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Russia: Yeltsin Speaks To An Economically Restive Country

Moscow, 6 March 1997 (RFE/RL) - Russian President Boris Yeltsin gives his annual state of the nation address today against a backdrop of mounting economic problems which have led trade union leaders to threaten a general strike later this month.

Labor unrest has already struck Russia's Far East, where several thousand workers from a submarine shipyard yesterday blocked a highway to the port city of Vladivostok. The workers were demanding payment of back wages which they say total more than $18 million. The workers also demanded the resignation of the government, echoing previous strike actions that have taken on an overtly political tone.

In another sign of growing discontent, a handful of miners in the Far East launched a hunger strike over wage arrears, saying they would not come out of their pit until all their back wages are paid. Russia's NTV television interviewed several of the miners, who explained in stark terms that their demand was simple -- to be paid for the work they have done.

Trade union leaders say they are continuing talks with government leaders over payment of back wages, but that they intend to press ahead with a nationwide strike on March 27. The deputy chairman of Russia's main Federation of Independent Trade Unions, Vyacheslav Goncharov, told Interfax news agency earlier this week that previous pledges by the government to pay back wages have come to nothing. He said the union, which has $45 million, is determined to go ahead with the strike actions.

Outstanding wage arrears at the end of January stood at $8.5 billion. Roughly a fifth of that amount is owed by the federal government, while the rest is owed by regional governments and enterprises.

Russia has been caught in a vicious cycle of non-payments, caused in part by the government's poor tax collection record. Tax collection, which improved late last year, has been well below budget targets so far this year. In order to keep the budget deficit down, the government has been forced to delay payment of pensions and wages. But as a result roughly a quarter of Russia's population now lives below subsistence levels.

The non-payments crisis has put many enterprises into a no-win situation. In one example, Russia's giant Norilsk Nickel group, one of the world's most important producers of nickel and other semi-precious metals, has been locked in an on-going dispute with its workers who are demanding payment of back wages totaling $160 million.

Management says it owes more than $200 million to various government budgets and has a plan to pay off wage arrears by the end of the year. But the workers want their wages sooner and have threatened to stage a one-hour warning strike on March 27 followed by a larger protest on April 2.

The non-payments crisis is also fueling discontent in the regions and straining relations with the federal center. The governors of Irkutsk and Tula regions announced this week they would stop transferring local tax revenues to Moscow, instead using the funds to pay wages and pensions.

However, government officials maintain that the problem rests not in Moscow, but in the regions. Finance Minister Aleksandr Livshits told a news conference last week that part of the budget crisis is caused by regional authorities, who often fail to use federal funds to pay salaries. He said the finance ministry was preparing two decrees that would boost measures to control the flow of finances to the regions.

In particular, he said finance ministry officials had launched a probe last month into charges that some of the funds under a $525 million World Bank loan to restructure the coal industry had not reached laid off coal miners in the economically-strapped region of Kemerova, their intended recipients.

Yeltsin's speech to the joint session of parliament, along with an expected cabinet reshuffle, is widely regarded as a sign of his return to decisive, full-time governing. But already, steps are being taken to deal with the non-payments crisis by dealing with enterprises deep in debt. Yesterday Chernomyrdin signed a resolution ordering indebted enterprises to transfer a controlling stake to the state or face bankruptcy.

According to Interfax news agency, the scheme calls for indebted enterprises to hand over a controlling stake to the Federal Property Fund, and pay off debts in five years. If a company was unable to pay its debts, the state could then sell the shares.

It is unclear which enterprises would be targeted in the scheme, which is due to start next week. But many of the enterprises with major tax debts to the state are Russia's largest companies. Russia's automaker, Avtovaz, the largest tax deadbeat owing nearly 3 trillion rubles to the federal budget, is a likely candidate.