US Pushed to Help Former Soviet States
THE Bush administration faces mounting pressure to provide large-scale assistance to the former Soviet republics at a time when the United States is absorbed in domestic concerns, including a presidential election.
The White House is still smarting from former President Richard Nixon's recent attack on US policymakers. He offered an apocalyptic view of the security risk to America should the reformers in the former Soviet Union fail due to lack of international support.
German Chancellor Helmut Kohl, whose own country has doled out the most aid to the former Soviets, underscored Mr. Nixon's warning during a state visit here last weekend. He cautioned against a US retreat from "global responsibilities."
A bipartisan group of senior US senators lobbied President Bush at the White House on Monday "to lead" by aggressively shoring up reforms in the former Soviet republics. The lawmakers called upon the president to extend more agricultural credits, increase technical assistance, and lift restrictions on US financing and exports - all of which would help American producers and give US firms access into a huge new market.
Far more prickly is their request for a costly US commitment to a multibillion-dollar fund for stabilization of the Russian ruble and increased financing for the International Monetary Fund (IMF).
Clearly, the Bush administration fears the political backlash of sending more money abroad during this election year, when many American voters view foreign aid as an impingement on the ailing US economy. But policymakers close to the issue suggest that the US intransigence has more to do with economics.
A senior US Treasury official puts it bluntly: "The stabilization fund is a terrible idea now. Russia's central bank is still recklessly printing money and giving credit to failing enterprises; $7 billion in requested Russian funds will be eaten up by imports in a couple of months."
The stabilization fund is not meant to be used directly; it exists to anchor the local currency to a fixed exchange rate and shore up consumer and investor confidence. The Treasury official says the US will have to give in to the pressure.
"We're going to give a couple of billion dollars. We'll attach strict conditions and it will be a huge risk at that," he says, adding that squandering of funds will greatly jeopardize reforms in Russia. "Lenders won't have an appetite to extend new credit."
Later this spring, Russia and other republics will become full members of the two largest global financial institutions, the IMF and the World Bank.
An IMF program will require Russia to implement austerity measures that close down the ruble printing presses, drastically curb government spending, limit the amount of government credit to failing enterprises, and reduce the official deficit. But all of this may be at a slower pace than the US Treasury would prefer.
The World Bank recently increased its financial base and is prepared to spend at least $2 billion on projects in the former Soviet Union this year; the bank has plenty of cash for its new members' turbulent years ahead.
But the reformers may scramble for resources when they look to the IMF. Unless the US approves an IMF capital increase this year, which is apportioned to each member country according to its quota (holding roughly one-fifth the shares, the US is the largest contributor), the fund may run out of money for the needy new members.
Critics implore the US to move fast to set up the stabilization fund and approve greater resources for the IMF.
"We're worried about the former republics and their nuclear arsenals, should the anti-reform right wing get the upper hand," says James Elles, spokesman for the European Parliament's budget committee.
Mr. Elles says, "We're also anxious about the impact on our neighbors to the East - such as Czechoslovakia, Hungary, and Poland. Chaos in the former Soviet Union poses a military threat, the complete collapse of important markets for Eastern and Central Europe, and the possibility of unmanageable migration."
By 1997, the 12-nation European Community will have paid out $6 billion for "external action," largely to aid its eastern neighbors.
Germany repeatedly points at US coffers. After plunking down almost $40 billion in assorted aid and spending roughly three times that amount per year on reunification with eastern Germany, public and private German finance managers say their funds are tapped out.
Mr. Kohl took that message to Washington this week, warning against American isolationism that is perceived as having gained momentum during the US presidential campaign. He implored the US "to play a decisive role."
He said, "A destiny of peoples is being decided on the foreign policy front.... Each people that does not understand and follow this lesson of history ... will have to pay very dearly" should the reforms fail.
Kohl will serve as host to the US president and other world leaders at the Group of Seven meeting to be held in Munich this July. Russian President Boris Yeltsin is also invited. The G-7, including Britain, Canada, France, Germany, Italy, Japan, and the US, is working out strategy for providing a broad-based aid package for the former Soviet republics.