The First Aid Summit

By GEORGE J. CHURCH

THE SETTING WAS MAJESTIC: A city of gleaming skyscrapers backed by magnificent snow-capped mountains, a Mediterranean-style villa perched on a splendid promontory overlooking the northern Pacific. The results of the weekend summit meeting in Vancouver, Canada, were inevitably less grandiose. Indeed, Presidents Bill Clinton and Boris Yeltsin hardly aimed at any readily measurable result. Dollars and cents may have been the language of discourse, but the effect was largely symbolic: to demonstrate that Yeltsin still has firm American support in his hour of trial, that Clinton is not quite an uninterested novice in foreign affairs and that the West really does care that Russia evolves into a free-market democracy.

Accordingly, this meeting was presented as a sober working session, shorn of the pageantry that enveloped the old superpower summits. There was no state dinner, no glittering receptions, only six-plus hours devoted largely to pie charts and spreadsheets. Canadian newspapers were more witty than accurate in % describing it as an "alms race" -- not when the donors are reluctant to cross the starting line. But Topic A was the vexing and indispensable subject of American and other Western aid to Russia, complete with details of how much, when and for what projects. It might well be dubbed the "First Aid Summit": it could do little more than start the patient on the road to recovery, but that was a great deal better than nothing.

Russia's transformation from central planning to a market economy and working democracy is a huge historic spectacle worthy of high summitry. As Clinton said in a speech last week to sell the proposition to skeptical Americans, the U.S. "cannot stop investing in the peace now that we have obtained it." But Vancouver is only a down payment -- for the U.S., a $1.6 billion down payment -- on a long-term commitment that will tax all the West's ingenuity and staying power, and Russia's own capacity to change, before it pays off.

Arriving at Vancouver in a driving rain that dampened his gray pompadour, the Russian leader pledged again to keep pressing for reform, whatever the opposition. "The Communists want to take revenge, to take us back to the past," he said. But "as long as there is President Yeltsin in power, then definitely my answer is yes, the reforms will continue."

Clinton, stepping from his plane a bit later, spoke soberly of the uncertainties surrounding any aid program, acknowledging that "future political events might undermine the impact." Still, he insisted, the future of Russian democracy is of such paramount importance that the West must "do what's right" to help, and he added, "I think that the kind of things we propose are likely to have lasting and tangible impact." Although Clinton's aides have made much of the idea that they are supporting democratic reform rather than Yeltsin per se, after the two Presidents had their first working session, spokesman George Stephanopoulos reported that his boss admired Yeltsin as a "true democrat" and "a fighter who is not deterred by long odds."

After all that, the size of the package Clinton discussed with Yeltsin during a walk in the woods -- ironically reminiscent of past arms-control negotiations -- might seem on the small side. All of the $1.6 billion has already been appropriated by Congress; about half will supposedly start being delivered this week. The biggest chunk of the program, $700 million, consists of food sold to the Russians at very low prices and on generous credit terms.

But Clinton is hoping that the real bang will come not from the bucks but from the innovative kinds of projects the money will fund -- programs that will start small but address needs neglected by conventional aid. When the President reviewed the ideas of his advisers a few weeks ago, he told them to start over and think bold. You let me worry about the politics, he told them. Tell me what will really make a difference over there. He gave the program planners four guidelines: I don't want to promise more than we can deliver; I want everything to have impact on real people; I want it to be of a magnitude that will not look paltry; I want it to stimulate bigger commitments from the Group of Seven industrialized nations.

Clinton pushed for greater attention to improving oil and gas output, which would generate hard-currency income for Russia; to building housing for Russian soldiers, because the military plays a pivotal role in maintaining political stability; and to student and other exchanges, which would please the U.S. Congress. His plan will put less emphasis on short-term humanitarian aid and more on long-term technical assistance; three-quarters of the dollars will go to nongovernmental recipients, and 75% will finance programs outside Moscow. "We can't make our assistance coup-proof," said a senior official, "but we want to make our economic partnership with Russia as invulnerable as we can to the ups and downs of Russian politics."

The Administration has earmarked nearly all the money for people-to-people projects, including $50 million for a capital-venture fund supporting small and medium-size Russian private businesses and an additional $95 million to help the government sell off state-owned property to private individuals and businesses; $48 million for a Democracy Corps of American lawyers, accountants and judges who will offer guidance to civic groups and private foundations; $30 million for energy projects; a program to build 450 housing units for military officers withdrawn from the old Soviet Union's far-flung ventures.

Officials said Clinton might yet decide to ask Congress for even more money -- if Yeltsin can convince him it would be used wisely and if the U.S. public and Congress might prove more receptive. If so, aides say, he will announce his proposal before the G-7 ministers meet in Tokyo next week. But the current package is modest, largely because both Presidents are subject to tight domestic restraints. Yeltsin knows Russia's economic crisis has hurt the pride of its citizens as well as their living standards; many Russians resent him as a leader under whom a onetime superpower has been reduced to begging for scraps from the tables of its former adversaries. In language hardly ever heard from the head of a country seeking foreign assistance, Yeltsin acknowledged at the summit that "too much" aid would enable his opponents to claim that Russia was being "shackled" by the West.

CLINTON WAS AWARE THAT THIS meeting offered him his first opportunity to assume the mantle of statesman. But the bigger test will come in persuading American voters and legislators, who resist even the most minimal help to a former foe at a time when the U.S. is having its own economic troubles, that aid to Russia will help the U.S. as well. He used the summit to continue his sermon on the wisdom of Russian aid as, basically, a domestic issue. Democracy and economic reform must be fostered now in Russia, "not out of charity," he said, "but because it is a wise investment."

