Alliance Marxist-Leninist: Chechnya, Oil and the Divided Russian Capitalist Class

chechnya

INDEX

1. INTRODUCTION. 4

1. THE WAR ITSELF – MUTINY OF THE GENERALS 5

2. WHAT LIES BEHIND THIS WAR ? THE OIL BACKGROUND 8

3.VIEW OF STALIN VERSUS KHRUSHCHEV AND VOSNOSENSKY UPON INDUSTRY 9

4. DIVISIONS INSIDE THE USSR CAPITALIST CLASS SINCE STALIN 15

5. THE ERA OF GORBACHEV AND YELTSIN 21

6. THE CRASH OF THE ROUBLE 22

 1. INTRODUCTION

The nation of CHECHNEYA, under the former socialist state of the USSR, enjoyed full national rights up to and including the right of secession. This lasted until the German invasion of Soviet USSR in 1941, when part of the Chechen-Ingush people allied themselves with the German fascists. For that reason, a correct policy of transportation of the rebels away from the Front, was undertaken (See forthcoming reprint of address to the Stalin Society by Bill Bland; Alliance 14). Following the war, full national rights were restored and Chechnya-Ingush was once more part of the Soviet Socialist Federation of Republics.

The democratic government of Chechnya-Ingush stated its wishes for autonomy in 1991. Since then, they have endured attacks by troops of the Russian Federation. Recently, this “hidden war” became a full scale vicious assault, led by Boris Yeltsin‘s Russian Government, against the Chechen Government. Yet the Chechen Government and its peoples led by General Dzokar Dudayev, have waged a determined and resolute battle of self-defence. The Chechen bravery is only matched by the relentless bombardments of the Russian invading army. In the midst of a brutal war, once more, the utter bankruptcy of Yeltsin’s regime is exposed.

BUT THE CONDUCT OF THIS WAR, SHOWS THAT THERE IS AN OPEN CONFLICT WITHIN THE RULING CLASS OF RUSSIAN CAPITALISTS. WHAT IS THE BASIS FOR THIS DIFFERENCE?

Even during Stalin’s lifetime, hidden revisionists advocated a shift away from emphasis on heavy industry. Stalin successfully defeated these hidden revisionists led by Khrushchev. But after his death, the division between advocates of Heavy industry on one side; and advocates of Light industry on the other, took on the character of a battle between two sections of the capitalist class. There remains now a fundamental division of interests in the Russian capitalist class, between capitalists based in heavy industry, and capitalists based in light industry. The detailed evidence for this is presented below.

This article tries to answer the following questions:

“Yeltsin must have had some reasons to launch this war. What were these?”

“What explains the divisions between the army and Yeltsin?”

“What is the nature of the open conflict between Yeltsin and his capitalist opponents?”

“What is the meaning of this for the working class of Russia and the other nations?” and,

“What is the attitude of Marxist-Leninist to Chechenya?

1. THE WAR ITSELF – MUTINY OF THE GENERALS

Marxist-Leninists recognise that the Army is part of the “armed might” of the state itself. If so we must explain the :

“Near-mutiny in the upper ranks of the army.. at least half a dozen senior generals and probably many more have refused to fight in Chechnya or give their support to the campaign there.. those who have signalled open dissent are high-profile, sometimes politically active and popular men in their early middle years.”

Financial Times, London UK. Dec 31/1 Jan, 1995. p.7.

In this mutiny, Major General Ivan Babichev, refused to fire on the people of Grozny.

THE CURRENT MUTINY OF THE ARMY GENERALS, AGAINST THE WAR IS DUE TO THREE FACTORS:

i) A Proletarian refusal to fire upon the people.

Some generals probably are genuinely moved by the plight of the people; and refuse to fire as an international proletarian duty.

ii) A Military and strategic refusal to engage.

Some generals realise that the war cannot be won in this manner. High echelons of Army elsewhere, like senior Commanders in the British army see Major General Ivan Babichev’s behaviour as follows:

“I think he knew they were going about the operation entirely the wrong way and he didn’t have the means to complete the task, “One said.. “Tanks and armoured vehicles are almost useless in fighting in built up areas, said a British general who helped devise NATO tactics for the defence of Berlin during the Cold War.”

Daily Telegraph, London, UK, reprinted Globe and Mail, Toronto, 3.1.95. p.A9.

BUT THERE IS A THIRD REASON WHY THE ARMY IS IN MUTINY:

iii) An Inter-Capitalist battle aimed at Yeltsin.

The army and its advocates, benefit largely from the advocates of heavy industry. Part of the army’s refusal is, explained by the lining up of the army with the scions of heavy industry based capitalists in Russia.

THE OBJECTIVE OF THE MUTINY WAS TO HUMILIATE YELTSIN AND LEAD HIS GOVERNMENT INTO A SERIOUS CRISIS OF CONFIDENCE IN ITS CONTINUATION.

THE TACTICS OF THE ARMY GENERALS IN RELATION TO THIS WAR WERE :

First to lure Yeltsin into a seeming “short lived war”. Obviously Yeltsin was led to believe that a military venture would be a short lived and “un-costly” war in terms of Russian dead and political consequences.

Second; to then refuse his directions when the war was palpably failing.

Third; to refuse to disengage when he ordered to do so. After foreign pressure was brought to bear following the brutal air bombing, Yeltsin was compelled to order the troops to stop bombing. Yet this order has been repeatedly ignored:

“Mr. Yeltsin demanded to know why the bombing of Grozny was not stopped when he ordered it at end last week. He has now ordered two bombing halts, and.. the artillery assault on the city has never been heavier. Looking directly at Mr. Grachev, he said : “I want to hear absolutely precise information from the Defense Minister (Mr. Grachev).”

New York Times, 7.1.95; p.1-4.

Reasons offered for ignoring Yeltsin’s orders have been clearly insubordinate, but have mainly hinged on military imperatives :

Col Gen.Pavel S.Grachev, commander of Russia’s airborne troops – said :”Once we’ve launched the operation we must finish it. There is no way back.”

New York Times, New York, 7.1.95. p.4.

Yevgeny Podkolzin, commander of Russia’s airborne troops in Chechnya, said the President’s order would cause serious problems for Russian soldiers inside Grozny.. If “Bombings stop, men from each window and basement and from behind each corner will fire at our soldiers..” He warned that it could take the military until the end of January to capture Grozny. Instead of storming the city, the military should have simply surrounded it and blockaded it, he said. But he added: “Once we have launched this operation, we must finish it. There is no way back”.

Globe and Mail, Toronto, 7.1.95. p. A11.

