Russia Watch: Moscow Central

...In fact, its impressive wealth is a testament to the symbiosis between financial and political power that is at the heart of the new Russian state...

...There are two main camps...

...As the seat of supreme political power, it is home to three-quarters of the country's financialinstitutions, including the dozen or so financial-industrial giants that dominate the nation's economy...

...The unconstitutionality of a third term presents little trouble...

...Yeltsin, in the name of "reconciliation and accord," has signed on to this approach: he has re-activated such extra-constitutional mechanisms as the Big Four, a consultative body that includes Yeltsin himself, Chemomyrdin, Yegor Stroyev, speaker of the Federation Council, the upper chamber of parliament, who is a former Soviet Politburo member...

...14 70 February 19 9 8 The American Spectator...

...Luckily for friends of Big Government, political illiteracy is pervasive...

...Thus he was able to get the husband of Yeltsin's elder daughter appointed head of Aeroflot, while securing the right to "manage" the44 Russians react to bad government the way they always have: they try to avoid its consequences...

...Chubais is teamed with Uneximbank, which used its connections to become one of Russia's largest "authorized" banks, with the right to hold billions of dollars in government funds...

...Meanwhile one of the most promising food-safety treatments for beef, irradiation, was banned by the FDA until this past November because of bogus concerns about its safety...

...There is in fact far too much public trust in, and far too much naïveté about, government (see Clinton's latest approval ratings...

...The rival camp is led by financier Boris Berezovsky, who in 1996 brought together Russia's top bankers to back Yeltsin's re-election, and hired Chubais to organize the campaign...

...The money had come from a Uneximbankcontrolled publishing house...

...In the Council's view, any government benefit, however limited, legitimizes any regulation or any tax burden, however unlimited...

...And should Yeltsin announce his intention to run again (he has made contradictory statements on the subject), the three main presidential aspirants from the "party of power," as Russians call the new establishment—Prime Minister Viktor Chernomyrdin, Moscow Mayor Yuri Luzhkov, and Nemtsov—will not challenge him...

...Yet legislation to simplify procedures for registering such firms and to give them legal protection encounters, as State Duma deputy Viktor Pokhmelkin told Literaturnaya Gazeta last October, "colossal lobbying resistance from representatives of bureaucratic structures and financial-industrial groups...

...Then in December, while meeting reporters during an official visit to Sweden, Yeltsin appeared to think he was in either Finland or Norway...

...And why pay the government for services you will have to pay for again, in bribes to individual officials...

...freer, of course, than Stalinist basket cases like Cuba and North Korea...

...Power, as his ex-press secretary Vyacheslav Kostikov once said, is Yeltsin's Burkina Faso has nothing to be ashamed of...

...freer than India and China...

...You'd better take pictures of the moon...

...Such is the reasoning...

...and Gennady Seleznyov, speaker of the State Duma, the parliament's lower house, who is a top Russian Communist Party official...

...This helps explain why economic success continues to elude a country so rich in natural resources and human capital...

...Chubais now portrays himself as a martyr in the war against the oligarchs, who, he complains, are using their media to destroy him...

...They want just enough "capitalism" to keep getting richer, but plenty of state power to stifle genuine competition and obviate the need to earn an honest ruble...

...So while 1.8 million small businesses emerged during the first five years of Poland's economic reforms, Russia after its fifth year of reform has only 831,000, fewer than two years ago...

...R ussians today react to bad government as they always have: they try to avoid its consequences...

...In November, newspapers and television stations under their control reported that Chubais and four of his deputies had each received a $90,000 honorarium for a history of Russian privatization, which had not yet been written...

...Why should anyone pay them...

...Yeltsin has secured his tsar-like position by combining a fine-tuned populist instinct with a virtuoso grasp of Machiavellian politics—a blend of"Byzantine treachery and elemental democratism," as one of his opponents described him with grudging admiration...

...It was rated less free than Mexico (88th place) and far less free than South Korea (24th place...

...Now Chubais is dying by the same sword...

...While luminaries of the democratic movement and leading ex-dissidents such as Afanasyev, Yelena Bonner, Aleksandr Solzhenitsyn, Vladimir Bukovsky, and Lev Ponamarev have expressed alarm and disgust over the course the country has taken, the new ruling elite is finding things to its liking...

...state airline's estimated $499 million yearly cash flow...

...Like much of the media, the Councilbelieves that popular distrust of government arises because people are misinformed, not misgoverned...

