August 23, 1997  
This Date's Issues: 1139 •1140  • 

Johnson's Russia List [list two]
#1140
23 August 1997
djohnson@cdi.org

[Note from David Johnson:
1. Moskovskiy Komsomolets: Nemtsov on Government 
Personalities, Scandals.
2. Moskovskiye Novosti: Banks' Shifting Role in Power 
Structure Eyed.] 

*******

Nemtsov on Government Personalities, Scandals 

Moskovskiy Komsomolets
August 19, 1997
[translation for personal use only]
Interview with Boris Nemtsov by Natalya Gotova of Moskovskiy
Komsomolets, Mikhail Sokolov of Radio Liberty, and Andrey Uglanov,
first deputy editor in chief of Argumenty i Fakty under the "Point
of View" rubric; date, place not given: "If the President Can Be
Called Czar, Then I Am a Monarchist" -- first four paragraphs are
introduction

Boris Nemtsov: "In spite of the summer, a phased transition from
semi-gangster capitalism to the natural rules of the game is underway in
the country."
Summer. Important people from [the world of] power and business have
gone on vacation -- to lie on the beaches of the warm sea, lazily sipping
choice Chablis from wineglasses. And to try and forget, if only for a
time, about the deals worth billions, the scandal-racked division of
property, the passions over filling the treasury coffers, and about us
journalists, who are forever pestering the powers that be with our
questions. But even though he is vacationing with his family in his native
Sochi, First Vice Premier Boris Nemtsov nonetheless agreed to meet with
journalists.
We found the first vice premier on the tennis court, where he was
fiercely playing out a game of tennis with friends from Nizhnyy [Novgorod].
"I won!" he proudly informed us, "and that is the way it goes, three
hours, twice a day. Now you will no longer be able to write that I should
not wear white." And here he ostentatiously showed off a fine athletic
form, doing 16 chin-ups on the horizontal bar. Boris Nemtsov was not able
to show off before us on a surf board or a sports scooter -- the weather
let him down. But the protracted thunderstorm proved a great help to us --
the conversation with the first vice premier turned out to be a long
one....
Our correspondent Natalya Gotova, Mikhail Sokolov, a commentator from
Radio Liberty, and Andrey Uglanov, first deputy editor in chief of
Argumenty i Fakty, took part in the conversation with Boris Nemtsov... 
[Introduction ends]
Day One. Morning [Subhead]
[Moskovskiy Komsomolets] What is your comment on the opinion
expressed by certain media that, just when a balance (between Chubays and
Chernomyrdin) had been established in the new government, your excessive
independence once again destroyed the balance of forces within the
government? You and the premier especially differ, in my opinion, in your
reactions to the recent investment tenders for the sale of Svyazinvest and
RAO [Russian Joint-Stock Company] Norilskiy Nikel shares.
[Nemtsov] You mean, in the past people would say that "it was all
Chubays' fault," and now "it is all Nemtsov's fault"? I can say that not a
single decision can be passed by the government until it is approved by the
prime minister, and there have not yet been any problems that would point
to a split in the government. The government that has now taken shape is
one that corresponds to the current state of Russia: Chernomyrdin, who
represents Russia Is Our Home, Chubays, who to a certain degree represents
Russia's Choice, and I, as a non-party person who is nevertheless close to
the Yabloko bloc.
There are some problems between these parties, but I feel that they
are not so antagonistic that a common language cannot be found. We are
driven by a single goal -- to boost the country's economy, lead the country
out of the crisis, and resolve the most complicated social problems over
the payment of pensions and wages. And I can say that the future of all
members of the government depends entirely on whether or not these goals
are achieved. If they are, we will be able to go on working. If not, we
will be kicked out. As for the tender for the sale of RAO Norilskiy Nikel
shares.... Loans-for-shares auctions are not the best method of
privatization. The state could earn more money if it sold these blocks of
shares at open auctions. Second, the actual procedure of appropriating
shares under the loans-for-shares model cannot be carried out exclusively
through the efforts of the state: The tender is conducted by whoever
controls the shares received for giving the state credits. That is why all
loans-for-shares auctions are doomed to run into many problems and scandals
