Former Russian Prime Minister Yegor Gaidar, the first prime minister after the collapse of the Soviet Union reveals his perspective on the political turmoil that Russia has undergone from the Kremlin to Chechnya.

MARGARET WARNER: Between the war in Chechnya and upheavals in the Kremlin, Russian politics are in turmoil. After five months of pounding the breakaway Chechen republic, Russian troops are now battling their way toward the center of the capital, Grozny, but the Russian army is taking more casualties than earlier in the conflict, and criticism of this once popular war is beginning to surface.

In Moscow, political forces are still trying to find their footing with a new parliament and a new president in power. Last month elections to the lower house of parliament, the Duma, diminished the strength of the Communists and increased the seats held by the Reformist Party. Ten days later, President Boris Yeltsin's surprise New Year's Eve resignation made Prime Minister Vladimir Putin acting president. Already popular for his aggressive prosecution of the Chechen war, Putin immediately became the favorite to win a full term in the upcoming March 26th presidential election. Putin signaled that he and his new Unity Party would join forces with centrists in the parliament like former Prime Minister Yegor Gaidar and Former Finance Minister Anatoly Chubais to push economic reform. But yesterday, to the surprise and dismay of reform backers, Putin struck an alliance with the Communists to reelect Communist legislator Gennady Seleznyov as speaker and to divide up control of the key committees between them. Seleznyov and the Communists have consistently opposed market reforms. The deal drew an angry reaction in the Duma.

YEVGENY PRIMAKOV, Former Prime Minister: (speaking through interpreter) I withdraw my candidacy for speaker. It is profanity, what is happening here.

SERGEI KOVALYOV, Member, Russian Parliament: (speaking through interpreter) All that is happening here resembles an old Soviet slogan, that the KGB is an armed group of the party. Sorry, I cannot participate in this swinishness.

MARGARET WARNER: More than 100 centrist lawmakers walked out of the Duma in protest, boycotting the vote for speaker. And when the Duma reconvened today, the reformers stayed away.

MARGARET WARNER: With us now for an insider's view on these developments is former Russian Prime Minister Yegor Gaidar; an economist by training and a free market reformer, he was the first man to hold that job after the collapse of the Soviet Union. He's now a leading member of the reform-minded party in the Russian Duma. He's in the United States promoting his book Days of Defeat and Victory. Welcome, Mr. Gaidar. Explain to us why you think Vladimir Putin made this deal with the Communists.

YEGOR GAIDAR: Well, it was very clear and very pragmatic, and also from my point a very serious mistake. Seleznyov, the person who was elected the chairman of the Duma...

MARGARET WARNER: The new speaker.

YEGOR GAIDAR: The new speaker. He's a political loser.

MARGARET WARNER: A political loser?

YEGOR GAIDAR: Yes. He fled from his constituencies in St. Petersburg because he was afraid to confront competition with Mr. Stepashin. He lost the elections in Moscow region for governorship. He will be weak and easy to manipulate. And then as a prize for the support of Seleznyov, he begins to hoard the control over a lot of the key candidates of the state Duma. So it was very pragmatic and very cleaver. But also from...

MARGARET WARNER: Wait. Let me just ask this question, though. You say pragmatic. I mean, what would be Putin's thinking? Why would he do this?

YEGOR GAIDAR: Well, because he will get the speaker of the Duma who is easy to work with, because the payment for this support will be the support of the Communists in the division of the key Duma opposition. So from the short-term point of view, clever decision, but also serious mistake because it's easy to make a deal with the Communists about nominating Seleznyov as the speaker, but then government for instance will have to push a new land quota with the private property and land. And Communists, I can assure you, will not support this idea. And then the government to have to ask for the support of a part of exactly those part the Duma which it isolated from the key Duma opposition during the last two days. And it will not be very easy.

MARGARET WARNER: Would you... If you'd been in parliament yesterday, would you have walked out?

YEGOR GAIDAR: Yes, of course, as our party go.

MARGARET WARNER: Now, all of you reform-minded legislators, even though you're in different parties, you all expressed hopes of working with Putin on reform. I mean, what do you think now? What do you think about his intentions?

YEGOR GAIDAR: Well, I think that in no way he would like to danger markets or private property.

MARGARET WARNER: He would like to what?

YEGOR GAIDAR: He would not like to put in danger markets or private property. So the worst scenario with Putin is a scenario status quo: Increased political stability, less danger for the market mechanisms, but absence of a clear for-reform strategy is worst-case scenario. Best-case scenario is that he will be able to implement the program of economic change, which was discussed in Russia during few last years, which was impossible to push through the present parliament, which is probably possible to push with the support of the government through this parliament. And of course our hope is that he will support this program.

MARGARET WARNER: But do you think now that he's made this deal with the Communists it is possible for him still to push the reform plan that they've been opposing all this time?

