Sanctions Won’t Help Soviet Republics

It’s a time to wonder whether all hope is dying. While the world is focused on imminent war in Iraq and Kuwait, Soviet army tanks ride down on unarmed civilians in Vilnius, Lithuania, and seem to cancel the promise of a new era of peace and economic well-being.

Nor is Vilnius the first crackdown on independence in the Soviet republics. In earlier incidents, the army has opened fire in Tbilisi in the Soviet state of Georgia, and in Baku in Azerbaijan. With 14 dead in Vilnius, the toll is beginning to rival what the Chinese army did in Tien An Men Square in June, 1989.

Yet world reaction to Lithuania has been muted. The European Community voted to go ahead with $1 billion in food aid to the Soviet Union while threatening to cut off $520 million in technical aid. The United States is proceeding with $1 billion in federal loan guarantees for food shipments.

Economically that makes sense. The federally guaranteed loans--from U.S. banks--pay for corn, wheat, soybean meal and poultry exports and thereby help U.S. farmers and companies. That’s in contrast with the grain embargo of 1980-81, which hurt U.S. farmers without slowing down the Soviet tanks that were then invading Afghanistan.

But economics is not the point, of course. Morality is. Should the West be helping the Soviet Union as it turns away from reform to what looks like a rerun of Stalinist terror? Wouldn’t cutting off credits and food shipments force President Mikhail S. Gorbachev to call off the army and give reform and modernization a better chance?

The answer is no; cutting off credits and food wouldn’t help, and keeping commerce going supports the forces calling for reform in the Soviet system. There are limits, of course; continued murder can’t be tolerated.

But the truth is that commercial sanctions don’t work on the Soviet Union because it’s already cut off from the world’s capital markets as a deadbeat. A little over a year ago, the Soviets began running late on payments to suppliers and bankers. So banks cut them off, and industrial suppliers will now only ship for cash. Government credits, given for political reasons, are the only kind of international finance the Soviets can get today, says Klaus Friedrichs of Washington’s Institute of International Finance, a research organization for the world’s banks.

Yet credit difficulties haven’t stayed the hand of the army and other forces opposed to reform.

Nor would cutting off food shipments. There is plenty of food in the Soviet Union--there was a bumper harvest last fall. But food is being held back from the state distribution system. Some is going into the black market, and some is being destroyed by anti-reform forces to foment chaos and strengthen the case for a crackdown on liberty. Matters are seldom simple in the land Winston Churchill called “a riddle wrapped in a mystery inside an enigma.”

Thus, this week, in the aftermath of Sunday’s events in Vilnius, Soviet reformers--young politicians and economists of the Russian Federation and others among the 15 Soviet republics--have been on the phone to friends in the United States urging that business contacts go forward.

“There are new Soviet leaders traveling the world, discussing and planning new directions for their economy,” says James Wilburn, dean of the business school at Pepperdine University, which welcomes such Soviet travelers.

“They believe the society has come too far to go backward,” Wilburn says.

The amount of U.S.-Soviet business so far is not especially large, although in the right atmosphere it can grow rapidly. Last year, U.S. exports to the Soviet Union may have doubled to $4 billion. Those totals severely understate the total Soviet business done by U.S. multinationals, often shipping from overseas facilities. That total could be almost $30 billion, according to one American executive.

The potential is enormous if an economy of 280 million people is allowed to modernize. That is why about 20 U.S. energy firms hope to have a pavilion at a Moscow industrial fair in mid-February, looking for opportunities to help the Soviets develop oil and gas. And that is why the International Monetary Fund is contemplating a $20-billion loan to the Soviet Union.

While furthering commerce, they hope to support the cause of a new Soviet Union, one that is now struggling to be born.

George F. Kennan, the architect of U.S. policy toward the Soviet Union in the postwar period, writes in a new article in Foreign Affairs that the Soviets are going through a kind of triple bypass. All at the one time, they are trying to go from Communist Party rule to free elections, from a centrally planned economy to free markets and from central control of national groups--Russians, Ukrainians, Armenians, etc.--to a form of independence for the 15 republics.

That kind of change threatens a lot of people--a market economy undermines state planners and functionaries, independent republics undermine the Soviet state and weaken the authority of colonels and generals, such as those who shot to kill in Vilnius.

Change so historic will take time, writes Kennan, and outsiders can play only a minor role.

But they can play an encouraging one--keeping in mind that the change to work for in the Soviet Union and the Middle East as well is from despotism to democracy.