U.S., Soviets Set Frame for Trade Hike
The Soviet Union’s planned economic reforms will put the country on the road to capitalism and make it a major growth market for U.S. exports, a delegation of American businessmen said Thursday after four days of talks with Soviet officials.
“Capitalism is clearly coming to the Soviet Union, and it is equally clear that Wall Street will come to the Soviet Union shortly thereafter,” Donald B. Marron, chairman and chief executive of Paine Webber Group, Inc., declared. “I think that early in 1991 major U.S. investment will begin here.”
Buoyed by a warm welcome from President Mikhail S. Gorbachev, the business delegation, led by Commerce Secretary Robert A. Mosbacher, seemed willing to overlook the Soviet Union’s growing economic chaos and accept assurances from Gorbachev and others that the envisioned reforms will mean big deals for the United States.
“Their economy has some real problems,” Mosbacher said. “No one is claiming that this is a robust economy, but they have the will to fix it.”
After years of high hopes but relatively little business with the world’s second-largest economy, the United States can now expect the rapid expansion of ties, including fast growth in two-way trade, unprecedented sales of U.S. technology and extensive investment in the country’s redevelopment.
“President Bush told us to do all the business that is appropriate and profitable,” said Dwayne O. Andreas, chairman and chief executive of Archer-Daniels-Midland Co., an agricultural commodities firm in Decatur, Ill. “That should allay the fears of our corporate people who have been very reticent about doing business with the Soviet Union during the Cold War.
“President Gorbachev has now promised us a law allowing full foreign ownership and management of companies here. . . . And when the emigration law (allowing free emigration) is passed in the next two months--when that last barrier is removed--there will be a surge of interest, enthusiasm and enterprise here.”
Meeting with the 15-member U.S. delegation for nearly three hours in the Kremlin, Gorbachev said the Soviet Union is committed to establishing a market economy and is nearing completion of its transition program.
“We are counting on our forces and are not copying someone else’s models,” Gorbachev told the group, according to the news agency Tass. “But we realize that it would be short-sighted to ignore the experience of economic development in the United States. Entering the stabilization period aimed at revitalizing our economy, we are ready to draw foreign, including U.S., investments on mutually beneficial terms.”
The main spur to U.S.-Soviet trade, which totaled just under $5 billion last year, including $4.3 billion in U.S. sales, is expected ratification of the trade agreement signed in June at the Soviet-American summit conference in Washington. This would reduce tariffs on Soviet goods sold in the United States and permit the use of government-backed credits to finance sales to the Soviet Union.
Mosbacher said a wide-ranging effort is under way to help the Soviet Union revamp its economy and speed the transition from central planning to market forces, to integrate the Soviet Union into world trading patterns and to improve the conditions for U.S. companies wanting to do business here.
To give an impression of the size of the market and the potential for U.S. exports, the businessmen later ticked off the deals they are negotiating or have just concluded:
* Chevron Corp., the San Francisco-based oil company, expects to conclude a joint venture contract by the end of the year with the Soviet government to develop a huge oil field, perhaps the largest discovered in the last decade, on the northeast shore of the Caspian Sea.
Other U.S. oil companies, including Atlantic Richfield Co. of Los Angeles, Pruet Oil Co. of El Dorado, Ark., and Louisiana Land & Exploration Co. of New Orleans are discussing smaller projects.
* United Telecom Inc., parent of the Sprint telecommunications system, will install electronic packet-switching equipment that will expand the Soviet Union’s communications capacity, especially its ability to send and receive computer data, faxes and high-speed telexes.
* Transcisco Industries Inc. of San Francisco is expanding its highly profitable venture with Soviet and Finnish partners on specialized railway cars to carry petroleum products. The joint venture now has 1,500 tank cars and is investing $50 million to buy 1,000 more.
* Dallas-based Dresser Industries Inc., which wants to sell more oil and gas equipment here, is exploring the possibility of joint production with a Soviet plant that John J. Murphy, Dresser’s chairman and chief executive, described as one of the best equipped and most modern in the world.
* James D. Jameson, chairman of Glenair International of Del Mar and president of the Young Presidents’ Organization, said he is establishing a venture capital business with a Soviet partner, an entrepreneur like himself, to finance franchise deals, real estate development and the export of Soviet technology to the West.
Kenneth T. Derr, Chevron’s chairman and chief executive, acknowledged that the current economic turmoil had raised questions about whether to proceed with what would be the biggest joint venture in the Soviet Union, but that the company was pushing to complete the deal by the end of the year.
“This is not the easiest time to be negotiating a major joint venture,” Derr said, “but getting in early has some significant potential advantages.”
Mark C. Hungerford, chairman and chief executive of Transcisco, which has been doing business here for four years and making money for a year and a half, said his Soviet partners had learned U.S. business procedures very quickly and had developed a great entrepreneurial drive.
“I wish I had more partners in the United States who knew what they wanted to do, as our partners here do,” Hungerford said.
In speaking with Gorbachev and other top officials, the American executives had run through a long list of their problems in doing business with Moscow, starting with the difficulty they had for much of this year in getting paid. At one point, the Soviet Union owed American companies more than $200 million, Mosbacher said, but this figure has been brought down to less than $100 million in recent weeks.
However, in a sharp reminder that some problems remain unresolved, Mosbacher told William T. Esrey, the United Telecom chairman, who had just announced Washington’s approval for the installation of the switching equipment here, that the Commerce Department had not, in fact, issued the licenses and that their issuance would depend on the answers to more questions about the equipment’s capabilities and use.
“It is premature to say that (permission) will be granted,” Mosbacher said.
Other members of the U.S. delegation included Lodwrick M. Cook, chairman of Atlantic Richfield Co.; Donald M. Kendall, chairman of the executive committee of Pepsico Inc.; James W. Kinnear, president and chief executive of Texaco Inc.; Alex J. Mandl, chairman of Sealand Service Inc.; Chesley Pruet, president of Pruet Oil; H. Leighton Steward, chairman of Louisiana Land; Leonard Sylk, chairman of Shelter Systems Group, and James Hayes, publisher of Fortune magazine.
CIGARETTES TO THE SOVIETS: Two U.S. tobacco companies will send billions of cigarettes to the Soviet Union. D2
