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    2 More Chubais Aides Fired, Dealing Further Blow to Economic Reform

    By David Hoffman
    Washington Post Foreign Service
    Sunday, November 16 1997; Page A25

    President Boris Yeltsin fired two more top aides to Deputy Prime Minister Anatoly Chubais today but refused to accept Chubais's resignation, leaving Russia's leading economic reformer still in office but dealing a major setback to the prospects for further liberalization of Russia's economy.

    Chubais survived because Russia's economy is fragile, its capital markets severely weakened by recent global economic turmoil, analysts said. The Interfax news agency quoted a Kremlin official as saying that Chubais was not dismissed because of "an extremely critical social and economic situation in Russia."

    But the dismissal of two of his top aides, coupled with two earlier firings, raised questions about how effective Chubais will be in the future. "It's very bad," said Alexander Oslon, a pollster who has worked closely with Chubais. "Even if Chubais stays, it will be a different Chubais. It will be a Chubais without a team, a weaker Chubais. This Chubais will be less capable of achieving his goals."

    Yeltsin fired the federal privatization chief, Maxim Boiko, and the head of Russia's bankruptcy commission, Pyotr Mostovoi, both close Chubais allies. On Friday, he dumped Alexander Kazakov, a Chubais lieutenant who was deputy Kremlin chief of staff. In August, Alfred Kokh, then privatization boss, also was forced out.

    The firings followed disclosure earlier this week that Chubais and several co-authors -- including Boiko, Mostovoi and Kazakov -- had received payments of $90,000 each for a book on the history of Russia's massive privatization of state assets. Chubais acknowledged the payment was large and said most of the money was to be donated to a foundation overseen by Yegor Gaidar, a former prime minister and fellow free-market reformer. But the uproar grew more intense because the source of the payments appears to be one of the most influential and wealthy of the Russian tycoons who have been feuding with each other and Chubais in recent months.

    According to Russian news reports, Yeltsin telephoned Chubais and warned him to avoid such transactions in the future, but refused to accept his resignation.

    Chubais is one of the few real survivors of the rough-and-tumble of Russian domestic politics. He has served almost continuously in Yeltsin's governments since the new Russian state was born in 1992 out of the Soviet collapse. He was fired in early 1996, then brought back a few months later as a result of a strong push by some politically well-connected business magnates.

    Since March, he and Boris Nemtsov, both first deputy prime ministers, have taken the lead on Russian economic and domestic policy and have often been described, inside and outside Russia, as running the most reform-minded government since Gaidar's in 1992. Now, hopes that Chubais and Nemtsov could score major gains in their drive to reshape Russia's economy have been dimmed, at best.

    Chubais always has been surrounded by a coterie of extremely loyal aides, and Yeltsin's latest action all but strips him of his high command. Although he has long been unpopular in the eyes of the public, he remained strong inside government because of his skills as a bureaucratic infighter.

    "These dismissals are a blow to Chubais and his team," said Lilia Shevtsova, an analyst with the Carnegie Endowment for International Peace in Moscow. "Clearly, it will be very difficult for Chubais to restore the former balance. His loneliness and political isolation are obvious."

    The firings had their origins in an intense battle last summer for 25 percent of Svyazinvest, a telephone holding company put up for auction. The winning bid went to Vladimir Potanin, whose Uneximbank is one of Russia's largest private banks. His victory enraged the losing bidders, led by Vladimir Gusinsky, head of the Media-Most group, who alleged collusion between the government and Potanin.

    The outcome of the Svyazinvest deal touched off an acrid fight between the tycoons, with some of them pitted against Chubais. Each side used its allies in the news media to sling mud at the other in leaked documents and smear campaigns.

    "Nobody has the right to compromise the president, the government and the reform program itself," Prime Minister Viktor Chernomyrdin said after the sackings. Alexander Shokhin, leader of the pro-government faction in the lower house of parliament, the State Duma, said the scandal "doesn't increase the government's prestige."

    Chubais and his team have claimed the attacks were motivated by the dissatisfied financial clans. "The different political forces involved in the attacks on Chubais understood that this is a team which is preventing stealing public money and stops unfair rules of the game," said Leonid Gozman, a Moscow State University political psychology professor who has been close to Chubais and Gaidar.

    Analysts said the impact on Russia's hopes for economic recovery could be significant. Investors in recent weeks have been losing confidence in Russia and fleeing for more stable, developed markets. The full impact of the capital flight has not yet been measured because it takes several weeks for stock market trades to be cleared through Russia's system. The wounding of Chubais -- a favorite of Western financial institutions -- could further rattle investors.

    Moreover, many of Chubais and Nemtsov's goals have been frustrated because of a lack of support in parliament. They have put off plans for a new tax code until next year. And a series of important oil company privatizations now might be delayed as a new boss takes over from Boiko.

    Chubais and Nemtsov have claimed they are champions of a new, more transparent form of Russian capitalism, opposed to the corrupt oligarchy that has been taking root here. One possible outcome of the latest firings is that some tycoons will try to again change the rules to favor their own interests.

    © Copyright 1997 The Washington Post Company

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