Russia on a Short Leash

March 31, 1994

Without exactly saying so, the Clinton administration has decided to make do with the Russian government now in power rather than pine for the zealous economic reformers jettisoned after the ultra-nationalist surge in December elections.

Not only does the administration see hitherto unperceived virtues in Prime Minister Viktor Chernomyrdin but it encouraged the recent reconciliation between IMF director Michel Camdessus and Russian Central Bank chairman Viktor Gerashchenko, a man Mr. Camdessus once described as "the world's worst central banker."

In trying to put Russia on a path toward a market economy, the International Monetary Fund had previously insisted that certain reforms had to be in place. But with U.S. support, it finally settled for something less: Mr. Chernomyrdin's promise he would put these reforms before a reactionary parliament whose compliance by no means assured.

This was a gamble for Mr. Camdessus, a stickler for strict monetary management, but the risk of turning the IMF's back on the Russians was far greater. So he decided to accept at face value Mr. Chernomyrdin's stated devotion to reform and put him to the test. A highly symbolic transfusion of $1.5 billion in hard currency for the anemic Russian economy is to be put before the IMF board for almost certain approval, provided the Russian prime minister sends to parliament a satisfactory blueprint for fighting inflation, privatizing industry and reducing the deficit.

Such steps may sound boilerplate to Western ears. But in the chaotic economic and political situation that grips Russia, they hold Mr. Chernomyrdin to reformist goals he had previously resisted. The thinking is that power has sobered the prime minister, a product of the inefficient state-owned enterprises that wrecked the Soviet economy.

In a speech during his Moscow visit, Mr. Camdessus said further subsidies for these enterprises should be given only to close them down or make them profitable. Subsidies used just to preserve jobs, he said, would be money better spent on job retraining and unemployment insurance. As for the Central Bank, he told it to stop the presses.

In the months ahead, especially if power continues to drift from President Boris Yeltsin to Mr. Chernomyrdin, it is important to keep the prime minister on a short leash. If he fails to get his program through parliament and bring down inflation by the end of the year, the time for hard decisions will be at hand. Meanwhile, there are many reasons, political and economic, to try to keep Russia from collapse, anarchy or revanchism.

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