January 12, 1999    
This Date's Issues: 3012• 3013 • 

Johnson's Russia List
#3013
12 January 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Boston Globe: David Filipov, Russian roads can exact a toll
on drivers.
2. RFE/RL: Russell Working and Nonna Chernyakova, Political Turmoil 
Continues In Vladivostok.
3. Financial Times (UK): RUSSIA: Mystery of the missing $4.8bn.
Andrew Jack on cries of corruption and Stalinism over central bank's 
problems.
4. Zavtra: Democrats' Failure in Petersburg Assembly Poll Assessed.
5. Moskovskiy Komsomolets: Boris Nemtsov, "The Blocked Stream of a 
Hard Year." (Predictions for 1999).
6. Voice of America interview with George Krasnow on Primakov's 
foreign policy.
7. Moscow Times: Geoff Winestock and Leonid Bershidsky, The Oligarchs:
Who's Up, Who's Down.]

********

#1
Boston Globe
January 11, 1999
[for personal use only]
Russian roads can exact a toll on drivers 
By David Filipov

TOTMA, Russia - The captain was not pleased. 
He frowned at the documents strewn on the tiny desk of his checkpoint:
the US
passport, Russian press accreditation, Russian car registration, and US
driver's license. The captain did not like this. It reeked of an international
plot. 
''Where'd you say you were going again?,'' the captain asked, again. 
The American explained, again: to Veliky Ustyug, a picturesque 12th century
town, a 650-mile drive northeast of Moscow and 150 miles east of Totma. The
captain mulled this over, again. 
''You can't get there from here,'' he concluded. 
New Englanders may remember that as the punch line from an old joke about
Yankees. In Russia, the joke is often reality. Over 40 percent of Russia's
135,000 towns are not connected to the rest of the world by roads, according
to Russia's Transportation Ministry. Over 40 percent of the roads that do
exist are considered ''substandard.''
Vast tracts of Russia's nine time zones have no roads at all and have to
depend on supplies that come by rail, river, and air. And since railways are
also far from ubiquitous, air travel is too expensive, and most Russian rivers
freeze, lots of these places go cold and hungry in winter. 
Veliky Ustyug no longer has this problem. Last year, a direct road from
Totma
was finally completed. But apparently no one had told this captain. 
The Globe's boxy Czech-built Skoda had journeyed some 400 miles from Moscow,
the last 100 on one of those ''substandard'' roads - in fact, an obstacle
course of potholes with wickedly serrated edges. One crater had just cost the
Globe's Moscow bureau two steel-belted radials a few miles back. We were proud
of having made it this far. 
The captain, it seems, wanted a bribe for letting us go any farther. Russian
conventional wisdom dictates that when a Russian traffic police officer, still
known by the Soviet-era acronym GAI (pronounced ''Guy-EE''), waves his white
baton at your car, an extortion attempt is in the offing. 
Our driver made an abstract comment about writing down his badge number and
reporting this as breach of international treaties. In Moscow, that would have
merely upped the price. Here, miraculously, the bluff worked. 
Why are Russian roads so bad? One popular theory blames Russian generals,
who
remember how Hitler's Blitzkreig was slowed when it ran into Russia's unpaved,
muddy ruts. 
Perhaps a more realistic explanation is that most Russian regions cannot
afford to build new roads. As a result, they remain isolated from many goods
and services. 
The area around relatively prosperous Moscow has six-lane highways with
fluorescent lane markers, drive-in fast-food restaurants, and spiffy 24-hour
service stations. Farther from the capital, such amenities deteriorate with
the quality of the roads. The last fast food we saw was at a McDonald's in
Yaroslavl, 160 miles north of Moscow. The last gas station with plumbing was
140 miles farther north in Vologda, capital of the impoverished region where
Veliky Ustyug is located. 
The rest of the route through the dark, snow-capped taiga has only one lane
that is plowed. As two oncoming vehicles approach, the drivers flash their
lights at each other to signal the other car to yield. Rule of thumb: If the
oncoming vehicle is a KaMAZ lumber truck and you are driving a Skoda, you
yield. Then you drive with extra care to avoid the logs the KaMAZ has
inevitably sprinkled in its path. It is a harrowing trip. 
But in Veliky Ustyug - until recently best reached the way Russian settlers
found it in 1147, by river - people are happy to have any road at all. 
''We love our road,'' said Yevgeny Udachin, who works at a local furniture
company. ''It feels so much like ...'' 
He paused to search for the right word. 
''It feels so much like civilization.'' 
David Filipov is the Globe's Moscow bureau chief. 

