NEWS ANALYSIS : West’s Aid a Touchy Issue in Yeltsin Power Struggle

Just before gaveling the Congress of People’s Deputies to a close last week, Ruslan I. Khasbulatov, the architect of President Boris N. Yeltsin’s humiliation, raised an issue of national pride.

Presidents Ronald Reagan and George Bush promised to aid Moscow, he complained, as a way of coaxing Soviet President Mikhail S. Gorbachev to allow the “disintegration” of the Soviet Union. “But at the end of the day, the (U.S.) Congress did not release a single cent.”

Today, the Speaker of the Parliament declared, unmet Western pledges of $24 billion to turn Russia into a free-market democracy are just a new ploy to dominate the country. “The problem of Russia is not aid,” he said. “The problem is we still have no serious concept of cooperation with the West.”

In his dramatic loss of executive power to the Soviet-era Parliament, Yeltsin has been hurt by few things more than the faltering of the year-old Western aid program and the view among nationalists like Khasbulatov that its aim is to destroy Russian industry and take away Russian markets.

The powerful Speaker’s parting shot Saturday at the end of a raucous four-day Congress cast Russia’s Titanic political struggle as one between two national identities: Yeltsin’s vision of a liberal democracy leaning toward the West and his opponents’ longing for a resurgent, centralized Russian empire asserting a more confrontational foreign policy.

Alarmed that the outcome could restart the Cold War, President Clinton last week urged other Western industrialized nations to rush to Yeltsin’s rescue. Yet when the two men hold their summit early next month, Yeltsin will be hard-pressed to show that he has enough power to translate new aid into a revival of his reforms.

The scale of the transformation Yeltsin is attempting is enormous: from a centrally planned, totalitarian system of heavily militarized industry and collective farms to a democratic culture of grass-roots capitalism in which millions of small shareholders have a stake.

Western aid has lagged. Of $24 billion promised a year ago, Russia has received about $10 billion, most of it in short-term credits that do little to promote Yeltsin’s free-market reforms. About $3 billion of those credits are already due, and Russia’s inability to pay is leading some foreign banks and governments to cut off credits.

“The $24 billion was an illusion,” said Mikhail Bocharov, a Congress deputy and leading businessman. “Instead of reform, we got the destruction of our economy.”

Western officials argue that Russia is to blame. The government hurt its cause, they argue, by losing control of the Central Bank, which has violated Russia’s commitment to control the money supply.

As a result, inflation is running at a rate of 25% to 30% a month, severely eroding living standards. Russians who once idolized Yeltsin now associate his democracy with the economic hardship, crime and corruption that weigh on their daily lives, and many say they long for dictatorship.

In their showdown last week, Congress not only stripped Yeltsin of his power to introduce legislation and issue decrees but also refused to give up partial control of the Central Bank, whose chairman keeps bailing out inefficient industries that the Yeltsin reformers want to bankrupt.

Deputy Prime Minister Boris G. Fyodorov, a leading reformer, said last week that lawmakers are trying to double the government’s proposed 1993 budget.

Against this backdrop, Yeltsin will ask Clinton and other Western leaders for debt relief, aid to convert military enterprises to civilian use and support for small businesses, Russian officials say.

But without high-level control over spending, corruption and inefficiency, giving new aid would be like “putting huge sums of money into a pocket with holes in it,” British Foreign Secretary Douglas Hurd said last week.

Echoing that view, leading Russian economist Gennady S. Lisichkin said: “Giving the money to Yeltsin is like giving a bottle of vodka to an alcoholic. He will drink it and ask for more.”

Lisichkin, who is president of the Assn. of Assistance to Entrepreneurs, estimates that Russians are holding $40 billion to $80 billion in foreign banks. Meanwhile, “politicians are begging for $24 billion instead of creating appropriate conditions for entrepreneurship at home.”

He said that all U.S. aid should be given directly to promising Russian businesses.

Nationalists and Communists, who are gaining ascendancy in the country, insist that Russia should reject any aid tied to tightening the money supply and weakening Russia’s existing industries.

Such views are echoed within Yeltsin’s government. Prime Minister Viktor S. Chernomyrdin placed himself in that camp last week by complaining to the Congress that “some of our ‘friends’ have nearly succeeded” in making Russia “disappear from the face of the Earth.”

“Nobody in the West is willing to create a competitor with his own hands,” said Vice President Alexander V. Rutskoi, who often calls Western aid “fresh cheese in a mousetrap.”

Yeltsin’s most extreme nationalist critics oppose his START II treaty with the United States to reduce strategic nuclear arms. And they say that rather than accept Western aid, Russia should resume conventional arms sales to such traditional clients as Iraq, Libya and Serbia. They estimate that participation in Western-led boycotts against those international pariahs has cost Russia $20 billion in lost revenues.

Nationalist pressure to resume those sales is so strong that a consensus has emerged: Yeltsin, backed by most political factions here, will ask Clinton to help Russia find new, internationally acceptable markets for rocket engines, submarines, antiaircraft missiles and other high-tech weaponry.

“If the West really thinks that in the future we are going to live in a normal world, by civilized mores, then the West must do some serious thinking on this issue,” said Leonid B. Gurevich, a pro-Yeltsin deputy. “Otherwise, the feeling arises that Russia is a colony that the West uses according to its whims. And the unreconcilable opposition exploits this to the hilt.”