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Powerful Few Rule Russian
Mass Media

By David Hoffman
Washington Post Foreign Service
Monday, March 31, 1997; Page A01

MOSCOW -- Vyacheslav Kuznetsov, a beefy man with large hands and a wavy pompadour, bluntly explained why Gazprom, Russia's colossal natural gas monopoly, has embarked on a drive to dominate the Russian mass media.

Gazprom chair and holdings
Rem Vyakhirev, chairman

Gazprom (40% state-owned) owns 29 regional newspapers/television and supports Komsomolskaya Pravda and Trud national newspapers.
"Do you understand what I've got in my hands, and where I can turn?" he asked, referring to the 29 newspapers and television stations Gazprom has subsidized or invested in. The Russian mass media, he said, are caught up in an epic battle among the financial titans of Russia, a contest reminiscent of the struggle for wealth and power by such American magnates as John D. Rockefeller and J. P. Morgan.

In Gazprom's gleaming skyscraper, where employees use coded space-age identity cards to open ubiquitous security doors, Kuznetsov sits close to the seat of power. He is counselor to the chairman, Rem Vyakhirev, one of the leading financial oligarchs of the new Russia.

Kuznetsov's job is to make sure that Gazprom remains a formidable financial and political empire. "Gazprom must be very careful about its image," said Kuznetsov, referring to its controversial, and lucrative, monopoly structure. "That is why we have to work with the mass media. Not just work. We have to invest in them."

In buying up the fledging Russian mass media, Gazprom is not alone. Russia's powerful financial and political clans have invested heavily in the country's major newspapers and television channels in search of profits and political capital. Factories may be shuttered across the bleak Russian steppe, but media tycoons are scrambling for properties from fluffy, glossy entertainment magazines to pay-satellite television. "Russia's information market," said Kuznetsov, "is a Klondike for business."

Media-Most chair and holdings
Vladimir Gusinsky

Media-Most owns Sevodnya newspaper; Echo of Moscow radio; Itogi Magazine; NTV Plus; 7 Days, and NTV Television.
It is also a gold mine for political influence. In last year's presidential campaign, two of the most powerful media tycoons, Vladimir Gusinsky and Boris Berezovsky, played a key role in reelecting President Boris Yeltsin, demonstrating the might of television in the young Russian democracy. Now, others are striving to follow.

The growth of corporate media empires is another sign of the power and influence wielded by Russia's ruling oligarchies, the half-dozen clans that have taken a dominant role in the country. After the Soviet collapse, many newspapers and magazines were bequeathed to their workers, poorly paid journalists who could not provide needed investment. They were sitting ducks for the newly acquisitive media barons.

In the broad diversity of media -- and free speech -- available today, Russia is light-years beyond Soviet totalitarian rule. Hundreds of newspapers, magazines, radio and television stations bombard Russians with uncensored views. At the same time, the idealism of the early post-Soviet years, in which the liberal press blazed new trails in challenging authority, has dimmed in the shadow of the powerful new corporate owners.

"Freedom of speech and the independent attitude of the mass media were the first gains of perestroika," the reform program led by former Soviet leader Mikhail Gorbachev that led to the collapse of Communist rule, recalled Ludmila Telen, deputy editor of Moscow News. "Today, disappointment and disillusionment in the mass media is becoming disappointment in democracy itself."

Logovaz chair and holdings
Boris Berezovsky, on leave

Logovaz owns ORT Television (51% state-owned, 3% Gazprom, rest by private investors); Ogonyok Magazine; Nezavisimaya Gazeta; and TV 6, Moscow.
Last year, many Russian journalists backed Yeltsin because they feared a Communist victory would threaten their hard-won freedoms. But the dalliance with the Kremlin did not end there. Since then, Gusinsky and Berezovsky, along with a circle of wealthy financiers, have continued to support the Yeltsin government, and Berezovsky serves in it.

Despite their fraternal quarrels, these plutocrats are part of an emerging Russian establishment, and they have seized the reins of Russia's print and broadcast media, vital to the evolution of the country's fledgling democracy and growth of its nascent civil society.

The media magnates are not shy about their goals. Kuznetsov said Gazprom enforces one unwritten condition: that "these magazines, newspapers and television will support the line which is the line of the president and the government."

