U.S. Rules Out Direct Soviet Aid : Reforms: The Kremlin's new economic plan won't do the job, a senior American official says. But Washington may provide some other forms of assistance.

U.S. Rules Out Direct Soviet Aid : Reforms: The Kremlin’s new economic plan won’t do the job, a senior American official says. But Washington may provide some other forms of assistance.

By DOYLE McMANUS

May 31, 1991 12 AM PT

TIMES STAFF WRITER

LISBON — The Bush Administration considers the Soviet Union’s new economic reform plan inadequate to the job of reforming the Soviet economy and has ruled out direct U.S. financial aid to Moscow for the foreseeable future, a senior American official said Thursday.

But the Administration also believes that several European countries will soon offer substantial financial aid to Moscow, he said--a development that would leave the Western allies fragmented on one of their most important issues.

The senior U.S. official, who spoke to reporters traveling with Secretary of State James A. Baker III, said Baker and his aides had studied the reform plan presented to them this week by a Soviet special envoy--and were not impressed.

“I don’t think it represents the really fundamental, major effort that’s going to have to be made if they are going to move to the free market,” the official said.

“We think they want to move to a market economy. We think they are convinced it is the only salvation. We are not convinced of two things: One, that they know how to do it. . . . And two, that they have the political will to accept the pain that will come with doing it.”

He said the Administration remains willing to help the Soviets by sending economic experts and through other low-cost actions but made it clear that Gorbachev should hold out no hope for direct U.S. financial help.

Even if the Soviet leader came up with a reform plan that satisfied U.S. economic criteria, the Administration would still have political objections, he said.

“The percentage of their GNP (gross national product) that goes into defense, Cuba and the Baltics--these are all ‘hot-button’ issues for the United States,” he said.

The official, who spoke under a rule that he not be identified, was speaking on Baker’s plane a day after the secretary of state met with Gorbachev’s special envoy, Yevgeny M. Primakov, to discuss the reform plan. Primakov is scheduled to present the plan to President Bush today.

Gorbachev aides have asked the United States and other Western countries to consider aid packages from $20 billion to $35 billion a year for five or more years to help turn the state-administered Soviet economy into a Western-style market system.

The U.S. official said some countries appear willing to extend direct aid to Moscow. But officials have said figures in the $20-billion range appear unrealistic.

The hardening U.S. position on the plan makes it appear likely that the seven major industrial democracies will be unable to agree on a joint approach on helping the Soviet reform drive at their economic summit meeting in London in July.

“There’s going to be, I think, a wide range of views,” the official said.

If the Soviet government presents a more credible reform plan to the West, he added: “I would anticipate that certainly many of our allies will want to be very, very forthcoming on assistance that goes beyond--far beyond--anything we’ve talked about so far.”

Gorbachev has asked to attend the London meeting, which will include the United States, Japan, Germany, France, Italy, Britain and Canada. U.S. officials have been unenthusiastic about the idea, fearing that the Soviet leader might embarrass Western countries into pledging aid. Baker told reporters on his plane that the request is “being discussed.”

A major reason the Soviet reformers are seeking aid, the official on Baker’s plane said, is “to put consumer goods on the shelves while they make these very difficult adjustments.” Some U.S. officials have expressed skepticism about that idea, saying the Soviet Union needs capital investment more than consumer goods.

The official expressed a degree of understanding and sympathy for Gorbachev’s political position despite the Soviet leader’s zigzag course--from reformism last summer to a conservative crackdown over the winter and now back to reform.

“He is going to have to tack,” the U.S. official said. “He can’t be simon-pure on the establishment of a market economy because he’s going to have to keep a sufficient political base (in the Soviet Communist Party) to make things happen.”

Baker arrived in Lisbon on Thursday evening to attend the signing of a peace treaty that the United States mediated ending a 16-year civil war in the former Portuguese colony of Angola.

He is scheduled to meet here Saturday with Soviet Foreign Minister Alexander A. Bessmertnykh to discuss U.S.-Soviet disagreements over the 1990 treaty reducing conventional armed forces in Europe--the sole issue standing in the way of a summit meeting between Bush and Gorbachev this summer.