Businessweek Archives

Business Won't Ante Up Until Gorby Names The Game


Top of the News

BUSINESS WON'T ANTE UP UNTIL GORBY NAMES THE GAME

When superpowers get together, nothing ever is certain. But the July 30-31 meeting in Moscow between President Bush and Soviet President Mikhail Gorbachev will be as close as summits get to a sure thing. With the signing of a historic arms-control deal as a centerpiece, the Moscow get-together is bound to be a political success for both leaders.

However, while Gorbachev and Bush enjoy photo ops from the Kremlin to Kiev, the pomp will obscure a sobering fact: For the U. S.-Soviet partnership in perestroika to succeed, a reluctant Gorbachev has to stop treating economic reform as an intriguing theoretical possibility. "The task," says a senior White House official, "is to convince Gorbachev that he doesn't need to talk to the heads of government as much as he needs to convince Western investors that he means business."

CLOSE TO THE VEST. That's one tough audience. Would-be investors are watching warily as the Soviet economy disintegrates. They're slow to put their money down until they see whether Gorbachev can simultaneously handle pressure from reactionary hard-liners and negotiations with restive republics over the rules of the investment game.

The London meeting of the Group of Seven industrial democracies turned up the pressure on Gorbachev by taking away his excuses for continued inaction on reform. The G-7 leaders agreed on July 17 to give Moscow associate status in the International Monetary Fund and World Bank--and, along with it, access to a deep pool of expertise in the transformation of socialist economies. Washington officials believe that if Gorbachev is interested, the IMF can within a few months provide him with a detailed reform plan that would gain him credibility with investors. It could include creating a central bank, converting the ruble, and getting Moscow's ballooning budget deficit under control.

In Moscow, Bush will throw in some sweeteners of his own. He's ready to say he'll offer the long-deferred U. S.-Soviet trade agreement to Congress for ratification, setting the stage for most-favored-nation tariff status for the Soviets. Bush also is likely to call for raising the current $300 million ceiling on Export-Import Bank loan guarantees to U. S. businesses selling to Moscow. And Bush will bring a proposal for expanded technical assistance--worth as much as $15 million next year--to help the Soviets develop their energy sector, convert defense factories to civilian production, and boost agricultural output.

Gorbachev is likely to welcome the help--and use it against hard-liner critics. They recently blasted him for abandoning sacred communist principles and threatened to force a vote on his performance as party chief at a plenum on July 25. Support from the U. S. and other countries, says Ernest Obminsky, deputy Soviet foreign minister, "is now of the utmost importance to the internal situation in the Soviet Union."

While the Kremlin is preparing to take such steps as privatizing the huge, state-owned maker of Lada passenger cars, it's far from clear that Gorbachev understands the potential of his new links to the West. Any doubts were heightened on July 23, when Gorbachev announced his intention to seek full membership in the IMF and World Bank. The West believes that Moscow must make far more progress on reform first, but the Soviets are impatient. Says one State Dept. official: "An IMF reform program without any real cash behind it is not going to be very enticing to Gorbachev."

POTSHOTS. Bush, who is well aware of just how far down the reform road Gorbachev must go, is approaching U. S.-Soviet economic ties cautiously. But even his measured entente is drawing fire from the right, so he will likely try to deflect some of these potshots by trying to teach the Soviets Western values. He plans to deliver major speeches on democracy and free markets. He'll hobnob with Russian Republic President Boris N. Yeltsin and will reassert support for the Baltic states. And in Kiev, he'll demonstrate support for religious freedom at the site of a Nazi massacre of thousands of Jews.

If all this sounds a bit anticlimactic, it is. But that's only because the U. S.-Soviet relationship has matured to the point where jaunts from Washington to Moscow are no longer the stuff of high drama. Among the least intoxicated by the big show in Moscow will be U. S. executives. They'll be less interested in the summit communique than in the fine print of a slew of promised reforms that could finally clear what stands between them and big deals in the Soviet Union.

MEETING IN MOSCOW: THE AGENDA

ARMS CONTROL

As the summit's centerpiece, Bush and Gorbachev will sign the Strategic Arms Reduction Treaty, cutting nuclear arsenals by 30%

TRADE

Bush plans to announce he will propose most-favored-nation trading status for the Soviet Union. He will also pledge improved trade with the Baltic republics

ECONOMIC LINKS

Bush will announce an expanded program of U.S. technical advice to Moscow on areas ranging from agriculture to energy development

BRANCHING OUT

To build ties beyond the Moscow central government, Bush will meet with leaders of the Soviet republics, most notably Russian President Boris Yeltsin

REGIONAL ISSUES

Bush and Gorbachev will discuss U.S.-Soviet cooperation in encouraging a Mideast peace conference and policing Iraq

DATA: BWBill Javetski with Rose Brady Washington, Moscow


American Apparel's Future
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus