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Russia: Yeltsin Becomes Mediator In Row Between Bankers And Officials

Moscow, 15 September 1997 (RFE/RL) - Russian President Boris Yeltsin, aiming to put an end to a bitter dispute among key government officials and leading Russian bankers, met today in the Kremlin with six of Russia's most powerful financial and business leaders.

Russian news agencies said privatization policy, the creation of an effective treasury system, and relations between the business community and the government were among main topic discussed.

Claiming success for his mediation effort, Yeltsin said the bankers "are stopping their fight with (Anatoly) Chubais, (Boris) Nemtsov and the government." In a cabinet reshuffle at the beginning of the year, Yeltsin had appointed Chubais and Nemtsov to the posts of First Deputy Prime Ministers, in charge of overseeing economic reform, and paying back wages and pensions.

The bankers Yeltsin met included representatives of almost all the influential financial groups that had joined forces to support, with their money and media coverage, Yeltsin's successful re-election campaign last year.

The alliance has since broken up amid highly public disputes over stakes in some of the most potentially lucrative of Russia's state assets. The infighting -- involving directly some of the bankers Yeltsin met today -- became particularly nasty and public this Summer over the privatization of 25 percent of the stakes of Russia's telecommunication monopoly, Svyazinvest. It further escalated in preparation of the privatization of one of the most lucrative assets, the state oil company Rosneft.

The dispute also brought into the open the breakdown of cooperation between some of the businessmen and Chubais, who had been the architect of Yeltsin's campaign. Chubais and some of his main allies, including Nemtsov, were the target of strong attacks in media controlled by some of the business tycoons. They had previously closely cooperated with him, but lately felt he was unilaterally changing the rules of the privatization game.

Interfax news agency quoted Yeltsin as describing the situation after the meeting, saying that in the last months "banks had started quarreling a little with the government." He said that "the word of the president, whom they have supported and do support, proved necessary" to unlock the standoff. He added that he had called on business leaders to work in close contact with him and the government, without "cover each other with dirt through the media."

None of the bankers present at the meeting have so far commented on their conversation with the Russian president.

Interfax reported that all the bankers during the meeting agreed with Yeltsin that clear "rules of the game" should be established once and for all to regulate further privatization deals, in order to avoid violations and make sales of state assets fair and transparent. Yeltsin said he is "considering" the proposal made at the meeting by the bankers, to meet "more frequently" and create a joint team in charge of strategic economic planning.

Yeltsin met with Oneksimbank's Vladimir Potanin, Media-Most's Vladimir Gusinsky, SBS-Agro's Aleksandr Smolensky, Alfa-Bank's Mikhail Fridman, Inkombank's Vladimir Vinogradov, and Rosprom group's Mikhail Khodovkorsky. Security Council Deputy Secretary Boris Berezovsky, one of Yeltsin's main backers last year, was not present at the meeting.

Berezovsky is considered among Russia's wealthiest and most influential businessmen. He says he has given up direct business involvement since joining the Security Council last Autumn, but Nemtsov said recently that since his appointment, Berezovsky "has done nothing else" than deal with his own business interests.

Saturday, one of the Russian dailies believed to be controlled by Berezovsky, launched a front-page attack against Chubais, under the headline of "Anatoly Chubais strives for full control over Russia."

The article appeared before the announcement of Yeltsin's upcoming meeting with the bankers was made, but Yeltsin's statements after the meeting suggest that some of the bankers may have asked -- unsuccessfully -- for Yeltsin to dismiss Chubais. In an apparent effort to discredit Chubais with Yeltsin, the article made a parallel between Chubais and Bolshevik leader Vladimir Lenin, and accused Chubais of seeking "oligarchic" powers, with the aid of Potanin and of cynically manipulating the president.

In a development that some observers say may be linked with the dispute, Chubais' spokesman Andrei Trapeznikov said security protecting Chubais was strengthened yesterday following tips that an attack was being prepared. Interfax quoted an anonymous source in the Federal Security Service (FSB), suggesting that an unspecified oil company threatened by bankruptcy because of tax debts could be behind the threat.

Sergei Markov, an analyst with the Carnegie Endowment for International Peace in Moscow told RFE/RL that Yeltsin met the bankers today in an attempt to gain their understanding and support of the new rules that Chubais, Nemtsov and the new economic team in the government are establishing. According to Markov, since the beginning of the year, Yeltsin has not changed his stance to support the team led by Chubais and Nemtsov, despite pressure from part of the business community, which was accused to the sweetheart deals with the government in the previous loans-for-shares privatization scheme. Observers say many lucrative state assets were sold for a song during that scheme.

"The possibility that Yeltsin may at some stage change his stand can never be fully dismissed," said Markov, "but I see it as extremely unlikely... The government is now determined to sell state assets to investors offering the more advantageous bids for the state. It is clear that Yeltsin supports this line in the first place."

Last week, Yeltsin put the sail of Rosneft on hold and said the sale should not proceed until a legal dispute over the ownership of its subsidiary, Purneftgaz, has been resolved. Privatization is now scheduled to begin in the last quarter of this year, and the deadline for completion is set for the second quarter of 1998. Oil industrial analysts in Moscow said the delay was prompted by technical considerations linked with the dispute over Purneftgaz, and was not linked to the political fight surrounding the issue.