Clinton, Yeltsin Discuss Ending Iran Arms Sales : Summit: U.S. officials are optimistic. Cash-strapped Russia earns $1 billion a year on weaponry for Tehran.

President Clinton and Russian President Boris N. Yeltsin opened their fifth meeting in 18 months Tuesday with an informal two-hour chat in the calm setting of the White House garden and a sign that Russia may agree to phase out its $1-billion annual arms sales to Iran.

“I believe that there’s a resolution in sight on this very difficult issue,” Secretary of State Warren Christopher told reporters after the first of two sessions between the leaders Tuesday. “That will be discussed again (today).”

He said the solution would involve “some approach” to ending the Russian sales to Iran but refused to divulge any details until the deal is concluded.

For cash-strapped Russia, weapons sales have taken on increasing importance, and Iran has become a major customer--buying submarines, combat planes and missile technology.

The purchases particularly worry Clinton Administration officials because of intelligence reports that say Iran, in addition to buying large numbers of conventional weapons, has been pursuing nuclear technology.

Earlier this summer at a meeting in Naples, Italy, Yeltsin offered assurances that he would at least consider cutting back sales to Iran, but until Tuesday U.S. officials saw no progress.

The defense factories that once dominated the Russian economy are now in horrendous straits. Government orders have dropped to nearly nothing, but the factories lack the money to switch over to peacetime production and remain unwilling to lay off the populations of entire towns that depend on them. Moscow argues that it must continue to export arms--even if that means selling to states like Iran.

Boris Kuzik, Yeltsin’s adviser on arms sales, who accompanied the Russian president to Washington, told reporters in a pre-summit briefing that Moscow simply wants the global arms market to be a fair race. “There should be normal competition,” he said.

Clinton discussed U.S. objections to the arms sales “in some detail” with Yeltsin, said a U.S. official who briefed reporters afterward.

Clinton and Yeltsin had been scheduled to spend the opening hours of their summit meeting in a formal session with top officials from both governments. But in keeping with his belief that he can accomplish more with less formality in international discussions, Clinton instead took his guest on a brief tour of memorabilia in the Oval Office and then escorted him outside to the patio.

The talks were “very upbeat, very friendly--at times informal and at times very direct,” said the U.S. briefer.

Clinton and Yeltsin discussed the Russian arms sales as well as the continuing war in Bosnia-Herzegovina, the prospects of settling the war between Armenia and Azerbaijan and Clinton’s recent decision to lift many U.S. trade restrictions on Russia, officials said.

As he welcomed Yeltsin to the White House in a ceremony on the South Lawn, Clinton noted that “it wasn’t so long ago that Russian-American summits were moments of high drama and sometimes disappointing results.”

Today, by contrast, much of the drama is gone. While the two nations still possess massive nuclear forces, they are no longer engaged in the struggle of the Cold War. “The Russian-American relationship is at last, remarkably, a normal one,” Clinton said.

That normality does not, however, mean an absence of problems. “The United States,” Yeltsin said in his arrival remarks, “is a strong partner and not an easy one to deal with, just like Russia.”

A reminder of the problems between the two countries came during a White House photo session, when a reporter asked Yeltsin what his response would be if the United States were to try to lift the arms embargo on Bosnia, as Congress has urged and as Clinton repeatedly has threatened to do.

“My response would be negative, of course,” Yeltsin responded.

Luckily for Clinton’s relations with Yeltsin, the Bosnian government has decided that--at least for now--it too does not want the arms embargo lifted, fearing the move might provoke a sudden attack by Bosnian Serb forces before the government could prepare its defenses. The Bosnians “may be interested in deferring any action on that for four to six months,” Clinton said after Yeltsin spoke. “At least for the moment, this may be a largely academic discussion.”

Officials said the two presidents agreed to continue to try to find ways to pressure the Serbs to accept international terms for ending the country’s civil war but had also agreed to keep the “solidarity of the contact group”--diplomatic code for avoiding any moves that might cause dissension among the United States, Russia, Britain, France and Germany in their policies toward Bosnia.

U.S. officials said Yeltsin once again brought up his proposal for an international summit meeting on Bosnia but they made it clear that the Administration has little enthusiasm for the notion.