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Russia: Moscow Mayor Faces Challenges

Moscow, 27 November 1998 (RFE/RL) -- The Moscow city government's budget meeting this week was dominated by two issues: how to maintain services amid the deep economic turmoil affecting the country, and where to get the necessary funds to guarantee existing city programs. For the populist mayor of Moscow, Yuri Luzhkov, the realization that the Moscow city government's once-bottomless coffers are running dry brings several important challenges.

The first is economic. Until recently, Moscow was considered an island of relative prosperity in a sea of economic disarray. But as Russia's economic crisis deepens, the image of the Moscow miracle, and Luzhkov's reputation as one of the few Russian political bosses who can get things done, is rapidly coming under threat. Political analysts say that to preserve his image, Luzhkov the populist has to transform himself into Luzhkov the realist.

At the meeting of the Moscow city government on Tuesday, deputy mayor Yuri Razlyak said that projected budget revenues in 1999 will be the same or even less than this year.

Other city officials said the situation is compounded by the fact that tax collection is dramatically shrinking. Meanwhile, in order to service some $1.5 billion in foreign debt, Moscow will have to pay $120 million in 1999. Officials said the sum is equal to 45 percent of the city's present hard currency reserves.

One of Luzhkov's most persistent critics, Aleksey Ulyukaev, deputy director of the Institute for the Economy in Transition, told RFE/RL that "Moscow's budget situation is very serious." He said "the real base of the budget is shrinking."

Luzhkov's second challenge stems from the dilemma over how to introduce unpopular measures without damaging his position as one of the main contenders for the Russian presidency. Political analysts say that Luzhkov's weekend launching of a political movement, Otechestvo (Fatherland), represents the opening of his presidential campaign.

Having decided to abandon a short and largely unproductive flirtation with the communists, Luzhkov said his movement would "absorb everything that is logical from the left and everything that is logical from the right," but would "avoid all radicalism either of right or left."

Acutely aware of the need to maintain social services despite Moscow's economic troubles, Luzhkov told city officials at this week's city government meeting that social programs, including plans to build new schools and medical clinics in Moscow, should continue.

Financial officials replied that new funds to make up the shortfall in tax revenues could come from new Western credits, from increased revenue earned by government-controlled alcohol sales, or from the introduction of a new sales tax and other unpopular fiscal measures. Luzhkov, who said that fresh Western credits should be avoided, was forced to approve some unpopular moves.

The price of monthly Moscow city travel cards will go up by one-third next January. Also, Moscow apartment rents and utility prices will rise 30 to 50 percent over the next few months. In addition, water prices will increase 45 percent in December, while rents will go up another 50 percent next April and heat and electricity by 30 percent next July.

According to Ulyukaev, unpopular measures have been taken, but "without too much publicity." He added that Luzhkov's social program for Moscow is unrealistic and "financing it will be difficult, but (for political reasons) it must continue up to the presidential elections."

At the city government meeting, Luzhkov also introduced a new colleague. President Boris Yeltsin's former spokesman, Sergei Yastrzhembsky, abruptly fired in mid-September, was appointed this week after much speculation as Luzhkov's deputy in charge of public relations, regional and international affairs.

Yastrzhembsky has not denied Russian media reports that he was fired by Yeltsin for promoting the Moscow mayor as a candidate for prime minister over Yevgeny Primakov.

Other former Yeltsin aides, including former Security Council chief Andrei Kokoshin, former Constitutional court representative Sergei Shakhrai and former Interior Minister Anatoly Kulikov have also joined forces with Luzhkov.

Russian media have speculated that Yastrzhembsky would be brought into the Moscow government to promote Luzhkov in his presidential bid. In the past, he was widely credited with giving a smooth, professional face to the Kremlin press service and frequently rescuing Yeltsin from his own words and actions.

Attending his first city hall meeting this week, Yastrzhembsky did not rule out the possibility of assuming the role of Luzhkov's new image maker. On Tuesday, he warned journalists that the race for the presidency has not yet officially started, but said that if he were asked to help Luzhkov, he would certainly do so:

"If the electoral trumpet sounds, I think I will take part in this campaign."