Publication: Prism Volume: 5 Issue: 11

By Yulia Latynina

Last week an amazed Russian public got to watch an instructive spectacle. A united coalition of oligarchs which had just ousted Yevgeny Primakov and brilliantly overcome the impeachment crisis almost instantaneously began to fight over the division of the spoils. It was as if war allies, having vanquished a mighty enemy on the field of battle, on that very same spot began to battle among themselves among the ruins for what remained. Or–pardon a more concrete analogy–it was remarkably similar to a gang of thieves who, after robbing a bank, start fighting over the loot.

The group made up of the tycoon Boris Berezovsky and Sibneft oil company chief Roman Abramovich won a decisive victory. The only response that was left for the losing team, made up of MOST business empire founder Vladimir Gusinsky and Moscow Mayor Yuri Luzhkov, was to holler in the press that “The Family”–that is, the Yeltsin inner circle–had made off with the sources of financing which the victors in the battle to oust Primakov had originally agreed to divide jointly.

The outsiders bitterly complained that with the natural monopolies (including, among others, Gazprom, Russia’s natural gas monopoly, United Energy System, its electricity grid, and Russia’s railway system) in the hands of Nikolai Aksenenko, the former railways chief and first deputy prime minister, the Pension Fund with “Family” friend Mikhail Zurabov and the customs services with Mikhail Vanin, the winning group has been left with the lion’s share of the most opaque and tasty budget flows.

What is more, the noted agencies are not restricted only to the funds they are authorized to oversee. The Pension Fund, for example, is owed money by practically all Russian enterprises. This means that it has the right to block the accounts of and start bankruptcy proceedings against a given enterprise. And the Fund has often done this: In the summer of 1997, as part of the drive to pay off pension arrears, the Fund on a mass scale blocked the accounts of defense plants, whose arrears to the Fund occurred because salaries to their workers were not being paid.

Those salaries, in turn, were not being paid because the state had not paid what it owed to the defense enterprises. “But we’re not responsible for the arrears,” cried the defense plant heads, “and there is even a presidential decree stating that if a factory is in debt to the budget as a result of the budget being in debt to it, then the government has no right to punish the factory!” “But we are not the budget,” the Pension Fund answered. “We are an extra-budgetary fund, and the decree doesn’t apply to us.”

It is quite easy to see that the Pension Fund is a lever to force any factory director to dance to a tune. As is the customs service. There is not one importer operating in Russia, even the largest, which pays the legally constituted duties. “It is not even a question of not wanting to pay them,” one of the major Russian importers explained to me. “The fact is that if we pay the duties, then small companies which bring in contraband merchandise will squeeze us out of the market.”

“From the money we pay a customs broker for each shipping container, US$1,000 gets kicked upstairs,” continued the importer. “This is huge money, which goes to the electoral ‘needs’ of this or that broker’s “krysha” [roof]. The “krysha” can be anything ranging from the presidential administration to the power structures [meaning the security, the police or the armed forces] to the Moscow government.” The head of state customs committee is capable of creating big headaches for any uncooperative importer.

But is the money which is collected in this fashion actually used for electoral campaigns, as is claimed in the media? It is doubtful. It is hard to imagine that in 2000, the oligarchs will close ranks around one presidential candidate, as they did around Yeltsin in 1996. It is even more difficult to imagine that the successor named by The Family will win. Thus it is likely that the people placed by The Family to oversee the financial flows will, rather than trying to protect an obviously losing position, simply carry out a “privatization” state budget and quasi-budget funds under the guise of electoral expenditures.

Yulia Latynina is a staff writer for the newspaper Segodnya.