The Kremlin's new leadership Friday granted independence to Lithuania, Latvia and Estonia, ending more than 50 years of Soviet rule. Dozens of nations had already recognized the Baltic states, spurred on their bold course of freedom by last month's failed coup.

The day-old State Council, the executive body composed of President Mikhail Gorbachev, Russian President Boris Yeltsin and leaders of the other Soviet republics, recognized the Baltics at its first meeting.A day earlier, the Congress of People's Deputies approved the council's formation as part of a dramatic restructuring of the Soviet government during the nation's post-coup transition to a loose confederation of sovereign states.

The re-emergence of the three Baltic nations from under Kremlin rule capped a 11/2-year campaign by independence activists that was marked by bloodshed, mass demonstrations and defiance of Soviet economic sanctions.

"Today is a very important day to the new status of our state," said Lithuanian President Vytautas Landsbergis.

"The fact that this decision has been made is a very joyful and positive act in all aspects not only to Lithuania, Latvia and Estonia, but also to the Soviet Union itself and the whole world," Landsbergis told reporters in Lithuania's capital, Vilnius.

Soviet Foreign Minister Boris Pankin said the State Council's decision to grant diplomatic recognition to the republics was unanimous, and that Moscow would begin negotiations "on the entire range of issues" with the three Baltic states.

Pankin said the issue of compensation for state-owned and -built Soviet property in the Baltics would be among those discussed, but he gave no details.

The Baltic states have demanded withdrawal of Soviet troops. They also have demanded the Kremlin's annulment of the 1940 decision to absorb the Baltics, but the State Council resolution did not explicitly nullify the absorption, Pankin said.

The three Baltic states, which have 8 million people along the Baltic Sea north of Poland, were forcibly annexed by the Kremlin in 1939-40 under a secret pact signed by the Soviet Union and Nazi Germany.

The Baltic leaders took advantage of the power vacuum created by the failed hard-line coup of Aug. 18-21 to step up demands for international recognition oftheir independence drive. All but five of the 15 Soviet republics have declared independence.

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Friday's move comes four days after President Bush recognized the Baltics. About 50 countries have also extended recognition since the coup.

Leaders of the Baltics have acknowledged that their resource-poor states will remain economically intertwined with the Soviet Union, which provides most of their oil and raw materials at subsidized prices.

One key question is whether the Soviet Union will now end those subsidies and charge world market rates in hard currency. The Baltics have appealed to the West for aid during the transition period.

The new Soviet defense minister, Gen. Yevgeny Shaposhnikov, told a news conference he would hold talks with representatives of all republics on the status of Soviet troops on their territory. More than 100,000 Soviet troops remain stationed in the Baltics, according to Western estimates.

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