Russian president slashes payments


MOSCOW -- Russian President Boris N. Yeltsin, in a major confrontation over the future of the Soviet Union as a federal state, has cut his republic's contribution to the national budget by 85 percent, threatening the whole country with imminent economic collapse, Soviet President Mikhail S. Gorbachev has told the national parliament.

The Soviet Union consequently will enter 1991 without a state budget, Gorbachev said yesterday, and the government will quickly run out of money for everything from pay for civil servants and soldiers to operating funds for universities, libraries and science labs to old-age pensions and welfare payments.

But the real damage will be to the Soviet economy, which is already disintegrating, as other republics increase prices and taxes to make up for the money they will no longer receive from the central government in subsidies compensating them for low, state-set prices on their products.

"If we embark on this road, it will destroy everything we have done," Gorbachev warned the Congress of People's Deputies. "Everyone would then live by the principle of 'every man for himself.' This would mean the breakup not only of the economy but of the Soviet Union."

For Gorbachev, it is a triple challenge. He must protect, as best he can, the country's battered economy from further blows. He must fight for his conception of a new relationship between the Soviet central government and the country's constituent republics. And he must employ his newly enhanced authority as president to reassert his leadership.

Gorbachev angrily accused Yeltsin, who is president of the Russian Federation, the largest of the Soviet Union's constituent republics, of trying "virtually to break up the country" by pressing its claims to sovereignty -- or even to take over the nation, usurping the current powers of the central government.

"We have to follow the laws of the Soviet Union on forming a budget -- no one has annulled them, and no one has the right to do so," Gorbachev told the Congress, which endorsed his position.

However, as the major contributor to the central budget, financing more than 55 percent of this year's expenditures, the Russian Federation has political as well as economic leverage that Yeltsin is ready to use. This week, he cut Russia's payment to the central government from $256 billion to $41 billion at official exchange rates. Next year's projected state budget is about $450 billion.

The prospects for a compromise are uncertain, although further negotiations will be held in January. Gorbachev and Yeltsin have frequently faced off, but then backed away from the confrontation.

"The question is largely political, not economic," Georgy Shakhnazarov, a presidential adviser, commented. "Russia is trying to dominate the central government, even become it. Their idea is, 'He who pays the piper calls the tune.' "

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