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By John Helmer in Moscow

The Peter Pan of Russian reform, Boris Nemtsov, went to battle this week with Captain Hook at the Railways Ministry. Reality won. Nemtsov proved petulance is not political magic.

The railways are as natural a monopoly as Captain Hook was a blackguard. They are also, as the new Railways Minister, Nikolai Aksenenko, told Nemtsov “more easily manageable.”

Nemtsov didn’t quibble with that. In a speech to more than 70 railway bosses from across Russia, the novice at the prime ministry lectured on the need for the rail monopoly to protect the government by managing itself better. What Nemtsov meant by that, he said, was “two tasks. The first is to decrease freight tariffs. The second is to pay salaries and taxes.”

This is as obvious as it’s contradictory, which the railwaymen proceeded to explain. If Russia’s railways are already in deep debt to workers, federal and regional budgets, how will cutting the tariffs on freight allow them to pay more? Not by generating greater demand for rail service, they believe. At least, not so long as the economy continues to contract, and both passenger and cargo volumes shrink.

Nemtsov replied that he doesn’t intend to cut up the federal system, or sell off the losing lines. Instead, he ordered the railwaymen to get rid of as many of their workers as possible; slash their operating and maintenance costs; and eliminate all of the welfare charges which the rail divisions, especially in Siberia and the Far East, have inherited from the Soviet period.

This is a popular tune. Rather than speak plainly about unemployment, hospital closures, and apartment evictions, Nemtsov chose instead to speak of labor efficiency, competition, reform. Whistling is what this is. It is usually done by freshly privatized corporations, acquired cheaply by Moscow banks, that aim to throw their communities on to the tax base of the federal or regional government. Nemstov is suggesting the federal railways pass the buck to regional budgets, like the one he, so recently
governor of Nizhny Novgorod, was unable and unwilling to pay.

The facts of regional life had to be explained to Nemtsov by Anatoly Vasiliev, the head of the railwaymen’s trade union. “In the eastern regions of the country especially,” he said, “we are carrying most of the burden that should be carried by the state.” He cited the example of the Chita region of southeastern Siberia, close to the Chinese border. “Sixty percent of the budget comes from the railway. There are also ten or more towns that are totally dependent on the railway, and 35 million square metres of housing. We subsidize schools, health care, police, and trade.”

Nemtsov said the government aims to transfer the welfare responsibilities of the rail system to regional budgets in the 1998 budget cycle. Vasiliev of the trade union said this could not be done. “There is noone with money to transfer these (costs) to.”

Vasiliev was joined by other rail division chiefs in urging Nemtsov to give tax credits for these expenditures, to offset the current rail debt to the federal budget. “We are taxed twice,” he argued, “the first time on our income, and the second time when we make these social payments.”

Ivan Paristi, chief of one of only two rail lines in Russia (the other is Kaliningrad) to be operating in the black, told Nemtsov what the trick is. He claimed he has cut more than 17,000 from the payroll, eliminated night and weekend cargo loading operations, reduced maintenance of rails and rolling-stock. “This is dangerous,” Paristi acknowledged aloud. In private conversation, Paristi admitted something else. The economic crisis allows the railways an opportunity to solve problems, he said, before demand picks up again. What he means is that, operating under monopoly conditions and under pressure to cut state funding costs, the railways can profit by doing less, much less.

That’s the management approach of the most prosperous rail line in Russia.

Nemtsov conceded that “while reforming the system, we have to take into account differences between the regions. I’d like to stress our objectives, but I understand that life is more difficult than issuing instructions.”

At the Railways Ministry Nemtsov missed his big chance to explain how to surmount that difficulty. Instead, he showed that reform is just the sensation of issuing orders, and audits, especially to his critics, while continuing the old-fashioned habit of dispensing favours to his friends.

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