The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. Important events in the Soviet Union again lead the news this Thursday. The Soviet legislature suspended all activities of the Communist Party. The country's two most populous republics, Russia and the Ukraine, formed an alliance and invited other independent republics to join them, and Western nations pledged emergency food aid to the Soviets. We'll have the details in our News Summary in a moment. Judy Woodruff's in Washington tonight. Judy.

MS. WOODRUFF: On the NewsHour tonight, how much aid should the West give the Soviets. We look at that question starting with a portion of today's news conference with President Bush and British Prime Minister Major. Then Charles Krause interviews a Soviet who is an expert on one of his nation's needs, and four U.S. experts weigh in with what they think the need is and how the West should respond. Finally, the aftermath of the Exxon Valdez oil spill, arguing over who pays the bills. NEWS SUMMARY

MR. MacNeil: Soviet lawmakers put what may be the final nail in the coffin of the Communist Party today, banning its activities across the Soviet Union. It was just one of a series of developments today in the rapidly shifting Soviet political landscape following last week's coup. We have more in this report narrated by Louise Bates of Worldwide Television News.

MS. BATES: The Communist Party was disbanded with the resounding support of the Supreme Soviet now into the fourth day of an emergency session. By 283 to 29 votes, deputies also froze the party's bank accounts and directed the interior ministry to seize its archives. It's not yet clear whether the suspension is permanent. Nonetheless, the party will never re-emerge in its old form. The fatal blow concluded a week which saw the party condemned for its part in the coup which marked the expected fall of the Soviet Union. That end moved a step closer when the two richest and most popular Soviet republics, Russia and the Ukraine, formed an alliance. Together they comprise about 65 percent of the Soviet population and possess most of its natural wealth. The temporary military and economic treaty appears to leave the Kremlin out in the cold. No mention was made of a future role of the Soviet President Mikhail Gorbachev, whose authority has plummeted since being briefly deposed last week. The republics appear to claim the right to carry out diplomatic contacts with foreign countries, circumventing the Kremlin. Other states of the former USSR were invited to join the alliance.

MR. MacNeil: In other developments today, Mikhail Gorbachev proposed Edward Shevardnadze and other top liberals to a new Soviet Security Council. He said the Council would take the main responsibility for resolving urgent problems in the country. The Supreme Soviet put off a final vote on the proposal and a spokesman for Shevardnadze said he refused point blank to join the Council. Also the speaker of the Soviet legislature, Anatoly Lukianov, was stripped of parliamentary immunity. The Soviet chief prosecutor said Lukianov should be charged with treason. The prosecutor then announced his own resignation. He said he felt the need to take responsibility for employees in his office who failed to oppose the coup. Judy.

MS. WOODRUFF: The Supreme Soviet voted today to take away the special emergency powers it gave President Gorbachev last year. The powers were granted to provide Gorbachev with more freedom to deal with the nation's economic problems. President Bush and British Prime Minister John Major discussed plans today for aiding democracy and economic reform in the Soviet Union. The two leaders met at the Bush summer home in Kennebunkport, Maine. Major said they had agreed on the principles governing aid.

JOHN MAJOR, Prime Minister, Great Britain: There is a window of opportunity at present for their speeding up of the economic reform process, and that is absolutely vital for the Soviet Union. The need to speed that is urgent and we agreed this morning that we need to support the effort. Our judgment is that what the Soviet Union and the republics most need is emergency humanitarian assistance, practical help in converting their economy into one that works, and that means that aid must be linked to a clear and comprehensive and practical reform plan, that it must go to those people who are in need, including directly to the individual republics, and that it needs to be linked to the Soviet commitment to further reduce defense spending.

MR. MacNeil: France's foreign minister went to the Baltic republic of Lithuania today. Roland Dumas said his trip marked the re-establishment of diplomatic relations between France and the Baltic republics. He and Sweden's foreign minister, who is in Estonia, were the highest ranking foreign government officials to visit the Baltics since last week's coup. President Bush today urged the Soviet leadership to grant independence to the Baltics. He called independence inevitable and said clearly the Baltics will have their freedom. But he stopped short of extending full US diplomatic recognition. The President made the remarks after his meeting with Prime Minister Major. He was asked whether he was concerned about who controls the Soviet nuclear arsenal as the union begins to disintegrate.

PRES. BUSH: We feel very comfortable about that. We had a group knowledgeable -- as knowledgeable as one can be about Soviet procedures taking a look at this. And I want to reassure the American people that at no time has there been any concern on -- official concern about inadvertent use of nuclear power -- nuclear weapons or something going awry. But that is a matter that needs to be sorted out and I'm confident that everybody in the republics and in the center understands that the last thing that the world needs is some kind of a nuclear scare, say nothing of a nuclear confrontation.

MR. MacNeil: Nuclear concerns apparently led Mikhail Gorbachev to send a special delegation to the republic of Kazakhstan today. Gorbachev said the situation there had become more complicated. Kazakhstan's President said tensions were rising over territorial disputes with the Russian republic. He said, "Special danger lies in the fact that Kazakhstan is a nuclear republic," an apparent reference to warheads based there.

MS. WOODRUFF: The State Department today blamed leaders of Yugoslavia's Serbian republic and the Yugoslav military for the escalating violence in the country. A State Department spokesman said, "It is clear that federal Yugoslav military units in Croatia have not been serving as an impartial guarantor of a cease-fire." He called for a peaceful solution to the conflict. Fighting between Serbs and Croats over territory in Croatia has claimed nearly 300 lives since the republic declared independence eight weeks ago. There were sporadic clashes today but the battles were less intense than those over the past four days.

