Russia Extends Profit Curbs in Move Away From Free Market

Russia’s new, conservative-led government, retreating from free-market practices to fight soaring inflation, announced Wednesday that it is extending its legal limit on profits to nearly all enterprises selling food and industrial raw materials.

The decree was the first major policy decision by Viktor S. Chernomyrdin since President Boris N. Yeltsin appointed him as prime minister last month in an effort to quiet a political uproar over plummeting living standards in the first year of post-Communist reforms.

Some economists called the decree a significant retreat from the reforms. They said it means that Chernomyrdin, a former Soviet industrial manager, wants to stabilize the economy through heavier state intervention than did his reformist predecessor, Yegor T. Gaidar, who favored stricter controls on the money supply.

But government officials noted that Gaidar, after freeing nearly all prices a year ago, had imposed profit controls on monopoly producers last August and that Chernomyrdin’s decree merely broadened those curbs.

The new decree was signed on New Year’s Eve and was sketchily reported for the first time Tuesday. Initial accounts indicated it affected only food, but Wednesday’s announcement of the full decree was far more comprehensive.

Profit ceilings--ranging from 10% for milk to 50% for iron ore--will now cover all producers, wholesalers and retailers of food, alcohol, building materials, ferrous metals, chemicals, plastics, timber, paper, leather, fabric and combustion engines. Only high-tech goods and luxury items such as carpets, caviar, furs and jewelry were exempt.

The announcement said many producers who were not covered by the previous controls on monopolies had engaged in collective price fixing, aided by “the absence of well-developed market structures and natural competition.” By extending controls, it added, the government is not returning to a Soviet-style economy but simply allowing the market to work “with utmost efficiency.”

“This does not mean that the principles of the market economy are being abolished,” Vitaly Kaurov, deputy chairman of the Russian state price committee, told the Interfax news service.

But Mikhail V. Leontiev, editor of the Moscow News Economic Review, called the decree “an outrageously anti-market measure” and “a poorly disguised attempt to control all prices.” If fully applied, he said, “most basic foods and consumer goods will disappear from the shelves in no time.”

It was unclear how the government intends to enforce profit limits against enterprises that are not large, visible monopolies. Russia’s economy is far more decentralized than it was under Soviet rule, and many agencies of central control have been abolished.