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. Last Updated: 07/27/2016

Premier Turns Back On Market Economics

Russia's new reform program will include only "elements" of the Western free market system, which has "caused more harm than good" on Russian soil, a spokesman quoted Prime Minister Viktor Chernomyrdin as saying Friday.


The statement, reported by Itar-Tass, appeared to confirm fears that the prime minister plans a radical change of economic policy: earlier Chernomyrdin had opened an inaugural meeting of Russia's new-look cabinet, which announced it would put support for industry at the top of its agenda.


The spokesman, Valentin Sergeyev, also quoted the prime minister as saying that the new economic program will mainly take into account the "special characteristics of our state, people and Russian traditions."


Citing the change in policy, two top Western economic advisers to the government resigned on Friday, saying they could not work with the new team.


Jeffrey Sachs of the United States and Anders Aslund of Sweden, both top-level economic advisers who have worked with the former Russian government on its reform program, announced their resignations Friday.


"We can no longer help the Russian government," they said in a statement that warned against future inflation. "The aims and policies announced by the prime minister are strongly opposed to our own concepts."


Following the resignations of Yegor Gaidar, the author of Russia's reform program, last Sunday and of Finance Minister Boris Fyodorov on Thursday, four of the top five members of the government now support policies that stress raising investment and subsidies for industry rather than tight budgetary controls.


Reaction to the change of direction has been pessimistic, as Russian liberals and Western experts on Friday prophesied massive inflation and economic collapse from the cabinet's policies, urged by Chernomyrdin as he chaired its first session.


"We have to find ways and means to give help to those enterprises which ought to start working and bringing revenue to the budget," Chernomyrdin told the cabinet meeting inside the White House, according to Itar-Tass.


Fyodorov's departure is being widely interpreted as the starting gun for a wave of government spending, which will boost Russia's inflation rate.


Grigory Yavlinsky, the prominent economist and leader of the second largest reformist bloc in the State Duma, told a press conference Friday that he expected the economy to cross a "critical frontier" in the autumn.


By then the economic situation would "arouse extreme, particular, special alarm," Yavlinsky predicted, with inflation topping 50 percent, the level at which it is declared hyperinflation.


Yavlinsky said that a natural rate for the ruble was 3,000 to the dollar. But after falling several hundred points in a few days the ruble held steady Friday, finishing at 1544 to the dollar.


Yavlinsky, who offered himself to form a government on Wednesday was dismissive of the new cabinet.


"As regards the current government, its construction, then I can say that it is a typical government which we had under the Soviet Union," he said.


Anatoly Sobchak, the mayor of St. Petersburg, called the changes in government "extremely dangerous" Friday, Reuters reported, saying government statements were "reminiscent" of ultranationalist leader Vladimir Zhirinovsky.


Zhirinovsky, who has frequently denounced Gaidar and Fyodorov, denounced Foreign Minister Andrei Kozyrev during a debate in the Duma on Yugoslavia.


"Why is the foreign minister not here?" Zhirinovsky shouted as he harangued Deputy Foreign Minister Sergei Lavrov and accused Kozyrev of an "anti-Serbian, anti-Slavic, anti-Russian position" over Bosnia.


After the motion was passed, condemning sanctions on Serbia and Montenegro and calling for non-interference in the former Yugoslavia, the Duma broke up for two weeks.


Western reaction to Fyodorov's resignation has been cautious. President Bill Clinton reaffirmed his backing for Boris Yeltsin Thursday, but Friday expressed concern at the prospects of inflation.


German Foreign Minister Klaus Kinkel said his government would continue to support Yeltsin "under the conditions that no serious threat arises for the aims of the reforms."