Yeltsin Aides Hope to Seize the Day on Reforms : Economics: Obstacles gone, Russian government sees unique opportunity to take free-market steps.

Lines of shoppers quickly started forming on the evening of Oct. 1 when rumors swept the markets here of the lifting of price controls on a Russian staple--bread. Graffiti appeared on shop windows: “Bread is the source of life.”

Locked in a bitter (and soon to be bloody) battle with a hostile Parliament in which public support was crucial, the administration of Russian President Boris N. Yeltsin read the writing on the wall. Hours before Yeltsin and his aides took action against their foes, bread decontrol was suspended.

Now officials are warning that the decontrol will be back, probably by the end of November. They also have hinted at higher taxes and financial controls designed to revive the sagging economy, but at the price of higher unemployment.

The difference between last week and this, of course, is the liquidation of the Parliament by tank shells Monday. That was the climax of an increasingly tense struggle that began with a Yeltsin decree dissolving Parliament on Sept. 21; it ended with the deployment of troops Oct. 4 to put down armed attacks by Parliament supporters throughout Moscow.

Now Yeltsin’s advisers believe that they have an unprecedented chance to unilaterally lay a foundation for further economic reform. Their opportunity to work unhindered will last at least until Dec. 12, when Yeltsin has scheduled new parliamentary elections.

“It’s a unique situation,” Alexei L. Golovkov, a longtime Yeltsin adviser, said with satisfaction. “Before Sept. 21, real economic decisions couldn’t be taken. Now one of the components of obstruction has disappeared.”

Government economic aides say their first priority is to reduce inflation, which has been running at about 27% a month and naturally has the most baleful impact on the public.

They are also preparing to legislate by decree: a widening of the privatization program, already the biggest selloff of public assets in history, and a liberalization of rights to private ownership of land, an issue that has been a trigger of political and economic change through a thousand years of Russian history.

Among other measures, the reformers have moved to bring Russia’s Central Bank firmly under Yeltsin administration control, the better to supervise its manipulation of the money supply.

The bank reported to Parliament until Sept. 21; its president, Viktor V. Gerashchenko, unambiguously supported Yeltsin during the ensuing struggle. This has earned him a new lease on his job--to the chagrin of many economic reformers, who regard him as unable to cope with the demands of Western-style economics.

“I don’t think loyalty is the proper measure of a central banker,” complained Jeffrey Sachs, a Harvard University professor who is an important adviser to the Yeltsin administration. “I think competence should speak much more loudly.”

Political and economic observers here warn that the forthcoming elections limit the government’s ability to take all necessary steps, especially those that will have sharply unpleasant consequences for voters. These include full-scale limits on government credits to under-performing industries, which would sharply increase unemployment.

“The government has to be very cautious and delicate in order to avoid all unfavorable results of the change in economic policy,” said Mikhail Berger, an economic columnist for the newspaper Izvestia.

But the liberation of policy from parliamentary influence is more important, economists said. For the last 18 months, Parliament was more than simply an obstructionist force. Yeltsin, in dissolving the body, made it clear that he regarded it as almost more of an economic menace than a political one.

The legislature was made up mostly of lawmakers who had not faced an election since before the failed August, 1991, hard-line coup. They not only resisted Yeltsin’s own economic initiatives but tried to implement many of their own economically bizarre ideas.

Among other things, Parliament had passed a government budget that called for a deficit of 26 trillion rubles ($21.8 billion), more than double the Yeltsin government’s proposed shortfall and a near-certain trigger of hyper-inflation. Parliament was also a lobbying center for the interests of a range of wasteful or rent-seeking enterprises exercising a claim on the public purse; Yeltsin’s advisers are now trying to pare back these demands.

One came from the agricultural lobby, which in 1992 received a loan subsidy of 1.3 trillion rubles ($1.1 billion) or fully 7.7% of Russia’s gross domestic product that year. The money was doled out to four government monopolies controlling the grain trade, including one chaired by a man still under indictment in connection with the failed 1991 putsch.

As a drain on Russia’s resources, government economists said, such subsidies far outstripped the more visible impact of political thievery, corruption and capital flight, charges of which had become commonplace in Moscow during months of political stalemate. “Next to this,” said Sergei Vasiliev, head of the Center for Economic Reform here and an economic counselor to the government, “the crimes some of our politicians were accused of are child’s play.”

Although Yeltsin advisers are wary of promising too many positive results too soon from their new regulations, they are confident that they can get inflation under better control and limit the government deficit by the end of December.

At an international banking conference here recently, Finance Minister Boris G. Fyodorov said the government hoped to cut monthly inflation to 20% by year’s end and to 15% by February. This year’s budget deficit, he added, might be kept as low as 12 trillion rubles, or $10.1 billion.

Perhaps more important, the government is hoping to reduce money growth--the increase in new rubles the Central Bank must print to keep the economy moving--to 5% to 10% a month in the fourth quarter of 1993.