I welcome the opportunity to discuss with the Committee developments in Russia and U.S. policy toward that country. You have chosen a good time for this hearing. Russia is much on our minds these days, and rightly so. Secretary Albright is at the United Nations this week, and she has heard repeatedly from our friends and allies around the world that Russia is much on their minds too. They are counting on us to manage U.S.-Russian relations with skill, foresight and clarity of purpose.

Not for the first time and not for the last, Russia is undergoing a time of troubles. Those troubles pose a complex set of challenges to American foreign and national security policy.

The trouble that has received the most attention of late is a spate of allegations and revelations about large-scale financial malfeasance, including charges of money-laundering through American banks. The challenge to us is threefold: first, to ensure that we are enforcing our own laws and protecting Americans from international organized crime; second, to ensure that we are doing everything we can to protect the integrity and effectiveness of our bilateral and international assistance programs; third, to intensify our work supportively and cooperatively with those Russians who realize - as Foreign Minister Ivanov stressed in New York when he met with Secretary Albright on Monday - that their country and their people are suffering from rampant crime and corruption, and who are therefore committed to fighting back against that scourge.

Russia has other troubles too. Continued fighting between insurgents and Russian troops in the North Caucasus is claiming hundreds of lives. Terrorist bombings in Moscow and two other cities have exceeded the death toll of Oklahoma City and the World Trade Center combined.

Like crime and corruption, terrorism is not just a Russian problem - it's a global one; and like crime and corruption, it won't prove susceptible to just a Russian solution. On both issues, the government of Russia has sought help from us and from others. One of the several issues we in the Executive Branch are discussing in our current consultations with the Congress - including this hearing today, Mr. Chairman, is the terms of our ability to provide that help and the strategic goals that our support for Russian reform is meant to serve. Let me, before going to your questions, suggest an overall context for that discussion:

First and foremost, our policy must advance the national security interest of the United States - both in the short-term and the long-term. The test we must apply - day in and day out, year in and year out, from one Administration to the next - is whether the American people are safer as a result of our policy. This Administration's Russia policy meets that test. When we came into office, there were roughly 10,000 intercontinental nuclear weapons in four states of the former Soviet Union; most were aimed at the United States. Today, there are about half as many - some 5,000; they're only in Russia; none are targeted at us; and we're discussing significant further reductions in overall numbers and further steps to diminish the nuclear threat in all its aspects. That's one of several issues of vital importance to the U.S. that Secretary Albright and Minister Ivanov grappled with earlier this week, along with peace in the Middle East, in the Balkans, in the Gulf - and in the Caucasus.

My point, Mr. Chairman, is simply this: corruption is an important issue that we are taking very seriously, but as we probe its cause and as we refine our response, we must keep in mind that it is part of a much larger process under way in a vast and complex country - a country whose nature as a state and whose role in the world will have a lot to do with what sort of 21^st century awaits us.

For a decade now, Russia has been undergoing an unprecedented transformation. In fact, it is undergoing three transformations in one: from a dictatorship to an open society; from a command economy to a market; and from a totalitarian empire and ideological rival toward becoming what many Russians call - and aspire to as - a "normal, modern state," integrated into the international community of which we are a part.

We've been helping keep that process going. Just as one example, the FREEDOM Support Act and other programs have helped Russia make dramatic improvements in the protection of human rights and religious freedoms.

All of us are realistic about the difficulties. Russia's transformation has encountered plenty of obstacles, none greater and more challenging than the crucial need to create the laws and institutions that are integral to fighting crime and corruption in an open society and market economy. Still, the transformation continues, and so does our commitment to stay engaged. And while there are no easy answers and no quick answers to what ails the Russian body politic today, there is one overarching principle that is fundamental to creating the forces for change that will drive the scourge of corruption out of Russian society, and that is democracy. When I was in Moscow two weeks ago, I was struck, yet again, by the preoccupation of virtually everyone I met with the upcoming parliamentary and presidential elections. For the first time in their history, Russian citizens are now voters; they can register their grievances and express their aspirations through the ballot box - or, for that matter, on a soap box. Their grievances prominently include disgust with corruption; their aspirations prominently include good governance.

If they and the leaders they choose can stay on the course of constitutional rule and electoral democracy, not only will Russia's own people be better off, but so will our own. That's the hard-headed essence of why we must continue to support them in coping with the difficulties they face, notably including those that are in the headlines today. That's also why Russia's current problems with crime and corruption are different from the corruption so entrenched in Soviet communism. Indeed, today's problems are a result of an incomplete transition to democracy and market reform. The solution to today's problem is to keep moving forward to realize the full promise of the transformation Russia has begun.

Since the Cold War ended, the United States has, as Secretary Albright pointed out in her speech last week - in her speech before the Carnegie Endowment for International Peace - pursued two basic goals in our relations with Russia. The first is to increase our security by reducing Cold War arsenals, stopping proliferation and encouraging stability and integration in Europe. The second is to support Russia's effort to transform its political, economic and social institutions. Both of these goals are very much works in progress. In the years since Russia helped bring the Soviet system to an end, our work with that nation has helped secure some breakthroughs that are clearly in the national interest. First, the Soviet Union dissolved in a largely peaceful fashion with its nuclear weapons in secure hands, an outcome that was not fore-ordained. Imagine the chaos the world would face if the Soviet Union, and its nuclear arsenal, had come apart in the same way Yugoslavia has. First the Bush Administration and then the Clinton Administration worked assiduously to ensure that such a nightmare did not come to pass. Second, Russia helped dismantle the apparatus of the Soviet system and has rejected the forcible reformation of the Soviet Union or the creation of a new totalitarian super-state. It has no practical option to turn back the clock.

