Department of State - 09.18.2002

"U.S.-Russia Relations: Seizing New Opportunities"  Alexander Vershbow  U.S. Ambassador to the Russian Federation

Office of International Information Programs
U.S. Department of State

Address to the Seventh Annual Meeting of the U.S. West Coast - Russian Far East Ad Hoc Working Group

Governor Knowles, distinguished guests, and colleagues. It is a pleasure to be addressing what I consider one of the strongest and most enduring examples of Russian-American cooperation - the U.S. West Coast-Russian Far East Ad Hoc Working Group.

Before I go on, I want to recognize some of my American colleagues who are here today. First, I would like to introduce Peter Hale, Executive Director for Market Access and Compliance at the Department of Commerce and co-chair of this Working Group. I am very pleased to welcome Dr. Kent Hill, the USAID Assistant Administrator for Europe and Eurasia. It is also my great pleasure to present Pamela Spratlen, our Consul General designate in Vladivostok, and our new commercial attaché in the Far East, Bill Lawton. Some of the members from my team in Moscow who made the trip to Anchorage are Jim Warlick, the Consul General, and Jeff Van Dreal, our Assistance Coordinator in the Economic Section. Bill Lawton's colleague Stefan Wasylko, our senior Foreign Commercial Service representative in the Russian Federation, is also here today, as is Jack Brougher, who heads the Russia office at the Commerce Department in Washington.

After arriving here Monday after a long flight from Russia via Seattle, I must admit, it is a somewhat strange experience to be back in the United States and yet, at the same time, be closer - actually much closer - to Kamchatka, or even Yakutsk, than when I am sitting at my desk in Moscow. I understand too that the inhabitants of Little Diomede Island aren't able to see Alaska or the rest of the United States at all, but can, on a clear day, make out Russian terrain. That strange geographical phenomenon reflects some interesting things about the ties between the Russian Far East and the U.S. West Coast. Geography and history bring America and Russia close together physically. Our two great nations, covering vast expanses of land, meet at this point on earth as a result of the legacy of years of expansion and colonization by our ancestors. As a result, the inhabitants of these two regions of our countries, the Russian Far East and the West Coast, particularly Alaska, both far from the political center, have become kindred spirits of a sort. And gazing over the Bering Sea, which touches both our shores, and which is really the boundary between our two nations, they have come to understand - perhaps better than the rest of Russia and the United States - that we share many common interests and values.

As you know, last Wednesday was the anniversary of a national tragedy which occurred in New York City, Washington, D.C. and Pennsylvania that killed thousands of people from over 30 countries. Those terrorist attacks were an assault on some of those very same interests and values that our two peoples have in common - on our belief in an open society and a democratic form of government, on our commitment to free markets as the best guarantee of global prosperity, and on our joint efforts to build a community of nations based on peace, mutual understanding and partnership among peoples. As many of you no doubt remember, just hours before the attack, this Ad Hoc Working Group had concluded the first day of last year's meeting in Ulan Ude, in the Russian Republic of Buryatia. In the face of the attacks, the conference continued, underscoring our common commitment not to let terrorism deter us from building trust, cooperation and friendship between our two nations and peoples.

The relationship between the United States and Russia as a whole has indeed developed in very positive ways for more than a year, beginning with the warm meetings between our presidents in Ljubljana and Genoa last summer, and moving dramatically forward after September 11. President Putin, you might recall, was the first world leader to speak to President Bush after the terrorist attacks to offer his condolences and support, and the American people will not forget this kind gesture. Russia and the U.S. since then have been united in the war on terrorism. The Russians granted us use of their airspace to fly troops and equipment into Central Asia and shared intelligence that greatly helped us prevail in Afghanistan. After the fall of the Taliban regime, Russia built hospitals and provided humanitarian assistance to the people of Afghanistan.