The results for Mr. Yeltsin to date are depressingly clear, he is “between rock and a hard place”:

“Mr Yeltsin finds himself caught between two clear dangers: the political and moral cost of pressing on militarily in Chechnya, and the political and strategic cost of giving up.. it seems he has decided that the costs of giving up are worse for himself and the country than pressing ahead.”

New York Times, 7.1.95.; p.4.

IN FACT THE OVERALL OBJECTIVES OF THE ARMY GENERALS’ MUTINY APPEAR TO HAVE BEEN SUCCESSFULLY ACHIEVED:

“The economic and personal costs of the war continued to mount. Russian newspapers and agencies have estimated Russian casualties in the fighting to date at anywhere between 256 to more than 1000. Another victim is the Russian currency, which has fallen 2.7% over the last two days to a rate of 3,661 roubles to the dollar. The Russian central bank, which estimates has spent at least $200 million over the past 2 days to prevent a larger fall, raised its key re-financing rate to a nine month high of 200 %, up from 180%. “The Russian economy has started to feel the consequences of the Chechen crisis,” Mr. Alexander Livshits, the president’s chief economic adviser said.. warning of inflationary pressures.”

Financial Times, London, 7.1.95. p.26.

“The economy is suffering.. the expense threatens to blow a hole in a budget designed to be tough.. it is a critical time. The budget depends on a phased series of loans from the International Monetary Fund and World Bank. The stabilisation of the currency- the main aims of the loan- depends in its turn on making the budget even tougher than that approved by the state duma, parliaments’ lower house this month. Moreover the government will have to stick to its budgeted targets. Last year it squandered opportunities for economic reform by printing money when the going got rough..Mr. Yeltsin humbled his Government after “Black Tuesday” in October, when the rouble lost a quarter of its value against the hard currencies. This re-established his pre-eminence, but no international financial institution or government will now find it a stabilisation programme credible unless they also believe he is committed to it. At present however, he is committed only to wining in Chechnya.”

Financial Times, London, 1.1.95, p.7

Mr. Yegor Gaidar, until recently a staunch ally of Yeltsin’s, warned of a military coup:

“There is a great danger of a military coup.” Russian democracy has never been shakier since the break up of the Soviet Union. Mr. Gaidar who broke with the President over the Chechnya policy, called events there “a massive military crime.” He urged Mr. Yeltsin to get rid of those “who pushed him into this adventure,”, including Defense Minister Pavel S. Grachev; Deputy Prime Minister Nikolai D. Yegoroav and Oleg Lobov, the secretary of the National Security Council.”

New York Times, 4.1.95. pA1-A6.

It is precisely because the foreign imperialists see their man, Yeltsin, under such intense difficulties; that they give him advice. This advice consists on the whole to stop the battle in Chechnya to search for a negotiated settlement. These efforts are led by France and Germany, and would use “experts” from the Organisations for Security and Cooperation In Europe (OSCE) (New York Times 4.1.95, p.A1). The USA also concedes Yeltsin’s mistakes, but continues to fully support Yeltsin as “their man”, also urging Yeltsin to use the OSCE (NY Times, 7.1.95. p.A4). In fact, the international imperialists have not criticised Yeltsin’s basic stand of denial of national rights to Chechnya. Thus President Clinton:

“Reiterated his Administration’s support for Russia’s unity and territorial integrity and its opposition to any attempt to change the international border by force.”

New York Times, 7.1.95. p.A4.

2. WHAT LIES BEHIND THIS WAR ? THE OIL BACKGROUND

Data from recent trade negotiations over oil indicate something is more at stake in Chechnya than simple autonomy. Azerbaijan, itself a victim of recent aggression launched by Russian imperialist forces, tried to exert national rights. The suppression of these rights was directly linked to the oil reserves. Prospects of oil prompted fervent bargaining by Russian capitalists with foreign imperialism. But the deal cut, antagonised a section of the Russian capitalist class, enough to spur them on to struggle with foreign imperialism:

“A leaked letter sent by Andrei Kozyrev, Russia’s Foreign Minister to Viktor Chernomyrdin, his prime minister, reveals that Russia plans to prevent Western oil companies from going ahead with a $8Bn (PS 5bn) agreement to exploit offshore field in the Caspian The agreement advertised as “the deal of the century”, was signed by Azerbaijan and a consortium of Western oil companies led by British petroleum.. Mr. Kozyrev stresses the importance of Russia retaining its share of the Caspian reserves.. and proposes that Russia will impose economic sanctions on Azerbaijan if it does not back down.. Russia is unlikely to retreat because the way it deals with Azerbaijan sets a precedent for Kazakhstan and Turkmenistan, the two other republics with long Caspian coast lines and growing oil industries.”

The Independent; London UK; 3.11.94. p.14

This agreement would link the British owned British Petroleum, owning 30% of shares; with the US Oil companies of Pennzoil and Amoco which together holding 40% of shares; and Azerbaijan’s Socar Company holding 20%, and Russian owned Lukoil owning 10%. The Carnegie Endowment For International Peace commented :

“If the Russians throw a monkey wrench in the oil deal there will be a strong reaction here in Washington because so much money is involved.” A diplomat said : “It shows Russia will not allow any of the ex-Soviet states to move towards full economic independence.”

Independent, Ibid, 3.11.94. p.14.

The War in Chechneya shows that this interpretation is correct.

BUT WHO IS MR. CHERNOMYRIDIN, THE PRIME MINISTER,

AND WHY DOES THE ABOVE CONCERN CHECHNYA?

“The oil and gas lobby is very powerful with Mr. Viktor Chernomyridin, former head of Gazprom, as prime minister. Ensuring that oil and gas from Central Asia is transported to Europe via Russian pipelines and ports is an obsession. the main oil pipeline from the Caspian Sea to the oil export harbour of Novorossiisk passes through Chechnya.. at stake is.. control over the main rail, road and gas rich Caspian sea and the central Asian republics.”

Financial Times, London, UK, 7-8.1.95. p.2.

Thus, Chechnya is critical as a conduit for the oil reservs of the Caspian coastal areas. Naturally Chernomyridin has financial interests stemming from his previous job, to protect. But, to fully understand the complexity of the stands taken by Chernomyridin, Kozyrev and the other new Russian ruling capitalists, we have to understand their class positions.

3. WHAT LIES BEHIND THIS WAR ? THE BATTLES BETWEEN HEAVY AND LIGHT INDUSTRY ADVOCATES

i) Under Socialism : View of Stalin Versus Khrushchev and Vosnosensky Upon Industry

There is a basic difference between two types of industry.

