Dr. Allan Kagedan

November 1991
Unclassified

Editors Note: Dr. Allan Kagedan has recently joined the Analysis and Production Branch of CSIS as a Strategic Analyst. In this issue of Commentary, he compares the potential for a reconstituted economic union in the former USSR to the possibility of a new form of political confederation. The prospects seem not to auger well in either case.

Commentary is a regular publication of the Analysis and Production Branch of CSIS.

Disclaimer: Publication of an article in the Commentary series does not imply CSIS authentication of the information nor CSIS endorsement of the author's views.

What will the Soviet region look like in the short-term-six months' time or a year or two hence? Will a confederation succeed the USSR or will a plethora of new states join the international community?

Since the decline of the central Soviet government's authority after the failed August coup, political power has passed to republic leaders. With few exceptions, these leaders are products of the Communist Party and Soviet élite, political survivors who have grown more nationalistic to suit the current political mood. Relying on their erstwhile communist colleagues (who dominate the legislatures in Belarus (formerly Belorusssia,), Azerbaijan, Uzbekistan, Turkmenistan, Kyrgyzstan and Kazakhstan) republic leaders lean toward economic union and perhaps even a loose political association.

Support for a future political association has come also from Boris Yeltsin, the most powerful political figure in the country, who wishes to create a mechanism for peaceful future relations between Russia and its former colonies. All this has extended the political life of Mikhail Gorbachev, nearly claimed by the August coup.

But the possibility of a future inter-republic association is no more certain than the prospects of the current republic political leaders. The republics lack democratic traditions and institutions; single-candidate elections and an absence of clearly defined political parties are the norm rather than the exception. Calls for the resignation of present leaders, moreover, grip many republics.

In Georgia, opposition groups have challenged the legitimacy of Zviad Gamsakhurdia's rule; in Azerbaijan, criticism of Ayaz Mutalibov is growing; Ukrainian legislators are suspicious of Leonid Kravchuk's role during the August coup; and even in Russia, legislators have protested Boris Yeltsin`s sweeping powers, and his cronies from Sverdlovsk used their boss's vacation in early October to do battle with leading Russian parliamentarians. Political instability like this stems from a crumbling economy and a rising stream of nationalism that is carrying the republican leadership along with it.

Economics

Economic failure is the clearest daily indicator of the inability of the former and current union to provide for the material welfare of the republic populations. Industrial decline, food shortages, skyrocketing inflation and an almost-worthless ruble are driving ever-greater numbers of Russians and non-Russians below the poverty level.

Democracy and the fall of communism have not paid off economically, and to the average citizen things seem to have been better a decade ago. Indeed, despite the harsh deprivations of the first four decades of Soviet history, including the brutal program of agricultural collectivization which cost millions of Russian, Ukrainian, Kazakh and other lives, in the 1960s and 1970s material life improved for many Soviet citizens. The range of consumer products expanded, salaries grew and the educational system generated a large middle class of engineers, managers and other professionals, the putative backbone of perestroika.

Undoubtedly, some nationalities benefited more than others, and the Communist Party nomenklatura the most of all. But a policy of affirmative action brought non-Russians into the burgeoning local government bureaucracies, and into local universities and professions, albeit only if they demonstrated an ability to work in Russian.

By contrast, the Gorbachev era (1985-91) and the post-coup period have meant economic collapse and consumer deprivation. To be sure, these economic woes originated in the malfunctioning command economy and, indeed, in the contest for legal authority over the economy, the so-called `war of laws', between the republics and Moscow waged in the heyday of glasnost and perestroika. Nonetheless, such analytic assessments interest the broad Russian and non-Russian publics only mildly. A more widespread view is that the Moscow-based Russian élite ran and is still running a centralized economic system in an ineffective and self-interested manner.

Given the current harsh economic situation, it is unlikely that the population will be receptive to schemes that require further sacrifices. Fear of public reaction to such sacrifice has, in fact, long been used by conservative opponents to block reform. Economic union and economic reform-so logical and appealing in the West-may in fact prove unpopular in the former Soviet Union. The persistent Ukrainian desire to establish its own currency and to ditch the ruble exemplifies the desire to escape from the sinking ship that is the Soviet economy.

The same economic weariness and wariness throughout the republics generally grips the Russian population itself. Russians have long felt they have subsidized the non-Russian republics and may themselves be uncomfortable with new union structures that perpetuate this relationship, despite Yeltsin`s personal support of them.

Economics can work in favour of a Union even as it can work against it. The pro-Unionists use the common-sense argument that economic reform will fail if republics erect customs barriers and issue separate currencies. Given the interdependent and poor Soviet economic infrastructure, the low quality of Soviet goods and the consequently limited markets for them, economic independence might prove costly. With little ability to generate hard currency, the republics will find it more difficult to attract foreign assistance.

The Yavlinsky Plan

Since the August coup attempt, the principal effort to lay a foundation for shaping a new union has been a plan for economic union drafted by Grigory Yavlinsky, a key aide to Yeltsin and Gorbachev. The plan was launched prior to any effort to revive discussion of a draft union treaty, on the reasonable basis that it would be easier to agree first on issues critical to daily survival before tackling political matters. The State Council, comprised of leaders of the 10 republics, endorsed the plan in principle in September. On October 18, nine republic leaders signed on to the plan. Despite this it will likely run into difficulty in the republican legislatures because of its centralizing bent.

The Yavlinsky plan declares all the parties to the scheme to be "sovereign states" with a right to "autonomously decide all questions of socio-economic development". It would, however, require the participants to relinquish control over broad areas of economic and social policy. The parties must co-ordinate policy regarding, among other things, goods and services, financial and credit policy, finances and taxes, prices, the labour market and social guarantees, customs and tariffs, and foreign economic activity.

