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.