The split is between Heavy (Marx’s Department A) and Light (Marx’s Department B). This, split, is an important consideration for the development of a country’s industrial, and economic independence. As Stalin said:

“We must maintain the present rate of development of industry; we must at the first opportunity speed it up in order to pour goods into the rural areas and obtain more grain from them, to supply agriculture, and primarily the collective farms and state farms, with machines, so as to industrialise agriculture and to increase the proportion of its output for the market. Should we perhaps, for the sake of greater “caution”, retard the development of heavy industry so as to make light industry, which produces chiefly for the peasant market, the basis of our industry? Not under any circumstances! That would be.. suicidal; it would mean abandoning the slogan of industrialising our country, it would mean transforming our country into an appendage of the world capitalist system of economy.”

Stalin J.V.S. 28 May, 1928. “Speech to the Institute of Red Professors, On the Grain Front”, ‘Works’, Volume 11, Moscow 1954, p.98.

Stalin was arguing here, mainly against Nikolai Bukharin, who had argued that the economic measures proposed by Stalin were:

“A disastrous going over to the Trotskyist positions.” An industrialisation based on the “impoverishment of the country, the degradation of agriculture, and the squandering of reserves.”

Stephen F.Cohen, “Bukharin and the Bolshevik Revolution A Political Biography 1888-1938″, Oxford, 1980, p.306.

Nonetheless, a successful industrialisation was achieved leading to the establishment of socialism in 1936. But hidden revisionism later resurrected the Bukharin line, in its new life under Khrushchev. Khrushchev and allies wished to reintroduce profit as a regulator of production. Moreover they wished to place more emphasis on increasing the availability of consumer goods. This of necessity, would lead to a dominance of consumer based industry – or light industry, over heavy industry. The countryside became one focus of this sharp conflict, and took the form that:

“Some members of the Politburo.. urged that the traditional course be modified in the direction of increased reliance on economic levers.. and relaxation of central controls over kolkhozes.. this was current among leaders.. like.. Voznosensky.. and Khrushchev.. and opposed by Malenkov and Beria.”

Sidney Ploss Conflict and Decision Making in Soviet Russia. A case study of agricultural policy 1953-1963. Princeton, 1965. p.28.

The general line of Khrushchev in the countryside was completely in keeping with Vosnosensky‘s own stated views. Thus Vosnosensky had allied with a wing of economists and party officials who wished to relax the planning priority for Department A goods:

Vosnosensky, Mikoyan, Kosygin and Rodionov came in 1945 explicitly together as a managerial grouping which favoured establishing a place in the eacetie economy of the Soviet Union of light as well as heavy industries.. Vosnosensky’s Five Year Plan speech of March 1946 assigned priority on the immediate level to reconstruction tasks, civilian housing and consumer goods.. After 1945 this group and particularly Rodionov was involved in political intrigues.. Rodionov was a Russian nationalist.”

William O McCagg, Junior:”Stalin Embattled: 1943-1948″, Detroit; 1978; p.134-135.

The Vosnosenky clique, effected their programme in their own power base of Leningrad:

“After 1945.. in the Russian republic a number of administrative reforms to increase consumer production.. ministries for technical culture, cinematographic, luxury goods, delicatessen products light industry and the like was established.”

McCagg bid, p. 135, 163.

In 1947, Vosnosenky published a major work, entitled “The War Economy of the USSR In the Period of the Patriotic War.” This work took significant departures from Marxism-Leninism. Amongst others, it favoured relaxing the priority of Department A goods:

“It is proposed to increase the portion of the social product earmarked for consumption.”

Nikolai Vosnosensky “War Economy of the USSR in the Period of the Patriotic War”; Moscow; 194; p.147.

Khrushchev, now allied with Vosnosensky, argued that the self-interest of the peasants be boosted by a “link” system of small unit production which would aid incentive related payment.

These policies all aimed to “enrich” the peasant and reinforce individual small scale capitalist tendencies in the countryside.

“They adopted measures to reward diligent work in both the private and socialised sectors. The policies of one-cow-per-house-hold, commercial trade, and the small work unit in grain farming were all directed at this end. The leaders most closely associated with these incentive policies were Khrushchev and Voznosensky.”

Ploss Ibid. p.39-40.

“N.A.Voznosensky.. promoted greater material encouragement.. defense of the collective farmers rights to conduct private activities and enhanced autonomy and payment for on the spot technicians.” Ploss. p.29.

Powerful agrarian party officials supported Khrushchev.

At the February 1947 CPSU(B) CC Plenum, Vosnosensky was raised to full membership in the Politburo. Khruschevites dominated the 1947 CC Plenum :

“Within the CPSU(B) CC Plenum in February 1947, Andreyev promoted the same views.. and with Dronin (a key Khruschevite supporter from the Ukraine).. authorized incentive driven “link” in grain farming. Still another concession to peasant self-interest which resulted from the Plenum was broader allowance for consumer cooperatives to act as commission agents in disposing of kolkhoz surpluses in urban markets. The cooperative shops paid higher than official state purchase prices for foodstuffs bought under decentralized procurement and offered urban consumers an alternative to the free kolkhoz market in supplementing their purchases. In the early part of 1947, 19,000 commission shops opened.”

Ploss p.32-33.

Initially, as Stalin was in a minority on the Politburo, his counter-attack was tangential; but effective, in that no changes at the kolkhozes could be made without the direct participation of practical specialists at the kolkhozes:

“Stalin came forward at the February 1947 CC Plenum with one of his rare overt interventions of the day. Andreyev revealed.. that Stalin recommended that agricultural experts not working in farms and MTS, but in administrative posts remote from the barnyards should receive a quarter less pay than those in operational jobs. This would have logically complemented a recent directive prohibiting anyone from rescinding or altering agro-technical measures formed by kolkhozes.. without the knowledge of the specialists involved or permission of the district representatives of the Ministry of Agriculture.

p.33 Ibid. Ploss.

Stalin also effected the removal of Khrushchev from the party First Secretaryship of the Ukraine, subordinating him to Kaganovich. But Khrushchev remained premier of Ukraine.

BY 1949, THE PLANS OF THE LENINGRAD CLIQUE OF VOSNOSENSKY TO RESURRECT CAPITALISM WAS EVEN MORE CLEAR. ACCORDING TO KHRUSHCHEV HIMSELF, STALIN HAD SAID ABOUT VOSNOSENKY’S 5 YEAR PLAN:

“You are seeking to restore capitalism in Russia.”

Khrushchev, cited by Wolfgang Leonard:”The Kremlin Since Stalin”, London; 1962; p.177.