...Such is the house that Boris I has built—or rather, moved into and partially renovated...

...Yet the shadow economy is a zone of lawlessness, ruled by corrupt bureaucrats and racketeers—hardly fertile soil for the growth of small business and a middle class...

...To fill the state's accounts in "authorized" banks, for subsequent looting...

...If Yeltsin is able to maintain even a vague semblance of health, sobriety, and sanity, it is almost certain that Russia's new power-brokers will do what they did in 1996—put wads of cash and their media to the task of keeping him in the Kremlin...

...To subsidize luxury dachas for army generals, collective farm managers and regional administration heads (and presidential yachts...

...Last year's Index of Economic Freedom, compiled by the Heritage Foundation and the Wall Street Journal, rated Russia freer than all the other former Soviet republics except Moldova and the Baltic states...

...On the one hand this means that Russians are better off than official statistics indicate...

...RUSSIA WATCH by Jonas Bernstein Moscow Central S trolling with Jiang Zemin during a visit to China last November, Russian president Boris Yeltsin suddenly turned to the trailing press entourage...

...Lawyers for the president are expected to argue that, since Yeltsin's presidency started in 1991, when Russia was still the Russian Soviet Federated Socialist Republic, his first term didn't count...

...The man who rose to prominence as a campaigner against the privileges of the Communist Party nomenklatura has at least five official residences in the Moscow area...

...The populist element is less noticeable these days: it was last seen during the 1996 campaign, when Yeltsin repeatedly criss-crossed the country, and even danced The Twist while in need of quintuple-bypass surgery...

...We have reconciled ourselves to the fact that a monopolized economy will exist in Russia," the historian Yuri Afanasyev recently wrote...

...While they fight over the last remaining tasty chunks of state property slated for privatization, the battle is ultimately about who will play the decisive role in either re-electing Yeltsin or picking his successor...

...As do the results of another survey carried out late last year: Control Risks Group, a British consultancy, rated Russia as the world's most corrupt country, with Nigeria, the long-reigning champion, in second place...

...Seleznyov is the former Pravda editor who, after a trip to North Korea in 1996, said that people there were eating grass not because they were starving, but because "their culture is higher than ours...

...Berezovsky has also done well in privatization, but his main achievement has been to "privatize" access to the Kremlin and Yeltsin's family...

...Chubais groveled before Boris I, admitting the honoraria were too high...

...It also won big in the privatization sweepstakes...

...According to the World Bank, Moscow controls 8o percent of Russia's financial resources...

...Chubais is currently on the ropes...

...ian male...

...That would be bad for business...

...The following month, fifty-one top business leaders stopped by Seleznyov's office to pay their respects...

...Yeltsin's behavior has of late gotten stranger and stranger, which is perhaps not surprising given his epic partying and the fact that, at 66, he has already lived eight years longer than the average RussJONAS BERNSTEIN is a writer living in Moscow...

...Vitaly Tretyakov, editor in chief of Nezavisimaya Gazeta, recently described an incident which took place in the fall of 1996, before the tycoons began their latest round of fighting...

...The higher they are in the pecking order, the closer they get to the presidential limo...

...He later declined an invitation from Jiang to extend his visit by saying: "I only have enough food with me for two days...

...Small wonder, then, that the unofficial economy now accounts for more than 50 percent of the gross domestic product, by one estimate...

...As Boris Nemtsov, a first Deputy Prime Minister, told NTV television in November, "Without a tsar in Russia there is discord...

...The real riches, many people believe, are The American Spectator • February 1998 69 sitting in Liechtenstein banks...

...If beef irradiation had been approved sooner, hundreds of American lives could have been saved...

...Last summer, a Unexim affiliate was among several banks accused, in a leaked Central Bank memorandum, of embezzling $237 million from the state...

...If the underground economy of the Brezhnev era was a quiet rebellion against central planning, contemporary Russians vote no-confidence by evading the country's labyrinthine and confiscatory taxes...

...Perhaps more important than the perks is respect— a key element in any personalistic system...

...Some here have begun comparing him with the ailing Brezhnev, and a few newspapers have even called for his early retirement...

...During a meeting between Russia's top newspaper editors and Chubais, then Yeltsin's chief of staff, one editor complained that the presidential administration was interfering in his editorial policy via Gazprom, the natural gas monopoly Chernomyrdin once headed, which owned a large stake in the publication...

