------------------------------------------------------------------------------- [Prev][Next][Index] 9 February Prism - Part 3 ------------------------------------------------------------------------------- * To: Multiple recipients of list * Subject: 9 February Prism - Part 3 * From: Broadcast * Date: Sat, 10 Feb 1996 11:46:18 -0500 * From jf-monitor@sura.net Sat Feb 10 11: 46:42 1996 * Reply-To: jf-monitor@sura.net * Sender: jf-monitor@sura.net ------------------------------------------------------------------------------- -- [ From: Broadcast * EMC.Ver #2.5.02 ] -- THE JAMESTOWN FOUNDATION PRISM A BI-WEEKLY ON THE POST-SOVIET STATES PART 3 ____________________________________________ RUSSIA'S PRESIDENTIAL RACE: THE MANEUVERING BEGINS by Gleb Cherkassov The break between the end of the election campaign for the State Duma and the beginning of the preparations for the upcoming presidential elections was very short, precisely as long as the New Year's Day holidays. As a matter of fact, those who took part in the election campaign for the Duma viewed it as merely the first stage of the presidential election campaign which was supposed to identify serious candidates and sift out those who were planning to run by force of habit or as the result of overweening ambition. It is difficult to say to what extent these expectations have been realized . Due to the excessive number of party slates, very few of the parties had a real chance of entering the new Duma. The results of the elections have confirmed that Grigory Yavlinsky, Gennadi Zyuganov and Vladimir Zhirinovsky are serious candidates for the presidency. At the same time, the prospects of Aleksandr Lebed and Svyatoslav Fedorov appear less favorable. They did manage to be elected to the Duma, not as part of party slates, but only from single member districts. The popularity of the famous General (now in reserve) and eminent eye surgeon turned out to be insufficient to help their parties surmount the 5 percent barrier. As far as Aleksandr Rutskoi, Boris Fedorov, Stanislav Govorukhin, Ella Pamfilova and Boris Gromov are concerned , their chances of replacing Boris Yeltsin in the Kremlin appear negligible in light of the fact that their parties received a miserable 1-2 percent of the vote in the State Duma elections. Nevertheless, all the above mentioned politicians have decided to enter the presidential race. Apparently, the results of the elections to the Duma have taught them nothing and so we must conclude that the Duma elections have failed to become real "primaries," capable of eliminating some of those who aspire to the country's highest post. There is another reason why the elections cannot be regarded as "primaries. " Significantly, Boris Yeltsin, who is definitely one of the major candidates for the top office in the Kremlin, did not take part in the State Duma elections. Although he made no announcement, only a few persons doubt that he will take part in the race. It is difficult to draw any conclusions about Yeltsin's popularity at this point. The showing of the "Russia Is Our Home" bloc in the elections is of little help because many of those who support Boris Yeltsin backed other parties while many supporters of the "Russia Is Our Home" bloc and personally of Viktor Chernomyrdin will never vote for Boris Yeltsin. The first campaign moves by President Yeltsin have taken many by surprise, both among the broad public and the President's entourage. In the brief space of two weeks, the president fired three men whose names had long been associated with the democratic process and economic reforms in Russia; Foreign Minister Andrei Kozyrev, former senior vice premier Anatoly Chubais and former presidential administration head Sergei Filatov. Their offices have been given to the politicians with the reputation of being anti -liberal hard-liners. The second unexpected move by the incumbent president was the bloody resolution of the Kizlyar-Pervomaiskoye hostage crisis. Without doubt the storm of the settlement where Salman Raduyev and his men were entrenched was carried out with Yeltsin's approval. In this sense, he rejected (both verbally and practically) the experience of Viktor Chernomyrdin who, in a similar situation, managed to come to terms with the Chechen terrorists and avoid a massacre. The third unexpected action by Boris Yeltsin has been his decision to demonstrate publicly a friendly attitude towards Moscow Mayor Yuri Luzhkov, who has been openly critical of the course pursued by the Russian government recently. Judging by all indications the president has decided to try to change his image and to rely on other parts of the electorate, specifically those who backed neither the democrats nor the Communists in the parliamentary elections. He is obviously aware of the fact that part of the democratically oriented public will back him whatever he does if it comes to choosing between him and Zyuganov and Zhirinovsky. But he apparently has been strongly impressed by the results of the past State Duma elections where the majority of the voters supported candidates of both the constructive opposition and the irreconcilable opposition. In his election campaign, Boris Yeltsin definitely plans to rely in the first place on the executive power structures. The recent order of Transport Minister Vladimir Fadeev to his subordinates to collect signatures on Yeltsin's nominating petition has already become the subject of discussion at a plenary meeting of the State Duma. But while seeking to win over voters, Yeltsin and his entourage have not forgotten to protect their "rear." Prime Minister Viktor Chernomyrdin has been practically squeezed out of the presidential race. The majority of functionaries of his movement have already begun working for Boris Yeltsin's election campaign; in the meantime, the premier