Potanin Gone, but Banks Stay Strong

Former Uneximbank chairman Vladimir Potanin is leaving his senior post in the government, but analysts said Tuesday that Russian banks will continue to exert plenty of influence in the corridors of power.


Potanin, appointed first deputy prime minister in charge of the economy last August after President Boris Yeltsin's re-election, was left out of the lineup in the reshuffled cabinet announced Monday. He said Tuesday at a press conference that he would return to oversee investment activities at Uneximbank, which in just a few years under his leadership grew to become the country's fourth-largest bank.


One of the so-called "Group of Seven" top bankers who banded together to finance Yeltsin's campaign, Potanin also was the original architect of the loans-for-shares privatization program.


Under the program, powerful Russian banks won auctions for government stakes in blue-chip firms, paying little more than the asking price and usually having a hand in the auction process. Uneximbank's reward was the Norilsk Nickel metals giant, for which Potanin secured lucrative tax breaks -- until they were revoked last week.


Potanin's departure, analysts said, would not have negative repercussions on the banking industry as a whole. Insiders, however, could have their wings clipped.


"I wouldn't think that this would be an adverse development for the banking sector, but it might point to a slightly more arm's-length relationship with financial-industrial groups," said Ramin Habibi, president of Thomson Bankwatch-BREE, an international bank ratings agency that tracks Russia.


"[Still], the banking sector has many connections with the government," he said.


One of those connections is Anatoly Chubais, who was tapped by the Group of Seven to run Yeltsin's campaign. After a spell as Kremlin chief of staff, Chubais now inherits Potanin's ministerial post, but with far greater authority.


"If anyone is the banking sector's protector, it's Chubais, not Potanin," said one Western analyst who asked not to be identified.


Other powerful guardians of the banks' interests are the reformist Central Bank Chairman, Sergei Dubinin, and Boris Berezovsky, the deputy secretary of the Security Council who represents the financial-industrial groups.


Banks also have many allies in the State Duma and in the regions.


"I don't think the influence of the Russian banking system is on the wane just because Potanin is on his way out," said a Western banker in Moscow, who also asked not to be identified. "The Russian banking sector is an extremely powerful economic segment, and will continue to be."


Indeed, Potanin said Tuesday that he had reached an agreement with Prime Minister Viktor Chernomyrdin enabling him to "interact with the new Cabinet of ministers."


But at the very least, Uneximbank is left without political protection at the highest level -- a reality shown in last week's cancellation of tax privileges worth hundreds of millions of dollars a year to Norilsk Nickel.


The abolition of the tax break raises questions for other banks that have relied on strong government contacts.


"The question is: What's going to happen to ... these banks that have these strategic holdings?" said Tom Balestrery, head of research at Creditanstalt investment bank.


Potanin did not leave much of a mark on economic policy during his time in office -- eight months characterized by general torpor in the government.


Yet Balestrery said Potanin did not have enough time to prove himself in areas such as deregulating so-called natural monopolies and sorting out the mess at industrial giants Avtovaz and Norilsk.


"I think he was given an impossible task for which he took the fall," said Balestrery, calling the dismissal a "politically expedient" move by Yeltsin.