Five Effective Ways the U.S. Can Provide Effective Help to Russia -- Quickly

April 04, 1993|By JAMES L. HECHT

The national security of the United States requires that President Clinton do more for Russia that just deliver the increased dollars in aid he has promised Boris Yeltsin at their summit concluding today.

The chaos in Russia is being fueled by falling standards of living. If the Russian public loses hope for a more prosperous future, the reforms may be scrapped, and a government hostile to the United States could take over. Thus, aid to Russia needs to be spent in ways that help the people quickly and provide a lot of help for each dollar spent. Unfortunately, most aid money now is being squandered.

Here are five ways that U.S. aid can make a difference -- and quickly:

* Renegotiate debt payments so that the Russians do not need to make any payments for the next two years.

This can be justified because the Russians have enormous assets compared to their foreign debts. Russia's oil reserves are worth trillions of dollars; other natural resources, including the world's largest supplies of natural gas, are worth trillions more. Yet total foreign debt is less than $100 billion. Insisting on payments now, when the Russians have very little hard currency because of problems related to their transition to a market economy, sabotages reform.

* Provide massive technical assistance to improve food production.

Agricultural imports have drained much of the hard currency available, yet Russia, with a high ratio of arable land to people, should be a net exporter of food -- which it was prior to World War I.

Privatization will provide an incentive to Russian farmers that has been lacking, but for Russia to begin to realize its potential, modern methods of producing and preserving food products must be introduced. This can be done quickly and without huge capital investments. For example, when McDonald's was starting up its operations in Moscow, it found it could not get potatoes and lettuce meeting its specifications, but the problem was resolved rapidly by importing superior seeds and teaching some Russian farmers how to produce better crops.

* Recognize that if the Russians are to succeed in converting to a market economy, millions of people must receive economic education quickly.

This is needed for Russia to manufacture products that will compete in global markets and to have entrepreneurs who will be successful when they build houses, fix cars, operate shops and serve the many other functions that entrepreneurs do in the West.

Fortunately, there are very cost-effective ways that this Herculean task of economic education can be accomplished. One is to assist Russian television producers to create interesting programs that explain how the free-enterprise system works. Ninety percent of the households in the former Soviet Union have television, and almost all can be reached by two satellite networks which already have demonstrated a willingness to air programs during prime time which deal with economic education.

In addition to the use of television, books specially written to meet Russian needs for economic education can be produced and distributed inexpensively. Many Russians with the required reading skills are eager to learn all they can about Western business methods. But suitable teams need to be created and paid to write the books.

* Provide extensive technical assistance to conserve energy derived from oil.

Because oil has been provided to Russian industry at only a fraction of world market prices, it is used very inefficiently. Much of this waste could be eliminated quickly by adapting American knowledge. Intensive conservation would allow Russia to export between $2 billion and $4 billion a year more oil within two years; eventually the savings would allow export of more than $5 billion a year more oil. Modest capital expenditures would be required, but would be completely recovered by energy savings in less than six months.

* Provide large quantities of medical supplies as humanitarian aid.

Russians are suffering and dying because of acute shortages of medical supplies. The U.S. government could parlay modest funds into substantial supplies by making deals with U.S. manufacturers to buy incremental production at incremental costs. If the sales of a product are below capacity, which is the usual case, additional product can be made at a very low incremental cost since capital, marketing, research and administrative costs will be zero. Many manufacturers would cooperate since the aid program would get their products well-known in Russia and could led to profitable business in the future.

But Mr. Clinton's challenge is much more than recognizing what needs to be done. He also must get it done right. That will not be easy because four of the five priority items normally would be implemented primarily by the Agency for International Development (AID) -- an organization with a dismal record.

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