Talk about Hamlet without the Prince: First Deputy Prime Minister Yuri Maslyukov presented the budget to parliament without the numbers. In a closed session November 11, Maslyukov reportedly made the case for a 1999 budget with a surplus equivalent to 2 percent of gross domestic product (GCP). Leaked accounts say he claimed the alternative is no support from the IMF or other international financial institutions and inflation of 300 percent. But Maslyukov had no numbers to map out the path from where the country is today–with deficits running at an annual rate of 8 or 9 percent of GDP–to a 2 percent surplus. And no wonder: You can’t get there from here. A nine or ten point swing in the budget is six or seven points beyond credible.
Maslyukov may have been referring to a “primary” surplus, which excludes interest payments from the expenditure side of the accounts. The “primary” budget is a accounting device useful in highly inflationary economies, where budget deficits drive up interest rates, adding to the government’s debt-service costs and feeding back into higher budget deficits. Excluding this circular phenomenon from the budget-planning process can help to clarify the underlying flows of revenues and outlays. But even a primary surplus of 2 percent seems well beyond Russia’s reach, unless tax collection–now less than 12 percent of GDP–improves dramatically.
Japanese Prime Minister Keizo Obuchi spent two days in Moscow, the first Japanese visit at that level since 1973. The two sides continue to search for a path to a solution of the territorial dispute over the southern Kuril Islands, taken by the Soviet Union from Japan in the final weeks of World War II. Although progress at last week’s summit was less than many had expected, the goal of a peace treaty by the year 2000 remains in place. Increasingly reclusive President Yeltsin did meet with the prime minister for two hours but skipped the official banquet. Yeltsin also plans to skip the eighteen-nation Asia-Pacific summit in Kuala Lumpur November 17-18. He is, however, scheduled to meet with Chinese President Jiang Zemin in Moscow on November 22.
Conditions in Chechnya continue to deteriorate. The authority of President Aslan Maskhadov is ebbing under the pressure of economic decline and resistance from Salman Raduev, who wants to unite Chechnya and neighboring Dagestan as an independent republic outside the Russian Federation. Maskhadov quixotically issued a decree reducing Raduev’s rank from general to private and withdrawing the six-man security detail to which he is entitled. Raduev, who commands a private army and goes his own way, may not notice his loss of status…. With the intercession of Boris Berezovsky, seventy Russian hostages have been freed in Chechnya this year, ten of them last week. Berezovsky, who carefully guards the secrecy of his operations in Chechnya, denies that any money ever changes hands. But there have been no arrests, and the kidnappings continue unabated. It must be a good deal for someone, somehow.