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Russia Report: December 3, 2001

3 December 2001, Volume 1, Number 30
TWO RIVAL CLANS VIE FOR POWER IN THE KREMLIN. Last week, the Russian ruling elite sent a signal that sounded more than familiar to most observers of post-Soviet Russia. On 26 November, the "Moskovia" private television channel announced that the head of the presidential administration, Aleksandr Voloshin, had resigned. Although it turned out that Voloshin had not yet resigned, that disclosure triggered rumors and speculations about a new political struggle within the Kremlin.

What is at stake in the present power-sharing struggle is much more than just complete control over the president's administrative apparatus. The struggle is over control over Russia's strategic resources and cash flows in the Russian economy, and is a direct consequence of the world economic recession that followed the 11 September terrorist attacks. Despite the fall in oil prices, Russian leaders keep saying that the country's economic indicators allow them to remain optimistic about the future. However, Moscow's refusal to comply with a request by the Organization of Petroleum Exporting Countries (OPEC) to substantially reduce its oil output testifies to the contrary (see "RFE/RL Newsline," 26 November 2001).

On 29 November, "Obshchaya gazeta" quoted Union of Rightist Forces leader Boris Nemtsov as saying that Russia, too, is awaiting its share of economic troubles. According to Nemtsov, "Putin wants to have by his side the most devoted, loyal, and reliable [collaborators]" in anticipation of a crisis. If we assume that Nemtsov is right, should Putin opt for structural economic reforms to cope with the crisis, he would need to secure control over financial resources. Should he decide to implement administrative measures and demand more discipline from representatives of the executive branch, he would need to rely on the judiciary and law enforcement agencies. Therefore, in both cases, one should expect a new wave of power struggles in the near future.

As was the case during the 1996 presidential campaign, the current power struggle pits two rival clans against each other while the head of state remains above the melee. This time, the "outgoing team" is the one which won the 1996 and 2000 presidential elections, as well as the 1999 State Duma race. Among the key figures of this team are Voloshin, Prime Minister Mikhail Kasyanov, Unified Energy System (EES) chairman Anatolii Chubais, Railways Minister Nikolai Aksenenko, and LogoVAZ chairman Boris Berezovsky. And the "incoming team," which is reportedly trying to gain control over the presidential administration, includes the head of the Federal Security Service (FSB), Nikolai Patrushev, and his deputy, Yurii Zaostrovtsev. Zaostrovtsev runs the FSB economic counterespionage section and is believed to have played a key role during the anti-NTV campaign and in recent attacks against the leadership of the Customs Committee (see "RFE/RL Newsline," 30 November 2001). Patrushev and Zaostrovtsev are also said to have the upper hand in the office of the Prosecutor-General's Office and the Moscow city courts. The "incoming team" is not only seeking control over the presidential administration -- Patrushev is seen as a potential candidate to succeed Voloshin -- but also over the Prime Minister's office as well as Russia's natural monopolies and natural resources, such as, the Railways Ministry, EES, diamond manufacture ALROSA, and Gazprom.

Up until 26 November "Moskovia" was a little-known television channel, even in the Russian capital, and had kept silent on domestic political issues. And it would probably have remained little known, except for the fact that it is run by Mezhprombank chairman Sergei Pugachev, a man whom "Izvestiya" and the "Ekspert" economic weekly have already branded as the "new oligarch" close to Putin (see "Political Index" below). Mezhprombank is believed to be Russia's largest private bank. It is also the country's third-biggest bank after the Savings Bank (Sberbank) and the Foreign Trade Bank (Vneshekonombank).

According to "Obshchaya gazeta," Finance Minister Aleksei Kudrin recently protested Pugachev's claims that the government owes $200 million to Mezhprombank. Soon after, the Office of Prosecutor-General started investigating Kudrin's activities when he was in charge of St. Petersburg's finances in the mid-1990s, "Obshchaya gazeta" reported on 29 November. According to the weekly, Putin stopped the investigation and ordered that the debt be repaid to Mezhprombank.

Since Putin came to power in March 2000, there has been a lot of speculation in the Russian media about a confrontation between members of Yeltsin's entourage -- the so-called "Family" -- and FSB officers close to the new president, the so-called St. Petersburg group. But whatever the outcome of the present struggle is, there will be little change for Russia since it will affect individuals, rather than address the structural problems of Russia's governance. The two clans share several patterns of behavior that are instrumental in shaping the current decision-making process and provide a background favorable for nepotism, abuses of power, and the weakening of the state capacity.

