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Western Press Review: Russian Economy Fails To Transform; Oil Flows From Iraq

Prague, 10 December 1996 (RFE/RL) - Russia's economic woes come under the scrutiny of the Western press today as analysts examine why the country's economy has failed to turn around five years after the collapse of the Soviet Union.

INTERNATIONAL HERALD TRIBUNE: Russia's economy is still shrinking

Fred Hiatt writes in today's: "It has been five years since Boris Yeltsin signed the Soviet Union into oblivion, yet Russia's economy, according to official statistics, is still shrinking. This is not how the transition from communism to free market was supposed to work...Estonia and Czechoslovakia (where the transformation was successful) still had memories of prewar commerce and rule by law; Russia had been under communism a full extra generation...Russia's economy was the most distorted, with not only factories but entire cities having no rational economic reason to exist...Economic stabilization, privatization, free prices -- all that is essential, even in Russia, but is not enough."

"You have to attract foreign investment...To attract investment you need some predictability -- in contracts, in tax collection, in the law. Russia has none of that. Contract enforcement comes too often via contract murder. Tax collection is sporadic, but confiscatory...The coming year will be a pivotal one for Russia, to show whether normal rules of economics can apply."

WALL STREET JOURNAL EUROPE: Soviet-era corporate directors are under attack

Gregory L. White of the AP-Dow Jones News Service focuses on Russia's First Deputy Prime Minister's efforts to reform some of the country's oldest and biggest industries, in today's. White says: "Russia's Soviet-era corporate directors are under attack, and Vladimir Potanin is leading the charge. The 35-year-old former banker, who took over as first deputy prime minister in August, says he is just trying to enforce the laws of economics among the Soviet-era managers who still rule much of Russia's industry with feudal authority...At stake are the commanding heights of Russia's economy -- both the metals and manufacturing behemoths that were the pride of the Soviet economy, and the sprawling banks that serviced them. Many of these concerns have been driven by their management to the edge of collapse..."

"Mr. Potanin is using the government's revenue crisis to step up the pressure on the Soviet-era directors. In recent weeks, he has summoned managers of the worst tax deadbeats before the special interagency commission on debt, which he chairs, employing the threat of bankruptcy against those who won't make a deal."

WASHINGTON POST: Factory production is in a deep depression and it's still falling

David Hoffman says a steel mill in Zlatoust, Russia, exemplifies the industry's great leap backwards. Hoffman writes: "The great leap from Communist rule to a free-market system has, after nearly five years, led to a severely distorted economy. Some industries, such as oil and gas, are riding high...But a big, black hole remains in the Russian economy; factory production is in a deep depression, and it is still falling. The reasons can be seen here, at the Zlatoust Metallurgical Factory..."

"From grocery stores to steel smelters, Russia's economic troubles are on display here. The workers still make steel, but they are not making headway in the new Russia. The factory is chock-full of aging equipment and has barely begun modernization and restructuring...Moreover, the factory's day-to-day survival is wrapped up in the primitive bartering system that has taken hold across Russia. Much of the Zlatoust steel is traded for cars, refrigerators, medical services and even a recent shipment of pickles to the company store."

FRANKFURTER RUNDSCHAU: The government has had a series of successes that no one believed would happen

A report by Von Florian Hassel in today's edition is less pessimistic as it analyzes Russia's budget problems for the coming year. Hassel notes the deadline for finalizing the budget is Sunday. "If before Sunday, Finance Minister Alexander Livshits fails to come up with a plan acceptable to parliament, he must then prepare an emergency budget for the first three months of 1997. If this also fails to get parliamentary approval, President Boris Yeltsin and Prime Minister Viktor Chernomyrdin must then continue to govern in the new year with the financial figures from the last quarter of 1996."

"At first glance, it appears that chaos continues to reign in Russia. But appearances are deceptive. In recent weeks the government has, in fact, had a series of successes that, until the last minute, no one believed would happen. These successes included a better-than-expected prognosis of Russia's economic situation from a leading American analytical agency, the government's offering of Eurobonds on international financial markets, after a long pause, and, finally, progress in collecting taxes -- vital for the continued credits from the International Monetary Fund."


United Nations Secretary General Boutros Boutros-Ghali's authorization yesterday for Iraq to go ahead with limited oil exports in order to buy food and medicine for its people has also attracted the attention of the Western press.

WALL STREET JOURNAL EUROPE: Hussein has a propensity for cloaking broader aims in a mantle of humanitarian need

The paper warns that the first oil exports from Iraq since the invasion of Kuwait should be scrutinized carefully. The paper says: "There's a humanitarian case to be made for chaperoning Iraq back into the world oil market, but it should come with a big dose of caution. Saddam (Hussein's) propensity for cloaking his broader aims in the mantle of humanitarian need should be recognized for what it is; an attempt to use the suffering he has imposed on the Iraqi people to bring an end to an isolation that is damaging his power base and war-making capabilities. So, whatever relief the U.N. grants the Iraqi people should not be allowed to benefit their leader."

WALL STREET JOURNAL EUROPE: The industry had been counting on Iraqi oil flowing before now

Anne Reifenberg reports today that the new oil sales will impact the world markets, but not significantly. "While oil futures prices fell, they were dragged down as much by weakness in heating oil values as by the imminent addition of some 600,000 barrels a day to the world crude supplies," she writes. "The 600,000 barrels a day or so of crude that will be sold under the accord will hit world markets in the northern hemisphere's winter, when supplies are tightest. The industry had been counting on Iraqi oil flowing even before now. The fact that the oil didn't appear in the third quarter has helped keep prices high. Oil is now trading for about five dollars more a barrel than it was a year ago. With Baghdad back in the exporting business in 1997, prices may soften, after the peak-demand winter season ends and before refineries start cranking up for the summer."

NEW YORK TIMES: President Bush allowed Saddam and his SS to stay in power

A.M. Rosenthal says in a commentary in today's edition that Saddam Hussein is stronger now than when the sanctions were first imposed, that the United States has lost its intelligence capabilities in the region and that Saddam has built up a supply route to assure himself of receiving banned missile parts. Rosenthal writes: "It was President Bush who made the terrible blunder of allowing Saddam and his SS to stay in power. But it became Clinton's responsibility the day he took office at least to prevent Saddam from growing in strength and influence. He failed."