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. Last Updated: 07/27/2016

Would-Be Owners Find Luzhkov No Ally

Lena Makashova and Lyudmila Kovrikova were once Mayor Yury Luzhkov's cause c?l?bre in his campaign for control of privatization in Moscow. But now that Luzhkov has won, they say his help is the kind they can do without. Dining on borshch and homemade pastries in the Stromynka Cafe, the traditional Soviet-style restaurant she runs in northern Moscow, Kovrikova flipped through a copy of Luzhkov's "special" city privatization plan, which the mayor has gained President Boris Yeltsin's support to implement. "This is not privatization," she said slowly, furrowing her penciled eyebrows. "This is the same system that always was, only it is called privatization." Next door in the fashion studio and clothing store Dom Mody, director Makashova, chic in a blond braid and a gauzy black vest of her own design, said she feared that the plan, which allows the Moscow government to control privatized firms' prices, number of employees, work regime and business activities, could mean a "return to socialism." Makashova and Kovrikova are not just any two Moscow business directors. Just five months ago, their businesses became a flash point in Luzhkov's battle with federal privatization chief Anatoly Chubais. The Stromynka and Dom Mody, like most restaurants, stores and small service businesses in Moscow, were privatized in 1992 under a plan which turned over enterprises to workers' collectives nearly for free and promised them the right to buy their storefronts at negligible prices within a year. But when the two women tried to buy their storefronts near Sokolniki metro, they were blocked by a company that claimed to have already privatized the property according to federal rules. City hall jumped into the fray, issuing a blizzard of press releases denouncing Chubais. And when Kovrikova and Makashova went to court and won the right to take over the storefronts under city rules as opposed to federal ones, mayoral spokesmen touted their victory as "proof" that the law was on Luzhkov's side. By the time the court decision took effect in April, however, Luzhkov had suspended privatization in a subsequent skirmish with Chubais. Now Moscow officials say Makashova and Kovrikova have "little chance" of buying their premises under Luzhkov's special privatization plan. And the more the women hear about the new plan, they say, the more they feel they have jumped from the frying pan into the fire. According to Oleg Tolkachev, head of the Moscow Property Committee, the city has decided commercial property must be sold at market price if at all. And the new city sell-off plan says firms renting or privatizing commercial property must sign a city contract which may control prices, forbid layoffs, force firms to build employee cultural centers or impose "other obligations linked with the production, social and cultural interests of Moscow." Makashova said those obligations, particularly price controls, will likely scare off potential investors, who are her only hope of raising capital to purchase her storefront at its market price. What galls Makashova and Kovrikova, they say, is that the Moscow plan apparently aims to have its cake and eat it too, to demand market price yet retain tight controls on business. The two directors said they were willing to fulfill Soviet-style social responsibilities as long as the government was giving them a cheap deal. And they did, employing 279 Muscovites between them and reporting to local authorities on everything from revenues to renovations. Kovrikova continued serving discount meals at a loss to the poor and elderly. "But if I buy it at market price, then excuse me, what right do you have to do this?" said Makashova, pointing at the list of city controls. Oleg Baranov, the local Moscow Property Committee representative, said the requirements would only scare off "speculators," not "reasonable" investors. He said he was fighting to get the old prices for Kovrikova and Makashova, since if not for bureaucratic difficulties they would have bought their storefronts long ago, but he said he saw little hope. Makashova said she rejected her other option, a 25-year lease, because the lease does not limit the city's ability to raise the rent at will. "That's like putting a noose around your neck and just waiting for the stool to fall out from under you. They can just decide one day, 'Let's kick her out,'" she said. Makashova said she supported some city controls over business, such as Western-style zoning laws. "Okay, I won't build a casino, they can tell me that," she said. "But there have to be some limits, so we don't just head back to socialism."