********

#2
Russia: Political Turmoil Continues In Vladivostok
By Russell Working and Nonna Chernyakova

Vladivostok, 11 January 1999 (RFE/RL) -- A court decision canceling a coming
mayoral election in Vladivostok in Russia's Far East has thrown the city's
troubled political scene into further chaos. 
The decision on Sunday by the Leninsky district court means that a
Vladivostok
election has been cancelled or declared invalid 14 straight times. The poll,
which had been due on January 17, was to have sorted out the city's latest
political dispute in which two different officials claim to be the real mayor.
The cancellation leaves in place acting Mayor Yury Kopylov, whom regional
Governor Yevgeny Nazdratenko appointed last month after President Boris
Yeltsin removed Mayor Viktor Cherepkov. Unlike Cherepkov, who clashed with the
governor, Kopylov is a Nazdratenko ally who consults with the governor on the
running of the city. 
Itar-Tass reported that the court acted on a suit brought by an ally of
Kopylov. It ruled that the mayoral election had been illegally scheduled and
that elections to the Vladivostok City Duma must be held first so that a new
city charter can be adopted. 
Kopylov expressed support for the cancellation, which leaves him in power
until a vote can be held. He called it a "very good, reasonable decision".
Kopylov said, quoting, "What if another crazy man is elected? He will say, 'I
have four years and can do what I want.'" 
Igor Alekseyev, Cherepkov's legal representative, said he was outraged,
although not surprised. Alekseyev said that the governor was behind the
cancellation. Alekseyev also scoffed at a presidential order that Nazdratenko
ensure that the mayoral elections occur. In his words, "That's like putting a
goat in a vegetable garden to guard the cabbage". 
Sunday wasn't the first time the Leninsky district court has stepped into a
city election dispute. In September, the court and the regional election
committee struck Cherepkov from the ballot days before the vote, saying he was
campaigning with city money. 
But thousands of voters were convinced Nazdratenko was behind the move. More
than 50 percent of the electorate supported Cherepkov's call to vote against
all the candidates, thus voiding the election. 
Yeltsin removed Cherepkov in December, saying his term had run out, and let
Nazdratenko choose Kopylov. Cherepkov responded by barricading himself in the
mayor's office, but later gave up. He then ran for mayor but did so largely
from hiding, saying he feared his enemies would kill him. 
The city's political feuds have aggravated the region's desperate economic
circumstances for the past several years, with parts of the city at times
going without electricity, heat or water. 
Natalya Menshenina, director of the Far Eastern Institute of Political
Science, urged the regional Duma to step into the dispute and pass laws to
resolve the city's ongoing election problems. She said 5 million rubles had
already been spent on the election. Menshenina noted that that is equal to one
month's salary for all the workers in Vladivostok paid with public funds. 

********

#3
Financial Times (UK)
January 11, 1999
[for personal use only]
RUSSIA: Mystery of the missing $4.8bn
Andrew Jack on cries of corruption and Stalinism over central bank's problems

The giant thermometer on the facade of the Russian central bank in Moscow
may
be hovering at zero this week, but the inside temperature has been far hotter
in the wake of allegations of misuse of more than $1bn by the institution.
When Sergei Stepashin, interior minister, announced late last month that he
was broadening investigations into supposed wrongdoings entailing "enormous
losses", he added a new scale to criticisms against the bank that have been
growing over recent months.
But he also invoked the ire of many within and outside the institution, who
see the allegations as the latest elements in a long-running destabilisation
exercise and an attempt to seek convenient scapegoats for the decisions made
during Russia's financial crisis in August.
In the wake of the crisis, the Auditing Chamber, which is responsible for
scrutinising the use of public funds, quickly launched an investigation, and
Sergei Dubinin, governor of the bank, resigned. But Mr Dubinin argued in an
interview this week that the inquiry had taken a "traditional Soviet approach"
in attempting to find someone to answer before the justice system. "It's a
Stalinist process to find the enemies of the people."
At the centre of concern is the evaporation of $4.8bn in the two weeks up
until the August crisis, when Russia simultaneously devalued the rouble and
defaulted on its debt. That corresponded to the first instalment of a loan
made in late July to Russia by the International Monetary Fund.
Officials say $3.8bn was consumed from central bank reserves in trying to
prop
up the rouble as it came under pressure when investors began withdrawing large
sums from the Russian market. The remaining $1bn was transferred to the
Ministry of Finance to repay government bonds because tax revenues ear-marked
to provide reimbursement had dried up.
For Andrei Illarionov, an economist and long-standing critic of the central
bank, the sums spent on supporting the rouble represented "pure subsidies to
major commercial banks to enable them to pay back credits. .. siphoned out of
the pockets of the Russian taxpayers and into the pockets of the corresponding
banking and financial institutions".
Proving corruption is another issue, however. In spite of the multitude of
bodies now working on the investigation - from the FSB (successor to the KGB)
and the public prosecutors' office to the Auditing Chamber - concrete
allegations against the central bank are so far scant.
The public prosecutor has provided details of just three cases: the
misuse of
cash advances on expenses by central bank employees; irregularities in issuing
credits and licences; and suggestions of insider trading related to the issue
of government bonds. Mr Dubinin argues that the limited number of people under
suspicion and the sums involved are on far too small a scale to explain the
August crisis with which they have been "artificially tied".
Some officials criticise the central bank's transfer of $1bn to the Ministry
of Finance. Mr Dubinin says he followed all the necessary procedures and the
IMF approved the decision, although he criticises the "illegal" failure of the
government to reimburse the money.
While there may well have been misdeeds at the central bank, it also has
many
enemies who have wasted no time in exploiting any weak points to the full. The
Communist-dominated parliament has long been angered by the formal political
independence of the institution, which was enshrined in legislation in 1995.
The Auditing Chamber, which has promised further revelations about the
central
bank soon, is itself accountable to parliament. It is also currently locked in
a power struggle with the bank in efforts to gain greater powers to scrutinise
its books.
The central bank has sparked envy over the relatively high salaries paid to
its staff - as well as perks including opulent offices, chauffeur-driven cars
and the use of country retreats or dachas.
Mr Dubinin says the employment conditions were introduced by his
predecessors,
precisely to prevent corruption and to motivate high-quality professionals to
work at the bank when they could have earned more in the private sector.
Ironically, the perks were introduced in the early 1990s when Victor
Gerashchenko was head of the bank. He has since been re-appointed, following
Mr Dubinin's resignation. The fact that the Interior Ministry says the inquiry
now extends back as far as 1992 may prove a warning of the intense political
pressures he is likely to face during the difficult months ahead. 

