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. Last Updated: 07/27/2016

Premier Closes Era of Romantic Reform

Prime Minister Viktor Chernomyrdin pronounced the end of "market romanticism" Thursday as he unveiled a new cabinet that the last of the government's heavyweight reformers, Boris Fyodorov, refused to join as finance minister.


"I would say that market romanticism has ended, but we are not turning away from a market economy," Chernomyrdin told reporters as he announced the cabinet at a rare press conference Thursday. "Russia will not return to the past."


Fyodorov, however, told reporters that had resolved not to join the government because the conditions he had set for continuing to run the Finance Ministry were not met.


In public Fyodorov, 35, had set three conditions for joining the government: that he should keep the status of deputy prime minister and that Central Bank Chairman Viktor Gerashchenko and the conservative Deputy Prime Minister for Agriculture Alexander Zaveryukha should be fired.


Chernomyrdin flatly denied that any bargaining had been done.


"No conditions are being accepted," he said. Fyodorov's post "was offered, and that's it." If Fyodorov did not accept, "we will find someone else."


The loss of the finance minister will ring alarm bells in Western capitals, where he was viewed as a last guarantee of financial stability after the resignation of First Deputy Prime Minister Yegor Gaidar last Sunday.


Fyodorov predicted that the new government would likely fall on the influence of "various lobbies" and would be incapable of conducting a single policy. By "April or May" he predicted "monstrous inflation, real losses in wages," and said that "no one will live better by such a policy."


Chernomyrdin repeatedly stressed that his new government, approved by President Boris Yeltsin on Thursday, would not reverse the country's two years of market reform.


But the make-up of the new cabinet and the substance of the prime minister's remarks pointed toward a clear change of course, away from financial stabilization and toward inflationary spending.


A Western diplomat commented: "I think its true when Yeltsin and Chernomyrdin keep protesting they are for reforms; I'm not at all confident they know what that means." Chernomyrdin read a Yeltsin decree announcing the new cabinet, which will include the industrialist Oleg Soskovets as first deputy prime minister.


Three deputy prime ministers were named as Zaveryukha of the pro-communist Agrarian Party, moderate Yury Yarov, in charge of social policy, and the privatization minister, Anatoly Chubais, the last remaining radical reformer to hold a position of influence in the cabinet.


Alexander Shokhin, formerly in charge of foreign economic relations, will replace Gaidar as economics minister, while Sergei Shakhrai will keep his post as minister of regional relations.


With the announcement, Chernomyrdin appeared to have prevailed in a four-day struggle with Yeltsin over the fate of young free-marketeers like Fyodorov, whose deeply unpopular anti-inflationary policies had brought a degree of stabilization to the economy by the end of 1993.


Chernomyrdin, 55, said the government's new focus would shift from preventing hyperinflation to preventing a "hyper-recession." As earnest of his intentions, he promised to pay back the government's debts to the military and agricultural industries.


Gerashchenko -- Fyodorov's main sparring partner in disputes over spending -- has estimated those debts at 7.8 trillion rubles ($5.02 billion), a sum that Fyodorov has said would wreck the annual budget.


"I would hate to begin the year with the burden of debt before the population once again," Chernomyrdin said.


The cabinet reshuffle was ostensibly the outcome of a Yeltsin decree ordering the cabinet reduced to 29 from 77 members. But the victory of proponents of more gradual change over radical reformers, who suffered a defeat in December's elections, was clear.


Indicating that Yeltsin was not entirely pleased with the result, his spokesman Vyacheslav Kostikov told Russian television that the list was not final and that their could be other changes. He did not elaborate.


The loss of Gaidar and Fyodorov, the two linchpins of reform in the view of Western governments and financial institutions, will come as an embarrassment for Yeltsin, who only last week assured President Bill Clinton that he would stand by the reformers in his government and continue or even accelerate reformist policies.


In the new government Chernomyrdin said that fighting inflation would remain a priority, but: "From mainly monetarist measures, we will go over to other measures that have been used in many countries."


"I don't know what 'non-monetarist methods of fighting inflation' means," Fyodorov later scoffed at a press conference to announc his rejection of an offer to enter the government.


The prime minister, a veteran of the Soviet gas industry, gave his own prognoses for price rises, forecasting that inflation, at 12 percent in December, would rise to 15-18 percent in the first quarter before returning to 12-14 percent by the middle of the year and falling to 8-9 percent by the end of the year.


The government had earlier predicted a 5 percent rate by the end of the year, in line with requirements from the International Monetary Fund for the release of further financial aid.


Chernomyrdin also repeated earlier commitments to pay greater attention to social welfare.


"Increasing social allocations tops all our concerns," he said. But he sought to dispel "rumors that Chernomyrdin will start paying everyone easy credits, left and right. That won't happen. We will be very careful with credits."THE MOSCOW TIMES


The following is a list of the changes to the cabinet of the government of the Russian Federation, as confirmed by presidential decree and carried by Interfax:





Oleg Nikolayevich Soskovets -- First deputy prime minister


Alexander Kharlampiyevich Zaveryukha -- Deputy prime minister


Anatoly Borisovich Chubais -- Deputy prime minister


Yury Fyodorovich Yarov -- Deputy prime minister





These four deputy prime ministers will be joined by the heads of the ministries of the Russian Federation. The following is a list of the heads of reformed state committees and ministries who will sit in the cabinet:





Eduard Alexandrovich Nechayev -- Minister for health and health industry


Viktor Nikolayevich Khlystun -- Minister for agriculture and food products


Sergei Mikhailovich Shakhrai -- Minister for nationalities and regional politics


Sergei Kuzhugetovich Shoigu -- Minister for civil defense, states of emergency and disasters


Alexander Nikolayevich Shokhin -- Minister for economics