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Russia: Putin Alliance Casts Clouds Over Economic Reform

Russian acting President Vladimir Putin has given conflicting signals on his plans for reforming the economy. Moscow correspondent Sophie Lambroschini reports that with this week's link-up between Putin's Unity party and the communists, forecasting the future of reform has become more difficult.

Moscow, 21 January 2000 (RFE/RL) -- Since being named acting president at the end of last year, Vladimir Putin has been vague on his plans for reforming Russia's ailing economy.

In some comments, he's endorsed market reforms. In other comments, he seems to favor stronger central and state intervention.

Earlier this week, Putin's Unity party banded together with the communists in the lower house State Duma in a surprise alliance. This grouping adds another layer of uncertainty and investors aren't sure what to think.

Aleksei Zabotkin of the Russian brokerage house United Financial Group tells RFE/RL that Putin created worrisome uncertainty for investors by not defending the alliance outright.

Duma speaker Gennady Seleznyov has said Putin was "surprised" by the alliance, and Putin did not comment publicly about it. Russian businessman and self-styled Kremlin insider Boris Berezovsky has said that he is the force behind the alliance.

Zabotkin says Putin's silence creates a negative atmosphere of "suspense." He says if Putin was behind the alliance, then it is a positive factor. But he says if it's true that it was Berezovsky's creation, then the alliance is "worrisome."

The head of the Moscow office of Morgan Stanley, Rair Simonyan, says Putin's role until now has been positive. He says last month's resignation of President Boris Yeltsin and the quick decision to hold early presidential elections helped end some political uncertainty in Russia.

But he says the Duma alliance is disturbing because, in his opinion, there's no apparent logic behind it.

He says the alliance seems to be guided solely by pragmatism, and he says too much pragmatism can compromise a politician's ability to carry out reform:

"Pragmatism can easily become cynicism. [In other words,] your actions are not the consequence of a system of values -- of a system of political or economic priorities. They're only tactical and can go into different directions. [Without a system] of clear values it is difficult to implement a course, all the more economic reforms. And that's a problem -- these things that look like [simple] tactical [steps] can have considerably more negative consequences.

Until now, Putin has seemed to favor a "reform-oriented" economic policy -- but one with a reinforced role for the state as a regulator.

This week, in remarks before the Unity-Communist alliance was made public, Putin qualified his economic policy as "moderate liberalism." He said the state must create what he called "a good investment climate" by strengthening institutions such as the courts.

Putin's think-tank in Moscow, the Center for Strategic Research, appears to be advocating the same type of liberal-statist mix found in Putin's statements.

The center's director, German Gref, recently said the group is planning a "liberal" model with "quite a lot" of state regulation. The think-tank is supported by some of the economy's leading figures, including the head of Russia's gas monopoly Gazprom, Rem Vyakhiriev, and Anatoly Chubais, the head the electricity giant UES.

One of Putin's first economic decisions was to raise wages for state employees by 20 percent. The plan has been criticized by a Russian newspaper as entailing spending of more than 9 billion rubles and possibly igniting inflation.

But Zabotkin says there are also strong signs Putin "will be listening more to market-reformers than to conservatives."

One of these signs is Putin's rejection Tuesday of a controversial measure favored by Central Bank to force exporters to convert their hard-currency revenue into rubles. That idea was strongly opposed by private companies as well as by the International Monetary Fund.

Putin has also hinted that recently appointed Deputy Prime Minister Mikhail Kasyanov could be elevated to prime minister after the elections. Kasyanov is widely viewed as a reformer.

For both Zabotkin and Simonyan, Putin's first test will be to distance himself from the negative pressures of Russia's highly concentrated, "oligarchic" economic system. That will be the initial hurdle.