A Loan in Siberia

For nearly a decade, Japan and the Soviet Union have been mired in desultory negotiations over joint development of the vast natural resources of Siberia. The Japanese need the oil, natural gas, coal and timber that the Russians offer and have plenty of hard currency to invest in extracting it. The Soviets need the cash, and Russian leaders from the time of the czars have been eager to develop that frozen wilderness. But the two parties have differed on just about every detail, from interest rates to what should be developed first.

Last week the odd couple finally agreed to agree--maybe. Japan will lend $1.05 billion to the Soviet Union so that work can begin on three major projects: mining coal in southern Yakutia, prospecting for natural gas in northern Yakutia, and harvesting timber in the Soviet Far East. The Russians will repay the loan in hard currency at 6.375% interest over the next 16 years. Four-fifths of the loan must be used by the Soviets to purchase Japanese mining and lumbering equipment. Once the projects get rolling, the Soviet Union will supply Japan with coal at prevailing world market prices and timber and natural gas.

As that description might indicate, Japan's future in Siberia is still so uncertain that many diplomats wonder if last week's deal will come off at all. As recently as this month an agreement looked more unlikely than ever. The Japanese have stipulated that two interested U.S. firms, Occidental Petroleum and El Paso Natural Gas, be brought into the gas exploration venture because of their expertise in that activity, and that the U.S. put up an equal amount of money for the venture. The Soviets are amenable, but Congress lately has been opposed to granting the Export-Import Bank credits necessary for U.S. participation. Some legislators object to Soviet treatment of dissident intellectuals and Jews; others feel that the money would be better spent inside the U.S. In addition, the idea of lending billions of dollars to the Soviets at low interest when American businessmen must pay 10 1/2% or more on bank loans is politically unattractive, to put it mildly.

Still another potential hitch is the fact that the Soviets last month abandoned their plan for an east-Siberian oil and gas pipeline and instead plan a railroad that would run roughly parallel to the Chinese border some 250 to 300 miles inside Soviet territory. Among other things, it would carry Siberian oil to ports for export to Japan. The Chinese are probably worried by the idea of a railroad, which also could be used to carry troops and arms. Japanese relations with China have been improving recently, and Premier Kakuei Tanaka is unlikely to do anything to jeopardize that budding friendship.

Mired in Mud. Japanese and Soviet representatives have until September to work out final details on the three ventures. Late last week the coal project was settled, and early agreement on the timber venture appeared likely. But everything hinges on getting the gas deal, with U.S. participation, sewed up too. If that can be done, the Soviets could start receiving Japanese mining and foresting machinery by September. Siberian timber could start moving to Japan as early as this fall, coal by 1979 and natural gas some time in the 1980s at the earliest. If the September deadline is not met, the loan will not be made, and Japanese-Soviet economic cooperation will still be mired in Siberian mud.

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