Sanctions Against the Soviets May Be the Hottest Potato on Bush’s Plate

As the last Soviet troops leave Afghanistan, the Bush Administration is coming under increasing pressure to lift the sanctions the United States imposed nearly a decade ago on Western exports of militarily valuable technology to the Soviet Union.

The decision on whether to relax the sanctions put in place after the Soviet invasion of Afghanistan is “the hottest foreign policy issue facing the new Administration,” a State Department official said last week. It will provide the first sign of how President Bush will act on a broad range of controversial issues, including trade and economic credits that might be offered to Soviet President Mikhail S. Gorbachev.

Western European nations, which have been chafing under the technology export restrictions for eight years, argue that removing them may encourage Gorbachev to pull back from other foreign adventures as well as to continue his efforts to reform his country’s political and economic systems.

At the same time, business leaders, both in the United States and Western Europe, want to expand their trade with the Soviet Union. American manufacturers anxiously watch their West European competitors rushing to Moscow, financed by billions of dollars of credit lines that U.S. banks will not match.

The issue divided the Reagan Administration in its closing days. The Pentagon opposed any easing of technology controls while the State Department favored it. The split seems likely to continue in the Bush Administration as the new secretary of state, James A. Baker III, begins a whirlwind tour of Europe this weekend.

The question goes well beyond the narrow matter of strategically sensitive technology, however. “It’s much more political than economic,” an official said, because of related issues that are backed up behind it. Among them:

- Should Washington also give Moscow the full array of trade and credit privileges that it confers on other Communist bloc nations, such as China? This issue has been linked to Soviet curbs on Jewish emigration, with Jewish groups in the United States now reassessing their opposition to relaxed trade regulations.

- Should the United States allow the Soviets to join international economic organizations such as the Geneva-based General Agreement on Tariffs and Trade, the International Monetary Fund and the World Bank?

The controversy is already causing a flurry in Congress, where conservatives--suspicious of any warming of U.S.-Soviet relations and aware of how the Soviets took economic advantage of detente 15 years ago--are considering new legislation to impede the growing rapport between the superpowers. Some senators are also exploring whether those trade restrictions aimed at achieving freer emigration from the Soviet Union can now be tied to other human-rights issues instead.

“The greatest challenge to the new Administration,” according to Don Bonker, a former Democratic congressman from Washington and a specialist on international economic policy and trade, “is to develop a Western consensus on how to handle economic and political relations with Moscow.”

The technology issue is particularly sensitive. A task force of senior officials from various agencies, including the State and Defense departments, had scheduled a meeting last week to discuss options. However, the session--ordered initially by the National Security Council--was canceled abruptly only a few minutes before it was to have begun, apparently because the White House feared that it might reduce the Administration’s flexibility in advance of Baker’s trip to North Atlantic Treaty Organization capitals.

The most pressing issue is whether the United States should lift its virtual ban on the sales of high-technology items to the East. Washington exercises this almost unilaterally as part of the Coordinating Committee for Multilateral Export Controls, the 16-country organization set up to regulate strategic exports from the West.

Under the rules of CoCom, as the organization is known informally, militarily sensitive technology is sorted into three major categories. More sophisticated items--particularly those with military applications--require unanimous approval of all members before any of the 16 can legally export them to Communist bloc countries.

In the early 1980s, in the wake of the Soviet invasion of Afghanistan, Washington served notice that it would veto with “no exceptions” all applications for permission to export highest-category technology to the Soviet Union. It has stuck tenaciously to that stand.

Last summer, when Moscow was about halfway through its withdrawal of troops from Afghanistan, NATO nations, led by Britain, petitioned the United States to relax its “no-exceptions” policy. In interagency debates, the Pentagon argued that the continued restriction was justified on national security grounds whether or not the Soviets got out of Afghanistan by the Feb. 15 withdrawal deadline.

However, the State Department called for lifting the limitation, contending that it was imposed initially for foreign policy reasons--as a punishment for Soviet actions--and not for national security considerations.

Thus, State argued, it ought to be withdrawn once the Soviet occupation ended. National security was not at stake, it said, since Communist bloc nations such as Poland, whose intelligence and military services are closely tied to those of the Soviets, were not covered by the “no-exceptions” restrictions.

The “no-exceptions” controversy could become a divisive issue in the alliance. West European states have long bridled under U.S.-imposed technology controls, particularly in the “extra-territorial” reach--beyond U.S. borders--that the United States exercises by vetoing sales of equipment.

And the Europeans, noting pointedly that Washington has allowed China to buy high-level technology without impediment, complain of a double standard.

