07 December 1998
KIRIYENKO SPEAKS AT NATIONAL PRESS CLUB
(Says Russia lacks national consensus) (1110) By Rick Marshall USIA Staff Writer Washington -- Sergiy Kiriyenko spoke at the National Press Club Friday afternoon, December 4. He was warmly introduced by the U.S.-Russia Business Council and the Eurasia Group to an audience with considerable interest in and concern for Russia's current economic and political conditions. You are probably expecting me to tell you that seven years of reform have brought about collapse, that this is the final defeat of reform, that corruption, now, is beyond hope, and that with no place else to turn, Russia is heading back to Socialism. But, no, the former prime minister said, the seven years have not been completely wasted. Still, "there have been confused moments," and there has not been systematic reform. Five months in office led Kiriyenko to conclude that the deepest problem Russia faces is a fundamental lack of consensus. This point he emphasized several times. Looking back over the past seven years, he said, it is clear that no one calculated the time it would take Russian society and the Russian people to change. "One cannot condense the time it takes for people to change their mindsets.... We willingly yielded to illusions," he said. It is sometimes believed that in voting for Boris Yeltsin the people had somehow bought the whole package of economic reforms. They did agree to the overthrow of communism, but that does not mean that they were ever fully aware of -- or have accepted -- the price and social costs involved, Kiriyenko told his NPC audience. At first, the people were not discouraged, believing that the market would not be too long in establishing itself. But, now, "the Russians are weary of waiting," he said. "People have the defeat syndrome." Russia cannot be compared to Eastern Europe. There, reform was part of national liberation. For Russia, by contrast, the psychology was not one of liberation but the collapse of an empire. There have been problems at both macroeconomic and microeconomic level, whose impact was not fully appreciated before, Mr. Kiriyenko continued. Companies that should have gone bankrupt did not; seven years later they are dragging the country down. There has not been a single year in the past seven when a realistic federal budget has been adopted. "It is increasingly difficult to speak the truth." Minister Yevgeniy Primakov's government "is fairly left wing" -- according to the Russian definition of the term, and it relies to a considerable extent on the Duma. Yet there has been a change, he said. Even recently there were those who believed that a return to the old system would help. But no more. However unwillingly, the people in the government are talking today of protecting the market and encouraging foreign investment. Primakov has been able to provide stability; for this he should be given a good deal of credit, Kiriyenko said. Still, time is running out. Nothing has happened economically; a budget is needed this month. The Communists do not have any effective prescription. At least, nobody is talking of printing more rubles, Kiriyenko said. Opinion polls show a small majority of the population would not support this policy even if were pledged to their salaries. "Nobody wants to go back to hyperinflation." The Communists are looking for scapegoats, the anti-Semitic remarks attributed to General Makashov should be viewed in that light. "There is no realistic alternative to continuing market reform in Russia," Kiriyenko said. The problem is that Russians have lost all trust in authority. The only approach that makes sense is to restore that trust, form a social contract with the people in which the costs of change are clearly explained. There must be "open doors," Kiriyenko said of his country's economic relations with the international community. The first of these doors should be built around Russia's London and Paris club debts. Seventeen billion (17,000 million) dollars is due next year, 10 percent of gross domestic product. Russia will not be able to meet it. The second door is accommodation with the World Bank and the International Monetary Fund (IMF). Russia needs to have the choice of going through this door -- even if it does not take it in the end. A third is the World Trade Organization (WTO). The fourth is the ability of Russian companies to have access to world markets. In space launches, for example, Russia has been "made subject to quotas." It is, indeed, time for Russia to sink its teeth into its economic problems; even so, there is a need for a proper international climate, he said. In the question-and-answer period that followed these remarks, Kiriyenko said that the alleged influence of the so-called oligarchs "has been greatly exaggerated." Their controling strength over the media and the large chunks of real estate they manage, however, he readily conceded. Asked the value of the U.S.-Russia Binational Commission -- or the Gore-Chernomyrdin as it was familiarly called -- Kiriyenko said that "it has produced positive results" and that "it should keep up its activities." On pipelines issues, Kiriyenko said that when he was minister of energy he had argued that it would prove cheaper to export Caspian Basin oil through Russia than construct the Baku-Ceyhan pipeline. He acknowledged that "there will be a need for food and fuel aid" in Russia this year, but said that the specifics of where and how it would be distributed have not been worked out yet. "Russia is going to need aid in many places." Asked to comment on the anticipated presidential candidacies of Moscow Mayor Yuri Luzhkov and General Alexandr Lebed, governor of Krasnoyarsk, the former prime minister spoke only of the latter, saying "my impression of Lebed is that he does not have a clear-cut economic program" at this point. Lebed will adopt whatever program will contribute to his success, Kiriyenko stated. Kiriyenko stressed that the State must crack down on tax delinquents; there must be no exceptions, no matter how large they are. Last summer's experience with Gazprom showed that it is possible, he said. But there is no question that a new tax code is needed. This should shift the tax burden from the producer to the consumer. The government has largely failed to carry out its part of the social contract, Kiriyenko said. It has to show people that it can collect taxes and use the revenue for public benefit. He said that he harbored "a very good impression about my stay in Washington." His country's biggest problem internationally, he said in conclusion, is the international community's "inability to understand Russia."
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