AS Russia faces its biggest economic crisis since the dissolution of the Soviet Union, President Yeltsin has been warned by his defence minister, Gen Igor Rodionov, that the military was on the very edge of "uncontrollable developments".
Unable to collect its taxes effectively, the state has delayed wage payments to soldiers, miners and millions of industrial workers for several months. Yesterday Mr Yeltsin made a nationwide radio broadcast in which he blamed the situation on squabbling among high Kremlin officials and, without naming him, pointed the finger at sacked security chief, Gen Alexander Lebed.
To complicate matters the International Monetary Fund (IMF) announced yesterday that it was postponing payment of a tranche of US$10.2 billion from a fund designed to stabilise the Russian economy. The IMF is understood to have called off the payment because of a lack of discipline in tax collection.
In his radio address, Mr Yeltsin castigated high officials involved in Kremlin power struggles and pointed out that "senior officials" had been dismissed over the past several days. "This will also happen to everybody who engages in squabbles instead of working," he said.
Non payment of workers and soldiers has, however, been a pattern in Russia for some considerable time before the political upheaval of the past two weeks.
A delayed payment to workers and soldiers was made immediately before the Presidential Elections in June but, since Mr Yeltsin's re election, the pattern of non payment has resumed.
Russia is now faced with a major economic dilemma. If workers are paid, the money supply will increase and inflation will be fuelled. If it does not, more and more people will fall below the poverty line and disaffection in the army will increase.
This week the International Red Cross reported that up to 40 million Russians had reached such poverty that they urgently needed humanitarian aid.
The issue of tax collection also poses problems. A crackdown on large companies which have not paid their taxes has been announced, and this is likely to cause the collapse of some large companies. Among those believed to be on the verge of bankruptcy are the big Moskvich automobile plant in Moscow and the Kamaz company, a major manufacturer of trucks.
The choice is stark. If taxes are properly collected, several thousand workers will lose their jobs. Unless tax discipline is instituted, money from the IMF will not be forthcoming.
Gen Rodionov yesterday warned that the situation in the military is precarious. He said that cash shortages, poor maintenance and appalling social conditions could lead to "undesirable and even uncontrollable developments".
He said: "If the 1997 defence budget is not corrected, Russia may finally lose the armed forces as an integral and capable state structure and face all the corresponding repercussions."
. High ranking Russian officials will give a series of presentations on the country's economy to investors around the world, starting November on 11th. J.P. Morgan and SBC Warburg said yesterday.
Market analysts expect the officials to include discussions on Russia's long awaited debut Eurobond. Morgan and SBC Warburg are the joint lead managers of the Eurobond, which was expected to be for up to $500 million with a five year maturity.
