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Russia Report: March 5, 2001

5 March 2001, Volume 1, Number 7
KASYANOV SLIPS INTO DEEPER TROUBLE. Although the government is expected to easily survive an upcoming no-confidence vote in the State Duma, it will likely face a bigger challenge in the near future: the need to show some progress with economic restructuring this year as Russia's economic growth starts to slow. "Nezavisimaya gazeta" noted on 2 March that Prime Minister Mikhail Kasyanov will now have to pass along news of unfavorable economic indicators: rising inflation, a weakening ruble, and a slowdown in industrial growth. According to Ben Slay of Washington, D.C.-based PlanEcon, inflation in Russia last month rose 23 percent compared with the same month last year, while in January the "economy showed broad signs of a slowdown."

Meanwhile, the government has missed two important deadlines for submitting economic legislation to the Duma. According to "Nezavisimaya gazeta," the cabinet was required by the law on the budget to submit a bill on the government's privatization program to the State Duma by 1 March. On 2 March, the government announced that it will submit this legislation in the second half of March, according to Interfax. Last month, the cabinet missed another deadline, this one set by President Vladimir Putin. On 24 January at a meeting with the country's top businessmen, President Putin announced that he was giving the government three weeks to submit to the Duma a package of four draft laws aimed at "de-bureaucratizing the economy." Putin said at the time, "If the premier does not demonstrate his will, then consultations on these draft laws will be dragged out. These are my instructions to the government; the draft laws should be submitted to the State Duma in three weeks maximum," according to ITAR-TASS that day.

Kasyanov apparently showed insufficient will, since some two weeks after Putin's deadline -- on 2 March -- the cabinet approved only two of the four bills aimed at "debureaucratizing" the economy. One bill protects the rights of businessmen during audits while another attempts to set up a more streamlined system for registering new businesses. The remaining two bills require further work and will be discussed at a cabinet session on 10 March, according to Interfax.

Following the cabinet session, Minister for Economic Development and Trade German Gref told reporters that although he expects many legislators to support the bills, he does not think "their approval at the State Duma will be easy." In an article the previous day, "Segodnya" expressed a similar opinion, noting that the government will need to be united behind the deregulation package because some members of both the upper and lower legislative houses have already declared their opposition. For example, State Duma Chairman Gennadii Seleznev, who is usually on the Kremlin's side, has sent an official letter to President Putin in which he states that the "principle of deregulation" in the economy is "unacceptable." And in the Federation Council, Khabarovsk Krai Governor Viktor Ishaev, who has authored an alternative economic program to Gref's, has said that deregulation would be harmful for the country. Ishaev is also a member of the State Council's presidium. The daily, which is owned by Vladimir Gusinskii's Media-MOST Group, also reported that discussion of the four "debureaucratizing" bills had been dropped from the cabinet's agenda of 1 March cabinet "at the last minute," because the government needed more time to reach a final agreement with a number of departments

As the government scrambles for support for its deregulation legislation both within its ranks and without, the Communist faction in the Duma submitted on 2 March the 111 signatures that it has gathered to hold a no-confidence vote in the government to the Duma. Debate over the motion is expected to take place on 14 March. Few analysts expect the effort to succeed since some 226 votes would be necessary (see "RFE/RL Russian Political Weekly," 26 February 2001). "Segodnya" on 1 March calculated that every Communist and Agrarian vote would total "no more than 130," while only 20-30 votes might be forthcoming from "kamikazis" in other factions, such as Yabloko, Russian Regions, and People's Deputy. The Communists have so far refused to reveal which deputies have signed the petition; however, "Kommersant-Daily" reported on 1 March that according to its unnamed sources, several members of the Fatherland-All Russia faction, ten or so members of the People's Deputy group (see item below), five deputies from the Russian Regions group, and one Yabloko deputy in addition to members of the Communist faction have signed. According to the daily, Duma Chairman and Communist faction member Seleznev has reportedly refused to sign, thus demonstrating again his loyalty to the Kremlin. On 2 March, Seleznev told reporters that he doesn't support the vote of no confidence because he considers the measure "ill-timed." JAC

