Russia, December 20, 1998
The man who will be Tzar in 2000Bloomberg Profile, Dec. 20 1998
Moscow Mayor Luzhkov Aims for Presidency
Moscow - When the Russian ruble plunged 60 percent against the dollar in August and September, Moscow Mayor Yuri Luzhkov imposed citywide price limits on staple foods, defying federal policy. When December came, he mandated holiday cheer, ordering Moscow businesses to put up Christmas decorations.
Luzhkov, 62, is counting on Moscow's image as an island of joy and prosperity in the midst of Russia's worst economic decline in four years, to catapult him into the presidency. This weekend, about 1,500 delegates from 62 of 89 Russian regions crowded a hall in downtown Moscow to found a new political party, Otechestvo, or Fatherland, and voice support for its founder, Luzhkov.
Luzhkov's critics charge that Moscow's apparent prosperity is a thin veneer that already is threatening to crumble. "Luzhkov really needs presidential elections much earlier than in June 2000, as scheduled," said Andrei Ryabov, a political analyst with the Carnegie Foundation in Moscow. "He is selling the image of reforms in Moscow -- a hybrid of market economy and state paternalism. But this house of cards is being tested by the financial crisis and may collapse if the crisis deepens."
For now, Luzhkov's reputation is that of a leader who gets things done -- and his supporters say that Moscow's newly-paved, neon- lit avenues, its efficient subway, its ever-expanding skyline and its well-stocked store shelves support this reputation.
An avid soccer player, Luzhkov's other favorite weekend activity is visiting the city's multitude of construction projects, entourage in tow, for tours of inspection.
Luzhkov's message is one of national pride, which has been battered by a series of economic and political crises over the past few years. The latest, following Russia's default on its domestic debt in August, has driven up prices and pulled down the ruble, wiping out Russians' savings and leading to an exodus of investors.
"We must understand why Russia lost the status of a great power and got the shameful status of a debtor," Luzhkov said at his party's weekend meeting. The capitalist reforms of the past seven years, which have enriched a few while leaving millions of workers struggling have been a dangerous "experiment," Luzhkov said. "Russia had been overtaken by Western doctrines, alien to our culture," Luzhkov said. "Now, dear sirs, the experiment is over."
Yet it was the very reforms that he rails against that transformed Moscow into the bustling center of commerce that it is today. Russia's new middle class worked for Moscow-based banks and brokerages and in the Moscow headquarters of Russia's most successful companies, mainly in the oil, gas and metals businesses. While these companies were paying city taxes, the city itself has been investing in unprofitable businesses.
Moscow owns stakes in more than 500 companies, of which 260 companies are controlled by the city. City-owned companies include unprofitable car factories AO ZIL and AO Moskvitch, which are surviving on the city's subsidies and loans. The city has made loans of 240 million rubles ($11.7 million) to ZIL alone.
Luzhkov, whose family has lived in Moscow for several generations, won the mayor's office in 1996 by a landslide vote of almost 90 percent. By then, he had been involved in running Russia's capital for nine years -- as deputy head of the city administration, first appointed by the city assembly, and then re-appointed by Moscow's first popularly elected mayor, Gavriil Popov.
When he was elected Moscow's mayor, Luzhkov also earned a position in the parliament's upper chamber, thus raising his profile nationwide.
In October, Luzhkov said he's considering a bid for president in the next election, currently scheduled for 2000. President Boris Yeltsin, who is serving a second term, has said he won't seek reelection. Other likely contenders for the job include retired General Alexander Lebed, the governor of the Krasnoyarsk region. Lebed also imposed price controls in his region in an attempt to eliminate inflation by decree.
Catapulting Luzhkov into the Kremlin is the main goal of his Fatherland party. According to polls, Luzhkov is supported by about 14 percent of voters. The percentage, though relatively low, gives the Moscow mayor a strong chance of emerging from a crowded field to make it into the second round of elections. In a head-to-head race with any potential contender, including Communist Party leader Gennady Zyuganov, the front-runner, in a second round vote, current polls show Luzhkov would win.
Luzhkov's nationwide popularity defies a general tendency among Russians from the provinces, who are traditionally wary of Muscovites they consider affluent and arrogant. "People don't like Muscovites but they do want to live like the people in Moscow," said Vyacheslav Novikov, head of the Center for Strategic Studies in Krasnoyarsk, a Siberian city four time zones east of Moscow. "They want Luzhkov for themselves."
Russia's current financial crisis, precipitated by the federal government's inability to service its debt or support the currency, is shining a harsh light on Luzhkov's showcase city of Russian capitalism. Now that the stock and bond markets based in Moscow have collapsed, and many foreign banks have closed offices or fired most of their employees, Moscow's image is in danger of being tarnished.
