Senate OKs $130 Million to Demolish Bug-Riddled U.S. Embassy in Moscow : Appropriations: But with the House calling for ‘top-hatting’ the structure, dispute still is not resolved.

The Senate, moving an embarrassing 6-year-old diplomatic fiasco a little closer to a conclusion, voted Wednesday to spend $130 million to demolish and begin reconstruction of the new U.S. Embassy in Moscow, which is riddled with bugging devices.

The money to tear down the building, left unfinished after the Soviet listening devices were discovered, was included in a $22-billion appropriations bill for the departments of State, Justice and Commerce.

The bill, which also bars the State Department from doing business with firms that comply with the Arab boycott of Israel, passed 86 to 13, with Sens. Alan Cranston (D-Calif.) and John Seymour (R-Calif.) both voting with the majority.

It must now go to a conference committee with the House, which also has appropriated $130 million for the Moscow Embassy. But the House version would let the Bush Administration choose between two controversial options: tearing down the embassy and rebuilding it, or razing only the top two floors and fitting it with four new ones--the “top hat” option.

A stalemate between supporters of the two options has kept Congress from deciding what to do about the embassy since 1985, when construction was halted. Meantime, a fire heavily damaged parts of the old embassy last March and has made the need for new quarters more urgent, according to the Bush Administration.

Wednesday’s vote did little to resolve the dispute. Indeed, with House appropriators insisting on the top-hat option as more cost-effective and the Senate equally adamant that nothing short of a new building will satisfy the embassy’s future security requirements, the two sides appeared to be set on a collision course when House and Senate conferees meet in September.

The Reagan and Bush administrations supported the tear-down option. But the State Department said earlier this year that it is willing to settle for “top-hatting” the embassy, if that would break the congressional stalemate. “We’ll go either way but what we really want is for Congress to finally make a decision so that we can begin construction in Moscow without further delay,” a State Department source said.

Supporters of the partial tear-down argue that it will meet the embassy’s need for secure space at a lower cost than reconstruction. Those who want the building torn down say that security at the Moscow facility is too important to risk compromise by what they view as a halfway measure.

The $130 million appropriated in both bills would cover the cost of either top-hatting the building or demolishing it. But it would not cover the full cost of putting up a new building. The Senate said that the Administration should first seek reimbursement for the construction costs from the Soviets before any more money is appropriated--a recommendation that is likely to further delay work on the embassy.

The spending bill appropriating the embassy funds allocates a total of $22.12 billion to the departments of State, Justice and Commerce, the federal judiciary and various related agencies for the fiscal year beginning Oct. 1.

One other controversial provision bars the State Department from issuing separate Israel-only passports to U.S. citizens traveling in the Middle East. Because several Arab countries deny entry to people whose passports indicate that they have visited Israel, the State Department for years has issued separate passports that diplomats, business people and journalists traveling in the Arab world use for visits to Israel.

But in drafting this year’s appropriations bill, senators said it is “absurd and insulting,” in view of the U.S. role in liberating Kuwait, for countries like Saudi Arabia to reject American passports just because their holders have been to Israel.

In a related provision, the bill also bars the State Department from doing any business with U.S. or foreign-owned companies that comply with the Arab economic boycott of Israel.

The Bush Administration opposes both provisions, arguing that they would “raise obstacles to the conduct of diplomacy” and inhibit necessary travel to the Middle East.