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U.S. gives Soviets $1.5-billion grain credit

President Bush approved $1.5-billion worth of credits for the Soviets to buy U.S. grain Tuesday despite little expectation that American taxpayers will be paid back. Bush took the expected step both to help U.S. farmers and Soviet President Mikhail Gorbachev, who has been making the rounds of world leaders all but pleading for help from the West for his country's chaotic economy.

Bush took the step after a team of U.S. agricultural experts toured the Soviet Union and reported to him that the Soviet food distribution system is a mess.

Nonetheless, White House spokesman Marlin Fitzwater said Tuesday that the Bush administration has been assured that the grain will be distributed fairly and that the Baltic republics will share in it. He also expressed optimism the Soviets will repay the money.

But many experts believe the grain credits, which follow a billion-dollar grain deal extended to the Soviets just six months ago, in effect are a handout to the Soviets.

The deal, which lasts through January, assures that the U.S. government will guarantee loans by banks to the Soviets to buy the grain. If the Soviets default, American taxpayers pick up the tab.

The administration also is expected to soon recommend that Congress give the Soviets most-favored-nation trade status to reduce the tariffs imposed on goods Soviet imports to the United States. It would have little practical effect, other than to reduce the cost of vodka and caviar, but it would signal businesses and investors that the United States has confidence in the Soviets. The special status was denied the Soviet Union as long as it had restrictions on emigration of Soviet Jews.

The administration is making the credits as much for political reasons as anything else. It hopes the deal will forestall a direct appeal for a major bailout of the Soviet economy when Gorbachev meets with leaders of the world's seven largest industrialized democracies at the annual economic summit in London next month.

Bush doesn't want to provide massive sums of money to the Soviets without proof that the money will be used wisely or that the Soviet Union is prepared to make the sacrifices necessary to have a free-market economy.

But he also wants to express confidence in the Gorbachev regime, believing no other Soviet leader has any chance of ending the communist system.