FY1995: Russia and NIS Progress on 498A

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IV. ASSESSMENTS OF PROGRESS IN MEETING THE STANDARDS OF SECTION 498A OF THE FOREIGN ASSISTANCE ACT OF 1961

FY 1995 Annual Report on "U.S. Government Assistance to and Cooperative Activities with the New Independent States of the Former Soviet Union," published April 1996. Prepared by the Office of the Coordinator of U.S. Assistance to the NIS Submitted Pursuant to Section 104 of the FREEDOM Support Act (Public Law 102-511).

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CRITERIA FOR U.S. ASSISTANCE UNDER SECTION 498A(a) OF THE FOREIGN ASSISTANCE ACT OF 1961

ARMENIA

Section 201 of the FREEDOM Support Act amended Section 498A of the Foreign Assistance Act of 1961 to require that the President "take into account not only relative need but also the extent to which that independent state is acting to:"

Section 498A(a)(1): "make significant progress toward, and is committed to the comprehensive implementation of, a democratic system based on principles of the rule of law, individual freedoms, and representative government determined by free and fair elections."

The Armenian Government has proclaimed its aim to build a Western-style parliamentary democracy, which will serve as a basis for Armenia's political system. However, there were a number of worrisome incidents on the political front in 1995. The Government of Armenia suspended a major opposition party--the Dashnaks--in December 1994 because of alleged involvement in criminal activity. International observers questioned the inherent fairness of the parliamentary elections and constitutional referendum conducted in July 1995, citing polling deficiencies, lack of cooperation by the Electoral Commission and the failure to register certain opposition parties and candidates. Moreover, the new Constitution greatly expands the powers of the executive branch and gives it much more influence over the judiciary. However, observers also noted that several opposition parties and candidates were able to mount credible campaigns and proper polling procedures were generally followed.

The Armenian Government maintains monopoly control over television and radio broadcasting. The Government closed down the Dashnak Party's newspapers and civic organizations in January, soon after suspending the party. Another newspaper representing opposing views was harassed by the Government, which tried to force it out of its office space; however, the Government eventually relented under international pressure.

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 conflict over Nagorno-Karabakh, the embargoes by Turkey and Azerbaijan and the resulting dramatic reduction in imports of fuel and raw materials, the destruction caused by the 1988 earthquake, and the collapse of traditional trade patterns which all the NIS have experienced, combined to cause in Armenia one of the sharpest declines in economic activity in the NIS. Nevertheless, the Government of Armenia, with the help of the cease-fire that has been in effect in Nagorno-Karabakh since May 1994, has been able to carry out wide-ranging economic reforms which paid off in dramatically lower inflation. Armenia also registered strong economic growth in 1995, building on the turnaround that began the previous year.

In December 1994, the International Monetary Fund (IMF) approved the first tranche of a Systemic Transformation Facility to support Armenia's macro-economic reform program. As part of the program, the Government of Armenia has pledged to strengthen its macro-economic management (in part by increasing revenue collection), move towards full price-liberalization, eliminate most exchange and trade restrictions, and accelerate the privatization process. Most prices have now been completely liberalized.

Privatization has gone the furthest in Armenia's agricultural sector. About 87 percent of farm land has been distributed and the sale of land has been permitted since February 1994. Privatization in other areas of the economy is moving more slowly. Distribution of privatization vouchers began in October 1994. The Government of Armenia accelerated the pace of small-scale privatization and began to convert larger enterprises to joint stock companies as a first step towards full privatization. More than half of the country's housing stock has been privatized.

A liberal foreign investment law was approved in June 1994. Armenia's national currency, the dram, which was introduced in late November 1993, was very stable in 1995. Armenia ratified a trade agreement which enables it to receive most-favored-nation (MFN) status and incorporates intellectual property rights provisions, and an agreement with the Overseas Private Investment Corporation (OPIC). In October, the Armenian Parliament finally ratified a bilateral investment treaty with the United States. Armenia has also expressed an interest in negotiating a tax treaty, and is receiving U.S. technical assistance in revising its tax structure. Armenia has joined the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD).

Section 498A(a)(3): "respect internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."

The observance of human rights in Armenia was uneven and marked by serious shortcomings in 1995. Police brutality continued to go largely unreported, while observers noted that defendants were often beaten to extract confessions and were denied visits from relatives and lawyers. In May, a detainee held in the Dashnak "Dro" trial died in a prison hospital while awaiting trial--the Armenian Government repeatedly denied requests by international organizations and foreign embassies to visit him and other detainees. Public demonstrations generally took place without government interference, though one rally in June by opposition parties was broken up by paramilitary troops. Freedom of religion is not protected under existing law. Non- apostolic churches were subjected to violent harassment in April, also by paramilitary troops, which ransacked offices, stole property and beat church followers. The Armenian Government took no action against the paramilitary troops in either incident. Non-apostolic churches must register with the Government and proselytizing is forbidden by law. Armenia's ethnic Azeri population, deported from Armenia in 1988-89, remain refugees, mostly in Azerbaijan. At the same time, however, Armenia's record on discrimination towards the few remaining national minorities is generally good. The Armenian Government does not restrict internal or international travel.

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."

Armenia's observance of international law and obligations and OSCE commitments in this respect has been marred by the ongoing conflict over Nagorno-Karabakh. Karabakh Armenians, supported by the Republic of Armenia, now hold about one fifth of Azerbaijan and have refused to withdraw from occupied territories until an agreement on the status of Nagorno-Karabakh is reached. President Ter-Petrosyan, who rose to prominence and power on the issue of Nagorno-Karabakh's status, has refused to recognize the self-proclaimed independence of the "Nagorno-Karabakh Republic." He has, however, acknowledged allowing Armenian "volunteers" to fight for the Karabakh army. Some human rights organizations have accused Armenia of sending regular troops to fight in Nagorno-Karabakh. In May, the Armenian Government announced it would release all the POWs and detainees in its custody.

Armenia continues to observe the cease-fire which has been in effect since May, 1994 and Armenian Government officials meet regularly, either bilaterally with Azerbaijani officials or within the OSCE's Minsk Group (see below), in an effort to resolve the conflict.

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

The CSCE (now OSCE) created the Minsk Group in spring 1992 as a forum for achieving a peaceful, negotiated resolution to the conflict over Nagorno-Karabakh. Negotiating sessions, co-chaired by Finland and Russia, were held regularly throughout 1995 and focused on the return of refugees, the status of disputed territories, and the status of Nagorno-Karabakh. The OSCE also continued its work on deploying a multinational peacekeeping force to the region as part of a broader political settlement. Armenia agreed to allow OSCE field representatives based in Tbilisi to help facilitate the peace process.

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."

The CFE Treaty was ratified by the Armenian Parliament in July 1992. Armenian officials have consistently expressed determination to comply with its provisions. Armenia has provided data on armaments as required under the CFE Treaty, including submission of data to meet the November 17, 1995 deadline--the date the CFE Treaty's limits on equipment took effect. Armenia has been responsive to concerns expressed about the accuracy of its November 17 declaration and is working closely with the Joint Consultative Group (JCG) in Vienna. Armenia has hosted on-site inspection teams to verify its reports. There are indications that Armenia is trying to establish mechanisms to ensure fulfillment of its arms-control obligations.

Armenia acceded to the Nuclear Non-Proliferation Treaty (NPT) as a nuclear-weapons-free state on July 15, 1993. The U.S. and other Western governments have discussed efforts to establish effective export control systems with Armenia. On March 19, 1993, Armenia signed the multilateral Chemical Weapons Convention, which calls for the eventual elimination of chemical weapons.

We have periodically received reports of proliferation-related transfers of weapons of mass destruction involving Armenia which we carefully review in light of our legal obligations under the various proliferation sanctions laws. None of these reports has resulted in a sanctions determination during the reporting period.

Armenia is not a significant exporter of conventional weapons, but has provided substantial support, including materiel, to separatists in the Nagorno-Karabakh region of Azerbaijan.

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

Armenia continues to face serious environmental problems. Water pollution caused by industrial wastes discharged into rivers has contributed to a serious decline in public health. Overuse of the country's forests has led to increased soil erosion and loss of arable land. The Government of Armenia has taken some steps to establish public-policy mechanisms to address environmental issues, including the establishment of a Ministry of Environment. National environmental NGOs are gaining access to the policy-making process on environmental issues. Armenia has shown an interest in regional cooperation on environmental issues, and has agreed to the establishment of a coordination and information-sharing mechanism as a first step toward fuller cooperation on transborder and international environmental issues.

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

The Government of Armenia does not grant sanctuary from prosecution to individuals or groups which have committed acts of international terrorism or otherwise support international 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 dissolution of the Soviet Union, 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 which assigned to each of the signatories 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 by seeking full liability for the debt in return for all the external assets. All of the NIS countries have signed protocols with Russia under which Russia either will pay the debt in return for the assets or will take on management responsibility. An agreement under which Armenia agreed to transfer all of its rights and responsibilities for these debts and assets to Russia was ratified in October 1995.

