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. Last Updated: 07/27/2016

Kadannikov Jeered as Duma Rips Economy Policy

Parliamentary deputies Wednesday ripped the government's handling of the economy, virtually humiliating a top minister and pronouncing the state of the budget under President Boris Yeltsin's administration "unsatisfactory."


The verdict was endorsed by 325 deputies in the 450-seat State Duma after First Deputy Prime Minister Vladimir Kadannikov failed to sway the hostile mood. He stumbled through the text of his report and suffered the criticism intended for his boss, Prime Minister Viktor Chernomyrdin, who skipped the meeting at a short notice.


Chernomyrdin's press office said Wednesday he was "urgently summoned to Kremlin by President [Boris] Yeltsin" and was not able to attend the Duma session in the morning. A spokesman gave no further details.


The parliament's condemnation came one day after Finance Minister Vladimir Panskov said the budget was being crippled by lagging tax collection and aggravated by Yeltsin's pre-election spending promises.


Some deputies felt duped by Kadannikov assuming the role of the punching bag, as they had been saving their venom for Chernomyrdin. And observers said it was clear that four months after Yeltsin plucked Kadannikov from the directorship of Avtovaz to take over the reins of the economy from Anatoly Chubais, Russia's first deputy prime minister still sounded like a novice to the problems of the free-market economy.


"Esteemed Vladimir Vasilyevich, I admire your courage because you are being held responsible for sins committed by the others. Chernomyrdin should have stood in your place," said Gennady Raikov, member of the centrist Regions of Russia faction.


But for others even Chernomyrdin was not good enough as a scapegoat. "President [Yeltsin] should have been answering for everything," suggested Vladimir Semago, the Communist "red banker."


Nevertheless, the deputies used every break to pester one of Russia's most senior officials on minor issues, as they cut Kadannikov short and shouted from their seats, greeting some statements by such hearty laughter that the minister struggled to re-establish himself as a speaker.


"What, have I said something funny?" he asked after a particularly loud patronizing chuckle was heard from the front benches after he reminded the deputies of the times of empty store shelves in the Soviet era.


"I think I have not said anything that is funny," Kadannikov said, trying to reassert himself.


But the Duma was in no mood to let Kadannikov put across the government line -- that the economic picture is difficult but "not hopeless" -- as deputies delved into the holiest of holies: import privileges that go to insiders with close government ties.


Vladimir Bayunov, member of the leftist Agrarian group of deputies, pressed Kadannikov for information a decree allegedly signed by Chernomyrdin granting the right to excise-free alcohol imports to the Culture Foundation headed by the Russian film director -- and supporter of the government Our Home Is Russia faction -- Nikita Mikhalkov.


"I am not aware of such decree," Kadannikov replied. "Do you know of such a decree?" he asked, looking up for help at the balcony upstairs that hosted a number of other key officials, including Finance Minister Vladimir Panskov.


"I am not aware of such a decree," Panskov came to rescue. "I told you all that we have cancelled all privileges for foreign trade."


Kadannikov, a longtime industrialist, appeared especially ill at ease discussing such macroeconomic matters as the government reliance on state securities and foreign loans.


In hailing the major debt-relief deal the government reached with the Paris Club at end of April, Kadannikov said that Russia reduced its 1996 debt-payment obligations to Moscow's official creditors from $17 billion to $8 billion.


However, Paris Club and Russian government officials said when the deal was signed that the accord allows Russia to pay back just $2 billion in 1996, down from $8 billion if the rescheduling had not been agreed.


Commenting on Kadannikov's general grasp of his portfolio, one Russian economist said experts who have met with him found "he was not able to adequately evaluate macroeconomic problems on a level required for making strategic decisions."


"He doesn't have any ability to make independent economic decisions," said the economist, who asked not to be named. He added that Kadannikov's appointment was a "purely political decision" by Yeltsin in an effort to win the votes of company directors in June's presidential ballot.


The skepticism was echoed on the Duma floor. Millionaire deputy Vladimir Bryntsalov, owner of the giant Ferein pharmaceutical company and a fringe candidate for the presidency, grilled Kadannikov on the burdensome tax load Russian enterprises pay under current law and said the minister had a "low level of competence" on the issue.


"As for competence, I think your remark is unjustified," Kadannikov retorted. "As for taxes, taxes must be collected both from enterprises and from citizens. How else can they be collected?" Kadannikov said the government planned to send teams of tax inspectors to some 20 major Russian enterprises -- including his former company, AvtoVAZ -- to collect arrears. Overall, tax receipts are 40 percent below projections, he said, and the government was forced to cut planned spending by 20 percent.


Kadannikov said Yeltsin's pre-election promise to pay off wage arrears to federal employees and other social benefits consumed 41 percent of all expenditure in the first quarter.


Mikhail Zadornov, a member of the reformist Yabloko faction and chairman of the Duma's budget committee, said parliament and government should share the blame for the weak state of the budget. But he said the government was becoming dangerously reliant on foreign and domestic borrowing as "to compensate for shrinking tax revenue."