Soviet Republics Fight Over Rubles

Ukraine's unilateral move to issue its own currency raises Russian concerns over inflation

By , Staff writer of The Christian Science Monitor

UKRAINIAN and Russian officials are trying to avert an economic war that would shatter what remains of the "common economic space" of the former Soviet Union.

The de facto introduction of a Ukrainian currency has raised economic tensions, with Russian officials threatening in turn to erect customs barriers with Ukraine and other former Soviet republics that move outside the "ruble zone." There is a growing feeling among the Russian leadership that Russia would be better off junking what remains of economic union among the former republics, says a senior Russian economic official.

Ukrainian President Leonid Kravchuk and Russian President Boris Yeltsin met briefly Jan. 14 following the summit of Commonwealth of Independent States leaders to try to cool these disputes.

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A draft economic agreement between the two largest former Soviet republics was put on the table for consideration.

According to Vladimir Pokrov-sky, the head of the Russian State Committee for economic cooperation with commonwealth members, the Ukrainian government is amending the draft and will send it back to Russia within days.

At the Jan. 14 meeting, the commonwealth members signed another agreement on trade and economic relations in 1992. It calls for the ruble to be used in mutual settlements between enterprises, banks, and others in deals between republics. If an individual member decides to introduce its own currency, a procedure for settling accounts will have to be pre-arranged.

The agreement calls for trade to be conducted at market prices, but for certain critical products, such as oil and gas, a ceiling may be set by mutual agreement. It bars commonwealth states from reexporting commodities such as oil without the permission of the producer-state. This is an attempt to control the widespread practice of buying Russian oil cheaply in rubles and then selling it for a profit on the world market.

The document reiterates earlier pledges to create a "common economic space" which have been ignored in practice, as evidenced by the across-the-board decline in interrepublican trade. Mr. Pokrovsky, the Russian official who participated in drafting the latest agreement, admits it will have little impact. It will require more concrete pacts, both bilateral and multilateral, to make it work, he says.

To emphasize the point, the head of the Russian customs service, Anatoly Kruglov, told reporters Jan. 17 that unless a specific customs treaty is signed, "Russia will have to introduce its own customs posts on its border." But he admitted that talks to form a common market, with a single customs tariff, are bogged down.

The Russian government has managed to create what it calls a "ruble zone" in which there is free movement of goods, services, capital, and labor with two of its neighbors. A bilateral agreement was signed on Jan. 17 with Kazakstan and a similar agreement with Belarus on Jan. 27. Others, such as the Central Asian republic of Kyrgyzstan, may join, officials say.

Russian officials complain that the Ukraine is exploiting the ruble zone by moving up previous plans to introduce its own currency by the end of 1992. The Ukraine introduced rationing coupons last year to ensure that Ukrainians would have supplies of basic goods such as food. Now the Ukrainian government is moving to transform those coupons into a de facto currency, paying half of salaries in coupons as of Jan. 10, while still using the ruble.

"If you issue your own currency, according to international law you should buy the currency of the other state which is circulating in your country and return it," says Pokrovsky. But instead, Ukrainians are using the ruble to buy goods in Russia, Belarus, and elsewhere, he charges, increasing the rate of inflation. At the same time, Ukraine has established customs posts on its border to try to block the flow of its commodities out.

A Russia-Ukraine economic pact could settle some of these problems.

But Russian officials are quick to threaten that they will win any economic war. Russia, which accounts for 80 percent of the exports of the former Soviet Union, is the only commonwealth member with a favorable trade balance. The ruble will become a strong currency, Pokrovsky predicts, and the Ukraine and others will have to come back to negotiate a "common currency space" eventually.

But when they do, the Russian official says, "they will have to deal with a new Russia, a new state which will treat them completely differently. This state won't sell a ton of oil, which sells for $127 on the world market, for 380 rubles [about $3.80 at current market prices.]"

"Within the Russian leadership, there is now a large group who have a sharply negative attitude toward maintaining the commonwealth," he warns. "On the contrary, they want to get rid of it as soon as possible."

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