Russia agrees to bail out Soviet regime Gorbachev gets loan guarantees

Yeltsin gains control Yeltsin guarantees loans, gains control

December 01, 1991|By Carey Goldberg | Carey Goldberg,Los Angeles Times

MOSCOW -- Russian Federation President Boris N. Yeltsin, moving to resolve a major budget crisis, agreed yesterday to bail out Soviet President Mikhail S. Gorbachev's near-bankrupt central government -- at a price.

Coming to Mr. Gorbachev's rescue the day after Soviet State Bank officials announced that their coffers were empty, Mr. Yeltsin said Russia would guarantee the state loans Mr. Gorbachev's government needs to keep functioning and merge the central government's costs into its own budget for the coming quarter.

But the agreement that Mr. Gorbachev and Mr. Yeltsin struck in an emergency meeting in the Kremlin yesterday also gave Russia considerably more control over the central Soviet budget, control that it is expected to use to hack away mercilessly at what remains of the Soviet government.

The agreement involves "quite a tough budget," Mr. Yeltsin said.

The Russian president reassured millions of state employees whose pay is jeopardized by the budget crunch that "Soviet people will get their salaries in any case. . . . Russia guarantees that."

But official communiques and reports of the meeting indicated that Mr. Yeltsin had squeezed consent from Mr. Gorbachev for dramatic cuts in the Soviet budget, apparently as part of Russia's concerted efforts to liquidate much of the central government and take over many of its functions.

Russia claimed control Friday over the operations of the Soviet Foreign Ministry, including its embassies and its Moscow skyscraper, on the grounds that the ministry could no longer afford to run them, and it is still asserting its claim to the Soviet State Bank, known as Gosbank.

Concern about the Soviet government's imminent financial collapse arose last week when Soviet lawmakers, led by Russian Federation deputies, refused to approve the state loan of 90 billion rubles -- $159 billion calculated at the official exchange rate -- that the government needed to keep running.

The Soviet government's budget deficit is already expected to total at least 200 billion rubles this year -- $360 billion at the official rate.

The loan amounts in effect to permission for Gosbank to print up an additional mass of rubles, thus further fueling runaway inflation already estimated to be running at 450 percent a year.

After Russian deputies blocked the loan, complaining that it amounted to a "blank check" for central authorities, Gosbank Chairman Victor Gerashchenko told national television that the bank had stopped all its payments to the Soviet government, raising the threat that the giant governing apparatus would simply grind to a halt.

The Yeltsin-Gorbachev agreement appeared to stave off that danger, and Mr. Yeltsin contended that ordinary state employees would never have been left without paychecks anyway. "We said right away that if there are any problems with the union budget, Russia will take fully on itself the payments for the military as well as maintaining science, culture and budget-funded organizations," Mr. Yeltsin said.

The terms of the agreement remained fuzzy, however, and it appeared to depend on consent from the other 11 remaining Soviet republics to guarantee portions of the loan.

It also implied that Russia agreed to guarantee a state loan only for "minimal, agreed-upon expenses" -- not necessarily the entire 90 billion rubles -- and only if budgetary policy remains closely coordinated and cuts are made as agreed upon.

And it appeared to require parliamentary approval -- no easy task given the current mood in both the Soviet and the Russian Supreme Soviets.

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