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Even As Union Splits, Talk Turns to Economic Cooperation

September 1, 1991

MOSCOW (AP) _ Ten of the 15 Soviet republics have declared independence from the union, but Soviet experts predict they will remain bound together economically.

″Splitting this economy is impossible,″ and the republics know it, said legislator Alexander M. Yakovlev.

″If someone tries to stop the oil flowing from Siberia to Lithuania, there will be a cold winter and mass starvation, mass death,″ he said. ″All republics, regardless of their political slogans and declarations of independence, are 100 percent dependent on this economy.″

Economic cooperation and the outlook for the republics are expected to be hotly debated Monday when the national Congress of People’s Deputies convenes in the Kremlin.

In the new and splintered Soviet Union, resource-rich republics like the Russian Federation, with its massive industrial base, are likely to fare better than the already impoverished republics of Central Asia.

But legislators from nearly all the republics say the main challenge they face is not coping with independence, but breaking the chains of the Communist command economy.

″Independence? That’s the easy question,″ said economist and national legislator Pavel Bunich.

The command economy, imposed with great bloodshed in the early decades of Communist rule, binds nearly every factory and store into behavior that Western and Soviet experts describe as senseless and economically destructive.

Under the command system, Communist apparatchiks in Moscow’s giant bureaucracies tried to set prices on every transaction and to control the movement of every wholesale and retail product across the country.

Republic leaders say they will benefit from dismantling that inefficient system, but it will be hard to move to a market economy.

For example, Gintaras Saunoris, director of the Elfa factory in Lithuania, says that to stay profitable and in business, he must stop manufacturing electric motors, which require metal that his republic does not produce.

But if he does, hundreds of thousands of workers in kitchen-appliance factories in other republics across the Soviet Union would lose their jobs, because the Lithuanian factory is their only source of motors. None of these factories has foreign currency to import parts or to retool.

Recognizing the strength of the economic ties that bind them, all 15 republics, even the nearly independent Baltics, have consistently said they want to continue economic ties with other republics.

Last week, President Mikhail S. Gorbachev finally authorized negotiation of an economic cooperation agreement that would put that commitment in writing.

Many republics have already signed bilateral economic agreements with each other. The Baltics have a three-republic common market agreement and there is another one among the five republics of Central Asia.

Russian republic President Boris Yeltsin last week signed economic pacts with his two largest neighbors, the Ukraine and Kazakhstan. All three republics have strong industrial, agricultural and raw material bases, and could flourish once they get over what promises to be a difficult transitional period.

Estonian legislator Mikhail Bronstein, a longtime advocate of decentralization, suggests the Soviet republics will have to build a European Community-type of economic system, and continue trading with the worthless ruble inside of it, until deep reforms take root.

Foreign trade and investment could help them make the leap, but loss of subsidies, particularly cheap oil from Russia, would hurt many republics, especially the poor Muslim ones in Central Asia: Uzbekistan, Tadzhikistan and Kirgizia. Some have little industry, others inadequate education.

The fourth Central Asia republic, Turkmenia, has rich natural gas reserves, and taking control of them from the central government could speed that republic’s development, Turkmenian officials say.

The largely agricultural republics in the Caucasus Mountains, Georgia and Armenia, may have problems earning enough from sales of fruit and vegetables to buy the oil and other goods they need. Armenia, surrounded by mountains and historical enemies, could find itself cut off from the outside world. Neighboring Azerbaijan likely will benefit from taking control of its oil resources, but they have been largely played out.

U.S. economist Cissy Wallace said that independence will rob the republics of an adjustment period that could continue absurdly low prices for parts and energy.

Years of a command economy placed factories nowhere near either markets or raw materials. Byelorussia has an economy based on heavy industry, with few natural resources or parts factories to support it, Ms. Wallace said.

She noted that many eastern European factories were forced to close because they were dependent on parts from a factory that suddenly began charging foreign currency, and they had none.

But Bunich said Soviet factories must adapt to world prices as soon as possible.

″For some republics, it will be terrible,″ especially at first, he said. ″But we are a rich country. We will help some. America will help some.″

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