RUSSIAN SHUFFLE August 24, 1998 The NewsHour with Jim Lehrer Transcript

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These days, stability is not Russia's middle name. In response to the growing economic crisis, President Boris Yeltsin has reversed an earlier promise not to devalue to ruble. And yesterday, Yeltsin removed his entire cabinet and rehired the prime minister he had fired mere months ago. Will these changes be enough to haul Russia out of its state of instability?

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A RealAudio version of this segment is available. NEWSHOUR LINKS: July 13, 1998 International lenders agree to loan Russia over $22 billion.. May 28, 1998 Russia's government tries to maintain the value of the ruble. April 24, 1998 After two tries, Sergei Kiriyenko is confirmed as Russia's Prime Minister. January 6, 1998 Is Russia in control of its nuclear arsenal? February 4, 1998 The unhealthy state of Russia's health care system. December 30, 1997 How does a new law affect religious life in Russia? OUTSIDE LINKS: The Russian Government Information Network. International Monetary Fund.

JIM LEHRER: That latest shakeup in Russia. We begin with a report by Gaby Rado of Independent Television News.

GABY RADO: If you think you've seen this before, you have: the two hearty of perennials of recent Russian politics, Yeltsin and Chernomyrdin, patched up their differences this morning and the president eased his reinstated prime minister into the most insecure chair in Moscow. And Boris Yeltsin addressed the nation.

BORIS YELTSIN: (speaking through interpreter) Viktor Chernomyrdin's main advantages are decency, honesty, and thoroughness.

(March 1998)… lacks dynamism, and initiative, new outlooks, fresh approaches, and ideas.

The Russian political shuffle.

GABY RADO: The new man brought in then, Sergei Kiriyenko, was taken into the prime minister's office but reminded rather ominously, as it turned out, that the boss's photo hung on the wall, and the eyes would be watching him. Now it's the new man's turn to be sacked. As he cleared his desk in the White House, he couldn't resist a dig at the man who preceded and succeeds him.

SERGEI KIRIYENKO: (speaking through interpreter) I'm very proud that in the last five months I've managed to keep my hands clean, and no one has blamed me for the shortcomings of my predecessors. I'm especially proud of that.

GABY RADO: Mr. Chernomyrdin didn't waste much time in calling a cabinet meeting, basking in the fact that Boris Yeltsin had also given him a heavy endorsement for the job of president in the year 2000. He got straight to the point.

VIKTOR CHERNOMYRDIN: (speaking through interpreter) Well, of course, there's the rule. Why have we gone on for so long like this? The ruble in Russia is the situation we've inherited. My mission from now on will be to safeguard our currency.

GABY RADO: Chernomyrdin is 60 years old, and it'll be his second stint as prime minister. He held the job from late 1992 to March this year. Before that, he was president of Gas from the Russian state gas monopoly. The newly reappointed prime minister has already been talking to party leaders in the parliament, the Duma, and is working on a coalition, which may for the first time since the end of the Soviet Union, bring Communists into the government.

JIM LEHRER: For more on all this now we go to Leon Aron, a fellow at the American Enterprise Institute, a Washington research group, and author of an upcoming biography of Boris Yeltsin; Padma Desai, a professor of economics at Columbia University, author of the forthcoming book Russian Reform under Yeltsin; and Robert Legvold, professor of political science, also at Columbia, who writes frequently about Russian politics. Leon Aron, why did Yeltsin do this? Why do you think Yeltsin did this?

