Install

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

. Last Updated: 07/27/2016

INSIDE FINANCE: Financing Elections Is New Government's Real Business




It's amazing, but it's true. Nobody has found a name for the new government so far. It can't be called rightist or leftist, nor youthful, nor old, nor militarist, nor elitist and certainly not populist.


It seems like the new government could be called the government of public trust. Not because anybody really trusts it, but because of its main task - to provide a financial basis for the victory of the party of power on the oncoming elections. More precisely, it might be named as the government for attracting public trust.


The closer the election, the more economists need to pay attention to everything related to its financing. The question of establishing preelection funds can be considered as the motivating force for both the mechanism of impeachment and the formation of the government.


The main task, which was also set for the previous government under former Prime Minister Yevgeny Primakov, was not to let the main opposition forces get access to sources of money. For a while, Primakov's Cabinet was fulfilling this job.


Except that is, for former Tax Minister Georgy Boos, who tried occasionally to help the Moscow budget and insisted on increasing local taxes.


But then Primakov began leaning more and more toward the leftists. Control over the production and export of weapons was practically concentrated in then First Deputy Prime Minister Yury Maslyukov's hands. Under his auspices, the government started to create a Russian Bank for Reconstruction and Development, to which budget money and hundreds of millions dollars from the World Bank would, according to Maslyukov's scheme, be funneled.


The leftists were also reportedly preparing to place one of their own at the head of Vneshekonombank. The bank - Russia's payment agent for foreign debt - represents a badly needed source for hard currency for whoever can get their hands on it.


As these actions raised the specter of the leftists gaining increasing control over real cash flows, President Boris Yeltsin felt the need to make abrupt changes in his cabinet. There is also the almost openly discussed aim of the new government - to prepare for the coming elections.


The first steps of the newly appointed government heavyweights have already confirmed this. The first thing newly tapped First Deputy Prime Minister Nikolai Aksyonenko did was move to bring the military industrial export sector under his wing. For better or worse, this would bring in $3 billion to $4 billion dollars a year.


The intractable accountant Mikhail Zadornov has been removed from the Finance Ministry. Meanwhile, the president's adviser on social issues Mikhail Zurabov, better known in the financial world as the owner of the Maks insurance company, has been tapped to coordinate the significant means of the Pension Fund (hundreds of billions rubles a year, almost a third of the state budget). And the pensioners' money acquires special significance in the lead-up to the elections - everyone in this country knows the importance of the law-abiding - and disciplined - pensioners at this time.


The new Fuel and Energy Minister, Viktor Kalyuzhny, quickly showed his colors - signing a decree giving Sibneft access to Iraqi oil deposits. And the new Customs Service head is like to prove to be of the same mettle.


In short, the Blitzkrieg aimed at appropriating what was left of the Russian budget has been completed.


Only one bastion remains unbowed: the Central Bank, whose independence is guaranteed by the Constitution. This is an important point. Firstly, money printing is its direct responsibility. Secondly, the Central Bank runs national savings bank Sberbank.


Thirdly, the Central Bank is well informed regarding which banks hold deposits, where and how much. And it has very wide powers to obstruct any bank's operations, or to assist any banks that are in trouble.


Today's Central Bank leadership is entirely focusing on Moscow Mayor Yury Luzhkov. If any bankers receive stabilization credits in the near future, chances are, they can thank Luzhkov for his intercession.


Therefore we should not be surprised if the ever-watchful eye of the president's administration soon turns to the Central Bank. The annual shareholder's meeting at Sberbank scheduled for June will be very interesting. The position of chairman at this "sack of money" - currently held by the neutral Andrei Kazmin - is likely to be the center of a most fascinating battle.


Irina Yasina was a Central Bank spokeswoman under former Central Bank chairman Sergei Dubinin.