MR. MacNeil: In U.S. economic news, personal income fell a tenth of a percent last month. Analysts said the decline would probably have a negative effect on consumer spending in the future. In July, consumer spending rose .4 percent. The Commerce Department also reported that the sale of new homes fell 8 1/2 percent in July. There were declines in all regions of the country except the Northwest. So far new home sales are down 13 percent from last year.

MS. WOODRUFF: In Teladega, Alabama, prison officials delivered food to Cuban inmates for the first time since the hostage situation began there. Yesterday the inmates freed one of their ten hostages, a woman in need of medical treatment. Today medics were allowed to see the remaining hostages. The uprising began eight days ago to protest the scheduled deportation of 32 inmates to Cuba.

MR. MacNeil: The CITCO Petroleum Corporation today agreed to pay a record $5.8 million to settle claims stemming from a fire earlier this year. The accident happened at a refinery near Lake Charles, Louisiana. Six workers died when super heated oil and water combined to cause a steam explosion. The Occupational Health & Safety Administration said CITCO violated 49 safety regulations and failed to provide adequate training for workers. That's our News Summary. Now it's on to today's post coup topic, economic aid for the Soviet Union. Then an update on the legal battle over the Exxon Valdez oil spill. FOCUS - AID & COMFORT

MS. WOODRUFF: Our main focus tonight is aid to the Soviet Union amid a changing political situation and a potential economic emergency. It was just six weeks ago that the leaders of the world's seven industrial powers met with Mikhail Gorbachev at the London Economic Summit offering him special membership in the International Monetary Fund but making no promise of cash aid. Today the aid issue was back at the top of the agenda as President Bush and Prime Minister John Major talked in Maine, while representatives of the entire G-7 met in London. The President and Prime Minister set out six courses of action. First, continue existing food credits; second, assess the need for food aid this winter; third, send teams to the Soviet Union to help structure more efficient food production and distribution; fourth, continue technical assistance programs agreed to by the G-7 previously; fifth, get the International Monetary Fund and World Bank involved quickly to help with structural reform plans; and finally, speed up the process for associate membership in the IMF for the Soviet Union with possible full membership in the future. The two leaders spoke to reporters this afternoon in Maine. President Bush was asked if the Soviet Union's efforts toward restructuring the government were moving too slowly.

PRES. BUSH: No. I think the changes are so monumental that it is going to take time to sort it all with finality. Every day there are new announcements of some, some new dramatic step taking place and so that's for them to sort out. We can't affect it particularly. I think the prime minister is right on target when he says we want to help, we're not just bystanders. We have a tremendous stake in what's taking place. But, no, these changes have moved withsuch rapidity that, well, put it this way, if two weeks ago somebody had predicted this, everybody would have said he had lost it, and so changes are going on, but, again, all the cards are not on the table when it comes to what the United States' role should be or the UK role in further assistance of one kind or another.

REPORTER: Most of the measures that you say you've discussed today involve speeding up things that were already in train. Do you not have any sense that given the momentous changes that we have seen in the Soviet Union some more fundamental reconsideration of Western policy might be necessary?

JOHN MAJOR, Prime Minister, Great Britain: We identified sometime ago what was most practical and of most assistance to the Soviets. That hasn't changed. The dimensions of that has changed. The need to speed forward has changed. Perhaps the volume of it has changed. What we've actually done this morning is agree a very practical way forward. People are suggesting all sorts of things that ought to be done. But the priorities are to deal with the problems of food and food distribution, to deal with the ways in which we can help the Soviets maximize their own capacity to produce both food and other mechanistic and hardware produce. And we need a good deal of information in order to do that. There's no point in getting beyond that until we can see precisely what the need is. I understand the wish that there is in some people's mind to do something fresh, entirely different, and entirely dramatic. But we have to consider what will be practical, what is deliverable, and what would actually help. And it was actually quite striking earlier this week that one of the Soviet spokesmen was saying the problem isn't really a question of large scale money, we actually need technical advice and know-how and we need food. This is what we're providing, and we're potentially doing it on a very substantial scale and across a very wide field. I would envisage that we would send some of these life-line teams not just to the center but to a number of the republics in order to go there, see what needs to be done, report back and enable us then to put in their hands the practical measures that are needed to help. I think that's what is most in the interest of the Soviet Union and that's what we've agreed this morning.

MS. WOODRUFF: At one point in the news conference, President Bush was asked about a proposal made yesterday by Democratic Congressman Les Aspin, Chairman of the House Armed Services Committee. Aspin suggested taking $1 billion out of the defense budget and using it for Soviet aid.

PRES. BUSH: I'd say let's take a little time and sort this thing out intelligently. Certainly we want to live within our budget agreement. We owe this to the American people. We've got to get this economy going and more and more government spending is not the answer. His suggestion, as you say, doesn't result in more, but you've got to accommodate a lot of domestic interests that would like to see more money going somewhere. It's ironic that I was attacked prior to all this coup about being too much concerned about money for the Egyptian debt or money for the Soviet Union. And now suddenly, before the cards are all laid down on the table, we have people saying, hey, what we got to do now to prove that we are interested is to send more money, send more dough for something. I couldn't agree more with what our G-7 chairman, John Major, said about helping people, whether in the republics, or in the center, wherever, in terms of food aid. We also want to be sure it gets there. We want to be sure that distribution systems work, so we've got a lot to do.

