Soviets give Baker preview of reforms linked to aid

May 30, 1991|By Mark Matthews | Mark Matthews,Washington Bureau of The Sun Tom Bowman of The Sun's Washington Bureau contributed to this article.

WASHINGTON -- Secretary of State James A. Baker III, getting a glimpse of what the Soviets hope will be a "grand bargain" linking economic reforms to the promise of Western aid, withheld judgment yesterday on whether the Soviets are taking strong enough steps toward a market economy to warrant major U.S. assistance.

Still, the Bush administration appeared to be moving toward lifting legal barriers to a trade agreement with the Soviets and allowing the Soviets some sort of association with the World Bank and International Monetary Fund that would help spur economic reforms.

Mr. Baker met for about 90 minutes yesterday with a top envoy from Soviet President Mikhail S. Gorbachev, Yevgeny M. Primakov, who reviewed what he said was "the Soviet Union's latest plan for coming out of the crisis situation."

The plan, Mr. Primakov told reporters, calls for "liberalization, privatization, destatization . . . liberalization of prices and getting away from the policies of the administrative structure that had been existent" previously.

With Mr. Primakov was Grigory Yavlinsky, who has been working with Harvard economists on an economic reform package that would be linked to billions of dollars in Western assistance, part of it from the United States.

Mr. Baker said, "I am satisfied that the leadership of the Soviet Union has as a fundamental goal the moving toward a market economy.

"But I think we should not lose sight of the fact . . . that you have here a situation where a country is trying to change 70 years of political and economic philosophy and change it in a way that moves it in exactly the opposite direction."

He said the United States and Soviets had agreed that it was important that any economic aid actually serve to move the Soviet economy "to a free-market status."

Under the plan, total Western support, including aid from governments and financial institutions, would come to about $30 billion a year for two years, then decline as the private sector moved in. Of the $30 billion, about $3 billion would come from the United States under the proposal, said Jeffrey Sachs, a Harvard economist working with Mr. Yavlinsky on the reform package.

A great deal of the institutional and legal basis for reform could be put in place by the Soviets in 2 1/2 years, he said, including a commercial code, private property protection, a private service sector and convertibility of currency.

In Moscow yesterday, the Soviet parliament hurriedly passed the draft of a foreign investment law that contradicts the whole premise of communism. It would allow for the first time 100 percent foreign ownership of businesses, including those involved in developing natural resources such as oil.

While Mr. Primakov was at the State Department, about 20 Baltic-American protesters, many of them from Baltimore, protested his visit and the prospect of U.S. aid to the Soviet Union. The group said economic aid should be withheld until Soviet assault troops were recalled from the Baltics and "good-faith negotiations" were held toward Baltic independence.

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