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. Last Updated: 07/27/2016

State Made Right Move On Pensions

It may all be a publicity stunt, and there is no guarantee that it will not collapse in a few months, but the "young reformers" who have taken over the Cabinet deserve real praise for their achievement in paying pensioners on time.


Cynical indifference to the rights of pensioners has been one of the darkest aspects of the new Russian state. People who worked all their lives saw their savings wiped out between 1991 and 1993 by raging hyperinflation. They then faced a double whammy because pensions, which became their only means of support, were delayed by as much as three or four months by governments that regarded them as the lowest priority.


President Boris Yeltsin repeatedly promised to rectify the situation, in particular during his re-election campaign, but nothing was done about the problem until now.


Deputy Prime Minister Anatoly Chubais is an arrogant political operator, but he has done one very humane thing: Under his stewardship of the Finance Ministry, Russia's obligations to its pensioners have been placed at the top of the list.


Cynics will argue that the gesture toward pensioners is partly an attempt to garner political support at a time when Chubais is in a battle with the Duma for the passage of a new tax code and a revised 1997 budget that includes unpopular spending cuts.


But it could equally be said that this is an example of democracy at work. Chubais is showing that the sort of rigorous financial controls he is pushing through the Duma are not inconsistent with concern for the average Russian.


The real question underlying the maneuvers on pensions is whether they can be sustained in the long term. Here, the outlook is altogether unclear.


The government acknowledges that the pension payments system remains chaotic. The State Pension Fund is chronically insolvent. Many regional governments are simply unable or unwilling to collect the taxes needed to fund their local pension systems, and no clear mechanism exists for making up the shortfall.


In this case, the Finance Ministry simply threw money drawn from all over Russia into the pension fund. The government used funds raised in its tax crackdown over the past few months, especially $2 billion squeezed from state natural-gas monopoly Gazprom, to meet its pension debts.


This situation is inherently unstable. Gazprom will not cough up $2 billion every month. In the long term, tough measures will be needed to force all the other tax backsliders to pay up. The state pension system also needs a complete and painful overhaul. But for now, the government should be praised for a job well done.