Soviets Make Proposals on Daniloff Case : Negotiations ‘Active,’ U.S. Official Says, but Secrecy Prevails

The Reagan Administration is engaged in “active” negotiations to free U.S. journalist Nicholas Daniloff, a senior American official said Wednesday, adding that “there have been a number of Soviet proposals” to resolve the case.

Little is known about the negotiations, however, as U.S. and Soviet diplomats worked behind a tight veil of secrecy to end the crisis without forcing either side into a humiliating retreat.

It is understood, however, that the United States has insisted that besides releasing Daniloff, the Soviet Union would have to free a Soviet dissident or an acknowledged Western spy, in return for the release of a Soviet U.N. employee now facing espionage charges in New York.

Expulsion Order

The Soviets have made it clear that, besides seeking the release of the U.N. employee, Gennady F. Zakharov, they want a modification of last week’s U.S. order expelling 25 members of the Soviet Mission to the United Nations.

Administration officials have said that the United States would never rescind the order but that it might be possible to compromise with the Soviets on the names of those on the expulsion list, the Washington Post reported Wednesday. U.S. intelligence officials have said all 25 Soviets are spies.

White House spokesman Larry Speakes, traveling with President Reagan in the Middle West, said the Daniloff issue “is not resolved.”

“I just don’t want to talk about it,” Secretary of State George P. Shultz said Wednesday when reporters asked if progress had been made in the Daniloff negotiations. “We’re working on it.”

Soviet Foreign Minister Eduard A. Shevardnadze, asked by reporters if Moscow had made any new proposals to advance the negotiations, said, “We gave them good proposals.”

‘Chance Still Remains’

When asked if the matter can be resolved, he added: “Yes, yes. There is a possibility . . . and the chance still remains.” But, as he has done since he arrived in the United States last Thursday, Shevardnadze insisted that a settlement is “up to the American side.”

Shultz and Shevardnadze, who held two unscheduled meetings on the subject Tuesday, went about other business Wednesday, leaving to lower-ranking officials the matter of discussing the freedom of Daniloff, the Moscow correspondent for U.S. News & World Report.

However, U.S. officials said Shultz and Shevardnadze could meet again at any time. Shultz is scheduled to return to Washington early Friday but plans to return to the United Nations next week. Shevardnadze is scheduled to remain in New York until the middle of next week.

Daniloff was arrested by the KGB on Aug. 30 after he accepted from a Soviet acquaintance a package that the secret police said contained secret military material. U.S. officials maintain that Daniloff, who was held in a Moscow prison for 13 days and still faces espionage charges punishable by death, is the victim of a “frame-up.”

Daniloff’s arrest followed by a week the arrest by the FBI in New York of Zakharov, who has been indicted on three charges of spying.

On Sept. 13, both Daniloff and Zakharov were released from prison to the custody of their respective ambassadors under an arrangement that the Reagan Administration agreed to for what were described as humanitarian reasons.

Administration’s Stand

The Soviets have made no secret of their desire to trade Daniloff for Zakharov. But Reagan has refused to consider such a one-for-one swap because, as he said in a speech to the United Nations this week, “Gennady Zakharov is an accused spy who should stand trial; Nicholas Daniloff is an innocent hostage who should be released.”

The United States and the Soviet Union have traded spies for years. Washington rejected Moscow’s original proposal of a Zakharov-Daniloff exchange because officials said that would make every American in the Soviet Union potential “trade bait” in the event that other Soviet spies were apprehended.

Nevertheless, it seems certain that the only way out of the impasse will be the eventual release of both men. The United States is understood to be demanding that Moscow release additional prisoners, either acknowledged Western spies or political dissidents, to sweeten the deal. In that way, the United States could claim that Daniloff was released on humanitarian grounds and that Zakharov was freed in exchange for the others.

However, the details of such a deal are extremely complex. With the prestige of both nations on the line, the negotiations could take some time.

‘Line for the Day’

Speakes, talking to reporters aboard Air Force One, was asked about possible trades involving Daniloff and Zakharov. “I wouldn’t comment on anything else. ‘The issue is not resolved’ is my line for the day,” he replied.

Shevardnadze and other Soviet officials have insisted for several days that the matter can be resolved quickly and easily. They have implied that the way out of the impasse is a quick Daniloff-for-Zakharov trade.

State Department spokesman Bernard Kalb responded in kind: “It can be ended very easily: Free Nick Daniloff.”

Summit Progress

Despite the Daniloff case, overall U.S.-Soviet relations seem to be on an upswing. Shevardnadze, in a speech to the United Nations on Tuesday, said that progress has been made toward the first superpower arms control agreement of this decade and that the prospects are improving for a summit meeting this year between Reagan and Gorbachev.

However, Shultz has said that it would be impossible to hold a “fruitful” summit meeting until Daniloff is allowed to leave the Soviet Union.

French Premier Jacques Chirac, who met separately Wednesday with Shultz and Shevardnadze, said in reference to a possible Reagan-Gorbachev summit, “I am sure it will take place.” He did not elaborate.

In Moscow, the Kremlin appeared to soften its rhetoric, as an official spokesman referred to Daniloff as an “American citizen” instead of the usual “American spy.”

Yuli M. Vorontsov, the first deputy foreign minister, also said the arrest of Daniloff should be kept off the front pages. “We want to discuss this question calmly with the American side, without publicity,” Vorontsov told a news conference. He said the case had “been blown out of all proportion” in the United States.

Vorontsov declined to say what conditions the Soviets have offered for Daniloff’s release.