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Russia: Analysis From Washington -- Power Countervailing And Otherwise

Washington, 15 June 1998 (RFE/RL) -- The weakness of the Russian state increasingly allows privatized firms there to challenge its authority, but the strength of these firms on occasion may help Moscow to extract more resources from the international financial community.

That dual role of large Russian firms was highlighted on Saturday when Gazprom chief Rem Vyakhirev told European officials that his firm could not afford to sign new gas export contracts if the Russian government implemented plans to collect more taxes from his company.

But because the International Monetary Fund reportedly has demanded that Moscow break up the Russian gas monopoly, Vyakhirev's threat at a meeting in Sardinia could trigger a new financial and hence political crisis in the Russian capital.

In a speech in Sardinia to the European Business Congress, a group Vyakhirev himself founded, the Gazprom chief said that Moscow's plans to impose a value added tax of 22 percent and an excise duty of 30 percent on exports would effectively "bury" future gas supplies from Russia to Europe in the future.

Such taxes, Vyakhirev said, were making the export of gas increasingly unprofitable, with his company now losing approximately "a dollar for every 1,000 cubic meters." No privately owned firm, he noted, could continue to operate for very long with such losses.

By painting the situation in such dark colors, Vyakhirev was clearly hoping to use the threat of reduced natural gas deliveries to force the West to drop efforts to force the Russian government to improve the collection of taxes particularly from large firms like his.

But Vyakhirev's effort to enlist Western support for his company against the Russian authorities may paradoxically work to the advantage of that very government as well.

In order to ensure that Russian gas keeps flowing westward, Europeans and those dependent on the European economies are likely to press both for a more understanding approach to Moscow's difficulties with tax collection and for additional loans to the beleaguered Russian government.

And they may even back away from the support they apparently have given to IMF plans to demand that the Russian government break up Gazprom and make other specific reforms if Moscow is to receive more aid.

If Vyakhirev's threat works in that way, the Russian government would be the beneficiary in the short run, but the Russian economy and political system might be its victims over the longer haul.

Greater IMF assistance and less IMF micro management of the Russian economy could indeed give Moscow the resources it needs to get through its current financial crisis and also allow it greater freedom of action in dealing with powerful interests in Russian society.

But this victory could prove a Pyrrhic one both for the Russian government and for Gazprom itself.

More foreign assistance and fewer conditions on it also allows the Russian government to put off some reforms that will be necessary if it is to put its economy back on track. And to the extent that happens, the crises that Russia is going through may be put off but will not be solved.

And any success by Gazprom in holding both the Russian government and Western Europe hostage on tax collections and gas deliveries is likely to increase demands from reformers in the Russian government for breaking up a domestic firm with so much power.

Such demands and the certain resistance by Gazprom and other members of the oligarchy that now dominates the Russian economic scene could trigger a new and potentially more serious political crisis.

And that crisis would provide another measure of the strengths and weaknesses of both sides, as well as of the ways in which each continues to depend on and support the other.