Next Step : Russia Mixing Business With Politics : The influential industrialist class emerges as a powerful voice in the new order.

Vladimir A. Ovchinnikov--the quintessential representative of Russia’s influential industrialist class--is easily the most powerful man in this ancient Russian city.

As general director of the Aleksandrov Radio Factory, the city’s largest enterprise and Russia’s largest producer of televisions, he is responsible for the livelihoods of nearly half the city’s 130,000 residents.

Top city and regional officials routinely consult him before making decisions on everything from appointing a police chief to paving streets. Most of the taxes that support the city come from the factory, since almost all other enterprises have closed--at least temporarily--as victims of Russia’s painful economic reform. When the people of this city elected their representative to Russia’s Parliament, Ovchinnikov won easily over his four opponents.

“My influence is sizable,” Ovchinnikov, 45, said. “It is not possible (for local officials) to ignore my point of view.”

But Ovchinnikov is more than a local lord whose clout is limited to Aleksandrov.

“My influence extends beyond this city,” he boasted. “I can go talk to (acting Prime Minister Yegor T.) Gaidar, and I’ve been to see him more than once. Doors open to me.”

Thousands of directors like Ovchinnikov from across Russia, who traditionally enjoyed great power in local affairs, have joined forces and are emerging as a significant force in the new Russian political order.

Known as the “industrialists,” these directors have learned to flex their political muscles in the country’s Parliament, in dealings with the government and with Russian President Boris N. Yeltsin himself.

Three from their ranks have ascended to become deputy prime ministers in the Russian government and have direct control over the country’s reforms. Directors of state enterprises, who make up 10% of the members of the Russian Parliament, have formed a parliamentary faction that is playing an important role in shaping the new Russia.

“Yeltsin has to consider the opinions of the directors,” Ovchinnikov said. “Today, real power is in the hands of directors because the livelihoods of tens of millions of people depend on them, and their workers believe in them.”

When Yeltsin launched his radical economic reforms early this year, political pundits wondered if discontented masses would take to the streets and leave him no choice but to abandon his pro-market policies. The Russian people have proved more patient than imaginable. Instead, it is the directors corps that has sent Yeltsin’s reformists backpedaling--not by holding demonstrations but through public and behind-the-scenes politicking.

Among the directors’ recent victories: The government has reduced some taxes and made substantial new soft credit available to financially troubled state enterprises.

And the industrialists appear to be just hitting their stride for the long race for power and influence in Russia. More of them are likely to appear in high posts over the next several months, and they will continue to gradually prod the government to adopt their tactics for reform. Their strategy is much more like that of a marathon runner than a sprinter. They have chosen to exert their influence little by little, over a long course, to save their political strength, perhaps for the next parliamentary elections, which are scheduled for 2 1/2 years from now.

“We are approaching what I define as a ‘managerial era’ in Russian politics,” said Mikhail Berger, the economics editor for the influential newspaper Izvestia. “The practical managers, industrialists, directors of industrial enterprises have become a very influential group. And their weight is growing.”

Key to the industrialists’ power is Arkady I. Volsky, the outspoken leader of the Union of Industrialists and Entrepreneurs, who boldly sets ultimatums for top officials, including Yeltsin. Not coincidentally, Volsky’s headquarters are in the same complex where the members of the Cabinet have offices.

A short, stout man with lots of charisma, Volsky bragged to reporters earlier this month: “Lately, the government announced that it is revising some of its positions. . . . This is very much due to our influence.”

Most recently, he delivered a set of demands to Yeltsin and is awaiting a response. If he is not satisfied, he has threatened to call a congress of the 2,000 members of his union to discuss hardball tactics.

“I do not want you to think that we have no influence,” he added with a devious smile.

To strengthen his clout, Volsky launched a political party, the Renewal Union; joined forces with several other “centrist” parties, including Vice President Alexander V. Rutskoi’s People’s Party of Free Russia, in a bloc called Civic Union, and bought a popular newspaper--all within a few months. He plans to use his new party and the Civic Union to press the government to comply with industrialists’ interests.

“Power belongs to those who have property and money,” Volsky said at an earlier press conference. “At present, it is not the government but industrial managers who have both.”

Proof of how strong the industrialists have become came in August when the Central Bank issued an order to pay off 3 trillion rubles--$18.6 billion--in debts that state-owned factories owed each other.

