- The Washington Times - Tuesday, March 14, 2000

MOSCOW Vladimir Putin's economic program, which he has promised to reveal by the March 26 election, will please Western lenders with deregulation proposals but alarm them by strengthening the states' role in the economy.

Experts drafting the program say it will include economic liberalization as demanded by the West. But they said while Mr. Putin, who is acting president and considered a shoo-in in the coming polls, is eager to sweep away some of the Soviet-era bureaucracy that bedevils private commerce, he also wants to boost state intervention in the economy.

"We must end an omnipresent state control of businesses," said German Gref, the head of the Center of Strategic Research, the Moscow-based think tank developing Mr. Putin's program. But the "state's role must be increased" as well, he said in a radio interview.

Mr. Putin has promised to release his economic blueprint before Russians go to the polls, but has not said exactly when that will happen.

Mr. Putin insists that he will continue with market reforms, but there is no alternative but to expand the state's economic oversight to ensure everyone gets a fair break and that laws are enforced.

But pro-reform critics maintain that Mr. Putin is at heart a statist and not interested in throwing the economy open to genuine competition.

They also argue he is surrounding himself in the Kremlin with mediocre bureaucrats and former KGB agents who lack understanding of modern economics.

Mr. Putin has received some support from pro-reform quarters.

Andrei Ryabov, an analyst with the Carnegie Endowment, has argued that state assertiveness will be necessary to overcome the stranglehold on the economy by the small group of superrich "oligarchs" that was enriched in the years under former President Boris Yeltsin through sweetheart deals and privatization bids.

"It will be necessary to build a strong executive political apparatus of vertical governance, relieving the president from the oligarchs' pressure," he wrote in a recent analysis.

But Mr. Ryabov also notes a major worry: that Mr. Putin is not well-versed in capitalist economics.

"Unfortunately for Russia, nothing in Putin's KGB-trained mind shows an understanding of the fact that the fluidity of capital markets in the West is the product of financial institutions that are independent of government."

There have also been few signs so far that Mr. Putin will reduce the political influence of the oligarchs. Since he became acting president when Mr. Yeltsin stepped down on New Year's Eve, Mr. Putin has been ambiguous on keeping the oligarchs at "an equal distance" from power.

Asked recently what economic policy Mr. Putin would follow one of more state intervention or a hands-off free-market approach, Alexander Zhukov, chairman of the Duma's banking committee, said: "I don't know."

"Bringing some order to some sectors of the economy would be no bad thing, but not a return to the command economy of the past," he said.

Above all, Mr. Zhukov said that for foreign investors to be lured back to Russia, Mr. Putin must introduce "laws protecting investors' rights and new tax laws."

The vagueness of Mr. Putin's economic thinking coincides with a major debate among international economists about the efficacy of Western lending to Russia.

The International Monetary Fund and World Bank have pumped tens of billions of dollars into the Russian economy in the eight years since the Soviet Union fell apart. Economic output has only just begun to revive from a long slump that has left millions of Russians living below the poverty line.

In the summer of 1998 Russia defaulted on some debt and devalued its ruble currency only weeks after winning a multibillion-dollar IMF rescue deal. IMF lending has resumed to Russia since then but the loans are to settle old Russian debt to the Fund. Payments were halted again last year because Russia was not meeting the program's structural conditions.

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