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The Soviets Are Looking To Swap Reforms For Aid. Again


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THE SOVIETS ARE LOOKING TO SWAP REFORMS FOR AID. AGAIN

It started at an international monetary conference in Washington in mid-April. A young Soviet economist tapped economic consultant David Smick on the shoulder. "Can I have 35 minutes of your time?" Posing the question was Grigori A. Yavlinsky, a chief architect of the Soviet Union's abandoned "500 Days" economic-reform plan. He wanted Smick's advice on how to win back Western aid for the tottering Soviet economy.

Since then, Yavlinsky's modest request has grown into an appeal for a crash Western-Soviet plan to plunge the Soviet Union into a market economy. The plea, conceived by Yavlinsky and Yevgeny Primakov, a close adviser to Soviet President Mikhail Gorbachev, is the first hint that Moscow may be willing to renew its efforts at radical market reform in return for Western aid and advice. If that happens, the way could be paved for dramatic economic changes, including mass privatization of state-owned farms and factories and fast moves to make the ruble convertible.

The Soviets were on just such a track last fall. But they got derailed when Gorbachev's government dropped its reform plans. Protests by homeless people setting up tent cities in Moscow prompted authorities to disperse the protestors, but the signs of economic distress have, if anything, worsened. Far graver, the government initiated bloody crackdowns on nationalist dissent. More recently, Gorbachev has been forced to moderate his behavior because of a desperate need for Western cash. His advisers have been stunned by recent forecasts that Soviet mil exports, which earn most of the nation's hard currency, this year will drop 50%. The growing clout of Boris N. Yeltsin, his chief political rival, has forced Gorbachev to seek a new peace with most of the restive Soviet republics. And Gorbachev's plea for up to $20 billion in aid from the Japanese got a frigid reception at a Tokyo summit last month.Now, Gorbachev is hitting up the West for money--big money. On May 22, he put forth a figure for Western aid: a huge $100 billion. "We have reached a very important stage of real reform, radical reform in the country," he said. Even so, Gorbachev's estimate is still lower than that of Harvard University economist Jeffrey Sachs, who advised Poland on its economy and is now working with Yavlinsky and Primakov on a new Soviet reform package. Sachs argues that an economic overhaul would require the West to cough up $150 billion over five years.

But the Bush Administration is limiting itself to a far more modest strategy to aid the Soviets. It's long on technical assistance and short on cold cash (table). The Administration's aid plan centers around $20 million in technical assistance for pilot reform projects in such fields as environmental control and agriculture. "It's a Band-Aid package," says Brookings Institution scholar Helmut Sonnenfeldt. More U. S. guarantees for Soviet grain purchases are likely, though the amount will be less than the $1.5 billion Gorbachev wants. Bush will also seek the repeal of laws that limit export and investment credits. That move got a boost on May 20 when the Soviet Parliament passed a law liberalizing emigration and travel.

CLEAR SIGNS. Also envisioned are joint programs with U. S. allies that could send NATO experts to jump-start stalled Soviet attempts to transform weapons plants into consumer-products factories. And Washington is coordinating defense-conversion efforts with Tokyo, which in July will send industrialists on a tour of Soviet military facilities.

Bush remains cool to proposals to invite Gorbachev to the Group of Seven summit of industrialized nations in London this July. Gorbachev sees the G-7 meeting as the way to win Soviet entree to institutions such as the International Monetary Fund. But first, Bush wants to coordinate a Soviet aid program and see clear signs of radical reform.

Gorby may yet sit down with the G-7. Winning Western aid is another matter. Even if the West had plenty of money to spare, officials almost everywhere, with the exception of Germany and Italy, are reluctant to offer a big financial commitment until they're convinced the Soviets are serious about market reforms. Neither Yavlinsky nor Gorbachev has produced a clear-cut reform plan. So as the Soviet Union's need for cash grows increasingly dire, the pressure to come up with a plan is sure to intensify.Amy Borrus in Washington, with Rose Brady in Moscow


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