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THE WHITE HOUSE

                  Office of the Press Secretary
                         (Naples, Italy)

                       BACKGROUND BRIEFING
                                BY
                  SENIOR ADMINISTRATION OFFICIAL

July 10, 1994

                          Palazzo Reale
                          Naples, Italy

4:30 P.M. (L)

SENIOR ADMINISTRATION OFFICIAL: Good afternoon. I'd just like to give you a very short briefing from our perspective on the President's bilateral meeting with President Yeltsin which, as you know, just concluded. With me is my colleague, and we'll both be glad to answer any questions that you've got.

Let me just say it was an excellent meeting, 90 minutes. It was the fourth meeting they have had. In terms of atmospherics, it was very animated. They were direct with each other. I think, for the most part, as they covered a very wide range of issues there was agreement between Russia and the United States on most of them. There were a few problems raised by both sides, problems raised by President Clinton in the relationship, problems raised by President Yeltsin, and they were dealt with in a very direct, frank manner.

Let me raise first the issue that I think received the most prominence in the meeting and the one that was covered at the press conference, and that's the Baltics. The President raised the Baltics. He told President Yeltsin about his visit to Riga a couple of days ago, about his very good meeting with the three Baltic presidents, about the fact that the United States believes that it ought to be possible for Russian troops to leave Estonia and Latvia by August 31st.

The President, as you know, carried some ideas from President Meri in order to break the impasse in the talks -- the troop withdrawal talks on Estonia. He characterized those ideas as constructive. The President believes that the differences between Russia and Estonia have been narrowed by the transmission of these proposals today. And he believes that the Estonian government has made a good faith effort to take a step towards the Russians to resolve the problems.

The President mentioned his very strong support of a withdrawal by August 31st. What he heard back from President Yeltsin was quite interesting. President Yeltsin mentioned that he had not wanted to see the Estonian president for the past year because of the problems with the officers. At the President's prodding, President Yeltsin agreed that he should meet President Meri and that they should attempt together, personally together, to take this situation into their hands and to try to come to a speedy conclusion. President Clinton, needless to say, will stay involved in this effort.

Secondly, they talked about Ukraine, and I think both of them agreed that Ukraine is a very important country for the United States and Russia. We've had success in the trilateral agreement. We're ahead of schedule on that agreement. They talked about the fact that the Ukrainian elections are being held today, and that once the government is formed both countries have an interest in convincing Ukraine to adhere to the NonProliferation Treaty. And I think both countries, the United States and Russia, also have an interest in economic reform in Ukraine.

You heard from the press conference there was considerable discussion about COCOM. President Yeltsin talked about trade restrictions from the past that remain in the U.S.- Russia relationship. President Clinton was very forthcoming and said that, of course, COCOM has ended and the problem now is to create a new organization to replace it; that Russia must be a member of that organization. And I think that their goal is that by their summit in September, they want to have that problem resolved.

President Clinton suggested that we need to make further progress in trade and investment. He specifically said that by September we want to have more action on some of the major oil and gas deals that are in the works. He named specifically in that regard the Timen-Pechora project that Texaco is trying to put together in the north.

I think, in general, the President, President Clinton is quite pleased with the progress that the Russian government has made in economic reform. He cited in his statement the progress that has been made, the very broad support the G-7 has given Russia at this summit for continued IMF, World Bank lending and bilateral lending.

They announced their summit on September 27th and 28th in Washington. It's going to be a state visit. That means the formal arrival ceremony and state dinner. There will be six or seven hours of meetings.

I would just conclude by saying this: President Clinton believes this relationship is on track. You remember back to January when the conventional wisdom was that reform in Russia was ending, that there were problems in the U.S.-Russia relationship. Since then, we have seen a continuation of reform, a very good economic program put in place by Yeltsin and Chernomyrdin. Russia has joined the Partnership for Peace. The trilateral agreement with Ukraine is being carried out. President Clinton believes there is reason to hope for a continuation of good relations. We think things are definitely going in the right direction.

Q Could you go into a little detail on Estonia? What is the alleged discrimination against Russian officers? And could you remind us again what we were hearing in Latvia about vouchers and cleaning up the radar? And how does that help the Russians? How is the U.S. trying to broker this agreement?

SENIOR ADMINISTRATION OFFICIAL: Okay, I'll just try to be brief because I've covered this a lot of times. But I'll get into the voucher question if you want.

Since Vancouver in the four meetings President Clinton has had with President Yeltsin, President Clinton has raised this problem of the Baltics. And, in general, we think that there is reason to hope that all Russian troops will be out of the Baltics quite soon. Our expectation, our hope is that will be by August 31st.