STEPASHIN, KIRIENKO VIE FOR PREMIERSHIP? As Prime Minister Kasyanov's "will" is apparently being tested by President Putin with regard to the economic deregulation package (see item above), speculation about who might be tapped to replace him continued, with "Argumenty i Fakty" offering four likely candidates in its most recent issue (number 9). According to the weekly, two former prime ministers, Sergei Kirienko and Sergei Stepashin, and one former first deputy prime minister, Boris Nemtsov, are on the short list along with presidential administration head Aleksandr Voloshin. As far as timing goes, the weekly suggests that the cabinet will be dismissed right after President Putin's annual address to the Federal Assembly, a decision that will be justified by the president's new political and economic initiatives. (That address is now scheduled for the latter half of March.) At the end of January, "Nezavisimaya gazeta" also predicted that Putin would replace most of the cabinet as well as top administration officials starting at the end of March through the beginning of May. That daily, which is controlled by Boris Berezovskii, suggested that the primary rationale for sweeping house will be for Putin to have in place his own team -- loyal only to him.

"Argumenty i Fakty"'s list of candidates for premier differs from the usual discussion of such matters with its omission from the candidate list of Security Council Secretary Sergei Ivanov and Deputy Prime Ministers Aleksei Kudrin and Ilya Klebanov. However, the weekly suggests that if Voloshin is tapped to be prime minister, Ivanov would "essentially become a vice president" by assuming Voloshin's post as head of the presidential administration. Last January, "Novaya gazeta" suggested that Ivanov would actually be named to the revived post of vice president.

Kirienko, who is now presidential envoy to the Volga federal district, has been a regular fixture in articles speculating about the new cabinet, but Stepashin's name is now being bandied about with the same frequency, at least in publications owned by Gusinskii's Media-MOST Group, "Segodnya" and "Itogi." "Segodnya" on 13 February argued that Stepashin as head of the Audit Commission has strayed into the cabinet's area of responsibility by commenting publicly on such matters as debt payments to the Paris Club and spending on the military campaign in Chechnya. (Stepashin urged that this amount of the government's expenditure be publicized.) The daily said that its unidentified sources say that Stepashin is "being groomed for prime minister" because he is a former intelligence officer and is from St. Petersburg. "Itogi" in its issue number 7 suggested that another factor in Stepashin's favor is his "liberal views" on economics. JAC

THE OLIGARCHS VERSUS THE RED DIRECTORS, PART II. At a 27 February meeting of the executive council of Russian Union of Industrialists and Entrepeneurs (RSPP), the small group of oligarchs who recently joined that organization appeared to strengthen their position in it. Participants in that meeting voted to approve an amendment to the union's charter under which the president of the organization will be elected by the union's executive council rather than at a congress, which has been the past practice, Interfax reported. According to "Vedomosti" on 28 February, this selection will now take place every three years rather than every year. According to "Vremya novostei" on 28 February, some 179 people make up the union's executive council and 27 have seats on its special bureau (see table below). The bureau will propose candidates for the presidential post. The structure of the union itself was also streamlined from various branches to seven departments. These departments, according to the daily, will prepare legislative initiatives, which the RSPP will present to the president and lobby in the State Duma. The first of these will be aimed at raising customs tariffs, simplifying procedures for registering businesses and obtaining licenses, and the Labor Code. According to "Trud-7" on 1 March, a new vice president of the union will also be selected, which will likely be some "well-known person" such as State Duma deputy (Fatherland-All Russia) Artur Chilingarov or Association of Russian Banks head Sergei Yegorov.