-- be it the sale of Sibneft [Siberian Oil] shares or Norilskiy Nikel
shares. In all fairness, I should say that the Norilskiy Nikel auction was
held in a much more open manner. As proof I will cite only one incident.
Under the rules set by Sibneft, the money had to be deposited with SBS-Agro
(that is, "its own" bank). Whereas when Norilskiy Nikel shares were sold,
the money could be deposited not just with MFK [bank], but also with the
Central Bank -- the choice was theirs. There was free access to the
Norilskiy Nikel auction -- all journalists, with no restrictions, were
invited. During the Sibneft [auction] no one was allowed within pistol
shot. During the Sibneft auction, any competitors (of Berezovskiy --
editor) who might have appeared were sent packing for absurd reasons. Not
allowing someone to take part in the tender at Norilskiy Nikel was unheard
of. Therefore, in spite of the defects of loans-for-shares auctions, the
sale of Norilskiy Nikel was held in a much fairer manner.
[Moskovskiy Komsomolets] An opponent to Uneximbank during the holding
of the Norilskiy Nikel tender was the Russian-British Trans World Group
Company, which maintained that Norilskiy Nikel was being sold too cheaply. 
Essentially, it was ignored. Does it not seem to you that we still have a
gradation into [on the one hand] business groups which take priority with
various government leaders, and [on the other hand] the rest of the
business world which does not have a voice?
[Nemtsov] We cannot erase what happened in the past. This is our
history, this is our nightmare. But now, not a single group has any
advantage whatsoever. Since the new government was set up, no privileges
have been granted. Give me one example of a decision that we made that
would have offered someone an advantage. We gave independent producers
free access to the gas pipeline, we set prices on the transportation of
gas, we brought the charter of the natural monopoly, RAO Gazprom, into line
with the law on joint-stock companies. And I hope that in the near future
a contract on the trust management of the state block of shares will be
signed with the chairman of Gazprom's board, Rem Vyakhirev.
All that was once created on the basis of exclusivity is now receding
into oblivion and is being replaced by natural rules. For example,
suppliers of oil for state programs had super-advantages, and [now] they
have lost them. Authorized banks have also lost the right to handle budget
money. For technical reasons we cannot give up their services overnight. 
But all customs accounts are already being transferred to the Central Bank,
and practically the entire budget and the accounts of all the ministries
are being transferred to the treasury for servicing. I think that by 1
January, as was stipulated by the [president's] edict, all the accounts
will be in the treasury.
[Moskovskiy Komsomolets] There were rumors that an extraordinary
meeting of Gazprom shareholders could take place in September, and on the
agenda will be by-elections to the board of directors (it was assumed that
Boris Nemtsov will become chairman of the the board). Will this
shareholders' meeting take place, and what is the current situation at
Gazprom?
[Nemtsov] The next shareholders' meeting should take place in
As for the situation at Gazprom, the general position is as
follows. In the first place, we must extract debts from consumers in the
CIS. This is why the situation regarding relations with Ukraine, Belarus,
and other republics has changed now. They will be paying us money for the
pleasure [of services received]. If they do not, we will cut them off from
the Russian pipeline. I came to this conclusion after I traveled to
Urengoy and Yamburg and saw how drillers and gas extractors have not
received their wages for six months on end. As for the Russian market,
here too they will have to pay for their pleasure. But we made a decision
to offer a discount of up to 40 percent for those who pay on time. We and
the management of Gazprom have a common position on foreign markets, which
is to do everything possible to make Gazprom a monopoly in gas trade, above
all with European countries. If Gazprom's monopoly on the European market
is violated, the state will lose trillions, and Gazprom will lose the
opportunity for investment activity and future work in general. Therefore,
our common position is to create as competitive an environment as possible
within the country in order to bring down the prices, and ensure the
maximum possible monopolization of trade with the outside world so as to
receive a maximum profit....

