On Eve Of Referendum, Many Fear For Ukrainian Economy

Sunday's referendum in eastern Ukraine comes as fierce battles are waged in the port city of Mariupol. A vote for independence may calm tensions, but it might also bankrupt the economy.

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SCOTT SIMON, HOST:

This is WEEKEND EDITION from NPR News. I'm Scott Simon. Separatists in eastern Ukraine are asking voters to take part in an unauthorized referendum tomorrow on whether to make their region independent. Many Ukrainians believe that a yes vote will lead Russia to annex their territory as in Crimea. This latest referendum comes at a time of heightened tensions.

A fierce battle played out yesterday when Ukrainian armored personnel carriers rolled into the port city of Mariupol. Officials say at least seven people were killed and dozens more were wounded. Ukraine's interior minister says that fighting started when terrorists tried to take over a police station. But as NPR's Soraya Sarhaddi Nelson reports, many people, at least those willing to talk, say the referendum is the only way to calm tensions and the only way to save the local economy.

SORAYA SARHADDI NELSON, BYLINE: Hundreds of workers stream out of the NKMZ plant here in Kramatorsk at the end of a recent shift. They work for a Soviet-era manufacturer that produces parts for everything from electric tea kettles to submarines. It is the biggest employer in this eastern Ukrainian city.

The plant has downsized considerably since the collapse of the Soviet Union, and there are 13,000 employees today compared to the 40,000 that once worked here. Even now the company depends heavily on Russia, which accounts for 60 percent of its business. Workers here fear the ongoing tensions between their government and Moscow will cause the business to shut down altogether. Victor Serikov (ph) is a machine operator at the plant.

VICTOR SERIKOV: (Russian spoken).

NELSON: He says Russian friends tells him they are being pressured by their bosses not to deal with Ukrainian businesses these days. Serikov adds, I'm worried I'll be laid off. In the nearby regional capital of Donetsk, Enrique Menendez is already feeling the pinch. He's the owner of an online advertising agency and says more than half of his revenue has dried up as frightened business owners cut back on their spending.

ENRIQUE MENENDEZ: It means that we all getting on our way to poverty. That scares us a lot, especially all that middle class because we have very low ways to influence on that situation.

NELSON: Fear of an economic tailspin is what pro-Russian separatists are banking on to get voters to agree to turn eastern Ukraine into one or more independent republics. Economist Alex Ryabchyn says recent cuts to regional budgets and government jobs don't help nor does the fact that the Ukrainian government and its Western allies have failed to send timely financial relief after promising to do so for months.

ALEX RYABCHYN: People will say, like, West wants your enterprises. West wants your economy, you know, restaurants, you know, to rule your land. And they want to force you, like, to have clashes with brotherhood nations. And now it makes sense or them, for those who support pro-Russian idea.

NELSON: He adds the separatists are also gaining support by paying unemployed workers to join their ranks - something the pro-Russian groups deny. Businessman Menendez says eastern Ukraine has always been close to Russia economically and that the governments in Kiev and the West need to accept that fact instead of deepening their rift with Moscow.

MENENDEZ: In the close, short-term perspective, all we need is stability - stable currencies, predictable monetary politics of the government and predictable relations with Russia. And of course, we don't want to be a part of war.

NELSON: Serhiy Taruta, who is the Kiev-appointed governor to Donetsk, agrees the central government must do more to stimulate the economy here. But he says the separatists are wrong if they think turning Donetsk into an independent republic is going to lead to prosperity. Taruta says the resulting sanctions and flight of investors would shut down factories here.

SERHIY TARUTA: (Foreign language spoken).

NELSON: He adds that the separatists have repeatedly threatened business officials both here and in the neighboring region of Luhansk. But Taruta says business people have refused to join the independence movement because they understand the economic consequences. Soraya Sarhaddi Nelson, NPR News, Donetsk.

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