Soviet Union: Did You Say $250 Billion?

By Bruce W. Nelan

The Russians are threatening the West again. Their increasingly strident pleas for billions of dollars in aid carry a subtext: if the U.S. and its industrialized allies do not come up with the money, a disintegrating Soviet Union may bleed all over them. Officials in Moscow talk of instability, possible civil war and a potential tidal wave of refugees clamoring to enter Western Europe. Some of them suggest that chaos in the U.S.S.R. could lead to nuclear war among the Soviet republics.

In his speech accepting the Nobel Peace Prize in Oslo last week, Mikhail Gorbachev joined the ominous chorus. If his reform program succeeds, he said in a passage aimed squarely at George Bush, a new world order is possible. But "if perestroika fails, the prospect of entering a new, peaceful period in history will vanish, at least for the foreseeable future." The West should hasten to assist perestroika, Gorbachev insisted, and "it is futile and dangerous to set conditions."

The response from Washington and from the other members of the Group of Seven leading industrial democracies has been to set just the sort of conditions Gorbachev hopes to avoid. Bush is sincere when he says, "I want perestroika to succeed," and he intends to do what he can to make it happen. But the West does not believe that even massive aid -- the figures being bandied about total something like $250 billion over five years -- will help unless the Soviet Union embarks on more fundamental changes than it has been willing to consider so far.

The most recent Soviet reform proposal envisages what some American experts call the "grand bargain" and uses the language of free-market economics. While it calls for privatization and easing up on price controls in return for support from the West, it is still a set of half measures. In fact, halfway seems to be about where Gorbachev intends to stop. He said in Oslo that his plan is to "establish a mixed market economy" -- that is, something less than a free market. At the same time he admonished Western capitals not to hold back assistance until the Soviet Union's system comes to resemble theirs.

Bush values his working relationship with the Soviet President, at least partly because no one knows who or what might follow him. Bush is grateful to Gorbachev for his decision to liberate Eastern Europe from the Kremlin's grip, his diplomatic support in the gulf war, his political reforms at home. He wants Gorbachev to understand that their differences over aid do not mean Bush is backing away from him. But Bush's private doubts about sending hundreds of billions to the U.S.S.R. are as strong as those his aides express publicly.

Among the Group of Seven, says a senior White House adviser, there is general agreement on two points. First, it is in no one's interest to send Moscow huge amounts of aid that it cannot use properly; and second, "the U.S. and its allies need to do everything else they can to support Gorbachev and the reformers."

To do that, Bush has decided on several steps. He will grant the Soviets the most-favored-nation trading status that more than 100 other countries have been given, and he will ask the Senate to ratify a U.S.-Soviet trade agreement. He has already increased credits for grain purchases, and plans to expand the program of technical assistance.

Those are not hollow offers. A large part of the Soviet Union's consumer crisis arises from mismanagement rather than a lack of resources. The Soviet oil and gas industry, for example, has enormous reserves but has suffered a crippling fall in production. Similarly, farms could provide food for the entire country if the primitive storage and distribution system were improved. Western experts can show the Soviets how to tackle these problems.

Administration officials agree that Gorbachev faces crucial decisions and believe what the U.S. should push for is not increased efficiency alone but transformation of the entire system. Says one: "We have to provide political and psychological support to the Soviets and encourage them to continue in the direction of reform." Until such a fundamental program is actually being carried out, the official says, "all the nations of the West are going to be very cautious."

In a speech to NATO foreign ministers in Copenhagen last week, Secretary of State James Baker listed several of the conditions for assistance that Gorbachev had tried to head off. The U.S.S.R. is potentially a prosperous country, said Baker, but "to tap this potential, the Soviets must move to embrace a real market economy." And to provide stable political underpinning for it, Moscow should fully accept the rule of law, stop repressing the independence-minded Baltic states, cut its military spending and curtail or end its aid to "regimes that pursue internal repression," presumably including Cuba.

The Soviets, said Baker, will have to begin by helping themselves. "If they do, we will support them." But, referring to the starry-eyed talk of billions in aid, he added, "I don't honestly think we can catalyze Soviet reform through a big-bang approach."

Like Baker, Bush believes Soviet economic reform will be so agonizing that the West will have to dole out aid carefully, both to avoid waste and to give the Soviets an incentive for sticking to a hard road. "Bush knows Gorbachev is a communist and has no visceral or intellectual commitment to market reforms," says one of the Administration's top Soviet specialists. "But Gorbachev knows his country is going down the drain and that he has to do something extraordinary."

Bush personified his current approach to the Soviet Union last week when he appointed Robert Strauss, a veteran Democratic Party leader and Washington lawyer, to be his next ambassador in Moscow. The appointment was hailed almost unanimously in Washington as a brilliant move. Strauss, 72, knows all there is to know about how Washington politics and American business work, though admittedly next to nothing about the Soviet Union. If Gorbachev pursues real economic change and there are deals to be made with him, Strauss can help close them. Of course, if reform stalls again and bilateral relations sour, Strauss could be out of business.

The on-again, off-again course of reform in the U.S.S.R. is no more certain in the future. Gorbachev said as much in Oslo, advising the West that "it would be self-deluding" to expect the Soviet Union to copy its system. One of his closest advisers, Yevgeni Primakov, a member of the Soviet Union's Security Council, said in an interview that Moscow frowns on aid that is "tied to specific requirements."

Primakov promises only that the Soviet Union would "cover a certain part of the road toward a market economy" if the Group of Seven provides assistance, and says it would then seek more aid for further steps. As to political conditions of the sort Baker mentioned, the Soviet planner dismissed them: "I think there is no sense in making them." Washington knows that Moscow cannot appear to be selling its foreign policy for Western money, but wants to make sure the Soviets understand where they must make concessions.

In the next few weeks, Gorbachev will be able to make two direct appeals to Western leaders. Following an agreement that resolved apparent Soviet violations of the Conventional Forces in Europe treaty, Moscow and Washington have now mounted what they hope will be the final push on START, the treaty that would reduce their strategic nuclear arsenals 25% to 30%. The two sides have designated START as their "top priority task." The summit Bush and Gorbachev were to hold in Moscow in February is likely to take place as soon as the treaty is ready for signing.

After months of trying to wangle an invitation and finally demanding one, Gorbachev will be asked to address the summit of the Group of Seven after its formal sessions wind up on July 17. The U.S. and Britain, the host country this year, had been reluctant to invite Gorbachev because they did not want to raise his expectations for aid. As Gorbachev said in Oslo, he thinks he is "entitled to expect large-scale support" to ensure perestroika's success. But, said British Foreign Secretary Douglas Hurd, "I am sure Mr. Gorbachev is not expecting to find a check under the plate" at the London summit. Primakov and other Soviet officials say Gorbachev will not be asking for any specific amount of aid.

If his Oslo speech was a dress rehearsal for the two summits, Gorbachev might want to consider some fine tuning. Senior officials at the White House gave poor reviews to his approach -- "telling us we have to help save the system they've got or they're going to lose control of their nukes." That was ( something close to "rhetorical mugging," said one official, and another called it "attempted extortion." Gorbachev is in no position to threaten. He is more likely to get results from the West if he switches to specific pledges and actual performance.

With reporting by James Carney/Moscow, Dan Goodgame/Washington and J.F.O. McAllister with Baker