LEON ARON, Yeltsin Biographer: Well, it's exactly the right caveat. I'm puzzled. It seems to me that in the past Yeltsin has done unexpected things, surprising things, things that were shocking in the beginning but later turned out to be the right things to do, or even brilliant things to do. This one, it seems to me, only could provide for short-term relief. I think Yeltsin was really grasping for short time, short-term relief. He was-he brought back Chernomyrdin, I think, to get some respite from a very aggressive Communist-dominated parliament that torpedoed previous package of relief measures of the Kiriyenko government, and I think he also wants to use Chernomyrdin's connections or ability to talk to the Communists in the Duma and also to the economic leaders, the so-called oligarchs. But I think that on both of those fronts the relief is bound to be very short lived, because with respect to the Communists, they already feel that the president has weakened; they smell the blood in the water; and they are positioning themselves for the kill. They already said we're not going to even discuss Chernomyrdin; let's wait another week. And that-after they've waited for a month in order to move on the package of measures-and with respect to the stability that Chernomyrdin provides. Yes, he did provide stability in the past, but this was a stability of status quo. I mean, he was very good in maneuvering, which is what you do in the democracy as divided as Russia, but right now, it is a time to end the financial crisis or alleviate it by going through a package, through a series of very radical political and economic measures. And Chernomyrdin is not the man to do it.

Is Chernomyrdin the man to resolve Russia's economic woes?

JIM LEHRER: This has all the potential for a disaster.

LEON ARON: I think at best that it will prove a waste of time. At worst, I think it will be a slide toward a free fall.

JIM LEHRER: Professor Legvold, how do you read it?

ROBERT LEGVOLD, Political Scientist: Well, first, I think there are three reasons why he did it. Evidently he was convinced. If so, I think he misunderstood that the Kiriyenko government was finished, that it had committed suicide with the measures taken last week, the devaluation of the ruble and the decision to restructure the short-term domestic debt in Russia. Secondly, it does appear that he is now trying to build a broader-based government, which is necessary in these circumstances or makes sense. But, third, I have a hunch that he's in these difficult times simply more comfortable with a person like Chernomyrdin and to some extent, I think it represents his insecurity. But, like Leon Aron, I think this is a step backwards. And I don't think that it bodes well for Russia dealing with its current crises.

JIM LEHRER: Professor Desai, a step backward?

PADMA DESAI, Economist: Oh, I think that considering everything and the fact that Russia is in the middle of financial turmoil, bringing in Prime Minister Viktor Chernomyrdin is on the whole a positive step. The first order of the day when the Duma, which has come together in order to consider some emergency financial measures, is to pass the tax code which simplifies tax, reduces their numbers, lowers their rate, and that is the first step by which taxable revenue can be generated. Now, the Duma is not in a mood to pass that tax code. It is hopping mad, because the president imposed the young prime minister on the Duma at the end of March, removing Viktor Chernomyrdin. The Duma, in its view, also finds the program of the young group led by Sergei Kiriyenko quite radical. And in the long Russian tradition of fathers versus sons, the Duma does not want to be dictated by the young men who are in charge of the government. So it would seem to me that the coming in of Viktor Chernomyrdin, who is a seasoned politician, who is also a bridge builder, who is our consensus maker, is a step in the right direction. There is no indication in the past five years that Mr. Chernomyrdin has been prime minister that he would revolt or revoke-take back any of the steps, the reform measures that are in place today like privatized factories, like liberalized prices, like the opening of up the trade system, and inflation control. So in my view, while Papa Bear is back and Baby Bear has been removed, the porridge which Mr. Chernomyrdin will serve, will be of the reform variety.

JIM LEHRER: And so Papa Yeltsin, to continue the thing, essentially had no choice; he had to do something if he wanted to get these tax measures down. Is that your reading of it?

PADMA DESAI: Are you addressing the question to me?

JIM LEHRER: Yes, yes, I am.

PADMA DESAI: I could not follow your question.

JIM LEHRER: That essentially you're saying President Yeltsin had no choice. If he wanted these tax-these tax measures passed by the Duma, he had to get, as you said, Baby Bear out of there, is hat correct?

PADMA DESAI: Yes, yes, of course. If the president wanted the tax code to pass, then, of course, he had no choice. The Russian constitution gives enormous economic powers to the lower House of parliament, the Duma. The Duma right now controlled by the majority of Communist deputies and the left wing deputies. And without their consent, without the Duma passing the tax legislation, the government and the president cannot through his decrees change tax rates. He can change maybe import duties, but changing the corporate tax rate, changing the value added tax rates, or imposing new sales tax. All that has to be passed by the Russian Duma. Otherwise, the president passing on these measures could decree-maybe consider it unconstitutional. Therefore, at this moment of financial crisis the first step restoring tax revenue collection by simplifying a tax code, which must be passed by the Duma, is a very essential step, and Viktor Chernomyrdin is the man who can bring around the Duma to passing that tax code. He has always been a good implementer of programs.

