West to ‘Wait and See’ on Russia Aid

Senior officials of the seven leading industrial democracies will meet in London this week to assess the political and economic upheaval in Russia, but they probably will not offer any new help until a new Russian government is finally in place, officials here said Sunday.

The session, convened by Britain, is intended to enable the West to respond quickly to help Russia overcome its economic crisis once its parliament can agree on a new prime minister and Cabinet and the new government spells out its policies.

The working-level meeting will be attended by sub-Cabinet officers from finance ministries and foreign ministries of the Group of 7: the United States, Britain, Japan, Germany, France, Italy and Canada. Officials said no specific meeting date has been set.

U.S. officials said Deputy Treasury Secretary Lawrence H. Summers, who has served as the administration’s point man for both the Asian and Russian economic crises, most likely will head the U.S. delegation.

Summers said Sunday that officials of the Group of 7 countries had been “in constant touch” on the economic situation in Russia. But he cautioned that Western authorities will “wait and see” what a new Russian government does before taking any action themselves.

Summers reiterated the allies’ insistence that Moscow begin carrying out needed financial and economic reforms before the International Monetary Fund disburses any more of the $22.6-billion lending package that it approved for Russia in July.

“The IMF should make its choices based on Russian performance, but I trust it will only provide support if it will be well used and won’t simply flow out of the economy,” he said during an appearance on Fox News Network’s “Fox News Sunday.”

The Russian Duma, or lower house of parliament, was scheduled to meet today to decide whether to approve the nomination of Viktor S. Chernomyrdin as prime minister, as President Boris N. Yeltsin has requested. But many analysts believe it is likely to postpone action.

Russia has been without a functioning government for a little more than three weeks, and its economy is in a state of collapse. The previous government devalued the currency--the ruble--and imposed a moratorium on foreign debt, sending financial markets plunging worldwide.

The meeting of senior officials from the industrial nations is designed to pave the way for possible action by finance ministers of the United States and its major economic allies, who are scheduled to meet in Washington in early October.

Summers said the allies want to see what policies the Russians adopt before deciding whether to provide more aid.

“Right now, we’ve got to see what kinds of choices the Russians want to make, and then we’ll formulate an effective response,” he said.

The IMF already has disbursed $4.8 billion of the $22.6-billion package to Russia, and it was scheduled to send Moscow another $4.3 billion on Sept. 15, provided the Russians were fully complying with the IMF’s policy demands. The second installment now is in doubt.

Western officials believe it would be a waste of money to provide more aid to Russia before Moscow begins carrying out its promised reforms, such as devising a new tax-collection system and strengthening its banking structure.

The IMF had been reluctant to approve the $22.6-billion loan to Russia until Moscow started on its reforms. But the United States, on orders from President Clinton, pressured the 182-country organization into authorizing the money.

Meanwhile, foreign ministers of the European Union, meeting in Salzburg, Austria, warned Russia not to revert to a Soviet-style, government-run economy, as Communist leaders there are urging, if it expects help in recovering from its economic crisis.

“We see a continued reform process as an expression of Russia’s commitment to democracy, a market economy and its integration into the world economy,” the ministers said in a formal statement issued Sunday. “The responsibility for these reforms lies with Russia.”

Separately, Abby Joseph Cohen, a stock strategist for Goldman Sachs & Co., the New York investment banking firm, predicted that the U.S. stock market will soon begin to recover from the drubbing that it has taken since the latest Russian economic crisis.

Appearing on the CBS-TV program “Face the Nation,” Cohen said investors have been too preoccupied with Russia’s economic woes and have not fully considered that the country accounts for less than 1% of America’s foreign trade.

“We think . . . the stock market direction is up over the next few months,” Cohen said.