Soviets unlikely to receive desired aid from industrialized nations

July 07, 1991|By Richard O'Mara | Richard O'Mara,London Bureau of The Sun

LONDON IVB — LONDON -- It is just about certain that Soviet President Mikhail S. Gorbachev will not walk away from his meeting here with the Group of Seven summit leaders next week with promises of massive financial aid for the Soviet economy.

The countries opposed from the start to giving large amounts of assistance to finance Soviet economic restructuring have not changed their positions. Those inclined to favor it have lost their enthusiasm for it. And the one country probably in the best financial position to grant it -- Japan -- remains dead set against it.

Japan is disinclined to assist Moscow until it gets some satisfaction on its demands for the return of four Kuril Islands taken by the Soviets at the end of World War II.

Japan's Prime Minister, Toshiki Kaifu, after hearing of Soviet economic plans from Gorbachev adviser Yevgeny M. Primakov, was reported Friday by the Financial Times to have said: "Plans without action are meaningless."

The point has been stressed repeatedly by representatives of the summit countries, especially by the British, who are hosts to summit, which will begin here next Monday.

"No one will be coming to London with the idea that this will be the time to be making decisions on financial assistance" for the Soviet Union, said one senior British official who requested anonymity. He recently briefed the Soviet president on the thinking of some of the summit participants.

Mr. Gorbachev has not been invited to attend the summit, which is an annual meeting of the world's seven richest industrialized democracies: the United States, Canada, Britain, France, Italy, Germany and Japan.

(The European Community is also represented by its commission and council presidents.)

But he has been invited to address the leaders after their deliberations on other topics, and to apprise them of his plans to transfer his country's command economy to a market-driven one. Soviet officials say he will not ask for money.

The position of the United States, Britain and Canada has been that the Soviets must meet certain conditions before massive aid would be considered. These include the creation of a genuine free-enterprise system that would permit prices to be set by the market; a true commitment to the privatization of business, real property and land; the creation of a convertible ruble; and a solid working agreement between the Union government and Soviet republics.

None has been fully achieved.

"It is hard to see the American government putting up any cash," said David Calleo, head of European Studies at the Johns Hopkins School of Advanced International Studies. "We

increasingly have less money to play these games."

"Some European countries might be more inclined to go along," he added. "They might see themselves as much worse off if things go badly in the Soviet Union."

Until recently, Germany had been the G-7 country most inclined to grant large-scale assistance to Moscow, but the cost of absorbing the dead weight of East Germany into its own economy has proved greater than anticipated, leaving little money left over for the Soviets.

Italy and France were also in favor, but neither has the kind of funds desired by Moscow.

As the summit draws closer, pressure for a generous response by the G-7 has been generated by the supporters of the economic plan devised by former Deputy Prime Minister Grigory A. Yavlinsky.

He has been assisted by academics at Harvard's Kennedy School of Government, among them Jeffrey Sachs, who engineered Poland's switch to a market economy, and Graham Allison, head of the institute.

The Yavlinsky plan, otherwise known as the Grand Bargain, if adhered to, would propel the Soviet Union almost overnight into the turbulent sea of capitalism. The drafting of the plan was countenanced by both Mr. Gorbachev and Russian Federation President Boris N. Yeltsin.

Among other things, the plan states: "In economics, the core value of freedom is exercised in a market economy based on private ownership, in which market forces of supply and demand answer the question of who produces what for whom. Ownership means the freedom to use or dispose of property as '' the individual chooses. Basic laws of economics tolerate no equivocation on this point, none whatsoever."

Despite the plan's bold outlines, skepticism of the Soviet willingness to plunge directly into a market economy persists. A source close to British Prime Minister John Major said, "The Soviet economy has been a planned economy for a long time. There's nobody around who remembers anything else."

The Yavlinsky plan is being sold along two tracks, one positive and one negative. It recalls the success of the Marshall Plan and other postwar U.S. aid programs.

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