Yeltsin Nods to Critics But Backs Market Shift

Speech to parliament signals trouble for key reformers in Cabinet

RUSSIAN President Boris Yeltsin performed yet another pirouette in his political balancing act between supporters and opponents of his government's reform policies.

In a speech Oct. 6 before the Russian parliament, Mr. Yeltsin leveled sharp criticism at "mistakes" in the reform course and assailed key reformists among his Cabinet by name.

Both in his remarks and his policy "correctives," Yeltsin backed proposals from powerful lobbies of state-run industry and others who have urged a slowdown in certain reforms.

But he also argued against "the resignation of the government," and vowed to continue the march to a market economy.

"The reforms have started and they are under way," Yeltsin told the parliament. "Now we are further from the command-administrative system and looking more like a market economy society."

The speech nonetheless fed speculation that the government of reform economist and Acting Premier Yegor Gaidar is in deep trouble. The president singled out two prominent aides to Mr. Gaidar - Minister for Foreign Trade Pyotr Aven and Economics Minister Andrei Nechayev. Both men have been targets of the industrialists' lobby led by Arkady Volsky, a former Communist party official and aide to former Soviet President Mikhail Gorbachev.

"There is some big pressure [on Yeltsin]," Mr. Nechayev told reporters after the speech.

He said the opposition was vying for control of "key ministries," specifically the foreign trade, economics, and energy ministries, and the government committee on privatization. The opposition gained control of the energy ministry in a Cabinet reshuffle this summer that installed the head of head of the former Soviet gas industry, he added.

The Volsky-led alliance known as Civil Union, which groups several parties including one led by Vice President Alexander Rutskoi, has repeatedly called for the replacement of some of Gaidar's young followers with more "competent" figures from industry. The Union supports continued market changes but also seeks to preserve key state-run industries. Without certain central controls, they argue, there could be severe unemployment and collapse of production.

Mr. Volsky advocates the "China model" of reform, which he says includes two economic sectors - one private, one state-run - and strict state control.

Yeltsin nodded explicitly toward the Civil Union on Oct. 6. "Many of their ideas can be used. They should not be rejected outright just because they were not invented by Gaidar," he said.

"Reforms are made by people," Foreign Trade Minister Aven replied when asked how the removal of himself and other Cabinet reformers might influence future policies. He said he did not see a retreat from reform, at least "not yet, not for today."

OTHERS read Yeltsin's speech more cautiously. "I did not understand that as an invitation to resign," deputy premier and reformist Alexander Shokhin said. "It is a normal process of self-criticism."

Yeltsin balanced his attacks on the Cabinet by including a sharp rebuke of Industry Minister Alexander Titkhin, considered a conservative. And he gave high praise to the controversial privatization program, which began last week with the distribution of the vouchers to the entire Russian population.

Yeltsin pledged as well to accelerate privatization of agricultural land, although he warned against any attempt to pit private farmers against collective farms.

In his policy pronouncements, Yeltsin echoed some of the conservative criticism of the Gaidar policies. He said the government erred in allowing the creation of "a very expensive consumer market" as a result of price liberalization policies. The government paid too much attention to macro-economic policy - namely its insistence on curbing inflation and getting government spending under control - to the detriment of "specific needs," he said.

The president acknowledged the problems created by the massive increase in government credits to state-run industry in recent months, the result of pressure from the industrialists lobby. But he avoided commenting on the new head of the Russian Central Bank, former Soviet bank head Viktor Gerashchenko, who has been attacked repeatedly by Gaidar's team for sabotaging their tight money policies.

Yeltsin backed Mr. Gerashchenko's insistence on tighter controls over currency trading in an attempt to shore up the sinking value of the ruble, including compelling exporters to sell their hard currency earnings and forbidding the use of foreign currencies within Russian borders.

He also supported some ideas from the Industrialists Union to "stimulate production" by lifting taxes on new investments and granting tax privileges to enterprises that increase production.

The cautious tone of Yeltsin's speech contrasted with Gaidar's open assault on his opponents immediately following. He dismissed the "China model" as out of step with Russia's commitment to democracy, including separation of powers between the executive and legislative branches.

"China," Gaidar pointed out, "preserved a powerful structure of authoritarian rule. In China any attempts by the opposition to destabilize the situation were cut short, including by such bloody measures as in Tiananmen [Square]."

In response to the criticism of the government's current privatization campaign by the industrialists lobby, Gaidar accused them of carrying out "quiet nomenklatura privatization," putting the state property into the hands of the old Soviet elite.

The flow of cheap state subsidies to industries already threatens to spark a new round of hyperinflation this winter.

The solution is not to stop the flow of credit, Gaidar said, but "to actually privatize the enterprises."

Hinting at his own replacement, the acting premier concluded by stating that it was up to the president and the parliament to choose a government to lead the economy "out of crisis." But he warned that "the objective economic problems facing our country ... cannot be solved by a change of government."