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. Last Updated: 07/27/2016

Nemtsov Issues Back-Pay Alarm

The sell-offs of the last of Russia's state-owned oil companies will occur earlier than planned so the government can use the proceeds to pay its massive wage arrears, First Deputy Prime Minister Boris Nemtsov said Wednesday.

Although Nemtsov did not name specific dates, he said privatization auctions of the state-owned Rosneft and Eastern Oil companies are to go ahead in the "near future" to enable the government to fulfill President Boris Yeltsin's demand that wage arrears be paid by Jan. 1.

"Without attracting money through the sale of stock in Russian companies, we will not fulfill the president's order to pay off wage debts to public sector workers," Interfax quoted Nemtsov as saying.

A State Property Fund representative said Wednesday, however, that a new investment tender for a 34 percent stake in Eastern Oil would be Jan. 20.

The issue of wage arrears came to the fore this week after Yeltsin issued a veiled warning that heads would roll if the government has not paid off the 9.6 trillion rubles ($1.6 billion) it owes state-sector workers in unpaid wages by the year 's end.

"You must do this without fail, if the government does not want to have some negative consequences," he said Tuesday.

The sell-off of the massive Rosneft oil company has until now been provisionally slated for next month or early in 1998 and, according to conservative estimates, could net the state coffers between $1.5 billion and $2 billion.

A 34 percent stake in Eastern Oil Co., with an estimated value of $338 million, should have been sold Monday, but the auction was delayed when one of the two bidders pulled out. The sale was rescheduled for January 1998.

Nemtsov added that the sell-off of a 49 percent stake in Tyumen Oil Co., postponed last week, is likely to take longer because of legal battles surrounding its privatization.

With tax collection for the first nine months of this year a little over half of targets and regional leaders stubbornly refusing to foot the bill, receipts from privatization auctions are the federal government's only realistic chance of paying off the arrears. If the government fails, embattled First Deputy Prime Minister Anatoly Chubais could be first in the firing line as he was brought into the cabinet in March with the specific task of tackling the arrears.

Some progress toward paying the debt has already been made. Deputy Prime Minister Oleg Sysuyev said this week that state sector workers have been paid 3.3 trillion rubles in wage arrears since July 1.

"I have been paid up to November," said Mikhail Chistyakov, a traffic policeman in the Siberian city of Krasnoyarsk, who added that until this fall he was owed several months back wages. "It's not much, but I've been paid."

But that still leaves the government with an uphill struggle to pay out the remainder by the end of next month. Government ministers are already warning that it may prove impossible.

"Current information does not give us reason to view the completion of our task with great optimism," Sysuyev said in remarks broadcast on Russian television.

The cabinet, meanwhile, is trying to shift part of the responsibility for paying workers onto regional leaders. Ministers said this week that for every ruble in arrears paid to state sector workers by the federal government, regional leaders will have to pay the same sum from their own budgets.

"If they do not find the money, this means they are working badly," Chubais said. He added that regional bosses were guilty of a "parasitic attitude" toward federal funds.

Sysuyev warned that federal funding will be cut to those regions that are not paying off wage debts. He also announced plans to dispatch teams of federal officials to the most problematic regions with powers to enforce Moscow's edict.

Sysuyev said their powers would be spelled out after the return from abroad of Prime Minister Viktor Chernomyrdin.

Sysuyev said 11 of Russia's 89 regions account for more than half of the total wage debt, and that only four regions had paid off all their arrears.

Regional leaders respond that they simply do not have the money to pay off the back wages. According to Oleg Sheiko, first deputy prime minister of the Republic of Khakassia in southern Siberia, regional coffers are empty because the federal government has not paid the subsidies it owes to the region.

"First and foremost, the center, under the law on the budget, is required to pay transfers to the regions," Sheiko said. "But the center and the respected Mr. Chubais have forgotten about this." Asked if Khakassia would be able to settle up with its state sector workers by the new year, he said, "I do not think that is realistic."

If the wage arrears are still unpaid by Jan. 1, it is Chubais who may suffer. His political reputation is directly linked to the wages issue. Chubais was drafted into the cabinet largely because Yeltsin, under pressure from trade unions over unpaid wages, believed he was the man to tackle the problem.

Mikhail Shmakov, leader of the Russian Federation of Independent Trade Unions, said Tuesday that nationwide protests could be renewed unless public sector wage arrears were paid off. The mass protests were shelved soon after Chubais' appointment.

"The new year should prove to be an unpleasant one for Chubais," said Yevgeny Volk of the Heritage Foundation. "Tax collection is miserable and many in the state sector will not be paid in time. Yeltsin will need a scape goat. Chubais would fit the bill nicely."

***-- Staff writer Dmitry Zaks contributed to this article.***