Gorbachev and Yeltsin Face Off Over Economy, Role of Republics

BORIS YELTSIN has returned to Moscow from a grand tour of his domain, the Russian Republic. Awaiting him is Mikhail Gorbachev. The two most powerful men in the Soviet Union will have to make decisions this week that will be crucial to the country's future.

Immediately on the agenda is the fate of yet another new plan to move the country to a market-based economy. But the economic program is only a part of the larger issue - the future shape of the nation itself.

Mr. Yeltsin, the Russian Republic's president, is now the acknowledged leader of the movement to devolve power from the center outward to the 15 republics that make up the Soviet Union and downward to the local governments. As the largest and most powerful republic, Russia's declaration of sovereignty has become the standard for all the other republics to follow.

The two men engaged in a public skirmish last week over where to draw the lines of power between republic and center. Mr. Gorbachev, the Soviet president, issued a decree voiding an Aug. 9 Russian resolution that claimed control over all Russian resources. That resolution annulled deals to sell diamonds, gold, and other resources to foreign companies without Russian approval.

``The president's decree does not concern the Russian Supreme Soviet [parliament] decision. He does not have such a right,'' Yeltsin told reporters while visiting Sakhalin Island in the Soviet Far East. ``I would advise [Gorbachev] not to quarrel with Russia, where 150 million people live.''

Yeltsin sounded one of his favorite populist themes: Russian resources are being wasted for projects such as foreign aid and defense. ``We are helping others at the time when we are hungry ourselves,'' the Postfactum news agency reported him saying.

The two men have entered ``preparation for the decisive battle,'' observes Andrei Fadin, political editor of the independent weekly Commersant. ``Personal relations between them are now better than ever,'' he says, but a clash of interests puts them on opposite sides.

``If Yeltsin's program is realized, there is no room for Gorbachev's power in the country,'' Mr. Fadin comments. The other republics will follow Russia's path and ``the union leadership will have nothing behind it, nothing to be based on,'' he says.

The Russian policy effectively deprives the central government of control over foreign trade, even over military aid, because it claims control of all the industries in Russia where the vast majority of defense plants are based.

The main battlefield is the shape of a new union treaty, a constitutional-type agreement that will redefine republic-center relations. Gorbachev offers a federal state, with Moscow still at the center but in looser relationship to its constituent parts. All summer long, the Kremlin has summoned representatives of the republics here to discuss its draft of this new union treaty.

But Yeltsin's insurgent government pronounces another vision - a confederation created amongst the republics themselves, granting to the center whatever powers they decide not to keep. Already Russia is negotiating bilateral treaties with the Baltic republics of Latvia and Estonia. Others are ready to follow.

``The new union treaty can and will arise only from treaties between individual republics,'' says Fyodor Shelov-Kovedyayev, head of the Russian parliament committee on inter-republican relations, in an interview in Moscow News weekly. If the Kremlin opposes Russia, he warns, the Soviet Union will end up consisting of only the Central Asian republics, Kazakhstan, and Azerbaijan.

In the next days, Yeltsin and Gorbachev will meet, alone and in a larger joint session of the Presidential Council and the Federal Council, the latter bringing together the heads of the republican legislatures. The main agenda item is to decide on a new economic reform plan.

Yeltsin and Gorbachev agreed earlier this month to form a joint group to draft a plan based on the more radical Russian 500-day program. This plan is to become the economic section of the new union treaty. At the same time, Gorbachev's own government, headed by Prime Minister Nikolai Ryzhkov, is drafting a revised version of its reform program.

In theory, the two groups are working together, but there is abundant evidence in the comments from both sides that the two efforts are opposed.

The deputy head of the central State Commission on Economic Reform sniped at the Russian plan for not being ``a concrete program but only interesting sketches, concepts, variants of transition,'' in an interview Friday in the labor newspaper Trud. A. Orlov also accused its authors of seeking ``shock therapy,'' the label for a Polish-style overnight shift to a free market, with free prices and no central planning.

Russia throws the charge back at the Kremlin. Its program pays more attention to protecting the people from the effects of moving to a market economy, Gennady Filshin, deputy chairman of the Russian Cabinet told Sovietskaya Kultura. A ``sharp transition'' to a market will bring ``social catastrophe,'' he said, including large-scale unemployment.

Despite the harsh rhetoric, there are grounds for compromise. The Ryzhkov group has accepted the need to prepare for the market through more radical privatization of property. Even the use of the word ``privatization'' is new, replacing ``de-statization,'' an awkward term to avoid that thorny issue.

Both sides also agree to put off free prices, and the inflation that is expected to follow, until safety nets are in place and measures taken to try to absorb the huge volume of rubles without any goods to chase.

Without some agreement, the prospect of chaos is lurking visibly around the corner. The alarm signals could be seen in the Siberian city of Chelyabinsk, where youths rioted for three days following demonstrations against shortages of alcohol and cigarettes. Less violent protests have taken place in many other cities.

And everywhere, nationalism is increasingly the vehicle of expression.

``Centrifugal forces have such speed that the situation is going out of control,'' Mr. Orlov said. ``Just a little more and we'll see either an eruption or super-emergency measures will be taken.''