Center Applauds Bush Opposition On Loans To Moscow

The Center for Security Policy today commended President Bush for flatly opposing Western loans to the Soviet Union. In a Saturday interview with National Public Radio, the President said: "This concept that we ought to go loaning money, or giving money to the Soviet Union now, I don’t accept that….I don’t think that’s in America’s interest, and I don’t think it’s needed to encourage reform and perestroika and glasnost in the Soviet Union." He stated that the Soviet Union "has a long way to go before sound loans can be made there" from Western financial institutions. The president thus reinforced his earlier statement in a 14 March press conference: "Do I think it’s a good idea to loan money to the Soviet Union today? No."

The Center has long opposed extending either U.S. government-subsidized loans or guarantees to the Soviet Union or untied, general purpose loans from private sources. "With the creditworthiness of the Soviet Union rapidly declining, the American taxpayer should not be asked to take on this additional financial liability," said Frank J. Gaffney, the Center’s director. "The President is correct: Undisciplined lending would only serve to postpone the need for genuine, systemic reforms and would provide Mr. Gorbachev the flexibility to divert funds to support activities inimical to Western interests."

Unfortunately, with the imminent creation of the European Bank for Reconstruction and Development (EBRD), the prospect of large-scale international lending to the Soviet Union is looming. Ironically, the Bank was originally conceived just to help fund economic revitalization in the newly-emerging democracies of Eastern Europe. An op.ed. by Center Board Member Roger W. Robinson, Jr. which appeared in last Friday’s Wall Street Journal (a copy of which is attached) revealed that the Soviet Union intends to use the EBRD to obtain Western funds for itself. As Robinson put it, "Moscow’s objectives toward the development bank are clear: Mr. Gorbachev intends to put the Soviet Union in a position to influence decisions on subsidized credits and to receive those credits itself."

The Center urges President Bush to oppose Soviet participation in the EBRD; under no circumstances should Moscow be permitted even limited borrowing privileges. Doing otherwise would be to reward the USSR with development bank funds urgently required by fledgling East European governments and private sectors. According to Robinson, "The United States and Japan should withdraw from the EBRD rather than participate in an institution that will clearly work against the interests of Eastern Europe and not — in the words of President Bush — encourage reform in the USSR."

Yet another potential source of subsidized funds for the Soviet Union is the U.S. Export-Import Bank, whose loans and government guarantees will become available with the waiver of the Jackson-Vanik and Stevenson amendments now under negotiation as part of the U.S.-USSR Trade Agreement. U.S. negotiators should be instructed at once to cease their efforts to arrange the very sort of lending to Moscow President Bush so clearly opposes.