By Paul Blustein
Washington Post Staff Writer
Friday, May 22, 1998; Page A42

Having breathed a sigh of relief over the resignation of Indonesia's President Suharto, the Clinton administration yesterday treated his successor warily and made it clear that further international aid to the country would depend on its progress toward establishing a government with broad popular support.

Administration officials acknowledged that they harbor deep reservations about the new Indonesian president, B.J. Habibie, a lifelong Suharto protege who has espoused eccentric economic theories. Their public comments reflected concern that, unless Habibie moves quickly to establish himself as a reformer, the country will be headed for a new period of political tumult and deeper economic crisis.

"We've seen one act; we saw a situation where clearly we're better off today than we were yesterday," State Department spokesman James P. Rubin said, referring to Suharto's announcement that he was ending his 32-year rule. "But . . . what the other acts in this play will look like, will be determined by the extent to which the reform process involves participation of representatives from across the Indonesian political spectrum. And for that we will have to wait and see."

The administration maintained its policy of refraining from prescribing how Indonesia's political system should evolve, although President Clinton welcomed Suharto's decision as giving Indonesia a chance "to build a stable democracy." Officials said the situation in Jakarta is so fluid that any number of scenarios could emerge.

"We do not have an American plan," Rubin said, adding that Washington was instead urging that the process of change be guided by three principles -- inclusiveness, dialogue and what he called "democratic principles." He said the process should "proceed as quickly as possible and if elections are to be held, we obviously want them to be free, fair and credible." Pressed later, he amended that phrase, saying the United States was confident elections would be held.

The cautious approach marked a continuation of a stance Washington has maintained throughout Indonesia's recent crisis of speaking softly on the need for change in the country's authoritarian system.

Until a few days ago, the administration pressed the Suharto regime only through private channels -- notably a trip by former vice president Walter F. Mondale in February -- to allow dissident opinions greater voice. Administration officials contended that public admonitions might spark a nationalistic backlash by Indonesia's leadership. Even after riots and protests rocked Indonesian cities this month, U.S. calls for change were largely limited to appeals for "political reform."

For all Habibie's drawbacks as a weak leader with little support among the powerful military and pro-democracy protesters, U.S. officials said they are not inclined to write him off. As the nation's constitutional leader he may emerge as its only prospect for national unity for the foreseeable future.

"Certainly he has a reputational burden to overcome with both the financial markets and presumably the students," one senior official said. "But ultimately, the key test is not his past reputation but his future actions, and whether they signal a real and credible transition to democracy."

To prod Habibie along that path, Washington left no doubt that Indonesia's $43 billion international bailout will remain frozen if he seeks to thwart popular demands for political change. A planned $1 billion installment in the loan package scheduled for June 4 has been postponed indefinitely, in part because the unrest in Jakarta forced an International Monetary Fund staff mission to leave the country for safety.

Asked about what will happen to future installments of the IMF-led rescue, Rubin replied that the United States -- which exercises enormous influence over the fund -- will be looking for "progress toward the political and economic conditions that will permit an effective program of support for Indonesia's economic recovery."

In other words, officials said, Indonesia's rescue effectively hinges on an improvement in its political outlook as well as compliance with the usual IMF economic targets such as budget reductions and subsidy cuts.

The IMF tries to avoid involvement in member countries' internal political affairs, but its deputy managing director, Stanley Fischer, said Wednesday before Suharto's resignation that there is little prospect of a resumption of IMF loans to Indonesia "until the political situation clarifies." An IMF spokesman said yesterday that Fischer's remarks still stand.