Publication: Monitor Volume: 2 Issue: 223

Further controversy has flared over Russia’s plans to privatize its telecommunications sector. The World Bank had already objected to the government’s plans to merge Rostelekom, the state-owned company that controls long-distance communications in Russia, with Svyazinvest, which controls Russia’s regional communications network. (See Monitor, November 22) Controversy heightened yesterday when the government confirmed rumors that it was dismissing the consortium of western investment banks, headed by N.M. Rothschild, which had been handling the planned public sale of $1 billion worth of shares in Rostelekom and Svyazinvest. Instead, the government is passing control to two Russian banks, Alfa Bank and the Most group. (Financial Times, BBC World Service, November 26) Alfa and Most were members of the team of six leading Russian financial companies that bankrolled Yeltsin’s reelection campaign (to the tune of $3 million). Their involvement in the telecoms deal is controversial since they are expected to act not only as advisers but also as investors. As with last year’s controversial shares-for-loans scheme, this development is likely to exclude not only western investors but also Russian investors outside the charmed circle of big finance houses close to the Yeltsin team. The World Bank has already threatened to withdraw funding from the telecoms modernization scheme, warning that the resultant monopoly will be neither efficient nor competitive.

Still No Decision on IMF Credits.