FF B tl & re & FP O RR T FBIS-USR-94-004 14 January 1994 CENTRAL EURASIA FBIS Report: Central Eurasia FBIS-USR-94-004 CONTENTS 14 January 1994 COMMONWEALTH AFFAIRS Russian Diplomacy, Results of Ashgabat Summit Scored /SEGODNYA No 104, 28 Dec] 0.0... l INTERSTATE AFFAIRS Benefits of Russia-Belarus Monetary Union Questioned /SEGODNYA 11 Jan] o.ccccccccccccccccceeeees 3 RUSSIA ECONOMIC AND SOCIAL AFFAIRS Shatalin, Others on Reform in 1994 /LITERATURNAYA GAZETA No 51-52, 29 Dec] ........00644 » § Economic Program Prospects for Leading Blocs in State Duma /KURANTY No 247, 24 Dec/_...... 7 Sociological Polls on Tendencies in Current Political Climate /KURANTY No 244, 21 Dec] ......... 10 Arbatov on Economic, Industrial Policy /NEZAVISIMAYA GAZETA 29 D@c] coccccccccccccssssseesesesseees 1] Chubays’ Confidence in Privatization Success Questioned /RABOCHAYA TRIBUNA 31 Dec] ..... 14 Importance of Fuel-Energy Sector Emphasized /RABOCHAYA TRIBUNA 4 Jan] woccccccccccccccesceeeee 15 Federation of Goods Producers on Economic Crisis /NEZAVISIMAYA GAZETA 29 Dec] ............ 16 Grain Futures Market Developer Explains Advantages /SELSKAYA ZHIZN 21 Dec] 0.0.0... 17 DELOVOY MIR Economic Statistics, 22 December /DELOVOY MIR 22 DOC] .o.cccccccccccccsseseeeee 19 DELOVOY MIR Economic Statistics, 29 December /DELOVOY MIR 29 Dec] .o.ccccccccccccsscsessesseeee 27 MVD Official on Bank Fraud /KOMSOMOLSKAYA PRAVDA 29 DOC] woccccccccccccscscssecseseeseeseeeseenes 34 Fate of Large Diamond Deposit Discussed /KOMMERSANT-DAILY 23 D@c] voccccccccccccccsscsesseeeeees 35 Activities of State Committee on Precious Metals, Stones Questioned /SEGODNYA 30 Dec] ....... 36 Edict, Statute on Property Fund Functions /ROSSIYSKIYE VESTI 30 Dec] ......cccccccccccccssesseesseeeeee 37 UKRAINE POLITICAL AFFAIRS Independent Unions Support Lanovyy /NEZAVISIMOST 22 Dec] cocccccccccccccccccccssscessescseeseeeneeeseeesees 42 Pavlychko on Russian Relations, Elections /GOLOS UKRAINY 28 D@c] ..ccccccccccccccccsesssssseesseesseenees 42 Socialists Adopt Election Platform /PRAVDA UKRAINY 21] D@c] cicccccccccccccscsccssessscessesseesessseesceneeess 44 Lessons of Russian Elections Pondered /GOLOS UKRAINY 24 DO@c] ciccccccccccccccccsesessessesseeseesseeecenes 45 ECONOMIC AFFAIRS Fokin Discusses Fund for Humanitarian, Economic Ties With Russian Federation ES CY 2 GE scnncerssincrscssssntencsecesesnmensseheagusnqendedeaianniademeataasitsiiiteaseenitbauiantias 46 Ukrainian Ambassador Discusses Economic Ties With ~ rkey /GOLOS UKRAINY 24 Dec] ........ 50 Report on Black Sea Economic Cooperation Organization /URYADOVYY KURYER 21 Dec] ...... 51 National Space Agency Develops Program for Satellite Links /URYADOVYY KURYER 7 Dec] ... 52 INTERNATIONAL AFFAIRS Envoy on Delegation Working Conditions /UKRAYINSKA HAZETA No 20, 2-15 Dec] ..c..ccccc0000 54 WESTERN REGION BELARUS Foreign Minister Hit for Maladministration /SOVETSKAYA BELORUSSIYA 18 Dec] ...........0000+ 56 FBIS-USR-94-004 | 14 January 1994 2 MOLDOVA Ambassador Taranu on Elections, Dniester /[ARGUMENTY I FAKTY No 1, Jan] ccc cccccccceeeeees Party Election Activities Digest /NEZAVISIMAYA MOLDOVA 8 DO] coccccccccccccccccecceccceesceeeeeeeeeees Spokesman on Church, State Separation /NEZAVISIMAYA MOLDOVA 4 DOG] cocccccccccccsecceeeees Minister Outlines State of Agriculture /NEZAVISIMAYA MOLDOVA 8 DOC] coccccccccccccccccceeeceeeeees BALTIC STATES ESTONIA Industry Growth For '93 Reviewed /ARIPAEV No 7, 1 D@C] coccccccccccccccsscccscecssseeesseesesnsseeseeseesees ane Economics Minister Cites Benefits of Trade With Russia /PRAVDA 5S Jan] voces Foreign Minister Discusses CIS, Relations With Neighbors /VEK No 50, 24-29 Dec] .o.cccccccccccees Warehousing Attracts Foreign Capital /ARIPAEV No 136, 1 D@c] coccccccccccccccccseseessessesesseeereeeeeeeeenees Wholesale/Retail Trade Largest Growth Industry /ARIPAEV No 136, 1 DOC] cocccccccccccccccccccesceeees ~ LITHUANIA Government Passes Legislation To Benefit Foreign Investors (MOSCOW NEWS No 49, 3 Dec] .. Denmark Promises Further Assistance in Environment, Energy ECCT COR FD PO coccernceeeotercmnsnsnenncoerseageprarecantnermpeneensennngnevnagnenaveenegetocsecies Parliament Chairman Urges Referendum on NATO /LITHUANIAN WEEKLY No 48, 3-9 Dec] .. Russians Hand Over Last Military Facility to Lithuania CCT ONe CES CO Gk I coctpntaseccpcecnccassstanzeseensennsnsernneenansssenpenvtbnnceesensvecnssssecsecese Conscripts Found Unfit for Military Duty /LITHUANIAN WEEKLY No 48, 3-9 Dec] .......00.000. Status of Lithuania’s Light Industry Examined /LITHUANIAN WEEKLY No 48, 3-9 Dec] ........... Opposition Urges Immediate NATO Membership /LITHUANIAN WEEKLY No 49, 10-16 Dec]. Gylys on ‘East-West Balance’ in Foreign Policy {LITHUANIAN WEEKLY No 49, 10-16 Dec] ...... ‘Fast-Track’ Privatization Plan To Be Tested /LITHUANIAN WEEKLY No 49, 10-16 Dec] ......... Wave of Emigration Continues /LITHUANIAN WEEKLY Ne 49, 10-16 Dec] c.ccccccccccccccccccceeeeeeeess President Dismisses National Security Advisor /LITHUANIAN WEEKLY No 49, 10-16 Dec]_...... FBIS-USR-94-004 COMMONWEALTH AFFAIRS i 14 January 1994 Russian Diplomacy, Results of Ashgabat Summit partially legitimized Niyazov’s regime in the international Scored arena. Hence the persistent iniviatives of the Ashgabat leader to complete the bilateral Russian-Turmen summit 944Q0122A Moscow SEGODNYA in Russian meeting with the signing of a large intergovernmental No 104, 28 Dec 93 p 2 agreement. [Article by Sergey Parkhomenko: “Impromptu Diplomacy. The When preparing for the visit, experts persistently recom- Results