Showcase of reform in power struggle with Moscow

AS the power struggle and wrangles continue in Moscow, the muddle in the capital found a reflection yesterday in the city of Nizhny Novgorod, formerly Gorky, 100 miles to the east of Moscow.

The city, once known as the place of exile of Andrei Sakharov, is currently seen as a showcase for economic reform. Boris Nemtsov, the governor, spoke of his support for President Boris Yeltsin and distaste for the chairman of parliament, Ruslan Khasbulatov.

'Yeltsin is not directly involved in Nizhny Novgorod's reforms. But his presence in Moscow is very important for them,' he said. 'I think there is a bigger chance of getting rid of Khasbulatov than of Yeltsin. That would be much better. That is for sure.'

The city's support for Mr Yeltsin, though, is balanced by unease that Moscow, no matter who rules there, can still stifle economic change. Officials demand that it relax its hold on regional purse strings. 'It is not a war,' said one official, 'but almost.'

Mr Nemtsov himself spent a day in Moscow at the Congress and had a private meeting with Mr Yeltsin on Wednesday but, in a sign of where his real interests - and those of reform too - lie, he rushed back to Nizhny Novgorod for a meeting of the regional council yesterday.

The arguments over central and regional control are perhaps as crucial today as the dispute in Moscow over the division of power between the executive and legislative branches of government. 'In a way, it is a continuation of the battles between the republics and Moscow (before the collapse of the Soviet Union in 1991),' said Yevgeny Gorkov, an official with the regional administration.

Nizhny Novgorod argues that Moscow is, in effect, punishing it for efficient housekeeping in the past year by leaving it with a smaller amount of money than other regions which have spent more and incurred larger debts. Nizhny believes it should be allowed greater control over its funds.

Despite such arguments with Moscow, however, Mr Nemtsov remains a staunch supporter of the basic direction of Mr Yeltsin's reforms. The changes in Nizhny Novogorod, a closed city for foreigners until 1991, are certainly remarkable. More privatisation has taken place here than in any other part of Russia, not least because of Mr Nemtsov. About half the city's shops, 600 out of 1,200, have been privatised and small businesses are being sold off at auctions at the rate of several dozen a month.

Nizhny Novgorod was famous as a trading town before 1917. In the Stalin era, renamed Gorky, it became an important centre for defence manufacturing. It is now hoping to regain its reputation or commerce. The old Yarmarka, or trading market, has reopened in a building that used to house the local Communist Party committee.

Despite the radicalism of Mr Nemtsov and his team, which includes a clutch of US financial and management advisers, not everybody is enthusiastic about the changes taking place. As one women commented in a busy pedestrian precinct close to the medieveal Kremlin at the heart of the city: 'There is more in the shops, but it is all so expensive. I used to believe in Nemtsov, but not now. What has he achieved?'