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. Last Updated: 07/27/2016

Army's Pay Dilemma for Yeltsin

On top of promises of cash for miners, pensioners, scientists and war-battered Chechnya, the Kremlin faces yet another demand that some experts say could be the biggest federal budget-buster yet: paying off debts to the financially crippled army and arms industry.

They say the dilemma means another delicate balancing act for President Boris Yeltsin: If he gives the military too much, he wrecks the budget and jeopardizes international credits tied to reforms; if he gives too little, he further undermines his already shaky re-election chances in June.

"Yeltsin will have to pay something to the defense complex and the army. This is millions of voters," said analyst Yury Nikologorsky of the Expert Institute of the Union of Industrialists and Entrepreneurs. "Otherwise he does not have a chance."

The national defense budget did get a hefty boost this year, to the equivalent of about $15 billion in real terms, from $11 billion in 1994 -- about 11 percent of the overall budget and 3.8 percent of gross domestic product. Additionally, the military lobby has coaxed an extra 7 trillion rubles out of the government for 1996.

But military and industrial leaders say that is nowhere near enough for the long-neglected army, now bogged down in the Chechen war, and defense plants dying of cash starvation.

"The present budget could cover only 48 percent of the army's everyday needs," Defense Minister Pavel Grachev said Friday.

The new head of the State Committee on Defense Industries, Zinovy Pak, also has been complaining. "The state has failed to support the defense sector, and the defense sector has failed to find its place in the new circumstances," he said at a recent news conference.

Yeltsin's strategy so far is unclear. He met Wednesday with Pak at the Kremlin. No details were disclosed, although Yeltsin later promised to at least pay back wages owed to military personnel.

Calls by The Moscow Times to a half-dozen military units, including several elite units around the capital, showed that officers are still owed several months of back pay.

Grachev says the government now owes the army at least 20 trillion rubles that was budgeted but not received by the military in recent years. The back wages debt for 1995 alone is more than 2 trillion rubles, he claims.

Additionally, data released by the State Committee on Defense Industries shows that the government owes defense enterprises 1.5 trillion rubles in back wages. Moreover, those industries have not been fully paid for weaponry produced in 1994 and 1995.

Experts say this is politically dangerous for Yeltsin, who traditionally has counted on support from an industrial heartland that once thrived on military contracts. More than 5 million people work in defense-related industries, and their dependents number several times over.

"Now his chances there are dubious, as the situation at almost all defense plants is awful," said the analyst Nikologorsky.

The Yeltsin team is trying to make adjustments. The Finance Ministry says that by Jan. 22, the government made good on 10 trillion rubles owed for military procurements in 1995. It also has established a new schedule of escalating weekly payments to the army for wages, the military newspaper Krasnaya Zvezda reported.

The government also is nearing completion of a long-range weapons program intended to bring order and predictability to the industry.

Some experts say it is too little, too late. "No matter what promises Yeltsin would make, the majority of defense industries won't support him," said Sergei Markov of the Carnegie Endowment in Moscow. "They cannot forgive him for diminishing the privileged status they had in the Soviet era."