YEGOR GAIDAR: Of course, because it was the very concrete deal, involved one very concrete matter, connected wholly with the chairman of the Duma. He thinks that, probably thinks, of course; it's better to ask him. He probably thinks that it's quite another matter of what kind of legislative program he would like to push through Duma. And to some degree it's true.

MARGARET WARNER: Okay, let's turn to the war in Chechnya, and we've read here that the Russian public supports it, liberals like yourself have been supporting it, or at least not speaking out, as a fight against terrorism. But now of course the causality figures are mounting. How long do you think Putin can maintain political support for this war?

YEGOR GAIDAR: Well, I think for substantial amount of time. You see, Russian public attitude towards events in Chechnya change drastically in August of last year, even before the bombing, during the Dagestan events and invasion from Chechnya to Dagestan territory. Now, from this moment, it was strong perception of the major part of the Russian society that it is the duty of the state to defend life and security of Russian citizens. And it hasn't changed basically during last few months.

MARGARET WARNER: Do you and other centrist members of parliament share that feeling and still believe that?

YEGOR GAIDAR: Yes, I think so. The war is terrible thing, and I was strongly opposing the previous Chechen war because then it was first of all the war connected with threat of whether Chechens have a right to form independent states or not. And we discussed this matter. But from my point of view, it's not a matter that should be decided on a battlefield. Now it's another matter. It's a matter of whether the Russian citizens have the right for the protection, have the right that their freedom and their life be protected by their own state. And here the position is quite different, of course. It's the obligation of our state. Of course, those who do think that the war is nice, splendid adventure, that it's some noble adventure, they just do not understand anything about wars. Wars are always terrible, nasty, bloody things, and I would like very much this war to stop as rapidly as it could. I do understand also that the conflict will not be eliminated - we will have long problems like in Lebanon, like in Northern Ireland, but the elimination of a big, well-organized, well- armed regiments, detachments of the terrorists of course should be done.

MARGARET WARNER: That is one of the... President Clinton not only criticized of course the tactics, but he is saying it's bad for Russia, that it is going to be a Vietnam, another Afghanistan, that there is no military solution.

YEGOR GAIDAR: Well, I do agree with this absolutely. There is... It will be bad for Russia and it is bad for Russia. And I as a Russian politician would like to do a lot to avoid it and I have tried to do a lot to avoid it. But just imagine, well, attitudes in Russia toward Chechnya War in '94-'96 were exactly like American attitudes toward Vietnam War: Nasty, unnecessary, dirty, casualties, et cetera. And that's why Russian public opinion pushed the government to stop this war. But let you imagine that Vietnam is not 10,000 kilometers from here, it's here in Texas. And then after you stop the war, you are having invasion in Russian territory-- in American territory. I would assure you that the attitude of the American public opinion would be quite different.

MARGARET WARNER: So what, if any, impact does the criticism from the West, the U.S. and Europe, have on thinking in Moscow on this matter?

YEGOR GAIDAR: On Chechnya, not very serious. I think no position of the west could change seriously attitudes in Moscow toward the fact that organized detachment of Hatab and Musav should be destroyed. Of course, we as Russian public, as Russian politicians, should push our government, our military to care more about human rights of those, about the humanitarian side of the conflict, about the refugees and the problems and about the support of the refuges, and I think if Russian public opinion concentrated on these issues which are absolutely real, it would be much more positive.

MARGARET WARNER: All right. Finally, how different do you think the U.S.-Russia relationship would be under Putin than under Yeltsin?

YEGOR GAIDAR: Well, under Yeltsin, our relationship with the States were very different at different stages.

MARGARET WARNER: Yes.

YEGOR GAIDAR: I think that with Putin there will be less enthusiastic, less ideological, more pragmatic. I don't like the present trend in the relationship between Russia and the United States. I think that they are moving in the wrong direction. I hope it will be shot down. I think that Putin, being pragmatic, will not... Would very rapidly understand that the campaign that you have to have a good, working, concrete, efficient relationship with the States. I hope that will happen also on the American side after presidential elections.

MARGARET WARNER: But as you know, American policy-makers are trying to figure him out, and they're saying, "here's a guy that was in the KGB. For, what, 15 or 20 years. On the other hand, he was a reformed-minded deputy mayor in St. Petersburg." Which of those is more important?

YEGOR GAIDAR: Well, everything in Russia is complicated. He really was in the KGB for 17 years, in intelligence. He really was working in a rather liberal St. Petersburg city government, and was also associated with a lot of reformers, and his views on the economy are genuine and open. I am quite sure that he will not be bad on economic policy. I don't think that he will be not pragmatic enough, not understand the realities of the modern world. How much the more or less inevitable thinking in the terms of plots will influence his decision-making process, we will see.

MARGARET WARNER: All right. Well thank you, Mr. Gaidar, for being with us.

YEGOR GAIDAR: Thank you.