If a report in "Kommersant-Daily" of 1 March is correct, then last week's "reorganization" is only the second push in a broader effort by the oligarchs to consolidate their position in the organization. The daily, in which Boris Berezovskii has a controlling interest, reported that back in January the oligarchs tried to launch a "mini-putsch," during which Alfa Bank head Mikhail Fridman was lobbying for replacing the current Union head Arkadii Volskii with Impeksbank Chairman Oleg Kiselev. However, Volskii remained and survived the past week's meeting as well. Kiselev, who is a member of RSPP's bureau, told "Vedomosti" on 1 March that after the oligarchs succeed in acquiring administrative control of the union, an audit of the RSPP's assets will be performed and certain "dubious" sources of the union revenue will be blocked.

Last November, Kiselev and Fridman, along with a number of the country's best known "oligarchs," joined RPSS's bureau, transforming that organization once known as an assembly of "red directors" (see "RFE/RL Newsline," 13 November 2000). According to Volskii, the enterprises that make up the RSPP produce some 80 percent of Russian GDP, "Vremya novostei" reported on 28 February. In an interview with "Izvestiya" on 1 March, Volskii tried to dispel rumors of impending split in the union. In particular, he denied an assertion by Federation Council Chairman Yegor Stroev that the red directors are leaving the group. According to Interfax-AFI, Volskii himself has reportedly come under attack from those red directors who are close to the Communist Party and are grouped around former USSR Council of Ministers Chairman Nikolai Ryzhkov. Ryzhkov has reportedly accused Volskii of "yielding to the new capitalists."

Meanwhile, as the country's oligarchs appear to be showing uncharacteristic cooperation in the RPSS, a recent opinion poll suggests that at least some Russian citizens do not feel that President Putin's war on the oligarchs has been waged successfully. On 2 March, the polling agency, reported that 55 percent of the1600 respondents agreed with the statement that President Putin has not succeeded in bringing to an end the influence of the so-called oligarchs on state officials. The poll was conducted at the end of February in 100 different cities in towns across Russia. Fourteen percent of those polled disagreed with the statement, while 31 percent did not have an opinion. JAC

THE NEW UNION OF OLIGARCHS The following table lists the 27 members of the bureau of Russian Union of Industrialists and Oligarchs, according to Interfax-AFI on 27 February.

Unified Energy Systems Chairman Anatolii Chubais
Alfa Group Chairman Mikhail Fridman
Interros head Vladimir Potanin
MDM-Bank head Aleksandr Mamut
Impeksbank President Oieg Kiselev
International Industrial Bank Chairman Sergei Pugachev
Uralmash head Kakha Bendukidze
Siberian Aluminum Group President Oleg Deripaska
Sistema Chairman Vladimir Yevtushenkov
YUKOS Chairman Mikhail Khodorkovskii
Severstal General Director Aleksei Mordashov
Gidromash President Vladimir Luzyanin
Vympelkom General Director Dmitrii Zimin
Avangard Chairman Vakhtang Koveshnikov
Bankirskii Dom St. Petersburg President Vladimir Kogan
Troika Dialog Ruben Vardanyan
Interfax agency General Director Mikhail Komissar
Interkhimprom President Boris Titov
Ust-Ilimskii LPK Chairman Nikolai Makarov
Kraneks Chairman Yurii Tokaev
Sterkh1 Director Evgenii Malgin
RPSS President Arkadii Volskii
RPSS Vice President Viktor Dombrovskii
RPSS Vice President Valerii Nikulin
Coordinating Council of the Association of Russian Workers General Director Oleg Yeremeev
International Fund for Investment and Privatization Chairman Vladimir Shcherbakov
All-Russian Union of Insurers President Igor Yurgens

PEOPLE'S DEPUTY GROUP HAS DISCIPLINE PROBLEMS? The People's Deputy group in the State Duma, which some sources suggest is being groomed as an alternative pro-presidential party to Unity, appears to be having discipline problems similar to those that have plagued that party (see "RFE/RL Russian Political Weekly," 2 February 2001). The Communist Party is refusing to reveal the names of the deputies who have signed its petition calling for a vote of no confidence in the government; however, "Kommersant-Daily" reported on 1 March that according to its unnamed sources, ten or so members of the People's Deputy group are among the signatories. The next day, however, People's Deputy leader Gennadii Raikov told reporters that reports in the mass media that "a number of members" of his group had signed the petition were "untrue." At the same time, ITAR-TASS, which reported Raikov's comments, added that he did not deny that deputy Sergei Shashurin had signed the document "by mistake" and revoked his signature later.

