Russian president slashes payments

December 28, 1990|By Los Angeles Times

MOSCOW -- Russian President Boris N. Yeltsin, in a major confrontation over the future of the Soviet Union as a federal state, has cut his republic's contribution to the national budget by 85 percent, threatening the whole country with imminent economic collapse, Soviet President Mikhail S. Gorbachev has told the Congress of People's Deputies, the national parliament.

The Soviet Union consequently will enter 1991 without a state budget, Gorbachev said yesterday, and the government will quickly run out of money for everything from pay for civil servants and soldiers to operating funds for universities, libraries and science labs, to old-age pensions and welfare payments.

But the real damage will be to the Soviet economy, which is already disintegrating, as other republics increase prices and taxes to make up for money they no longer receive from the central government in subsidies compensating them for low, state-set prices on their products.

For Gorbachev, it is a triple challenge. He must protect, as best he can, the country's battered economy from further blows. He must fight for his conception of a new relationship between the Soviet central government and the country's constituent republics. And he must employ his newly enhanced authority as president to reassert his leadership.

As the major contributor to the central budget, financing more than 55 percent this year, the Russian Federation has political as well as economic leverage that Yeltsin, as president, is ready to use. This week, he cut Russia's payment to the central government from $256 billion to $41 billion at official exchange rates. Next year's projected state budget is about $450 billion.

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