Russia's Financial Woes Grow Into Social Unrest

An $11 billion loan from the IMF, expected soon, may not quell discontent.

Every few hours in front of the White House, where Russia's main government offices are located, a circle of striking coal miners pound their helmets in a rhythmic din on the cobblestone ground.

Office workers, grandmothers, and an array of opposition politicians pay visits to the tent city where the protesters have camped for a month, giving them sandwiches and handshakes in support.

"We will be here until they listen," says miner Andrei Lodazev. "We'll stay here until [President Boris Yeltsin] steps down."

The miners' vigil calling for the resignation of Mr. Yeltsin is the most visible sign of rumbling popular discontent. Russia is teetering on the edge of a financial collapse, which some say the likely emergency loan from the International Monetary Fund (IMF) won't avert.

This week, negotiators hope to wrap up discussions on approximately $11 billion in loans from the IMF - and between $1 billion and $1.5 billion from the World Bank.

Underlying this financial crisis is social unrest, which some analysts say could threaten the free-market and democratic reforms that Yeltsin has tentatively embraced.

Millions of workers have not been paid for months. Protesters have shut down mines and blocked the Trans-Siberian railroad. Several provincial towns are paralyzed, with electricity and gas shut off because of unpaid bills. Teachers and defense workers have joined the miners in protest. At least three regional governments have demanded that Yeltsin resign.

Most troubling are rumors circulating in the capital of plans for a coup d'tat by security forces.

"The Crisis to End in Coup?" asked the July 7 front-page headline of Nezavizimaya Gazeta, a Moscow-based newspaper.

Yeltsin has appealed to the IMF for urgent help to cover a huge debt, avoid devaluing the ruble, and attract foreign investors, who have fled the country. His government is trying to push austerity measures and tax reforms demanded by the donors through a recalcitrant Communist-dominated parliament.

Yeltsin took several dramatic steps over the past several days to convince the world of the situation's gravity. He postponed his summer vacation. He telephoned leaders of the United States, Japan, Britain, Germany, and France to enlist their aid in staving off economic collapse. Then he assured the military that he was in control.

But all this only added to a general sense of alarm.

"We have enough force to cut short any extremist plans to seize power," he declared in televised remarks.

Analysts say that an IMF loan might pull Russia back from temporary financial collapse, but it could also sow the seeds of increased social unrest. The country will still have to continue paying billions of dollars for debt servicing, which accounts for about 35 percent of total budget spending. The stock market is unlikely to erase its 60 percent fall. Low world prices of oil, Russia's main export, will not rise.

The austerity package dumps much of the burden of financial survival on ordinary people by cutting social services and shifting the tax burden from companies to average citizens.

"The general economic crisis in Russia is causing social tensions. Austerity measures would make these tensions worse," says Iskander Hazimov, head of the politics department at the Expert Institute in Moscow.

Doomsday prophets also worry about the social and political dangers from nationalists or leftists who want to edge Yeltsin out before the 2000 presidential elections. They cite a series of destabilizing factors, including Yeltsin's frail health and the weak political position of Prime Minister Sergei Kiriyenko, whose three-month-old government does not have the support of powerful oligarchs.

But while there may be considerable discontent, it is unlikely that one charismatic figure or party will be able to harness it. "The opposition is likely to intensify its political activities by autumn," says Boris Zhikharevich, vice president of the Institute for Social and Economic Issues in St. Petersburg. "But I believe these protests will be localized. There will be no general disorders."

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