In April 1993, Russia and the official creditors of the former Soviet Union reached agreement on a rescheduling of outstanding arrears and 1993 maturities arising from credits extended to the former Soviet Union. The April agreement included a declaration signed by the Russian Government which acknowledged and confirmed Russia's liability for the debt to foreign creditors of the former Soviet Union. A bilateral agreement with the United States implementing the April accord was signed in Washington on September 30, 1993. On June 4, 1994 Russia and the official creditors of the former Soviet Union reached agreement on rescheduling 1994 maturities arising from credits extended to the former Soviet Union. A bilateral agreement with the United States implementing the June accord with respect to debt owed to the United States was signed October 25, 1994. On June 3, 1995, the official creditors provided Russia with some seven billion dollars in relief on payments due during the year. A bilateral agreement with the United States implementing the June 1995 accord was signed October 9, 1995. In November 1995, the group of official creditors and Russians met to initiate discussions on comprehensive debt rescheduling and planned to meet again to negotiate terms in January 1996.

Russia has been engaged in negotiations with the London Club of commercial creditors. In these negotiations, Russia has been seeking to restructure amounts owed banks not insured by official guarantees, arising from their loans to or other claims on the former Soviet Union. In November 1995, Russia and its commercial-bank creditors reached preliminary agreement on a 25-year rescheduling of the stock of bank debt.

Consistent with the terms of the Paris Club agreements, Russia has been engaged in negotiations with the London Club of commercial creditors. In these negotiations, Russia has been seeking to restructure, on terms comparable to those agreed to by the official creditors, amounts owed banks not insured by official guarantees, arising from their loans to or other claims on the former Soviet Union. In November 1995, Russia and its commercial-bank creditors reached preliminary agreement on a 25-year rescheduling of the stock of bank debt.

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 in the former Soviet Union is being conducted through the Joint U.S./Russian Commission on POW/MIAs, which was established in January 1992. The Commission sent a delegation to Armenia in August 1993 to expand contacts with Armenian officials and to visit the crash site of a C-130 plane which was shot down over Armenia in 1958. The delegation received much support and cooperation from the people and Government of Armenia during the investigation.

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

The Government of Armenia is not providing military, economic, nuclear or other assistance to the Government of Cuba.

CHECKLIST FOR GROUNDS OF INELIGIBILITY UNDER SECTION 498A(b) OF THE FOREIGN ASSISTANCE ACT OF 1961

ARMENIA

Section 498A(b)(1): Has the President determined that the Government of Armenia has "engaged in a consistent pattern of gross violations of internationally recognized human rights or of international law"?

No. While there have been some serious shortcomings in the observance of human rights in Armenia (as discussed above), we do not believe that the Government of Armenia is engaged in such a pattern.

Section 498A(b)(2): Has the President determined that the Government of Armenia "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"?

No. While there have been flaws in its record (as discussed above), we do not believe that the Government of Armenia has failed to take such actions.

Section 498A(b)(3): Has the President determined that, after October 24, 1992, the Government of Armenia "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"?

We periodically receive reports of proliferation-related transfers of weapons-of-mass-destruction which we carefully review in light of our legal obligations under the various proliferation sanctions laws. None of these reports has resulted in a sanctions determination during the reporting period.

Section 498A(b)(4): Is the Government of Armenia "prohibited from receiving such assistance by Section 669 or 670 of [the Foreign Assistance] 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 Armenia is not prohibited from receiving assistance under these statutes.

AZERBAIJAN

CRITERIA FOR U.S. ASSISTANCE UNDER SECTION 498A(a) OF THE FOREIGN ASSISTANCE ACT OF 1961 Section 201 of the FREEDOM Support Act amended Section 498A of the Foreign Assistance Act of 1961 to require that the President "take into account not only relative need but also the extent to which that independent state is acting to:"

Azerbaijan is on a slow path toward democracy. The Government of Azerbaijan continues its harassment of the opposition. An independent media exists, but so does censorship and periodic government interference in the publication of newspapers. The leadership nevertheless maintains that it is committed to democratic principles. On November 12, Azerbaijan held its first post-independence parliamentary elections. However, the election process was flawed in a number of ways, including the Central Election Commission's failure to register a major opposition party and some individual candidates, pressure on the media, and multiple voting. A referendum on the constitution giving primary power to the president was passed on November 12.

Even though the conflict in Nagorno-Karabakh has had a negative impact on Azerbaijan's economy and has diverted the Azerbaijani Government's attention away from economic reform, the Government has taken some positive steps toward reform. For example, the Government's stabilization program has reduced inflation by over 50 percent. The International Monetary Fund (IMF) will make available to Azerbaijan $88 million in a standby loan and $44 million for a second Systemic Transformation Facility loan. Azerbaijan's national currency, the manat, has been stable for most of the year. In addition, Azerbaijan's new privatization law went into effect on November 21. The Government plans to privatize 8,000 small enterprises and to sell 50 large- and medium-sized enterprises.

Azerbaijan has joined the IMF, the European Bank for Reconstruction and Development (EBRD), and the International Bank for Reconstruction and Development (IBRD), and concluded an OPIC agreement and bilateral trade agreement with the United States. Azerbaijan has most-favored-nation (MFN) status.

Section 498A(a)(3): "respect for internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."

In 1995, the conflict over Nagorno-Karabakh continued to be the most significant factor in the human rights situation in Azerbaijan. The expansion of ethnic-Armenian separatists into Azeri-populated regions in Azerbaijan in 1993 created hundreds of thousands of additional Azerbaijani internally-displaced persons.

While believers of other faiths practice their religions without restrictions or sanctions, Armenian churches in Azerbaijan remain closed. The remaining Armenian population in Azerbaijan numbers approximately 10,000 to 20,000, and consists mostly people of mixed descent or in mixed marriages. There is no government policy of discrimination against Armenians, who are free to travel. However, there are strong anti-Armenian feelings among the general population. In addition, low-level officials seeking bribes often harass members of minorities wishing to emigrate.

The Government of Azerbaijan has reiterated its commitment to the observance of international legal obligations and OSCE commitments in the area of human rights. At the same time, the conflict in Nagorno-Karabakh continues, and both sides have committed violations of international humanitarian laws. The parties to the conflict continue to observe a cease-fire which has been in effect since May 1994. There has been some direct dialogue between the Armenian and Azerbaijani Governments, and both are participating in the OSCE Minsk Group effort to resolve the conflict (see below).

To mark the anniversary of the cease-fire, Azerbaijan released 35 Armenian prisoners, Armenia released 29 Azerbaijani prisoners, and 36 Azerbaijanis being held in Nagorno-Karabakh were also released. While the Armenian and Azerbaijani Governments have released all known prisoners, ICRC estimates that 91 Azerbaijanis are still being held in Nagorno-Karabakh by ethnic Armenian forces.

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

The OSCE created the Minsk Group in Spring 1992 as a forum for a peaceful, negotiated resolution to the conflict over Nagorno-Karabakh. Negotiations have focused on creating the conditions for deploying a multinational OSCE peacekeeping force to the region as part of a broader political settlement. Current negotiations center on the status of disputed territories and the modalities for the OSCE mission to the region. Azerbaijan participates fully in the OSCE peace process.

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

Azerbaijan has formally declared its willingness and intent to accept all of the relevant arms control obligations of the former Soviet Union. The CFE Treaty was ratified by the Azerbaijani Government in July 1992. While Azerbaijan has not provided all notifications required by the CFE Treaty on its conventional forces, it did provide data on its conventional forces by the December 1993 Treaty deadline. Azerbaijan did not complete CFE reductions by November 17, 1995--the end of the 40-month reduction period--but did announce its intention to declare a reduction liability and to provide numbers and identification of reduction sites. Azerbaijan has accepted CFE on-site inspections of forces on its territory. Azerbaijan is only beginning to develop the expertise needed for implementation of complex arms control agreements, but is taking steps to establish the necessary infrastructure. Azerbaijan also acceded to the Nuclear Non-Proliferation Treaty (NPT) as a nuclear-weapons-free state on September 22, 1992.

We do not believe that Azerbaijan has engaged in the proliferation of nuclear, chemical or biological weapons, their delivery systems or related technology. Azerbaijan is a signatory to the Chemical Weapons Convention, which calls for the eventual elimination of chemical weapons. Azerbaijan is not a significant exporter of conventional weapons.

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

Oil development, air and water pollution, and urban/industrial pressure on the land have created serious challenges to the environment in Azerbaijan. River systems, including the Volga, as well as the Black Sea, suffer from severe chemical pollution which is resulting in the loss of fish species. Deterioration and erosion of soil and salination of agricultural lands contribute to extensive soil loss, as does the heavy use of fertilizers and pesticides. There are radioactivity hazards in some parts of the country. Poor air- and water-quality contribute to increasing public health risks. The rising level of the Caspian Sea and the prospective development of the Caspian for oil and other resources will bring new, serious environmental challenges.

Response to environmental problems has been slower in Azerbaijan than elsewhere in the NIS. However, new laws passed to address environmental problems and the use of natural resources are based on laws in effect in the West. Funding is problematical and inadequate to meet the breadth of problems that exist. The National Environment Committee seeks to use Azerbaijan's schools, information organizations, and the media to educate the populace. "Green" organizations and a Green party advocate on behalf of environmental interests. Efforts to overcome the environmental obstacles in Azerbaijan would benefit from a resolution of the Nagorno-Karabakh conflict and a resulting redirection of resources to environmental tasks.

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

The Government of Azerbaijan does not grant sanctuary from prosecution to individuals or groups which have committed acts of international terrorism or otherwise support international 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 dissolution of the Soviet Union, 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 which assigned to each of the signatories 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 by seeking full liability for the debt in return for all the external assets. All of the NIS countries have signed protocols with Russia under which Russia either will pay the debt in return for the assets or will take on management responsibility. Azerbaijan agreed to transfer all of its rights and responsibilities for these external debts and assets to Russia in September 1993.

