Publication: Monitor Volume: 5 Issue: 51

Rumors that a government shake-up is in the works continued to circulate over the weekend. President Boris Yeltsin fueled the fire on March 11, when he suddenly summoned Yabloko leader Grigory Yavlinsky to come to the Central Clinical Hospital for a meeting (see the Monitor, March 12), and again the next day, when he met with Yegor Stroev, speaker of the Federation Council, the upper chamber of Russia’s parliament. Both Yavlinsky and Stroev said that personnel questions were not discussed during their meetings with Yeltsin; some observers interpreted the meetings not as Yeltsin interviewing candidates to replace Yevgeny Primakov, but simply as a message to the prime minister that he is not indispensable.

On the other hand, Yavlinsky and Stroev, who is the governor of Orlov Oblast, have themselves been forging ties. Stroev, who referred to Yavlinsky on March 12 as an “intelligent, carefully thinking person,” has reportedly delegated his assistant, Sergei Nikolsky, to write Yabloko’s agricultural program for the parliamentary elections scheduled for later this year. Orlov Oblast has, over the last five years, carried out what some observers say is a successful agrarian reform (Segodnya, March 13). Thus some combination of Stroev and Yavlinsky could possibly replace the Primakov cabinet: Stroev, a former Soviet Politburo member with distinctly “centrist” views–similar to those of Primakov–might be named prime minister, which would help mitigate the anger of the leftist majority in the State Duma if Primakov were fired. In this scenario, Yavlinsky would serve as Stroev’s first deputy in charge of the economy, and other Yabloko members would hold the other main economic ministerial portfolio, all of which would please international lending institutions and Western governments.

Many observers see Primakov’s fate as hinging on the outcome of the negotiations with the International Monetary Fund (IMF). Billions of dollars in debt payments to foreign creditors are coming due, and should Russia not win an agreement from the IMF to restructure those debts, it will have to devote 70-80 percent of its budgets until the year 2003 to foreign debt payments. Thus the alternatives are massive cuts in social spending (risking a social explosion), default (risking international economic isolation) or revving up the printing presses (meaning hyperinflation). This is why the Primakov government suddenly agreed to the IMF demand that it hold off on lowering value-added tax, which it had wanted to do to stimulate domestic industry. Yet the leftist-dominated Duma put the government in a bind on March 12 when it insisted on passing a package of laws which included lowering VAT from 20 to 15 percent as July 1 of this year. The Duma did so despite an appeal from tax minister Georgy Boos that the cut be postponed until next year (Russian agencies, March 13). The Duma vote is likely to complicate the talks with the IMF.