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Big Trouble Waits In The Wings (Int'l Edition)


International -- Intl' Business: RUSSIA

BIG TROUBLE WAITS IN THE WINGS (int'l edition)

Late this summer, Boris N. Yeltsin staged a big political comeback. After weeks of treatment in a Moscow hospital for heart problems, the 64-year-old Russian President had all but decided he would run for another five-year term. Gone was his erratic, seemingly drunken behavior. Instead, a spiffed-up, dried-out Yeltsin seemed to be in charge again. But on Oct. 26, hopes that the brave leader who stood up to coup plotters four years ago was making a comeback flew away with the helicopter that rushed him to a Moscow hospital yet again.

Yeltsin's relapse is another warning that his political days are numbered. It also is touching off a worrisome succession scramble in the runup to legislative elections on Dec. 17 and the presidential vote next June. A return to communist central planning seems unlikely, because about 75% of the Russian economy has already passed into private hands. But the communists could well sweep the parliamentary elections, which would pave the way for a hard-liner to replace Yeltsin next year. "After the Duma elections," says Dimitri K. Simes of the Nixon Center for Peace & Freedom in Washington, "you will see a more conservative, more nationalist Russian government."

BELLICOSE STANCE. What would be the effect of a communist takeover of the Duma? A more statist legislature could spark inflation by busting the budget with bailout subsidies to pensioners and failing factories. It also could slow the continuing reforms of the Russian economy, toughen up terms to investors, and take a far more bellicose posture in international affairs.

Many Westerners hope that Prime Minister Viktor S. Chernomyrdin, who is well regarded by business executives, will emerge to counter those trends. If Yeltsin died or resigned, Chernomyrdin would automatically succeed him, and elections would be held three months later. Or if Yeltsin decided against running for health reasons, Chernomyrdin would be well positioned to run as his successor in June elections. The trouble is, many voters associate Chernomyrdin's party--Our Home is Russia--with the corrupt ruling elite. The party is doing poorly in the polls. If it fails in the December elections, Chernomyrdin may end up being ousted as Prime Minister as early as January.

The leading contender to replace Chernomyrdin is Yuri Skokov, an anti-reform bureaucrat from the defense industry. Skokov is currently allied with General Alexander Lebed, a hard-line nationalist. All could be presidential candidates, along with liberal economist Grigory Yavlinsky, who is popular with voters but who so far has failed to get his party registered for the December elections.

WET BLANKET. If either Skokov or Lebed wins the presidency, Russia's reforms will be slowed down. Although Skokov insists he would make the Russian market more orderly and thus more attractive to foreign investors, his efforts to fight crime and corruption would likely put a damper on private business. "We could see more authoritarian tactics--that is certain," says a French official. Lebed's economic views aren't generally known.

Either of the two could be bad news for business. A hard-line leadership would likely push for Russian control of the oil-rich Caspian Sea region, where Western energy companies--such as Chevron, Amoco, Mobil, and British Petroleum--plan projects worth billions of dollars. Sales of state-owned shares also could slow. Taking no chances, the Yeltsin government is scrambling to sell the state's shares in more than 9,000 enterprises before the Duma elections.

Worst of all, a hard-line victory would presage much tougher stands in foreign policy, including strident moves to slow down NATO's eastward expansion. The Kremlin also might return to bullying former Soviet republics to return to Moscow's orbit. Perhaps the only heartening news is that Russian voters are getting sick of the clownish ultranationalist Vladimir Zhirinovsky, and he is unlikely to do well in December races. Small consolation. Western business is still in for six months or more of nail-biting in Russia.

UNCERTAINTY IN RUSSIA

Boris Yeltsin has fallen ill just as his nation enters a critical period:

OCT. 29 Election authorities reject registration of Grigory Yavlinsky's reform party, raising questions about the legitimacy of Russia's upcoming elections

DEC. 17 Scheduled elections for the Duma, Russia's legislature

JANUARY, 1996 The Duma could call for the resignation of Prime Minister Viktor Chernomyrdin if his party, Our Home is Russia, does poorly in the election

JUNE 12, 1996 The presidential elections are scheduled

DATA: BUSINESS WEEKBy Peter Galuszka in Moscow, with Bill Javetski in Paris and Stan Crock in Washington


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