Inside the Russian crisis

Peter Koenig, in Moscow, finds the country's top bankers desperate for the chance to pull the economy back from the brink
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The Independent Online
I AM STANDING in front of a television set in a Moscow office beside Yuri Kudimov, an unlikely hero of Russia's snowballing crisis.

A friend since 1984 when he was a London correspondent of Pravda, Yuri is now a powerful banker - first deputy chairman of the privately-held National Reserve Bank. But along with the rest of NRB's management, he fits none of the Western stereotypes of the men vying for control of events in Russia.

Yuri has little time for Gennadi Zyuganov, the communist leader of the Duma, Russia's parliament. Mr Zyuganov spent last week arguing that Russia must reverse course - renationalise assets, provide state credits to big businesses, protect trade, and print however many roubles it takes to put money in the people's pockets now - and damn hyper-inflation later.

Neither, however, does he have much time for the Russian reformers - men like Sergei Kirienko, Prime Minister for five months until President Boris Yeltsin dismissed him and sought the reappointment of Viktor Chernomyrdin.

To Yuri, the high-profile reformers look weedy, Muscovite equivalents of City yuppies - clever, slick, but with little character. In their forties (and so a half-generation older), big, handsome, and bluff, Yuri and his fellow NRB executives have histories predating the reforms. During the Soviet era they were aspiring nomenklatura.

Most used to be diplomats. Yuri and his colleagues were never communist ideologues, and they are not much interested in capitalist ideology now. They are pragmatists.

Yuri flicks channels with his remote, and says: "Britain had a serious recession in the early 1990s. What did it feel like?"

It is Saturday afternoon. Yuri and I are chasing the news of the sliding rouble and the confrontation between Mr Yeltsin and the Duma - the worst since 1993 when Mr Yeltsin disbanded the Soviet-era legislature and used tanks to quell an armed uprising. On the streets outside there are rumours that the US is flying a Boeing 747 stuffed with dollars into Moscow once a week to finance its operations and pay staff now that the banking system has seized up. People are hoarding food.

A friend who has spent an afternoon tracking down butter - ending up with a box of restaurant-size patties - bemoans the fact that Moscow dairies no longer make butter and that the city now imports 60 per cent of its food from abroad.

The stand-off between Mr Yeltsin and the Duma remains unresolved. The Duma will decide on Monday if it is to approve Mr Chernomyrdin as Mr Yeltsin's prime minister and so resolve the political crisis. According to cable news broadcasts I've watched here, London is increasingly focused on doomsday scenarios in Russia: social unrest; loose nukes. Such concerns seem premature. One Russian banker laughed at the idea of a second 1917. "The people are too busy pickling and canning."

Pundits on Western cable have discussed the sabre-rattling of Alexander Lebed, the former general who ran for president unsuccessfully against MrYeltsin in 1996. The army are among those owed $11bn in back pay. But the military man I met here last week, a colonel introduced by a banker, was wearing a smart topcoat with a leather collar.

"He doesn't look ready to revolt," I said.

"His dacha's next to mine," the banker replied.

As glimpsed from Moscow, indeed, apocalpyse seems possible, but not imminent. Even from moscow the chief risk to the world seems to be a global recession. Russia's economic recovery is imperative if that is to be avoided. This is because Russia could destabilise the post-Cold War order.

It is for this reason that unknowns in the West like Yuri Kudimov should interest London. It is pragmatists like him who have the best shot at picking up the pieces of Russia's economy now that the confidence of the 170 million people here - as expressed by the run on the rouble, down 21 per cent against the dollar on Friday - has been shattered.

For all the problems created by the economic crisis, Yuri's bank remains a going concern. It is a bulwark against further chaos. NRB has its origins in a small financial company founded in 1992. In 1994, the partly privatised natural gas giant Gasprom - run by Mr Chernomyrdin until he was appointed Mr Yeltsin's prime minister in 1992 - became the bank's dominant shareholder.

NRB built a business trading uncollected debts owed to Gasprom. During the Russian bull market of 1996 and last year it diversified into trading government treasury bonds and Russian eurobonds.

Last spring NRB moved into an impressive new building. It has 400 staff and a trading floor which is a miniature of a City operation. Before the crisis it had assets of $2bn. These have shrunk to less than half that value in the wake of hundreds of millions of dollars of losses sustained when Russia defaulted on its treasury bonds.

On the back of NRB's success before the crisis, Yuri grew rich. He and his family have a flat in central Moscow, a dacha outside Moscow, and a flat in London. In the stereotyping current today this makes Yuri suspect - a potential Mafia figure.

He is lumped together with oligarchs like Boris Berezovsky, the former maths professor and car dealer whom Forbes magazine reckons to be a multi- billionaire. He is reported in Russia to have a Rasputin-like influence over Tatyana Dyachenko, Mr Yeltsin's daughter and aide.

But Yuri is neither Mafia nor an oligarch. He is a Russian version of a City banker. He has accumulated wealth the same way it is done in the City; he has used his knowledge of the markets to invest his salary.

NRB is part of the Gasprom power group in the country - not only because the gas giant is the bank's dominant shareholder, but also because its chairman, Alexander Lebedev, is one of Mr Chernomyrdin's advisers. As part of the Gasprom group, Yuri and NRB stand to gain if Mr Chernomyrdin is approved as prime minister by the Duma on Monday. With his approval NRB could emerge as one of the country's inner core of banks in its revamped financial system. NRB is in talks to merge with Inkom, a retail bank with 100 branches. If the merger goes through, NRB - until now a specialised investment bank - could become the Russian counterpart of Barclays or Lloyds.

On Monday, either Mr Chernomyrdin will be appointed prime minister or Mr Yeltsin will submit another candidate in his place, or he will dissolve the Duma and force a general election.

Mr Chernomyrdin's future is anything but assured. Because he was prime minister from 1992 until Mr Kirienko replaced him in March, the public associates him with the collapse of the reforms.

Last month 90 per cent of 25,000 Russians polled by the television station NTV said they did not believe the once-and-future prime minister could solve the economic crisis.

With or without Mr Chernomyrdin, however, the pragmatists will seek to build support for an economic programme halfway between what the communists want and what the reformers promised, but failed to deliver.

On Thursday I spent an hour with Andrei Kostin, the chairman of Vnesheconombank, the institution handling the debts left over from the Soviet era. Mr Kostin moved to the bank from NRB, and like Mr Lebedev is a Chernomyrdin adviser. He is one of Russia's four-man anti-crisis team.

He outlined Mr Chernomyrdin's embryonic economic recovery programme: work within the constitution to reinforce the rule by law; ease monetary policy more than the International Monetary Fund wants, but less than the communists want; tighten bankruptcy laws; and cut social benefits for all but the poor.

"The people know the reforms have failed in some ways, but have succeeded in others," says Mr Kostin.

"People complain about the fall of the rouble against the dollar, but 10 years ago they would have got 15 years in jail if they had traded the rouble against the dollar."

I asked Mr Kostin how he thought Russia's political crisis would resolve itself.

"There are too many possibilities," he replied. "It is impossible to say. All Mr Chernomyrdin can do is take one step at a time."

This remains Yuri's sentiment. Finishing this report I popped up to his office. I wanted to get his prediction about what is coming but he was in a meeting. His secretary said it would be a long one.

"He's planning next week?" I asked.

"No", she replied, "just Monday."