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Russia Report: February 23, 2000

23 February 2000, Volume 2, Number 8
Acting President Vladimir Putin said on 18 February that since the system of electing governors has already come into effect, "it would not be right to go back on it," ITAR-TASS reported. Putin was commenting on the recent statements of some Russian officials that regional heads should be appointed by Moscow rather than elected (see "RFE/RL Russian Federation Report," 16 February 2000). He added that appointing governors is not the "only way to strengthen vertical management" in the Russian Federation. Voronezh Governor Ivan Shabanov announced on 9 February that he favors the presidential appointment of governors, while "Vremya MN" reported the same day that Tula Governor Vasilli Starodubtsev opposes the measure. JAC

In an interview with "Trud" on 19 February, Kemerovo Governor and presidential candidate Aman Tuleev outlined his plan for administrative reform of the Russian federation. He suggested reducing the number of regions by one third and having the Kremlin appoint governors. In Tuleev's view, the number of regions should range between 30 and 35. He suggested that the restructuring start in Kuzbass, as Kemerovo Oblast is merged with the bread-producing region of Altai Krai and the oil-producing region of Tomsk Oblast. According to "Kommersant-Daily" the previous day, Tuleev believes that a reduction in the number of regions is needed so that Russia's president has the possibility of conducting normal relations with regional leaders. Tuleev reasoned that with 89, this is simply impossible. According to Tuleev, his Siberian colleagues in general "understand that he is right, but they are afraid." According to "Kommersant-Daily," Tuleev made his suggestions for refashioning the Russian federation, as soon as he had concluded a number of "gentlemen's agreements" with the Kremlin, such as one in which the Transportation Ministry agreed to extend special customs privileges for export freight from Kemerovo oblast. Media magnate Boris Berezovskii owns a controlling interest in "Kommersant-Daily." Berezovskii's company LogoVAZ recently acquired a stake in Novokuznetsk Metallurgical Combine, over which Governor Tuleev has been battling for control (see "RFE/RL Russian Federation Report," 15 December 1999 and End Note below.) JAC

Interior Minister Vladimir Rushailo plans to reorganize his ministry so that all criminal police units throughout Russia are subordinated directly to Interior Ministry headquarters in Moscow, "Segodnya" reported on 17 February. Local authorities will supervise only the activities of district policemen, traffic cops, and similar personnel. According to the daily, this is analogous to the U.S. justice system. The formal justification for the restructuring is to disassociate local law enforcement units from local authorities so they are better able to battle official corruption; however, the newspaper suggests that the move is in keeping with the Kremlin's efforts to centralize control and strengthen vertical power. JAC

Addressing a gathering of the interregional association Siberian Accord, in Irkutsk on 18 February, acting President Putin said that "the improvement of the living standards of the people [in Siberia] must be the end goal of any discussion of economic policy in Siberia," according to ITAR-TASS. Putin noted that despite Siberia's vast natural resources, the population there "is poorer than in the country as a whole." Nevertheless, "Siberians are a state-minded people and put the country's interests in the forefront," he added. The pro-Kremlin party Unity did particularly well in Siberia and the Far East during the 19 December State Duma elections. JAC

Putin also told members of Siberian Accord that he believed that the borders of Russia with neighboring countries, particularly Mongolia, need to be strengthened. He added that it is necessary to develop further trade relations between regions and foreign countries, particularly, China. ITAR-TASS reported the same day that the rate of cattle theft along the border of Mongolia and Republic of Tuva has climbed dramatically, with the majority of the cattle being spirited away from Tuva to Mongolia. JAC

Siberian Accord Executive Director Vladimir Ivankov does not exclude the possibility that Siberia will secede from the European part of Russia, "Nezavisimaya gazeta-regiony" reported on 8 February in article entitled "Does Russia Need Siberia?" According to Ivankov, Siberia's population has been abandoned by the center to deal with one problem after another and as a result the demographic situation there is unpredictable. According to the semi-monthly, Siberia together with the Far East occupies 80 percent of Russian territory but contains only 20 percent of its population. Living standards there are 20 times lower than in Moscow and two to three times lower than in regions bordering the capital. The publication reported that staff of Siberian Accord are placing their hopes on acting President Putin, because in contrast to his predecessors, Putin has attentively looked into Siberia's problems. According to Ivankov, Putin, once "wore out" the association's specialists with many questions about the concrete details of the region's situation. They admit that they do not yet know Putin's economic views, but they draw comfort from the fact that he has placed special emphasis on development of domestic industry. According to ITAR-TASS on 16 February, 19 regions are members of Siberian Accord: Altai, Buryatia, Tuva and Khakassia Republics, Altai and Krasnoyarsk Krais, Irkutsk, Kemerovo, Novosibirsk, Omsk, Tomsk, Tyumen and Chita Oblasts, and the Aginsk-Buryat, Taimyr, Ust-Ordinskii, Khanty-Mansii, Evenk and Yamalo-Nenets Autonomous Okrugs. JAC

