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  •   Recovering President Returns to Kremlin

    By Daniel Williams
    Washington Post Foreign Service
    Saturday, March 21, 1998; Page A16

    MOSCOW, March 20—President Boris Yeltsin worked three hours at the Kremlin this morning after overcoming a week-long bout with respiratory illness.

    He appeared, all smiles, on television, greeting and conversing with aides. He joked that he had phoned the Kremlin Thursday to ask whether the hallways were empty while he was gone.

    "Everyone is working intensely in their offices," spokesman Sergei Yastrzhembsky assured him.

    For all today's levity, another sign of the Kremlin's concern for Yeltsin's health appeared: a meeting with French President Jacques Chirac and German Chancellor Helmut Kohl that was to be held next week in the Ural Mountains city of Yekaterinburg was moved to Moscow so Yeltsin will not have to travel.

    The question of the moment is less about the state of Yeltsin's health -- everyone seems to agree he is more fragile than six months ago -- than the state of Russian affairs. Some of his top lieutenants say that Russia is nearing a crossroads: Will it follow what many here call the Asian model in which government and favored big businesses and banks dominate the economy, or an American and emerging European model where government sets the rules but keeps business at arm's length?

    Many Russian business leaders favored the Asian model because during the past decade, it provided East Asian economies with impressive economic growth and riches for well-connected tycoons. That bubble burst last fall when currencies and stock markets collapsed because of corruption, cronyism and protectionism, economic observers said. Russia, in turn, suffered a financial crisis-by-association. Investors fled the Russian stock and bond markets.

    Two top Yeltsin aides, deputy prime ministers Anatoly Chubais and Boris Nemtsov, have been attacking the Asian model, the local version of which they refer to as crony or bandit capitalism. In particular, they are wary of the influence of several major banks, which built their businesses using proceeds from government accounts placed in their institutions and bought state enterprises at low prices. Several of the banks are pressuring the government for new sweetheart deals.

    "Such relations between big business and the government . . . result in the state . . . forming private links. It results in setting up different rules of the game for different structures, which is called crony capitalism," Chubais said in a recent newspaper interview. "I read analytical materials about Indonesia, Thailand or South Korea. I shut my eyes -- everything is much like it is here."

    Chubais, who directed Russia's privatization campaign, stands accused of creating a Frankenstein monster of pushy big businesses. Beneficiaries of the program returned the favor by financing Yeltsin's 1996 reelection campaign.

    © Copyright 1998 The Washington Post Company

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