of the Ashgabat Summit: ‘More Unanimous Than Ever mended to members of the official Russian delegation: A Before,’ and, As Usual, Meaningless”) firm condition for consent to the solicitation of the [Text] Failure. Among the 14 conferences of heads of CIS Turkmen elite must be the presentation of reliable guar- states held up to the present moment, the Ashgabat antees of protection of the civil rights of the republic’s meeting during 23-24 December was not the first that one Russian-speaking population. The policy of planned pres- can confidently categorize as a failure for the Russian sure on representatives of nonindigenous nationalities delegation. Representatives of the Russian Federation from the sphere of state administration, industry, educa- completed their mission quite ignominiously in all four tion, and the Army leadership is just as typical of the major clubs whose sessions make up the traditioval pro- Ashgabat regime as it is of the majority of its neighbors. gram of such summits—the councils of defense ministries, The only difference lies in the much more skillful appli- foreign affairs ministries, government heads, and cation of demagogic devices to mask ethnic purges and in presidents. the reliable control of the press, which could divulge cases of discrimination as well as the precise nullification of the There was no dearth of analytical developments, conclu- activity of foreign observation missions. The flow of sions, and recommendations prepared for the opening of emigrants from Turkmenistan is steadily increasing all the summit by specialists from the government apparatus, the while. the Ministry of Foreign Affairs, and the administration, who were well oriented for the forthcoming discussion. In these conditions to agree to the use of pseudoscientific And probably the simplest thing would have been to euphemisms that distort the essence of the problem—such explain our current failure by the indisputable fact that as “regulation of migratio flows” or “parity guarantees of Russian officials of the highest ranks who represented the assistance to resettlers’—would mean to encourage the Russian Federation in negotiations with their colleagues in outflow of the Russian population, forgiving in advance the hateful Commonwealth again demonstrated their deep the future transgressions of President Niyazov's regime. scorn for the work of their own experts. Documented There is no counterflow from Russia to Turkmenistan, and results of the Ashgabat work of Boris Yeltsin, Viktor none is anticipated in the foreseeable future, the experts Chernomyrdin, Andrey Kozyrev, and Pavel Grachev are reminded them—this has to do with casting a policy of filled with the most impressive examples of that segregation in civilized form. “impromptu diplomacy” whose unpredictable rules the Nonetheless, the president of Russia, ignoring common Russian leaders have been following recently, unfortu- sense, agreed to sign an agreement on dual citizenship. nately, not only in contacts with nearby foreign countries. And the public exercise in a rare genre of political buffoon- Here are just a couple of examples. ery—the ceremony in which Boris Yeltsin was awarded a For Russian specialists who are reliably informed about Turmen passport, ordained ‘‘an honored citizen of Turk- the political situation in the Central Asian region, there menistan,”’ and declared to be the first possessor of dual was no secret about the completely pragmatic objectives citizenship—was the logical culmination of the bilateral pursued by President of Turkmenistan Saparmurad division of the Ashgabat program. Niyazov in arranging a full-scale meeting with Boris Yeltsin. A similar motif promised to become central at the multi- lateral summit. Specialists in the Ministry of Foreign The only political result of the widely advertised program Affairs and the administration of the president of the “Ten Years of Well-Being,” which, according the author’s Russian Federation had prepared carefully for consulta- intention, was to have transformed the more backward tion on the draft “Convention on Ensuring the Rights of Union republics into a flourishing “second Kuwait,” was Individuals Belonging to National, Ethnic, Linguistic, Cul- the rapid formation of a personality cult of the “father of tural, and Keligious Minorities.” The list of agreements all Turkmens.” The efforts of roniantics who hoped at least eee for discussion at the meeting, as usual, snow- to look beyond its beggarly attributes to signs of an eastern balled into almost 30 documents. But the draft convention autocratic tradition consecrated over the centuries ended promised to be perhaps the only one for which one could in failure. The failure of the adventure with the hasty see a critical practical need and clear-cut political meaning. exchange of the ruble for the “freely convertible” (in fact it seems to be convertible by force and at an absurd artificial The briefcase of Andrey Kozyrev, who went to the nego- rate) manat only reinforced observers in their conviction tiations within the framework of the first official meeting that they were dealing with the remnants of an attempt to of the Council of Minister of Foreign Affairs in the entire build socialism of the classical Soviet type in one separate history of the CIS, contained detailed comments on his emirate. It is not surprising that attempts by the political draft. “Taking into account the priority significance oft his relic to establish contacts with the civilized world evoked