adionov Plays the Banker.

Report by politics desk: "Radionov Plays the Banker"
February 28 1997.

Something incredible was going on at the Defense Ministry yesterday. Dozens of Mercedes and Volvo cars packed the parking lot in front of Entrance 2 to the white-stone "Pentagon" on Arbat Square. For the first time leading Russian businessmen and entrepreneurs flocked to visit the head of the defense department.

The "VIP's," as the occupants of the building dubbed the guests, began to arrive in advance. The first to come, 20 minutes before the meeting, was Nikolay Bychkov, deputy chairman of the Menatep Board of Directors. Among the first was also Vyacheslav Kostikov, former presidential press secretary and now president of the "Moskovskiy Delovoy Mir" [Moscow Business World] group. The last to come -- right on time, at 1600 -- was SBS-Agro chief Aleksandr Smolenskiy.

The guests were received with the due piety they deserved. Generally, to reach the minister's office, you have to go through at least three checkpoints, but the "business circle" was checked only once -- at the entrance. At all other checkpoints the NCO's on duty only saluted them solemnly. Each guest was accompanied to the hall, where the table was waited upon by a lieutenant colonel, at least. The lunch took place behind tightly closed doors. Even the mere fact that Rodionov was having a meeting with businessmen was kept secret until the last. The military was afraid that some mishap could scuttle the event. They say that not even all the guests knew with which of their partners (or competitors) they would be sitting at the table. In addition to Rodionov himself, the Defense Ministry was represented by his civilian First Deputy Andrey Kokoshin, First Deputy Chief of the General Staff Valeriy Manilov, and chief of the Main Military Budget and Finance Directorate Georgiy Oleynik.

Originally, the objective of this meeting was to "build bridges" between the military and the private sector of the economy. But after the minister's Sunday comments about "New Russians," who are apparently out to create a hired army while they themselves will continue to fly to the Canary Islands, a new subtext appeared: to set the record straight, and even apologize to the financiers and industrialists, quarreling with whom could not be further from Rodionov's mind.

According to reliable sources, yesterday Rodionov told his guests that in his comments he was referring to "those who are abusing democratic rhetoric, while remaining indifferent to Russia's woes and concerns, as well as its interests." As for the representatives of the "actual business market," the term the minister applied to his interlocutors, they should have the credit for "laying down the foundations of a new Russia." To all appearances the apology was accepted. An hour and a half later the lofty assembly was left by the first guest: Aleksandr Smolenskiy. He was followed by Uneximbank Board Chairman Mikhail Prokhorov. The rest parted with Rodionov closer to 1900. What specifically the military and the businessmen discussed is a closely guarded secret.

Apparently, Rodionov wanted to discuss forms of possible cooperation. The minister spoke in favor of "attracting private capital and extra-budgetary sources to fund military reform, and promote new economic forms of fulfilling defense orders," also proposing the idea of creating "a defense fund." Responding, as it were, to the president's Wednesday rebuke about his "whining" and the absence of concrete actions, Rodionov announced that practical efforts are being taken to overcome the crisis in the military.

Why did the Russian business elite so eagerly respond to Rodionov's invitation? The answer is obvious: "National defense" is the largest spending item in the national budget: Every fifth ruble goes through the Defense Ministry. Attempts to confine the process of funding the military to federal treasury branches or the Central Bank's field outlets proved futile. License to operate Defense Ministry accounts has been one of the biggest attractions to major Russian banks. And the opinion of the head of the military department about who should be given access to this most powerful financial flow has always been crucial. As far as he is concerned, this is a tool for wielding political influence. So Rodionov's invitation to the bankers should be seen as the minister's attempt to consolidate his political position. It is noteworthy that no representative of the Most Group was spotted at the Defense Ministry. Neither was Boris Berezovskiy. On the other hand, it is indicative that many of those who did come -- accidentally or not -- have joined, or consider joining, an investment consortium that was created in late December on the initiative of Aleksandr Lebedev, chairman of the Board of the National Reserve Bank. The consortium offered the government to pay the enterprises' tax arrears on condition that the "cool cash" that will be provided to the state will go toward investment projects coordinated with the consortium. Possibly, the defense sector has also fallen into the sphere of the consortium's interests. In any event, a meeting with the Russian business elite is, without doubt, a strong move on the part of Rodionov.

If he managed to find a common language with private capital, the minister's position will certainly strengthen. Two dozen leading Russian businessmen would hardly have spent three hours talking with a person who is on his way out.