Russian Elections: Bankers pay out for goodwill as parties profit: After topping Lenin's hit-list in 1917, banks are back at the centre of political life as Russia prepares for Sunday's elections

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The Independent Online
THE meeting lasted three hours, and took place at 44 Gertsena Street, a splendid, renovated tsarist mansion, headquarters for Russia's Choice which expects to be the country's ruling party after Sunday's elections.

On one side sat Yegor Gaidar, Finance Minister, party boss and champion of laissez-faire capitalism. Facing him were two dozen of Russia's richest private bankers, many of them generous contributors to the campaign coffers of Mr Gaidar's party and other pro-reform groups. 'They easily found a common language,' says Arkady Murashev, a co-chairman of Russia's Choice. 'They all left very satisfied.'

The reason soon became clear. Two days later, President Boris Yeltsin issued a decree protecting Russian banks from foreign competition. With the stroke of a pen, all but two foreign banks in St Petersburg had been frozen out of the most lucrative sectors of Russia's financial market. Mr Murashev denies any direct ultimatum: 'Our bankers are smart. They would never say: 'Do this or else.' But we can help each other. We have mutual interests.'

Three months earlier, as his power struggle with parliament approached its violent climax, Mr Yeltsin judged these interests differently. He vetoed a new banking law passed by the Supreme Soviet and condemned restrictions on foreign banks as 'unjust'. But by the time his protege, Mr Gaidar, called the Gertsena Street meeting, the issue was not how to fight the old parliament, but how to bankroll the fight for a new one. After Sunday interests will no doubt change again.

When Lenin jotted down a nine-point economic programme in November 1917, he placed banks at the top of his hit list. This weekend's election, the first truly post-Soviet poll, has brought them back to the centre of political as well as economic life.

'The more money you have, the more influence you have. This is true everywhere,' says Petr Aven, head of Alpha Bank and former foreign trade minister under Mr Gaidar. He is also on Mr Gaidar's list of candidates for Russia's Choice. Protectionism for banks is, he says, regrettable but necessary if it helps reformers stay in power. 'It is a far lesser evil than the return of communism.' Some banks, he says, hedge their bets and spread campaign donations between parties, but Alpha backs only Russia's Choice. How much? 'That is top secret.' He is not alone in both running and donating. In Ufa, the capital of the oil-rich region of Bashkortostan, the head of Vostok Bank, Rafis Kadyrov, hopes to become the republic's first president in a poll to be held with Sunday's parliamentary election. His campaign has a simple theme: 'I want to make people as rich as I am.'

Most bankers are more discreet. Cash-and-carry campaigning is still taboo. Some insist they avoid politics entirely. 'We have not given anyone a copeck,' says Alexander Kaganov of Stolichny Bank. 'We are in business, not politics.' But the two can never be separated, particularly in Russia, where all business - from running a kiosk to buying a privatised state factory - depends on the good will of the state. Buying good will is as much a part of doing business as driving a BMW. With more than 1,900 different banks registered, the funds to be invested in influence are immense.

'Practically all the large banks listed in Kommersant Daily give us money,' Mr Murashev says of Russia's Choice. Another important list of big spenders is the membership register of the All-Russia Association of Privatised and Private Enterprise, a business lobby set up by Mr Gaidar earlier this year.

Russia's Choice is not the only party bankrolled by business. Also popular with bankers is the reformist bloc headed by Grigory Yavlinsky, an economist who co-authored the ill-fated 500 Day Plan for Mikhail Gorbachev. His main backer, Most Group, also finances a newspaper, Sevodnya, and is one of three banks behind Russia's first commercial television news station, NTV. But, to be safe, it donates to Russia's Choice as well.

'Elections are impossible without money,' says Valery Bagin of the Central Election Commission. 'Everyone wants more.' The state chips in some: 200,000 roubles ( pounds 110) to each candidate and 100m roubles for each of 13 blocs competing for seats under a proportional system. This is double what was originally earmarked but still far from enough. Estimates of what it takes to get into the State Duma range from 10m to 50m roubles.

The Russian Communist Party has few friends in boardrooms. One of its leaders, Valentin Kuptsov recently phoned the Electoral Commission desperate to know when he could get the next tranche of state money: 'When I said tomorrow, he was very happy,' says Mr Bagin.

The tub-thumping nationalist, Vladimir Zhirinovsky, has no need to beg. A sizeable war chest has allowed him to splash out on television time, the most effective political weapon in a country spread over 11 time zones. The source of his money is a mystery. Opponents whisper about KGB slush funds. More likely are fat-cats who stand to profit if he does well.

Tight controls govern individual and corporate donations. But the scope for abuse is huge. And, says Mr Bagin, all but the most blatant violations will go undetected. 'We have to assume people are honest. We cannot control everything.' The commission has 21 members. A separate enforcement agency has only 17. All donations are supposed to be deposited in special accounts with the state savings bank monitored by the Election Commission. But, admits Mr Bagin: 'If two men exchange a bag of money in a room, we will never know. How can we?'

Another problem is the changing rules. The ceiling for corporate donations to each political party was set at 20,000 times the minimum wage - about 150m roubles (pounds 80,000). Individual candidates could receive only a 100th of this. Last Sunday, a week before election day, Mr Yeltsin signed a decree doubling the minimum wages. This in effect doubled the legal limit on campaign donations.

Wind of recovery, page 19

(Photograph omitted)

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