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Whiz-Kid Banker Named to Russian Cabinet

TIMES STAFF WRITER

President Boris N. Yeltsin named the youthful founder of Russia’s richest private bank Thursday to join his new Cabinet as manager of the country’s free-market reforms, weakening the clout of conservative Soviet-era industrialists to the lowest level in years.

Vladimir O. Potanin, 35, who as head of Onexim Bank has bought into industries and ousted their “red directors,” became one of three first deputy prime ministers in a government led by holdover reformers and trusted Yeltsin aides.

His surprise appointment was a nod to the snowballing wealth of Russia’s post-Soviet financiers and a payback for the millions of dollars they poured into Yeltsin’s reelection campaign. The first banker in a Yeltsin Cabinet, Potanin replaces Vladimir V. Kadannikov, who had come into office in January as a failing auto maker and an advocate of bailouts to industry.

Potanin will lead a team of reformers known and respected in the West--including Alexander Y. Livshits, who moved from Yeltsin’s personal staff to become finance minister, and Yevgeny G. Yasin, who remains economy minister.

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Prime Minister Viktor S. Chernomyrdin, introducing the Cabinet in the Russian White House, said it will work more as “one team” than its predecessor--which often resembled a collection of clans feuding over limited spoils.

Having won the Communist-led parliament’s approval Saturday to keep his job, Chernomyrdin said the government will address some Communist concerns. It will pursue “more active social policies” to ease the burden of reform on Russia’s poor, he said, and “pay more attention to production and investments” that create jobs. But he also vowed “strict control over finances” to keep down inflation.

In many ways the new Cabinet looks like the previous one, with Foreign Minister Yevgeny M. Primakov, Interior Minister Anatoly S. Kulikov and Atomic Energy Minister Viktor N. Mikhailov among the 16 holdovers. But eight of the 33 posts were left vacant, apparently for opposition forces willing to work with the government.

Viktor V. Ilyushin, 59, long one of Yeltsin’s closest personal aides and a major player in his reelection last month, was named first deputy prime minister in charge of social policies.

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The other first deputy prime minister is Alexei A. Bolshakov, 56, a colorless engineer who will oversee industry. Although Bolshakov will rank highest among Chernomyrdin’s three top deputies, he is neither a committed reformer nor a forceful advocate of subsidies for unprofitable industries.

Two of the former Cabinet’s strongest lobbyists for the Russian rust belt--Kadannikov and Oleg N. Soskovets, who was fired in June--are gone. Another, Oleg I. Lobov, was demoted from first deputy prime minister but remains in the Cabinet with no defined task.

That gives free-market forces greater weight in policymaking than at any time since the heyday of radical reform in early 1992--in the months after the Soviet Union’s collapse and before Yeltsin’s retreat to an awkward coalition of young, Western-oriented economists and older, Soviet-schooled industrialists.

Potanin is a different breed altogether: a wildly successful product of the new freedoms. Trained at the elite Moscow State Institute for Foreign Relations, he founded Onexim Bank at age 32 and built its assets to $335 billion, setting up a Swiss affiliate in the process.

Critics say he also represents a shadier side of the new Russia: a “crony capitalism” in which go-go bankers and financiers use high-level connections to become overnight millionaires.

His bank profits as the government’s authorized dealer in short-term bonds. Last year, he helped devise a “loans for shares” plan under which the bank and a few others would bridge the government’s $2-billion budget deficit in return for a first crack at shares in some of the most valuable state-owned industries. The program was halted after public criticism, but not before Onexim Bank acquired 38% of Norilsk Nickel, which produces platinum and a quarter of the world’s nickel, for $171 million--half as much as a rival bank was willing to pay.

Then, after forcing out corrupt “red directors” who had siphoned away the plant’s profits, Potanin used his influence to win $1 billion in tax breaks for the newly restructured company. The deal was announced Tuesday.

“It’s unsavory,” said Anders Aslund, a Swedish economist who once advised Yeltsin’s government. “He seems to be coming to the government to defend business of his own. But nobody seems to mind. They want people who can hit ‘red directors’ over the head, and Potanin fills that bill.”

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Potanin pledged Thursday to work for Russia’s economy “in the broadest sense” and not as a lobbyist for banks. In an interview with Izvestia, he said he wants to restructure some money-losing state enterprises rather than selling them outright to try to make them profitable enough to attract private partners.

But he admitted having no master economic plan, a worrisome deficiency given Russia’s strained finances. “We’ll talk about it in two to three months,” he said, dismissing speculation about a severe financial crisis by autumn.


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