We have tried to help that progress -- President Clinton has -- by being personally involved not only with Yeltsin, but with the Latvian and Estonian leadership. We are providing 2,500 housing vouchers, worth $25,000 a piece, to Russian military officers who are going to leave Latvia and Estonia this summer. We are also going to pay $4 million to help dismantle the radar facility at Scrunda, which was the big issue in the Latvia-Russian negotiations. And we're going to pay $2 million to help clean up the nuclear training facility at Paldiski, which is also an issue in those negotiations.

So we're confident that, with the leadership that President Clinton has shown, the resources we put into play here, there's going to be a positive outcome.

Q What about this -- Yeltsin made it sound as if there had been some kind of major breakthrough concession on trade. The things you described sounded rather modest. Do you know what he was talking about?

SENIOR ADMINISTRATION OFFICIAL: I think both President Clinton and President Yeltsin want to get beyond where our two countries were during the Cold War where we had lots of trade restrictions on each other. As you know, last year President Clinton sponsored a bill to remove over 200 restrictions. They've got MFN; they've had it for some time. COCOM is gone.

The challenge -- I think what President Yeltsin was referring to is there is a challenge now to replace COCOM with an organization that would include Russia as a member. And the goal of that organization would be to have Russia and the Western countries operate together to try to stem the proliferation of sensitive technologies to the pariah states that we think do not deserve to have them.

Q Did you say that to Yeltsin for the first time today -- that the new COCOM, or whatever its successor is, would include Russia? Was that what Yeltsin --

SENIOR ADMINISTRATION OFFICIAL: No, it's not new. In fact, we had -- I think President Clinton had made this offer as far back as the Vancouver Summit that we would do this. What President Yeltsin and President Clinton agreed upon today was that by their September summit they would like to have an agreement between Russia and the West on the structure and the rules and the objectives of this new institution.

Q My understanding had been that Yeltsin was balking at agreeing not to provide trade and technology to countries like Iran. Now, he made a statement today that he would try to limit transactions with terrorist countries. Can you expand on that; do you feel you have a straight-out commitment?

SENIOR ADMINISTRATION OFFICIAL: It was a very significant statement made by President Yeltsin. It was significant that he said that Russia would try to limit its sales to countries like Iran. That has been the problem, frankly, in trying to put together this new successor to COCOM. Obviously, the new group, the new organization, has to have as its -- the prevention of sales of sensitive technologies to countries like Iran.

Russia still does have a trading relationship with some of these countries. So we need to work out an arrangement with Russia that is consistent with the purposes of the new organization.

Q On Estonia, you said very explicitly that the August 31st deadline is very, very important. And President Yeltsin said today just as explicitly that the Russian troops would not be gone by that deadline.

SENIOR ADMINISTRATION OFFICIAL: I think what you heard in the press conference with President Yeltsin was public negotiations. Russia and Estonia are in the middle of a negotiation. And both sides are expressing their viewpoints, sometimes privately, but often times to the press. I think that's what you heard, because privately, the sense that we have -- having been in Riga and had these talks with President Meri, having had the talks with President Yeltsin today -- is that these two countries are quite close if you look at the three major issues that are in these negotiations.

The ideas the President Clinton brought today and delivered to President Yeltsin narrow the differences in all three issues. And I think that as a result of this meeting, it is fair for me to say that President Yeltsin was encouraged by the fact that President Clinton had brought these ideas, encouraged by the fact that there have been a narrowing of differences so much so that he has now decided to take this issue into his own hands and to meet President Meri.

But let me just take you back to where we were in January. Russia and Latvia were having the same kind of public negotiations about their differences in Moscow when all of you were there at the press conference as Russia and Estonia did today. That problem was resolved when President Yeltsin and President Ulmanis got together. And so we're hopeful that when Meri and Yeltsin get together, there will be a resolution.

Q If they're that close, why did President Clinton have to prod, in your words, President Yeltsin to meet with Meri? And how much prodding did it take?

SENIOR ADMINISTRATION OFFICIAL: It was a very long conversation. It was an animated conversation on the Baltics. President Clinton spent some time describing what he had heard in Riga in private from the three leaders, what he had said publicly to try to move forward on the issue. And I think by the end of the conversation, President Yeltsin was convinced that the way to go forward was to take the issue out of the mid-level negotiations where they currently are, and move them to the headof -state level. That to us was the most significant thing that happened today, and it's very positive.

Q Did they share views, assessments, on the latest development in North Korea?

SENIOR ADMINISTRATION OFFICIAL: They didn't really get into details on North Korea. I take it there had been a sort of basic discussion of that in the other sessions. I think the one thing that we are clear about is that President Yeltsin has reaffirmed the fact that he supports keeping sanctions as a part of the possible scenario if it's necessary, and that he also continues to think that an international conference ought to be in the mix if we end up not getting a success from the kinds of talks that are going on with Mr. Gallucci and the North Koreans.

