Individual Soviet Republics Wrangle With West Over Aid

THE Soviet Union is bankrupt, and the fractious state of the 12 former Soviet republics is frustrating Western creditors and aid donors.Deputy finance ministers of the Group of Seven (G-7) leading industrial nations sat down Nov. 18 for three days of talks with representatives of the republics to try to settle the Soviet debt crisis. According to various reports, the G-7 arrived with a proposal to defer payments on the debt and to offer some new credits. But the package depends on the Soviet republics implementing a memorandum signed last month to take joint responsibility for the estimated $70 billion Soviet debt. According to the independent Soviet news agency Interfax, 10 of the republics signed a further agreement Nov. 19 on collective responsibility. The Ukrainian representative signed with the condition that his signature be confirmed in a week. During that time the republics must define their exact shares of the debt and of Soviet assets. Uzbekistan refused to sign the document at all, insisting that it would not take responsibility for other republics' share of the debt. The Uzbeks, who produce about a quarter of Soviet gold, say only three or four republics are capable of earning money to pay the debt. They also accused the G-7 of imposing unreasonable conditions on the republics. "They want to resolve the question in the form of an ultimatum - first sign the memorandum and then we'll talk about credits," Uzbek Vice President Shukurulla Mirsaidov told Interfax. "There is no ultimatum at all," Canadian Deputy Finance Minister David Dodge responded, according to a Reuters report. The insistence on republican unity "is unrealistic," says the head of the Moscow office of one leading Western bank. If they stick to that condition and do not offer some new loans, "the G-7 is going to go home empty handed," the banker says. He warns that the State Bank for Foreign Trade, the bank which is the agreed central manager for debt payments, is already freezing accounts of foreign clients, blocking the transfer of money overseas. "They're obviously running out of money," Mr. Dodge says. "Deferral [of debt payments] is in everyone's best interest," US Ambassador Robert Strauss told US reporters Nov. 18. "Failing to defer is not going to increase the chances of getting payment - it's going to decrease it," he argued. The situation has been complicated by the recent actions of the Russian government of Boris Yeltsin. As part of a radical reform policy, the Russians over the weekend issued a series of decrees including what amounts to a nationalization of Soviet gold and currency reserves as well as Russian oil production, which is 90 percent of the Soviet total. The Russian decrees effectively dismiss the Soviet State Bank and Ministry of Finance. The Russians are seeking to protect their reforms as well as bid for inheritance of the collapsing union. In turn, Russia has offered the West security by stating recently that it will be willing to guarantee the debt of other republics as well. "Yeltsin's policy seems to be of dual purpose now - to support Mikhail Gorbachev's efforts to create a union of sovereign states and at the same time to revive Russia's economic might as soon as possible," the daily Komsomolskaya Pravda wrote Nov. 19. Mr. Strauss, who saw Mr. Yeltsin Nov. 16, said the Russian leader "had a very healthy realism about the problems ahead of him. He knows he's bet his future ... on control of these economic problems. He thinks if he can get some support from the West, he can weather the next six to eight difficult months." Strauss expressed concern about the growing political mood of opposition to foreign aid in the United States. "I know it's hard for the American people to realize it's a good investment of a modest amount of taxpayers' money," Strauss said. "We can come out of here in a few years with a modestly stable government and society that has the values we believe in in our country," he said, opening the door to "the greatest period of peace and prosperity we have ever seen." The ambassador warned that failing to give aid poses far greater dangers. A tough winter could easily bring people into the streets, Strauss predicted. "Out of that kind of climate demagogues are made.... I'd rather risk a couple of billion bucks ... than fail to risk it and end up ... with a fascist-type situation out here."

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