Focusing on which elite group -- or clan -- is the most powerful, few Russian observers have noted that most of Russia's shortcomings do not originate from individuals, but from the overpowerful executive branch that strengthens collusion between the political and financial spheres, the state policy of patronage that leads to clan logic, and the highly secretive environment that encourages confrontation and power struggles. (By Virginie Coulloudon, director of regional analysis at RFE/RL. She is a former project director at the Davis Center for Russian Studies, Harvard University.)

ACCESSING PUTIN. If a recent table published in "Kommersant-Daily" in its 24 November issue showing a list of meetings of top Russian businessmen with President Putin during 2001 is at all representative of comings and goings at the Kremlin, then oligarchs from the Yeltsin-era have not been completely shut out of the presidential administration. While the name of Boris Berezovsky has been struck off the visitors list, an old Yeltsin ally, Russian Aluminum head Oleg Deripaska, appears to have had the next best success in reaching Putin -- with the exception of the so-called "government oligarchs," Unified Energy Systems head Anatolii Chubais and Gazprom head Aleksei Miller. But Deripaska has always shown a lively interest in the inner workings of the Russian government under Putin's stewardship. Last fall, he volunteered to serve on more than 27 commissions, including one on foreign trade and customs-tariff policies, "Vedomosti" reported on 20 September. The keenness of Deripaska's enthusiasm prompted the deputy head of the government's apparatus, Aleksei Volin, to comment that "if Deripaska joined all of these commissions, it's difficult to understand how he could run his own company." Sistema head Vladimir Yevtushenkov was similarly eager at the time, requesting membership on nine government commissions, including one on industrial policy and problems of the military-industrial complex.

But since "Kommersant's" list was compiled based only on meetings reported in the press, it may not provide a complete list of Putin's frequent visitors. After all, Sergei Puchachev, head of Mezhprombank, is the oligarch du jour in the presidential administration, if the Moscow-based press is to be believed. In March, "Versiya" dubbed Pugachev "one of the most politically influential oligarchs in recent times" (see "RFE/RL Russian Political Weekly," 16 April 2001). And more recently, "Vedomosti" suggested that Pugachev has control over the Office of the Prosecutor-General, while "Vremya MN" charged on 28 November that Pugachev is also behind a "media campaign" to expel the "Family" from the White House and Kremlin. And that, according to the daily, is why Pugachev's name was not included initially in the list of businessmen meeting with Putin on 23 November. (Julie A. Corwin)

Oligarch______________________________# of meetings*

Oleg Deripaska, Russian Aluminum________________5
Anatolii Chubais, Unified Energy Systems____________5
Aleksei Miller, Gazprom_________________________5
Semen Vainshtok, Transneft______________________3
Vagit Alekperov, LUKoil__________________________3
Aleksei Mordashov, Severstal______________________3
Andrei Kazmin, Sberbank_________________________3
Vladimir Potanin, Interros_________________________3
Yevgenii Shvidler, Sibneft_________________________3
Kakha Bendukidze, United Machine Works___________2
Vladimir Bogdanov, Surgutneftegaz_________________2
Viktor Vekselberg, SUAL__________________________2
Arkadii Volskii, Union of Industrialists and____________2
Entrepreneurs Vladimir Kogan, Promstroibank_____________________2
Vladimir Lisin, NLMK______________________________2
Mikhail Fridman, Alfa-Bank_________________________2
Mikhail Khodorkovskii, YUKOS_______________________2
Vladimir Yevtushenkov, Sistema______________________1
Oleg Kiselev, Metalloinvest__________________________1
Aleksandr Mamut, MDM Bank_____________________1

*Based only on the basis of meetings reported in the press and does not include tally from meeting between Putin and the board members of the Russian Union of Industrialists and Entrepreneurs on 23 November.

Source: "Kommersant-Daily," 24 November 2001

DUMA PASSES FIRST ELEMENTS OF LEGAL REFORM... Last week, deputies gave final approval to a number of President Putin's central reforms, legal and pension reforms and passed the 2002 budget in its third reading. On 28 November, the Duma approved on the third and final reading three bills that are part of an effort led by the presidential administration to reform the legal system. The bill on the constitutional court stipulates 70 as the retirement age for judges which will take effect in 2005 -- only current Constitutional Court Chairman Marat Baglai and Judge Anatolii Sliva will be affected by the new limit. And the bill on the court system sets the age of 65 as the age limit for judges on other courts. The third bill, on the status of judges, extends professional requirements for judges as well as introducing open competition for judicial offices. Judges' immunity from criminal prosecution would also be reduced under the legislation. JAC

...REINS IN POWER OF PROSECUTORS... The previous week, deputies passed in the third and final reading the Criminal Procedure Code, another element of the presidential administration's judicial-reform effort. Under the bill, court warrants for investigation, search and detention will be required as of 1 January 2004, "Vedomosti" reported on 23 November. Trials by jury for serious crimes will be introduced nationwide as of 1 January 2003. The bill was approved with 289 votes in favor and 93 against. Also on 22 November, deputies approved on the second reading a bill raising the legal status of electronic "signatures," such as those entered on websites. JAC