********

#4
Democrats' Failure in Petersburg Assembly Poll Assessed 

Zavtra, No. 52
December 1998 (signed to press 28 Dec 98) 
Article by Aleksandr Boroday: "They Have Voted Themselves Out"

The past year has been marked by several grandiose failures by
democratic politicians, and a special place among these is occupied by the
elections to the St. Petersburg city assembly. It would seem that the
beginning of the elections proceeded with precision. The assassination of
Galina Starovoytova generated the expected shock in society, and the
initiatives of the radical democrats "to separate the sheep from the goats"
and form their own "clean" list of candidates proved to be effective. Many
of the democrats' candidates -- who had split into two blocs -- got through
the first round successfully. It was clear, however, that the radicals in
the "Northern capital" could not be helped even by the hysteria following
the latest sensational assassination in this city. Seven years of radical
reform have left the people with excessively painful scars.
The "democratic forces" were really hoping for the victory of
Yavlinskiy's "moderate" bloc and, anticipating it, spread the news far and
wide through the information channels. According to the experts, the St.
Petersburg elections were supposed to have demonstrated the potential of
the party and its leader to Yabloko's Western sponsors. The victory of
Yavlinskiy's party in the city elections would give Yavlinskiy a good
chance of becoming president of the whole country in the future.
The second round, however, completely wiped out the democrats' hopes. 
Only eight Yabloko candidates obtained deputies' seats, while 20 seats were
lost to the blocs [as published] of city governor Yakovlev and 16 seats to
the Boldyrev (Yavlinksiy's former party comrade) bloc. It is
characteristic that the governor's bloc, which gained the largest number of
seats, contested the election under overtly patriotic slogans. The result
secured by Boldyrev's bloc looks even more curious -- its candidates,
incidentally, enjoyed all possible support from the city's patriotic
forces.
Experts are drawing the following conclusions from the results of the
elections:
Yabloko's popularity in St. Petersburg, which had become the talk of
the town, is no more than a fabrication; it is the native Petersburger
Boldyrev, who quit the party long ago, who enjoys popularity in the city,
and not Yavlinskiy at all.
Boldyrev, who operates in the same electoral area as Yavlinskiy (the
intelligentsia, the middle class), was able to win over a large proportion
of the voters by using the image of an independent politician and putting
forward slogans advocating a strong state and anticorruption slogans (let
us recall that on the eve of the elections he accused Yeltsin himself of
the unlawful expenditure of state funds).
Sociologists unanimously acknowledge that, given the choice between
Boldyrev and Yavlinskiy or Yakovlev and Yavlinskiy, a considerable
proportion of voters preferred the latter pair as ethnic Russians.
Even Yabloko members themselves admit that their bloc lost a lot of
votes following the showing on regional television of the documentary "The
Conspiracy," in which Yavlinskiy was seen as a puppet of Chubays, who is
preparing the revenge of the democrats. Thus the detection of a real link
between Yavlinskiy and the "young reformers" is proving to be pernicious
for him.
Proceeding from the above, election technology specialists maintain
that Grigoriy Yavlinskiy and his party -- the last hope and bastion of the
Russian democrats and their Western masters -- will, on a countrywide
scale, be unable to gather more than 10 percent of the votes whatever the
circumstances.
Understanding this, the democratic ideologues have launched a
large-scale campaign to discredit the system of single-seat, "universal,
direct, and equal elections by secret ballot" for which they campaigned so
hard for so many years. Now they are saying that the campaign methods are
too dirty and base (they have finally grown up), and that the Russian
people very much lack political awareness and have not yet developed to
such a level of democracy. Instead, the ideologues are trying to propose
multistage elections subject to various qualifications and so on.
...In practice, their project remains very simple -- one "democrat"
will have 10 votes, and 10 patriots will have one vote between them.
But bad luck: The election procedure which exists today is enshrined
by the Constitution, and while the Guarantor lives, there is no way it can
be changed....

