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Clinton Tells Russia That It Can Recuperate With Effort

By Ken Fireman

President Clinton told Russians high and low Tuesday that their country could recover its economic footing only by rooting out corruption and favoritism, regaining the confidence of international investors and trusting in market mechanisms.

But President Boris Yeltsin and other Russian leaders opening a two-day summit with Clinton offered him only generalized assurances that they would resist opposition demands for a reimposition of Soviet-era state controls on their battered economy.

Russia's Interfax news agency reported the Russians told Clinton that some increase in state intervention would be necessary to quell the country's political crisis and pacify its Communist-dominated parliament.

A U.S. official traveling with Clinton, Deputy Treasury Secretary Lawrence Summers, confirmed the Russians had "indicated a number of areas in which they felt more active state involvement was appropriate." He said the administration remained hopeful any major backsliding could be avoided and would reserve final judgment until it saw a definitive economic plan from the government.

That could be some time in coming, given the caretaker nature of the present government and its uncertain future at the hands of the State Duma. Yeltsin's nominee for prime minister, Viktor Chernomyrdin, plowed ahead with plans to form a new Cabinet despite his overwhelming rejection by the Duma on Monday, and Yeltsin demanded that the lawmakers confirm his choice in a new vote that could come as early as Friday.

But Communist Party leader Gennady Zyuganov blasted Chernomyrdin anew and accused Yeltsin of "pushing the nation to a civil war." Duma Speaker Gennady Seleznyov, also a Communist, predicted Chernomyrdin would be rejected again, moving the country one step closer to dissolution of the Duma and a snap election that the Communists would be heavily favored to win.

Against that turbulent political backdrop, the Russian economy remained mired in a worsening crisis that has caused the ruble to plummet in value against the dollar, led the government to effectively default on its internal debt and cut it off from additional international loans and investment.

In meetings at the Kremlin with Yeltsin and Chernomyrdin and later in a speech to younger Russians at the Moscow State University of International Relations, Clinton insisted that the crisis could not be solved through what he called "the failed policies of the past:" inflationary monetary policies, arbitrary treatment of creditors, unfair and capricious taxation.

He inveighed at length, for the first time in a public speech in Russia, about a complaint made with increasing frequency by foreigners and Russians alike trying to do business here: the ability of a few well-connected tycoons to bribe or bully their way around Russia's weak regulatory and legal structures.

"When Russia chose freedom, it was not supposed to benefit only the young and well-educated, the rich and well-connected," Clinton said. "It was also supposed to benefit the men and women who worked in factories and farms and fought the wars of the Soviet era, those who survive today on pensions and government assistance. It was also supposed to benefit the laborers and teachers and soldiers who work every day but wait now for paychecks."

Acknowledging "the stakes are enormous" for both Russia and the rest of the world, given increasing global economic interdependence, Clinton warned Russians that any attempt to avoid present pain would only increase their hardship in the future.

"Increasingly, no nation, rich or poor, democratic or authoritarian, can escape the fundamental economic imperatives of the global market," he said. "Investors and entrepreneurs have a very wide and growing range of choices about where they put their money. They move in the direction of openness, fairness and freedom."

Clinton's audience at the university - a collection of students, faculty members and young professionals - reacted positively to his remarks but questioned how much impact they could have on the complex situation in their country.

"I see Bill Clinton speaking for the first time as a pastor," said Natalia Travkina, a political scientist. "We are in a very critical moment in our history, and Bill Clinton understands it well. But we are still left with the old Russian question: What is to be done?"

Yeltsin and Chernomyrdin responded to Clinton's pleas by assuring him there would be no return to Russia's communist past, U.S. officials said. "Russia's strategic course toward the economy is unchanging, and we are grateful to U.S. leaders for their support of this course," Yeltsin told Clinton at a formal dinner in the Kremlin.

Yeltsin's numerous absences from Moscow and his sometimes labored and rambling speech have given rise to widespread rumors he was seriously ill. U.S. officials who saw him at the Kremlin said he appeared physically vigorous and mentally engaged.

The two presidents are scheduled to meet again Wednesday and sign two agreements on reducing their countries' stockpiles of plutonium and sharing early warning data on missile launches.