Getting Cold Feet On Soviet Bailout

THAT long awaited and dreaded moment of decision has come for Western leadership for a program of economic aid in an effort to help stabilize the regime of Soviet President Mikhail Gorbachev. Among the factors making the issue an agonizing one for Western decisionmakers, Moscow's political repression in the Baltic republics, which has received President Bush's attention even in the midst of the Persian Gulf conflict, is only the tip of the iceberg. Perhaps even more important is the impact of the Soviets' rapidly deteriorating economic relations with Western capital and trade markets.

The argument that the West ought to help Gorbachev make his way through horrendous economic problems is beginning to wear thin. At a time when Gorbachev is backing further away from fundamental movement toward a market economy, and his former ``liberal'' advisers are publicly abandoning him, Gorbachev is increasingly losing his image of a reformer.

In the United States, President Bush is going to be under growing pressure to call a halt to any further government-guaranteed credits for the Soviet Union.

The Baltic crackdown came only days after Moscow took up $1 billion in credits for grain purchases and the president waived the restrictive provisions of the Jackson-Vanick Amendment.

In addition, the US Department of Agriculture made a controversial ruling permitting the Soviets to use $50 million of the credit to finance freight costs. It's significant that Sen. Robert Dole, the Republican leader from Kansas, a wheat state, has nevertheless called for suspension of the credits.

Germany, where enthusiasm for trade and investment in the Soviet Union has had its largest claque, is turning sour. The announcement of Deutschebank CEO Hilmar Kopper that his bank would not lend further to Moscow without a 100 percent guarantee of Bonn's export-import bank is a bombshell.

Deutschebank's former co-chairman, F. Wilhelm Christians, has been foremost in West Germany among those who called for a ``Marshall Plan'' for Gorbachev. Christians told me two years ago that Germany had to go for the new markets in Russia to replace those lost in debt-ridden Latin America.

Kopper spent a good deal of time last year with Gorbachev in Moscow, and told the Financial Times that Deutschebank was not worried about its huge outstanding debt with Moscow. If so, he was one of the few (former West) German businessmen not worried. Moscow is at least 1 million deutsche marks ($600 million) in arrears on current German bills.

An index to Kopper's real feelings may be his refusal to enter into a Soviet loan in September when the Bonn government offered only a 95 percent guarantee. Kopper recently told interviewers that he saw no Soviet economic rationale, no economic plan, and that he had only questions about the direction Moscow was headed.

But it isn't just German banks that are getting cold feet about Soviet investment. Western European and American boardrooms are full of returning potential investors who have now written off any possibilities in the near future for profitable business. Most of the $2 billion in investments that has, at least theoretically, been committed over the past five years is in service organizations and a few large projects.

Writing in the Harvard Business Review, Jeffrey Herzfeld, a Paris-based lawyer and booster for Soviet business, has how-to-do-it suggestions that would be less than enthusiastically accepted by potential investors.

He suggests that investors follow McDonald's example; the company has built a vertical operation, from growing its own potatoes to getting the city of Moscow as a partner in its fast-food outlets. Even then, Herzfeld admits, an investor must be farsighted enough to wait 20 years for a return.

And he warns that investors must look at potentially huge domestic markets rather than using the USSR as an export base, although how profits would be remitted remains a mystery.