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Baker Advises Shevardnadze About Heavy-Handed Domestic Measures

December 14, 1990

WASHINGTON (AP) _ Secretary of State James A. Baker III told his Soviet counterpart this week that heavy-handed measures to enforce control of the economy and in the restive Baltic republics could jeopardize a massive U.S. aid package, U.S. officials say.

Baker made the point privately to Foreign Minister Eduard A. Shevardnadze as the Soviet described Moscow’s drive to assert central authority in a country beset by economic problems and separatist movements, a knowledgeable official said.

″I wouldn’t describe it as a major warning,″ the official, speaking on condition of anonymity, said Thursday night.

The conversation occurred in Houston before President Bush’s announcement Wednesday that he would help the Soviets meet anticipated winter shortages by approving up to $1 billion in federally guaranteed loans for purchases of food and other agricultural goods.

Baker, a former Treasury secretary, and Shevardnadze often candidly discuss the Soviets’ attempt to reconstruct their economy and the hardships encountered along the way, said officials who recounted the conversations.

Shevardnadze explained how the central government was trying to tighten control of the distribution of food to make sure it gets to the marketplace.

The foreign minister said one problem was coping with profiteers who buy food at prices set by the government and then sell it, sometimes at 10 times what they paid, to consumers trying to overcome shortages.

Without approving profiteering, Baker told Shevardnadze it’s one thing to maintain order and another to use a heavy hand to root out attempts to stifle a market economy.

Baker said a violent crackdown in dealing with the independence movements in Estonia, Latvia and Lithuania could strain the improved U.S.-Soviet relationship and that Bush’s assistance program might be jeopardized, the officials said.

Baker’s advice came in a general discussion and Shevardnadze did not take it as a confrontation, the officials said.

Shevardnadze requested U.S. assistance from Baker on Tuesday in Houston. The aid package announced by Bush the next day at the White House exceeded Shevardnadze’s request, according to U.S. officials who briefed reporters afterward.

Bush lifted a 16-year-old ban on guaranteed credits, said he would propose that the World Bank and the International Monetary Fund give the Soviets a ″special association″ and offered help in dealing with transportation problems.

None of the U.S. aid is in the form of a gift and Baker stressed at a news conference in Houston that it was temporary and that the Soviets eventually would have to depend on their own vast resources.