Scandal isn't just about 'bribe' Russian economic rivalries are behind Chubais' woes

November 19, 1997|By Kathy Lally | Kathy Lally,SUN FOREIGN STAFF

MOSCOW -- Some Russians are wondering why Anatoly B. Chubais, the first deputy prime minister and a liberal reformer, is in trouble over a $90,000 book advance -- described as a bribe.

That kind of money, they say, is small change in the world of official corruption.

"It's not $1 billion, it's only $90,000," scoffs Lilia Shevtsova, a political analyst and widely published writer. "It means something else is behind it."

The alleged bribe is a colorful detail in a larger, murkier story, woven with corruption and intrigue. And the latest twist of plot hints at an ominous chapter in the history of Russian economic reform.

More and more voices are saying that Chubais, who oversees privatization, has been fatally weakened and will soon be out, that he has been rendered impotent by the dismissal of important members of his team over the scandal and that no one else is equipped to take over for him.

"Politically, he's dead," said Andrei Piontkovsky, director of the Center for Strategic Studies. "And I say that not with jubilation but sadness."

Alexander Bevz, director of the Civil Society Foundation, a think tank, foresees an unpleasant period for Russian reformers. With Chubais gone or confidence in him lost, Western investors will retreat, he predicts. With world financial markets unstable, already risky Russian investments will be considered unacceptably dangerous.

Russia will drift, Bevz said, voicing a certain despair about it.

The trouble started last week when an investigative journalist named Alexander Minkin revealed that Chubais and some of his closest associates were being paid $90,000 each for a book called "The History of Russian Privatization," which has not yet been published and isn't considered likely to sell well.

The publishing company is controlled by Vladimir Potanin, a Chubais ally and one of the six powerful tycoons known as Russia's robber barons because they own about half of the nation's assets, and want more.

Over the weekend, President Boris N. Yeltsin fired three of the co-authors: Maxim Boiko, a Harvard-trained economist who was privatization minister, Pyotor Mostovoi, head of Russia's bankruptcy agency, and Alexander Kazakov, a senior adviser.

But Yeltsin rejected Chubais' offer to resign.

Shevtsova and nearly everyone else are convinced that the information about the Chubais book deal came from one of the rival tycoons -- Boris Berezovsky.

On Nov. 5, Yeltsin fired Berezovsky as deputy secretary of the Security Council. But Berezovsky was no mere civil servant. Forbes magazine estimates his fortune at $3 billion, including major television, newspaper, banking, automobile and oil interests.

'Bankers' War'

Berezovsky, Potanin and the other four tycoons -- whose huge holdings include newspapers or television stations that can present their side -- have been embroiled since last summer in a so-called "Bankers' War" over how the remaining state assets will be divided up.

Until the summer, they had an informal agreement under which they took turns buying up Russian industry at bargain prices.

Prompted by Potanin, who controls Uneximbank, Chubais drew up a "loans-for-shares" privatization plan in 1995.

Controlling shares in Russia's big industries were auctioned off to banks; in return, the banks made loans to the government. The banks would return the shares if the government ever repaid the loans; if not, the banks could buy the shares -- which they have done.

Then in the summer Chubais decided on new rules, which would require open bidding. With this fatal move, he staked everything on his own reputation for honesty. Potanin, the head of Uneximbank, promptly won the auction for Svyazinvest, a state telecommunications company.

The other tycoons were outraged, complaining that it wasn't his turn.

This set off a war in the newspapers owned by each of the protagonists, in which articles viciously attacked the government and accused Chubais of back-room dealing to hand the company over to Uneximbank. At one point, a Uneximbank-owned newspaper wrote that the banks were plotting to overthrow the government. Next, Chubais reported that he had been warned of a possible assassination attempt.

Chubais' new rules

Finally, in September, Yeltsin called in the six bankers and ordered them to make peace. They came out of that September meeting smiling, but the war quietly continued. Berezovsky reportedly refused to accept the new rules. Berezovsky's dismissal was widely viewed as a signal from Yeltsin that he intended to back Chubais' team of young reformers strenuously.

But Chubais had made too many enemies in a Kremlin where everyone apparently has something on everyone else.

In an interview yesterday, Minkin, the journalist who broke the story of the $90,000 fees, denied that he was working for Berezovsky when he broke the Chubais story.

It was only another case of government corruption, he said.

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