21st December 1997

Yeltsin’s Russia: A period of change

by Mervyn de Silva

Like an old champ who has mastered ring-craft and all its tricks, Boris Yeltsin keeps fighting, sometimes swinging a punch at an old friend or ally. Marxism Leninism may be a religion that has lost its flock and most of its preachers but its first precept remains valid. As the Chinese would say “Economics in command”, even if it is a free market or market economics that they have in mind.

It is the transition that remains difficult and painful. And all the more difficult because of widespread concern in Russia and abroad about President Yeltsin’s health. Last week, Kremlin officials impressed on the media that Mr. Yeltsin had recovered from a viral infection and was back at work. True, he was fit enough to meet distinguished foreign visitors but no political affairs commentator in the Moscow-based media, now quite outspoken, neglected to underline the implications of Mr. Yeltsin’s health. Foreign analysts, who now concentrate on both the economy and its difficult transition to a free market as well as Mr. Yeltsin’s physical capacity to carry the burdens of office cannot conceal mixed feelings.

What kind of administration would a post-Yeltsin’s Kremlin run? Could it stand up to its opponents in Parliament where the Communists led by Gennady Zyuganov command a fair number of votes? And what sort of onslaught can we anticipate from the ultra - nationalists who are already accusing Yeltsin and his policy advisors of “selling” Russia to the I. M. F. and the World Bank. Yes, the propaganda battles in an increasing open media does look like the popular debate in a Third World capital.

The external pressure on the Yeltsin regime would be familiar to any analyst of the Press in any developing country. And that includes the hard choices open to the Yeltsin government.

“Until the Russian government is able to demonstrate that it is capable of closing the gap between its spending aspirations and its ability to collect tax, Russia will remain vulnerable to adverse shocks and investment risks”. This observation from FITCH IBCA, the International Credit Agency. It does resemble a passage on almost any developing country in a World Bank-IMF report or a western Bank on almost any under-developed country.... but for Russia’s military establishment and its resources, a massive nuclear arsenal most of all.

So Gennady Zyuganov, spoke as a Russian rather than a Communist when he warned the National Assembly and the electorate, communists included that rejecting the budget “would spell the complete disintegration of the economy for many reasons.”

Taxation investment

So taxation and the hunt for tax dodgers, a new species in post-Gorbachev Russia, are a vital national issue which the media has recognised as countrywide campaign in which it must play a major role. Thus the call from the Kremlin and many a party headquarters from Zyuganov’s communists to Zhirinovsky’s ‘patriots’. Between the two, the “Reds” are winning the race. But consider the fate of Mr. Anatoly Chubais, the President’s first deputy prime minister, who was recognised at least by the diplomatic corps in Moscow as Yeltsin’s favourite. With Mr. Yeltsin however, favourites soon join the firing line. The London ECONOMIST which Karl Mark regarded as the best defender or capitalism, gave this reason for the sudden ‘exit’ of the deputy prime minister;

“Mr. Chubais, Russia’s most effective reformer had spoilt things for himself by accepting jointly with four colleagues an implausibly large advance payment of 450,000 US dollars for writing a book to be called “The History of Russian Privatisation”. Incidentally, this particular bank had a history of doing well out of privatisation that Mr. Chubais had overseen. The ‘new’ Russia seems to be picking up some of the tricks of private enterprise familiar to the Third World in its ‘mixed economy’ decades. In the former “socialist” under-developed countries too top politicians and Corporation Chairmen made an early contribution to the theory and practice of privatisation.

Russia has weathered the international financial crisis quite well, observes Chrystia Freeland in a contribution to the Financial Times. “We have an impression that the nervousness of investors about emerging markets is passing” claimed Denis Kisilev, the Bank’s deputy chairman.

The behaviour of the “market” also reflects the importance of President.

If it was the privatisation issue that led to a head-on clash between the president and the powerful “reformer” Anatoly Chubais, it was not the only reason which prompted President Yeltsin to axe him. Mr. Yeltsin’s Finance Minister had lost the support of the President’s daughter, Tatyana Dyachenko, known to the press as Mr.Yeltsin’s trusted counsellor. The Minister had dismissed Boris Berezovsky from his post in the ministry, rashly ignoring the fact that Berezovsky was a friend of the first family.

Political freedom

With the full backing of the IMF and the World Bank, Russia is on the road to a market economy. No doubt about that. But how rapidly and how successfully? The same question may be posed about the transition from a one party state to a multi patry system with a popularly elected President.

Only 5 years ago, Yegor Gaider was Russia’s prime minister. He was in his mid-thirties.

And he believes that the Russian middle class is “gradually becoming accustomed to the thought that order based on the strength of the law, and not on fear, not on arbitrariness of power, is possible”.

Another promising trend is President Yeltsin’s decision to appoint young liberals to Cabinet posts. While he concentrates on the economy, he has realised that it is the new generation which can deliver. The third area of importance is the judicial system. The pundits have a term of their own to define the nature of the cumulative impact of these radical reforms. Russia is becoming a “normal country”.

A more dispassionate view is offered by a foreigner - Peter Schulz, Director of the Friedrich Ebert Stiftung, the German NGO which has an office in Moscow. To him this was an exciting, complex period of transition. We have had two presidential elections in accordance with international standards.

We have had two parliamentary elections and a series of regional elections which also fulfilled the same standards.... These democratically elected bodies are performing their constitutional functions.”

But the “New Russia” has new problems. The former finance minister Boris Fyodorov urged the government to launch bankruptcy proceedings against 100 top corporate “tax dodgers”.

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