Leading Article: Storm clouds over Yeltsin

BORIS YELTSIN has now been in power for a year. In some ways he has been remarkably successful. Unlike Mikhail Gorbachev, he enjoys an electoral mandate from the Russian people as well as strong support from the Western world and its multilateral institutions. Unlike Mr Gorbachev, he has gathered around him an enthusiastic team of economic reformers and pushed forward their programme with reasonable skill and fortitude. Prices have been freed and some progress made in cutting the budget deficit. About 10 days ago the World Bank approved a dollars 600m loan to finance imports.

Yet the clouds are gathering around Mr Yeltsin, and the coming winter promises to be politically as well as economically difficult. Predictions of social unrest and coups abound. Real wages are about half what they were a year ago. Foreign trade has almost collapsed. Production has dropped by about 30 per cent in two years and could fall another 10 to 15 per cent next year. Inflation may reach 2,000 per cent by the end of this year. Many of the reforms simply drop into an administrative void as soon as they leave Moscow, or are deliberately sabotaged by what remains of the old leadership. Others are held up by inexperience or the ruined state of the infrastructure. Little progress has in fact been made towards breaking up monopolies and privatising agriculture.

As a result, the people are losing confidence in Mr Yeltsin, and a majority now tell opinion pollsters that they would like more authoritarian rule. Political opposition is gathering around the Civic Union, led by Arkady Volsky, a former senior member of the Communist apparatus with a background in heavy industry. The Civic Union represents the interests of the military-industrial complex, which formed the bedrock of the old system, but it is also gathering support among the middle and lower levels of the administration. It commands substantial funds, wide experience and great power in key sectors of the economy. It professes to be in favour of reform but at a slower pace and with more state control. Some of its members see the need for more efficient production but others want mainly to protect feather-bedded industries that have no future in a market economy.

Mr Yeltsin's response has been to draw members of the industrial lobby into his administration, hoping to co-opt, rather than confront, the more enlightened of them. It is a risky strategy, but probably less dangerous than any alternative. It means, however, that the brakes may be applied to the reforms just when the accelerator is needed to drive them through their most critical period.

This could confront the West with new decisions on how rigorously to apply its conditions for help. On the one hand it is worth spending the equivalent of several Nato defence budgets to buy the long-term security gains that could be expected from establishing democracy in Russia. On the other hand, money transferred without firm conditions and clear targets is likely to delay reforms by reducing the pressure to restructure the economy. The inevitable compromise will require political sensitivity and a careful choice of priorities, but the emphasis must still be on reasonable conditionality.

At the moment, Mr Yeltsin looks like the best Russian leader the West could hope for. The West should therefore give due weight to his diagnosis and his estimate of his needs for as long as there is sufficient political support for his programme. If he loses that support, it should be neither for want of Western help nor because he had become too dependent on it. Beyond that there can, at this stage, be only uncertainty.