Former Soviet Republics Still Need Each Other

TODAY, when it is clear that the Soviet Union is politically dead, great hopes are pinned on the idea of creating an economic union in its place. A draft convention for such a union has been presented by academician Stanislav Shatalin. The Russian Republic's Ministry of Economy has put forward a program for organizing the inter- relationship of sovereign states. And there is also a program concocted by economist Grigory Yavlinsky, this time without the collaboration of Harvard University experts.The idea of creating a single economic space within the borders of the former USSR is based on the deep integration and strong interdependence of the economies of the 15 republics, which have been tied into a state economic complex for decades. It is this consideration that two years ago caused Estonian economist Mikhail Bronstein to launch the idea of a common market agreement. Delays in implementing it, while economic stagnation was deepening, pressured the leaderships of the republics to seek their own ways to salvation. In an attempt to avoid a sharp decline in the living standards of their populations, they resorted to closing domestic markets. One after another, republics banned the export of products and introduced their own customs serv ices. On the other hand, inflation grew as the cabinet of then-premier Valentin Pavlov (one of the leaders of last month's attempted coup) pursued a policy of expanding the money supply. Republics responded with a policy of "escaping from money," openly distributing large amounts of the depreciating funds as social welfare and at the same time acquiring as much property as possible on the territories of other republics, thus transforming the rubles into real wealth. No wonder, then, that the majority of republican leaders agree to an economic union only if their rights to protect domestic markets are guaranteed. That obviously undermines the idea of a common economic space. Soviet President Mikhail Gorbachev and the leaders of 10 republics, in their joint statement of Sept. 2 to the Congress of People's Deputies, proposed "to immediately create an economic union with the aim of cooperating in the framework of a single economic space, to ensure the normal functioning of the economy." But during three days of discussions, mostly behind closed doors, this proposal evaporated. In the final text, it had been reduced to an appeal to "work out and sign inter-republican agreements on economic and financial cooperation." Taking into account the background of these developments, this shift is understandable. Existing inter-republican agreements to preserve economic ties have produced few results. They have been blocked, in practice, by restrictions on exports imposed by republican governments. Barter deals or bribes in the form of donations are used to get these. Thus the Baltic republics of Estonia and Latvia, failing to fulfill their obligations to Russia under agreements on mutual deliveries, came to an understanding with the authorities in the oil-producing region of Tyumen to exchange foodstuffs for oil and gas. Or consider the deal between the Russian Republic and the Central Asian republic of Kirghizia. Under a recently signed treaty, Russia will provide 650 million rubles in aid to Kirghizia in exchange for guaranteed delivery of raw materials. What do republican leaders gain by enclosing themselves in their own markets? Manufactured goods produced by Soviet enterprises are usually non-competitive. Instead, the leaders hope to earn hard currency by exporting raw materials and agricultural products overseas. Under the peculiar conditions of the Soviet market, this is not an entirely illusory goal. Certainly, Central Asian cotton can't compete with Egyptian cotton on the international market. The same can be said about pork and beef from the Baltic republics. However, the republics are ready to sell their products at the lowest possible prices in order to earn at least some hard currency, or to strike a barter deal. Because of an extremely low ruble/dollar exchange rate, such a deal would be profitable in any case. Does that mean that the idea of a single economic space has been dropped and economic-union drafts are no longer in demand? Actually, the present republican export plans are only feasible as long as the republics continue to receive massive state subsidies, including the same subsidized services from the central government as before - services such as low-priced energy and transportation. It is also crucial for the republics that the markets of two major republics - Russia and Kazakhstan - remain open. Limits on exports from, say, the Russian Federation - the main supplier of raw materials and basic manufactured products - will inevitably suffocate the industrial potential of all the other republics. Small wonder that the republics expressed concern when Russia's president, Boris Yeltsin, declared that Russia might start selling oil and gas at world market prices for convertible currency. That would effectively take most republics out of the market for these goods. This prospect probably impelled delegates at the Congress to create an inter-republican economic committee "to coordinate the management of the economy, the carrying out of economic reforms, and social policy." Paradoxically, the republics' push for isolation objectively works for the creation of an economic union. For instance, their desire for national currencies of their own inevitably increases the ruble's chances to survive in order to play the role of an exchange unit. Moreover, there is an idea to create a new general convertible currency unit ("chervonets," for example), which could unite the non-convertible weak national currencies. Finally, once the republics acquire the political status of sovereign states, their leaders will have to pay more serious attention to economic ties. Previously their proclaimed enemy was the center, but now they will be able to contribute to the creation of joint institutions themselves, thus influencing their policy. Will all this suffice to create an economic union in a single economic space? The demand for draft projects of such a union gives rise to hopes.

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