U.S. Approves $1.5 Billion in Soviet Food Aid

The United States and 12 Soviet republics have reached agreement on $1.5 billion in economic aid to help the Soviet Union feed itself through the winter, with most of the money coming from private loans guaranteed by the U.S. government, the White House said Wednesday.

Under pressure from members of Congress reluctant to assist other nations when the United States faces uncertain economic conditions, the Bush Administration portrayed the program as one of domestic aid, because the loans will be used to buy U.S. grain, and thus boost the domestic economy.

“This is not a foreign program,” said Agriculture Secretary Edward R. Madigan. “This is a domestic program that has as its intent moving U.S. grain out of the U.S. market for the benefit of American farmers who will make these sales and then will spend that money in the American economy--buying pickup trucks and buying other things that are manufactured in urban areas.”

The new aid package was announced as the House ended months of delay by approving President Bush’s request to grant most-favored-nation trading status to the Soviet Union and voted to normalize trade relations with the Baltic states, Czechoslovakia and Hungary.

The package involves $1.25 billion in federally backed loans and $165 million in direct grants for food assistance. Funds for agricultural education and other programs account for the balance.

The terms of the agreement reflect the continuing fragmentation of the Soviet Union. It holds the central government, its Foreign Trade Bank and each of the 12 individual republics responsible for repaying the $1.25 billion in loans.

But by reaching agreement with the Foreign Trade Bank--an organ of the central government--and with the Inter-Republic Economic Committee, made up of representatives of the republics, the Bush Administration sought to give the struggling central Soviet government an injection of authority, although the arrangement also expands Washington’s dealings with the republics.

In fact, said one Administration official, making the three segments jointly responsible for the loans is “the best possible solution from our perspective, because we want to get repaid.

“If 11 don’t pay, the 12th guy has to,” Madigan added.

The agreement is likely to be signed today in Moscow.

The program specifies that at least some of the money must be earmarked for feeding Armenia and the Ural industrial region of the Russian Federation, two areas expected to be hit by food shortages during the winter.

Other elements of the package will provide technical aid in food production and distribution by establishing a model farm in the St. Petersburg area run by U.S. farmers and development of wholesale markets in Moscow and Kiev to teach farmers how to market their products and determine prices.

The loans will be used to pay for feed for chickens and livestock, rather than for such foodstuffs as wheat. This arrangement, officials said, is intended to help overcome hoarding problems that hampered distribution of more readily usable grains. And, they said, as long as the loans by private banks are repaid, the costs to the U.S. taxpayer will be limited.

Providing funds for feed grains, Madigan said at a news conference at the White House, will mean the difference “between them being able to maintain their (livestock) herds or having to slaughter them.”

Including the newly announced aid, the United States has provided $4 billion in food aid to the Soviet Union and its republics since January. Madigan held out the possibility that more assistance would be offered after the winter.

Today’s plan, which requires no further action, received mixed reviews in Congress.

Sen. Patrick J. Leahy (D-Vt.), chairman of the Senate Agriculture Committee, apparently anticipated a failure by the Soviets to repay the loans. “We cannot expect American taxpayers to send billions of dollars in development assistance to the Soviet Union when our bridges are crumbling, our schools are under-funded and our unemployment benefits are running out,” he said.

But Senate Minority Leader Bob Dole (R-Kan.) said: “We have benefited enormously by the dramatic changes in the Soviet Union. . . . So it is in our concrete, material interest . . . to do what we can to keep the Soviets on the right track.”

Meanwhile, in approving most-favored-nation status for the Soviets on a 350-78 vote, the House gave Moscow the benefit of the same low tariffs enjoyed by almost every other nation.

California Rep. Christopher Cox (R-Newport Beach), who opposed the legislation, said: “Let’s not subsidize communism--let’s end it.”

In a separate 407-21 vote, the House extended most-favored-nation trading rights to Czechoslovakia, Hungary and the newly independent states of Latvia, Lithuania and Estonia. The measures must be approved by the Senate and signed by Bush before taking effect.

America’s Plan to Assist the Soviets

Highlights of the President’s food aid package to the Soviet Union:

Amount Approved: $1.25 billion in U.S.-backed loans and $165 million in grants.

Purpose: The loan will enable the Soviets to purchase U.S. food, mostly grain for livestock feed. The grants will be used for emergency food purchases and technical assistance.

Cost: Only the $165 million in grants will be borne by American taxpayers.

Benefits: The farm economy will be stimulated by providing an export channel for American grain.

Repayment: The Soviet central government and the 12 Soviet republics are being held responsible for the debt.

Requested Amount: Soviet President Mikhail S. Gorbachev had asked for $2.5 billion in loan guarantees and $1 billion in humanitarian help.

Distribution: For the first time, the U.S. aid will go directly to the 12 republics rather than to the central Soviet government. The credits will be made available through the Commodity Credit Corp. in four installments--$500 million immediately and $250 million in February, March and April.

Total: The package brings to nearly $4 billion the amount the United States has committed in loan guarantees since January for Soviet purchase of American farm products.