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Russia Resents Lag in Western Aid

Moscow insists that meeting West's strict conditions could spark a social explosion. GROUP-OF-SEVEN SUMMIT

RUSSIAN President Boris Yeltsin, preparing for a crucial meeting with the leaders of the industrialized world, is stressing that Russia will not put its foreign aid needs ahead of domestic political and economic considerations.

The topic of aid to the former Soviet Union is expected to dominate the agenda of the G-7 summit, which begins today in Munich. Mr. Yeltsin is scheduled to attend the gathering Wednesday to argue his case for Western aid to Russia. The West has promised Russia a $24 billion aid package, but so far the money has not been forthcoming.

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Though Western assistance could play an important role in helping Russia rebuild its crumbling economy, the country can survive without the foreign aid injection, Yeltsin said at a news conference over the weekend.

"We won't get down on our knees for [aid]," Yeltsin said. "Russia is a great power and will not allow itself to do that." Rising frustration

The president's comments hinted at a growing sense of frustration among Russian leaders with the West and its financial institutions, particularly the International Monetary Fund.

The IMF insists on fulfillment of strict conditions before Russia can become eligible to receive loans. The Russian government revised its economic reform program last week in an attempt to meet IMF standards. (Reform plan, left.) Nevertheless, IMF officials are saying more must be done. The IMF's two biggest remaining concerns are Russia's ability to control its money supply and Moscow's reluctance to lift price controls on energy resources.

"The outlines are correct, but we need more explanation," said one Western financial official in Moscow of Russia's latest reform plans. "Western leaders don't want to see billions thrown into the Russian economy without a firm plan being in place."

Yeltsin, who met with IMF Managing Director Michel Camdessus on Saturday, says domestic conditions rule out the liberalization of energy prices anytime soon. Such action, the president said, could touch off hyperinflation and possibly culminate in a social explosion.

Russia should not be held up to the same IMF standards as those for other nations, Yeltsin argued. "Russia is unique and the reforms here are unique," the Tass news agency quoted him as saying. Mr. Camdessus said after the meeting that the IMF would work out a "special approach" on aid to the former Soviet Union, according to Tass.

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Russia already seems to have stretched itself to the breaking point. In addition to revising its overall reform blueprint, the Russian government made some risky moves last week to demonstrate to the IMF its commitment to a market system. On July 1, Russia took a small step toward making its currency convertible on world markets, as the government established a single domestic exchange rate and allowed the ruble to enter into a "controlled float." Previously, there were three ruble exchange rates.

The government move is a far cry from a "free float" for the ruble, under which the currency would be at the mercy of world supply and demand. In the controlled float the Russian Central Bank will be able to influence the ruble's exchange rate. Though mostly symbolic, Central Bank officials hope the controlled float will stimulate domestic investment and exports.

Potentially far more dangerous for the government is Yeltsin's decree last week making Russian industrial enterprises responsible for their debts. Under the communists, factories were not expected to be fiscally responsible. The Yeltsin decree could force many inefficient enterprises into bankruptcy, causing widespread unemployment.

Such reform attempts are not being overlooked by G-7 nations, which are expected to voice support for the Russian reforms at the Munich meeting. As for concrete measures, the G-7 summit is expected to approve Yeltsin's request to reschedule foreign debt, including at least a two-year moratorium on interest payments. A moratorium on some principal payments is currently in effect, due to expire in September.

In addition to debt relief, Acting Prime Minister Yegor Gaidar suggested the G-7 nations take measures to open up their markets to Russian exports. "We must have special, favorable conditions" for access to Western markets, he said. Falling output

Regardless of what the G-7 decides, the Russian government will be hard pressed to turn the economy around. Russian industrial output dropped 13 percent during the first five months of 1992, and exports over the same period were down 30 percent, Mr. Gaidar told parliament Friday.

More alarmingly, Gaidar reported that government spending was on the verge of spiraling out of control. The budget deficit in May alone amounted to 60 billion rubles (about $479 million at the new exchange rate), Gaidar said. Government failure to control spending could spark hyperinflation and scuttle reform attempts. Finance Minister Vasily Barchuk said the projected 1992 Russian budget deficit would total 588 billion rubles (about $4.69 billion).

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