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Russia: Diamond In The Rough--How Yeltsin Decides

Moscow, 4 August 1997 (RFE/RL) -- One of the best things about Boris Yeltsin, an opposition deputy said before the president's first heart attack, was the way he would listen attentively to what you said and agree with you. One of the worst things about him, the deputy added, was that Yeltsin agreed with everyone.

First Deputy Prime Minister Anatoly Chubais knows the president's qualities. So he drafted a decree in August 1996 -- while Yeltsin was in medical isolation -- that strictly regulated how presidential decrees could take force. The way Chubais arranged the paperwork, if someone with a piece of paper managed to see Yeltsin and Yeltsin signed it, nothing could happen until the paper was published. And publication remained under Chubais' control.

Last month, while Yeltsin was on holiday on the Volga, he signed a decree reforming Russia's diamond industry. The document had been in preparation for months. Diamond producers in the Sakha republic, diamond manufacturers and exporters in Moscow, and different parts of the government bureaucracy lobbied for their interests.

Yeltsin wasn't personally involved, as he once was. But prime minister, ministries, and Chubais were all agreed. The decree stripped the Sakha republic of tax and other privileges it had been granted by Yeltsin five years ago. The monopoly of diamond sales inside Russia and abroad, which Almazy Rossii-Sakha (ARS), a diamond mining company, had sought, was rejected. Price competition was introduced by allowing, for the first time, diamond cutters in Russia to import diamonds from abroad without duty. New Finance Ministry controls were ordered over every aspect of the diamond industry, including the stationing of inspectors inside ARS. The company was prohibited from supplying Nikolaev's administration or its friends with diamonds at a discount.

This was the biggest defeat Sakha Republic President Mikhail Nikolaev has ever suffered at Yeltsin's hands. So, on July 25, he flew down to see the president face to face. Nikolaev had been seeking this meeting for months, but was always blocked. This time, with Chubais on holiday out of Russia, he got his wish.

And more than that. For officials of ARS were saying last week that Yeltsin did the proverbial. He agreed to everything Nikolaev asked for. The ARS officials claim the Sakha government will be able to buy the stones it wants from ARS at a price Nikolaev told Yeltsin was at cost. Re-selling or exporting cut-price goods will be easy and profitable. Yeltsin reportedly agreed, and signed a paper to that effect.

This is awkward, because in section 10 of the paper Yeltsin signed five days earlier, he had decreed that Sakha could buy diamonds but only on terms and prices fixed by the Russian government. That meant the Ministry of Finance. Now that he's back from vacation, that means Finance Minister Chubais.

Sensing the potential for embarrassment, some ARS officials now say they can't confirm the meeting between Nikolaev and Yeltsin took place. The presidential press service rummaged in its records, and said a meeting had occurred about a week ago. A Finance Ministry official in charge of the diamond sector said he, as he put it, had "heard something about the meeting, and (was) sure they agreed on something." He wasn't sure what.

The legal department of the Kremlin, which was also ordered last year to check every decree before signing, says it can't do this, because the only place all the decrees must now go is Chubais's office.

Just what the latest document may say is hinted at by Nikolaev's representative in Moscow, Kliment Ivanov. He claims Yeltsin has approved government action to settle the terms on which the republic will get its stones, taking into consideration the interests of the republic, Chubais followed Nikolaev to see Yeltsin four days later. His office hasn't responded to questions about what was decided, if anything.