Publication: Prism Volume: 1 Issue: 25

“New Russians,” Banks, and the Election Campaign

by Victor Yasmann

Bankers and "New Russians"

Russian bankers and financiers are striving to find a politicalrole commensurate with their economic position. Despite frequentmistakes and false starts, the bankers remain a political forceto be reckoned with. An understanding of their role and theirpotential requires an understanding of their background and theirplace in the social pecking order of modern Russia.

The Russian bankers are usually identified with the term "NewRussians." They are in fact at the very topmost rung ofthis new elite.

The term "New Russians" was coined by New York Timescorrespondent Hedrick Smith, who used it as the title of his1990 book about the rising generation of Russians, largely freeof the legacy of totalitarianism, urbane and sophisticated, witha knack for business.

In fact, the generation of "New Russians" is a morecomplex phenomenon. Compared to the old communist nomenklatura– whose spiritual and often literal children they are — thisnew elite is educated, refined, and more free-wheeling, but alsomore reckless, arrogant, and amoral. Their vaunted "knackfor business" derives from the patronage of the party andespecially the communist youth, or Komsomol.

No sector of the business world illustrates the role of the Komsomolbetter than the banks. Most of the great commercial banks ofRussia grew out of Komsomol enterprises called "centers foryouthful scientific-technical creativity," and the headsof these banks are all former Komsomol activists or had closeassociations with the Komsomol leadership. In this category wecan list the following institutions and their chairman:

Menatep (Mikhail Khodorovsky)

Inkombank (Vladimir Vinogradov)

Stolichnyi (Aleksandr Smolensky)

Most (Vladimir Gusiinsky)

Onexim (Vladimir Potanin)

Olbi (Oleg Boiko)

Logo Vaz (Boris Berezovsky)

Other banks that do not have a direct Komsomol lineage neverthelessare run by men with a Komsomol background, including Sergei Rodionovof Imperial Bank; Vladimir Bukato of Mosbiznesbank; and YakovDunetskyi of Promstroibank.

These banks and bankers have tried to play a political role. The sociologist Olga Kryshtanovskaya of the Institute of AppliedPolitics calculates the average age of Russians bankers at 36and states that 71 percent of them tend to support democraticparties. During the election campaign of 1993, the banks belongingto the New Russians spread their political contributions aroundamong these parties. Such banks as Menatep, Most, and NationalCredit contributed to Yegor Gaidar’s Democratic Russia party;Grigory Yavlinsky’s Yabloko; the Democratic Russia party of LevPonamorev and Gleb Yakunin; and the Movement of Democratic Reformsled by Gavriil Popov and Anatoly Sobchak. All but the last ofthese won seats in the Duma, proving the wisdom of the strategyof diversification.

Political problems

Although the New Russians generally and the bankers in particularhave enjoyed some success in politics, they have failed to builda political entity that speaks for them and for them only. Despitegrowing economic clout — in the two years since the last election,the number of commercial banks has grown to 2000 — efforts tobuild a New Russian political organization have not succeeded. Konstantin Borovoy’s Party of Economic Freedom, for example,united only a narrow circle of his supporters. Arkady Volskytried and failed to create an "industrial-financial"party.

One business-oriented political organization with good chancesfor success was the "Business Roundtable Russia," abroadly based group of several hundred New Russians under theleadership of banker Ivan Kivelidi. But when Kivelidi was murderedlast August, in a professional killing that shocked even jadedRussians, the Roundtable was left without strong leadership. Kivelidi’s successor, Vladimir Shcherbakov, has tried to bringbusiness and labor interests together in a coalition called theUnited Industrial Party, the Federation of Independent Trade Unions,and the remnants of Arkady Volsky’s industrial-financial party. This strange hybrid is a weak coalition with poor election chances,and most members of the Roundtable are keeping their distance.

To some extent, the political weakness of the New Russians reflectsthe realities of money and power in the country’s ruling class. The very rich of Russia are not businessmen and bankers, butstate officials and government bureaucrats. The list of the country’srichest men published this year in the Russian mass media includesPrime Minister Viktor Chernomyrdin; Chairman of the Council ofthe Federation Vladimir Shumeiko; Moscow mayor Yury Luzhkov; thegovernor of the Sverdlosk region, Eduard Rossel; former presidentof the USSR Mikhail Gorbachev; and former Moscow mayor GavriilPopov.

