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. Last Updated: 07/27/2016

Gusinsky Still Needs State Favors

Media-MOST, engaged in a furious propaganda war with the presidential entourage, is vulnerable in defending its editorial integrity from the Kremlin because, like other media companies, it depends on government favors for survival and development.

But owner Vladimir Gusinsky's hand is strengthened in his war with the Kremlin because Media-MOST is also different from other Russian media. It is the only private media holding built from scratch to grow and make money, not just exert political influence. Unlike other Russian media it has Western credit lines, which partly offsets its dependence on the government.

With overseas financial support, and by allying itself with Gazprom - the huge natural-gas monopoly, which is not easily manageable from the Kremlin - Media-MOST has more independence than any other media company.

Yet, as a money-losing operation that once agreed to compromise its independence by backing the Kremlin in exchange for favorable conditions, it will have a hard time saying "no" to playing the Kremlin's election game again.

To ensure election of a successor acceptable to President Boris Yeltsin and his inner circle, control of television would be essential - as it was when Yeltsin defeated Communist Gennady Zyuganov in 1996. As the only nationwide private television channel, NTV could give the Kremlin fits by covering its opponents, most notably Moscow Mayor Yury Luzhkov.

At a Wednesday news conference, executives of Media-MOST's NTV television, Ekho Moskvy radio, Itogi magazine and Segodnya newspaper accused Kremlin chief of staff Alexander Voloshin of "lying" when he said, purportedly on Yeltsin's behalf, that Media-MOST had received "more financial aid from the government than all government television channels combined."

Gusinsky's deputy Andrei Tsimailo said his company had not received direct or indirect state funding. But Media-MOST has received loans and guarantees that would have been impossible without a close relationship with the Kremlin.

After NTV backed Yeltsin in 1996, its access to the fourth national channel was extended from just prime time to all day.

Then, Yeltsin signed a decree declaring NTV a national channel, which means it is charged the same rates for signal transmission (which is up to 75 percent of television channels' budgets) as government-owned channels - and less than other private television firms. In 1997, the Finance Ministry guaranteed a $140 million bank loan to build, and in 1998 launch, the first privately owned Russian communications satellite, which broadcasts its NTV Plus service.

But Russia's economic crisis turned all broadcasters, including modestly profitable NTV, into money losers. Projections about NTV Plus profits went up in smoke, while Media-MOST had to pay $15 million a year in debt servicing.

For the past year, Russian media observers have marveled at how little visible effect the crisis had on Gusinsky's holdings, and wondered where his money came from. But the propaganda war with the Kremlin has shaken loose evidence supporting long-circulating speculation that Media-MOST got loans from its shareholder Gazprom and government-owned Vneshekonombank. Tsimailo confirmed the company had received a $60 million loan from Vneshekonombank.

That's where the government struck its first blow. Last month, the bank refused to extend the loan and demanded its money back. Last week, Vneshekonombank sued Media-MOST in the arbitration court.

Media-MOST attempted swap defaulted government bond it holds for the debt, and Tsimailo said Wednesday that the conflict was over. But Vremya MN newspaper said this week that a decision to accept bonds for debt, if it was indeed made by the Finance Ministry, was not satisfactory for Central Bank, which sued Media-MOST last week for the $60 million.

Another major aspect of Media-MOST's business activities is the company's relationship with Gazprom. Officially, the natural gas monopoly holds a 30 percent share in NTV, but there has been news media speculation that Media-MOST is deeply in debt to Gazprom and has tried to give Gazprom shares to pay off the loan.

Both Media-MOST and Gazprom denied this, and the subject is clouded in the murkiness typical of Russian big business. According to government-owned ORT, which started the campaign against Media-MOST earlier this month, Gazprom holds over $800 million of Media-MOST's debt, both directly or as guarantees for Western lenders.