REPORTER: You said that you wanted to see significant Soviet defense cuts. What sort of level are you looking at as a share of say GNP and what sort of time scale?

PRIME MINISTER MAJOR: Well, we want the commitment to extend the defense cuts they are committed to already. The first part of the equation is to make sure that they continue with those cuts to which they've already committed, and we have no reason to suppose that isn't going to happen. But even when they've done that, they're still spending 1/4 of their central government expenditure on defense. Now I don't think it is a tolerable proposition for them to sit on that level of defense expenditure at a time when they're seeking very substantial assistance in one form or another from the West.

MS. WOODRUFF: As the two leaders pointed out, there is concern about potential food shortages this winter in the Soviet Union. But those shortages may be due as much or more to structural problems like poor transportation as to bad harvests. Not only that, aid in the past has had a way of falling into the wrong hands. Nik Gowing of Independent Television News reports on what happened to a recent European effort.

MR. GOWING: At last December's Rome European Summit, there was a rush by the 12 heads of government to support Gorbachev through his political difficulties at that time by sending 200 million pounds of food aid to tide the population through the rest of the winter. They were convinced most of the food would get there.

DOUGLAS HURD, MP: [Dec. 1990] Clearly, it's very important it should go through to the people who need it and therefore, it will need to be carefully monitored.

REPORTER: Would that be through the KGB?

DOUGLAS HURD: It will not be through the KGB. We, not the KGB, will need to be fully satisfied that the food which is bought goes to those who need it.

MR. GOWING: It was wishful thinking. The Germans who mounted an immediate and massive Soviet help operation funded by the government and public donations discovered that 3/4 of the food and medicines disappeared inside the Soviet Union. These television images of convoys gave the right impression. The reality is that this aid had a political, not practical, significance. Sources calculate that much of the German aid fell into the hands of black marketeers or found its way into official organizations like the Communist Party, diverted from the Soviet people meant to receive it. It proved the impossibility of monitoring even such a modest aid distribution operation. And by the time the first EC food aid arrived, it was summer and the food crisis was past. The chaotic state of the Soviet supply system and the refusal of official Soviet organizations to give distribution guarantees forced the EC to delay its operation for six months. Only now is aid dribbling through. Aircraft are too costly for any massive long- term operation, especially in a country as vast as the Soviet Union. While EC aid is readied for shipment, senior EC and Western government officials monitoring the existing Soviet programs are privately skeptical that they can fight through the inertia of an entrenched Soviet system to achieve the humanitarian goals that politicians have set them. At ports and on the railways, they do not have the manpower to track the aid and prevent it just disappearing. One key Western official told me tonight, "We are conscious of the risks involved." And the empty food shops will not be filled by the EC program.Officials have no faith that Western aid would get this far. Instead, the EC has targeted orphanages, hospitals and old people, where the risk of wastage and pilfering is reduced but not eliminated. And while the new free markets are causing severe hardships for many, views remain divided on whether the food crisis is really as severe as some predict. In recent years, the specter of famine has often been raised around now, harvest time. But the fact is that in winter most people do manage to survive, the frozen plastic bags hanging from windows highlighting the average Russian's ability to cry "wolf" in public while quietly hording and setting aside food for winter. It is a daily struggle, but city apartments and their fridges are often crammed with food. The tens of millions of peasants fill their cellars with potatoes and pickled produce. As one Western official at the heart of the Soviet aid operation told me tonight, "There is no real shortage of food in the Soviet Union."

MS. WOODRUFF: For one ground level perspective on the immediacy of the economic problems within the Soviet Union, Correspondent Charles Krause talked today with the man who tries to make sure the lights go on in Moscow.

MR. KRAUSE: Moscow's energy czar is Boris Rekk. He is an engineer who's responsible for providing heat, hot water, and electricity to the Kremlin, and to the Soviet capitals nine and a half million people. As chairman of the Moscow City Council's energy commission, Rekk has a firsthand view of the day-to-day problems of the faltering Soviet economy. Occasionally, he also gets himself involved in politics. It was Rekk who personally turned out the lights this past week at the Communist Party's Central Committee office building near Red Square in Moscow. We interviewed Rekk this afternoon.

MR. KRAUSE: Mr. Rekk, thank you for joining us. Western analysts are predicting that the Soviet economy may contract by 20 percent this year, that inflation is running at about 100 percent. Just how critical is the economic situation in this country?

MR. REKK: [Speaking through Interpreter] Well, I believe that the situation in the USSR is well known the world over and we really are in dire straits today. The situation can be described as somewhat close to a crisis. The figures that you have just provided are very close to reality and at this point for us all the people who have just taken up power in this country, be it the USSR, Russia, or even the city of Moscow, we will have to spare extraordinary efforts not to let the decline go further down.

MR. KRAUSE: From what you know of the Moscow city government, have any contingency plans been made to deal with shortages of bread and other food stuffs this winter?

MR. REKK: [Speaking through Interpreter] The leadership of Moscow is paying a lot of attention and is sparing a lot of trouble to safeguard Muscovites from food shortages from this winter. One of the actions taken by them is the establishment of direct food links between the producers and consumers of food products. The so- called "interior barter" relations are being developed these days to bring the product to the consumer in least long time, despite the fact that on the whole, the situation remains to be quite difficult.

MR. KRAUSE: In the area you're most familiar with, energy, oil production is down, coal miners are threatening to strike again, will there be shortages of heat and electricity in Moscow this winter?

