| U.S. Government Assistance to and Cooperative Activities with Eurasia -FY 2003 Released by the Bureau of European and Eurasian Affairs January 2004 II. Country Assessments and Performance Measures - Russia U.S. STRATEGIC INTERESTS
Russia remains a principal focus for U.S. foreign policy, despite its economic and military decline following the collapse of the USSR. Defining Russia’s relationship with the Euro-Atlantic community is still the main unfinished business from the U.S. Government’s (USG) decade-long effort to build a Europe whole, free and at peace. Russia is reemerging as an important factor in the international economy, especially in the energy field, and is a growing market for U.S. trade and investment. As a major nuclear power with influence in regions of vital interest to the United States, Russia’s policies will continue to affect U.S. security and our ability to meet the global threats of the 21st century, including international terrorism, organized crime and the proliferation of weapons of mass destruction (WMD). Progress on democratic reforms would help strengthen U.S. national security, and would serve as a positive model for other Eurasian countries.
OVERVIEW OF U.S. GOVERNMENT ASSISTANCE
In FY 2003, the U.S. Government provided an estimated $963.33 million* in assistance to Russia:
In FY 2003, some 4,885 Russians traveled to the United States on U.S.-funded training and exchange programs implemented by the Open World Leadership Center, USAID and the U.S. Departments of Agriculture, Commerce and State, bringing the cumulative number of Russian participants to over 58,200. U.S. ASSISTANCE PRIORITIES
Democratic Reform Programs: USG-funded assistance and exchange programs are helping Russia in its transition from a Soviet-era authoritarian form of government to a democratic system that guarantees the fundamental rights of its citizens. FREEDOM Support Act (FSA)-funded technical experts have advised Russian politicians about the development of modern political parties and the strengthening of democratic electoral institutions. FSA-funded programs have nurtured the emergence of a strong and diverse non-governmental organization (NGO) sector in Russia, providing multiple opportunities for Russians to participate in civic life. FSA-funded programs also support the development of independent media, giving Russian journalists an opportunity to develop their professional skills through training and exchange programs. Similarly, Russian academic, government officials and politicians have benefited from exposure to Western approaches to issues of state and local governance.
Economic and Social-Sector Reform Programs: USG assistance programs support the small and medium-sized enterprise (SME) sector by training entrepreneurs and supporting non-bank credit institutions to respond to SMEs' need for credit to expand their businesses and create jobs. Other USG-funded programs are helping the Russian banking system transform itself into an effective intermediary of funds. The U.S. Treasury Department provides technical assistance in the effective use of budget resources. The USG-supported enterprise funds, which have turned handsome profits in recent years, have helped promising Russian companies grow. USG-supported independent Russian think tanks have strengthened their analytic capacity and are increasingly influencing government policy-makers. Specialized USG assistance programs help develop and reform Russia’s large, inefficient agriculture sector. USG-funded technical experts have reviewed the complexities of the World Trade Organization (WTO) accession process with Russian officials and business representatives and helped draft WTO-compliant legislation. In the health sector, USG assistance has helped Russia cope with the current tuberculosis epidemic and the growing threat of HIV/AIDS.
Security, Regional Stability and Law Enforcement Programs: The USG provides a variety of assistance to promote security, stability and law enforcement in Russia, including efforts to safeguard and/or destroy WMD; programs to secure and safeguard nuclear reactors and materials; and assistance designed to combat trafficking in persons and narcotics, and terrorism. USG-funded rule-of-law programs are helping the Russian judiciary strengthen its ethics codes and assert independence from the executive branch. USG-funded technical assistance also supports the implementation of the 2002 Criminal Procedure Code, which updated Russia’s criminal procedures and provided a right to jury trial in serious criminal cases.
