ANALYSIS: Where does U.S. assistance go?

by Eugene M. Iwanciw
Special to The Ukrainian Weekly

WASHINGTON - The Office of the Coordinator of U.S. Assistance to the NIS in the Department of State recently released its semi-annual report on "U.S. Government Assistance to and Cooperative Activities with the New Independent States of the Former Soviet Union." The report covers the period from October 1995 to March 1996. The 64-page report provides updates on assistance programs by country, updates of regional/NIS-wide programs and cumulative assistance information.

While the four and a half pages devoted to specific initiatives in Ukraine are helpful in understanding the scope of U.S. programs in Ukraine, of greater interest to this writer were the cumulative budget charts. These charts detailed the amount of assistance, since the inception of the program, by funds budgeted, obligated and expended. The accompanying chart contrasts the funds budgeted and expended for each of the 12 nations considered part of the NIS.

The funds budgeted for Ukraine have risen dramatically in the last two years, largely as a result of congressional earmarks (mandates) for increased assistance to Ukraine. In fiscal year 1996, for instance, Congress mandated "not less than $225 million" for Ukraine, making it the third largest recipient of U.S. assistance after Israel and Egypt.

There is, however, a major contrast between funds budgeted and expended, i.e. actual expenditure of the funds for programs. According to the report, only 51.33 percent of the budgeted funds were actually spent, contrasted to expenditure rates of 94 percent for Turkmenistan, 89.9 percent for Georgia and 64.01 percent for Russia. In fact, Ukraine has the third lowest rate of expenditure, beating out only Uzbekistan (43.72 percent) and Kazakhstan (43.70 percent). Ukraine's average was over 10 points below the over-all NIS average.

When the expenditures are calculated on a per capita basis, Ukraine fares no better. Per capita assistance to Ukraine has been $11.70, the third lowest. Only Uzbekistan ($1.92), a repressive regime, and Azerbaijan ($8.39), whose government is prohibited by U.S. law from receiving direct assistance, ranked lower. The NIS average per capita expenditure was 64.96 percent higher than that of Ukraine. Leading the list was Armenia ($140.62) followed by Georgia ($65.92). Ukraine's immediate neighbors also received substantially higher levels of assistance: Moldova ($35.29), Belarus ($27.06) and Russia ($17.99).

Calculated within these figures are the expenditures for the Cooperative Threat Reduction (CTR) programs, known as Nunn-Lugar, which provide assistance for demobilization of nuclear weapons. Only Russia, Ukraine, Belarus and Kazakhstan are eligible for these funds. While important to all these countries, CTR is also in the U.S. national interest and provides little to no direct assistance for economic reforms to its recipients.

If the CTR funding is discounted, the rate of expenditure to Ukraine (60.71 percent) increases but Ukraine drops to 11th place behind only Uzbekistan (43.72 percent). The rate of expenditure to Ukraine trails the NIS average by over 7 points.

Discounting NIS-wide programs, which are spending at a very low level, and comparing the rate of expenditure to Ukraine versus the expenditures directly to other countries, Ukraine fares far worse. Including CTR programs, Ukraine's rate of 51.33 percent compares to an NIS average of 65.82 percent, a difference of 14.5 points. Excluding CTR programs, Ukraine's rate of 60.71 percent compares to an NIS average of 73.31 percent, a difference of 12.6 points.

In the past, when administration witnesses were asked about the low per capita levels of assistance to Ukraine, they responded that the per capita basis of calculating assistance is not relevant, despite the use of the per capita basis for measuring all economic activity. This report, however, reveals that Ukraine, the second largest nation of the NIS, is only the third largest recipient of U.S. assistance if CTR programs are discounted. As of March 31, Ukraine, a nation of 51.87 million people, received $477.59 million of assistance while Armenia, a nation of 3.56 million, received $500.6 million, or $23.01 million more than Ukraine.

The bad news, however, does not end there. The report also provides information on "Cumulative U.S. Government Commercial Financing and Insurance." Here again, Ukraine fares poorly, this time in comparison to Russia.

