#8
Wall Street Journal
December 21, 2001
As a Strapped Russia Looks to Diamonds To Raise Funds,
Is Democracy at Risk?
By JEANNE WHALEN
Staff Reporter of THE WALL STREET JOURNAL
MOSCOW -- Democracy is on the run in Russia's richest diamond-mining region, where the Kremlin is vying to put its men in charge of the country's most precious nonliquid assets.
Tightening control over Russia's diamond revenue has become even more important as falling oil prices undermine federal budget targets for next year. And so the state has been waging a thinly veiled war for victory in this Sunday's presidential race in Yakutia, the glacial Siberian republic known for its big jewels.
The theater surrounding the vote shows Moscow is sacrificing democracy as it strengthens its control of regional riches lost in the Boris Yeltsin years. Many human-rights activists condemn the meddling, although some analysts say regional corruption is so high, Moscow doesn't have much choice but to interfere.
Back in the early 1990s, Mr. Yeltsin feared that the nationalism that helped shatter the Soviet Union would spread to Russia's ethnically diverse regions, so he placated several far-flung provinces with broad powers. The republic of Yakutia, dominated by deer-herders and fishermen, received its own presidency, constitution and the right to its own native language. Local authorities also won control of Alrosa, the giant diamond-mining monopoly that controls annual output second only to Botswana's.
Vladimir Putin has devoted his presidency to revoking powers like these, believing that some of Russia's regions have grown drunk on independence. Lately, his focus has settled on Yakutia's frigid diamond mines.
Earlier this year, Moscow said it intended to raise its stake in Alrosa to 51% from 32%, and to boost its control over Alrosa's $1.7 billion (1.89 billion euros) in annual sales. Showing that the Kremlin meant business, Finance Minister Alexei Kudrin flew to Yakutia's capital this week to sign a new five-year diamond trading agreement with De Beers.
Russian media and analysts say the Kremlin also has conducted a bare-knuckles campaign to oust local president Mikhail Nikolayev and put its own ally in charge. "The election campaign ending Sunday has been record-breaking in its number of lawsuits and volume of dirty PR," newspaper Vremya Novostei wrote this week.
On Thursday, a Kremlin spokeswoman denied that the Kremlin is meddling. "We do not intrude in any elections," she said. "This is up to the will of the people in any particular region."
But political analysts say signs of federal pressure have been mounting since early this year. The Audit Chamber, a parliamentary watchdog group that oversees government spending, has alleged a host of financial shenanigans in the republic, accusing the local government of collecting four times too much diamond-mine "rent" from Alrosa, and of misspending federal funds sent to clean up a disastrous flood this summer. The region denied any foul play.
After several recent meetings with Mr. Putin in Moscow, Mr. Nikolayev withdrew his candidacy last week and threw his support behind the Kremlin's favorite, Vyacheslav Shtyrov, head of Alrosa. In a televised award ceremony, Mr. Putin tacitly anointed Mr. Shtyrov by pinning a medal on him and thanking him for his help in cleaning up the flood.
Russian media say Mr. Putin wants to move Mr. Shtyrov out of the diamond company and put an ally from his home city of St. Petersburg in charge. The Russian president has appointed many St. Petersburgers to top government and corporate posts in the past year, including at gas monopoly OAO Gazprom.
Human-rights activists have deplored what they say is widespread Kremlin meddling in regional elections. Yuri Korgonyuk of the Indem think tank in Moscow agreed that Sunday's vote in Yakutia can't be called democracy, but added that he didn't disapprove of Moscow's interference. "Nikolayev's leaving is a necessary thing because the level of corruption in Yakutia was outrageous even for a regional republic," he said. "Democracy works well where there is civil society, but where clans form the basis of society ... any election will end in the victory of the clans, no matter how corrupt they are."
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