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08/03/1998 02:07:55 FEATURE - Bureaucrats are a big force in Russia reform war

By Philippa Fletcher

KOSTROMA, Russia, Aug 3 (Reuters) - Yuri Tsikunov, one of Russia's vast army

of bureaucrats, is anxious that people recognise his importance.

"Before you, you should know, sits the head of the emergencies committee

with colossal powers, so whatever I order, it will be carried out," he says in

his imposing wood-panelled office in the historic town of Kostroma.

The reach of those powers is miniscule in Russian terms -- Tsikunov is first

deputy governor of just one of 89 regions.

Combine the Kostroma region -- itself the size of Belgium -- with the

others, however, and Tsikunov and his like make for a formidable force, whose

views and actions shape what happens in Russia every bit as much as the central

government.

That government, trying to show the International Monetary Fund it can plug

its leaking budget, should be encouraged therefore, by Tsikunov's frankness

about where the holes are in Kostroma, 340 km (200 miles) northeast of the

capital.

MIDDLEMEN SYPHON OFF RUSSIA'S WEALTH

"Local factory directors think to themselves 'why should we spend all our

time trying to pay wages on time?' So they create some little companies. The

factory's production is sold through these companies and they get gigantic sums

of money," he said.

"In some places the cynicism of those directors is so great that they've

lost their humanity. They end up thinking 'I've come out on top and you are my

slave'."

The result is plain to see, not only among Kostroma's 800,000 population but

across Russia, where countless workers and pensioners go unpaid for months on

end while their bosses and their friends acquire luxury cars and foreign bank

accounts.

Corruption does not account for all the wage delays -- reluctance to close

moribund, communist-era industries for social reasons has allowed a web of debts

to strangle even well-run firms -- but it does tell a big part of the story.

Which makes it all the more surprising that neither the government, nor

Tsikunov, for all his avowed powers, appears to have done much about the graft,

which has helped create conditions reminiscent of Russia's pre-revolutionary

serfdom.

Until now that is, when financial instability and popular exasperation are

beginning to force Moscow's hand.

Ministers have been sent on rare forays to the provinces to stop blockades

of key railway lines by miners fed up with not being paid. They have promised to

crack down on the middlemen who spirit the coal away without the miners seeing

any money.

PROTESTING WORKERS RISK PUBLIC IRE

In Kostroma doctors and teachers are also angry, but have not resorted to

such desperate measures, confining their protests to banging pots and pans

outside Tsikunov's office in a pre-revolutionary church school for girls by the

river Volga.

He said the protest was unlikely to develop since workers risked the wrath

of friends and neighbours by going on strike.

In June, President Boris Yeltsin chose Kostroma to try to show workers that

the government was on their side. Departing from the traditional script, he

lashed out at officials who had papered over the cracks for his visit in

time-honoured fashion.

The director of Kostroma's biggest plant, a linen factory, may have made

Yeltsin smile by getting attractive young models to show off his cloth, but he

did not escape the presidential wrath when he said he was seeking big new

investments.

"Perhaps the money will go to finance your easy life," Yeltsin stormed in

front of a crowd of workers nervous of discussing delays in their pay under the

eye of their boss.

The manager of a cattle-breeding farm fared little better.

"I always hear such phrases," Yeltsin snapped when the man said output was

up. "The Bolsheviks have already said this," he said. "Do you think I don't

understand anything?"

Yeltsin also accused Kostroma's governor of trying to blame Moscow for all

the region's wage and pension delays even though he was responsible for half.

But though he may claim to understand the problems, he did not set much of an

example.

He brought with him 46 million roubles ($7 million) owed to pensioners,

teachers and doctors and other state workers. His spokesman said it was an

unfortunate tradition that money tended to be released in time with official

visits.

IMF DEMANDS PUT LOCAL LEADERS IN HOT WATER

The IMF is not happy with such loose financial planning.

The Fund's first deputy managing director Stanley Fischer said on his latest

visit to Russia it was time companies, especially big monopoly energy companies,

began paying taxes.

"It's a very unusual belief that you don't have to pay taxes, that they're a

subject of negotiation," he said. "That should not be the case."

Driven by fears that without IMF cash the rouble could slide, sparking

inflation and wiping out the gains of seven years of painful reform, the

government has taken Fischer's message to heart, declaring an end to the

practice of writing off mutual debts and insisting taxes are paid in cash.

In Kostroma, the effect of the measures has been dramatic. The town has been

one of several to have lost its hot water when the local gas company, under

pressure to pay taxes to Moscow, responded to local non-payments by simply

turning off the taps.

Tsikunov admitted to playing a role in the tax problem, saying he lets some

local firms off their taxes because they would otherwise go under.

Arguing "it is harmful to give up smoking all at once", he predicted the

government's crackdown would not last the summer.

"All talk about getting all taxes in 'real money' today is groundless. It

won't happen," he said, adding that he had to think about the well-being of the

local population.

For all the government's good intentions about imposing financial

discipline, local leaders in a country where the temperature drops to minus 40

degrees Celsius (minus 40 degrees Fahrenheit) have other priorities.

Come the winter, Tsikunov said he would use his emergency powers to keep the

hot water running, though he did not make clear whether he would target tax

dodgers or the energy firms.

"In the winter we will behave differently. If necessary we will take them

all and put them in prison. We will not allow the pipelines to be shut off," he

said.

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