SECTORAL ASSESSMENTS
Democratic Reform
A number of events during 2003 called into question the depth of Russia’s commitment to develop meaningful democratic institutions: the central government asserting control over formerly independent television networks; manipulation of the electoral process; continuing violence, human rights abuses and political pressure in Chechnya; selective criminal prosecutions which appeared to be driven by political motivations; and the Kremlin’s ever-growing control over local and regional governments. In some cases, foreign assistance efforts may have been caught in the political crossfire: the raid and destruction of the Moscow office of the Soros Foundation’s Open Society Institute - Russia, the tax investigation of the Yukos Oil Company’s Otkrytaya Rossiya (Open Russia) Foundation and hostile tax laws that apply to all NGOs have affected their ability to attract donors, fulfill grant requirements and work productively to promote civil society development.
In spite of these challenges, Russia has accomplished much on the road to democracy over the past twelve years, and FSA-funded technical assistance has helped facilitate many of these accomplishments. The beginnings of an independent judiciary; hundreds of successful local, regional and national elections; several thousand independent local and regional television and radio stations; and tens of thousands of civic, industry, philanthropic and advocacy associations and foundations are just four notable features of Russia’s emerging democracy in which FSA-funded assistance programs have played a key supporting role.
Over 60,000 Russians have visited or studied in the United States on educational and professional exchanges since the break-up of the Soviet Union. Through programs like the Future Leaders’ Exchange (FLEX) and Undergraduate Exchange Programs, the USG continues to empower the next generation of Russian leaders by giving them a first-hand introduction to democratic ideals. Every year, U.S. and Russian social, human rights and business groups form dozens of lasting partnerships with the help of USG-funded small grants. Russian counterparts have been key players in supporting democratization in Russia, whether by establishing jury trials on a nationwide basis, passing legislation to stop trafficking in persons, creating and supporting a nationwide network of financially strong and relatively independent local and regional media outlets, or working with local governments and Russian research policy institutes to put in place an updated division of responsibilities between the local and central governments.
The next steps in the democratic reform process are more difficult than those taken over the past twelve years. They are essential, however, because without common principles informing Russian and American institutions at various levels, U.S. citizens and businesses will be reluctant to make the kinds of investments in and commitments to Russia that occur every day between the United States and fully established market-based democracies.
In 2004 and beyond, FSA-funded democratic reform assistance will focus on strengthening Russian institutions by supporting NGOs and think tanks that foster the further development of a civil society, with a special emphasis on activities that promote religious and ethnic tolerance, and knowledge of and respect for human rights; and by improving the legal and social climate for philanthropic support of civil society development.
Economic and Social-Sector Reform
The Russian economy has experienced a dramatic recovery from the 1998 financial crisis. GDP growth has averaged over 6% since 2000, the ruble has become stable, Russia maintains a foreign trade surplus, domestic-oriented sectors of the economy have started to recover, and personal incomes are rising at over 8% per year. However, while Russia's total GDP in 2002 equaled roughly the combined GDP of Poland, the Czech Republic and Hungary, Russia's population was three times larger, making Russia's per capita GDP roughly one-third that of the other three countries taken as a block. While personal income rose by 8.8% in 2002, at $124 per month Russia is still well below Poland, Hungary or the Czech Republic. Official statistics state that 28% of the Russian population lives below a very modestly defined poverty line.
The USG has worked with the Russian Government and more intensely with Russia’s private sector to help transform the country’s centrally planned socialist economy into a diversified, sustainable and growing market-based economy. SME development is key, as this will increase the private-sector share of the economy, while also strengthening the middle class and spreading the benefits of economic growth throughout the population and all the regions of the country. USG-funded assistance has focused on policy changes that make SME growth possible, training and exchanges to provide the basic tools for running a successful business, access to finance to allow businesses to start and/or expand their operations, and business associations that can provide a voice for SMEs in the continued struggle for administrative and policy reform.