...The prime minister's approach differs mainly in that he wants to open up membership in the ruling elite to "pragmatic" members of the Communist opposition...

...68 February 1998 • The American Spectator ideology, friend, concubine, and mistress — and the perks aren't bad, either...

...In December, as the government was scrambling to pay off hundreds of millions of dollars in back wages to state workers, London's Independent discovered that the Kremlin had spent $490,000 to purchase two yachts for the chief...

...Championing mass delusion can make the Council for Excellence in Government feel good about itself, but it won't lead to excellence in government...

...It is unlikely that the Constitutional Court will object...

...For delayed salary and pension payments, barely functioning public health services, and corrupt law enforcement...

...While he and Nemtsov last October managed to convince Yeltsin to remove Berezovsky as deputy secretary of the president's Security Council (Berezovsky was reportedly using the post, among other things, to gather intelligence on his rivals),the ousted financier and his allies soon struck back...

...The tsar was merciful, and allowed him to remain a first deputy premier—for the time being...

...Indeed, it's hard to imagine Yeltsin willingly retiring to a life of gardening at his dacha...

...This $450,000 book deal was small beer, at least by local standards...

...He himself empowered the oligarchs through rigged privatization auctions, which makes complaints about the media campaign laughable...

...The first includes First Deputy Prime Minister Anatoly Chubais, the architect of Russian privatization and the West's long-time heart-throb...

...That, of course, is easier to do than it was in the bad old days...

...When supreme power weakens, civil war develops...

...Progress...

...And if you don't, bones will crack...

...Yeltsin, clearly seeking to restore a balance after firing Berezovsky, removed Chubais as finance minister and fired three of his allies (all of them co-authors), effectively ending his control over privatization and bankruptcy...

...Such book contracts, including those arranged for Yeltsin's and Nemtsov's memoirs, are often thought to be simply a way for the tycoons to give their favorite official pocket money that can be legally declared...

...Even Boris I cannot decree his immortality, however, and the rival financial-bureaucratic clans are already working out contingency plans...

...and then pointed at the setting sun...

...he exclaimed...

...Last November, Yeltsin rewarded him with a second-level order for services to the Fatherland, honoring his contributions to Russian parliamentarianism...

...He is turning into a major power broker...

...A criminal investigation was launched and, typically, never followed up...

...What, you're taking pictures of me...

...Even in his decline, Yeltsin has maintained his legendary skill in balancing the competing forces within the new elite—the bankers, the government ministers, the regional leaders, the parliament—and without a grand arbiter their ongoing power struggle could well veer out of control...

...This is more than an idle joke...

...While entire regions of the country have reverted to barter, Moscow sucks up two-thirds of all foreign investment...

...According to Viast, when Yeltsin travels to Russia's regions, local officials fight for a spot in the presidential motorcade: it is a mark of prestige...

...According to one estimate, small businesses alone fork over at least $5oo million per month in bribes...

...Moscow—as before, Russia's showcase —is often cited as evidence that capitalism has taken hold...

...He improvised an offer to scrap a third of Russia's nuclear warheads, misidentified Japan and Germany as nuclear powers, and generously promised that Russia would not "provoke war" as long as he was in office...

...In December, Kulikov called for the formation of a Supreme Economic Council, composed of the heads of Russia's largest financial-industrial groups, each of whom would be a presidential economic adviser...

...This is the kind of organization that would give an award to the Postal Service for not losing all first-class mail...

...His fall, however, simply strengthens Chemomyrdin, which is nothing to cheer about...

...On the other hand, Russia was ranked 1o4th out of 154 countries—tied with the Dominican Republic and Armenia, one spot ahead of Burkina Faso (the former Upper Volta, without rockets), and one behind Cape Verde...

...That is a sad outcome...

...Chubais responded: "You will do what the owners tell you...

...It's a formula likely to keep Tsar Boris in power for as long as he remains half-cogent...

...But it's entirely possible that Yeltsin will stay on for a third term—explicitly forbidden by Russia's constitution—and he has begun referring to himself with the tsar-like moniker, Boris the First...

...The Chubais-Unexim clan is betting on Nemtsov as Yeltsin's successor, while Berezovsky's is staking on Prime Minister Viktor Chernomyrdin...

...Interior Minister Anatoly Kulikov, however, a Chernomyrdin ally, wants to make the monopolies part of the government...

...Nevertheless the scandal tarnished Chubais's image as an "energetic young reformer...