WEAK OIL PRICES, LOW DOLLAR HURT SOVIET MODERNIZATION EFFORTS

WEAK OIL PRICES, LOW DOLLAR HURT SOVIET MODERNIZATION EFFORTS

Soggy oil prices and the slide in the dollar are hampering the Soviet Union's drive to restructure and modernize its economy, by eroding valuable revenue

from fuel exports.

Moscow needs this revenue to pay for imports of Western machinery to help re-equip aging Soviet factories and boost productivity.The latest economic survey by the 34-member United Nations Economic

Commission for Europe, which groups West and East European countries with the United States and Canada, says Soviet terms of trade (the ratio of export to import prices) with the West fell by 40 percent in 1986 and a further 7 percent in the first three quarters of 1987.

This reflects the country's heavy dependence on sales of oil, natural gas and other fuels, priced in dollars, which account for two-thirds of Soviet exports to the West.

Moscow's response has been to boost the volume of exports, mainly fuels, by 21 percent in 1986 and another 5 percent in the first nine months of 1987. But it has also been forced to squeeze imports, especially consumer and engineering goods, the ECE notes.

Imports dropped by 10 percent in the first three quarters of last year after a 19 percent fall the previous year. The report says the result was to bring the Soviet trade account with the West into balance in 1987 after two successive years of deficits. But the adjustment may have cost Moscow dearly in its restructuring drive.

Referring to the Eastern bloc generally, including the Soviet Union, the U.N. report says the stagnation of imports from the West in the past two years may have partly caused the slowdown in economic growth in 1987 by hampering modernization efforts.