Five months ago when the Reagan administration invoked economic sanctions against Poland and the Soviet Union to retaliate for the Polish government's imposition of martial law, critics scoffed that the punishment was little more than a slap on communist wrists.
Today it is still an open question whether western economic pressure can force the regime in Poland to bargain with the suppressed Solidarity trade union for a measure of democratic rule. But there can no longer be any doubt, administration officials say, that western economic retaliation can make it extremely costly, if not unbearable, for Poland's military rulers to deny their citizenry a taste of freedom.
In Europe this week and next, President Reagan will be arguing that the time is opportune for western nations to use their economic power to reinforce their diplomacy, by joining the United States in curbing trade credit benefits for the Soviet bloc, especially for the Soviet Union.
The Soviets, in turn, seek to exploit western European reservations about taking that course by portraying the United States as bent on wholesale economic warfare in Europe. Poland, the Kremlin claims, is a prime example of what the Reagan administration intends.
The Polish economy, staggering before military rule was invoked last Dec. 13, is reeling to the extent that the Soviet Union charges the United States with a campaign "to strangle Poland." Administration officials counter that the Soviets and Poland's military rulers are beginning to recognize that a Poland governed by coercion is "headed down a dead-end street."
Poland's leaders by no means concede that; they insist that martial law has brought "positive results" to Poland's economy. In the aftermath of street skirmishes between special police and tens of thousands of Poles during the first two weeks of May, however, even the controlled Polish press is talking about the "dangerous explosive mixture" that exists in trying to govern without "social control."
As a result of the U.S.-led drive to deny western credits to Poland, that nation's imports from capitalist countries dropped "by more than 43 percent" during the last four months, the most since World War II, Poland's parliament, the Sejm, was told last week.
With new loans from the West "radically restricted," Finance Minister Marian Krzak reported, Poland has been obliged to turn increasingly to the Soviet Union for support. But it is "a dangerous illusion," a leading Polish economist publicly cautioned, to believe that Poland, by expanding its trade with the Soviet bloc, can "fully replace cooperation and trade with the West. . . . "
Instead, he said, without western financing, Poland will be compelled to reorient its entire economy to Soviet bloc trade, locking Poland more tightly to the Soviet Union than ever before.
Poland's only hope for avoiding economic disaster, a senior administration official said, is "a reconciliation with its own people--there is no other way out. If anything has been proved in Poland during five months of martial law, it is that repression is not the answer."
In retaliation for martial rule in Poland, Reagan in December suspended all new U.S. credit guarantees for Poland and all federally sponsored shipments of agriculture and dairy products to the Polish government. Humanitarian food and medical aid for the people of Poland, distributed by U.S. relief organizations, has continued, with $66 million in new support authorized last week.
The United States in December also imposed limited sanctions on the Soviet Union, including suspensions of Aeroflot flights and of new licenses for high technology, on grounds that the Kremlin bore "direct responsibility for the repression in Poland." Major U.S. sales of grain to the Soviets continue, however, causing European allies to say they are being asked to make disproportionate sacrifices in their Soviet trade.
When Poland is prepared to honor commitments it made to Solidarity for "basic human rights," Reagan said, "America will gladly do its share to help the shattered Polish economy. . . ."
The U.S. government and American commercial banks hold 14 percent of Poland's total debt of about $26 billion to western creditors. Of that amount, $3.2 billion is owed in the United States, with $1.9 billion covered by government-guaranteed "If anything has been proved in Poland during five months of martial law, it is that repression is not the answer." credits, primarily through the Commodity Credit Corp. The remaining $1.3 billion is in non-guaranteed loans from private creditors in the United States, primarily commercial banks.
Under an agreement reached by the North Atlantic Treaty Organization in January, negotiations on rescheduling payments due this year on Poland's debt to the West are on hold. Because of this, it is virtually impossible for Poland to obtain any long-term credits from any western nation, depriving its processing industries of critically needed raw materials, equipment and spare parts.
"We are determined to break this deadlock" by negotiations with western creditors, Zbigniew Madej, deputy chairman of the Council of Ministers, told the Sejm last week.
But the United States and NATO have set three western-style political conditions for lifting the credit blockage: an end to martial law, release of political prisoners, and restoration of triangular "dialogue" involving the government of Gen. Wojciech Jaruzelski, the Roman Catholic church and Solidarity.
"This is not just interference in internal affairs," Polish Deputy Foreign Minister Josef Wiejacz protested. "This is a requirement that is completely unrealistic, for the fulfillment of those conditions would mean nothing more or less than a return to the situation as it was before Dec. 13. . . . "
Administration officials deny that they are attempting to dictate to Poland how it should structure its system of government or that the United States seeks to pry Poland out of the Soviet bloc or out of communist rule. The "dialogue in Poland" to which American policy is committed, however, is unquestionably strong medicine for any communist nation to swallow.
To maintain that pressure, the administration not only requires continued allied support but also has to fend off increasing demands in Congress to move precipitously, from the administration's standpoint, to pin a default label on Poland as a hopeless debtor.
So far this year the U.S. Treasury has paid out about $170 million to American banks on overdue U.S.-guaranteed commodity loans to Poland.
The Senate voted last week, 82 to 10, to push the administration toward declaring Poland in default on its debts, or to require Reagan to justify each month on "national security" grounds his reasons for withholding a default judgment.
Early this year, when a similar debate about Poland's debts took place inside the administration, the president decided, officials said, "that maximum pressure can be put on Poland by insisting on repayment rather than declaring a default now." This remains the administration position, officials reiterate.
Sens. Robert W. Kasten Jr. (R-Wis.) and Daniel Patrick Moynihan (D-N.Y.), who cosponsored the amendment on Poland in a supplemental appropriations bill, said they want to strengthen Reagan's bargaining hand. Administration officials, strongly disagreeing, may seek to modify the amendment in a Senate-House conference scheduled next Wednesday.
A delegation from Poland's central bank came to the United States at the end of May to sound out American bankers on rescheduling Poland's debts and supplying new credits. An administration official labeled that "a futile effort" unless there is a basic change in the position of the Polish government and the Soviet Union.
What has occurred in Poland, administration officials contend, should make it apparent in the Kremlin that the crisis can escalate beyond the grasp of martial law, with Soviet military intervention and a profound upheaval in Europe the only alternative to a dialogue in Poland.
The overriding question is whether the Kremlin will see itself limited to the same narrow choices. It may gamble, instead, that western disunity will thwart the U.S. strategy.