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Russia: Yeltsin Backs His Reformers

  • Stephanie Baker

Moscow, 5 February 1998 (RFE/RL) -- President Boris Yeltsin threw his support behind his beleaguered reformers Anatoly Chubais and Boris Nemtsov today, promising to keep them on until the year 2,000.

At a meeting in the Kremlin, Yeltsin moved to dispel rumors that his two first deputy prime ministers would be fired. As he put it: "I'm saying both will continue to work until 2000."

With a nod to the opposition which has been demanding the reformers be sacked, Yeltsin said: "If they hold their ground, I shall push away all those who are pressing on them. I shall not allow them to be touched."

Opposition deputies in the State Duma have singled out Chubais in particular for criticism. Chubais' position has been shaky every since he was implicated last fall in a scandal involving fees for a book on privatization.

Chubais and Nemtsov were given extensive powers when they were brought into the government last March, but their authority has been steadily curtailed recently. Prime Minister Viktor Chernomyrdin took control over the Finance Ministry and the Fuel and Energy from his two younger deputies last month, which led many to believe they may be removed from the Cabinet altogether.

Yeltsin's backing of his deputies, however, left open the possibility that the two could be sacked if they failed to carry out the president's ambitious agenda for 1998. Both Chubais and Nemtsov have been given responsibility for pushing through tough reforms this year.

Chubais is in charge of improving Russia's chronically poor tax collection rates, considered an uphill battle without tax reform. Nemtsov has been handed the unpopular task of reforming housing and utilities, which will mean higher bills for Russian consumers.

Nemtsov today announced a new presidential initiative aimed at boosting foreign investment. He said the government would give special tax concessions to any company that invested more than $250 million. The measure, outlined in a presidential decree, would require investors to increase the use of Russian parts in their production, bringing it to least 50 percent in five years.

Yeltsin's strong show of support for his reformers comes after he met Chubais yesterday and backed a series of measures aimed at cleaning up Russia's messy public finances and restoring the confidence of foreign investors.

Yeltsin called on the government crack down on abuses of shareholders' rights, including those involving foreign investors.

With an eye on Russia's fiscal troubles, Yeltsin ordered a moratorium on government borrowing in the first quarter of 1998 and urged the government to take a "tough line" against major tax debtors.

The Russian president also told Chubais to ensure that the State Duma passes a new tax code in a first reading by the end of March and instructed the government to draw up a new list of enterprises to be privatized this year, spelling out what sales would be open to foreigners.

The government is struggling to make ends meet in the face of depressed markets, which have caused the cost of public sector borrowing to skyrocket. Investors are now concerned about how the government will cover its budget deficit in light of chronically low tax collection rates.

Yeltsin, however, said that Russia should "live within its means" and directed the government to refrain from new foreign and domestic borrowing for the first three months of the year.

He also instructed the government to draw up a list of budget institutions that need to be enlarged or shut down as part of efforts to streamline spending.

Russia is still without a budget for 1998, adding to concerns about the government's fiscal situation.

Deputies in the State Duma took up the overdue 1998 budget on a third reading yesterday, but failed to make their way through hundreds of amendments by the end of the day. They are scheduled to return to work on the budget today.

The budget had been considered realistic before Asian financial turmoil hit Russia last October, but many believe the government will have a hard time adhering to the plan given the high cost of servicing state debt and the difficulty of borrowing on international markets.

With borrowing prohibitively expensive, the government is expected to rely heavily on proceeds from the sale of state assets this year. Although an ambitious sell-off plan had already been approved, Yeltsin told Chubais to draft a new list of major state assets up for sale in 1998, signaling that privatization may be accelerated.

The biggest prize this year will be the sale of state oil company Rosneft, but a range of other auctions are planned, including a stake in telecom's holding company Svyazinvest.

The terms of the Rosneft sale are due to be announced at the end of March, with many investors closely watching whether the auction will break from the country's legacy of insider deals.