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NEWS ANALYSIS : CRISIS IN THE KREMLIN : Failure of Junta Bodes Well for Western Investors : Outlook: Risks remain, but Soviet economic reforms could find new life, economists said, and a revitalized economy there would send favorable ripples throughout the world.


The abortive coup in the Soviet Union threw a scare into the world and U.S. economies, but its ultimate failure should bode well for them.

The coup had threatened to hike world oil and grain prices, further delay repayment of the Soviet Union's $60-billion in debt--mainly to Western Europe--and dash consumer and investor confidence just as industrialized nations were struggling to climb out of--or to avoid--a recession.

In the United States, which had relatively small direct investments and outstanding debt, the crisis nevertheless rocked financial markets.

Failure of the coup against Soviet President Mikhail S. Gorbachev removes those threats. It also eliminates the greatest fear that held back Western investors in the Soviet Union and Eastern Europe: that of a right-wing takeover.

The coup's collapse virtually eliminated the hard-line opposition to reforms and has strengthened the hand of the republics, particularly the Russian Federation led by Boris N. Yeltsin, economists said Wednesday.

As a result, Soviet economic reforms could find new life and a revitalized Soviet economy would send favorable ripples throughout the world, economists said.

But the coup's failure still leaves the Soviet Union in disarray, facing the same daunting economic problems. Without substantial foreign help, further economic deterioration in the Soviet Union could eventually affect Europe and the United States.

On Wednesday, the Bush Administration planned a massive increase in food and humanitarian assistance to the Soviet Union to show support for Gorbachev, Administration officials said.

Even so, there could be new problems for the Soviet and the world economies.

For example, there is the possibility of conflict between the reconstituted Gorbachev central government and Yeltsin's strengthened Russian Federation over the disposition of natural resources, such as oil.

The entire episode this week also raises the possibility that the Soviet Union will move even faster toward disintegration into a loose federation of sovereign republics.

That poses an economic risk to Western and Eastern Europe, which will be looked to for direct and indirect investment and aid. Europe would also bear the brunt of any sizable refugee migrations.

For the U.S. economy, failure of the coup is "good for farmers, but bad for the oil industry because oil prices will stay down," said David Hale, chief economist at Kemper Financial Services in Chicago. It's also "good for consumer confidence. It means we can plan again."

Grain exports can be expected to resume, and talks on Western investment in Soviet oil ventures, which had been hung up before the coup, can forge ahead.

As for interest rates, the Federal Reserve Board "was already under the gun to stimulate the economy. I think this is just another reminder to them that we're in a shaky situation and that they should buy some economic insurance in the form of a more generous credit policy," said Roger E. Brinner, an economist and executive research director at DRI/McGraw Hill in Lexington, Mass.

In Western Europe, especially in Germany, the coup had threatened debt payments by the Soviet Union that were already in arrears. The Soviet Union has a foreign debt of about $57 billion, and economists estimate debt service requirements this year as high as $12 billion.

But the Soviet Bank for Foreign Economic Affairs, responsible for servicing the country's debt, issued reassurances. "Tanks or no tanks, we have not stopped our operations or declared any moratorium," a bank spokesman told Reuters on Wednesday.

The failed coup will probably have little affect on the economic scene in the Asia-Pacific region, largely because there was not much Soviet activity to be threatened and few great prospects for the immediate future.

Five years ago, Gorbachev issued a proclamation in the Pacific port of Vladivostok proposing increased economic cooperation in the region, which was widely interpreted to be a bid to tap capitalist Asian powerhouses for investment of capital and technology in the Soviet Far East. He had few takers.

Only South Korea has responded to Soviet overtures with investment deals and expanded trade, in a strategy to outflank rival North Korea, formerly a close Soviet ally. Billboards advertising Korean electronics companies now dot parts of Moscow.

But the Japanese government has adamantly opposed warmer ties and refused to give the green light to its industry leaders for large-scale investment, pointing to an unresolved territorial dispute that has thwarted the signing of a bilateral peace treaty since the close of World War II. Even Gorbachev's historic visit to Tokyo this spring failed to result in a more favorable environment for economic activities between the two neighbors.

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