FINANCIAL ‘DATE RAPE’: GORBACHEV’S SUMMIT DESIGNS ON THE WEST?

(Washington, D.C.): A year ago, Saddam
Hussein issued clear threats to a vital
Western interest — Kuwait and the
stability of the Gulf region. The West
failed to respond until after the Iraqi
invasion last August. Now, Mikhail
Gorbachev has issued an even more ominous
warning to leaders of the industrialized
nations as a prelude to the upcoming
London Economic Summit: Provide
him with large-scale financial,
technological and energy-related
assistance now or face the prospect that
“the new peaceful
period
in history will vanish.”

As before, the West appears likely to
suffer for its misreading and improperly
responding to such threats.

“The G-7 leaders remain
determined to view Gorbachev as a
respectable suitor, one holding out the
promise of long-term political and
economic arrangements compatible with
Western interests,” said Jennifer J.
White, Senior Associate at the Center for
Security Policy. “What he really has
in mind, however, is the equivalent of financial
‘date rape.’

Tragically, the unwitting victims are
sure to be the U.S. taxpayer and those of
allied nations.”

In recent days, the Bush
Administration has done much to put the
American people in such a compromising
position. Consider the following
concessions granted to the Gorbachev
regime by Washington in just the past ten
days — or in the imminent offing:

  • the granting of an
    additional $1.5 billion in
    taxpayer underwritten
    agricultural export credits

    — in spite of the fact that the
    law prohibits providing such loan
    guarantees to an uncreditworthy
    sovereign borrower or for foreign
    policy, foreign aid or debt
    rescheduling purposes. This
    new credit, like the $1.3 billion
    that
    preceded it
    in December 1990, is viewed by
    several prominent lawmakers as

    illegal on some,
    if not all, of these four
    grounds.
    At the very
    least, it is indefensible on economic
    grounds
    insofar as it is
    increasingly likely that the
    Soviet Union will shortly be
    compelled to reschedule
    its debt obligations
    to
    both Western governments and
    private creditors;
  • an extension of last
    December’s waiver of the
    Jackson-Vanik amendment,

    clearing the way for a major
    expansion of U.S. taxpayer credit
    guarantees to Moscow, including
    for the export of manufactured
    goods to the strategic Soviet
    energy sector;
  • the granting of Most
    Favored Nation status to Moscow,
    giving
    it preferential trade treatment
    despite the fact that the central
    authorities have yet to put into
    force legislation guaranteeing
    the right of free emigration as
    stipulated by the Jackson-Vanik
    amendment. Worse yet, the U.S.
    government has completely
    abandoned the position staked out
    by President Bush at the Houston
    Economic Summit a year ago to the
    effect that had to be a period in
    which the faithful observation of
    this right could be observed;
  • a quiet dismantling of
    the Stevenson amendment
    which
    places a $300 million ceiling on
    U.S. Export-Import Bank credit
    exposure to the Soviet Union
    (which was tapped out by Bush’s
    premature concessions of December
    1990);
  • the intention to submit
    the U.S.-Soviet Trade Agreement
    and nine side-letters to the

    Senate for ratification, clearing
    the way for approval of tax and
    investment treaties. As a result
    of these accords, Moscow will,
    among other things, be able, in
    effect, to borrow from the U.S.
    Export-Import Bank to pay off
    defaulted Lend-Lease obligations.
    (The President elected not to
    mention these past instances of
    Soviet non-repayment of debt
    obligations to the U.S.
    government when he stated on 28
    May 1991 that “they have
    never failed to pay on
    ag[ricultural] credits”);
  • a commitment to support Soviet
    associate membership status in
    the International
    Monetary
    Fund and World Bank,
    providing
    Moscow with access to long-term,
    below-market interest
    rate loans
    available at
    the credit windows of these
    organizations;
  • relief of the constraints
    imposed pursuant to the Johnson
    Debt Default Act,

    permitting the Kremlin to issue
    bonds and raise other, untied
    credits in the American market.
    Such relief becomes effective
    either through Soviet IMF
    membership or via Moscow’s
    settlement (on a
    pennies-on-the-dollar basis) of
    defaulted czarist debt; and
  • scheduling of a Moscow
    summit
    whose purported
    focus on strategic arms control
    will, in all likelihood, be
    completely overshadowed by the
    effort to construct the
    modalities for large-scale aid to
    Moscow center on the basis of
    vague — and readily moveable —
    milestones;