MR. REKK: [Speaking through Interpreter] I do not dare say an affirmative yes. In general, characterizing the situation, one can say that if the winter is going to be just like the recent two or three which were somewhat spoiling us with warm and nice weather, Moscow energy system would stick it, despite the fact that we are planning to encounter some difficulties.

MR. KRAUSE: Stick it. You're saying that it would -- it would be sufficient?

MR. REKK: [Speaking through Interpreter] Yes.

MR. KRAUSE: Mr. Ridjkov, the former chairman of the Council of Ministers under President Gorbachev, has said that the Soviet economy cannot survive without aid from the West. Do you think that the West should provide emergency assistance, while the larger questions of providing more permanent aid are debated?

MR. REKK: [Speaking through Interpreter] There is no doubt to the extent that the Western assistance to help us make it through the coming six months would be very desirable. The USSR holds 1/6 of the world's dry land and you know what the psychology of a hungry man means in comparison to the psychology of a well fed man. You know that in terms of perspectives, waiting for the USSR, particularly the enormous military machine which this country has should not leave the rest of the world totally unaware of the USSR and it simply should display certain degree of responsibility for the destiny of not only the USSR but the whole world.

MR. KRAUSE: But as you look ahead, the next six months could be critical. What kind of assistance could you use from the West?

MR. REKK: [Speaking through Interpreter] It's food stuffs, medicine -- well, perhaps that's it, you know, from those items of urgent need. Coal, you know, it's ridiculous to ship coal from the USA to the USSR.

MR. KRAUSE: What happens if the West for political reasons or for other reasons decides not to help the Soviet Union? What happens if the food and medicine you talked about simply don't arrive?

MR. REKK: [Speaking through Interpreter] You know the Russian people is very tolerant. I don't know whether it's positive or a negative feature of the Russian character but still that's the way they are, and the recent events have given them a new banner, a new slogan. People have consolidated and it's a brand new country that have emerged out of the turmoil of the last week. But I still think that we will not have to live in the besieged Leningrad the way it was during the Second World War, but the situation would be difficult, of course.

MR. KRAUSE: Do you think the West will, in fact, aid your country in time?

MR. REKK: [Speaking through Interpreter] I believe yes.

MR. KRAUSE: Thank you very much.

MR. MacNeil: Now four American views of the economic situation and the appropriate Western response. Graham Allison has led the so-called "Graham bargain approach" to aiding the Soviet Union. He is a professor of government at Harvard University's Kennedy School and joins us from Boston. Judy Shelton is a senior research fellow at the Hoover Institution, a public policy research center at Stanford University, she's the author of "The Coming Soviet Crash," and she's in our Washington studio tonight. Dwayne Andreas is CEO of Archer-Daniels-Midland, an agricultural products company with extensive dealings with the Soviet Union. He joins us from Decatur, Illinois. And Padma Desai is professor of economics at Columbia University and author of "Perestroika in Perspective." Graham Allison in Boston, as someone who has been urging a much grander program of aid, are you disappointed by the Western aid as represented by the Bush major pronouncements today?

MR. ALLISON: Well, quite disappointed, Robin. It seems to me that this standing on the sideline and sort of wringing our hands forfeits our opportunity to influence events in the Soviet Union, and what I would have liked to have seen was an announcement, a pledge of sustained and substantial assistance to the Soviet Union when they take the actions that would be necessary to make that assistance effective. By failing to say what we would do when they take the actions that would make that assistance effective we simply let events clarify, as the President said, as if we had no influence over the events.

MR. MacNeil: Judy Shelton, are you disappointed? Do you think we're forfeiting our opportunities?

MS. SHELTON: No. I think it was the appropriate response. I think it would be a big mistake for a Western government to become heavily involved in granting massive financial aid to the Soviet Union for two reasons: one is the last thing we want to do is inject government into an area where they're just beginning to appreciate the, the power of free markets. I think that goes against our own economic principles. But secondly, if the West is perceived as trying to influence the destiny of those republics, I think that could backfire as well.

MR. MacNeil: Yeah. Should we be doing more, Padma Desai?

MS. DESAI: I think we should be doing a lot more because the Soviet situation has changed so dramatically, the conservatives have been trounced, the Communist Party is practically dead, there is a very liberal reformist government coming into place in the center, that government to begin with will have the psychological support of the Soviet people. There is also a lot of enthusiasm abroad that investors, business people, who are ready, poised to invest into the Soviet Union if the reform plan gets on track, so I was sort of disappointed with the President's and the prime minister's position. They really haven't changed that approach from what it was at the time of the G-7 meeting London. That will give them food aid, and now emergency food aid, emergency food aid, and that we will be clear for them associate membership of the International Monetary Fund. The prime minister said maybe we'll quicken the pace, they will make it larger package but the package is going to remain the same and it is sort of like a bandaid. It's almost like offering swimming lessons to a drowning man. And it seems to me that we will stand on the sidelines so long as we keep on saying, start your own reform program, unless your reform program is on track, we cannot help you, it must be on track. But my feeling is that we must come up with some pre-conditions on our part, what are the economic pre-conditions which we want them to fulfill before we'll consider any package of aid, public funds, PACS actions before that is absolutely necessary so the President's emphasis and the Prime Minister's emphasis on Soviet government commitment to reduce defense expenditure was right because there was no -- not a chance in the world we can commit taxpayers' money to helping the Soviet Union unless they commit themselves to reduce defense expenditure, but we want come up with certain other pre-conditions of an economic nature so that we can force them into taking proper well coordinated economic actions and that was missing.

