Gorbachev’s Woes to Shape Summit : Diplomacy: President Bush may want to concentrate on older arms control issues, but the troubled Soviet leader’s internal agenda could be more pressing.

Marking a watershed between the Cold War and post-Cold War eras, this week’s U.S.-Soviet summit will have a two-part agenda: It will cover “old” business, especially arms control, and “new” business, particularly the shape of a more unified Europe.

President Bush’s first priority will be to focus on the old issues. “We want to get these deals finalized,” he said of agreements made in the strategic arms reduction talks (START) and other arms negotiations. “I don’t want to have two ships pass in the night.”

Bush’s priorities may be overshadowed, however, by internal developments in the Soviet Union--Lithuania’s drive for independence and President Mikhail S. Gorbachev’s reluctance to undertake radical economic reforms in the face of increasing social unrest.

“Serious instability in the Soviet Union is much more thinkable than it was six months ago,” when Bush and Gorbachev last met, a senior Administration official said. Specifically, summer strikes could ex acerbate the increasing ethnic battles, hoarding and struggles for independence, he added.

“To a degree that we have never seen before, this summit and U.S.-Soviet relations are affected by preoccupations by Soviet domestic affairs,” the official argued.

Even the personal rapport between Bush and Gorbachev may have changed since their Malta meeting in December. Asked whether their relationship had cooled, Bush said last week: “I’ll have to wait and see.”

The new circumspection reflects both uncertainty about Gorbachev’s true situation and a division within the Administration over a fundamental question of strategy: While all agree that Bush is heading into this summit holding the best hand of cards of any recent U.S. President in a meeting of this kind, some U.S. officials think he should now distance himself from the Kremlin leader and begin embracing some of Gorbachev’s opponents, who favor faster democratization and economic reform.

For this summit, at least, the President’s answer is “not yet.” Bush will continue to link U.S. interests with the success of Gorbachev’s perestroika program of political and economic restructuring, U.S. officials said.

According to Secretary of State James A. Baker III, the single most important priority of this week’s summit will be to break the impasse over slashing conventional forces in Europe (referred to as CFE)--the armed forces of the Warsaw Pact and the North Atlantic Treaty Organization--that have faced each other across the Iron Curtain for 45 years.

The Soviets appear to be having second thoughts about the CFE reductions, which call for roughly four times as many cuts by the Warsaw Pact as by the NATO alliance. They also are beginning to balk at a proposed requirement that any discarded equipment--more than 100,000 tanks and other weapons on the Soviet side--be destroyed rather than just withdrawn.

“Those CFE negotiations were begun two years ago, a vastly different time--on a different planet, almost--before the Warsaw Pact and the entire Soviet position in East Europe collapsed,” one Administration analyst said. “The Soviets have to convince themselves, or be convinced, that they will be better off with a treaty than without it. It will be a close call whether they buy it (the CFE treaty) now.”

Difficult as it may be for him to accept, Gorbachev’s willingness to go ahead with the CFE treaty is seen by Washington as the “litmus test of Soviet intentions” for the new Europe. If Moscow refuses to go forward with the deal, it will “send a bad signal,” Bush told a news conference here last week.

But the bargaining is not going easily. Earlier this month, Baker took Moscow a package of ideas for resolving outstanding CFE issues and offered to present them to NATO to use as the basis for alliance-wide proposals for the talks. The Soviets showed no interest.

According to one official, Bush will tell Gorbachev that completion of a CFE accord is the “fundamental precondition” for moving ahead on proposals that the Soviets want, ranging from an all-European summit and a push toward a European-wide security system to cuts in NATO short-range nuclear weapons in Europe.

“He won’t expect Gorbachev to compromise on the spot on aircraft, tanks and the other categories,” the official said. “And he’ll say we understand Soviet concerns and are prepared to seek reasonable compromises. But what he wants is a new impetus given to the negotiations.”

Closely linked to conventional force cuts is the question of where a newly united Germany will fit. Bush hopes to persuade Gorbachev that a reunified Germany should remain a member of NATO, within its integrated command structure, as the best way to control the powerful new state emerging in the center of Europe.