Cumulative funds budgeted and expenditures for major NIS assistance programs as of March 31, 1996 1

Countries 2	Total assistance 3
	Budgeted 5	Expended 5	Percent Expended	Per Capita 6
NIS-Wide	807.44	162.24	20.10	.56
Russia	4112.25	2696.37	64.01	17.99
Armenia	612.47	500.60	81.73	140.62
Azerbaijan	80.29	65.34	81.38	8.39
Georgia	420.17	377.72	89.90	65.92
Kazakhstan	487.17	212.91	43.70	12.25
Kyrgyzstan	295.27	228.44	77.37	47.89
Tajikistan	144.81	122.62	84.68	19.91
Turkmenistan	131.23	123.35	94.00	30.23
Uzbekistan	80.99	44.32	43.72	1.92
Belarus	382.20	282.48	73.91	27.06
Moldova	204.36	158.45	77.53	35.29
Ukraine	1182.24	606.79	51.33	11.70
NIS Total	9040.88	5581.64	61.74	19.30

Countries 2	Assistance minus Nunn-Lugar 4
	Budgeted 5	Expended 5	Percent Expended	Per Capita 6
NIS-Wide	739.54	137.24	18.56	.47
Russia	3439.95	2426.67	70.54	16.19
Armenia	612.47	500.60	81.73	140.62
Azerbaijan	80.29	65.34	81.38	8.39
Georgia	420.17	377.72	89.90	65.92
Kazakhstan	314.67	194.81	61.91	11.21
Kyrgyzstan	295.27	228.44	77.37	47.89
Tajikistan	144.81	122.62	84.68	19.91
Turkmenistan	131.23	123.35	94.00	30.23
Uzbekistan	80.99	44.32	43.72	1.92
Belarus	263.70	246.38	93.43	23.60
Moldova	204.36	158.45	77.53	35.29
Ukraine	786.64	477.59	60.71	9.21
NIS Total	7514.08	5103.54	67.92	17.64

1	Information from "U.S. Government Assistance to and Cooperative Activities with the New Independence States of the Former Soviet Union, October 1995 - March 1996," cumulative from inception of U.S. assistance to the NIS.
2	Population figures from The World Factbook 1995 published by the Central Intelligence Agency.
3	Includes all U.S. assistance through numerous U.S. departments and agencies and both Freedom Support Act and non-Freedom Support Act funds.
4	Includes all U.S. assistance minus Department of Defense Cooperative Threat Reduction (CTR) programs (Nunn-Lugar).
5	In millions of U.S. dollars.
6	In U.S. dollars.
7	Expenditures for programs affecting more than one country.

The U.S. Export-Import Bank (Ex-Im) provides Russia with $2.24 billion of assistance and Ukraine, with 34.6 percent the population of Russia, with $402.3 million, or 17.96 percent of the assistance received by Russia. Ex-Im assistance is through short-term insurance and loans or guarantees. The comparison of the type of Ex-Im assistance provided to the two is enlightening. Ex-Im short- term insurance shipments were $230.9 million to Ukraine and $6.3 million to Russia while Ex-IM loans or guarantees were $171.4 million to Ukraine and $2.23 billion to Russia.

Programs administered by the Overseas Private Investment Corp. (OPIC) are also in sharp contrast among the NIS nations. OPIC provided $3.36 billion in finance projects, insurance projects and funds support to the nations of the NIS. Russia received nearly $1.95 billion, Kyrgyzstan $461.5 million, Uzbekistan $214.91 million and Ukraine $47.74 million.

Lastly, the report details U.S. Department of Agriculture (USDA) programs. The cumulative sales registered from FY 1991 to FY 1996 are $501.3 million for Russia and $90 million for Ukraine.

While the coordinator's report provides a great deal of information about U.S. assistance programs to the NIS, many policy questions remain. The cumulative assistance charts in the report, once again, give rise to the question of whether the United States has pursued a Russo-centric policy if not an anti-Ukrainian policy. Despite congressional mandates for increases in the level of assistance to Ukraine, the actual expenditure of these funds remains at a low level as does per capita assistance.

Copyright © The Ukrainian Weekly, June 9, 1996, No. 23, Vol. LXIV

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