Nonetheless, resistance will be strong enough that Clinton kept his initial package small, in part to make sure that he would not offer Yeltsin more than he would be able to deliver. Said one of his aides: "We've been sort of haunted" by the memory of last year's promise of $24 billion in aid by the G- 7. To the chagrin of the Russians, only about half was actually delivered. The U.S. is now busy trying to persuade its G-7 partners to pledge even more this year -- and pay it out.

Even so, the U.S. effort and its justification tend to slight by several orders of magnitude the difficulties and frustrations involved. They can be illuminated by a kind of parable:

Suppose rich Japan decides it cannot afford to let the American economy stagnate. There is popular opposition to an aid program that would help the U.S. compete. But after a round of slightly bombastic and self-congratulatory speeches in the Diet about how much the Japanese people have to lose if the U.S., a customer as well as a competitor, turns inward and hostile, Tokyo approves various forms of help: exchanges of high school students and the loan of Japanese experts to teach inventory-control techniques to Detroit automakers and to preach the virtues of a lawyerless society to the American Bar Association. Japanese diplomats visit every American city with a population of more than 750,000 to locate grant recipients who promise to ( spread the lessons of Japan's economic success to their countrymen.

Swallowing national pride and braving the taunts of the America First party, the U.S. President goes to a summit meeting with the Japanese Prime Minister to accept the package -- a munificent $2 billion, less than half as much as IBM lost all by itself in 1992. Yet it is supposed to not only help restore IBM and other faltering corporate giants but also enable American cities to get a start on clearing slums and assist in reducing the unemployment rate.

The analogy is hardly exact. But that is not necessarily encouraging, because the situation in Russia is so much worse. The country is plagued by raging inflation, has a government so weak and unstable that it cannot collect most of the taxes it levies, has few managers trained in modern business techniques and, despite its past achievements in space exploration, is so backward on the ground that many of its hospitals lack even bandages and aspirin. It lacks most of the laws and protections that would invite investment from abroad. Even zealous advocates of Russian assistance recognize that a few billion dollars' worth of demonstration projects can no more remake the economy than a putative $2 billion from Japan could in the U.S.

Even counting prospective G-7 aid, the mismatch between needs and means is every bit as great for Russia. German economists estimate it will cost $100 billion a year for a full decade to bring living standards in the former East Germany up to 75% of those prevailing in the western part of the country. Russia has about 10 times the population of eastern Germany, and had a much less developed economy to begin with. On a straight mathematical projection, the size of the aid program needed to produce even a measurable and sustained rise in Russian standards of living would be so enormous -- on the order of $1 trillion a year for years on end -- that no Western statesman would even discuss it.

AMERICAN OFFICIALS PORTRAYED Vancouver as the first step in a two-stage process, the next and bigger step coming from the G-7. Quite as important as the total sum agreed on -- as high as $30 billion in some estimates -- is a loosening of the rigid rules that kept much of last year's $24 billion package on the shelf. The main portion will again be aimed at shoring up the ruble; Moscow's failure to slow down the money-printing presses last year forced international backers to withhold stabilization funds. Russia also lost access to promised aid when it failed to make payments on its estimated $80 billion in foreign debt. That attitude is changing: just before the summit, the Paris Club, an informal group of creditor nations, agreed to give Moscow another 10 years to repay $15 billion in interest and principal originally due in 1993.

One of Clinton's aims in Vancouver was to earn the U.S. some credibility for prodding the G-7 partners to pick up a bigger share of aid for Russian reform. That pitch will run into resistance. Tokyo resents Moscow's refusal to return four Kurile Islands, seized at the end of World War II. Clinton phoned Japanese Prime Minister Kiichi Miyazawa on Friday and told Yeltsin that he expected Japan to "play a constructive role."

Other G-7 members, and even some Russians, fear Western aid will largely be wasted, disappearing without a trace into the chaotic, inflationary maw the economy has become -- if not into foreign bank accounts in a vast capital flight reaching between $10 billion and $30 billion a year. The Russian economy "is like a large and deep pool of mud," says a senior British diplomat. "You can toss in anything you like, and it just sinks to the bottom."

HIS VIEWS ARE ECHOED BY VLADImir Ivanyushkin, a Moscow businessman. Says he: "If the Westerners keep giving us aid or credits, it's stupid. No matter what kind of government we have, communist, fascist or democratic, it's still going to be a Russian government, which means that all that aid will simply go down the drain, and nobody will ever find where it ends up."

To a surprising extent, Western aid appears to be buying resentment. One placard waved by demonstrators in Moscow pictured Yeltsin fatuously caressing a cow labeled RUSSIAN FREEDOM, while an evil-looking Uncle Sam milked dollars from the cow's udder. Russians are irritated that so much Western help seemed to be promised and so little appears to have been delivered. And some are suspicious that foreigners are out to swindle them; they resist making their once powerful country look like a Western clone.

At bottom, government aid can only prime the pump; to get things going effectively will take private money. Only Western business can supply the massive funds Russia needs. Over the long term, says Michael Mandelbaum, professor of American foreign policy at Johns Hopkins School of Advanced International Studies, "the most important economic contribution the West can make is not assistance at all but access to Western markets." That means trade, which will not flow unless Russia reforms its tax and legal codes enough to assure foreign businessmen they can make, keep and repatriate profits.

Very little can be done until a resolution of Yeltsin's conflict with the hard-line Congress puts Russia squarely on the road to reform. Nothing will help rescue the Russian economy until the state brings hyperinflation under control; it cannot do that unless the central bank stops its wildly profligate printing of rubles; that seems unlikely to happen unless Yeltsin can wrest control of the bank from his parliamentary opponents. First aid cannot restore a body, or an economy, to health, but a country bleeding to death needs any help it can get.

With reporting by David Aikman/Moscow, Anne Blackman and J.F.O. McAllister/Vancouver