convention for Russia,” its authors pointed out, “it would in democratic states a reaction that was almost instinctual be expedient to work for its adoption with a maximum repulsion. The acquisition by Turkmenistan of the status number of participants and to have it signed even if other of a full-fledged partner of the Russian Federation was states object...."” Objections could be expected primarily intended above all to quell this reaction even though it from the delegations from Ukraine and Uzbekistan, who FBIS-USR-%4-004 2 COMMONWEALTH AFFAIRS 14 January 1994 spoke out especially actively against the article of the draft mandatory for the country to carry out the decisions made according to which the agreeing parties would make com- there....” Well, of course, that is it in a nutshell... mitments to “adopt legislative, administrative, and other The diplomatic efforts of Pavel Grachev took an altogether necessary measures on their territory to prevent attempts unexpected turn. For example, the discussion about pro- at assimilation of minorities against their will...” Arguing tection of Russian Army contingents in keeping with this opinion in detail, the experts recommended insisting international norms and about granting them the status of on the fairness of the Russian position and, if necessary, military bases on foreign territory suddenly led to a point applying pressure to partners in the negotiations, linking the fate of the national majorities to the prospects for where Russia took over the burdensome and dangerous duties of protecting the borders of sovereign Turkmeni- oneee ne military cooperation within the framework stan. And the agreement of the minister of defense of the of the CIS. Russian Federation to revise the Collective Security But the chief of Russian diplomacy was either not in the Treaty at the insistence of the delegations from Georgia mood or not in his best form. Or perhaps he was too and Azerbaijan will inevitably bring Russia one step closer impressed by the atmosphere of touchingly feigned hospi- to direct participation in two open armed conflicts. tality created by the summit officials for highly placed CIS executive secretary Ivan Koroichenya, it seems, is guests (as distinct from the journalists, whose work was vigilantly keeping track of the adherence to the tradition organized, let us note, in a simply disgraceful way). In brief, the convention did not reach the point of being according to which at every press conference that is the culmination of another summit they note the “warm discussed by the “presidential club.” Mr. Kozyrev allowed it to be sent “for further work to joint groups of experts” atmosphere of cooperation and mutual understanding” of the participants. And neither did he fail to add the remark for an indefinite period of time and with unclear prospects. that in Ashgabat the agreements were adopted “more Equally doubtful for the Russian side were the results of unanimously than ever before’’ this time. It seems that the negotiations on the economic and military sections of the Russian delegation was at grea: pains to help the observers program. describe this conference following the canon of the Bible story. If one wished, this form could even be considered After congratulating Turkmenistan on its full-fledged (and appropriate for Christmas. Not Catholic Christmas, of not associated) membership in the economic alliance of course—it has nothing to do with this. In the capital of the CIS, Viktor Chernomyrdin essentially welcomed the Turkmenistan the two-year anniversary of the birth of the expansion of the group of contenders for a chunk of the Commonwealth, and, naturally, the breakup of the USSR, meager pie of Russian technical credit. And it would be was celebrated with pomp. interesting to know what other result Russia could receive from an economic alliance with a state whose leader The fate of the CIS at the end of these two years is announces without special embarrassment at a press con- unenviable. They are not being kind to the Common- ference: “We have stood to gain from entering the CIS. We wealth. They do not even sympathize with it. They are understand. It is just that we would not want for it to be laughing at it. FBIS-USR-94-004 INTERSTATE AFFAIRS 3 14 January 1994 Benefits of Russia-Belarus Monetary Union sign the agreement on the single mechanism for managing Questioned the budget systems, which indicates their wish not to come under Russian control. The situation becomes even more 94P50079A Moscow SEGODNYA in Russian understandable taking into account the agreement, already Ii Jan 94 pl signed by Gerashchenko and Bogdankevich, on the [Article by Aleksandr Bekker: “Belarus is Trying to Keep schedule for unifying the mechanism for the function of Russian as a Donor” the common munetary system. According to this agree- ment, the Central Bank of Belarus has the right to establish [Text] In the very near future the interstate agreement on credit limits and to grant licenses to banks on its territory, unifying the monetary systems of Russia and Belarus will while the Centrai Bank of Russia ‘‘is to ensure satisfaction be presented for signing. Government heads Viktor Cher- of the basic (? A.B.) requirements...for currency bills.” nomyrdin and Vyacheslav Kebich stated on 5 January that ‘the necessary preparatory work...has been practically Thus Belarus maintains its political independence, completed,” and certified the “achievement of a high including an independent emissions bank and an autono- degree