HELPING HANDS

THE WES TRIES TO RESCUE RUSSIA

ANDREW PHILLIPS April 5 1993

HELPING HANDS

THE WES TRIES TO RESCUE RUSSIA

ANDREW PHILLIPS April 5 1993

HELPING HANDS

THE WES TRIES TO RESCUE RUSSIA

ANDREW PHILLIPS

If it accomplished nothing else, last week’s confrontation between Russian President Boris Yeltsin and his opponents had at least one effect: it sent Western leaders scurrying to assemble yet another massive aid package for Russia. U.S. Secretary of State Warren Christopher sombrely called Russia’s shaky transition to democracy “the greatest strategic challenge of our time.” And Prime Minister Brian Mulroney insisted that the West must launch nothing less than a modern-day Marshall Plan to prevent a relapse into dictatorship. But even as the leaders struggle to show their commitment to Russian democracy—and insulate themselves against the possibility of being accused of “losing Russia”—experts on the reform process have a sobering message. Despite all the goodwill in the world, the reality is that almost nothing the West can do will have a quick impact on the lives of Russians—or on Yeltsin’s struggle to survive.

There was no shortage last week of suggestions for helping Russia. The list included everything from a $7.6-billion fund to stabilize the ruble and arrest the country’s hyperinflation, to supplying disposable syringes to Russian hospitals. President Bill Clinton will likely give Yeltsin the outlines of a proposed new $30-billion aid package from the leading industrial countries, the G-7 group, at their planned two-day summit in Vancouver beginning on April 3. The package would

likely offer relief on Russia’s $99-billion foreign debt, import credits to buy Western food and goods and a program to help budding Russian entrepreneurs. But in practice, any steps will have little short-term effect. Even optimists acknowledge that it will take many months— even years—for Western aid to have the kind of impact that would be felt among Russian citizens.

One reason for pessimism is the West’s track record to date. After the 1991 coup attempt that led to Mikhail Gorbachev’s resignation, Western leaders rushed to promise help for Yeltsin’s new, reformist government. Last year, the G-7 pledged $30 billion for Russia. But only about half of that aid package has actually been delivered. Another stumbling block is that much of the new aid would have to be implemented, at least in the short run, through Russia’s notoriously inefficient bureaucracy. Among the proposals:

• Create a social safety net to protect Russians against the worst effects of poverty and unemployment. If the country’s creaking stateowned enterprises are privatized or lose their subsidies, vast num-

bers will go bankrupt and millions of people will lose their jobs. The West might help to pay social benefits to poor families and the unemployed, a gesture that some experts argue would ease Russians’ fears about economic reform. But, such payments would have to be distributed through existing structures. Said Soviet expert Jonathan Eyal: “You have to rely for now on the corrupt, inefficient and disintegrating bureaucracy.”

• Establish an independent central bank and a tax-collection system. Russia’s central bank has fuelled hyperinflation, now raging at 25 per cent per month, by printing vast quantities of increasingly worthless rubles. At the same time, the lack of effective ways to collect tax leaves Yeltsin’s government with little revenue—a further temptation to simply print more money to pay its bills. Jacques Attali, president of the European Bank for Reconstruction and Development, has urged the West to help Russia create a new tax system. But Attali’s suggestion that Russian military personnel could be retrained to become tax officials appears farfetched, at best.

• Build new housing for Russian soldiers forced to withdraw from Eastern Europe and the former Soviet Union. That might improve army morale and help to pacify a potentially dangerous group, but it will take time. Germany made new army housing part of the deal it struck with Gorbachev’s government to allow unification in 1990. But the demand has run far ahead of Germany’s capacity to fill it.

• Reschedule Russia’s $99-billion foreign debt. Allowing Moscow to defer interest payments on the debt, so the thinking goes, would let Yeltsin’s government use the money to improve the economy and help its own citizens. But in fact, Russia has fallen far behind in those payments already. A G-7 agreement to reschedule debt would merely put an official stamp of approval on that situation and do nothing to help Russians in general.

One idea that may form part of the G-7 package is an offer of financial help to restructure the country’s key oil and gas industry. An increase in Russia’s energy exports would bring in more hard-currency earnings and enable the country to help itself. That would assure Western taxpayers that their money is not wasted, and proud Russians that they are not viewed as objects of charity.

ANDREW PHILLIPS in London