Summit Query: Can the U.S. Rescue Yeltsin?

MOSCOW — Can the United States save Boris N. Yeltsin and the course of Russian reform?

After days of discord between the Russian president and the conservative-dominated Congress of People’s Deputies, that question preoccupies the Clinton Administration as it prepares for its first meeting with the teetering Russian leader.

“The old Bolshevik system is fighting for survival,” Russia’s unabashedly pro-Western foreign minister, Andrei V. Kozyrev, has warned.

And so is Yeltsin.

President Clinton, putting the final touches on an emergency aid package to be unveiled at the April 3-4 summit in Vancouver, Canada, lauded Yeltsin last week as the popularly elected leader of Russia’s “historic movement toward democratic political reform.”

With this Cold War adversary suddenly looking as if it could lapse back into tyranny, Clinton, who has already proposed increasing direct U.S. aid to Russia from $417 million annually to $700 million, wants to do something fast that yields immediate, tangible benefits for ordinary Russians.

“We’re looking up the Russian equivalent for ‘It’s the economy, stupid,’ ” said a senior official in Washington, echoing Clinton’s unofficial campaign motto.

Clinton’s short journey next Saturday morning from Portland, Ore., to the summit site in British Columbia will be his first official trip abroad as President. His goal is unique in the annals of summitry: to secure the political future of the Kremlin leader who will sit across the table.

But will it make the difference? Can the Clinton Administration and the meeting in Canada help Yeltsin negotiate the perilous road of reform?

Impeaching Yeltsin did not make it onto the agenda of the Congress of People’s Deputies on Saturday because of lack of support. And, early today, it was announced that Yeltsin had agreed to a plan for simultaneous presidential and parliamentary elections in November.

“The hot-button issue in the 1950s was ‘Who lost China?’ ” former President Richard Nixon warned a year ago. “If Mr. Yeltsin goes down, the question ‘Who lost Russia?’ will be an infinitely more devastating issue.”

“There goes the peace dividend,” one official in Washington remarked.

Dominated by Communists, nationalists and militant anti-Westerners, the Russian legislature has delayed the ratification process of the second Strategic Arms Reduction Treaty, wants to fire Foreign Minister Kozyrev and has concluded in committee that Yeltsin’s acquiescence to U.S.-championed boycotts of Iraq, Libya and Yugoslavia--all Soviet-era friends--has cost Russia $18 billion in lost arms sales.

Yeltsin warned the Russian people this month that if he was to lose power, the result would be “another arms race, another growth of military expenses and more global confrontation with the whole world.”

Moderates who long ago lost their starry-eyed admiration for Yeltsin think his forecast is too self-servingly apocalyptic. But they acknowledge that Russia’s transformation to a liberal democracy with a supply-and-demand economy would be dealt a heavy blow, with backtracking the likely result, if Yeltsin was ousted.

Realizing that Yeltsin’s position is now dangerously shaky, a delegation from the European Community held talks with Kozyrev here Saturday. A special envoy of Japanese Prime Minister Kiichi Miyazawa flew in and handed Yeltsin a formal invitation to attend the annual summit meeting of the Group of Seven industrialized nations in Tokyo in July.

For a year, the G-7 leaders have promised multibillion-dollar programs of assistance to Russia’s fledgling democracy. So, in Vancouver, Clinton will be doing nothing new.

The record of assistance so far, however, is one of generous shipments of foodstuffs and medicines but also of bottlenecks, misunderstandings and suspicion, Russian corruption, catering to U.S. and other Western commercial interests and great hopes that fizzled.

Yeltsin seemed to count himself among the disappointed when he told the Congress on Friday that his leadership erred in its “excessive reliance on foreign aid.”

Former President George Bush’s record in this area has been roundly criticized by the Clinton Administration, and it is the backdrop against which Russians--some dismayed by what they see as America’s big-talking niggardliness--will scrutinize Clinton’s announcement.

For instance, asked to assess last year’s much-ballyhooed Provide Hope airlifts of U.S. humanitarian aid, economist Pavel G. Bunich, a member of Yeltsin’s consultative council, remarked, “If we look at the amount that was distributed in Moscow, it was barely enough to feed Muscovites for a day and a half.”

