Moscow, Feb. 29 (RFE/RL) - The prospect of a Communist victory in Russia's June presidential election has wracked the nerves of many, but the worst case of the jitters can be found, not surprisingly, in the country's business community.
For many investors, both Russian and foreign, the mood has never been so bleak. "Western investors are in a trough of despair," says Bernard Sucher, managing director of Russia's top brokerage house, Troika Dialog. He told RFE/RL in an interview that both Russian and foreign investors are no longer assuming that "things will work out." As for himself, he was even more candid: "I was more optimistic bunkered down in my kitchen when the tanks were attacking the parliament in '93."
But Sucher, like all of those interview in Moscow last week for this report, says a victory for President Boris Yeltsin does not necessarily guarantee a rosy picture for business leaders. He says there will be no good outcome in June, regardless of whom wins, because backtracking on economic reform is already happening. Sucher summed up the mood of many by saying Yeltsin is still favored as the lesser of two evils: "He's the devil you know."
Even so, many business leaders voiced concern about Yeltsin's recent policy changes in economic reform. Their first disappointment came as Russia's privatization architect, Anatoly Chubais, resigned last month after coming under heavy criticism. Chubais and the business community had long shared a mutual understanding and respect.
Other setbacks followed, culminating in Yeltsin's pledge last week to pay back-wages to state workers, and raise pensions and student stipends at the cost of some four billion dollars. While many acknowledged the hardships Russians have suffered during the reform, they predicted that such steps could spark inflation, a collapse of the ruble and overall economic chaos, to the detriment of ordinary citizens.
Russia has tended to attract high risk money from investors who, in the words of one observer, "checked their fears at the door" and rode out waves of political instability to pile up huge profits. But now that may be changing.
The uncertainty surrounding the presidential election has apparently caused many investors to adopt a "wait-and-see" approach. "It is more difficult now for companies entering the market than for those with an established presence," says Carl Johaneson, who heads CIS operations for the global consulting and accounting firm, Ernst & Young. He told our correspondent that some of his clients, which include companies like Coca-Cola and Hershey's, are watching the situation closely, but are not extremely anxious. Still, he says, new investment tends to be put on hold.
His views were confirmed this week when the deputy head of Russia's State Property Committee, Alfred Kokh, said that most privatization had been put on hold until after the presidential election. Kokh said the political uncertainty had driven investors away, pushing down the price of shares and making it less profitable for the government to sell stakes in state enterprises. He added that fears of re-nationalization had also scared off many investors.
Those fears were revived when Interior Minister Anatoly Kulikov said this month that Russia's top banks and energy companies should be re-nationalized. His statements follow the formation in the communist-nationalist-dominated Duma of a special committee to examine what it calls the "negative results" of privatization, and the possible re-nationalization of companies that were privatized under the government's controversial loans-for-shares program.
While most business leaders dismissed talk of re-nationalization as more rhetoric than reality, some were clearly worried about the trend towards questioning privatization.
Re-nationalization, even if it occurs in a limited form, could hit the banking sector the hardest. "We're not worried about being taken over," says Gina Knight, a board member at OPM, a medium-sized Russian bank. But she told RFE/RL that there are worries about a shake-up of the banking sector, if just some banks are taken over by the government. New regulations, she says, could force smaller institutions out of the market.
Critics have charged that a privileged handful of banks has profited enormously from the government's privatization program, while others have been left out in the cold. Knight says a victory by Communist leader Gennady Zyuganov is unlikely to abolish such favoritism. On the contrary, she says, a communist presidency will probably continue the "double standard," but with new players. In other words, she says, "it's someone else's turn to get a piece of the pie."
Exactly what a Zyuganov presidency would look like, say market analysts, is about as difficult to figure out as Kremlin politics were during the Brezhnev era.
International Monetary Fund (IMF) managing director Michel Camdessus brushed off the threat of a communist victory while in Moscow last week to seal a new 10,200-million dollar loan to Russia. He said a new Russian government would see the realities of the country's economy, and maintain the conditions set under the loan agreement. "Otherwise," he said, "our support will be interrupted."
At Renaissance Capital, another top Russian brokerage house, young, smartly-dressed Russian traders were busy last week watching the stock market plunge and then surge with news of the IMF deal. But unlike Camdessus, they have little choice but to deal with whomever holds the top job in the Kremlin after the June election.
One equity trader, Nikolai Klekovkin, says Zyuganov made a good impression on investors at last month's World Economic Forum in Davos, Switzerland. But he says there are serious doubts in the business community about whether the Communists really understand how the current Russian economy works, and how fragile it is.
"I'm optimistic," says his colleague Dirk Damrau, who heads research at Renaissance Capital. But he says the biggest challenge to economic reform could come from regional communist party leaders, who would inevitably become more powerful with a Zyuganov victory. Damrau says local Communist Party officials tend to take a hardline on economic reform, frightening the business community with talk of re-nationalization and hostility toward foreign investment. As he puts it: "Even if you have three or four Communist leaders saying what the West wants to hear, the bulk of the Communist party here stretches across a wide (political) spectrum just because of the regional structure of the country."
But Damrau predicts that Russia, under a communist or non-communist government, will continue to, in his words, "muddle through," backsliding on economic reform, but moving forward, step by step, toward economic stablity.