G-7 Unveils Aid Plan for Russia : Summit: Leaders OK $3-billion package to reform economy, political system. Communique calls for greater growth in industrial nations but offers few specifics.

The seven-nation economic summit, encouraged by Russia’s progress, unveiled a beefed-up $3-billion aid package today to support the former Communist country in its rapidly expanding efforts to repair its economy and shore up democratic political reform.

American officials hailed the Group of Seven aid package, which they said was increased by $1 billion at President Clinton’s insistence. They said it shows confidence that Russian President Boris N. Yeltsin’s leadership is keeping his nation on the right track. The American share will be a modest $375 million, much of it in the form of export credits.

Yeltsin arrived here Thursday, on the eve of the three-day summit’s final session, to meet with G-7 leaders as a group and to hold separate talks with Japanese Prime Minister Kiichi Miyazawa and with Clinton, who said at the outset of his presidency that supporting reforms in Russia would be his No. 1 foreign policy priority.

Although Yeltsin still faces many problems, a senior Administration official said Russia has made so much progress under his leadership that he arrived at the Tokyo summit “less as a supplicant and more as a leader who has proved himself up to the Gargantuan task that still lies ahead.”

Approval of the Russian aid package capped the three-day G-7 summit, which ends today.

As they wound up their annual meeting with a final burst of diplomatic pomp today, the leaders of the major industrial nations issued an economic communique that contained a general call for increased economic growth but few specifics on how to deal with the apparent stagnation of the global economy.

The leaders once again pledged to make successful completion of the Uruguay Round of negotiations to liberalize world trade their highest priority in the months ahead, voiced concern over “insufficient growth and inadequate job creation in our economies” and agreed to attend the jobs summit Clinton has called for next fall.

They also declared that Japan will stimulate consumer demand and take other steps to reduce its huge trade surpluses. And they promised continued aid to developing countries, whose growth and integration into the world economy, they said, “are essential for peace and prosperity in the world.”

Reflecting concerns expressed by British Prime Minister John Major and by Clinton, the communique also declared that future summits should be “less ceremonial, with fewer people, documents and declarations, with more time devoted to informal discussions” among the leaders.

A senior U.S. official said the Clinton Administration is pleased that the communique commits Japan to take measures to stimulate its economy. But he acknowledged that the loosely worded language says only that Japan will take fiscal and monetary measures as necessary to ensure strong economic growth, apparently leaving Tokyo free to reject any steps it decides aren’t needed.

Further, the Administration suffered a seeming setback when the summit’s economic communique failed to endorse an American suggestion to set a specific target of 3% for economic growth among the G-7 nations as a whole. To achieve that highly ambitious goal, Japan and Germany--which both fear inflationary pressures--might have been forced to stimulate their economies.

But the economic communique avoided setting any numerical growth targets. “You have to be realistic,” the official said, explaining the G-7 failure to endorse the 3% target. “Countries have their own legislative schedules, their own rhythms and their own central banking institutions. One doesn’t hope for major announcements on policy decisions (at an economic summit),” the U.S. official said.

Officials said two to three months of intense discussions among representatives of the summit nations had been required to hammer out the Russia aid package, which calls for providing the funds over an 18-month period. Originally, a $4-billion package that was to be disbursed over several years was discussed, but a later proposal called for $2 billion over 18 months.

The Russians should be especially pleased because it was larger than expected. On the eve of the Tokyo summit, Deputy Prime Minister Boris G. Fyodorov said a $2-billion package then under discussion represented “concrete assistance” to privatization.

Key elements of the program include: $500 million for technical assistance to subsidize investments in businesses from the Group of Seven industrialized nations; $1 billion in export credits; $1 billion from the World Bank and other international financial institutions to support privatizing and restructuring enterprises, and $500 million from the World Bank to help areas affected as large enterprises are restructured.

With the aid package, the West for the first time will directly underwrite one of the central planks of Yeltsin’s economic reform--the selloff of tens of thousands of state-owned factories and enterprises bequeathed to Russia by seven decades of Soviet socialism and the fostering of a new class of entrepreneurs.

“Until now, Western aid has had an indirect character,” said Alexander B. Parkansky, of Moscow’s prestigious U.S.A.-Canada Institute. “It alleviated our lives, but it didn’t target given sectors. Now starts the active Western participation in the reform.”

Clinton, returning to his hotel after another long day that ended with a royal banquet at the Imperial Palace, linked the aid package to providing more jobs for Americans--a tie he has sought to establish with almost every topic raised at the summit.