Our two nations have also moved forward over the past year in other areas of cooperation as well, for example, agreeing on a radical reduction in strategic nuclear weapons, new cooperation to halt the spread of weapons of mass destruction, and establishing an extraordinary new partnership between NATO and Russia. Our Presidents, at their very warm and productive summit meetings in November in Washington and Crawford, Texas, and in Moscow and St. Petersburg last May, made clear that the Cold War is truly behind us and that Russia and the United States are now on the way to becoming allies in meeting the challenges and the opportunities of the 21st century.

In fact, I would say that Presidents Bush and Putin over the past year have fundamentally redefined the relationship between our two countries. They have taken the lead in overcoming past suspicions and prejudices - and they have projected a common vision in which our mutual security is strengthened by strategic partnership and by Russia's full political and economic integration into the Western family of democratic nations. It is a vision that foresees expanding cooperation between our two countries, support for the further development of Russia's market economy, and the strengthening of democracy, civil society, and human rights.

Alaska truly seems an ideal place to celebrate this strengthening of the U.S.-Russia relationship and to explore opportunities to deepen that relationship even further. The people of Alaska and the RFE [Russian Far East] were at the forefront of the warming of relations between the Soviet Union and the United States at the end of the 1980s, the first to try to "melt" the "Ice Curtain," as the Iron Curtain was called here. As political barriers began to come down, two peoples with a similar heritage and history, facing common challenges and problems, holding the same hopes and dreams for themselves and their families and communities, began to seek their own ways to open up to each other. 1988 was a watershed year as these two regions were drawing closer together, with the formal opening of the border for the first time in four decades with the Alaska Airlines "Friendship Flight" on June 13 of that year. Yupik Eskimos from Alaska and Chukotka were reunited with friends and relatives they had not seen in forty years. And the list of joint activities - trade missions, university exchanges, conferences, sporting events - that took place, years before the dissolution of the Soviet Union, is long and impressive. That "Friendship Flight" back in 1988 was just the start of the people-to-people contact that has by now become almost commonplace.

State governments, such as Alaska's, as well as local governments, private businesses and a wide variety of non-governmental organizations, have all contributed resources to further developing ties between our countries. The U.S. Government additionally has supported the efforts of many of these organizations - Russian and American - working together to address critical challenges through citizen exchanges, Sister City relationships, and community, judicial and university partnerships. And many of these efforts have taken place under the sponsorship of the U.S. West Coast - Russian Far East Ad Hoc Working Group.

Let me focus here on those developing economic ties that are so critical to deepening this partnership. You know, the Russian- Alaskan relationship actually began with trade; Tsar Pavel I commissioned the Russian American Company in 1799 as an exclusive trading agent. Economics are once again becoming a driving force in the growing ties between the United States and Russia, especially in the Far East. We are seeing significant developments, such as the $22 [billion] to $31 billion in investments being made by U.S. and Western oil companies on Sakhalin in oil and gas development. Companies involved in arctic and sub-arctic oil production and mining in Alaska are interested in working in similar areas in the RFE. U.S. firms are expected to invest about $13 billion over the next four years in infrastructure related to shipping oil and gas to world markets. These investments have the potential to transform the economy of the region. Our governments recognize that strengthening transportation links is key to the economic relationship as well. Our recent civil aviation agreement makes possible an increase in the air routes between the U.S. West Coast and the RFE, and we hope the airline industry will now take advantage of the new opportunities. 

As the bilateral economic activity intensifies, especially in oil and gas development, we anticipate that there will be a dramatic increase in the number of American citizens working on Russia's eastern frontier. This has led us to consider a different mechanism to better serve the needs of our citizens. The American Business Center on Sakhalin is already doing an excellent job in promoting U.S. business. However, the time has come to establish a more permanent, official U.S. Government presence. As announced at the Presidential Summit in November, we are planning to establish a presence on Sakhalin Island. That means placing a U.S. Government employee there who will be responsible for handling consular services for American citizens as well. We are still in the process of selecting this individual as well as finalizing details of the office space. We are also examining how to continue to provide the needed support to U.S. business in the future.