These accomplished and
prospective
concessions come against
the backdrop of ever more brazen
indications that Moscow intends to behave
less than honorably in its romance of the
West. For example:

  • On 30 May 1991, Gorbachev
    indicated in a speech in
    Kazakhstan his abiding purpose
    for a Western-funded perestroika
    program: “We
    must revive the party, just as we
    are >reviving the
    society, our Union, all
    peoples….It would be the
    greatest victory if, on the
    basis of a new program of the
    Soviet Conununist Party, we
    achieve cohesion and
    unity of the Party and avoid its
    split. If the Party split, it
    would be a present to
    those who would like to damage
    not only the Soviet Communist
    Party, but our entire
    Perestroika policy.”
  • In keeping with this purpose,
    Gorbachev used the occasion of
    his Nobel Peace Prize acceptance
    speech to renounce explicitly any
    willingness to consider reforms
    that would alter the primacy of
    the Soviet communist party and
    the traditional levers of Kremlin
    power: “It is also futile
    and dangerous to set conditions,
    to say: ‘We’ll understand and
    believe you, as soon as you, the
    Soviet Union, come completely to
    resemble us.’ That is the West.
    No one is in a position to
    describe in detail what
    perestroika will finally produce,
    but it is certainly
    self-deluding to expect that
    perestroika will produce a
    copy of anything….Our
    state will preserve its own
    identity within the international
    community.”
  • This theme was trumpeted the day
    before in Moscow by two of
    Gorbachev’s hard-line ruling
    clique: First Deputy
    Prime Minister Vladimir
    Shcherbakov and Yevgeny Primakov,
    the Soviet president’s personal
    envoy.
    Interestingly,
    both of these men were part of a
    high-level delegation that met
    with President Bush and other top
    Administration officials. The
    President said of these sessions:
    “I liked what I heard….I
    view this as a very positive,
    positive meeting”; they
    evidently did much to encourage
    the recent spate of U.S.
    concessioneering.
  • After dismissing out of hand any
    linkage of Western financial
    assistance to political reforms
    in the USSR Shcherbakov said: “The
    [Soviet] government has no
    intention of
    departing from its [economic
    reform] program, already approved
    by the Supreme
    Soviet
    [i.e., the
    meaningless half-measures
    contained in the Pavlov
    ‘anti-crisis’ program].”
    According to the Washington
    Post,
    he went on to demean
    Gregori Yavlinsky as a
    “‘private expert’ who does
    not have the authority to
    elaborate ‘any new program’
    beyond the one already adopted by
    the Soviet government….We
    confirmed his powers to him once
    again and stressed that if he
    exceeds them, his work
    will be unacceptable to us.”
    (Emphasis added.)

  • The Post reported that
    Primakov, for his part,
    deprecated his U.S. official
    interlocutors by suggesting that
    they “did not have a clear
    picture of Soviet economic
    realities, including the need to
    rely upon ‘administrative
    measures’
    [read, central
    control] to stabilize the
    economy.”

  • In short, Moscow center appears
    to agree with the strikingly
    discordant note sounded yesterday
    in Hungary by Vice President Dan
    Quayle. Quayle called the
    so-called “Grand
    Bargain” being cooked up by
    Harvard academics and Yavlinsky
    and other freelancing Soviet
    economists — which has been
    closely monitored, if not at
    least
    tacitly approved, by
    the rest of the Bush inner circle
    — as a “non-starter.”

