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Financial Crisis Said to Loom in St. Petersburg

St Petersburg, July 16 (RFE/RL) -- Members of St Petersburg Governor Vladimir Yakovlev's newly appointed administration are claiming the outgoing administration of Anatoly Sobchak has left the city with a crisis in its public finances.

An exchange of charges and rebuttals began last week. Vice Governor Vyacheslav Shcherbakov and the new chair of the city's Finance Committee, Igor Artyemev, and the chair of the Economics Committee, Dmitri Sergeyev, announced the findings of a report on the state of the city's finances. The report cited poor investment decisions, the high cost of a city's municipal bond issue, and a city budget deficit equivalent to 500-million U.S. dollars.

It criticized especially a decision by city officials to deposit public funds in Severny Torgovy Bank (Northern Trade Bank) and Astrobank, despite knowldge that the two banks were on the verge of collapse. The deposits probably were intended to prop up the faltering banks to prevent a banking crisis. Neither bank is operating today.

The report also criticized the city's municipal bond program for paying yields higher than local bank interest rates. The rates on St Petersburg municipal bonds have run as high as 100-to-110 percent. The commission's report also criticized the city for continuing to pay interest on a 1989 loan taken out by the then state-run bread factory Lenkhlebprom. Lenkhlebprom since has been privatized.

Finance chief Artyemev said that Governor Yakovlev's new economic team will draw up what he called an "anti-crisis program" in the coming weeks.

Members of the new administration also suggested that some of the city's financial problems could be the result of corruption among Sobchak's team. As Deputy Governor Shcherbakov put it, "A number of actions require examination by law enforcement officials."

The city prosecutor's office said Monday that it has received Shcherbakov commission report and will investigate.

The city's former Economics and Finance Committee chair, Alexei Kudrin, rebutted the charges at a press conference Friday as illegitimate. "The allegations, which he said were commonplace in politics, could harm the city's chances of attracting much needed investment, Kudrin said. He said that the city's budget deficit fell within the limits of what he called "acceptable" budget deficits for the city, as set by guidelines determined by the Legislative Assembly.

Kudrin said he has been participating in the current administration's efforts to solve the debt problem, but, as a result of Shcherbakov's statements, will suspend further consultation pending a personal conversation with Yakovlev.

The president of the St Petersburg Bank for Reconstruction and Development (no relation to the European bank, EBRD), Dmitri Pankin, concurred, at least in part. He said the situation is not dangerous. St Petersburg previously has run deficits between 15-and-17 percent of its budget, he said.

During this exchange, Governor Yakovlev has been in Atlanta, Georgia, in the U.S., where the 1996 summer Olympic will begin Friday. Former Mayor Anatoly Sobchak also has been away, vacationing in Turkey.

There are reports that Sobchak is being considered for a foreign service appointment, possibly as an ambassador. The press office at the Ministry of Foreign Affairs in Moscow said it had no information regarding the prospective Sobchak appointment.

Nikolai Petrov of the Carnegie Endowment in Moscow said that, with possible charges pending, an ambassadorial post for Sobchak would not be ideal. But, he said, there are numerous posts abroad to which Sobchak could be named. An ambassadorship would require consideration by Russia State Duma, and possibly an embarrassing public debate.

Some foreign post may be within Sobchak's grasp, though. A former administration official who requested anonymity, said Sobchak was offered the ambassadorship to France in 1993, but declined it then.