"Moscow had the lion's share of foreign capital when it was arriving," said Sergei Volobuyev, an economist at Credit Suisse First Boston in Moscow. "The departure of foreign money is hurting the city more than other Russian regions." The ruble's 69 percent plunge since mid-August has slashed companies' revenues -- and those of the city.
The Moscow government reported a 3.9 billion ruble ($191 million), or 10.3 percent, shortfall in revenue for the first nine months of 1998. The city has been repeatedly recalculating the 1999 budget since October, and the budget will likely be approved no earlier than in January, said Oleg Muzyrya, chairman of the city assembly's budget committee.
The latest draft keeps the budget balanced, with both revenue and expenses at 57 billion rubles, or about one-third of the dollar value of this year's budget parameters. Meanwhile, the city will have to pay $210 million during the next year to service its international loans and 1 billion rubles to repay a municipal loan. "This isn't a disastrous situation but this is a situation worth watching," said Margot Jacobs, banking analyst at United Financial Group in Moscow.
Cutting support to Moscow companies, as well as reducing social spending, may cost Luzhkov many potential votes, the Carnegie Foundation's Ryabov said.
The mayor hopes to transcend the economic crisis, convincing Russians painful steps are needed restore Russia's position as superpower.
Dec 16 (AFP) via Johnson's Russia List
Provinces flock to their favorite villain -- the Moscow mayor
VLADIVOSTOK, Russia, - Anna Fyodorova is baffled by which of this isolated port's two self-declared mayors is the real thing. But she aches to see pugnacious Moscow chief Yury Luzhkov become her next president. "Look at this mess," said Fyodorova, pointing sceptically at the gray mayor's building. Holed-up inside are two men -- Viktor Cherepkov and Yury Kapylov -- each of whom claims Vladivostok's top office for himself. "They are lunatics, both of them," the city native explained. "Nothing like this ever happens in Moscow. They have a real master who knows how to pave streets and keep order. But look at our streets. Look at our houses."
Conventional wisdom suggests that Russian provinces' greatest villains are Moscow bureaucrats who hoard all of the country's wealth at the expense of the neglected and poorer regions. Luzhkov's chances in the 2000 presidential polls are thought to be weakened by this inherent provincial distrust of all things Moscow. But the bumbling performance of many regional administrations and Luzhkov's frequent and vociferous criticism of the Russian government have made Moscow's bullet-headed mayor into something of a provincial hero. As Fyodorova puts it: "Luzhkov would kick both of our mayors out and finally make something of this place."
Cherepkov and Kapylov are battling for supremacy in a port that currently sees 500 apartment buildings standing without any heat. The streets Fyodorova complains of are sloshing in thick mud and rarely lit at night. Police have mostly abandoned their patrol cars because there is almost no cash left in city coffers to pay for gasoline.
And services that still function are split in allegiance between Cherepkov -- who refuses to recognise a presidential decree firing him last week -- and local governor appointee Kapylov. "The situation is catastrophic. We live from day to day. Even in the war years we had energy supplies," said Alexander Lutsenko, deputy head of regional energy provider Dalenergo. "When the center does not solve our problems, our local leaders begin clashing heads," Lutsenko said. "Now I don't even know which of our two respected mayors should be collecting the electricity bill."
Dalenergo is itself flirting with bankruptcy and can no longer afford to provide the city with heating on credit. Lutsenko is urging either self- declared mayor to pay the energy bill or the entire city will go dark next month. But neither has, leaving Vladivostok with sporadic power outages this winter that has locals contemplating the warm and well-lit apartments of Moscow.
Although Vladivostok offers a stark example, infighting between competing factions in local government have also disrupted life in other regions, including Saint Petersburg and Nizhny Novgorod. Many of them are suddenly stretching for support to the Moscow mayor, who they credit with running a tight ship that has made the Russian capital into a showcase.
Luzhkov's critics point out that any city raking in 90 percent of all foreign investments in Russia would flourish in no time, adding that Moscow has progressed despite Luzhkov's autocratic rule, not because of it. But Luzhkov's one-month-old political movement -- Otechestvo, or fatherland -- has snowballed into the provinces and has already enlisted 20 regional heads into its ranks. These included Nizhny Novgorod mayor Ivan Sklyarov and Yekaterinburg mayor Arkady Chernetsky, heads of two districts that have twice helped bring President Boris Yeltsin into power.
The mayoral dispute in Vladivostok meanwhile should be decided next month when the city holds an election. But pensioner Fyodorova flatly ruled out showing up to the polls. "There are two of them now and it's still no good," said said. "When Luzhkov runs, I will vote."