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Will Yeltsin's New Order Put Bread On The Table?


International Business

WILL YELTSIN'S NEW ORDER PUT BREAD ON THE TABLE?

It was billed as a Slavic Summit, a weekend confab near the Polish border at a hunting lodge that only recently catered to Communist bigwigs. Worried about the fate of their tightly linked economies as the Soviet Union collapsed around them, the leaders of Russia, Ukraine, and Byelorussia gathered to talk over new political and trade treaties. But when they emerged from seclusion on Dec. 8, they unveiled a stunning surprise: a new commonwealth arrangement to replace most functions of the Soviet Union, which they deemed officially dead.

No one was more taken aback than Mikhail Gorbachev, whose attempt to piece together a new confederation was floundering badly. Even George Bush was told about the deal earlier. Once again, Gorbachev was upstaged by Russian President Boris N. Yeltsin, who announced the new order at a press conference. Gorbachev is hanging tough, declaring the new commonwealth illegal. Some of his aides, meanwhile, are hinting that he may resign.

MARKET MOVES. Still, after two years of bitter struggle, the new shape of the former Soviet Union may finally be emerging. Called the Commonwealth of Independent States -- so far, consisting of Russia, Ukraine, and Byelorussia -- the loose governmental structure would replace the former Soviet Union. It will account for three-quarters of the former superpower's population and more than 80% of its gross domestic product. Modeled after the European Community, it will be a free-trade zone, probably united by a single currency -- the ruble. The commonwealth aims to maintain a single NATO-style command structure over its armies and nuclear weapons. On paper, the plan would deliver the stability that has eluded Gorbachev as he tried to bring renegade republics back into the Kremlin fold. But Yeltsin and his cohorts still face a big hurdle: convincing the fractious army that the plan will prevent political chaos.

The top priority of the commonwealth leaders is to push ahead with the difficult transition to a market economy. They will try to revive the slumping ruble by reining in spending and forging a joint monetary policy. On Jan. 1, the three Slavic states will simultaneously free prices on most goods in a joint plunge into economic shock therapy.

This unprecedented show of economic unity will give the reforms a better chance of success. Already, Ukrainian and Byelorussian parliaments overwhelmingly have endorsed the commonwealth, which will be open to new members from former Soviet republics and even Eastern Europe. Armenia and Kirghizia may be ready to sign on, even though some Central Asian officials, such as Kazakhstan President Nursultan A. Nazarbaev, were miffed because they hadn't participated in the summit.

Even the hint of more stability is stirring interest among foreign investors, who have been spooked by the former superpower's roller-coaster politics. While it's too early to know how the commonwealth will play out, it should clarify investment requirements. "Businesspeople don't necessarily care what the rules are," says Judy Shelton, a Soviet expert at the Hoover Institution, "they just want to know the rules." The prospect of orderly decentralization was good news at Coca-Cola Co., which already had plans to expand in the former Soviet Union through a joint venture in Kiev and a new office in St. Petersburg. The faster a market economy is set up, the faster Coke can replace inefficient state-run producers with its own network.

Even so, the formation of the commonwealth sent shivers through Western capitals over the control of nuclear weapons. And it heightened fears of a second coup attempt. Governments fretted about the viability of their treaties with the superpower, including Soviet pledges to repay some $84 billion in foreign debt. The stage was set for the unexpected commonwealth arrangement when Ukrainian voters enthusiastically endorsed forming an independent state on Dec. 1. That dashed Gorbachev's remaining hopes of salvaging the Soviet Union. It also spurred the leaders of the three Slavic republics to start talking over how to prevent total economic collapse.

'INSPIRATION.' The leaders -- Yeltsin, Ukrainian President Leonid Kravchuk, and Byelorussian Supreme Soviet Chairman Stanislav Shushkevich -- say they arrived at the hunting lodge near Viskuli, a Byelorussian village, with no agenda for a commonwealth. "It was creative inspiration. . . . We came without a text. It was born right there, collectively," says Gennady Burbulis, State Secretary of Russia and a key Yeltsin aide.

Within hours after the new pact was inked, there were upbeat signs. Ukrainian officials stepped up exports of meat, sugar, and vegetables to Russia and Byelorussia. They promised to take down new customs posts that had stymied trade of other key products. They also pledged to create a new central banking system that would institute tight monetary controls to strengthen the ruble. At the same time, Yeltsin delayed freeing prices from Dec. 16 to the first of the year to give Byelorussia and Ukraine time to prepare similar economic moves.

By stepping into the political vacuum left by Gorbachev's weak leadership, Yeltsin and his counterparts hope to head off the growing threat of a second coup or civil war. To win the army over, Yeltsin plans to double military salaries on Jan. 1. On Dec. 11, Yeltsin seemed close to winning over top Soviet military commanders.

The three Slavic states also want joint control over nuclear weapons, which is the issue that has Western governments most concerned. It will be at the top of Secretary of State James A. Baker III's agenda when he visits Minsk, Kiev, and Moscow beginning Dec. 15. He will make it clear that U.S. recognition, aid, and easing of export curbs will depend on how well nuclear weapons are controlled.

Of special concern to Washington and other Western governments is managing the tens of thousands of smaller, tactical nuclear weapons scattered about the former Soviet Union. They worry that cash-starved former Soviet republics will be tempted to unload weapons or nuclear knowhow in aggressive Third World countries. Already, on Dec. 9, a small nuclear reactor was up for sale onthe Moscow International Commmodity Exchange.

Yeltsin and the other Slavic leaders insist that they will stick to all the former Soviet Union's international obligations. That means fulfilling the START and Conventional Forces in Europe treaties, as well as paying back Soviet loans. Such moves will go a long way to keep open credit lines with Western banks and forge new diplomatic ties. Should it survive what may be the worst winter in years, the commonwealth may offer the former Soviet republics at least some hope for a turnaround. Meanwhile, exhausted citizens of Moscow, Kiev, and Minsk can only wait.WHAT THE

NEW COMMONWEALTH

AIMS TO DO

-- Repeal all Soviet laws and assume powers of the old regime

-- Launch radical economic reforms, including freeing most prices

-- Keep the ruble, but allow new currencies

-- Set up European Community-style free trade

-- Create joint control of nuclear weapons

-- Fulfill all Soviet foreign treaties and debt obligations

DATA: BW

Deborah Stead in Moscow, with Rose Brady in New York, Igor Reichlin in Bonn, Patricia Kranz in Washington, and Walecia Konrad in Atlanta


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