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Is Yeltsin Kissing Reform Goodbye? (Int'l Edition)


International -- Int'l Business: RUSSIA

IS YELTSIN KISSING REFORM GOODBYE? (int'l edition)

Not likely. His recent shift right may be designed to win votes

Boris N. Yeltsin has again swerved to hard-line policies. Wary of the growing clout of Communists who won big in December elections, the Russian President has jettisoned his pro-Western Foreign Minister Andrei V. Kozyrev in favor of Yevgeni Primakov, the tough former head of the Foreign Intelligence Service. His army has laid brutal waste to Pervomaiskaya, a southern hamlet where Chechen rebels held about 100 hostages. Most recently, he forced the resignation of Anatoli B. Chubais, the last radical economist in his Cabinet, who masterminded the country's vast privatization program.

A clear blow to reform? Not over the long haul. Yeltsin's moves are primarily tactical maneuvers played out with the June presidential elections in mind. None will significantly alter current policies, many analysts believe. The Kremlin's foreign policy, for example, had become tougher months before Kozyrev left. Nor will economic policies change much. "There'll be no reversal," says Sergei Markov, a program associate at the Carnegie Endowment for International Peace. "It will just be less ideological and more pragmatic."

Chubais' departure may seem like a bitter pill. For four years, he had been reform's fair-haired boy to Western academics and International Monetary Fund bureaucrats alike. Still, his legacy is assured by his success. His privatization program, which on paper turned 85% of the economy over to nongovernment owners, is virtually completed. Some 120,000 state-owned companies have been privatized.

Despite their recent victory, Communist legislators don't have enough votes to turn back privatization or even dent it. It's even unlikely that they'll be able to reverse Chubais' most controversial scheme. Launched last fall, it involved selling state shares in blue-chip companies to key banks in exchange for loans to plug the budget. Critics say the program ended up as a sweet deal for the banks.

ON COURSE. Yeltsin's new stance isn't likely to have much impact on policies to stabilize the ruble, at least for six months. Plans to keep the ruble within a tight corridor are a solid Central Bank policy that can't be easily tinkered with. And a $9 billion IMF loan appears to be forthcoming. Other policies also seem safe. "Sure, the Communists can very easily slap tariffs on imports like cars or food," says a Western stock analyst based in Moscow. "But the course will continue to be clearly market-oriented. The financial markets will be the grease for investment and development."

Unlike last summer's hostage crisis, Yeltsin seems clearly in command this time. And despite the widespread unpopularity of the Chechen war, polls show that Russians approve of his hard-nosed action in Pervomaiskaya despite the threat to those held captive. The kidnapping of some 30 Russian electrical workers in Grozny and a Chechnya-related terrorist incident aboard a Turkish ferry boat in which gunmen held more than 165 passengers only bolster sympathy for Russians and the Kremlin.

Big dangers still loom for Yeltsin, of course. His antiterrorist moves could backfire and widen the Chechen war even more. Yeltsin could also stumble with the economy. He must appease millions of workers whose living standards deteriorated with radical reform or who haven't been paid because of a cash squeeze at some enterprises. But if he hands out cheap credits to bankrupt factories, he'll blow the progress that has been made on taming inflation. Still, for better or worse, it's clear that Yeltsin is back, he's in charge, and he's on the campaign trail.By Peter Galuszka in Moscow


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