Divisions remaining over aid for Russia

AS the Group of Seven summit in Tokyo becomes the Group of Eight, with the addition today of Russian President Boris Yeltsin, deep divisions remain within the seven as to what the industrialised countries can and should do to aid Russia.

While strong public relations efforts are certain to be made today by the G-7 to show that they have been decisive and generous regarding aid to Russia, Mr Yeltsin is likely to lay equal stress on qualitative changes in the way Russia is treated.

In his G-7 debut, US President Bill Clinton has pulled out the diplomatic stops to salvage his plan for assistance to Russian plans for privatising former state-owned industries, and appears to have met with some striking success.

Ironically, divisions within G-7 have resurfaced in part because Russia no longer appears to be threatened by an intractable crisis as it was earlier in the year.

Then, hyperinflation of more than 2,000 per cent per annum looked likely on the economic front while, politically, Mr Yeltsin was engaged in a battle with a conservative parliament in which many die-hard communists were making their last stand.

At that time the G-7, after meetings in Hongkong and Tokyo, announced an emergency aid package of US$43 billion (HK333.42 billion) immediately prior to a critical referendum.

Following his striking victory, his Government has taken back control of the Central Bank from the parliament. The threat of hyperinflation has receded and economic reform has regained momentum.

Instead of further rewarding Mr Yeltsin's success, the G-7, itself beset with economic difficulties, has allowed old doubts about Russian aid to resurface.

The doubts have been particularly strong in Japan, the G-7 host, still concerned over the unresolved territorial dispute with Russia, and at first even unwilling to have today's G-8 session with Mr Yeltsin.

Russia, in fact, has become one more note of discord in US-Japan relations. Mr Clinton, after his initial summit in Vancouver with Mr Yeltsin, has seen increased Russian aid as a centrepiece of his foreign policy.

When Mr Clinton sought G-7 approval for an imaginative US$4 billion plan to assist Russian plans to accelerate privatisation of the former all-encompassing public sector, the Japanese Foreign Minister Kabun Muto dismissed the idea as ''preposterous''.

Earlier this week, Japanese officials were still telling the Japanese press that G-7 support for Russia was ebbing.

They reckoned without Mr Clinton. At the end of the first day of the conference US officials were confidently expecting that a US$2 billion privatisation scheme would be agreed. The word in Tokyo last night was that US arm-twisting had got the plan back up to US$3 billion, three-quarters of its original size.

But the larger issue of the degree of real G-7, as distinct from merely US, commitment to Russian aid remains uncertain.

The Russians feel that too much aid helps Western exports more than anything else and a key new demand will be a much more sustained relaxation of restrictions on Russian access to Western markets. The question of Russian membership in the General Agreement on Tariffs and Trade, will be raised.

Mr Yeltsin is also expected to ask for permanent membership of G-7 but, for now, until he grasps the nettle of solving the island dispute with Japan, the present arrangement will be continued.