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    Yeltsin Makes Key Appointments to New Cabinet

    By Christine Spolar
    Washington Post Foreign Service
    Friday, August 16 1996; Page A27

    President Boris Yeltsin realigned his second-term cabinet today with several key appointments that signal continued stress on free-market reforms and a new determination to reinvigorate Russia's ailing industrial base.

    Prime Minister Viktor Chernomyrdin said Aleksei Bolshakov, 56 -- an engineer by training who most recently handled Russian relations with other former Soviet states -- will become the senior first deputy premier among several and take charge of policy affecting industry, construction, transport, communications and mineral resources.

    Also named first deputy premiers were Vladimir Potanin, 35, head of Russia's fourth-largest private bank, who will oversee government macroeconomic policy; and Viktor Ilyushin, 59, a longtime Yeltsin confidant and a key figure in his reelection campaign, who will be in charge of social services. Alexander Livshits, 50, a close adviser to Yeltsin on economic issues, was named a deputy premier and minister of finance, while Yevgeny Yasin, another free-market advocate, was retained as minister of the economy.

    A number of other prominent cabinet members were kept on as well; among them were Foreign Minister Yevgeny Primakov, Nationalities Minister Vyacheslav Mikhailov and Internal Affairs Minister Anatoly Kulikov. Also retained was Defense Minister Igor Rodionov, who was appointed just a month ago at the insistence of Yeltsin's new national security chief, Alexander Lebed.

    Chernomyrdin said the new administration would pursue "more active social policies, pay more attention to production and investments, maintain firm control over the financial sphere and set up and strengthen new market institutions."

    The prime minister, whose own reappointment was quickly approved by parliament on Saturday, also announced a paring down of the state bureaucracy from 88 departments to 66 and called the overall government reconfiguration a "radical restructuring of the system of executive power in Russia." Others here were not so sure, however, noting that most senior cabinet members had been retained from Yeltsin's previous administration. Legislator Mikhail Zadornovhe, chairman of a parliament budget committee, called it "a new old government."

    In any case, Russia's nascent financial community apparently took heart from the appointments, as the Moscow stock market index shot up 8 percent.

    The announcement was made as fighting between Russian troops and separatist rebels in Chechnya eased for a second day while Lebed sought to negotiate with insurgent leaders on ending a 20-month-old conflict that has been a political millstone for Yeltsin. Little mention of the war was made here today except in comments by Chernomyrdin, who said that he and others in the new government "deplore the way events in Chechnya are developing," that "we should do all we can to resolve this problem and that we will tackle this problem together."

    The new appointments came as a delegation from the International Monetary Fund was in Moscow for a periodic check on Russia's ability to meet budgetary and economic restructuring targets required for international financial assistance. Last month, the IMF found that the Kremlin was not collecting tax revenues efficiently enough -- in fact, collections had plummeted over the last three years -- and it postponed delivery to Moscow of a $330 million installment on a $10 billion aid package.

    Economic analysts here said the new government should prove attractive to the IMF and may ease concern about Russia's commitment to reform. "They should be reasonably happy," said a Western diplomat who cautioned nonetheless that Potanin's and Bolshakov's grasp of macroeconomics remains untested. The IMF delegation is expected to decide late this week whether the Kremlin has complied closely enough with IMF strictures to receive July and August loan installments.

    The appointment of Potanin, who has headed Moscow's Oneximbank since 1993, had been widely expected and analysts here said it was crucial in demonstrating the new government commitment to a continued free-market policy. "He's experienced [and] he knows market economy," said Vladimir A. Mau, the deputy director of Russia's Institute for the Economy in Transition.

    Potanin, who is likely to play an especially influential role in the banking sector, said that he did not put much stock in what the "prophets of doom and gloom" say about the parlous state of Russia's economy. "The financial situation is not simple, but it does not warrant prediction of a collapse, as some people would like us to believe," he said.

    Potanin said he believes the government has the "necessary levers to keep the situation under control" and to improve tax collection and to make ends meet. The budget should be a "basis for economic recovery [or] at least reverse the trend" of Russia's economic deterioration, he said.

    Bolshakov, a deputy premier since November 1994, was strongly supported for his new post by Yeltsin chief of staff Anatoly Chubais, himself a champion of free-market principles. Before entering government, Bolshakov was director of an ambitious transportation project that is intended to institute high-speed rail service between Moscow and St. Petersburg. He said in mid-1994 that the first section of the line could open in 1997, but the project is still on the drawing board, and project officials say construction could take up to 10 years.

    Some analysts believe Ilyushin may have sacrificed some executive influence by giving up his place at Yeltsin's side to accept the social services portfolio, but political insiders say they expect he will still have access to the president on all important issues and that Yeltsin is likely to call on him when needed for political advice.

    During the election campaign, Yeltsin had hinted that he might find places for opposition politicians in his new government, but so far none has been appointed. Analysts noted, however, that leadership of some lesser ministries could still be offered to opposition figures.

    Seven cabinet positions were not filled today, including the important fuel and energy post. The previous energy minister, Yuri Shafranik, had been widely blamed for a coal miners' strike last month that was set off by a government failure to pay overdue wages.

    Also dropped from the new government lineup was Vladimir Kadannikov, who had overseen macroeconomic policy and had favored state subsidies to failing industries. But two other highly criticized members of the previous cabinet were retained: Oleg Lobov was demoted from first deputy premier status to that of deputy premier under Bolshakov, while Alexander Zaveryukha stayed on as deputy premier responsible for agriculture.

    © Copyright 1996 The Washington Post Company

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