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Luzhkov Clashes With Medvedev in Struggle for Moscow

Yury LuzhkovSept. 15 (Bloomberg) -- Moscow Mayor Yury Luzhkov, whose wife is Russia's only woman billionaire, is locked in a battle with President Dmitry Medvedev for control of the capital after two weeks of critical media reports.

A weekend of attacks on Luzhkov, 73, began on Sept. 10, when NTV, owned by state-controlled OAO Gazprom, aired a documentary that blamed him for issues ranging from corruption to traffic jams. State TV followed with accusations of inaction as wildfire smoke choked Moscow this summer and favoritism toward his wife, Yelena Baturina, president of construction and real estate company ZAO Inteko.

"The situation is more volatile than it has been since he became mayor," said Mikhail Vinogradov, head of the Petersburg Politics Foundation, a research group based in Russia's second- biggest city. "The presidential administration has never sent signals like these."

At stake is control of the capital ahead of a 2012 presidential election in which Prime Minister Vladimir Putin may seek to regain the office he turned over two years ago to Medvedev, 45. Luzhkov, who has been mayor of Moscow since 1992, has aligned himself with Putin.

While Putin, 57, and Medvedev have ruled out competing against one another, neither has said who will run in 2012. The ability to deliver a large majority in the capital may ultimately help determine the candidate, said Dmitry Oreshkin, an independent political analyst in Moscow.

'Bargaining Chip'

"The Moscow battle is important because whoever controls Moscow will have an important bargaining chip when they decide who runs for president," Oreshkin said. Putin hasn't commented on the dispute.

Medvedev's spokeswoman, Natalya Timakova, declined to comment on media reports of Luzhkov's imminent removal or critical reports about the mayor. She replied to questions by text message today.

The best time to change mayors would be in the next few months so Luzhkov's successor would have time to build his own power base before a parliamentary election in December 2011 and the presidential contest the following March, said Dmitry Orlov, director of the Moscow-based Agency for Political and Economic Communications. Luzhkov's term ends in December 2011.

Media Skirmish

Moscow is also a rich economic prize. The mayor controls a budget of more than 1 trillion rubles ($32.7 billion). Moscow accounted for 23.8 percent of Russia's gross domestic product in 2008, the last year for which data are available, according to the Federal State Statistics Service.

The uncertainty surrounding Luzhkov may cut short a rally in bonds sold by city-controlled Bank of Moscow by increasing the political risk associated with holding the securities. The city owns 46.5 percent of the bank, Russia's fifth-biggest lender by assets, according to its website.

The latest skirmish was touched off on Aug. 31, when Moskovsky Komsomolets, a newspaper close to Luzhkov, published an opinion piece praising Putin while accusing Medvedev's team of "direct persecution" of the mayor.

On Sept. 1, Luzhkov wrote an article in Rossiiskaya Gazeta, the government's official newspaper, that challenged Medvedev's decision to suspend construction of a Moscow-St. Petersburg highway in the face of environmental protests.

'Inadmissible' Attempt

The mayor defended the current route for the highway, which Putin has backed since its inception. The project "is a crucial test of the country's ability to modernize," Luzhkov said, echoing the economic modernization theme Medvedev has made a priority of his presidency.

The Kremlin hit back on Sept. 8, when an unidentified official told Interfax that city hall had "overdone it" in its "inadmissible" attempt to pit Putin against Medvedev.

Two days later, Luzhkov denied that he was trying to drive a wedge between Putin and Medvedev. The mayor said his article on the highway dispute was an "objective assessment" of the project that the administration had requested.

Medvedev issued a veiled rebuke to Luzhkov on Sept. 10, when asked if he shared the mayor's view that Russian society is plagued by a lack of trust and principles.

"You're suggesting I send greetings to the Moscow mayor?" Medvedev said. "No, I don't agree with that point of view. Government officials in this situation should either take part in improving our social institutions or go into opposition."

Luzhkov's 'Weakness'

The mayor yesterday reiterated his determination to serve out his term, Interfax reported.

In response, an unidentified presidential administration official told Interfax today that the decision to extend or truncate the mayor's term can only be made by the president.

Luzhkov's position is "extremely difficult," Oreshkin said. "He can't make a deal with Medvedev and has appealed to Putin out of weakness."

Given the scale of the confrontation, Medvedev will have to fire Luzhkov to save face, Orlov said. There is a 70 percent chance Luzhkov will step down in the "near future," he said.

The Moscow City Duma, the capital's legislature, passed a resolution today that supports Luzhkov and condemns media reports intended to "blacken" his name, RIA Novosti reported.

Medvedev has removed long-standing governors in Bashkortostan, Tatarstan and the Sverdlovsk region, leaving Luzhkov as the most powerful regional leader remaining from the era of former President Boris Yeltsin.

Possible Successors

Luzhkov may be removed in two to three weeks, the Vedomosti newspaper reported today, citing an unidentified presidential administration official. An unidentified government official told Vedomosti that the mayor would step down in December.

Possible successors include two deputy prime ministers, Sergei Sobyanin and Sergei Ivanov, Emergency Situations Minister Sergei Shoigu and former Kaliningrad governor Georgy Boos, Vedomosti reported, citing unidentified Kremlin and government officials.

Luzhkov's current tussle with the Kremlin is the most serious since 1999, when he had presidential ambitions and his Fatherland-All Russia party competed in parliamentary elections against the Unity movement supported by Putin, then in his first stint as prime minister.

Fatherland-All Russia backed Putin in the 2000 presidential election and later merged with Unity to create United Russia, the party Putin currently leads.


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