Clinton Dealt Two Setbacks on Russia Aid

President Clinton’s proudest foreign policy achievement, his program for massive multinational aid for Russia, has suffered a pair of embarrassing and unexpected setbacks, leaving U.S. officials scrambling to recover.

An ambitious Clinton plan to raise $4 billion to reform Russia’s giant state-owned enterprises and turn them into private firms abruptly shrunk to an initial $500 million after Japan and other allies balked at the President’s price tag, U.S. officials said Wednesday. Japan’s foreign minister, in a statement that stunned American officials, publicly dismissed Clinton’s proposal as “preposterous.”

At the same time, Russia bit the American hand that wants to feed it, rejecting U.S. pleas to cancel sales of Soviet-developed missile technology to Libya and India. The dispute produced an unusual volley of public rebukes between Washington and Moscow, and Administration officials said it would delay plans for U.S.-Russian cooperation in space technology.

“We don’t want to talk about this very much,” said a senior U.S. official, contemplating the spate of bad news on an issue that the Administration had considered a major success story.

As recently as last Friday, senior officials told reporters that they had a good chance of getting the pledges they sought for the privatization fund. But at a meeting in New York over the weekend, finance officials from several of the countries that the Administration was soliciting dug in their heels and said the figure was too big, officials said.

Instead, the world’s industrial powers will pledge an initial $500 million for a scaled-down privatization effort and will later seek another $1 billion or more from the World Bank and other international financial institutions, they said.

The rebuff to the United States first came to light in Japan, whose government had never been enthusiastic about the fund. In a speech, Foreign Minister Kabun Muto said Tuesday that the original Clinton proposal had been “a preposterous suggestion.” He said the United States had finally accepted Japan’s advice on the issue, according to the Kyodo news service.

State Department spokesman Michael McCurry called Muto’s statement “mystifying” and said the United States is seeking a formal explanation.

Administration officials had described the fund as a centerpiece of Clinton’s aid plan and said they hoped it could be ready for the summit meeting of the seven major industrial powers in Tokyo two weeks from now. Clinton proposed the fund in response to a request from Russian President Boris N. Yeltsin for help in turning his country’s huge state-owned industries into viable private businesses, they said.

Administration officials tried to put the best face on the situation Wednesday, saying that the setback was only temporary.

“We’ll have a Phase 1, at least, of the privatization program, which will be a very substantial start,” Secretary of State Warren Christopher told reporters.

Officials said the reduction in the overall size of the fund would mean that the U.S. share, originally $500 million, would also shrink.

The United States and Russia were also locked in a series of disputes over Moscow’s drive to sell missile technology--one of the former Soviet Union’s few high-technology exports--and the Administration’s desire to block the spread of hardware that could be used for weapons of mass destruction.

In talks earlier this week, U.S. officials asked Russia to impose severe limits on a planned sale of Soviet liquid-fuel rocket stages to India. India, which has nuclear weapons, says it plans to use the rockets only to launch weather and communications satellites, but U.S. officials fear that some of the technology in the deal could be adapted for military use.

The Russians have not yet met the U.S. concerns, a State Department official said, “but we’re still talking.”

In a related issue, the State Department publicly rebuked Russia for attempting to sell ammonium perchlorate, a component of solid rocket fuel, to the radical government of Libya.

“We are all over the Russians on this issue and related issues,” McCurry said.

State Department officials said the issue put them in a difficult position, caught between a desire to stop the spread of sophisticated weapons and their understanding for Russia’s economic plight.