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Russia: Moscow's Mayor Steps Up Presidential Effort

Moscow, 22 October 1998 (RFE/RL) -- Nobody in the Russian capital was very surprised when Moscow Mayor Yuri Luzhkov announced early this month that he would take part in the next presidential elections. The surprise has come in reaction to the frenetic pace of Luzhkov's statements since.

Two main factors seem to be pressing Luzhkov: the poor health of President Boris Yeltsin and the state of Moscow's economy.

Until recently, Moscow was considered an island of relative prosperity amid Russia's economic troubles. But economists say the current financial crisis is hitting the city harder than other areas and risks to destroy Luzhkov's image as an efficient mayor.

Luzhkov first stated his plans in London, saying he would take part in the presidential campaign provided no other candidate satisfied him. In a later interview with the BBC last week, he said he could not "rule out" a possible resignation by President Yeltsin for health reasons. Also last week, Luzhkov said he will launch a new Center-Left party. The new movement, tentatively named the Party of Political Centrism, will hold its founding conference next month.

Luzhkov, 62 years old, has a reputation as a man who gets things done. In 1996, he was elected to a second term in Moscow with more than 90 percent of the vote. But these days, as Russia's economic crisis continues to unfold, his critics say that Luzhkov is preparing to jump off the Moscow boat.

One of the leaders of the Moscow chapter of the Democratic Choice of Russia party, Arkady Murashev, told RFE/RL that, in his words, "the crisis is showing that there was no Moscow miracle based on particularly effective policies at city hall. The capital," Murashev added, "is now suffering even more than other places and Luzhkov knows that within two years his reputation as a great manager will be gone." Murashev and his party leader, economist Yegor Gaidar, have been among Luzhkov's main critics.

The Deputy Director of the Institute for Economy in Transition, Aleksei Ulyukaev, says: "As Moscow's financial pyramid is about to collapse, Luzhkov needs to assume a different role before the Spring."

Recent moves by Luzhkov aimed at forming a political bloc with the more pragmatic part of the Communist Party, and possibly with other political movements, show that he is seeking to build a broad platform for his presidential campaign.

Like other political figures, Luzhkov is putting pressure on Yeltsin to step down voluntarily, since the Russian Constitution provides a long and complicated procedure for the President's impeachment. Luzhkov has always been extremely cautious in dealing with Yeltsin, but last week he said: "'The President) must say to himself, 'Because of my bad health, I am no longer able to give my country as much time as a president should.'"

Luzhkov's words seemed to signal the effective opening of the presidential campaign. The Federation Council, formed by the leaders of Russia's 89 regions, including Luzhkov, fell short last week of passing a motion calling for Yeltsin's resignation by only 11 votes. Yeltsin, who fell ill on a recent trip to Central Asia, seems to be increasingly sidelined, and important decisions are often made by Prime Minister Yevgeny Primakov's government and by the Central Bank.

Murashev says: "Luzhkov now feels that the old lion, Yeltsin, is badly ill and therefore he is not afraid of him anymore." Under the Russian Constitution, if the president dies or is incapacitated, the prime minister assumes the role of caretaker and calls for new elections within three months. Yeltsin's current term ends in 2000.

In 1996, when Yeltsin began his presidential campaign with a very low popularity rating, his campaign managers canvassed support from Russia's then financial and business tycoons to secure financing for the campaign.

With this example apparently in mind, Luzhkov has already accumulated significant financial resources. In 1993 --one year after Luzhkov first became mayor of Moscow-- one of the city's departments, the Committee for Science and Technology, chaired by his close ally Vladimir Yevtushenkov, was turned into a company. The company soon developed into a private financial-industrial conglomerate under the name AFK Systema. According to a company report issued just before the August economic crisis, Systema had a total market capitalization of $2.3 billion at pre-crisis market prices and posted $266 million in pre-tax profits in 1997.

Systema is now a holding company with 11 sub-holdings. It covers a wide range of areas, including telecommunications, real estate, construction, electronics, food processing, oil products and media.

Systema is a prime example of how Moscow city-hall authority and the business world are intertwined. Yevtushenkov is not only Systema's board chairman. To this day, he retains the official title of advisor to the Mayor and sits on the City Council of Investment, a board chaired by Luzhkov that governs the distribution of city loans.

In one of his rare interviews, given to the Washington Post in December 1997, Yevtushenkov said that he received no salary from the city government. But he also said he spent most of his time working on city projects. He said, too, that he is close to Luzhkov and his family. And Yevtushenkov told the paper: "If Luzhkov ever decides to run for president, (he would) obviously help him."

Since 1993, when it was reportedly set up to unite a number of import-export trading companies, Systema has enjoyed booming growth. Today, the company owns its own pool of banks, authorized to service its accounts as well as those of the Moscow city government.

Having consolidated its financial resources, Systema is now busy creating a media holding that is seen as indispensable in carrying out a successful electoral campaign. In addition, and separate from Systema, the city government itself controls broadcast media and a major publisher. All in all, that adds up to a formidable media base for Luzhkov's expected presidential campaign.

(For more details on media assets controlled by the Moscow city government, refer to "Russian Media Empires Four" on RFE/RL's web site.)