U.S. Department of State

Annex A: Assessments of Progress in Meeting the Standards of Section 498A of the Foreign Assistance Act of 1961 - Moldova

RUSSIA

Russia's progress since 1991 towards building a society governed by law-based, democratic institutions has been substantial in many aspects, but uneven and beset by serious challenges. The 1993 Constitution established a governmental structure with a strong head of state (a President), a Government headed by a Prime Minister, and a bicameral legislature (Federal Assembly) consisting of the State Duma (lower house) and the Federation Council (upper house). President Vladimir Putin was elected in a competitive election in March 2000, and Prime Minister Mikhail Kasyanov took office in May 2000. While the OSCE determined that the presidential election met international standards, there were concerns that the Kremlin unfairly used the advantages of incumbency, particularly in its use of the media, to promote Putin's candidacy. Domestic and international observers commended the Central Election Committee for performing effectively as an independent and professional body, and, although there were some irregularities, the vast majority of polling station commissions were rated highly for their performance during the conduct of the voting.

Duma deputies are elected by party lists and single-mandate districts. Members of the Federation Council are appointed by regional governors and regional legislatures: two from each of the 89 regions of the Federation. Duma elections, in 1993, 1995 and 1999 met international standards, despite some deficiencies in the 1999 elections. As for the December 2003 Duma elections, however, the International Election Observation Mission led by the Organization for Security and Co-operation in Europe (OSCE) reported that, while voting procedures were conducted in a technically correct way, the election process overall failed to meet many international standards. The OSCE expressed concerns about this step backwards, stating that "[t]his is a worrisome development that calls into question Russia's fundamental willingness to meet European and international standards for democratic elections."

The Constitution provides for an independent judiciary, including a Supreme Court that hears appeals from the courts of general jurisdiction and a constitutional court. The judiciary remains seriously impaired by a shortage of resources and by corruption, and is still subject to undue influence from other branches of Government; however, it has shown some signs of limited independence and is slowly undergoing reforms. Laws on the judicial system, the status of judges, and the Constitutional Court and a Code of Criminal Procedure, are being phased in over a three-year period that began in 2002. The new Code balances the protection of society with the rights of the individual, establishes an adversarial system rather than an inquisitorial system, and requires that all serious crime cases be tried before juries within two years of the alleged offense in all 89 regions. (Jury trials are currently available in 12 of Russia's 89 subject territories.) The Code also provides that courts be given exclusive authority over the issuance of arrest and search warrants beginning in 2004. The Law on the Constitutional Court establishes the obligation of Russian legislatures to alter immediately laws found unconstitutional. The Law on Judges makes judges more accountable for their actions and liable to criminal investigation. The judicial system continues to be plagued by large case backlogs and trial delays, though both the number of persons in pre-trial detention and the average length of time spent there have declined significantly.

Although significant reforms occurred in law enforcement and judicial procedures in 2003, the apparently selective arrest and detention of prominent businessman Mikhail Khodorkovskiy less than two months before parliamentary elections raised concern over the arbitrary use of the judicial system. Furthermore, there have been several prosecutions in relation to so-called "espionage" cases that appear to be politically motivated. Several of these cases have involved Russians and foreigners working together and exchanging information that the authorities considered sensitive. For example, Russian military journalist Grigoriy Pasko, who had reported on the Russian Navy's dumping of nuclear waste, was convicted in 2001 of one count of espionage in a case that led many human rights activists and Russian politicians to question the apparent undue influence of the Federal Security Service (FSB) and judicial independence. In another case, the jury trial of arms control researcher Igor Sutyagin was postponed indefinitely shortly after it began in November. Sutyagin has been in pre-trial detention since October 1999.

Russia has yet to enact comprehensive anti-corruption legislation or to develop a multidisciplinary approach to address corruption. The Government has, however, begun to engage on the issue in multilateral fora, such as the UN, the G-8, and the Council of Europe. It has also participated in the Global Forum on Fighting Corruption process begun in 1999, including the most recent Global Forum III sponsored by South Korea in 2003.

Section 498A(a)(2): "make significant progress in, and is committed to the comprehensive implementation of, economic reform based on market principles, private ownership, and integration into the world economy, including implementation of the legal and policy frameworks necessary for such reform (including protection of intellectual property and respect for contracts)."

The Russian economy has undergone tremendous stress as it has moved from a centrally planned to a free-market system. Since 1991, Russia has succeeded in privatizing most of the formerly state-owned economy and freed business entities to trade and compete in a market where prices are generally set by supply and demand. The Russian Government officially estimates that more than 75 percent of manufacturing enterprises are fully or partially privatized. 85 percent of current manufacturing output reportedly stems from such enterprises, and more than 80 percent of Russia's industrial workers work in these firms. The vast majority of Russia's financial sector is in private hands, with only one state-owned bank (Sberbank, which controls most retail banking) remaining from the Soviet era.

As of December 2003, the Russian economy was on track for over six percent growth during 2003, up from 4.3 percent growth in 2002. Russia has maintained prudent macroeconomic policies, posting a primary federal budget surplus of about one percent of GDP during 2003, partly due to the rise in oil prices, but also a consequence of tighter fiscal policy. The country has maintained a stable exchange rate, and accumulated international reserves of over $70 billion, an increase of $23 billion during January - October 2003. Public external debt has fallen from 80% of GDP in 1999 to less than 30% of GDP in 2003, eliminating concerns about debt servicing. During 2003, the Duma passed legislation restructuring the national power monopoly RAO UES by separating generation and distribution of power, and enacted reforms of foreign trade, anti-dumping and other areas to bring Russian law into closer compliance with WTO norms.

Implementation of structural reforms has significantly accelerated under President Putin since 2001, but much remains to be done in this arena to ensure Russia's sustained economic development. Even with the economic windfalls from energy exports, slow development and uneven enforcement of securities regulation, lack of a developed real property system, lack of financing due to political and economic uncertainty, over-reliance on barter transactions and failure to enforce bankruptcy against insolvent enterprises continue to prevent the Russian economy from reaching its potential, and render it vulnerable to adverse external shocks. In addition, resistance by the bureaucracy and other vested interests has attempted to divert reforms from their original aims, and hampered implementation, especially at the local level. During the run-up to the Duma/Presidential elections in late 2003/early 2004, political sensitivities slowed down the reform pace.

Since 1995, Russia's trade regime has moved generally toward greater liberalization, eliminating an oil export quota, special exporter regime and export tariffs. Russia's trade surplus, fueled by high oil prices, was $46.2 billion in 2002 and had exceeded that figure to reach $49.6 billion during January - October 2003. Russia's economy -- and its federal budget -- is particularly vulnerable to the world energy markets. The IMF advises tightening fiscal policy well before oil prices begin to fall. A provision for a stabilization fund appears for the first time in the 2004 budget. A portion of government budget surpluses will go into the new stabilization fund, which may accumulate $3 billion in its first year alone. Ruble appreciation has already ended the benefit that the Russian domestic economy and exports gained from the 1998 ruble devaluation.

Russia's economic team appears committed to a reformist agenda, but remaining reforms -- breaking up the monopolies, production sharing agreements, reducing dependence on a few sectors, reform of the public service sector, and more -- will be difficult. Russian officials have recognized the connection between WTO accession and structural economic reform and reinvigorated their accession effort. Since 1994, U.S. presidents have determined, subject to semiannual reporting requirements, that Russia is in compliance with the freedom of emigration provisions of the Jackson-Vanik amendment to the Trade Act of 1974, allowing Russia to receive normal trade relations status. Russia joined the Asia-Pacific Economic Cooperation group in 1998. While the Russian Government is committed to further integration into the world economy, making the necessary reforms has proved politically difficult.

Russia's intellectual property rights (IPR) legislation provides protection for patents, copyrights, trade and service marks, and semiconductor chip designs. Legislation introduced in 2001 reflects Russian efforts to prepare for World Trade Organization (WTO) accession and the IPR commitments of the WTO Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS). The legislation includes retroactive protection of copyrights, but includes alterations to the civil code that may confuse rights holders when pursuing claims against pirates. Passage of the legislation has been repeatedly delayed and the Duma will take up this legislation once again in Spring 2004. Pervasive problems in enforcement and piracy of optical media have become much worse over the past several years. The great majority of Russian optical disk production -- 300 million CDs and 25 million DVDs -- is illegal. Many of these CDs and DVDs are exported worldwide. Partially in response to increased optical disk piracy, the Russian Government set up an IPR task force led by Prime Minister Kasyanov in the fall of 2002. However, IPR enforcement and handling of IPR cases remains poor. Only 20% of piracy cases ever make it to court. Russia remains on the U.S. Special 301 priority watch list. In 1998, Russia established a Patent Chamber, a specialized court for appellate review of patent disputes.

