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Ukraine Will Speed Up Breakaway From Russia : Economy: Parliament approves acceleration of program to drop the ruble and peg trade to world prices.

March 25, 1992|ALEX SHPRINTSEN | SPECIAL TO THE TIMES

KIEV, Ukraine — Angered by what it regards as Moscow's continued domination, the Ukrainian Parliament on Tuesday approved a program that will speed up the country's economic break with Russia and reorient it toward the West.

President Leonid Kravchuk, blaming Ukraine's sharp economic downturn on Russian policies, warned deputies that "mass unemployment, increasing inflation and a worsening of social conditions await us" unless the country takes full control of its own economy.

"Any delay in implementing this economic policy threatens our very statehood," Kravchuk told a special, closed session of Parliament, winning the deputies' approval, 306 to 106, for the new policies.

Under the program, the Russian ruble will cease to be the legal currency here, trade between Russia and Ukraine will be conducted on the basis of world prices and Ukraine will charge Russia for all imports and exports, including oil and gas, crossing its territory.

The money-like coupons that Ukraine uses alongside the ruble now will become the sole currency until Ukraine introduces the hrivna, its own full-fledged currency, later this year.

To protect its domestic market, Ukraine will establish customs posts along its entire perimeter, including the borders with Russia and other Commonwealth countries, to enforce restrictions on exports of consumer goods that are in short supply or are simply cheaper here.

Other measures include a reduction in subsidies for unprofitable state enterprises, plans for a tight budget with a minimal deficit and the quick privatization of state property.

As a general policy, Kravchuk's report declared, "We need an immediate restructuring of the economy that would include an aggressive stimulation of any entrepreneurial activity."

The new program, drafted by Kravchuk's economic advisers, would put Ukraine on a bold path toward a free-market economy and shift its focus from Russia, still its largest supplier and best customer, to the West.

The policies will speed the dissolution of the once highly integrated economy of the former Soviet Union and seem likely to hasten the breakup as well of the Commonwealth of Independent States, formed three months ago by 11 former Soviet republics.

The move reflects Kiev's increasing frustration with the "Russia first" policies of President Boris N. Yeltsin in Moscow as well as the growing sentiment here for Ukraine to quit the Commonwealth.

During last week's Commonwealth summit meeting here, Kravchuk was deeply embarrassed by Yeltsin's point-blank refusal to discuss economic issues, including the division of the Soviet assets now held by Russia.

Blaming Russia for the runaway inflation here, Kravchuk said that Moscow had not even talked with his government about the price rises this year and had repeatedly and unilaterally increased the money supply.

Unless Ukraine acts now, Kravchuk warned, "future developments in the Ukrainian economy will, to all intents, take place according to plans and directions proposed by Russia."

With Russia the dominant economic power in the Commonwealth, all of Moscow's policy changes have an immediate impact in Kiev. Kravchuk argued strongly that the next round of price increases that are planned as part of Russia's economic reforms will have a devastating effect here. These include an 8- to 10-fold jump in the cost of oil, gas and electricity.

The new program appears to meet Western demands that Ukraine open its economy to foreign participation as a condition for new loans and credits as well as membership in the International Monetary Fund.

"It is necessary to establish a free market for real estate, including buildings and land, that are necessary for the activities of foreign investors," Kravchuk said in the policy statement. "It is also necessary to establish an international investment bank and a state fund that would act as an insurance agent for foreign investment."

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