  • In the most breathtaking
    indication to date of the
    dimensions of Gorbachev’s
    chutzpa, he indicated that Moscow
    regards massive Western aid as obligatory:
    “…I am convinced that the
    world needs perestroika no less
    than the Soviet Union itself
    does. Fortunately, the present
    generation of [Western]
    politicians for the most part are
    becoming ever more deeply aware
    of that interrelationship and the
    fact than now, when perestroika
    has entered its critical phase, the
    Soviet Union is entitled to
    expect large-scale support to
    insure its success.”
  • Coincident with the Kremlin’s new
    fearmongering tone noted above
    for external consumption has been
    yet another resurgence in
    Moscow center’s aggressive
    embrace of
    repressive policies at home.
    Particularly
    notable in this regard is the
    report just released on last
    January’s violent crackdown in
    Lithuania. This report
    wascommissioned personally by
    Gorbachev and prepared by Nikolai
    Trubin, the Soviet Prosecutor
    General. Despite the laughable
    whitewash this report represents
    it exonerates the
    central authorities of any
    wrong-doing
    in connection
    with the death and destruction
    inflicted by Interior Ministry
    and KGB troops — Gorbachev
    has done nothing
    to disassociate himself from it.

At the same moment, new violence has
been perpetrated by MVD troops, including
efforts to intimidate the republic’s
elected parliament by surrounding it with
troops and arresting pro-independence
activists in Vilnius.

The Center for Security Policy
believes that these recent developments
simply reinforce its long-standing view
that Western aid to the central
authorities of an unreformed Soviet Union
is worse than a waste of money;
it will postpone rather than catalyze
necessary structural change inside the
USSR and enable the threat Moscow has
posed throughout the Cold War to be
perpetuated unnecessarily.

Paul Craig Roberts, a distinguished
international economist and syndicated
columnist, succinctly described the
Soviet situation in the Washington
Times
today. He said: “The
Soviet Union lacks the institutions to
make effective use of Western aid. If it had
the institutions, it would not need
the aid. If it gets the aid in
advance
of the institutions, they
will be bureaucratized and
stillborn.”

The Center judges the idea of using
the G-7 summit meeting as an opportunity to
pledge massive Western assistance
— or even to define a near-term
“process” for making such
taxpayer aid available — to Gorbachev to
be reckless and absolutely contrary to
the long-term interests
of both the citizens of the USSR and
their counterparts in the industrialized
nations.

Western taxpayers should feel no more
secure if their leaders make no explicit
pledges of assistance before the
summit meeting but nonetheless appear to
encourage Gorbachev’s advances on this
score, coquettishly leading him to
believe that they might come across with
aid if he proves sufficiently persuasive
in London. Either way, at the least, it
must be expected that more pressing and
legitimate summit issues will be
subordinated to the Soviet agenda. These
include: resuscitating the Uruguay trade
round; bringing down high German interest
rates; consolidating democracy in Eastern
Europe; addressing natural and man-made
catastrophes afflicting beleaguered Third
World nations; responding to political
and economic crises in Iraq, Yugoslavia,
Albania and India and elsewhere;
advancing constructive Middle East peace
initiatives; and managing dangerous arms
flows.

“A serious disconnect has
developed between most of the G-7
political leaders and their
respective Finance Ministers over the
wisdom of large-scale financial
assistance to an
untransformed Soviet Union,”
observed Roger W. Robinson, Jr.
former chief economist at the National
Security Council and a member of the
Center’s Board of Advisors. “At the
Paris OECD ministerial meetings this
week, these officials virtually ruled out
quick action on such aid — a view
solidly shared by two-thirds of
the American people according to a recent
national poll.”

Robinson added, “President
Bush and his head of state counterparts
risk turning G-7 summitry into an exalted
version of ‘Skull and Bones,’
at
least on the Soviet aid issue. Such a
closed convocation of politicians intent
on constructing an immense taxpayer
safety net for a colleague — to the
point of ignoring the pleas for caution
and discipline from even their own experts
— can only further erode popular
confidence in presidential leadership.

Center for Security Policy

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