The St. Petersburg Sea Port, Primorskii Krai's Eastern Port, the Far East Steamship Line (DVMP), the Sovkomflot Steamship Line, and Sibirskii Aluminum have signed a protocol on setting up a company to handle container shipments along the Trans-Siberian Railroad and sea routes linking Europe and Russia's Far East, "Vedomosti" reported on 18 February. Backed by the Transport and Rail Ministries, the venture aims to take a larger share of the container-shipping business, 90 percent of which is currently controlled by foreign companies. DVMP and Sovkomflot are the federation's largest steamship firms, while Sibirskii Aluminum is interested in securing contracts for its subsidiary Abakanvagonmash, which is Russia's only manufacturer of railroad containers. Both ports also expected to benefit from increased shipment volumes. An agreement is expected to be concluded within the next couple of months. JC

Arguing that the gubernatorial collegium formed in October 1998 has had insufficient influence on the resolution of socio-economic problems in the oblast, Governor Vladislav Tikhomirov has decided to form a regional government, "Nezavisimaya gazeta" reported on 19 February. Tikhomirov's deputy, Anatolii Golovkov, has been named to head the new cabinet. JC

Seven candidates have registered for gubernatorial elections in Khanty-Mansii Autonomous Okrug on 26 March, Interfax-Eurasia reported on 18 February. Competing for the post will be the current head of the okrug's administration Aleksandr Filipenko, Chairman of the Pensioners' Party Sergei Atroshenko, head of Yukos-Geo Sergei Kravets, State Medical Institute Rector Sergei Soloviev, Association of Reserve Officers Vice President Aleksandr Chusovitin, and Valerii Abramov and Yevgenii Ostapenko, both of whom are currently unemployed. JAC

Incumbent Governor Vladimir Sergeenkov has come under fire from his fellow challengers in the 26 March gubernatorial elections in Kirov Oblast. "Nezavisimaya gazeta" reported on 19 February that Valentin Pervakov has filed a lawsuit against Sergeenkov for slander. Sergei Sharenkov charged that the current governor has been conducting an election campaign long before the official start and has "bought up"--illegally--almost all local media outlets. Andrei Alpatov, for his part, remarked that the very day he announced his candidacy, Sergeenkov ordered a thorough check of Alpatov's company, Vyatinvestfond. Meanwhile, Sergeenkov's challengers have also pointed a finger at the head of the oblast election committee, who they say ignored candidates' complaints about Sergeenkov's illegal tactics during the campaign for December's Duma election. JC

After talks with federal Minister of Atomic Energy Yevgenii Adamov failed to yield results, workers at the Leningrad nuclear power station announced that a protest action will begin at 5:00 p.m. local time on 28 February. According to "Kommersant-Daily" on 19 February, those workers believe they have found a way to circumvent legislation prohibiting strikes in the nuclear sector. Instead of organizing a walkout or reducing output, the power station's strike committee has proposed that work on the renovation of the first reactor be halted. While the station's other three reactors will continue to produce sufficient amounts of electricity, this move would put the first reactor out of commission, resulting in large bills for the station when the block is put back into commission. Workers at the Leningrad nuclear power station are demanding wage hikes, compensation for the non-indexation of wages last year, social benefits, and the dismissal of the station's director. A conflict has been brewing there since the beginning of the year, when the strike committee was formed. JC

