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Prior to Russian roschedullng, USDA has focused on Food for 

 Progress — a very flexible program umbrella designed to provide 

 concessional food assistance to countries transitioning to democratic 

 market systems. This would mean« In the case of Russia, a likely 

 15-year concessional loan. Including 3 percent annual fnterest rates, 

 and a 3-year grace period on principal repayment. Funding can cone 

 out of the CCC authorities. However, legislation will have to be 

 enacted to raise the freight "cap" over the $30 million annual limit 

 for CCC unless monies can be found in other non-agricultural accounts 

 to cover the costs of U.S. flag vessels under cargo preference 

 requirements. 



if FFP is to be only a stop-gap or interim program until Russia can 

 operate as a commercial buyer again, how long will that Interim period 

 be? What kind of coamerclal program does Russia need? 



It is generally assumed by Administration officials that FFP will be 

 needed through the remainder of FY 1993. However, when a rescheduling 

 is completed and Russia is committed to an economic restructuring 

 based on G 7 programs and IMF guidelines, the GSU 103 program or a 

 direct intermediate credit program would best fit Russia's needs and 

 U.S. objectives over the next several years. 



When a business or a country is engaged In a restructuring. It Is 

 hardly sensible to load the borrower up with short-term debt 

 maturities. Yet, longer-term financing on commercial terms can be a 

 viable option. In the case of Russia — a country tremendously 

 resource-rich — this would appear most suitable. 



Russia already is earning more than $20 bill Ion annually In hard 

 currency for sales of its minerals and energy resources. Due to 

 political turmoil, economic Instability and the breakdown in central 

 authority, much of its hard currency earnings are not being recovered 

 back to the government and Central Bank to service debt. Estimates 

 are that $12 billion or more in Russian export earnings moved last 

 year Into accounts in western banks — both legally and illegally. 

 Bankers have defined Russia's current debt service problem more as one 

 of "cash flow" rather than "balance sheet". 



if this is the case, and an intermediate credit program Is the most 

 logical and financially relevant solution, do we have a program that 

 would work? 



Now. some argue that Russia needs a special credit program In order 

 that the regular GSU programs — 102 or 103 — not be tainted by the 

 financing risks to Russia, based on the credit worthiness language of 

 the 1990 law. This would mean new legislation. 



I don't believe that we need to Isolate Russia under new legislation, 

 i would recommend that. If cooraerciai credits are appropriate. Russia 

 and other eligible FSU states be maintained under the existing GSU 103 

 program structure — ^wlth modifications I am proposing. 



I have Included a background description of the program with my 

 written testimony. 



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