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Administration Threatens Financial Penalties Against Russian Firms

June 23, 1993

WASHINGTON (AP) _ A need for capital and a decline in weapons markets are prompting Russia to make questionable technology deals with Third World countries, a former Russian prime minister said today.

Arms sales have dropped sharply to a fraction of the $50 billion earned yearly during the Cold War. Traditional markets in Iraq and Libya are drying up as Russia shifts its foreign policy, former Prime Minister Yegor Gaidar told reporters at a breakfast at the Heritage Foundation.

On top of that, he said, the West is discouraging Russia from providing missile technology to India and Iran, causing ″a very serious political debate″ within the Russian government, Gaidar said.

He said Russia would be ″most happy″ to push arms sales only to stable, democratic countries even though every country is doing what it can to find weapons markets. ″It’s always possible to find a reasonable way out,″ said Gaidar, now head of a Russian free-market research group.

Meanwhile, the Clinton administration is threatening to impose economic penalties on Russian companies that sell missile technology to India and other Third World countries, U.S. officials said Tuesday.

But the officials said high-level talks may lead to a more restrictive policy in Moscow, the officials said.

Russian Deputy Prime Minister Alexander Shokhin has been meeting with administration officials in Washington for the past two days. The sessions will be followed in the next week or so with talks between Vice President Al Gore and Russian Prime Minister Viktor Chernomyrdin.

White House Press Secretary Dee Dee Myers, asked about the reported violations, said, ″This is something that we’re reviewing. As you know, in the past, we have imposed sanctions on commercial companies who have violated this. And we’re concerned about reports that there might be further violations.″

In a recent incident that alarmed U.S. officials, a Russian shipment of 80 tons of ammonium perchlorate, a chemical ingredient of solid rocket fuel, was intercepted in Ukraine before it could reach its intended destination of Libya.

Other Russian sales to India, China and Iran of such high-tech weaponry as booster rockets, surface-to-air missiles, jet fighters and submarines have distressed both the Bush and Clinton administrations. At the same time, Russia’s need for capital to make a conversion from communism to a market- oriented economic system also draws sympathy in Washington.

President Clinton will meet in Tokyo on July 7-9 with leaders of Japan, Germany, Britain, France, Canada and Italy on ways to assist Russian President Boris N. Yeltsin and his economic reform program.

Clinton also is asking Congress to provide $2.5 billion in aid to help bolster Yeltsin’s position.

Two U.S. officials, speaking on condition of anonymity, said late Tuesday that a decision had been made at the highest levels to impose sanctions against Russian companies, but the penalties were set aside pending the outcome of talks with Shokhin and Chernomyrdin.

″We’re generally concerned, though, with what they’ve been doing,″ one of the officials said.

The New York Times said in Wednesday editions that Clinton raised the threat of sanctions in a letter to Yeltsin but also offered an inducement to for Russian companies to share in the multibillion-dollar U.S. space station project and launch U.S. satellites for profit.

In May 1992, the United States imposed a two-year ban on sales of certain rocket technology to Russia and India on grounds that it could be converted for military uses even though the Indians insisted it was intended to launch a communications satellite.

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