Accordingly under Stalin’s directives Vosnosensky was dismissed as Chairman of the USSR State Planning Committees on 5 March 1949. The trial of Vosnosensky and the other members of the “Leningrad Affair” took place on 29-30 September 1990; and Vosnosensky was sentenced to death. (See “The Leningrad Affair”, extracted from W.B.Bland; ” Restoration of capitalism in the USSR.” Wembley, London 1979; ISBN; re-printed Alliance Number 9).

Meanwhile, Khrushchev soon launched a campaign aimed at creating “agro-towns” to “improve the lot” of the peasant, at a Moscow Regional Soviet meeting in March 1950 he unveiled a grand plan:

“He tabled proposals to consolidate the many medium and small sized kolkhozes into large scale units and provide them with elementary urban amenities like electric lighting and plumbing.. the Kolkhozes were also entitled, he held, to build their own subsidiary enterprises.. he envisioned model plans for administration, public and recreational buildings.”

Ploss, Ibid, p.46-7.

“Khrushchev.. championed the village improvement program in speeches.. abridged in Pravda on March 4 1951.”

Sidney Ploss. Ibid, p.49.

THESE POLICIES OF THE KHRUSCHEVITES WOULD INCREASE THE DEMAND FOR CONSUMER LIGHT INDUSTRY. STALIN WAS OPPOSED TO THESE MANOUEVRES:

“Stalin decisively intervened in the matter of rural reconstruction on March 5 1951. At his behest, the editors of Pravda informed readers that, through an oversight.. word had been omitted that Khrushchev’s article of the previous day was offered only for purposes of discussion and did not express.. official opinion.. Malenkov at the 19th Party Congress, rebuked “some of our leading workers” (Khrushchev) who.. had forgotten the principal production tasks facing the collective farms”.. Malenkov claimed also that building materials produced in kolkhozes were more expensive .. than those of state industry.”

Ploss, Ibid, p.49-50.

AS PART OF STALIN’S COUNTER-ATTACK ON REVISIONISM, HE PUBLISHED “ECONOMIC PROBLEMS OF SOCIALISM IN THE USSR”, IN 1952.

IN THIS WORK STALIN ATTACKED IDEAS THAT :

  • PROFIT SHOULD BE THE REGULATOR OF PRODUCTION;
  • THE LAW OF VALUE SHOULD BE THE REGULATOR OF PRODUCTION;
  • LAWS OF POLITICAL ECONOMY NO LONGER APPLY UNDER SOCIALISM.
  • STALIN ALSO ATTACKED THE NOTION THAT HEAVY INDUSTRY WAS NOT THE BASIS OF SOCIALIST CONSTRUCTION:

“Stalin made permanent the priority status of heavy engineering over that of light and food industries.. In the course of his monologue, Stalin revealed that one of his critics outside the Kremlin had appealed to the Politburo at large to start creating badly needed material incentives for the peasantry. The statistician Yaroshenko affirmed at a plenary session of the economic conference in November 1951, and in a letter sent on March 20th, 1952, to members of the Politburo, that Marx’s theory for the normalcy for preferential development of heavy industry was applicable only to capitalist economies and was inappropriate under socialism.”

Cited Ploss, Ibid, p.53-54.

Later, Khrushchev following Stalin’s death, effected the very changes he had earlier argued for unsuccessfully against Stalin. Khrushchev, first dismantled the Machine and Tractor Stations in the countryside (MTS), then actively promoted the proponents of light industry over and above that of heavy industry. During his lifetime, Stalin fought against each of these retrogressive steps introduced by Khrushchev.

Ill informed commentators see the struggle between the Marxist-Leninists, led by Stalin (pro-Heavy Industrial) and the revisionists led by Khrushchev (pro-Light Industry), as hinged on how hard to “squeeze” the peasant. It is alleged that Stalin wished to squeeze the peasant, and that his resistance to “consumerism” or light industry was based on this. In fact, Marxist-Leninist resistance at that time to further expenditure on light industry was based on the overwhelming necessity to increase the heavy industrial base in order to improve the well being of the people. Stalin makes this clear in “Economic problems of socialism”:

“Insuring the maximum satisfaction of the continual growing material and cultural needs of society – that is the goal of socialist production : a continuing growth and development of socialist industry on the basis of an even higher technology that is the means for its attainment.” J.V.Stalin Cited F.A.Durgin Jr. “The relationship of Stalin’s death to the economic change of the post-Stalin era”

In R.C.Stuart. The Soviet rural economy. New Jersey, 1984. p. 78.

Durgin writing in 1984, comments how modern this concept is:

“This postulate…is one that the current generation for US economists has come to recognise…in the new ‘supply side’ economics.”

p. 121.

During points out the higher expenditures on consumer goods under Stalin, rather than Brezhnev:

“One of the most salient and overlooked features of the post-Stalin era has been the ever decreasing share of GNP going to consumption and the ever increasing share going to investment.. consumption’s share fell from 62.4% of the total in 1950 under Stalin to some 56.5% in 1974 under Brezhnev. Investments’ share during the same period doubled, rising from 14.8% of the total to 28.4%. The “imbalance”.. of the Stalin years seems not to have improved, but rather in a certain sense have worsened.”

p. 119.

Durgin concludes :

“All of the Stalin Five Year Plans called for significant increases in consumption. While consumption’s share of the national income during the First Five year Plan was to fall from 77.4 to 66.4 %, in absolute terms it was to increase by some 75%. The Second Plan called for a 133 % increase in the output of consumer goods and a two fold increase in the urban workers consumption of food and manufactured products.. The priority that Stalin gave to consumption in the post war period..was also high.”

Durgin, Ibid. p.121-2.

But Stalin’s priority was to increase consumption as the heavy industrial base could be expanded.

ii) DIVISIONS INSIDE THE USSR CAPITALIST CLASS SINCE STALIN; TO BREZHNEV

After the death of Stalin, the revisionists, succeeded in the resurrection of capitalism. But, the new Russian capitalist class, was divided between a section of capitalist linked to Heavy Industry and that section linked to Light Industry. This was first reported to Marxist-Leninists, by “The Communist League” UK; in Compass. This section is drawn from that. The basic division, between heavy based industrial capitalists and light based industrial capitalists has persisted, down to the current time.

