U.S. Experts Voice Hope About Russia : Reforms: Treasury officials express optimism as hyper-inflation slows. International loans, credits and grants are cited.

As President Clinton begins his first official visit to Moscow, his Administration views the coming days as a make-or-break period for the massive reform being undertaken across Russia.

“This is a critical juncture for the Russian government,” Treasury Secretary Lloyd Bentsen said here after a day of private meetings with Russian leaders and diplomats from the Group of Seven nations. “Major decisions are being made in the next few days.”

He was referring to the political and economic turning point at which Russia finds itself in the aftermath of last month’s parliamentary elections, which gave rise to an ultranationalist wing under the leadership of Vladimir V. Zhirinovsky, and to current attempts to form a new government.

The U.S. Treasury officials who preceded Clinton to Moscow--the President meets today and Friday with President Boris N. Yeltsin--were unusually upbeat about the prospects for long-term reform and about the current state of Russia’s chaotic economy.

Encouraged by an inflation rate down from roughly 30% a month--bordering on hyper-inflation--last spring to the current rate of about 12%, officials spoke optimistically, if vaguely, about reaching agreement with their Group of Seven aid partners on a program of further support.

The group of leading industrial democracies is currently administering a $43-billion program of loans, credits and grants, about half of which have been disbursed. No major new U.S. program is anticipated.

At stake, one senior Treasury official said, is whether Russia will continue to develop a market-oriented economy or revert to the central government control that prevailed under communism. U.S. officials are watching to see at what pace privatization proceeds, how the government budget deficit is tackled and whether the flow of central bank credits to industry is reduced.

It remains unclear whether a reshuffled Cabinet will lead Russia in a decisive new direction or will continue to swerve between such stringent economic reforms as ending government support for unprofitable businesses and keeping the subsidies flowing to hold down unemployment.

Arriving in the icy darkness of the Moscow morning after an overnight flight from Washington, Bentsen led the advance party for the Clinton Administration’s most sensitive international economic foray to date. He met with Anatoly B. Chubais, the deputy prime minister responsible for the government campaign to convert the economy resulting from seven decades of state-controlled communism to a market-oriented one based on private enterprise.

Yeltsin’s task of driving the Russian nation through this unguided intersection clearly has Clinton Administration officials energized--and concerned.

In their view, the economy now is in better shape than in the past to withstand the rigors of shedding inefficient state-supported industries. But even more than in the past, there is anxiety about whether the Russian people, fearful that the reform process will leave them literally out in the Russian cold, will go along.

“We think the economic situation in Russia is better than it is widely seen,” said a senior Treasury official who has spent much of the past year monitoring developments here. “The privatization has made substantial progress.”

By U.S. count, 40% of the employees in Russian industry are working for companies that are now part of the private sector, and 70% of the employees in small retail operations are working for private companies.

This, however, is not to suggest that the largest economic challenges have been met:

Industrial production has fallen deeply--partly as a result of the drop in the manufacturing of military hardware but also due to reduced output in non-defense areas. The value of the ruble in relation to the dollar has been unsteady, and it is uncertain whether a recent stabilization will hold.

And even though inflation has fallen sharply from a mind-boggling rate of 2,500% a year, it is still running at nearly 300%.

Sounding just like his colleagues in Washington whose domain is the U.S. federal budget, the senior Treasury official said: “The key to the Russian economy is the Russian budget. What Russia needs is to make less resort to inflationary finance”--the printing of rubles to meet the budgetary needs of inefficient state-run enterprises--while still spending money to help pensioners and to fund unemployment insurance.

U.S. officials are reluctant to predict when the next budget will be completed--a wariness born of their own experience pushing a budget through a Congress more compliant than the Parliament that Yeltsin faces. But they say it is one of the crucial tasks facing the post-election government now being formed.

One private analyst in Washington who has spent 30 years studying the Russian economy estimated that roughly $10 billion--about 7% of Russia’s gross national product--will be needed for unemployment insurance for one year.

During their meetings with Yeltsin, the senior Treasury official said, the U.S. officials will focus on specific programs of U.S. and international support for economic reform; efforts to tailor those programs to meet Russia’s social-service needs, and trade issues.

And they will review problems in existing aid programs, including those created to make nearly $700 million available in loans to develop energy and for unemployment assistance.

The loans include $70 million in World Bank funds for Russian employment projects built around closing inefficient factories whose subsidies drain the national budget.

The international funds are available, but they have not been drawn upon because there is a lack of agreement in Russia’s government on how to design an unemployment program. There is some concern in the government that such outside support creates the impression that Moscow is yielding to Western pressure to throw people out of work.

Bentsen on Wednesday announced the appointment of Michael Gillette, a senior World Bank staff member, to head a group intended to push such support through the Russian pipeline--a position that Clinton and Yeltsin agreed last April must be filled speedily.

As the winter has progressed, the United States has found itself at odds with international funding agencies over how closely to link financial aid to progress in economic reform.

As reforms to make industries more efficient bring increases in unemployment, which is officially listed as 1.5% but is believed by private analysts to be closer to 10%, U.S. officials have called for relaxation of the strict standards.

Indeed, a representative of an international financial institution in Moscow said in an interview that Russia’s needs meant that it could not be held to the same standards applied to other nations when they seek loans.

Characterizing the problem as “the ‘Jurassic Park’ syndrome,” he said: “A zoo is a zoo, but it’s a lot more difficult to manage when the animals are dinosaurs than when they’re zebras, tigers, giraffes. That’s what distinguishes Russia from Ghana, Bolivia.”

Times staff writer Richard Boudreaux contributed to this report.