YELTSIN READS BANKERS THE RIOT ACT.

President Boris Yeltsin called in six of Russia’s leading financiers yesterday and told them to stop picking on the "young reformers" in his government. (NTV, RTR, September 15) Yeltsin said he has no intention of replacing the two first deputy prime ministers — Anatoly Chubais and Boris Nemtsov — who have in recent weeks become targets for virulent attacks in media controlled by some of the financiers. There have also been reports this week that an unidentified oil company, threatened by bankruptcy because it owes millions of rubles in unpaid taxes, has put out a contract for Chubais’ assassination. (RTR, September 14) Yeltsin said after the meeting that the bankers had agreed to "stop their fight" and "make peace" with Chubais and Nemtsov.

Attending yesterday’s meeting were Alfa-Bank’s Mikhail Fridman, Inkombank’s Vladimir Vinogradov, Media-Most’s Vladimir Gusinsky, Oneksimbank’s Vladimir Potanin, Rosprom’s Mikhail Khodovkorsky, and SBS-Agro’s Aleksandr Smolensky. This means the meeting was attended by most of the members of the original "Davos Seven," whose financial support helped Yeltsin win reelection last year. Notably absent was LogoVAZ’s Boris Berezovsky, a member of the original group who is now Deputy Secretary of Russia’s Security Council. Doubtless Berezovsky was not invited because he professes to have given up his business interests for the duration of his state appointment; it was, however, the Berezovsky-controlled Nezavisimaya gazeta that last weekend published the hardest-hitting attack yet on Chubais and which prompted Yeltsin’s summons to the banking community.

Analysts have interpreted the conflict as a prologue to in-fighting over Yeltsin’s succession, and the Russian president said yesterday that he had assured the bankers that "continuity would be assured" in the elections, due in 2000. Yeltsin also made it clear yesterday that he wants to the bankers to accept the "new rules of the game" laid down by Chubais and Nemtsov as the government’s program for privatizing state property continues in the autumn. The coming months are to see the privatization of one of Russia’s most valuable assets, Rosneft, which is the last major state-owned oil company. Next year will bring additional important sales — a 25 percent minus one share in the telecommunications giant Svyazinvest, 6 percent of oil giant LUKoil, 51 percent of state airline Aeroflot, and a 50 minus one share percent of pipeline operator Transneft.

Yeltsin has already betrayed his nervousness over the destabilization these sales could bring. Last week, he called in the Deputy Prime Minister in charge of privatization, Maksim Boiko, and told him to put the sale of Rosneft on hold until a legal dispute over who owns its subsidiary, Purneftgaz, has been resolved. The battle arises from the attempt by Potanin’s Oneksimbank to detach Purneftgaz from Rosneft and turn it over to its own Sidanko oil company; this has run into strong opposition from Sibneft, an oil company controlled by Berezovsky. (AP, September 12)

In his effort to restore calm between the financial elite and the government, Yeltsin promised yesterday to think about the proposal, put forward by Inkombank’s Vinogradov, that he and the bankers should not only meet more often but also set up a working group through which the financial community could advise the government on economic strategy.

From the government’s point of view, the feuding now ravaging the elite threatens to undermine the fragile stability that was briefly and laboriously established after the fights that erupted during Yeltsin’s incapacitation last winter. This latest bout of squabbling is particularly unwelcome since it occurs at a moment when the Russian government is hoping against hope that signs of an economic upturn will attract urgently-needed foreign investment to the Russian economy.

From Yeltsin’s point of view, yesterday’s meeting with the bankers, which lasted nearly two hours, provided at least one indirect benefit. It demonstrated to the country that he is in control at a time when the media has begun to allege, just as they did during Yeltsin’s illness, that it is Chubais rather than the president who is pulling the strings in the Kremlin.

Russia’s Oil Woes.