The U.S. effort to uncover evidence of American POWs and MIAs in the former Soviet Union is being conducted through the Joint U.S./Russian Commission on POW/MIAs, which was established in January 1992. The Commission has not initiated direct negotiations with Azerbaijan, but plans to meet with Azerbaijani officials in the near future.

The Government of Azerbaijan is not providing military, economic, nuclear or other assistance to the Government of Cuba.

CHECKLIST FOR GROUNDS OF INELIGIBILITY UNDER SECTION 498A(b) OF THE FOREIGN ASSISTANCE ACT OF 1961

AZERBAIJAN

Section 498A(b)(1): Has the President determined that the Government of Azerbaijan has "engaged in a consistent pattern of gross violations of internationally recognized human rights or of international law"?

No. While there have been serious shortcomings in the observance of human rights in Azerbaijan (as discussed above), we do not believe that the Government of Azerbaijan is engaged in a pattern of gross violations.

Section 498A(b)(2): Has the President determined that the Government of Azerbaijan "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"?

No. We do not believe that the Government of Azerbaijan has failed to take such actions.

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

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

No. We do not believe that the Government of Azerbaijan has made such transfers.

Section 498A(b)(4): Is the Government of Azerbaijan "prohibited from receiving such assistance by Section 669 or 670 of [the Foreign Assistance] Act or Sections 306(a)(1) and 307 of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991"?

No. We do not have any information which would lead us to conclude that the Government of Azerbaijan is prohibited from receiving assistance under these statutes.

BELARUS

CRITERIA FOR U.S. ASSISTANCE UNDER SECTION 498A(a) OF THE FOREIGN ASSISTANCE ACT OF 1961

There were a number of troubling incidents in Belarus during 1995. Although parliamentary elections were held in May and November, international observers judged each of these elections to be "less than free and fair." Nevertheless, the most recent elections, held November 29, were declared valid on the basis that they surpassed the required 50-percent minimum voter turnout. Although a political opposition exists, special government troops on occasion used force against opposition members of parliament, opposition political gatherings, and union activities.

Shortly after his election in summer 1994, President Lukashenko announced that Belarus had no alternative to market-oriented reform. Although Lukashenko is from the old school of Soviet economists, he has nevertheless put into action some reform measures. His performance in the economic area has been mixed, with some freeing of prices on basic commodities, rent and services, but no effort made to increase privatization or to limit credit emissions. In November 1995, the International Monetary Fund (IMF), which had approved a $300 million standby credit for Belarus in September, was unable to conclude its first review of the program due to Belarus's inability to meet performance targets. This has delayed both the November and January disbursements, and has put the future of the entire IMF program in Belarus under a dark cloud. The issue that has the IMF worried most is the Belarusian Government's intransigence on letting its ruble exchange-rate float. In addition, the IMF is worried about Belarus's lack of progress on privatization, massive agricultural subsidies and large-scale dipping into foreign currency reserves. Lukashenko has pledged further steps to comply with IMF requirements in time to qualify for the next tranche of funding. Some type of "social safety net" provisions are likely to be included with these reforms to protect the most vulnerable members of Belarusian society.

The Government of Belarus wants to attract foreign investment and has introduced reforms to improve the investment climate; however, there have been few concrete implementing policies. A law on copyright protection is in the draft stage. Belarus is a member of the IMF, the European Bank for Reconstruction and Development (EBRD), and the International Bank for Reconstruction and Development (IBRD)--we have encouraged the Belarusian Government to work actively with these institutions on a comprehensive economic reform program. An OPIC agreement entered into force in 1992. A trade agreement between Belarus and the United States which extends reciprocal most-favored-nation (MFN) status and contains intellectual property right (IPR) provisions entered into force in February 1993. A bilateral investment treaty has been negotiated and was ratified by the Belarusian Parliament in October 1995, but still awaits U.S. ratification before it can enter into force.

Section 498A(a)(3): "respect for internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."

The Belarusian Government's respect for internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration, has been mixed. On the one hand, ethnic tensions have not been a problem in Belarus, and persons of all faiths may now worship without fear of persecution. In addition, emigration procedures have been relaxed considerably. However, the Belarusian Government maintains a virtual monopoly over the press, and in late 1995, restricted the ability of certain publications to appear, forcing them to seek such alternatives as publishing outside the country.

Belarus has demonstrated its respect for international law and obligations through its participation in the Organization on Security and Cooperation in Europe (OSCE), but has simultaneously shown a tendency to discourage some forms of trade-union activity and other labor-organizing.

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

Belarus is not involved in ethnic or regional conflicts and has supported the Commonwealth of Independent States (CIS) and OSCE as conflict-resolution mechanisms. Belarus is only a conditional member of the CIS Collective Security Agreement--no foreign troops may be deployed in Belarus, nor may Belarusian troops be sent abroad, without the explicit approval of the Belarusian Supreme Soviet.

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

Belarus has formally declared its acceptance of all of the relevant arms-control obligations of the former Soviet Union. It has ratified the START and CFE Treaties. In October 1995, Belarus resumed the destruction of weapons as mandated by the CFE Treaty. While it did not meet the November 17 deadline for weapons-destruction, Belarus reaffirmed its strong commitment to the CFE Treaty, and set an April 1996 target date for completing the destruction process. Belarus acceded to the Nuclear Non-Proliferation Treaty (NPT) as a nuclear-weapons-free state in July 1993 (as it had committed to do in the May 1992 Lisbon Protocol to START I), and deposited its instrument of accession with the three NPT co-depository states. Belarus will conclude a full-scope safeguards agreement with the International Atomic Energy Association (IAEA). Belarus participates in discussions on implementing the INF, ABM and START Treaties as a successor state to the Soviet Union. All former Soviet tactical nuclear weapons were removed from Belarus by May 1992, two months ahead of the announced deadline. Also in May 1992, Belarus signed a letter accompanying the Lisbon Protocol to START I promising to eliminate all strategic offensive arms located in Belarus. Belarus and Russia have set a September 1996 target date for removing all nuclear weapons from Belarusian territory, well ahead of the seven-year START reduction period.

The Belarusian Government's official policy is to reduce its armed forces by more than half, and to be a neutral, nuclear-weapons-free state. Belarus was the first of the NIS countries to sign an agreement with the United States under the Defense Department's Cooperative Threat Reduction (Nunn-Lugar) Program, which has been providing assistance to Belarus in the areas of export control, defense conversion, environmental restoration, and the establishment of a continuous communications link with the U.S. Nuclear Risk Reduction Center (NRRC). We do not believe that Belarus has engaged in the proliferation of nuclear, biological or chemical weapons, their delivery systems or related technology. Belarus is an original signatory to the multilateral Chemical Weapons Convention. Belarus has engaged in limited commercial conventional weapons transactions. It seeks to convert its defense industry to civilian production but lacks the funds to do so quickly.

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

Belarus has taken positive steps to address international environmental issues by establishing Ministries of Energy, Forestry and Water Resources, and Land Reclamation. It has also established state committees on the consequences of the Chornobyl accident, ecology, and supervision of safety procedures in industry and the nuclear-power industry. Belarus suffered the brunt of the effects of Chornobyl and has actively sought U.S. assistance in cleaning up areas devastated by radiation.

Belarus is plagued by air- and water-pollution problems of varying degrees. The country's rivers are considered "moderately polluted" from industrial and agricultural sources. Some land reclamation efforts, undertaken in the name of economic development, have contributed to severe ecological problems in the Polesye Region. Environmental protection efforts undertaken by individual ministries are supervised by the Committee of the Council of Ministers on Emergency Situations, the Consequences of the Chornobyl Disaster, and the Environment.

Several Belarusian nongovernmental organizations (NGOs) and more than 20 foundations and citizens organizations are focusing on alleviating the consequences of the Chornobyl accident. Belarus possesses the human and natural resources to address the environmental challenges facing the country. With sufficient political will and stability, the chances for progress in the environmental field will be improved.

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

The Government of Belarus does not grant sanctuary from prosecution to individuals or groups that have committed acts of international terrorism or otherwise support international 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 dissolution of the Soviet Union, Russia and nine other Soviet republics signed a Memorandum of Understanding declaring themselves jointly and severall liable for the pre-October 1991 debt to foreign creditors of the Soviet Union. In December 1991, Russia and seven other republics signed an agreement which assigned to each of the signatories a share of all the external assets and foreign debt of the former Soviet Union (FSU). Belarus signed both the October and December 1991 agreements. The December 1991 agreement provided that Belarus's share of the former Soviet debt would be 4.13 percent. In 1992, Russia sought to replace the joint and several liability principle by seeking full liability for the debt in return for all the external assets. In July 1992, Belarus signed a zero-option agreement with Russia, under which Russia will pay Belarus's share of the debt in return for its share of the assets.

The U.S. effort to uncover evidence of American POWs and MIAs in the former Soviet Union is being conducted through the Joint U.S.-Russian Commission on POW/MIAs, which was established in January 1992. The Joint Commission sponsored several trips to Belarus in 1995 and has considered its work with the Government of Belarus as a model of cooperation.

The Government of Belarus is not providing military, economic, nuclear or other assistance to the Government of Cuba, and based on available information, all trade is believed to be taking place on market terms.

CHECKLIST FOR GROUNDS OF INELIGIBILITY UNDER SECTION 498A(b) OF THE FOREIGN ASSISTANCE ACT OF 1961

BELARUS

Section 498A(b)(1): Has the President determined that the Government of Belarus has "engaged in a consistent pattern of gross violations of internationally recognized human rights or of international law"?