MR. MacNeil: As a businessman, Dwayne Andreas, what do you think about what the government should be doing, the Western governments and peoples at this moment?

MR. ANDREAS: Well, Robin, before we go to much farther into where we're headed, I'd like to take one minute to explain where we are.You know the President put the highest possible priority on this problem when he appointed Amb. Strauss, one of the most talented experience,and knowledgeable people, ambassadors that we have, to go over there and represent the President in the halls of the Kremlin to help work out these problems. Now I'm sure that Amb. Strauss is doing over there what he spent 20 years doing here, which is getting the very top political people of different persuasions together to work together in the common good, them to work with each other and for them to work with our President and our Secretary of State. Then in addition to that, President Bush enlisted the health of Sen. Dole to get a billion and a half dollars worth of credit, which he has already offered to the Soviet Union and the food involved in that credit is already starting to be shipped. Now if that isn't a big head start, then I don't know, but maybe we could do something here for the cause by explaining where, specifically where the difference of opinion lies. Gorbachev and his emissaries have been saying the following: About eight months ago they made a mistake of announcing six weeks' notice that they were going to go to a market economy. Well, the farmers immediately concluded that prices would rise two or three hundred percent and they started hording everything they could possibly horde and quit shipping it to the cities. Whereupon the housewives with the same thought, instead of buying one pound of sugar, tried to buy five, and one quarter of cooking oil to buy a gallon, and they started hording. Now the pantries are full and the farmers have food held back and the rest of the food has found its way into the black market, which is a very unsatisfactory social situation. Now what Gorbachev people are saying is that they'd like to get over to a supply and demand situation to a market economy but if they go to a market economy when there's nothing -- no consumer goods in the shelves, they're very much afraid that prices will be -- the rise in prices will be such a shock that you might have riots in the streets, you might even have the basis occur for another coup.

MR. MacNeil: So where does the West come into that, Mr. Andreas?

MR. ANDREAS: Where does the West come in? What they want to do and what they need to do is to fill their shelves in their eight biggest cities with food. They want an abundance of food. They want to be inundated with food so that it's visible in their eight biggest cities. They feel that this will put a damper on prices, No. 1, and stop hoarding, No. 2. Now if you can stabilize the prices, stop the hoarding, then they think they could proceed to a market economy. But they're afraid that they cannot do it in the absence of full shelves in the shops.

MR. MacNeil: Well, is it your point the West should be putting that food in those eight cities?

MR. ANDREAS: They say that it -- well, of course, we can do that easily. We can fill those shops in those eight cities with food between Western Europe and the United States, and I'm not -- it's not my job to say what we should or shouldn't do. I'm just explaining that that is the nature of the difference of opinion between some people here who are reticent and who are holding our officials back and some of the officials in the Soviet Union. And that's the kind of a problem that Bob Strauss is supposed to try to work out.

MR. MacNeil: Let me go back to Graham Allison. President Bush said today there aren't enough cards on the table to show what the U.S. should be doing. Now you think otherwise. You think the cards are clear enough on the table, do you?

MR. ALLISON: Robin, I think both the cards are on the table but they're also -- we can influence the cards as they get dealt and the way that they get turned over. And it seems to me that in addition to food and medicine, which are partly getting them over a transition as they move to a market economy, and I agree very much with Dwayne Andreas's analysis, there's also hope. The virtue of announcing that we will provide substantial and sustained assistance to the extent that that can be effectively used and will not let them fail as they try to build democracy in a market economy there for want of assistance we could practically provide will influence their expectations and their actions. So I think we should be exercising that because the outcome of this game is going to affect not only them, but it affects our values and our interests. If six months from now, the Soviet Union should, God forbid, look like Yugoslavia or like even worse Lebanon, that's going to affect our interest. We have a security interest in the outcome of this game. We, therefore, should be trying to affect and influence at the margin with the influence that we have how it comes out. And the notion that the cards are dealt by some hand which we have no effect upon strikes me as curiously passive, particularly for a President who in the Gulf when the time came to stand up stood up and led the alliance in a way that I think we're all very proud of.

MR. MacNeil: Judy Shelton, you see this so differently. Who holds the cards, in your view, in this case? You've heard the argument going before.

MS. SHELTON: Well, I think the goal is for individuals over there to hold the cards, and the reason those shelves are empty is because those shelves have been owned by the state and for Western governments to come in and try to pick up where central planning has left off I think is ludicrous. Keep in mind that last year the Soviet Union had a record harvest and some 40 percent rotted in the fields. People had no incentive to gather it and no incentive to deliver it to market. They did horde. But it would be so simple to have a free market solution. Yeltsin could announce tomorrow or Provchuk in the Ukraine, say everyone who picks potatoes gets to keep 10 percent. Every potato would get picked and suddenly there would be a lot more food. And if you then told those people you can consume it or you can sell it, all of those potatoes would make it to market. You don't need refrigerated trucks. People would get them there in wheelbarrows.

MR. MacNeil: In other words, you think the West doesn't need to fill those supermarket shelves to promote the transition to a market economy, just announcing a market economy would fill the shelves you think?

MS. SHELTON: Well, I think it's very important to quit referring to the black market as something onerous. The black market is the market. It is equilibrating supply and demand and as soon as you take the risk out of the black market by making it legal, a lot more people will get involved. And if you believe in the invisible hand, then eventually the more competition, the more prices will come down.

