Western Advisers Quit to Protest Russia Policy : Finance: U.S., Swedish economists resign in despair over the anti-reform bent of the new Cabinet, which they say is ‘doomed to fail.’

Two prominent Western economists who had been advising the Russian government on its free-market reforms quit Friday in a demonstration of despair over the inflationary course they believe President Boris N. Yeltsin’s new Cabinet is about to set.

“We can no longer assist the Russian government,” professors Jeffrey Sachs of Harvard University and Anders Aslund of the Stockholm School of Economics said in a statement. “The aims and policies announced by the prime minister are strongly contrary to our own views.”

Sachs and Aslund joined an exodus of free-market economists who have been throwing up their hands at Yeltsin’s apparent willingness to back away from tough economic measures because reformers did so poorly in last month’s elections.

“A real choice was made--to go with old-guard Communist apparatchiks” who will spend freely and try to control inflation by fiat, Sachs said in a telephone interview. “I don’t want to have anything to do with it personally, and it’s doomed to fail.”

Yegor T. Gaidar, the young economist who was the driving force behind Russia’s economic transformation from socialist planning to capitalism, and Boris G. Fyodorov, the outgoing finance minister who tried to keep down government spending, both quit this week, citing the Cabinet’s unwillingness to effect consistent reforms.

Their main target has been Prime Minister Viktor S. Chernomyrdin, who makes no secret of his belief that the government should hike subsidies to failing industry and agriculture even if that means inflation will rise. They have also called for the resignation of Viktor V. Gerashchenko, the Central Bank chairman who helped spur inflation by doing little to control the money supply.

But Yeltsin, apparently determined to learn a lesson from election results that gave the reformist Russia’s Choice less than 15% of the vote, chose Chernomyrdin and his old-school comrades, leaving only two of Gaidar’s team of young economists in the Cabinet.

With their ranks in the government decimated, Gaidar and his allies indicated they would now move into opposition to Yeltsin’s Cabinet and use their new freedom to tear Chernomyrdin’s economic policy publicly to shreds.

They are already predicting that without the financial discipline they imposed, Russia’s inflation--now about 12% per month--will swell into hyper-inflation by midyear.

Sachs and Aslund pointed out that had Russia stuck with austerity measures, it could have shared the fate of the Czech Republic, Poland, Estonia and Latvia, which managed to control inflation and embark on economic recovery.

But the only response to their resignation Friday was a subtle good-riddance from Chernomyrdin’s office; his spokesman told reporters that the Russian prime minister did not believe in using foreign advisers anyway.

Russia’s reform “naturally takes into account world experience in market economics, but its pivot is the reality of the Russian state, its traditions, understanding of the country’s specifics and the mentality of Russians,” spokesman Valentin Sergeyev said.

Chernomyrdin is expected to distance Russia from Western lending institutions as well as international advisers.

A Western official in Moscow said that those in Chernomyrdin’s camp “don’t see these Western institutions as particularly relevant to the problem, which is the need to revive industry and create jobs. (They) are telling Yeltsin that Western business is more important and that Western business will come here if there is order--the kind of order you had here under communism.”

Yeltsin has yet to speak publicly on the direction his new Cabinet plans to take, but a top aide said the president will lay out his policy to Parliament soon.

Aide Viktor Ilyushin told the Reuters news agency that despite personnel changes, “There are no grounds to doubt the president will stand by his reforms.”

In Washington, President Clinton asserted that the United States was prepared to “do what we can” to support economic reform in Russia despite the Cabinet shake-up, but that assistance from abroad would depend on the pace and type of economic change Moscow adopts.

“How much economic help they can get from the international community will be directly related to what kinds of reforms they decide to undertake,” Clinton said.

He said Washington remained willing to provide financial and technical assistance on job training, unemployment compensation and other social support systems. But he said he was concerned about Russia’s ability to cope with inflation and the other costs of a rapid transition to a market economy.

“We’re prepared to help do what we can,” he said. “But they’ll have to chart their course, and then we’ll be there to try to be supportive.”

Later in the day, White House Press Secretary Dee Dee Myers expressed the Administration’s “disappointment” that Fyodorov would not be staying in Yeltsin’s Cabinet as finance minister. “He was someone who was clearly committed to reform,” she said. But, she added, it is “too soon to give up on reform.”

Times staff writer John M. Broder in Washington contributed to this report.