Day One. Evening [Subhead] [Moskovskiy Komsomolets] In his memoirs,
Korzhakov writes that Yeltsin started winning prestige by fighting against
officials' privileges. You started in the same way. Who do you think will
be the winner in this war -- you or the officials?
[Nemtsov] I do not think that making officials switch to Volga cars
[from foreign cars] is fighting against privileges. It is a banal idea --
to spend budget money that is being spent on the purchase of transportation
to support domestic production. This is patriotism. Whereas, say, in an
African country the president can drive around in a foreign-made car
because cars are not produced there, in Russia officials are obliged to
drive around in Russian- made cars simply so as not to be humiliated before
the Western world.
Officials should definitely have their privileges. But the problem is
that society should know about it, rather than finding out about it from
published memoirs. The problem is one of openness, glasnost. The public
knows that State Duma deputies are entitled to use public transportation
and stay in hotels free of charge, and make free long-distance phone calls.
What is stipulated in the legislation is a privilege, not an abuse. If,
say, a first vice premier has a state dacha in Arkhangelskoye, he pays a
certain amount of money for it, and people know how many state-owned square
meters he is entitled to, they know that he uses the state-owned airplane
to take trips abroad or within the country -- these are also privileges,
not abuses. The public knows that the leadership has these benefits....
[Moskovskiy Komsomolets] Do you feel pressure from the press? Your
telephone conversations being tapped -- is this a first for you?
[Nemtsov] Yes, it is a first. Phone-tapping is not pressure from the
press. It is simply impudence.
[Moskovskiy Komsomolets] Has it been established who was listening
in?
[Nemtsov] I do not know, I am not an expert on phone-tapping. I know
one thing -- all my constitutional rights have been violated (and
Lisovskiy's rights too, incidentally). As citizen Nemtsov I stress that my
civil rights have been violated. I have appealed to the Russian Federation
general prosecutor....
[Moskovskiy Komsomolets] In your opinion, what kind of person is
Security Council Deputy Secretary Boris Berezovskiy?
[Nemtsov] A smart man. Very.
[Moskovskiy Komsomolets] Is he the right person for the job?
[Nemtsov] I do not think so. You cannot combine business and running
the state.
[Moskovskiy Komsomolets] But officially he is not engaged in
business...
[Nemtsov] These words "officially engaged" or "not engaged" have very
little to do with life. Perfectly concrete matters have more to do with
life. For example, the reaction of the media that are under his control. 
While he is formally not engaged in business, that is all he (Berezovskiy
-- editor) ever does.
[Moskovskiy Komsomolets] Do you think that Berezovskiy's intellect
and energy are directed toward constructive goals?
[Nemtsov] Often, yes; even more often, no. If we are talking about
settling the situation in Chechnya, then on the whole his influence is
positive.
[Moskovskiy Komsomolets] And what is his influence on Russian
business?
[Nemtsov] It is difficult for me to judge this -- I am only connected
with business indirectly. But I can draw a general conclusion: It is bad
when a person involved in business has privileges purely because he has
direct access to the state's leadership. In this case either everyone
should have such access, or no one. I prefer the latter. You can meet,
talk. But you should not use your official position to resolve commercial
problems or settle accounts with competitors. As was the case with the
episode of the sale of Svyazinvest shares. People exploited their
unlimited opportunities to influence and express their point of view to
state leaders. This, in fact, is what provoked such a major scandal -- for
summer time. Imagine a situation where an entrepreneur in Nizhnyy Novgorod
takes part in the Svyazinvest tender, loses out, and decides to raise the
same kind of stink. Is such a thing possible? He would simply not have
been allowed into my office. The scandal acquired a special flavor because
a great many high-ranking people were involved in it. These people only
participated in it because official members of the Presidential Staff could
appeal to them.
[Moskovskiy Komsomolets] Such relations between the authorities and
business developed after the presidential elections, when the president
owed his election to a certain financial group -- the so- called "seven
bankers" -- which, for its part, took on certain commitments to support the
current authorities. Do you think that system will be preserved in the
future? [Nemtsov] I do not think that these people were the ones who
brought Boris Yeltsin to power. Having traveled throughout Russia, I have
met thousands of people who campaigned for Yeltsin absolutely unselfishly
and they make no claims on either the president or the government. They
feel that in voting they were making their own choice and not doing a favor
to some politician or other. Whereas others feel that they did do someone
a favor, and that the state should go on repaying them for this for the
rest of their lives. Certainly they made a contribution. But I do not
think that they should demand reparations or compensation for this. That
is absurd. It will not happen. Incidentally, this was precisely the reason
for the scandal. They believe that the authorities are under an obligation
to them, but the current authorities do not feel that way. They are under
no obligation to them. They campaigned for Yeltsin not because they loved
him. But because if he had lost, they would have been out of here a long
time ago. They were thinking about themselves first and foremost. They
could have demanded reparations from Zyuganov. But they needed business
and private property to develop and intelligible rules to be established in
the country. In Yeltsin they saw a person who could secure this.
[Moskovskiy Komsomolets] What will the government do if these people
