Leaders Pledge to Help Soviets Shift Economy

Leaders of the world’s major industrial democracies, responding to President Mikhail S. Gorbachev’s plea for aid, pledged Wednesday to help the Soviet Union shift its economy onto a free-market basis, but they stopped short of providing large-scale financial assistance.

The Group of Seven told Gorbachev that their countries will provide extensive advice on economic reform, technical assistance in modernizing his country’s industry and support in integrating the Soviet Union into the world economy.

They were clearly reluctant, however, to provide the billions of dollars in assistance that Gorbachev had argued for to underwrite the initial, difficult stages of the Soviet reforms, promising only to look again at Moscow’s needs after it begins to implement its economic transformation.

“We all agreed to work together to promote the integration of the Soviet economy into the world economy,” British Prime Minister John Major, the chairman of the meeting, said later on behalf of the Group of Seven, “but we also agreed that our help would not have lasting effect unless there was a clear political will in the Soviet Union to create the environment for change.

“Our objective must be to help the Soviet Union in mobilizing its substantial resources. Outside assistance can make a contribution--it can help to catalyze the process--but the Soviet Union itself must mobilize its resources.”

The Group of Seven spelled out a six-point commitment during a dramatic four-hour meeting with Gorbachev at the conclusion of its annual economic summit conference, which had discussed many far-reaching issues of global importance but been overshadowed by the Soviet leader’s first appearance at the forum.

“There is a great deal that needs to be done,” Major said, explaining the Group of Seven’s failure to commit extensive funds to transforming the Soviet economy despite weeks of debate on how much assistance it needed and how much it would get. “This wasn’t the occasion to address, large-scale, nation-to-nation funding. . . . That’s a little way ahead.”

Gorbachev, who for two years had sought the historic meeting, accepted the decision as sufficient to open possibilities of much broader economic cooperation of the industrial democracies, including multibillion-dollar projects to develop Soviet natural resources.

The meeting was a breakthrough at the highest political level, he told a press conference with Major, and that in time should bring the economic assistance that Moscow will need as it tackles such tough problems as making the Soviet ruble convertible into other currencies.

“This wasn’t a meeting of finance ministers, but of heads of state,” Gorbachev replied when questioned about his failure to win pledges of financial assistance. “As we assess the political results, they go well beyond (the speculation) that was in the press.”

The six-point program announced by Major provides for associate membership for the Soviet Union in the International Monetary Fund and World Bank to provide it with immediate assistance in planning and carrying out its reforms and further advice on its plans to free prices, attract foreign investment and privatize large portions of its state-owned economy.

The seven--Britain, Canada, France, Germany, Italy, Japan and the United States--also promised help to modernize the Soviet Union’s energy industry, to convert much of the defense industry to civilian production, improve food distribution, increase nuclear safety and develop transport. They will provide further assistance in privatizing state enterprises.

For Gorbachev, however, the most important commitment was to develop the dialogue begun here, reviewing the Soviet Union’s progress in carrying out the reforms and institutionalizing the relationship to the point where both he and Major spoke of the “Seven Plus One.”

“We’re going through a difficult time now,” Gorbachev commented. “We shall find our way through this period, we will pull ourselves out, whether you help us or not. That’s not the point--we are not even talking about assistance here. We are talking about a new quality of cooperation when we become organically part of the world’s economic space.”

President Bush, addressing a separate press conference, also emphasized the importance of the continued dialogue between the other economic leaders and the Soviet Union.

“It is not going to be quick or easy to implement change in the Soviet Union,” he said. “It is enormous problems they face. But we believe that President Gorbachev has made an irrevocable commitment, and I would like to feel that this course that he has embarked on . . . is irreversible.”

Wednesday’s meeting turned into an intense exchange between Gorbachev and the Western leaders on the next stage of the Soviet Union’s political and economic reforms, with many hard questions on how he intended to carry them out and pointed advice on what a free-market economy really means.

“In keeping with the summit’s style, the emphasis has been on informal, frank and direct discussions,” Major commented. “Questions were put across the table, and answers were given.”

Although he had already outlined his program in a 23-page letter last week, Gorbachev began with a summary of the planned reforms--the Union Treaty that will lay a new constitutional basis for the country, the centrist political accord he is building with other leaders and the economic transformation that will end seven decades of state socialism.

The program presented by Gorbachev was based on the government’s stage-by-stage plan for stabilizing the Soviet economy and recommendations from outside economists for accelerating the shift to a market economy. Most of Gorbachev’s initial presentation was “conceptional,” according to Vitaly N. Ignatenko, his press secretary, but it also took into account some of the early foreign criticism.

Each of the other leaders had questions, some of them sharp. Bush and others pressed Gorbachev hard on the Soviet Union’s heavy military spending, which still consumes more than a fifth of the country’s national income. There was also a Bush question on the Soviets’ continued assistance to Cuba when their own economy was in such desperate shape.

The evolution of Soviet reforms, notably Gorbachev’s difficulty in overcoming conservative resistance to development of a free-market economy, prompted many comments, according to Soviet sources, about the need to implement the program he had laid down and move ahead more boldly.

And there was real reluctance, they said, to finance the two major funds--one for the import of about $10 billion in consumer goods to fill Soviet stores as prices are freed from state control next year and a second of perhaps $12 billion to support the ruble as the Soviet currency becomes convertible in 18 months to two years.

Never before had Gorbachev been questioned so closely on his reform plans, an aide said later; never had there been such a detailed examination by men who were his political peers.

“The pressure on the president was intense--he knew that the future of his reforms and, to some extent, the future of our country depended on his performance,” a Gorbachev aide said later.

At the end of the four hours, somewhat longer than planned, Gorbachev was exhausted and needed a brief rest before addressing the press conference with Major.