Ukraine's march into nationhood leads to trouble Despite bumper crops, economy falters, and political system is in a shambles

KIEV, UKRAINE — KIEV, Ukraine -- Only two years ago, Ukraine marched bravely off to independence, confident that once freed of Soviet shackles it would thrive on its own rich, black soil.

It hasn't worked out.


This year's harvest has indeed been bountiful, but the plenty in the fields has served only to magnify the failures that daily confront a poverty-stricken people.

With grain in abundance, the citizens of Kiev have stood in line for hours to buy bread. Despite a bumper sunflower crop, weary shoppers search in vain for the sunflower oil on which every kitchen depends.


Two years of freedom have left the economy in shambles, the government in disarray and the nation near collapse. The political and economic systems of the old command have broken down and lie unused and unreplaced. The Parliament, president and prime minister are embroiled in all-consuming battle. Ukraine stands paralyzed, caught midway between past and future.

"What hope can we have?" asked Anastasia Sandratskaya, 33, as she furiously scrubbed a cafe window on Kiev's main street. "All we can hope for is new leaders. The only other way out is to lie down in the earth and die."

The level of mismanagement is astounding, resulting in horrifying statistics and rampaging inflation. Production is dropping precipitously, down 13.8 percent in the first six months of this year. Food prices shot up 67 percent in June alone. This month, the price for bread quadrupled and meat doubled. Spiraling prices have put 80 percent of the nation -- a country the size of France -- below the poverty level.

The Ukrainian currency, the karbovanets, makes the anemic Russian ruble look robust. It depreciated by 100 percent in one month alone. Originally pegged to the ruble, which now trades at about 1,000 to the dollar, the karbovanets sells for 8,000 to the dollar. During one panicky day in August, it fell to 19,000 to the dollar.

"Here I expect nothing," said Anya Kudim, 19, a music student, as she waited in line hoping to buy butter. "The only hope I have is to leave and go to the United States."

Both the conservative Parliament and the government have sought cautious reform, calling for slow, tightly controlled changes. But their desires for power and control over the process have led only to ferocious, unproductive wrangling.

Unable to agree between themselves on the best way to accomplish this, they have created a vacuum, which the National Bank of Ukraine has filled by rapidly printing money and issuing credits to keep old, unprofitable industries alive. The credits have resulted in a huge budget deficit, equivalent last year to 44 percent of the gross national product.

'Protest is inevitable'


The result has been disaster, with no meaningful reform in sight.

Those who favor faster reform assert that the political balance has become so tenuous that anything can happen.

"The people can't stand the situation any longer," said Volodymir M. Pylypchuk, a member of Parliament who wants quicker reform. "They don't believe in anything anymore. Protest is inevitable. We just don't know what form the protest will take."

These are unsettling sentiments in a country armed with nuclear weapons. Earlier this month, some of the anger began to emerge in bitter criticism of government plans to transfer the nuclear warheads based here to Russia for destruction. Another proposal to sell the Ukrainian share of the Black Sea fleet to Russia to pay off debt also roused nationalistic ardor.

And every day, things seem to get worse. Life has become so dark for Ukrainians that Russia appears positively prosperous by comparison. From here, Boris N. Yeltsin looks like a political genius of immense accomplishment.

Despite his own fractious Parliament and dismal economy, Mr. Yeltsin has created a sense of possibility. The stores in Moscow are filled now, though prices are high; the lines of a year and a half ago are forgotten.


"The difference is privatization," Mr. Pylypchuk said. "Yeltsin has made a great deal of progress with privatization. The bigger the private sector, the less the economy depends on government management."

Ukraine, he said, can produce enough grain, sugar and steel to pay for the ever-more expensive energy it desperately needs to buy from Russia -- if only it would accept the shock therapy of swift privatization and stanch the hemorrhaging money supply.

Reinventing government

"They still want to regulate production," Mr. Pylypchuk said. "Ukraine can provide itself with energy. There is nothing to prevent it -- except the ineffective management of the government."

Furthering the chaos, Prime Minister Leonid Kuchma resigned Sept. 9, admitting defeat, acknowledging he saw no prospects for compromise with the Parliament.