do not agree to leave the authorities alone? Now much is being said about
the possible dismissal of Boris Berezovskiy from his post as a Security
Council official through a presidential edict on reorganizing the Security
Council....
[Nemtsov] The Lord giveth, the Lord taketh away. If the president
wants to dismiss any official appointed by him, he can easily do it without
a reorganization.
[Moskovskiy Komsomolets] But if the party of power has decided to
quarrel with Mr. Berezovskiy and dismiss him from the Security Council,
this will still not decrease Berezovskiy's influence on Russian Public
Television [ORT], which is under his control....
[Nemtsov] If we have proclaimed a policy of equal conditions for all,
then people who are engaged in business should not be in power. That's the
first point. About ORT: The state owns a controlling interest in this
company and has every opportunity to control it. The managers, the
financial flows, and even the ideological base of this company's work. 
Unfortunately, in the past few years the government has lost all capability
and possibility of controlling what it owns. And only now has this control
begun to manifest itself. If only in relation to the natural monopolies --
Gazprom, RAO YeES Rossii, Transneft.... The issue of ORT is a rather
delicate one. And not because Berezovskiy himself owns a few percent of
the shares. There is also a law on the press. And journalists, even if
they work for a state company, are protected by that law. That is why the
state cannot behave like a bull in a china shop with regard to ORT or other
media. There is [also] journalistic solidarity and freedom of speech.
I have already said that Berezovskiy is smart, and I can add that
everyone thinks that privatization happens when property is bought.
Actually, here in Russia there are three methods of privatization
unconnected with the sale of shares. The first: Imagine that there is a
state company. But those running the company are receiving money from a
private firm. That is, you have the privatization of managers. In this
case all the advantages go to the person who bought off those managers. 
The second is the privatization of financial flows. In this case, you have
a state company, but its money is pumped through private firms, and a
profit is made there. And only after that does direct privatization take
place, that is, the purchase of the company.
And this is Berezovskiy's discovery. Or rather, he is the one who
perfected this scheme. Take Aeroflot, ORT, AvtoVAZ, and other companies. 
Everywhere, the first thing he did was take control of the managers, the
financial flows, and only then, when everything is "taken care of," as my
daughter says, does privatization come. Not many people have managed to
conduct this kind of "privatization" on such a scale. What is more,
officially, everything was done in an absolutely legal manner.
[Moskovskiy Komsomolets] How can one fight this? The companies start
getting mired in credits, the managers in financial commitments, and so
on...
[Nemtsov] If you have efficient owners this is not possible. They
will not allow their company to be run by a group of individuals who have
nothing to do with them [the owners]. If the state is an ineffective
owner, there are two options. The first is to transfer your company into
trust management. The state hands over its rights, on a competitive basis,
to private organizations that will defend its interests: guarantee maximum
profits, the payment of taxes, the preservation of jobs. The second
possibility is real privatization, when the controlling interest is
purchased in a competitive battle.
[Moskovskiy Komsomolets] But every such tender turns out to be
accompanied by a scandal.... [Nemtsov] In spite of the summer, a phased
transition is taking place in the country now. From lawless, semi-gangster
capitalism, when the rules are dictated by whoever is trying to take
possession of state property, to a situation in which the rules are
dictated by the state. Naturally, according to the laws of physics, during
a phased transition huge flare-ups or, as physicists call them,
fluctuations, occur. When people get used to one way of life, and they are
told that now a new one is coming, the ones who were making big money under
the old system rebel. Accordingly, scandals arise, which will die down with
time.
[Moskovskiy Komsomolets] The representatives of semi-gangster
capitalism can also win in an honest battle....
[Nemtsov] Fine. I believe that if Gusinskiy and Berezovskiy had won
the battle for Svyazinvest, then everything would have been quiet. An
owner has one distinctive feature -- he cannot lead a company to bankruptcy
because then he will lose the capital he has invested. Having paid such
big money, nobody of sound mind will worsen the state of the company. He
will try to improve it.
[Moskovskiy Komsomolets] Good intentions are not always realized. 
There is the example of Norilskiy Nikel, where during the loans-for-shares
management by Uneximbank-MFK, the consolidated debts grew from 6 to 24
trillion rubles. Of course the people were doing their best, but still....
[Nemtsov] All people, that is, owners, are different. The
"lazybones" naturally go broke and give way to people who will be better at
management. This is a law of nature, of economic life. If they continue to
work like this, the company will be declared bankrupt, they will be removed
from management, and others will come to do the managing.
[Moskovskiy Komsomolets] Or the state will give them credits, and
everything will continue all over again....
[Nemtsov] While I have been working in the government, no one has
been given credits yet. Or state guarantees of private credits, either. 
In the past, guarantees were given to those who were the first to "crawl
up" to the bosses. But in Samara the president signed an edict on the
procedure for offering state guarantees. No one noticed this edict, but
this edict is also a part of the battle against gangsterism. It says that
state guarantees are offered on a competitive basis. The criteria for this
