Ottawa summit: 7 leaders search for compromise

Already thorny issues are pricking through the bland surface of the communique that seven Western leaders hope to produce at the end of their Ottawa summit meeting.

Scarcely had the rotor blades of their arriving helicopters stopped whirling before French President Francois Mitterrand and West German Chancellor Helmut Schmidt let President Ronald Reagan know how unhappy they are over the high level of US interest rates.

Mr. Reagan, meeting alone with Mr. Schmidt, fired back with a pet concern of his own. He wants the Germans to cancel a pending deal with Moscow that would funnel Soviet natural gas to Western Europe. [The Soviets are moving to break the deadlock in negotiations on this deal; see story, Page 3.]

Meanwhile, an undercurrent of grave concern over the spreading violence in Lebanon became evident, as summit leaders huddled on their arrival at the secluded Chateau Montebello outside Ottawa.

there was little, if any, sign of flexibility on contentious issues, reflecting the fact that each president and prime minister clings to deeply held convictions.

Mr. Reagan, while expressing concern for the economic havoc wrought by high interest rates, said they were not "a specific policy" of his govenment, but rather an "unwelcome legacy" inherited from the previous administration.

Control over interest rates, the President noted, is exercised by the "independent" Federal Reserve Board, not by the White House. While factually correct, this apparent shifting of responsibility seemed unlikely to please Fed chairman Paul A. Volcker and his fellow board members.

Mr. Volcker often expresses concern over the "social costs" of maintaining high interest rates, but claims that tight control over the growth of the money supply -- which tends to boost interest rates -- is the only way to combat inflation until Reagan's budget and tax policies are in place.

President Mitterrand contended that France, in particular, and Europe, in general, have a "toleration limit" beyond which time interest rates at the current level would become unbearable.

The US President, although setting no timetable, said his mix of programs -- fiscal, monetary, and regulatory -- should begin to bring down rates as the year wears on.

If Mr. Reagan was adamant on economic issues, so was the West German chancellor on the question of buying natural gas from the Soviet Union.

On two scores, a German official said privately, the Federal Republic would gain through this deal. German dependence on Middle Eastern oil would be lessened and German construction firms might win lucrative contracts in the building of the necessary pipeline and infrastructure.

German defense experts, the official said, had calculated how much Soviet gas West Germany could take without becoming vulnerable to political and economic pressures from Moscow. The Germans, he said, would stay within this limit.

This was designed to ease Washington's concern that West Germany and other European powers buying Soviet gas might become less reliable partners of the United States on East-West matters.

Mr. Reagan proposed at Ottawa that Western industrial powers meet this fall to tighten up their sales to the Soviet Union of sensitive "defense-related" items. Reagan, in short, would reduce high-technology exports, not increase them.

The President sought to deflect Mr. Schmidt from the Soviet deal by dangling the prospect of US "alternative" energy sources that might prove more attractive than Soviet gas. Such alternatives, according to American officials, would include coal, nuclear power, and perhaps supplies of fuel oil and natural gas.

To most analysts, there is little realism in such an offer. US coal exports cannot be greatly increased until time-consuming and expensive work is done on deepening and improving American harbors, rivers, and other elements of coal transport network.

West Germany, assuming the Schmidt government could win compliance from the German people, is quite capable of building its own nuclear power reactors. While the US does have a surplus of natural gas, there is, the chancellor noted, "an ocean between us." Despite wide divergences on these and possibly other issues, the Ottawa summit allows seven of the West's key leaders -- several of them new to summitry and to the world stage -- to establish personal contact and , to some degree, rapport.

Several, possibly all, of the summit seven will meet again in Cancun, Mexico, in October, when heads of government of rich and poor nations gather to discuss the next step in the protracted process of harmonizing relations between the so-called North and South.