Russian deputy premier resigns in protest Shokhin refuses to work along with new finance minister

September 26, 1998|By Will Englund | Will Englund,SUN FOREIGN STAFF

MOSCOW -- No sooner had a Russian Cabinet finally been put together yesterday -- 33 days after the last one was dismissed at the start of the economic collapse -- than one of its most prominent members said he was quitting in disgust.

Alexander Shokhin, deputy prime minister for economic affairs, had just finished talks with a delegation from the International Monetary Fund when he announced that he was walking out. He had received news that he had lost a drawn-out, behind-the-scenes struggle over who would be named finance minister.

Shokhin declared he couldn't work with Mikhail Zadornov, who was reappointed to the position he held when Russia announced Aug. 17 that it was effectively defaulting on foreign and domestic debt.

"It is very difficult," Shokhin said, "to negotiate with investors and creditors when the key government posts are held by liars." Shokhin has accused Zadornov and others of having misled investors before Aug. 17 about the ability of Russia to pay its debts.

"I did not want to be a fig leaf talking to the West without being sure that the ministries I was overseeing would be guiding the policies I could be responsible for."

But Shokhin, a centrist deputy, had already gotten off to a rough start since his own appointment nine days earlier. He has been talking about trying to reschedule Russia's debts to take some of the sting out of the August default but managed only to irritate Western investors for being unrealistic and, reportedly, Prime Minister Yevgeny M. Primakov for not being tough enough with foreigners.

Primakov called his resignation "irresponsible" and "capricious." But Shokhin had warned both Primakov and President Boris N. Yeltsin that he would quit if Zadornov were reappointed.

Shokhin wasn't alone in his protest. Russian media reported that Dmitry Vasilyev, head of the watchdog Federal Security Commission, also resigned over the appointment.

"Russia looks more and more like a crazy team of officials who are still quarreling among themselves," Sergei Kolmakov, an analyst with the Polity Foundation, said last night. But the move also demonstrates Primakov's strong will, he said.

Shokhin had been allied with Yeltsin's "entourage" and with the banker oligarchs Boris Berezovsky and Alexander Smolensky in opposing Zadornov, a liberal reformer who had infuriated the "crony capitalists" by his incorruptibility, Kolmakov said.

Primakov reportedly wanted to keep Zadornov from the beginning. The announcement of his appointment is further evidence that the prime minister has begun to overshadow Yeltsin himself.

Nevertheless, the new government hasn't even started and is already crumbling. Primakov outlined some general economic goals Thursday -- primarily the paying off of wage and pension arrears -- but there is still no plan for tackling the country's month-old economic collapse.

Shokhin said on television last night that the Cabinet had gotten too "Red" for his tastes, although Zadornov is about as far from a Communist as it is possible to get.

The Communists in parliament are themselves getting more restless over the way things are shaping up. Yesterday for the second time the Central Bank engaged in a debt-clearing operation with commercial banks that involves the a sharp increase in the ruble supply. In theory, the Communists want to see the government issue more money, but they are pessimistic that any of it will end up being pumped into the economy instead of into bankers' hard-currency accounts abroad.

The IMF delegation that met with Shokhin left Moscow later in the day without agreeing to release the second installment of a $22.6 billion loan package that Russia says it desperately needs. A first installment, of $4.8 billion, arrived here in July and proved fruitless in forestalling the crash.

Pub Date: 9/26/98

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