are the volume of the private capital involved that is unconnected with
state resources, and a minimal percentage of state guarantees on borrowed
funds. The person who asks for a minimal guarantee and invests the maximum
amount of his own funds in the project will be the winner.
[Moskovskiy Komsomolets] For the people, a phased transition is
simply a shakedown among the top people: millions, billions, trillions....
A gap appears between the authorities and the people, and various
political forces try to drive a wedge into it. Are they trying to isolate
you completely from the people, who do not understand what is going on?
[Nemtsov] I do not know where you are getting such an erroneous
impression. Not long ago we were in Kirov. In fact, people understand
everything quite simply: "The state has wrung out huge sums of money from
the bankers to pay doctors, teachers, and the military. The bankers do not
want to hand over the money. They want to be given property for nothing. 
That means that the bankers are bad, and the state is good. The fact that
they are stirring up scandal is natural. The bankers do not want to part
with their money." That is how the people I have had contact with
understand the situation.
[Moskovskiy Komsomolets] If elections take place when you have built
your political system, and most of the population votes communist, they
will do the same thing to your system that communists usually do with
normal economic systems.....
[Nemtsov] The communists can only come to power in one case -- if
economic chaos in the country continues to grow. In a normal country,
where there is no hyper-inflation, where enterprises work and economic
growth is visible, they cannot come [to power] legally, through elections. 
This is a law of nature. If people do not have any particular problems and
they are not taking to the streets to demand the money that is rightfully
theirs, then the communists cannot come to power. Today we are attracting
money into the budget so as to pay these people. In this situation the
communists cannot come to power, in spite of the infinite scandals that
erupt because of them.
[Moskovskiy Komsomolets] What if the plan to collect money for the
revenue side of the budget fails...
[Nemtsov] It will only fail if crazy economic decisions are made. 
But if there are common rules for the entire country, I see no cause for
alarm.
[Moskovskiy Komsomolets] A few words about Chubays, about his
character, perhaps about his ultimate program in terms of his guiding
principles. [Nemtsov] Chubays is one of the finest administrators that I
have ever seen. It is very easy to work with him, he never forgets a
thing. But because Chubays has red hair, people do not like him. Many
Russian politicians are still afraid of saying good things about Chubays. 
They are afraid of losing prestige if they say that he is very competent
and talented.
I am not afraid, because this really is the way it is. At least, in
all the time that I have associated with him, not once have I noticed any
actions that would point to the opposite.
[Moskovskiy Komsomolets] Do you have differences of opinion with him?
[Nemtsov] Sometimes we argue, but we find a common language.... The
fate of Chubays, as high-flown as this may sound, depends entirely on the
general situation in the country. If the country starts scrambling out [of
the crisis], then Chubays's prestige and reputation will be on an
incomparably higher level then now or in the past. If the crisis
continues, then his fate is not to be envied. Chubays is a hostage to the
economic and social situation in the country. Subjectively, in terms of
external perception, of the feeling that accompanies privatization, he will
not be able to prove that he is a good person. And only a general change
for the better in the situation will allow him to prove that he is what he
is. As for his future rise.... He and I already occupy a very high
position in the country. I think that he is an ambitious person, but an
absolutely realistic one. And he knows his limits.
[Moskovskiy Komsomolets] Do you like the way Boris Nikolayevich
Yeltsin treats you? To the onlooker it seems as though his attitude toward
you is a fatherly one. He sees in you his unrealized dream of having a
son. It is known that he wanted a son very badly, but he has two
daughters....
[Nemtsov] You have a Freudian perception of Boris Nikolayevich. But
in general the president treats me very well. His support is of the utmost
importance to my work.
[Moskovskiy Komsomolets] What does he call you? "Son"?
[Nemtsov] Boris Yefimovich. He addresses his subordinates without
any familiarity.
[Moskovskiy Komsomolets] Does he swear?
[Nemtsov] I have never heard him utter a foul word. I am not saying
this because I am speaking to journalists, but because I really never have
heard it. As far as I know, he is very harsh on those who use unprintable
words in his presence.
[Moskovskiy Komsomolets] Then how does Chernomyrdin communicate with
him?
[Nemtsov] I think Viktor Stepanovich [Chernomyrdin] tries to use
[only] printable words when in Boris Nikolayevich's presence...
Day Two [Subhead]
[Moskovskiy Komsomolets] A philosophical question: In the history of
Russia there have been Westernizers and Slavophiles. Between them there
have appeared various Eurasianists. Where do you see your place in this
spectrum?
[Nemtsov] Closer to Stolypin [pre-revolutionary premier]. He had
will. He distinctly and clearly realized the importance of economic
decisions. He was not a populist, and made decisions that produced
results. Perhaps not right away, but in the future. He purposefully
achieved the goals that he set for himself.
[Moskovskiy Komsomolets] Are you not bothered by the fact that
Stolypin was a Russian nationalist and had a fairly harsh attitude toward
the national minorities in Russia?
[Nemtsov] Compared to the current nationalists, he was a fairly
liberal person. At least in public he never permitted himself any attacks
on the ethnic minorities, but on the contrary, believed that Russia was a
multinational state and it was necessary to observe equality for the sake
of preserving peace.