Another promising initiative on the economic front that potentially will have an impact on the RFE is enhanced energy cooperation. In just a few weeks, our Secretaries of Energy and Commerce will be hosting an Energy Summit in Houston, which will bring together not only their Russian counterparts, Ministers Yusufov and Gref, but also the leaders of Russian and American oil and gas businesses. We hope that this event will help forge contacts between our company representatives that will result in future long-term cooperation. My colleagues in the Embassy in Moscow, as well as back in Washington, are working hard to ensure that the summit meets these goals. 

I see tremendous opportunities for continued cooperation as the Russian economy grows - in the rebuilding of the social infrastructure, and in investment in electricity and rail as these sectors are further privatized. The State of Alaska and Sakhalin Island are also actively collaborating to stimulate investment and trade through the Alaska-Sakhalin Working Group. On our part, we are encouraging the U.S. Government agencies that provide assistance to U.S. investors and exporters - the Export-Import Bank, the Overseas Private Investment Corporation, and the U.S. Trade and Development Agency - to more actively seek out these opportunities, as well as to make their services more widely known to potential clients. The U.S. Embassy is also working closely with the Commerce Department on future trade missions in order to familiarize a greater range of U.S. companies with the opportunities available in the RFE and elsewhere in Russia.

I regret to say that overall trade and investment levels are still far, far below their potential. But at the May Summit, our presidents pledged to stimulate bilateral economic activity. While governments can try to encourage companies to increase trade and investment and to improve the business climate, ultimately only the private sector itself can make that happen. Therefore, a key part of the new economic relationship is a reliance on the private sector. In Genoa, Presidents Putin and Bush announced the initiation of the Russian-American Business Dialogue, or RABD, which brings together two Russian and two American groups of business people. Over the past year, the RABD has been working to develop a list of proposed ways to spur trade and investment, which they presented to the presidents at the Moscow summit. This document touched on a wide array of issues including e-commerce and visas, Jackson-Vanik and WTO accession, investment policies, healthcare reform, taxation, and litigation.

The two governments - working with the RABD representatives - are now focused on implementing those recommendations. I would ask each of you here today to take a look at the report presented to President Bush and President Putin, available in both English and Russian on the U.S.-Russia Business Council's website, for example (www.usrbc.org). Talk to your colleagues in the business world and your elected representatives about these proposals. And ask yourselves what you can do to help make these ideas a reality. 

There are, of course, many areas where we can improve the relationship. Despite much closer contacts, there are still misunderstandings and outright disagreements. The conflict earlier this year over U.S. poultry exports to Russia is an example on the economic front that illustrates the need for implementation of established rules for trade. For this very reason, to remove existing barriers to trade and to ensure that we are all playing by the same rules, we strongly support Russian accession to the WTO. Thanks to President Putin's strong economic team and its cooperation with the State Duma, Russia has made remarkable progress on its economic reform program. This includes the enactment of liberal land and labor codes, legislation establishing a dramatic reform of the pension system, far-reaching tax reform, and laws to reduce administrative burden on businesses. However, full implementation of these reforms remains a challenge, and additional legislation is still needed in such areas as communal housing reform, restructuring of the natural monopolies, protection of intellectual property rights, and, perhaps most importantly, civil service reform. Only then will Russia achieve the stable and predictable economic and legal framework necessary for sustained economic growth and a real expansion in trade and investment. Increased foreign investment depends especially on better protection of investors' rights, including the enforcement of decisions by Russia's own courts. 

Local governments, for their part, need to ensure that the laws on reducing administrative burdens are actually implemented. As a recent World Bank funded study has shown, local governments are often responsible for impeding the development of small business through unnecessary inspections, and excessive licensing and registration requirements - often in violation of federal law. Regional business associations are working with their memberships and local governments to improve the business environment. U.S. West Coast partners can do their part by forming partnerships with these associations and helping strengthen their lobbying and organizational capabilities. Success in all these areas, I am convinced, will help create that healthy business environment for Russian companies and U.S. investors.