Russia's Constitution guarantees respect for internationally recognized human rights, and its Government generally respected the human rights of its citizens in some areas, but serious problems remained in many areas and a tendency to exert strong pressure on certain democratic gains of the past decade was evident. Although the Russian parliament has been slow to pass implementing legislation in many areas, the Constitutional guarantees of freedoms of speech, press, religion, assembly and movement have dramatically recast the individual's relationship with the state in Russia compared with the Soviet period.

There were continuing, credible reports of widespread human rights violations by Russian troops in Chechnya. (Chechnya is further addressed in the following section (a)(4).)

The treatment of prisoners and conditions in pretrial detention facilities and prisons were generally poor, though somewhat improved. Lack of respect for due process remains a serious shortcoming. There were credible reports that law enforcement personnel continued to torture, beat, and otherwise abuse detainees and suspects. Arbitrary arrest and detention, while significantly reduced by a new Code of Criminal Procedure, remained problems, as did police corruption. The Government prosecuted some perpetrators of abuses, but many officials were not held accountable for their actions.

The Russian Constitution provides for freedom of expression and of the media. Nevertheless, despite a wide diversity of the press, a variety of direct and indirect government actions further weakened the autonomy of the electronic media, the primary source of information for most individuals. For example, the January 2003 firing of the head of television station NTV's media holding company has been linked to criticism of the station's coverage of the October 2002 Moscow theater hostage crisis by Russian officials, including President Putin. In June 2003, the Ministry of Press and Television closed down the only remaining independent national television network, TVS. Some journalists have been killed or kidnapped and, in the eyes of some observers, the Government has failed to investigate these crimes actively. The August 2003 reorganization of VTsIOM - an independent, commercially-viable state-owned polling agency - was widely seen as an attempt to eliminate an independent source of information about issues such as political party ratings and public opinion on the war in Chechnya. The Government depicted the reorganization as part of its program to privatize state enterprises, but the new board of directors is comprised of bureaucrats from the ministries and the presidential administration. On the positive side, in June the Government extended Radio Liberty's license for another five years, and in October the Constitutional Court struck down a clause in the law on voters' rights that would have restricted media coverage of election campaigns so broadly that reporting information on a candidate could have been construed as a violation.

The Russian Constitution prohibits discrimination based on race, sex, religion, language, social status, or other circumstances. However, both official and societal discrimination still exist. There continue to be credible reports that law enforcement agents in Moscow routinely detain, intimidate and extort money from and beat people of color, mainly people from the Caucasus and Central Asia. Police and other security forces in various parts of Russia continue their practice of targeting citizens from the Caucasus and darker-skinned persons in general for arbitrary searches and detentions on the pretext of fighting crime and enforcing residential registration requirements. Human rights groups in Moscow have complained of increased detentions of people from the Caucasus, who have come under intense police scrutiny following the October 2002 terrorist attack on the Dubrovka Theater. On the positive side, both President Putin and Moscow Mayor Luzhkov have made strong, repeated public statements on the unacceptability of collective punishment, and the need to respect Chechens' civil rights.

Although religious freedom has greatly expanded in Russia since the end of the Soviet Union, with a variety of faiths experiencing new opportunities and gaining new adherents, the last year has seen continued pressure on religious minorities, especially Roman Catholics. In September 1997, President Yeltsin signed a law "On Freedom of Conscience and Religious Associations" that replaced a more liberal law on religious freedom and introduced significantly more government regulation over religious organizations. At first the Federal Government generally attempted to apply the 1997 law liberally, and most allegations of restrictive practices were directed at local officials. However, there is evidence that the Procurator General encouraged local state prosecutors to challenge the registration and re-registration of some "non-traditional" religious groups. The vagueness of the law and regulations, contradictions between federal and local law, and varying interpretations of the law have furnished regional officials with a pretext to restrict the activities of religious minorities. Many of those groups initially denied registration were evangelical, proselytizing groups. In some cases they successfully sued and the courts ordered local officials to register them. Under a 1999 amendment to the law, groups that failed to reregister became subject to legal "liquidation," i.e., deprivation of juridical status. The Ministry of Justice reported that by May 2002, approximately 980 of an estimated 2,095 religious groups that were subject to liquidation had been liquidated. The Ministry asserted that most liquidated organizations were defunct, but religious minorities and non-governmental organizations (NGOs) contended that a significant number were active. Complaints of involuntary liquidation have deceased in recent years. About 90 percent of the estimated 20,000 organizations required to re-register at the local level did so successfully, and many of those that did not are apparently defunct. According to the Ministry of Justice, there were 21,448 registered religious groups as of January 1, 2003.

Officials in Moscow and other cities have repeatedly attempted to ban local branches of the Salvation Army, the Jehovah's Witnesses, and Scientologists, so far without success. Some religious groups have experienced harassment either from official sources, such as the FSB and local officials, or unofficial sources, such as extremists. Roman Catholic clergy came under renewed pressure in 2002, when five foreign-born priests and a bishop - one of only four Catholic bishops serving in Russia - had their visas cancelled or were forced to leave Russia when their current visas expired and their visa applications were denied. Since that time, other priests have received visas ranging in validity from three to twelve months. The denials of visas to Roman Catholic clergy in 2002 raised strong concerns over the influence of the security services and the Russian Orthodox Church and had a chilling effect on Russia's Catholic community, which depends on clergy from abroad. Some Evangelical Protestants, Buddhists, and Muslim religious workers and clergy also were denied visas or visa-renewals. Federal authorities have issued directives to bring local laws on religious registration and non-complying regions into line with the federal law. The U.S. Government and NGO community are monitoring this closely and have raised these issues with Russian officials at the highest levels.

Muslims, Jews and members of other religious minority groups continue to encounter societal prejudices, antagonism, and discrimination. With the continuing conflict in Chechnya and more recently the international war on terrorism, societal discrimination and harassment against Muslims is frequently reported. President Putin and other officials have called for greater tolerance and specifically have condemned anti-Semitic acts, especially during the rash of anti-Semitic bomb attacks and threats during the summer of 2002. President Putin has spoken out publicly on the need to protect religious freedom, promote tolerance, and preserve the separation of church and state. While many groups have noted improvements in certain respects over the past year, societal discrimination, harassment, and violence against members of some religious minorities remain a problem.

Some regional governments severely restrict the constitutional right of citizens to freely choose their place of residence by requiring residence permits to live and work in a specific area. These restrictions, though repeatedly challenged in court, remain largely in force and are tolerated by the Federal Government. The presence of these restrictions, which increased following terrorist bombings in September 1999 and were reinvigorated following an explosion in Moscow in August 2000, demonstrated the continued obstacles to the enforcement of judicial rulings. Citizens may freely travel within Russia, but must carry internal passports. Citizens are free to emigrate. However, individuals who, during the course of their work, had access to classified material can be refused permission to travel abroad for five years following the last date of access to such material. The law allows for an additional period of five years, although in practice, restrictions of more than five years are rarely imposed.

There were increasing limits on worker's rights, and there were reported instances of forced labor and child labor. In a step back, in December 2002, the Government refused to permit the longtime director of the Solidarity Center, an NGO that provides technical assistance and training to workers and promotes cooperation among labor, management and government, to re-enter the country. The refusal apparently was related to her activities in support of worker rights. Despite lobbying by NGOs in Russia, some members of the Duma, and some in the international community, the Government did not permit the Solidarity Center Director to re-enter Russia in 2003.

Section 498A(a)(4): "respect international law and obligations and adhere to the Helsinki Final Act of the Conference on Security and Cooperation in Europe and the Charter of Paris, including the obligations to refrain from the threat or use of force and to settle disputes peacefully."

Responding to attacks on Dagestan in July and August 1999 by extremist Chechen field commander Shamil Basayev, and to the bombing of apartment buildings in Moscow and elsewhere, the Russian Government launched a military campaign to assert control over Chechnya. The indiscriminate use of force by both government and rebel troops resulted in widespread civilian casualties and the displacement of more than 250,000 people, the majority of whom sought refuge in the neighboring republic of Ingushetia. Four years later, the conduct of Russian armed forces in the campaign against Chechen rebels continues to be poor.

