Yeltsin Acts to Rescue Newspapers Facing Ruin From Spiraling Costs : Russia: Huge state subsidies are ordered for publishers of periodicals and books.

The muckraking, liberal press helped boost Boris N. Yeltsin to power, and the Russian president returned the favor Friday by ordering that the country’s newspapers, reeling from the pressures of doing business in a free market, be fed billions of rubles in state subsidies.

Under Yeltsin’s decree, both the periodical press and book publishers will receive price-indexed government subsidies, offsetting their operating and distribution costs. Those costs have quadrupled in the last two months under the Russian government’s stringent economic reforms.

The price of newsprint, which has increased 20-fold since Jan. 1 and brought every major newspaper to the point of bankruptcy, will now be fixed at a more affordable level, and paper mills will be obliged to sell 70% of last year’s volume of production to the state at lower prices for distribution among periodicals.

Yeltsin ordered a breakup of the paper industry, ending the monopolies enjoyed by state enterprises, to avoid a recurrence of the crisis.

The decree comes after two months of frantic calls for help from beleaguered editors who have discovered democracy and market economy have their dangers.

Their efforts to find “market” solutions to skyrocketing publication costs--attracting advertisers or raising the per copy cost--failed against the mind-boggling tempo of price escalation.

Angered, the democratic press accused the government of destroying the very tool that brought it to power.

The subject was raised again during a boisterous meeting this week between representatives of the nation’s biggest newspapers and an envoy from the Russian legislature, the Supreme Soviet.

Igor Y. Yeremin, a member of the Supreme Soviet’s mass media committee, listened sympathetically as the democratic editors poured out their anguish over the imminent collapse of their publications. “We will not survive until the end of March,” said a representative of Trud, probably the world’s biggest daily with 14 million copies still being sold around the former Soviet Union. “Help must come before then.”

Yeremin assured the editors that his committee is fully aware of the importance of the press and is helping Yeltsin to overcome determined opposition from his Cabinet to “special treatment for any industrial sector in the economy.”

This was the point that the Russian mass media were making--they do not see themselves as an industrial sector but a political instrument.

In that role, Russia can use the press to project its influence into the now independent parts of the former Soviet Union and promote its interests; according to their reasoning, Russia cannot afford to let its papers die.

“Do you know that Izvestia, for instance, prints 800,000 copies and Komsomolskaya Pravda 3 million in Ukraine?” asked Pavel S. Gutiontov, chairman of the Committee for Free Press and Journalists’ Rights, touching on the heated relations between Russia and Ukraine, the second most important member of the Commonwealth of Independent States. “If these papers disappear overnight, how will Russia put its case across there?”

There is also a domestic political angle, said editors of Megapolis Express, a Moscow daily.

“If we are successfully throttled, there will remain only the easily controlled television, and that will mean the end of democracy here,” they said at the meeting.

Yet even as the draft decree was discussed, many editors called it “totally unworkable” because, if paper mills were told to cut their prices, they--not the newspapers--would collapse. But in the end, the result would be the same.

“What is needed is subsidies all down the chain, right to the lumber companies, or it will not work,” one editor said. “Removal of value-added tax from our product, on the other hand, could take as big a step toward solvency.”

As reported Friday, the Yeltsin decree does not grant any tax concessions and instead provides direct subsidies.

According to Yeremin’s account of his lobbying efforts, neither Deputy Prime Minister Yegor T. Gaidar, the economics minister, nor the No. 2 man in Yeltsin’s team, Gennady E. Burbulis, would listen to proposals concerning tax reductions.

If the decree is implemented as planned, the deficit-ridden government will have to find 7 billion rubles--at current market rates, about $100 million--just for the first quarter of the year to support the mass media, according to press estimates.

But that could be followed by demands from many other professions with even more damaging consequences.

“You threaten a day without political news in protest,” Yeremin told the editors, who had said they would stop covering the government unless they received assistance. “But what if the clinics stage a day without treatment? Or schools turn back the pupils? There is a feeling in the public the press is getting what it worked so hard to bring--so let’s not overdo it.”

Yeltsin’s decree also created a classic situation, so loved by former Soviet bureaucrats, in which they hold up the prize and then decide who gets it.

The editors and the Supreme Soviet agree this approach will cause a tangle of conflicts and internal divisions among mass media: Should only the newspapers that have supported Yeltsin and his policies get the subsidies? What about fringe publications and extremist sheets? Won’t all subsidies go only to the giants?

The list of questions is long, but money is short--and so is the time for both the press and the government.

But the days of the old Soviet “imperial press” with its colossal circulation in the millions are numbered, and observers believe that before the first half of the year is out there will be radical transformations in the “central” mass media, the only pillar of the bygone Soviet era still standing largely intact.

Grebenshikov is a reporter in The Times’ Moscow Bureau.