“For half a year, there was a war of nerves between the government and state industry,” the prestigious Nezavisimaya Gazeta newspaper commented. Now “industry has won.”

By paying off debts that threatened to drown industries, Russian State Bank Chairman Viktor Gerashchenko was revealing his allegiances.

“It showed that the Central Bank is 100% on the side of the industrialists,” Berger said.

The bailout indicated that the industrialists have learned how to play politics in Russia’s new political system.

“They have become more organized, their goals are clearer and they have made some very powerful allies, like Gerashchenko,” Berger said.

The industrialists assert that they do generally support Yeltsin and his commitment to change Russia’s economy into a free-market system. But they want to show Yeltsin’s team how their policies affect the country’s 25,993 state enterprises and the tens of millions of people who work for them, with an eye to slowing down the transition to a market economy.

“Economic decisions are made by a group of economists who have never worked at enterprises and are unfamiliar with production,” Volsky said. “We would like the Union of Industrialists and Entrepreneurs to have a say in this.”

Russian Deputy Prime Minister Vladimir F. Shumeiko says the industrialists affect government policy through an active campaign in the press and television and by meeting regularly with him and other top government figures.

“They are proposing their own path for a transition to the market,” said Shumeiko, a former director of a large factory. “They are a constructive force--much more constructive than the others.”

But Berger said the industrialists’ impact on Russia’s transition to a market economy “on the whole is negative.”

“Their declared goal is to slow down the reforms, to buy some breathing space,” he said. “(As a result) we are going to witness at least partial restoration of government control of the economy and renewed effort to bail out economically insolvent factories. This is good populist politics but bad economics, and the price the society pays for the reforms will be even higher as a result.”

Another way the industrialists have input is through Alexander P. Vladislavlyev, an industrialist who heads up Yeltsin’s council of entrepreneurs, an advisory body, Shumeiko said.

The industrialists, however, are not unanimous in their views. While Volsky, Vladislavlyev and others have decided to work through the current government, some members of the manufacturers’ parliamentary faction attempted to oust Gaidar when he gave a report on the economy to the legislature last week.

Yuri G. Gekht, an industrialist and leader of the faction, accused Gaidar of ruining the Russian economy and called for him to vacate his post.

“(You) have created a system of self-destruction,” a fuming Gekht said, looking straight at Gaidar.

Ironically, the head of the group responsible for the current, middle-term reform plan is Yevgeny G. Yasin, director of the research arm of Volsky’s Union of Industrialists and Entrepreneurs, who was chosen by the government in an obvious concession to the industrialists.

Even the conservative Rabochaya Tribuna newspaper, owned by the Union of Industrialists and Entrepreneurs, said the program included “many measures softening the shock therapy.”

The new plan, for instance, puts off financial stabilization until the middle or end of next year, instead of the end of this year, as prescribed in the earlier version. It also introduces a program for selling off state-owned industries that enables employees to buy 51% of the shares and, with agreement of his employees, a director can buy as much as 20% of the shares, which could give him controlling interest.

“This benefits the directors because they know that for a certain amount of time they will keep their posts and they do not have to fear the future,” Yasin said.

Yasin, who also represents the government in the Parliament, has a close-up view of the conflict between Gaidar and the industrialists. He said the government realizes it must deal with directors because they represent the strongest remaining step of the power pyramid that existed in the Soviet period.

“On the top were the Communist Party’s Central Committee and the government; on the next step were the state economic planning committee and the ministries, and on the next level of the hierarchy were the directors of the state enterprises,” Yasin said.

“After the August (1991) putsch (in Moscow), and to some extent during the years of perestroika that preceded it, the higher levels of the pyramid were removed.

“What is left is a topless pyramid, and on the highest remaining level is the directors’ corps. It cannot be removed because the livelihood of communities is at stake.”

Workers look to their factory for child care, housing, medical services, leisure time activities and consumer goods ranging from cars to butter at prices far below what they would pay elsewhere.

“An enterprise in Russia is not just a firm in America, where people go to work and receive their pay but live independently the rest of the time. It is a social organism that takes upon itself great responsibility for the needs of its workers,” Yasin said.

Alexander Fomin, a 45-year-old assembly worker at the Aleksandrov Radio Factory, took a break from his work to recount the impact Ovchinnikov, his factory’s director, has on his life.

Like most other workers, Fomin lives in a factory apartment, grows vegetables on a private plot supplied by the factory, buys most of his other food and household appliances at the factory store and goes for checkups at the factory medical clinic.