But wealth runs deepest in the numerous and corrupt ranks of mid-levelbureaucrats, who sell their political and administrative powerfor material gain. A report recently compiled by the Defense and Security Committee of the Council of the Federationestimates that in the last few years corrupt officials have obtained in bribesthe fantastic sum of 100 billion dollars. The money was paid for the issuance of illegal exportand import licenses and quotas, for permits to remit and receiveforeign payments, and for registration of unauthorized commercialenterprises and real estate deals.

Electoral fears

It may not matter to the New Russians that they are not the richestRussians, but it does matter that they may be frozen out of power. The New Russians, especially the bankers and financiers, fearthe forthcoming elections, and for good reason. The communists,after all, are on the march.

A win by the communists and their allies would be disastrous forthe New Russians. A communist-dominated legislature could putforward constitutional changes, shifting the balance of powerin the Russian government away from the president toward the parliamentand the administration. More immediately, a communist victorycould force Viktor Chernomyrdin and his government into retirement,removing from the center a group with which the New Russians havelearned to deal, if not dominate.

A rear-guard action

Not surprisingly, the bankers have tried to block or stall theelections, filing a request with the Constitutional Court on October24 to probe the constitutionality of the elections law. Amongthe bankers associated with this filing were Irina Khakamada,the leader of "Common Case;" Boris Fedorov of "Forward,Russia"; Vyachelov Nikonov and other members of the leadershipof the "Party of Russian Progress and Accord"; and KakhaBendukidze of "Roundtable Business Russia."

Khakamada , Nikonov and Bendukidze have the support of most ofthe Roundtable. They speak for the New Russians, with whom theyshare not only a common outlook but also a common social origin. They are all part of the same generation of children of the nomenklaturaand Komsomol activists. Vyacheslav Nikonov, for example, is thegrandson of Stalin’s Foreign Minister Vyacheslav Molotov. IrinaKhakamada is the daughter of a prominent Japanese communist andKomintern veteran, who went into exile in Moscow. Oleg Boiko ofNational Credit, who also joined in the filing, is the son ofthe CEO of Vzlet (lift-off), one of the biggest Russianmilitary-industrial enterprises.

The court case these New Russians have brought has caused realturmoil in the election campaign that is already under way. Althoughboth Boris Yeltsin and Viktor Chernomyrdin were quick to say that the election will take place on schedule, their closest allies,Speaker of the Council of the Federation Vladimir Shumeiko andpresidential political aide Georgy Satarov, acknowledged in astatement on November 15 that a delay of the election cannot beruled out. To add to the confusion, Khakamada and her colleagueshave argued that if the election does take place, the ConstitutionalCourt has the power to annul its results.

Placing their bets

Even as this rear-guard action unfolds, New Russian bankers continueto support a panoply of basically democratic political parties,just as they did in 1993. Despite their spread-the-wealth approach,they remain oriented toward the ruling parties, in particular"Our Home Is Russia" (NDR).

With Boris Yeltsin and Moscow mayor Yury Luzhkov, Viktor Chernomyrdincompletes the troika of the most influential, though not necessarilythe most popular, Russian politicians. Chernomyrdin enjoys asolid reputation abroad, with the respect of the Clinton administration,the government of German Chancellor Helmut Kohl, and other Westernleaders. Many in Russia see in him a legitimate successor toBoris Yeltsin. He attracts support from those in the Russianelite who want to continue on the course on economic reform butare uncomfortable with Yeltsin’s leadership. The slogan of hisbloc — not by accident — is "stability."

Chernomyrdin’s bloc has perhaps the most to lose in this electioncycle. Its strength apparently is waning, and it has lost thebenevolence of Boris Yeltsin. Nevertheless, Chernomyrdin’s "Russiais Our Home" (ROH) party still includes 10 federal ministersand more than 60 governors or their deputies. To avoid the epithetof the "party of the nomenklatura," many othersenior officials who support the ROH have withdrawn their namesfrom the federal party list and are standing in single-mandatedistricts, while their places on the list are taken by celebritiesfrom outside the political and administrative establishment. For example, the second, third, sixth, and seventh places on theNDR federal list are held by film director Nikita Mikhalkov, eighthguard corps commander Lieutenant General Lev Rokhlin, academicianZhores Alferov, and theater director Galina Volchek. Similarly,the ROH list in St. Petersburg is headed by Ludmila Narusova (wifeof Mayor Anatoly Sobchak) and by the nationally known actor, MikhailBoyarsky.

