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Russia: New Government Takes Measures To Manage Job Crisis

Moscow, 26 May 1998 (RFE/RL) -- Russia's new government has gained a small window of opportunity to persuade angry coal miners, state-sector employees and increasingly anxious Western investors and domestic business leaders of its ability to govern. However, economic analysts argue that the government will have to show huge political and economic initiative, if it wants to achieve some much-needed results.

Following two days of intense negotiations with top government officials, at the week-end, frustrated coal miners lifted a ten-day blockade of the Trans-Siberian and North Caucasus railroads. The national protest, after a week of wildcat protests, immobilized more than 600 freight and passenger trains on the tracks across Russia, inflicting damages that the Transport Ministry put at about $29 million. The blockades also hurt many industries, which could not transport their goods to markets or obtain vital supplies.

The temporary resolution of the issue came as a surprise to many, as it followed a first day of unsuccessful negotiations in the Siberian region of Kemerovo, in the southern Rostov region, and in the northern Vorkuta region, conducted respectively by First Deputy Prime Ministers Oleg Sysuev and Boris Nemtsov and by Economics Minister Yakov Urinson.

Thousand of angry miners, who have not been paid in months -- and, in some cases not in the last two years -- seemed in no mood to back away from their demands to receive full payment.

In his Friday radio address, President Boris Yeltsin raised tensions as he told strikers their protest was "unreasonable," and that they were making an already difficult situation worse. Yeltsin said that the protesters "have ceased to be an instrument of resolving economic issues and threaten to cause huge damage to the whole of the country."

Prosecutor-General Yury Skuratov quoted the President as saying that the miners had "gone too far," and that Yeltsin believed that coal miners "have not yet learned to work in a market economy."

The immediate reaction of miners was to vow to block the railways until all the overdue wages were paid. However, after intense negotiations, the miners agreed to end the blockade -- for the time being. Key rail lines to Eastern and Southern Russia were re-opened. Officials in Kemerovo said Monday that it will take about a week for trains on the Trans-Siberian railway to get back on schedule.

Only miners in the Artic Komi Republic continued to prevent freight trains from traveling on the Moscow-Vorkuta railroad. Miners complained that Urinson, who conducted the talks on behalf of the government there, had been "poorly prepared for negotiations."

The government has long pledged to solve the problem of overdue wages in the coal industry -- and in other sectors -- but, little has been done, driving miners and their families to become, what is commonly referred to as "prisoners of their own mines."

Friday, First Deputy Prime Minister Sysuev was confronted by an angry crowd of miners, other workers and families, who had been calling for the resignation of Yeltsin and the entire government. Sysuev said he had not come with "empty promises," as the government understood the depth of the problem in the mining industry and was taking steps to resolve it. He also said "the authorities have realized that economic reforms are irresponsibly conducted faster than accompanying social support is given."

First Deputy Prime Minister Nemtsov, speaking after his return to Moscow, said, "many words have been said in the past, but now there is time only for decisive action." And, he added, "the government will immediately act to create new jobs for workers made redundant, when financially ailing mines are closed down."

Closing down unprofitable mines is a measure international financial institutions favor, but which governments have been hesitant to implement. The government's inability to tackle the issue of restructuring the coal industry, in a more resolute way, has led to the spiraling of the wage arrears problem.

Nemtsov said the government favors closing down loss-making mines. But, he added that this will take place only where enough money is found, along with the creation of new work places, and creation of a proper social safety net, including the possibility of relocating and employment in different regions for miners who lose their jobs.

Kemerovo Governor Aman Tuleyev, a former top Communist leader who has expressed his support for new Prime Minister Sergei Kiriyenko, took part in the negotiations together with Sysuev. Tuleyev, who enjoys wide respect among miners in his region, said the most difficult issue addressed during negotiations between the government and strike representatives was not the payment of back wages, but, rather, the way the government would address the problems of workers made redundant when unprofitable mines are closed.

The government's approach was sufficiently effective to persuade miners to lift their blockade. However, Tuleyev, who told the miners he would guarantee the new government fulfills its obligation, said miners would review the results July 1, and would renew their blockades if they were not satisfied with the progress made.

On the Nemtsov-led negotiations in Rostov, Russian news agencies reported state funds were found to pay three months' back wages. And, according to Itar-Tass, it was decided to withdraw money from the accounts of intermediaries, who are supposed to trade the mines' production on their behalf. However, according to government data, the middlemen owe more than 500 million rubles to the mines, and special teams are being formed to investigate possible diversion of money that was supposed to go to wages and to meet other needs of that region's mining sector.

Most of the unpaid wages are not owed by the state, but directly by the mines, a great number of which have been privatized. However, company heads say they cannot pay their workers, because they are not being paid by the government and private customers who buy the coal.

Despite their readiness to appease the miners, Sysuev and Nemtsov did not contradict Yeltsin and Kiriyenko, who, last week, insisted that the government would not give in to mounting demands to loosen its austere monetary policy to pay all the miners' back wages. The two ministers explained to the miners that there would be no printing of money, and no re-distribution of funds between regions or between different sectors of the economy.

Kiriyenko last week had said the new government "is responsible not only for putting out today's fire, but also for the future of the country's economy as a whole."

Overall, analysts suggest that the government's performance during the crisis was effective. Nikolay Petrov, a senior associate with the Carnegie Center in Moscow, told RFE/RL that the government "has dealt rather well with this crisis... despite subjective attempts by other people to exploit the outcome of the situation to their ends."

According to Petrov, trade union activists in the regions have played a much more positive role in the negotiation than national leaders, and the strike once again showed that "big trade unions, keeping their Soviet-style traditions and their immense properties, don't have real influence over the workers, who are driven mainly by anger and frustration."

Rory McFarquhar, an analyst with the Russian-European Center for Economic Policy, told our correspondent that the government had "successfully defended the budget vis-a-vis the miners' demands." However, he adds that "the overall economic situation is very precarious, as crisis seem to feed on themselves." According to McFarquhar, "objectively, Russia's economic situation was worse in the past two years, but subjectively, for a confluence of difficult circumstances, the new government is in a situation where many people, including concerned investors and financial operators, have lost their previous confidence and perceive it as being worse now."