An insistent President Clinton met with a beleaguered Boris Yeltsin on Tuesday and told the Russian president he has to stick with free-market economic policies even though his nation is on the brink of economic collapse.
Yeltsin, who is without a confirmed prime minister, a government or an economic plan, reassured Clinton that Russia would not abandon reform.
Later, however, Yeltsin seemed to signal that while Western-style reform remains the future of Russia, he may need to increase some forms of state control to stop the free fall of his economy and to fend off his Communist opposition.
According to the Kremlin, Yeltsin told Clinton: “Naturally, in certain situations, there could be some tactical adjustments to this course, including in terms of strengthening the state role in the economy.”
No details of the “tactical adjustments” were provided, and Yeltsin went on to say, “But there will be no going back on reform.”
In a meeting with Cabinet officials, Acting Prime Minister Viktor Chernomyrdin declined to specify what “tactical adjustments” Russia has in mind but outlined his priorities in the face of the crisis: protecting savings, restoring the currency market, saving the banking system and imposing more control over currency transactions.
Chernomyrdin also said he plans to cut taxes and overhaul the taxation system to boost Russia’s paltry revenues. “We cannot do without radical measures,” he said. “We’ve had enough talk.”
Without a continued commitment to Western free-market ways, Russia has little hope of getting the remainder of the $22.6 billion pledged by the International Monetary Fund and other lenders to the ailing nation. Russia already has received, and practically spent, $4.8 billion.
Clinton not only told Yeltsin there is no going back to the state controls of communism, but also he made the statement publicly in an attempt to sell a deeply disgruntled Russian public on the notion. The American president pointedly also did not offer new U.S. economic assistance.
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According to U.S. Deputy Secretary of State Strobe Talbott, Yeltsin in return pledged his “staunch commitment to reform and vowed that there would be no retreat.” His vow followed several hours of meetings in the Kremlin with Clinton, Secretary of State Madeleine Albright and Commerce Secretary William Daley, among others.
After meeting with the Russian leader, Clinton addressed a group of students at the Moscow University of International Relations. “I have to tell you that I do not believe there are any painless solutions,” he said. “And indeed, an attempt to avoid difficult solutions may only prolong and worsen the present challenges.”
Russians have undergone painful “solutions” for nearly seven years, however, and have very little to show for it.
Russia needs quick measures to keep the banking system from collapsing and the currency from plunging even more than it has. The Central Bank set the official rate at 10.88 rubles to the dollar Wednesday; on Aug. 17, it stood at 6.31.
“No one could ever have expected your country to be able to make this transition without pain,” Clinton told the students in a speech that was not carried live nor in its entirety by Russian television. “You’ve only been at this seven years. . . . Don’t be discouraged but don’t be deterred. Just keep working until you get (a free-market society) in place. Once you get it in place, Russia will take off like a rocket, because you have both natural resources and people resources.”
Clinton stated at least 10 times during his speech that Russia, along with other nations, needs to follow the “rules” of international economics, including honest government, strong checks on corruption in the business world and openness in how investments are handled.
Without that, Clinton said, foreign investors will not put their money in a country, and foreign investment is precisely what Russia desperately needs.
“If somebody from outside a country intends to put money into a foreign country, they want to know what the rules are,” Clinton said. “What are the terms on which my money is being invested? How will my investment be protected? If I lose money, I want to know it’s because I made a bad decision, not because the law didn’t protect my money.”
Unfortunately for Russia, there are few such rules in place. But Clinton said if Russia follows the rules of free-market investment, it would prosper.
“The bottom line is that the American people very much want Russia to succeed,” he said. “We value your friendship. We honor your struggle. We want to offer support as long as you take the steps needed for stability and progress. We will benefit greatly if you strengthen your democracy and increase your prosperity.”
Referring to events in U.S. financial markets, Clinton added: “Now, in terms of what has happened in America, obviously it’s always more enjoyable when our stock market goes up than when it goes down. But . . . we believe our fundamental economic policy is sound . . . And we are determined to stay on a path of fiscal discipline that brought us to where we are.”
In the evening, as Clinton stood in a reception line before a formal state dinner with Yeltsin, Clinton domestic policy adviser Gene Sperling came through the line, and Clinton gave him a thumbs-up and said happily, “The market’s up.”
Yeltsin was much less chipper and made little small talk with Clinton or anyone else.
Clinton’s aides are privately wondering whether Yeltsin, whose approval ratings have dropped to single digits, has the political stamina to carry out the difficult course of action Clinton is demanding.
They hasten to say, however, that Yeltsin’s physical stamina is tip-top.
Yeltsin is “vigorous, very much engaged, very much on top of the extremely difficult situation that he is trying to deal with,” Talbott said.
Although the constitution that Yeltsin himself helped craft gives him extraordinary powers, he cannot avoid dealing with parliament. His relationship with the lower house, the Duma, stands at rock bottom.
The Communist Party, which Yeltsin has twice defeated in national elections but which holds the largest bloc of votes in the Duma, wants the state to resume control of banks and major industries and print more money to pay workers and restore economic order.
The Duma overwhelmingly voted down Chernomyrdin’s nomination as prime minister Monday. A second vote has been scheduled for next Monday, though Duma members said it might be moved up.
If the deputies reject Chernomyrdin, or anyone else the Kremlin puts forward, three consecutive times, the Duma would be dissolved and new parliamentary elections called 18 months ahead of schedule.
Chernomyrdin, 60, is not waiting around. He already is building a Cabinet to combat Russia’s “grave situation,” and Tuesday he submitted to Yeltsin several candidates for ministry posts.
Yeltsin is going ahead with two agreements that he will formally sign with Clinton on Wednesday: The first would commit the two countries to share early warning data on the launch of ballistic missiles and space launch vehicles; the second would remove 50 metric tons of plutonium from each nation’s nuclear-weapons stockpile and either divert the material to peaceful use or make sure it cannot be used again in weapons.
Few people are focused on arms control, however, in a nation where the price of McDonald’s Big Macs–13 rubles last week, 15.50 rubles this week–is watched as a sign of the economic condition.
On another food front, Yeltsin presented Clinton a large, round loaf of Russian bread at the Kremlin. Clinton took it, pushed the center of it down with the heel of his hand several times and watched it bounce back.
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“Amazing,” Clinton said to Yeltsin. “Kind of like you.”