the Russian political elite and from the public with anti-American demonstrations or large political movements.

And I think that that, again, helps us to understand where the Russian political leadership is in trying to play a role. They want to have a say in these kinds of international outcomes and these issues of international law, but they do not claim that the United States views them necessarily illegitimate. And they especially do not rule out the notion of use of force at some point in dealing with these issues. So I think there's plenty for the United States to work with as long as Russia itself plays by the international rules of the game.

Thank you.

MR. RUMER: Mr. Chairman, if I may, I agree with much of what my colleague, Dr. Wallander, said. I don't have any specific information to add to what you said about the letters, although I have to confess that anything you say about the letters, I would believe. It's a country that can defy, unfortunately, our worst expectations.

I think, as Dr. Wallander said, we need to work with the Russians. I think that in the last few months, couple of years, Russian-Belarusan relations have soured quite a bit. And I think the Kremlin has been quite irritated with the Belarusan leader, Lukashenko, and his less than subtle meddling in Russian domestic politics. There is no great enthusiasm for sponsoring his regime in Russia.

I think nothing would embarrass Moscow more today than a revelation that a Russian system was passing through Belarus on the way to some regime that is beyond the bounds of internal Russian law. I think we have a more important ally and constituency to work with in Russia.

This is not to say, as Dr. Wallander said, that this is going to be easy. There are problems. There is a great deal of inertia and a great deal of integration between Russian and Belarusan defense- industrial complexes. And these are people with not a whole lot of scruples, with very powerful incentives to sell.

Let me just make one point on trans-Atlantic relations. The way I see the Russian position today -- and I think it was reflected in Chairman Margelov's testimony -- Russian diplomacy would be a lot easier today if the United States and its European allies patched up the relations and came together on a common shared platform. Putin would not have to choose between his friends, George on the one hand, and his friends Jacques and Gerhard on the other hand. It's a choice that he really, I believe, does not want to make.

On Iran, I think there are some rays of hope. It is, as Dr. Wallander said, a very powerful constituency, Minatom, and there are diverse interests. But there is also a set of Russian corporate interests that is seeking better relations with the United States, greater acceptance in the international community, greater acceptance in Washington, I think. The energy lobby is one such group of interests in Russia that we should work with and try to explain to them our view and our concerns. I think it's potentially very receptive responsive audience to our concerns.

REP. SMITH: Thank you, Dr. Rumer. Mr. Wexler.

REP. WEXLER: Thank you. If we accept as a given the fact that economic policy and economic interests are the driving force behind President Putin's international relations and foreign policy, and couple that with the description of the disproportionate impact that oil prices and energy exports have on the Russian economy, I'm trying to understand what is it the United States must do in order to provide meaningful economic incentives to Russia.

I understand that one thing would be graduation from Jackson- Vanik. But I also understand that the actual trade value of doing that would be fairly minimal. So other than artificially keeping up energy prices to the detriment of American consumers, what specific steps should we take that would provide meaningful economic incentives to Russia so that, whatever swing might otherwise happen because they feel we have ignored their economic interests, we could reverse it? If you could offer specific suggestions, I would greatly appreciate it.

MR. RUMER: Thank you, sir, for your question. One idea -- and I think there's precedent for this kind of potential cooperation in the Caspian area, where I believe Russian positions have changed over time and have become more cooperative. But, again, this is looking to the future.

As we consider the post-Saddam Iraq and as we consider the reconstruction of the Iraqi war industry, it is not inconceivable to me that international financial institutions will come to play an important role in financing some of these major projects.

I think we should make it quite explicit that we would welcome, certainly not discourage and certainly not establish any set-asides for the American companies, but I do also want to protect their interests, obviously. There will be opportunities for maybe financing guarantees for international projects and joint ventures that may involve major Russian oil companies. That's one possibility that would build on the precedent that we have already established in the Caspian. Such announcements were made in the case of Caspian energy developments in '97, '98, I believe, with financing available for the national projects from EXIM Bank, TDA, OPIC and other export credit agencies. I see no reason for the World Bank not to get involved.

REP. WEXLER: Let me just follow then -- but it seems then the recommendation is essentially to enhance the Russian oil industry, one of those venues being Iraq. But Dr. Wallander's point, if I understood it correctly, was to the degree that we are successful in exploring and then ultimately pumping oil out of Iraq, ultimately that is very disastrous for Russian parochial interests because inevitably the price will come down. So what do we -- is that simply just a mitigating factor?

