Publication: Monitor Volume: 4 Issue: 88

Viktor Khristenko, newly appointed deputy prime minister with responsibility for financial relations with the regions, is something of an unknown quantity. Most observers see him as a technocratic placeman whose main characteristic is loyalty to Boris Yeltsin.

The 40-year old Khristenko is a graduate of the Chelyabinsk Polytechnic Institute and Economics and the government’s Economic Academy in Moscow. He was a businessman, serving as head of the Chelyabinsk securities commission, before being appointed deputy governor and then presidential representative in Chelyabinsk between 1994 and 1997. In July 1997 he was brought to Moscow by Anatoly Chubais to serve as deputy finance minister. Khristenko is a member of council of Russia is Our Home, which backed his candidacy for the government in the latest reshuffle. Yegor Gaidar vouched for Khristenko’s reformist credentials, saying in a television interview that he is “just the type of person that the prime minister needs,” (Komsomolskaya pravda, April 30; NTV, April 29)

The enemies of the Gaidar-Chubais axis wasted no time in digging up dirt on Khristenko. In November 1996, a Chelyabinsk investment fund–of which Khristenko was deputy head–Social Protection of the Population, suspended operations amid reports that it had been subject to criminal extortion. In a second case, reminiscent of the book-royalty scandal which brought down First Deputy Prime Minister Anatoly Chubais, Khristenko was reportedly asked to return 50 million old rubles ($9,000) spent by him and two co-authors on publishing a book entitled “In Search of Lost Deposits.” The money had been borrowed from the Chelyabinsk fund for defrauded investors, of which Khristenko was deputy director. (Kommersant-Daily, April 30)

Peccadilloes aside, Khristenko faces a daunting task in imposing order on financial relations with the regions. In the past the central government relied on fiscal transfers to buy the loyalty of regional leaders. By 1997, however, the federal tax take had shrunk to 11 percent of GDP, while regional governments managed to collect 16 percent of GDP. With each passing year, therefore, they have been less reliant on handouts from Moscow. Complicating the picture is the fact that a large proportion of regional taxes are collected in kind, while the federal authorities have made a determined effort to accept only “real” money.