No. While there have been serious shortcomings in the observance of human rights in Belarus (as discussed above), we do not believe that the Government of Belarus is engaged in a consistent pattern of gross violations.

Section 498A(b)(2): Has the President determined that the Government of Belarus "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"?

No. We do not believe that the Government of Belarus has failed to take such actions.

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

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

No. We do not believe that the Government of Belarus has made such transfers.

Section 498A(b)(4): Is the Government of Belarus "prohibited from receiving such assistance by Section 669 or 670 of [the Foreign Assistance] Act or Sections 306(a)(1) and 307 of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991"?

No. We do not have information which would lead us to conclude that the Government of Belarus is prohibited from receiving assistance by these statutes.

GEORGIA

CRITERIA FOR U.S. ASSISTANCEUNDER SECTION 498A(a) OF THE FOREIGN ASSISTANCE ACT OF 1961 Section 201 of the FREEDOM Support Act amended Section 498A of the Foreign Assistance Act of 1961 to require that the President "take into account not only relative need but also the extent to which that independent state is acting to:"

Section 498A(a)(1): "make significant progress toward, and is committed to the comprehensive implementation of a democratic system based on principles of the rule of law, individual freedoms, and representative government determined by free and fair elections."

The Georgian Parliament adopted a new constitution in September 1995. Presidential and parliamentary elections were held on November 5, 1995, in all areas except those under the control of Abkhazian and South Ossetian separatist forces, who refused to support the process. The Georgian Government has stated that representatives from these districts will be elected immediately following resolution of these regional conflicts. International observers stated that, despite problems in some regions, the elections were conducted in a manner consistent with democratic norms.

Following several years of disastrous performance resulting from civil war, trade disruptions and weak monetary and fiscal policies, Georgia's economic policies and performance improved significantly in 1995. Accomplishments included a significant reduction in the inflation rate, successful introduction of a new national currency (the lari), elimination of most price and enterprise subsidies, liberalization of domestic and external trade, reduction in public employment, new banking and investment laws, and accelerated privatization. Georgia's reform program is supported by International Monetary Fund (IMF) loans of $80 million under a Systemic Transformation Facility and $113 million under Stand-by Arrangements.

Further structural, legal and organizational reforms are needed in order to create an environment attractive to foreign and domestic investment in Georgia. Remaining state monopolies need to be ended, and further progress on land reform and privatization will be required for Georgia to realize its growth potential. Additional IMF lending on a concessional basis is being considered to support continued reform in Georgia.

Georgia is a member of the IMF and the World Bank. A bilateral trade agreement with the United States which provides mutual most-favored-nation (MFN) treatment and contains intellectual property right (IPR) provisions, came into force in August 1993, and a bilateral investment treaty is awaiting ratification by the U.S. Congress. An OPIC agreement has been in force since 1992, and Georgia has submitted a letter to the Office of the U.S. Trade Representative requesting status under the GSP system.

Section 498A(a)(3): "respect internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."

The Georgian Government's human-rights record improved somewhat in 1995. Progress included adoption of a new constitution, the restructuring of Georgia's state human-rights-protection body to strengthen its ombudsman functions, the arrest of two Ministry of Internal Affairs officers on charges of abusing prisoners, and the resumption of access by international monitors to prisons and detainees. Freedom of religion was unrestricted, as was the freedom for foreign and internal travel and emigration. Serious human rights problems remained, however. While there have been improvements, some limitations on the press remained. Despite the Government's commitments to address these problems, torture and beatings of detainees by the Security Forces, extremely harsh prison conditions, judicial corruption, denial of the right to a fair and expeditious trial, and arbitrary interference with privacy continued. Torture and killing of civilians by Abkhaz separatists in the areas under their control continued. While violence subsided, allegations of human rights violations by all sides continued.

While some progress was made towards the observance of international legal obligations and OSCE commitments in the area of human rights, the issue of the status of Abkhazia remained unresolved. The United States continued to urge all parties to pursue a peaceful resolution of the conflict in a manner that safeguards both the territorial integrity of Georgia and the rights of individuals belonging to ethnic minorities.

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

President Shevardnadze has consistently stressed Georgia's commitment to negotiate a peaceful settlement to the conflict in Abkhazia; he has pledged to continue this approach despite Abkhazia's unilateral declaration of independence in November 1994 and subsequent demand that any settlement grant the region equal status with the state of Georgia. Since 1992, a OSCE mission has been working in Georgia to facilitate a political settlement of the South Ossetia dispute. Since the OSCE mission's mandate was expanded to include developing democratic institutions and protecting respect for human rights throughout Georgia, the Georgian government has fully supported the mission's activities under this mandate.

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

Under the leadership of former Soviet Foreign Minister Eduard Shevardnadze, Georgia has consistently made clear its commitment to achieving full implementation of the CFE Treaty, of which Shevardnadze was a major architect. Georgia is in full compliance of the CFE Treaty and has accepted CFE inspections of forces on its territory.

The Georgian Government initialed a twenty-year basing agreement with Russia which would allow for three Russian bases and military equipment to be maintained on Georgian territory. The agreement has not yet been ratified by either the Georgian or Russian Parliament. Even though Russia has been providing military assistance to Georgia, the Georgian military remains ill-equipped and has been hard-pressed to maintain its forces in Abkhazia and South Ossetia.

We do not believe that Georgia has engaged in significant transfers of conventional weapons, or in the proliferation of nuclear, biological or chemical weapons, their delivery systems, or related technology. Georgia acceded to the Nuclear Non-Proliferation Treaty (NPT) as a nuclear-weapons-free state in March 1994. The United States and other Western governments have discussed efforts to establish effective export-control systems with Georgia. Georgia has indicated its intention, as a successor state of the Soviet Union, to become a party to the ABM Treaty. Georgia is an original signatory of the multilateral Chemical Weapons Convention, which calls for the eventual elimination of chemical weapons.

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

The Government of Georgia has taken steps to establish public-policy mechanisms to address environmental issues, including the establishment of a Ministry of Environment. National environmental NGOs are gaining access to the policy-making process on environmental issues, and a Green Party is active in Georgia. Georgia has also shown an interest in regional cooperation on environmental issues, and has agreed to the establishment of a coordination and information-sharing mechanism as a first step toward fuller cooperation on transborder and international environmental issues.

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

The Government of Georgia does not grant sanctuary from prosecution to individuals or groups which have committed acts of international terrorism or otherwise support international 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 dissolution of the Soviet Union, Russia and nine other Soviet republics signed a Memorandum of Understanding declaring themselves jointly and severally liable for the pre-October 1991 debt to foreign creditors of the Soviet Union. In December 1991, Russia and seven other republics signed an agreement which assigned to each of the signatories a share of all the assets and foreign debt of the former Soviet Union. Georgia signed both the October and December 1991 agreements. The December 1991 agreement provided that Georgia's share of the former Soviet debt would be 1.62 percent. In 1992, Russia sought to replace the joint and several liability principle by seeking full liability for the debt in return for all the external assets. Georgia has signed a zero-option agreement with Russia transferring Georgia's share of the former Soviet debt to Russia in exchange for its share of former Soviet assets.

In April 1993, Russia and the official creditors of the former Soviet Union reached agreement on a rescheduling of outstanding arrears and 1993 maturities arising from credits extended to the former Soviet Union. The April agreement included a declaration signed by the Russian Government which acknowledged and confirmed Russia's liability for the debt to foreign creditors of the former Soviet Union. A bilateral agreement with the United States implementing the April accord was signed in Washington on September 30, 1993. On June 4, 1994 Russia and the official creditors of the former Soviet Union reached agreement on rescheduling 1994 maturities arising from credits extended to the former Soviet Union. A bilateral agreement with the United States implementing the June accord with respect to debt owed to the United States was signed October 25, 1994. On June 3, 1995, the official creditors provided Russia with some seven billion dollars in relief on payments due during the year. A bilateral agreement with the United States implementing the June 1995 accord was signed in October 1995. In November 1995, the group of official creditors and Russian officials met to initiate discussions on comprehensive debt rescheduling and planned to meet again to negotiate terms in January 1996.

The Government of Georgia is not providing military, economic, nuclear or other assistance to the Government of Cuba.

CHECKLIST FOR GROUNDS OF INELIGIBILITY UNDER SECTION 498A(b) OF THE FOREIGN ASSISTANCE ACT OF 1961

GEORGIA

Section 498A(b)(1): Has the President determined that the Government of Georgia has "engaged in a consistent pattern of gross violations of internationally recognized human rights or of international law"?

No. While there have been serious shortcomings in the observance of human rights in Georgia (as discussed above), we do not believe that the Government of Georgia is engaged in such a pattern.

Section 498A(b)(2): Has the President determined that the Government of Georgia "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"?

No. While there were minor flaws in Georgia's record in this regard during its first years of independence, we do not believe that the Government of Georgia has failed to take such actions.

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

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

No. We do not believe that the Government of Georgia has made such transfers.

Section 498A(b)(4): Is the Government of Georgia "prohibited from receiving such assistance by Section 669 or 670 of [the Foreign Assistance] Act or Sections 306(a)(1) and 307 of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991"?

No. We do not have information from which to conclude that the Government of Georgia is prohibited from receiving assistance under these statutes.

