Yeltsin seeks moratorium on debt, spurns IMF aid conditions Special conditions in Russia stressed

July 05, 1992|By Will Englund | Will Englund,Moscow Bureau

MOSCOW -- President Boris N. Yeltsin announced yesterday that he will seek a two-year moratorium on repaying principal and interest on $68 billion in debt when he meets President Bush and leaders of the other richest nations this week.

Putting the nation's pride -- or perhaps his own -- ahead of Western cash, Mr. Yeltsin also declared that Russia would refuse $24 billion in promised aid before it would accept the stiff terms that currently come with the offer.

"To force us to our knees for this loan, no! Russia is still a great power," he said at a news conference.

Under fire at home for his embrace of the West and of market capitalism, Mr. Yeltsin struck a defiant pose on the eve of the meeting of the world's richest countries in Munich, Germany.

But within that pose he had two quite different messages to deliver.

The stolid president announced that Russia was too poor to handle the foreign debt amassed by the former Soviet Union and angrily said that Russia didn't need the $24 billion in aid so badly that it would kowtow to the West.

It's a delicate line that he must walk. Criticism of his reform program grows every day, but most Russians believe that inaction would be worse. Mr. Yeltsin has to appeal to Russians' hopes for the future while fending off attacks from broad segments of the country that would be threatened by real change.

The Russian economy has been showing few good signs recently. Inflation is running at about 1,000 percent, production is down, exports are down 30 percent, and across the country factories are teetering on the brink of economic collapse.

The industrial nations, known as the G-7, for Group of 7, will meet in Munich, starting tomorrow. G-7 includes leaders of of Germany, the United States, Japan, Britain, France, Italy and Canada.

Mr. Yeltsin will meet with them on Wednesday.

He said that Russia needs a breathing spell before it can assume its share of paying off the Soviet debt, which he said totals $68 billion. Earlier in the week, Yegor Gaidar, the acting prime minister, said it was $74 billion.

Russia intends to pay off the debt, eventually, Mr. Yeltsin said. "At the moment, however, this is just not possible."

He called for a "minimum" two-year delay, saying, "I would say it would be impossible to leave Munich without agreeing on it."

Mr. Yeltsin meets tomorrow with the leaders of the other members of the Commonwealth of Independent States, and if they go along with him on the issue of debt rescheduling, he will speak for the entire commonwealth at Munich, he said.

Russia has assumed two-thirds of the total Soviet debt.

Mr. Yeltsin argued yesterday that accepting the terms demanded by the International Monetary Fund in exchange for Western aid -- in particular, setting prices free on oil, coal and gas -- would push the nation over the edge.

Freeing fuel prices would send inflation soaring, he said.

"Would the people hold out? They would not hold out." He said Russians' "faith in the president would die, and the chaos would begin."

He said that his free-market reform program was making progress and that he knows better than the IMF what Russia needs and what Russians can bear.

He said that the IMF is trying to impose a "set formula" on Russia, but that "Russia's position is unique and these reforms are unique."

At the beginning of the year, the government had planned to end its subsidies for fuel, but fears that such a move would knock out huge swaths of Russian industry led to a change of heart.

At some point Mr. Yeltsin's government must come to terms with its subsidies of grossly inefficient and uncompetitive industries, but Mr. Yeltsin made it clear he believes that the day of reckoning should be postponed until after other economic reforms are more firmly established.

Mr. Gaidar raised a different issue yesterday that he hopes will be tackled in Munich: the access of Russian goods to Western DTC markets. He said a variety of barriers was stemming Russian exports.

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