The Importance of the Sacking of Moscow Mayor Yuri Luzhkov

September 28, 2010 12:00 PM

The ouster of the Mayor of Moscow this morning (September 28) by President Dmitry Medvedev is the most important political event in Russia since then-President Vladimir Putin had Mikhail Khodorkovsky arrested in 2003 and had his oil company Yukos confiscated. It opens up the possibility of an aggressive new campaign against corruption and a new and more intense phase of the rivalry between Medvedev and Putin.

The action that opens this new phase of politics in Russia came in the form of President Medvedev signing a decree relieving Yuri Luzhkov of his duties as Moscow Mayor. Contrary to Russian practice, this decree states in no uncertain terms that "the president has lost confidence in the Mayor." Legally, the mayor of Moscow is one of many regional governors who are appointed by the president and serve at his pleasure.

Luzhkov has been one of Russia's most powerful men since 1992 when he became mayor. For the last few weeks the Kremlin (that is, Medvedev) has been pursuing a vicious media campaign against Luzhkov, attacking him for outrageous corruption. Three Russian state television channels broadcast long attack films on Luzhkov, whose Moscow channel prepared a response but was not allowed to show it. Last week Kremlin sources circulated rumors that Luzhkov would resign this week. But on September 27 a combative Luzhkov returned to Moscow publicly stating that he was not going to resign.

Luzhkov is reported in Western news media to be the second most corrupt person in Russia after Putin. Forbes assesses that his wife Yelena Baturina has a net value of $3 billion, but her real assets are likely to be much larger. She owns a big construction company, Inteko, which has received numerous advantageous insider deals without competition. Lately she appears to have felt the political wind; news reports in Russia say that she has sold off many assets and transferred much of her wealth to a private holding company in Austria, where she now spends much of her time.

Medvedev's sacking of Luzhkov has many significant consequences.

First, through this act Medvedev has made clear that he has substantial, real power. Until today, most Russia-watchers erroneously claimed that Luzhkov was more powerful than Medvedev, although Medvedev has already ousted some 25 regional governors, including such heavyweights as the long-time presidents of Tatarstan and Bashkortostan or the governor of the Sverdlovsk region.

Second, the Moscow city administration has long been described in news reports as a center of corruption in Russia. By taking on Luzhkov, Medvedev has for the first time launched a serious attack on this issue. The prior standard was that if a governor goes voluntarily, his corruption would be forgiven and not investigated. If he refused, as Luzhkov has, vicious investigation and prosecution have followed. Three recently ousted governors are going through those difficulties right now.

Third, Medvedev's attack on Luzhkov represents a proxy attack on Putin. Putin has not engaged in any criticism of Luzhkov, while Medvedev and Luzhkov attacked one another publicly. A few days ago, Russian media reported that Putin had congratulated Luzhkov on his birthday, but Medvedev did not. Ever since Medvedev became a candidate for president in December 2007, he has distinguished himself by attacking corruption, state corporations, and lawlessness while Putin has done nothing of the sort, except for speaking like the chairman of Gazprom. These developments demolish the official Moscow claim—widely accepted by many gullible observers—that there was no difference between the president and the prime minister, or that Medvedev was a mere puppet, although he has enjoyed much more television coverage than Putin. Now, the struggle between Medvedev and Putin is in the open and likely to get nastier. Nobody can deny their differences any longer.

Fourth, the Luzhkov group of friendly businesses has been an important part of the Russian business world. Undoubtedly, Inteko will be investigated and cut down to size. One friend of Mrs. Luzhkov is Suleiman Kerimov, whose Nafta Moskva holding company has just taken over large stakes in the dominant Russian potash company Uralkali and the dominant gold company Polyus Gold, with the open support of Putin. But the other day United Russian Parliamentarian Ashot Yegiazaryan managed to have $6 billion of Kerimov's assets frozen by a Cyprus court in a battle over the Hotel Moskva complex just beside the Kremlin—clearly as a part of the struggle against Luzhkov. The biggest businessman in the Luzhkov sphere is Vladimir Yevtushenkov of Sistema and MTS. He might be sufficiently strong in his own right, but the ouster of Luzhkov has, in all likelihood, undermined his standing.

Medvedev has not yet given us any indication on who he will appoint as the next mayor of Moscow. So far he has just made Luzhkov's loyal first deputy acting mayor. Several candidates have been mentioned from top government posts, but my bet is that Medvedev will try to promote his old mentor Alexander Voloshin, who was chief of staff to both Yeltsin and Putin.

With this act, Medvedev has thrown down the gauntlet and exposed himself to political retaliation from nobody less than Putin. It is far too early to say how this drama will evolve, but you can be sure that it will be a great drama with two major actors.

Anders Åslund is coeditor with Sergei Guriev and Andrew Kuchins of "Russia after the Global Economic Crisis."

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Anders Åslund Former Research Staff

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