Republics shun Yavlinsky plan: Leaders opt for alternative to Moscow’s version of economic union

BY CHRYSTIA FREELAND, KIEV
Financial Times , September 23, 1991

FEAR of Russian domination has led the former Soviet republics to set up an alternative to the
economic union proposed in Moscow earlier this month by Mr Grigory Yavlinsky, one of the
four-man interim central government.

Leaders of the republics met in the Estonian capital, Tallinn, at the end of last week and signed
three non-binding ‘interstate’ protocols concerning trade relations, monetary policy,
communications and transport.

The agreement opens the prospect of two distinct economic unions emerging, one based in
Moscow and a second with headquarters in Tallinn.

Mr Nursultan Nazarbayev, Kazakhstan’s president, is attempting to convene a conference of all
republic leaders in his capital, Alma Ata, on September 30 to discuss emergency economic
measures. Soviet President Mikhail Gorbachev would not be invited.

Thirteen of the 15 republics participated in the Tallinn meeting, including Russia, although the
latter’s representative, deputy prime minister Yevgeny Saburov, disagreed with some of the
proposals.

The Tallinn Process, as the negotiations have been dubbed, reflects growing fear among the
non-Russian republics that Mr Boris Yeltsin’s White House – the Russian parliament – is as great a
threat to their sovereignty as the Kremlin.

Mr Volodymyr Lanovy, Ukraine’s minister for privatisation, said the joint moves were an
attempt to prevent Russia from unilaterally taking over former all-Union property.

At the weekend Mr Lanovy rejected the Yavlinsky model as ‘another effort to force upon us a
single financial and monetary system’.

The republics agreed to discuss division of the Soviet Union’s foreign debt and gold, diamond
and hard currency reserves at their next meeting, in three months.

They agreed to negotiate new inter-republic trade contracts, but assured the Baltic republics
that their supplies would not be cut off this year in retaliation for independence.

They also agreed to drop the rouble as the internal trading currency as soon as the republics
introduced separate currencies. By contrast, the Yavlinsky plan envisages inter-republic trade
being conducted in roubles, even after separate currencies emerge.

The republics also discussed a Ukraine suggestion to create an interstate clearing-bank, which
would establish exchange rates between republican currencies. The Russian delegation favoured
instead a single all-Union bank.

Ukraine will be poised to introduce a separate currency by the first quarter of next year. Over
the weekend the republic decided to print banknotes and to embark on an economic reform
programme which would give them value.

Mr Volodymyr Matvienko, chairman of the Ukrainian National Bank, signed a letter of intent
with the Canadian Banknote company. According to a company consultant, Mr Orest Nowakisky,
Mr Matvienko will travel to Ottawa next week to negotiate a deal to print 1.5bn banknotes in
Canada and construct a turnkey mint in Ukraine.

Canadian Banknote is asking about Dollars 2.9m (Pounds 1.71m) to print the notes and is
offering to build the factory as a joint venture, which would recoup its costs by printing money for
other republics and nations.