US Senators Cautious on Aid to Former Soviets
Amy Kaslow, writer of The Christian Science Monitor, The Christian Science Monitor
UNITED States senators are sharpening their focus on the ex-Soviet republics' debts as they examine President Bush's proposal to help fund the $24 billion international aid package for the beleaguered new states.
The lawmakers are concerned that the republics' heavy burden to repay foreign governments, suppliers, and especially commercial banks will absorb international funds intended to shore up economic reforms. They worry that the cash crisis will prolong the former republics' reliance on military exports for hard-currency earnings.
The $24 billion aid package "will be wasted unless there is a simultaneous resolution of the debt problem," says Karin Lissakers, director of international and banking studies at Columbia University's School of International and Public Affairs. She says that Russian representatives submitted documentation to commercial creditors in March that their debt burden is $2 billion a month. Other banking sources say the number is grossly inflated. Whatever the amount, Ms. Lissakers's concerns are shared by Democrats and Republicans on Capitol Hill.
The "top economic priority" of the former republics "should be to ... modernize the economy and to halt the plunge in living standards that is stirring social unrest and undermining popular support for democratic reforms," says Lissakers. But the republics are "under heavy pressure from the West" to meet debt payments in order to keep credit lines open. "The desperate payment situation ... has had a chilling effect on foreign investment and on the new private sector," she says.
US Sen. Bill Bradley (D) of New Jersey, chairman of the Senate Finance Subcommittee on Deficits, Debt Management, and International Debt, supports the $24 billion package, but only after the former Soviets are substantially relieved of their debt obligations. "The infusion of fresh capital cannot be allowed to be recycled to international bankers," he says.
The breakdown of the $65.3 billion debt, a difficult task given poor Soviet records, has been laboriously documented by the Advisory Committee of Banks for the Management of Commercial Debt for the Former Soviet Union. Foreign governments hold $22 billion; commercial banks - led by Germany, then Italy, Japan, France, and Austria - hold $24 billion. US banks have minimal exposure. Foreign suppliers, such as trading houses, hold up to $4.5 billion; the rest is a mixture of bonds, letters of credit, and other short-term credits.
Roger Robinson, a former Chase Manhattan banker who is now a private consultant, contends that German sovereign and commercial lenders, by far the largest national group of creditors, should reschedule some debts over the long term and forgive others. German refusal to offer debt relief would turn the $24 billion aid package into a debt-service fund, he says. …