Russian PM hints at wage and price freeze

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RUSSIA'S Prime Minister, Viktor Chernomyrdin, yesterday insisted the exit of radical free-market champions from the cabinet would not bury reform but, in a move sure to sharpen Western fears of a lurch back to Soviet-style planning, hinted at a wage and price freeze to blunt inflation.

'The new government has only just started work and people are already burying it,' said Mr Chernomyrdin, a former gas industry bureaucrat who seems to have come out on top after a week of intensive Kremlin infighting for control of economic policy.

After a year in the shadow of more dynamic and youthful free-marketeers, Mr Chernomyrdin has reshaped the cabinet in his own image, with the privatisation chief, Anatoly Chubais, the only notable reformer left.

Reviving an idea he flirted with early last year, Mr Chernomyrdin yesterday suggested a possible pact with trade unions and industrial leaders to fix prices and wages. 'The time has come to use non-monetarist methods as well in solving our economic problems,' he said after meeting President Boris Yeltsin. Inflation fell to a 15-month low of 12 per cent in December but is now rising sharply, fuelled in part by a spending blitz before last month's parliamentary elections.

In Washington, the US special ambassador, Strobe Talbott, told a Senate sub-committee that Russia's reformers were 'down but not out'. Until the resignations last week of Yegor Gaidar as economics minister and Boris Fyodorov as finance minister, Russia's economic policy had been built around the conviction, cheered by a phalanx of Western advisers, that tight control of credit was the only way to avoid hyper-inflation and restore long-term economic health.

Mr Chernomyrdin, who has declared an end to 'market romanticism', has made it clear, however, that he intends to place more emphasis on supporting Russia's crumbling industry. This is an approach backed by a large segment of the new parliament.

Confusion still surrounds the fate of Mr Fyodorov, who at the weekend predicted further 'surprises' and suggested he could still return as finance minister. But, having announced that he expected to see Mr Yeltsin, he seems to have met only the man touted as his own replacement, Vladimir Shcherbakov, an economics minister in the last Soviet government.

There would seem little likelihood of Mr Fyodorov rejoining a cabinet dominated by a troika of conservative apparatchiks and which, in a television interview on Sunday night, he predicted would trigger hyper-inflation and push the rouble as low as 25,000 against the dollar from 1,544 yesterday.

Mr Yeltsin has been silent during the crisis, a crisis which Mr Chernomyrdin says does not exist. Seen as a possible successor to President Yeltsin, Mr Chernomyrdin yesterday denied any rift between them.