********

#5
Boris Nemtsov's Predictions for 1999

Moskovskiy Komsomolets
5 January 1999
[translation for personal use only]
Article by Boris Nemtsov: "The Blocked Stream of a Hard
Year"; first paragraph is introduction

A great deal is set to change in the new year. Including Moskovskiy
Komosomolets. For example, we intend to give experts a forum as often as
possible -- so that not only journalists but politicians too write for us. 
The first "essay" on the subject "My Political Prediction" was written for
us by Boris Nemtsov.
Making predictions in our country is a thankless task. Particularly
today, when Russia is bogged down in a political and economic crisis. In
general, I have noticed, there is a trend that the more politicians we
have, the worse things are for the people. Unfortunately 1999 is
parliamentary election year. Amd this means that life will get worse. The
social situation will deteriorate. Prices are bound to rise. Incomes are
bound to fall. The overall decline in production, I believe, will be of
the order of 5-10 percent. A high level of unemployment can be expected. 
I believe that people who go to work but do not get paid should be regarded
as unemployed. And around 40 percent of enterprises currently fall into
that category. Their directors do not have a bad life. But the workers --
alas. Such enterprises must be restricted and their thieving directors
replaced with competent managers....
The government has announced an inflation forecast of 30 percent. 
This is a mere pipe dream for Yevgeniy Maksimovich. Most likely this figure
will be at least 60 percent. And 90 percent by the end of the year. All
because the budget is predicated on unrealistic figures. The dollar rate
in actual selling is already above the 21 rubles [R] stated in the budget.
It is simply ridiculous to expect foreign countries to loan us $7.5
billion. So far nobody has given us a cent. Even in the best years they
did not given us that much. The tax take, it transpires, is to grow by
some improbable means. To almost double. From R20 billion to R40 billion.
It will never happen. So there is only one way out: The government will
print money. This will cause prices to rise. Inflation is already running
at 10 percent a month. And it is growing by inertia. The prices of basic
foodstuffs are rising particularly dramatically in the provinces: In the
past couple of months prices have already risen by 50-80 percent in some
places....As for paying wages and pensions on time, the government will need
at
least six months to clear the arrears. But we again have a vicious circle.
If the government prints money and starts making payments, these wages
will be worth less anyway because of inflation....
But, despite the criticism, I would like to see a few most important
things work out for the Primakov government. To see it:
learn to collect taxes in real terms allowing for inflation;
impose order at specific enterprises by seeking effective owners;
have a clear program for combating corruption (it could be called
"Clean Hands," for example), which would eliminate the crooked system of
mutual offsets and exclusive benefits;
rule out monetary assistance to banks without clearly regulatedrules;
hold open tenders for state orders and contract work.
I don't want the people to be deluded. The year 1999 will be
extremely difficult, and 1997, when we were in power, will be remembered
with the same kind of nostalgia as 1913 once was.
If there is anyone for whom there is no escape, it is the oligarchs. 
There is no need to be afraid for them. Many of them have lost whole
fortunes. But nature abhors a vacuum. Unfortunately, there is someone
behind every politician. Behind Yavlinskiy there is Gusinskiy, behind Lebed
-- Berezovskiy.... As long as this group exists in the country, there will
be no peace.A gloomy prediction? Don't be upset: Not everything is as bad as
that. Everyone can and must make this a better year on their own account. 
It is no use just whining and despairing. And when the time comes to go to
the polling places it is necessary to choose honest, decent people who are
capable of making decisions and thinking about the country, and not just
their own skin. A competent Duma is the best gift to Russians in the 21st
century.Money will play a major role in the election campaigns. Judging by the
inventiveness of our image-makers, there will be so much stupidity,
compromising material, and mud-slinging that it will make the St.
Petersburg elections look like a picnic. Sadly, all this is the
consequence of the semi-criminal capitalism that has been built in Russia. 
But despite this I think the young generation are more honest and pragmatic
than the previous one. And the main task for us and for the mass media is
to ensure that the young people turn out for the elections.
In the course of the coming year people will gradually realize that
the Communists are now in power, and the TV anchors' talk of the Communist
opposition will look like a mockery. There are Communists in the Duma, the
governors are Communists, and there is no need to say anything about
parliament. The Communist personalities in power will reduce the party's
chances in the Duma elections, of course, But on the other hand this will
be compensated for by the even greater impoverishment of the population. 
Therefore the CPRF can be sure of around 20 percent of the votes.
The chances of the LDPR [Liberal Democratic Party of Russia] are, I
think, very small, despite the finances at their disposal. Not even a
talented clown like Zhirinovskiy can fool the people constantly. So they
might very well not get into parliament.
Yabloko will of course get into the Duma. But they will not take the
first place, as their leader says. Just look at St. Petersburg.
The saddest prospect among the parties currently in parliament faces
the NDR [Russia Is Our Home]: A split has occurred there. While the center
is sorting out its own affairs, some of the regional organizations,
accustomed to being in the "party of power," will join Fatherland, which is
taking that place. Today's Luzhkov is yesterday's Chernomyrdin. And it is
obvious that Fatherland is the new party of power. Fatherland's drawback
is that, for the provinces, it is primarily the party of the mayor of
Moscow. A city that is getting fat at their expense. Every governor is
sure that if he had that much money he would have built just as much
housing and made Okhotnyy Ryad just as fine...
As for our right-wing bloc and Young Russia, which I am setting up, if
we carry out educational work energetically and meet with people
personally, if we can explain to people the reasons for the crisis and the
prospects for the future, I think we will get over the 5-percent hurdle in
the elections...
The parliamentary elections are only a rehearsal for the presidential
race in 2000. The formation of some kind of coalition is possible, for
instance Yavlinskiy and Luzhkov. The person I really cannot see in the
post of president is Lebed. He is no kind of politician. Soon he will
have been working as governor for a year, and it is a mystery what he
is doing...
What can you wish everyone in this difficult situation? Not to give
up in any circumstances. Those who do not receive their wages for months
at a time should fight for their rights by all lawful means: demands,
strikes, pickets, (not hunger strikes; they are harmful to health). If
this does not work it is necessary to find another job, retrain, not be
frightened of acquiring a new specialty. It is necessary to act. You have
to unblock the stream if you want the water to flow. Nothing happens of
its own accord.
Despite the fact that life will be hard, I would like to congratulate
everyone on the new year and wish you happiness and confidence in you own
strength.