No decision is expected by the Administration for at least a few weeks, until Baker returns and the review is completed, officials said.

The spate of Western credits to Moscow over the past eight months, amounting to more than $7 billion, is the next most-urgent economic issue facing the Administration.

An alarmed Congress declared, in the trade act passed last year, that the United States must not be tougher on its own business people, including banks, than foreign governments are on their own. That sentiment could be converted into specific laws next year as Congress reviews the Export Administration Act.

Bonker told business executives at a meeting here recently that one proposal would try to ensure that the Soviets do not use Western commercial bank credits to finance the purchase of equipment deemed strategically important. Another proposed measure would insist that West European firms, whose governments are less rigorous in policing export rules, be held more accountable for violating any alliancewide rules in offering credit to the Soviets, he said.

However, there is also sentiment in Congress for repeal of two amendments that severely limit credit to Moscow from the U.S. Export-Import Bank. One puts a ceiling of $40 million on any Soviet project, while the so-called Stevenson Amendment sets an overall limit of $300 million on Soviet borrowing. But since the bank may not receive additional funds this year due to U.S. budget constraints, such moves may have little impact.

Both of the credit limits are tied to Soviet immigration policies, as is the best known restriction on trade, the so-called Jackson-Vanik Amendment of 1974. It forbids the granting of most-favored-nation trading status--which would eliminate special tariffs on goods--to the Soviet Union until Moscow permits substantially more emigration.

The late Sen. Henry Jackson (D-Wash.) indicated that a level of 60,000 Jewish emigrants per year would allow most-favored-nation status for Moscow. The level reached 51,000 in 1979, and various U.S. Jewish groups have since admitted privately that they should have encouraged its continuation by calling for a waiver on the amendment.

The emigration rate dropped precipitously to less than 1,000 in 1986 before beginning a steep climb, to more than 19,000 last year. The emigration of as many as 40,000 Soviet Jews is anticipated in 1989, and Jewish groups are signaling their willingness to support liberalizing steps. Even the amendment’s co-author, former Rep. Charles A. Vanik (D-Ohio), has recommended relaxation in a letter to the Jewish groups.

Vanik urged a waiver of the amendment for 18 months if emigration continues high. At least one Jewish group endorsed that path, while most others are reassessing their stands.

Of the two groups dealing specifically with the issue, a spokesman for the National Conference on Soviet Jewry said the group is “looking toward a new policy in the near future.” The Union of Councils on Soviet Jewry, which is less inclined to support a relaxation, has called for repeal of the Stevenson Amendment only if emigration levels remain high.

The Reagan Administration’s policy, which is likely to be continued by Bush, is to “favor expansion of mutually beneficial (i.e., non-subsidized) non-strategic trade with the Soviet Union,” an official said.

However, the Administration sees trade as a largely domestic political issue. Rather than the government taking the lead, the official added, consensus must develop within the U.S. electorate before the present restrictions can be changed. Change is unlikely to occur this year, he said, but it could come before a wide-ranging East-West economic conference, proposed by the Soviets and grudgingly agreed to recently by the United States, is held in the spring of 1990.

Finally, the Soviets have shown interest in joining international economic organizations such as GATT, the IMF and the World Bank. Their initial overture to GATT was summarily rejected by the United States in 1986, ostensibly on grounds that the Soviets’ non-market Communist economy was incompatible with the aims and practices of the Western capitalist trading world.

Soviet economic statistics are inadequate, its currency is not convertible to Western currencies, and its prices are so thoroughly subsidized that the true cost of goods is unknown. On the other hand, other countries with non-market economies--Poland, Hungary and Romania, for example--are GATT members, and, with U.S. encouragement, China has been granted observer status--the first step toward full membership.

Washington remains opposed to a proposal that the Soviet Union be granted observer status in GATT because of fear that Moscow would use it for short-term propaganda and political advantage. However, Western European nations are increasingly sympathetic to this course, U.S. officials admit, particularly as Gorbachev continues his effort to change the Soviet image abroad.

Even so, U.S. officials caution that even if Washington decides to relax its restrictions, any changes are likely to be gradual--”more symbolic than actual”--at least for a few more years. Western analysts say the Soviet economy is so backward now that the Kremlin is likely to have difficulty bringing it into the 20th Century--let alone the 21st.

Still, senior U.S. policy-makers concede that the issue is one they must address, if only to maintain American credibility on the strategic technology issue among U.S. allies. “If we seem unreasonable on this, we will lose our ability to lead,” one strategist here said. “We’re going to have to be flexible in spirit, if not also in fact.”