In FY 2003, the USG’s main foreign assistance goals in the social services sector were to stimulate a sustained improvement in public health, the protection and effective management of environmental resources, and helping local and municipal governments deliver a broad range of social services as efficiently as possible. There is a long history of U.S.-Russian partnerships in the social sector. For nearly a decade, the USG has worked collaboratively with Russian federal-level counterparts to strengthen primary health care systems, with a special emphasis on maternal and child health and family planning services through public-sector and non-governmental facilities, and on biomedical research, disease surveillance, and diagnosis and treatment of infectious and chronic diseases; with local governments to streamline social service administration, improve the targeting of benefits, and shift more service provision into the NGO community through competitive grants and contracting mechanisms; with ecological and health authorities in the regions on improving the environment; and with civilian scientists to advance nonproliferation and social-sector goals by channeling their research towards key public health issues. Thanks at least in part to USG-funded assistance programs, Russia has seen a falling rate of abortion, improved rates of effectiveness in treating tuberculosis, improved primary care standards, greater municipal funding for health care in some areas, decreases in the number of abandoned and vulnerable children, and greater Russian Government attention to environmental issues. USG-funded programs have also helped Russian scientists pursue civilian research in important areas such as HIV/AIDS, measles, small pox, tuberculosis and West Nile virus, while simultaneously exposing them to commercial business practices.
Russia accounts for 22% of the world’s remaining forestry reserves. In FY 2003, with the help of USG assistance, Russian and U.S. forestry experts addressed significant crossborder risks such as pest control and global climate change. These efforts focused on forest fire prevention, pest monitoring and more effective use of forest resources. USG-funded experts also provided technical assistance and training to businesses, NGOs and other counterparts to help reduce energy consumption, comply with international environmental standards, and to substitute renewable energy technologies, which contribute to U.S. Presidential initiatives related to clean energy and global climate change. NGOs that have benefited from USG-funded NGO development programs are beginning to mobilize Russian citizens to lobby for safe drinking water and cleaner air – two issues that in and of themselves account for a huge share of Russia’s current disease burden and are undermining the country’s labor productivity. A strong community of environmental NGOs is particularly important in Russia, given growing concerns about weak environmental governance due to the previously ministry-level environmental regulatory entity being subsumed under the Ministry of Natural Resources.
USG assistance in the economic sector will be decreasing significantly in FY 2004 and beyond, and will fall into three broad areas: policy, financing and regional development. The policy area will consist of think-tank projects, policy development and advocacy, and monitoring. The think-tank projects will be designed to support the sustainability of indigenous institutions that can continue to press for reform. Financial-sector activities will include support for the nascent indigenous lending industry and specifically the Russian Microfinance Center, with an added emphasis on policy. The regional development activities will be designed to support economic development outside of Moscow and St. Petersburg, with a particular emphasis on the Volga Federal District, western Siberia and the Russian Far East, via the USG’s cross-sectoral Regional Initiative.
In FY 2004, USG assistance activities in the social sector will reflect a phase-down of USG-funded environmental programs and an increased emphasis on the fight against HIV/AIDS, including prevention of mother-to-child transmission. USG-funded local government programs will continue to foster a more balanced relationship between the center and the regions.
Security, Regional Stability, and Law Enforcement
The U.S. Defense Department’s (DoD) Cooperative Threat Reduction (CTR) Program is the largest USG-funded program of cooperative activities in Russia, accounting for nearly one quarter of total USG assistance from 1992 to date. The CTR Program has focused primarily on destruction, dismantlement and secure storage of WMD and their delivery systems. In 2003, DoD allocated almost $290 million in FY 2003 funds for CTR programs in Russia, including $133 million for the construction of the Shchuchye Chemical Weapons Destruction Facility and to demilitarize former nerve agent production facilities at Volgograd and Novocheboksarsk. The remaining CTR funds were used to continue to provide transport, storage and dismantlement of nuclear missiles, launchers and related infrastructure, and to support cooperative biological research and enhance safety and security at biological facilities. In addition, the International Military Education and Training (IMET) Program was restarted in Russia in FY 2003, with $800,000 allocated to the development of English-language capability among Russian officials, including the construction of seven language laboratories for the study of English at the Ministry of Defense, Ministry of Emergency Situations, and the Border Service. IMET also funded U.S-based training for 12 English-language teachers from Russia. In addition, the USG funded U.S.-based training for 14 other military professionals, and training for 45 officers at DoD’s Marshall Center in Germany.