The next day, President Leonid Kravchuk prevailed upon him to stay on until Tuesday, when the Parliament convenes.


In Mr. Pylypchuk's opinion, the economic ruin will only be prolonged. "The only way out is the same as in Russia -- early elections," he said. "We hope there will be enough reformists to carry out real change."

But few new leaders have emerged so far. Mr. Kravchuk, for example, formerly was the chief ideologist for the Communist Party here. Mr. Kuchma directed the world's largest rocket factory under the old Soviet regime.

"This Parliament was elected by the old rules," said Vitaly P. Dzubenko, director of an old Soviet-style factory that is slowly sliding toward oblivion as the economy falls apart.

Mr. Dzubenko's Ukrcement factory -- like other work collectives and institutes -- was asked to supply one member of Parliament for the 1990 election.

"Of course I'm not going to send a smart one," he said, dragging on an ever-present cigarette. "I need the smart one here. So what did they get? All those second secretaries [of the local Communist Party] who forgot how to work. And now they have the fate of our country in their hands."

Changing the old ways


Mr. Dzubenko, a loyal servant of the state, has been converted to the cause of shock-therapy reform by watching the factory he loves falter.

His hulking plant is as big as a half-dozen football fields and employs 1,200 workers. They mix asbestos with cement, roll it out by machine into large thin sheets and stamp it into corrugated panels that are used for roofs.

Like other factories of its era, it looks like the worst horror of the Industrial Age gone mad -- huge, dark, dank, with large heavy objects moving threateningly overhead, monstrous machines clanking and creaking, and open vats of mysterious substances yawning ominously.

Actually, it's worse than it looks. Large amounts of asbestos are handled casually, without protective gear and with little apparent fear. In the United States, asbestos has become the subject of billion-dollar lawsuits filed by workers alleging their health was ruined by exposure to it. Americans who handle it do so encased in sealed space suits.

"Of course it's terrible for your lungs," said Alexander Kalinin, 28, who has worked with asbestos for 10 years. "We're supposed to wear respirators, but no one does."

The air is thick with dust. One recent day, a man opened a large paper sack of asbestos and poured it into an open bin. Bits of asbestos had been trampled underfoot all over the factory. Mr. Kalinin, who has two young children, had traces of it in his hair.


A large door, big enough for a boxcar, was open to the outdoors. Apartment buildings sat nearby. A school and playground were just down the street.

"Of course no one lives very long once they go on pension," Mr. Kalinin said.

Mr. Dzubenko said the press has exaggerated the problem.

"People who constantly work with asbestos are less subject to danger than those who are used to its influence," he said -- the opposite of what U.S. experts might argue.

Business barriers

The factory is a potential killer, but the 1,200 people who work here willingly suppress worrisome thoughts. Better to risk possible death years from now than certain starvation tomorrow.


What infuriates Mr. Dzubenko, who started here as a worker 32 years ago, is that government policies make it harder rather than easier for businesses like his to operate.

"Our government is making decisions that don't allow us to be profitable," he said. "Wages and prices are controlled. Our work is one of the most dangerous, but they want my workers to work for 40,000 karbovanets a month. That's just over $4. And no matter how hard they work, they can't earn any more."

Government currency rules require businesses earning hard currency through exports to sell half their income to the government at a fixed National Bank rate.

When they need to buy hard currency to purchase parts or supplies, they have to buy it at the much higher market rate -- causing them a loss of 30 percent. The laws have destroyed trade and set off currency speculation.

"At the same time, they ask loudly why production is becoming so expensive," Mr. Dzubenko said.

But he is a natural entrepreneur. He is opening new factories to support his failing plant. One will produce fine wood furniture and the other crystal chandeliers.


Both products have done well in market tests.

But ultimately, Mr. Dzubenko is bound by the old ways. He doesn't want the income to increase his salary -- that's controlled by the government, too. No, he wants to pour it into the unprofitable, poisonous asbestos plant.

He rejects a suggestion that it might be wiser to abandon the old asbestos dinosaur and concentrate on the new, profitable work.

"The asbestos-cement enterprise cannot stop doing what it's doing," Mr. Dzubenko said in shocked tones. "It belongs to the state. I can't sell the equipment or stop producing what I'm told to produce. We're all trapped here."