thestreet.com article. Moscow Journal: Good Morning, President ... Lebed?
thestreet.com
Excerpt: "This contest is being fought out in Russia's stock market,
where stocks have been sold down to levels not seen since
before Yeltsin was re-elected in 1996. "It's a matter of
differentiating worthless assets from inexpensive ones" all
over again, wrote Renaissance Capital in a Friday research
note.
Still, hope springs eternal. A basket of the top five blue-chip
stocks in Russia bought at Friday's close "will more than
double in two years, probably much sooner," says Peter
Everington, a partner with Hong Kong-based Regent Asset
Management and frequent vulture investor. On Monday,
Russia is meant to announce the details of the restructuring,
"the point of maximum uncertainty and therefore probably
the lowest asset prices," the firm wrote.
"In hindsight, people will pinch themselves and ask why they
did not think to take advantage of the situation," he adds.
By Erin Arvedlund
Staff Reporter
8/24/98 3:43 PM ET
Forget default and devaluation. The outlook for Russia's
financial markets hinges on who succeeds President Boris
Yeltsin.
This weekend Yeltsin made what seemed like a last,
desperate wriggle out of taking the blame for Russia's
financial death spiral, tossing out his young prime minister
and resurrecting Viktor Chernomyrdin to take the post. A
longtime ally of Russia's robber barons, and Yeltsin's
handpicked heir, Chernomyrdin retakes the prime minister
position from Sergei Kiriyenko, who was in office for just
five months.
But more to the point, Yeltin looks like a madman
desperately clutching for power on the eve of a
make-or-break bond default and refinancing deal. And if he
loses power, it's worth considering how the markets would
function under a successor -- one who could come to office
before the next scheduled election, in 2000.
Russia's Communists smell blood. They know that Yeltsin's
decision last week to allow a 34% ruble devaluation under
the guise of a wider trading band may have mortally
wounded his administration. Who Chernomyrdin includes in
his new yet-to-be-named cabinet -- could it include reform
figures like tax czar Boris Fyodorv? -- will shed light on
whether Russia will stick with Western-style capitalism or
some other watered-down version of reform.
Meanwhile, "Yeltsin may continue formally in office until the
end of his term in July 2000, although even this cannot be
guaranteed," Fleming UCB's research department writes.
And if he doesn't, there are plenty of ambitious men ready to
dig his grave.
At this point, Russia has had a taste of Western-style
reformers and found them sorely lacking. That means the
presidency will come down to a race among three powerful
contenders. The odds-on favorite is Aleksandr Lebed,
onetime presidential hopeful, former general and
governor-elect of the Kranoyarsk region. A close second is
Moscow's mayor, Yuri Luzhkov, a political don with
presidential ambitions as wide as his girth. And there's the
handsome lightweight, Boris Nemtsov, deputy prime
minister and one-time star of the Nizhny Novgorod regional
democratic experiment, who is largely thought of as a black
horse.
Nemtsov has reformist credentials, but the politics of either a
Luzkhov or a Lebed would be shaped by the circumstances
under which they come to power, Fleming UCB's chief
economist Christropher Granville argues. "Both Lebed and
Luzhkov will unnerve investors by campaigning on antireform
rhetoric; but once in office, and with much of the unpopular
dirty work done by their predecessors, they would have no
interest in tampering with a sound macroeconomic
framework."
But what does a "sound" Russian economy entail? If it
means allowing most of Soviet-era industrial sectors to go
bankrupt, producing mass unemployment and voter outrage,
we'll see who wants to take that bullet.
The choice for Lebed or Luzkhov is stark: Either take Russia
down the neo-conservative path -- back to a Soviet-era
planned economy, mapped out in all its horror by the
example of Belarus -- or remain open to the outside world.
In spite of their nationalistic leanings, however, both men
would probably choose the latter. Russia's regions are too
fiercely rebellious and mistrustful of Moscow to enforce
currency controls set by the capital, and the Russian people
too conditioned to economic chaos to welcome a return to
full-blown central planning.
Chernomyrdin himself poses no real threat to the
presidency, despite an endorsement by Yeltsin as his pick
for 2000. Chernomyrdin is widely viewed as uncharismatic,
stone-faced and popularly unelectable. It's more likely
Chernomyrdin will act as a caretaker for Yeltsin's
administration, then choose to ally with Luzhkov or Lebed for
2000 and line up Russia's oligarchs behind the lucky
front-runner.
Linked to budget goals for this year and through 2000,
Monday's debt swap terms will give a better picture of
Russia' overall financial health. But the bond swap itself has
turned into a political battlefield -- outlining the government's
preference over whom to pay back first: Russian banks,
foreign investors or workers and pensioners who haven't
been paid in months.
This contest is being fought out in Russia's stock market,
where stocks have been sold down to levels not seen since
before Yeltsin was re-elected in 1996. "It's a matter of
differentiating worthless assets from inexpensive ones" all
over again, wrote Renaissance Capital in a Friday research
note.
Still, hope springs eternal. A basket of the top five blue-chip
stocks in Russia bought at Friday's close "will more than
double in two years, probably much sooner," says Peter
Everington, a partner with Hong Kong-based Regent Asset
Management and frequent vulture investor. On Monday,
Russia is meant to announce the details of the restructuring,
"the point of maximum uncertainty and therefore probably
the lowest asset prices," the firm wrote.
"In hindsight, people will pinch themselves and ask why they
did not think to take advantage of the situation," he adds.
And the candidates themselves? Luzhkov so far has denied
any presidential aspirations. But both men are known for
their commanding leadership and are said to be
authoritarian.
Asked last week by a Russian newspaper about his
candidacy in 2000, Lebed replied: "Let's clear up this issue
once and forever. I do not deny the possibility of participation
in the elections. But I do not intend to speak about it at
every corner either. Russia's president will be the man
claimed by its people and a number of circumstances which
will not depend on him. So, why make a fuss?" |