of readiness of the monetary systems” for unifica- —_ budget, which, as is known, is the main calalyst of tion. Both passa,s in the statement do not seem obvious. inflation. Even with all its difficulties, the stability of Russian There is no precedent for unifying monetary systems under finances is significantly higher than that of its “Slavic similar conditions. Consequently, it is possible to discuss brother.” The negative balance in Belarus’ trade has the seamy political issues of what is going on. The striving reached more than 100 billion rubles [R], its rate of by the high officials of the Russian Central Bank to inflation is 20-25 percent higher than Russia’s and the reanimate, even in a truncated version, the monetary- exchange rate of the surrogate “zaychik” to the ruble is credit [system] of the USSR is an open secret. There are 4.5:1. At the same time, the level of wages and pensions of supporters and collaboraters in the government. However, our neighbor exceeds that of Russia by three times. one must think about the economic consequences of such The motives which are compelling the Belrusian leader- a “mutually beneficial” union for Russia. There is still one ship to force monetary integration are extremely trans- tricky obstacle. Belarus is not o d to the agreement parent. First of all, union, judging by the words of the being implemented by decree of the Russian Federation Belarusian Central Bank chairman Mr. Bogdankevich, is government, bypassing the State Duma. It is not difficult thought of according to the artificial exchange rate of 1:1, to guess that the opposition would not hesitate to use this thus Russia is supposed to allocate approximately R1.6 as grounds for accusing the president and the cabinet of trillion to maintain currency circulaiion. Secondly, the ministers of betraying national interests. need for our neighbor to pay for energy sources in freely In September during the signing of the agreement on covertible currency will disappear, and the possibility of creating a ruble zone of a new type, Belarusian Supreme raising the question of “brotherly” prices—like those for Soviet chairman Stanislav Shushkevich delicately posed Russian consumers—appears. Thirdly, the Belarusian tax- the question of writing off his republic’s debt to Russia. payers are saved from the excise tax, while in Russia oil Hastening the current agreement, Belarus apparently and gas are subject to a strict tax. wants to keep Russia as a financial donor and achieve with Despite the optimism of the two countres’ prime ministers, a “caress” what Kazakhstan and Uzbekistan did not the Belarusian side has still not expressed its readiness to succeed in with pressure. FBIS-USR-94-004 4 RUSSIA 14 January 1994 ECONOMIC AND SOCIAL AFFAIRS It is bad that the dollar is not being put to work in the country. Entrepreneurs, as before, prefer to keep their hard Shatalin, Others on Reform in 1994 currency abroad. There is a great disyarity between exports and imports. This is evidence of a prolonged poor condi- 944K0550A Moscow LITERATURNAYA GAZETA tion in the economy. The result of distortions in legis!ation in Russian No 51-52, 29 Dec 93 p 10 and political instability. Measures of law enforcement organs cannot solve such economic problems. Russ! can [Report on interviews with leaders of leading economic- obtain a significant influx of currency not from foreign analytical centers of Russia; places and dates not given: “A Year investors but from “their own,” those who are keeping of Hope and Disenchantment”] their dollars abroad. Putting them into circulation in the [Text] West, our ill-starred entrepreneurs have a poor idea of the rules of the game in local markets and are not aware of the 1. How do you assess the results of the economic reforms in immense risk to themselves. Incidentally, the risk in 1993? Russia is even greater. This me ins that we must seriously 2. What, in your opinion, siiould we expect in 1994? create conditions for business at home. These questions are answered by leaders of the leading The fact that domestic prices are coming close to world economic-analytical centers of Russia. The materials will be prices threatens to strike a blow to exports. Only high- published in full in the international journal DELOVYYE quality products can be moved. The game involving cheap LYUDI (No. 12, 1993 and No. 1, 1994) raw material and a cheap work ‘orce is coming to an end. But high quality requires expenditures: the purchase of Yevgeniy Saurov, Director of the Center for Information new technologies and so forth. Pouring dollars into Mer- and Social Technolegies under the Government of the cedes is shortsighted. A new reality will be clearly mani- Russian Federation: “Pouring Dollars into Mercedes Is fested in the forthcoming year. Not Farsighted” The year 1993 was marked by development of reforms. It proceeded as though of its own accord, with less partici- 1. The experience of two years of reforms convinces us that pation by the government, and with a smaller degree of we have climbed onto an “economic roller coaster.” In the state regulation. The year showed that a fairly serious, winter, by compressing the monetary mass we slow up the aggressive business has appeared in the country although, rates of iflation. In the spring, by advancing credit we true, it is not very civilized yet. It is in a state of return to our previous positions. Depending on the rates of development. inflation, the level of production increases somewhat or, especially during August-September, its decline increases. 