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Russia: Yeltsin Gives Political Backing To Reforms

Moscow, 18 February 1998 (RFE/RL) -- Russian President Boris Yeltsin's main policy statement of the year, the state-of-the-nation address he delivered to both houses of parliament yesterday, concentrated mainly on economic issues.

Some political analysts in Moscow say he largely re-stated old priorities. However they noted that by doing so, Yeltsin gave an important signal of his personal commitment to a resolute pace of economic reform and indicated that whatever disagreements may occur among top cabinet officials, reform will remain on track.

In his fifth annual address to the parliament, Yeltsin said the draft 1998 budget must be made "realistic," even if that will require amendments to the document. State Duma First Deputy Speaker Vladimir Ryzhkov of the Our Home Is Russia faction told RFE/RL that Yeltsin's comments on the budget were, in Ryzhkov's phrase, "a sensation."

With his demand that parliament adopt cost-cutting amendments, Yeltsin suddenly decided to undermine legislation he and his cabinet had pushed past the lower house of parliament, the State Duma, since last Fall.

After talks between Prime Minister Viktor Chernomyrdin and parliamentary leaders, deputies today put off a final reading of the much-delayed 1998 budget. It will probably be discussed on Friday. Chernomyrdin said he thinks, as he put it, "the deputies will understand," but admitted that the lawmakers' initial reaction had been negative.

In the weeks preceding the speech, there was speculation in the Russian press about what Yeltsin would say. Kommersant daily reported last week that early drafts of the speech had seen the president criticizing reformist cabinet members. Such a scenario would have reflected the balance of forces that emerged after a January reshuffle in which the more conservative Chernomyrdin was seen as the main gainer in the reallocation of duties, at the expenses of his two first deputies, Anatoly Chubais and Boris Nemtsov.

At the weekend, Russian media reported that Yeltsin had suddenly expressed discontent at the final draft and had ordered speech writers, headed by the chief of his administration, Valentin Yumashev, to continue working on the text. Yumashev is considered close to the business opponents of Chubais and Nemtsov, headed by financial tycoon Boris Berezovsky.

Russian commentators noted after yesterday's speech that Chubais recently had called for amending the budget in light of recent negative reflections of the Asian financial turmoil on the Russian markets. Finance Minister Mikhail Zadornov also warned earlier this month that the budget was unrealistic, given that revenues were always well below projection.

At the eve of the speech, Kommersant daily wrote that work on the text would continue to the very delivery of the speech and added, in the newspaper's words, that "the presidential administration was unlikely to surrender without a fight."

Today, the daily Russky Telegraf, owned by Oneximbank, seen as one of the main supporter of Chubais' reform line, said that members of Chubais' team at the last moment had contributed significantly to the final text of the address. As a result, the paper reported that criticism of too fast privatization of state assets had been dropped.

Russky Telegraf also said that an alleged previous statement that "the draft 1998 budget is more realistic than last year" had been transformed into Yeltsin's dissatisfaction with the "unrealistic draft" and the call on parliament to adopt government amendments, axing some $5 billion from the budget.

Most financial analysts in Moscow point out that the tougher version of the speech was aimed at encouraging wary international investors, worried about the drift in Russia's economic policy. Even most importantly, Yeltsin's speech represents a positive signal for the International Monetary Fund, whose head, Michel Camdessus, is seeking this week in Moscow signals of Russia's greater financial discipline.

Camdessus arrived in Moscow hours after Yeltsin's address yesterday. He is meeting today Chernomyrdin, Chubais and Nemtsov and will hold talks with Yeltsin tomorrow. The talks are focusing on the government economic program for 1998.The IMF is expected to decide on the release of a $670 million tranche of the organization's $10 billion loan to Russia. Last year the IMF froze a $667.5 million tranche after the government undershot budgeted tax revenues. Funds were released only last month.

Camdessus is scheduled to give a press-conference in Moscow at the end of the talks. Foreign investors, after Yeltsin's speech, are now awaiting the IMF's verdict on the country's economic soundness. Chubais said today that he is optimistic about the IMF verdict.

However, an analyst at the Russian-European Center for Economic Policy, Rory McFarquhar, told RFE/RL in a telephone interview that Yeltsin, despite outlining some new measures, has not given the government a coherent agenda aimed at achieving the growth for Russia's economy that he has stated for 1998.

McFarquhar also said: "If last year the full text of Yeltsin's address was prepared by speechwriters close to the reformers, this year it included only a diluted message from the their team."

Other observers say that this means that Yeltsin, as always, was seemingly driven once again by the desire to re-establish himself at the center of political power. They say Yeltsin's warnings to deliver on the economy were addressed to the reformers, but also to Chernomyrdin.

Yeltsin's habit of playing rivalries among top members of his administration to maintain himself at the center of power has so far been one of the main factors weakening the pace of reforms in Russia. The Russian president said in his speech that "We must all learn the lesson that sluggish reforms result in damage. Time lost has his price." Future developments will show whether Yeltsin included himself among those who should learn this lesson.