In addition, the Departments of State and Energy administer complementary programs to counteract the threat of Russian WMD. In FY 2003, the Department of Energy allocated $443 million to help safeguard nuclear reactors and material and dispose of nuclear materials. The USG has also helped fund productive civilian research and development opportunities for former weapons scientists and engineers, which not only address nonproliferation concerns but also assist in the establishment of a market economy by promoting and identifying commercially viable joint research, development, and demonstration activities between U.S. businesses and Russian scientists. The USG also facilitates customs- and tax-free transfers of funding and equipment for cooperative science programs between Russian scientists and U.S. public and private academic organizations. In Russia, the USG and other donors have a unique partner that has the ability and potential to contribute to global solutions to some of the world’s most pressing environmental and health problems.
In FY 2003, after five years of engagement focused on training and equipping Russian Customs Service, Border Guards, Ministry of Atomic Energy, and other border control officials, the USG-funded Export Control and Related Border Security (EXBS) Assistance Program shifted its focus towards enhancing compliance and enforcement. While the EXBS Program continues to provide radiation detection equipment and training, its emphasis is now on export control procedures and product identification training and software, which will help export officials to detect violations more efficiently and will lead to a more comprehensive, effective border control regime.
USG-funded law enforcement assistance programs supported a wide range of activities in FY 2003, including the implementation of the July 2002 Criminal Procedure Code; the adoption of modern anti-crime techniques in combating narcotics smuggling, money laundering, terrorist finance, trafficking in persons and child pornography; development of U.S.-Russian legal cooperation under the Mutual Legal Assistance Treaty; the adoption of community-based policing in the Sakhalin region of the Russian Far East; and support for research into crime and corruption issues in Russia.
USG-funded programs in the security, regional stability and law enforcement sector will continue at roughly current levels in 2004 and beyond. Issues such as the non-proliferation of WMD, nuclear safety, and the fight against narcotics, terrorism and trafficking will all continue to be USG priorities. The USG will continue to cooperate with former weapons scientists and engineers, as long as they continue to constitute a WMD-proliferation threat.
Humanitarian Assistance
In FY 2003, with just over $2 million in FREEDOM Support Act (FSA) funding, the U.S. Department of State transported 59 containers of humanitarian commodities valued at nearly $7 million to needy and vulnerable populations in Russia through U.S.-based NGOs. In addition, the State Department’s Bureau of Population, Refugees, and Migration (PRM) spent $1.5 million in FSA funds to support U.S. NGOs administering critical humanitarian programs in the Northern Caucasus, and the U.S. Department of Agriculture (USDA) provided approximately $10 million in food assistance through the Russian Farm Community Project.
COUNTRY PERFORMANCE MEASURES
Russia's macroeconomic policy performance was strong in FY 2003, but the power of the central government remained largely unchecked in the economic and political spheres. New laws restricting the activity of the media, state control over all national television channels, and a re-division of power between the center and the regions that strongly favors the center all contributed to backsliding in democratic reform during the year.
Economic Policy Reforms and Democratic Reforms in Russia, 1991-2002
Democratic Reforms
Ratings of democratic freedoms are from Freedom House, Nations in Transit 2003 (2003) and cover events through December 2002. Economic policy reform ratings are from EBRD, Transition Report 2002 (November 2002), and cover events through September 2002. Economic policy reforms include price liberalization, trade and foreign exchange, privatization, legal, banking and capital markets, enterprise restructuring (credit and subsidy policy), and infrastructure reforms. Democratic freedoms include political rights (free and fair elections; openness of the political system to competing political parties and to minority group representation; governance and public administration) and civil liberties (free media and judiciary; freedom to develop NGOs and trade unions; equality of opportunity and freedom from corruption). Ratings are based on a scale of 1 to 5, with 5 representing the most advanced.
