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. Last Updated: 07/27/2016

For Clinton, New Troubles Loom Over Aid

A decision to scale back drastically the proposed international $4 billion fund to assist privatization in Russia marks a political embarrassment for the Clinton administration in its much-publicized aid effort. Western diplomats in Moscow said Thursday.

The reduced size of the program, now proposed at around $1 billion, could also damage U. S. -Russian relations, which have been strained recently because of a dispute over the sale of defense technology.

News agencies reported Thursday that Prime Minister Viktor Chernomyrdin had postponed his visit to Washington just two days before his scheduled arrival Saturday because the two countries could not find a compromise on a deal to sell $350 million worth of Russian rocket supplies to India. The United States is concerned that India could use the technology to upgrade its missiles.

That dispute is now compounded by the Clinton administration's inability to convince the Group of Seven leading industrial nations to deliver the promised $4 billion.

Russian reaction to the cutback, attributed to Western economic difficulties by the State Department on Wednesday, was muted. Sergei Chestnoi, a Foreign Ministry official who deals with aid issues, said the actual size of the program was not significant to Russia, only that the program is set up.

"The most important thing is the mechanism itself", Chestnoi said Thursday. "I don't see any difference between $4 billion and $1 billion".

The administration had touted its Russian aid program as a major foreign policy success, citing it as evidence of its leadership of the G-7 on the issue.

Under the new plan, the program is likely to include a $500 million contribution from the G-7 with a similar amount coming from the World Bank and the European Bank for Reconstruction and Development.

Diplomats said the size of the proposed fund did not take into account the difficulties of setting up a huge institution to administer it, questions about using the fund and long-standing opposition from G-7 countries.

"I don't think they were reasonable about building up large institutions in such a short period of time", a Western diplomat said "Now that it's been cut back, I suspect there's a big sigh of relief".

The Clinton administration had persisted in pushing the program despite objections from Japan and Germany. As early as April, German officials said they would not contribute to the fund.

But Japanese Foreign Mi r Kabun Muto shocked U. S. officials Tuesday when he labeled the $4 billion program "preposterous". One day later the State Department announced the drastic cutback in the plan.