Bush extends Soviets credit to purchase grain

June 12, 1991|By Mark Matthews | Mark Matthews,Washington Bureau of The Sun

WASHINGTON -- President Bush agreed yesterday to provide up to $1.5 billion in credit guarantees to help the Soviet Union purchase American grain.

In a step toward helping the Soviets steer their economy toward the free market, Mr. Bush also offered to form a high-level team to assist the Soviets in improving their food distribution system.

The actions marked the second significant gesture in less than two weeks as Mr. Bush works to put U.S.-Kremlin relations on a new footing that would bolster Mr. Gorbachev and help prevent collapse of the Soviet economy.

Last week, Mr. Bush waived for one year the Jackson-Vanik restrictions on trade with the Soviet Union, citing liberalization of Soviet immigration policy. Mr. Bush also is expected to send a trade agreement to Congress and grant the Soviets most-favored-nation trade status.

White House spokesman Marlin Fitzwater said a recently returned U.S. delegation led by Under Secretary of Agriculture Richard T. Crowder had told the president there was "a need for grain and a need for these loan guarantees to see that they have adequate supplies to get through the winter."

The Soviets received $1 billion in credit guarantees to buy grain in December but quickly exhausted them. A new request arrived more than two months ago. Mr. Bush recently had cast doubt on whether the Soviets, because of their rapidly deteriorating economy, would meet the legal test of credit-worthiness to qualify for the guarantees.

But Mr. Fitzwater said the White House took into account the Soviets' record, saying that they had repaid loans totaling about $500 million in the 1970s. This, plus the judgment of experts "and frankly, the commitment of President Gorbachev," persuaded Mr. Bush that the Soviets were credit-worthy, he said.

The prospect of new grain sales to the Soviets had pitted American farm interests, which were strongly in favor of the move, against congressional backers of Baltic secessionists who opposed any new assistance to the Soviets and feared the republics wouldn't get their share.

The White House statement said the decision "followed assurances from the Soviet government that the grains made available through the credit guarantees would be fairly distributed among Soviet republics, and the Baltic states."

U.S. officials believe the Soviets are able to produce all the grain they need but lack an efficient distribution system, causing the crops to rot before they reach the stores. But the Soviets are in need of shipments in the near future to meet shortages in feed grain for cattle, sheep and poultry, Mr. Fitzwater said.

The credit guarantees will be available in three stages over nine months, Mr. Fitzwater said: $600 million this month; $500 million in October; and $400 million next February.

The White House is prepared to form a team drawing heavily on the private sector to help the Soviets develop new marketing and distribution networks. Their advice would be a further prod to get the Soviets to dismantle their command economy, an administration official said.

The announcement came on the eve of Russian elections today in which Boris Yeltsin is seen as the favorite to become the popularly elected president of that republic, an event that could diminish Mr. Gorbachev's political stature. But an administration official denied that the election was a factor in the timing of yesterday's announcement.

Russian economist Grigory Yavlinski, together with a team of Harvard economists, is completing work on a reform plan linking sweeping changes in the Soviet system with promised reforms, but it is uncertain whether Mr. Gorbachev will find the political strength to implement them.

The recent turn in U.S.-Soviet relations was prompted by agreement to end a dispute on the interpretation of last year's treaty cutting conventional forces in Europe. U.S. officials had said the dispute raised a serious question about Soviet trustworthiness in complying with arms treaties.

But it may be weeks before the final obstacles are lifted to allow signing of a treaty slashing long-range nuclear weapons.

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