Boris Nemtsov, Russia’s 38-year-old first deputy prime minister, is a former governor of the Nizhny Novgorod region who was handpicked by President Boris Yeltsin to help reform Russia’s government and economy. On Oct. 25, a couple of days before Russian stocks plunged along with those of emerging markets across the globe, Nemtsov sat down with Tribune senior editors to discuss Russia’s economy, a political war over privatization, relations with the breakaway republic of Chechnya, and a political crisis that ended when the government successfully warded off a no-confidence vote in Parliament’s lower house, the Duma.
Q: How were Russian stocks doing overall?
A: They have grown three times this year in dollars, three times, not 3 percent. The capitalization of the Russian economy has grown about 3.5 times this year, and there are some Guinness-record results.
Q: What about negotiations with the Chechens?
A: We believe that Chechnya is part of the country. And Chechens think in another way, that they are independent. But it is a disaster for Russia to let the country disintegrate and to support some mafia activities, such as drugs, if Chechnya would be independent. This is another reason why I am for a united country with Chechnya, maybe with some specific statutes and significant points, but in the country.
I think that time is the only way to overcome our problems. We shouldn’t sign any agreement, except maybe to solve some commercial problems, such as in the oil industry or on construction projects, or to pay pensions or to support social programs. But we shouldn’t sign any union for a few years, maybe sometime later when people forget about the war.
Q: Will they be able to forget about the war?
A: Vremya lechit liudei. (Time heals people.) People even forgot about the Second World War. And Vietnam. And Afghanistan. A new generation will never remember what happened before–maybe read it in books, but no more.
Q: Do you expect foreign investment to grow in the next few years?
A: This year the total foreign investment increased more than three times, compared to last year. By the end of the year we will have received maybe $11 billion or $12 billion. Last year we had about $6 billion. Direct investment will be about $4.5 billion.
Q: What is your opinion of the chances of passing a new tax code?
A: I think that after the crisis it will be easier to push this code through the Duma. Everyone understands that Russia needs to simplify the tax code system and to reduce the total amount of taxes. Everyone understands that, even Vladimir Zhirinovsky (a nationalist leader in Parliament) and Gennady Zyuganov (leader of the Communist Party). It looks like there will be a compromise because everyone wants to support industry. There is some question about individual taxes. We are like the liberal part of society that supports not so big individual taxes to try to press people to have more money, but the Communists try to organize very big taxes if you look, well, look like you, for example.
Q: It’s the same in the West.
A: But what is the final percentage of your (tax-eaten) income? That is the question. If it will be, for example, 90 percent, that is stupid. Everyone will try to be a citizen of Monte Carlo. If it will be 50 percent, that is big, but maybe someone will try to put their money into Russian banks. I don’t know.
Q: If you look at economic successes in Russia today, first people will look at Moscow, second Nizhny Novgorod. How do you see what you did in Nizhny Novgorod as being different from the way that Moscow has made itself an economic success? Are there two different paths there?
A: Russia is a federal country, and governors, who are elected, play a very big role in political and economic concerns. Moscow is a capital, but if you compare it to the United States, it is not Washington, D.C. Moscow is Washington and New York City together; that’s why headquarters and banks and oil companies like Gazprom are concentrated here. This is the main reason why the standard of living is much higher than in other parts of the country. But the standard of living is not so high because of intention or because of the level of help from the local administration. It’s because of the very big concentration of capital. Nizhny is different. Nizhny has no natural resources and is not the capital. That’s why the only way for me was liberalizing, privatizing property, privatizing enterprises, trying to attract a lot of investments to the region. When we compare Moscow and Nizhny, Moscow looks like a city immediately after colonial times, without private ownership of land, without private ownership of real estate and so on. I think this is a very big problem for Moscow. Moscow looks like so-called nomenclature capitalism–everything is under control of the mayor and privatization is only a very big slogan for the administration. Many places where we go, even where there is no privatization, if you have a lot of money you can get what you want without privatization. But for development of the city and infrastructure I think that Moscow needs more liberal ideas. Reforms started only in the place where there is no money. Where there is a lot of money there is no idea for reforms.
Q: How has privatization unfolded? How will it proceed?
A: I think the first and very important ideology is to privatize the competitive sector and control, state-control, natural monopolies. That’s why as far as the oil industry is concerned we have very strong competition among companies and it’s easy to privatize it, to attract private money. We want to privatize telecommunications, but because this is a natural monopoly we want to have control, about 51 percent of the shares.
Q: Since the meeting at the Kremlin between President Yeltsin and leading Russian bankers, do you feel that tension over reform has eased?
A: I think that the bankers are afraid of presidential rule. But they have their own ideas and intentions, especially such bankers who have control of electronic mass media. They try to behave a little more quietly than before, but they think the same. Nevertheless, rules will be established by the government, and if you want to stay here you have to behave according to these rules, not according to your own mind. Some people believe these bankers control the Russian economy. And this is not true. If you calculate gross national product and the part of these six bankers or seven bankers, it doesn’t matter, they control a few percent. But people in the world think they control . . .
Q: . . . 50 percent, you hear a lot.
A: No, no, no. A few percent. But they control some TV stations, and people think that they control us.
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An edited transcript