KAZAKSTAN

CRITERIA FOR U.S. ASSISTANCEUNDER SECTION 498A(a) OF THE FOREIGN ASSISTANCE ACT OF 1961 Section 201 of the FREEDOM Support Act amended Section 498A of the Foreign Assistance Act of 1961 to require that the President "take into account not only relative need but also the extent to which that independent state is acting to:"

Kazakstan continues its post-Soviet transition, and human-rights conditions have improved significantly since the pre-independence days. Freedoms of assembly and religion are generally respected, and the press is increasingly pluralistic. New political groups have formed. Nonetheless, human rights concerns continue to exist. Some political parties and independent trade unions have not been allowed to register or operate freely. Although they constitute only two-fifths of the population, ethnic Kazaks predominate in the government. During 1995, the Kazakstani Government deviated from important democratic norms. In March, after the Constitutional Court ruled the March 1994 parliamentary elections invalid, President Nazarbayev dismissed the Parliament and assumed the power to rule by decree. The Kazakstani Government limited some opposition activities and pressured the media to mute criticism of its actions. In April, the Kazakstani authorities sponsored a Soviet-style referendum to extend President Nazarbayev's term in office until the year 2000. In August, a similar referendum was used to approve a new constitution which greatly strengthened the executive branch of government at the expense of the legislature and judicial branches. Meanwhile, President Nazarbayev proceeded with a series of edicts to reform the economy and establish modern state institutions.

Overall, Kazakstan's democratic development still places second in the region after Kyrgyzstan. Kazakstan shows no consistent pattern of human rights violations, political pluralism is significant and growing, and Kazakstan has the most developed and active independent media in Central Asia. Foreign monitors reported that Kazakstan's December 1995 parliamentary elections exhibited important procedural improvements over the previous parliamentary elections. Nonetheless, the monitors also cited significant irregularities.

Kazakstan continues to make progress in restructuring its economic system. The Kazakstani Government has instituted major reforms in price liberalization, banking, privatization, bankruptcy, and other key areas. It has undertaken tax, trade, and exchange reform and has liberalized the country's investment laws. The privatization law permits privatization in all sectors of the economy, including defense, and does not discriminate against non-citizens. Housing privatization is close to completion in most regions, and privatization of small enterprises is largely complete. The new constitution makes an important step forward by permitting the sale of non-agricultural land. In November 1993, Kazakstan introduced its national currency, the tenge, which has helped it establish an independent monetary policy. An OPIC agreement, a trade agreement, and a bilateral investment treaty with the United States are in force. The United States and Kazakstan have also signed a treaty to avoid double taxation, the ratification of which is on hold pending resolution of a disagreement over Kazakstani banking-secrecy rules. Kazakstan is a member of the International Monetary Fund, the International Bank for Reconstruction and Development, the European Bank for Reconstruction and Development, and the Asian Development Bank. Kazakstan negotiated an IMF standby program which went into effect in January 1994. Aside from a short period in early 1994, Kazakstan has met overall IMF guidelines and has continued to receive IMF support. Tight financial controls in keeping with IMF requirements have resulted in a sharp decline in the inflation rate and a stabilization of the tenge's value.

Section 498A(a)(3): "respect internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."

Freedom of assembly and religion are generally respected, but freedoms of movement and assembly are occasionally limited. The Committee for National Security (KNB) has legal authority to deny permission to travel in and out of the country. The press is increasingly pluralistic, with a large number of independent publications, although we continue to receive credible reports of government harassment of independent media. While ethnic Slavs and other minorities are concerned about increasing discrimination in favor of ethnic Kazaks in government employment, state-controlled enterprises, education and housing, President Nazarbayev has publicly emphasized that all nationalities are welcome in Kazakstan and are entitled to equal treatment under the law. The constitution includes substantial protections for individuals, including members of non-Kazak ethnic groups, although it has been criticized for not making Russian a state language.

The Government of Kazakstan has made a strong commitment to respect the observance of international legal obligations and OSCE commitments. Kazakstan is at peace with its neighbors and has defensive military forces which do not pose an offensive threat to the region. Kazakstan is also a strong proponent of dialogue and cooperation among the states of the former Soviet Union. Kazakstan is a member of the Partnership for Peace.

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

Kazakstan supports regional and international efforts to resolve peacefully the conflict in Tajikistan, to which it has dispatched border troops to participate in the Russian-led peace-keeping force. The Government of Kazakstan has also played a constructive role in trying to achieve peaceful settlement of the conflict between Armenia and Azerbaijan. Kazakstan is committed to establishing a multi-ethnic national identity and is sensitive to the concerns of the large ethnic Russian community in Kazakstan.

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

Kazakstan was the second NIS nuclear successor state to accede to the Nuclear Non-Proliferation Treaty (NPT) as a nuclear-weapons-free state, doing so in February 1994. Almaty has also ratified the CFE and START treaties and is a full successor and participant in the INF, START, and ABM Treaties. Kazakstan is also committed to maintaining a military force consistent with legitimate defense requirements. We do not believe that Kazakstan has engaged in significant transfers of conventional weapons, or in the proliferation of nuclear, biological or chemical weapons, their delivery systems, or related technology. Kazakstan is an original signatory to the multilateral Chemical Weapons Convention, which calls for the eventual elimination of chemical weapons. Kazakstan signed a full-scope safeguards agreement in July 1994 and is preparing the required inventory for the IAEA Kazakstan's November 1994 transfer to the United States of approximately 600 kilograms of weapons-grade uranium compellingly demonstrated the Kazakstani Government's willingness to work closely with the United States to advance global peace and stability. The last Soviet-era nuclear warheads still on Kazakstani soil were transferred to Russia for destruction in April 1995. A nuclear device implanted at the Semipalatinsk nuclear weapons test range prior to the collapse of the Soviet Union was destroyed, at the request of the Government of Kazakstan, with conventional explosives in May 1995. Section 498A(a)(7): "take constructive actions to protect the international environment, prevent significant transborder pollution, and promote sustainable use of natural resources."

Kazakstan suffered severe environmental degradation under Soviet rule, and there is broad-based support for domestic protection of the environment. Kazakstan has shown an interest in regional cooperation on environmental issues, and has agreed to the establishment of a coordination and information-sharing mechanism as a first step toward fuller cooperation on transborder and international environmental issues. Kazakstan has taken some steps to establish public policy mechanisms to address environmental issues, including the establishment of a Ministry of Environment and the introduction, at least on an experimental basis, of a pollution-fee system under which taxes are levied on air and water emissions and solid-waste disposal, with the resulting revenues channeled to environmental protection activities. National environmental NGOs are gaining access to the policy-making process on environmental issues.

Kazakstan has been an active and constructive player in regional and international efforts to alleviate the deteriorating environmental conditions and foster regional cooperation in the Aral Sea Basin. President Nazarbayev is also President of the International Fund for Saving the Aral Sea. Kazakstan has worked with the World Bank and international donors on a 15- to 20-year plan to stabilize the Aral Sea. The Kazakstani Government is currently considering a draft bilateral agreement on the environment which it has discussed with the U.S. Government over the last year. Kazakstan is currently engaged in talks with Russia, Turkmenistan, Azerbaijan and Iran on environmental protection of the Caspian Sea. These marine environmental protection talks will include discussion of development of the mineral resources of the Caspian seabed and use of the sturgeon population in a way that protects the Caspian ecosystem.

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

The Government of Kazakstan does not grant sanctuary from prosecution to individuals or groups which have committed acts of international terrorism or otherwise support international 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 dissolution of the Soviet Union, 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 which assigned to each of the signatories a share of all the external assets and foreign debt of the former Soviet Union. Kazakstan signed both the October and December 1991 agreements. The December 1991 agreement provided that Kazakstan's share of the former Soviet debt would be 3.86 percent. Beginning in 1992, Russia sought to replace the joint and several liability principle by seeking full liability for the debt in return for all the external assets. In September 1993, Kazakstan signed a zero-option agreement with Russia under which Russia will pay Kazakstan's share of the debt in return for its share of the assets.

In April 1993, Russia and the official creditors of the former Soviet Union reached agreement on a rescheduling of outstanding arrears and 1993 maturities arising from credits extended to the former Soviet Union. The April agreement included a declaration signed by the Russian Government which acknowledged and confirmed Russia's liability for the debt to foreign creditors of the former Soviet Union. A bilateral agreement with the United States implementing the April accord was signed in Washington in September 1993. In June 1994, Russia and the official creditors of the former Soviet Union reached agreement on the rescheduling of 1994 maturities arising from credits extended to the former Soviet Union. A bilateral agreement with the United States implementing the June accord with respect to debt owed to the United States was signed October 25, 1994. On June 3, 1995, the official creditors provided Russia with some seven billion dollars in relief on payments due during the year. A bilateral agreement with the United States implementing the June 1995 accord was signed October 9, 1995. In November 1995, the group of official creditors and Russian officials met to initiate discussions on comprehensive debt rescheduling and planned to meet again to negotiate terms in January 1996. Russia has been engaged in negotiations with the London Club of commercial creditors. In these negotiations, Russia has been seeking to restructure amounts owed banks not insured by official guarantees, arising from their loans to or other claims on the former Soviet Union. In November 1995, Russia and its commercial-bank creditors reached preliminary agreement on a 25-year rescheduling of the stock of bank debt.

The Government of Kazakstan is not providing military, economic, nuclear or other assistance to the Government of Cuba.

CHECKLIST FOR GROUNDS OF INELIGIBILITY UNDER SECTION 498A(b) OF THE FOREIGN ASSISTANCE ACT OF 1961

KAZAKSTAN

Section 498A(b)(1): Has the President determined that the Government of Kazakstan has "engaged in a consistent pattern of gross violations of internationally recognized human rights or of international law"?

