SOVIET TRANSFORMATION WATCH #1: WEST SCRAMBLES TO GIVE RECONFIGURED MOSCOW CENTER LIFE-SUPPORT

(Washington, D.C.): Even as Secretary
of State James Baker in his press
conference today tried to suggest
complete U.S. indifference as to how the
peoples of the former Soviet Union choose
to organize their government, the
West’s strong partiality to doing
business with Moscow center has been
exhibited by both words and deeds.
Unfortunately, the cumulative effect of
the signals being sent by Western
governments, banks and businesses may
well be such as to impede the necessary
and desirable transformation of the
erstwhile USSR, if not to perpetuate a
reconfigured Moscow center.

Evidently sensitive to his — and
President Bush’s — now obvious
overinvestment in the pre-coup central
authorities led by Mikhail Gorbachev,
Secretary Baker went to some lengths to
suggest that the United States would be
just as happy dealing with democratic
republics as a monolithic Soviet center.
Even so, his personal preferences were
unmistakable:

“I’m not picking and
choosing between fifteen separate
republics, a loose confederation
of sovereign states, or a firm,
strong central union. It’s
not up to us to make these
determinations. And I’m not
picking either between
individuals, in terms of who we
might or not prefer to deal with.
We are going to deal with
reformers wherever we find
them.”

The Nuclear Pretext:
Baker made no effort to conceal his
attachment to central authority on one
score, however: He embraced the insidious
notion that some form of centralized
control is the optimal means of
preventing accidental, unauthorized or
other deliberate use of Soviet nuclear
weapons.

Despite the frequency with
which this bit of conventional wisdom is
repeated, it fails to take into account
two crucial points: It was the center
that amassed these weapons in the first
place and that continues to represent the
single greatest threat of their use
against the United States or its allies. “Dual-“
or “multiple-keys” for the
release of Soviet nuclear weapons
actually would, in all likelihood, greatly
reduce the danger of any such
weapons being utilized. This
would be particularly true if at
least one such key rests firmly in
the hands of democratically elected
governments, rather than exclusively with
forces traditionally loyal to
totalitarian authority.

Business Prefers Order over
Freedom: The notion that the
United States — to say nothing of the
West as a whole — really is
indifferent as to the future viability of
Moscow center has been further belied by
the following:

• Baker also used the opportunity
  of the press conference to ask a
  series of rhetorical questions.
  Their common theme was obvious —
  the absence of a central
  financial authority would
  complicate future U.S. aid:

“What happens to the
debts of the Soviet Union? To
what extent will republics that
are leaving the Soviet Union
disclaim any responsibility? To
what extent would some accept
responsibility? What does that do
to the credit rating of the
center should there remain a
center anything like the one that
we have been used to dealing with
or that is there now, let me put
it that way? And what does that
do to the ability of those of us
in the West whose laws call for
certain credit requirements to
help on CCC credits?”

• Yesterday, Agriculture
  Secretary Edward Madigan
  used his own press conference to
  run a similar line up the
  flagpole: “It remains to be
  seen as to what our business
  relationship [with the Soviet
  Union] will be. But certainly it
  would be most easily facilitated
  if it was with a central
  government….” He went on
  to opine:

“We have to comply
with the law. You may be
familiar with the
provision in the law that
says — particularly with
regard to the GSM
[General Sales Manager]
program, that we must
make a creditworthy
analysis of any
additional credit that we
would extend. We
were able to do that with
regard to the Soviet
Union.

“It would be very
difficult to do that with
regard to an individual
republic, since the
individual republics at
this point in time do not
even have their own
banking systems. Unless
and until the economic
relations between the
central government and
the individual republics
is clearly defined, there
would be no way that we
could make an assessment
with regard to an
independent republic that
would enable us to comply
with the terms of the
law.”