Q Did President Yeltsin flesh out for President Clinton his strenuous effort he described he would get -- he would make to have the Contact Group plan accepted by the Serbs?

SENIOR ADMINISTRATION OFFICIAL: He didn't flush it out in detail. Really, what he did was very firmly state to President Clinton that he had carefully looked at and followed the work of the Contact Group and of the foreign ministers, and he was intent that those proposals that have emerged from the Contact Group and the ministers should succeed, and that he was going to do everything personally -- and he stressed that -- to try to bring that about.

So it was a strong commitment to, I suppose, support the Contact Group and what the ministers have achieved.

Q I have two economic questions. First, was there any talk in today's meeting between the President and President Yeltsin about the timing of a new IMF stand-by loan? And second, given President Yeltsin's comments about wanting eventually to become a full member of the G-7 when their economic situation is better, is it reasonable to expect that, say, within a year or two Russia could become a member, full-fledged member of the G-7?

SENIOR ADMINISTRATION OFFICIAL: They did not have in the bilateral meeting a specific discussion of the next steps in the IMF relationship with Russia. But obviously, coming out of yesterday's G-7 session and today's session with Russia, it's quite clear that each of the G-7 countries believes that Russia deserves the support of the IMF and the World Bank.

Russia's economic performance -- as President Clinton said in his statement -- single-digit monthly rates of inflation, the deficit down, privatization expanding -- has been quite good. What we would expect is that in a best case Russia would earn a stand-by agreement by the end of the calendar year that would be worth about $4 billion, and we're hopeful.

I think you also know that the United States pushed at the summit yesterday for new proposals and special drawing rights and credit access that will expand Russia's ability to draw resources from the IMF by about $5 billion -- I think it's a little over $5 billion. So we're talking about the possibility of another $9 billion then in aid from the IMF to Russia.

On the second question, my sense is -- very strong sense from the private meeting they just had and other discussions is that the Russians are very pleased with the current arrangement. They are now pressing to become a member of the G-8. President Yeltsin said that specifically today. He said that they were very happy and thought they deserved a tight relationship on political issues, but he knew the economic relationship would take some time because Russia's at a different level of development.

Q Can you give us the details about in what way specifically the gap was narrowed on Estonia?

SENIOR ADMINISTRATION OFFICIAL: Okay, the question was in what way have the differences in the Baltics, on Estonia, been narrowed.

Let me just say again, I come away from this trip, the President comes away from this trip certainly, Secretary Christopher, with a strong belief that these two countries are making progress. We heard that in Riga from the Estonian government. The quality ideas transmitted today were quite specific on each of the three issues, and they were quite constructive. And what we got a very strong sense of from the meeting in private today was that President Yeltsin is now going to act personally to try to resolve these issues.

These issues have to deal with the rights of Russian military officers to apply for residency in Estonia. They have to do with their rights to an apartment. And the third issue is the future of this facility, Paldiski. They're the kind of issues that the end can only be resolved by political leaders. And the positive thing that came out of today was that the political leaders will resolve them. So we've got confidence about what's going to happen.

Q Can I follow on Russia -- the numbers you just said?

SENIOR ADMINISTRATION OFFICIAL: Could I just have a word on this? I followed this saga for four years. And I think what I would give you as a judgment is that what President Yeltsin essentially said today is, yes, there are two or three political decisions to be made. And I in a sense understand that I and President Meri are the ones who will have to make them; that we've probably done about what we can at the technical level or at the sort of negotiator level. And I think that is an encouraging sign and a very important sign.

Q Are you sure the troops will be gone by the 31st?

SENIOR ADMINISTRATION OFFICIAL: I think I would simply have to leave it that these two men are going to have to come to an agreement, and I don't think that you or I or any other person in this room is in a position to prejudge that. But I think there is a much greater opportunity to do it and find the decision today than there was six months ago or three months ago.

Q Can I go back to the stand-by loan? You mentioned a figure of $9 billion. We earlier today heard a figure that the once-upon-a-time $4 billion stand-by would now most likely be $7.5 billion. And Mr. Shokin said that he welcomed the $7.5 billion figure and hoped that he would have it by October in the Madrid IMF meeting. Is that a realistic time frame? And what's the difference between the $7.5 billion standby versus the $9 billion figure you gave?

SENIOR ADMINISTRATION OFFICIAL: The stand-by agreement with the IMF is going to be roughly $4 billion. The increased access that Russia will now have to IMF, World Bank resources as a result of the decisions taken by the G-7 yesterday will mean, we think, an additional little over $5 billion.

Now, what might be happening here is he's taking the $4 billion, and he's taking one of the -- or two of the three programs agreed-upon yesterday and adding the numbers. But I think it's probably a little more accurate to say, it potentially can reach $9 billion, in addition to what has already been promised by the G-7 and the international financial institutions.

