Japan to Offer $2.5-Billion Aid to Soviets Despite Isles Dispute

In a move to align itself with the United States and the European Community, Japan said Tuesday that it will offer the Soviet Union an aid package worth $2.5 billion.

The announcement, made by Chief Cabinet Secretary Misoji Sakamoto, amounted to a step away from Japan’s longstanding policy of insisting that Moscow return the northern islands that the Soviets seized after the end of World War II as a precondition for major aid. The package, however, failed to include any grants and is subject to a host of preconditions.

News of the move came on the eve of a visit here today by Treasury Secretary Nicholas F. Brady and a meeting of the finance ministers and central bankers of the seven advanced industrialized democracies in Bangkok on Friday and Saturday. It also was timed to pave the way for a trip Saturday to Moscow by Foreign Minister Taro Nakayama.

The European Community on Monday offered Moscow $1.5 billion in new credit guarantees for the purchase of food and medicine, bringing the total EC food assistance to $2.4 billion. The United States has offered $2.5 billion in agricultural loan guarantees.

But Japanese Foreign Ministry officials insisted that Tokyo’s loans are not being offered in the hope of winning a Soviet promise to return Kunashiri, Etorofu, Shikotan and the Habomai island group off the northeast coast of Japan’s northernmost main island of Hokkaido.

Rather, Sakamoto described the move as designed to encourage Soviet moves toward democracy and a market economy. “We hope this will help create a better environment for Japan-Soviet relations,” a Foreign Ministry official told reporters.

But the loans will be contingent upon Soviet acceptance of four conditions, officials said. Moscow must: use a $100-million loan from the Japan Export-Import Bank that Japan offered last December for the purchase of food; assure Japan that it will eventually repay $350 million in trade debts; guarantee repayment of the new loans, and ensure that distribution of supplies purchased with the new loans will be carried out properly. The conditions are expected to delay implementation of the loan package.

Sakamoto said Export-Import Bank credits of $500 million will be offered to enable the Soviets to buy food, medicine and transportation equipment, such as trucks, for humanitarian relief, while another $200 million in Export-Import Bank financing of trade deals will be made available. The remaining $1.8 billion would come in the form of government guarantees for private Japanese export deals.

A high Finance Ministry official was reported separately to have told Japanese reporters that Tokyo also is willing to accept a temporary freeze on Soviet repayment of $70 billion in foreign debts. The subject, the official said, will be discussed at the G-7 financial officials’ meeting in Bangkok.