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Russia: Analysis -- Luzhkov, Nemtsov Jockey For 2000 Election

  • Floriana Fossato



Moscow, 20 March 1998 (RFE/RL) -- Some Russian presidential hopefuls, bearing in mind that the 2000 election will require concerted preparation, are implementing initiatives this week aimed at consolidating their possible electoral base.

In particular, Moscow Mayor Yuri Luzhkov and First Deputy Prime Minister Boris Nemtsov have shown a burst of activity.

Moscow is by far the wealthiest Russian region, and its Mayor presides with an iron fist -- not only over the city's political institutions -- but, also over a powerful business holding that can be considered an industrial, financial and media empire in itself.

At a closed meeting at City Hall attended by top government officials this week, Luzhkov said Moscow expects the Federal Government to transfer to the City Government 50 percent of the shares in some of Russia's most prestigious military enterprises. According to Luzhkov's request, packets of shares in the aircraft design bureau "Sukhoi," in the "Ilyushin" and "Antei" aviation complexes and in the joint stock company, "Aircraft electronics and communications systems" should be transferred as part of a plan to eliminate the federal budget's debt to the city of Moscow.

According to a report in the daily "Russky Telegraf," Russia's Deputy Prime Minister and Economics Minister Yakov Urinson, Security Council Secretary Andrei Kokoshin, Interior Minister Anatoly Kulikov and Deputy Defense Minister Nikolai Mikhailov attended the meeting, together with Moscow officials and representatives of regional governors and of top military industries based in Russian regions.

Moscow's interest in Russia's immense, but decaying, military-industrial complex has immediate reasons, but it is also linked to the perspective of future financial and political dividends. Experts at the meeting said that production decline in the sector last year reached 16 percent overall, in the country, and more than 18 percent in the capital. Profits in the military sector, traditionally a stronghold of Russia's export, have consistently declined, while the Defense Ministry's debt to producers, on the contrary, has risen to reach about 3 billion dollars.

Following those depressing figures, at which President Boris Yeltsin has expressed deep concern, it is understandable that Luzhkov asked the federal government to approve substantial tax breaks for military industries. According to official statistics, more than 20 percent of Russia's military-industrial complex is based in Moscow, and Luzhkov is reported to have told meeting participants that he is ready to mobilize financial resources in support of the military-industrial complex -- if the federal government will agree to transfer the packets of aviation companies' shares to the city.

"Russky Telegraf" quoted unnamed government sources as saying the transfer of shares is likely to be approved, as the recently approved 1998 budget does not allocate adequate resources to re-animate the military sector. According to the daily, a deal between the federal government and Moscow on the issue has already been concluded.

And, Prime-Tass news agency yesterday quoted Russian Economics Minister Urinson as saying that the prestigious "Sukhoi" aircraft design bureau is to be reorganized into a state-controlled holding. He said that the government is prepared to transfer 25 percent of "Sukhoi" shares to Moscow authorities, and added that 50-percent-plus-one share of each enterprise belonging to the company will become part of a government-controlled Central Moscow Holding Company. Following the meeting at Moscow City Hall, Urinson announced the dismissal of Sukhois General Director, Aleksei Fyodorov.

According to observers, control over large packets of share in "Sukhoi" and "Ilyushin," which produce Russia's best aircraft fighter planes, can be extremely profitable in the future, since their privatization is expected next year.

However, according to Russian observers, the most immediate and considerable interest in the ownership of military companies for the Moscow Mayor could stem from the possibility of increasing his political influence over regional elites in parts of the country, where enterprises belonging to the military concerns are based, sometimes owning entire cities. For instance, companies belonging to "Sukhoi" are based in Bashkortostan, in the Far-East (Komsomolsk-on-the-Amur), in Siberia (Novosibirsk and Irkutsk), as well as in the cities of St. Petersburg and Samara. Experts note that Luzhkov's policy could also help him gain mass appeal among nationalists, and those nostalgic for the Soviet era.

Luzhkov has denied presidential aspirations. But, the populist Moscow Mayor last year started a program of extensive travels across Russia's regions, in an effort to boost his image and Moscow's economic ties. His last move seems to indicate Luzhkov is now aiming at expanding his influence from the Volga and Central Russian regions, where he is already popular, to Siberia and the Far East.

Nemtsov, who strongly denies even the possibility of his presidential candidacy, and, who was appointed to the Cabinet one year ago this week, celebrated the anniversary with a number of articles in the Russian press, and he hosted a roundtable on "The Future Of Russia: Oligarchy or Democracy?" Russian observers regard these as the launch of his presidential campaign.

Nemtsov this week also became the first Russian government official to launch a personal Internet site. In the introductory page, Nemtsov says, "I believe Internet users are the most progressive class of Russia's society."

Thousands of Russians are getting hooked up to the Internet, and computer sales are booming. Many institutions, including the Kremlin, the Defense Ministry and the Russian Orthodox Church have their own sites.

During the round-table discussion, attended by politicians, journalists and scholars, Nemtsov said he has decided to head a movement aimed at fighting "oligarchies" and seek to build "people's capitalism" in Russia. Nemtsov says his alternative is to be based on antitrust legislation, tax reform to support the creation of a middle-class in Russia, fair competition and "healthy" government protectionism. Nemtsov called for the government to enforce a 'level playing field' for all companies, manage state property more effectively, and "demonopolize" the electronic media.

The round table discussion focused on the state of the current regime in Russia. Drawing conclusions from analysts, Nemtsov said that the next step should be to understand "which political forces can oppose the establishment of the disgusting oligarchic regime...and how they can cooperate in the next parliamentary and presidential elections." (parliamentary elections are scheduled for Dec. 1999; the presidential election is scheduled for 2000).

In an interview with the weekly "Argumenty I Fakty," Nemtsov said that the future of Russia will hang on the next presidential election. He said "the choice in 2000 will be no less dramatic than in 1996," when incumbent Yeltsin prevailed over Communist challenger Gennady Zyuganov. According to Nemtsov, "if, in 1996, the choice was between primitive Communism and primitive capitalism, the choice in the year 2000 will be between an oligarchic regime of mongrels and a popular, democratic regime."

The daily "Kommersant" reported that Nemtsov had invited seven leading Russian financial, business and media magnates to the round table, but none showed up. While tycoons such as Boris Berezovsky, Vladimir Gusinsky and Vladimir Potanin were mentioned during the discussion of "oligarchs," Nemtsov said he is motivated by principle, not by personalities. He said, "names do not matter. What matters is the phenomenon."

Observers see Nemtsov's warning as a response to comments by the Berezovsky-led camp. Berezovsky supporters have accused Nemtsov and his fellow first deputy prime minister, Anatoly Chubais, of hypocrisy, charging that appeals for fair and open competition between business groups mask their own close ties to Potanin's Oneximbank financial empire.

Recently, Chubais and Nemtsov have stepped up attacks on Berezovsky, whom they describe as the main advocate of oligarchic capitalism. Since February, Berezovsky has reportedly been recovering in a Swiss clinic from a spinal injury sustained while failing from his snowmobile.

Interfax news agency reported that Berezovsky reacted angrily to Nemtsov's last polemics. Berezovsky told the agency that "because an oligarchy is a merger of power and capital, the choice is straightforward: either Boris Nemtsov is not a first deputy prime minister, or those whom he attacks are not an oligarchy."
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