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. Last Updated: 07/27/2016

Turmoil Leaves Chernomyrdin Smiling

A chaotic week of Kremlin shake-ups did little to decide the fate of economic-reform chief Anatoly Chubais, who was left badly bruised but still standing Friday after a storm of corruption allegations.

The six-year Kremlin veteran still has parliament calling for his scalp. His chief rival in the Cabinet, Prime Minster Viktor Chernomyrdin was grinning like a Cheshire cat Friday when presenting Chubais' successor as finance minister.

Chubais this week did well simply to survive allegations that he and four allies each palmed what amounted to a $90,000 bribe from a Moscow bank run by Chubais' friend and former colleague, Vladimir Potanin.

In short sequence, Chubais saw a trusted band of allies booted from the government, lost a powerful lever over Russia's economy and heard influential Western voices question his credentials as a fair and above-board politician.

Chubais lost his job as finance minister, but stayed on in the government as a first deputy prime minister in charge of the economy, largely because he is a symbol of reform in the eyes of Western investors.

President Boris Yeltsin, in a television appearance, said Chubais must be retained because he is a "smart" politician who "helps out when the going gets tough" and is "known in the world."

The damage went well beyond Chubais, however. The Kremlin's other top young reformer, First Deputy Prime Minister Boris Nemtsov, was not tainted by the scandal, but he lost his post as fuel and energy minister in the shake-up that ensued.

"Chubais has been left standing on one leg -- the president's," said Yury Korgunyuk, an analyst with the INDEM think tank.

"Another blow like this book scandal, which can come from one of many sources, and I think Yeltsin will let Chubais go," concurred Yevgeny Volk, Moscow office director for the Heritage Foundation.

Perhaps the only Kremlin player looking cheerful was Chernomyrdin, who said Friday that Chubais and Nemtsov can now "concentrate on their own allotment of work."

Both lost their ministry briefs as part of a compromise, devised by Chernomyrdin, with an opposition-dominated parliament that wanted Chubais ousted.

Chubais ceded the Finance Ministry to State Duma Deputy Mikhail Zadornov. On Friday, Chubais called the former State Duma budget committee chairman a "reasonable choice" for finance minister. But Moscow analysts say Zadornov, while also a liberal free-marketeer, has never had an easy working relationship with Chubais.

Some even view Zadornov's appointment as a coup for Chernomyrdin, a former Soviet energy minister who has been more conservative about the shift to a market economy.

"For the prime minister, a new Cabinet member who has never given cause to suspect his sympathies for the young reformers, and who at the same time is not linked to the left opposition -- this is a successful acquisition," said Friday's edition of Segodnya daily newspaper.

Zadornov's appointment is expected to help ease passage of the 1998 draft budget through a reluctant parliament. Although deputies this week delayed action on the austere plan until next month, hoping to wring more concessions from the Kremlin, Zadornov is highly respected in the lower chamber.

Nemtsov was replaced as head of the Fuel and Energy Ministry by Sergei Kiriyenko, the former No. 2 man there. He is a solid Nemtsov ally, making Nemtsov's loss far less damaging than Chubais'.

Few observers in Moscow could believe that a small, still-unpublished pamphlet about privatization was the root of all of Chubais' troubles. He was flying high until a muckraking journalist and a Communist parliamentarian each accused him of accepting a $90,000 bribe from Uneximbank, which this summer won a highly contested sell-off of state telecommunications giant Svyazinvest.

By Moscow standards, $90,000 is a miserly bribe, and observers suggest more was afoot.

As he has in past scandals, Chubais initially brushed aside the book queries. But suddenly three of his co-authors -- Alexander Kazakov, Maxim Boiko and Pyotr Mostovoi -- were fired from their senior Kremlin posts. A fourth, Alfred Kokh, who was already dismissed under a cloud this summer, saw his downtown offices raided by Moscow police.

"In our country, book deals, even those that look like bribes, do not get people fired," said the weekly Obschaya Gazeta. "Now it is clear that the 'war of oligarchies against the young reformers' began long before the Svyazinvest confrontation. Only previously, it was not an explicit but a latent war."

Using their television and newspaper holdings, losers of the Svyazinvest auction have run scorching attacks against Chubais and Nemtsov since the summer.

Chubais successfully engineered the removal of archenemy Boris Berezovsky, a business tycoon with influence at ORT television, from the Russian Security Council two weeks ago. Some suggest that Berezovsky, trying to get even, leaked the first evidence about the Chubais book deal to the press.

Moscow analysts further suggest that Chernomyrdin may be forging a loose alliance with Berezovsky and some other losers on the deal, like Media-MOST chief Vladimir Gusinsky, who controls NTV television. The purpose: to finance a winning presidential election campaign for Chernomyrdin in 2000.

Although he denies this, Chernomyrdin was seen as this week's only big winner precisely because both Chubais and Nemtsov -- frequently mentioned as Yeltsin's heir apparent -- had suffered setbacks.

"The young reformers' partial drop in authority is evidence that they have lost their previous influence over the president," Nezavisimaya Gazeta, controlled by Berezovsky, said Friday.

Another loser was presidential hopeful Gregory Yavlinsky, who dumped Zadornov from the liberal Yabloko faction for breaking ranks and joining Chernomyrdin's government.

It was as a blow not only because Yabloko lost the budget committee chairmanship Zadornov held -- it went to Alexander Zhukov of the left-leaning Russia's Regions faction -- but also because it showed a crack in the historically unified small Duma faction.