PARIS, JUNE 7 -- The Soviet Union and East European nations that have bankrolled the Cambodian government are cutting off most of their economic aid to Phnom Penh, pushing that country into dire financial straits, according to a confidential report obtained by The Washington Post.
The Cambodian government was informed in the last month that as of January 1991, aid from Warsaw Pact countries will be replaced largely by pay-as-you-go commercial exchanges and that an outstanding loan to the Soviet Union estimated at 250 million rubles will come due, payable in hard currency, according to the report. The study was commissioned by Western nongovernmental charities and aid organizations operating in Cambodia, including Oxfam and Handicap International, and was confirmed and elaborated upon by Western officials with ties to Vietnam or Cambodia.
East European diplomats in Phnom Penh told the report's author, Raoul Jennar, that their aid cut was required for membership in the International Monetary Fund, which forbids most of the aid that Soviet Bloc countries now give Cambodia. That aid provides the Phnom Penh regime with 80 percent of the revenues for its national budget.
The Western agencies requested the report to evaluate their projects in light of the civil war between Phnom Penh's Communist government and the rebel armed forces dominated by the Khmer Rouge and including two junior non-Communist partners.
Jennar, until recently the foreign affairs staff adviser to the Belgian Senate, traveled in April and May to Cambodia, where he interviewed East German, Soviet, Hungarian and Polish diplomats as well as top Cambodian officials, including Prime Minister Hun Sen.
In the report, Jennar advised the relief organizations to suspend some of their long-term developmental projects and concentrate on finding massive, emergency relief supplies for what he describes as a dangerous economic situation.
"When adding up all the factors," Jennar wrote in the French-language report, "one must seriously question whether the country can survive longer than six or 18 months."
Chief among those factors, according to the report, is the economic embargo by the non-Communist world and China that prevents the government in Phnom Penh from finding alternatives for the East European and Soviet funds. The embargo was imposed in 1979 to protest Vietnam's occupation of Cambodia.
The main Vietnamese occupation force retreated last September, ushering in the civil war, but the United States has insisted that the sanctions program and diplomatic isolation of Phnom Penh continue until a "comprehensive settlement" is approved by all the warring parties, including the Khmer Rouge.
The non-Communist and Khmer Rouge rebels receive food, shelter and medical aid for an estimated 400,000 civilians and soldiers living under their control from the United States and other Western nations through the United Nations Border Relief Organization. The rebels' military needs are met by China, and the United States provides additional aid to the non-Communist rebel armies.
Upon receiving news of the East Bloc aid cut-off, the Cambodian government decided in May to lay off 56,000 employees -- one-fourth of its civil servants -- and to sell government gold reserves to meet civilian and military needs, according to the report and independent sources.
The report says the government is divided and Cambodians are becoming demoralized by inflation, government corruption, the wealth of private moneylenders, confusion created by reintroducing free-market practices and private property in the middle of a war, and the prospect of the Khmer Rouge's return.
"The general situation of the country is progressive decay," Jennar wrote. "which benefits the Khmer Rouge exclusively. . . . If diplomacy continues at its slow pace and the embargo remains, time is on the side of the Khmer Rouge."
The Soviet financial withdrawal is in sharp contrast to the era of Leonid Brezhnev, when the Soviets spent $1 million to $3 million daily to underwrite the Vietnamese occupation. Now, while the Soviet Union played a "decisive role in the Vietnamese decision to retreat from Cambodia, . . . it is changing its role from considerable economic and military aid to an almost exclusively commercial exchange whereby Phnom Penh only receives what it can pay for," Jennar's report said.
This means Cambodia must now pay on delivery for its oil and petroleum supplies rather than benefit from a three-year delayed payment. The Eastern European technical advisers who have been helping to rebuild Cambodia's infrastructure must return home.
To make up for these aid losses and to meet rising costs of fighting the Khmer Rouge -- which requires 40 percent of the budget -- the government is taking money out of essential agricultural programs and putting it into defense, according to the report.
Because of a huge jump in the inflation rate -- the local currency has been devalued from 175 riels to the dollar before the civil war to 550 riels today -- government employees often work second jobs and evade duties at their offices. This has forced Handicap International to put off a reeducation program for amputees because of hospital workers' absenteeism.
Relief organizations fear that the recent exodus of about 1,000 Cambodians by boat to Indonesia could be just the beginning of a serious flight from the country if the economic situation deteriorates as Jennar predicts.