Numerous credible reports have continued of human rights abuses and atrocities committed by both federal and Chechen forces, including extrajudicial killings, torture, rape, disappearance and arbitrary detention. Such actions are not consistent with Russia's international commitments under international humanitarian law and/or the OSCE's Code of Conduct on politico-military aspects of security, which provides that states should "take due care to avoid injury to civilians or their property." Despite General Moltenskoy's March 2002 Decree #80, which was designed to improve the conduct of Russian forces in Chechnya, command and control amongst military and special police units often appeared to be weak, and a culture of lawlessness and corruption has flourished. This culture fostered individual acts of violence and looting against civilians and a lack of accountability. While government prosecutors have ostensibly pursued investigations of some of these incidents, few cases have been brought to court. According to Russian Government statistics, since the beginning of the conflict through April 2003, 51 servicemen, including seven officers, were convicted of various crimes against civilians, although some were granted amnesty. In the most highly publicized case, in July, a military court re-tried and convicted Colonel Yuriy Budanov on charges of abducting and murdering a young Chechen woman. Budanov received a ten-year prison sentence. The ruling represented a positive step in efforts to promote accountability, although the ten-year prison sentence was a relatively lenient punishment for murder in Russia. The conviction followed a successful appeal of a December 2002 court finding that Budanov was temporarily insane at the time of the killing. There have been no reliable mechanisms to investigate and prosecute abuses purportedly committed by Chechen separatists. Chechen fighters have reportedly used landmines, booby traps and other explosive devices that sometimes have caused civilian casualties, and they have carried out numerous assassinations of local civilian officers serving in the pro-Moscow Chechen administration.

According to UN estimates, 30,000-40,000 people returned to Chechnya in 2003, but humanitarian and human rights organizations have noted that many internally displaced persons (IDPs) have been pressured into returning. Arjan Erkel, head of the Medicins Sans Frontieres mission in Dagestan, was kidnapped in August 2002 and remains missing. During 2003, the security situation in Ingushetia deteriorated. In July, Human Rights Watch reported that Russian human rights abuses were spreading to Chechen IDPs in Ingushetia.

In December 2002, the Russian Government refused to renew an agreement with the OSCE Assistance Group (AG) in Chechnya, whose mandate included human rights monitoring and facilitating delivery of humanitarian assistance. In November 2002, the Russian delegation to the OSCE proposed far-reaching changes to the Assistance Group's mandate. The changes, if implemented, would have greatly reduced the AG's political and human rights dimension and largely restricted it to assisting the Russian Government in its efforts to restore Chechnya economically and to facilitating the return of refugees. The U.S., together with other OSCE member states, accepts enlarging the AG's economic dimension in response to Russia's request, but insists that the AG's role in monitoring human rights be preserved. This issue remained unresolved in 2003.

The consolidation of Chechen fighters under Maskhadov in the summer of 2002, followed by the Moscow theater hostage crisis in October 2002, have led Russian officials from President Putin down to rule out negotiations with Maskhadov or any other Chechen separatist. President Putin declared his own political solution for Chechnya, centered around a constitutional referendum in March 2003, followed by a Chechen presidential election in October 2003. The OSCE/ODIHR did not deploy a full-scale observer mission to the March referendum. Instead, it sent a small technical assessment team. According to team leader Hrair Balian, "the organization and conduct of the referendum were not without shortcomings." OSCE/ODIHR Director Ambassador Christian Strohal stated that the referendum "can only be considered a success if it is followed by a serious effort by all sides to engage in a sustained political process bridging the divide between Moscow and the Chechnya people." Prior to the presidential election, the exit of all viable challengers to Akhmad Kadyrov's candidacy and the overt control of Chechen media by pro-Kadyrov forces resulted in an election that failed to meet international standards for free and fair elections.

Russian leaders have generally called for enhanced efforts by the UN and the OSCE in peacekeeping, including in the New Independent States (NIS). Russia has, to varying degrees, been supportive of OSCE missions and UN peace efforts in Azerbaijan (Nagorno-Karabakh), Estonia, Georgia, Latvia, Moldova, Tajikistan, and Ukraine, but did not support the decision in December 2001 to close missions in Estonia and Latvia.

Section 498A(a)(5): "cooperate in seeking peaceful resolution of ethnic and regional conflicts."

Russia's role in resolving regional conflicts in adjacent countries has been generally positive, but in 2003 Moscow adopted a more assertive foreign policy toward former Soviet states. Russia has a strong interest in increasing stability and security along its borders to reduce the threats of terrorism, extremism, narcotics trafficking, and organized crime growing out of unresolved regional conflicts. Moscow, however, sometimes uses unresolved conflicts as leverage to pressure its neighbors. Russia's foreign policy remains committed to strengthening the Commonwealth of Independent States (CIS), preserving and enhancing Russia's influence in the region of the former Soviet Union and defending the interests of ethnic Russians in neighboring states.

Russia continued to cooperate with a Georgia-based OSCE mission charged with bringing Ossetians and Georgians to the negotiating table. In 1992, Russia helped broker the cease-fire agreement in South Ossetia. This truce accord still holds.

Abkhazia has so far not been prepared to enter into serious negotiations with Georgia on remaining part of the Georgian state. Moscow says that it supports Georgian sovereignty and territorial integrity, but has taken few, if any, serious steps to press the Abkhaz to negotiate seriously toward a settlement. Georgia has expressed concern over Russia's issuance of passports to ethnic Russians living in Abkhazia and about efforts to reestablish transportation links between Russia and Abkhazia without Georgia's consent. Following President Eduard Shevardnadze's resignation in December 2003, high-level Russian officials met with Abkhaz and other separatist leaders in Moscow as a reminder to Georgia to take Russia's interests into account.

With regard to Russian forces in Abkhazia, at the Istanbul OSCE Summit (November 18-19, 1999) Georgia secured a Russian commitment to: remove all equipment limited by the CFE Treaty from the Gudauta base in Abkhazia (as well as from certain other facilities) by December 31, 2000; and disband the Gudauta and Vaziani bases entirely by July 1, 2001. Russia withdrew from Vaziani before the deadline and later announced that it had disbanded Gudauta and withdrawn all but "peacekeeping" troops from Gudauta. However, Russia and Georgia have not yet agreed on the status of the Gudauta base and Russian troops located there, nor have they reached a common understanding on transparency modalities for the base.

Russia, the United States, and France co-chair the Minsk Group peace process, which is the OSCE's negotiating forum for a peaceful settlement of the Nagorno-Karabakh conflict. Cooperation among the co-chairs has been excellent. The Co-Chairmen of the Minsk Group have been actively negotiating with the parties to reach a durable settlement. A Russian-brokered cease-fire has been in effect in Nagorno-Karabakh since May 1994 and has held, despite sporadic violations.

President Yeltsin visited Kiev in May 1997 and signed a Friendship and Cooperation Treaty with Ukraine that has been ratified by both countries. The two sides also concluded agreements to resolve the issue of the Ukraine-based Black Sea fleet, which had been a source of disagreement since 1992. In 2003 unresolved border issues in the Sea of Azov and Kerch Strait grew contentious when local Russian engineers began constructing a causeway to link the Russian mainland to a Ukrainian island in the strait. Both sides traded accusations and counteraccusations for several weeks, but Presidents Putin and Kuchma calmed the waters by hammering out a tentative settlement at their Christmas Eve summit in Crimea.

Russia played a significant role in facilitating the peace process in Tajikistan that led to a comprehensive settlement of the internal conflict there in June 1997. Russia's 201st Motorized Rifle Division, stationed in Tajikistan since Soviet times, is still present in the country. The 201st is the largest group of Russian forces outside Russian borders. The Division supports the current regime and Russia's interests in the region. Cooperation exists between Russian and Tajik armed forces and Tajiks serve in the Russian forces stationed there.

In Moldova, Russia has played an active role in the five-side negotiations (involving Moldova, the Transnistrian region, Russia, Ukraine and the OSCE) to reach a peaceful, political settlement of the conflict between Moldova and its secessionist region of Transnistria. However, Russia has not been consistent in using its considerable influence over Transnistria and its leadership to overcome its intransigence and lack of cooperation with the peace process or the withdrawal of Russian forces from Moldova. In 2003 Russia's failed attempt to resolve the conflict outside the five-sided process raised doubts about Moscow's commitment to the existing negotiating structure. Russia complicated the efforts of OSCE mediators by undertaking non-transparent, unilateral shuttle diplomacy between the two sides that, while ultimately unsuccessful, would have resulted in an agreement skewed heavily in favor of the Transnistrian separatists.

