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Businessweek Archives

Soviet Reform Gains A Life Of Its Own



The start of 1991 in the Soviet Union finds the heady spirit of perestroika all but evaporated. Gone from the scene are early architects of reform, such as Eduard A. Shevardnadze, the brilliant Foreign Minister whose surprise resignation came with an ominous warning of an impending return to dictatorship. Moscow's new media stars are a KGB chief who still can't distinguish foreign investment from intrigue and a brace of young, reactionary colonels.

But reform is actually forging ahead, with or without Mikhail Gorbachev (page 32). The country's 15 restive republics are working out new trade and political relations among themselves. Despite the gloomy mood, the national legislature did set into motion a draft agreement that would retain central tariffs and a currency and create a central bank capable of administering a monetary policy.

While Gorbachev shrinks from instituting a market economy, market forces are coming into play as market pricing takes root. Provincial markets are filled with moderately priced meats and produce, despite shortages in big industrial cities such as Moscow and Leningrad. Why? Local farmers are no longer forced to follow Kremlin diktat and sell food at ridiculously cheap prices to cities thousands of miles away. Given time, market prices will retool distribution and food supply imbalances will be rectified.

That's where the West comes in. It should continue to nurture systemic change by providing advice, loans, and technology. The New Year finds Western oil companies such as Chevron and Elf Aquitaine preparing to produce in the Soviet Union. They are dealing with new sets of officials on the republican and local levels. But the potential gains are huge for both sides. The oil companies also provide a valuable gauge: If Shevardnadze's warning comes true, they'll probably be on the first plane out.

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