********

#6
From: "W. George Krasnow" <krasnow@compuserve.com>
Date: Tue, 5 Jan 1999 
Subject: Voice of America interview on Primakov's foreign policy

Transcript of a Voice of America Interview with Dr. W. George Krasnow
Former professor of Russian Studies at the Monterey Institute of
International Studies W. George Krasnow is the author, as Vladislav
Krasnov, of Russia Beyond Communism: A Chronicle of National Rebirth,
Westview: Boulder, CO, 1991. He is now president of Russian American
Goodwill Associates

Q: What is Mr. Primakov is trying to achieve by building the strategic
triangle of Russia, India and China? Why is he so concerned?
A: It seems to be natural for Russia under Primakov to try to improve its
own national security and geopolitical situation. It also seems to be a
reaction to certain policies of the United States which Russia does not
like as it perceives them to be reckless, aggressive and imperialist. Under
the Clinton administration we have been
· increasingly playing the role of a policeman of the world;
· ignoring the United Nations and its Security Council;
· expanding the NATO beyond its original charter.
The Russians particularly dislike our highhandedness in imposing on them a
disastrous course of economic reforms, and generally meddling in their
affairs. While urging them to develop a free-market economy, we
paradoxically deny them a permanent Most-Favored Nation status and free
access to our market.
In short, Primakov is trying to do what he perceives to be good for
Russian national interests.

Q: But aren/t his policies going to harm U.S. national interests and the
world peace?
A: Well, I am not sure whether our present policies serve the long-term
interests of the United States. Russia seems to be geographically and
historically designed to be a superpower. By reducing Russias superpower
status we might create a dangerous power vacuum, dangerous not only for the
Russians, but also for ourselves, and certainly destabilizing for the world
peace.

Q: Are you saying that Primakov is saving us from ourselves?
A: If not saving, he at least produces necessary checks and balances to
stave off the hubris and jingoism in which our foreign policy makers have
indulged, feeling (themselves) excessively triumphant after the collapse of
Communism. Its a rather unhealthy situation to have just one superpower in
the world. But the world is inherently multi-polar. It is multi-polar
culturally, politically and economically. And the multi-polar world is more
consistent with our political pluralism, and with our domestic trends
toward cultural diversity and multi-culturalism. 

Q: But wouldnt Primakovs strategic triangle consolidate the largest land
mass and population concentration in the world?
A: We should not forget that his plans, whatever they are, have not been
accepted yet by either India or China. But if they lead to a greater
stability, prosperity and democracy of the region, so be it. The fact is
that since we started the expansion of the NATO, Russias relations with
both India and China have been improving, and they are likely to improve
further under Primakov. Moreover, once the territorial dispute over the
Kurile Islands is resolved, we might see a great improvement in
Russo-Japanese relations. I dont see how a greater security and economic
prosperity of this entire region could harm U.S. national interests.

The interview was conducted, in English, by Ed Warner, a VOA reporter.

********

#7
Moscow Times
January 12, 1999 
The Oligarchs: Who's Up, Who's Down 
By Geoff Winestock and Leonid Bershidsky 

Rem Vyakhirev 

Rem Vyakhirev, the man at the head of state gas monopoly Gazprom, emerges from
1998 a little shaken but still firmly at the center of political and financial
power in Russia. 

Gazprom as a business is suffering some worrying setbacks. The fall in world
energy prices cut export revenues dramatically and the collapse of the Russian
securities market decimated its investments in several big Russian banks. 

But politically, Vyakhirev has skillfully warded off a much bigger threat from
the government of Prime Minister Sergei Kiriyenko, which was trying to
reassert the state's control over Vyakhirev's private empire and untangle its
finances. 

The dismissal of former Gazprom head Viktor Chernomyrdin as prime minister in
March must have come as a shock to Vyakhirev. The new government of
technocrats quickly confirmed his worst fears by bankrupting two Gazprom
subsidiaries over tax debts. 

Kiriyenko then made a direct threat to tear up the five-year-old "trust
agreement" under which Vyakhirev was allowed to manage the state's 40 percent
stake in the gas monopoly. Eventually, Vyakhirev could have lost his job. 

Gazprom then used its control over the media, including a 30 percent stake in
NTV television, and its influence with the State Duma to launch a frontal
attack on the government. 

The result of this political brawl was a draw, with Gazprom paying back more
debt than it wanted, but less than it owed. 

The situation changed however, and to Vyakhirev's advantage, after the Aug. 17
devaluation and debt default. 

On the one hand, Gazprom lost heavily on its investments in Inkombank,
National Reserve Bank and Gazprombank. 

But the devaluation boosted export revenues and, best of all, the financial
crisis led to the dismissal of the pesky Kiriyenko. 

In a sense, new prime minister Yevgeny Primakov is more friendly to Gazprom
than even Chernomyrdin, who may have loved his alma mater but who by the end
of his rule was paying too much attention to the International Monetary Fund.
It was Chernomyrdin who forced Gazprom in 1997 to take out $2 billion to
settle its debts. 