Positive macroeconomic policies and growth of small and medium-sized enterprises (SMEs) have improved real incomes in Russia, but at a very low level. The country's economy remains highly dependent on natural resource (oil and gas) exports, and the gap between rich and poor continues to grow.
Economic Structure and Human Development in Russia, 1991-2002
Human Development Index
The Human Development Index (HDI) is based on three indicators using 2001 data: longevity, as measured by life expectancy; educational attainment, as measured by a combination of adult literacy and combined primary, secondary and tertiary enrollment ratios; and standard of living, as measured by real per capita GDP ($PPP). The HDI ranges from 0 to 1, with higher values representing greater human development. UNDP, Human Development Report 2003 (July 2003). Private-sector share of GDP is from EBRD Transition Report Update (May 2003).
SECTORAL PERFORMANCE MEASURES
DEMOCRATIC REFORM
Performance Indicator: USAID NGO Sustainability Index (1 = highest, 7 = lowest)
FY 2003 Results: While Russia’s NGO sector strengthened somewhat in 2002, developments during 2003 were more negative. The central government's moves against the most promising sources of indigenous funding for the NGO sector had a serious and concrete negative impact. USG-funded programs continue to work towards improving the legal climate for NGOs, including changes in the tax code that would provide incentives for charitable giving. The USG also continues to help NGOs identify self-sustaining activities and other sources of funding, as well as encouraging them to work together to promote issues of common concern.
Performance Indicator: Freedom House Nations in Transit Independent Media rating
FY 2003 Results: 2003 was a bad year for the independent media in Russia. New media laws were implemented that made it much more difficult for the media to speak out on political issues. The last independent national television station was shut down over the summer. Nevertheless, USG-funded programs have had success at the regional level and in the print media. The USG-supported Association of Independent Regional Publishers (AIRP) was formed as a result of the synergies developed during the Russian-American Media Entrepreneurship Dialogue. The USG also continues to fund efforts to provide independent programming to its Russian partner media outlets. In addition, USG-funded training programs are providing Russian journalists with a fresh perspective on the role of their profession in a free society.
ECONOMIC AND SOCIAL REFORM
Performance Indicator: Employment in SMEs as a percentage of total employment
FY 2003 Results: While the Russian Government has been generally supportive of SME development, the Russian economy's overwhelming dependence on natural resource extraction creates a natural bias against SMEs. USG programs enjoyed considerable success in establishing mechanisms for providing financing to entrepreneurs. Revisions in the tax code, developed with USG assistance, have also helped improve the climate for small business. Unnecessary administrative barriers to business remain a serious challenge, but the central government is likely to take some steps to address this problem in the relatively near term. USG-funded training programs have helped SMEs improve their business practices and made them more receptive to partnering with American firms. This training benefits both the U.S. and Russian economies by increasing the value of bilateral trade and promoting partnerships among U.S. and Russian businesses.
FY 2003 Results: Russian progress towards WTO accession has been slow. The USG has funded some consultancy work to help the Russian Government understand what must be done in terms of legislative and administrative changes. Russia continues to seek special deals and conditions, but progress has nevertheless been made, particularly in the area of legislative reform. Almost all legislation necessary to bring Russian law into conformity with WTO requirements has been submitted to the Duma, with several key laws coming into effect in 2003. Nonetheless, much more work is necessary to ensure implementation of new legislation as it is passed. Russia has begun to conclude negotiations on goods market access with a few WTO members; however, significant differences remain with its major trading partners, particularly the United States and the European Union. Progress in the services-market-access negotiations has been slower.
