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Excerpts from the JRL E-Mail Community :: Founded and Edited by David Johnson

The Russia Journal
October 12-18, 2001
Final act for Russia’s Anatoly Chubais show?

At the height of the battle over the restructuring of Unified Energy Systems (UES), I asked a friend, a fairly savvy analyst, what he thought of the situation.

"Well, in 1993-94 we Russians learned that Anatoly Chubais was a swindler; in 1997-98 the IMF and U.S. Treasury learned that Chubais was a swindler; and now, finally, in 2000, foreign investors are learning that Chubais is a swindler.

"But," he added, "he’s an entertaining swindler."

Chubais is, indeed, a great performer. But the question today is whether the curtain is about to fall on the Chubais show.

In early 2000, Chubais released his plan to reform the electricity-grid operator – a proposal that struck all but company management as something akin to the last great heist.

The plan was in two parts, and its genius was its simplicity. The first was to offload company assets to friends at massive discounts – essentially in return for kickbacks to Chubais’ SPS Duma Faction, a group of political flakes that are little more than a parliamentary-lobby group for big business.

The second, which is still unfolding, was for Chubais to take complete control of the electricity distribution network – including the networks of regional energos.

What the second part would mean is that anyone wanting to sell electricity would have to go through Chubais. In effect, Chubais would become the Transneft of the electricity sector: able to use his monopoly powers to make allies very rich, or to send enemies to the wall.

In terms of the Russian business community, he would be an extraordinarily powerful figure. And that, in the end, is the point – power.

Chubais never ceased being a political figure. It’s just that after he sold Russia’s industrial assets for a song in 1995; got caught receiving a bribe in 1997; and committed numerous other indiscretions, there was no way Boris Yeltsin – even with his legendary disdain for public opinion – could retain Chubais in government.

Chubais moved on to become chief executive of UES in March 1998. But he wasn’t leaving politics. Indeed, if the past decade has shown anything, it is that Chubais is the ultimate political "vanka vstanka."

Chubais had luck on his side. The financial crisis of August 1998 and end of the young reformers’ government saw him gain in two important ways – the crisis saw the economy remonetarize; and he remained the only pro-Western politician in a position of power.

Chubais quickly began putting an end to barter for electricity payments, which became possible as domestic producers, shielded from imports by the ruble’s collapse, began to have the cash to pay – and UES’ books started to look good.

To foreign investors, ignoring his previous machinations, Chubais looked like a beacon of hope during Yevgeny Primakov’s prime ministership. They even changed the company charter so that 75 percent of shareholders, instead of 51 percent, would be required to oust Chubais. The government owns 52.5 percent and foreigners 34.3 percent of UES – meaning the Primakov government, and any successive administration, could not oust him.

But then the political situation altered. After Vladimir Putin became prime minister, Chubais threw his lot in with Putin and, most scandalously, with the latter’s vicious war in Chechnya. Chubais went on to brand the conflict’s opponents – coincidentally his own political opponents – as "traitors." It was a brilliant election campaign, and it got the Yeltsin reformers back into the Duma.

Indeed, Chubais, like Boris Berezovsky, again proved a master of the Russian political landscape.

But a year later, Berezovsky was in self-imposed exile; and Chubais found himself, and his UES reform plans, under siege. This time, though, it was not from the Communist Party or Moscow Mayor Yury Luzhkov – corrupt apparatchiks who could be dismissed. This time Chubais was under assault from the president’s economic advisor, Andrei Illarionov, a man with more liberal economic views than Chubais himself.

Chubais was outflanked. He couldn’t say his reforms were being blocked by "the old guard;" he couldn’t say he was "defending the country from bureaucracy;" and he couldn’t say he was trying "to build a class of property owners." He was being called a swindler … by his own side.

The ensuing fight was one of the best political debates seen in the post-Yeltsin era – a period where debate in general has been stifled. Chubais was beaten back again and again by Illarionov until a compromise restructuring was agreed – one, crucially, without asset sales. Equally important, the fight showed that the political climate was changing; that Putin would not indulge Chubais.

Chubais was bowed, but is still not broken. He is currently forging his national electricity-distribution network – and this partly explained his struggle with Luzhkov over Moscow’s Mosenergo.

By any stretch of the imagination, Chubais is still on track to be an extraordinarily powerful political and financial figure. The Kremlin, it seems, is aware of this. In a little-reported incident in mid-September, the Duma passed a motion appealing to the president to investigate the activities of senior management at UES. The appeal was co-drafted by the Unity faction, whose members don’t breathe without the presidential administration’s approval. It was a shot across the UES chief’s bow. The Kremlin made it clear it knows what Chubais is up to.

It’s also worth noting that in their disgust with Chubais’ restructuring plan, foreign shareholders changed the company charter back earlier this year so that only 51 percent of voters are required to oust the UES chief. In other words, the government can do it any time it wants.

Add that to the fact that Russia is likely to see a string of Primorye-type power and heating crises in the regions this year, and it is clear that there will be an easy pretext for Chubais’ dismissal. This seems increasingly likely – and few will mourn his passing into history.

But history holds a fascination for Machiavellian figures – and Chubais, as his supporters will tell you, is a great Machiavellian, having used the political master’s methods to ensure Russia could not return to the past.

But Machiavellians always have a use-by date, and Chubais’ seems about to fall due.

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