[Moskovskiy Komsomolets] Stolypin was a rather sincere supporter of
the monarchy. To what degree are you a monarchist in the current system,
which in a sense can be called czarist?
[Nemtsov] If the president can be called a czar, then I am a
monarchist, of course.
[Moskovskiy Komsomolets] So you have absolute loyalty toward the
czar-president?
[Nemtsov] Absolute. I can say that for Russia, the weakening of
presidential authority is extremely ruinous. I am not a monarchist in the
same sense as Stolypin was. And now the president, as the head of state,
cannot hand down the throne to the heir (and thank God for that). 
Nonetheless, I feel that the presidential authority should be rather firm,
even though it is curbed by parliament. This is in Russia's traditions. A
great weakening of presidential authority has led and will always lead to
strife. That is why those who are trying to turn Russia into a
parliamentary republic are, intentionally or unintentionally, pushing the
country toward chaos.
[Moskovskiy Komsomolets] To what degree is strong power compatible
with the fact that federalism, the regions, and elected governors have been
proclaimed in Russia? Something like this is difficult to imagine in a
monarchist system, other than developed feudalism. [Nemtsov] The point is
that we do not have a monarchy in our country. We have a presidential
republic with strong federalism, which, unfortunately, sometimes plays bad
jokes on people. But I think that the growing pains connected with
separatism and independence will pass of their own accord. The psychology
of a beggar who hides his last morsel under his pillow will, in the end, be
discredited. I think that the majority, including the powers that be in
the regions, understand that a unified state is an indubitable blessing
that must be nurtured in every way.
[Moskovskiy Komsomolets] To what degree will the position of the
governors determine the political situation in Russia by the time of the
presidential elections in the year 2000?
[Nemtsov] To a substantial, but not a decisive degree. The political
positions of many governors are very weak. The promises that they made
before the elections were often not fulfilled. And the constant hints that
the federal center is to blame for everything cannot go on forever. That
is why the political weight of the governors in many regions is rather
weak. And this means that [their] influence is also limited. On the other
hand, there are respected people among them. The regions in which they
rule is where their influence will be greatest.
[Moskovskiy Komsomolets] Will you be establishing relations with the
respected governors?
[Nemtsov] I already know almost all of them. I am one of the oldest
governors in Russia.
[Moskovskiy Komsomolets] Are your relations with Moscow Mayor Luzhkov
bad?
[Nemtsov] I would not say that. They remind me more of relations
that develop between a jealous person and someone who reacts calmly to
these things.
[Moskovskiy Komsomolets] He is constantly arguing and bickering with
you....
[Nemtsov] There is no arguing, there is a monologue. However, I do
not intend to take part in polemics if there is no point to them. If these
polemics are motivated by purely political interests. It did, of course,
seem strange to me, after the normal relations that had developed between
us for many years, to hear attacks on what the government is doing. But on
the other hand, there is a certain political subtext to such actions, and
that reassures me. I know that there is nothing but political calculations
behind Luzhkov's angry tirades.
[Moskovskiy Komsomolets] Luzhkov is constantly saying that you are
incorrectly informing the public about his activities. Particularly the
construction of the beltway.
[Nemtsov] I am saying that if the MKAD [Moscow Beltway] costs exactly
one quarter of the country's road fund (and that is precisely what it
costs), then it would not be a bad idea to carry out an audit on the prices
of the work on this beltway. The audit will take several months. I feel
that the Moscow Government should be happy that the Russian Government is
prepared to conduct a financial and economic audit of the MKAD and, by
handing over its findings to the Moscow leadership, to warn it against
errors. I do not see what there is to get angry about here.
[Moskovskiy Komsomolets] Are you not afraid that the sequestration of
the budget, the suspension of financing of Mosmetrostroy [Moscow Subway
Construction Company] -- that all these measures are fraught with the risk
of destabilizing the situation in the capital...that uprisings and
revolutions could break out?
[Nemtsov] Someone would have to try very hard to destabilize the
situation in the capital. Moscow, unlike Russia's other regions, is many
times better off in terms of the budget. There is many times more money
for every Muscovite than for a resident of, say, the Pskov or Samara
regions. This is achieved not only because of the fact that all the banks
are concentrated in Moscow, but also because the offices of major companies
working far beyond the bounds of the capital are located in Moscow. Take
Gazprom. Gas is extracted in Western Siberia, but taxes -- which are huge,
in the trillions -- are paid into Moscow's budget. Although we have just
been talking to some vacationers from Urengoy, and I can say that life
there is not sweet. That is where Gazprom's main riches are created. But
taxes are not paid there. Therefore creating an atmosphere of instability
in Moscow, however much someone might want to, would take maximum (foolish)
efforts.
[Moskovskiy Komsomolets] To what degree will the situation in the
year 2000 depend on whether or not Boris Nikolayevich names an heir?
[Nemtsov] Boris Nikolayevich is a smart man. He will not openly
foist his point of view on the voters. On the other hand, it seems to me
that he will try to do something to prevent any discord among the
authorities with regard to the upcoming presidential elections.
[Moskovskiy Komsomolets] Would you want him to name you?
[Nemtsov] No. What for? I have plenty of problems as it is. Do you
want me to have one more?...