2. It is difficult to predict the situation today purely This is the second year in which we have been living in economically: a great deal depends on political decisions. such a cycle. In the absence of a pro-inflation parliament the govern- ment might possibly be able to hold down the mass of The amplitude of the fluctuations is somewhat less this money better throughout the winter. But inflation could be year. It is still unrealistic to speak about putting an end to significantly encouraged by campaign promises and diffi- inflation. 1993 was a year of in-depth study of the market culties in relations with the regions. by enterprise leaders. While last year everyone went through what might be called the introductory course, now We will not manage to reduce inflation significantly in they feel like sophomores. There are more enterprises 1994. The other danger—unemployment—might become which are not certain whether they will survive or not. serious. Not catastrophic, but in any case it is very unde- Those that are not viable, of course, do no good for the sirable. It is necessary to make the designation of social economy. They must be reprofiled, showing concern for protection more specific. As one of the developers of the retraining the people. This work is already underway new housing system I am particularly against the same low during the process of privatization. This is a gratifying payment for service for privatized apartments ror low- phenomenon. There are also points of great tension—the income families and for Konstantin Borovoy. The income coal industry, for example. level must not be ignored. I have my doubts about the published data on the decline The year will not bring the country out of its crisis. But I of production. It is fairly great. But it is linked primarily to hope that there will be more appreciable outcroppings of the reduction of military orders. To the reduction of the hope than there were this year. “self-consuming” production of machine building. To the reduction of the output of poor-quality products. While a Stanislav Shatalin, Academician, President of the year ago there was a plethora in the viable branches, in International Fund for Economic and Social Reforms, 1993 signs of a positive structural change appeared during and Sergey Fateyev, Chief of the Department of Reform the slump. Thus things were not bad in the construction Strategy of the Fund: “It Will Not Be Possible To materials industry. There was a very slight growth in Compensate for the Collapse of the Social Sphere” housing construction, mainly because of the individual sector. But the situation with electric energy is alarming: 1. It is not easy to give an assessment during a transition With all the problems of the economy, the consumption of period. There are at least two groups of criteria that lie on kilowatt-hours is not decreasing. The country has forgotten completely different planes. The first are the directly about economizing on resources. What prices must we macroeconomic indicators of current development, and have for energy resources so that consumers will finally the second are the institutional changes (since we are begin to be concerned about economizing on them?! speaking about reforms). FBIS-USR-94-004 RUSSIA 14 January 1994 As for the first group of criteria, regardless of what has on tive industrial plane, they are still clearly not sufficient been said about signs of “stabilization” in the economy, a to enable us to speak about the success of the reforms even sober analysis of the results of three quarters of 1993 (there in this area. were no Statistical data for the fourth quarter by the time 2. Naturally, there is no justification for speaking of any this text was written.—Ed.) shows the opposite. The economic advancement in 1994. As we know, the future of decline (as compared to three quarters of 1992) in the the economy is being set today and yet the investment majority of productions did indeed slow up, but stabiliza- climate throughout 1993 remained extremely unfavorable tion as a condition of steady equilibrium and the appear- for the majority of branches—the enterprises do not have ance of signs of upsurge did not occur. As a rule, the the reserves for successful operation. slowing up or even termination of the recession in certain months in certain branches was then replaced by a drop in What features of development in 1994 can be predicted as production. Based on seasonal and random factors it is still the most probable? The overall decline of production will impossible to draw a conclusion about stabilization. continue, although at slower rates. At the same time the Taking into account the real condition of production decline in certain branches will begin to be partially capital in the majority of branches, and the continuing compensated for by advancement in others. There will be imbalance in the national economy, one can state that the increased differentiation in the economic position of the “low point” has not yet been reached. Incidentally, if one regions. The high level of inflation will remain. It will be considers the situation in retrospect it is not inappropriate practically impossible to reduce it to less than 10 percent to recall that government representatives have already per month. The task will be to learn to pursue an industrial repeatedly reported “signs of stabilization,” but the time and social policy with a high level of inflation. frames for it are constantly being