Soviet Economic Union Planned by 10 Republics

Leaders of 10 of the Soviet Union’s 12 republics on Monday approved in principle an economic union to prevent the country’s complete collapse, but that union would be based on their independence as separate nations.

The State Council, made up of Soviet President Mikhail S. Gorbachev and republic leaders acting as the Soviet Union’s transitional government, called for the immediate drafting of a treaty establishing a common market among the country’s remaining republics and stemming the nation’s disintegration.

The leaders also accepted far-reaching economic reform principles on which the union would be based--free enterprise, private property, prices set by supply and demand and the free movement of commodities, services and labor throughout the union.

If the republics succeed in forming this economic union, their leaders said during the daylong meeting, they would then be ready to take up the proposed “union of sovereign states” as the political successor to the Soviet Union.

In an important test of their ability to cooperate on crucial issues, the republics agreed to adopt a single food policy this week for the coming winter to cope with expected shortages of grain, sugar and other agricultural produce.

“The country will be able to live through this winter normally,” Ivan S. Silayev, the Russian prime minister and chairman of the commission managing the Soviet economy, said after the State Council meeting. “We will coordinate our purchases and deliveries, and we will coordinate our imports. We are all now working hand in hand. The people need not fear.”

Yuri Luzhkov, deputy mayor of Moscow and vice chairman of the commission, was sent today on a trip to European Community headquarters in Brussels and to London to consult with British officials representing the Group of Seven leading industrialized democracies on purchases of food from Eastern Europe for delivery here.

“The danger of hunger is very high, and we cannot ignore it,” Luzhkov commented. “These efforts at averting famine should also contribute to our resolution of the broader issue of economic cooperation, namely the establishment of an economic union.”

But the shape and scope of the new economic union remained unsettled after hours of debate by leaders of 10 of the remaining 12 Soviet republics.

Grigory A. Yavlinsky, 39, the radical free-market economist who developed the plan, said that “a definite but very difficult” point has been reached in restructuring the Soviet economy and that hard negotiations lie ahead as the republics balance their independence with economic necessity.

If the union and the reforms are not accepted, Yavlinsky warned, the Russian Federation, as the largest and richest republic, would probably proceed alone. The committee drafting the treaty probably has no more than a month to complete its work, he added.

“Unfortunately, as we know from our experience, delays are possible in this work, as well as the replacement of its principles and the creation of a hotchpotch made of various programs,” Yavlinsky said as he emerged from the sharp debate over his proposal. “But the most important thing now is that the work starts in principle. Judging by the discussion that has just finished, it will be very difficult.”

Although endorsed by the leaders of 10 republics, including Russian Federation President Boris N. Yeltsin and Ukrainian President Leonid Kravchuk, the Yavlinsky plan is highly controversial for the continued role that the central government would play in making economic policy, including control of the banking system and money supply.

Representatives of 10 of the 12 remaining republics took part in Monday’s meeting. Moldova and Georgia, two republics that want to secede, did not participate. The three former Baltic republics of Estonia, Latvia and Lithuania are now independent.

Yavlinsky said the plan already contains significant compromises to win the support of as many republics as possible. To secure the backing of the Ukraine, for example, republics would be allowed to issue their own money. To win support in Central Asia, the plan would establish a regional development fund financed by richer republics.

Yavlinsky emphasized, however, that the central government must have power to coordinate the republics’ budget policies to control spiraling internal and external debts, which totaled about $1.4 trillion at the official exchange rate last June, by latest estimates.

“These days, an increase in internal debt of each republic is an increase in the debt for the entire union,” Yavlinsky said.

Even though it was approved as the “basis” for a treaty, the Yavlinsky plan ran into significant opposition during the discussion. Askar Akayev, the president of Kirghizia in Central Asia, stated a preference for the even looser economic grouping proposed by Stanislav Shatalin, another prominent economist. Akayev declared the Yavlinsky plan far too centralized.

But Ayaz Mutalibov, the Azerbaijani president, warned at the meeting’s outset: “If economic decline continues, all democratic achievements in the Soviet Union may be lost for the future. I am very concerned about weakening economic ties between the split-apart portions of the union.

“Our most urgent problem is to consolidate direct horizontal connects between republics. Otherwise, we will have to face the rebirth of the old strong central administration, and that would surely jeopardize the sovereignties of newborn republics.”

Saparmurad Niyazov, the leader of Turkmenistan, another Central Asian republic, said he saw little prospect for a quick agreement because of the complexity of the issues and the uncompromising positions of some other republics.

“We need two or three months to rid ourselves of all the problems that have arisen recently” after the failure of the conservative coup d’etat last month, Niyazov said. “But I think every leader should declare now whether his republic will join the new ‘union of sovereign states.’ ”

And Yavlinsky himself expressed doubts that all republic leaders would accept the plan. “As late as yesterday, (some) occupied high posts in the Communist Party,” Yavlinsky told reporters.

With its market orientation, the plan “is geared toward free enterprise,” he noted, “and that to a great extent limits the sphere of activities of republic authorities.”

By one account, perhaps only six republics--out of the present 12 and the previous 15--are willing at present to join the economic union, according to a senior Soviet economist. That number will rise only as the central authorities make further compromises.

For Yavlinsky, however, economic necessity will gradually overcome what he called “the excessive independence of some republics.”

“They will realize that together they have a chance of emerging from this crisis, and alone those chances are sharply reduced,” Yavlinsky argued.

Even the Baltic states, whose independence is now recognized by the Soviet Union, acknowledge the need to maintain economic ties with Moscow because of their extensive integration into the Soviet economy over the past half century.

Latest Developments

Here’s what happened Monday in the Soviet situation: * SAVING THE UNION: Leaders of 10 of the Soviet Union’s 12 remaining republics approved in principle an economic union to prevent the country’s complete collapse. They endorsed reforms such as free enterprise, private property and supply-and-demand. But the republics also want independence as separate nations, under a “union of sovereign states.”

* NUCLEAR POLICY: The president of the Kazakhstan republic said he opposes moving all the country’s nuclear weapons into the Russian Federation, as Soviet military authorities have suggested. “I am absolutely against having any single republic control all nuclear weapons by itself, irrespective of how large that republic might be,” Kazakh President Nursultan A. Nazarbayev said after meeting with Secretary of State James A. Baker III. Instead, Nazarbayev said, the weapons should be under the control of the central government.

* WESTERN AID: Chancellor Helmut Kohl pressed President Bush to provide aid quickly to the Soviet Union, warning that later on “things will get far more expensive than they are now.” Kohl’s remark at the White House underscored the debate among Western nations over what to do about the disintegration of the Soviet Union.