**********

Banks' Shifting Role in Power Structure Eyed 

Moskovskiye Novosti, No. 32
August 10-17, 1997
[translation for personal use only]
Report by Anna Ostapchuk and Yevgeniy Krasnikov under the
"Scandal" rubric: "'Young Reformers': You Do Not Need a Hundred
Friends [reference to proverb "You do not need a hundred rubles, you
need a hundred friends"]..."

Having got back from vacation, the president has ordered a stop to the
banks' information war. But, as in any war, there are casualties already,
and there will probably be more.
The main outcome of the "bank war" is a change in the balance of power
in the president's retinue.
Having returned to Moscow, Boris Yeltsin determined the winners and
the losers of the drawn-out squabble. In his words, he knew where the
attack on his "proteges" was coming from, and promised that "there would no
longer be any pressure of this kind." Thus he put an end not so much to
rivalry among the financial-political elite, as to the media war. 
Henceforth Nemtsov, and consequently Chubays too, have been taken under
[his] protection.
Boris Yeltsin's announcement was no improvisation. According to MN
[Moskovskiye Novosti] sources, at a meeting with Chubays in Volzhskiy Utes
the president agreed to recognize the outcome of the Svyazinvest
competition, which helped "the young reformers" to pay off their debts to
the army, and asked the first vice premier to cut short any public scandals
to save the face of the Russian authorities. Chubays notified the most
influential financial magnates of the president's directive, and at a
meeting of the managers of the leading Russian banks they promised not to
wash their dirty linen in public again.

Who Is Going to Leave [Subhead]

So at the moment one can speak of a tactical victory for the team of
"young reformers." But without the enemy's surrender the victory cannot be
considered final. That is why rumors of the impending dismissal of Deputy
Security Council Secretary Boris Berezovskiy and of a coming "personnel
revolution" at ORT have already begun to circulate in the corridors of the
Kremlin. Chief of Presidential Staff Valentin Yumashev's possible
voluntary resignation from his job is also being hinted at.
They say that Anatoliy Chubays suggested that Boris Berezovskiy should
tender his resignation two weeks ago, but in response he only got advice to
resign himself. Evidently, at the time, Berezovskiy had grounds to believe
that the president's entourage would not let him down. The deputy
secretary of the Security Council's fatal mistake was, to all appearances,
his quarrel with his namesake Boris Nemtsov, the president's evident
favorite. According to MN sources, ORT's anti-Nemtsov attacks enraged not
so much Chubays as Yeltsin. And the anti-Nemtsov diatribe in Novaya Gazeta
decided things once and for all.
However, it was decided to undertake personnel changes without fuss
and without any linkage to the bank scandals. The official reason for
Berezovskiy's dismissal, if it happens, will most likely not be his quarrel
with Nemtsov and Chubays, but something else. Say, the failure of talks
with Chechnya, presided over by the deputy secretary of the Security
Council. And the other day in the Kremlin a group of analysts and
presidential advisors hurriedly prepared recommendations on the subject of
what is to be done with ORT. According to MN sources, participants in the
session decided that in order for ORT always to take a "state stance" in
any conflict, a big scandal involving a repeal of the registration of its
statute is by no means necessary. Simple staff purges will suffice. While
many Kremlin officials currently believe in the impending dismissal of
Berezovskiy and a personnel reshuffle at ORT, the possibility of the
resignation of the chief of the Presidential Staff, on the contrary,
arouses a lot of doubt. Although it was Yumashev who brought Berezovskiy
into "the president's family," he had practically no part in the bank war,
clearly displaying both decency and caution.