The conflict between the then embryonic, state capitalists involved in heavy industry and those involved in the consumer goods industries came into the open within a few months of Stalin’s death. On August 8th, 1953 the new Prime Minister Georgi Malenkov cast off his socialist cloak, to show his erst-while hidden revisonism. He told the Supreme Soviet :

“On the basis of the success achieved in the development of heavy industry, all the conditions exist for a sharp rise in the production of consumer goods. However, while the output of means of production as a whole has risen in the last 28 years by almost 55 times, the production of consumer goods during the same period had only increased 212 times, which cannot be considered satisfactory. Hitherto we have had no possibility of developing light industry and the food industry at the same rate as heavy industry. We must, therefore , in the interests of ensuring a more rapid increase in the standard of life of the people, promote the development of the light industry by every means.”

G. Malenkov :Speech to the Supreme Soviet, August 8th, 1953, Cited in :Kessings Contemporary Archives”, Volume 9; p.13,096.

It took the state capitalists involved in heavy industry eighteen months to secure the official reversal of this policy and the removal of its leading proponent, Malenkov. In his letter of resignation of February 8th; 1955, Malenkov humbly recanted:

“On the initiative and under the leadership of the Central Committee of the Communist Party, a general programme has been worked out.. The programme is based on the only correct principle– the further development of heavy industry to the maximum. The further fulfilment of this programme alone can create the necessary conditions for a real advance in the output of all the consumer goods needed.”

G. Malenkov: Letter of Resignation to Supreme Soviet, February 8th., 1955; Cited in “Keesings Contemporary Archives”, Volume 10; p.14,033.

Malenkov’s successor as Prime Minister was Marshall Nikolai Bulganin, who as a representative of the armed forces, might be expected to give full support to the principle of higher priority for heavy industry in the name of “defence.” In his first speech as Prime Minister, in fact, Bulganin emphasised:

“Heavy industry is the basis of the defensive capacity of our country and of our military forces.. Heavy industry provides for the development of all branches of our national economy, and is the source of the constant growth of the well being of the people.”

N. Bulganin: Speech February 9th., 1955, Cited Keesings Ibid, p.14,033.

In May 1957 First Secretary Nikita Khrushchev presented to the Supreme Soviet his scheme to “decentralise” the state’s control of the economy. 25 industrial Ministries were to be abolished and replaced by 92 Regional Economic Councils.

In June 1957 the representatives of Russian heavy industry on the Presidium of the Central Committee of the CPSU allied themselves with the surviving Marxist-Leninists, headed by Vyacheslav Molotov, to reject this scheme. Khrushchev appealed to the Central Committee itself and succeeded in winning a majority of this body to condemn his opponents as an “anti-Party group” and to secure their removal. In November 1957, Khrushchev felt his position strong enough to be able to say that industrial development:

“Had reached a such a level that without detriment to the interests of consolidating the defence of the country, without detriment to the development of heavy industry ad machine building, we can develop light industry at a considerably higher speed.”

N.S.Khrushchev :Speech at 40th Anniversary of October Revolution, in : “Pravda”, November 7th, 1957.

In March 1958, Bulganin was removed as Prime Minister, and in November denounced for having been a member of the “anti-Party group.” His successor was Nikita Khrushchev himself, who retained the post of First Secretary of the Party.

At the May meeting of the Central Committee, Khrushchev put forward the view that the “decisive” branch of “heavy industry” was the chemical industry, and proposed that the expansion of the chemical industry, with “aid” from the older capitalistic countries, should be a prime element in the Seven Year Plan– painting a glowing picture of the consumer goods applications of this expansion.

At the 21st Congress of the CPSU in January/February 1959, Khrushchev’s basic theme was that eh Soviet Union was now in process of passing from “socialism” to “communism,” a process which could be complete when:

“We shall have a provided a complete abundance of everything to satisfy the requirements of all the people.”

And he elaborated further the doctrine put forward at the 20th Congress, that war was “no longer inevitable,” and that the danger of war was “receding.” His report thus laid a theoretical basis for according greater scope to the development of the consumer goods industries.

On January 17th, 1961 Khrushchev declared :

“Today our country has such a powerful industry, such a powerful defence force that it can, without jeopardising the development of industry and the strengthening of its defence, devote more funds to the development of agriculture and increase the production of consumer goods,”

and he deplored the fact that :

“An appetite had developed in some of our comrades for giving more metal to the country.”

(N.S. Khrushchev: Speech Jan.17th., 1916, In Soviet Embassy (London) Press Dept Release).

At the 22nd Congress of the CPSU in October 1961 Khrushchev referred to the Seven Year Plan target of 68-91 million tons of steel a year to say:

“Some people proposed increasing steel output to 100 million tons a year. But we restrained them, saying that all branches of economy had to be developed evenly.”

(N.S.Khrushchev:Report to the CC to the 22nd Congress of the CPSU; London; 1961; p.40.)

And in his report to the congress on the following day on the new party programme, Khrushchev said:

“The 20 year national economic development plan- the general perspective- provides for the rates of growth in the output of means of production and of consumer goods to come considerably closer together.”

N.S.Khrushchev : Report on the Programme of the CPSU; London; 1961; p.24.

As a result of this lead, the congress adopted a resolution which said :

“The revenues accumulated as a result of the over-fulfilment of industrial production plans should be channelled mainly towards agriculture, light industry and the food industry.”

Khrushchev Report on the Programme of the CPSU; London; 1961; p.24.

On September 9th., 1962 “Pravda,” the organ of the CC of the CPSU, published an article by the Kharkov economist, Professor Yevsey Liberman, advocating a discussion on the question of reorientering the Soviet economy on the basis of the profit motive. On Khrushchev’s initiative, a Plenum of he Central Committee on November 19th-23rd 1962 took an important step to weaken the Party’s control over the economy.

The party organs up to, but not including, the level of Republic Central Committees were divided into two separate branches: one concerned with industry, the other with agriculture. At a press conference in October 1963 (reported in “Pravda” on October 27th) Khrushchev declared that the time was now ripe for diverting immense funds from heavy industry to chemicals, agriculture and the consumer goods industries. At the end of February 1964 “Pravda” published an article by A.Arzumanyan, Director of the Institute Of World Economics and International Relations, attacking the “dogmatists” who defended priority for heavy industry and recommending equal growth rates for heavy and consumer goods industries, with future priority to the latter.

In July 1964 an official press campaign began to popularise Liberman’s theories. The Bulletin of the Soviet Embassy in London summed this up as follows:

“In recent years.. the consumer goods industries have been greatly enlarged, It has become clear that the planning of the production of consumer goods must be brought closer to market demands. It has also become clear that economic incentives must be provided in order to induce industry to produce what the consumers want and adapt themselves quickly to changes in fashion, and also so as to ensure that the whole factory from the director to the worker is interested in meeting the demands of the consumer.”

Soviet Embassy, London Bulletin, Cited in “Keesings’ Contemporary Archives”, Volume 15; p. 21,036.

