‘What Did Gorbachev Know And When Did He Know It?’ : Hard Questions Before Trusting Moscow On Iraq

The Center for Security Policy reacted with substantial skepticism to the new cooperative partnership being trumpeted in the aftermath of the Baker-Shevardnadze photo opportunity in Moscow today.

"Little did Secretary Baker realize that when Eduard Shevardnadze put out the ‘Gone Fishing’ sign to amuse his guest on Lake Baikal that the Soviets were actually expecting to catch a big one in the Persian Gulf," said Frank J. Gaffney, Jr. "Indeed, it is only prudent to assume that Moscow was informed in advance of Iraq’s incipient invasion of Kuwait. Shevardnadze and his colleagues must have been gleefully contemplating the considerable economic, financial and political gains that would accrue to the USSR even as his American counterpart was innocently trolling, unawares of the tragic events about to occur — quite possibly with Moscow’s blessing."

The Center considers the following developments to be particularly noteworthy in considering where Soviet interests lie vis a vis Iraqi aggression — and in calculating the likely character of Moscow’s policy:

• The Soviet Union’s hard currency earnings and payments crisis is reaching a crescendo on Western markets. The attendant creditworthiness crisis gives Moscow a powerful, vested interest in any development that would boost world oil prices — its earnings centerpiece.

 

• The strengthening of the dollar is likewise a windfall for the USSR because of its large-scale dollar holdings resulting from the settlement of its oil and gas exports to the West which are denominated in dollars.

 

• The jump in the price of gold — while modest thus far — comes at a time when Moscow has been selling not only its annual gold production (approximately 300 tons) but also dipping significantly into its strategic gold reserves. Such sales reflect the genuine desperation of the Soviet leadership for quick infusions of hard currency income.

 

• Moscow is owed approximately $5 billion by Iraq for as yet unpaid deliveries of sophisticated arms to Baghdad. Many analysts believed that Iraq’s own liquidity crisis and $40 billion debt overhang primarily as a result of the Iran-Iraq war would result in yet another write-off or heavy discounting of the USSR’s financial claims on Iraq.

 

• With the likelihood that Iraq will now successfully pilfer billions of dollars from Kuwait in the course of its military occupation — and presumably on an ongoing basis from the puppet regime it will likely leave behind when the occupation ends — Moscow can now be reasonably assured of the full payment of what is owed and still further lucrative arms and commercial contracts with Baghdad once the dust settles.

   

Gaffney added, "Certainly, the Soviets bear indirect responsibility for Iraq’s aggression by dint of the vast quantity of advanced weaponry they have lavished on Baghdad over the past two decades. While Soviet rhetorical commitments to cooperate in an embargo on arms sales to Iraq is preferable to the alternative, let’s not kid ourselves: Gorbachev’s decision to suspend arms supplies to Iraq may well amount to little more than securing the barn door long after the horse is gone. It does not amount to — nor should it be construed as — active Soviet collaboration in rectifying the present crisis."

Evidently, the Bush Administration is already a bit uneasy about overselling the value of Soviet cooperation. Indeed, officials are beginning to explain away the lack of forceful, decisive actions by the Soviet Union against Iraq on the grounds that Moscow is trying to play a constructive "intermediary" role in brokering an end to the conflict. In the Center’s view, this is yet another way of permitting the Kremlin to pocket the benefits of Iraqi aggression without having to estrange unduly its traditional client relationship with Iraq.

Roger W. Robinson, Jr., former chief economist at the National Security Council and member of the Center’s Board of Advisors, added, "The Kuwaitis have reason to expect rather better from their friends in Moscow — especially in light of the $300 million emergency seven-year cash credit Kuwait made just last May to assist the Kremlin’s payment crisis."

Robinson concluded, "Before the West celebrates what is being hailed as a ‘remarkable breakthrough’ in U.S.-Soviet cooperation in a crisis of this gravity, it must take account of the impressive litany of windfall benefits already accruing to the Soviet Union from the Iraqi thrust into Kuwait and possibly beyond. In fact, Moscow is even now taking the Iraq-Kuwaiti crisis to the bank."

On the related topic of steps the United States and other allies should take in dealing with Iraq’s aggression, please refer to a paper released by the Center yesterday entitled Signal Allied Willingness to Release Oil Stocks Now!: Buy Time to Forge Punitive Response Against Iraq. Copies of this paper may be obtained by contacting the Center.