‘Fit To Print’: Bush Has No Excuse For Continuing To Ignore Soviet Non-Creditworthiness

(Washington, D.C.): Today’s New York Times features a front-page story updating information published by the Center for Security Policy a month-and-a-half ago and — in the process — confirming the Center’s contention that the Bush Administration is involved in a cover-up concerning Soviet creditworthiness.

In a paper released on 28 June 1991, entitled "President’s Certification of Soviet Creditworthiness Blown Away by Private U.S. and Western Credit Markets," the Center originally reported that:

"Virtually every major American and European commercial bank has given lie to President Bush’s recent contention that the Soviet Union is creditworthy, a precondition which legally must be met by sovereign recipients of U.S. agricultural export credit guarantees."

At that time, the Administration could get no takers for its effort to persuade commercial lenders to underwrite credits virtually entirely guaranteed by the American taxpayer. The reason: Prudent bankers were simply unwilling to accept any risk exposure for their shareholders involving new lending to the Soviet Union. Clearly, the marketplace was speaking articulately and authoritatively — Moscow is decidedly a lousy credit risk.

The Times reports today, however, that four American branches of European banks (Banque Nationale de Paris: $300 million; Barclays Bank: $150 million; Rabobank Nederland of Utrecht: $100 million; and Banque Indosuez: about $60 million) were finally prevailed upon to accept the two-percent risk exposure associated with bankrolling the first $600 million tranche of the $1.5 billion Soviet grain purchase. According to The Times’ report:

"American bankers contend that the European banks came under pressure from their governments to make the loans. Western European governments have been more worried than Washington about the potential for civil disorder and large-scale emigration from the Soviet Union, and have been lending the [USSR] huge sums at concessionary rates."

 

While the Bush Administration is reported by The Times to have properly rebuffed Soviet efforts to get the American taxpayer to accept the entirety of the risk (i.e., 100% guarantee of principal rather than 98%), its doing so has had the unintended and perverse effect of "subsidizing European banks in their efforts to establish relationships with American exporters." This is yet another of the ways in which its policy of dissembling about the true state of Soviet creditworthiness is working against U.S. commercial and taxpayer interests.

In light of the information detailed in the New York Times’ report (a copy of which is attached), the Center reiterates the recommendations made in its 12 August Decision Brief entitled "Speaking of Cover-Ups: Western Effort to Conceal Soviet Insolvency While Giving New Aid is a Real Scandal":

"The strategic and political risks associated with this Bush Administration policy — not to mention the huge losses likely to accrue to American taxpayers as a result — require nothing less than complete candor on the part of the Bush Administration and an opportunity for open and informed public debate over such a course of action. The Center for Security Policy calls on the President to make a full disclosure of his Administration’s assessment of actual and projected Soviet creditworthiness. He should also reveal the extent to which various commitments for economic, financial and energy-related assistance, notably through the device of government-guarantees for U.S. exports, will expose the American taxpayer to new contingent liabilities."

 

 

"Should the Bush Administration not be immediately forthcoming, the Center believes that it is the duty of Congress and the media to press for a thorough investigation of these and related issues. It goes without saying that until such an investigation is completed, no consideration should be given to extending additional taxpayer-underwritten assistance to Moscow center unless it is on a fully collateralized basis."