The new Russian oligarchs "want to try and preserve the status quo in Russian politics and society," said media analyst Andrei Richter. "They don't mind spending millions of dollars to do that, and they think that by spending millions of dollars they will influence public opinion in favor of what they believe is a market economy, stable government, with Yeltsin as the guarantor."

The Next Murdoch

When Gusinsky slips away from Moscow to New York or London, it is often to see Rupert Murdoch, the international media tycoon and a role model.

"I know many people in the media business," Gusinsky said in an interview, wrinkling his expressive brow, sitting in an office with six television monitors. "But I never met such as man as Murdoch, so dynamic, who makes decisions so quickly, and who has such phenomenal intuition."

Gusinsky, 44, a one-time theater director who found riches in banking and real estate, has recently taken a Murdoch-sized gamble. Earlier, he built a lucrative business, Most Bank, closely linked with Moscow Mayor Yuri Luzhkov. Now, Gusinsky has given up his post as bank president and devoted himself full time to a new media-holding company, Media-Most. One reason, an associate said, is that the days of "easy money" in banking have passed, but fortunes are still to be made in communications.

Gusinsky's gamble is that Russia is hungry for entertainment and news, despite its economic distress. His empire includes a slick television weekly, 7 Days; a popular Moscow radio station, Echo of Moscow; and a weekly newsmagazine he created from scratch, called Itogi, (published in partnership with Newsweek, owned by The Washington Post Co.).

Although Gusinsky's flagship newspaper, Sevodnya, has been troubled, his crown jewel is NTV television. He founded it in early 1994 as Russia's first major commercial network, and it began with just six hours of nighttime programming. Since then, NTV has grown to become a Russian television powerhouse, one that offers a glimpse of the evolution of the Russian media from outsider to member of the establishment.

When Yeltsin went to war against separatists in Chechnya in late 1994, NTV's news broadcasts were hailed as brilliant and courageous, showing that the Kremlin was lying. "In the morning one day there was a statement that Russian warplanes were not bombing Grozny," recalled Igor Malashenko, president of NTV. "This very day, in the evening, we showed our piece from Grozny, with Russian warplanes dropping bombs. It had an enormous effect."

But in the last two years, NTV's leaders and broadcasts have allied closely with the Kremlin. As Yeltsin's reelection campaign loomed early last year, Gusinsky joined forces with Berezovsky, a one-time mathematician who turned his Logovaz auto-import business into a conglomerate including media, aviation, banking and oil businesses.

Berezovsky bought a piece of the largest television channel, ORT, when it was privatized. The state owns 51 percent of the channel, but sources say it is financed largely by Berezovsky. In effect, between them, Gusinsky and Berezovsky controlled two of the three top television outlets -- and became behind-the-scenes kingmakers for Yeltsin.

"This was not an election," said Gusinsky, "but a choice between two paths for the country. It was like a civil war without the shooting."

The tycoons recruited reformer Anatoly Chubais to run the campaign. Malashenko joined the Yeltsin reelection staff, and the television coverage was overwhelmingly pro-Yeltsin. The group helped recruit, promote and later dump Alexander Lebed, the popular retired general, and pushed for the ouster of Yeltsin's crony and chief bodyguard, Alexander Korzhakov.

Sergei Lisovsky, an advertising and entertainment specialist who was part of the election team, said the tycoons were defending their fortunes, fearing "a constant threat" to their gains from the Communists.

The alliance with Yeltsin came as Gusinsky was preparing to launch his biggest gamble yet, a Murdoch-style pay satellite television network, NTV-Plus. Gusinsky talked to foreign investors, but said he could not give them the control they wanted.

On June 11, just days before the first round of the presidential election, a wealthy investor appeared. Gazprom, Russia's largest company, a prospering monopoly once headed by Prime Minister Viktor Chernomyrdin and still partially state-owned, announced it would buy 30 percent of NTV. The cost of the deal has never been disclosed.

Several outsiders have speculated that Gazprom made the investment to help Gusinsky at the behest of the government. "They were forced to do it," said media analyst Richter. Kuznetsov, the Gazprom executive, replied, "This is not true to reality. This is not the way people talk to Gazprom and Vyakhirev." He said the investment was purely business.

