CONFLICTING ASSESSMENTS OF RUSSIA’S ECONOMY…

The second annual U.S.-Russian Investment Symposium convened at Harvard University’s Kennedy School of Government in Cambridge, Massachusetts, from January 9-11. More than 500 businessmen and officials — including no less than seven Russian regional governors — gathered to discuss the prospects and problems of foreign investment in Russia. The Russian delegation was led by Deputy Prime Minister and Economics Minister Yakov Urinson, and included financier Boris Berezovsky and Mikhail Khodorkovsky, the founder of Menatep bank and head of the Yukos oil company.

The conference opened with a characteristically contrarian presentation from international financier George Soros. He said that the privatization program hastily launched in 1992 had opened the door to "robber baron capitalism," and that First Deputy Prime Minister Anatoly Chubais was "tainted" by his role in fund-raising for the 1996 presidential election. Soros argued that his own participation in the purchase of 25 percent of Svyazinvest shares in July, 1997, had been a breakthrough in openness, and caused a "ruckus" among the leading financial cliques, thus breaking their unhealthy collusion. Soros said he will not participate in the sale of a second tranche of Svyazinvest shares, scheduled for later this year — which raises the question of whether the Russians will be able to find a Western telecom operator willing to get involved with the restructuring of their telecom giant.

Soros’s message did not go down well with the conference’s Russian participants. The next day the president of Sakha (Yakutia), Mikhail Nikolaev, pointedly noted that "I have come here not from a bandit Russia, but from a normal, democratic, developing Russia." In a curious twist, Boris Berezovsky delivered an address on January 10 in which he defended his arch-rival Chubais from Soros’s attack, which he described as "incorrect and unfair." Berezovsky credited Chubais with the enormous achievement of launching the privatization program that transformed Russia into a market economy. He questioned Soros’s faith and commitment to Russia, revealing that at the Davos forum in February, 1996, Soros had personally urged him to flee the country, since Soros thought that a Zyuganov victory was inevitable. Berezovsky also countered Soros’s claim that state assets had been sold to insiders at bargain prices by reporting that at the time of the loans-for-share auctions, in late 1995, he had invited Soros to lend him money to help him bid for Sibneft, but had been rebuffed.

Still, Berezovsky indirectly argued that it was time for Chubais to quit, by saying that the "revolutionary" phase of transition had now ended, and it was time for "evolutionary" processes to take over, which meant that those with a "Bolshevik" approach to solving problems should leave the stage. Berezovsky also warned that there was a dangerous concentration of political power in Russia, and that the administration still has the power to close down any bank or media outlet — or start a war– at any time.

…While Investors in Russia are Urged to Look to the Long Term.