“Our director is on our side--the side of the workers,” Fomin said as he leaned against a newly assembled television. “The government should do what the directors say, because they are close to the workers.”

The Powerbrokers

These Russians are key members of the industrial bloc.

* ARKADY I. VOLSKY, president of the Union of Industrialists and Entrepreneurs, 60. He is a member of the Soviet old guard who has managed to become more influential in the new Russian political order. He started out as an engineer at the Zil car and limousine factory, became chief of the factory’s party cell and then spent almost 20 years as an apparatchik in the Communist Party’s Central Committee. He served as economic adviser to Soviet leaders Yuri Andropov and Konstantin Chernenko. For the last few years he has made a name for himself as an outspoken powerbroker for the country’s factory directors and entrepreneurs. During the hard-line coup in August 1991 he positioned himself firmly on the side of democracy and Russian President Boris N. Yeltsin. This year, he has launched his own political party, Renewal Union, and helped forge a political bloc with other parties called Civic Union.

* VLADIMIR F. SHUMEIKO, first deputy prime minister, 47. Shumeiko is a polished, Western-style politician who worked his way up from turner to chief engineer to general director of the Measuring Tools Plant in Krasnodar before turning his attention to politics. In 1990, he was elected to the Russian Parliament and was selected by his peers to be deputy speaker. In June, Yeltsin appointed him as first deputy premier.

* VIKTOR S. CHERNOMYRDIN, deputy prime minister, 54. He is best known as the gas industry minister who managed to keep production growing over the last few years while most other industries were in decline. Earlier, he was the director of an oil refinery and worked in the bureaucracy of the Communist Party Central Committee. He later held the posts of radio industry minister and gas industry minister. In June, Yeltsin appointed him as deputy prime minister in charge of fuel and energy.

* GEORGY KHIZHA, deputy prime minister, 54. He is a newcomer to the national political scene who was tapped to join the Russian Cabinet after proving himself as deputy mayor in St. Petersburg. He, like Shumeiko and Chernomyrdin, was previously a director of a large state-owned industry--an electronics research and development institute in St. Petersburg that did most of its work for the military-industrial complex.

* ALEXANDER V. RUTSKOI, vice president, 45. A third-generation military officer and highly decorated Afghan War veteran, Rutskoi rivals Yeltsin as the country’s most popular politician. Not afraid to speak his mind, he leads the People’s Party of Free Russia, which is considered part of Yeltsin’s opposition and is a successor of the liberal wing of the Soviet Communist Party. His party formed an alliance this summer with Volsky’s party and other centrist forces.

* VIKTOR V. GERASHCHENKO, Central Bank chief, 54. He was chairman of the Soviet State Bank under Mikhail S. Gorbachev but was replaced last December when the Soviet Union collapsed. His successor, Georgi Matyukhin, resigned after repeated clashes with Parliament over his harsh monetary policy. Gerashchenko was seen as a compromise figure who could work better with the industrialists. He is a career banker who has worked in London, Lebanon, Germany and Singapore for Soviet banks. He was chairman of Vnesheconombank, the Soviet foreign trade bank, from 1988 to 1989, then served on the board of the Soviet State Bank and in March 1991 became its chairman.

Highlights of the industrialists’ demands:

* Keep the social costs of economic reforms to a minimum.

* Keep industry under government regulation.

* Introduce a two-sector economy while making the transition to a market system.

* Guarantee state-owned enterprises access to credits for the next three years to help them make the transition. These should cover 80% of salaries for the first year, 50% for the second year and 30% for the third year.

* Work out individual plans for large enterprises to prevent them from going out of business in the first stage of privatization.

* Create a unified economic zone in the territory of the old Soviet Union.

* Regulate scientific and technical research and development.

* Make the tax system less complicated and more fair.

Vladimir Ovchinnikov’s empire

Here’s what’s owned by the factory he directs, which in turn is owned by the state.

* Half of Alexandrov’s housing

* 10 day-care centers

* A hospital and medical clinic

* Subsidized cafeterias and grocery stores at the factory

* A stadium

* A sports school that trains world-class sambo wrestlers. (Sambo wrestling incorporates elements of judo.)

* A cultural center with a folk-singing group that performs abroad

* A summer camp where 1,200 children spend their vacations

* A farm that raises pigs and vegetables in hothouses