Russian aid (II).

• Author: Kramer, David J.

Amid the post-election scramble to see who can cut the most from the federal budget, foreign aid has become a prime target. "We ought not to be funding anything abroad that we would feel uncomfortable funding [in the United States]," said Senator Mitch McConnell last December, echoing the sentiment of many on Capitol Hill. In particular, aid to Russia is being reconsidered in light of the brutal and costly handling of the Chechen crisis, growing strains in relations between the United States and Russia, and uncertainty about the future of Russian political and economic reform.

Such a reconsideration would merely accelerate trends already at work. First, the amount of aid is shrinking, as Charles Flickner noted in the last issue of this magazine. Assistance for the Newly Independent States (NIS) collectively has fallen from $2.5 billion in the 1994 budget to $850 million in 1995.(1) For next year, the figure is expected to be around $800 million.

Second, this shrinking pie is being carved up differently. Responding to criticisms that its policy has focused too much on Russia at the expense of the other states, most notably Ukraine, the Clinton administration has scaled back the amount of aid going to Moscow for this year to $380 million, roughly 45 percent of the total for the NIS. Last year, fully 65 percent of the NIS assistance budget went to Russia. In the past,it would have been pointless to have given substantial aid to Ukraine while the Kravchuk government was failing to implement any reform at all. Since President Leonid Kuchma assumed office last summer, the Ukrainian government has shown a serious determination to launch a reform program, and the United States has responded by increasing aid to Kiev: from less than 10 percent last year, it is projected to receive nearly a quarter of the 1995 NIS assistance package.

Third, in addition to diversifying scarcer aid dollars, the administration is increasing its emphasis on the promotion of trade and investment. Roughly 3 percent of last year's assistance went to the U.S. Trade and Development Agency (TDA) and the Overseas Private Investment Corporation (OPIC). This year, these two agencies account for 9 percent of the total NIS package. In addition, the Export-Import Bank, which helps finance and promote the export of American goods and services around the world, was allocated $300 million$in 1994 from the NIS aid budget to be spent over two years. This comes on top of the several billion dollars that the bank and OHC allocate for activities in Russia from their own budgets. As well, Enterprise Funds, non-profit corporations designed to attract private sector investment in the NIS, receive $90 million from the NIS assistance budget.(2)

Helping Others, Helping Ourselves?

Promotion of trade and investment in Russia, defenders of the policy argue, goes hand-in-hand with technical assistance. Russia's strategic importance, combined with its poor business climate, compel the U.S. government to create incentives for American corporations to explore opportunities in Russia. Moreover, the argument goes, such a policy serves U.S. economic interests by creating more export opportunities and jobs for American workers.

Not surprisingly, promotion of trade and investment is very popular in the House and Senate as a means of funneling assistance to...