In connection with the Transnistrian conflict, Russian forces have been stationed in Moldova since July 1992 pursuant to a bilateral peacekeeping arrangement. Additionally, remnants of the Soviet 14th Army, now referred to as the Operational Group of Russian Forces, are present in Moldova. At the Istanbul OSCE Summit in 1999, Russia agreed to withdraw all of its military forces from Moldova by December 31, 2002. The status of this commitment is discussed in the arms control section below (498A(a)(6)(A)). Withdrawal of arms and ammunition from Moldova was not completed by that deadline. At the OSCE Ministerial Meeting in Porto, Portugal (December 6-7, 2002), Russia agreed to complete the withdrawals by December 31, 2003. Important progress was made in 2003 on the withdrawal of stored Russian munitions from Moldova, but Russia did not meet that extended deadline. While more than half of the Russian ammunition and military equipment has now been removed from Moldova and Russian military authorities say they can complete the withdrawal by mid-2004, it appears that the process may be complicated by the uncertain status of the settlement talks.

Russia has been generally constructive in mediating international conflicts, e.g. as a co-sponsor of the Middle East peace process, a former part of the international security presence in Kosovo (KFOR), a member of the Bosnia Contact Group, and a supporter of UN and other multinational peace initiatives in Africa.

Section 498A(a)(6): "implement responsible security policies, including--

(A) adhering to arms control obligations derived from agreements signed by the former Soviet Union;

(B) reducing military forces and expenditures to a level consistent with legitimate defense requirements;

(C) not proliferating nuclear, biological, or chemical weapons, their delivery systems, or related technologies; and

(D) restraining conventional weapons transfers."

Arms Control: The Government of Russia continues to make progress resolving arms control issues inherited as a result of the disintegration of the Soviet Union, including the fulfillment of obligations undertaken in connection with bilateral and multilateral treaties such as the Intermediate-Range Nuclear Forces (INF) Treaty, Strategic Arms Reduction Treaty (START), the 1972 Convention on the Prohibition on the Development, Production, and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on Their Destruction (BWC), and the Conventional Armed Forces in Europe (CFE) Treaty. Russia is also a party to the Chemical Weapons Convention (CWC). However, we continue to have concerns about Russia's current arms control compliance in some areas, notably biological and chemical weapons.

Since the START Treaty entered into force on December 5, 1994, Russia has verifiably eliminated substantial numbers of strategic offensive arms. Russia met its START Treaty reduction obligations by the December 5, 2001 deadline, and is in compliance with the Treaty's central limits. Nevertheless, Russia has failed to fulfill some of its other START obligations and in some cases has not allowed the United States to exercise fully its Treaty verification rights. The Parties continue to work through diplomatic channels, including the Joint Compliance and Inspection Commission (JCIC), the Treaty's implementing body, to resolve compliance issues and questions. The JCIC meets periodically in Geneva; a number of implementation questions have been resolved through this mechanism. The United States will continue to press Russia to take steps to resolve outstanding compliance issues.

Russia is in compliance with the INF Treaty. The Soviet Union completed its INF Treaty-required eliminations in May 1991. The INF inspection regime was successfully completed on May 31, 2001. Russia continues to observe its obligations under the INF Treaty, including participating in the Special Verification Commission, the mechanism for resolving implementation questions under the Treaty.

Russia continues to reaffirm its commitment to comply with the CFE Treaty and urges entry into force of the CFE Adaptation Agreement signed by the 30 States Parties at the OSCE Summit in November 1999. Russia complies with key elements of the CFE Treaty, although important longstanding compliance concerns remain.

According to its flank data as of July 1, 2003, and a related notification, Russian holdings of Treaty-limited equipment (TLE) continue to exceed most of the legally-binding limits for the original and revised flank areas. However, the 30 CFE States Parties acknowledged the validity of Russia's desire for additional flexibility regarding flank equipment levels by agreeing on higher ceilings for the Russian flank under the Adapted CFE Treaty, which was signed in 1999 but not yet ratified by all 30 States Parties. Russia now appears to be within the future limits of the Adapted CFE Treaty for TLE on Russian territory in the revised flank area (the "adapted flank" area).

Russian data as of 1 January 2003 showed compliance with overall limits for TLE, but Russia continued to exceed its overall limits for artillery and tanks in active units. While Russia has demonstrated a generally positive record of implementation of most CFE Treaty provisions, there have been some areas of concern that the Administration has continued to monitor closely.

In addition, for several years, there have been serious concerns about Russian forces stationed in Georgia and Moldova in spite of a CFE provision that requires the consent of those countries for the presence of Russian forces on their territory. At the 1999 OSCE Summit in Istanbul, Russia committed to specific actions related to withdrawal of its forces and equipment from these two States Parties. Russia has fulfilled some of these commitments, in particular those that pertain directly to CFE TLE. But the issue of the continuing presence of Russian forces remains unresolved.

In Moldova, Russia fulfilled its Istanbul commitment to destroy or withdraw its declared TLE by the end of 2001. Fulfillment of the commitment to withdraw all Russian forces by the end of 2002 was hindered by political issues related to the Transnistrian separatist regime, which has obstructed the process, and by the magnitude of certain aspects of the withdrawal task, which includes the removal, destruction, or demilitarization of large quantities of stored Russian ammunition and Russian small arms. Some ammunition was withdrawn in 2002, including encouraged by assistance from the OSCE via a Voluntary Fund, and this has been confirmed using multinational OSCE and CFE inspection teams. At the 2002 OSCE Ministerial in Porto, Russia committed to complete the withdrawal as early as possible and stated its intention to do so by December 31, 2003. OSCE Voluntary Fund donor states provided continued support for the withdrawal process and the pace of withdrawals picked up in early 2003. It halted in mid-July again due to Transnistrian obstructionism and Russian failure consistently to use its political influence to overcome that. Withdrawals resumed in November and December but the 2003 revised deadline was not met. However, by the end of 2003 approximately half of the munitions stored at the main Kolbasna depot had been verifiably withdrawn to Russia.

In Georgia, Russia completed its Istanbul commitments to withdraw CFE TLE in excess of agreed levels by December 31, 2000, and closed and transferred to Georgia its base at Vaziani by July 1, 2001, as agreed at Istanbul. Still to be achieved - consistent with the Istanbul commitments contained in a Georgia-Russia Joint Statement (Annex 14 of the CFE Final Act) - are agreements between Russia and Georgia on the status of the Russian base at Gudauta in separatist Abkhazia (which was to have been disbanded by July 1, 2001), and on the duration of the residual presence of Russian forces at the remaining bases at Batumi and Akhalkalaki. Following the OSCE's Porto Ministerial in December 2002, Russia and Georgia resumed discussions of withdrawal issues at the expert level. Some discussions continued in 2003, but without any concrete results.

There are a number of other compliance-related issues that the United States continues to track, including: instances of denial of full access during on-site inspections at sites where units or installations that are not subordinate to the conventional armed forces are present; denial or delay of inspections due to questionable claims of force majeure; questionable armored personnel carrier (APC) ambulances at some flank units; continued Russian claims of more decommissioned items than the Treaty allows to be exempted from counting rules (although this did not take place in Russia's data as of January 1, 2003, it has been a frequent condition); continued Russian failure to count against limits items characterized as "non-combat-capable" (a category that the Treaty does not recognize); declaration of all ground TLE in the flank zone as being in active units (which is not permitted until entry into force of the Adapted Treaty); and Russian refusal to declare MT-LB-APC look-alikes or IRM armored infantry fighting vehicle (AIFV) as TLE look-alikes that are listed in the Treaty's "Protocol on Existing Types" of CFE-accountable equipment. (Details can be found in the Annual Compliance Reports).

On the other hand, in late spring 2003, the United States and NATO agreed that there was sufficient evidence to support Russia's claims of having fulfilled the provisions of a CFE-related side agreement on equipment destruction outside the CFE area, on Russian territory east of the Urals. The United States and NATO accepted Russian commitments that extended the deadline and modified some of the parameters of this agreement.

Russia has submitted Confidence- and Security-Building Measures (CSBM) annual data declarations for 1991-2001 and has willingly undergone CSBM inspections and evaluation visits in accordance with the OSCE Vienna Document.

Russia is also a party to the Treaty on Open Skies (OS), which establishes a regime of unarmed aerial observation flights over the territories States Parties. (The Soviet Union was not a party to the OS Treaty.) The Treaty is a U.S. initiative designed to enhance mutual understanding and confidence and to promote openness and transparency in military forces and activities. Prior to the Treaty's entry into force on January 1, 2002, Russia cooperated with 26 other signatories during its period of provisional application. Although the Treaty has been successfully implemented since it entered into force, the United States has been forced to routinely challenge Russian actions.