RFE/RL Russian Service's "Korrespondentskii chas" reported on 12 February that the republic's hospitals may soon run out of blood--owing to a lack of funding for local blood transfusion centers. Over the past four months, those centers have received no money to pay for new equipment, for donations of new blood, or for the preparation of blood samples. As a result, they have had to curtail some aspects of their work. Part of the problem is that the means of compensating donors has changed over the past few years: whereas earlier those donating blood received coupons for a free meal in a local restaurant, today the donor is entitled to receive cash. Currently, donors in the republic are owed some 1,5 million rubles ($52,200), but according to "Korrespondentskii chas" Mordovia's government is not planning to offer any new funding anytime soon. JC

A "New York Times" correspondent from Moscow and another employee of that newspaper's office in the Russian capital were recently detained in a zone out of bounds for foreigners who do not have a special permit. "Kommersant-Daily" on 12 February reported that Patrick Tyler and Sofia Kishkovskii were discovered close to the Northern Fleet base of Skalistyi and, by their own admission, were interested in the deserted military settlement of Saida-Gyba, where nuclear components from decommissioned atomic submarines are being stored afloat until such time as a storage area on land has been built. Under a project drawn up the federal Ministry of Atomic Energy and Ministry of Defense, a "cordon sanitaire" to be drawn around that storage area would include a water intake system as well as Skalistyi's electric power station and cemetery. Local residents have strongly protested those plans and are to hold a referendum on the project on 26 March. JC

"Izvestiya" reported on 17 February that so-called social stores, where prices are on average 20-30 percent cheaper than elsewhere, are hiring psychologists. Owing to the large number of customers seeking to snap up various bargains, arguments and scuffles frequently break out at the stores' counters, particularly, according to the newspaper, among elderly shoppers. The psychologists are on hand to calm down the over-excited bargain-hunter and, during quieter times, even give advise to the undecided shopper. Nizhnii Novogorod, with a population of some 1.4 million, has 22 social stores. JC

Citing recent findings by the Russian Glasnost Foundation, the chief editors of three local independent newspapers have issued a memorandum complaining that oblast residents receive information on only some 10 percent of what is really going in the region, "Izvestiya" reported on 22 February. In particular, the journalists expressed concern over the pressure that the administration exerts on the press, attempts to deprive independent publications of benefits provided for by the law, the eviction of newspapers from leased premises, and the creation of a certain "gubernatorial media concern." JC

The local branch of the Communist Party has gone to court to contest the results of the 19 December State Duma elections in the single-mandate District No. 141, which was won by Mikhail Kuznetsov, a former member of the caucus of the Liberal Democratic Party of Russia, "Nezavisimaya gazeta" reported on 16 February. According to an investigation carried out by Communist Party representatives, some voters in various electoral districts were asked to vote by portable ballot box even though they had not officially applied to vote in this way, In particular, the Communists are calling into question the election results in those electoral districts, which have a combined total of 60,000 residents and in which every fourth voter cast his/her vote by means of portable ballot box. JC

The European Bank for Reconstruction and Development has announced that under its program offering support to small and medium-sized businesses, it is increasing the volume of credit available to such enterprises in St. Petersburg, "Izvestiya" reported on 17 February. The program was introduced in St. Petersburg in 1995, since when some 1,800 credits totaling more than $38 million have been issued. According to an EBRD official, it is proposed that this year 100 credits will be granted each month. "Izvestiya" notes that 23 Russian regions are taking part in the program. JC

By Julie A. Corwin

Not content with winning seats in Russia's national legislature last December, two of Russia's best-known "oligarchs," LogoVAZ head Boris Berezovskii and Sibneft head Roman Abramovich, appear to be extending their influence to other sectors of the Russian economy and other Russian regions. This month, LogoVAZ and Sibneft revealed they are in the process of acquiring controlling interests in two of Russia's largest aluminum smelters, Bratsk and Krasnoyarsk. It was also announced that LogoVAZ has acquired a controlling interest in the Novokuznetsk Metallurgical Combine in Kemerovo Oblast. With these acquisitions, the Berezovskii/Abramovich tandem will have control over an estimated 60-70 percent of Russia's aluminum industry or some 10-20 percent of the world aluminum market. Aluminum is one of Russia's most lucrative industries and, like the oil and gas sector, provides a steady flow of hard currency from exports.