The base of support which Khrushchev had built up among the intelligentsia and petty bourgeois enabled him to survive against growing opposition for more than 10 years. But on October 15th, 1964, Khrushchev was forced to resign both as First Secretary of the CC of the Party and as Prime Minster. One of the changes levelled against him later was that of:

“Neglecting the priorities of heavy industry by over-emphasising light and consumer goods industries.”

“Keesings Contemporary Archives,” Volume 14; p. 20,390.

Khrushchev was succeeded as First Secretary by Leonid Brezhnev, and as Prime Minister by Aleksei Kosygin. This was to some extent a balanced coalition, as Kosygin was inclined towards consumer industires. This is shown by his sponsorship of economic measures advocated by Professor Abel Aganbegyan. (Later these measures would be more energetically enacted by Gorbachev. See below). Therefore the new leadership of the party and the state went some way to placating the demands of the state capitalists involved in the consumer good industries (e.g. By the adoption of Liberman’s theories, providing for increased independence of enterprises and the gearing of production to the market through the profit motive). However Brezhnev’s influence prevailed, and the regime demonstrated its’ basic interest in serving the state capitalists involved in heavy industry by greatly strengthening party and state control of the allocation of material resources, investment funds, etc.

The new line was summarised by General Secretary Leonid Brezhnev in his report to the 23rd Congress of the CPSU in March/April 1966 :

“Strengthening the centralised planned direction of the national economy is now combined with the further development of the initiative and independence of the enterprises.”

L.Brezhnev: Report to the 23 rd Congress of the CPSU, cited in “Keesings Contemporary Archives”, Volume 15, p. 21, 466.

On November 16th, 1964 the Central Committee of the CPSU abolished the division of the party introduced in 1962, with the aim of strengthening the party’s control over the economy. On the other hand, in January 13th 1965, it was announced that 400 consumer goods factories would go over to the system of production abased on market demand.

On April 1st, 1965 textile, lather and some other factories were transferred to the new system, under which they would gear their production to the basis of orders from retailers. These factories were permitted to retain a considerably larger amount of their gross profit than previously, this to be used partly for self-investment and partly for renumeration of management and workers over ad above basic salaries and wages.

In August-September 1965, the new leadership began punitive action against intellectuals representing objectively the interests of the state-capitalists involved in the consumer goods industries. In these months 30 Ukrainian intellectuals were arrested, Andrie Sinyavsky and Yuli Danile were arrested, as was Aleksandr Yessenin-Volpin and Vladmir Bukovsky.

Meanwhile on September 28th, 1965, the CC of the CPSU resolved to abolish the Regional Economic Councils of Khrushchev, established in May 1957; and to re-establish the industrial Ministries which had been abolished. The same resolution resolved to extend the “economic reform” introduced experimentally earlier in the year to the economy as a whole.

The Supreme Soviet gave legislative effect to this resolution on October 1st-2nd 1965. On December 10th, 1968, Nikolai Baibokov (Chairman of the State Planning Committee) told the Supreme Soviet that enterprises working under the new “profit motive” system now produced 75% of total industrial production and 80% of profit.

At the 23rd Congress of the CPSU (March 26th-April 8th 1966) Ivan Kazanets (Minister of the Iron and Steel Industry) complained that the Khrushchev regime had lowered the planned rate of increase in iron and steel output as a result of “the wrong and subjectivist counterposing of the chemical industry against the iron and steel industry.”

However the main reports presented at the congress revealed that the state capitalists involved in the consumer goods industries had fought successfully for an increased allocation of material resources, investment funds, etc, to their field.

In his report on the new 5 Year Plan from 1966-70, Prime Minister Aleksei Kosygin said:

“Funds will be re-distributed in favour of the production of consumer goods, while continuing to give priority to the development of the output of means of production. Their output will rise by 49-52% and that of consumer goods by 43-46%, compared with 58% and 36% respectively during 1961-65.”

A. Kosygin: Report on the 5 Year Plan, 23rd Congress CPSU, Cited in “Keesings Contemporary Archives”, Vol 15; p.21,468.

Backed by propaganda from the dissident intellectuals, the political representatives of the state capitalists involved in the consumer goods industries continued to press their case. In the economic plan for 1968 it was still maintained that:

“The emphasis will continue to be on the development of heavy industry”,

“Keesings Contemporary archives”, Vol 16; p. 22,508.

But in that year, 1968, the planned growth on the output of consumer goods for the first time exceeded (at 8.6%) that of the panned growth of the output of heavy industry (at 7.9%).

This picture was repeated in the economic plan for 1969, which provided for a planned growth rate of consumer goods of 7.5% against 7.2% for heavy industry, and in the economic plan for 1969 where the figures were 6.8% and 6.1% respectively.

At the 24th Congress of the CPSU (March 30th – April 9th 1971), General Secretary L. Brezhnev said:

“The CC considers that the accumulated productive potential permits of a somewhat higher rate of growth for Department 2 (ie the consumer goods industries).. This does not invalidate our general policy based on the accelerated development of the output o the means of production.”

Brezhnev L: Report to the 24th Congress of the CPSU, in: “Keesings Contemporary Archives”, Vol 18; p. 24,656.

And the Five Year Plan for 1971-75 adopted by the congress provided for the first time in any Five Year Plan for a higher rate of the output of consumer goods industries (at 44-48%) than that of heavy industry (at 41-45%). But as the intellectuals were repressed, and as the movements for “freedom ” in the Baltic states were repressed, the leadership of the party and state felt able to reverse this dominance of consumer industry. By 1975, the representatives of the state capitalists involved in heavy industry had again won temporarily. On December 2nd, 1975 Nikolai Baibakov reported to the Supreme Soviet that it was planned to increase the output of heavy industry in 1976 by 4.9% (against 8.3% achieved in 1975) and that of the consumer goods industries by 2.7% (against 7.2% achieved in 1975).

iii) INDUSTRY IN THE ERA OF GORBACHEV AND YELTSIN

Following the death of Brezhnev, Yuri Andropov came to power in 1982. Andropov had been the director of the state security forces the KGB, since 1967. Using this base, Andropov launched a so called “anti-corruption” drive, especially targeted at the Brezhnev faction. This allowed the pro-Consumer goods industries faction to regain control of the state. Andropov had built up the careers of younger pro-Consumer advocates, such as Mikhail Gorbachev; Eduard Shevardnadze; Nikolai Ryzhkov; and Yegor Ligachev. All these individuals would follow the same “liberal” programme aimed at aiding the consumer based industries. In a short space of time, Andropov made changes aimed at:

“The independence of assciation and enterprises of collecvtive farms and state farms to be increased.”