No. Although Kazakstan's human-rights record is imperfect (as discussed above), we do not believe that the Government of Kazakstan is engaged in such a pattern.

Section 498A(b)(2): Has the President determined that the Government of Kazakstan "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"?

No. The Government of Kazakstan has taken a significant number of such constructive actions (as discussed above), including ratification of the START I Treaty. Kazakstan deposited its instrument of accession to the Nuclear Non-Proliferation Treaty (NPT) in 1994.

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

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

No. We do not believe that the Government of Kazakstan has made such transfers.

Section 498A(b)(4): Is the Government of Kazakstan "prohibited from receiving such assistance by Section 669 or 670 of [the Foreign Assistance] Act or Sections 306(a)(1) and 307 of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991"?

No. We do not have information from which to conclude that the Government of Kazakstan is prohibited from receiving assistance under these statutes.

KYRGYZSTAN

CRITERIA FOR U.S. ASSISTANCEUNDER SECTION 498A(a) OF THE FOREIGN ASSISTANCE ACT OF 1961

President Akayev and his ministers have expressed strong commitments to human rights, democracy and the rule of law; since gaining independence, Kyrgyzstan has made important progress, albeit with occasional setbacks, in these areas. For example, in September 1995, Kyrgyzstan rejected a referendum to extend President Akayev's term of office, choosing instead an open presidential election which was held December 24, 1995. Although some criticized the relatively short notice before the holding of the elections and there were numerous complaints about opposition candidates' difficulties in attempting to register, a total of five candidates in addition to President Akayev were included on the presidential ballot by the Central Election Committee. The Supreme Court, however, subsequently ruled three of the candidacies invalid. Although multi-party parliamentary elections held in early 1995 featured widespread irregularities, international observers concluded that the results generally represented the will of the Kyrgyzstani people. The July 1995 conviction of two journalists for defaming President Akayev raised concerns about the government's commitment to free speech, as did the occupation of a public square by troops to hinder an anti-government demonstration in October 1995. There are, nevertheless, numerous independent newspapers and magazines in Kyrgyzstan which are frequently critical of the government.

Kyrgyzstan's constitution gives substantial guarantees of rights for its citizens, including members of non-Kyrgyz ethnic groups. Nevertheless, discrimination by ethnic-Kyrgyz government officials against non-Kyrgyz citizens has remained a complaint of the ethnic Russian and Uzbek populations, despite efforts by President Akayev to mitigate the effects of Kyrgyz nationalism and to provide constitutional guarantees. The Government of Kyrgyzstan supports efforts to cultivate political activity by its citizens, and opposition groups are, with rare exceptions, free to organize and conduct political activities.

Kyrgyzstan has made significant progress in restructuring its economic system and implementing legislation that will serve as a basis for a market economy. Kyrgyzstan introduced its own national currency, the som, in May 1993, which has given the Government greater control over its monetary policy. The parliament adopted favorable laws on privatization, joint ventures, foreign trade and investment, and free economic zones. A trade agreement with the United States provides reciprocal most-favored-nation (MFN) status and contains intellectual property right (IPR) provisions. An OPIC agreement is also in force. A bilateral investment treaty with the United States became effective in January 1994. A U.S.-Kyrgyzstani bilateral tax treaty has been discussed, although negotiations have not begun. Kyrgyzstan is a member of the European Bank for Reconstruction and Development (EBRD), the International Bank for Reconstruction and Development (IBRD), the Asian Development Bank (ADB) and the International Monetary Fund (IMF).

As the first of the NIS countries to embark on an IMF-backed reform program, the Kyrgyzstani Government's commitment to reform started early and has deepened. The Government of Kyrgyzstan continues to make progress under the current three-year structural reform program backed by an IMF Enhanced Structural Adjustment Facility (ESAF). As a result, in March, Kyrgyzstan became the first NIS country to commit itself to avoid imposing any restrictions on payments for current international transactions and to avoid engaging in multiple currency practices or discriminatory currency arrangements.

Section 498A(a)(3): "respect internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."

With some exceptions, internationally recognized human rights appear to be generally respected in Kyrgyzstan. Kyrgyzstan hosted international human-rights conferences on Central Asia in 1992 and 1993. President Akayev has sought to reassure ethnic minorities while simultaneously trying to satisfy Kyrgyz aspirations for greater national identity. The new constitution includes substantial protection for individuals, including members of non-Kyrgyz ethnic groups. Concerns remain about ethnic discrimination, but in general, the situation for minorities has improved, and emigration has decreased.

The Kyrgyzstani Constitution provides for freedom of religion, and the government respects this in practice. There is no law on emigration, but administrative procedures permit the movement of people.

Kyrgyzstan has made a strong commitment to respect international legal obligations and CSCE commitments. Kyrgyzstan is at peace with its neighbors, and is also a strong proponent of dialogue and cooperation among the states of the former Soviet Union.

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

Kyrgyzstan supports regional and international efforts to resolve peacefully the conflict in neighboring Tajikistan. A unit of the Kyrgyzstani military serves in the CIS peacekeeping force in Tajikistan. The Government of Kyrgyzstan is committed to establishing a multi-ethnic national identity and is particularly sensitive to the concerns of the non-Kyrgyz ethnic groups in Kyrgyzstan, although there are credible allegations of discrimination on the part of individual government officials.

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

The Government of Kyrgyzstan has formally declared its willingness and intent to accept all of the relevant arms control obligations of the former Soviet Union. Kyrgyzstan acceded to the Nuclear Non-Proliferation Treaty (NPT) on July 5, 1994. Kyrgyzstan is also committed to maintaining a small, defensive military force or national guard. Kyrgyzstan has said that it is strongly opposed to the proliferation of weapons of mass destruction, their delivery systems or related technologies. Although we have received unconfirmed reports of Kyrgyzstani involvement in unspecified defense-related cargo transfers which are of concern, which we review under applicable legal provisions, we do not believe that Kyrgyzstan has engaged in significant transfers of conventional weapons, or in the proliferation of nuclear, biological, or chemical weapons, their delivery systems, or related technology. Kyrgyzstan is a signatory to the multilateral Chemical Weapons Convention.

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

Kyrgyzstan suffered severe environmental degradation under Soviet rule, and there is broad-based support for domestic protection of the environment. Kyrgyzstan has shown an interest in regional cooperation on environmental issues, and has agreed to the establishment of a coordination and information-sharing mechanism as a first step toward fuller cooperation on transborder and international environmental issues. Kyrgyzstan has taken some steps to establish public policy mechanisms to address environmental issues, including the establishment of a State Committee on Nature Protection. National environmental NGOs are gaining access to the policy-making process on environmental issues.

Kyrgyzstan has been an active and constructive player in regional and international efforts addressed to alleviate the deteriorating environmental conditions and foster regional cooperation in the Aral Sea Basin. Kyrgyzstan has worked with the World Bank and international donors on a 15- to 20-year plan to stabilize the Aral Sea.

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

The Government of Kyrgyzstan does not grant sanctuary from prosecution to individuals or groups which have committed acts of international terrorism or otherwise support international 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 dissolution of the Soviet Union, Russia and nine other Soviet republics signed a Memorandum of Understanding declaring themselves jointly and severally liable for the pre-October 1991 debt to foreign creditors of the Soviet Union. In December 1991, Russia and seven other republics signed an agreement which assigned to each of the signatories a share of all the external assets and foreign debt of the former Soviet Union. Kyrgyzstan signed both the October and December 1991 agreements. The December 1991 agreement provided that Kyrgyzstan's share of the former Soviet debt would be 0.95 percent. In 1992, Russia sought to replace the joint and several liability principle by seeking full liability for the debt in return for all the external assets. In August 1992, Kyrgyzstan signed a zero-option agreement with Russia under which Russia will pay Kyrgyzstan's share of the debt in return for its share of the assets.

The U.S. effort to uncover evidence of American POWs and MIAs in the former Soviet Union is being conducted through the Joint U.S./Russian Commission on POW/MIAs, which was established in January 1992. In November 1995, the U.S. side of the Commission made a successful visit to Kyrgyzstan. The Commission met with senior government officials, including President Akayev. All Kyrgyzstani officials cooperated fully and pledged to do their utmost to locate information on American POW/MIAs. There is no evidence of any American POW/MIAs in Kyrgyzstan.

The Government of Kyrgyzstan is not providing military, economic, nuclear or other assistance to the Government of Cuba.

CHECKLIST FOR GROUNDS OF INELIGIBILITY UNDER SECTION 498A(b) OF THE FOREIGN ASSISTANCE ACT OF 1961

KYRGYZSTAN

Section 498A(b)(1): Has the President determined that the Government of Kyrgyzstan has "engaged in a consistent pattern of gross violations of internationally recognized human rights or of international law"?

No. We do not believe that the Government of Kyrgyzstan is engaged in such a pattern.

Section 498A(b)(2): Has the President determined that the Government of Kyrgyzstan "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"?

No. We do not believe that the Government of Kyrgyzstan has failed to take such actions.

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

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

No. We do not believe that the Government of Kyrgyzstan has made such transfers.

Section 498A(b)(4): Is the Government of Kyrgyzstan "prohibited from receiving such assistance by Section 669 or 670 of [the Foreign Assistance] Act or Sections 306(a)(1) and 307 of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991"?

No. We do not have information from which to conclude that the Government of Kyrgyzstan is prohibited from receiving assistance under these statutes.

