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Russia: Yeltsin Orders Back Wages Paid By Year's End

Moscow, 9 July 1997 (RFE/RL) - President Boris Yeltsin has decreed that back wages to all state sector workers - totalling over $5 billion - should be paid by the end of the year. The action was clearly aimed at building on the Russian Government's recently declared success in fulfilling its pledge to pay pension arrears by the end of June.

But Yeltsin's decree on back wages, signed yesterday, still reflects a revised payment schedule. Last week, before leaving Moscow for a vacation, Yeltsin had promised that all wage arrears would be paid by October 1.

At the time, Yeltsin's remarks created concern among cabinet members in charge of economic issues. First deputy Prime Minister Anatoly Chubais said on television that the deadline was impossible to meet and asked for an extension. Following pressure from other key ministers in his reformed cabinet, Yeltsin yesterday signed a decree that partially reflects a change in his previous pledge.

Yeltsin made clear that back wages for servicemen in the demoralized and unreformed Russian army are a priority. He decreed that military wages should be paid in two months. In another decree, Yeltsin ordered wage arrears among other public sector employees, such as teachers, doctors and miners to be paid by January 1, 1998.

Yeltsin's move seems to be related to widespread concern and discontent in the military, reflected in an open letter addressed to him last month by the chairman of the State Duma's Defense Committee, General Lev Rokhlin. The letter severely criticized Yeltsin for not being serious about military reform and for being responsible for the lamentable situation in Russia's armed forces.

Yeltsin signed these and other decrees aimed at finding ways to finance the operation after meeting First Deputy Prime Minister Boris Nemtsov and other top cabinet and Presidential administration members. Nemtsov traveled to Karelia in Northern Russia, where Yeltsin is vacationing, to submit a detailed plan to fulfill the back-wages decrees. Nemtsov said that pressure on the President to change the payment deadline was motivated by the wish to "avoid misleading people with unrealistic promises."

During a news briefing in Moscow today, it was Nemtsov who estimated Russia's total debt to public-sector workers at more $5 billion. Nemtsov said the figure includes the wage backlog to the armed forces, which amounts to some $860 million.

Nemtsov also said that only in 15 of Russia's 89 regions are salaries paid regularly or delayed for no more than a month, while wage delays exceed three months in 34 regions. He added that the situation is worst in Siberian and Far Eastern regions. He also said that in several Siberian regions (Buryatia, Khabarovsk and Chita) public-sector workers have not been paid for more than six months.

Nemtsov's role in coordinating the finding of funds to clear the wage arrears is seen as crucial in Moscow. Nemtsov earlier conducted most of the negotiations that led Russia's giant gas monopoly Gazprom to pay off some $1.5 billion in back taxes last month. Analysts say this money has been essential for the payment of back pensions. They note that the government's ability to obtain similar sums quickly from other tax debtors and from increased revenues will determine its success in fulfilling Yeltsin's last decrees.

Yeltsin said the arrears problem can be solved only through joint efforts by his administration, the government, regional authorities and banks. He said the joint effort should be aimed at determining how to cut spending and increase revenues as well as how to use loans and receipts from the sale of property and securities.

As part of the effort, Deputy Prime Minister and Chairman of the State Privatization Committee Alfred Kokh told reporters today that Russia's state-controlled utilities monopoly Unified Energy Systems (UES) would issue convertible bonds starting in October. Kokh said the UES bond issue, worth five percent of the company's shares, would allow the government to generate at least $870 million.

Nemtsov said the money would be used to pay back wages. Yeltsin said the government would not resort to inflationary measures suggested by the communist and nationalist-dominated State Duma to meet his pledge. He said that he would not print more money under any circumstances.

Nemtsov said funds would likely come from the government's crackdown on the largest tax debtors, from privatizing some large companies and from developing several projects to attract foreign investment.

Yeltsin yesterday also signed decrees on production-sharing agreements between Russian and foreign firms and a decree on quotas of oil sales. Production-sharing accords allow foreign partners to gain profits in the form of output on the ventures they invest in. The ventures usually involve extraction of oil and other natural resources.

Nemtsov today said investment in four Far East oil and gas projects could generate $47 billion. Two of the projects, Sakhalin-1 and Sakhalin -2, involve the development of offshore oil-fields.

Nemtsov said the realization of the four projects is expected to bring Russia more than $90 billion and a one-half of the oil output. He also said that the projects would create 160,000 new jobs.

As Nemtsov was meeting Yeltsin yesterday, Prime Minister Viktor Chernomyrdin chaired a session of the Emergency Tax Committee in Moscow. He promised to crack down on some 50 big companies, particularly in the oil and gas sector, that are not paying their taxes. The State Tax service said the sector owes the government some $5 billion.