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. Last Updated: 07/27/2016

Russia, Ukraine: The Economic Ties That Bind

If we ignore for a minute high-level political battles, last week's main theme was economic relations among the countries of the CIS. There were unproductive talks between the governments of Russia and Ukraine. and last Thursday the government considered the question of of trade and economic relations between Russia and the other Commonwealth states.


Approximately one month ago a representative of the Ukraine State Oil Commission announced that if his republic received less than 30 million tons of oil in 1993, the petrochemical industry in both countries would collapse.


Leonid Kuchma, prime minister of Ukraine, said a month ago that he would resign if Russia raised prices on energy sources, since such a step would lead to the collapse of Ukraine's economy.


Today we know that Ukraine has managed to get only 20 of the 45 tons of oil it needs. and only 8. 8 million of these are guaranteed - the rest Ukraine has to get by means of direct contracts with the various regions and producers, entering into fierce competition with other consumers from the rest of the CIS.


And Russia thinks that starting Jan. 29 it is delivering gas to Ukraine at world prices - approximately 45, 000 rubles for 1, 000 cubic meters. Ukraine thinks differently, but this does not change the situation.


Russia is trying to get some concessions from Ukraine. Ukraine is asking that gas be supplied at a price five times lower than the world levels, but does not want to even discuss the question of the Russian military fleet remaining in Sevastopol under any conditions.


Each side, naturally, maintains that its partner in the negotiations is putting forth unacceptable conditions and is demanding excessive concessions.


Russia's relations are just as complicated with other countries of the Commonwealth, which account for 80 percent of Russia's foreign trade. In Moscow it has been calculated that a shift to world prices in trade with the other Commonwealth nations would bring Russia $16 billion per year, and this figure is probably causing some officials to lose their heads. But the U. S. S. R. already tried to get this kind of "added profit" from the members of COMECON, and instead of making a profit it ruined trade.


A shift to world prices in trade with countries that cannot pay would most likely cause economic collapse in all these countries. But, on the other hand, maintaining these artificial prices would also lead to economic collapse, for Russia first of all, since it would remain, against its will, the biggest and most generous contributor to the Commonwealth countries.


What can be done? This is not a question for the fainthearted.