Cited: “Gorbachev: Chistian Schmidt-Hauer: “The Path to Power”; Topsfield, MA; 1986; p.84.

But Andropov was ill, and died after 8 months, on February 9th, 1984. His successor Konstantin Chernenko, was himself severely ill. His accession was a temporary reprieve for the heavy based faction, in whose favour Chernenkov’s report of November 15th 1984, “Accelerate The Intensification of the Economy,” was given (Schmidt-Hauer; Ibid; p.109). However his death on March 10 1985, left the path open for the vigorous proponents of light consumer industry. By 11 March 1985, Gorbachev had taken the post of General Secretary of the CPSU.

Gorbachev now took up the programme outlined by Professor Abel Aganbegyan, whose Institute of Economics was in Novosibirsk. His programme, first outlined in 1965, and promoted by Kosygin, identified as the major problem in the USSR economy:

“The staggering share of resource that the economy committed to defence, with something like a third of the entire workforce involved in the defence sector, and ‘the extreme centralism and lack of democracy in economic matters.”

Cited in “The Waking Giant: The Soviet Union Under Gorbachev,” Martin Walker, London, 1986; p.38.

This then was a programme targeted against the heavy industrial base, and was pro-light industry. However the programme also aimed to openly acknowledge and allow “profit.” These changes were similar to those proposed by Liberman i.e. further decentralisation and self contained “planning,” and local profit sharing under the guise of “incentives.” This was embided under the principle of “autonomous financial accounting” or Khozraschet.

Kosygin’s attempts to fully implement Aganbegyan’s changes met with resistance, because they entailed an increased unemployment. But since both wings of the capitalist class (heavy and light based industrialists) stood to gain, they collaborated to push some of Aganbegyan’s programme through :

“In 1970…the Khozraschet experiment…decreed that not only each factory, but the industry itself had to become self-financing…By 1980, four of the biggest industrial ministries had been transferred to the self-financing system: tractors and farm machinery, heavy and transport engineering, energy engineering, and electrotechnical. The principles of self-financing and management autonomy had also been adopted for…the creation of territorial-production complexes (TPCs), the new industrial complexes… in Siberia.”

Walker Ibid, p.43.

But enforcing the Russian workers towards capitalist norms was not easy, and the capitalist class wished for a speedier transformation. Professor Popov of Moscow now advocated in Pravda on 27 December 1980:

“Wage cuts to increase incentives and a system of planned unemployment with a minimum wage of 80 rubles a month for the redundant.”

Walker Ibid, p.45.

To facilitate this, one of Aganbegyan’s pupils, Dr. Tatiana Zaslavsaya offered an updated programme in 1983 targeting “bureaucracy” who were “preventing further dissolution of central planning.” This programme was accepted by Gorbachev. In February 1986, he reported to the 27th Congress of the CPSU:

“Prices must be made flexible. Price levels must be linked not only to the costs of production, but also with the degree to which they meet the needs of society and consumer demand..it is high time to put an end to the practice of ministries and departments exercising petty tutelage over industrial enterprises.. enterprises should be given the right to sell to one another, independently what they produce over and above the plan.. enterprises and associations are wholly responsible for operating without a loss, while the state does not bear any responsibility for their debts.. Increase of the social wealth as well as losses should affect the income level of each member of the collective.”

Walker Ibid, p.51-52.

But as well as these general steps to increae market forces, a narrower sectional interest became also clear. An underlying aim apart from completely raising the lid on private market forces and profit was to enhance consumer industry:

“Gorbachev’s requirements (are).. set out in the “Prinicpal Directiosn fo the Economic nad Soical Development of the USSR Fro the Year 1986 to 1990 and For the Period up to 2000”.. “More consumer goods and better serives are vital.. says the new Chairman of the State Planning Commision (Gosplan) Nikolai Talyzin.. over the past 5 years the supply of consumer goods had grown at an averae of below 4%.. the “Complex Programme For the Development of the Production of Consumer Goods and the Service Sectors for the Year 1986-2000”, .. meant.. production of Consumer goods is to increase by as much as 30 % during the first 5 Year Plan period (1986-90) “mainly tough intensification of production on the basis of improved organisation and full use of existing capacity..the programme aims at “perfecting the production and consumption of light industry goods, cultural and domestic articles, reacting in good time to changes in public demand”… The long term plan .. prescribes that the contribution made by heavy and defence industries to supplying the public with high-quality industrial goods as well as modern electrical household goods must be “substantially increased.”

Maria Huber : The Prospects for Economic Reform”, in C.Schmidt-Hauer, Ibid; p.171-179.

Furthermore, as part of Gorbachev’s strategy, links with foreign capital were actively encouraged:

“At the beginning of 1985, Oleg T.Bogomolov, Director of the Institute For the Economics of the Socialist World System, in lecture in Vienna announced that eh Soviet Union would make it possible for joint-venture companies to be set up with capitalist enterprises.. an important step for decentralisation.. trade relations with the industrialised capitalist countries are to be likewise intensified.. the joint resolution of the Central Committee and of the Council of Ministers of July 1985.. foresaw the promotion of exports at enterprise level.”

Maria Huber; Ibid; p.174.

But the division of interests and between the two basic groups of capitalists, is now much more acute. It has also taken a new form. The most current form it has taken, is that of a division between those who wish to be an appendage to the foreign imperialists, and those who wish to be totally independent of the foreign imperialists. As Mikhail Leontiev:

“One of Russia’s most respected liberal commentators…and the Segodnya newspaper owned by one of Russia largest private businesses notes…in an editorial on November 24th, 1994 said : “‘The first stage of Russia’s transformation – Westernization – is over. It has ended in defeat and disappointment.'”

Cited “The Economist” London UK, Week of Dec 5th, 1994. Reprinted Globe and Mail, Toronto, 5.12.94.

Clearly, the anti-Western capitalists are not dead inside Russia. Although more than $500 million US of foreign capital are flowing into Russia every month, there has been some opposition to this virtually unrestricted entry :

Anatoly Chubais…as the first deputy prime minister responsible for coordinating economic policy…has been leading the effort to attract foreign investment…Moscovsky Komsomolets has published a stinging series of attacks on Mr. Chubais, who used to be responsible for Russia’s program of mass privatization, Komsomolets argues that this sell-out is just a sell out to the West. GAZ a car makers with 1000,000 workers was worth a mere $27 million when it was auctioned earlier this year. That, the newspaper points out sourly, is only $2 million more than the Vancouver Canucks agreed to pay Pavel Bure a Russian ice-hockey star, for a 6 year contract.”

