Publication: Monitor Volume: 4 Issue: 154

The blustering rhetoric of the government of Prime Minister Sergei Kirienko about its determination to hike tax revenues cannot conceal the fact that such a campaign will eat into its already slender base of support among the country’s political and economic elites.

In recent weeks, there have been a series of reports about the desertion of the new government by regional leaders previously loyal to President Boris Yeltsin. Saratov governor Dmitri Ayatskov said that the Kirienko team “has not made even one positive step.” Samara governor Konstantin Titov criticized the decision by Federation Council Chairman Yegor Stroev to convene a special parliamentary session next week to discuss the government’s additional tax proposals. Titov also said he will appeal to the Constitutional Court against the government’s decision to eliminate by decree the lower VAT rate for children’s goods and food products and to increase individual pension payments from one to three percent. (According to the Russian constitution, only the parliament has tax-raising powers.) (Izvestia, August 7)

Correspondingly, it is not surprising that Kirienko has been trying to make peace with some leading industrialists. On August 6, he met Gazprom chairman Rem Vyakhirev and expressed his admiration for the company’s role in the economy. Also last week, he met with leaders of the oil industry, and proposed creating an interdepartmental commission under Deputy Prime Minister Viktor Khristenko, to review their financial status and determine their ability to pay taxes. (Kommersant-daily, August 7) As has so often been the case since 1992, Russian economic policy is trapped between a desire to placate Western lenders and a need to maintain at least a minimum of cooperation with domestic elites.