MR. MacNeil: Dwayne Andreas, how do you see that between the two arguments you've just heard?

MR. ANDREAS: Well, in the first place, there is no free market in any of these farm commodities anywhere in the world, including in the United States. And these prices have all been controlled and for the farmers there to start producing in competition with the Western European socialist governments would be a major undertaking which has to be dealt with. Then we have to consider -- I think we have to give a very high priority to the question of social stability because I think the President has a tremendous overriding consideration. But he has to take into consideration -- and that is that there 30,000 atom bombs there and if you have anarchy and if you have social uprising because of a suddenly rising price of food, who knows what will happen to those bombs? He has to think about that, and under those circumstances, it may be worth a lot for us to guarantee a stabilized government and a stabilized situation and a government that has those bombs under control, particularly since all the democratic forces now are unleashed. So I believe that the -- Gorbachev once said to me my predecessors just went out and shot the peasants to get 'em to move their food to the cities, we don't do that anymore. Now I believe that they have a good point when they say, if you can fill the shops, you can stabilize the prices and stop the hoarding without violence. And it seems to me that we should consider that point of view.

MR. MacNeil: What do you think of that?

MS. DESAI: I think what we really need to concentrate on is what are the economic cards which we can play on -- from our side, because unless we do that, we will be standing on the sideline, as it were. I have two cards in view. One of them is that when Mr. Major goes to Moscow on Sunday, what he should be telling Gorbachev and Yeltsin and all the republic leaders, all their representatives, he should get together with all of them, and tell them that look, this is our precondition for giving you aid, big or small. One precondition is that the country is awash in rubles, worthless rubles from the Baltics to the Caspian Sea, from East to West, and the only way the supply of rubles can be controlled, the hemorrhaging can be stopped, is for each one of you to agree to an independent central bank. That bank has to be independent off the center. That bank has to be independent off the mighty Russian federation, especially with Boris Yeltsin in charge. That bank will not support or finance any of the deficits off the center or off the republics. That will stabilize the value of the ruble. That will also stabilize the external value of the ruble. And that is absolutely necessary. That is the minimum precondition which we should be imposing on them and telling them that we might even be prepared to give you full membership in the International Monetary Fund if you agree to some kind of a very definite monetary union with an independent central bank, because then the International Monetary Fund could monitor the plan, can even make proper suggestions, and this will inspire some confidence in the outside world, our business community, that the reform process is proceeding along systematic lines. The second suggestion is that why have all these efforts on the part of the EC to send food there failed? The main problem here is, and I agree with Mr. Andreas, the main problem is that the Soviets, themselves, have to free up their agricultural system, free up the prices which they pay to the producers, free up the subsidies which they pay to the consumer on the bread and the milk and everything which the consumers buy, and then --

MR. MacNeil: In other words, do what Dr. Shelton was saying and that is just announce there is now a free, open market?

MS. DESAI: Yes, but they are not going full fledged on abolishing the consumer subsidies also. But at the same time there are fears that if you abolishsubsidies there will be a lot of discontent, there may even be riots, and for that maybe for the most disadvantaged sectors of the population, like the 60 million pensioners, you can introduce the minimum level of temporary rationing so that people feel secure that their standard of living is guaranteed and then they would not want to hoard all the food items. So there is a need to free up their food system and that is -- that should be part of our distribution effort, that should be part of our effort to ask the European community which has large stocks of grain amounting to about 18 million tons of grain, which is what the European community has, they would be happy to get rid of them, because they are incurring storage costs on them, but they have to free up their --

MR. MacNeil: Let me come back to --

MS. DESAI: -- distribution system.

MR. MacNeil: -- Dr. Shelton, who's the skeptic here. What do you think of the idea of making it -- playing this card that Dr. Desai has talked about, of saying we will do this if you will stabilize your currency in the manner she described?

MS. SHELTON: Well, I think that fixing the money is one of the first tasks that they have to deal with. It gets so complex immediately if the West tries to dictate how they go about doing it. For instance, we talked six weeks ago when the grand bargain was being floated about a ruble stabilization fund. Well, they were talking about stabilizing a Soviet ruble. That idea would not fly today. Well, are we talking about then stabilizing a Russian ruble? Well, I don't think the Ukrainians or the Georgians like that idea. The Ukraine voted to have an independent currency on Saturday. So does that mean the West would stabilize 15 different currencies, since the Baltics, they all want their own separate currencies? It gets very, very complex, and it's not clear to me what we have to gain by dictating to them how to solidify their money.

MR. MacNeil: Dr. Allison, what do you think about this -- you said we should make conditions and tell them what we will do if they will do certain things -- is that one of them, currency stabilization?

MR. ALLISON: I think currency stabilization is one of the key elements of a coherent economic reform program. I think the essential conditions for our participating and providing sustained support for them are first that they're moving forward, not just talking about, but moving forward with a coherent economic reform program, but which monetary stabilization is a piece. Macroeconomic stabilization with the slashing of their defense budget and assistance to places like Cuba and other subsidies is an essential equal piece, so there's a whole set of those. There are also political elements, Robin, that I think become especially important, given the point, the problem that Mr. Andreas pointed to. We need to increase their incentives for finding a peaceful problem solving of whatever political configuration emerges in the Soviet Union. Right now they're struggling about the nature of a federation, confederation, commonwealth. Our crucial interest is that this not disintegrate into chaos and civil wars, that the Ukrainians and Russians are not a year from now fighting each other the way the Serbs and --

MR. MacNeil: How do we --

MR. ALLISON: -- Croats are doing.

