G-7 Links Aid to Russian Reform : Summit: Yeltsin, in a 3-hour session with leaders of major industrial nations, commits himself to real progress. $680 million is pledged for nuclear plant safety.

Western leaders, pleased to see Russia at last on the road to democracy, promised President Boris N. Yeltsin billions of dollars in economic assistance Wednesday to support his reforms but warned that they expect tangible results.

Although the Group of Seven (G-7) major industrial nations largely reaffirmed earlier pledges of $24 billion, the allied leaders also offered Yeltsin “a genuine and comprehensive partnership” as he works to move his country from a centrally planned and state-owned economy to one based on market forces and entrepreneurship.

“I expected nothing more, and I would have accepted nothing less,” Yeltsin declared, beaming with delight over his warm reception at the world’s most exclusive club.

Canadian Prime Minister Brian Mulroney praised Yeltsin for the political and economic reforms he has already undertaken. “I want to welcome you to the search for a safer and better world,” Mulroney declared, telling Yeltsin that his reception in Munich was a vote of confidence in his reforms.

With that, the bargain was struck: Russia’s commitment to democracy and a free-market economy will be underwritten by the West in return for real progress, not endless compromises and retreats from the difficult decisions Russia must make in breaking with seven decades of communism.

In their communique, the G-7 leaders of the United States, Britain, Canada, France, Germany, Italy and Japan outlined a 10-point program under which their countries would release the $24 billion in assistance that was promised Russia in April but that largely has been held up pending agreement on how it would be used.

They also pledged a further $680 million for safety improvements in Soviet-designed nuclear power stations, with additional funds expected. And they established a consultative group under Group of Seven auspices to coordinate assistance to Russia, also promising Moscow further technical assistance in its efforts to establish a free-market economy.

“Your success is critical to our success,” German Chancellor Helmut Kohl told the Russian president, voicing the conviction of all the leaders that, with the breakup of the Soviet Union and the collapse of communism, the world has a historic chance to emerge finally from an era of confrontation.

“We have to help Russia get on its feet,” French President Francois Mitterrand said after Yeltsin had outlined his country’s massive economic problems.

The extraordinary three-hour dialogue around a small, oval-shaped table in the Room of the Four White Horses in the Residenz, the tradition-laden home of the Bavarian monarchs, was described by senior officials as warm and friendly--but equally frank and candid.

“Questions were posed, and questions were answered,” one official said, as Yeltsin sought credibility for his reforms, his government and himself.

Contrasting Yeltsin’s participation in this year’s Group of Seven summit with that of former Soviet President Mikhail S. Gorbachev last year in London, Kohl said, “He is not a poor relation visiting richer relatives,” and he instead characterized Yeltsin as “our partner.”

Yeltsin, speaking at a press conference after his talks with the G-7 leaders, made clear how crucial he considers Western assistance for the reforms in Russia--and how high the stakes are for the world:

“Without support to Russia during this period, (the reforms) won’t work. And if they were to collapse, it would be felt throughout the world economy. . . . This would be too high a price--it would be whole orders of magnitude more than is now being invested in our democracy.”

In a performance that awed some of the world’s toughest politicians, Yeltsin sought support for Russia’s forced march to a market economy, including the selloff of state-owned enterprises, the breakup of collective farms and the opening of stock markets--all amid an economic collapse comparable in depth to America’s Great Depression of the 1930s.

“I regret economic reform was not initiated six years ago,” Yeltsin said, alluding to the repeated failure of then-President Gorbachev to move ahead, “but we cannot turn the clock back. . . .

“We have had a firm march for six months, and there is already no turning back. But six months for Russia is really very little. We need to change much more than rules--we need to change the thinking of the people.”

With acting Russian Prime Minister Yegor T. Gaidar, the architect of the reforms, at his side, Yeltsin discussed his government’s efforts to control its mounting deficit, now estimated to be as much as 20% of the country’s total output; to bring down inflation that is still running at 25% a month, and to deal with unemployment expected to reach one out of five families by 1993.

Seeking deferral of the $70.7 billion in foreign debts that Russia inherited from the old Soviet Union, Yeltsin thanked the Group of Seven for the “breathing space” it recommended, although the actual terms must still be negotiated with Russia’s creditors.

And, to the surprise of the Western diplomats and economists, Yeltsin suggested that some of that debt might be turned into foreign investment in the Russian economy.

“We could go boldly for a debt-for-equity swap--buildings, factories, mines, oil fields,” Yeltsin said, suggesting that Russia would sell these assets to foreign investors to pay its foreign debts and expand the overall base of foreign investment in his country’s economy.

British Prime Minister John Major immediately interjected: “What you have just said is the most important step of this trip. It would make this whole meeting worthwhile.”

Earlier, Major had warned Yeltsin about the dangers of containing hyperinflation, which he described as “the seed corn of revolution.”

More than once, Yeltsin pleaded for additional foreign investment, promising to remove the still-substantial barriers to Western firms wanting to develop subsidiaries in Russia.

“A billion dollars or $24 billion won’t save Russia,” he said, referring to the Western aid package, “but direct investment of private capital from other countries is hundreds of billions of dollars, and that should substantially assist our reforms.”

But Western leaders repeatedly told Yeltsin that money alone--even such massive foreign investment--would not pull Russia out of its economic collapse or propel it toward capitalism.

“I don’t know that there’s enough money in the world to instantly solve the problem of the Russian economy,” President Bush told a separate press conference. “I think (the $24-billion package) is a substantial commitment. But it’s got to be accompanied with a continuation of this vigorous reform program.”

Major, who led the discussion with Yeltsin on economic issues, also underscored the need for performance if Russia is to continue receiving such sums.

“Just simply saying ‘Here is the money’ will not really be of help to the Russians except in the very short term,” Major said. “There are structural changes necessary. There is a complete culture change from the command economy that they had had thus far to the market economy. Many decrees and parliamentary changes have been made--and they are very welcome--but they have to be implemented. . . .

“We have an obligation to assist, and it is in our self-interest to assist, but it has to be on the basis of our assistance with tangible resources, with advice and in other ways and (with) a Russian response that is tangible in moving down toward a proper, enforceable reform program that actually meets the demands that are necessary if it is to be successful.”