West European bankers breathe easier over loans to East bloc
Boston — Hannes Androsch was gloating a little. The chief executive of Austria's largest bank, Creditanstalt-Bankverein, had always said the Soviet Union was a good credit risk.
But when Poland got into serious debt difficulty in 1981, the debt reputation of the whole of the Soviet bloc was contaminated. So, it seemed, might also be Mr. Androsch's reputation as an analyst.
Now, however, the Soviet Union and some of its Comecon trading-bloc allies are borrowing again in the West. Androsch commented over a recent lunch: ''Our judgment turned out to be not wrong.''
Indeed, the Austrian banker feels that all the East European nations, possibly aside from Poland, are good loan risks. ''We have no solvency concern as far as the East bloc is concerned,'' he says.
From the standpoint of such key West European banks, that development with their Eastern neighbors is a relief. They have lent heavily to them and, for a time, were more concerned about that money than about their smaller loans to Latin America.
For American banks, with only a few billion outstanding in loans to East European nations, it is Latin America that is crucial.
The total net debt in hard currencies of the Eastern bloc at the end of 1983 was $61.1 billion, down from $65.6 billion at the end of 1982 (see map). That reduction was partly technical, the result of a stronger United States dollar reducing the value in dollar terms of nondollar debts.
In Latin America, debt levels are still climbing, although at a considerably slower pace than the increase in the region's exports. So the Latin debtors are also in better shape.
Commercial banks are not yet voluntarily lending new money to the Latin American nations, although they may soon do so to Mexico. But the Soviet Union and Hungary are able to borrow on Western capital markets and get favorable interest rates.
So far this year, the USSR has raised some $800 million in publicized Euromarket borrowings by Soviet banks. Last month, for instance, West Germany's Commerzbank said it was arranging a deutsche mark loan equivalent to $165 million for Vneshtorgbank, the Soviet foreign-trade bank. In February, in the Soviets' first general-purpose publicized loan from Western banks in four years, they raised $250 million at a slim margin of five-eighths of 1 percent over LIBOR, the basic interest rate in London.
Further, most Comecon countries have large trade surpluses. Jan Vanous, the research director handling ''centrally planned economies'' with Wharton Econometric Forecasting Associates Inc., estimates that the Soviet Union, after drastically slashing imports, could have a trade surplus this year of $6 billion to $7 billion with hard-currency countries, the highest ever. Its East European allies may rack up a surplus of more than $6 billion.
This indicates that the Soviets' borrowing has been aimed partly at polishing their credit image in order to get the best terms on their outstanding debt. That mostly consists of credits from Western banks, which are regularly rolled over without fuss. Perhaps only about 5 percent of Soviet loans are publicized, Mr. Vanous estimates.
Basically, the experts believe, the Soviet-bloc debt crisis is over.
These communist nations with their ''command economies'' can manage their external payments situation, if necessary, by draconian cuts in imports, and the Soviet Union will be able to afford huge imports of grain.
Noting that the Soviets have suffered another bad crop year, Creditanstalt's Mr. Androsch figures they may have to buy as much as $7 billion of grain from the West to cover their crop shortfall this year.
''Their indebtedness is low,'' he said. ''They are in a convenient position to borrow.''
But if Wharton's Mr. Vanous is right, they won't really have to borrow much more, if any more.
The net debt of the Soviets, as measured by the Bank for International Settlements in Basel, was $10.6 billion at the end of 1983, up from $10 billion at the end of 1982.
Meanwhile, the Soviet economy continues to grow. Vanous estimates that the ''net material product'' (gross national output minus output of most services and of depreciation) will grow 3.6 percent this year, compared with 3.9 percent last year.
That growth, he says, is ''not doing badly, in Soviet terms.''
But all is not rosy economically for the Soviet Union. Vanous sees many challenges ahead for that nation of 280 million. Here are some of them:
* The USSR lacks economic direction and political leadership. Its leaders are wrapped up first with jockeying for position in the Kremlin, and second with defense and foreign affairs. Janous says the economy ranks third in the Politburo's attention.
* The Soviet economy is plagued by unfavorable developments, ending more than a decade of massive windfalls.
Energy prices have weakened. During the 1970s and early '80s, the Soviets benefited enormously from the higher price of oil. The terms of trade of the USSR with its East European allies were vastly improved.
The Soviets got far more machinery and consumer goods in return for the oil and gas it shipped west. That trend will soon be reversed unless oil prices rise again.
With US dollar investments earning 8 percent real interest, the price of gold - another important Soviet export - has stagnated.
The Soviets cannot sell much without depressing prices. Gold sales of the communist countries (mostly the Soviets) dropped from 200 tons in 1982 to 80 tons last year.
* The arms race continues, with Soviet defense expenditures taking a much greater proportion of national output than those in the United States.
Moreover, arms sales to noncommunist countries are way down, partly because of money shortages in the Middle East. In the first six months of this year, Soviet sales outside its own bloc were down 23 percent, to $4.2 billion, from $3 .2 billion in the same half year in 1983.
Perhaps worst of all for them, the Soviets see that agricultural output in China - a relatively primitive economy with 1 billion people - grew 10 percent per year for the past three years by using free-market principles.
''In the sophisticated segments of Soviet society, such as economists and planners, they are beginning to wonder,'' said Mr. Vanous. ''The Soviets will go through a phase of soul-searching. It is a country where symbols mean a lot.''
''It is going to be tougher for them,'' Vanous said. ''There is no end to their problems in sight.''