West Links Aid for Soviets to Economic Reform

By KAREN TUMULTY

June 6, 1991 12 AM PT

TIMES STAFF WRITER

PARIS — The world’s wealthiest nations joined the United States on Wednesday in warning Soviet President Mikhail S. Gorbachev that he must produce a concrete program to turn his crumbling economy from central planning to free-market capitalism before they will discuss the massive aid package he wants.

A “broad range” of drastic reform measures remains “the only answer to underlying structural problems in the Soviet economy,” the 24-nation Organization for Economic Cooperation and Development said in a communique at the end of its annual two-day ministerial-level meeting here.

Dutch Finance Minister Wim Kok, the meeting’s chairman, added that economic reform is “not in the first place, not in the second, and not even in the third place a matter of bringing money to the Soviet Union.”

The wide-ranging, 20-page communique addressed dozens of other economic issues as well. One is a renewed resolve to get stalled global trade talks moving again with hopes of reaching a conclusion by year’s end.

The diplomatically worded document stated that the West can best help the Soviets’ economic reforms through consultations, technical assistance and “humanitarian aid.”

But it stipulated that “whenever appropriate, existing multilateral institutions should be used to channel assistance.” The reference suggested that the Soviets would have to turn to such institutions as the World Bank and International Monetary Fund--which generally condition their lending on commitments by borrowing countries to make necessary economic reforms.

The language did not rule out the possibility that individual nations might decide, as events unfold over the next few months, to embark on aid programs of their own.

“The ball is in (the Soviet) court. They have to make the policy decisions,” Canadian Trade Minister Michael Wilson told reporters.

Economists and Western leaders have said that those changes must include measures that are anathema under the traditional communist system--among them, establishing private property rights and allowing successful ventures to reap profits.

That position echoed comments a day earlier by Treasury Secretary Nicholas F. Brady, who said that reform proposals advanced thus far by the Soviets lack “sufficient precision” to merit even a serious discussion of the $30 billion to $50 billion in aid that some Soviet officials have said their economy will need in each of the next five years.

Thus far, offers of assistance from the West have been minuscule. Germany, France, Italy and Canada have extended credits, and President Bush is expected to agree to another $1.5 billion in farm credits requested by the Soviets. Additionally, Western officials said they are willing to consider offering Moscow an associate status in the IMF and World Bank, which would make the Soviets eligible for technical advice but not loans.

Policy makers here sought to quash speculation that Gorbachev might be offered more assistance if he meets with the Group of Seven, the world’s largest industrial democracies, at next month’s economic summit in London.

British Foreign Secretary Douglas Hurd said a “gathering consensus is in favor of an invitation” to Gorbachev, although the Soviet leader would not be a participant in the summit itself.

Asked whether that means an inevitable offer of financial aid, Hurd replied, “I don’t think anyone is expecting, and I don’t think he is expecting, to find a check under the plate.”

Until Gorbachev has a reform program in place, financial aid would be wasted, Hurd added. “If he’s got holes in his pockets, why put coins in his pockets?”

The annual OECD meeting is generally seen as an occasion for laying some of the groundwork for the G-7 summit. The United States was represented by key officials from the Treasury, Commerce and State departments, the U.S. trade representative’s office and the President’s Council of Economic Advisers.

Although the Soviets say they are committed to charting a new economic course, Western officials note that the U.S.S.R.’s latest plans follow a series of failed attempts in recent years. As recently as last fall, Gorbachev embraced, then abandoned, a bold 500-day reform program.

The Soviets are pressing for economic aid at a time when the Western countries, most of them struggling under recession or stagnation, can little afford it.

The OECD predicted, however, that its member nations will begin to see a recovery in the coming months, thanks in part to declining interest rates in some countries and to the renewed confidence and lower oil prices that followed the Persian Gulf War.

Crucial to the continued growth of the world economy, the final communique said, is bringing the global trade talks--known as the Uruguay Round--to a successful conclusion. Those ambitious negotiations involve 107 nations and seek to rewrite the rules that have governed world trade for more than 40 years.

In doing so, the negotiators would lower barriers to trade and curb rising protectionism that threatens to divide the world into powerful trading blocs.

“Political decisions to overcome major existing differences are needed by all participants without delay, the pace of negotiations must be intensified in all areas and substantial progress must be achieved by the end of the summer,” the communique said.

The talks, now in their fifth year, broke down at what was to be their final session in December when the 12-nation European Community refused demands by the United States and other agricultural exporters that it slash its huge farm-subsidy program.

Since then, negotiators have continued to meet, but neither side has budged.

GORBACHEV WARNING

The “new world order’ is linked to aid for the Soviets. A1