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Russia: IMF Tries To Force Breakup of State Rail System

Moscow, 24 February 1998 (RFE/RL) -- During last week's negotiations with Russia's government, the International Monetary Fund (IMF), headed by Managing Director Michel Camdessus, told President Boris Yeltsin that Russia's national rail system must be broken up and privatized. This is a previously undisclosed condition, which the IMF has now placed on its loan agreement with Russia.

The IMF Deputy Representative in Moscow, Tom Richardson, refuses to clarify for RFE/RL Moscow the IMF's venture into setting Russian railway policy. But he did not deny that the IMF has issued an ultimatum for the breakup of the state-owned system.

The IMF push on Russia's railways flies in the face of a public promise from President Yeltsin last September to preserve state control over passenger and freight operations, and to keep the main territorial operating divisions intact, under Ministry of Railways control. Similar promises have been given since then by Boris Nemtsov, the first deputy prime minister overseeing Russia's state monopoly utilities; and by the Railways minister, Nikolai Aksenenko. For different reasons, the two ministers had agreed to preserve the national railroad system in its present form for at least two years, while spinning off and privatizing a number of subsidiary operations.

For Nemtsov, it is important in the short term to preserve the huge revenue contribution which the national system makes to the federal budget. Despite falling passenger volumes and freight, and rising costs, Russian railways' revenues have grown steadily. They were $9.9 billion in 1996; and $11 billion in 1997. This year, they are expected to reach more than $15 billion.

Aksenenko, the regional rail administrators, Russia's cash-strapped regional governments, the railway workers' union and the Russian parliament are all opposed to privatization of the system. They fear this will result in the closure of vast sections of track, and the loss of the employment and welfare benefits, which the railroad provides in Russia's isolated Siberian and Arctic regions.

Moscow rail sources tell RFE/RL that Camdessus and the IMF tried to take Yeltsin by surprise by raising the rail privatization demand at their Kremlin meeting. The sources say Camdessus took advantage of the absence of Nemtsov and Aksenenko at the Kremlin session to press his point. IMF Deputy Representative in Moscow Richardson again refused to provide detail.

Russia's Rail Ministry reports the volume of passenger traffic (108 million long-distance passengers and 1.35 billion commuters) fell by 7 percent compared to 1996. Freight traffic fell in 1997 for the fourth consecutive year. The decline in 1997 over 1996 was about 3 percent. The Rail Ministry has announced a plan to continue cuts this year in long-distance passenger fares and in freight tariffs.