Raikov also confirmed that day that seven of his group's members did not support amendments to 2001 budget during the vote held on 22 February. According to Interfax, Raikov said that the group will discuss the conduct of its members regarding this vote and ask the seven to explain themselves. "Novye Izvestiya" reported on 28 February that 12 members of the group had voted against the amendments and are now facing "possible expulsion." Raikov, however, said that it is "forbidden to punish a deputy for his opinion," however, at the same time he added that "we have a set team of deputies" and if a person wants to play on that team, he should play by the rules. Among the dozen deputies whom "Novye Izvestiya" claimed had "fallen into disfavor" were Ivan Grachev, chairman of the Duma's Commission on the Development of Mortgage Credits, Deputy Chair of the Budget Committee Oksana Dmitrieva, Deputy Chair of the Information Policy Committee Boris Reznik, and Deputy Chairman of the Regulations Committee Sergei Zagidullin. The group has 62 members, according to the website, According to the daily, which is controlled by Boris Berezovskii, the group's deputies were informed by deputy presidential administration head Vladislav Surikov on the eve of the vote that they must support the government unequivocally.

"Novye "Izvestiya" did not comment on how the deputies' mutiny will affect that group's plan to become a new party of power. According to "Moskovskie Novosti" on 20 February, Surikov has been trying to nurture the group's birth into a political party, and the Kremlin had decided to use People's Deputy to a create political counterweight to Unity. The publication even asserted that the People's Deputy group is closer to the presidential administration's chief poltiical administration than even Unity.

According to "Novye Izvestiya," the lion's share of the organizational work and control over discipline is practically concentrated in the hands of the group's "grey cardinal," the leader of its apparatus, Viktor Tyutkin. The newspaper reported that members of the group have complained on more than one occasion that Tyutkin was elected not from the ranks of its legislators but was nominated to oversee them by the special services. However, a press release from the group issued on 16 February denied that either the Kremlin or the Federal Security Service had had any involvement in the creation of the deputies' group, "Nezavisimaya gazeta" reported on 17 February. JAC

COMINGS & GOINGS IN: Former Energy Minister Aleksandr Gavrin has been nominated by Tyumen Oblast Governor Sergei Sobyanin to serve as Tyumen Oblast's representative in the Federation Council. Tyumen's legislature approved Gavrin's nomination on 27 February, according to "Kommersant-Daily." Gavrin was dismissed by President Putin last month for his role in the months-long energy crisis in Primorskii Krai.

POLITICAL CALENDAR 11 March: Iranian President Mohammad Khatami is expected to visit Moscow

14 March: State Duma will debate vote of no confidence in the government, "Nezavisimaya gazeta" reported on 2 March

Second half of March: President Putin will deliver his annual address to the Federal Assembly, Interfax reported on 2 March

Second half of March: The government will submit a bill on its privatization program to the Duma, according to Interfax.

15 March: The government will consider draft legislation on combating money laundering, according to Interfax

21 March: The Ministry of Finance will submit its version of the profit tax on organizations to the government, according to "Izvestiya" on 1 March

22 March: State Duma will debate in its second reading a law allowing the import of spent nuclear fuel

29 March: The government will review a newly elaborated concept for pension reform, according to Pension Fund head Mikhail Zurabov

1 April: The government should have prepared its concept for reform of the railway system, according to "Izvestiya" on 1 March

25 May: Russian Union of Industrialists and Entrepeneurs will hold its 12th congress, according to "Vremya novostei" on 28 February

22 June: Annual shareholder meeting for Tatneft, according to Interfax on 27 February.