The Chemical Weapons Convention (CWC) requires Russia to declare and destroy its chemical weapons (CW) stocks. (Russia ratified the CWC, but it was never an obligation of the Soviet Union.) In becoming a State Party to the CWC, Russia accepted legal obligations to destroy its CW stockpile and to forego the development or possession of CW. Russia has requested Cooperative Threat Reduction (CTR) assistance to destroy Russian chemical weapons stocks and destroy several former chemical weapons production facilities (CWPFs) in accordance with the Convention. In May 1997, the Duma passed and President Yeltsin signed the Russian Federal Law on Chemical Weapons Destruction, approving implementation of the 1996 destruction plan. The plan has subsequently undergone several revisions, the latest in 2003.

In recent years, the Russian Federation has taken steps to strengthen its CW destruction program, including consolidating responsibility under civilian leadership and significantly increasing funding, admittedly from a low starting point. For both financial and bureaucratic reasons, progress toward fulfilling Russia's CWC obligations has been slow, and senior-level Russian policy statements regarding Russia's general commitment to destroy its CW stocks remain largely unimplemented. As a result, Russia has requested extensions on its CW destruction deadlines from the Organization for the Prohibition of Chemical Weapons (OPCW). With international assistance, Russia in April 2003 completed the destruction of one percent of its Category 1 stockpile three years after the original CWC deadline for completing such destruction.

Since the December 1997 entry into force of the Treaty for Russia, the Unites States has considered the CWC provisions to be the appropriate basis for evaluating Russia's commitment toward CW disarmament. The CWC provides mechanisms under Article IX for pursuing concerns about Russia's compliance. The United States is concerned that Russia may maintain undeclared CW stockpiles and facilities as well as CW production mobilization capabilities, and that Russian CW research activities may continue on fourth-generation agents and other nontraditional agents. Any development, production and stockpiling of fourth-generation agents that are "chemical weapons" as defined by the CWC are prohibited by that Convention. In addition to the declared agent and weapons at Russia's seven declared storage sites, the United States is concerned that Russia may possess chemical agent/munitions stocks in excess of what it declared under the CWC.

The Administration believes that the Russian declaration of chemical weapons development facilities is incomplete. Moreover, there are facilities that Russia may be required to declare as chemical weapons production facilities as well. Rather than destroying many of its declared CWPFs, Russia is converting them into commercial chemical production facilities, making them sources of revenue. Based on the implementation of U.S. negotiated changes at these converted facilities, once completed, they should have no greater capability than equivalent industrial facilities to produce CW, as required under the CWC. Additionally, these facilities will be subject to OPCW inspections throughout at least 2012, where at such time States Parties can review their status to determine if continued verification is warranted.

The U.S. Government and the Russian Federation continue to engage at senior levels and through expert-level bilateral consultations to address these concerns.

With respect to the 1972 Convention on the Prohibition on the Development, Production, and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on Their Destruction (the BWC), the United States has determined that the offensive biological weapons (BW) program Russia inherited from the Soviet Union violated the BWC at least through March 1992. (Russia succeeded to this convention, as obligations were binding originally under the Soviet Union.) In early 1992, President Yeltsin confirmed that the former Soviet Union had an offensive BW program and issued a decree prohibiting all activities that contravened the BWC. In June 2000, President Putin reiterated Russia's adherence to the BWC. By April 2001, the Duma voted to remove a Russian reservation to the 1925 Geneva Protocol that had allowed for Russia's retaliatory use of biological weapons.

Beginning in September 1992, U.S. and UK officials have met their Russian counterparts to discuss compliance issues related to the BWC. The so-called "Trilateral Process" has remained moribund recently primarily due to Russian refusal to allow access to military facilities suspected of having the capability to make offensive BW weapons. There has been a significant increase in openness on an institutional level at key civilian facilities associated with the former Soviet BW program. Nevertheless, the United States remains concerned about the activities taking place at former Soviet BW-related facilities, especially those controlled by the Russian Ministry of Defense.

We continue to have significant concerns about Russia's current arms control compliance in some areas, notably biological and chemical weapons. While Russia has taken concrete steps toward fulfilling its arms control obligations since the dissolution of the Soviet Union, the status of Russian compliance performance remains under our constant, careful review.

Reducing Forces and Expenditures: Due to extreme budgetary constraints and a changing view of Russian military needs, military spending on equipment and manpower was drastically reduced during the period of 1992-1995. During this period, Russian troop strength was cut by approximately 35%, while tanks, ACVs and artillery were reduced by 50% or greater. Since 1995, Russian personnel strength has continued to drop sharply from a level of 1.7 million authorized military personnel to a present level of roughly one million. However, Russian equipment levels have declined to a lesser degree in this time period as the Russian military restructures its forces in accordance with planned military reforms.

We continue to have concerns about possible Russian offensive chemical and biological programs, as described in the previous section. Any such activities exceed legitimate defense requirements.

Non-Proliferation: The United States and Russia have continued their active dialogue concerning non-proliferation of nuclear, biological, and chemical weapons, their delivery systems, and related technologies. Moreover, nonproliferation has become a key part of the new relationship, with the agenda broadening to include regional issues. The United States and Russia are, for example, conducting a high-level dialogue on Iran nonproliferation issues.

As a co-depositary government of the NPT with the United States (and the UK), Russia continues to consult closely on matters relevant to this important Treaty. In a joint statement of November 13, 2001, Presidents Bush and Putin endorsed efforts to strengthen the NPT. The Treaty of Moscow, which was signed May 24, 2002, and entered into force June 1, 2003, both refers to and furthers Russia's progress in meeting its disarmament obligations under the NPT. The United States and Russia consulted prior to and at the first meeting of the first Preparatory Committee for the 2005 NPT Review Conference, which was held in New York in April 2002. The United States and Russia met in October 2002 as preparations began for the second meeting of the Preparatory Committee, which will be held in Geneva in April 2003.

Although economic difficulties have limited Russia's ability to provide resources for dismantling activities, we believe it remains committed to making a substantial investment in dismantling weapons of mass destruction.

The government-to-government Highly Enriched Uranium (HEU) Agreement between the United States and the Russian Federation, signed February 18, 1993, provided for conversion of 500 metric tons of HEU from dismantled Russian nuclear weapons into low enriched uranium fuel over a 20-year period.

The Agreement provides for the United States Enrichment Corporation (USEC), the U.S. Executive Agent under the agreement, to purchase HEU as HEU or in the form of LEU suitable for fabrication into fuel for commercial power reactors. Between June 23, 1995, the date of the first LEU delivery, and December 31, 2003, approximately 5933 metric tons of LEU (equal to roughly 201.5 metric tons of HEU) have been delivered to USEC. The LEU is sold by USEC for use as fuel in commercial nuclear reactors. In 2002, the U.S. and Russian executive agents entered into an amendment to the implementing contract that provides the terms for LEU shipments through 2013.

In March 1999, agreement was reached concerning the disposition of the natural uranium component of material delivered under the HEU Purchase Agreement. Under this arrangement, the U.S. Government agreed to purchase natural uranium associated with material delivered in 1997 and 1998. In a separate contract, a group of Western companies (Cameco, Cogema and NUKEM) agreed to buy the natural uranium component beginning in 1999. Material that is not purchased by the Western companies is shipped back to the Russian Federation.

Transparency measures have been agreed upon and are being implemented at U.S. and Russian facilities, designed to increase confidence that the material purchased under the HEU Agreement is derived from HEU and is used for peaceful purposes.

The United States and Russia are cooperating on a variety of other initiatives and programs related to fissile materials. Among these is the bilateral initiative for disposition by the United States and Russia each of 34 metric tons--68 metric tons total--of weapon-grade plutonium that have been declared excess to defense needs. A bilateral agreement that records these mutual obligations and provides a framework for cooperation on the construction and operation of industrial-scale plutonium disposition facilities was signed and began to be applied in September 2000. The United States is seeking participation and funding from other G-8 countries in this initiative.

