U.S., Soviets Extend Grain Deal 2 Years

After eight months of hard bargaining, the United States and the Soviet Union agreed Monday to extend for two years a pact under which Moscow will buy at least 9 million tons of wheat, corn and soybeans annually.

The agreement will assure American farmers a major share of Soviet grain purchases in what is likely to be at least one year--and probably two years--of extensive food imports by Moscow as the government here seeks to make up for poor harvests and to raise living standards.

Alan F. Holmer, the deputy U.S. trade representative who negotiated the agreement, said it will “stabilize grain trade between our two countries, ensuring a secure source of supply for Soviet grain imports and a secure market for U.S. grain exports.”

For the Soviet Union, the purchases will play an important role in President Mikhail S. Gorbachev’s drive to solve what is known here as “the food problem”--the inability of this still heavily agrarian country to feed its 285 million people.

Soviet officials said the grain imports are intended as an interim measure to ensure stable food supplies and to help increase meat production after a reduced harvest this year.

“The general trend should be to enable us to reduce the general imports of grain and develop our own agriculture to achieve self-sufficiency,” Yuri N. Chumakov, deputy minister of foreign economic relations, said after the agreement was signed. “But in the short and medium term, stable supplies are also very important for us.”

Most Important Deal

The agreement, Chumakov noted, is the most important that the United States and the Soviet Union currently have in their economic relations.

Taken together, wheat, corn and soybean purchases totaled $871 million in fiscal 1987, the last year for which full trade figures are available, and constituted nearly 60% of U.S. exports of $1.48 billion to the Soviet Union. In 1984, however, U.S. grain sales alone were $2.8 billion, and in the 1970s they were even greater.

Washington had sought both a larger Soviet commitment on purchases and a longer term for the agreement, according to business sources here. But the United States rejected Soviet efforts to broaden the agreement through the inclusion of trade in other areas and guarantees of greater access to American ports for Soviet ships.

“We wanted a pure grain agreement,” Holmer said. “It took awhile before we realized how insistent they were that those provisions (on the expansion of trade and ship access) be in the agreement, and they realized how insistent we were that they not be in.”

Although the U.S. negotiators believed that the grain trade was best kept separate from other commercial issues for the sake of simplicity, other Reagan Administration officials saw Moscow as trying to gain economic advantages for which it had not yet paid in political terms.

“As with every grain agreement we have signed with Moscow, there is an internal battle within our own government over the terms--how much we should sell, whether we even should have an agreement,” one U.S. official said. “The issues this time were really no harder than those we faced before. It just took longer to work things out.”

The agreement signed here Monday extends until the end of 1990 the terms of the previous pact, which had run for five years and expired Sept. 30.

“Our approach to a new agreement was that we envisaged it as playing a greater role between the Soviet Union and the United States,” Chumakov said. “We failed to reach agreement on the content of such a new accord. And that is why the signing of this protocol is a great compromise between the two sides.”

Under the accord, the Soviet Union has pledged to buy at least 4 million metric tons each of wheat and corn annually, as well as 1 million metric tons of additional wheat, corn, soybeans or soybean meal. It also allows purchase of up to 3 million metric tons of additional wheat and corn a year without further negotiations.

But it does not provide for federally subsidized prices for wheat that the Soviet Union has received for the past 18 months under a U.S. export program meant to meet competition from the European Common Market and other suppliers subsidizing their agricultural exports, although these could now be resumed.

Substantial Purchases Expected

According to the U.S. Agriculture Department, Moscow bought 9 million tons of wheat, 5 million tons of corn and 2.1 million tons of soybeans and soybean meal for delivery in the last year of the current agreement. There are no dollar estimates for the value of these sales, which are made by private U.S. companies.

Since the beginning of October, Moscow has purchased 5.5 million tons of U.S. corn and 500,000 tons of soybeans and soybean meal, U.S. sources here said.

That means it is only required to buy 4 million tons of wheat by next October to fulfill the agreement. But businessmen who follow Moscow’s agricultural trade expect substantial purchases of wheat shortly as a result of the poor harvest here.

Soviet news media have reported that this year’s grain harvest will be less than last year’s 211 million tons, despite reforms intended to boost production. The U.S. Agriculture Department has estimated the harvest at 205 million tons, while the International Wheat Council has put it at 200 million tons.

The Agriculture Department also has forecast Soviet grain purchases this year of 31 million tons, but European grain traders believe they may reach 35 million or even 40 million tons.

Chumakov would not be drawn into a discussion of probable purchases or the size of this year’s harvest. “Let’s just say that, if the harvest were a catastrophe, we would have reached an agreement (with the Americans) after the first round of talks,” he said.