Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Yeltsin to Chubais: Let Moscow Alone

President Boris Yeltsin, settling a long-simmering dispute over privatization in the capital, told Deputy Prime Minister Anatoly Chubais to keep his hands off Moscow and gave a clear victory to Mayor Yury Luzhkov. "The matter has been decided," Yeltsin said at a press conference in the Kremlin on Friday, adding that he had instructed First Deputy Prime Minister Oleg Soskovets to "tell Chubais to leave Moscow alone." The decision is a major victory for Luzhkov, who has asserted unique powers to regulate the private sector and carry out privatization at a slower pace than the rest of the country. Luzhkov has sought to earn the city money from the sale of enterprises and accused Chubais of selling state property too cheaply. The announcement comes after several months of bitter public feuding between Luzhkov and Chubais, who charged that the mayor is grandstanding because of presidential ambitions. The conflict forced Yeltsin to choose between one of the last remaining radical reformers in the government and the mayor, a steadfast supporter. "I wanted them to make peace themselves," Yeltsin said. "I wanted the government to take a decision and make peace between them, but nothing came of this." A Luzhkov spokesman said City Hall is preparing privatization decrees. "It's a victory without a doubt," said Igor Zverev. "City Hall will itself decide what to privatize, at what prices, how, and so on." Chubais, architect of the two-year-old voucher program that gave all Russians vouchers to invest in privatizing enterprises, was not available for comment Friday. The president's decision Friday raises questions over Chubais' future. The deadline for investing vouchers is July 1, and some commentators have predicted that his days may be numbered after his program ends. Wednesday, Chubais had declared victory over Luzhkov when the mayor annulled an April decree halting privatization in the capital. Yet the president has changed the tide again. Yeltsin said he heard Luzhkov speak in the Kremlin on Friday morning during a conference on urban construction. "We will carry out privatization not in Chubais way, but according to common sense," Luzhkov said. Yeltsin told Soskovets that he had decided the matter in Luzhkov's favor. The mayor's proposed privatization plan will regulate a private firm's profits and give Moscow the right to skim off excess earnings. It also allows Moscow to dictate how many workers a firm employs and whether or not it can move into new lines of business. Moscow plans to enforce these rules by signing contracts with newly privatized enterprises. Those who do not follow the rules can lose their property. One economist reached Friday said separate privatization in Moscow is a blow to free market development. "I'm surprised by this approach because I thought that there should be unified legislation on Russian territory," said Vladimir Mau, the deputy director of the Economy in Transition Institute, which is associated with reformer Yegor Gaidar. "Any individual procedure is always worse than a general approach because it creates the potential for corruption." Luzhkov, whose vision of a managed economy harkens back to his days as a Soviet manager, has said that Chubais' privatization plan would turn over valuable assets to organized crime. Chubais called Moscow's privatization program "nearly out of government control and near catastrophe." Luzhkov's spokesman predicted that Chubais will keep on slugging for uniform privatization. "I think Chubais will carry on the resistance some more, despite the president's words," Zverev said. "If he gives up he will acknowledge defeat."