The United States is also actively cooperating with Russia to improve security of fissile material stockpiles, combat illicit nuclear trafficking, protect radioactive sources and redirect the activities of weapons scientists and institutes, with the aim of reducing proliferation risks. Additionally, in December 1999, the United States, Russia, and the International Atomic Energy Agency began discussions on a proposed program to return fresh and spent nuclear fuel containing uranium enriched in Russia or the former Soviet Union from foreign research reactors to Russia for management and future disposition. In August 2002 the Russian and Yugoslavian Governments cooperated with the United States in shipping nearly 50 kilograms of fresh HEU from the Vinca Institute in Belgrade to Dmitrovgrad in Russia, where it will be blended down to LEU. In September 2003, the Russian, Romanian, and U.S. Governments and the IAEA cooperated in the shipment of 15 kilograms of HEU reactor fuel to Russia for downblending.

Since 1996, the United States, Russia, and the IAEA have been working on a new IAEA verification regime that can be applied to materials declared excess to defense requirements in the U.S. and Russia. In 2002, the three parties concluded that the original task undertaken, i.e. to examine the technical, legal, and financial issues associated with such verification, had been successfully completed.

Russia continues its efforts to strengthen its export controls on sensitive materials and technology. Over the past two years the Russian Government has issued several regulations to implement the Federal Law on Export Controls, which was enacted in 1999. The United States continues to work closely with the Russian Government to aid in the effective implementation and enforcement of these laws and regulations. As part of this effort, Russia and the United States are working to educate Russian producers and exporters of sensitive technologies on the importance of export controls and of their obligations under Russian law, and to install internal compliance programs at individual Russian entities to help ensure that these entities fully comply with Russian export control laws and regulations. The U.S. is also helping to outfit key Russian border transit points with detection equipment to deter and interdict illicit transfers. Of concern, however, is Russian nuclear cooperation with India in violation of Nuclear Suppliers Group Guidelines for nuclear export control and Russian attempts to reinterpret the provisions for exemption from the full-scope safeguards provisions of the Guidelines.

Russia joined the Missile Technology Control Regime (MTCR) in August 1995, became an original Subscribing State to the International Code of Conduct Against Ballistic Missile Proliferation (ICOC) in November 2002, and has stated its commitment to missile nonproliferation, regional stability, and the goals of the MTCR. The Russian Government also has assured the United States of its commitment to the highest nonproliferation standards and has told us repeatedly that it does not support Iran's long-range missile development efforts. In this context, the United States has pursued a high-level dialogue with Russia aimed at finding ways to work together to cut off the flow of sensitive goods to Iran's ballistic missile development. Russia's government has created institutional foundations to implement a newly enacted nonproliferation policy and passed laws to punish wrongdoers. It also has passed new export control legislation and adopted implementing regulations to tighten government control over sensitive technologies and continued a dialogue with the United States aimed at strengthening export control practices at Russian aerospace firms. However, while some progress has been made, there are reports of missile cooperation by Russian entities with Iran, in many cases apparently without the knowledge of the Russian Government. In sum, Russian entities have engaged in transfers that are contrary to the nonproliferation criteria outlined in the MTCR guidelines. The Russian Government needs to address the remaining proliferation concerns in order to meet fully its political commitment under MTCR.

Russian entity support to sensitive nuclear programs in Iran remains a serious concern, and intensive discussions with Russia continue in order to find a satisfactory resolution of this issue. The United States also continues to press the Russian Government to take additional steps against entities involved in missile-related technology transfer to Iran. In June 1998 and January 1999, the United States imposed administrative measures pursuant to the provisions Executive Order 12938, as amended, against a total of ten Russian entities involved in cooperation with Iran's missile or nuclear weapons programs. These measures remain in force (specifically, a ban on U.S. exports and U.S. Government assistance to these entities, and on imports and USG procurement from these entities). The Executive Order penalties imposed on entities INOR and Polyus in 1998 were lifted in November 2000. We periodically receive reports potentially related to Russian entity transfers of material, equipment, or technology that could contribute to the ability of countries to manufacture missiles or weapons of mass destruction (WMD). We carefully review these reports in light of legal obligations under the applicable nonproliferation sanctions laws. None of these reports has resulted in a sanctions determination on the Government of Russia for missile or WMD transfers during the reporting period.

Conventional Arms: The United States and Russia maintain active contacts on a wide range of conventional arms transfer issues. With some exceptions, ostensibly by Russian firms, the Government of Russia has generally complied with its obligations to observe UN arms sanctions against Iraq and the former Yugoslavia, and has worked with the UN Sanctions Committee as questions have arisen. Russia has moved away from past policies of arms transfers for ideological or strategic purposes and now relies heavily on arms exports to maintain the viability of its military-industrial base. We have continuing concerns with respect to Russian arms sales to state sponsors of terrorism and regions of instability and are working with the Russian Government to address these concerns.

In 1999, as a matter of policy, the U.S. Government (USG) imposed sanctions against three Russian entities for transfers of lethal military equipment to a state sponsor of terrorism. These measures included the denial of U.S. assistance to the entities, a ban on USG procurement, denial of new export licenses for USML items and an import ban on defense articles and services. In 2002, the United States, as a matter of policy, imposed sanctions (in this case the sanctions were imposed for one year) against three Russian entities for the transfer of lethal military equipment to state sponsors of terrorism. These measures included the denial of U.S. assistance to the entities, a ban on USG procurement, and the denial of new licenses for the export of defense articles and services to and from the sanctioned entities. Additional similar sanctions of Russian entities were imposed in 2003. The United States periodically receives reports potentially related to Russian entity transfers of material, equipment, or technology that could contribute to the ability of countries to manufacture missiles or weapons of mass destruction or acquire advanced conventional weapons. Reports of transfers that raise questions under the applicable nonproliferation sanctions laws are under review.

Section 498A(a)(7): "take constructive actions to protect the international environment, prevent significant transborder pollution, and promote sustainable use of natural resources."

In 2000, the State Commission for Environmental Protection (SCEP) and the forestry service were abolished; the Ministry of Natural Resources (MNR) absorbed their duties and many, but not all, of their personnel. It appears that MNR's priorities lie mainly in natural resource-based economic development, not in environmental protection. This trend has become more pronounced during the tenure of Minister Vitaliy Artyukhov. On Artyukhov's watch, the system of environmental charges that has been the mainstay of Russia's limited investment in environmental infrastructure over the past decade collapsed in the face of a court challenge by Norilsk Nickel. Draft legislation to reinstate it faces an uncertain future in the Duma. More recently, Artyukhov has introduced a reorganization of management responsibilities within Russia's network of nature reserves and national parks that appears to threaten the integrity of both. In general under the MNR the key elements of environmental protection; environmental assessment, permitting, inspections, and enforcement appear to have been weakened.

In contrast, the Ministry of Economic Development and Trade (MEDT) has taken a number of positive steps on the environment. It has re-inserted environmental language into Russia's Medium-Term Program of Socio-Economic Development, and it now requires Russia's regions to include an environmental chapter in their development plans. MEDT is also putting in place a countrywide system for financing environmental infrastructure. The system is capitalized by a World Bank loan of $55 million, and it now has a project portfolio on the order of $90 million. Further progress in this direction is expected in FY-04, particularly through the regional development part of the Russian Federal budget.

Improvements in environmental quality are also occurring as a result of actions taken in other Russian government ministries and in certain sectors of the economy, primarily under the impact of economic and efficiency calculations. Energy-efficient building codes have been introduced countrywide in the construction sector, with concomitant reductions in energy use, greenhouse gas emissions, and emissions of conventional air pollutants. The phase-out of leaded gasoline is nearing completion, especially in European Russia.

Climate Change and CFCs: The United States and Russia announced in January 2003 the formation of an Inter-Ministerial Climate Change Policy Dialogue, one of several bilateral partnerships developed pursuant to President Bush's February 2002 announcement of a new U.S. approach to climate change The U.S. worked closely with Russia on the World Conference on Climate Change, held in Moscow in October 2003. Along with the U.S. and other key non-EU industrialized countries, Russia remains a member of the "Umbrella Group", a loose coalition for issues related to the U.N. Framework Convention on Climate Change (UNFCCC). During the 2002 World Summit on Sustainable Development, Russia indicated its intention to become party to the Kyoto Protocol. More recently, however, senior Russian officials have given ambiguous and sometimes conflicting signals as to if and when Russia will ratify the treaty. Without Russian ratification, the Kyoto Protocol cannot enter into force.

In August 2002, the World Bank announced payment of $17.3 million in compensation to seven Russian enterprises that have ceased production of chlorofluorocarbons and halons, the most dangerous ozone depleting substances (ODS). The ending of ODS production in Russia completed the phase out of CFCs and halons in developed countries as required by the Montreal Protocol. Experts retained by the Bank continue to monitor Russia's ODS production phaseout.

