Publication: Monitor Volume: 4 Issue: 181

Prime Minister Yevgeny Primakov and his team met behind closed doors Thursday to discuss a plan aimed at resolving Russia’s economic crisis. The proposals presented at the meeting were reportedly those drafted by Yuri Maslyukov, Primakov’s economics czar. (Indeed, government spokesman Andrei Korotkov had announced the previous day that Maslyukov would be presenting the anticrisis program at Thursday’s meeting.) The prime minister’s attempts to keep the proceedings confidential, however, were torpedoed even before the meeting started: The business newspaper Kommersant daily published what it said was Maslyukov’s draft in its Thursday edition.

The Maslyukov draft has a strong whiff of vintage Gosplan. Dollars would be available only to those with hard currency accounts in Russian banks, while citizens could take only US$500 out of the country. Such measures would effectively rob many Russians of their only reliable hedge against inflation and a weakening ruble (according to various estimates, Russians hold anywhere from US$25 billion to US$75 billion in U.S. cash). Commercial banks, meanwhile, could carry out foreign currency operations only after concluding special agreements with the Central Bank, requiring them to transfer funds held in foreign banks to correspondent accounts in the Central Bank.

According to the plan, the state would choose which companies would be allowed to conduct export-import operations; exporters would have to sell 50 percent of their hard currency earnings to the state via “authorized” banks, and 25 percent directly to the Central Bank. The Central Bank, meanwhile, would set the ruble rate. Price controls would be imposed on staple goods, and the state would subsidize enterprises in the military-industrial sector (Russian agencies, October 1).

Maslyukov’s plan was met with a chorus of criticism from observers who argued that such measures would simply drive foreign currency operations back to where the resided before 1991–in the underground economy. Primakov decided to keep it at arm’s distance, at least publicly: He told reporters following the government meeting that it was just one of six anticrisis plans, and that no final decision had been made on which one would be adopted. The prime minister added, for good measure, that any talk of a state monopoly on foreign currency turnover was “sheer nonsense.”

Other comments by Primakov on Thursday help explain why he sought to distance himself from Maslyukov’s handiwork. The prime minister said that if the International Monetary Fund releases the scheduled US$4.3 billion installment of its bailout package promised last summer, Russia “will be able to overcome the current difficult situation with the least losses.” But he warned that if the tranche is not forthcoming, or is postponed for a long time, the government will take “measures which will be quite unpopular” (Itar-Tass, October 1).

For his part, former Vice Premier and tax chief Boris Fedorov, who was forced out of the government earlier this week, put an entirely different spin on the bailout. In an interview with Western correspondents, he said the IMF should withhold any further aid until Primakov’s government takes drastic steps to institute market reforms. During the past five years, he said, the IMF “was pretending to see reforms, Russia was pretending to enact them and the Western taxpayers were paying for it” (The Washington Post, October 1).