CONFIDENTIAL
FM FCO
TO DESKBY 17210OZ OTTAWA
TELNO 303
OF 171948Z DEC 92
AND TO IMMEDIATE WASHINGTON
CONFIDENTIAL
173760
MDHOAN 6097
FINAL PART OF TWO
Following for Prime Minister's Party
PRIME MINISTER'S VISIT TO WASHINGTON: BUSH (CONTINUED)
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MEETING WITH PRESIDENT
Government no longer has clear intellectual sense of direction - unclear whether Chernomyrdin and others of his quote industrial unquote background begin to understand crisis of looming hyper-inflation: already Moscow economists making pessimistic noises. Drift, incompetence or wilful neglect of money supply issues could prompt highly dangerous chain-reaction of wider economic collapse.
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General policy of "support for production" could easily lead to printing money recklessly to subsidise bankrupt, prospectless enterprises.
- Departure of Gaidar leaves Kozyrev and other liberal ministers exposed. Now likely that Kozyrev in particular will be replaced by more
conservative/hardline figures Less ready to cooperate with basic Western policies (eg former Yugoslavia, arms-sales, Iraq etc).
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More assertive 'Russian' policy in Moscow could cause trouble in CIS, especially with Ukraine. Economic problems of rouble zone likely to intensify.
West must not give impression of being rattled by these setbacks can expect more of them, and must collectively pursue a strategy which takes them into account.
Important to keep engaged with new Russian government (not
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