Yeltsin Creates a Post-Poll Mess By Pledging Thrift, Doling Cash
Winner of Russian election soon will have to face economic reality check
Boris Yeltsin seems to have finally decided what Russian voters want from him: to be the dynamic leader of reform that he was in 1992.
The Russian president promised last week to be more than just the man who could beat the Communists - his main appeal thus far. He promised a sustained burst of energy and commitment to the reforms that have stalled in recent years. But can President Yeltsin, if reelected, again become a reform crusader?
He's not short on ambitions. Along with vowing to complete privatization by the year 2000, he added that Russians will by then have the highest social welfare payments in Eastern Europe. And he will cut inflation to 5 percent a year, convert the ruble into hard currency, balance the national budget, cut taxes, and complete the expensive task - not yet begun - of creating an all-volunteer, professional Army.
But the reality check is going to hit with a jolt in the month or two after this summer's presidential election.
According to senior aides to Yeltsin himself, the coming months will not be good ones to be in high political office - mostly because of the deep hole Yeltsin has dug in the budget in order to win reelection. Under the dramatic budget gap yawning across coming months lie economic troubles that could sharpen popular discontent.
By the end of March, the national treasury was 25 percent behind in its budgeted spending to make room for the unscheduled handouts Yeltsin is awarding like candy at campaign stops around the country. Around September, a mountain of unpaid state debt to Russian enterprises will come due. And since last fall, major Russian industries have been holding down artificially the prices of energy and transport to promote Yeltsin's chances in the election. Post-election, the prices will bounce upward.
The same wet blanket would fall on Communist candidate Gennady Zyuganov too, if he wins the election, but not so smotheringly. This is mainly because the Communists care less about meeting Russia's tight budget goals than Yeltsin does. These monetary conditions have been set by the International Monetary Fund as a precondition for its $12 billion megaloan to Russia, and the Communists object to the loan as a mechanism of Western control. So the Communists are likely to get money to people and state enterprises regardless of the impact on inflation, according to their platform.
The same is not true for Yeltsin, at least not after the election. "We will fulfill the IMF agreements regardless of political events,'' says Mikhail Delyagin, a budget expert on the Kremlin analytical staff. "So unscheduled payments mean we have to reduce spending elsewhere."
The economic situation will not be a good one for the political careers of major government figures, admitted Gyorgy Satarov, Yeltsin's chief political aide, in a recent interview. One way that Yeltsin can ease the budget crisis, he says, is to crack down hard once the election is over on tax cheats and local administrators skimming federal money meant for wages, pensions, or hospital supplies - both practically normal practices now.
Yeltsin has already begun such a crackdown, says Mr. Satarov, but he must go easy for now because he depends on local administrators' electoral support.
The critical difference in coming months between a Yeltsin and a Communist-led administration, says Mr. Delyagin, the Kremlin economist, is that Yeltsin can draw foreign investment into Russia that would stay out if the Communists won. And foreign capital is the only way around an economic crisis this summer, he says.
The view of Yeltsin as a reformer has been in decline in Russia since 1993, when the leading radical democrats left his government. His privatization of the economy has been marred by inside dealing.
Yeltsin has not so much been advancing reform as maneuvering around reform, says Andrei Zagorsky, a political analyst at the Moscow State Institute for International Relations. In a next Yeltsin administration, he would expect "business as usual." Even if Yeltsin brings back some of the liberal democrats he has purged, such as Anatoly Chubais, the architect of what became the largest privatization program in world history, Zagorsky sees noticeable change in Yeltsin's pattern unlikely. Yeltsin will still be sewn into a dense fabric of ministers and staff aides who act as lobbyists for a wide array of regional and industrial interests, he says.
Others, such as democratic politician Andrei Nuykin, argue that Yeltsin has always been pushing a reformist course, but that radical reform has a natural cycle of pushing ahead and then settling in.
He hopes for a vigorous new push for reform from Yeltsin post-election. He sees the success Yeltsin has had against inflation - his clearest economic victory to date - as a factor that gives Yeltsin room to maneuver.
But not much room. Delyagin points out that in the first quarter of this year, less than half of the allotted federal funds were paid out to state industry and construction, health spending was 43 percent behind, servicing the federal debt was 37 percent behind, and defense spending was 34 percent behind schedule.