Polevanov Out, Sell-Offs Up in the Air

Despite the sacking of controversial former privatization boss Vladimir Polevanov, the sell-off program was still under attack Wednesday from liberals and conservatives alike and its supporters said the threat to economic reform was far from over.


"Of course, the battle will continue," said Dmitry Vasilyev, head of the securities commission and until recently deputy privatization chief.


In his brief tenure as State Property Committee head, from his appointment last November to his dismissal by presidential decree Tuesday, Polevanov hobbled the sell-off process, terrified foreign investors and left Russian stocks reeling, Vasilyev said.


Polevanov had shaken confidence in the future of Russia's economic reforms by calling for renationalization of "wrongly" privatized companies and labeling foreign investment a "threat to national security."


Vasilyev said in an interview that Polevanov delivered a severe blow to the State Property Committee's credibility and sparked infighting that ground federally run privatization to a halt.


"Because of Polevanov, we lost several hundred million dollars in funds not invested in Russia," he told a press conference, brandishing a thick folder of graphs charting the recent plunge in prices of leading Russian stocks.


But Vasilyev added that Polevanov's dismissal would in itself do little to get Russia's economy on the right track. To that end, he said, the government must firmly guarantee the rights of both foreign and Russian investors and establish the infrastructure needed for a rational, regulated securities market, such as independent registrars and depositories.


"Polevanov is gone, but there's no guarantee someone with a different name but the same nationalization ideas will not appear," Grigory Yavlinsky, leader of the reformist Yabloko bloc in the Duma, told a business lunch, Reuters reported. "How do we know that tomorrow, someone from the circus or the zoo won't be appointed to his position?"


Opponents of First Deputy Prime Minister Anatoly Chubais' radical version of privatization also played down Polevanov's dismissal, saying they would continue to fight to soften Russia's approach to sell-offs.


Sergei Sulashin, deputy head of the Duma's military-industrial committee, painted Polevanov as a hero who blocked privatization officials bent on "killing the budget, killing the potential of this country," and who was fired because he "asked questions."


"It's not a question of Mr. Polevanov, it's a question of life," said Sergei Ivanenko, a member of the Duma's privatization committee and of the reformist Yabloko faction. "We truly need a new system of privatization. Privatization has not been economically effective."


Ivanenko had no kind words for Polevanov, saying he made "excessive statements" on nationalization and needlessly antagonized his own staff because "he is not a professional."


But Ivanenko proposed a new sell-off system based on bankruptcy. "Enterprises that were privatized but failed -- 'wrongly' privatized companies, if you like -- will get new owners. That's reprivatization, not nationalization."


One name floated as a possible replacement for Polevanov is that of Sergei Belyayev, Russia's top bankruptcy official. Observers were reluctant to speculate further on Wednesday.


"I can only say one thing: A second Polevanov would be very hard on the securities market," Vasilyev told the press conference, sparking a wave of laughter.


Mstislav Afanasyev, an analyst at the Center for Economic Reform, said Polevanov had support high in the government and that "there could be other attempts in other ministries" to reverse reforms. But Vasilyev called President Boris Yeltsin's decree firing Polevanov a sign that anti-reform forces in the government were on the wane.


Afanasyev said that during Polevanov's tenure, the total market capitalization of 200 top Russian companies fell from $35.5 billion to $23 billion.