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Russia Vote Returns Tycoon to Spotlight

By David Hoffman
Washington Post Foreign Service
Thursday, December 23, 1999; Page A15

MOSCOW, Dec. 22—One of the big winners in the Russian parliamentary elections Sunday was a candidate from district No. 15 in Karachayevo-Cherkessia, an ethnically riven internal region of southern Russia.

There, a short, soft-spoken businessman who only recently bought a home in the district, Boris Berezovsky, won a seat in the State Duma, the lower house of parliament.

But much more than that, the outcome of the elections demonstrated that Berezovsky has reclaimed his status as a Moscow power broker. He has helped build a new party that will be the second largest in the Duma; he has boosted the political fortunes of popular Prime Minister Vladimir Putin; and he has dealt heavy blows to a pair of long-standing opponents.

Today, chipper and voluble, Berezovsky described the election results as a "revolutionary process," a "new phase" in Russian political life. He left unspoken what was even more obvious; he is back in the saddle again.

Berezovsky is the most outspoken and politically ambitious of a group of Russian tycoons, known here as the oligarchs, who banded together in 1996 to rescue President Boris Yeltsin's reelection bid with their money and media outlets, and who have come to symbolize Russia's evolving brand of tycoon capitalism. Many of them fell on hard times after a ruble devaluation and debt default caused economic chaos here, but several of them have come bouncing back.

In the last year, Berezovsky has come a long way. After the financial crisis erupted--and Yeltsin named Yevgeny Primakov prime minister--Berezovsky's fortunes took a turn for the worse. Primakov vowed to make room in the prisons for some of the oligarchs, and Berezovsky was at the top of his list.

Berezovsky's allies were ousted from key companies, and some of his firms were raided by the prosecutor general. In April, while in France, he was charged with fraud involving an offshore company to which foreign currency earnings of the national airline, Aeroflot, had reportedly been channeled.

But Berezovsky, who has had close ties with Yeltsin's circle of advisers, including the president's daughter, Tatyana Dyachenko, was not down for long. Yeltsin dumped Primakov, and the criminal charges against Berezovsky were later dropped.

Berezovsky regained his influence at the nation's largest television channel; bought up the most respected business newspaper; bought a Moscow television station; and dabbled constantly in his self-professed favorite occupation--politics. He and his business partner, Roman Abramovich, both won seats in the Duma from remote regions. As members of parliament, they automatically enjoy immunity from prosecution.

He has come out of the election having waged a fierce "information war," or smear campaign, against his opponents, and, as events of recent days have shown, the mud stuck more to his foes than to him. "Berezovsky is a little like the Road Runner," said Eric Kraus, chief strategist at Nikoil Capital Markets, a brokerage firm here. "You think the [coyote] has got him, and 'Beep, beep, beep!'--he gets in the revolving door behind you and comes out ahead of you."

Perhaps Berezovsky's most serious impact on the election was the creation of the the new faction supporting Putin, the Unity party, which won the second-largest share of seats in the Duma with a campaign in which it put forth no serious platform or policy positions.

The party's success was the surprise of the election, and Berezovsky was asked today at a news conference about his role in creating it. He averred, modestly, that he had something to do with it. "I have never made a secret of my idea that the parties created before . . . did not meet the political expectations of society," he said. "That is why I thought that there was space for creating one or maybe more powerful political forces."

Unity's success may give Berezovsky a powerful new lever in Russian politics. Political sources said he is also one of several influential figures--including Anatoly Chubais, an economic reformer and former deputy prime minister who now heads the electricity grid--who are preparing to manage Putin's campaign for president in next June's election.

A physicist who once studied mathematical models of decision-making, Berezovsky, 54, made his first money as an auto dealer and later found wealth in oil, airlines, media, banking and politics. He led a consortium that bought 49 percent of ORT, the state-owned television channel, over which Berezovsky retains broad influence. The channel is the only one that spans Russia's vast territory, and Berezovsky turned it into a propaganda weapon against his chief political enemies--Primakov and Moscow Mayor Yuri Luzhkov, who headed a rival party that finished third in Sunday's elections.

As Berezovsky was basking in success today, the Luzhkov-Primakov party began splitting up. Mintimier Shaimiyev, president of the region Tatarstan, and several other regional leaders said they would set up their own faction in parliament and would cooperate with the Putin government.

Some of the other oligarchs also are rebounding from the depths of last year's financial crisis. Mikhail Khodorkovsky, head of Yukos, Russia's second-largest oil company, has settled a long fight with a major minority shareholder, industrialist Kenneth Dart. Yukos is buying out the Dart holdings for an undisclosed price, a deal that came about after Khodorkovsky had successfully diluted the shares of Dart and others.

Another tycoon, Vladimir Potanin, along with other investors, was on the verge of losing control of a another large oil company, Sidanco, through the disputed bankruptcy of a subsidiary. However, an agreement announced today nullified the bankruptcy and brought Potanin together with another oligarch, Mikhail Friedman, who holds part of rival Tyumen Oil Company. The agreement also preserves an investment in Sidanco by BP Amoco.

© Copyright 1999 The Washington Post Company

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