...PASSES PENSION REFORM AND AMNESTY BILLS... On 30 November, deputies approved in the third and final reading three bills that constitute an essential basis for a planned reform of the pension system (see "RFE/RL Russian Political Weekly," 16 July 2001). The bill on workers' pensions establishes three levels of pensions: base, insurance-based and fully funded, "The Moscow Times" reported on 30 November. The state pension law guarantees pensions to those who are not eligible for workers' pensions, while the obligatory pension insurance law establishes a framework for insurance-based pensions. Also on 30 November, deputies approved on third and final reading an amnesty for minors and women, Interfax reported. The vote was 352 in favor with zero abstentions or votes against the measure, reported. The amnesty will apply to some 10,000 minors and 14,000 women charged with petty crimes, a group that represents 9 percent of the overall population of Russian prisoners. JAC

...TINKER WITH CURRENT BUDGET... State Duma deputies approved on 29 November on second and third readings amendments to the 2001 budget. The bill details how 318.4 billion rubles ($10.6 billion) in additional revenue will be spent. Deputies also approved on second reading a bill on the privatization of state and municipal property. The vote was 269 in favor, 88 against, and no abstentions, according to Interfax-AFI. According to the bill, items that will be privatized will be confirmed by a decree of the government and not by federal law, which was the earlier practice, RFE/RL's Russian Service reported. In addition, the bill requires the president to approve of the sale of any enterprise that has strategic significance. Sales of natural monopolies require the parliament's agreement. JAC

...GIVE 2002 BUDGET A PASS... The next day, State Duma deputies passed the 2002 budget in its third reading. The bill was approved with 291 votes in favor, 16 against and one abstention, according to RIA-Novosti. Changes introduced to the bill since the second reading include an amendment providing for a mechanism that protects the budget from sharp fluctuations in world fuel prices. According to the amendment, the government will delay the spending of 68.6 billion rubles from the budget if revenues fall short of projections. According to "The Moscow Times" on 30 November, if the world oil price drops below $16.50 per barrel, the government will forego setting up a planned financial reserve for future debt payments. Currently, the draft budget assumes the average price will be $23.50 per barrel. JAC

...AND PREPARE FOR NEXT YEAR'S CENSUS. Also approved by the Duma on 29 November on first reading was a bill on the next all-Russia census, which will be conducted beginning on 9 October 2002. To pay for the census, some 4 billion rubles ($133.6 million) will be allocated from the federal budget and 1.5 billion rubles from the budgets of the federation subjects, ITAR-TASS reported. JAC


Name of Law______________Date Approved__________# of reading

2002 Budget________________30 November_____________3rd

On amnesty for_______________30 November____________3rd minors and women

2001 Budget________________29 November___________3rd

On privatization______________29 November___________2nd

__________________________30 November___________3rd

On the All-Russia census_______29 November___________1st

On the Constitutional Court____28 November_____________3rd

_________________________22 November_____________2nd

On the judicial system_________28 November____________3rd

__________________________22 November____________2nd

On the status of judges_________28 November____________3rd

__________________________22 November_____________2nd

On workers' pensions___________28 November___________2nd

____________________________30 November___________3rd

On state pensions_____________28 November___________2nd

__________________________30 November____________3rd

On obligatory pension__________28 November___________2nd

insurance____________________30 November___________3rd

Criminal Procedure Code_________22 November___________3rd

On electronic signatures__________22 November___________1st

IN: At the constituent congress for the new "Unity and Fatherland" party on 1 December, delegates selected an 18-member Supreme Council that will be chaired jointly by Emergencies Minister Sergei Shoigu, Moscow Mayor Yurii Luzhkov, and Tatarstan's president, Mintimer Shaimiev. Other members include Duma deputy speakers Lyubov Sliska (Unity) and Artur Chilingarov (OVR), Interior Minister Boris Gryzlov, gymnastics champion Alina Kabaeva, Duma deputies Georgii Boos and Viktor Kulikov (both OVR), Theatrical Society chairman Aleksandr Kalyagin, Olympic wrestler and member of Unity's political council Aleksandr Karelin, Bashkortostan President Murtaza Rakhimov, Tyumen Oblast Governor Sergei Sobyanin, Magadan Oblast Governor Valentin Tsvetkov, St. Petersburg Governor Vladimir Yakovlev, Mordovia President Nikolai Merkushkin, Moscow Institute for Heat Technology General Designer Yurii Solomovov, and the director of the Institute for Transplants and Artificial Organs of the Ministry of Health, Valerii Shumakov. In addition, Aleksandr Bespalov was elected head of the General Committee for the Unity and Fatherland party. Other members of the committee include OVR faction leader Vyacheslav Volodin, Unity faction head Vladimir Pekhtin, duma deputies Aleksandr Vladislavlev (OVR) and Frants Klintsevich (Unity).

