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. Last Updated: 07/27/2016

Stops Pulled Out but Budget Still Stalled

In October, Prime Minister Viktor Chernomyrdin announced that his cabinet had come up with a "breakthrough" 1995 budget to put an end to Russia's economic woes.


Now, two months and a stunning 12 State Duma ballots later, Russia still has no budget and is losing hope of getting one early enough to avoid financing the country's economy on a month-by-month or quarter-by-quarter basis.


Duma Speaker Ivan Rybkin tried to take legislators by storm Thursday, making them vote again and again on a compromise version of the budget. But the eight votes he called, like the four taken Wednesday, failed to get the draft budget through a first reading.


Russian parliamentary rules make it possible for legislators to vote an unlimited number of times on a motion, but that is hardly the answer to the problem at hand. Though on two occasions the Duma came within five votes of the 226 required to pass the draft, more than 100 deputies were consistently voting against the proposal.


The sad fact for the government and the majority of legislators who would approve any kind of budget is that the people who have so far voted against the proposal are doing so as a matter of principle, and no amount of concessions, bullying or persuading is going to change their minds.


Another reason the 1995 budget cannot be passed soon enough to ensure steady financing throughout the year is that even if a 13th vote, scheduled for Friday, carries it through the first reading, the remaining three readings promise to be very time-consuming.


During the first reading, only the concept of the budget must be approved. The general spending and revenue figures, as well as the size of the deficit, will come under discussion during the second reading. The third one will become the arena for a relentless struggle among lobbies for specific allocations. The fourth reading is meant for style editing and other cosmetic changes.


There is no telling how long the marathon will take. But the government this week seemed willing to make any sacrifices to get the draft budget through the first reading and start the process.


"We are going all the way to meet you," Economics Minister Yevgeny Yasin implored deputies Thursday. "It would be very desirable for us to have a budget from the beginning of the year, otherwise we will again run up debts and then drive up inflation when we repay them at the end of the year."


Indeed, there were no sacred cows left for the government as it first gave up plans to drastically reduce inflation next year, then increased its forecast for industrial decline, then allowed deputies to raise the minimum wage and all social security payments, then agreed to keep a 2 percent value-added tax to subsidize agriculture.


As a result, Yasin admitted that at least an extra 2 trillion rubles ($583 million) would be added to the budget deficit, which is already pushing the limits acceptable to the international lending institutions whose loans the government expects to cover most of the deficit.


The concessions, however, bought nothing for the government. The Agrarian Party, which demanded the 2 percent tax as a condition of approving the budget, voted in favor of the budget both with and without the tax. But many radical reformers in the December 12 and Yabloko factions voted against the budget after the government started making concessions.


"We are worsening what the government originally gave us," said Alexander Zhukov of the December 12 faction, which has never been too happy about the proposal but which turned completely against it after the concessions were made. "It will make us all a laughing-stock."


A proposal eliminating the 2 percent tax, put forward by Yabloko's Mikhail Zadornov, consistently drew five or six votes more than the Agrarians' version of the bill, suggesting that the government should have aimed to please the liberals rather than the conservative lobbyists to ensure the budget's passage.


The Agrarians and Vladimir Zhirinovsky's ultranationalists have backed the draft budget all the way, saying that any budget was better than no budget. The Agrarians' leader said it best.


"It is naive and silly to count on a better budget under the existing regime," Mikhail Lapshin said Thursday. "We have to win the next parliamentary and presidential election and then we will pass a beautiful budget."


But the reformers, who, despite their recent parting of ways with the government, are associated with it in popular opinion, want the budget to be good now. It makes sense for the government to work closely with them, because, perversely, this time they can count on most conservatives' support.


The 45-member Communist faction in the Duma, however, will vote against the budget no matter what concessions are made. The faction's leader, Gennady Zyuganov, said as much Thursday, arguing with his longtime ally, Agrarian leader Lapshin. Zyuganov asked the Duma to take a 30-minute break so he could confer with the Agrarians, but the two factions failed to agree.


However, in order not to break up the alliance with Agrarians, Zyuganov suggested that the Duma pass a budget for just the first quarter of the year, taking into account the Agrarians' demands. The option seems viable, and Budget Committee member Vladimir Manannikov said the committee would probably soon propose a budget for the first quarter of 1995, mostly based on the government's proposal.


Far removed as it is from visions of an economic "breakthrough," the quarter-by-quarter option may be the most the government and the Duma can hope for in their current deadlock.