Grain Diplomacy Feeding U.S.-Soviet Ties : Economic aid: President Bush said providing “humanitarian assistance” is being complicated by the disintegration of the central government.

Harried Bush Administration officials, pondering how to react to the most dramatic foreign crisis in a generation, quickly realized that they have only three available policy options--wheat, corn and soybeans.

Largely by default, agriculture has become America’s No. 1 foreign policy tool in dealing with the Soviet Union.

Although some U.S. allies are calling for more extensive assistance in response to the Soviet Union’s second revolution, the Bush Administration has been standing largely on the sidelines.

Faced with severe budgetary constraints at home and uncertain about the prospect for fundamental economic reforms in the Soviet Union, it has steadfastly refused to expand costly economic aid for the Soviets.

Except when it comes to agriculture.

So far, virtually the only overt act that President Bush has taken since the failure of last week’s hard-line coup was the acceleration of $315 million worth of loan guarantees backing up U.S. shipments of agricultural exports to the Soviets.

Now, as senior officials from the United States and its major industrial allies meet in London today to discuss how to provide more assistance, Western leaders are widely expected to agree to a broad expansion of food and humanitarian aid as an emergency move to help the Soviets through the coming winter.

Such assistance is expected to consist primarily of expanded credits or guarantees to help the Soviets buy grain, rather than outright donations of food.

“They certainly need food aid . . . and I think the West will be prepared to assist with that,” British Prime Minister John Major said Wednesday in Washington before he met with Bush in Kennebunkport, Me.

“They need it more urgently, more speedily, and perhaps in larger quantities” than the Western allies expected when they last reviewed Soviet aid programs at the London economic summit in July, Major said.

Bush acknowledged Wednesday that it would be important for his Administration to act in an “orderly” fashion in offering food aid to the Soviet Union. “It’s early now for that,” he said. “You don’t just kick off a decision.”

The President nevertheless took pains to avoid giving the impression that he is somehow opposed to such a move. “I hate to call it aid,” he said, saying that he prefers the term “humanitarian assistance.”

“Obviously the people of the United States, when it comes to food and keeping people from starving in the winter, want to help,” Bush said after finishing an afternoon round of golf.

Bush noted, however, that any effort to provide aid is complicated by the fact that “the republics and the center are all sorting out new relationships.” Referring to the recipients of such assistance, Bush said: “We want to know who they (are).”

To be sure, the White House and the Western allies have compelling reasons to focus their initial aid efforts on agriculture. Providing food and related technical assistance for agriculture represents a high-profile humanitarian gesture and signals political support for the Soviet democratic movement.

At the same time, it does not conflict directly with the Administration’s oft-stated opposition to providing long-term economic aid and investments until the Soviets reform their economy.

Expanded credits for Soviet grain purchases can be provided “without complicating other foreign policy considerations,” observed Sen. Richard G. Lugar (R-Ind.), an influential member of both the Senate Foreign Relations Committee and Agriculture Committee.

“The Soviets need everything,” added Robert Lawrence, an international economist at the Kennedy School of Government at Harvard University. “But food is the one thing that is easy.”

In the view of many analysts, the biggest problem with food assistance is that it is a stopgap measure that does little to help the Soviets address their fundamental economic problems. And with the splintering of the Soviet Union and its republics, there is also no way to ensure that the food will actually end up in the hands of hungry people.

The Soviet distribution system is in a state of chaos, and observers believe that at least one-third of the Soviet grain harvest will spoil rather than reach consumers. Under the current Soviet system, food prices are so out of whack that bread is cheaper than an equivalent amount of raw grain, so farmers feed their cows and pigs bread instead of corn.

As a result, analysts argue, food and humanitarian aid may be wasted unless the United States backs it up with an expanded program of technical assistance and investments to help upgrade Soviet transportation and distribution systems.

The State Department and the Agriculture Department have jointly planned to help the Soviets develop wholesale food distribution centers in Moscow and Kiev, but so far that project has not received federal funding.

“We should be in there with a massive amount of technical help and know-how,” said Graham Allison, author of a sweeping Harvard University proposal, called the “grand bargain,” that is designed to reform the Soviet economy with Western help.

Yet despite such criticism, grain continues to dominate the Administration’s Soviet aid agenda. Apart from agriculture, perhaps the biggest component in the White House aid package is a plan to provide a mere $20 million in technical assistance.

The Administration’s heavy reliance on agriculture has as much to do with domestic politics as it does with the logical development of America’s Soviet policy. Agriculture accounts for virtually all of Washington’s aid to the Soviets in large part because the United States finds it so rewarding to provide: Loan guarantees for Soviet grain purchases help expand American exports, although they can cost U.S. taxpayers if the loans later go sour.

“Loan guarantees and credits cost the taxpayers just as surely as direct aid to the Soviets,” said Robert Hormats, a former economic policy-maker in the Reagan Administration. “But they are much less controversial than just writing out a check because the farmers like them.”

Foreign food assistance programs have remained popular and typically sail smoothly through Congress because they have one of the most potent domestic constituencies--the farm lobby--behind them.

The Soviet Union has for decades been one of the biggest and best export customers for Midwestern farmers, regularly buying millions of tons of wheat, corn and soybeans to make up crop shortfalls.