Center Commends Cheney, Challenges Bush On Western Bail-Out Of Moscow

The Center for Security Policy today commended Secretary Dick Cheney for his firm opposition to a multi-billion dollar Western financial rescue package for the Soviet Union. This proposal was initiated by West Germany and France, was endorsed in principle yesterday by the European Economic Community meeting in Dublin and will be a major agenda item at the upcoming NATO summit meeting in London and the Houston Economic Summit.

"President Bush should express no less robust opposition to such Western assistance — and particularly to any U.S. government or taxpayer participation — in the interest of encouraging a genuine transformation of the Soviet economic and political system," said Frank J. Gaffney, the Center’s director.

Several months ago, this appeared to be the President’s view. For example, in a 17 March interview with National Public Radio, the President opposed aid to the Soviet Union stating, "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…[The Soviet Union] has a long way to go before sound loans can be made there." The soundness of these observations were fully vindicated by the subsequent evidence of a payments crisis to Western suppliers estimated to be in the range of $2-3 billion.

More recently, however, as the European bail-out initiative has gotten underway, President Bush has struck a more felicitous tone. In an interview in Huntsville, Alabama on 20 June, he confirmed that the subject would be discussed at the Houston Economic Summit and clearly left the door open for U.S. participation in the $20 billion Western aid package saying, "I recognize that support from the West can help the [Soviet] economy."

Roger W. Robinson, Jr., a member of the Center’s Board of Advisors, added, "How could such alliance and U.S. financial assistance to the USSR conceivably be justified when, for example, Latin American debtor nations require urgent economic revitalization, the democracies in Eastern Europe need to be consolidated, and numerous other more compelling country applicants go short-changed?"

Robinson added, "In short, Western assistance resources are already vastly overcommitted. Adding the Soviet Union as a multi-billion dollar annual claimant of such resources for years to come is more than folly — it is cruel to those deserving nations crowded out of Western aid flows by Moscow’s heavy-handed tactics and a craven West German payola scheme."

On this latter point, the recent $3 billion untied loan guaranteed by the West German government to the USSR is unprecedented both in the amount of money and the size of the taxpayer subsidy involved. It represents the very worst of the financial arrangements between West and East — similar to the large West German credits extended in 1979 to the doomed Gierek regime in Poland that were uncollectible.

The Center offered several related reasons for President Bush to stand by his earlier opposition to any Western economic assistance package to the Soviet Union:

• A Western bail-out package at this juncture would permit a postponement of the necessary, sharp reduction in Soviet expenditures on: defense (now roughly 25 percent of GNP), Soviet client-states (consuming approximately $15 billion per year), and the theft of strategic Western technology and enhanced espionage operations inimical to vital Western security interests.

 

• Leading Soviet reformers and economists (such as Vladimir Tikhanov) are convinced, moreover, that Western financial assistance to the central authorities in Moscow would likely be squandered and never reach republics like the Baltic states and entrepreneurial segments of the economy which could otherwise become engines of reform.

 

• It would be imprudent for the United States to enter into an additional open-ended taxpayer liability by extending financial assistance to a country which already has $2-3 billion in payment arrearages to Western suppliers, lacks any mechanism for the productive channeling of Western assistance flows, and continues to resist providing even basic economic and financial data to the international community.

 

• At a time when the United States is already owed some $65 billion in foreign aid repayments that are unlikely ever to be collected, it would seem particularly imprudent to add substantially to these potential taxpayer losses.

 

• The idea of making any direct aid available to the Soviet Union is opposed by over two-thirds of the American public according to a recent Wall Street Journal/NBC poll.

Furthermore, included in the list of aid measures under active consideration by the European leaders is a scheme to assist the Soviet Union in extracting and selling oil and natural gas from the Soviet Union, using European expertise and equipment and providing royalty payments to the Soviets. "Such efforts, which would have the effect of enhancing Soviet energy leverage over the Baltics, make a mockery of Western claims to support those whose independence movements are being crushed by precisely this device," Gaffney added. "Especially in light of Moscow’s continuing economic repression in the Baltics, even the discussion of such aid is entirely inappropriate."

The Center believes that the Bush Administration may well inform U.S. allies — and the media — at the NATO and Houston summits that it supports the efforts of other capitals who wish to assist Moscow, but that the United States cannot contribute significantly at this time. There will be all of the appearances of sensible Administration opposition to this ill-considered multilateral initiative when, in fact, the Administration plans this fall to put the American people in the cross-hairs of direct or contingent losses stemming from U.S. government guaranteed credits and trade transactions with the Soviet Union.

The Center anticipates that the Bush Administration will privately inform the allies that restored Soviet access to Export-Import Bank loans and credit guarantees, 3-year Commodity Credit Corporation grain loans and Overseas Private Investment Corporation insurance coverage represent a substantial U.S. assistance package to the USSR. Thrown in as part of the U.S. "contribution" will likely also be Soviet eligibility for the benefits of the "SEED 2" legislation, food aid, and major energy-related assistance.