Bush aims to ease front-line states' 'staggering burden' quickly President follows up on allies' promises

September 26, 1990|By Stephen E. Nordlinger | Stephen E. Nordlinger,Washington Bureau of The Sun

WASHINGTON -- President Bush announced yesterday the formation of an international clearinghouse to accelerate financial aid to needy Middle East countries whose cooperation officials regard as essential in maintaining the economic embargo against Iraq.

Expressing concern over the "staggering burden" faced by these front-line countries, the president told the annual meeting of the 152-nation World Bank and International Monetary Fund that he wanted "to transform [financial] commitments into concrete contributions."

So far, the administration has received about $20 billion in commitments from its chief industrial allies, including Japan and West Germany, as well as Saudi Arabia and Kuwait's government in exile.

But an administration official said that "a second stage has arrived in which we need to decide more precisely what we need and the right mechanisms to get the funds out, while making sure they are used most effectively."

Officials want to start channeling aid as quickly as possible to shore up the economies of Jordan, Egypt and Turkey, which have been jolted by trade losses, soaring oil prices and the heavy loss of worker remittances from their citizens who had worked in Iraq and Kuwait.

The administration is concerned that should these economies disintegrate, businesses and individuals might be driven in desperation to engage in undercover trading with Iraq, breaking the embargo that the president is relying on to force Iraq to withdraw from Kuwait.

"Serious challenges have emerged for countries rocked by unpredictable tides in the flow of oil, trade, displaced workers and refugees," Mr. Bush said.

Mr. Bush said he was forming a Gulf Crisis Financial Coordination Group, "with the aim of achieving effective, timely and sustained financial support" to the most seriously affected countries.

Even though the United States will be contributing little if any money directly, the panel is to be headed by Treasury Secretary Nicholas F. Brady. Its first meeting will be today.

The other members include Japan, West Germany, Italy, France, Britain, Canada, Saudi Arabia, Kuwait, United Arab Emirates, Qatar, South Korea and the 12-nation European Community.

Administration officials said the $20 billion in promised contributions for both military and economic assistance might not be enough in view of the spiraling cost of oil.

They said earlier this week that the front-line nations would need about $12 billion to $14 billion in economic aid over the coming months, compared to $10.5 billion estimated three weeks ago.

Formation of the coordinating group was a victory for the administration, which wanted to maintain as much control over the money as possible to coordinate the aid and to make sure it was disbursed as quickly as possible.

Japan and West Germany wanted the aid largely channeled through the IMF and the World Bank to make sure it would be used in keeping with the agencies' economic reform policies.

President Bush also pressed for rapid action by the World Bank and the IMF to provide financial and technical aid not only to the front-line nations, but also to needy countries such as Brazil, India and the Philippines, which also face problems caused by the spiraling cost of oil imports.

Meanwhile, a Soviet delegation of "special invitees" said informally yesterday that their country wanted to join the two lending institutions.

A top IMF official said that the agency "in principle" favored Soviet membership but that there were "numerous hurdles" -- including such technical issues as determining the actual size of the Soviet economy so that the Kremlin's financial contribution to the IMF could be figured.

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