Soviet Crackdown Watch (Part 7): Mikhail Gorbachev — Financial Terrorist

(Washington, D.C.): As part of its
continuing effort to monitor the
dimensions and character of the widening
Soviet repression against the genuinely
pro-democratic forces inside the USSR,
the Center takes special note of — and
deplores — Mikhail Gorbachev’s
decision to conduct financial
terrorism against the people of the
USSR in general and those attempting to
pursue free enterprise activities in
particular.

Terrorism is the best way to describe
the effect of the latest Gorbachev edict
to the effect that existing 50 and 100
ruble notes will cease to be legal tender
virtually immediately. According to the
new anti-reformist Soviet Prime Minister,
Valentin Pavlov, as much as one-third
of the Soviet Union’s money supply is
currently denominated in these two notes.

By removing this portion of the
currency from the money supply, the
Kremlin is effectively confiscating billions
in earnings and savings of the Soviet
people. Hardest hit are likely to be two
key groups: The first are those
who actually believed the genuineness of
Gorbachev’s commitment to fundamental
economic reform and the move to
a free market system — ostensibly the
very centerpiece of his program of perestroika.
Such individuals took entrepreneurial
risks in the Soviet Union and, for their
pains, have been in effect branded
black-marketeers and “economic
saboteurs.”

The second are those millions of
Soviet pensioners and peasants who have,
with good reason, long been suspicious of
the capriciousness of Soviet governments
and the vulnerability of personal savings
in state-run financial institutions to
sudden and capricious expropriation by
Moscow center. For such individuals, the
stuffed mattress was viewed as a safer
haven for one’s life-savings than the
Gosbank and its sister banks.

The explanation TASS offered
on 22 January for this extraordinary act
of highway robbery on a national
scale was that the measures were
intended to crack down on
“profiteering, corruption,
counterfeiting, and unearned
incomes.” Appearing on state
television on the same day, Prime
Minister Pavlov added that, “If one
receives 150 rubles per month salary, and
turns up to exchange 150,000 rubles, then
naturally, a question would be in order
of where this money came from.”

It is worth noting that, just as it
has recently been charged with
responsibility for food
distribution, the Soviet KGB has
now had its mandate expanded further, to
“help supervise” the
repercussions of this draconian,
centralizing initiative. Presumably,
Moscow’s secret police will be
particularly active in the Transcaucasus
and Central Asia — areas populated
heavily by those whose suspicions of the
central authorities made the 50 and 100
ruble notes particularly popular.

In that vein, Reuters reported that
Moscow center has sharply cut supplies of
electricity and fuel to Georgia, forcing
authorities to halt the operations of
virtually all light industry. Meanwhile,
the Financial Times reported
yesterday that Gorbachev is preparing to
send Interior Ministry troops to the
republic.

According to Mr. Zviad Gamsakhurdai,
president of the Georgian parliament, “If
the Kremlin starts in Georgia what it did
in Lithuania, there will be civil war….If
they win in the Baltics and the West
gives them permission to do so, after
that they will being against us.”

This financial terrorism is
the very antithesis of the process of
confidence-building that is indispensable
if the Soviet economy is to be pulled out
of its present tailspin.
Specifically, the massive ruble
“overhang” should have been
addressed by the massive sale of
state-owned enterprises and other
privatization measures, along with
traditional disciplining steps (e.g.,
constriction of the money supply and
price reform). This is precisely the
approach called for by the now-abandoned
500-day economic reform program of
October 1990.

Further evidence of the continuing
crackdown in the Soviet Union and
wholesale abandonment of perestroika and
glasnost include:

• On 20 January, Soviet
  Black Berets troops stormed the
  Ministry of Internal Affairs in
  Riga, Latvia killing five persons
  and injuring at least 10 others.
  Soviet Foreign Ministry’s
  spokesman Vitaly Churkin called
  the event “a fact of
  life.”
• In a press conference on 22
  January, Gorbachev blamed
  the elected authorities in
  Lithuania and Latvia for the
  recent tragedies there,
  charging them with: “illegal
  acts and trampling underfoot of
  the [USSR] Constitution, neglect
  for presidential decrees, gross
  violations of citizens’ rights,
  discrimination against people of
  other nationalities,
  irresponsible conduct [towards]
  the army, servicemen, and their
  families….This is where the
  source of the recent tragedy
  actually lies, and not in some mythical
  orders from above.”
  (Emphasis added.)
• On 22 January, Gorbachev
  completed what amounted to a
  purge of those
  “reformers” remaining
  in leadership positions.
  According to Interfax, Aleksandr
  Yakovlev, Evgenii Primakov,
  Leonid Abalkin, Nikolai Petrakov,
  Stanislav Shatalin, Stepan
  Sitaryan and Yuri Osipyan have all
  been dropped from influential
  posts on the Gorbachev team.
• On the same day, one of the most
  prominent of these, Shatalin — a
  long-time advisor to Gorbachev
  and principal drafter of the
  500-day economic reform program,
  wrote an open letter to the
  Soviet leader in Komsomolskaya
  Pravda. He stated that:

“The country is in a
state of most severe crisis,
disintegration and savagery.
Economic catastrophe is
approaching with breakneck speed
and nothing has actually been
done to avoid it.” (Emphasis
added.)

• On 23 January, Soviet MVD troops
  stormed and seized a warehouse in
  Vilnius, Lithuania which supplied
  independent-minded republic
  newspapers with newsprint. The
  seizure came just one
  day after Gorbachev
  professed that there would be no
  more military seizures of
  buildings in the Baltics.

The Center commends the U.S. Congress
for its overwhelming approval of
resolutions condemning the Soviet
crackdown in the Baltics. This step is
being taken against the welcome backdrop
of IMF and World Bank decisions no longer
to consider a special membership status
for the Soviet Union. These international
financial institutions have correctly
concluded that the Soviet leadership has
reversed course in its market reforms
want no part of aiding a regime engaged
in suppression of independence movements
in the Baltics.

Unfortunately, the Bush Administration
has yet to go beyond rhetorically
criticizing the widening Soviet crackdown
and urging negotiations to resolve
differences. The Center has identified in
Soviet Crackdown Watch (Part
6): It Begins…Repression with a
“Human Face”? ( href=”index.jsp?section=papers&code=91-P_03″>No. 91-P 3, 11
January 1990) the steps that should be
immediately taken to penalize Moscow for
the brutal crackdown to date — and to
provide real disincentives to a further
intensification of Soviet repression. It
renews its call on the Administration and
the Congress to act on such sanctions
forthwith.