Soviet Coup Collapse Prompts Rethinking Of US Aid Strategy

THE Bush administration's accelerated economic aid plan for Eastern Europe may become the blueprint for US aid to the Soviet Union and its spinoff republics.To ensure the stability of fragile East European democracies in the face of what looked like a reemerging hard-line leadership in the Kremlin, the administration last week pushed its assistance programs to the front burner during the brief Soviet coup. But the putsch's collapse has taken the intensity off Eastern Europe and put new pressure on the United States to invest in reform in the Soviet Union itself. The premise for aid to the Soviet Union remains a credible program for economic reform - something Soviet President Mikhail Gorbachev has never produced to the satisfaction of many Western leaders. Until last week, the aid to Eastern Europe had moved only sluggishly through the bureaucracy. "The long-awaited pipeline is finally open, coinciding with all the turmoil in the Soviet Union," says Paul Sacks, president of Multinational Strategies, Inc., the privatization firm hired by the US Agency for International Development. The urgency of assistance to the region may slip following the coup's failure. "It would have been a very high priority if a dark cloud stayed on the USSR," says Mr. Sacks, now in Czechoslovakia. The political climate has shifted in the US in favor of aid to the USSR, but it still awaits the kind of credible commitment to reform that Poland has made over the past two years. On the table for White House and congressional consideration are a host of potential offerings to the Soviet Union: most-favored-nation status; additional foods credits; the removal of the $300 million cap on US Export-Import Bank guarantees for American exports to the Soviet Union; even direct financial aid. "Things have not changed any ability of the Soviet Union or its republics to have a game plan in which aid works," says Sen. Richard Lugar (R) of Indiana, referring to the coup and its aftermath. He has been a Bush confidant on foreign policy and generally supports the president's approach toward Moscow. "The problem with Gorbachev at the London summit was that he had no game plan," Mr. Lugar says. "There was not a credible way in which assistance might lead to economic resurrection of the economy. Now, that still has to happen, either at the republic level or at the central level." This relationship appears to be shifting dramatically in favor of the republics since the coup. The upshot may be that foreign assistance eventually flows directly to republics, bypassing the Soviet government altogether. Lugar says that if the republics successfully negotiate a degree of autonomy that allows the US access to them, "then it'll be much more practical to consider specific assistance to a republic." The administration has been wary of responding to the various Soviet republics' requests for direct relationships. Sen. Bill Bradley (D) of New Jersey is among the most vocal Bush critics on Capitol Hill. He says that declarations from Russian Republic President Boris Yeltsin in recent days "directly imply that there's a dramatic reduction in defense spending with much bigger peace dividends. The military force outside the Russian republic is negligible." Republics such as the Ukraine, which declared its independence Saturday, as well as Kazakhstan, Russia, and the Baltics, will all be seeking independent relationships with the West, Bradley says. Before significantly expanding aid or granting most-favored-nation tariffs, he says, the Soviets need to establish a new constitutional order that grants more unambiguous rights to the republics than the currently proposed union treaty. The Ukraine's declaration of independence shows how difficult achieving this order will be. The Ukraine's secession would devastate the Soviet economy: The republic accounts for 50 million people and much of the USSR's food production. "The one thing that happens out of this thing is ... more support for assistance," said House Armed Services Committee chairman Les Aspin (D) of Wisconsin after the coup fell apart. The reforms that American investment was waiting for are more likely to happen now, he said. But also the American stake in a reformist government in the Soviet Union has been rendered vivid by the fleeting return of the old guard. "I think it's changed the politics in this country," Mr. Aspin said. Patrick Glynn, a conservative scholar of Soviet affairs at the American Enterprise Institute, sees the same change in political climate: "I would say there is dollar aid in the picture." Until key reforms are made, however, the Bush administration remains a bastion of skepticism. Asked if the US should send more money to Gorbachev, Secretary of State James Baker III, replied, "No. None.... You're not going to see the Soviet Union succeed economically through the mechanism of check-writing by others." Another administration official, asked about humanitarian aid to help feed Soviet citizens, answered: "It's not clear that there is any dramatic new need for humanitarian aid." One key step for the Soviets before Westerners can expand private investment is to clarify how businesses must deal with different levels of government without getting caught in tugs of war between the Kremlin and the republics over whose taxes and laws take precedence.