Turning aside firm opposition from congressional leaders, the Clinton administration said yesterday that it will proceed with plans to let Russia postpone payment on $485 million in debt owed to the U.S. government. In retaliation, the Senate Foreign Relations Committee said it will put all ambassadorial nominations on hold.
Secretary of State Madeleine Albright sent the news by letter Thursday night to the committee chairmen, who had argued that the rescheduling would help finance Russia's war in Chechnya and its aid to Yugoslav President Slobodan Milosevic. In addition, the full Senate has passed a measure critical of debt rescheduling.
"Refusal to reschedule would not stop Russia from taking actions that it deems to be in its interests," Albright said in a letter to House International Relations Committee Chairman Benjamin A. Gilman (R-N.Y.). She sent a similar letter to Senate Foreign Relations Committee Chairman Jesse Helms (R-N.C.).
Russia had been due to pay $155 million to the United States yesterday for old debts left from the World War II Lend Lease program; it will now be allowed to put off that payment and others due this year and next year.
Senate committee spokesman Mark Thiessen called it "unprecedented and unacceptable" for the administration to defy the chairman in this way. He added, "That's not done without consequences."
Albright has publicly courted Helms, flying to his home state to consult with him and holding hands with him in a photograph. However, serious tensions have continued in the relationship and now are flaring again.
Russia is still suffering the effects of a financial panic that broke out in 1998. "It's either alternate repayment schedules or default," State Department spokesman Richard Boucher said. "It's not money that they have." Rescheduling will help assure the debt will be paid back later, he said, rather than the money being lost forever.
But Helms and Gilman contend that it merely frees up money for dark purposes. "In no way should the United States underwrite the Kremlin's war against the peoples of Chechnya or its support of the Milosevic regime," Helms said in a June 14 letter to Albright, citing a $150 million Russian loan to the Yugoslav government.
He said that before he would back the rescheduling, Russia would at the least have to declare a cease-fire in Chechnya, begin peace negotiations with its elected leader and end assistance to Milosevic.
Gilman also is "very upset" by Albright's move, House committee spokesman Lester Munson said, and is "going to seek a legislative remedy for this problem." He also said Gilman would hold up elements of the Russia aid program.
Critics contend that by rescheduling the debt payments, the United States will merely encourage economic irresponsibility in Russia and will miss a chance to bring the government there to heel.
Boucher said the United States is pressing by other means for peace in Chechnya and an end to aid to Milosevic. He said Russia had turned down a recent request from Serbia for $32 million for diesel fuel.
He faulted the Senate committee's decision to hold up ambassadorial nominations, of which at least 13 are pending. "We send up qualified applicants" for confirmation, Boucher said. "We need to have these people in posts and we don't think their fate should be linked to unrelated issues."
The U.S. debt postponement is part of a larger rescheduling agreed to last year by the Paris Club, a forum in which creditor governments sit down with governments that are having trouble paying what they owe. It was the fifth rescheduling for the Russian Federation, which inherited the Soviet Union's foreign debt.
A U.S. refusal to reschedule its share of Russia's debt would create tensions within the Paris Club, U.S. officials have said. Moreover, under U.S. law, if Russia falls behind on Lend Lease payments without U.S. permission, Russian goods entering the United States would be hit by higher duties. U.S. officials are eager to avoid that disruption to the Russian economy, as well as possible retaliation by Russia.