VIEWPOINTS : DETENTE II? : The Warming of East-West Relations Is Welcome News in Washington, but Most Firms Still Won’t Rush to Do Business There

Yes, it’s springtime again between Moscow and Washington. The superpower leaders appear to be close chums. And once again the corridors of Washington’s trade promotion agencies are humming with optimism not seen since Henry Kissinger and Richard Nixon decided more than a decade ago that Pepsi-Cola and loans from Citicorp could wean the Kremlin away from godless Communism.

Is it Detente II? In terms of strategic weapons reduction agreements, one should certainly hope so. But Wall Street and corporate America may want to hang back a bit before joining the headlong rush to help lift the 19th-Century Soviet economic system into the 21st Century.

It is true enough that Gorbachev’s drive to liberalize and modernize the Soviet Union depends on an enormous improvement in trade with the rest of the world and that, in turn, depends on huge injections of foreign investment capital. Nevertheless, the Kremlin has shown itself to be quite disciplined in accepting proffered Western capital and corporate enterprises only to the extent that it fits in with the Soviet’s own narrowly conceived economic objectives.

Or put another way, there is little danger that the Soviet Union will turn into another Mexico or Brazil even though the theoretical capacity to take everything the West can give it is as limitless as China’s. Unlike the Latin American borrowers, who took every loan offered them by ambitious international bankers, the Moscow leadership really doesn’t have a shortage of internal capital the way the Third World does--most Russians have too many rubles as it is.

A good example of how American investments behind the Iron Curtain can work is the experience of Pepsico, whose then-chairman Donald Kendall was a big friend of Nixon and Kissinger during Detente I. In 1973, after two years of tedious negotiating, Pepsiso signed a contract to bring its soft drink and technology to the Soviet consumer.

The first bottle of Soviet Pepsi rolled off the assembly line at Novorossisk in 1974. Today, 35 million cases of 24 eight-ounce bottles come rumbling out of 20 plants throughout the Soviet Union to compete with kvass, lemonade and other Soviet soft drink favorites.

“It certainly has been a success,” said Richard Detweiler, a company spokesman. But does that mean that the rest of the company’s vast food empire has rushed in to exploit the taste for things Western?

Hardly. One Pizza Hut is in the planning for Moscow and that’s about it. And even that is described as “a good-will gesture.” There are no Taco Bells, no Kentucky Fried Chickens (“we couldn’t guarantee supplies or quality”), largely because Pepsi officials say the Soviets discouraged such proposals. The concept of food served outside the home still is considered a luxury item confined to international hotels or to sidewalk stands at resorts.

Sometimes, even when the Kremlin is enthusiastic about a project and its proposer, the contrary Soviet environment conspires to destroy the best efforts of the bureaucracy.

There can be no more experienced American businessman in deals inside the Soviet Union than Armand Hammer, the 90-year-old chief executive of Occidental Petroleum, who began there in Lenin’s day as a pencil manufacturer.

So it was back in 1981, during the depths of Ronald Reagan’s “Evil Empire” diatribes, that Occidental’s beef processor subsidiary, now known as IBP, had signed a long-term contract with the Soviets to provide “scientific and technical information in the field of meat processing.” Reminded of the announcement today, most IBP executives laugh the way one does recalling a childhood escapade of incredible foolhardiness.

“Oh, gosh, that’s right,” one senior manager recalled. “Fortunately, nothing came of it at all. There were some visits but we never actually spent any real money trying to build a meat-packing plant there or anything like that. What happened, as I recall, is that the Russians had disastrous grain harvests over a period of years, and the amount of beef produced actually declined, so there didn’t seem to be much point in our project.”

And even where the climate, the bureaucracy and Soviet proletariat agree, the American businessman may find himself facing the final insurmountable hurdle to success--the U.S. government. For instance, after the Soviets invaded Afghanistan in 1979, Washington responded by blocking big deals arranged by the likes of Hammer, Dresser Industries and General Electric.

There are other American governmental barriers too. Next to the technical question of the convertibility of the Russian ruble into dollars, the toughest barrier to a free flow of financings into Russia remains the Jackson-Vanik Act of 1974. Among the U.S. benefits denied the Soviets until glasnost becomes a reality are most-favored-nation status (low tariff and no quotas) on exports, access to U.S. Treasury and Export-Import Bank credits and, indeed, the negotiation of a bilateral trade treaty. Congressional liberals also have sponsored other legislation linking controls on American financiers to the Soviets’ human rights record.

But those are political barriers that could, in theory, be quickly erased if the political will existed. Perhaps a more serious roadblock is the need for the Soviets to reduce their currently lopsided trade deficit with the West, particularly the United States. Until that happens, the Soviets are unlikely to open their doors wide to U.S. business.

Meanwhile, major American corporations and their bankers have been laggard in responding to Reagan Administration hints that it now is fashionable to do business with the Soviets. Those who were burned in the rush to Russia sparked by the Nixon-Kissinger era of detente in the 1970s are not going to hurry back. The U.S.-Soviet joint venture law that was put into place last year with great fanfare has drawn only 80 U.S. firms into deals in the last 18 months, with only old friend Occidental Petroleum and Combustion Engineering clinching deals in the millions of dollars.