Economic Powers Enter The Political Arena


BUSINESS ANALYSIS

Since 1985 Soviet/Russian history has consisted of victories, battles between the winners, new victories and new battles. MAX TROSHICHEV reports that the political struggle is taking on an increasingly economic face, as the latest power blocs clash under the banners of import and export lobbies.

Mikhail Gorbachev's union with Yegor Ligachev defeated the gerontocracy. Then Mr Gorbachev, supported by Boris Yeltsin, defeated Ligachev and his allies. Later Gorbachev himself was sent out to pasture by Yeltsin and Ruslan Khasbulatov. Soon after Yeltsin axed Khasbulatov and his national/communist group.

Yeltsin's ascendency had been supported by three main forces, whose different interests were temporarily submerged by their common hatred of the USSR's upper strata.

One was a new Russian nomenklatura, whose core became the Supreme Soviet and its leader Khasbulatov. A second group was made up of industry bosses, whose power sprang from fuel and military-industrial complexes. Their most prominent leader was Victor Chernomyrdin, a former Gasprom boss. They lived well under Communism but wanted to become free to manage export profits. A third force were so-called "new Russians" who made good importing computers, cars, food and consumer goods and whose political influence grew from their wealth. Their goal was borderless trade liberalization and their mouthpiece was the new-generation politician Yegor Gaidar.

Russia's recent trade liberalization has led to a new system in which political power stems from economics. Those who would later make up both the import and export lobbies (based around Chernomyrdin and Gaidar respectively) supported the liquidation of the USSR because it let them concentrate capital in Russia, trade with former republics on world prices, and evade taxes. Given the new font of power in the new Russia, Khasbulatov and the Supreme Soviet, lacking an economic basis, had to win or disappear. Ultimately, they lost.

With the common enemy gone, the struggle between import and export lobbies has begun. A clear example is the scandal at Most-Bank in Moscow in December, when Yeltsin's guards blockaded the main office. Vladimir Gusinsky, president of Most-bank, is one of the most well-known representatives of the "import group." He is very close to Moscow Mayor Yuri Luzhkov and is the informal leader of the import group. His influence is growing not only in Moscow, but in all of Russia. He is seen as a likely presidential candidate in the 1996 elections.

The incident can be seen as an attempt to intimidate the import group and discredit its main figures, in the guise of the "struggle against corruption and organized crime," as was stated in the first unofficial commentaries on the attack offered to media. It is interesting that the Most-bank attack was conducted by the president's security service. There are no doubts now which group the president supports.

To be successful, importers need a cheap dollar to make foreign goods competitive on the national market. National producers, on the other hand, need an expensive dollar to protect the national market and raise export effectiveness. During two years under Mr Gaidar, the buying power of the dollar decreased 15.8 times on the Russian market. As of January 1, 1994 its real price was only 6.3% of its January 1, 1992 value.

That led to the depletion of hard currency reserves through giant dollar interventions for the maintenance of the rouble rate and also invited aggressive imports, a national industry slump, a rise in unemployment and a strengthening of nationalism. Drastic changes became inevitable after the December 1993 elections. Market romanticism could no longer be the state religion.

After Gaidar's resignation dollar interventions lessened, but not enough to make the dollar more expensive. Now all the members of Mr Gaidar's team, except Anatoly Chubais, are out. And the movements of the rouble against the dollar reflect not a struggle between export and import lobbies, but one inside the export lobby --between supporters of an expensive dollar and those who cling to the idea of a strong rouble.

The economic power of the export and import lobbies are nearly equal, but the political force of the export group is stronger. Exporters occupy the federal executive. The export lobby has not only purged the government of the import lobby, but taken measures to hold them far from the commanding heights.

From 1987 to 1993 Mr Yeltsin has always stuck to the right, leaving his opponents and enemies to the left of him by European standards. After every victory he took a step to the right, battled those who could or would not take this step, and secured a new victory. Now, for the first time his antagonists are farther to the right, and another Yeltsin victory would therefore stop his rightward drift.

If this happens, the Russian political structure will find stability because only the export lobby will remain, with Yeltsin and Chernomyrdin in charge. It can put an end to political intrigues and bloody clashes and devote its attention to economic problems.

If the new ruling team rids itself of dreams about a strong rouble and lets the rouble fall by stopping dollar interventions, businessmen, both foreign and national, will discover that it is more profitable to produce goods in Russia than to import them.

This could lead to a move of capital from the trading sphere to the production sphere and, as a result, the investment boom we have been hearing about for the last four years. The boom will reanimate national industry, decrease unemployment, and lessen social tension.

But it will be possible only if the government is firm in economic policy but flexible in its political policy. The problem is that Russia's leaders show severity in politics but hesitation in economics. The jury is still out.