Kremlin suggests Duma power deal

THE BATTLE to establish a government for Russia continued yesterday amid deepening economic chaos and social tension, and the precipitous fall of the rouble - now down to 16.99 - continued too. The queues outside banks grew larger; food hoarding carried on apace, and evidence began to surface of shortages of flour, sugar, and rice.

The State Duma yesterday postponed the second vote on Mr Chernomyrdin's nomination until Monday, to allow time to consider their latest offer from the president, whose willingness to negotiate underscores his new weakness. MPs decision to delay the vote in the Duma - which was broken into by an angry gaggle of striking coal miners - will offer the premier a glimmer of hope, but his chances still look bleak.

The word within the corridors of parliament last night was that there would be one final attempt to nail down a political agreement between the Kremlin and the Duma at talks on Monday. But if that fails, Mr Yeltsin will find himself under intense pressure to choose someone else.

He could choose to let the Duma reject his man three times, and then be dissolved, allowing him to install Mr Chernomyrdin. But that may set the scene for a constitutional crisis, as the chamber can prevent its dissolution by starting impeachment proceedings. If there are new elections, the next parliament is certain to be far more hostile and could vote to throw out the administration.

As Moscow fiddles while Russia smoulders, the president is in a fix. Chief among his problems is the Communist Party, whose leadership will find it difficult to alter its opposition to Mr Chernomyrdin.

The Kremlin is offering to allow the State Duma to vet some cabinet appointments, no small concession from a president who has always centralised power on himself. It is, however, not within his gift as it would require a change in the constitution - a move that requires a constitutional assembly or a referendum. Further- more, the Communist leadership knows a deal with Mr Yeltsin - who is deeply unpopular - would split their own ranks, which include elements firmly opposed to compromise.

Emerging amid all this bartering is the stocky figure of the mayor of Moscow, Yuri Luzhkov, who is tipped as a possible replacement candidate for Mr Chernomyrdin. He is popular among the nationalist-left, having used command economics to create a city-run financial empire. Liberals complain, correctly, that he rides rough-shod over human rights and democracy and the IMF is unlikely to be thrilled by his interventionist style.

He yesterday underlined the gap between himself and the Yeltsin years, by accusing Russia's reformers of "stealing a considerable part of public wealth and inflicting damage comparable to World War Two."

Nor do the regions like him much, as they - also correctly - accuse Moscow of sucking in almost all outside investment and commandeering the country's resources. This may explain why the Federation Council, which comprises regional leaders, yesterday passed a symbolic vote of confidence in Mr Chernomyrdin, despite his crushing defeat in the lower house on Monday.

They listened attentively as the acting premier outlined his plan for remedying Russia's problems. He promised yet again - in remarks that will be scoffed at across the country - to pay Russia's wage arrears bill, now shrinking by the day alongside the rouble.

He said the rouble should be tied to central bank gold and foreign exchange reserves, which appears to be a step towards forming a currency board - a measure used with great success by Russia's latest economics adviser, Argentina's former economy minister, Domingo Cavallo.

However, analysts were quick to point out that Russia does not have enough reserves to back the currency. After wiping out $4bn of IMF money on a useless attempt to save the rouble and defaulting on foreign debts, it will have trouble getting outside help.

"Starting in January the government will introduce an economic dictatorship - enterpris- es will be put in the condition under which they will not be able to fail under their obligations," Mr Chernomyrdin told the upper house,

"It may be our last chance to build a normal economy in Russia. Everyone will assail us. But don't tie the government's hands, give us time to step back from the precipice."

t Thousands of Russian companies that account for about 40 per cent of the country's gross national product are controlled by criminal groups, according to the head of Russia's Federal Security Service.

Vladimir Putin also told the Federation Council, the upper house of the Russian parliament, that the service is investigating about 2,500 officials suspected of corruption.

Former soldiers are particularly vulnerable to being drawn into criminal activities, Putin said, according to the ITAR-Tass news agency.