Conditions on Aid to Russia

Washington Post, 12 December 1993

WHEN VICE President Gore was in Moscow
last week, he suggested that perhaps some
of the conditions for foreign loans to
Russia need to be loosened. That’s a
change in at least the tone of American
policy, and it apparently took some of
Washington by surprise. But having seen
some of the effects of the economic
decline — and having read the results of
the Russian election — Mr. Gore thinks
that the United States needs to try
harder to find useful ways to respond.

That’s admirable. Russians ought never
to be left under any shadow of doubt
about American responsiveness and
goodwill. But conditions on aid are
necessary as well. Otherwise the loans
enable an embattled government to put off
difficult decisions that sooner or later
have to be made.

A second point that Mr. Gore and
everyone else needs to keep firmly in
mind: The worst social misery is not
being caused by reform but by the lack of
it. The old Soviet economy is collapsing,
irrevocably. What’s called reform is the
way out of the wreckage into something
more hopeful. Social conditions are much
better in Russia than in, say, Ukraine.
The reason is that Russia has made a
substantial beginning on the process of
reform, while Ukraine has done little and
is suffering for it. To the extent that
foreign loans are conditioned on further
reform, they become a visible incentive
to keep going.

Mr. Gore said specifically that the
two great lending institutions, the World
Bank and the International Monetary Fund,
ought to consider loosening their
requirements a bit. In fact, they have
recently done some loosening. But there’s
a need for a real social safety net in
Russia — the structure of public
benefits that the West takes for granted.
Whether social benefits should be
financed with borrowed money is
questionable. Perhaps the United States
and the other rich democracies have an
obligation to come up with larger grants
rather than more loans.

Mr. Gore’s comments and all the debate
on this crucial subject are pointed
toward the meeting in Moscow between the
two presidents, Mr. Clinton and Mr.
Yeltsin, in mid-January. Within the
Russian government most of the decisions
on reform were put on hold pending the
election. At the Moscow summit, Mr.
Clinton will ask whether the Russians are
prepared to continue toward a market
economy. If the answer is yes, the West
needs to be ready with more support for
that progress. That doesn’t mean dropping
the conditions on aid. Instead, it means
ensuring that there is enough aid of the
right kinds to see Russia’s people
through the next several years as they
struggle to unlock their own country’s
great potential wealth.