Russian Cabinet Quits in Clash : Politics: Economic reforms are endangered in battle between ministers and legislature. Yeltsin has not yet accepted the resignation. Some foresee a compromise.

The Russian Cabinet formally submitted its resignation to President Boris N. Yeltsin and stalked wrathfully out of the national Parliament on Monday in an explosive governmental crisis that ministers said threatens to wreck the country’s economic reforms.

Yeltsin had yet to accept the resignation--the first by a full Russian Cabinet since before the 1917 Bolshevik Revolution--and lawmakers said there is still a good chance that a compromise can be worked out to make the Cabinet change its mind.

But the war of wills between ministers and legislators nonetheless amounted to the most volatile political clash the Russian president has faced since he began his economic reforms last winter. And it exposed fierce behind-the-scenes battles between the branches of government that, officials worried aloud, could stymie the reforms themselves.

Yegor T. Gaidar, Yeltsin’s brash, 36-year-old economics chief, warned that Parliament, by making irresponsible economic decisions, would bring on “a catastrophic decline in living standards, famine, social upheavals and chaos.”

The Cabinet refuses, he told a news conference, “to follow the path of irresponsible populism.”

Lashing back at Gaidar, Speaker Ruslan Khasbulatov accused the Cabinet of trying to blackmail the Congress of People’s Deputies, which, as the national Parliament of more than 1,000 members, is theoretically the highest governmental body. Habitually sharp-tongued, sarcastic and condescending, Khasbulatov went a step too far this time.

In a gibe at the youth of the economists in the Cabinet, Khasbulatov sneered: “The boys just lost their cool.” At that, in some of the liveliest theatrics ever to hit the normally somnolent Congress, the two dozen government ministers arose en masse and stormed out of the white-columned hall. That left Khasbulatov to adjourn the session and 150 pro-Yeltsin deputies to discuss their own plans to boycott the Congress if it did not come around.

Khasbulatov later apologized on national television, saying he “didn’t mean to insult anyone,” but the damage was done.

Yeltsin, through all of this, was absent, as he had been on Saturday when the Congress passed the measures that led to the crisis, and on Sunday, when ministers and lawmakers met to try to work out a compromise.

But not to fear, his closest adviser, Gennady E. Burbulis, said when asked why Yeltsin had not moved to defend the ministers he had sworn to stand behind.

“All that is still to come,” he said.

Several ministers predicted that Yeltsin would take the floor today to foster a compromise. Probably, they said, it would be based on a formula proposed Monday that would defuse the immediate crisis by creating rules for solving disputes over fiscal issues between Parliament and the Cabinet.

Although its roots lay deeper, in the unclear division of power between Parliament and the Cabinet, the current dispute arose over a resolution on economic reform that the Congress passed Saturday.

Trying to please their constituents, whose standard of living has dropped sharply since the government freed prices in January, deputies voted that savings bank accounts should be indexed to inflation, that government employees be paid as highly as industrial workers and that agricultural subsidies be increased dramatically.

They also gave Yeltsin just three months to come up with a law on the organization of the Russian government--after which his interim special powers to rule by decree would run out--and to nominate a candidate to replace him as prime minister.

Yeltsin’s Cabinet, horrified at what it contends will mean the end of its reform program, fought back on Monday with an alarmist memorandum estimating that if the Congress gets everything it wants, it will swell the government’s budget deficit to 1.5 trillion rubles, which would amount to 23% of the gross national product.

That, in turn, the memo predicted, would fling the country into hyper-inflation at a level of 2,000% a year, and consumers’ buying power would plummet to one-fifth of what it is now.

Furthermore, ministers warned, if the West believes that the economic reform program may be radically altered, it may renege on billions of dollars worth of aid it has promised, including a recently announced package of $24 billion from the major industrialized nations, the United States among them.

In Washington, a Bush Administration official offered a blunt warning to the Russians:

“We don’t want to tell them what to do,” he said. “But if they do things counterproductive to establishing a reliable economic program, we’re not going to sink taxpayer dollars into a likely loser.”

The official, who spoke on condition of anonymity, said the Administration is watching the development carefully and is “not yet alarmed.”

“The fact the Cabinet threatened to resign over the apparent attempt to gut the economic program by the Congress of People’s Deputies underlines that the Cabinet is serious about economic reform,” he said.

“Yeltsin is a political survivor, and a good politician has the capability of coming out of this with what he wants and support for his program,” the official added. But, he said, “if the Congress of People’s Deputies should succeed in gutting the economic program, that would be a very bad sign and would place in jeopardy the package of economic assistance we put together.”

He continued:

“It is possible Yeltsin will win the day and explain to them the importance of staying the course.”

At his news conference, Gaidar implied that even if Western aid continues to flow, it would be unethical to accept it if reform policies are changed.

“We want to avoid the tactic of small-time swindlers when substantial funds are borrowed for a certain type of program,” he said, “and squandered in futile attempts to satisfy disparate interest groups.”

The Congress has already taken a toll on the government’s reforms, said one of the Cabinet’s top economists, Andrei Nechayev.

“The government has been paralyzed for a whole week already,” he complained. “It cannot function as it used to because of the Congress.”

Some deputies, however, maintained that the entire governmental crisis had been purposely overblown in an attempt by the Cabinet to push the Congress into backing down and generally refraining from meddling with the reforms.

“It seems we are witnessing an attempt to put pressure on the Congress,” said Vasily Lipitsky, head of the nationalist Free Russia Party. But “it seems to me a compromise will be found quickly.”

Others said that even if the government did go through with its resignation, it would be no tragedy.

“I think a favorable situation has arisen in which the president can form a coalition government of popular confidence,” said deputy Nikolai Pavlov. “Any government relying on a narrow segment of society is doomed to failure. So the government did the right thing in offering to resign.”

Yeltsin allies, meanwhile, prepared their own counterattack on the conservatives, announcing a mass meeting in support of the president and his government for Sunday and launching a signature drive for a referendum shoring up his powers. A referendum could also theoretically call for the Congress to dissolve itself.

Burbulis, still steaming over Khasbulatov’s insults, said that “a referendum is a very attractive idea, but we would like to avoid it today. There are a lot of concrete things to be done.”

Still, he said ominously, “We will not allow the Congress to turn into a worldwide laughingstock.”

Times staff writer James Gerstenzang in Washington and Viktor K. Grebenshikov, a reporter in The Times’ Moscow bureau, contributed to this article.

* WHERE IS YELTSIN?: Russia’s leader was not present to defend his Cabinet. A8