Gorbachev's desire to perk up Soviet economy will put pressure on him at Geneva

Will the need to forge economic change at home put Soviet leader Mikhail Gorbachev in a bargaining mood at the forthcoming Geneva summit? It's a question that's intriguing Kremlin-watchers here as the summit approaches.

For while Mr. Gorbachev is clearly causing some new ripples on the international scene with his arms control proposals, here at home he's making waves with promises of an economic shake-up.

In advance of next month's summit, Western analysts are carefully considering the ambitious domestic agenda Gorbachev has set for himself -- and trying to determine how that might affect his negotiating behavior at Geneva.

``Gorbachev's real interest is in the internal situation in the Soviet Union,'' says one Western diplomat, adding, ``The summit is secondary.''

But the two are, of course, interrelated.

The key question is whether those economic problems will make him seek to strike an arms control agreement that could allow him to channel more money to domestic concerns, another diplomat says.

So far, the Soviets have insisted that there can be no agreement unless the Reagan administration gives up its plans for its Strategic Defense Initiative (SDI), popularly known as ``star wars.''

Soviet officials admit that they would like to be able to divert funds from military spending to reinvigorate the Soviet economy. But they say it is misguided to assume they will sacrifice security concerns for economic expediency.

``Our economy has reserves we have not even begun to tap,'' says one Soviet official.

And Gorbachev has outlined some far-reaching changes to this country's economic picture.

In September, the ruling Communist Party Politburo promised major increases in consumer goods and services. It also endorsed a plan calling for ``steady growth of the people's living standards'' from now until the year 2000. One key component: new uses of high technology.

Yet the Soviets start from a none-too-enviable position. The size of the labor force is not growing as it did in the past. Raw materials are becoming harder to extract, and therefore more expensive. Oil production is dropping.

Taken together, these factors are having an undeniable impact on the country's economy. During the first half of this year, the Soviet Union had a trade deficit with the West of over $3 billion. Of that figure, $2.2 billion was with the United States. The figure is a four-fold increase over the first half of 1984.

The Soviets also recently failed to publish certain economic indicators, suggesting that overall economic output and labor productivity may not be reaching expected targets -- and could even be slipping.

Meanwhile, Gorbachev has sparked rising expectations among Soviet consumers.

Indeed, if conversations with Soviet citizens are any guide, Gorbachev has sparked widespread enthusiasm -- largely on the basis of what he has promised to bring about.

``I love him,'' says one woman, adding the hope that he will bring more attractive dresses into the shops.

But there is still some lingering skepticism.

``They tell us our lives are getting better,'' says one man, ``but I don't see it.''

It would be wrong to dismiss the sentiments of long-suffering Soviet consumers as irrelevant, say some Kremlin-watchers. For, they argue, Gorbachev must have a degree of public support in order to energize the country's economy. If the country's work force becomes disillusioned early on, economists say, then Gorbachev's efforts to motivate workers will become that much more difficult.

``Public opinion does not count for much here,'' says one diplomat, ``but it does count for something.''

And Gorbachev is facing something of a deadline. A once-every-five-years Communist Party Congress is scheduled for next February, and it is expected to endorse Gorbachev's plans for streamlining the nation's economy. This will be formally embodied in the country's next five-year plan, which has the force of law here once it has been approved by this country's nominal parliament after the party gives its approval.

The five-year plan for 1986 to 1990 has already sparked a good deal of behind-the-scenes debate, according to diplomats here, and more is expected. Gorbachev will need to concentrate his political energies on getting his limited economic reforms enacted, and then ensuring that the country has the resources to meet the plan's targets.

By this reasoning, then, Gorbachev has some powerful reasons to strike a compromise with the US.

Some analysts here believe that alone will eventually lead to a modification of the soviet insistence that SDI be dropped before there can be cuts in offensive weapons.

One says that the prospect of major cuts -- and the implicit ceiling that puts on both sides' nuclear arsenals -- is tempting to Gorbachev because of the savings that it would mean.

On the other hand, the Soviets, by their own admission, do not want to spend the millions, if not billions of dollars that would be required to put their own SDI system in place.

Although the recent Soviet proposals at Geneva have some major drawbacks for the US, one Western diplomat says, ``At last we have something to negotiate over. There's something on the table.''

And if no agreement to ban ``star wars'' is reached, Soviet officials insist that they will spend whatever funds are necessary to counter the SDI program. Then, they say, the most probable result will be a no-holds-barred arms race in which both sides will have to spend enormous sums simply to neutralize the other's military programs.