Better Than Nothing

By Bruce W. Nelan

Russia was facing the threat of civil conflict, and ominous signs of disintegration were showing up in the provinces. It looked as if President Boris Yeltsin would once again put forward his choice for Prime Minister, Viktor Chernomyrdin--and parliament for a third time would reject him. That would mean dissolution of the Duma and new elections, as banks continued to fail and the ruble plunged. But the communists in parliament warned that if Yeltsin ordered them to leave, they would not go. They started up the machinery to impeach the President. Key military and security units around Moscow were put on heightened alert. It felt a lot like 1993, when Yeltsin ordered tanks to fire on the parliament building to dissolve a rebellious legislature. Meanwhile, governors across Russia began to act on their own to replace the central government that had vaporized three weeks earlier. From Kaliningrad to Yakutia, provincial leaders decreed price controls, slashed taxes and cut off payments to the Russian Federation. "Forget about Moscow," Governor Aman Tuleev of Siberia's Kemerovo region advised his staff.

By the middle of last week, it suddenly became clear to everyone, even the detached and disoriented Boris Yeltsin, that under these circumstances, any government would be better than none. So Foreign Minister Yevgeni Primakov was persuaded to overcome his reluctance and take the job of Prime Minister. Primakov, a former journalist, academic and spymaster, is a man who believes in strong government, and presumably felt he had to respond when his President called. The Duma confirmed him overwhelmingly, 315 votes to 63, last Friday. His appointment solves the political stalemate at the top, at least for now, but it does nothing to cure the nation's economic crisis. Primakov has not yet put forward a program, but his signals indicate a partial turn away from market reforms and toward more state intervention in the economy. That is not what the U.S. and the bankers of the West were hoping for.

Not that the U.S., which was being polite about his latest appointment, has ever found Primakov easy to take. Washington officials vividly remember how he showed up in Baghdad late in 1990 in an effort to rescue his friend Saddam Hussein and head off the Gulf War. Since then he has been head of the Foreign Intelligence Service, which succeeded the KGB. As Foreign Minister, he has done his best to prevent the expansion of NATO, lift the sanctions on Iraq and forestall Western military action against Serbia. Even so, Secretary of State Madeleine Albright has gone out of her way to maintain a good working relationship with him. Last July at a banquet in Manila, the two sang a parody of the duet from West Side Story, with Albright warbling, "The most beautiful song I ever heard, Yevgeni, Yevgeni, Yevgeni."

Primakov is not overtly anti-U.S., but he is a gosudarstvennik, a proponent of a strong, centralized Russian state in foreign and domestic affairs. His opposition to American policies stems from this world view. And it wins him the support of the nationalists and communists in the Duma, who share his resentment of the world's lack of respect for their country. Washington understands his motivations. He is, says a senior White House official, "a hardheaded pursuer of what he believes are Russia's national interests."

The appointment of Primakov was promoted by Grigori Yavlinsky, a liberal reformer who heads the Yabloko Party. The Foreign Minister's name also appeared on a list of acceptable candidates put forward by Communist Party leader Gennadi Zyuganov, an odd alliance of convenience. Yeltsin chose Primakov partly because he was obviously confirmable and partly because he thought he could count on Primakov's loyalty. But by agreeing to drop Chernomyrdin, the man Yeltsin wanted to succeed him, the President visibly weakened his position and strengthened those of Zyuganov and Yavlinsky. Whether Primakov succeeds or fails, both of his backers intend to run for President--in 2000 if Yeltsin lasts that long, sooner if he resigns.

But how successful can Primakov be? His opening moves are not promising. He is pledging to form a kind of coalition government, apparently to please several of the Duma's parties, and that may be a formula for confusion. In a statement last week, he denied any plans to return to the Soviet past but said flatly, "The government should intervene in economic affairs and regulate them." Then he selected two men with a lot of experience with such intervention. As his first Cabinet appointment, he named Yuri Maslyukov, a Communist Party member and a former head of the Soviet State Planning Committee, Gosplan. With headquarters in the building where the Duma sits, Gosplan was the organization that tried to plan in advance every transaction in the Soviet economy. Since Primakov has no experience in running an economy, Maslyukov is presumably the man who will try to do it.

Primakov also accepted the Duma's choice as the new head of the central bank, Viktor Gerashchenko. Actually, he is not new, as he was head of the bank twice before: once when many ordinary citizens had their savings wiped out by a disastrous reform in 1991, and again when the ruble sank 30% on a single day, Black Tuesday, in 1994. During both tours of duty, Gerashchenko was widely criticized for heedlessly printing rubles and pumping almost unlimited credit into rusting, unproductive industrial enterprises and collective farms.

"I'm not a magician," says Primakov. "Don't judge this government by its first hundred days." But his first two appointments will frighten foreign investors and worry Western governments. They probably guarantee that the next bailout installment of $4.3 billion from the International Monetary Fund, due this month, will be held up. The U.S. opposes even considering another payment until it sees Primakov's plan to stabilize the Russian economy. "All previous programs are irrelevant," says a White House aide.

While the politicians fiddled, the economy was decomposing. The ruble, bouncing wildly from rate to rate and inflicting on traders what they call "ruble whiplash," has lost half its value in the past month. Prices are heading skyward. Domestic products are--at long last--in greater demand, but their prices are up so high that they have officially crossed the threshold of hyperinflation. In August monthly inflation jumped to 15%, the biggest increase in more than four years.

The communists in the Duma think they can restore order and stability by returning to a form of command economy: nationalizing the banks, setting exchange rates by fiat and subsidizing industry and agriculture with rubles hot off the press. Yavlinsky claims he is working on a plan of his own. Primakov, a dealmaker, will no doubt hold negotiations and search for a compromise. "He has nothing smacking of an economic strategy or policy," says Dmitri Trenin, deputy director of the Moscow office of the Carnegie Endowment for International Peace. "His main task will be to produce a consensus."

But consensus building may not be what is best for Russia right now. What it needs most is competent leadership. Not brilliant, just competent. It is not impossible that Primakov can provide it, but his first moves are not promising. In fact, many Moscow politicians figure he will not last long. The economy will continue to sag, and unrest across the country will grow. The communists hope he will do at least one thing: declare the liberal market reforms attempted over the past six years dead.

Yavlinsky sees him doing the country another service--presiding over Yeltsin's resignation. "We cannot even dream of an economic recovery until Yeltsin leaves the Kremlin," says Yavlinsky. He and his allies think this will happen soon, possibly in the next six months. Primakov, with his steady hand and presumed lack of presidential ambitions, will be just the man to hold the country together through that dangerous transition. Zyuganov is conceding nothing to Yavlinsky. The communist chief was a joke, wooden and ineffective, until he became the pivotal figure in the Duma, ready for another race for the Kremlin. To the politicians, it hardly seems to matter whether Primakov succeeds or fails. For the 148 million other Russians, it is a different story.

--Reported by Andrew Meier and Paul Quinn-Judge/Moscow and Douglas Waller/Washington

With reporting by Andrew Meier and Paul Quinn-Judge/Moscow and Douglas Waller/Washington