Publication: Monitor Volume: 5 Issue: 110

Moscow is apparently facing a financial crisis, due in part to a sharp drop in foreign investment, and perhaps also in part to the apparent Kremlin attempt to undermine Luzhkov (see the Monitor, June 2, 7). The city may not be able to make its scheduled payments to creditors in July or, in the best case, in August, and has reportedly been trying to restructure a US$200 million foreign loan it received last summer. Moscow receives some 3 billion rubles (roughly US$120,000,000) from the federal authorities each year, which could be cut off. Evidently, the Kremlin could try to re-register such huge state companies as Gazprom and United Energy Systems outside Moscow’s administrative boundaries, thereby robbing the city of tax revenues. Thirty percent of Moscow’s budget comes from taxes from large corporations like these (Moskovsky komsomolets, June 8).

Increasingly isolated, Moscow Mayor Yuri Luzhkov may be seeking allies from among Russia’s other regional leaders. He seemed to receive some support yesterday from Oleg Morozov, head of the Russian Regions bloc in the State Duma and head of the executive political committee of the new political movement All Russia (Vsya Rossiya). Morozov said that All Russia will soon take up questions of political cooperation with Luzhkov’s Fatherland (Otechestvo), adding that the two movements are “simply destined for a strategic alliance.” Cooperation, Morozov said, could entail an outright merger, or simply agreeing on a single list of candidates for the December parliamentary elections. Morozov noted that both movements agree that “ineffective high state power” is to blame for the failures of Russia’s reforms, and that All Russia’s views on such matters “absolutely coincide” with those of Luzhkov’s movement (Russian agencies, June 7).

Morozov’s strong support for Luzhkov and Fatherland is especially significant given media reports that Yeltsin personally warned Tatarstan President Mintimer Shamiev, the founder of All Russia, not to cooperate with Luzhkov. Aleksandr Voloshin, head of the Kremlin administration, said in an interview published yesterday that the Kremlin’s relations with Luzhkov are “very good,” but that it is impossible to have a view of Fatherland, which he said has not yet revealed its political or economic orientation (Izvestia, June 7).