In the name of free enterprise, the Yavlinsky plan proposes restricting government control of industry and the free movement of labour. This would mean that republics would lose their capacity to regulate migration. For instance, if Ivan Ivanovitch (a Russian) hires thousands of his fellow Russians to work in his factory in Kazakhstan, the local Kazakhs would be powerless to stop him. The incoming Russians could skew the demographic balance against the hapless Kazakhs.

The Yavlinsky plan would establish the ruble as a common currency and place other national currencies in a secondary position. It also proposes a banking union and a common reserve system. Monetary policy, in other words, could not be carried out independently. Furthermore, the economic union would offer equalization payments to poorer members and all would have to agree on when to obtain new foreign loans.

The plan makes sense in its own terms. However, unlike the European Economic Community régime, in many respects its parent, the potential parties to the plan are politically unstable governments engaged in the emotionally laden project of nation-building. Republic leaders must sell the plan to legislatures and populations that have a limited understanding of its content, and a high degree of suspicion that, ultimately, it is another Russian scheme to control them. And the republican leaders, many of whom are former Communist Party apparatchiks (the Ukraine's Leonid Kravchuk is a prime example), will be wary of seeming too cosy with Moscow lest this endanger their own political position. Leading Russian parliamentarians characterize the Yavlinsky plan as designed to "milk" Russia (The New York Times, 10 October 1991).

Nevertheless, based on the preferences of the current republic leaders, and with the winter looming, a revised Yavlinsky-type plan will be accepted by as many as 12 of the republics on a trial basis, although it is less certain to be implemented in an optimal manner over the next three years (as Yavlinsky prescribes).

Nationalism

Because of the heavy personal sacrifice involved, trust and even common purpose must exist among the participants in any new economic or political union. Yet emotional nationalism or perceived national self-interest on the part of the republics stands in the way of sustaining a union.

Centre-republic and republic-republic relations take place under the burden of a sordid past in which millions were consumed in government-condoned famines, purges and deportations. These Soviet misdeeds were heaped upon earlier instances of Russian conquest and colonization and of internecine conflict between Armenians and Azerbaijanis and others. The level of inter-ethnic antagonism, of fear and mistrust, rooted in history of violent conflict, works against a future union.

Nationalism is fuelled not only by historical memory, but also by perceived self-interest. Republics want to protect what they consider to be their proper borders and they may oppose a union if it means relinquishing these claims (Moldovan claims on Ukrainian territory, for example.) Another issue is whether sub-republican units, like Tatarstan in the RSFSR, will be able to join as parties to the treaty; the republics affected (in this case Russia) are opposed. Similarly, the republics will chafe at any Russian effort to dominate the Union's decision-making in any matter, from ecology to human rights, from cultural to foreign policy and control over migration.

Indeed, even if blissful relations obtained between the republics, the spiritual satisfaction that large and small, rich and poor peoples derive from flying their flag and declaring themselves independent, is one of the most potent forces in 20th century international relations. National liberation, self-determination and autonomy have become the watchwords of ever smaller groups of people.

On the other hand, the ethnic minorities created by Soviet tinkering with "national" boundaries and centuries of internal migration (the 25 million Russians living outside the Russian republic being the most prominent), will feel less secure where they are a minority within smaller, more ethnically homogeneous units.

National security, too (one might argue), requires a co-ordinated union. Only Russia has the scientific and technical capacity to deploy strategic nuclear weapons (the Ukraine may possess the weapons, but is not in a position to use them), or that in the expensive and complicated functions of intelligence collection and foreign policy implementation, the republics would be better off co-operating. But while co-operation may make sense, it flies in the face of national self-assertiveness and requires a political acumen and national self-assurance which few nations possess.

Furthermore, five republics (the Baltics, Georgia and Moldova) have refused to participate in discussions over new agreements. This refusal enlivens national feelings and sets a poor example for the remaining 10 republics, since all 15 former Soviet republics sail in similarly leaky boats when it comes to economic affairs. If these five can have their cake and eat it too (or so it seems), then why, wonder the other republics, can't the rest of us do so?

Republic leaders will have to cope with these nationalistic sentiments if they wish to attach their republic to a new confederation proposed by Moscow. Political confederation will be an even harder sell than economic union, and here the number of participating republics may be closer to nine than to twelve (thus not including Georgia, Armenia and Moldova).

Prospects

Given the fear of famine this winter, Western pressure for a strong economic union and the natures of current republic leadership, a watered-down Yavlinsky plan, perhaps giving up on the idea of a central bank and a common currency, will initially be accepted by the republics. However, the chances for its survival over its proposed three-year tenure are slim. And, as Yavlinsky and his colleagues themselves have stated, economic union will be easier to achieve than political unity. Quite simply, few republics really want to cohabitate and no amount of constitutional conjuring will help. What comes next?

The republic leaders govern very different polities. Some republics (Balts, Ukraine) have a high degree of economic self-confidence compared with their fellows. Belarus' geographic proximity to Russia, and Central Asia's economic dependence, will render these republics more docile.

Therefore, over the next three to five years, nationalistic pressures will lead to a fragmentation of the former Soviet Union into a Russian-Belorussian plus Central Asian unit (though the central Asians will eventually break away); independent status for Ukraine, Azerbaijan, Armenia, Georgia and Moldova (the latter to be associated with Romania), and independence for the Baltic states. Economically weak and politically unstable, many republics will be tempting targets for the economic aspirations of Germany and Japan, and the possible political ambitions of Turkey, Iran and China. A reborn but hobbled Russia (contending with internal independence movements as in Chechen-Ingushetia) will have trouble staunching the flow of power away from Moscow.

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