On the Ramparts of Russian Reform

Embattled government economists take heart at first signs that privatization is taking hold

WHEN the auctioneer shouted "sold" and banged his gavel, Sergei Dimyanov thrust both arms in the air as if he had just won a bidding war for a Cadillac convertible once owned by Elvis.

In reality, Mr. Dimyanov had become the owner of a beat-up, five-year-old truck that cost 250,000 rubles (about $628). There was nothing special about the vehicle, yet Dimyanov's purchase - the first truck bought at the auction - was a momentous occasion in Russia's ongoing transition from a centrally planned to a market economy. It marked the first time government-issued vouchers were used in the transfer of state-owned property into private hands.

"I wanted to be the first to use a privatization voucher. It's a historic moment," Dimyanov said shortly after he signed the papers finalizing the purchase.

In all, 59 of the 60 trucks up for sale - part of the fleet owned by the state-run Nizhgorodavtotrans conglomerate - were sold, mainly to young, small-time entrepreneurs like Dimyanov. That the event went smoothly provided a boost to Russia's beleaguered government, which currently has its hands full trying to quell unrest in the mountainous Transcaucasian region, as well as beat back a threat to radical reforms posed by conservatives.

The rapid privatization of state-owned enterprises is considered a linchpin in the market-reform strategy of acting Prime Minister Yegor Gaidar's government. Distribution of privatization vouchers to Russia's 150 million people began on Oct. 1, but enthusiasm has been lukewarm.

During the first two weeks of the voucher campaign, the numbers lagged behind government expectations. For example, in Moscow only 90,000 out of an available 3.1 million vouchers, each with a face-value of 10,000 rubles (about $25), were picked up by those interested in the program, according to the Tass news agency.

But the Nizhny Novgorod auction on Oct. 31, organized by the International Finance Corporation, a World Bank organization, gave radical reformers cause to cheer.

"It is a milestone in our privatization campaign. It's the beginning of a new era of privatization - popular privatization," says Boris Nemt-sov, governor of the Nizhny Novgorod region, site of the truck auction. "We will show that what we've started here will be possible to repeat in other regions of Russia."

Led by the progressive Mr. Nemtsov, the Nizhny Novgorod region, which straddles the Volga River about 250 miles northeast of Moscow, has been in the vanguard of the privatization effort. In April, it held a first-of-its-kind auction of small-scale shops. Some owners of those privatized stores say they are thriving, but add their success is due mainly to the enlightened policies of the regional administration.

"The leadership of the region has made it all possible," says Vladimir Sedov, chief of Russky Klub, the city's largest privately owned business. "It will be very difficult to achieve the same results in other regions because the leaders elsewhere are more conservative."

Many entrepreneurs, such as Vera Pavlova, head of the recently privatized Dmitrievsky cheese shop, say they are at the mercy of political developments. "Everything depends on the political situation. The fate of Russia is being decided in Moscow, as always," Ms. Pavlova says.

Of late, Russia's political situation seems to grow more chaotic by the day. The latest crisis is the ethnic conflict in the North Ossetian Autonomous Republic, located in southern Russia. On Nov. 2, President Boris Yeltsin declared a state of emergency in the North Ossetia and Ingushetia regions to stop fighting between the Ossetian and Ingush ethnic groups that has killed dozens in recent days.

The clashes arise out of a land dispute. The Ingush people claim they are entitled to territory now administered by North Ossetia.

Under the presidential decree, Deputy Prime Minister Georgy Khizha has become the head of a temporary administration in both embattled regions. He is backed up by about 3,000 crack troops, known as Spetsnaz, which were dispatched to the area by Moscow. All strikes and demonstrations are banned and strict controls have been placed on the local press.

Since the breakup of the Soviet Union last December, the Transcaucasian region has become a cauldron of ethnic conflict. However, the outbreak of violence in North Ossetia Oct. 30 was the first incident of large-scale ethnic fighting on Russian territory.

Back in Moscow, the power struggle continues between the reform-minded government and conservatives. Many analysts expect an all-out assault on the government and its policies to be launched Dec. 1, when a session of the conservative-dominated Congress of People's Deputies - Russia's supreme legislative body - convenes. Mr. Yeltsin, who wants to postpone the congress until spring, has vowed that he will defend his government.

"I don't want this congress, but if it must be, then I will show strength," he said in a television interview.

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