Chernomyrdin Accord Crumbles, Threatening Russian Government:
Close to Crumbling
08/30/98
By BETSY MCKAY Staff Reporter of THE WALL STREET JOURNAL
MOSCOW -- Russia's political crisis deepened Sunday when an accord aimed at easing the confirmation of Viktor Chernomyrdin as prime minister fell apart only hours after it was hammered out by the country's feuding leaders.
The failure of the deal makes it highly unlikely that Mr. Chernomyrdin will win swift parliamentary endorsement -- and thus threatens to leave the country without a government as it tries to fend off
financial collapse and prepares to welcome President Clinton Tuesday.
President Boris Yeltsin appointed Mr. Chernomyrdin a week ago, only five months after firing him in favor of a young reformer, Sergei Kiriyenko. The Communist-dominated lower house of parliament,
the Duma, was originally due to vote Monday on Mr. Chernomyrdin's reinstatement. The vote is now likely to be postponed.
The disarray intensifies a quandary in Washington and other Western capitals over how to respond to Russia's economic crisis. A $4.8 billion infusion of cash last month from the International
Monetary Fund did nothing to halt Russia's slide, and Moscow's growing political uncertainty could jeopardize a second tranche of $4.3 billion due next month.
On Friday, the IMF's managing director, Michel Camdessus, called for a "clear demonstration of clarity of orientation of the government."
The Kremlin, Mr. Chernomyrdin and leaders of the Duma's main factions spent the weekend frantically negotiating what was to have been an 18-month truce. The proposed political cease-fire lasted one afternoon. Communist Party leader Gennady Zyuganov said Sunday that his followers, who make up the biggest group in the Duma, would reject Mr. Chernomyrdin's candidacy. Far-right and liberal legislators said they would do the same.
"Mr. Chernomyrdin is an accomplice with Yeltsin in the destruction of the past five years," said Mr. Zyuganov, who earlier in the day had given tentative approval to the power-sharing deal.
The accord would have diminished President Boris Yeltsin's authority by giving parliament a say in the formation of the cabinet and would have committed the Kremlin to vague promises of constitutional reform. But Mr. Zyuganov later reversed himself after a meeting with party leaders. In a television interview Sunday night, he said the document agreed upon earlier in the day left too many loopholes and "does not guarantee anything."
The Kremlin also seemed to back away from the accord, saying that amendments to the constitution demanded by the Communists shouldn't be rushed, Interfax news agency reported. Mr. Yeltsin on Friday vowed to stay in office until the end of his term in 2000, despite pressure from political opponents to resign.
"I'm not going anywhere," he said.
The failure to agree on confirming Mr. Chernomyrdin means that the debate over the new prime minister could drag on for days or even weeks, diverting attention from a financial crisis that has
sent the ruble into a nosedive, forced a default on government debt and reignited inflation.
Mr. Chernomyrdin assured the West over the weekend that Russia wouldn't reverse its market reforms. He put Boris Fyodorov, an acting deputy prime minister who is highly regarded in the West as a tough champion of fiscal austerity, in charge of drawing up measures to extract Russia from its financial crisis. However, another of Russia's prominent reformers, Anatoly Chubais, was fired by Mr. Yeltsin on Friday as Russia's liaison with international lenders.
In an interview with a German newspaper, Mr. Fyodorov promised foreign investors better terms in the settlement of Russia's defaulted government debt, but gave no details. He said the terms would
be "changed to the investors' benefit." Russia two weeks ago imposed a 90-day moratorium on the repayment of foreign loans to Russian banks and companies and defaulted on $40 billion of ruble-denominated government bonds.
Mr. Chernomyrdin also invited the architect of Argentina's free-market reforms, Domingo Cavallo, and some Moscow reformist think tanks to advise on crisis measures. Mr. Cavallo, a Harvard-trained economist, tamed Argentina's inflation by introducing a currency board. In
comments published in an Argentinian newspaper Sunday, he said he might advocate the same step for Russia.
But Mr. Chernomyrdin has raised eyebrows in the West by consenting to an economic plan drawn up by a commission that contains some measures which harken back to the Soviet command economy, including currency controls and the nationalization of the oil sector and other struggling strategic industries.
Mr. Chernomyrdin has suggested that he may form a coalition government, but a coalition would be unlikely to push through the tough reform measures urged on Russia by the IMF. Mr. Zyuganov said
Sunday that any agreement between parliament and the Kremlin should include a promise that the new cabinet would review some of the conditions set for Russia by the IMF, such as a promise to break up its gigantic natural-resources monopolies.
"Time is of the essence for Russia to avoid a complete economic collapse," said Alexander Konovalov, president of the Institute for Strategic Assessments, a Moscow think tank. "If you have a
government made up of all the political powers represented in government, it will be an animal that cannot move."
Mr. Camdessus warned on Friday against a "populist scenario" that he said would lead to hyperinflation and social unrest. He said the new government must demonstrate a clear commitment to reform in order to qualify for a second tranche of an IMF-led, $22.6 billion
stabilization package. Russia could still receive that tranche as scheduled in September, he said.
Western governments are also pressuring Moscow. German Chancellor Helmut Kohl, who spoke Sunday by telephone with Mr. Yeltsin, said Russia must deepen market reforms before it can win any new international aid.
Meanwhile, the financial crisis is taking an increasing toll on the economy. A black-market trade in the ruble, not seen since the Soviet era, has reappeared on Moscow's streets. A growing number of
importers are holding up their shipments to Russia, wary of losing money on the wildly fluctuating exchange rates.
On Saturday, the ruble appeared to be gaining strength at exchange booths in Moscow. The ruble was trading at 9 rubles per dollar, stronger than the 12 per dollar rate earlier last week. The ruble is
still languishing, however: The rate was about 6.3 rubles per dollar before the ruble was effectively devalued earlier this month.
The effects of the ruble's plunge could be disastrous, political analyst Vyacheslav Nikonov warned, because in some regions 60% of foodstuffs are imported. A decline in the ruble's value raises the
cost in rubles of goods that are traded in dollars, marks and other currencies. Mr. Nikonov said some regions may be forced to introduce food-rationing coupons soon if the crisis continues. |