The vacillating Primakov government, on the other hand, has stopped pressing
Gazprom to pay taxes, allowing payment by bizarre offsets and barter deals
which usually work in Gazprom's favor. For instance, Gazprom has been allowed
to pay its tax debts in barter using overvalued goods from Belarus. 

Vyakhirev has reciprocated by cutting ties with his old boss Chernomyrdin and
publicly endorsing Primakov. Gazprom and its media are now pushing the Duma
and the regions to pass Primakov's budget. 

Vyakhirev has been rewarded. Instead of forcing Gazprom to pay taxes, the
government at the end of the year raised money by selling off 2.5 percent of
its shares for $660 million to Gazprom's German partner Ruhrgas. 

Vyakhirev could not be more delighted. He has got the state off his back
without spending a cent or committing himself to any reform. 

Boris Berezovsky 

Boris Berezovsky, the man who invented the whole idea of the Russian
oligarchy, did not have a great year in 1998. And it was not just the
financial crisis. 

Politics was the big problem. The blackest day for Berezovsky was not Aug. 17
but Sept. 10 when the Duma rejected Berezovsky's ally Chernomyrdin as prime
minister and replaced him with Primakov. 

The key to Berezovsky's power has long been his tentacular influence within
the Kremlin, especially through President Boris Yeltsin's daughter Tatyana
Dyachenko and his former chief of staff Valentin Yumashev. 

Berezovsky spent the first half of the year fighting a vicious battle against
the so-called young reformers in the government who had driven him from the
Cabinet and saw him as the godfather of Russia's version of bandit capitalism.

The master intriguer suffered a major blow in March when Chernomyrdin was
sacked as prime minister. Yeltsin mollified Berezovsky by offering him the
symbolic post of secretary of the Commonwealth of Independent States, the
toothless union of former Soviet states. 

Berezovsky was not fooled. He used his television station and newspapers to
smear Kiriyenko, playing up stories of social unrest and spreading allegations
of sleaze. For a brief moment, on Aug. 23, he appeared to have won back
Yeltsin's ear when the president brought back Chernomyrdin. 

But the Duma's rejection of Chernomyrdin was a public humiliation both for
Yeltsin and Berezovsky. The tycoon's influence in the Kremlin was dealt a body
blow, especially since the departure of his ally Yumashev. And power has in
any case shifted away from the presidency to the government and the
parliament. Berezovsky is now no longer the quintessential insider. 

If politics has been a rearguard action, financially things have been little
better. Berezovsky responded to the decline in oil prices by announcing a
merger of his Sibneft oil company with Mikhail Khodorkovsky's Yukos. But this
unravelled in mutual distrust. Sibneft is now barely profitable. 

The financial collapse was not a direct blow to Berezovsky, who does not own a
bank (although rumor has it he is a major shareholder in SBS-Agro.) But the
subsequent collapse of advertising markets hurt ORT television, a key base of
Berezovsky's power. The bankruptcy proceedings against ORT were a mark of the
tycoon's weakened stature. Berezovsky's other big interests in LogoVAZ and
Aeroflot can hardly have been profitable. 

Earlier this year, Berezovsky, who is ridiculously coy about his wealth,
admitted that Forbes magazine was about right when in 1997 it said he was
worth $3 billion. He would be lucky to be worth a fraction of that now. 

Vladimir Potanin 

Vladimir Potanin, head of the Interros group was rated Russia's richest man by
Forbes magazine last year with assets of more than $1.5 billion in oil, mining
and banking. By now, all of them have turned into lemons. 

Potanin's political pull was weakened by the departure of Anatoly Chubais from
the government earlier in the year. His Sidanko oil company was hit especially
hard by the decline on world oil prices, and the regional administration has
even threatened to take over the Angarsk refinery, one of its key subsidiaries
over tax debts. Norilsk Nickel, the mining giant controlled by Potanin, has
also been hit by low commodity prices. 

But Potanin's biggest headache is Uneximbank, formerly Russia's fourth biggest
bank and now on the edge of bankruptcy. The bank reportedly owes
Surgutneftegaz as much as $500 million, about as much to foreign creditors and
as much as $950 million in hard currency forward contracts. 

Immediately after Aug. 17, Potanin positioned himself to receive Central Bank
stabilization loans by announcing a merger with MOST-Bank and Bank Menatep,
owned by two of his fellow oligarchs. But this merger now exists only on
paper. Cut off from influence in the government and the Central Bank, Potanin
has received little help. 

Potanin always groomed himself as the most pro-Western of the oligarchs, even
convincing BP to pay $500 million for 10 percent of Sidanko. But that and a
partnership with stock brokers Renaissance Capital are both in doubt.
Potanin's star is waning. 

Mikhail Khodorkovsky 

The financial crisis has decimated the Rosprom group, which Khodorkovsky
heads, but his deft political skills may yet see him through. Many might have
expected him to leave the stage months ago. 

Khodorkovsky's Bank Menatep was made insolvent by the Aug. 17 financial
disaster - some would say it was in trouble even before. It has since
defaulted on foreign loans and lost control of a 30 percent stake in the Yukos
oil company, the other pillar of Khodorkovsky's empire. 

