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. Last Updated: 07/27/2016

The Bell Tolls For Reform, Privatization

Last week saw two telltale appointments to the Russian government. Alexander Kazakov, once a deputy to former privatization chief Anatoly Chubais and more recently a boss in the president's office, was appointed to run the State Property Committee.


If Chubais were still in charge, it wouldn't much matter who took over the State Property Committee. The former first deputy prime minister kept careful watch over the institution he created and the process itself of privatization. Anyone under Chubais could not have changed policy much. But with Chubais gone, the committee's new head will have far more latitude to correct the course of privatization.


Some reporters are inclined to see the appointment of Kazakov as proof of President Boris Yeltsin's intentions to continue with reform and privatization. They argue that Kazakov worked with Chubais and is a "Chubais man."


But anyone even slightly familiar with life in the apparat will tell you that to work under someone and to be a member of someone's team are two very different things.


Knowledgeable sources say that Kazakov left the State Property Committee for Yeltsin's administration because of differences with Chubais. Kazakov has already said that the time for mass privatization is over and that now the time has come for individual work with individual enterprises. This statement can be understood to mean that too many enterprises have already been privatized and that the process, if it continues at all, will do so only in isolated cases.


Privatization on the basis of "individual decisions" will lead either to its suspension in practice or to its quasi-preservation coupled with massive corruption. "Individual decisions" for individual enterprises is the ideal environment for abuse of power. In any event, the course of the State Property Committee will change substantially. Given the new political reality (a left-wing parliament and a left-leaning president), you won't find many people wanting to continue what Chubais started. And you'll find even fewer people able to continue the process, even if they want to.


Meanwhile, the appointment of AvtoVAZ general director Vladimir Kadannikov to be first deputy prime minister shows that economic policy, despite all recent protests to the contrary from Yeltsin and Prime Minister Viktor Chernomyrdin, is in fact about to change in major ways.


Far removed from any understanding of macroeconomics, Kadannikov is unlikely to try and stick to a strict financial policy and unlikely to aim for financial stabilization. Kadannikov's background, too, inspires little hope. The automobile manufacturer he ran has long been in a crisis state, numerous experts report, as has AvtoVAZbank which depends on the manufacturer and depended on Kadannikov. The All-Russian Automobile Alliance -- organized in part by Kadannikov -- raised some $50 million from investors but has never produced a return on that investment.


The current make-up of the government's economic bloc suggests that economic policy will be revised. The only comfort is that the gloomy forecasts that followed the departures of liberals Yegor Gaidar as prime minister and Boris Fyodorov as finance minister have yet to be borne out. On the other hand, this is altogether another matter.





Mikhail Berger is economics editor for Izvestia.