Commentary

7th June 1998

Russia joins the Third World

By Mervyn de Silva

Rouble trouble! Quite serious too, almost as serious as any in an impoverished "Third World" country dependent on donors and relying heavily on the IMF and the World Bank for advice. Yes, that's how President Boris Yeltsin's Russia looks right now.

Boris Yeltsin did defeat all his rivals in the race to Moscow's "White House" but it was no famous victory. The political forces which fought him most fiercely in that contest have not given up the struggle. On the contrary, the parties, the vested interests, and the prominent personalities pitted against him have redoubled the effort and have opened two anti-Yeltsin fronts - parliament and extra-parliamentary. Yes, the White House is under siege, and the scene sometimes looks to a Third World spectator or analyst remarkably similar to what we watched last year in South-East Asia/East Asia from Thailand to Indonesia and the Korean peninsula. In a word the market reforms and resistance to change, currency, speculators, and important decision makers, political parties and Parliament. Yes, the Marxists were right-Economics in command, not politics.... but they got their economics wrong. The Moscow correspondent of the Economist (Marx called it the best defender of capitalism) observed, "If the Russian economy does grow strongly in 1998, there will be every reason to think that the future of market reform there is at last secure and that Russia will continue bonding with the West. But if in 1998 the optimism of a year earlier proves misplaced, Russia's prospects will be grim indeed". Why?

The financial markets will close to it as readily as they opened in 1997.

Public finance - that was what made the International Monetary Fund to be cautious.... and soon, quite critical. What could a besieged Boris Yeltsin and his administration do? What would be the least unpopular, the least provocative? How like the thinking of a Third World Finance Minister and his Prime Minister or President? Between the devil and the deep blue sea. Scylla and Charybdis?

Oil And Money

There is oil in Russia but never properly explored or exploited in the good old days of the USSR. But when the "union" broke up these assets were not always in Moscow's possession or control. Other republics have taken hold of the natural resources.

Right now however there is the more critical and urgent problem of the exchange rate. Once more, the Indonesian and South-East Asian crisis is a bitter lesson which cannot be ignored or neglected. The Central Bank and/or Finance Ministry must intervene in time and forcefully. Or the gods must smile while an embattled Yeltsin Presidency finds a way out.

Recently, the price of palladium reached 390 dollars a troy ounce when it was only hundred US dollars or a little less in early 1996. "This probably will do long term damage remarked Trevor Pitts, Chairman of the London Platinum and Palladium market. Why is palladium so costly? Pick up a mobile telephone or log on to your lap-top computer and they function because there is palladium in some of the electronic components and most anti- pollution catalysts fitted to motor vehicles also contain palladium".

No, it's not limited resources that made Communist Russia acquire characteristics of an under-developed or developing 'Third World' country but its state-structure and style of government. No real incentive, no drive, and no relentless quest for pribil (profit), a word hardly heard in the media or in decision-making groups, from the Commissars to the apparatchik.

Yeltsin's Move

What is to be done? That was the question posed by the outstanding leader of the October Revolution - an event that was destined to change the world, and still claim loyalty from millions, including the world's largest country. Well, President Yeltsin knew the answer at least to the immediate challenges that face him, and threaten the Presidency, an entirely new institution.

He has vested many new powers in the office of Prime Minister a post held by Sergei Kiriyenko. By signing a Presidenial decree, he has vested many new powers in the Prime Minister's office, powers that he himself held. President Yeltsin identified the problem and realized he had to share power so the new presidential system could work efficiently. And so his own exercise in devolution, and almost the next week de- centralization.

He may not be in perfect health but he is in good spirit. And sensible. He knows to use power. And he evidently has made up his mind that the time has come to share it. He has a gift for words just as he has a sturdy commonsense. "The long path along which a document would wind its way was two kilometres," he told some visitors. The Director of the Moscow Centre for Strategic Studies, Andrei Plontkovsky made this sensible comment: The Government has gained a little more freedom. On the operative level, it will be easier".

Blessed with a robust commonsense, and less visibly and more crucially, an intuitive gift to grasp the nature of a political situation, and problem, the options available and the implications of each choice, Mr. Yeltsin has understood the nature of an Executive Presidency in the particular context of today's Russia, that is , post USSR. It is the "U" that was crucial. Yet, for all the theoretical literature on "Union" and "the Nationalities question" Mikhail Gorbachev and his learned advisors had taken the wrong road. And the files were piling up, thanks to the vast bureaucracy.

And yet economics in command.

Red Light, Red Light

At the end of a week in which the stock market extended four weeks of decline, interest rates soared above 60%, striking coal miners tied up the country's rail traffic, a severely shaken Prime Minister Sergei Kiriyenko announced sweeping plans to cut spending and raise revenue, wrote Daniel Williams of the Washington Post from Moscow. The targets are revenue, 14 billion roubles (2.8 billion US dollars) and cut spending by 40 billion roubles. The first order to the State organisations: Save Energy.

The lights may burn in the White House but out by 9-10 pm in the hotels, cafes, theatres etc. Even the Bolshoi....? That's difficult to believe. The tourists would flee.

The dialecticians would have to resolve that "contradiction".

Jungle Telegraph

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