Yeltsin retreats from reform again

January 21, 1994|By Kathy Lally | Kathy Lally,Moscow Bureau Staff writer Mark Matthews contributed to this article.

MOSCOW -- President Boris N. Yeltsin appointed a conservative-dominated Cabinet yesterday, provoking the departure of yet another economic adviser trusted by the West and leading to predictions of economic chaos from advocates of rapid market reforms.

The Cabinet formation also generated unhappiness in Washington, where a State Department spokesman said that "the absence [in the government] of those known in the West as proponents of reform is a source of concern."

The new Cabinet was a clear victory for Prime Minister Viktor Chernomyrdin, a centrist with strong ties to agrarian and industrial interests.

"The market romanticism is over," said Mr. Chernomyrdin, implicitly criticizing the shock-therapy policies of Yegor T. Gaidar, who left the government Sunday to protest government economic policy.

"We will correct the course of reform," he said.

"The government of reforms has ceased to exist," pronounced the influential daily Izvestia, adding that a go-slow policy would lead to the economic collapse that has nearly destroyed Ukraine.

Mr. Chernomyrdin, gruff and assertive as he spoke to reporters, insisted he was well in control, even though uneasy Russians have dumped their rubles for dollars in the last few days, sending the Russian currency to new lows.

"There is no government crisis," he said. "There is a government, and the government is working."

While repeatedly offering reassurances that his new government would be as reform-minded as ever, Mr. Chernomyrdin's actions implied otherwise.

Though he had asked reformer Boris G. Fyodorov to remain in the government as finance minister, Mr. Chernomyrdin refused to make any concessions to him.

Mr. Fyodorov quit last night, and some analysts said his departure was a worse blow than Mr. Gaidar's.

Indeed, his resignation produced the first signs of public doubt from the Clinton administration that Mr. Yeltsin will be able to carry through his reform commitments. "Clearly [Mr. Yeltsin] has been struggling since the December elections to balance his formation of a new government," said a State Department spokesman, Michael McCurry. "There has to be some sympathy for the challenge he faces as a political leader.

"Nevertheless, the absence [from the government] of those known in the West as proponents of reform is a source of concern. That makes all the more important the commitment given by President Yeltsin to President Clinton that the direction of policy will remain true, focused on reform."

U.S. officials worried that the new government may not be able to challenge the Central Bank, still in the grip of anti-reformers. Strobe Talbott, the administration's top policy-maker on the former Soviet Union, is expected to face sharp questioning from members of Congress next week when he defends Mr. Clinton's request for $900 million in new Russian aid.

Mr. Fyodorov, known as a tough and effective fighter for reform policies, advocates the anti-inflation and ruble-stabilizing policies favored by the West.

In order to pursue those policies, he insisted that Mr. Chernomyrdin remove the head of the Central Bank, which has issued inflationary credits to industry, and remove Alexander Zaveryukha, a former collective farm leader and proponent of subsidies, from the Cabinet.

Instead, Mr. Zaveryukha, 50, was appointed deputy prime minister and Mr. Chernomyrdin told reporters he saw no reason to remove Viktor Geraschenko, the head of the Central Bank.

"I have no intention of staying in the government," Mr. Fyodorov said last night in reply.

Mr. Chernomyrdin trimmed the number of deputy prime ministers from nine to four in reorganizing his Cabinet. The members of the government now include:

* First Deputy Prime Minister Oleg Soskovets, 44, head of the metallurgical industry in Soviet times.

* Deputy Prime Minister Zaveryukha, 50.

* Deputy Prime Minister Yuri Yarov, 51, a former Communist Party official in St. Petersburg.

* Deputy Prime Minister Anatoly Chubais, 38, the strongest remaining reformer, who has a reputation as an outstanding manager and is in charge of privatization.

* Alexander Shokhin, 42, economics minister, a moderate reformer who had fallen out with Mr. Gaidar.

Mr. Chernomyrdin said he would quickly fill the job of finance minister that Mr. Fyodorov turned down.

Under the Russian Constitution approved in December, the Russian president makes the final decision on a Cabinet, choosing from names submitted to him by the prime minister.

Mr. Yeltsin, however, risked the resignation of Mr. Chernomyrdin if they could not agree on a Cabinet. This was a political risk the president was unwilling to take in the wake of the December legislative elections, in which ultranationalists and Communists made a strong showing to the detriment of Mr. Gaidar's reform party.

While proclaiming throughout Mr. Clinton's visit here last week that the pace of reform would be faster than ever, Mr. Yeltsin has clearly bowed to conservatives who argued that the Russian people could not absorb the pain of rapid change.

Mr. Chernomyrdin, 55, was head of the Soviet natural gas industry and is seen as a moderate acceptable to the industrial interests that have been threatened with bankruptcy by Mr. Gaidar and Mr. Fyodorov's tight monetary policies.

"I announce to all the world Russia will not renounce its strategic course," Mr. Chernomyrdin said yesterday, adding that he did not favor uncontrolled subsidies of failing industries.

"There will be no such thing as easy credits. Yes, certain benefits will be provided to certain sections, but we will not bring forth the scourge of yet more spiraling inflation."

Mr. Chernomyrdin asserted that he has Mr. Yeltsin's backing -- though it took four days of meetings before the Cabinet was announced yesterday.

"There are no disputes or contradictions between me and the president," he said.

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