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. Last Updated: 07/27/2016

Price Controls Will Be Revised

The growing image of disarray inside Russia's government sharpened focus Thursday when a top official said that a decree signed by Prime Minister Viktor Chernomyrdin to introduce price controls would be revised.


"This decree will be changed", First Deputy Prime Minister Vladimir Shumeiko told a roundtable of journalists in remarks that his office later faxed to news organizations.


"I think the mechanism of regulating prices in today's economy in Russia will not work", Shumeiko said. "We can write a lot of decrees on paper. We can put down a lot of restrictions but they will not work".


Shumeiko said that the government would soon issue a new decree to replace Chernomyrdin's "that will have only a small part of the third provision dealing with the restriction of prices for monopolistic enterprises".


Chernomyrdin, issued the controversial price regulation for a basket of staple foodstuffs and raw materials on New Year's Eve, imposing caps on the profits manufacturers would be allowed to make on them.


The legislation was interpreted by Western analysts as a sign that Chernomyrdin, a veteran of the Soviet energy industry who became prime minister last month, might try to turn the clock back on economic reforms.


But it quickly drew criticism from inside Chernomyrdin's cabinet, which is largely composed of ministers appointed or proposed by his predecessor, acting Prime Minister Yegor Gaidar.


The new deputy prime minister in charge of economic strategy, Boris Fyodorov, said in an interview published Wednesday that the resolution was "mistaken" and "impossible to realize" because of the difficulty of enforcing profit caps.


He said that the order, which was signed by the prime minister, "in no way reflected the policy of the government".


The to-and-fro over price controls indicates that the marriage between Chernomyrdin and the cabinet of Gaidar's younger fast-track reformers is off to a rocky start.


The acting press spokesman for the government, Vladimir Sklaruk, was at a loss when asked if Chernomyrdin had approved Shumeiko's announcement, or whether the prime minister planned to introduce price regulation by some means other than restricting profit margins.


"That's an interesting question, you should ask Chernomyrdin himself", Sklaruk said in a telephone interview. "We cannot say for sure whether the government is going to control prices or not".


Spokesmen for the economics minister, Andrei Nechayev, and the deputy prime minister in charge of privatization, Anatoly Chubais, both disclaimed responsibility for the initial decision to regulate prices.


The debate highlights a fundamental difference of approach between Chernomyrdin and his ministers over how to control inflation, which reached as much as 2, 500 percent for 1992.


Chernomyrdin has proposed increasing credits to industry in order to protect insolvent state employers from collapse - a move that would create inflationary pressures - while his New Year's Eve decree aimed to soften the effects of price rises on consumers.


The Gaidar team's policy has been to restrict credits to industry as far as possible to minimize inflationary pressures, while allowing prices to float freely.


Fyodorov will soon publish an economic stabilization program of his own that would limit credits and subsidies, according to Interfax.