• The notion is laughable that
  Secretary Madigan and the Bush
  Administration are genuinely
  seized with the issue of
  preserving the integrity of the
  statutory requirement for
  creditworthiness on the part of
  sovereign recipients of U.S.
  agricultural credit guarantees.
  After all, less than three months
  ago — in deciding to extend a
  further $1.5 billion in U.S.
  taxpayer-guaranteed credits to an
  unreformed, militarized USSR —
  President Bush contemptuously
  disregarded the informed judgment
  of key legislators like Sen. Bill
  Bradley, financial experts both
  inside and outside government and
  the Center for Security Policy
  that the Soviet Union could not
  be considered remotely
  creditworthy at the time.
  (Private credit markets
  subsequently vividly confirmed
  the folly of the Bush
  certification when all American
  banks declined to accept any
  Soviet credit exposure in
  underwriting this transaction.)

• The London Financial Times
  reported from Bonn yesterday that
  Theo Waigel, the German Finance
  Minister, yesterday “warned
  strongly against fragmentation of
  the Soviet Union and called for
  guarantees that existing Soviet
  debts be met.”
• According to the Wall Street
  Journal, Russia “made a
  grab for all Soviet gold and hard
  currency reserves and tried to
  install its own people in the top
  two jobs in the Soviet banking
  system. Russian President Boris
  Yeltsin was forced to back off by
  other republics and some
  Western banks.”
  (Emphasis added.)

If Baker is to be Made an
Honest Man: The Center for
Security Policy believes that, for
Secretary Baker’s professions of
willingness to work with independent,
democratic republics — as alternatives
to a reconfigured Moscow center — to
have meaning, the United States
and its allies must be willing to take
steps to ensure that such republics have
a chance to succeed without the
center.

Specifically, the United States and
other G-7 nations should immediately
offer to cooperate with republics
demonstrating a genuine commitment to
democratic pluralism and free market
economic opportunity concerning the
facilitation of direct Western trade and
credit flows and broader foreign policy
relations. Such a policy approach would
entail the following:

• Providing any “new
  money” flows,
  particularly with regard to
  humanitarian purposes, to
  qualifying republics in
  a disciplined, transparent
  fashion — unencumbered by the
  pre-coup Soviet foreign debt
  burden accumulated by
  non-reformers over which the
  republics have had, by and large,
  neither control nor use of loan
  proceeds. As long as a
  center exists, it should, by
  contrast, be held fully
  accountable for such past
  indebtedness.
• Offering energy-related
  assistance over time to
  qualifying republics where the
  West can verify that the vast
  majority of newly generated hard
  currency revenues (stemming from
  enhanced oil and gas production
  and exports) would be strictly
  earmarked for civilian economic
  development within the
  republic.
• Supporting the division of
  ownership and management
  responsibilities among the
  republics for operation
  of the Soviet Bank for Foreign
  Economic Affairs and its
  branches, Gosbank and, in
  particular, Soviet subsidiary
  banks located in the West.
  Without such a fundamental
  restructuring of these
  institutions dealing with the
  Western financial community, the
  most threatening aspects of
  central authority could be
  maintained — and perhaps
  strengthened.
• Opening immediate bilateral
  negotiations between the U.S. and
  its allies and qualifying
  republics with a view toward the prompt
  termination of any republic
  contributions to Soviet client
  state support, strategic
  modernization, technology theft,
  disinformation, hostile foreign
  espionage and other
  activities harmful to Western
  security interests.
• Offering forthwith to negotiate
  with qualifying republics separate
  trade and credit agreements and
  membership in key international
  trade, financial and political
  organizations (e.g., the
  IMF, UN, CSCE, etc.)
• Providing technical support to
  republics wishing to obtain a “dual-key”
  or “multiple-key” veto
  over the use of Soviet nuclear
  forces on their territory.
  This support should extend to the
  disarming and destruction of such
  weapons in place, should
  the republics choose to implement
  nuclear-free status.
• Assisting in organizing and
  facilitating genuine
  defense conversion in qualifying
  republics only where a complete
  privatization process has been
  implemented and the facilities to
  be converted are completely
  withdrawn from any vestige of the
  Soviet military-industrial
  complex.