Yeltsin Faces Challenges From Ukraine, Economy

TWO weeks ago, after the Russian tricolor was raised over the Kremlin, Russian President Boris Yeltsin was talking optimistically about the future.

"For the first time we have got an opportunity to focus all of our attention and energy on Russia and Russians," Mr. Yeltsin said in a televised New Year's message.

Since then, however, Yeltsin has found his energy being sapped by mounting problems and pressures on his government.

A bitter dispute with Ukraine over control of the Black Sea Fleet, threatening to undermine stability of the new Commonwealth of Independent States, has provided the most severe challenge to date for the Russian leadership. But on the domestic front, public discontent with price hikes introduced Jan. 2 is also testing the government's resolve.

For the time being, confrontation between Russia and Ukraine over the Black Sea Fleet appears to have been averted. A meeting Saturday in Kiev between representatives from the two most powerful states in the commonwealth eased tension. In a joint communique published by the Tass news agency, Russia agreed to classify part of the fleet as nonstrategic forces, thus allowing a section of it to be transferred to Ukrainian control.

The communique, however, was vague and could lead to renewed conflict. The precise division of the fleet was not specified. The two sides are to continue talks within a week to work out details. During that time they have agreed to refrain from unilateral steps, such as the Ukrainian demand that all forces on its territory swear allegiance to it.

The acting commander of the commonwealth's armed forces, Air Marshal Yevgeny Shaposhnikov, had said previously the Black Sea Fleet was part of the commonwealth's "strategic forces," armed with nuclear weapons, and thus ineligible for takeover by Ukraine. The commonwealth accords signed last month in Brest, Belorus, pledged to keep strategic forces under unified command.

Ukrainian leaders had disputed Mr. Shaposhnikov's classification, claiming the 300-vessel fleet did not possess long-range nuclear weapons, such as submarine-launched ballistic missiles. They also were at odds with military officials, who insisted the fleet was a key part of the commonwealth's southern defenses.

Before the agreement, Ukraine had demanded that all of the fleet come under its control starting in July. Yeltsin, meanwhile, had insisted the fleet remain indivisible and under commonwealth control, essentially dominated by Russia. In the days leading up to Saturday's compromise, rhetoric on both sides had become increasingly belligerent, threatening the commonwealth's viability.

"The Black Sea Fleet was, is, and will always be Russian," Yeltsin said in a speech during a three-day tour of the Russian heartland last week.

"As an independent state, Ukraine has the right to have its own armed forces," said Ukrainian President Leonid Kravchuk.

Then on Saturday the Nezavisimaya Gazeta newspaper reported Yeltsin was preparing a decree that would proclaim Russia the legal successor to the former Soviet Union in military affairs, effectively seizing control of the fleet until a stable commonwealth command structure was established. The decree was to have been issued if Saturday's talks with Ukraine did not yield a compromise, the paper added.

Though a settlement has been reached on the Black Sea Fleet, hostile feelings may linger.

Mr. Kravchuk said Russian leaders must "get out of a habit of thinking in an imperial spirit," Tass reported. "We cannot agree with one of the republics saying it's the successor of the former Soviet Union and everything belongs to this republic," the Ukrainian president added.

The settlement may satisfy politicians, but recent statements by senior naval officers indicate widespread dissatisfaction. Navy officers - not only those based at the Black Sea Fleet's headquarters in Sevastopol - say the Navy must remain united.

Yeltsin may face a tougher task in dealing with a population angry over price liberalization. The so-called freeing of prices has left many able to afford only the bare essentials, such as bread and milk. And the move so far has yet to yield the desired result of filling the stores with goods, a fact that is "absolutely unconsoling," Ruslan Khasbulatov, the Russian parliament speaker, said during a visit to the provincial city of Ryazan.

Price liberalization as it is now being implemented will not work, because the freeing of prices has not been accompanied by rapid privatization, says Rair Simonyan, an economist at Moscow's Institute of World Economy and International Relations.

"You can't liberalize prices without liberalizing producers," Mr. Simonyan says. "Price increases without the proper elasticity of supply won't lead to growing food supplies."

Instead of moving forward and making the necessary adjustments, there is a danger that Yeltsin's government may retreat slightly. During his tour of the Russian heartland, Yeltsin faced heckling over the high prices. The attacks threw him on the defensive and left him calling on the people to be patient.

But in Ulyanovsk, an industrial city on the Volga River, there are signs the local government may cave in to public discontent. Yuri Goryachev, the Yeltsin-appointed chief of the local administration, has indicated steps will be taken to subsidize some high-priced staple food, such as sour cream and cottage cheese, Tass reported Saturday.

Such action would be a step in the wrong direction, warns Simonyan. "The Russian government must be firm and show that it's made its choice," he says. "If they have to change their course it would be a disaster."

The Yeltsin government also faces a brewing financial crisis. Russia is printing money at a breakneck rate, but there still is a cash shortage because of the ruble's rapid decline in value and rampant inflation.

And Russia's pledge to stick with the ruble could lead to another conflict with Ukraine, which last week introduced coupons designed to eventually replace the ruble as the republic's currency.

Meanwhile, a cash crunch has forced Russia to seek a deferral of interest payments on its foreign debt. Pyotr Aven, head of Russia's Foreign Economic Relations Committee, says the commonwealth is having problems making interest payments because of management changes following collapse of the Soviet Union.

The request for a deferral is expected to be formally made to Western creditors during a meeting in Frankfurt, Germany, this week, said Russian Central Bank Chairman Georgi Matyukhin.