MR. RUMER: Well, sir, if I may, I will disagree somewhat with Dr. Wallander. I think in the long run there is definitely an issue with Iraq coming up to speed and becoming a major producer and exporter, and there is a risk in sudden fluctuations for the Russian domestic economy. I think it is also important to take into account the fact that there's not a whole lot of new investment going into the Russian oil and gas sector. Russian oil companies are looking for opportunities to diversify, and any oil company, to my mind -- although I've don't work for one and never have worked for one -- any oil company that is looking at Iraq, which will be under international and American security guarantee and umbrella for the foreseeable future, first it's Siberia, which not only has a very difficult climate but also is far removed from a market that requires trade investment in still a fairly uncertain domestic political climate, they'll to Iraq first as an opportunity to diversify their resources. So, I don't really see an inherent contradiction there from the standpoint of Russian oil companies.

MS. WALLANDER: Could I answer with just two specific -- I would say -- well, three specific -- one is that the United States can't -- since the United States can't control international oil prices, but what we can do, though, is support Russian in increasing investment in new sectors of the energy economy to build new kinds of capacity that Dr. Rumer was referring to. And one particular capacity that would be very much in the United States interests is the proposal to build a pipeline, the Nohodka (ph) pipeline, which would serve East Asian markets. It would bring new incentives for new Russian oil fields to come on line. It would change -- it could potentially change certain aspects of the strategic relationships in Asia. It would create a stake for Japanese positive relations with Russia, and so it would have economic benefit within Russia but also potentially strategic relations -- benefits in East Asia.

Two non-energy areas, is that the United States should continue the very good work it's been doing to help Russia join the WTO. We should hold Russia to the standards of the WTO, but we should continue the technical assistance and the intensive negotiations with Russia with the presumption that Russia will meet the standards and will be able to join the WTO. But it's had enormously positive effects in balancing the economic and business interests within Russia and bringing -- bringing the interests of some of those business groups to the fore in thinking about the West.

And finally, the United States should think about being more open to allowing Russian to sell on the American market something that Russia is actually pretty good at producing, which is steel and other processed metals. I know that that has certain political implications within the United States, but it is a very sore point for Russia. It's something that Russian can sell on international markets, and it would, I think, create a new constituency within the Russian heavy industrial sector for better relations with the United States.

REP. SMITH: Chairman Bereuter.

REP. BEREUTER: Thank you very much, Chairman. I want to thank the three of you -- the two of you here remaining, for your testimony and for your responses to questions. And Dr. Wallander, it's particularly good to see you because I know you've been very helpful to the Aspen Institute congressional seminars on one or two occasions, helping to inform, enlighten and stimulate us.

Dr. Wallander, I particularly appreciated the last -- nearly the last sentence in your first paragraph of your written remarks, and you mentioned it again, but for -- but to highlight it, I'm going to read it again. "Russia's policy is not geopolitical balance of power, but rather constraining U.S. policy through international rules, institutions and procedures." Not Quixote and windmills but Lilliputian -- you mentioned Gulliver, and the laws and institutions that the U.S. led in creating during the Cold War. I think that's exactly right, and that's -- it's what you called, I think, the geopolitics of a former superpower. It is also the politics I would suggest of would-be -- wannabe -- superpowers. And that's in fact what we see frequently with respect to some of our European allies. And it's one of the reasons why I think the United States has a greater reluctance or hesitation about multilateralism.

Governor Janklow gave us an interesting comment from Chairman Gorbachev that he heard at a dinner in South Dakota, and I think it bears repeating, if I may once again, in saying that Gorbachev said "We don't have permanent friends, we have permanent interests."

And I'm very pleased to see Chairman Margelov here today. And we want to encourage this dialogue. And we want to focus on the things we do have in common, which are many, but I hope that the wrong message does not come out here, that we are permanent friends. The Russians will be with us when it's in their interest, and they won't be with us when it's not in their interest, and we should -- we should count on that kind of procedure.