OUT: State Duma deputy and former Vladivostok Mayor Viktor Cherepkov announced on 28 November that he is leaving the People's Deputy faction. Cherepkov told journalists in Moscow that when he first joined the group he thought it "would be the chief representative of the people and their interests in the Duma." However, he said, further "analysis has shown that this group has become a lobbyist for the interests of the authorities and not the people."

OUT: Prime Minister Mikhail Kasyanov signed a decree on 19 November dismissing First Deputy Industry, Science and Technologies Minister Grigorii Rapota. Rapota has been transferred to an as yet unnamed position, and Mikhail Lychagin has been named to replace him. Lychagin earlier worked in Kasyanov's secretariat, according to President Putin signed a decree dismissing Deputy Foreign Minister Ivan Sergeev, who has retired, RIA-Novosti reported on 19 November. Also dismissed by decree on 26 November was Deputy Emergency Situations Minister Colonel-General Stanislav Suanov, who is ill.

BACK: Railways Minister Nikolai Aksenenko returned early from his vacation, arriving back at his post on 26 November. Aksenenko had been expected to be out until 7 December, having left for a long vacation last month following the opening of a criminal investigation against him (see "RFE/RL Russian Political Weekly," 30 October 2001).

POLITICAL CALENDAR 1-3 December: Constituent congress of the united party of Unity, Fatherland, and All-Russia

2-4 December: Ethiopian Prime Minister Meles Zenawi to visit Russia

4 December: EU external relations chief Christopher Patten will visit Moscow

6 December: Russian government to consider its tariff policy for 2002

6 December: Russia-NATO Joint Permanent Council to hold regular meeting in Brussels

9 December: President Putin to stop in Germany for a brief visit on his way to Greece

10 December: State Duma to consider Labor Code in its second reading, according to Interfax on 13 November

10 December: U.S. Secretary of State Colin Powell to meet with his Russian counterpart Igor Ivanov in Moscow

10 December: The working group on Russian entry into the World Trade Organization will hold a session in Geneva

13 December: State Duma will consider the 2002 budget in its fourth and final reading

14 December: President Putin to visit Kharkhiv, Ukraine

15 December: Muslim religious holiday of Ramadan ends

15 December: Deadline by which the government should examine a strategy for developing Siberia, according to presidential envoy to the Siberian federal district Leonid Drachevskii on 6 November

16 December: Presidential elections in Altai, Chuvash, and Komi republics

mid-December: Polish Prime Minister Leszek Miller to visit Moscow, RIA-Novosti reported on 21 November

19 December: Deputy Prime Minister Ilya Klebanov will address the State Duma on measures that have been taken to increase security on Russia's passenger airlines

19 December: State Council will hold its next meeting and will discuss the problems of small and medium-sized businesses, "Rossiiskaya gazeta" reported on 23 November

20-21 December: An international conference on the topic of "Islam against Terrorism" will be held in Moscow, ITAR-TASS reported on 9 October

20-22 December: Second presidential judo tournament will be held in Novokuznetsk, Kemerovo Oblast

23 December: Presidential elections in Sakha Republic

25 December: Qatari Emir sheikh Hamad bin Khalifa al Thani will visit Russia, according to ITAR-TASS

26 December: Supreme State Council of the Russia-Belarus Union will meet in Moscow

28 December: Duma's fall session will come to a close, according to ITAR-TASS on 13 July

13 January: Presidential elections in Kabardino-Balkaria and Adygeya

16-17 January: President Putin to visit Poland

second half of January: Foreign Minister Igor Ivanov to visit Japan, ITAR-TASS reported on 28 November

27 January: Presidential elections in North Ossetia

February: Newly established committee for financial monitoring will begin working, according to Finance Minister Aleksei Kudrin on 1 November

February: Spain's Crown Prince Felipe will visit Moscow

March-April: Russia will issue up to $2 billion in Eurobonds, according to Vneshekonombank head Andrei Kostin on 15 November

April: Unified party of Unity and Fatherland to officially register as a political party

April: The St. Petersburg Dialogue, a Russian-German Forum, will hold its second conference in Weimar, Germany, according to ITAR-TASS

April: Gubernatorial elections in Penza Oblast

May: Russia-EU summit to be held

30 May: CIS summit will be held in Chisinau, Moldova

9-16 October 2002: All-Russian census will be held