Yeltsin asserts his power with 'Russia first' policy 10 decrees to help economic reforms

November 18, 1991|By Michael Parks | Michael Parks,Los Angeles Times

MOSCOW -- Russian President Boris N. Yeltsin, moving boldly to implement his promised program of radical economic reforms, assumed control of key elements of the Soviet Union's financial system over the weekend.

Asserting the right of the Russian Federation to control its economy, Mr. Yeltsin ordered the republic's Finance Ministry to assume the duties of the Soviet Finance Ministry, including the issuance of money and custody of the country's gold reserves. In a renewed effort to force the breakup of the central government's bloated bureaucracy, he also decreed a halt of Russian payments, as of Wednesday, to all federal agencies except those, such as the Defense and Foreign Affairs ministries, to whose continuation he has agreed.

In a further assertion of his growing "Russia first" philosophy, Mr. Yeltsin suspended shipments of petroleum products to other Soviet republics, effectively treating them as foreign countries, in order to assure Russia of heat and power this winter -- and give it leverage in coming negotiations with its neighbors.

The 10 decrees, the first steps in Mr. Yeltsin's reform program, also raised the minimum wage, nearly doubled the pay of government workers and began to establish a "social safety net" to protect those with low incomes from the price increases that will come when government subsidies are ended.

The Yeltsin decrees reflect a victory for the radical economists who have advised the Russian president not only to move boldly but to make the Russian Federation, the largest of the Soviet republics, the vehicle for the country's transformation.

Yegor Gaidar, the new Russian deputy prime minster for economic policy, has argued strongly in recent days that "Russia has no choice -- it must take its own steps."

With about 60 percent of the country's wealth, Russia has the ability to propel the whole Soviet Union through radical reform, according to Mr. Gaidar, and for its own sake can no longer delay the measures required to transform a state-owned, government-run economy into one energized by market forces and private entrepreneurship.

Of Mr. Yeltsin's 10 decrees, which all have the force of law, the most significant, politically as well as economically, was that asserting Russian primacy in managing the country's financial system.

Declaring that the Soviet government had failed to implement the economic treaty signed recently establishing a common market among the remaining republics, Mr. Yeltsin formally subordinated the central government's fiscal organs to the Russian Finance Ministry.

After accusing the Soviet Finance Ministry of "destabilizing the economic situation, accelerating inflation and aggravating the financial crisis in Russia and the Soviet Union," Mr. Yeltsin not only ordered seizure of the ministry but also the Soviet mint in a direct step to halt the printing of more rubles.

That decree also cuts the central ministries off from funds from Russia, which traditionally provides more than two-thirds of the state budget, and thus forces implementation of an earlier decision by the central government to shut down about 80 ministries and other agencies, handing over the responsibilities to republican governments or newly established enterprises.

Although still preliminary in nature, the decrees indicated that Mr. Yeltsin was moving rapidly toward a "big bang" reform, freeing of prices from state controls, probably about Jan. 1, and sharp cuts simultaneously in state spending.

Mr. Yeltsin already has indicated that state subsidies will be withdrawn from all but a limited selection of basic consumer goods, mostly food, and that prices will then have to reflect production costs and the market forces of supply and demand.

Among the decrees published yesterday were measures freeing foreign trade from most of the current state controls in order to introduce new elements of competition and speed the integration of the Soviet Union into the world economy.

From Jan. 1, the value of the Soviet ruble -- now about 2 cents although the official rate of exchange remains $1.70 -- will be determined by the Russian Central Bank based on prices at foreign exchange auctions, interbank transfers and other free-market deals.

But in taking the lead Russia effectively will dictate to the other republics, notably the Ukraine, the second most populous and wealthy, the terms of the new economic union being established to succeed the Soviet Union.

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