Pollutants: Several projects addressing toxic contaminants in Russia were initiated or advanced in FY03, with leveraged funding from other member states of the Arctic Council. These projects deal with polychlorinated biphenyls (PCBs), dioxin/furans, obsolete organic pesticides, and mercury. Another project designed to incorporate cost-saving "cleaner production" techniques at the mining and metallurgy complex at Norilsk in the Russian Arctic has been completed with claims of substantial economic and environmental benefits. U.S. and European donors are considering expansion of "cleaner production" training elsewhere in the Russian Arctic and Russian Far East.

Radioactive Waste: Several projects and initiatives contribute to addressing the problem of radioactive waste management. The first project established was an operational low-level liquid radioactive waste (LLRW) processing facility in Russia located in Murmansk on the Kola Peninsula and operated by RTP-Atomflot. It has historically processed a small amount of LLRW from the Russian North Fleet. In 1994, the plant was operating near capacity, while storage capacity was virtually exhausted. Russia had no other LLRW processing capacity and, until 1993, disposed of LLRW in the Barents and Kara Seas.

In 1993, all parties to the London Dumping Convention of 1972, except Russia, adopted Resolution 51/16 to amend annex I and II of the Convention to ban completely the disposal at sea of radioactive waste, including LLRW. To assist Russia to be in a position to adopt the amendment, the United States, Norway, and Russia began exploring the possibility of expanding and upgrading the Murmansk facility. The agreed project expanded the capacity of this facility from 1,200 cubic meters to 5,000 cubic meters per year and thus upgraded Russia's capability of processing LLRW from nuclear submarine decommissioning. Japan has provided similar assistance to establish a facility in Vladivostok. Both facilities are now operational.

At the September 1994 Summit Meeting, the Russian Federation stated its intent, following the completion of these liquid radioactive processing facilities, to formally adhere to the London Convention amendment banning the disposal at sea of radioactive materials. This commitment was reaffirmed through a joint Protocol signed on June 20, 2001 at the completion of the Murmansk facility. However, as recently as the 25th Consultative Meeting of the Convention Parties (LC 25) in October 2003, Russia indicated that it still was not in a position to accept the amendment. Russia did confirm its continuation of a voluntary moratorium on the dumping at sea of radioactive wastes, implemented at the time of the adoption of the resolution in 1993. At LC 25, the Russian delegation reported that the Russian Government had developed an inter-agency action plan to satisfy the oversight requirements of a wide range of ministries involved in nuclear and environmental controls. However, despite expectations voiced at the previous Consultative Meeting in 2002, the Russian delegation reported that the Russian Federation did not anticipate being able to withdraw its non-acceptance of resolution 51/16 until 2005-2006 at the earliest. This was because the Russian Federation still was unable to address stockpiles of accumulated radioactive waste - waste they have been unable to transport to the Murmansk or Vladivostok facilities due to the lack of appropriate transport ships and trucks. Until such time as the Russian Federation feels it has complete control over its radioactive wastes - new or stockpiled - it reported in 2003, it would not be able to withdraw its non-acceptance of resolution 51/16. Numerous delegations joined the United States in expressing their regret at the Russian Federation's continued failure to withdraw its non-acceptance of the amendment.

The Artic Military Environmental Cooperation Program (AMEC) was established in 1996 to provide Norway, Russia and the United States the opportunity to work together in addressing military-critical environmental concerns in the Arctic. The United Kingdom joined the program in June 2003. AMEC has completed 8 key technology demonstration projects (six radiological and two non-radiological) in Northwest Russia.

The radiological projects have changed the Russian nuclear waste storage technology from a "wet" system, prone to failure, to a dry system used by most Western nations. Storage and transport of spent nuclear fuel (SNF) - which accounts for 99% of the radioactivity released from radioactive waste but only 5% of the volume - has been improved through the use of the AMEC "40 ton cask" and a temporary storage/transshipment pad. The cask, Project 1.1, is Russia's first "dual use" transport and storage cask. The pad, Project 1.1-1, reduces the SNF process of de-fueling from nuclear submarines from three months to three weeks. Solid radioactive waste (SRW) processing, transport and storage has improved through the use of a Mobile Pretreatment Facility (MPF), Project 1.3, and the use of steel transport and storage containers - another "dual use" first - Project 1.4. Radioactive storage sites are monitored remotely for both radiological and ecological conditions, Project 1.5-1, and the personal safety of radioactive waste workers has been improved through training and U.S. and Norwegian supplied dosimeters, Project 1.5. The projects enhance the security of stored radioactive material, decreasing the potential for diversion and possible use by terrorists in the manufacture of "dirty bombs." They also reduce overall quantities of WMD materials and eliminate bottlenecks in Russian submarine spent nuclear fuel management and improve efficiency of Russian nuclear submarine dismantlement.

Threatened/Endangered Species: The U.S. and Russia continue close cooperation under the 2000 bilateral agreement to conserve and manage Alaska-Chukotka polar bears. Trade in caviar from Caspian Sea sturgeon has been restricted under the Convention on International Trade in Endangered Species (CITES). In August 1998, former Prime Minister Kiriyenko signed a decree establishing a system of import/export controls on sturgeon and its byproducts, including caviar, to implement the recommendations of the Tenth Conference of the Parties of the CITES, and the Russian Government has taken steps to limit the Russian sturgeon harvest to 700 tons, down from 1200 tons in 1998. Conservation of sturgeon and the related sustainability of the caviar trade, as well as the survival of the Siberian tiger and other Russian biodiversity, are important areas of U.S.-Russia cooperation.

Fisheries: While the history of fisheries cooperation between the United States and Russia is quite long, it has at times been contentious. The basis for U.S.-Russia cooperation in fisheries is a 1988 "Mutual Agreement on Fisheries." This agreement expires December 31, 2003, although a five-year extension is expected. The 1991 maritime boundary treaty between Russia and the United States is another concern. A fundamental impediment to future cooperation by the two sides are Russian demands for compensation for catches it claims to have foregone as a result of the 1991 maritime boundary treaty. These concerns have blocked Duma ratification of the treaty, although it has been provisionally applied since 1991. Talks under the framework of the 1988 agreement are held annually, the latest in September 2003, with some advances in enforcement cooperation and science cooperation.

Section 498A(a)(8): "deny support for acts of international terrorism."

The Government of Russia does not grant sanctuary from prosecution to individuals or groups who have committed acts of international terrorism or otherwise support international terrorism. Since the September 11 attacks, the Government of Russia has provided significant and unprecedented diplomatic and intelligence support to the coalition against terrorism and to Operation Enduring Freedom. Russia provided U.S. military aircraft with access to its airspace and took measures to assist in strengthening border security on the frontlines.

The United States has conducted regular counter-terrorism consultations with Russia since June 1994. After September 11, 2001, counterterrorism cooperation with Russian expanded to unprecedented levels. Counterterrorism consultations with Russia in the Afghanistan Working Group, which began in August 2000, were expanded to cover terrorist threats around the world in the new Counterterrorism Working Group. This met for the first time with the new mandate in July 2002 and has met semiannually since then. One of the Working Group's subgroups deals with the use of chemical and biological weapons as instruments of terror. Numerous exchanges between governments took place during and in the aftermath of the October 23, 2002 terrorist hostage-taking incident in Moscow in which 129 hostages were killed, including one American citizen.

Russia is a party to eleven of the twelve international counter-terrorism conventions, has signed the other one, and has initiated UN consideration of a proposed convention to combat nuclear terrorism.

Section 498A(a)(9): "accept responsibility for paying an equitable portion of the indebtedness to United States firms incurred by the former Soviet Union."

In October 1991, shortly before the Soviet Union dissolved, Russia and nine other Soviet republics signed a Memorandum of Understanding declaring themselves jointly and severally liable for the foreign debts of the Soviet Union. In December 1991, Russia and seven other republics signed an agreement that assigned to each of the Newly Independent States (NIS) a share of all the external assets and foreign debt of the former Soviet Union. Beginning in 1992, Russia sought to replace the joint and several liability principle with the so-called "double zero" agreement, whereby all NIS countries would relinquish all Soviet-era assets and liabilities to Russia. All of the non-Russian NIS countries, with the exception of Ukraine, have signed and ratified the "double zero" agreement.