Menatep should have been dead but it lives on - just. It has passed on the
burden of its private depositors to state-owned Sberbank and the Central Bank
has mysteriously chosen to help it out with stabilization loans. 

Khodorokovsky has increasingly distanced himself from Menatep, a sign that he
will not answer for its debts. But he faces another huge battle to save Yukos,
Russia's second biggest oil producer, of which he still controls about 60
percent. 

The company is struggling to repay $1.25 billion of debt at a time of
historically low oil prices. It also faces a revolt from minority shareholders
who have accused it of breaching their rights. 

But Khodorokovsky, a former Komsomol leader, has shown amazing flexibility in
dealing with several governments. He is no doubt mounting a new offensive on
the Primakov team. 

Vladimir Gusinsky 

When in 1997 Vladimir Gusinsky resigned as head of MOST-Bank, the theater
director turned banker announced to the world that he saw his future in the
media and entertainment business. 

He did not know then he was jumping out of the frying pan and into the fire. 

While retaining control of MOST-Bank, Gusinsky switched his focus to the
Media-MOST group, which includes the television network NTV, the satellite
television company NTV Plus, several movie production firms, the magazines
Itogi and Sem Dnei and the daily newspaper Segodnya. The group also owns a 25
percent stake in the Israeli media concern Maariv. 

When the financial crisis broke out last summer, MOST-Bank foundered, freezing
individual deposits and later announcing it would restructure part of them
into long-term securities. 

According to some reports, Moscow Mayor Yury Luzhkov has lobbied for the
Central Bank to provide MOST with stabilization loans because the bank is
important for the city's economy. Though MOST has since received an
unspecified amount in loans from the Central Bank - and paid out some of the
money to depositors - it is hardly a going concern. Gusinsky's stature as an
oligarch, however, has always depended much more on his media interests than
on his medium-sized bank. But the media have been hit by the crisis too. 

NTV, 30 percent of which belongs to Gazprom, has had to cut its advertising
rates by 60 percent and lay off staff. Reporters at Segodnya are not receiving
their salaries. 

The crisis caught Gusinsky overextended. Media-MOST borrowed heavily abroad
and now has to pay $150 million to U.S. Eximbank over the next 10 years for
the U.S.-made satellite it launched last year for the NTV Plus system. The
satellite is now broadcasting five channels to European Russia, but the
company faces an uphill battle in finding new subscribers. 

Another ambitious Media-MOST project - the NTV-Mir Kino company, set up to
renovate 400 cinemas throughout Russia at a cost of $120 million - has seen
drastic cuts since the crisis hit. 

Analysts have criticized Gusinsky for starting too many projects at once
before some of them become profitable. Only Sem Dnei has been consistently
making money so far. NTV has claimed to be profitable, but the advertising
crisis has put these claims in doubt. 

Gusinsky's fate now depends on the outcome of the parliamentary and
presidential elections this and next year. Media-MOST's powerful propaganda
machine will come in handy to candidates with enough money or influence to use
it. So far, Media-MOST's news organizations have been running a concerted
campaign for Yabloko party leader Grigory Yavlinsky. 

Alexander Smolensky 

Alexander Smolensky, head of the SBS-Agro banking group, has lost a lot of
money to the financial crisis, but he has managed to hang on to shreds of his
political clout. Izvestia newspaper ironically dubbed him "Oligarch of the
Year" with the explanation that no one could have believed in August that he
would still be in business four months later. 

The man who once donated 50 kilograms of gold ingots to guild the roof of the
Christ the Savior Cathedral in Moscow saw a run on SBS-Agro soon after the
Aug. 17 ruble devaluation and debt default. But now the bank appears to be
slowly getting back on its feet, with Smolensky maneuvering to make the state
a large shareholder in it. 

SBS-Agro was the third largest bank in Russia before the crash with assets of
26.8 billion rubles on July 1, 1989. It was, however, a colossus with feet of
clay. It had invested imprudently in the government's doomed treasury bills
and in dollar-denominated Vneshekonombank state bonds, which have also dropped
dramatically in price since last summer. 

It was the Vnesh bond crash which pushed SBS-Agro into default on foreign
loans even before the government defaulted on T-bills. After Aug. 17, the bank
was swamped by individual depositors, who had 7.2 billion rubles in the bank
in July. 

Smolensky was not destroyed by the crisis, however. He fought off an attempt
by the Central Bank to impose external management on his bank and later
became, by all accounts, one of the biggest recipients of Central Bank
stabilization loans. New Central Bank chairman Viktor Gerashchenko quickly
announced that he would save SBS. 

Ever since it gained control of the Soviet-era agricultural bank,
Agroprombank, in 1996, Smolensky's group has served as the government's major
channel for massive subsidies to farms. Smolensky has fought tooth and nail to
hold on to the lucrative business after Aug. 17. The government has announced
that SBS-Agro, along with Alfa Bank, will retain its status as the state's
agent for disbursing easy agricultural loans. 

The victory came at a price, though. Deputy Prime Minister Gennady Kulik
announced recently that 75 percent of SBS-Agro was "in hock to the Central
Bank." SBS has not confirmed this, but its officials have admitted that
nationalization is one of the options it is discussing with the state. 

Banking analysts have pointed out that even if the bank is nationalized,
Smolensky will remain one of Russia's wealthiest businessmen. The SBS group is
notoriously opaque, and, to quote Richard Hainsworth of Thomson BankWatch,
"only Smolensky himself knows what he owns." 