The timing of Berezovskii/Abramovich's moves, just before the 26 March presidential elections, has caused some analysts to conclude the duo is engaging in a last-minute asset grab before acting President Vladimir Putin is elected. While the prospect of a hand at Russia's helm stronger than former President Boris Yeltsin's shaky grip could be speeding the oligarchs' efforts, the aluminum acquisitions might be more accurately seen as part of a longer-term, two-track strategy to expand their influence not just economically--but also politically--across Russia

Consider their role in past gubernatorial elections. Berezovskii played a highly publicized part in the April 1998 election of Krasnoyarsk Krai Governor Aleksandr Lebed. Almost two years later, that investment appears to be paying off for Lebed as well as Berezovskii. On 20 February, the board of Krasnoyarsk Aluminum voted to exclude Chairman Anatolii Bykov, a prominent foe of Lebed, from its ranks. "Segodnya" reported on 19 February that Abramovich is trying to persuade Bykov to sell him his shares in Krasnoyarsk Aluminum.

Within the last six months, governors close to Berezovskii and Abramovich were elected in Omsk and Novosibirsk Oblasts. Just two months before the elections, Omsk Governor Leonid Polezhaev hailed the positive role played by Sibneft in its home region, telling an audience in Chukotka that the company had helped pay off the region's 500 million ruble ($17.4 million) debt to its pensioners. Polezhaev's re-election for another four years should ensure that Sibneft continues to enjoy a favorable environment in which to operate.

Meanwhile, the 9 January 2000 election of Novosibirsk Mayor Viktor Tolokonskii to the office of governor may lay the groundwork for extending Berezovskii's economic influence into that region. Novosibirsk Oblast is home to Novosibirsk Electrorod factory, Russia's largest producer of electrorods for the aluminum and metallurgical industry. When incumbent Novosibirsk Governor Vitalii Mukha lost his post, Mukha's plans to reorganize the company and merge it with a new, partly foreign-owned firm fell by the wayside.

Judging by LogoVAZ's acquisition of an interest in Novokuznetsk, Kemerovo is apparently another region that excites Berezovskii's interest. However, he has not yet won over Kemerovo Governor Aman Tuleev, since that regional head continues to fight for control over the factory. Just recently, Tuleev won a legal battle in the struggle for control over that plant when a local court extended external management of the company for another six months. The two men may be able to accommodate each other in some way. Tuleev, who is nominally a Communist, is perhaps best known for his pragmatism, having supported a number of the pro-Kremlin bloc Unity's candidates in the State Duma elections, despite appearing as number four on the Communists' list. In the meantime, Berezovskii continues applying pressure on Tuleev in the newspapers he controls. For example, "Kommersant-Daily" alleged on 16 February that Tuleev is receiving financial support for his presidential bid from the Kremlin.

After Kemerovo, Berezovskii's next stop might be Samara Oblast, where incumbent Governor Konstantin Titov is up for re-election in December 2000. In that region, Berezovskii reportedly supports Samara Mayor Georgii Limanskii. Samara boasts one of Russia's strongest economies. And while Limanskii may have Berezovskii's support, he may no longer have the Kremlin's. In November, Unity head and Emergencies Minister Sergei Shoigu came to Samara and blessed Limanskii's effort to form the regional branch of Unity. However, AvtoVAZ Chairman Vladimir Kadannikov and his supporters three months later held a founding congress for its branch of Unity, electing Kadannikov leader of the Unity branch. According to "Kommersant-Daily" on 22 February, the presidential administration reportedly agreed to Kadannikov's selection.

Exactly how the Kremlin--and specifically acting President Putin--views Berezovskii/Abramovich's political and business activities is unclear. The Kremlin, at least, would have Russian voters believe that its relationship with the duo is very remote: Putin has never publicly acknowledged any link with either oligarch, and in a recent question-and-answer session with readers of "Komsomolskaya pravda," he promised to make sure that Berezovskii and Abramovich answer for the legal consequences of their actions, should any criminal activity be found. As a presidential candidate, no matter how comfortable his lead, Putin would be ill-advised to speak warmly of Berezovskii, a figure universally loathed by Russia's voting public.

The federal Anti-Monopoly Ministry has said it will make a decision on the oligarchs' recent moves in the aluminum market around 7 March. Most likely the ministry will find a good reason to delay an announcement for another two or three weeks. And Putin's real attitude toward Berezovskii/Abramovich may not become clear until after 26 March--and the place to watch may not be Moscow but much farther east, in Siberia and along the Volga.