Asked whether Gazprom was pushed into the investment, Gusinsky said in an interview, "For me this is new information. I don't know who pressured them. I don't think that many people can push them -- Gazprom is a state within a state."

Gusinsky's empire continued to expand. On Sept. 20, Yeltsin signed a decree effectively tripling NTV's air time from six hours a day to 18-20 hours. Then in November, NTV-Plus took to the airwaves.

"NTV today is a rare example of how television has become a business," said Vsevolod Bogdanov, president of the Union of Journalists. "All this power was turned to the victory of Yeltsin. As a result, it was not only Yeltsin who won, but NTV won, and Gusinsky's empire won."

While NTV's day-to-day news coverage is regarded as highly professional, the company's leaders have been openly sympathetic to the Kremlin. For example, when Chubais was named first deputy prime minister recently, he was interviewed in prime time. He was not asked a single question about crushing economic problems such as wage, pension and tax arrears, even though NTV has highlighted social ills in other news broadcasts.

Gusinsky does not hide his admiration for Chubais. "Chubais is not only an idealist, he's a fierce idealist," he said. He added that the wealthy Russian bankers and magnates see themselves as engaged in a bitter fight for "a democratic, open country, in which bandits will not come to the Kremlin and be photographed with the president. We want a normal country with a normal economy, not a fascist or nationalist country."

`People Are Hungry'

In the early years after the Soviet collapse, newspapers, once heavily subsidized, could barely survive on their own.

"There is simply no quality newspaper that is published on its own legs," said Vitaly Tretyakov, editor of Nezavisimaya Gazeta, or Independent Newspaper. In 1995, he recalled, his salary was $10 a month.

"I didn't think of the quality of the newspaper every day," he said. "Every day I had one task: where to get the money to pay the salaries."

Finally, after a bitter staff schism, the paper closed, its doors locked. Tretyakov went to an isolated Greek island for a vacation. Then Berezovsky called from Moscow.

Tretyakov said that he told Berezovsky, "I need money. People are hungry."

Berezovsky flew Tretyakov home, by helicopter and chartered jet, and paid for a security firm to break open the offices, Tretyakov recalled. Nezavisimaya Gazeta reappeared, in Berezovsky's portfolio. Tretyakov said he warned Berezovsky the newspaper would continue to reflect diverse opinions. It remains a highbrow paper for the intelligentsia, with a heavy emphasis on foreign affairs and security.

"He asked me in the preelection period not to attack the president too much," Tretyakov recalled of Berezovsky.

"That's what he said, not to attack the president too much. He understood we couldn't write odes to Yeltsin."

Berezovsky later became deputy secretary of Yeltsin's security council. In an interview, he said he invested in mass media for eventual profit, but in the short run "to explain to society our views, and without a doubt, influence the political process."

The major national newspapers are all being stalked by outside investors. In December, the pension fund of Russia's oil giant, Lukoil, bought 19.9 percent of the respected independent daily Izvestia, which Izvestia hopes will eventually help underwrite a six-year modernization plan.

A sign of how intensely the Russian clans are fighting for media properties came recently when a plan to sell 20 percent of Komsomolskaya Pravda to Gazprom ran into trouble. In a surprise move, some directors decided instead to sell to Oneximbank, another powerful financial group.

The competition among the clans often reaches the front pages. Editors and journalists say it is common for clan feuds to be settled through leaked material -- secret wiretaps, bank records, government documents -- designed to smear someone. "Qualified journalists understand when this kind of stuff gets into their paper, what kind of games are being played," said Telen, of the Moscow News. "But when they know it has been sanctioned by the owner, their power is limited."

"Not a single newspaper can survive on advertising," she said. "It is still very easy to turn newspapers into collective propagandists who will service the interests of opposing political forces."

1. Center Plus
2. Speed Info
3. Argumenti i Facti
4. Extra M
5. Komsomolskaya Pravda
6. Trud
7. Economika i Zhizn
8. Moskovsky Komsomolets
9. Sport Express
10. Izvestia
11. 7 Days
12. Sevodnya
13. Nezavisimaya Gazeta
Racy tabloid
Business weekly
Sports daily
TV, personalities

© Copyright 1997 The Washington Post Company

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