MR. MacNeil: How do we influence that?

MR. ALLISON: I think we influence that by saying to them these are the circumstances that would be required for sustained Western assistance to be effective. If you're engaged in economic conflict and a military conflict, of course, it makes no sense to think that we're going to pour money into a hole of that sort. So for a limited number of essential conditions, the kind of conditions, in fact, that the U.S. stated and maintained for the Western economic assistance that was provided to Western Europe in the aftermath of World War II, namely you nations have to work together, you can't engage in beggar thy neighbor economics, you can't engage in economic warfare, you can't engage in political conflict. If you're trying to work out your problems in a peaceable manner, since we have a stake in that outcome on the basis of our interests, we will provide the kind of support we practically can to that end.

MR. MacNeil: Dwayne Andreas, is the situation so dire to quote the interpreter in our Soviet interview that the West just can't - - there isn't time to say get your act together before we give you aid, that it has -- the aid has to go in while the act is being got together?

MR. ANDREAS: Ridgkov, who's a very knowledgeable man, said the other day that unless we have massive help from the West, we will have people freezing to death and starving to death in Moscow in the middle of the winter. Winter is only two months away, Robin, and I think that the four of us are all pointing in the same direction, but maybe it's a question of are we willing to prime the pump, or put it this way, maybe this is a chicken and an egg situation, they say, let's get food in our shops and then we will unleash the forces of supply and demand, that's what they're saying. We seem to be saying, unleash the forces of supply and demand and then we will help you. Perhaps there is a middle ground there that will work, but there's a long-term problem and a short- term problem.

MR. MacNeil: We --

MR. ANDREAS: I really think the urgent thing is to have food there this winter, which means you must start shipping it within the next three weeks.

MR. MacNeil: We have an urgent short-term problem here and that is we have to leave. Thank you all four very much. UPDATE - EXXON - SPILLOVER

MS. WOODRUFF: Finally tonight an update on the Exxon Valdez oil spill in Alaska and the continuing legal argument over who owes what. One settlement offer has already fallen by the wayside and yesterday US Justice Department officials and the state of Alaska let the Exxon Corporation know that they are willing to go to trial to resolve all outstanding claims. Correspondent Lee Hochberg of public station KTCS has our report.

MR. HOCHBERG: In fishing supply stores in Alaskan villages like Cordova, nets and other goods are piling up.

LIBBIE LIAN: All of the stock that you see here is carry-over gear from 1989 and --

MR. HOCHBERG: You are unable to sell it?

LIBBIE LIAN, Store Owner: I am unable to sell it. It didn't sell last year. It hasn't sold this year.

MR. HOCHBERG: Businesses like Libbie Lian's still haven't recovered from the jolt they suffered when the Exxon Valdez accident ruined the 1989 fishing season. Many fishermen are uncertain if their damage claims against Exxon will ever be resolved and they're spending conservatively. Lian has been forced to put her ten year old fishing supply business up for sale and she blames Exxon.

LIBBIE LIAN: I'll never forget the words of Exxon's, one of their top officials that came to Cordova right after the spill, I remember they had a large town meeting up at the high school and the gym was totally packed and he said that no one will suffer for this, we'll make you whole. And those words echo through everybody's mind and that's -- that's a promise that they made and they certainly have not kept up to it.

GOV. WALTER HICKEL, Alaska: I do not condone what happened with Exxon Valdez. But I say we have to go on, we're going to have to do these things, we have to get behind us --

MR. HOCHBERG: Alaska Governor Walter Hickel is tired of all of this griping against Exxon. He opened negotiations with the oil company last spring and came out with what he said was a great deal for Alaskans. Exxon offered to pay the Alaskan government almost $1 billion over 11 years for shoreline restoration. It also agreed to plead guilty to four misdemeanor pollution charges and pay a $100 million criminal fine, the largest ever proposed for a violation of federal environmental law.

GOV. HICKEL: It looks good and it feels good and that's what's important. I think it's a good settlement for the state of Alaska. I think it's a good settlement for the federal government. In my opinion, it's a good settlement for Exxon, it's a good settlement for the environment.

MR. HOCHBERG: But the agreement quickly unraveled. Exxon Chairman Lawrence Rawl enraged those who already thought Exxon was getting off too easily when he announced the company's 1991 first quarter profits were Exxon's highest ever and the billion dollar settlement wouldn't bruise corporate dividends.

LAWRENCE RAWL, Exxon: [March] The agreements in my view and the view of our board and everyone that has an impact -- on this -- are really in the interests of the shareholders and the employees of this corporation and I think our image is in pretty good shape.

MR. HOCHBERG: Federal Judge H. Russell Holland seemed to bristle at that and threw out the $100 million fine, saying, "I'm afraid these fines suggest that spills are a cost of business that can be absorbed." Exxon refused official comment, but their attorney admitted after the ruling he was stunned.

JAMES NEAL, Exxon Attorney: [April] We felt -- both sides thought the fines were adequate. I was very fair in stating that we had worked hard and we had come up with a settlement that we obviously thought was fair.

MR. HOCHBERG: The Democrat-controlled Alaska state legislature then dropped the other shoe, voting along strict party lines to reject the $900 million civil portion of the settlement. State Rep. Gene Kubina of Valdez argued Exxon should deliver all of the settlement money up front.