At Court [Subhead]

Sensational conflicts at the president's court have already become
habitual. It is well known that Boris Yeltsin is used to leaning on
several political groups in his government at once, not letting one take
precedence over the others. By summer 1997, there were three such centers.
Firstly, the young vice premiers Boris Nemtsov and Anatoliy Chubays, GKI
[State Committee for the Management of State Property] chairman Alfred
Kokh, and their ally Vladimir Potanin with his Uneximbank. Secondly, Prime
Minister Viktor Chernomyrdin with Gazprom, Internal Affairs Minister
Anatoliy Kulakov, and FSB [Federal Security Service] leader Nikolay
Kovalev. The third group is embodied by financiers Boris Berezovskiy and
Vladimir Gusinskiy, who, alone among the Russian bankers who took part in
the "Davos agreement" to back Boris Yeltsin, were able to consolidate their
hold in big-time politics after the 1996 elections. (Because of their
intimacy with television they are known in the banking community as the
"showmen.")
It is worth mentioning that for the first time in Yeltsin's presidency
a banking group whose interests were not mediated by any state institutions
became one of the centers of influence "at court." It seems that this
precedent alarmed many politicians. Several observers claim that the source
of Boris Berezovskiy's influence is not so much the positive results of the
1996 elections as his friendly business relations with members of the
president's family and close retinue. Moreover, this power center had
substantial potential for publicizing his point of view -- TV channels one
and four.
Recently this group's influence, under the Kremlin's protection, has
grown so much that, according to some sources, it has started to oppress
the president himself. Boris Yeltsin could not tolerate one of the centers
of power violating the customary "system of checks and balances." And, as
MN sources claim, it was he who had the idea of reducing the authorities'
dependence on financial magnates claiming political independence, by
setting the team of "young reformers" against them.

Perspectives For the Future [Subhead]

Even now, it is possible to say that relations between the authorities
and the financial elite have entered a new stage. The very nature of the
tasks set for Nemtsov and Chubays -- settling debts to the population,
replenishing the budget's revenue side, eliminating social tension -- is
forcing them to search frantically for new sources of funds. Talks on
foreign loans are not getting anywhere at the present, and that is why
getting hold of money to liquidate debts can only be done by auctioning off
shares.
As an MN correspondent was assured by certain financiers, until
recently preparations for an auction went as follows: First the bankers
would negotiate with the state a starting price that is as low as possible
(or else, they say, no one will buy), and then they would decide amongst
themselves who the buyer would be. All the others would undertake not to
raise the price above the agreed threshold.
But now the vice premiers have no time for "friendship" with bankers. 
The rules have changed. When he announced that auctions of shares in
enterprises "will be conducted honestly," Nemtsov meant that state property
would go to whoever would actually bring the most money to the budget.
To all appearances, the vice premiers' team will be compelled to stick
to their chosen tactic in the future too. The task of finding money for
the budget will confront them with new force at the beginning of the fall. 
Although some payments have already been made, this summer has not been
marked by a decline in strike activity. Protest actions are acquiring a
more and more catastrophic character (closing transport and railroad main
lines), and are apparently on the point of spilling over into mass riots.
The opposition is promising to organize a political strike in the fall. The
pressing search for money does not leave Nemtsov and Chubays the
opportunity of dealing with only one banking house, albeit one as
independent as Uneximbank-MFK- Renaissance. For this reason, the old
effective system of "divide and rule," whereby the state readily changes
its favorites in the world of finance, one minute bringing closer, the next
pushing away even the most loyal among them, will most likely be applied. 
They say that Uneximbank was partly used by the vice premiers in order to
"ditch" the competing bank group. Now it is important for them not to let
a rigid linkage between the "group of young reformers and Potanin" take
hold in public awareness. That is why, at the end of the "maneuvers,"
Anatoliy Chubays promised soon (before 18 September) to look at the
possibility of transferring the State Customs Committee's accounts from
commercial banks, including Uneximbank, to the Central Bank of Russia,
which may damage Potanin's enterprise to the tune of trillions of rubles. 
However, the authorities are certainly not interested in a conclusive break
with any influential financial group and will only go that far in extreme
circumstances. So, for instance, the very same Unexim, to all appearances,
is planned to be made the main purse for future presidential elections.
Meanwhile, as sources in Boris Nemtsov's retinue claim, the first vice
premier is now concerned not only with the quest for money to solve current
problems, but also with maintaining a "public reserve fund" from which
necessary funds can easily be taken at critical moments. After all,
Yeltsin in 1990 also relied on the unfettered love of the people, and not
on the calculating advances of financiers.

*********