Oftentimes they have different pulls on them, as you pointed out, Dr. Rumer with respect to the current situation in the Security Council over Iraq. I think that while there was some significant damage to the NATO multilateral institution, it is not a crisis. Lord Robertson reminded us that that's an overuse of the term. And probably the bigger damage, I think, from Mr. Chirac and Chancellor Schroeder was to the Security Council. And as you pointed out, Dr. Wallander, one of the (strategeo ?) institutions of significance to Russia of course is its veto arrangement as one of the permanent five there. And France also has that danger, and I hope they think about that occasionally, because the Security Council, I think, is in danger of becoming irrelevant and impotent institution, and more important, just to tie our hands to make life difficult for us.

I was impressed with what Ambassador Nicholas Burns told us when we were in Moscow. It was not just the recent antagonisms and irritations with the French over Iraq. Apparently, just routinely they have objected and created difficulties, administrative difficulties throughout the last years and they're becoming more frequent all the time.

I guess you make the point, too, about the potential, Dr. Rumer of the Security Council being pushed towards obsolescence, and the Russians certainly have to think about where they line up on this issue because while I believe in many cases they will think it's important to drive some divisions within the Trans-Atlantic alliance, they really don't want to lose their -- the significance of their veto in the Security Council either.

Finally, my question, if I could ask you to focus a bit on that, is the Caucuses. How do you think American and Russian interests will play out in this region, given that Russia has not played a constructive role in Georgia, given the fact that they certainly haven't done a whole lot successfully to reduce the animosity and conflict between Azerbaijan and Armenia, and given the fact that they didn't want to see a pipeline through that region which would -- which did not pass through Russia, which would take oil down to Turkey and available to the West? So, would you comment about -- beyond the problem of terrorism from extreme Islamic forces which we share with them, that significant problem, how are we likely to see Russian-U.S. relations affected by the Caucus region and our respective interests there?

MS. WALLANDER: Thank you, Congressman Bereuter. It's nice to see you again as well.

I think that the problem -- there are many problems in the Caucuses, but let me boil it down into a couple of elements that are manageable in policy terms. And it's largely that Russia has a sectorialized foreign policy that has good relations with the United States, that has good summit meetings with certain European leaders. Its business leaders come to Washington and have the right vision, have the right understanding of the world. Other sectors of the Russian state have other views of how Russian interests are advanced, and they tend to be more influential in policy in, in particular, the Caucuses.

What the United States needs to be able to convince Russian leadership of is that you can't -- you can't have different pieces of your foreign policy, that the United States views Russian interests and objectives and strategies in an integrated fashion, and that Russia will be dealt with on an integrated level as well. So that we expect -- we recognize that Russia faces a significant security challenge in the Caucuses, but we expect Russia to be adopting policies and exercising policies in the region that help to create solutions to those security challenges rather than to exacerbate them.

And I think it's fair to the United States to take the view that Russia has to now exacerbated the problems in the caucuses rather than help to call upon the international community, call upon the Europeans, the OSCE, and other institutions that Russia seeks to support in order to constrain the United States -- we say, "All right, we believe in the U.N., we believe in the OSCE, they're as legitimate in that region of the world as they are in Iraq and other regions in the world where you would like them to bring -- be brought to bear to shape U.S. policy."

REP. BEREUTER: That -- would that relate to certain countries in Africa and the French involvement there? Is that unilateralism?

MS. WALLANDER: There's two kinds of multilateralism. There's principled multilaterialsm and then there's tactical multilateralism. And we see an awful lot of tactical multilateralism on the part of too many countries in Europe these days, and we ought to be reminding some of our European allies and Russian partners that if they want to take an integrated, comprehensive approach to multilateralism, that it's going to be effective in getting the United States to the table to negotiate and compromise, the same rules hold for them as well.

REP. BEREUTER: Do you want to respond on the Caucuses?

MR. RUMER: Yes sir. I share your concern about the Caucuses. I think it is one of those regions that, because of big power involvement as well as because of its own domestically brewed instability, so to speak, is -- has great potential for a crisis and for souring relations between Russia and the United States. As you know better than I, Georgia and Shevardnadze are really neuralgic issues for many leading representatives of Russia's national security and foreign policy establishment, and no where is this feeling shared more than in the Russian military. As I look -- try to step back and take a look at this picture, I think it's important for us to realize that President Putin is really in the minority in a way, but he has responded to the U.S. and stepped up involvement in Georgia in response to the problem with various gangs and terrorist groups in the Pankisi Gorge. Everybody else in Russia's national security establishment was almost aghast at his acquiescence to this important step by the United States.

