NEWS ANALYSIS : Gorbachev Plea May Sway Bush to Extend Help

After a winter-long freeze, the Bush Administration’s relationship with Soviet President Mikhail S. Gorbachev has suddenly warmed up with an urgent new focus: Gorbachev’s desperate pleas for help to reform his country’s moribund economy.

Gorbachev’s appeals have caught President Bush and his aides in a dilemma: They are skeptical of the Soviet leader’s ability to turn his state-owned economy into a capitalist free market--but they don’t dare turn him down, lest they miss the last chance to transform the Communist giant that he leads.

“We are in a critical time here,” Bush told reporters last week. “Gorbachev, I am still convinced, is working the reform path. . . . I’m not going to pull the rug out from under him.”

Another official said the economic issue has crystallized a major, slowly evolving shift in U.S. policy toward its Cold War adversary. “The focus is no longer the traditional areas of arms control, regional issues and human rights,” he noted. “The focus now is the future of the Soviet Union itself.”

Bush aides will meet with a team of special envoys from Gorbachev this week to hear their latest economic reform plans--and their aid requests--in detail. Soviet economists have bombarded the Administration with proposals, including one worked up with American scholars at Harvard University’s John F. Kennedy School of Government, but this week’s meetings will be the first official word from the Kremlin itself.

So far, Bush has attempted to parry Gorbachev’s pleas for direct aid by saying he is ready to help the Soviet leader any way he can except by spending money, which aides bluntly reject as “money down the drain.” But Administration officials said the United States is willing to work with its allies to devise a joint project that would help the Soviets enact genuine economic reform--if the Kremlin takes some hard steps first.

“If the Soviets don’t make fundamental moves toward real reform, there’s going to be chaos,” a State Department official warned. “The question is: What can we do to help them get there? And if they do the right things . . . can the West stand idly by while they take the painful medicine of reform?”

“The right things,” officials explained, include three fundamental steps that Gorbachev has discussed in the past but repeatedly rejected: deregulating prices, now set by the state, to allow the market forces of supply and demand to work; permitting most farmers to buy or lease land and market their products freely, instead of depending on huge state-run farms. and ending restrictions on buying and selling the Soviet currency, the ruble.

U.S. and Soviet officials have discussed all those ideas in the past, without results. But Administration officials said the climate has changed during the past month, for several reasons:

First, after embracing conservative policies and freezing most discussion of serious economic changes for four months--and seeing liberals, led by Russian Republic leader Boris N. Yeltsin, win more popular support--Gorbachev has veered back to the side of reform.

Second, after cracking down on separatists in the three Baltic republics and clashing with Yeltsin, Gorbachev has opened negotiations with most of the 15 Soviet republics.

Third, with evidence mounting that the Soviet economy is heading toward collapse, Gorbachev has stepped up his appeals for help. The CIA reported this month that the Soviet economy is likely to shrink this year by at least 10% and perhaps as much as 30%--a decline comparable to that of the United States in the Great Depression of the 1930s.

So far, Gorbachev’s pleas have been unsystematic and broad. He has spoken twice of aid in the amount of “100 billion” without saying whether it was a serious figure, or even whether he meant rubles or dollars. His one specific request has been for an invitation to the London economic summit of the seven largest industrial democracies--the United States, Japan, Germany, France, Italy, Britain and Canada.

But U.S. officials regard that dimly. “We have not had any significant official communication on any of this,” an Administration official noted with impatience.

Bush has tried to be warm to the general idea of economic reform, but he has been noticeably cool to Moscow’s specific requests. He observed last week that “a hundred billion is a large piece of change,” and Administration strategists dismissed the figure of $30 billion a year, floated by other Soviet officials, as equally unrealistic. As for the idea that Gorbachev might meet with the seven Western heads of government in London, Bush said he was open to the idea but added: “We don’t want to just have some gesture that doesn’t help the struggling Soviet economy.”

Bush and other U.S. officials are especially firm when they insist that there will be no large-scale credits for Moscow--at least not until reforms have gone a long way. Soviet officials haven’t decided how much money they want, or what they would use it for. But American experts assume that they would want the credits for the same purposes that Poland used the aid it received when it launched economic reforms: stabilizing its currency, financing the privatization of large enterprises, instituting a “safety net” of social programs for those thrown out of work by the changes and buying imported consumer goods to soften the hardship of the transition.

“The main question is effectiveness: Is the money going to be wasted?” the State Department official said. “At this point, what they’re looking for is massive credits to fill the shops (with imported consumer goods). But that doesn’t make sense in terms of reform; it only delays the pain they will have to undergo. And the scale of imports they would need is pretty awesome.”

Still, he said, the United States and its allies are more willing to discuss the possibility of credits than they were a year ago, when the Western heads of government rejected the idea at the Houston economic summit. For one thing, the Soviet economy is in worse shape now. Food shortages are more likely this year than they were last year. For another, some Western officials believe that a promise of credits to be delivered only after specific reforms are enacted might strengthen the reformers’ hand in the Kremlin economic debate.

There is one more problem: Gorbachev and other Soviet reformers have begun to view the issue of credits as a major signal of whether the West is sincere about helping them succeed. “For many Soviet politicians, this has become a central test of the Western commitment,” one official said. “We need to convince them that other kinds of help, like technical assistance, are really what they need.”

For the same political reason, the London economic summit has turned into something of a deadline for the West to come up with an aid package. Officials won’t say so for the record, but Bush is likely to offer Moscow a package of “technical assistance” (mostly advisers), associate status at the International Monetary Fund and most-favored-nation trading preferences by the summit’s opening--all low-cost items.

Reflecting the new importance of the economic agenda, the London summit has come to overshadow the still-unscheduled Bush-Gorbachev summit meeting on the U.S.-Soviet calendar. Officials had hoped to hold the Bush-Gorbachev meeting summit in late June in Moscow. Its centerpiece was to be the formal signing of the long-awaited strategic arms-reduction treaty (START), with a symbolic side trip for the President to one of the other Soviet republics that U.S. officials are now dealing with directly.

A long-running deadlock over the meaning of the 1990 treaty to reduce conventional armed forces in Europe has blocked that summit. The Soviet military contends that equipment assigned to its marines isn’t affected by the treaty, but the United States and others other signatories disagree.

But the remarkable thing, U.S. officials said, is that the delay in completing those arms-control pacts--the heart of the “old” U.S.-Soviet agenda--has created so little alarm. “We’re going to get there,” one senior official said. “It’s clear that both sides are committed to these agreements. . . . The Soviets seem to be trying actively to reach a deal.”

Instead of arguing how to avoid destroying each other, in short, officials in both Moscow and Washington are now debating how to keep the Soviet Union from destroying itself.

“This isn’t a decision you can make over a weekend,” one official said. “The debate will center on what is the most effective way for the West to further Soviet reforms. But we start from the same place: Nobody wants to see the Soviet Union break into a thousand pieces.”

Times staff writer Karen Tumulty contributed to this story.