MOLDOVA

CRITERIA FOR U.S. ASSISTANCEUNDER SECTION 498A(a) OF THE FOREIGN ASSISTANCE ACT OF 1961

Section 498A (a)(1): "make significant progress toward, and is committed to the comprehensive implementation of, a democratic system based on principles of the rule of law, individual freedoms, and representative government determined by free and fair elections."

Throughout 1995, Moldova continued its efforts to consolidate its independence and continue its transition to democracy and a market economy. Local elections--the first under the new 1994 constitution--were conducted in a generally free and fair manner in April. The Moldovan Parliament approved judicial reforms, including the creation of a Constitutional Court and a system of appeals courts, which began to be implemented. In 1995, Moldova became the first of the NIS countries to be admitted to the Council of Europe. Moldova's new constitution, approved in 1994, provides improved protections for human rights, and includes fundamental principles of the rule of law and democratic governance.

Moldova continues to make progress in building the framework for a market economy. However, several factors have slowed down the reform process, including severe natural disasters in the form of droughts and flooding in 1994, large debts to Russia for energy, and civil conflict in the Transdniester region. Moldova has passed many of the basic laws needed for economic reform (including a privatization law), has freed the prices of most goods, and in late 1993 introduced a new currency, the leu, which is convertible and which has maintained a rather stable exchange rate since its introduction. Inflation has been cut from 100 percent in 1994 to roughly 15 percent in 1995. In 1993, Moldova began to implement an International Monetary Fund (IMF) reform program. From late 1994 to the end of 1995, Moldova privatized nearly 1,500 enterprises; about 80 percent of all housing units are now in private hands. Export quotas have been eliminated on most products. A U.S.-Moldovan bilateral trade agreement extending reciprocal most-favored-nation (MFN) status and containing intellectual property right (IPR) provisions entered into force in 1992. An OPIC agreement entered into force in 1993, and a U.S.-Moldovan bilateral investment treaty in 1994. Generalized System of Preferences (GSP) status was granted to Moldova in August 1995, and the U.S. Export-Import Bank began providing coverage in Moldova in November 1995. Moldova is a member of the IMF, the European Bank for Reconstruction and Development (EBRD), and the International Bank for Reconstruction and Development (IBRD). To support Moldova's stabilization program, the IMF has loaned SDR 65 million to Moldova under a systemic transformation facility, and up to SDR 90 million over a 12-month period through a standby arrangement. The World Bank approved a rehabilitation loan in 1993 for USD $60 million and a $26 million loan for drought recovery. A $60 million structural adjustment loan was approved in December 1994. In 1995, the World Bank approved a first-of-its-kind $30 million pre-export guarantee facility against political and economic risk for foreign investors.

Section 498A(a)(3): "respect internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."

Basic human rights such as freedom of speech, press, assembly and religion are generally respected in Moldova. Despite continued tensions between ethnic groups and political forces, such as the separatist dispute in the Transdniester region and the human-rights violations associated with it, the human-rights situation in Moldova remained generally positive in 1995. A conflict involving a separatist movement led by the Gagauz (Christian Turkic) minority in the southern part of the country was successfully resolved by granting the region local autonomy. Moldova's new constitution provides the legal framework to ensure protection of minority rights, and has received positive assessments from Western experts. Moldova has abolished exit visas for travel abroad. While some restrictions on emigration remain, there were no known cases denying permission to emigrate in 1994 or 1995.

Moldova takes seriously its membership in the OSCE and its obligations under the Helsinki Final Act. A 1992 Russian-brokered cease-fire in the separatist Transdniester region has held firmly since July 1992. The cease-fire established a tripartite peacekeeping force (comprised of Moldovan, Russian and Transdniestrian units) that has prevented a return to the use of force in the region. Negotiations aimed at resolving underlying issues in this conflict continue, as does the work of a OSCE mission there.

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

Since the beginning of the military conflict in the Transdniester region, the Moldovan Government has sought to cooperate with its neighbors--Romania, Ukraine and Russia--in seeking a peaceful resolution of this conflict. The Moldovan Government succeeded in negotiating with Russian and Transdniestrian officials an effective cease-fire in 1992. Moldova has cooperated with both OSCE and United Nations fact-finding/observer missions sent to the area and has consistently called for international mediation assistance. A OSCE mediation mission began working in Moldova in April 1993; its mandate has been extended through mid-1996. In 1995, Moldova peacefully settled a separatist dispute with the Gagauz (Christian Turkic) minority in the south by granting the region local autonomy.

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

Moldova has formally declared its willingness and intent to accept all of the relevant arms control obligations of the former Soviet Union. Moldova has fulfilled all obligations of the CFE Treaty, even accepting an inspection of forces on its territory that was not mandated by the letter of the agreement. Moldova's own armed forces are still in the formative stage, with a manpower objective at about one percent of the total population. Moldova acceded to the Nuclear Non-Proliferation Treaty (NPT) in October 1994 in Washington. We do not believe that Moldova has engaged in the proliferation of nuclear, biological or chemical weapons, their delivery systems, or related technology. Moldova is a signatory of the multilateral Chemical Weapons Convention. While Moldova has received some military equipment from Russia and Romania, such conventional weapon transfers have been very limited. There were credible reports that Moldova sold attack-fighter aircraft in 1994 that reached Southern Yemeni forces during the conflict in Yemen.

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

While information on specific "constructive actions" undertaken by the Moldovan Government is limited, we have no information or reason to believe that Moldova has contributed to transborder pollution or environmental abuse.

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

The Government of Moldova does not grant sanctuary from prosecution to individuals or groups which have committed acts of international terrorism or otherwise support international 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 dissolution of the Soviet Union, 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 which assigned to each of the signatories a share of all the external assets and foreign debt of the former Soviet Union. Moldova signed the October but not the December 1991 agreements. The December 1991 agreement provided that Moldova's share of the former Soviet debt would be 1.29 percent. Beginning in 1992, Russia sought to replace the joint and several liability principle by seeking full liability for the debt in return for all the external assets. In October 1993, Moldova signed a zero-option agreement with Russia under which Russia will pay Moldova's share of the debt, in return for its share of the assets as defined by the December 1991 agreement.

In April 1993, Russia and the official creditors of the former Soviet Union reached agreement on a rescheduling of outstanding arrears and 1993 maturities arising from credits extended to the former Soviet Union. The April agreement included a declaration signed by the Russian Government which acknowledged and confirmed Russia's liability for the debt to foreign creditors of the former Soviet Union. A bilateral agreement with the United States implementing the April accord was signed in Washington on September 30, 1993. On June 4, 1994, Russia and the official creditors of the former Soviet Union reached agreement on rescheduling 1994 maturities arising from credits extended to the former Soviet Union. A bilateral agreement with the United States implementing the June accord with respect to debt owed to the United States was signed October 25, 1994. On June 3, 1995, the official creditors provided Russia with some seven billion dollars in relief on payments due during the year. A bilateral agreement with the United States implementing the June 1995 accord was signed October 9, 1995. In November 1995, the group of official creditors and Russians met to initiate discussions on comprehensive debt rescheduling and planned to meet again to negotiate terms in January 1996.

The U.S. effort to uncover evidence of American POWs and MIAs in the former Soviet Union is being conducted through the U.S./Russian Joint Commission on POW/MIAs, which was established in March 1992. Moldovan officials warmly welcomed a Commission delegation led by the chairman of the U.S. side, Ambassador Malcolm Toon, in August and promised to cooperate fully with the Commission's inquiries. With the full support of the Moldovan Government, Ambassador Toon also made an appeal to the people of Moldova, asking them to come forward with information.

The Government of Moldova is not providing military, economic, nuclear or other assistance to the Government of Cuba.

CHECKLIST FOR GROUNDS OF INELIGIBILITY UNDER SECTION 498A(b) OF THE FOREIGN ASSISTANCE ACT OF 1961

MOLDOVA

Section 498A(b)(1): Has the President determined that the Government of Moldova has "engaged in a consistent pattern of gross violations of internationally recognized human rights or of international law"?

No. Although there have been shortcomings in the observance of human rights in Moldova; they have often been attributable to separatist "authorities," and we do not believe that the Government of Moldova is engaged in such a pattern.

Section 498A(b)(2): Has the President determined that the Government of Moldova "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"?

No. We do not believe that the Government of Moldova has failed to take such actions.

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

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

No. We do not believe that the Government of Moldova has made such transfers.

Section 498A(b)(4): Is the Government of Moldova "prohibited from receiving such assistance by Section 669 or 670 of [the Foreign Assistance] Act or Sections 306(a)(1) and 307 of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991"?

No. We do not have information from which to conclude that the Government of Moldova is prohibited from receiving assistance under these statutes.

RUSSIA

CRITERIA FOR U.S. ASSISTANCE UNDER SECTION 498A(a) OF THE FOREIGN ASSISTANCE ACT OF 1961

Russia has continued to make important progress towards building fundamental democratic institutions. In December 1993, the Russian people voted to approve a new constitution, replacing its heavily-amended Soviet-era predecessor. This new constitution provides strong guarantees of individual freedoms. The Russian Government took a step forward in 1994 by reestablishing a Constitutional Court, which is the only body with the authority to settle constitutional disputes; the Court resumed its activities in early 1995, as soon as all the vacancies on the bench were filled.

