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Japan, West Aim to `Help Russia Help Itself'

Group of Seven offers aid package ahead of Russian referendum

WITH just 10 days before a referendum in Russia decides the political future of Boris Yeltsin and his reforms, the West and Japan have thrown the beleaguered president a few financial life preservers. Fresh aid was pledged to Mr. Yeltsin yesterday at a hastily assembled meeting of finance and foreign ministers of the Group of Seven (G-7) most industrialized nations in Tokyo.

Altogether, the promised aid from this gathering, as well as the recent Clinton-Yeltsin summit and other emergency meetings on Russian aid, is expected to exceed $30 billion in loans, grants, and debt rescheduling. The intent of G-7 ministers is a strong message of support for Yeltsin in his April 25 ballot showdown with Russian hard-liners. (Yeltsin's campaign, Page 6.)

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"Since the fundamental spirit of these measures is to help Russia help itself, the size of the package per se will not be so important," says Noboru Hatakeyama, vice minister of Japan's Ministry of International Trade and Industry.

Much of the aid was designed to reach Russians directly and tangibly, not only to avoid any losses, but perhaps to influence the referendum. "This foreign aid is not enough to reform the Russian economy. Self-help is most important," says Akio Kimura, a Russian expert at Tokyo's Aoyama Gakuin University. "But G-7 support is very effective for Yeltsin's difficult position."

One surprise aid proposal came from the United States, which invited its G-7 partners, the World Bank, and the European Bank for Reconstruction and Development to help create a $4 billion fund to help privatize state-owned enterprises.

The US offered to put up $500 million for the fund, in addition to the $1.6 billion aid package that President Clinton promised Yeltsin at their Vancouver summit. US officials indicated that even more aid is in the works.

Russia's inability to break up state enterprises and the willingness of the Central Bank to provide easy credit to keep the enterprises running have been two major irritants to potential G-7 donor nations. The bank's massive printing of rubles, says US Treasury Secretary Lloyd Bentsen, has created inflation of about 25 percent a month - "bordering on hyper-inflation."

"You saw the total economy of Russia valued ... at $75 billion, as compared to the United States' being $6 trillion. You saw the average monthly wage go to approximately $39 a month because of what happened to the ruble. It's had a devastating effect. So it is critical that they begin to stabilize the currency," he says, noting that Yeltsin appears to be gaining control of the Central Bank.

The European Community offered $1.8 billion in aid to Russia, while Japan, as host to the G-7 meeting, followed with the same amount in a break from its past policy to withhold large-scale assistance until Russia returns four disputed islands taken at the end of World War II.

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Japan was under pressure from France, Germany, and the US to use its large trade surplus for Russian aid.

"The size of Japan's aid package was directed by the US," says Shigeo Sugiyama, professor at Hosei University in Tokyo. "But no matter how big or small the aid is, the most important thing is that it is well used - and that the people in Russia understand that the aid came from Japan."

Even after Japan made its package known, Secretary Bentsen indicated that Mr. Clinton would be asking Japanese Prime Minister Kiichi Miyazawa to contribute more in a summit meeting that begins tomorrow.

But a Japanese finance official says, "We have made the best efforts to assist Russia."

More than half of Japan's aid package is in the form of trade insurance to help Japanese companies. But Japan also will give $100 million to aid in the dismantling of nuclear weapons.

Japan is directing loans to help Russia increase its oil and gas output to earn foreign exchange. Petroleum is "the key to reform of the Russian economy," Mr. Hatakeyama says.

Japan has shelved its islands dispute with Russia for now in trying to raise its aid ranking among the G-7 donors and avoid further criticism. Yeltsin, in return for Japan's move, has offered to visit Tokyo in May.

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