Publication: Monitor Volume: 1 Issue: 143

Planned auctions of shares in three major defense industry companies (the Sukhoi Aircraft Design Bureau, the Ulan-Ude Aircraft Plant and the Arsenievsk Aircraft Plant) have been canceled for national security reasons, it was reported November 28. The auctions had been scheduled for December 17 but, for the time being, the plants are to remain in the hands of the state. (6)

The announcement comes amid growing controversy over the "credit auctions" through which the state had recently started to divest itself of some of the shares it holds in Russia’s largest industrial enterprises. (The first such auction was held November 17. The idea is that the government borrows money from commercial banks against the security of state-owned assets, while the lenders acquire the right to manage these assets for three years and stand to get a financial reward when that period is up.) On November 26, three of Russia’s top commercial banks called on the government to postpone all such auctions for the time being. The banks concerned are Inkombank, Rossiisky Kredit and Alfa-Bank, and they are complaining because they say another leading bank, Menatep, cheated in the first auction by bidding for more shares than it had assets to cover. The implication appears to be that Menatep was acting as an agent for another bidder. (Western financiers, for example, are officially banned from bidding for shares in enterprises designated as strategically significant, but there is suspicion that they may try to hide behind Russian agents.) Menatep has strongly denied the accusation, saying the other banks are complaining only because they themselves had planned to act on behalf of secret Western investors but lost out in the bidding. (7)

The commercial banks are not the only ones complaining about the controversial auctions: Communist Party leader Gennady Zyuganov has vowed that, if his party does well in December’s parliamentary elections, it will seek to reverse the sale of shares in at least one strategically important enterprise — Norilsk Nickel, which is the world’s largest producer of nickel, cobalt, chromium and platinum. In the November 17 auction, Russia’s Oneksimbank successfully bid $170.1 million for a 38 percent stake in Norilsk Nickel, while a higher bid by another company was rejected because its guarantor, Rossiisky Kredit, did not have sufficient assets to cover the auction price. (8) This latest controversy typifies the feverish uncertainty prevailing in the Russian elite as the elections approach and doubts continue over the state of President Yeltsin’s health.

Border Troops Reinforced in Far East Sea Border.