Q Right. So you're almost talking, sir, that $43 billion package they had, you're talking $9 billion on top of that for their total if you --

SENIOR ADMINISTRATION OFFICIAL: Last year in Tokyo, the G-7 committed to a $43 billion package, $30 billion of which has been approved. And part of the remaining difference was a stand-by.

Q But the other facilities you're talking about, were you talking the STF and -- or something other than that for the improved --

SENIOR ADMINISTRATION OFFICIAL: The decisions from yesterday have to do with the STF, and have to do to credit access. And our estimate at this point is a little over $5 billion, as I said. So it may be, just to repeat, that they are adding together a couple of figures, as opposed to all the figures that would be included.

Q You've been saying for the past couple of weeks that the G-7 has a very good record in relationship to the Tokyo package. President Yeltsin said today, it hurts a little bit that -- that they haven't gotten half of what was promised in Tokyo. Is there some discord about his perception of what was promised and what he's received?

SENIOR ADMINISTRATION OFFICIAL: We have a very good record. The West has met its commitments. The IMF and World Bank are on track. They are delivering what they promised. The United States government is delivering what it has promised. And I think by anybody's calculation, you take a $43 billion program and in 12 months, you have approved $30 billion of it. That's very good.

Now, what's the remaining difference? Well, two of the elements in the $13 billion that remains are the $4 billion stand-by and the $6 billion currency stabilization fund. Russia has not met the requirements to draw on either. This is a conditioned program, and we still believe in the principle of conditionality.

Q Did he bring that up at all?

SENIOR ADMINISTRATION OFFICIAL: No, he did not bring it up in the private meeting.

Q he indicated was not brought up in the --

SENIOR ADMINISTRATION OFFICIAL: We did not hear any complaint in the private meeting about that.

Q? A question about COCOM. If I'm not mistaken, weren't there still unilateral export controls on high-tech items that go to Russia? Is that still true? And would that continue under a new COCOM regime?

SENIOR ADMINISTRATION OFFICIAL: I believe there are still some laws on the books that do have an impact on Russian exports. But the goal that President Clinton clearly set out in Vancouver that he annunciated again today is that as Russia was the object of COCOM in the past -- the Soviet Union was -- we now need to transform that process so that Russia is inside a Western organization where we're working with Russia to prevent the proliferation of sensitive technologies to states that can't be trusted with them. That's the principle.

Q to remove any unilateral controls on technology to Russia?

SENIOR ADMINISTRATION OFFICIAL: Look, when the COCOM regime formally ended last spring, in its place was left, in a sense, a situation in which the states continued individually regimes that they themselves defined how stringent or nonstringent they would be. And the idea was that those could remain in effect until some new agreed system was negotiated.

The answer to your question is, I think, yes, there are still some restrictions that apply, because we're still in this interim period. What the final regime will look like really is part of this negotiation. And, of course, the key point is the status of Russia within that regime or outside it would have a tremendous bearing on sort of whether or not there were particular regulations that applied to Russia uniquely.

What we're trying to do is have Russia inside the regime so that it's a co-founder.

Q Was there any discussion of the Partnership for Peace or did Yeltsin have anything to say about Clinton's remarks in Poland the other day on expanding NATO? And did he express any interest in having some of this money, this $100 million amount for exercises in Russia? No?

SENIOR ADMINISTRATION OFFICIAL: Wasn't raised in the private meeting at all.

Q By either side?

SENIOR ADMINISTRATION OFFICIAL: By either side.

Q (Inaudible.)

SENIOR ADMINISTRATION OFFICIAL: He actually did.

SENIOR ADMINISTRATION OFFICIAL: He liked that.

SENIOR ADMINISTRATION OFFICIAL: He used it in the private meeting, the same line that he used. The President mentioned afterwards he liked it. He thought it was an appropriate comment. Yeltsin's clearly distinguishing himself from the Soviet past. He's a different type of leader.

Q Is that what you take it to mean, that he's not wearing Soviet --

SENIOR ADMINISTRATION OFFICIAL: As I said, the President commented after he saw Yeltsin off that he was intrigued by that line. He thought it was quite appropriate.

Q Does Russia still require annual renewal of MFN, or do they have it forever?

SENIOR ADMINISTRATION OFFICIAL: Currently, right now, President Clinton the last two years has waived the JacksonVanik Amendment in June of each year, which gives Russia MFN.

Q Does Yeltsin want it waived permanently?Why should they require an annual waiver?

SENIOR ADMINISTRATION OFFICIAL: Yeltsin does, and I think that we believe now that Russia's performance on immigration, Jewish immigration has been very, very good. And we think that by September when they meet there may be grounds for action on that one.

THE PRESS: Thank you.

END4:55 P.M. (L)