moved back. On the whole, there should be no economic catastrophe next year. At the same time, if 1994 does become the The same thing can be said about inflation, the budget veginning of stabilization (which is not very likely), the deficit, etc. The reduction of the monthly rates of inflation completion of this process will take an extremely long time by the summer of 1993 from 25 percent to 17-19 percent and can by no means be done within a year even with the was replaced in August by an increase almost up to 30 most optimistic predictions. percent, and then again a certain slowing down. The reduction of the budget deficit was again followed by an It is extremely likely that we will manage to stop the increase. decline of the standard of living of the population. Prob- lems of employment will be aggravated, but unemploy- The standard of living of the population has continued to ment will not develop to the point of a national decline. According to our estimates, the inflation index catastrophe. from September 1992 through September 1993 was 1,254 The problem of bankruptcy will definitely make itself felt percent, while the growth of monetary incomes of the in 1994, including, probably, among enterprises that have population during the same period was |, 037 percent. The undergone privatization. Moreover, it is likely that some instability of economic development during 1993 was of the bankruptcies will be caused by shortcomings and accompanied by a collapse of the social sphere, which it mistakes that occurred during the period of reforms and has not been possible to compensate for in recent years flaws in the market infrastructure that is being formed. It even with the active formation of new principles of social is impossible to rule out a series of financial failures in the policy. security market. On the whole, 1994 will more likely show a readiness to overcome new difficulties rather than the In general, economic development throughout almost all —— of really “seeing the light at the end of the of 1993 proceeded under conditions of a keen political tunnel.” struggle, and this fact alone could in no way contribute to economic stabilization. Yakov Urinson, Acting Minister of the Economy of the Russian Federation, Director of the Center for As for constitutional changes, that is, reformation as such, Economic Market Conditions and Prognostication under here without any doubt there have been certain advances. the Russian Federation Ministry of the Economy: “The The number of privatized enterprises has increased signif- Results are Contradictory, But the Balance Sheet Is icantly and privatization has indeed become irreversible, Positive” although it is frequently of a formally legal nature. The structure of property is changing, all the new elements of |. The results of the reform in 1993 are extremely contra- the market infrastructure are being created, and produc- dictory. On the one hand, the elimination of the plan- tion is beginning to react to demand. Nonetheless, since distribution system has been completed and the process of these processes are taking place in an extremely unfavor- liberalization (of prices and domestic and foreign trade) able general economic situation in which a high degree of and privatization has continued. Goods, although they are monopolization is retained in many cases, the changes are much more expensive, have filled the shelves of stores and occurring randomly and without control. wholesale warehouses. Although the ruble has lost value, the functions of the main means of payment in cash and Unless there are positive structural changes, under condi- noncash settlements lost at the beginning of the reform tions where price disproportions remain there is still the have been restored. At the center of public interest direc- probability of the creation of a pseudo-market with all the tives of the state plan have been replaced by finances and consequences that ensue from that. Therefore, in our budget, monetary circulation and credit, hard currency opinion, although 1993 brought certain positive changes exchange rates, and customs tariffs. FBIS-USR-94-004 RUSSIA 14 January 1994 People have stably accepted the higher cost of living, the energy and material-intensiveness per unit of GDP, growth weakening of state paternalism, and the economic insta- of the budget deficit, and a new (August-fall) cycle of bility. Some have changed the structure of consumption inflation. and begun to spend most of their income on food, while others have changed their employment and found But still the overall assessment of these positive processes additional earnings, and still others have entered into and negative phenomena is clearly positive. The country entrepreneurship. will enter 1994 with a significantly altered economy. After the decline of the gross domestic product by 20 percent in 1992, in 1993 it decreased by no more than 12 2. In 1994 it will be necessary to restore a strict financial percent. In 1993 investments are decreasing by 10 percent policy on a qualitatively new level, consistently reduce the (as against 40 percent in 1992). A positive foreign trade state budget deficit to a tolerable level, and hold back the balance is forming in Russia (true, mainly because of a growth of the mass of money. As calculations show, this reduction of imporis). After the sharp reduction in 1992 will make it possible to limit inflation to 500-600 percent (approximately twofold) the actual monetary incomes at (as compared to 1,100 percent in 