Third, the people of Russia, and their leaders, have embraced democracy and have held a series of free and fair elections at the national and local levels, followed by a stable transition of offices and power, and more broadly, are assembling the building blocks of a civil society based on public participation.

Fourth, Russia has made important strides in replacing central planning with the infrastructure and institutions of a market economy.

Fifth, and equally important, Russia remains committed to working as constructively as possible with the U.S. and other nations of the international community.

International support is an essential part of helping Russia take difficult internal steps to restructure itself.

The President, the Vice President, Secretary Albright and the rest of us have always understood that in transforming itself, Russia has been tearing down dysfunctional Soviet structures, but it has only begun to put in place the mechanisms of a modern state.

This is an enormous and time-consuming task. Russia, after a millennium of autocracy and more than 70 years of communism, had little or no historical memory of civil society, of a market economy or the rule of law. The Soviet system itself was in many ways institutionalized criminality. I first heard the phrase "kleptocracy" used to describe the Soviet state. There are no "good old days" of real law and order or legitimate private enterprise to which Russia can return.

In short, crime and corruption are part of the grim legacy of the Soviet Communist experience. The rampancy of that problem has impeded Russia's own progress and impeded our ability to help Russia move forward. Moreover, as Russia dismantled communism and sought to create a new market economy, the weaknesses inherent in its new economic institutions created vulnerabilities to corruption. That is why, in his 1995 visit to Moscow, President Clinton called for "a market based on law, not lawlessness."

Yet, just as we cited these dangers, we were also engaged in finding solutions. U.S. assistance, as well as that of multilateral bodies such as the International Monetary Fund, have focused on building the broader structures that will allow the democratic citizens of Russia - who have the most to lose from corruption - to bring transparency and accountability to both government and business dealings.

We have consistently emphasized the need for transparency and accountability in our dealings with Russia, and in the dealings of the international financial institutions working with Russia. When problems have arisen, we have insisted on full and complete investigations and will continue to do so. In instances where there have been concerns about Russian practices, the Fund has tightened controls, performed audits and reduced lending levels.

The IMF has conditioned further tranches on effective safeguards that lending will not be misappropriated, a satisfactory accounting of relevant Central Bank activities, and genuine broad-based implementation of reforms that go beyond simple commitments. Both multilateral and bilateral support for Russia will be shaped by this kind of realism. A Russian interagency law enforcement team headed by Federal Security Service Deputy Director Viktor Ivanov was in Washington last week to meet with Justice, FBI, Treasury and State officials. By the way, while this visit was primarily to deal with the Bank of New York case, the Russian team also met with FBI Director Freeh and State Department counter-terrorism officials to discuss the recent bombings in Russia.

I have referred several times to the sheer size of Russia. In that connection, I would like to emphasize that three-quarters of FREEDOM Support Act assistance is spent on programs that do not involve the Russian government, as part of our effort to help build grassroots support for change. The U.S. government has worked to build relationships with Russian law enforcement and judicial entities and helping them increase their capabilities to operate in a professional and ethical manner. We have also promoted the rule of law at the grassroots level by working with non-governmental organizations, human rights advocates, and independent media watchdogs, and by promoting ethical business practices. For example, USAID's [U.S. Agency for International Development] Rule of Law Project, which was developed in response to a presidential initiative that arose out of the 1993 Vancouver Summit, works with core Russian legal institutions on judicial and prosecutorial training, legal education reform and strengthening legal non-governmental organizations. The project has assisted the legislative drafting and the training of hundreds of judges from the commercial courts.

In addition, several U.S. law enforcement agencies have representatives based in Moscow who are working directly with their Russian counterparts on issues of mutual concern. There are three FBI [Federal Bureau of Investigation] attaches in Moscow working on ongoing criminal investigations and prosecutions. The U.S. Customs Service, DEA [Drug Enforcement Administration], U.S. Secret Service, DOJ [Department of Justice] and INS [Immigration and Naturalization Service] also have representatives in Moscow.

Law enforcement agreements with Russia allow us to share information on cases and cooperate on investigation, prosecution and prevention of crime. The current Mutual Legal Assistance Agreement between the United States and Russia allows each side to request information, interviews and other background material to support investigations. In June 1999, the U.S. and Russia signed a Mutual Legal Assistance Treaty which, when ratified and brought into force, will replace the Agreement. The Treaty will expand and strengthen the scope of cooperation, facilitating investigation and prosecution of transnational criminals.

In addition, in the recognition of the transnational dangers posed by the increased crime in the NIS and Central Europe, the U.S. government established the Anti-Crime Training and Technical Assistance Program. An interagency effort administered by the State Department, this effort is designed to help law enforcement officials develop new techniques and systems to cope with crime while simultaneously strengthening the rule of law and respect for individual rights. A major goal of this program is to develop partnerships between American and New Independent States law enforcement agencies that will enable them to combat organized crime and prevent organized crime in the New Independent States from spreading in the U.S.

In conclusion, Mr. Chairman, Secretary Albright as asked me to use this occasion to reiterate the case that she has made to you and your colleagues for the resources we need in order to defend and advance American interests. Congress is currently proposing a cut of between 25 and 30 percent from the President's FREEDOM Support Act budget request for programs in Russia and elsewhere in the New Independent States. The Secretary believes such cuts would be dangerously short-sighted, because the purposes of this assistance - from building an independent media to promoting small businesses -- are fundamentally in our interests. She hopes that engagement with Russia should be something Republicans and Democrats can agree on. Engagement is a bipartisan foreign goal because it serves the long-term interests of the American people.