Soviet Swords Into Plowshares? Not Quite Yet

FRESH from an eight-day tour of Soviet defense factories and research labs in Moscow, St. Petersburg, and Kiev, United States Deputy Defense Secretary Donald Atwood struck an upbeat note.The vast Soviet defense complex is ready to transform itself into civilian production, he told reporters on Tuesday. "The message was that there is a sincere interest on the part of industrialists, ministers, and workers that there can be an orderly transition in many key industries," Mr. Atwood said. The US government is ready to act as a catalyst for such a transformation, the senior official pledged, though the main job lies with American private investment. To emphasize that, a group of seven American industrialists accompanied him, including senior executives from companies such as Boeing, General Electric, Ford, General Motors, and the Kellogg Company. But such official optimism runs up against considerable evidence that the Soviet defense industry leaders and the current political leadership are reluctant to push too rapidly for conversion. And American executives say privately that conditions are far from ripe. "The Russians have to understand how a market economy works," said one executive on the tour. "They have to offer products that are salable. They don't even know what their costs are because they never had to," he said. Foreign investors are "holding back," he said, in part because of the uncertain political future of the Soviet Union. "Who do you do business with?" he asked rhetorically. Soviet leaders have touted joint ventures with Western firms as a means of easing the pain of conversion. They point out that conversion of the huge Soviet defense complex will be costly, especially dealing with the social consequences. Arkady Volsky, head of the Scientific Industrial League and current deputy chairman of the interim committee managing the Soviet economy, estimates that unemployment in the defense sector could easily hit 2 million people. While the talk is mostly about shifting from defense to consumer goods production, the Soviets also are increasingly raising what not so long ago would have been the astounding idea that Soviet and American defense firms could jointly develop weapons. "I was surprised when one Soviet cruise-missile developer proposed joint weapons development with the US and declassifying defense information," recounts Mr. Volsky, who hosted the American defense industry visit. "Soviet defense specialists believe their products are competitive." Even Soviet President Mikhail Gorbachev, in a meeting with Atwood on Tuesday, proposed cooperation in developing the technology to dispose of chemical weapons and in joint research on new products between Soviet and American defense firms. Russian President Boris Yeltsin has put an even more curious idea on the table, suggesting that the US and Russia work together to carve up the world arms market. According to a Tass news agency account, he unveiled this proposal at a meeting last week with the heads of large Russian state-run industry, many of which are part of the defense industry complex. Clearly trying to assuage fears of a large-scale cut in defense spending, Mr. Yeltsin told them that no moves toward conversion would be made until defense needs were assessed. Moreover, he said, the Soviets can still make profits by selling arms overseas. "We shall not trade ... in nuclear weapons," Yeltsin told the industry executives. "But we can well trade in tanks and Kalashnikov submachine guns." Yeltsin told the meeting that he had recently discussed with US President Bush "the question of whether the arms market should be divided between the two countries," Tass said. "But the US president deemed that inadvisable," the report continued. Many defense industry leaders here argue against rapid conversion, warning it will throw away huge investments in technology and manpower built up by the defense firms. "The Soviet engine industry can be destroyed overnight, but its reconstruction will take a minimum of 25 to 30 years," said Alexander Sarkisov, chief designer of engines for Soviet fighters and helicopters for the Klimov Association, told the New Times. Mr. Sarkisov dismissed the current conversion effort, which focuses on defense plants turning out civilian goods. "Look, in the world market a kilo of a modern fighter plane costs over $2,000, and a kilo of saucepans, $1," he contended. "Isn't it more rational to sell engines and spend a proportion of the income on Western-made goods of the kind we are compelled to make as part of 'reconversion The Soviet aircraft industry has been promoted, particularly by some Western observers, as a prime candidate for Western cooperation for conversion. With Western technology, it is argued, Soviet passenger jets could be sold on world markets. Boeing Senior Vice President Lawrence Clarkson, a member of the touring group, politely calls that prospect "unrealistic." "Even with Western avionics and engines, they won't meet Western standards of safety," Clarkson says. He says Soviet design capability is quite good but describes the level of their production methods as "very low." "In the long term, they have a possibility of designing and coproducing aircraft that do meet those standards," Mr. Clarkson says. In the meantime, it is more realistic, he says, for the Soviets to produce parts for Boeing and other Western aircraft. Soviet industry proposals for joint ventures, however, are based on unrealistic estimates of their abilities, the US industry executive says. "They want to start running the 100-yard dash in 9 seconds. Boeing feels we have to learn to crawl together before we walk together, before we run together, before we run the 100 yard dash together."