Backing Chernomyrdin

The banks have generally lined up behind ROH. ROH national campaigncoordinator Vladimir Belyaev admitted that his bloc has receiveddonations from the banks Olbi, National Credit, Inkombank, andMost.

The relationship between ROH and Most Bank deserves closer examination. When Rem Vichyrev, the president of Gazprom, fell out with Chernomyrdinearlier this year, (see Victor Yasmann "A Mexican Crisisfor Russia?" Prism, No 20, September 22, 1995), the ImperialBank, which is part of the Gazprom empire, began to distance itselffrom the ROH. Most Bank stepped in to fill the breach.

The chairman of Most, Vladimir Gusiinsky, had reason to seek friendsin high places. Early in 1995, he had had a noisy confrontationwith Yeltsin’s security chiefs, and he needed the intercessionof Moscow mayor Luzhkov to repair the damage with the Kremlin. But Gusiinsky’s return to favor was marked by great success. Media criticism of Most and Gusiinsky stopped in the summer,and by the fall Most had been added to the list of 15 commercialbanks eligible to participate in financing government reconstructionprojects in Chechnya.

In August the Chernomyrdin government gave Most an opportunityto expand its position in the mass media. Most, which alreadycontrols Russia’s largest private television channel NTV as wellas the newspaper Segodnya, was brought into the reconstructionof the Television Technical Center (TTC), which handles satelliteand ground-station transmissions for most Russian television,including the first national network, ORT. The support that Mostand Gusiinsky now provide to ROH and Chernomyrdin is clearly mutuallyrewarding.

ROH’s New Russian backing is not limited to the banks. Moscow’s"king of construction" Vladimir Resin, the first deputyto Moscow mayor Luzhkov, is a candidate on the Chernomyrdin list. Construction companies controlled by Resin have, like Most andother banks, benefited from government contracts related to reconstructionprojects in Chechnya. Campaign coordinator Belyaev has acknowledgedcontributions from Russian automotive giants KAMAZ, VAZ and GAZas well.

Fish and Suds

Besides NDR, New Russian support is evident in the group knownby its symbol, the Golden Fish. The leader of this group, IvanRybkin (whose name is derived from ryba, the Russian workfor fish), broke with a Gorbachevite party headed by AcademicianStanislav Shatalin in September. He picked up backing from Gazprom’sImperial Bank, whose chariman, Sergei Rodionov, is a candidateon Rybkin’s list. Joining Rodionov is Yury Petrov, Boris Yeltsin’schief of administration in 1991-1993 and a former Soviet ambassadorto Cuba. More to the point, however, Petrov is now the head ofthe State Investment Corporation, a state-controlled company withenormous assets. With Rodionov and Petrov on his team, Rybkinneed not worry about campaign finance.

One other group not only draws significant support from the NewRussians but (unlike ROH and Rybkin’s "Golden Fish")appears to be exclusively a New Russian party. This group isthe Party of Beer Lovers, which despite its name is not a joke.

The federal list of the "Party of Beer Lovers" couldbe the membership list of a club for movers and shakers in thebusiness world. Virtually all the names are bank presidents,CEO’s of major companies, publishers of business periodicals,or executives in advertising and public relations. The Moscowlist includes Yury Milyukov, president of the Moscow CommoditiesExchange; Aleksei Artyshkow, chairman of the board of directorsof First City Bank; Maksim Lisovskii, deputy chairman of the SlavicBank; Sergei Kalashnikov, director general of the Moscow Associationof Entrepreneurs; Yuri Pripachkin, president of Moscow TelecommunicationsCorporation; and Yury Lubchenkow, proprietor of the upscale businessmagazine VIP.

The PBL list of candidates in other regions is no less impressive. In Saint Petersburg, for instance, PBL candidates include theregional manager of PepsiCo Holding, Aleksei Lushnikov; the managerof UTC (United Technologies Corporation) International, IgorKopytsev; and the director of the regional office of the EastSiberian Bank, Aleksei Vukolov.

All this indicates that under its comic mask, the PBL representsserious business-political interests. Given the quality and positionsof its candidates, it will be no surprise if the PBL enters theDuma and then reveals itself as a serious political force forbankers and New Russians.

(Sources: Nash sovremennik, Novoe vremya, Nesavismiaya, Izvestiya, Vek, Komsomolskaya pravsa, Rossiskaya gazeta)

Victor Yasmann is a Senior Analyst with the Jamestown Foundation