Russians: "puzzled and indifferent and basically frustrated and angry."

JIM LEHRER: Professor Legvold, beyond the Duma, how is this likely to go down in Russia among the ordinary folks?

ROBERT LEGVOLD: I think the average Russian is puzzled and indifferent and basically frustrated and angry with the leadership. Yeltsin's approval rating is about as low as it can be. It's somewhere around four to five percent. That's almost meaningless to measure it in those terms. They are puzzled because Chernomyrdin is the fellow who was fired five months ago because he couldn't manage the economy because he was making a hash of things, according to Yeltsin. He needed new and young, vigorous leadership as your lead-in reported. That's the way Yeltsin put it. And now Kiriyenko's yanked, Chernomyrdin is brought back, and the average Russian asks, what difference does it make? Secondly, I think there is a general feeling among the halfway alert public that Chernomyrdin is associated more closely with the leaders of the so-called financial industrial groups of big bankers, in particular the leaders of the natural monopolies. He comes out of Gazprom, the gas monopoly, the oil companies, and so on, and they tend to see all of this as politics among the privileged, among those with access, probably not something that'll do them any good and not the country very much good.

JIM LEHRER: Leon Aron, you spent the last several years studying Boris Yeltsin. Does this strike you as an act of desperation by this man, or there have been a lot of explanations, none of them terribly pleasant. Is that-how do you read it, just in personal terms?

LEON ARON: I feel that it's one of those very rare cases where I cannot understand-

JIM LEHRER: It doesn't fit any pattern?

LEON ARON: It does not fit any pattern. He's always been a very good, strategic thinker, and given the record of the Duma, for example, which has refused to approve the tax code, since March of 1987, when Papa Bear and Baby Bear, when that entire family were there, and Kiriyenko was not even in the cards, they have failed to approve privatization of land, which would have brought enormous relief to the state coffers since October of '93. So I don't think it's because they're mad at Kiriyenko or because they don't like to be bossed around by younger men, which it all may be true, but if that's the reason why Yeltsin brought Chernomyrdin back, I believe he lost his magic touch?

JIM LEHRER: What about his own survival?

LEON ARON: His own survival, I think, is tied to the survival of the Russian economy and the entire edifice of capitalism and democracy that he tried to put in place since January of '92. That is the key to his survival. That is his key to the place in history, which is even more important, I believe, to him, than his immediate survival, and all of that, I believe is at the very least jeopardized by this move and perhaps already sort of, you know, crossed out.

JIM LEHRER: Prof. Desai, how would you read the-Boris Yeltsin's personal motivations in-how are they tied up in this?

PADMA DESAI: Boris Yeltsin's motivation in frequent governmental shake-ups, I imagine that is your question-and the current shake-up is one of the last ones in that process-I think what one has to sort of analyze here is, is there a method in his madness? One consideration is that Mr. Yeltsin, like all politicians and politicians who rise to become presidents want to hold on to power. We are watching it here also. So that when Kiriyenko was made prime minister, people were saying, ah, he has appointed a weak prime minister, a weak government, so that he has increased his chances of becoming president and a presidential candidate in the year 2000. Now that Viktor Chernomyrdin has brought back-the view is that well, Chernomyrdin is a strong man and Yeltsin's chances of presidential victory in the year 2000 are diminished-I think there may be also another reason, which is that in this governmental formation, President Yeltsin has always sought some kind of a balance in the government between reformers and moderate, middle-of-the-road person like Chernomyrdin, so that when there was Chernomyrdin, he was working with Chubais and then saw the reformers. So that is the recognition of the president after the Gaidar shock therapy measures, which failed-

JIM LEHRER: Okay.

PADMA DESAI: --that perhaps-cannot be taken to the road of the market on the basis of a very radical reform-

JIM LEHRER: He had to slow it down. It's very complicated, and we have to leave it there. Thank you all three very much.

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