NEWS ANALYSIS : Gorbachev Ready to Hand West a Bill for Perestroika

What will the bill for perestroika be--$100 billion, $150 billion, $250 billion? Perhaps even more?

Soviet President Mikhail S. Gorbachev is preparing the account that he will render next month to leaders of the West’s major industrialized nations, and the sum by any reckoning will be large.

Formally, the request will be for economic aid--loans, trade credits, investment--to assist the Soviet Union in its transition from an economy based on state ownership and central planning to one where market forces and entrepreneurship reign.

But there is a conviction here that the money the Soviet Union is seeking is, in fact, both its due for the changes that Gorbachev has brought to the world through his reforms and the surest guarantee that the West can get for a prolonged period of peace.

“We are now approaching what might be the crucial point, when the world community and, above all, the states with the greatest potential to influence world developments will have to decide on their stance with regard to the Soviet Union and to act on that basis,” Gorbachev said last week in his Nobel Peace Prize lecture in Oslo.

“The more I reflect on current world developments, the more I become convinced,” he continued, “that the world needs perestroika no less than the Soviet Union needs it.

“Fortunately, policy-makers of the present generation are, for the most part, increasingly aware of this interrelationship and of the fact that, with perestroika now in its critical phase, the Soviet Union is entitled to expect large-scale support to assure its success.”

The proposal has been dubbed the “Grand Bargain” by the American and Soviet economists who are drafting the program, which would underwrite the Soviet Union’s transition to a mixed, market economy with Western funds tied to specific reform measures on an agreed timetable.

Under the “bargain,” the transition would be accelerated and the agony eased by as much as $15 billion to $30 billion or even $50 billion annually for five or six years in Western aid and investment in return for commitments that, effectively, would end seven decades of state socialism here. The West, moreover, would turn what had been a deadly rival into a long-term partner.

Gorbachev will outline his ideas on how the Soviet Union should be integrated into the world economy, ending the autarky that has protected its socialism for seven decades, when he meets leaders of the Group of Seven industrialized nations in London next month.

The strongest pitch, according to Soviet officials, will be to the leaders as a group to permit the International Monetary Fund, the World Bank and the new European Bank for Reconstruction and Development to advance as much as $10 billion a year to the Soviet Union, perhaps a third of the credits required.

Germany, already the Soviet Union’s biggest donor with $33 billion in aid since 1989, would be asked for increased assistance on a broader basis, these sources said. The United States, which has given Moscow government credits to purchase grain, is expected to provide about a fifth of the funds.

A key element, according to Soviet thinking, would be the first involvement of foreign investment on a large scale since the Communists came to power in the 1917 Bolshevik Revolution. Under pending legislation, foreign companies would be encouraged to establish wholly owned enterprises here, bringing in new capital, modern technology and business know-how.

Gorbachev will also seek advice from the West at a variety of levels--governmental, enterprise and what one aide called the “strategic”--to help plot the transition to a “mixed market economy,” assist in its execution and, not least, to make sure the Western funds are well spent.

Questions abound, however, for the new program has not moved much beyond the “backs-of-envelopes” phase here and because Gorbachev’s approach to economic reforms over the past six years has been largely one of half measures, of balking at radical changes when confronted by conservative opposition.

“I cannot tell you, precisely and specifically, what we will do when,” Vladimir I. Shcherbakov, the first deputy prime minister in charge of the economic reforms, testily told a delegation of ambassadors sent by their governments on Friday to determine what the new Soviet program will be and how much assistance will be required.

“Our goals are clear,” Shcherbakov was quoted by one of the diplomats as telling the group, “but how we achieve them, in what time frame, in what order and with what means . . . is still being determined, and ultimately it depends in large extent on the decisions of our partners.”

Another diplomat, an economist by training, left the Shcherbakov briefing shaking his head and muttering. “This is not an economic reform program, it’s not even a wish list--it’s a giant ‘gimme’ game. . . . The economics are very vague, the strategy is iffy and the arrogance is appalling,” he said.

Specific but crucial questions go unanswered--how will the government reduce its growing budget deficit, how will the military-industrial complex’s 25% share of the economy be cut, what role will private entrepreneurs play, what is the future of the central government ministries that now control the economy?

“The Soviet plan must be assessed for credibility and detail,” a senior Western diplomat said, “but so far we have nothing to evaluate. . . . We nonetheless will look like the bad guys if Gorbachev is turned down in London.”

