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Russia: Yeltsin Calls For State Involvement At Budget Address

Moscow, 24 September 1997 (RFE/RL) - Russian President Boris Yeltsin today made an attempt to gain support of regional leaders for the 1998 budget and tax codes proposed by the government, and said a "new economic order" is needed to guarantee Russia's economic growth.

In a speech opening the autumn session of the Federation Council, Yeltsin called on deputies to support the re-establishment of a greater state role in the economy, and repeated the concept that state interests are above those of Russia's new and powerful private economic and financial interests.

In a move aimed at guaranteeing the support of regional leadership for further government activities, Yeltsin also told deputies that he favors a review of the relationship between the Kremlin and Russia's 89 political districts . He added that he supports the establishment of power-sharing agreements between the Kremlin and the regions for "all the federation subjects" that still lack them.

More than 30 Russian regions have undertaken the Kremlin power-sharing agreements, seen as economically advantageous for the regions.

In contrast with the appreciative tone he used to hail the "stabilizing political effect" of the Federation Council, Yeltsin used strong language to criticize powerful banks, seen as opposing the cabinet-led effort to ensure fairness and consistency of reforms. He said corporate interests' attempts to pressure the government "will not be tolerated."

In his keynote 30-minute speech, broadcasted nationwide, Yeltsin said "a strong authority, a strong state" would not mean a "return to Soviet-era central planning, reminding citizens of regulation of the economy in the style of Gosplan and Gosnab." Yeltsin said that at the beginning of economic reform in 1992, reformers were acting as a "fire brigade," and "the only force able to overcome the country's huge economic crisis was the free market." But he added that "for the transition to a stable economic growth - from which the majority of Russians could really benefit economically - freedom alone is not enough."

Yeltsin also said that many Russians, who have not yet profited from economic reform and are disillusioned with the concept of market and economic reform, will judge the government's tenure in the coming months by its ability to solve social problems and improve living standards.

Yeltsin said authorities "have no intention" of interfering in the legal activities of the "large corporations, concentrated in private hands," that have appeared in the last few years. But, he stressed that any attempts by businesses or banks to pressure the cabinet and Kremlin will not be tolerated. Yeltsin also said that businessmen "must serve society and work for the benefit of Russian citizens."

Interfax news agency quoted comments made separately today by First Deputy Prime Minister Boris Nemtsov as saying that this part of Yeltsin's speech, "in particular," reinforces the concept that "banks and capital will never control the state and its citizens." Nemtsov repeated Yeltsin's pledge that the state sets economic rules that are clear and equal for everybody, and requires rules be obeyed by all economic entities.

Nemtsov is one of the government officials criticized recently by business tycoons controlling Russian media outlets.

Yeltsin has made several statements defending cabinet members in charge of overseeing economic reforms, and last week called six of Russia's most powerful businessmen to obtain a pledge that they would stop a public and vitriolic dispute among themselves and with government members over rules regulating the privatization of state assets.

Yeltsin also pledged Russia would establish a functioning treasury system by the beginning of next year to replace the much-criticized system of so-called authorized banks. He said all federal government accounts will be transferred from commercial banks to a federal treasury, and said the state has "started tackling the economic roots of corruption" by establishing "strict control" over state funds.

Yeltsin said he is "personally" following the progress of such measures, and that "all state purchases are being put on a tender basis." Yeltsin added that "all behind-the scenes allocations of taxpayers' money" are being eliminated. He said his traditional radio address tomorrow will focus on "the problem of the criminalization of power."

Economic analysts in Moscow praised Yeltsin's speech, telling RFE/RL that the address "stresses once again that the Kremlin and the government are consistent in the establishment of clear and transparent economic rules, despite pressure from financial circles."

Yeltsin's speech had a mixed reception from Federation Council members. In comments made to RFE/RL, the majority of deputies said innovations referred to by the President were positive, but that they opposed Yeltsin's exhortation to approve the government-proposed tax reform, and what he called a "realistic budget" for 1998.

The budget is expected to find stiff opposition among regional leaders, since it cuts many federal contributions to regional budgets.

Expecting skepticism, Yeltsin offered regional leaders some concessions and promised that the government will consult them on revising the draft tax code and the 1998 budget. And in a move particularly praised by almost all Federation Council members, Yeltsin said that, in the future, enterprises based in the regions will pay their federal and regional taxes only through regional branches of the Treasury. The practice of paying taxes through representative offices in Moscow would be abolished, Yeltsin said.

Commentators observed that the only Federation Council member who will likely be displeased with Yeltsin's statement is the powerful mayor of Moscow, Yuri Luzhkov. Moscow city authorities have been seen as profiting greatly from the current tax code. Luzhkov left the Federation Council immediately after Yeltsin's address and was unavailable for comment.

Regional leaders also expressed displeasure at Yeltsin's statement that regional governments will bear half the burden for paying wage arrears to state employees.

As Yeltsin was addressing the Federation Council, calling it "an example of political culture," and terming as "political anarchy" the activity of the communist and nationalist-dominated lower house of parliament, the State Duma voted 304 to 52 to override a presidential veto of the Land Code.

Yeltsin had vetoed the code because it would ban the purchase and sale of farmland. Federation Council members told RFE/RL that they supported the Duma vote. The President of the autonomous republic of Bashkortostan, Murtaza Rakhimov, said he is "not in favor of private property of the land."