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. Last Updated: 07/27/2016

Battle Shifts From Politics To Budget

The battle which the opposition planned for last week ended almost before it began. In Friday's State Duma session, the Communists failed to deliver a no-confidence vote in the government, much less to begin impeachment proceedings against the president. They lacked the unity needed to bring these motions up for serious consideration.


But this failure was far from certain a day before. The Kremlin was palpably nervous about the session on Wednesday. One highly placed official in the presidential administration said they had no contingency plan for a no-confidence vote over the withdrawal of troops from Chechnya.


This official said the situation was extremely serious, because neither the resignation of the government nor the dissolution of the Duma was in the president's interests. He added that the Yeltsin team was working to defuse the issue.


The conflict should now shift back from the political to the economic sphere. The 1997 budget has not been passed, and the left opposition, having fallen short of the big prize, will seek revenge during the budget debate.


With this in mind, the government itself discussed the budget in a closed session last week.


The Economics Ministry recommended recalling the draft budget from the Duma and introducing key changes, most importantly adding a "development budget".


The development budget -- the investment section of the budget -- is intended to provide legislative protection for investment. That is, the sources of money earmarked for investment would be clearly designated, and these funds would be protected from later cuts.


At present, when the government faces unexpected expenses or when it is short of cash, seed money is the first to be curtailed.


Supporters of the "development budget" call for concentrating all investment funds in this "untouchable" section, including credits from the International Bank for Reconstruction and Development. Moreover, the Economics Ministry suggested allocating budgetary investment resources as credits to potentially profitable projects.


The ministry has long argued for extending federal investment rubles on a competitive basis, but the funds earmarked for this purpose in the last two budgets were diverted to pay back wages and fund the war in Chechnya. It is hard to say why the ministry hopes that next year will be any different.


The single-industry ministries and major state-owned corporations oppose competition-based distribution of investment funds, which they now divvy up themselves.


Nevertheless, the Economics Ministry's idea is being seriously considered by the government, which is probably counting on the very term, "development budget," to win the support of Duma deputies, including those on the left.


The government also hopes to win the backing of deputies by easing the tax burden on enterprises, although it cannot reduce taxes significantly because the budget deficit planned for 1997 already represents an increase.


After last Friday's debacle, the opposition must focus on the budget fight. But this is already less a political battle than political bargaining -- who concedes what to whom, and for what price.





Mikhail Berger is economics editor for Izvestia.