himself has been forced to announce that he will not run for president of Russia. It cannot be ruled out that Mr. Chernomyrdin will have to resign, however, this may only occur after the procedure of registration of presidential candidates is completed. There have recently been a lot of rumors that the president's structures have worked out a plan according to which the incumbent president and LDPR leader Vladimir Zhirinovsky will enter the second round of the presidential elections. Presidential analysts believe that if events take such a turn Mr. Yeltsin will be backed by not only his supporters but also by those who consider him to be the lesser evil compared to Zhirinovsky. One way or another, the LDPR and its leader have received substantial financial support recently. Several hundred thousand dollars are expected to be spent on the upcoming celebration of Zhirinovsky's fiftieth birthday, which is also supposed to mark the opening of Zhirinovsky's election campaign. The candidate nominated by the Communists will almost certainly be a strong candidate in the upcoming presidential elections. In all probability this will be KPRF leader Gennadi Zyuganov. However, Zyuganov's situation has recently been complicated by the pressure exerted by radical Communists both within and outside the KPRF. Therefore, Mr. Zyuganov will have to maneuver between the orthodox Communists (who are eager to take revenge for the defeat they sustained in the early 1990s) and the moderately disposed public who consider Mr. Zyuganov to be a sensible alternative to Boris Yeltsin. The situation of the KPRF leader may become worse if the plan is implemented that calls for the Communists to nominate several candidates for president. Each of these nominees will carry out his propaganda campaign until the very last week and eventually all of them will withdraw throwing their support to the most popular Communist candidate. Nobody can guarantee today that Mr. Zyuganov will in this case be recognized as the most popular Communist nominee. Not a smaller problem for a candidate nominated by the KPRF will be the one presented by Working Russia (a radical Communist movement) which has nominated its leader Viktor Anpilov as a presidential candidate. Mr. Anpilov can divert part of the Communist electorate from the KPRF thus diminishing the chances of the left to enter the second round of the presidential race. Moreover, Mr. Anpilov will probably attract many KPRF activists to assist him in his campaign work -- this will definitely be a great loss for Mr. Zyuganov or any other leftist candidate. The position of Grigory Yavlinsky is even shakier than that of a Communist candidate. The Yabloko leader is currently looking for people to collect signatures on his nominating petition who would be capable of organizing a more successful campaign for him than during the State Duma elections. For your information: In 1995 Yabloko received approximately the same number of votes as in 1993 in spite of the fact that this time Grigory Yavlinsky enjoyed the benefit of being regarded as a clear "favorite" in the democratic wing and his movement enjoyed all the advantages provided by the existence of its own parliamentary faction. Therefore, Mr. Yavlinsky obviously needs to amend his political strategy and tactics and to win allies over to his side. Perhaps he will be able to enlist the support of some members of Russia's Democratic Choice (the latter party recently refused Boris Yeltsin their support but have not found any other candidate yet). Far from all of the members of Russia's Democratic Choice members agree with Yegor Gaidar in his decision to support Viktor Chernomyrdin. Aleksandr Lebed is also busy looking for organizations that could help him in the upcoming presidential elections. The Congress of Russian Communities (on the slate of which Aleksandr Lebed ran for a seat in the Duma) is experiencing a crisis today. CRC leader Yuri Skokov is accused by his own cohorts of having deliberately undermined the party at the behest of the presidential structures. Nevertheless, Lebed is not going to leave the ranks of the CRC for the time being; the rumors that Mr. Lebed plans to ally with Stanislav Govorukhin do not appear trustworthy. In general, in its initial stage, the presidential elections campaign is very reminiscent of the State Duma elections campaign: A wide variety of candidates three quarters of whom do not have the slightest chance to win are preparing to run which means that the vote will again be spread in a thin layer over the entire length of the political spectrum. By the way, the Central Elections Commission, seeking to avoid a repetition of the situation where 43 elections blocks took part in the elections, is preparing to subject the signatures collected on the nominating petitions to a most comprehensive examination in order to help weed out the "unserious" candidates. Translated by Aleksandr Kondorsky Gleb Cherkassov is a commentator for Segodnya. ___________________________________________________________ RUSSIA ON THE EVE OF THE ELECTIONS: POLITICIANS VS ECONOMICS? by Alexei Kondratov Analysts have unanimously appraised the past year as the best since the reforms began in the country with regard to macroeconomic indicators. The rate of inflation decreased in 1995 from 20 percent in January to 3.5 percent in December. Furthermore, the past year was marked by an increase in production volumes in the raw-material producing branches of the economy, ferrous and nonferrous metallurgy, the chemical industry and petrochemicals. According to the Russian State Statistics Committee the combined industrial production volume in 1995 equaled 98 percent (in real terms) of the corresponding 1994 figure, while the GDP declined 4 percent. In 1994, the decline in the GDP from 1993 equaled 15 