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. Last Updated: 07/27/2016

U. S. Boosts Aid to Russia at Summit For Clinton, A Hope for Budget Cuts

VANCOUVER, British Columbia -- The first Clinton-Yeltsin summit ended with a down payment of $1. 6 billion on America's new "strategic alliance with Russian reform" -- and promises of much, much more to come, if the Russian leader can deliver his side of the grand bargain.


President Bill Clinton laid out for the embattled Russian leader the broad outlines of a total Western package of more than $40 billion -- if President Boris Yeltsin achieves financial and political stability in Russia.


Clinton undertook to mastermind his financial rescue net through the G-process, and pressed Yeltsin to assert control over the Russian Central Bank to prevent hyperinflation.


The U. S. president has a high stake in the success of Russian reform. His own economic plan for U. S. recovery depends on being able to cut the Pentagon budget by $170 billion over the next four years.


The summit went according to plans devised by the image-conscious White House. A sign pointing to Vancouver's nudist beach was hidden by freshly planted trees. Schoolchildren were brought through the massive security nets for a not quite spontaneous photo session. and Clinton consistently avoided the use of the word "aid". It was always "partnership" and "investment". and when Yeltsin told the final press conference "there is no alternative" to him as the leader of Russian reform, Clinton nodded in agreement and said, "Yeltsin embodies our interests and our values".


The summit worked because each man needed a success, and if Yeltsin needs the aid, Clinton needs the Pentagon budget cuts that Yeltsin can justify. Behind the scenes there were some ruffles. This was a very short summit of only three brisk sessions. and while Yeltsin happily accepted a harbor cruise aboard a luxury yacht, Clinton declined, and put his feet up to catch basketball on television. White House aides raised eyebrows when they heard Yeltsin had been drinking whisky (Glenfiddich malt on the rocks) aboard the boat, and the subsequent evening dinner wound up 20 minutes early.


Yeltsin was able to turn his political weakness to his advantage. He could go no further in pressuring the Serbs to accept a Bosnian peace plan, because this would give his domestic critics a new weapon, he argued. Similarly, he needed Clinton's understanding of the problems of Russian minorities in the Baltic states because this was an issue that Russian nationalists could exploit.


"I'm not frightened of reproach or recriminations by the opposition, because there was nothing on which they could hang such a charge", Yeltsin said. In return, Clinton was sufficiently reassured by Yeltsin's promise to control the Central Bank and money supply to pledge his commitment to a massive international effort to help Russia this year.


Clinton sketched out for Yeltsin his hope of getting a total of $8-10 billion from not only the Group of Seven industrialized nations, but from most of the 24 members of the Organization for Economic Cooperation and Development. From the International Monetary Fund, the Clinton team is hoping to secure $13 billion, more than half of it from money originally earmarked last year. The World Bank is expected to furnish $3 billion, and the European Bank for Reconstruction and Development another $2 billion. Adding that to the new debt relief agreed by the Paris Club last week -- which is worth $15 billion this year -- yields a total package of more than $40 billion.


So Vancouver was but the first act of this drama. Act Two will unfold in Tokyo on April 14-15, where the G-7 finance ministers meet to establish how much of the Clinton plan can be achieved. Act Three, with Yeltsin in the starring role, will take place with the April 25 referendum, when the Russian president will face the challenge of delivering the political stability the West will require.


Clinton told Yeltsin that he wants to establish a permanent G-7 coordinating office in Moscow to monitor the flow and disbursement of the aid. It will be aimed at the three separate areas of Russian fiscal crisis that have been identified by Finance Minister Boris Fyodorov, whose professional banking skills (honed in London) have deeply impressed the U. S. treasury team.


These three areas are ruble stabilization; a social fund for Russia's unemployed and pensioners; and a special fund to help bridge the budget deficit. The vast bulk of these sums are in the form of soft loans and credits, and although the repayment terms will be relaxed, Russia's total debt will grow to at least $120 billion by 1994.