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JAMES FLANIGAN

Russia Means Business--for U.S. Companies

March 03, 1987|JAMES FLANIGAN

Mikhail S. Gorbachev had U.S. business very much in mind last weekend when he made a proposal on medium-range missiles that has turned pessimism to optimism at the arms control talks in Geneva.

Indeed, it's not going too far to say that one big reason the Soviet leader made that arms proposal is that he needs the backing of the U.S. government, and the know-how of U.S. business, if he is to reform the vast but sclerotic Soviet economy.

Oh sure, more was involved in an offer to remove nuclear missiles from Europe than dollars and cents or rubles and kopecks. Gorbachev's weekend move is already being talked about as leading to a summit conference in Washington this year and to renewed talks on nuclear disarmament.

But on the economic front specifically, it could lead to greatly expanded business for U.S. companies in the Soviet Union, including joint ventures with Soviet state agencies in which American firms would invest money, produce goods for Soviet and other markets, make profits and bring those profits back home. In the development plans envisioned by a new U.S.S.R. law on joint ventures, west European and Japanese companies would get involved in similar ventures.

Better Relations

But everything depends on better relations with the United States, explains John P. Hardt, senior Soviet specialist at the Library of Congress, because the U.S. government provides an "umbrella" for international business. What he means is that West German and Japanese companies are extremely reluctant to get involved in Russia unless the American government approves. And, as American farmers and suppliers of oil drilling equipment have learned from years of embargoes imposed by Washington, U.S.-Soviet trade can turn on and off like a light switch.

Right now, trade is at a low point. The Russians bought only $1.2 billion of U.S. goods in 1986, and the Americans took only $600 million worth of Soviet merchandise. At its peak in 1979, the total was $4.5 billion, which still was pitifully small for U.S. trade with a country of 280 million people and a gross national product estimated at $2 trillion, or roughly half that of the United States.

But Gorbachev's timing is good. He has the attention of American business, which is getting enthusiastic again about the Russian market. John Murphy, the chairman of Dallas' Dresser Industries, returned from Moscow last Wednesday encouraged that the Soviet Union--the world's largest oil producer--will increase its purchases of U.S. oil and gas equipment to roughly half a billion dollars in the next few years.

U.S. Firms Interested

Several major firms, including the big electrical equipment makers Westinghouse Electric and Combustion Engineering, have expressed interest in Soviet joint ventures. Monsanto has signed a letter of intent to produce its major agricultural chemicals, the weed-killers Round-Up and Lasso, in Russia. And Archer-Daniels-Midland, whose boss, Dwayne Andreas, is also chairman of the U.S.-U.S.S.R Trade and Economic Council, wants to build a soybean processing plant in the Soviet Union to help the Russians increase their output of poultry.

We've been around this track before of course, in the Nixon-Brezhnev era of detente in the early 1970s. Then there was talk of U.S. companies participating in Soviet truck factories or helping to develop Siberian natural gas. But it all came to very little. When the Russians finally did build a gas pipeline to Western Europe, the U.S. government prevented such companies as Caterpillar Tractor from even supplying equipment to the job.

Why might it be different this time? For one thing, because Washington now realizes that embargoes are self-defeating, that the pipeline business it denied to Caterpillar went to Komatsu of Japan.

But more important, the Soviet economy is in terrible shape, falling further behind the U.S. and other western economies in terms of living standards and technological capabilities. The problem is that the system, in which all economic decisions are made by Communist Party officials in Moscow, is inefficient--the average Russian must work three times longer than the average American to earn the price of a pork chop, for example. And the system makes mistakes--Soviet oil and gas wells are declining prematurely because they have been overworked in response to politically dictated five-year plan targets. That's why Gorbachev wants to bring in the foreign companies: to go around the bureaucracy and get things done right.

It will be asked, of course, if by helping Gorbachev improve the civilian economy, the foreign companies are not aiding the Soviet military--which has been plenty efficient in putting missiles on launch pads and troops in Afghanistan. The answer is that economic backwardness has never yet reduced the numbers of those missiles, but the urge for economic betterment appears to be.

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