percent. These achievements are largely a result of the austerity regime imposed by the government. The government has tried to use new mechanisms to fund the budget, for example, "mortgage" auctions (where the state provides its share parcels in the industrial enterprises as collateral for loans), developing the market for state's short-term bonds and issuing a tranche of Savings Loan Bonds for the public. A considerable contribution was made by the tight credit and financial policy inspired by the International Monetary Fund; It is this very policy that has made it possible for the country (for the first time since the reforms began) to stay within the limits of the affirmed state budget and to abandon the practice of granting favorable loans to unprofitable industry. At the same time, these tough measures have resulted in not only the achievement of relative stabilization but in the cutting of the state financing of social programs; the latter has made the public critical of the Cabinet and this was graphically manifested during the December 1995 elections. The majority of the electorate backed the Communists who advocate revising the current economic course and vehemently criticize the government for their "anti- social" policy. Presidential elections are coming soon and these elections will be a battlefield for real power in the country. The Russian Constitution provides a president with considerable powers, including the power to appoint key figures in the government and the right to dissolve the parliament. Therefore, if the Communists win the presidential elections scheduled for June 16th, it will mean a fundamental change in the country's economic course. Until June, 1996, the Economy will Continue to Stabilize The fact is that up until June 1996 the current Cabinet will continue to hold the levers of economic power. The President's decision to remove Anatoly Chubais, who has been a champion of the economic reforms, from the government has inflicted damage on the government, the Cabinet is still able to continue the course of reforms. Prerequisites for the government's course to remain unchanged include the terms of the state budget for 1996 which was adopted in December 1995, the decision to extend the effect of the semi-fixed ruble/dollar rate and the refusal of the CBR to grant credits to the government to compensate for the budget deficit. In an interview he granted to an Itar-Tass correspondent while he was the senior vice premier Anatoly Chubais, commenting on the results of the past State Duma elections, stated that "the current Cabinet will enjoy every opportunity during the first half of 1996." "During this time," Mr. Chubais explained, "the Duma will be unable to retract the fundamental economic conceptions which were passed earlier." "Therefore," Mr. Chubais concluded, "by mid 1996 we will achieve a growth in the GDP of 1-2 percent." Many believe that the public will feel the results of the economic policy pursued by Chernomyrdin's Cabinet in the next 6 months to come. If these forecasts come true the disposition of forces on the eve of the Presidential elections will be different (from that during the last two parliamentary elections) and Yeltsin may receive carte blanche to continue the present course of reforms without revising it dramatically. At the same time analysts remark that the struggle for votes may prompt Yeltsin into making populist moves that could undermine the positive trends which have taken shape in the economy, such as the reduction of the inflation rate and the slowing of the tempo of the decline in production. In fact, Chubais' certainty, expressed in early 1996, was probably dictated by yet another consideration. Chubais was the man in the government responsible for holding negotiations with international financial institutions, specifically for the preparation and signing of Russia 's agreement with the International Monetary Fund on granting Russia a three- year loan worth $9 billion. Analysts involved in the problem believe that the "IMF factor" will play a considerable role for Russia in determining her economic policy during the time which is left until the Presidential elections. The fact is that Russia badly needs this loan because it is already included in the calculations for deriving the 1996 state budget. The negotiations between Russia and the IMF will in all likelihood continue until June 1996 (the IMF apparently wishes to be insured against political risk) and their results will depend on Russia's ability to meet the IMF's demands regarding economic policy. "Capitalism with a Human Face" The appointment of Oleg Soskovets as head of the Yeltsin re-election effort has led many to believe that if Yeltsin is re-elected, Soskovets will become the prime minister. Moreover, it appears that Mr. Soskovets has been chosen to articulate the president's election program. In an interview he granted to an Interfax correspondent in late January, Soskovets stated that "the government is not going to introduce any dramatic changes in the present economic course and will continue along the path of reducing inflation and rigid financial policy." He stressed that the government will not change its policy to pander to political demands in connection with the upcoming presidential elections. Outlining his immediate plans, Soskovets remarked that he will place his bets on creating favorable conditions for investments, stimulating the development of domestic goods producers, the formation of new financial- industrial groups and imposing stricter controls over pricing policy in the case of the so-called natural monopolies. He also, however, has spoken recently about the need to introduce certain changes in economic policy in order to build "capitalism with a human face." This, in turn, appears to become a major conception of