Cabinet Reshuffle Deals Reform Card in Kremlin

The latest sign that President Boris Yeltsin is suddenly serious again about reforming the Russian economy - after three years of drift and distraction - is Boris Nemtsov.

The mop-headed, high-energy, young governor of the province surrounding Nizhny Novgorod has made his central Russian region a model of market reforms and privatization. He also once got into an orange-juice throwing bout with radical right-winger Vladimir Zhirinovsky on national television that almost devolved into a brawl.

Mr. Yeltsin spent the weekend and part of March 17 persuading Mr. Nemtsov to take a leading position in the national government in what is the biggest Cabinet reorganization since 1991, when the first reform team was formed.

Nemtsov will be one of two people with the rank of first deputy prime minister, alongside Anatoly Chubais, who was the architect of privatization in Russia. Only Prime Minister Viktor Chernomyrdin outranks them in the Cabinet and Mr. Chernomyrdin may not carry as much clout. With the new Cabinet and its new marching orders, says political analyst Sergei Kolmakov, "we're approaching the essence of the most difficult problems of reform."

For a week, since Yeltsin asked Chernomyrdin and Mr. Chubais to form a new and more reform-oriented Cabinet, the two have been engaged in a pitched battle behind the scenes over who would fill the ministerial posts.

Reform versus caution

At stake, according to conventional wisdom:

Chubais represents the view that social crises in housing and paying pensions can only be avoided by more strict and efficient control of government spending and market-based economic investment.

Chernomyrdin is more concerned with sustaining the political support of the financial-industrial clans - tightly connected elite interest groups that dominate Russian life. It's not clear that any initiative can succeed in Russia today without their backing.

Earlier this month, Yeltsin's announcing of a Cabinet shakeup seemed to cast Chubais in the role of de facto prime minister. Chernomyrdin, the actual prime minister, would be sort of a vice president, providing political cover for the deeply reviled Chubais - who could never be confirmed as prime minister by Russia's Communist-dominated parliament.

But Chubais ran into trouble.

According to Russian political analysts, Chernomyrdin and the industrial lobbyists put up a stern resistance to Chubais's Cabinet choices.

And Chubais himself had trouble recruiting strong candidates for the challenge of tackling the government's social priorities - housing and pension reform.

The referee in this battle is Yeltsin, and he balanced the two sides cleverly enough that Mr. Kolmakov calls the whole week "a very good sign from the point of view of the physical and mental form of Mr. Yeltsin."

The man of compromise

The chief compromise was Nemtsov. Chubais lost a little ground in that he had to step aside for another prominent figure installed at his own rank.

A week ago, Chubais was to be the only first deputy premier. But Nemtsov is also essentially an ally to Chubais because of his general outlook and approach to reform.

Chubais also won the second job of finance minister, giving him a very strong position from which to control the currently ineffective and badly corrupt flow of funds into and out of government coffers.

Nemtsov will handle the social problems that are reaching acute crisis points in Russia, as well as the monopoly industries that are costing Russia so much money due to tax breaks and subsidies. Liberal parliamentary member Vladimir Lukin describes Nemtsov as "an optimistic kamikaze who ultimately will be a great success."

It is difficult to see how. Housing is heavily subsidized throughout Russia, as it was during the Soviet era, at a cost of $1.8 billion a year.

And Russians, whose paychecks and pensions are low and often months late, are already beginning to hear rumors that their rents might rise dramatically.

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