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The Sigh Of Relief Heard `Round Russia (Int'l Edition)


International -- European Business: RUSSIA

THE SIGH OF RELIEF HEARD `ROUND RUSSIA (int'l edition)

Yeltsin's return means the nation can start tackling its woes

At 6:00 a.m. on Nov. 6, a scant 23 hours after surgeons began quintuple-bypass surgery, doctors removed Russian President Boris N. Yeltsin's respirator. As soon as he could talk, Yeltsin requested a pen. Within seconds, he signed a document reclaiming his presidential powers and control over Russia's nuclear arsenal. As with so many close calls in his political career, Yeltsin seemed to have again bucked enormous odds to pull himself out of a tough spot.

Yeltsin's return gives Russia a chance to restore political stability after months of tumult. Within days, if all goes well, the Russian President and his aides are likely to begin firing off decrees to show he's back in charge and pushing ahead with the agenda he had set for his second term before his reelection last summer. At the top of the list are spreading reforms to the grass roots by winning crucial regional elections and convincing the international markets that the Russian economy is on track. "Yeltsin's survival removes a big chunk of the uncertainty," says Roland Nash, chief economist of Moscow-based Renaissance Capital.

Lack of firm leadership has led to a series of political setbacks for the Yeltsin administration this fall. In a series of races that began in September, pro-Yeltsin candidates have lost 7 of 17 regional gubernatorial elections. An additional 35 governors will be elected by the end of January. Now, as Yeltsin reassumes control over decision-making at the top, key aides such as Anatoly B. Chubais will put their energies to helping pro-government candidates pull off regional victories. Chubais, Yeltsin's chief of staff, engineered the President's reelection and is bent on making his reforms irreversible at the local level.

But obstacles also face Yeltsin. Among them are the plans of opponents such as the Communists and ex-general Alexander Lebed. Since the summer elections, Yeltsin's aides have attempted to co-opt Communist opponents by giving moderates in their ranks posts on powerful government commissions. So far, the strategy has worked: Communist leader Gennady Zyuganov has made it clear that his party won't stir up trouble in the immediate future.

Lebed, on the other hand, is a bigger challenge. He was fired from his post as national security chief in October after openly criticizing the President, and he has made no secret of his desire to become Yeltsin's successor. To build a political base, he is already hooking up with nationalists in the Stavropol and Krasnodar regions. And he may run for governor of the Tula region, which would give him a platform from which to oppose Yeltsin.

GRUMPY WORKERS. While tussling with his opponents, Yeltsin will have to find money for his cash-strapped government. Most important, he must find funds to assuage millions of workers who have gone months without pay and whose patience is expiring. On Nov. 5, more than 500,000 miners laid down their picks in a one-day strike. Altogether, workers at state and privatized companies are owed close to $8 billion. Says Joseph R. Blasi, an expert on Russian capitalism at Rutgers University: "The problem of unpaid wages is starting to get uncontrollable."

To ease his financial woes, Yeltsin will have to regain the confidence of international bankers, who have been discouraged by recent political instability. Now they'll be looking to see if Yeltsin can force his government to collect taxes and keep its deficit down--the keys to winning a monthly $340 million International Monetary Fund loan disbursement. Yeltsin will likely have to take difficult steps such as forcing the big companies that funded his campaign to pay their taxes. The government's planned $1 billion Eurobond offering in December will be a key test of market sentiment toward Russia.

Of course, Russia's stability still rides on how rapidly Yeltsin recovers. In the coming weeks, there's a chance that the President could suffer a relapse or die. And in the tumult of Russian politics, his opponents will be looking for weakness. But most Russians are tired of instability. For now, they seem to sense that their own economic health is closely tied to the vigor of the President they reelected just last June.By Patricia Kranz in Moscow


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