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Soviet Gold Reserves Fall Far Below Estimates

Lack of hard currency may dash Soviet hopes for badly needed Western credit

IN a stunning display of just how dire the Soviet economic condition has become, Soviet officials this week released figures on the country's perilously low gold reserves.A top Soviet gold analyst visiting Stockholm's prestigious Institute of Soviet and East European Economics confirms that Soviet reserves stand at 240 tons, worth roughly $2.5 billion. The number is one-tenth that of United States Central Intelligence Agency estimates. Analyst Grigory Khanin says the government has sold 135 tons of gold since Jan. 1 to pay for essential imports and to make timely foreign-debt payments. The sales are easy to detect because of the transparent Swiss gold market, which registers sales and purchases. Mr. Khanin says the precipitous drop in Soviet reserves is part of a continuing decline since 1986, "as it is with the entire economy," he says. Gold, whose price is determined by the international commodities market, is an important barometer of Soviet finances. The crumbling empire's currency, the ruble, cannot be converted, thus its value cannot be assessed by international standards. Soviet leaders warn that the cash-strapped central government, struggling to service its $70 billion foreign debt, faces a hard-currency shortfall of more than $7 billion for the rest of this year. Viktor Gerashchencko, head of Gosbank, the Soviet central bank, told finance ministers from the world's richest countries, who met in Bangkok this week, that government coffers are practically empty; they hold only enough to cover only two months of imports and loan payments. Long a closely held state secret, the amount of gold reserves is now publicly profiled as Mr. Gerashchencko and other Soviet economic managers desperately seek international financial help. "The Soviets said their credit standing would fall if they released the gold level before," says Anders Aslund, director of the Stockholm Institute of Soviet and East European Economics. Creditors such as Germany have tried to play down Soviet credit problems by pointing repeatedly to the country's vast energy and mineral reserves. They have opposed forgiving any of the former union's debts, stressing that with a wealth of resources to sell for foreign currency, Moscow can and must service its debts. More than one-third of the Soviets' $60 billion debt to the West is due Germany. The US has lobbied to reschedule some Soviet debt, suggesting that if the heavily exposed Germans do their part by easing the Soviet debt burden today, Washington will be more forthcoming with fresh credits tomorrow. But a senior US treasury official charged with assessing Soviet credit risk is skeptical. "The only shred of evidence concerning Soviet creditworthiness is the amount of gold or oil it has." This basis, he says, "is absurd. Especially when I think back to Iraq, a country which promoted itself and was perceived to be a good credit risk because of its huge oil deposits. Baghdad then turned around and repudiated its foreign debts." In the midst of political and economic chaos, the Soviet internal payments structure is collapsing. Republics have refused to remit foreign-exchange earnings from a variety of exports to Vneshekonombank, the Soviet Bank for Foreign Economic Affairs, responsible for international payments. Whether Moscow can rely on gold reserves as collateral for new Western credits has much to do with the mining sector's current disarray and the political dynamics between the Moscow center and independent republics. Khanin says 180,000 people work in the Soviet gold industry, producing some 180 to 200 tons a year. While much of Soviet territory has not been prospected, 60 percent of known mines are in the Russian republic; the rest are in Uzbekistan, Kazakhstan, and Armenia. Most of the gold is mined by 120,000 state employees, the rest is delivered to central authorities by some 60,000 quasi-private workers. The latter produce twice as much, says Khanin, but they steal much of the gold. Still, this pilfering is marginal compared to the amount of gold that could be withheld from central accounts by local republic leaders. As import costs soar and credit becomes tighter, local leaders could choose to store much of the gold for local use. A Sept. 26 bulletin from Tass, the Soviet news agency with close ties to central authorities, offers one of countless conflicting gold reports. "Ten percent of the Soviet gold reserve, worth $4 billion, was secretly transported from the USSR to the West on the instruction of a small group of people from the State Emergency Committee," which governed during the August coup, it says. Yet the amount of reserves, says the US Treasury official, is immaterial: "It's an illusion to think that Vneshekonombank brings in all revenues, makes all payments, and will meet international responsibilities. The place is falling apart."

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