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.