Throughout the Soviet discussions of prospects for massive Western assistance runs the argument, articulated by Gorbachev for the past year, that the West owes this aid to the Soviet Union for making the world a safer place.

There is also the strong suggestion, again raised by Gorbachev, that if the West does not provide this assistance then, at least, the Soviet Union will have to choose undefined “other ways” and pursue different policies to pull itself out of a deepening economic crisis; at worst, it could collapse into anarchy and chaos that could spread into Europe, the Middle East and Asia.

“It is clear,” a commentator in the Communist Party newspaper Pravda wrote on Saturday, “that before humankind starts receiving the ‘peace dividend’ from the disarmament process, it will have to pay for removing the war danger. But what will be the price?

“For our country, this is the most crucial problem. Those who will sign the disarmament documents (such as the proposed treaty reducing the superpowers’ nuclear arsenals or that eliminating chemical weapons) must remember that it would be unacceptable to place the heavy burden of liquidating military potential and demilitarizing the economy on the shoulders of the Soviet people. . . . If this happens, the consequences could be most grave.”

A suggestion is left that the Soviet Union could revert to totalitarianism and reverse the gains of perestroika, that Gorbachev could be swept aside and a new dictator like Josef Stalin could arise, that the Cold War could resume.

But this scenario begs logic. Gorbachev soundly defeated conservatives in a March showdown, and in his estimation the danger of “a political and social explosion,” toward which the country had been building, has declined significantly.

“Just how do we get ourselves out of this crisis by reverting to hostility with the West?” former Soviet Foreign Minister Eduard A. Shevardnadze commented last month. “If we cannot feed our people, how do we afford new missiles, and what do we do with those missiles--hold the world to ransom and demand that it feed our people? That is dreadful and dangerous foolishness.”

Still, Western politicians and commentators are harshly criticized as living in the Cold War era when they say that they see no point in pouring money into the ultra-wasteful Soviet economy or insisting that the Soviet Union abandon socialism as a condition for their countries’ assistance.

After Secretary of State James A. Baker III outlined 10 conditions--six of them economic, four of them political--for U.S. assistance last week at a NATO meeting, Gorbachev’s principal foreign policy adviser, Yevgeny M. Primakov, told a television interviewer that Americans “sometimes think we can act as they do and thus do not understand the specifics of our country and our economy.”

“Nobody should think that we can accept any kind of dictatorship,” Primakov continued, replying directly to Baker, “or that we are ready to pay political prices and dividends for possible economic support--all this is out of the question.”

Yet Baker’s economic conditions--principally the basic elements of a market economy, including private property, competition, profits, sound currency and prices set by supply and demand--are already part of the basic reform program that is being drafted by Soviet and American economists and outlined to President Bush and Baker by Primakov himself.

The political conditions, which Baker described as desirable rather than mandatory, are also likely to be met in time as a result of the Soviet Union’s continuing democratization. They include continued free elections, further cuts in military spending, an end to Soviet assistance to Cuba and independence for the Baltic republics and autonomy for other regions.

What Primakov was trying to do was reassure apprehensive Soviet citizens that they were not about to come under foreign rule and to warn the West, as Gorbachev had done in Oslo, not to attempt to remake the Soviet Union in its exact image but let it find its own way.

These are important political concerns here, for the capitalist West is regarded, perhaps equally, with both awe and fear for the changes that market forces, private enterprise and profits would work on Soviet society.

“We must find our own way out of this crisis,” former Soviet Prime Minister Nikolai I. Ryzhkov said last week as he campaigned for the presidency of Russia, the country’s largest republic. “The solution must come from ourselves, not ourselves alone, but ourselves first of all. . . .

“And let me say that I am against the extensive privatization of industry or of housing and against market forces playing the preponderant role in the economy. Our path is the socialist path . . . capitalism is unacceptable.”

Soviet planners are indeed exploring alternatives to the program being drafted by Grigory A. Yavlinsky, 39, and other pro-market economists with American advice. Some favor a slower, more-managed transition to what they call a “planned market economy,” and others have suggested economic alliances with China and developing countries.

But after 15 economic programs, worked out by the government or its advisers over the past three years, this is largely an academic exercise.

“Let’s face it: we have run out of ideas,” a commentator on Russian Television said last week. “We also have run out of money. The Yavlinsky plan may be our last hope if it has enough ideas to get enough dollars to get us out of this mess.”