`Economic Coup' Chokes Russian Reform

THE workers of the Zvezda arms manufacturing works in Russia's Far East, entrusted by the nation to repair and maintain its nuclear-powered and armed submarines, are burning with anger.

For six months they have received only nominal wages, the workers complained in a letter to President Boris Yeltsin, and since November, no money at all.

Bolshoi Kamen, the city in which their shipyard is the largest employer, is short of fuel to heat homes and hospitals, the letter goes on.

Meanwhile the government owes the yard some 20 billion rubles (around $13 million), which it refuses to pay.

``People are desperate, and there is no telling what action they might take,'' the letter said, according to a report in the official Itar-Tass news agency.

Across Russia there are countless cases like this one, from idle tractor factories and auto plants where workers are on indefinite ``furlough,'' to collective farms waiting for subsidies promised them more than a year ago.

These are the victims of the tough, anti-inflation policies fitfully pursued by Russia's young free-market reformers.

It is into these waiting hands that the government of Prime Minister Viktor Chernomyrdin is now preparing to place vast sums of money. The ``lobbies'' are lining up, and though the premier vows not to give each their demanded due, the signs of an opening of the spigot are already clear.

Most important, the prime minister is now officially freed from the one obstacle that has prevented him from doing this for months - the presence in his government of Finance Minister Boris Fyodorov.

In a virtual one-man effort, the young reformer has for months tried to resist inflation by simply refusing to pay out the countless billions promised and allocated by government officials, including, it must be said, by President Yeltsin himself.

Yesterday, after almost a week of wrangling, Mr. Fyodorov's resignation was accepted by Yeltsin. At a morning meeting, Yeltsin refused to meet his conditions for staying, which amounted to full control over financial policy, including the ouster of free-spending Central Bank chairman Viktor Gerashchenko.

With his departure, Fyodorov warned in a statement issued yesterday, Russia now stands poised on the brink of hyperinflation and economic collapse, triggered by a wave of government subsidies to inefficient and bankrupt state-run industry and agriculture.

The young economist dismissed claims from the Chernomyrdin camp that this strategy would revive the depressed state of production and avoid mass unemployment.

``At the same time, there will be no rise in production, no investments, no solution of the unemployment problem,'' he predicted.

``This is a way to a dead end at the expense of the people,'' he added.

In harsh language, Fyodorov denounced the government as one composed of ``red managers,'' referring to the state-run industry from which Mr. Chernomyrdin and his close allies hail, and dominated by ``a lifeless and illiterate state-planning ideology.'' He warned Yeltsin that the government would undo the reforms the president stands for.

``An economic coup is taking place in the country,'' Fyodorov said. ``All this contradicts many official government documents for which I voted and for which I fought with the former Supreme Soviet [parliament], the dreams of which are now being implemented. All this contradicts the course of the president, confirmed only several days ago.''

Yegor Gaidar, the reform architect who resigned from the government on Jan. 16, offered a less apocalyptic vision of the future. ``I think it's more likely that the government, under the pressure of various interests, will carry out a policy of half-measures, half-steps, thus alternately accelerating and decelerating the inflation process,'' he told the Moskovsky Komsomolets newspaper yesterday.

Swedish economist Anders Aslund, who resigned this week as an adviser to the Russian government, describes the Chernomyrdin Cabinet as a collection of ``lobbies.'' Mr. Aslund points to the background of the premier, who rose through the ranks of the Soviet gas industry to become head of Gazprom, the state gas monopoly. His top deputy, Oleg Soskovets, is a veteran of the Soviet steel industry, while deputy premier Alexander Zaveryukha is an unabashed representative of the collective farms and their agro-industry allies.

MR. ZAVERYUKHA on Saturday said the government was preparing a program for the agro-industrial complex that would cost up to 14 trillion rubles in 1994. By comparison, Fyodorov's Finance Ministry had set a deficit target for the whole of 1993 of 17 trillion rubles.

Chernomyrdin claims the deficit targets are not going to change. But on Tuesday, at a conference in Central Russia with regional leaders, accompanied by Central Bank chairman Gerashchenko, he pledged an additional 4 trillion rubles spending in the form of writing off the debts of enterprises, mostly in the defense and agro-industry sectors.

``When we talk about reform, it means the limitation of state intervention into the economy,'' comments reformist Sergei Vasiliyev, head of the government's Center on Economic Reform.

``These people understand reform as - before we regulated the economy by order, now we will regulate it by financial flows, by [controlling] profit margins, by directed subsidized credits,'' Mr. Vasiliyev says.

Vasiliyev, an ally of Mr. Gaidar, believes Russia is heading towards a situation similar to Latin America in the 1950s, `60s, and `70s with heavy state-regulated economies, high inflation, and economic stagnation.

``There is no way back to socialism,'' Vasiliyev says. ``But there is a very clear way to state monopolistic capitalism now, which is really a very ugly phenomenon.''

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.




Save for later


Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items


Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items


Failed to save

You have already saved this item.

View Saved Items