Return Boosts Chernomyrdin's Presidential Hopes, Placates Tycoons
By David Hoffman
MOSCOW, Aug. 23 The Russian financial crisis brought most of the big Moscow banks and commercial tycoons to their knees last week. The devaluation of the ruble put some of Russia's preeminent financiers into insolvency, or near it. Today, they struck back.
In rehiring the staid Viktor Chernomyrdin as acting prime minister five months after he was dismissed, President Boris Yeltsin has picked the favored choice of a coterie of politically active Russian magnates, known as the "oligarchy," to run the country. Several of them have longed to anoint Chernomyrdin as Yeltsin's successor, and they clearly hope Chernomyrdin will bail out their ailing banks.
Yeltsin's abrupt decision is also the latest example of his erratic leadership in recent months. He has appeared confused and disoriented at times, fired two prime ministers and their governments and devalued the Russian ruble only three days after vowing not to. Last week, Yeltsin remained silent, not saying a word about the crisis, while the country's finances went up in smoke.
In his brief announcement tonight, he offered no explanation for ousting Sergei Kiriyenko, 36, the provincial banker and oil executive he appointed prime minister in March. A government official who works closely with Kiriyenko said he had offered his resignation when Yeltsin made the devaluation decision a week ago but that the president had not accepted it.
Nevertheless, Kremlin maneuvering to replace Kiriyenko was well underway last week, even as Kiriyenko was being swamped by the currency crisis. According to a well-informed source here, Chernomyrdin "I don't think Chernomyrdin is that dear to the oligarchs. . . . He is a symbolic figure . . . stopping the movement toward the abyss."
met repeatedly last week with Valentin Yumashev, Yeltsin's chief of staff, to discuss his return to government. Yumashev and Yeltsin's daughter, Tatyana Dyachenko, are the key gatekeepers to the president, and both have been close to financier Boris Berezovsky, an auto, oil and airline magnate who is often candid about the political desires of the oligarchy.
For months, Berezovsky has been openly touting Chernomyrdin as the tycoons' favored successor to Yeltsin, although Chernomyrdin's clumsy public style and mangled sentences have led political commentators to doubt he could ever win an election.
Coming back as prime minister, however, could help his prospects immensely. Yeltsin officially named Chernomyrdin acting prime minister today but is expected to seek his permanent confirmation to the post by parliament.
Under the constitution, Chernomyrdin would become president temporarily if Yeltsin is incapacitated or resigns, and an election would be held in three months. Even if Yeltsin remains in office until the end of his term in 2000, Chernomyrdin will once again enjoy a power base on which to build a run for president.
Chernomyrdin's return also comes just in time to help his patrons, who are in financial agony. "The oligarchy has been trying to get Chernomyrdin back for months," the source said. "They are trying to protect their own little pecuniary interests."
In fact, their interests are not small. Central Bank officials have warned that several Russian banks are on the verge of failing, perhaps as soon as this week. The banks owe Western lenders several billion dollars that must be repaid in dollars in coming months, but the banks' ruble assets have been devalued, and they cannot make the payments. The government has imposed a 90-day moratorium on paying back the loans.
A few banks are in even more serious trouble. Sergei Dubinin, the Central Bank chief, acknowledged in an interview televised tonight that they need "extraordinary help." He said the government would take ownership of banks in return, which he called "velvet nationalization of part of the banking system."
Last week, at the time of the devaluation, the government said it would support an effort by 12 of the largest banks to create a special pool to receive credits from the Central Bank. As of Friday, the pool appeared to have collapsed, according to a leading banker, but the tycoons still need money. Chernomyrdin could help the troubled banks survive by pumping government credits into them.
One reason for the abruptness of Yeltsin's decision and the tycoons' anxiety may have been that Kiriyenko was reluctant to bail out the banks and was prepared to let some fail. "Everything that Kiriyenko has been doing lately disagreed with the oligarchs," said Olga Kryshtanovskaya, a specialist on Russian political power centers. "He did not have a tough control over the situation. . . . Panic started spreading among the population. People went to banks to take out their deposits.
"I don't think that Chernomyrdin is that dear to the oligarchs; he is not that important," she said. "He is a symbolic figure: stability, emerging from the crisis, stopping the movement toward the abyss."
It was during Chernomyrdin's first 5½ years as Yeltsin's premier that the oligarchy came into its own, grabbing factories, mines, airlines and oil refineries of the former Soviet Union for a song. The tycoons then bankrolled Yeltsin's 1996 reelection campaign and ever since have struggled to steer economic policy in their favor.
But the oligarchs are not united. Some have been close to economic reformer Anatoly Chubais, while a second camp has championed Chernomyrdin including Berezovsky and Rem Vyakhirev, head of the natural gas monopoly Gazprom, which Chernomyrdin once ran. Kiriyenko collided with Gazprom over its tax debts.
Chernomyrdin also has long been a favorite of regional governments. He founded a party, Our Home Is Russia, which draws most of its support from government bureaucrats, including those in the regions. Last week, as Chernomyrdin's return was being discussed in the Kremlin, he met with retired army general Alexander Lebed, who is now governor of the vast Siberian region of Krasnoyarsk and who also is expected to run for president.
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