Tapping Soviet Treasure

At his vacation home on the Black Sea last month, Leonid Brezhnev smiled conspiratorially across a plate of watermelon slices at U.S. Commerce Secretary Peter Peterson. "The Soviet Union has vast treasures for generations to come," the Communist Party boss said, "and we are now prepared to share them with you." He also told a joke about the peasant who bought eggs for two rubles, sold them for two rubles, and exclaimed "I am in business!" Brezhnev's point: the U.S. and the Soviets should not strike a trade bargain merely for the sake of making a deal, but should try large-scale ventures that would yield solid profit to both. Later, the usually matter-of-fact Peterson quoted a rather lyrical Alexander Hamilton remark that "the spirit of commerce has a tendency to soften the manners of men and to extinguish those inflammable humors which have so often kindled wars."

Peterson ended his talks convinced that more big deals like the recent threeyear, $750 million bilateral grain agreement are likely. Indeed, U.S. agriculture officials predicted last week that the Soviets would expand their purchases of farm products to as much as $1 billion in the next twelve months alone. Last week Peterson reported to President Nixon that eight days of trade talks with Soviet officials had disclosed "a top-level Soviet decision that it is important to get access to Western products." He also briefed TIME Correspondent Jerrold Schecter on the promise and the problems of Soviet-American trade. Schecter's report:

Peterson's dominant impression was that in return for American manufacturing expertise and equipment, the Soviets have concluded that they should share some of their unmeasured (in the West, at least) mineral resources. His Soviet hosts were quite specific about what they seek from the U.S.: advanced machine tools and techniques for making such products as trucks, farm machinery and color TV. "They want the latest and the best of our sophisticated manufacturing know-how," says Peterson. Yet the Soviets have no illusion that their consumer goods will be competitive in the U.S. "We are a good market for vodka and some caviar, but the Russians have surveyed American and worldwide demand for energy. The things that they have and that we most need are energy and raw materials." Peterson and the Soviets discussed three possible projects:

>Exploitation of Siberian natural-gas reserves. Two projects are being explored, one involving on the U.S. side a consortium of Tenneco, Texan Eastern Transmission and Brown & Root, the other El Paso Natural Gas and possibly Occidental Petroleum. The two together could require as much as $10 billion to $14 billion of U.S. development capital, and that may be too much for private U.S. financial institutions. Some new form of Government financing will probably be needed.

>Mining and processing Soviet oil, chrome, copper, nickel, palladium and platinum, which U.S. auto manufacturers may need to make antipollution devices (see story on page 65). The Soviets would like U.S. firms to supply advanced mining equipment in return for longterm, fixed-price contracts to buy the processed minerals.

> Joint ventures to produce cellulose and chemical fertilizers. Peterson says U.S. companies would build the plants, and the Soviet Union would furnish labor and raw materials.

There are many obstacles in the way before the plans can be implemented. The most troublesome are quasi-ideological: the capitalist U.S. and socialist Soviets have different business systems that find it difficult to make contact.

To begin with, the Soviet government leaders that Peterson met, he says, are at once "policymakers, negotiators and executors. They set the priorities and allocate the resources." By contrast, the U.S. side of prospective bargains would have to be fulfilled largely by executives of private companies, not the Government. Peterson is naming a U.S. panel to work out ways for Washington and private companies to coordinate negotiations with the Soviets.

Beyond that, the Soviet and American legal systems differ fundamentally, so there will have to be some special arrangement to settle commercial disputes arising between U.S. companies and Soviet government organs. The Soviet Union is not yet a party to international copyright conventions, and there is no bilateral tax treaty between the two countries.

Even some of the things that U.S. businessmen take for granted are rare or nonexistent in Soviet cities. For example, there is no such thing as a commercial office building in the Soviet Union, and a storefront in an apartment house is currently the best that the country can offer. Waiting periods for telephone and telex communication with home offices in the U.S. can seem endless. Nor can a U.S. businessman in Moscow place an ad in Pravda for secretarial help; secretaries must be supplied through a government agency that deals mostly with diplomats.

Another round of U.S.-Soviet trade talks will begin next month in Washington. An immediate aim will be to establish the rules for arbitrating commercial disputes and arranging office facilities for U.S. executives in the Soviet Union.

The essentials for doing business are there. Each side has something the other wants, and they are willing to talk in those terms rather than debate cold war politics. Brezhnev and Peterson put it rather neatly in their talk beside the Black Sea. Brezhnev: "The Soviet Union and the United States are the two largest economies in the world. It is time that commercial and trade issues move to the frontier." Peterson: "By their diversity, the U.S. and the Soviet Union are natural trading partners."

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