The SBS-Agro holding company, which is legally separate from the bank, is said
to control part of the Sibneft oil company, several ore mines and processing
plants in the Urals and a number of real estate projects. 

Yet Smolensky appears to be a bitter and depressed man these days. He recently
published a meandering full-page article in Russia's most influential business
daily, Kommersant, slamming liberal reformers for what he called their
destructive role in Russia's recent history. 

"How do you convince people to keep their money in banks if the state, and not
the banks - I insist that this is so - has robbed everyone again and does not
itself believe that this nightmare will not repeat itself?" Smolensky wrote.
"Today [I feel] a terrible aftertaste of years lived in vain." 

Aven and Fridman 

The powerful duo of Pyotr Aven and Mikhail Fridman, who run Alfa Bank and Alfa
Group, respectively, has been perhaps the most aggressive of Russia's
oligarchs in recent months. 

Along with SBS-Agro, Alfa Bank fought for and retained its status of
government agent for the distribution of agricultural subsidies. In return,
Alfa reportedly pledged a blocking stake - 25 percent - to the state. 

Tyumen Oil Company, acquired by Alfa Group in 1997, actively participated in
bankruptcy proceedings against Chernogorneft, a major unit of the Sidanko oil
company. Despite Tyumen's denials, analysts have described Alfa Group as a top
bidder for parts of Vladimir Potanin's disintegrating empire, which includes
Sidanko. 

Commodities trader Alfa Eko has waged a high-profile war for control over one
of Russia's biggest aluminum producers, the Krasnoyarsk Aluminum Factory, or
KrAZ. Last month, a Krasnoyarsk court defeated Alfa Eko's efforts to take over
the Achinsk Alumina Combine, a major supplier to KrAZ, but the Alfa Group
affiliate is still battling KrAZ in the courts for millions of dollars in
allegedly unpaid debts. 

Since the August crisis, Alfa Bank has made a play for a bigger share of the
Russian banking services market, advertising heavily in the press and on
television, paying all its clients and depositors on time, and boasting of
more than 3,000 new accounts since August - a record unmatched by any large
private Russian bank. 

Aven, who was foreign trade minister in Yegor Gaidar's first Cabinet, still
has strong enough government ties to have a finger in every economic pie in
Russia. 

Alfa gets more respect from Western bankers and analysts than most other
Russian oligarchs. In 1998, Central European, a Euromoney publication, gave
Alfa Bank its Award for Excellence as the best domestic Russian bank. 

The award, however, has not insured Alfa against financial trouble. The bank
has been negotiating to restructure a $77 million Western syndicated loan. In
November, it announced a "framework deal" on the restructuring had been
reached and a final deal would follow in a matter of days, but no agreement
has been signed yet. Alfa executives have even talked about the possibility of
having to restructure a Eurobond debt coming due in 2000. 

Like other oligarchs, Aven and Fridman are fighting for their future, and
their efforts seem better organized than most of their colleagues'. 

Vladimir Vinogradov 

Boris Berezovsky never included Vladimir Vinogradov, founder and former chief
of Inkombank, in his original list of seven oligarchs who helped Boris Yeltsin
win the 1996 presidential election. 

In retrospect, Berezovsky was right. Vinogradov is an oligarch no more. 

In October, Vinogradov, who has reportedly suffered from an ongoing illness,
stepped down as head of Inkombank, which he founded in 1988 and developed from
scratch into Russia's biggest private bank with assets of 35.2 billion rubles
last July. The European Bank for Reconstruction and Development was a
shareholder in it with 1.65 percent. 

Vinogradov had presided over a remarkable run, which included building a
confectionery empire around Moscow's Babayevsky Factory and acquiring
interests in other companies that deal in everything from margarine to fighter
planes. 

But the bank is now broke, and on Jan. 28, a court hearing is scheduled to
determine whether it should be declared bankrupt and liquidated. 

Former Central Bank chief Sergei Dubinin has accused Vinogradov of trying to
sell off some of Inkombank's prime assets before leaving the bank. According
to various reports, former managers have resigned one by one, after moving the
banks' assets elsewhere. One banker has said employees have been stealing
brass doorknobs from Inkombank's central office. 

Inkombank owes more than $300 million to depositors and $830 million to
foreign creditors, apart from a $1.2 billion liability on currency forward
contracts. 

Vinogradov, an aviation engineer who was born in the Ural mountains city of
Ufa, always tried to distance himself from other oligarchs, most of whom are
Muscovites. He scorned other magnates' attempts to buy into the media and get
appointed to ministerial posts. 

Before the August crash, however, he made the same mistakes as they did. When
the government securities market collapsed, he had no money left to run his
sprawling bank with dozens of branches throughout the country. The only
difference was that Vinogradov lacked the political clout of Aven or Smolensky
to save his bank. 

Vinogradov will not be poor, however. Many of Inkombank's industrial holdings,
including a 26 percent stake in the Magnitogorsk steel works and a controlling
stake in the Rot Front candy factory, are legally owned not by the bank but by
affiliated firms, in many of which Vinogradov is likely to have a share. 

If Inkombank is liquidated, cheated depositors and foreign creditors are
highly unlikely to get their hands on these properties. 

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