In August 2000, Russia finalized the agreement reached in February 2000 with the "London Club" of commercial creditors to restructure about $32 billion in Soviet-era commercial debt. The London Club agreed to write off $10.4 billion in exchange for $270 million in cash payment and $20.6 billion in Eurobond issuances, an approximately 35 percent reduction in the face value of the original debt. In those negotiations, Russia sought to restructure amounts owed to banks that were not insured by official guarantees and that arose in connection with loans to or other claims on the former Soviet Union. Repayment of each category of debt is scheduled to begin after completion of a seven-year grace period. In 2002, work began on restructuring foreign trade obligations -- borrowings by Soviet companies without state guarantees -- on similar terms.

In recent years increased Russian Government revenues due to high oil prices have made debt repayment easier. An aggressive debt management strategy that includes buybacks on secondary markets and negotiating debt reductions and swaps with creditors continues to produce significant reductions in Russian external debt owed to commercial creditors.

Section 498A(a)(10): "cooperate with the United States Government in uncovering all evidence regarding Americans listed as prisoners-of-war, or otherwise missing during American operations, who were detained in the former Soviet Union during the Cold War."

The U.S. effort to uncover evidence of American POWs and MIAs who may have been taken to the former Soviet Union is being conducted through the U.S.-Russian Joint Commission on POW/MIAs, which was established by Presidents Yeltsin and Bush in March 1992. President Yeltsin and the late General Dmitriy Volkogonov, former head of the Russian side of the Commission, pledged their full cooperation. President Yeltsin directed all relevant Russian ministries to cooperate fully with the Commission. Until his death in December 1995, General Volkogonov oversaw a broad-based research effort conducted by Russian archivists in search of information on missing American servicemen. He also arranged for the U.S. side of the Commission to travel across Russia in order to interview Russian citizens and conduct research in regional archives. This level of U.S.-Russian cooperation on POWs/MIAs was unprecedented.

In March 1996 General-Major Vladimir Zolotaryev became the Russian Chairman of the Commission, replacing General Volkogonov. In December 1998 General Roland Lajoie became the U.S. Chairman, replacing Ambassador Malcolm Toon, who had served as U.S. Chairman since the Commission's inception.

The Commission has held eighteen plenary sessions, the most recent in November 2002. Key events in 2003 included productive working-level meetings, a joint survey of suspected American crash and burial sites in the Russian Far East, and a meeting between Russian Commission members and Deputy Assistant Secretary of Defense for Prisoner of War/Missing Personnel Affairs Jerry Jennings. At the latter meeting, the Russians released another 12,000 pages of formerly classified Korean War materials to American researchers and offered further support to archival research, joint site surveys, and American investigative initiatives in Russia. The American side continues its effort to broaden access to Russian archives beyond the military's central archives, an effort that would help identify and locate historical records and eyewitnesses with possible knowledge of the fates of U.S. POW/MIAs from conflicts since World War II. Key Russian archives, especially those of the security services, continue to be closed to American researchers, and indications that they hold relevant materials-presented repeatedly to the Russian side-have not resulted in Russian cooperation in releasing these materials to Commission representatives. The American side of the Commission continues to investigate reports of sightings of American POWs in the Soviet Gulag. Russian officials do not impede investigation of these reports but have discounted them and offer little assistance in bringing them to a conclusion.

Section 498A(a)(11): "terminate support for the communist regime in Cuba, including removal of troops, closing of military and intelligence facilities, including the military and intelligence facilities at Lourdes and Cienfuegos, and ceasing trade subsidies and economic, nuclear, and other assistance."

In 1991, Moscow ended its $4 billion-per-year subsidy of the Cuban economy. In 1992, Russia halted construction of the Juragua nuclear power plant near Cienfuegos, Cuba. Russia maintained a credit line for mothballing parts of the facility completed before suspension, but Castro announced in January 2001 that Cuba had decided against continuing with the project.

In 1993, Russia withdrew its last remaining combat troops from Cuba. On October 17, 2001 President Putin announced Russian withdrawal from Moscow's intelligence facility at Lourdes, Cuba. The Russians completed the dismantling of the Lourdes site by late summer 2002, and the Government of Cuba announced that it would convert the former listening post to a large computer science campus. With the closing of the facility, Russia ceased providing Cuba a $200 million annual payment for its use.

Russian officials continue to assert that Russia is not providing assistance to Cuba, and that all trade is conducted on a commercial, non-preferential basis. Russian-Cuban economic interaction centers on oil-for-sugar barter arrangements and nickel plant investments, both part of a 2001-2005 trade plan agreement which established "recommended" trade targets. According to the agreement, Russia aims at delivering 1.5-2.0 million tons of oil per year to Cuba. Other Russian exports include spare parts, fertilizers, and steel. Cuba exports the lion's share of its sugar production to Russia each year, as well as nickel, medicines, vaccines and medical equipment, citrus fruits, cigarettes and rum. Russia and Cuba recently announced plans to increase mutual investment. Tourism, energy, and mining were noted as promising avenues of economic co-operation.

RUSSIA

No. The President has not made such determination at this time. However, there are grounds for concern: continuing and credible reports of human rights violations and abuses by Russian military forces and Chechen rebels in Chechnya; generally poor treatment of prisoners and inadequate detention facilities; and the law on religion and visa difficulties for foreign clergy serving in Russia. We will work to better address existing problems in the area of democracy and human rights not only through diplomatic efforts but also through our assistance programs.

Section 498A(b)(2): Has the President determined that the Government of Russia "has failed to take constructive actions to facilitate the effective implementation of applicable arms control obligations derived from agreements signed by the former Soviet Union"?

The President has not made that determination, as the Russians have taken constructive steps in this area.

Section 498A(b)(3): Has the President determined that, after October 24, 1992, the Government of Russia "knowingly transferred to another country":

(A) missiles or missile technology inconsistent with the guidelines and parameters of the Missile Technology Control Regime; or

(B) any material, equipment, or technology that would contribute significantly to the ability of such country to manufacture any weapon of mass destruction (including nuclear, chemical, and biological weapons) if the President determine[d] that the material, equipment, or technology was to be used by such country in the manufacture of such weapon"?

Russia became an MTCR Partner in August 1995. Russia is a Party to the NPT, CWC, INF, START and BWC, and the Russian Government has demonstrated a commitment to the non-proliferation of weapons of mass destruction. There was no termination of assistance to Russia during the reporting year under section 498A(b)(3). Additional information related to implementation of this section, however, has previously been provided to Congress on a classified basis. (We periodically receive reports potentially related to Russian transfers of material, equipment, or technology that could contribute to the ability of countries to manufacture missiles or weapons of mass destruction. We have under review reports of transfers that raise questions under the applicable nonproliferation sanctions laws.) However, during the reporting period, no determinations were made against the Government of Russia under section 498A(b)(3).

Section 498A(b)(4): Is the Government of Russia "prohibited from receiving such assistance by section 101 or 102 of the Arms Export Control Act or sections 306(a)(1) and 307 of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991"?

No. The Government of Russia is not prohibited from receiving assistance under these sections.

Section 498A(b)(5): Has the President determined and certified to the appropriate congressional committees that the Government of Russia "is providing assistance for, or engaging in non-market-based trade (as defined in section 498B(k)(3)) with the Cuban Government? If so, has the President taken action to withhold assistance under the Foreign Assistance Act within 30 days of such a determination, or has Congress enacted legislation disapproving the determination within that 30 day period?"

No. The President has not determined that the Government of Russia is providing assistance for, or engaging in any non-market-based trade with, the Cuban Government.

Section 498A(b)(6): Has the Government of Russia "failed to make significant progress on the removal of Russian or Commonwealth of Independent States troops from Estonia, Latvia, and Lithuania" or "failed to undertake good faith efforts, such as negotiations, to end other military practices that violate the sovereignty of the Baltic states"?

No. The process of Russian troop withdrawal from Lithuania was completed in 1993 and from Latvia and Estonia in 1994. Russia ceased operating its radar facility at Skrunda, Latvia in August 1998 as called for in a bilateral agreement. Dismantling of the facility was completed ahead of schedule by September 1999 under OSCE supervision. The Baltic states were invited to join NATO at the November 2002 Prague Summit. Russia did not react sharply to the invitations but expressed concern that unless the Baltic states acceded to the Adapted Conventional Forces in Europe Treaty, their accession to NATO would raise security concerns for Russia. The Baltic states have indicated that they are ready to join CFE when that is possible. The current CFE Treaty does not permit accession by additional countries, however, so the Baltic states' accession is only possible under the Adapted CFE Treaty, which was signed in 1999 but not yet ratified by all 30 current CFE states. The United States and NATO Allies have made clear that Russia must first fulfill its 1999 OSCE Istanbul Summit commitments to create the conditions for ratification and entry into force of the Adapted CFE Treaty.