Salute Mayor Luzhkov

The man who will be Tzar in 2000

Bloomberg 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.

Soccer Player

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.

500 Companies

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.

Launch Pad

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.”

Shaky Miracle

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.”