Publication: Monitor Volume: 3 Issue: 133

The Russian government’s temporary emergency tax discipline commission met on July 9 to discuss ways to implement Boris Yeltsin’s promise to pay off all 11 trillion rubles of wage arrears to federal and local state employees by the end of the year. (RTR, July 8)

The commission ran through the same set of measures which it has been discussing since its creation last fall — restructuring tax debts, threatening delinquent firms with bankruptcy, and holding directors individually responsible for diverting wage monies. Chernomyrdin also called, once again, for an end to the practice of channeling federal budget funds through a set of "authorized" commercial banks. This system has been a source of considerable profit to the banks, and has fueled corruption since banks compete to be included on the chosen list. Currently, federal funds are distributed among some 170,000 bank accounts, half in the Central Bank, 6 percent in Sberbank, and 44 percent in commercial banks. This decentralized system increases the opportunities for money to go astray in the process of distribution to the regions and to government agencies. The handling of funds in the four "off budget" federal funds (pensions, social security, health, and employment) is even more open to abuse. (Argumenty i fakty, No. 22, May-June)

Soon after joining the government Boris Nemtsov pledged to abolish the authorized bank system and distribute all budget funds through the federal treasury. In the end the government backed off, however, postponing the abolition of the system until January 1998, and promising instead to introduce competitive bids for banks wishing to take part. (NTV, May 12) Details on whether such auctions have taken place, and the conditions (interest rates, etc.) under which authorized banks operate, have not been made public.

Government officials complain that they lack the resources and expert staff to set up an exclusive treasury system. The head of the treasury, Aleksandr Smirnov, estimates it will cost 200 billion rubles to set up a nationwide distribution system, since his agency lacks an electronic network for transferring funds. (RTR, July 8) At a government meeting on June 17 which proposed introducing the unified system within six months, many ministries also complained that they did not have the resources to introduce such a radical reform. Complicating the picture still further is the fact that Tatarstan, Bashkiria and Evenkia have simply refused to set up regional branches of the federal treasury. (Moskovsky komsomolets, June 18)

Critics argue that the failure to abolish authorized banks is due to pressure from the banks themselves, whose capacity to channel money to top politicians for their political and personal needs is now well-documented. (Witness the July 1 Izvestia article about Anatoly Chubais’s relationship with Stolichny Bank.) As is so often the case in Russian policy-making, the inefficiency of many can be the source of profit for the few, and self interest can hide behind claims of incompetence and lack of resources.

Proposed FSB Reorganization Could Restore Much of its Lost Clout.