I do not believe, frankly, that President Putin is fully in control of his military. I think political control over the military establishment, the upper echelon of -- echelons of the Russian military have deteriorated in recent years. It's a process that builds on prior history and probably was accumulated in the Yeltsin era. But it really does pose a problem for Russia's relations with the countries of the South Caucuses, as we call them now, and the worst possible set of circumstances, which is really not beyond what we can imagine, is some kind of an internal crisis in Georgia or in Azerbaijan, and an uncoordinated, un-thought out, poorly planned response by local commanders in the Russian military, or by other players in the Russian domestic politics. I think that is a -- is an area of major concern, where we should maintain open channels of communications with our Russian counterparts.

Thank you, sir.

REP. BEREUTER: Chairman Smith, Governor Janklow, thank you for letting these witnesses pull out this subject for us.

REP. SMITH: Chairman Bereuter, thank you very much. And Mr. Janklow.

REP. JANKLOW: And I'll be extremely brief. Two quick questions. One. When Mr. Margelov was giving us his comments, he emphasized over and over -- the day after, the day after, the day after. Do you folks think that is really the primary Russian objection, the day after, or is it obviously more significant that than?

MS. WALLANDER: I think it is a serious and significant concern. I think that we have to remember --

REP. JANKLOW: Is it the number one that he made it?

MS. WALLANDER: No, I think the economic concerns are the number one concerns, but these are, of course, second, because Iraq is linked to the Caucuses. Iraq is just south of the Caucuses. And insofar as there are networks of transnational terrorism that are financed and take advantage of failed states, insofar as Iraq could become a failed state, especially in its northern reaches, which are connected to the Caucuses, and which there are movements of illicit arms and financing, and including individuals who have been trained, I think it's a legitimate concern. I think it's -- I think the response is the wrong one. I think the solution to that concern is to work more closely with the United States rather than to oppose the United States through the lens of French and German policy. That's my own view as an American, and that's my advice to my Russian friends. But I think it's a genuine concern, and it's one that resonates in Russian public opinion as well.

REP. JANKLOW: Do you agree?

MR. RUMER: Yes sir, I do agree. I do believe they have a major concern about instability in the Gulf spreading beyond the proper Gulf region into what they consider their soft underbelly. So, certainly I think that they act or has other dimensions that carry practical economic considerations for them as well. They would like to a play the day after in the post-war decisions about Iraq. So, I think it has a dual meaning, if you wish, for them in terms of both regional stability and instability as well as in terms of practical, pragmatic considerations.

REP. JANKLOW: And I have one other quick question. What -- what do you think -- again, I'll just go back to his comments -- what do you -- what's the area where you both disagreed the most with him today in terms of analysis?

MS. WALLANDER: I would disagree -- I would critique -- it's not such a direct disagreement --

REP. JANKLOW: That's a good -- that's a better way to put it.

MS. WALLANDER: I think that Russian policy and the perspective of reformers and the new generation of leaders, as Chairman Margelov is one, needs to take much more seriously the dangers of proliferation. It is a constant surprise to me that despite the statements in the foreign policy doctrine and the national security concept -- all these -- that proliferation is a problem. It doesn't -- it doesn't play that active of a role at the forefront of policy, and the way you would expect it to for a country that is, frankly, a lot easier to threaten with weapons of mass destruction than the United States is.

MR. RUMER: I very much share this view, Mr. Chairman. I am constantly amazed at how off-handed many of my Russian colleagues are in their remarks about, "Yeah, of course they're going to pursue nuclear weapons." I do not understand that blase attitude. I think Mr. Margelov, as Dr. Wallander said, is representative of a new generation of Russian political and business leaders, and he makes the case that they're taking greater interest in national security, foreign policy, international relations in general. I think they need to be making much more of a case. Frankly, a lot of these people were on the scene right after 1991 in important policy making positions. And they basically side-stepped all the major security issues, and chose to focus on domestic matters.

I think they need to turn their attention to Russia's role in the international arena. You know, I think they'll benefit from it.

REP. SMITH: Thank you very much, Governor. Mr. Bereuter, any further questions? Mr. Bereuter, any further questions? I want to thank our very distinguished witnesses for, again, your incredible insights. It does help this committee as we go forward. And I do wish that more members were here to hear it, but the record, as you know, will be very widely disseminated. And I -- and again, we thank you so much.

The hearing is adjourned.