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. Last Updated: 07/27/2016

'Red Director' Showing Reformist Colors

ix months ago, in the wake of the December elections that made Vladimir Zhirinovsky a household name, Prime Minister Viktor Chernomyrdin declared an end to "market romanticism" and formed a new, more conservative cabinet that sent chills down the slide rules of Western economists.


But Friday, outlining what he called "a new stage of reform" in Russia, Chernomyrdin sounded far more like a market romantic than the "red director" he has labeled himself to be.


Speaking to an expanded meeting of the government that included legislators and regional leaders, the prime minister lashed into local bosses for enacting reforms too slowly, named individual directors of enterprises who he said had squirreled away money in myriad hard-currency bank accounts and repeatedly stressed the virtue of tight budgetary policy and foreign investment.


Chernomyrdin, in a speech the World Bank and the International Monetary Fund might have written, said the new priorities of the government would be the creation of a favorable investment climate, liquidation and restructuring of bankrupt enterprises, and the start of the second phase of privatization in which state companies would be sold Western-style -- for cash.


As for monetary policy, the prime minister, who had declared six months earlier that Russia could not rely on monetary policy to solve its problems, said: "We cannot afford the luxury of any drastic revisions of financial and monetary policy. It will remain moderately tough."


Perhaps acknowledging that he has changed his economic thinking, Chernomyrdin said: "All of us have learned that the decline of inflation is an essential precondition for investment."


The change has come about as a result of two factors:


First, Chernomyrdin is reaping benefits, both internationally and to a lesser extent domestically, from the monetary policies of the liberal reformers whom he had blasted in January for failing to take into account the realities of Russia. Inflation is down to 5 percent monthly, largely as a result of the policies begun by former Finance Minister Boris Fyodorov and continued by his successor, Sergei Dubinin, with Chernomyrdin's blessings.


Supporting these policies has made Chernomyrdin welcome in Western capitals, as was evidenced by the deluxe red-carpet treatment he received on his recent official visit to the United States.


The second reason for the change is that Chernomyrdin himself was criticized in May by President Boris Yeltsin for moving too slowly to adopt economic reforms. "The president has been right to criticize us," Chernomyrdin told the government meeting. Unlike in his speech in January, the prime minister Friday often invoked Yeltsin as the man whose policies he was following.


Chernomyrdin turned his criticisms into reproaches of a slew of governmental bodies that seemed uncharacteristic for the prime minister. He said the Central Bank and the Finance Ministry "have clearly ignored their immediate duties"' to introduce an advanced bill-paying system; he criticized the Agricultural, Food and Defense ministries for being too slow to introduce reforms; and he complained that the State Arbitration Court was dragging its feet in deciding non-payment cases.


He publicly blasted the director of the Gorkynefteorgsintez oil production association, a man he called "Yegorov," for running up debts of 500 billion rubles while the company had nine hard currency accounts in seven different banks.


And Chernomyrdin chastised the director of the Saratov electric union for stopping production even though the company was manufacturing a marketable refrigerator.


"Let everybody in the country know their heroes and the real reasons behind their heroic activity," the prime minister said mockingly, saying a government report on the factory would be made public.


In one of the starkest examples of the change that has come over the prime minister, Chernomyrdin even went so far as to warn the Central Bank against lowering its interest rate too quickly, a move that would make it easier for enterprises to borrow money.


With the speech, Cheronmyrdin placed himself inexorably on the side of reforms and distanced himself from those in his cabinet who advocate a slower economic transformation.


Whether or not the government is capable of enacting any of the policies the prime minister put forward is another matter. Deputy Prime Minister Alexander Shokhin later in the meeting acknowledged that many of the government's promises remain unfulfilled.