New Slavic Bloc Seen Paving Way for Economic Reform : Commonwealth: Economists praise the rejection of separate currencies and the promised coordination of price increases.


Although the decision of three Slavic republics’ to unite in a new commonwealth has created great political turmoil, it actually could smooth the way for workable economic reforms here, economists said Tuesday.

“There’s a real chance for stability, a new possibility for reform,” prominent economist Nikolai Shmelev predicted.

Alexei Yemelianov, a lawmaker and Moscow economics professor, observed of the commonwealth: “From the economic standpoint, this is a very positive move. Finally, (the republics) can stop arguing over who owes whom more and who was hurt more and just start fulfilling their obligations.”

Almost unnoticed amid the political shock created when the three republics declared that they had formed a Commonwealth of Independent States was the reality that the agreement signed at a Belarus hunting lodge on Sunday removed two main obstacles blocking the coordinated, economic revolution that the former Soviet republics so desperately need.


The Slavic republics agreed not to introduce their own currencies--which, Shmelev said, would have “amounted to a declaration of war"--and to coordinate the price increases now expected to rock their economies simultaneously on Jan. 2.

If the Russian Federation had been forced to remove state controls on prices without parallel measures in Ukraine and Belarus, it would have risked a massive inflow of money and products, fueling inflation and infuriating its neighbors. And if Ukraine or Belarus had decided to introduce its own currency, it would have unleashed a mass of unwanted rubles on Russia, further destabilizing that already weak currency.

The three republics also agreed to jointly form a banking system to block the central Soviet government’s current practice of printing uncontrolled quantities of rubles; coordinate funding for defense and the Chernobyl power plant cleanup and work out customs policies.

“This is what I’ve been wanting and calling for this past year and a half: 1. a shared currency; 2. a shared banking system; 3. a shared customs regime; 4. shared funds, and 5. a shared budget,” Shmelev said exultantly. “The agreement seems to provide for all five of those.”


Russian Federation leaders, justifying their abandonment of Soviet President Mikhail S. Gorbachev’s attempts to forge a new federal treaty, told reporters on Tuesday that it was their concern about the economy that motivated them.

“We have found the only possible political formula for economic reform in this situation,” Sergei Shakhrai, deputy chairman of the Russian Parliament, told a press conference. “If we work out economic reform in the framework of this political commonwealth, stability will be retained in this geopolitical area and the people of these states will be led out of poverty, hunger and destruction.”

If the agreement holds, it is expected to bring one immediate benefit: a revival of trade among the three Slavic republics, breaking down some of the obstacles that grew up as each reneged on its export obligations to keep more goods and services for itself.

“There should be a noticeable rise in supplies,” Yemelianov said, noting that the agreement calls for the republics to “abstain from actions that can cause harm to each other’s economic interests.”

“Ukraine is full of sugar, and there’s none here,” he said. “All you need is an agreement with (Ukrainian President Leonid M.) Kravchuk and the rail cars should roll.”

But it remains in question whether the agreement will, indeed, hold, or whether the political pressure to return to self-serving economic practices will prove too strong to resist.

Kravchuk understands the damage that introducing a Ukrainian currency now would do, Shmelev said, but many of the nationalists around him do not. “If they break Kravchuk on this question,” he warned, “this whole construction will start to shake and fall apart.

“These people are economically illiterate,” he said of the nationalist activists whose popularity gives them political weight.


It is also unclear to what extent politics will keep other republics from joining the new commonwealth. This is especially true for Kazakhstan, the second largest of the republics after the vast Russian Federation. For the commonwealth to have the resources and integration it needs to work well, it must include Kazakhstan’s oil and land resources, economists said. That the republic of 16.5 million is home to more Russians than native Kazakhs and includes some nuclear missile sites makes its participation all the more crucial.

Although Kazakhstan would seem a natural partner, and its president, Nursultan Nazarbayev, is known as a pragmatist open to reasonable suggestions, he was left out of the Minsk talks, and, thus, presents an awkward problem for the Slavic presidents eager to woo him. “They have to find a good way to explain things to Nazarbayev and bring Kazakhstan in,” Yemelianov said.

Overall, the loose union that the three Slavic states have created could prove attractive enough to bring in most of the other republics, seeking the benefits of the integrated economy they used to enjoy, economists said.

That is, Shmelev added, if reason triumphs.

“These days, life is impossible to understand and describe in purely economic terms,” he said. “What will be, I cannot predict.”