The government said Wednesday that it is lifting controls on the prices of luxury goods in an effort to encourage production. Hours later, Russia's parliament declared the decree void in the largest of the 15 Soviet republics.
The move by the Russian Federation set up the latest struggle in the war between the central Soviet and Russian governments. It demonstrated the fragmentation and confusion plaguing the Soviet Union as the base of power moves from the Kremlin to the republics.The confrontation came despite an attempt Sunday by Soviet President Mikhail Gorbachev and Russian President Boris Yeltsin to patch up their differences on economic reform. The two agreed to set up commissions to decide how to divide authority between the two governments.
The latest battle began with a decree by the national Council of Ministers that prices would be freed on goods ``of no essential influence on people's living standards' - such as jewelry, furniture and American cigarettes.
It marked the first time in decades that the government has completely freed an entire range of retail prices to respond to the market forces of supply and demand.
Floating prices is an important element in the government's outline for converting the Soviet Union from a centrally planned economy - in which the government sets all prices often regardless of the cost of production - to a market economy.
The council's decree applied to some of the items most in demand. Their prices have been fixed but in fact many of the goods are sold above the official price by corrupt store employees who sell them, truckers who deliver them and factory workers who make them.
Shoppers have to wait as long as 10 years to receive furniture at the official price but can get it immediately if they are willing to pay three times that rate.
Other goods covered by the decree, which was released by the Tass news agency, include natural furs, carpets, high-tech electronics, cut glassware, china, spare car parts and imports such as whiskey, gin and U.S. cigarettes.
To prevent panic buying like that which preceded a round of price increases planned for July 1 - and later canceled - the government announced the action just one day before it was to take effect, today.
The government said freeing prices would ``provide extra incentives to increase the production of consumer goods.' It also said the measure would undermine the black market.