Performance Indicator: Reported HIV infections per one million population
FY 2003 Results: While infection rates continue to be extremely high in Russia, USG assistance programs enjoyed significant success in 2003, particularly in promoting public awareness and attracting high-level attention to the issue. President Putin publicly identified HIV/AIDS as a threat for the first time in May. Russian NGOs are slated to receive a Global ATM Fund grant totaling $90 million to fight HIV/AIDS. The USG has provided substantial assistance to several leading Russian NGOs in this field, and helped launch the NGO "Healthy Russia 2020," which is dedicated to combating the stigma associated with being HIV-positive.
SECURITY, REGIONAL STABILITY AND LAW ENFORCEMENT
Performance Indicator: Freedom House Nations in Transit Rule of Law rating
FY 2003 Results: Russia has made significant progress in the area of rule of law. The primary vehicle for legal reform, the new Criminal Procedure Code (CPC), was enacted in FY 2002 and implemented in FY 2003 with the active support of USG assistance. Thanks to a USG-sponsored monitoring project, during FY 2003, the Russian Government passed legislation containing over 100 amendments to the CPC, leading to further reform of the criminal justice system. Among other highlights, the passage of the new CPC and its amendments resulted in 465 jury trials being held in 2002, as jury trials for crimes punishable by more than ten years imprisonment were reintroduced after 70 years in almost every subject of the Russian Federation (by January 1, 2004, only Chechnya will not have introduced jury trials). Russian courts began authorizing search and arrest warrants for the first time, as the power to arrest individuals and search premises was previously held by prosecutors. Judicial review of detention decisions within 48 hours of detention as required by the new CPC became routine. Under the new CPC, statements made by defendants without the presence of their attorney became inadmissible. As required by the new CPC, illegally obtained evidence was excluded from trial proceedings by judges. In addition, over 10,000 guilty pleas were entered in 2002, as Russia adopted abbreviated trial proceedings for the first time under the new CPC.
FY 2003 Results: The Russian Government passed amendments to the Criminal Code criminalizing human trafficking and use of forced labor and expanding criminal liability for the organization and management of prostitution businesses and for the distribution of child pornography. During FY 2003, the State Duma Legislative Committee also drafted legislation providing for protection of trafficking victims and mandating public awareness campaigns to prevent potential victims from falling prey to traffickers. This legislation will be considered by the Duma in 2004. USG-funded technical assistance played a key support role. The USG provided legislative drafting experts, experts on trafficking in persons, and criminal procedure experts who worked closely with Russian counterparts. FY 2003 assistance activities also facilitated the development of working-level joint investigations and other forms of cooperation among law enforcement officials from Russia, Armenia, Azerbaijan, Georgia, Ukraine and Moldova. FY 2003 USG assistance also helped to expand cooperation between law enforcement and anti-trafficking NGOs and raised awareness of the extent and dangers of human trafficking, both among government officials and the general public. FY 2003 FUNDS BUDGETED FOR U.S. GOVERNMENT ASSISTANCE TO RUSSIA TOTAL USG FUNDS BUDGETED: $954.73 (IN MILLIONS, AS OF 12/31/03) FSA FUNDS BUDGETED: $143.31 USAID - Democratic Reform - $20.21 Dept. of Agriculture (USDA) - Cochran Fellowship Program - $0.15 Dept. of Commerce - BISNIS Business Info. Service - $0.78 Dept. of State - ECA Public Diplomacy Exchanges - $29.26 Dept. of the Treasury - EBRD Loan Programs - $2.50 Environmental Protection Agency (EPA) - Environmental Programs - $1.00 USAID - Child Survival & Disease Programs - $3.00 Dept. of Agriculture (USDA) - Bio-Chem Redirect - $2.88 Dept. of Defense - Chain of Custody - $59.40 Center for Russian Ldrshp. Dev. - Open World Program (formerly RLP) - $11.95 |
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Area: approx.10,612,300 sq. miles, approx. 1.8 times the size of the U.S.