Last April 1, in what turned out to be a failed effort to save the embattled reformist government of Prime Minister Yegor T. Gaidar and its tight-credit, relatively rapid privatization policies, the United States and other G-7 members announced a $24-billion aid package for Russia.

Many Russians, overjoyed to be admitted back into the community of “civilized” nations, suffered delusions of boundless Western generosity. But the package turned out to contain much less than had first met the Russian eye.

“As to the attitude of the West, including the U.S.A., their main strategy is to support democracy (and) market reforms and render massive support--without spending a single dollar. This makes me sad and surprised,” said Vladimir P. Lukin, Russia’s ambassador to the United States, who has returned to Moscow to take part in the Congress.

Lukin said Clinton’s actions in Vancouver and a meeting of the G-7 nations’ foreign and finance ministers to be held April 20 in Japan “will show if the West shifts from the principle of a lot of words and zero action to the principle of a few words and a lot of action.”

But the effectiveness of additional assistance is another issue, and one of the reasons aid has not been more forthcoming. If given to the government, aid money will vanish “down the black hole,” said prominent Russian economist Gennady S. Lisichkin, who wants it given to the fledgling private sector instead.

Yeltsin’s chief adversary, Parliament Speaker Ruslan I. Khasbulatov, has tried to exploit doubts about the West’s sincerity in order to undermine the president’s position and question what he might be able to bring home from Vancouver.

Despite a lot of encouraging talk from Washington, Khasbulatov charged recently, the U.S. Congress hasn’t allocated “one cent.”

In fact, American lawmakers last October voted $417 million in direct aid to Russia under the Freedom Support Act. That was in addition to $235 million “reprogrammed” earlier in the year to launch humanitarian and technical assistance programs.

As for the ephemeral $24 billion pledged by the Group of Seven, according to International Monetary Fund and World Bank officials in Moscow, only about $9 billion was actually disbursed last year.

To the Russians’ great dismay, a $6-billion “stabilization fund” for the ruble to be funded by the G-7 nations never was activated because of Moscow’s failure to get the national money supply under control.

A total of $12.6 billion in grants and credits have now been awarded by Western nations, but about 90% of that money was in short-term loans now starting to come due. The Russians can use those funds only to buy goods and services in the countries of origin.

As for U.S. assistance, the single largest chunk consists of $1.1 billion in loan guarantees issued by the Department of Agriculture to enable Russia to buy U.S. grain and other farm products at prices far above what it can pay its own farmers.

Last November, the Russians, who also shouldered the former Soviet Union’s debt in order to obtain its assets, began to default on those loans. With other former Soviet republics, they have now fallen more than $500 million into arrears.

In response, Washington has suspended further guarantees.

Pleading for a new debt deal, Deputy Prime Minister Alexander N. Shokhin notes that in 1993 a struggling Russia is supposed to repay $30 million on its own grain debt but that, if Soviet obligations are added, the sum will balloon to a prohibitive $1.5 billion.

For all types of foreign debt service, Shokhin says, Russia can pay no more than $3 billion this year. On Thursday, the cash-strapped Russian government resolved to freeze debt repayments for six months.

Heeding Shokhin’s argument, U.S. officials say that the Administration has deemed debt relief the most important medium-term form of assistance for Russia and that Clinton will propose a deal to Yeltsin in which Moscow’s short-term grain debts will be refinanced long-term.

Clinton also plans to push the rest of the G-7 for an overall rescheduling of about $16 billion in payments of interest and principal on the estimated $80 billion in Soviet debt, officials said.

He is also said to be pressing for a long-term aid program that includes another $12 billion in credits and easier access to International Monetary Fund loans conditioned on continued Russian reforms.

During his pre-summit trip to Washington last week, Kozyrev said that along with rescheduling the estimated $80-billion Soviet debt, Russia will request phased admission to the G-7--a step that would progressively integrate its proto-capitalist economy with the world’s industrial superpowers.

Economist Bunich, in an interview, said Russia will also seek urgent delivery of the $6 billion for ruble stabilization. In Washington, Kozyrev asked only for the West to “freeze” those funds so that they are kept available.