But Gorbachev opposes participation by a unified Germany in NATO’s military structure and wants to place a ceiling on German military strength before unification takes place. He also wants a breathing space of several years before the Soviets must withdraw their forces from East Germany. And the Soviets want major economic help from West Germany as part of the price for accepting East Germany’s absorption by the West.

A second set of summit issues will deal with completion of the bilateral arms agreements that have been under negotiation for so long. Although some key issues remain outstanding, the two leaders are expected to announce agreement on the fundamental principles of the START nuclear treaty. The accord, which calls for cutting the offensive nuclear arsenals of the two nations by one-third to one-half over the next seven years, should be ready for signing before year’s end.

Bush and Gorbachev also will initial an agreement to begin dismantling their chemical weapon arsenals--although details on verification must still be worked out. They also will sign protocols that should bring into force two old treaties limiting the power of underground nuclear weapon tests.

Third on the agenda will be regional or Third World issues, such as ending the conflict in Afghanistan.

Finally, Baker said, will be “the area of human rights and democratization”--a much-broadened category that enables the United States to bring up not just emigration and the plight of political prisoners but also Baltic independence and demands for greater autonomy by Soviet republics. These are issues that Moscow could otherwise contend are strictly internal affairs.

Baker predicted that Bush will spend “a good bit of time” discussing Lithuania, Latvia and Estonia, “emphasizing that their right to self-determination cannot be denied.”

Bush also will seek to go over the economic situation in the Soviet Union, which U.S. experts believe is on the brink of serious decline--certain to get worse before it gets better.

Ed A. Hewett, a Brookings Institution expert who briefed Bush on the Soviet economy last week, blames Gorbachev for five wasted years of inadequate reforms. The Soviet leader is finally facing up to the need for a coherent program, he said, but meanwhile “the population has lost faith in the leadership’s ability to do anything well.”

Beyond the formal agenda items, what is being called “the flavor of the summit” will be affected primarily by Lithuania and the growing political and economic turmoil inside the Soviet Union. Lithuania’s March 11 declaration of independence is fast replacing Jewish emigration as perhaps the most rancorous issue in U.S.-Soviet relations. Under pressure from Baltic supporters here, key members of Congress have told the White House that most-favored-nation (MFN) trading status for Moscow would be “a hard sell” as long as Gorbachev bullies Lithuania.

However, Gorbachev’s retrenchment on domestic reforms may be an even more significant factor in deciding whether U.S.-Soviet relations will deteriorate in the future. With the outlook worsening daily, the Administration is coming under increasing pressure to begin distancing itself from Gorbachev on other issues as well. Hard-liners argue that Gorbachev’s train has run out of steam and that more democratic forces among Gorbachev’s critics in the Soviet Union deserve added American support.

The question now is not whether Gorbachev will last, one senior Administration analyst said, but “can he stay relevant?” And, he added, “Can he manage what he’s unleashed?”

The debate within the Administration has surfaced publicly in comments by non-government experts on Soviet affairs.

“We have too many eggs in one basket,” complained Dmitri Simes, a Soviet specialist at the Carnegie Endowment. He compared the Administration’s “friendly obsession” with Gorbachev just as the Soviet leader is losing ground at home to U.S. support for Egypt’s late President Anwar Sadat a decade ago just before Sadat, who made peace with Israel, was assassinated.

Simes said the United States, by identifying closely with Gorbachev, is losing credibility with Soviet political forces that are demanding more democracy and free-market reforms than Gorbachev is proposing. And, Simes added, it is also losing credibility with the Lithuanians and other ethnic groups seeking independence.

But others point out that, if the United States switched support to national independence movements and more radical democratic forces in the Soviet Union, American policy could become hostage to a long, bitter and possibly bloody process now under way there--one that is far more important to the Kremlin than the dissidents and refuseniks of the 1970s ever were.

Fairway PRESIDENCY: Rest and relaxation top Bush’s pre-summit agenda. A11