Getting beyond the purely economic and political aspect of our growing ties, it is equally important that we build and expand upon our people-to-people contacts. You have already made an excellent beginning here. The Sister Cities program is a very effective mechanism for increased contacts across a broad spectrum - commercial, local government, non-governmental organizations. Where sister city relationships already exist, we should seek to expand and as necessary reinvigorate them. I know that Juneau and Vladivostok, Khabarovsk and Portland, Oregon, and Nakhodka and Bellingham, Washington, are all active partnerships. They can help show the way forward. 

The Seattle-based Foundation for Russian-American Economic Cooperation, FRAEC, which plays an important role as the U.S. Executive Secretariat for this Working Group, is also important as a builder of community ties. Right now they are carrying out a USAID-funded program to build partnerships between American communities and communities in the Russian Far East. Projects in health care, eco-tourism, and small business development are among those now being supported. These are all community-based efforts, involving citizens in dozens of towns from Kamchatka to Buryatia. What's more, there are local matching funds and in-kind support provided by the Russian and American communities - a strong sign of local commitment.

The Rotary Club of Homer-Kacemak Bay here in Alaska is organizing health fairs in communities in the Russian Far East to spread the word on preventative medicine and early detection of treatable diseases. The American-Russian Center here at the University of Alaska is currently developing a "traditional nature management" project for the indigenous communities of Kamchatka which, we hope, will promote the socio-economic revival and development of the peoples of that region. If you haven't already done so, I encourage all of you to get involved in organizations like FRAEC, this working group, and the many community partnerships and organizations that already exist. We have so many opportunities to build on the great efforts already made by the public and private sectors to strengthen the bonds that have developed across the Bering Sea. The other important goal in the area of people-to-people exchanges is obviously strengthening our educational, cultural and institutional exchanges. U.S. West Coast universities and scientific institutes already have extensive contacts and joint programs with their RFE counterparts, of course. One example is the longstanding relationship between Washington State and Far Eastern State University in Vladivostok, which just this last spring hosted an international conference focusing on U.S.-Russian relations, American Studies, and American Literature.

The U.S. Government has attempted to promote education exchange as well, and many of you are familiar with our various exchange programs for high schoolers, undergraduate and graduate students, professors and professionals. We are pleased that Russian civic and business leaders, such as Governor Abramovich and Yukos Oil's Chairman Mikhail Khodorkovskiy, are taking the initiative to sponsor student exchange programs of their own. 

You might also know that for many years now, our Peace Corps volunteers have been teaching English, American Studies, and in some cases business and economics, to students in a variety of institutions in the Russian Far East, sometimes in quite remote places. Beyond the subject matter that is taught by the volunteers in the classroom, the Peace Corps brings young Russians and Americans face to face, often for the first time in their lives. Both come away with a deeper appreciation of the other's culture and way of thinking, and a greater sense of those shared ideas and values I talked about earlier. 

As many of you may know, most of last year's Peace Corps volunteers have unfortunately been unable to renew their visas and therefore were unable to return to their educational institutions for a second year. We hope these problems can be resolved by next year and that the Peace Corps program, perhaps with some modifications, will be able to send a full complement of volunteers to Russia in the summer of 2003 so that this wonderful people-to-people exchange can continue. As the Russian economy improves, perhaps one day Russian volunteers from the Far East will spend time in the United States on a program similar to the Peace Corps working with American students of Russian. 

The U.S. Government, our Embassy in Moscow, and the Consulate in Vladivostok fully support you as you work to further consolidate these important ties between the RFE and the West Coast and to seize new opportunities for cooperation and commerce. We truly have much that we can learn from each other. I would like to applaud all who have organized and participated in these annual meetings over the past eight years for your leadership and commitment and for providing us with a shining example of the enduring and strengthening U.S.-Russia partnership. Thank you for your participation and I wish you success in the annual meeting, as well as in your further work upon your return home.