Day by day Russia's economic circumstances are changing for the worse, as new uncertainties assail its political leadership. The Prime Minister, Mr Yevgeny Primakov, has announced an economic plan emphasising tax cuts, price controls for selected goods and credits for ailing industries and agriculture. Money will be printed to pay wage arrears. The plan is an interim measure, which has not gained the confidence of negotiators from the International Monetary Fund. They say a credible Budget for next year must be published before they will release funds agreed after Russia's effective default on some of its external debts last August. There is little confidence that a more comprehensive default can be avoided as the country faces into the winter months.
That Mr Primakov is effectively taking over from the ailing President Yeltsin has now been openly stated by government spokesmen. He stood in for the President at a meeting last week with the EU in Austria and has assumed a high profile in the Russian media. Many believe he will agree to stand as Mr Yeltsin's successor when and if the President stands down in 2000 - or before that if ill-health forces him to resign. Such a scenario has upset the other contenders for the office, but it does not surprise long-time observers of this canny and skilful politician, who commands support across most of the political spectrum. His skills are sorely needed at this juncture in Russia's history, but they will be severely tested by the profoundly difficult problems facing his government.
Aside from his own uncertain constitutional position, these include a host of structural weaknesses and shortcomings. They were conveniently summarised by Mr Primakov last week. He said he would restore order to the Budget; defend property rights; enforce tax payments; and clamp down on the shadow economy. The government's tax revenues come to a mere 6 per cent of the country's gross domestic product - one of the lowest rates in the world. They will cover only half the government's planned expenditure for that period. Such fiscal feebleness makes it difficult indeed to mobilise resources, whether to repay international debts, to fund food imports, to pay huge arrears in wages and salaries or to shore up industries. Mr Primakov's undertaking to print money is not surprising in these circumstances; his commitment to avoid inflation is not to be believed.
Mr Primakov is hardly in a position to organise substantial reforms in the system of government so as to make the Budget credible, as the IMF demands. Tax collection has become prey to competition between the industrial magnates and mafia who profited so enormously from the privatisation of State assets and is a very dangerous occupation indeed. These magnates are intimately bound up with the Yeltsin regime. They have so far displayed little or no sign of becoming a quasi-normal investing capitalist class, as expected by the ideologues of transition. Rather have they sent their money outside the country. Mr Primakov could surprise so far as his commitment to reform is concerned; but he has precious little scope to escape from pure crisis management and depends on a coalition between liberal reformers and communists. Things are likely to get worse before they get better in Russia. The effects will not be confined within its own borders.