STATE REP. GENE KUBINA, [D] Valdez: It wasn't $900 million. It was $900 million over 10 years. And if you put that in today's dollars, we're talking closer to four, four hundred and fifty million dollars. And none of us felt that we should be Exxon's banker.

CHARLIE COLE, Alaska Attorney General: Exxon was unwilling to pay that sum of money under any other terms and it was a matter of take it or leave it.

MR. HOCHBERG: Alaska Attorney Gen. Charlie Cole says the deal was 50 times greater than any previous agreement of its kind and the best he could negotiate.

CHARLIE COLE: We had Exxon's commitment to pay the state and federal governments $900 million over a 10 year period. What do we have now? Nothing. Simply, we are looking forward to the prospect of years of litigation and the expenditure of staggering sums.

GOV. HICKEL: They were saying, well, we should have had the money quicker, we should have had more up front, we should have this, we should have that. I'm sure that 4,000 years ago there was people who said that Moses should have had 12 Commandments instead of 10.

MR. HOCHBERG: Although the rejection of the proposed settlement delays work on enhancing shorelines, it gives new hope to more than 5,000 Alaskans who filed civil claims against Exxon for personal or business losses. Fishermen like Dave Clark say the proposed deal would have made it difficult for private claimants to make their cases against Exxon.

DAVE CLARK, Fisherman: The data which the state and the federal government have been developing to show the economic and ecological damage in the Sound here was to be suppressed and locked away in a Warren Commission file somewhere in perpetuity and we would not have access as part of the deal.

MR. HOCHBERG: Gov. Hickel says the state isn't obligated to provide data for private claimants.

GOV. HICKEL: I wish the private people well. They can go on and keep suing now if they want to, whatever, but we were settling for the State of Alaska with the federal government, with Exxon. That was our duty, and that's our first call, and that's what we did.

ERNIE PIPER, State Clean-up Coordinator: I just stumbled on this. Here's another area right over there that's pretty big and then I'll show you the subsurface oil area too.

MR. HOCHBERG: With Exxon's last clean-up crews leaving Prince William Sound, the state is assessing how much oil remains and how much it should ask of Exxon if the case goes to court. Ernie Piper, the state's on-scene clean-up coordinator, agrees with the governor that there's been dramatic improvement on the beaches, but he emphasizes 15 miles of shoreline still are sopping with subsurface oil that will take years to dissipate.

ERNIE PIPER: Right on the point of that island, Night Island, that's where it's the motherload of subsurface oil. Sometimes you don't even find it until you've dug twenty, thirty inches, in a beach.

MR. HOCHBERG: Meanwhile, the federal government has released a summary of 58 animal mortality studies showing the spill took a much greater toll on wildlife, shorelines and fisheries than Exxon had reported. The government says up to 5500 sea otters died in the syrupy oil as did millions of fish, and the tally isn't yet complete.

PAUL GERTLER, Federal Damage Assessment Coordinator: The numbers do speak for themselves. You're talking about a half a million birds or more than a half a million birds that were killed. That's fair to say that we found -- what we found in this report was indeed worse than what Exxon was stating.

MR. HOCHBERG: State and federal economists place the economic value of these intangible losses at more than $3 billion. Alaska's leaders accept that figure but anxious for a settlement say they can't ask Exxon for it.

CHARLIE COLE: You don't demand the outermost limit of what you think you might be able to recover if you go to trial. That's what a settlement's all about.

GOV. HICKEL: You can estimate 3 billion or 4 billion or why not 10 billion or why not 1 billion? There's a few spots you can see some dark rock, but how do you prove how many billions that's worth?

RIKI OTT, Environmentalist: What we want is an amount of money that's going to make an impact on corporate mentality. And I say we settle high because of the long-term damage. So we're looking at probably five to ten billion dollars.

MR. HOCHBERG: Alaska's environmentalists like Riki Ott urge the state seek a settlement that punishes Exxon. Five thousand native Alaskan villagers whose subsistence lifestyle was damaged by the spill ask simply that they be included in the deal. A judge ruled that the proposed settlement would have unfairly overlooked their claims. Chenega Villager Darrell Totamoff.

DARRELL TOTAMOFF, Native Villager: You can't tell these people in Chenega that if you can't go out and get a duck or a seal or whatever, go have a steak. You know, this is not a Big Mac versus a duck; it's a way of life that people have relied on for thousands of years, uninterrupted, and all of a sudden in '89, that way of life came to a sudden and tragic halt.

MR. HOCHBERG: As the October 7th date for a criminal trial approaches, state leaders are warning that a trial could postpone for years resolution of the thousands of private claims. In towns like Cordova, already reeling from the economic impact of the spill, residents wonder if they can wait that long. The community's 80 member fisherman's co-op that was struggling before the spill now faces bankruptcy. Co-op member Kathy Halgren.

KATHY HALGREN, Fisherman's Co-op Member: We're just going further and further down. I think the whole community is going further and further down. You get so far down, you know, you don't see up.

MR. HOCHBERG: If the case goes to trial, Exxon's criminal penalty could balloon to $700 million and the almost $1 billion civil payment that this spring seemed earmarked for beaches will begin going to attorney's fees instead. RECAP

MR. MacNeil: Again the main story of this Thursday, the continued reshaping of the Soviet Union, Soviet lawmakers banned all Communist Party activities across the country and Western nations pledged to step up emergency food aid to the Soviets. Good night, Judy.

MS. WOODRUFF: Good night, Robin. That's our NewsHour for tonight. We'll be back tomorrow night. I'm Judy Woodruff. Thank you and good night.