In December 1993, the Russian people elected a bicameral legislature in Russia's first free and fair, multi-party parliamentary elections in over 70 years. Russia's new parliament has exercised its ability to check and balance the executive branch. The Constitution mandates that parliamentary elections be held every two years. Elections to the Duma were held once again on December 17, 1995, marking the first time in Russia's history that two consecutive democratic, multi-party elections have taken place. International observers concluded that the elections, with a high voter turnout of 65 percent, were free and fair. We are working closely with the Russian Government on judicial programs to help reintroduce adversarial jury trials. While progress has been slow due primarily to lack of adequate resources, the concepts of judicial independence and respectability are taking root, furthering the establishment of a rule-of-law state.

In 1995, the Russian Government and Central Bank embarked on a consistent stabilization program consisting of a tight budget, gradual lowering of inflation through non-inflationary financing of the budget deficit, and further trade and energy-sector liberalization. The government's stabilization program formed the basis for a $6.5 billion Standby Agreement from the International Monetary Fund (IMF). In February 1996, the government negotiated with the IMF a follow-on extended fund facility program of $10.2 billion for 1996-98 to continue the process of structural reform and macro-economic stabilization.

Responding to poor revenue performance, the Russian Government compressed spending sharply in order to maintain a budget deficit of not more than 4.1 percent of GDP in 1995. Russia met its monthly targets under the IMF program and is on track to achieve an annual budget deficit well below program targets. The 1995 budget deficit was fully financed through sales of domestic government securities and borrowing from international financial institutions. Tight monetary policy and the use of non-inflationary financing for the federal deficit helped significantly in the fight against inflation. Monthly inflation dropped from a peak of 18 percent in January to 3.2 percent in December. Total inflation for 1995 was 131.4 percent, down from over 214 percent in 1994.

The Russian Government has had considerable success in stabilizing the ruble. In July, the government and Central Bank introduced a currency corridor, under which the ruble would be allowed to move between 4300 and 4900 rubles to the dollar. The corridor, originally scheduled to expire on October 1, 1995, was subsequently extended until the end of 1995, then again until through June 1996, at 4550 to 5150 rubles per dollar.

The year 1995 also saw a of consolidation of economic liberalization measures in Russia. Legislative achievements during the year included passage of laws covering securities, the Central Bank, commercial banks, and state regulation of foreign trade activity. The government became stricter in subjecting state-owned firms to bankruptcy proceedings and in penalizing firms for arrears on taxes and on payments to suppliers. In mid-1995, a law on natural monopolies was enacted, giving the government the means to regulate utility prices including energy, transportation, and oil and gas export pipelines. There were no major attempts to reimpose controls on other prices.

After substantial success in privatization in 1993 and 1994, progress for most of 1995 was mixed. In fall 1995, the government began to secure loans for the federal budget using as collateral retained share holdings in some of Russia's most well-known firms. This program has not generated the projected revenues and has drawn criticism for alleged insider dealing. Nevertheless, about two-thirds of the economy is now in private hands.

The government has lifted restrictions on private economic activity, which will help in the creation of new economic entities. With the abandonment of central planning, even many state-owned enterprises are beginning to operate on market principles. It is also clear, however, that some firms have yet to adapt wholly to market-based economic rules.

Russia has made progress toward integration into the world economy. In 1992, Russia was admitted to the IMF and the World Bank. It is also a member of the European Bank for Reconstruction and Development (EBRD). Russia has abandoned the monopoly on foreign trade granted to state-owned "foreign trade organizations" during the Soviet era, allowing both private companies and state-owned enterprises to engage in foreign trade operations. Russia has applied for accession to the World Trade Organization (WTO), and two working party sessions to study its trade regime and develop a protocol of accession were held in 1995.

Russia has concluded negotiations with the United States on a series of economic framework agreements. A U.S.-Russian Trade Agreement entered into force in June 1992. A bilateral investment treaty was signed in June 1992 and approved by Congress in August 1992; however, during the run-up to parliamentary elections in December 1995, the Russian Duma failed to vote on ratification. A bilateral tax treaty entered into force in December 1993. An Overseas Private Investment Corporation (OPIC) agreement is also operative. Russia is eligible for public-sector short- and medium-term financing through the U.S. Export-Import Bank. Russia also received GSP benefits prior to the lapse of the program in July 1995.

With the signing of a U.S.-Russian bilateral trade agreement and the establishment of the State Committee on Patents and Trademarks (RosPatent), Russia signaled its intent to provide strong protection of intellectual property rights. The Russians have enacted laws protecting patents, copyrights, trade and service marks, and semiconductor chip designs. A provision of the unfair competition law protects trade secrets. The laws are consistent with the norms established by the conventions administered by the World Intellectual Property Organization (WIPO), including the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works. Among others, the Russia has joined the following WIPO conventions: the Convention Establishing the World Intellectual Property Organization, the Paris Convention for the Protection of Industrial Property, the Madrid Agreement Concerning the International Registration of Marks, the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks, the Berne Convention for the Protection of Literary and Artistic Works, and the Geneva Convention for the Protection of Producers of Phonograms.

Improvements to the copyright law were enacted in 1995, authorizing the seizure and destruction of equipment used primarily to infringe copyrights. Protection for sound recordings was not provided on a retroactive basis, however, and criminal penalties are not sufficient to provide a deterrent to copyright infringement. Enforcement of copyrights has been minimal and piracy is widespread. As a result, Russia was placed on the Special 301 Watch List in 1995. Russian civil and criminal codes are still under revision. Legislation amending the Criminal Code would increase penalties for infringement of intellectual property rights (IPR). Other draft legislation would establish special courts for intellectual property cases and would provide training for judges, attorneys, and police and customs officers. The government has requested technical assistance in this area. The IPR working group will meet in March to determine the nature of such assistance.

Adherence to contracts in Russia continues to be an area of difficulty. Judicial backlogs, conflicting jurisdictions, lack of a recognized body of contract law and corruption are among factors producing disputes and hindering their resolution. Foreign firms often have sought to include provisions in their contracts stipulating adjudication or arbitration in third countries.

A second section of the Civil Code encompassing some basic areas of commercial law was passed in late December 1995. The law will govern all civil transactions involving sale and purchase, gifts, rent and the conclusion of contracts. It also defines basic rules for transport of goods, loans and credit, bank deposits and other economic and financial activities. A specific evaluation of the impact of this legislation on contracts will be possible after the first adjudications of contract disputes.

Section 498A(a)(3): "respect internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."

Although Russia has made substantial progress in human rights over the last four years, its human-rights observance suffered reversals in 1995. The conduct of Russian forces toward noncombatants in Chechnya has been of particularly grave concern. Russian forces acted with widespread and repeated disregard for human rights during the conflict in Chechnya. As a result of the indiscriminate and disproportionate bombing of Chechnya by Russian forces, thousands to tens of thousands of civilians were killed, and about 500,000 people were displaced. Other Russian human-rights violations in Chechnya included the inhumane treatment of noncombatants, arbitrary detention, beating, and in some cases torture and possibly summary execution at "filtration" (detention) centers; and obstructing the delivery of humanitarian aid. These actions appear to have violated a number of Russia's obligations under international humanitarian law principles, both customary and conventional, including the Geneva Conventions and the OSCE Code of Conduct.

Russia's Constitution, approved by referendum in December 1993, provides strong guarantees of individual freedoms. Although the Russian Parliament has been unable to pass implementing legislation in many areas, the guarantees in the Constitution of human rights, the rule of law, and the fundamental freedoms of speech, press, religion, assembly and movement have played a major role in defining the human-rights dialogue in Russia. In addition to passing legislation, developing an independent judiciary is necessary to ensure that these rights guaranteed by the Constitution are enjoyed in practice. One important step in this direction was the re-establishment of the Constitutional Court on March 16 after nearly eighteen months of forced inactivity.

Bold media coverage and public debate over the war in Chechnya also demonstrated that Russia has made significant progress in the areas of free speech and freedom of the media. On one hand, some of the journalists covering the war in Chechnya were harassed by Russian Government representatives and even beaten, and a few were shot at. As of mid-December 1995, thirteen had been killed while reporting on the conflict. On the other hand, public debate about the war in Chechnya was generally free and media coverage fairly open.

It was unfortunate that the lower house of the Russian Parliament (the State Duma) removed Russian human-rights advocate Sergey Kovalev from his position as parliamentary human-rights ombudsman in March 1995 on account of his outspoken criticism of Russian military actions in Chechnya. Kovalev retained his position as Chairman of the Presidential Human-Rights Commission, and continued to speak out vigorously about Russian human-rights violations related to the war in Chechnya. Rumors in August that Yeltsin would sign a draft presidential decree abolishing the Presidential Human-Rights Commission undermined the Commission's authority. However, in December, Kovalev announced that his office will report to President Yeltsin on Russia's observance of human rights in 1995, disclosing widespread abuses and systematic violations of the Russian Constitution. (Note: Kovalev resigned his position as chairman in January 1996, just prior to the release of the report, to protest what he perceived as President Yeltsin's abandonment of his commitment to further democratic reform.)

Restrictions on freedom of movement continued to be a human-rights problem in Russia. Refugees from Central Asia and the Caucasus continued to face discrimination in the major cities. Local authorities were again enforcing, often selectively against dark-complexioned individuals, a modified propiska ("residence permit") system, now called "residence registration." Kovalev told human-rights activists in December that "the right of free movement is being systematically ignored under various pretexts" because compulsory residence registration has been reintroduced in several big cities, even for short-term visitors.

Although certain religious groups continued to encounter societal prejudices and even antagonisms in Russi