1993). By regulating the the disposal of the population this year are expected to bank interest rate at the same time it will be possible to increase somewhat (so far only in the range of 5 percent). create the necessary preconditions for invigorating the capital market and stimulating private savings, and in the But on the other hand, against the background of the next cycle—investments as well. Such measures must be already low standard of living, there has been an increase conducted resolutely, but in a balanced way. It is also in the differentiation in the well-being of groups of the necessary to give a new impetus to the process of privati- population at opposite poles. There have appeared not zation and overcome the obstacles that have been artifi- only legal millionaires, but also people who are officially cially erected on its path. At the same time it is extremely registered as unemployed. Certain defense plants have important for enterprises remaining in the state sector of been left without government orders and there has been no effective demand for the products of many state enter- the economy to revise the legislative base for their eco- prises. It has turned out to be necessary to interact with nomic activity in reduced periods of time. The finances of republics of the former Soviet Union in the economic these enterprises must be clearly separated from state sphere as with foreign states, that is, on a mutually finances. advantageous basis, and the maintenance of a ruble space without regulating and formalizing monetary-credit rela- Within the framework of the strict restrictions that are tions among ‘he countries included in it disorganizes the dictated by the requirements for financial stabilization, economy of Russia. support (through government orders, preferential credit, and direct budget financing) must be given to enterprises In addition to this, subjective factors have manifesied with all forms of ownership selected in keeping with strict themselves in a certain way as objective processes, having criteria and nationwide priorities. a negative effect on the reformation of the economy. The “gift” financial resources aimed at eliminating the conse- During the course of the market transformations there will quences but not the causes of the nonpayments, cheap credit for state enterprises, subsidies for agriculture and inevitably be an increase in unemployment (in 1994 it will the coal industry, subsidization of regions, and “technical” be necessary to find work for about 4 million able-bodied credits for republics of the former Soviet Union—all these citizens) and an aggravation of problems of social protec- served as an impediment to the formation of a mechanism tion. This means payment for structural rearrangement for feedback between production and demand. Under and increased effectiveness of the economy. The task of the conditions of inflation the enterprises began to transfer federal government and local authorities is to minimize their relatively free monetary funds into a consumption this payment and render special-purpose social support to fund or to apply for freely convertible currency. The segments of the population that objectively need it, former increased the mass of money in the hands of the granting capable citizens the broadest possibilities of man- population and stirred up inflation even more while the ifesting initiative, increasing labor productivity, and par- latter prompted a decline in the exchange rate of the ruble ticipating in entrepreneurial activity. on the foreign currency market. The situation was exacer- bated by the unjustified social payments (higher pensions With the implementation of the aforementioned parts of and labor compensation in the budget sphere) and a the economic reform in 1944 the budget deficit will random growth of wages (including under pressure from decrease to an acceptable level. The decline in production strike ultimatums). will not exceed 5-7 percent and it will assume a structural character. There will be some increase in the incomes It is especially dangerous that in 1993 institutional changes regulating the behavior of commodity producers slowed up actually at the disposal of the population. The population drastically. As long as they do not bear real property and enterprises will gradually begin to form natural sav- liability for the results of their activity and as long as ings. With the achievement of a positive rate of bank unviable enterprises of the state enterprise continue to interest, investment activity will increase. During the receive support from the budget, the inflationary process process of structural rearrangement of production there will apply more and more pressure to the economy. The will be new “points of growth” and within two or three consequences of inflationary financing of the economy: years there will be a period of stabilization of the economy retardation of the structura) rearrangement, increased in its renewed form. FBIS-USR-94-004 RUSSIA 7 14 January 1994 Grigoriy Yavlinskiy, Chairman of the Board of the clear guarantees for private property, the imperfecticu of Center for Economic and Political Studies legislation, corruption in all echelons of power, an (EPITsSENTR): “The Situation Will Remain Difficult increased number of crimes against entrepreneurs, and the fo. Entrepreneurs” impossibility of engaging in business on the basis of honest competition. 