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Moscow's Best And Brightest Pragmatists (Int'l Edition)


International -- European Business: RUSSIA

MOSCOW'S BEST AND BRIGHTEST PRAGMATISTS (int'l edition)

New reformers temper their idealism with gritty experience

Mikhail M. Zadornov knows how to sit in the hot seat without getting burned. For nearly four years, the 34-year-old economist has held the toughest job in Russia's Duma: chairman of its budget committee. One of the few liberal reformers in the 450-member parliament, he won the respect of Communists and nationalists through hard work and professionalism. Now, Zadornov has been tapped by President Boris N. Yeltsin for one of the toughest jobs in the Kremlin--Finance Minister.

Zadornov is the standard-bearer of a new generation of Russian reformers whose idealism is tempered by experience. The recent ethics scandal that almost toppled Yeltsin's chief reformer, First Deputy Prime Minister Anatoly B. Chubais, sparked fears of a serious reversal in Russian reforms. Chubais lost three key aides, his Finance Ministry portfolio, and credibility. Paradoxically, the crisis illustrates that support for the market economy has penetrated deep into Russia's institutions of government. As the sixth anniversary of the collapse of the Soviet Union approaches, a new team of pragmatic reformers is coming to the fore.

They are the technocrats who believe in the market economy but can also hammer out deals with their Communist foes. Many come from business, regional politics, or the Duma (table). Others worked their way up through the bureaucracy. They are less ideological than Chubais and other members of Yeltsin's original reform team. And because they are not identified with the pain of the early reform years, they don't act as lightning rods for the opposition. That enhances their chances of pushing key measures such as the budget through the Duma. Says Mikhail Berger, chief editor of the daily Sevognya: "It can be compared to the point in Western history when people were elected President who had not fought in World War II. Now, in Russia, people who weren't engaged in the battles of 1991-92 are moving into [high] positions."

Russia's regions are key breeding grounds for the new politicians. From 1992 through 1996, Russia's governors were appointed by Yeltsin. But in late 1996 and early 1997, virtually every governor and mayor had to stand in an election. The new responsibility to perform or be ousted by the voters has sparked a renaissance in local politics. Some leaders, such as Mikhail M. Prussak, 37, governor of Novgorod, a region north of St. Petersburg, have gained prominence through progressive policies on foreign investment or taxes.

YOUNG BOYS CLUB. Increasingly, Yeltsin is filling his Cabinet with such experienced regional politicians instead of theoretical economists. It started in March when he appointed Boris Nemtsov, the popular 37-year-old governor of Nizhny Novgorod, as First Deputy Prime Minister. Nemtsov, who had made Nizhny Novgorod a showcase of reforms, asked two local colleagues to help him. Boris A. Brevnov, 29, a banker, was named chairman of Unified Energy System, Russia's electric power monopoly. And Sergei V. Kirienko, 35, a banker and oil company executive, became first deputy minister of the Fuel & Energy Ministry. He was recently appointed minister.

Duma politicians are also finding a place in the Yeltsin government. Zadornov is the most prominent. But he was preceded by two others. Alexander P. Pochinok, 39, an economist from Chelyabinsk in the Ural Mountains, is the head of Russia's Federal Tax Service. Irina M. Khakamada, 42, a businesswoman who has been in the Duma since 1993, was named Russia's first Medium & Small Business Minister.

Still, good politicians do not always make effective administrators. Pochinok's liberal credentials are impeccable, for example. He was one of the first independent democrats elected to parliament in 1990. But he has not improved tax collections since taking over the tax service. Nemtsov's attempts to restructure giants such as Gazprom have been only partially successful. And it's not clear that Zadornov's allies in the Duma will support the government's budget and tax code just because their former colleague is now the government's lobbyist.

YELTSIN'S SIGNAL. For now, Chubais remains the leading light of reform. He has survived because Yeltsin values his superb administrative skills. Moreover, to Western governments and investors, Chubais epitomizes Russia's economic transformation. Yeltsin wants him in place to soothe their nerves at a dicey time for currency and securities markets. Close to $5 billion has been withdrawn by foreigners from Russia's government bond market in the past month as investors have reacted to the crisis in global capital markets.

But Chubais won't stay in power forever. By bringing on a new generation, Yeltsin is sending a clear signal that he plans to keep improving Russia's market economy. Boris Nemtsov, whom Yeltsin would prefer as his successor, recently declared in the weekly Novaya Gazeta that the battle between communism and capitalism is over. "The subject of the present debate," he added, "is which type of market Russia needs." Political tussles will continue in Russia, but they'll focus more on how to regulate the market--and increasingly involve Russia's new generation of reformers.By Patricia Kranz in MoscowReturn to top


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