“Economist,” from Globe and Mail Ibid, 5.12.94.

As the Economist notes:

“Mr. Yeltsin is nevertheless the only Russian peasant who could take a stand against a strong anti-western sentiment. He may look and act lie a Russian peasant, but so far at least, his instinct have been solidly pro-Western.”

“Economist” from Globe and Mail Ibid 5.12.94.

That Boris Yeltsin has been the “Man of the West,” inside the Kremlin is not new news. Of course recent events surrounding the “Crash” of the rouble also aroused major conflicts within the capitalist class, which also reflected the underlying differences. As the ICRSU report makes clear, the rouble was deliberately “crashed.”

6. THE CRASH OF THE ROUBLE

“The rouble’s 3 week slide began when the Bank set out trading on 22 September with dwindling reserves.. By the bottom on the Tuesday 11.10.94, the rouble had shrunk to 60% of its value.. the bank had spent a quarter of a billion US$ in 3 days…”

Globe and Mail, Business News, Toronto, 14.10.94. p.B1-2.

Alliance reprinted the analysis of The International Committee for the Restoration of the Soviet Union, based in Moscow, (ICRSU) on the “Crash” of the rouble, on October 11th, 1994. (See full reprint in Alliance 9). The ICRSU gives as a reason for the crash an impending General Strike, and a need for the Government to obtain additional funds to cover a cash shortfall:

“The ‘crash of the rouble’…on October 11th and its subsequent recuperation on October 12-13th…did not result from a loss of control by the Central Bank of the Russian Federation over the market of hard currency. On the contrary the crash of the rate of the rouble to the dollar by almost 900 points in one day (27% of the previous rate), and its recuperation on Wednesday and Thursday so that the rate came down lower than that of Monday, was planned and provoked by the leadership of the Central Bank with the permission of Victor Chernomyrdin, the Prime Minister. This was a result of a financial operation organized jointly by both the Central Bank and the Ministry of Finances TO COVER A FINANCIAL GAP… WHAT IS THE MAIN REASON FOR THIS FINANCIAL OPERATION? WHY HAS THE BUDGET GAP TO BE COVERED NOW? (Emphasis-Editor). The answer is clear. These cash based on speculation has been transferred to the Ministry of Finances to pay wages. Why now? Because a general strike is to take place on October 27th. That is the sole reason. The government is not in a position to manage a general strike in a generalized state of wage non-payments.”

I.C.R.S.U. October 19-10-94.

But it is possible that an additional reason for the engineered crash is the conflict between the wings of the capitalist class. We suggest that the manipulation of the rouble, in part, reflects the differences between pro-Western capitalists (led by Yeltsin) and anti-Western capitalists (led by Yegor Gaidar, and Victor Chernomyrdin, the Prime Minister). As the ICRSU point out it was Chernomyrdin who set in train the rouble crash. How was the manipulation managed?

“In the two weeks prior to the crash, the Central Bank provoked constant devaluation of the rouble by suddenly changing its policy of intervention in hard currency stock exchange sessions. Normally the Central Bank policy of intervention is based on selling relatively small amounts of American dollars on a regular basis so that the dynamics of the rate of the rouble to the dollar does not correspond to its real devaluation in the market. The result of that policy is that the rate was kept over 2000 when the real rate should be (the rate that would be reached if the Central Bank would not make dollar interventions in the market) according to reliable estimations around 5000-6000.”

I.C.R.S.U. October 19-10-94.

Who gains the most benefit from this policy?

“A ‘cheap’ dollar has led to a drastic reduction of Russian goods exports for the past two years. Import of western goods has far overtaken export. Russian goods can not compete even in the internal market (shops do not sell Russian goods). A low rate guarantees foreign trade companies a high rate of profit in commercial operations. The Central Bank policy is dictated by foreign interests. A low rate is one of the factors for the state of collapse in industry and agriculture, a huge budget deficit (that reached already in June-August 15% of the GNP!!), complete lack of state investment, non-payment of wages in the state sector (non-payment of wages has been very extensive from August).”

I.C.R.S.U. October 19-10-94.

“The Central Bank changed its policy of selling dollars to hold the rate by a massive sell of roubles. That provoked a raise of the rate from 2200-2300 to 3100 (for a period of 10-15 days). The Government argued that the raise of the rate is good for the economy and recognized that the Central Bank’s policy towards the rouble for the past two years has been highly harmful for the Russian economy.”

I.C.R.S.U. October 19-10-94.

But then a reversal occurred. We suggest that this policy, that favoured a foreign imperialist penetration of the Russian market, led to resentment and a reversal under pressure, of the policy:

“In a surprising move on Tuesday 11th, the Central Bank under the supervision of its President, Guerashenko, accomplished a massive rouble intervention that brought up the rate to almost 4000 roubles to a dollar. Those banks that were purchasing dollars were obliged to buy them from the same Central Bank and four major private commercial banks that were aware of the operation, at a rate that was 1000 roubles more expensive in the hope that the rate would rise even further. In one day the Central Bank “earned” 3 trillion roubles. 2 trillions were used to buy dollars at a high rate of 4000 from the Ministry of Finances (previously bought at a substantially lower rate) to cover a budget gap. The Central Bank got back the dollars which had been sold to the Commercial banks. The Ministry of Finances got in one day a huge amount of roubles to cover (almost 1000 roubles for every dollar sold) a budget gap. The Hard currency market was in shock so that in the next two days the Central Bank managed to bring down the rate with a relatively small intervention of dollars. A number of Commercial Banks that were not aware of the operation lost several trillions of roubles that are now transferred to the Ministry of Finances.”

I.C.R.S.U. October 19-10-94.

It is for the reasons outlined that Yeltsin said:

“the collapse of the roble was a ‘threat to national security’, setting up a committee of Inquiry the next day, with Sergei Stepashin Director of Federal Counter-Intelligence as a co-chair.”

Keesings Contemporary Archives, October, 1994, p. 40,250.

The Economy Minister Alexander Shokin was more explicit and said that the rouble’s collapse was a plot:

“To destabilise the government of Prime Minister Viktor Chenrnomyridin. “There are forces out there who do not want to see the government in full control,” Reuter’s quoted him as saying..”

Globe and Mail, Toronto, p.A1, A12. 13.10.94.

Vyascheslev Kostikov, President Yeltsin’s top spokesperson, suggested:

“The crisis was concocted by commercial banks that support political opponents of the regime. the strategy was to remove the President and curb market reforms.”

Globe and Mail, Business News, Toronto, p.B1-2, 14.10.94.

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