Chubais on Stepashin and the Irreversibility of Russian Reform

Meeting Report
May 19, 1999

Sergei Stepashin represents the "new generation of Russian politicians," declared Anatoly Chubais, Chairman of the Board of Unified Energy Systems (UES) and former chief of Russia?s State Privatization Committee, at the Carnegie Endowment on May 17. The Russian Duma has since confirmed Sergei Stepashin as Prime Minister, following Yeltsin?s May 12 dismissal of Yevgeny Primakov. Although the Western press portrays Stepashin as an elite spymaster and a chief architect of the Chechen War, Chubais said, Stepashin is "definitely not a Communist" and will bring stability to Russian political life. Chubais noted that one of Stepashin?s most worthy credentials is that his entire political career since his election to the Congress of People?s Deputies in 1990 has taken place during Russia?s transition, making him one of the first high government officials not originating from the Soviet nomenklatura.

A major theme in Chubais? remarks was the irreversibility of the process of economic reform. If there were ever a time for a rollback on reform, Chubais said, it would have taken place under Primakov?s government. During Primakov?s tenure, there was a danger that "Communist" and "Soviet-era" figures such as Central Bank Chairman Viktor Gerashchenko and First Deputy Premier Yuri Maslyukov would respond to the August 1998 financial crisis with backward monetary policies such as printing money. Instead, the last ten months have demonstrated that there is "no political room" for backtracking on reform, nor could leftist economic policies be implemented. The irreversibility of reform, Chubais added, is evidenced even by recent statements by Communist leader Gennady Zyuganov, who previously labeled the IMF an "imperialist institution" yet has recently expressed a willingness to cooperate with the IMF in order to resume the bank?s lending to Russia.

Paradoxically, Chubais? remarks portrayed the Communist Party as domesticated in the sense that it lacks the power to roll back the clock, yet it remains dangerous. He explained that Yeltsin fired Primakov in response to increasing Communist influence in the Duma and Federation Council. Although emotion rather than logic often motivates Yeltsin?s decisions, Chubais explained, Yeltsin?s sacking of Primakov was a "rational and timely political decision" based on his most fundamental political goal: to design a new Russia in which "the Communists will never be able to come to power." Chubais said that Berezovsky?s role in Primakov?s firing was "much lower than he [Berezovsky] would hope." In response to a question about his future, Chubais answered that he is not positioning himself for a seat in the new government. He said that he prefers to foster macroeconomic development in his position as Chairman of UES, where his main task is to reduce the current level of barter transactions (79%) and increase the volume of cash transactions (21%).

Asked about his role as privatization minister from 1992-1994, Chubais conceded that his privatization efforts could be characterized as "Bolshevik-style" ? lacking public support and quickly executed. Chubais said that he forged ahead with privatization in the face of universal public and governmental opposition, acknowledging that he is as a result perhaps the most hated politician in Russia. His strategy was to privatize as quickly as possible, using every minute of every day to privatize: "I didn?t speak, I privatized," Chubais proclaimed. As a result, there now is private property in Russia, he said, which limits forces that oppose the country?s emerging market economy.

Chubais admitted that the Stepashin government would have considerable difficulty getting the Duma to pass the laws required by the IMF as conditions to receive the next $4.5 billion credit. However, he suggested that the Russian government might be able to enhance revenue collection by means other than those contained in the laws before the Duma. Chubais hinted that it might be necessary for Russia to renegotiate the conditionality on its IMF loan.

Chubais said that NATO?s war against Serbia is undermining the reform movement in Russia. Zyuganov?s Communist Party and Zhirinovsky?s Liberal Democratic Party "gain from the NATO bombing more than anybody else," he said, asserting that each of these two parties gained 3-5 percent popularity points as a result of the NATO campaign. Chubais noted that the NATO bombings have severely damaged US-Russian relations, jeopardizing the passage of START II and further Russian participation in the Partnership for Peace. The situation in Yugoslavia has not only damaged high-level relations between Clinton and Yeltsin, and Albright and Ivanov, he explained, but it has also damaged relations between the Russian and American people. He warned that a NATO deployment of ground troops in Yugoslavia would destroy Russia?s relations with the United States and NATO. Responding to a question about what Russia could do to stop the war, Chubais said that the key to resolving the Yugoslav conflict is held by Washington, not Russia. He charged that NATO bombing against Serbia has made Milosevic a national hero, an outcome that the West did not foresee but which Russia uniquely understands because of its history. Therefore, stated Chubais, Russia?s role is to prevent further escalation of the conflict by "explaining its mistake" to NATO and working toward a common solution.