To date, Western leaders have refused Russians access to the money because of the fast clip at which Russia’s Central Bank has been printing rubles. Expanding the money supply tends to depreciate the value of the ruble and undermines the rationale for a fund to maintain the ruble’s value against other currencies.

Treasury Secretary Lloyd Bentsen, appearing on CNN’s “Evans and Novak,” said Saturday that the Clinton Administration expects Moscow to stabilize its Central Bank operations and bring rampant inflation under control before it extends more financial aid.

He said Russia should stop excessive printing of its currency and opening up new credit, which has fueled a high inflation rate.

“You can’t have the bank throwing money away to the extent they are now over there,” Bentsen said. “It doesn’t take a lot of money to stabilize that currency once they cut out the flood of printing.”

Sen. Sam Nunn (D-Ga.) said Saturday that long-term financial aid should wait until the Russian constitutional crisis is resolved but that, in the meantime, Washington should focus on short-term humanitarian issues, such as medical supplies and needles to immunize children.

“That’s not hundreds of billions of dollars. We’re talking about well-placed, targeted money to let the Russian people know we care about their human needs,” Nunn said on CNN’s “Newsmaker Saturday” program.

Among the urgent “quick-fix” measures for Russia now under consideration, Clinton aides say, are emergency shipments of pharmaceuticals; a program to provide new housing for former Soviet army officers returning home from Germany and Poland; shipments of livestock feed to boost the meat supply, and financing for equipment to restart idled oil and gas wells.

In a speech at George Washington University on Wednesday, Kozyrev said it is also high time to lift Cold War-era restrictions on high-technology exports to Russia and to allow its industries “unimpeded access” to sell their wares, including uranium and commercial satellite-launching capability, on world markets.

Clinton and Yeltsin have met only once before, last June 18, when the two had a 30-minute talk at Blair House in Washington. At the time, the Arkansas Democrat was running third in the polls, behind Bush and Ross Perot.

This time, it is the 62-year-old former Communist Party official from the Urals who seems menaced with political oblivion. And perversely, the impact of whatever Clinton announces in Vancouver will not be totally positive for Yeltsin, since it seems bound to confirm the view of his political opponents that he is a Western flunky.

“This dictatorship draws its support from anti-national forces and forces outside the country supported by international financial and speculative capital,” Deputy Yuri M. Slobodkin, a member of the Communists of Russia faction, charged in the Congress.

Iona I. Andronov, a parliamentarian widely believed to have worked for the KGB when he was a Soviet foreign correspondent in New York, was blunter. He called Kozyrev a “traitor” and, using strong innuendo, insinuated that the Russian government is now directed from 1600 Pennsylvania Ave.

“As far as I understand it, we have to be grateful to nobody else but U.S. President Clinton that no mass arrests have begun in Moscow yet, that there is no bloodshed,” Andronov said sarcastically at the Congress.

Stepped-up U.S. assistance will not silence such critics or wipe away the humiliation some Russians feel at requiring assistance from abroad. “If Yeltsin returns from Vancouver with a new commitment of American support, the so-called conservatives will charge him all the louder with being a lackey of the West,” Stanislav N. Kondrashev, a political observer for the newspaper Izvestia, said.

One supreme irony is that Russian leaders know their only real hope for a massive influx of foreign money is private investment. But for that to happen, stable and unequivocally pro-market laws on taxes, land ownership, foreign investment and property rights are needed.

That is not something that Yeltsin can deliver alone; it is in the hands of Khasbulatov and the conservative, often anti-reform legislature. The Vancouver summit will not change that.

Dahlburg reported from Moscow, McManus from Washington. Robin Wright in Washington also contributed to this article.

Reference Points

Here is how the current level of aid to Russia compares to other major international efforts:

Current plan: Last year, half a million tons of humanitarian assistance--food, clothing, medicine--arrived in Russia. Of that, 94,000 tons was from the United States, said Georgy K. Maltsen, a counselor on the Russian Government Commission on International Humanitarian and Technical Assistance.

Berlin Airlift: The assistance to the city of West Berlin over 11 months in 1948 and 1949 included 2.3 million tons of food, fuel, machinery and other supplies.

The Marshall Plan: $12 billion worth of economic aid went to Western European nations over four years after World War II.

Source: Times Moscow Bureau