$2.1 Billion : Soviets Get Line of Credit From West German Banks

A group of West German banks has granted the Soviet Union a $2.1-billion line of credit, the biggest Western financial package for Moscow in seven years, in a move that underlines West Germany’s willingness to help Soviet leader Mikhail S. Gorbachev modernize his economy.

The loan package, announced this week, is to finance projects to renovate the Soviet consumer goods and food processing industries, according to Deutsche Bank AG, West Germany’s largest bank and head of the bank consortium.

The agreement signals a shift in Soviet policy. Moscow previously has been willing to borrow large sums from the West only to finance heavy industrial development, mining or other capital-intensive projects, West German officials and bankers said.

Now the Soviet leadership sees an increased need to develop its consumer-oriented industries to raise living standards and win popular support for Gorbachev’s reform program, they said. The Soviets want to give their people more “shoes, clothes and underwear,” Wilhelm Christians, co-chairman of Deutsche Bank, said in Duesseldorf.

Top U.S. defense and commercial officials had varying reactions to the agreement.

Defense Secretary Frank C. Carlucci, speaking in Washington at a hearing of the Senate Defense Appropriations subcommittee, said Tuesday: “We are unhappy about these kinds of loans. It puts an extra burden on our defense forces.”

More Requests Likely

Carlucci said the line of credit gives the Soviet Union more money to use for its military activities. “This is an undesirable practice,” he said.

But Commerce Secretary C. William Verity Jr., in separate Capitol Hill testimony, said the loan was in the U.S. national interest because it would enable an important ally to boost its economy and create jobs by promoting trade in non-strategic goods.

“If a commercial bank in West Germany would like to do that, it’s their business,” Verity told the Commission on Security and Cooperation in Europe, a panel of lawmakers and administration officials that reviews implementation of the Helsinki security and human rights accords.

Christians also told reporters in Duesseldorf that Moscow is likely to make more requests to the West for help in modernizing its industries in the wake of the $2.1-billion loan.

Nuclear Energy Key

He said negotiations between Moscow and Western creditors are going on at various levels and that the Soviet Union wants the help of Western firms in exploiting raw materials and realizing energy projects in West Siberia and the Kola peninsula.

He said there is also great interest in reaching a bilateral agreement with West Germany in the nuclear energy sector. This involves a high-temperature reactor as well as West German help in examining and revamping the security standards at Soviet atomic energy plants, Christians said.

The credit line was granted as a private commercial transaction, without special guarantees from the Bonn government. But the government was enthusiastic about the deal, as officials welcomed it as a milestone in a 2-year-old thaw in West German-Soviet relations.

The package was the most significant example to date of West Germany’s declared commitment to help Gorbachev carry out his economic modernization program.

The credit line is the largest Western financial package granted to the Soviets since 1981, when West Germany and five other Western countries helped to finance construction of a controversial $15-billion Soviet natural gas pipeline from Siberia to Western Europe, West German officials and bankers said.

Few details were made public about the terms of the credit. Neither the interest rate nor length of loan was announced.