Yeltsin Puts in Motion Economic Reform Plan : Russia: He uses broad new powers to take over gold and diamond operations and suspend oil exports.


Russian Federation President Boris N. Yeltsin took over most of the Soviet Union’s gold and diamond mining on Friday to help finance a program of radical economic reforms, then suspended oil exports to ensure enough fuel for the winter.

Yeltsin also began to construct the “social safety net” of higher pay, larger pensions and an increased minimum wage that he regards as an essential preliminary step in ending government-controlled prices and state subsidies and establishing a free-market economy.

Issuing other decrees under recently broadened powers, Yeltsin sought to turn over most of Russia’s network of retail stores to their employees and private entrepreneurs and to liberalize foreign trade, allowing private companies to compete for business abroad with state enterprises.

Together, the moves constitute Yeltsin’s initial steps toward the fundamental economic reforms that he has said are necessary to save the country from collapse.

Yeltsin on Friday told the Russian Supreme Soviet, the republic’s legislature, that his government is rapidly pulling together a broad package of measures. But some key moves, notably increases in retail prices to reflect production costs and consumer demand, will come only when provision has been made for the welfare of workers and farmers.


“We--you and I linked together--are moving along a narrow path by the edge of an abyss,” he told the deputies. “One leg is shaky already. We must pass along this path as soon as possible with the help of radical reforms.”

But Yeltsin cautioned that there is no guarantee of success. “We think that there will be a deterioration (in living standards) after the freeing of prices,” he said. “Our task is to preserve . . . two-thirds of what is now in a consumer’s basket. . . . This will last for half a year, maybe seven months, but we expect a certain stabilization by next autumn.”

The Russian Cabinet approved key aspects of the program, including the reduction in the number of Russian ministries to 23 from 46.

Yegor T. Gaidar, Russia’s new deputy prime minister for economic reform, said that the first steps are aimed at ensuring the republic’s economic sovereignty, taking control of its key natural resources and lifting restrictions that would prevent development of a market economy.

The Russian government suspended all licenses for the export of oil and petroleum products, Gaidar said, when it found that the central government had recently made sales equal to a third of the republic’s oil output. “If we don’t stop this process immediately, we will have no fuel for heat in the winter, and the national economy will stop because of power shortages,” Gaidar said.

Russia accounts for about 90% of Soviet oil production; oil is a major export, going mostly to the West to finance imports.

Yeltsin’s takeover of gold and diamond mining in Russia was again an effort to ensure that its needs take priority over those of the Soviet Union’s other 11 republics and to ensure that it has enough money to underwrite the next stages of perestroika. The republic produces most of the Soviet Union’s gold and diamonds.

Soviet gold reserves have dropped dramatically in the last two years, with sales more than twice annual production. Reserves now total about 240 tons worth about $3.1 billion.

Gaidar indicated that, once Russia assumes responsibility for the entire Soviet foreign debt, now estimated at more than $91 billion, it needs to control gold and diamond production as a way to assure lenders that they will be repaid.

The overall reform strategy agreed upon at Yeltsin’s Cabinet meeting calls for preliminary measures to be taken with a view toward freeing prices from state controls and cutting the huge government subsidies.

The government will still set prices for bread, milk, salt, vegetable oil, sugar and matches. In industry, there will be controls over oil and petroleum products, coal, transport, communications and precious metals.

To help Russians cope, Yeltsin lifted the lid placed on wages in the market sector of the economy and granted pay increases of 50% and more to state employees. He also established a procedure for the regular review of the minimum wage so that the poor will not be swept away by inflation.

Reshaping Russia’s Economy

Russian President Boris N. Yeltsin on Friday initiated the first of his fundamental reforms aimed at establishing a free-market economy:

Ordered takeover of most of gold and diamond industries.

Suspended oil exports.

Will seek to turn most retail stores over to employees and private entrepreneurs.

Will seek to liberalize foreign trade so that private companies can compete with state enterprises.

Lifted ceiling on wages in market sector of economy.

Granted pay raises of 50% and more to state employees.

Set up procedure for review of minimum wage to compensate for inflation.