the renovated Cabinet . At least, in an interview he granted to the press in January, Mr. Soskovets remarked that "a rigid budget and financial course should be combined with searching for ways to resolve problems of the social sphere and patronage of domestic goods producers." This statement cannot be ignored when analyzing possible scenarios for the Russian economy, the more so since certain elements of the conception have already taken shape. Thus, the State Duma has adopted a resolution increasing the minimum wage and pensions by 20 percent and VAZ automobile plant director Vladimir Kadannikov was appointed to replace Anatoly Chubais as senior vice premier (Anatoly Chubais advocated reducing import duties); the latter move can well be regarded as directed at patronizing domestic goods producers. Curbing Inflation to 1.5 Percent Per Month? General stabilization requires that inflation be cut to 1-2 percent per month. This is precisely what the law on the federal budget for 1996 calls for. Is it reasonable for a country where the prices grew 131 percent during the past year to expect to achieve such a result? According to forecasts made by the Economics Ministry this goal is fairly realistic. The Ministry has drawn two scenarios of the possible development of events: an optimistic one and a pessimistic one. According to the former, manufacturers' prices in 1996 will climb at the same rate as retail prices, increasing at 25 percent per year or 1.9 percent per month. According to the latter (pessimistic) option the rate of inflation in the country will equal 3.5 percent per month due to the government's possible shifting to a milder monetary policy in the first quarter of the year. According to this (pessimistic) scenario the rate of inflation will equal 6 percent per month during the first three months of the year. In the second quarter, inflation will gradually diminish to 4 percent per month. In the second half of the year, the rate of inflation will be not higher than 2 percent per month and by the end of the year it will diminish to 1.5-2 percent per month. According to the optimistic scenario the rate of inflation will amount to 3 -4 percent per month during the first quarter; 1.8-2 percent per month during the second quarter and 0.8-1 percent per month during the third and fourth quarters of 1996. During the first quarter, inflation may be promoted by price hikes for products manufactured at the enterprises which belong to the so-called natural monopolies. The latter price hikes may come as a result of the prices for these items (along with rent, utility and transport tariffs) being frozen as of late 1995 and in connection with state subsidies for these enterprises being cut. According to the Economics Ministry's forecast, agricultural workers and the producers of consumer goods and nonferrous metals will encounter tough government pressure in pricing policy; current prices for many of these items have already exceeded the corresponding world prices. In the first half of 1996 the government will probably allow the natural monopolies to increase their prices which will probably cause a sales crisis and promote a decline in production primarily in the processing industries. However, specialists from the Economics Ministry believe that these adverse trends will not last for very long. The experts stress that a mechanism for regulating prices (which is currently being elaborated) for goods produced will help lead to prices and tariffs which best reflect the country's economic situation. The reduction of inflation is definitely a positive factor. The reduction of the tempo of price hikes helps to bridge the gap between the rich and the poor and thus makes the economic course more "socially oriented." The reduction of the inflation rate during 1995 helped to reduce the number of people living below the poverty line in the country by 20 million. In addition to that, the reduction of inflation stimulates investments in industry. It is well known that in the situation of high inflation, financiers tend to invest their capital in commercial profiteering, while as soon as inflation falls to a "normal" rate, the country's financial resources begin to stream into the production segment of the economy. A steady and consistent reduction of the inflation rate (which is expected to take place during 1996) will help make the economic situation in Russia more stable and predictable, will prompt a reduction of bank interest rates, will make credits more accessible and hence will promote industrial growth. A reduction of the inflation rate will help create the conditions for the Russian banks to invest in industry. If the government's forecasts come true the domestic commercial banks will be forced to reduce their interest rates by 40-50 percent during 1996; therefore, domestic commercial credits will at last become accessible for industrial enterprises. Translated by Aleksandr Kondorsky Alexei Kondratov is an economic analyst for Interfax. _________________________________________________ Prism is a publication of the Jamestown Foundation. We welcome your comments, suggestions, and any questions you may have. Please contact us by e-mail at Long@jamestown.org, by fax at 202-483-8337, or by postal mail at The Jamestown Foundation, 1528 18th Street NW, Washington, DC 20036. Copyright (c) 1996 The Jamestown Foundation. If you DO NOT wish to continue to receive your complimentary copy of the Prism, please send an e-mail message to: Listserv@services.sura.net In the body of the message type: SIGNOFF JF PRISM. ------------------------------------------------------------------------------- * Prev: 9 February Prism - Part 4 * Next: 9 February Prism - Vol.II Number 3 * Index: Latest Russian News -------------------------------------------------------------------------------