“There’s a lot of business to be done in Russia by Americans to create American jobs--business and energy and natural resources, in environmental technologies, in all kinds of consumer operations. This is a huge new market for American goods and services,” he said.

The President said he had found Yeltsin “in good humor” at the banquet and was impressed that the Russian leader was encouraging Western officials to set up a monitoring operation in Moscow “to make sure that our money was not wasted.”

Western leaders already have agreed on such a plan, Clinton said.

Yeltsin and his wife were the first guests to arrive Thursday night at the royal banquet, an event that added some color to an otherwise relatively drab and businesslike summit. The Yeltsins stepped from their Zil limousine and were greeted by Crown Prince Naruhito and Princess Masako.

While the banquet, approval of the aid package and Yeltsin’s visit highlighted Thursday’s events, Clinton sought to focus the summit participants’ attention on several other subjects, including structural unemployment, which has plagued the United States and the other G-7 nations--Canada, Britain, France, Italy, Germany and Japan.

David Gergen, Clinton’s powerful new counselor, said the other leaders responded warmly to the President’s proposal that they take a harder look at the problem.

Gergen said he expects the summit nations to follow through on Clinton’s recent proposal to hold a ministerial-level meeting in the United States to discuss structural unemployment. The session would, perhaps, lead to a larger discussion of the problem or to another discussion at next year’s summit, Gergen said.

Clinton also urged the other leaders to work together “to stem the world’s rapid population growth,” Gergen said. And, in an obvious reference to China’s rigid population controls, the President was quoted as saying that he is “bitterly opposed to inhumane attempts in some parts of the world to impose mandatory population control and mandatory abortion.”

Population issues, the President said, should include the enhanced role of--and status of--women; improved health and nutrition for females; universal literacy, and other measures.

Clinton, who according to several Administration sources has initiated most of the items on the agenda and dominated most discussions, also made a long statement on the environment. He told the other leaders that his Administration differs more from its predecessor on environmental protections than on any other foreign policy issue.

He said he expects to receive a plan shortly detailing how the United States will reach the target of reducing greenhouse gas emissions to 1990 levels by the year 2000. He added that he looks forward to seeing plans adopted by other countries.

Administration officials briefing the press on the Russian aid package said that about 60,000 enterprises, most of them small businesses, already have been privatized and that about 10% of the employees in Russian industry are now in privatized firms.

But privatizing small enterprises--shops, restaurants and the like--is easier than dealing with larger firms, said Undersecretary of State Larry Summers, “which is why this privatization program will be such an important shot in the arm to the reform effort.”

Summers said that six months ago there were two real risks in Russia: hyper-inflation and a return to authoritarian rule. But those risks are remote now because of Russia’s progress in democratic and economic reform under Yeltsin’s leadership, he said.

The Western aid will come at a propitious time for Russian industry. After 19 months of often-bruising change, the country has acquired a well-developed retail trade network, but actual industrial output has dropped alarmingly, by one-fifth last year. The problem is often lack of capital and managerial experience, antiquated assembly lines or products that few Russians want.

How the money will be apportioned will be crucial from the Russian point of view. The G-7 summit is expected to lead to the creation of a permanent “support implementation office” in Moscow, an idea approved by Clinton and Yeltsin at their Vancouver summit.

The Troublesome Issue of Trade

Of the six trading partners at the summit, only Britain represented a trade surplus for the United States in the lastest monthly figures. Here is the U.S. trade balance with the six other G-7 nations: Monthly figures for April, in millions

IMPORTS EXPORTS TRADE BALANCE Japan $9,181 $3,685 $-5,496 Britain 1,875 2,045 170 Canada 9,642 8,708 -934 Germany 2,331 1,633 -698 France 1,269 1,039 -230 Italy 976 670 -296

Source: U.S. Commerce Department

Clinton Calendar

A summary of President Clinton’s schedule. TODAY * Final G-7 meeting, 9:15 a.m. (5:15 p.m. Thursday PDT). * G-7 leaders meet with Yeltsin, 2:30 p.m. (10:30 p.m. Thursday PDT) * Clinton news conference, 8 p.m. (4 a.m. PDT) SATURDAY * Breakfast meeting with Yeltsin, 8:15 a.m. (4:15 p.m. Friday PDT) * Departs for Seoul, South Korea, noon (8 p.m. Friday PDT)