Yeltsin berates Russian Cabinet Ministers blamed for economic chaos

February 05, 1993|By Will Englund | Will Englund,Moscow Bureau

MOSCOW -- President Boris N. Yeltsin let his anger burst through yesterday as he blamed his own Cabinet ministers for the economic chaos afflicting Russia.

The country faces ruinous inflation, a sharp fall-off in hard currency earnings abroad, falling production and capital flight, he said, and in 1992 the government did nothing to avert those perils or actually helped bring them about.

Mr. Yeltsin said Russia must step up its arms sales abroad -- a sore point between Moscow and Washington -- and re-establish trade with Eastern Europe if it is to pull out of its headlong crash.

Just back from a trip to India, where the major topic was weapons purchases, he said it is foolish to talk about converting military plants in Russia to civilian use when arms and other military hardware are about the only manufactured items Russia can still sell abroad for hard currency.

India, for example, represents an "immense market," he said, and yet before his visit there Russia seemed poised to cede that market to the West. "Did nobody know this before?" he asked in exasperation.

Mr. Yeltsin unleashed his rebukes at a meeting of the Cabinet yesterday that received wide coverage on Russian television and in the press.

He reserved his most stinging criticism for the Ministry of Economics, the Ministry of Foreign Economic Relations and the central bank, which he said had each been pulling in a different direction.

He said he had no plans to fire any ministers just now, but he insisted that the government come up with a course of action to attack Russia's economic ills.

"It's sad when huge blunders are made in a country," he said.

The president's attack comes at a pivotal moment. The ruble fell sharply in January, mirrored by a burst of inflation. Factions within Russia are warily circling as an April referendum on a new constitution approaches.

In essence, Mr. Yeltsin was telling his ministers to be more disciplined and aggressive in their reforms. This is not what many had expected when he was forced to replace the young economist Yegor Gaidar with the veteran oil manager Viktor Chernomyrdin as prime minister in December. That move was widely seen as a retreat from reform.

Yesterday, Mr. Yeltsin implied that, if anything, Mr. Gaidar had been too lax in pursuing a market economy.

"In 1992 there were too many words about restructuring, but nothing was done," he said.

Mr. Yeltsin was particularly critical of the release of credits worth 3.5 trillion rubles by the central bank to help industrial enterprises pay their debts -- a move that more than anything has fueled inflation. He called it "the greatest adventure that Russia has ever seen."

He criticized the bank, and he criticized Andrei Nechayev, the economics minister, for not keeping a tight rein on the bank.

"Three billion rubles are issued, but no one can say where the money has gone and how it has been used," he complained.

Moreover, he said, the country is supposed to be heading toward a market economy, and yet the government has not had the nerve to allow any enterprise to slip into bankruptcy.

"Not a single model bankruptcy has been carried out," he said.

He also attacked Sergei Glazyev, the minister for foreign economic relations, for doing nothing to preserve trade with the countries of Eastern Europe, once Russia's major trading partners, and for having lost control completely of the flow of hard currency. He accused commercial banks here of laundering millions of dollars worth of hard currency -- and of doing it "in the open."

Mr. Yeltsin's promotion of renewed arms sales as a way of bringing in some money raises the stakes on an already delicate international issue. The United States has taken a dim view of continued Russian weapons marketing -- particularly of a recent sale of submarines to Iran -- but the Russians accuse the United States of actively continuing its own sales.

Few here or in the West would dispute that the best of Russian technology and engineering went into military production; Mr. Yeltsin and many others here believe it is foolish to throw that investment away.

In an earlier interview that was published yesterday in Moscow News, Boris Fyodorov, deputy prime minister, said the government needs a specific industrial policy: "To define who we support and who we don't, and what niches do we want to fill on the world market."

At the moment, he said, the economy is being flooded with rubles, and this has to stop.

"Our economic situation is such that we must walk a tightrope between hyperinflation and everything that is linked with it, on the one hand, and a catastrophic production slump and mass unemployment, on the other," Mr. Fyodorov said.

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