Spy Cases Thwart Plans for Summit : But Grim Shultz, Shevardnadze Say Talks Narrowed Gap on Arms Control

Secretary of State George P. Shultz and Soviet Foreign Minister Eduard A. Shevardnadze agreed Saturday that they have narrowed differences on arms control, but Shultz said that there can be no fruitful superpower summit meeting until American journalist Nicholas Daniloff is released.

At simultaneous, separate press conferences, Shultz and Shevardnadze said that they ended their two-day meeting in total disagreement about the Daniloff case and the U.S. expulsion order against 25 Soviet diplomats at the United Nations.

Shultz said no date can be set for a summit meeting this year between President Reagan and Soviet leader Mikhail S. Gorbachev because of the “cloud” over Washington-Moscow relations caused by the Kremlin’s espionage charges against Daniloff, a Moscow correspondent for U.S. News & World Report.

Remains a Sticking Point

“It is hard to imagine a fruitful summit meeting while the case is unresolved,” Shultz said. “So it ought to be resolved, and it can be resolved.”

Shultz emphasized that from the U.S. standpoint, the only satisfactory solution would be for Moscow to drop the espionage charges against Daniloff and allow him to leave the Soviet Union.

Shevardnadze said the Soviet Union wants a “normal” resolution of the Daniloff case. He did not spell out what he meant, but there is little doubt that he referred to Soviet suggestions that the American reporter could be traded for a Soviet employee of the United Nations accused of espionage in New York.

The Soviet foreign minister accused the Reagan Administration of trying to poison superpower relations by overreacting to the Daniloff case and by ordering the expulsion of members of the Soviet Mission at the United Nations. U.S. officials have said that all 25 of the diplomats ordered out of the country are officers of the KGB intelligence organization.

‘Knee-Jerk Reaction’ Hit

“Relations between the Soviet Union and the United States are too important for our peoples, for the destiny of the world and humankind to make them the subject of knee-jerk reaction,” Shevardnadze said.

He termed “irresponsible and provocative” the expulsion of the Soviet diplomats, who were told to leave the country by Oct. 1.

The Soviet foreign minister warned that “if the American side believes it can act arbitrarily and with impunity (against the Soviet U.N. Mission) it is making a big mistake. This action will not remain without consequences.”

Asked at his press conference about Shevardnadze’s implied threat of retaliation, Shultz said, “I don’t know what actions they’ll take, but I do know this: the President’s powder is dry.”

The controversies that dominated the 14 hours of meetings between Shultz and Shevardnadze left the two men grim-faced and apparently angry. They parted without a smile at the State Department and went on to their separate, simultaneous press conferences, forcing some reporters to choose which one to cover.

In a series of meetings last year, Shultz and Shevardnadze seemed to develop an easy rapport. In the past, they sometimes met reporters together and have never before called competing press conferences.

Nevertheless, both men spoke of progress on the substantive issues of the Washington-Moscow agenda--arms control, bilateral issues and regional issues. Shultz said that there was no progress on human rights, the fourth topic on the U.S. agenda. The Soviets have never accepted human rights as a proper topic of superpower diplomacy.

“These two days have indicated that considerable potential for progress exists,” Shultz said. “But the cloud that hangs over all this is the fact that Nicholas Daniloff is not free to leave the Soviet Union.”

Shultz said the two sides made substantial progress toward an agreement to reduce intermediate-range nuclear weapons based in Europe. He said that they also narrowed somewhat the gaps on strategic nuclear arms control and on limitation of chemical weapons.

Shevardnadze echoed Shultz’s view on intermediate-range weapons. Although he, like Shultz, declined to provide details, Shevardnadze said: “We do see in some very important areas certain prospects for progress. . . . I will say this is a very promising area.”

At their first summit meeting in Geneva last November, Reagan and Gorbachev agreed to hold at least two more meetings--this year in the United States and, in 1987, in the Soviet Union. However, efforts to prepare for this year’s meeting have been frustrated by a series of strains in the superpower relationship, including the U.S. bombing of Libya last April and, more recently, the Daniloff case.

Daniloff was arrested by the KGB on Aug. 30 after he accepted a package from a Soviet acquaintance. The Soviet secret police said that the package contained secret military information. The U.S. government maintains that he was the victim of a “frame-up.”

President Reagan met for 45 minutes with Shevardnadze on Friday in a session that the White House said was devoted exclusively to the Daniloff case. Spokesman Larry Speakes said Reagan used the session to “convey the strength of his feelings about the continued refusal of the Soviet authorities to allow Nicholas Daniloff to return home.”

Daniloff was arrested a week after the FBI nabbed Gennady F. Zakharov, a Soviet citizen employed by the United Nations, on espionage charges. U.S. officials have said Daniloff was seized as a hostage by the KGB in a move to try to force the United States to release Zakharov.

Soviet sources have suggested a Daniloff-Zakharov swap, but the Reagan Administration has rejected it because of Washington’s contention that Zakharov was caught “red-handed” while Daniloff was set up. The Soviets, following a strategy of mirror image reciprocity, have insisted that Zakharov was framed while Daniloff was “caught in the act.”

Shevardnadze said that he and Shultz will meet again during the next two weeks when both men are scheduled to be in New York for the opening session of the U.N. General Assembly. However, Shultz contradicted him. The secretary of state said that a New York meeting is possible but that none is scheduled as yet.

Shultz and Shevardnadze met frequently last year before the Reagan-Gorbachev meeting. According to U.S. officials, the foreign ministers repeatedly reviewed the Washington-Moscow agenda, searching for points of agreement that could be considered at the summit.

Shultz said that they began a similar process this weekend but that the Daniloff case, which consumed more than half of the 14 hours of meetings, sharply reduced the time available for other matters.

Asked to characterize the meetings, Shultz said:

“In terms of the substance . . . where we were talking about the types of subjects we generally wrestle with, they were serious, they were constructive, they were positive and conducted in a straightforward way. I think I would . . . apply plus-type adjectives to it. As for the Daniloff case and other aspects of human rights, certainly they were direct and serious discussions and I, unfortunately, have to report that we weren’t able to resolve the issue.”

Shevardnadze called the talks “thorough, substantial and overall, constructive.”

Asked if a summit would be imminent were it not for the Daniloff case, Shultz said: “I do think there are some very promising opportunities here. . . . We would like to capitalize on them.”