1. On the whole the process of economic reforms was not marked by the achievement of any significant positive 2. Government actions will have a large impact on the results. condition of the economy in 1994. Nonetheless there are macroeconomic variables that are relatively unaffected by Inflation (the consumer price index) remained steady at any actions of state power. the level of 20-25 percent per month. And this is in spite of the fact that the government made certain efforts to Under today’s conditions this is primarily inflation. In restrict the growth of the mass of money (the issuance of 1994 it will be high as usual—high and unpredictable credit, expenditures from the state budget). Measures enough so as to impede the development of the medium- aimed at limiting the aggregate demand were relatively and long-term credit market, and this means that we have successful. But a result of this policy was a further decline little hope of modernizing industry relying on the mecha- of industrial production and not a reduction of the rates of nism of positive interest rates. inflation, whose development was generated by inflation In the second place, this means a decline in industrial of expenditures, against which the policy of restricting the production. Even according to the most optimistic version, aggregate demand had no effect. Therefore the Russian the slump will continue. True, apparently it will not be as economy in 1993 experienced almost constant price deep as in 1933, and the more so in 1992. But one should shocks in various sectors. In the macroeconomic sense the keep in mind that even if stabilization is achieved at the situation was exacerbated also by the practice of monop- end of the year (which is not very likely), it will occur at the olistic price setting and the failure of the antimonopoly level of only 50 percent of the physical volume of indus- policy, in whose implementation the government is expe- trial production of 1989! riencing many difficulties. A great deal depends on the policy the government pursucs As compared to 1992 the decline in industrial production in the area of demonopolization and control of monopolies slowed up (especially during June-August) but one must and whether or not it decides to recognize in both word keep in mind that the recession in 1992 was very severe. and deed the adaptation of economic institutions to the All government announcements made during February- conditions of high inflation without abandoning the cau- March 1993 about stabilization of the volumes of indus- tious fight against inflation through resiricting aggregate trial production ignored the seasonal nature of this phe- demand, and also on the reform of economic legislation. nomenon and, as usual, during May-June there is a Within the designated framework it is possible to have a traditional reduction of the volumes of production, while broad choice of measures of economic policy. And the August-September is a time of seasonal upsurge. On the results of 1994 could vary a great deal depending on the whole as compared to 1992 the decline in the volumes of decisions that are made. industrial production amounted to approximately 13-14 percent. Economic Program Prospects for Leading Blocs in In the area of privatization of industrial enterprises the State Duma results of the 1993 policy may be characterized by the word “collectivization.” In essence we are seeing the appearance 944E0355A Moscow KURANTY in Russian of enterprises that are in the hands of collective owners. No 247, 24 Dec 93 p 4 The result of this kind of privatization is obvious: great difficulties in finding investors. For one must keep in mind [Article by Vasiliy Selyunin: “After the Elections: Whose that the position of Russian industry is very difficult— Program Is Realistic?”’} underinvestment has become extremely widespread and the condition of the equipment in many branches is [Text] At KURANTY's request, noted economist and com- terrible and must be replaced. mentator Vasiliy Selyunin has researched and compared In trade, privatization has led to the creation of monopo- the feasibility of the three electoral coalitions that got a listic markets in many cases. These monopolies exist considerable number of seats in the State Duma fulfilling because of the fact that trade enterprises are connected to their economic programs. the local authorities. Hence all the “charm” of the unreg- I will deal with only the main directions of the programs. ulated monopoly: price support to the detriment of the consumers, outlays increased because of the absence of Let us start with the Russia’s Choice program. It does not competition and a high profit norm, sales volumes below contain populist promises or idle talk. Priority problems those on the competitive market, and closing off of access are clearly identified, and the program says what needs to to the market for other sellers. be done and how. In spite of the fact that in 1993 there were successes that The cornerstone is bringing dcwn inflation, that is, may be characterized as partial (a large positive trade bringing it down to 3 percent a month by the end of 1994. balance and a certain stabilization of the exchange rate of This is a bit too much as compared to countries with stable the ruble), nonetheless for the entrepreneurial sector of ihe economies (which have 2-4 percent a year), but it would economy the situation remains very difficult. This is still make our life easier than it is now. In August inflation largely the result of the political uncertainty, the lack of was 28 percent; in September a little less--22 percent; in